Globalisation can be defined as the increasing interaction among, and integration of, the activities, especially economic activities of human societies around the world (Mussa, 2003). Globalisation is not a new phenomenon. The twentieth century began when the first wave of globalisation was approaching its peak. It has ended on the rising crest of a second wave far more forceful than the first (Yusuf, 2003). Globalisation, in the sense of increased integration of international markets, has waxed and waned throughout history (Bordo, 2002).

The recent wave of globalisation has generated intense debate among economists, attracting both strong supporters and opponents and although characteristics of current globalisation are different from previous ones, but still by turning the pages of history, one can find similarities and learn from past experiences. Therefore, initially the history of globalisation with the focus on the last two waves is reviewed and analysed. The opinion of various researchers have been presented and discussed.

Throughout the next section and during the analysis of the impact of globalisation, historical evidences are provided and with referring to recent events various aspects of globalisation are examined. The economic development, open door policies, financial liberalisation, sound institutions, the role of international financial intuitions, governance and welfare policies have been briefly discussed and investigated. This study strongly questions the notion that “Globalisation is always good” but by no means is complete and where references have not been provided, the opinions expressed are that of the author.

Globalisation in History The evolution of world business and globalisation has occurred through three discernible eras (Hill, 2005): the Exploration Era to 1500; the Colonisation Era spanning 1500-1900 and the era of International Corporation, from 1900 to the present. The new era of globalisation can be further divided to first wave of globalisation from 1900-1945: company internationalisation, when companies began to replace countries as the major catalysts of economic and cultural change.

From 1945-1980: era of increasing international competition, the U. S. irms reinitiated foreign investments and the 1960s and 1970s saw the revitalisation and expansion of Japanese and European firms in the international market as market blocs, such as the European Economic Community (today’s European Union) and free trade movements, increased the number of opportunities in the worldwide marketplace. Movement towards to free international trade, development of trade blocs, increase in Foreign Direct Investment, global movement towards capitalism, the major advances in technology and global media are major catalysts that shaped the post-1980 globalisation (Hill 1995).

Bordo (2002) focuses on two recent ages of pervasive globalisation: from nineteenth century until 1914 and since early 1970s, He argues that first era of modern globalisation ended badly in World War I, the Great Depression and World War II. But even before its demise there was a considerable backlash against it. James (2001) (cited in Bordo 2002) argues that the forces of globalisation embodied the seeds of its own destruction and he argues that the new trend in globalisation have significant differences with the old one.

Although he indicates similar trends in convergence in real wages and increased on trades between current wave of globalisation and the old one but in the new era of globalisation the growth of international trade is more widespread than pre-1914 and hence the groups that may be harmed are outweighed by those that benefit. Moreover, today there are more escape valves in trade legislation to relieve pressure than earlier (Bordo et al. , 1999 cited in Bordo 2002) and trade disputes can be resolved by multinational agencies such as the WTO which were not present then (Bordo, 2002).

O’Neill, (2004) agrees with the notion that apart from the term itself, globalisation as identified in its patterns were initially observed in the latter half of the 19th century but he strongly argues that measured by the intensity of trade, and labour flows, globalisation was more extensive before 1914 than after 1945. Cornia (2003) argues that two period have a number of common characteristics but also differs substantially from each other.

While marked regional differences characterised the expansion of trade and capital flows during both periods, it would appear that international migration played a greater role in equalising the within country distribution of wages and incomes during first globalisation than during the current one. Conversely, technology appears to have had a greater distributive impact during the current globalisation than the last century. Finally, the impact of capital flows to emerging and developing countries that are now dominated by highly unstable portfolio flows appears to be less favourable today than during the first globalisation (Cornia, 2003).

In addition, clearly contemporary globalisation is different in its geographical reach. The decolonisation in the last century have added a large number of independent countries to the global economy which contribute significantly to world growth and trade, while also adding more instability to financial markets (O’Neill, 2004). Watson (1998) compares the reduction of cable communication costs in late nineteenth century to late twentieth century decline in price of computation and claims that the reduction in cable communication rivals that of computation costs and its impact on globalisation are comparable.

Hirst and Thompson (2000) have indicated scepticism over whether the new era of globalisation or internationalisation of economy activity is radically new or different to previous one and even argue that governance mechanisms for the international economy have been in place over almost the entire twentieth century, in one form or another. Globalisation: Good or Bad O’Neill (2004) argues that there is no argument that the levels of income and disparity and poverty are significant between advanced and emerging countries.

