Globalization: Three Waves and Iceberg Warnings

In a prescient book entitled Three Billion New Capitalists: The Great Shift of Wealth and Power to the East, Clyde Prestowitz analyzes the trends of globalization and essentially the rise and impending fall of the U.S.?? Unlike Robert Kaplan (2024) who describes Globalization 1.0 as being in the early ?2000s and Globalization 2.0 basically beginning around 2010 or 2015, Prestowitz (2005, 2006) takes more of a historical point of view as he describes three waves of globalization:? The First Wave from 1415 to 1914 and the Second Wave from 1947 to 2000; the 21st century is now experiencing the Third Wave of globalization and the end may be in the distant future or perhaps a Fourth Wave is on the horizon.

First Wave of Globalization: 1415 to 1914

In 1415, according to Prestowitz (2005, 2006), China and the area of present-day India produced approximately 75 percent of GDP.? Portugal, with what Kaplan would describe as? geographical launching pad, commissioned a series of swift and agile ships known as caravels to explore the “outer space” of the vast earthly oceans.? King Henry from Lisbon initially sent his caravels to probe the coast of Africa.? The early Portuguese explorers found ivory, gold, and unfortunately people they called slaves.? They named some of their colonies the Ivory Coast, the Gold Coast, and the Slave Coast.? In 1488, Bartholomeu Dias rounded the southern tip of Africa and “discovered” the Indian Ocean.? The discovery of the Indian Ocean inspired Christopher Columbus to search for the “Indies” with the help of Spain.? Meanwhile Vasca de Gama sailed from Portugal to Calicut on the west coast of India.? Portugal established a lucrative 15th century “express” trade of spices, silks, precious gems, and drugs.? Portuguese merchants, for example, could now sell pepper for 20 percent less than the Venetian merchants with virtually no limit on quantities.? Spain, The Netherlands, England, and France soon joined the global trade and gradually developed a Western Civilization that dominated world trade until the outbreak of World War I.? The Industrial Revolution, effectively from 1600 with the emergence of the East India Company, ?accelerated and intensified this economic domination.? The Industrial Revolution included highlights such as Thomas Newcomen inventing the steam engine in 1714 and the first journey by locomotive in 1804.? By 1850, with just 2 per cent of the world’s population, Britain was producing 50 percent of the world’s manufactured goods.? Around this mid-century point Britain focused on rights for workers and limited working hours for women and children to 10 hours per day.? The United States, despite a tragic Civil War, was emerging as a world ?power and adding inventions like the cotton gin and the telegraph to the modernizing world.? This first wave of globalization ended with the First World War beginning in 1914, which the U.S. avoided until April of 1917.

Second Wave of Globalization: 1947 to 2000

According to Prestowitz (2005, 2006), the period between 1914 and 1947 with two world wars and a surprisingly brief interwar period effectively caused a pause in globalization.? Once the Second World War ended, the U.S. economy expanded dramatically.? Europe and Japan had reconstruction challenges after the war; meanwhile, the U.S. was able to focus on production and infrastructure projects such as Eisenhower’s Interstate Highway system and housing developments like the one in Levittown, New York.? The United States and the Soviet Union engaged in an ideological and deterrent competition in a Cold War. The Marshall Plan in Europe and Deming’s quality efforts along with the Dodge Plan in Japan helped both war-torn regions recover and thrive.? The U.S., European allies, and later Japan created the World Trade Organization (WTO). The U.S. reduced tariffs and encouraged free trade.? Gold had been the currency of the first wave of globalization and the U.S. dollar (based on the gold standard) became the currency of the second wave.? U.S. companies increasingly became multination expanding their operations across the globe.? Global markets led to increased revenues and broad opportunities to invest in Research and Development.

Third Wave of Globalization: 2001 to the Present

Prestowitz (2005, 2006) describes the third wave of globalization as the wave of change that has been washing over the United States and the rest of the world with massive changes observed by many, but understood? by few.? Within his chapter entitled “Icebergs” ahead and formulating his thesis statement in sync with his subtitle of The Great Shift of Wealth and Power to the East, Prestowitz writes about the massive changes occurring in China and India, as well as in Japan, Indonesia, and Brazil. Recalling the image of the Titanic, he observes, “As these developments [the economic surges] shift the basic structure of the global economy, they are calling into question assumptions that have long dominated global economic policies” (p. 17).? Prestowitz goes on to say that business ?and political leaders, have resisted rethinking their policies and strategies “even when they seemed seriously out of whack with reality” (p. 17).? Prestowitz cites many flaws in the business models and economic strategies including a focus more on stockholders than on stakeholders and a blind eye toward the growing U.S. trade deficit.

Concluding Thoughts and Potential Solutions

In The New York Times book on world history entitled Smarter by Sunday, after describing the death of Mao and the toppling of the “gang of four”, the authors write “Since the early 1990s, China has seen spectacular economic growth, often over 10 percent annually led by an export-oriented manufacturing sector.”? The Times mini-essay, published in 2010) lists some of China’s problems such as energy shortages and air and water pollution; however, they conclude, “China has become and will remain one of the world’s dominant economic powers, with corresponding political weight in world affairs” (p. 362).? Prestowitz (2005, 2006) ends his book with a similar observation (warning), “The fact that we are now riding a new wave of globalization with 3 billion new surfers [the Eastern Civilization] presents a unique opportunity for a still powerful America to turn from illusions of empire and exercise the ingenious entrepreneurial leadership that has long characterized it” (p. 278). Like the Portuguese in their caravels, we need to look outward and upward toward progress and collaboration rather than backward and downward with anger and animosity.? The image of the iceberg tells us to look and think deeper and to steer cleverly and with controlled speed rather than recklessly at breakneck speed.

References

Kaplan, R. (2024). Book signing lecture about geography and globalization [delivered at the Army Heritage and Education Center in Carlisle, Pennsylvania.

Prestowitz, C. (2005, 2006). Three billion new capitalists: The great shift of wealth and power to the East. Basic Books.? https://www.google.com/books/edition/Three_Billion_New_Capitalists/1Atnap6SaoUC?hl=en&gbpv=1&dq=three+billion+new+capitalists&printsec=frontcover

The New York Times. (2010). Smarter by Sunday. St. Martin's Press.

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