Globalization is mostly a cumulative process based on changes in the modes of accumulation (how growth is generated) and their functional relations (how growth is structured). The capacity to produce (manufacturing) and distribute (transport) remain fundamental as vectors of economic development. Since the beginning of the Modern Era in the 16th century, four major phases leading to the development of the world economy can be identified, with the fifth speculative about how globalization may unfold in the future:
- The age of mercantilism (c1500-1780) and the setting of the first transoceanic trade routes led to a remarkable expansion of the hegemony of Europe through the setting of colonial empires (such as the Spanish and Portuguese empires) and their underlying mercantilist system where trade relations were monopolized and controlled. Although Empires such as China and India (Mughal) were significant economic entities, they were not proactive at setting long-distance trade relations but transacted with foreign merchants. Still, for the majority of economic activities, the spatial scale of relations remained local in scope as economies of scale for inland transportation remained illusive. Production stayed relatively unchanged since the Middle Ages with a system based on the workshop where crafts were learned, developed, and diffused to apprentices. In many cases, this led to the emergence of specialized craft cities where specific production expertise was mastered and guarded by guild organizations. Yet this system was monopolistic and did not permit mass production.
- The industrial revolution (c1780-1880) saw the setting of mechanized production and distribution systems and the emergence of industrial capitalism where mass production and consumption became a possibility. This required the usage of a larger production unit; the factory. Additional demand for labor incited higher levels of urbanization and the emergence of industrial cities having a wide scale of trade relations, mostly with areas supplying raw materials and energy. This was made possible by the setting of canals and then by the first regional rail networks, permitting for the first time economies of scale for inland transportation. The introduction of the steamship strengthened long-distance trade and colonialism.
- The emergence of Fordism (c1880-1970) resulted in a capitalist system dominated by large multinational corporations or corporations operating under a quasi-monopolistic status over their respective economies. The growing complexity of manufacturing benefited from the setting of industrial clusters (manufacturing belts) where related industries agglomerated. The setting of the assembly line model relied on a network of suppliers in relatively close proximity and the advent of production management. International and regional relations were serviced by well-established steamship and rail networks. During the later part of this period, colonial empires collapsed with state imperialism replaced by corporate imperialism. The economic role of developing economies (many of which being former colonies) started to become more prevalent in a world that until then was dominantly assumed by Europe and its offshoots (e.g. USA). Yet, for entities such as China and India, this period marked a remarkable decline in their economic importance mainly due to their political systems.
- Post-Fordism (c1970-2010) saw an acceleration of globalization, particularly with the emergence of export-oriented economies (e.g. Japan, Korea, China) that gained from the offshoring of several manufacturing tasks and the setting of global production networks managed by corporate systems. This was made possible by a convergence of key transportation technologies, particularly containerization, jet planes services, and telecommunications. While the level of manufacturing output increased, its relative share declined in relation to the growth of service activities. Knowledge became a form of capital, particularly since innovation played an important role in the quantitative and qualitative improvement of goods and services. Information technologies became increasingly embedded in products and services. Multilateral trade agreements and economic blocs provided a transactional environment favorable to take advantage of the comparative advantages of locations in terms of labor, land, or resources.
- The challenges standing at the beginning of the 21st century bring the question about how globalization and its underlying production and distribution processes will evolve. Emerging environmental and resource scarcity concerns are indicative of a sustainable capitalism paradigm where economic activities are bound to minimize their externalities (e.g. waste, pollution, congestion) both because of regulatory and competitive pressures. Like the previous post-Fordist phase, the setting of efficient supply chains will be fundamental, particularly in the context where each element collaborate to add value. While globalization will remain a dominant paradigm, energy and recycling will incite a more regionally focused manufacturing system. Production systems are likely to take a more hierarchical structure, shifting to global sourcing when necessary, but preferring regional suppliers. The level of intermodal integration of transport systems, for both passengers and freight, will lead to additional efficiency improvements, even if modal speeds do not vary significantly. Nation-states will remain the basic functional unit, but economic integration will continue to blur the distinctiveness between the nation and the economic region. This phase has also been labeled as the Fourth Industrial Revolution.