Globalization in Historical Perspective

Abstract

After World War 2 (WW2) and till mid „70s most less developed countries (LDCs) and newly industrializing countries (NICs) implemented a closed economy, import-substitute industrialization model with excessive interventionism and protectionism. The results were slow growth due to balance of payments crises and worsening income distribution due to inflation. Therefore since mid „70s most moved to market economy, outward orientation and export encouragement. This necessitated encouraging private investments and direct private investments (DPIs), flexible exchange regime, freer foreign trade, and implementation of privatization. Since „90s, this time large flow of financial funds from developed countries (DCs) to LDCs and NICs, in addition to free foreign trade and flow of DPIs ushered in the process of globalization. 1997-8 global financial crisis slowed the flow of funds and DPIs, but globalization continued in essence while China and India entered free market economy with remarkable success. What is important, market economy and globalization reduces excesses of interventions and protectionism. But there is still room and need for “good governance” on the part of the governments of LDCs and NICs to avoid pitfalls and reap greater benefits.