Gunter and Hoeven (2004) claim that from enormous range of contributions to the literature on globalisation, a consensus has been reached that overall globalisation has brought more benefits than costs; that it has exacerbated inequalities both within and between countries because of sharply diverging experience at individual and country levels; and that it has increased economic and political insecurity even for those who have benefited in monetary terms from globalisation.

But they challenge making casual link between changes in poverty and inequality with increased globalisation, as the globalisation process today has an impact far beyond its economic aspects, and is increasingly influenced by global health and environmental crises. O’Neill (2004) disagrees with the claims that globalisation has increased global poverty and income inequality worsened over the last 40-50 years.

He argues that if correct economic indicators are used, global income distribution has become more equal over the last twenty years although inequality increased slightly in the 1970s. He also points out that the relative improvement of developing countries is not even across the world but evidence from both economic and social indicators suggest that open developing economies have grown double the rate of those of developing countries that have not opened up.

But he also concurs with the belief that openness to trade and investment are not the only factors that have contributed to the improvement of living standards of many developing countries. Sound domestic policy choices, including fiscal discipline, privatisation and other institutional reforms and sectoral restructuring (especially of the financial system) have played key roles in making them ready in embracing globalisation.

But Kohl (2003) does not agree and argues that even if globalisation is not a major cause of income inequality and poverty, it is likely to have contributed to the poor performance of efforts to reduce poverty. Stiglitz (2003) adds another dimension to the discussion as he argues that globalisation has not produced the promised benefits but he does not question that globalisation will benefit the poor of the world but that globalisation needs to be managed in the right way.

Gunter and Hoeven (2004) agree with these comments and indicate that at the international level, two sets of policy action have received broad support in the globalisation literature: a development round of trade negotiations; and a new financial architecture. Schmulker (2004) focuses on financial globalisation. He argues that financial globalisation tends to develop financial system, enhancing the financing opportunities, reducing the cost of capital and increasing investment and liquidity.

Although financial globalisation has several potential benefits, it also poses enormous challenges as countries become exposed to external shocks and crises not only generated in their own country but also from contagion effect. In the initial stages of liberalisation, if the right infrastructure is not in place or put in place, financial liberalisation can lead to increased risks. Moreover, in a financially integrated economy, policymakers have fewer policy instruments to conduct economic policy. Jomo (1998) indicates that the financial sector has become increasingly divorced from the real economy.

He argues that in the world economy where foreign exchange spot transactions are now worth more than 70 times the total value of international commodity trade transactions, the financial sector has a great potential to inflict damage on the real economy. Jomo(1998) also indicates that recent findings proves alleged benefits of financial liberalisation have not been realised, including improved macroeconomic performance – with greater investment and growth expected from better allocative efficiency- and in fact overall macroeconomic performance has been worse than before liberalisation.

In line with this discussion, Chomsky (2004) indicates that since World War II, international economy has passed through two phases: the Bretton Woods phase from the late 1940s to the early 1970s and the subsequent period based on, among other things, the dismantling of the Bretton Woods system of regulated exchange rates and control on capital movement. The term “Globalisation” as is used today is associated with the neo-liberal policies of what Williamson termed the ‘Washington consensus’.

The second phase has accompanied by marked deterioration in standard macroeconomic measures- the growth of the economy productivity, capital investment and world trade, higher interest rates, vast accumulation of unproductive reserves to protect diverse national currencies; increased financial volatility, and other harmful economic, social and environmental consequences. The East Asian countries were exceptions, which did not follow the rules: they did not worship at the alter of the religion that markets know best (Stigliz, 2002).

Many economists such as Jose Antonio Ocampo, director of the Economic Commission for Latin America and the Caribbean , observe that the mirage growth in 1990s was far below that of three decades of ‘state-led development’ in phase I (cited in Chomsky (2004)). Many international economists regard the liberalisation of capital as substantial factor in explaining the poorer outcome of phase II (Chomsky (2004)).

In an interesting argument, Rosenberg (2000) (cited Robinson 2003) starts his discussion by asserting that logical structure of the theoretical argument in globalisation theory is flawed by inversion of explanas and explanandum, or cause and effect. What presents itself initially as the explanandum, that is, what needs to be explained, is globalisation as the developing outcome of some historical process. Yet this is “progressively transformed into the explanans: it is globalisation which now explains the changing character of the modern world”.

