Columbia International Affairs Online: Working Papers

CIAO DATE: 11/2008

Has Financial Internationalization Turned into Financial Globalization?

Samir Saul

April 2006

Institute on Globalization and the Human Condition, McMaster University

Abstract

In the study of economic globalization, one of the most interesting and important debates focuses on the comparison of the international economy at the end of the nineteenth and the twentieth centuries. Some political scientists and economic historians argue that the level of internationalization in the period between 1870 and 1914 is at least as high as that found in the last quarter of the twentieth century. Accordingly, they prefer to speak less of "globalization" and more of "internationalization." Others argue that this analysis is flawed because it does not take sufficient account of the greater extensiveness of the international economy at the end of the twentieth century and of the deeper integration of world financial markets. They prefer to distinguish these changes by describing the current world economy as a "globalized" one rather than an "internationalized" one. The debate is also important because it has given rise to questions about how best to "measure" economic globalization, particularly when most statistics are still gathered by nation-states and are organized around the framework of relations between nation-state economies rather than a global economy.

Finally, the issues at the heart of the debate are crucial ones. Understanding well the economic processes of the current global economy is important for public policy. For those seeking a more economically just global economy, it is important to understand well what states can do on their own and where their actions will require cooperation with other states to be effective. Those who emphasize the continuity between the late nineteenth century world economy and that found in the late twentieth and early twenty-first century see greater possibilities for autonomous state action. In contrast, those who argue that important structural changes distinguish the current economy from its historical antecedent stress the importance of greater cooperation among states and perhaps a strengthening of international economic institutions in order to pursue successful and more just economic reform.

In this paper, Professor Samir Saul reflects upon these debates through the marshalling of important evidence that permits a stronger comparison between the two periods than is found elsewhere. One of the difficulties in resolving the debate has been the construction of data in ways that permit a systematic comparison of the two periods. Professor Saul has gone to considerable length in preparing data for such a systematic comparison, making this paper an important contribution to the overall debate. His analysis suggests that there are important continuities between the situation of the world economy in 1870 to 1914 and the present period. He also suggests that new elements are beginning to emerge in the current global economy that point to longer-term more profound changes, that he terms "globalization."