The Changing Face of Globalization
Since the mid-1980s, emerging markets have grown faster than advanced economies. When you think of how hard it once was for smaller economies to grow and globalize, this is an amazing feat. Looking at the current situation can give many aspiring economies hope to grow successfully.
The way that a country develops has drastically changed. Early in the industrial revolution, high transportation costs restricted trade. Many of the early advanced economies learned how to use steamships and railways to slash transport costs, which exposed firms to foreign competition for the first time. If a company learned how to take advantage of economies of scale, those were the firms that survived. To catch up with those firms, you would need to build an entire supply chain from scratch. Countries like Japan and South Korea are fine examples, but it took a lot of effort. Multiple economies after them tried to emulate but failed. It wasn’t until the 1980s that a new model emerged.
Driven by lower transport costs, cheaper communications, and advance information technology, firms could now manage supply chains over greater distances. Now all that was needed to industrialize was a business-friendly government and cheap labor. There is the risk of not building a deep technological base in the country, relying merely on supply-chain trade, which can leave emerging economies in the dust if supply chains shift. Overall there are many positives, especially with evidence that suggests that supply chain trade declined less and recovered faster than overall trade during the financial crisis. Modern supply chains are making it easier for countries to industrialize, and all aspiring countries need to do is reach out and grasp it.