Toppen (2004) also argues that while there is certainly evidence connecting increased trade and poverty reduction, our understanding of the empirical relationship between globalisation and poverty, like most important questions of social science, is incomplete and contradictory. Harvard economist Rodrik (2001), for instance, finds no evidence that reduction in import tariffs are related to economic growth. In fact, he finds that countries dismantle their trade restrictions only after they experience economic development.

Furthermore referring to the previous discussion on history of globalisation, many authors (Bordo 2002, O’Neill 2004) indicate similarities and differences between two contemporary era of globalisation. But question should be asked: if globalisation is the source of prosperity for countries, then why history has experienced reversal of globalisation even in cases as recent as 1914s. Can the reversal of globalisation can be attributed to the fact that globalisation has been the result of economic development and not vice versa?

Therefore as soon as the development has faced major setbacks, the globalisation trend has diminished rapidly and even led to protectionism. Does history show that globalisation and open door policies by itself, without proper check and balances in place, won’t result in economic development and prosperity and in fact in circumstances can lead to political upheaval as experienced in 1914 which Bordo (2002) argues have led to World War I? Although there are no direct answer to these questions but there are some common area of agreement among researchers.

Buchs (2004) reiterate many lessons drawn from recent financial crises, but finds the need for more policy making for coping with the globalisation of financial markets, as the most powerful one. He strongly argues that the trade off between the benefits of a largely unregulated financial system and the cost of financial volunerability makes it clear that before taking a huge leap forward toward further globalisation, more needs to be done in the field of domestic as well as international regulations.

Obviously sound macroeconomic management is crucial for health of growth, but the increasing integration of financial markets provides one additional confirmation that the conduct of autonomous macroeconomic without greater interaction and cooperation among the different players is just an illusion. Some critics of globalisation such as Mandle (2003) (cited in Toppen, 2004) argue that globalisation could be made fairer with more government actions.

Although he accepts that global market integration has been and is good for the poor in that it helps to advance worldwide living standards, but when trade barriers are lowered and poor-country economies are opened to an influx of imports, it is often the case that many local producers and industries are unable to keep up with their technologically advanced competitors in the developed world. The result is unemployment and other problems of social instability as local businesses and even entire industries are destroyed. At the same time, poor countries are under pressure from IMF and others in Washington to limit social welfare spending.

Mandle recognises the harmful side effects of globalisation and argues that its proponents have paid too little attention to these matters, and claims that more should be done to ameliorate painful but necessary dislocations. These researchers find the basic problem of globalisation, how to address “the damage that is done to some as a result of change that is beneficial to most” (Mandle 2003). Therefore they do not question the structure of the international economic order as much as they argue that enhance safety-net policies are needed at the national level.

They advocate policies designed to maintain worker income and benefits when globalisation results in job losses, to educate and retain people for the new opportunities created by globalisation, and to assist retrained workers seeking new employment (Mandle 2003). Some other researchers led by Stiglitz (2003) argue that the IMF particularly but also major international economic institutions (the World Bank and World Trade Organisation (WTO)) divided and pushed policies that “have served interests of the more advanced industrialised countries – and particular interests within those interests- rather than those of the developing countries.

Stiglitz devotes most of his attention to how public international financial institutions have worked to advance the financial interests of Wall Street, but he also notes that major commercial interests and priorities have similarly held away at the WTO. Conclusion As Stiglitz (2003) has expressed it, although globalisation did not produce the promised benefits, the issue is not whether globalisation can be a force for good which benefits of the world (it certainly will).

The fact is that too many people still live in conditions that are unacceptable in the twenty-first century and development will not happen with globalisation alone (Gunter and Hoeven, 2004). There are a lot of unanswered questions but there seems to be an emerging consensus that governments need to invest in education and training, adopt core labour standards, provide and improve social protection, establish sound institutions and tackle rising national inequality and provide space and opportunity to discuss globalisation (Gunter and Hoeven , 2004).

At the international level, major overhaul to international financial institutions is required, the governing bodies need to be examined and the influence of developed countries and particular interests within those countries as well as Wall Street should be revisited. The failure of neoliberal prescriptions over past couple of decades which assumed that markets are efficient irrespective of political conditions and development requires taking politics out of economic policy making, should be acknowledged and emphasis on political variables should be re-established (Toppen, 2004).