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Questions and Answers
What significant communication link was established in 1852?
What significant communication link was established in 1852?
What year marked the first successful trans-Atlantic cable connection?
What year marked the first successful trans-Atlantic cable connection?
Which countries had free-trading status by 1914?
Which countries had free-trading status by 1914?
What legal reform in the 19th century allowed for the growth of larger firms?
What legal reform in the 19th century allowed for the growth of larger firms?
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What technological advancements contributed to mass production and marketing in the 19th century?
What technological advancements contributed to mass production and marketing in the 19th century?
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What characterized firms in the 18th century?
What characterized firms in the 18th century?
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When did limited liability become fully available in Britain?
When did limited liability become fully available in Britain?
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What major global event in 1914 significantly impacted the global economy?
What major global event in 1914 significantly impacted the global economy?
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What was a significant change in international trade by 1914?
What was a significant change in international trade by 1914?
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Which region was the dominant source of Foreign Direct Investment (FDI) in 1914?
Which region was the dominant source of Foreign Direct Investment (FDI) in 1914?
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Which of the following was a primary focus of world FDI investments?
Which of the following was a primary focus of world FDI investments?
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What strategy did firms like Siemens and Singer employ in response to globalization?
What strategy did firms like Siemens and Singer employ in response to globalization?
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What type of organizational forms did businesses utilize in cross-border activities?
What type of organizational forms did businesses utilize in cross-border activities?
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In which sectors was most of the FDI in 1914 concentrated?
In which sectors was most of the FDI in 1914 concentrated?
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Which countries were typically the largest hosts for FDI by 1914?
Which countries were typically the largest hosts for FDI by 1914?
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What was one of the key motivations for entrepreneurs in the global economy?
What was one of the key motivations for entrepreneurs in the global economy?
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What was the trend of real wage dispersion between 1870 and 1910?
What was the trend of real wage dispersion between 1870 and 1910?
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Which country abolished slavery in 1888?
Which country abolished slavery in 1888?
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How many people were sent around the world as indentured laborers between the 1830s and World War I?
How many people were sent around the world as indentured laborers between the 1830s and World War I?
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Which of the following countries was occupied by the United States after the war with Spain?
Which of the following countries was occupied by the United States after the war with Spain?
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Which Asian country was forced to open its borders in 1853?
Which Asian country was forced to open its borders in 1853?
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By 1913, what was the population of the British Empire compared to its global empire?
By 1913, what was the population of the British Empire compared to its global empire?
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Which countries occupied substantial parts of Africa in the 19th century?
Which countries occupied substantial parts of Africa in the 19th century?
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Which modern states were included in France's Asian colonies?
Which modern states were included in France's Asian colonies?
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Which European nation had colonial possession over Indonesia?
Which European nation had colonial possession over Indonesia?
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Which territories did the United States occupy after its war with Spain?
Which territories did the United States occupy after its war with Spain?
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During which decade did British merchants begin forming overseas banks?
During which decade did British merchants begin forming overseas banks?
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What was a characteristic of the early cross-border investments made by bankers?
What was a characteristic of the early cross-border investments made by bankers?
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What principle did early merchants use when selecting people for cross-border representation?
What principle did early merchants use when selecting people for cross-border representation?
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What was the significance of the factories erected by entrepreneurs in the 1830s?
What was the significance of the factories erected by entrepreneurs in the 1830s?
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In what manner did merchants and bankers expand their businesses across borders?
In what manner did merchants and bankers expand their businesses across borders?
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How were the investments made by British merchants in the 1830s characterized?
How were the investments made by British merchants in the 1830s characterized?
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What was a significant consequence of the Industrial Revolution in Britain?
What was a significant consequence of the Industrial Revolution in Britain?
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Which of the following best describes the impact of British manufactured textiles on other countries?
Which of the following best describes the impact of British manufactured textiles on other countries?
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During the Industrial Revolution, which of the following was NOT a motivation for newly industrialized regions?
During the Industrial Revolution, which of the following was NOT a motivation for newly industrialized regions?
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What led to the unprecedented mobility of labor during the period referenced?
What led to the unprecedented mobility of labor during the period referenced?
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What enabled the creation of the 1st global economy?
What enabled the creation of the 1st global economy?
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What was a primary characteristic of trade during the Industrial Revolution?
What was a primary characteristic of trade during the Industrial Revolution?
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Which statement is accurate about the era of imperialism mentioned?
Which statement is accurate about the era of imperialism mentioned?
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Which of the following was a result of Britain’s dominance in manufacturing by 1800?
Which of the following was a result of Britain’s dominance in manufacturing by 1800?
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What economic policy did Australia implement in 1901 to control immigration?
What economic policy did Australia implement in 1901 to control immigration?
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What caused a worldwide economic shock in 1929?
What caused a worldwide economic shock in 1929?
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What event followed the Great Depression that further disrupted the international monetary system?
What event followed the Great Depression that further disrupted the international monetary system?
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What was a consequence of the severe recession following World War I in 1918?
What was a consequence of the severe recession following World War I in 1918?
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During the 1920s, what was a trend concerning foreign companies?
During the 1920s, what was a trend concerning foreign companies?
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How did the Gold Standard affect global economies in the mid-1920s?
How did the Gold Standard affect global economies in the mid-1920s?
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What major economic event occurred shortly before the onset of the Great Depression?
What major economic event occurred shortly before the onset of the Great Depression?
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What action did many governments take regarding enemy-owned companies during World War I?
What action did many governments take regarding enemy-owned companies during World War I?
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Study Notes
Multinational and Globalization
- The Industrial Revolution led to external circumstances that favored the growth of trade.
- The Industrial Revolution facilitated the unprecedented mobility of labor.
- Imperialism involved the forced movement of people as slaves.
- A rapid increase in cross-border flows of capital occurred.
- British exports of manufactured textiles significantly impacted handicraft industries in China and India.
- Newly industrialized regions sought markets for their products and raw materials needed for expanding populations.
- The end of the Napoleonic Wars (1790-1815) led to a period of relative world peace.
- International trade was stimulated by a shift towards liberal economic policies.
- Tariffs fell to low levels by mid-century.
- International trade grew faster than world output during the late 19th century.
- There were few restrictions on capital movements during this time, and adoption of the Gold Standard was widespread.
- Britain was the largest capital exporter, and London became the global financial center.
- Sterling (British currency) was the world's hardest currency due to its convertibility to gold.
- The Gold Standard reduced foreign exchange risks.
- The Bank of England, Britain's central bank, oversaw the Gold Standard.
- During the 19th century, 60 million Europeans emigrated to the Americas.
- By 1900, 14% of the US population was foreign-born, increasing from 5 million in 1800.
- There were few restrictions on international travel and work.
- Steerage costs fell, making emigration more feasible.
- Income gaps between rich and poor countries decreased.
- Slavery continued in the United States until the 1860s and in Brazil until the 1880s.
- Cross-border movement of indentured labor from Asia occurred.
- Infrastructure projects in the Caribbean, Africa, and elsewhere utilized indentured labor.
- Between the 1830s and World War I, approximately 4 million people, including Indians, Malays, Chinese, were transported globally.
- The United States occupied Cuba and the Philippines following a war with Spain (their former colonial rulers).
- Japan opened its borders to foreigners after the arrival of an American naval force in 1853.
- Japan rapidly modernized and occupied Korea and Taiwan by 1914.
- The British Empire expanded across Asia and Africa during the 19th century.
- France, Belgium, Portugal, and Germany also occupied parts of Africa.
- The Dutch East Indies (Indonesia) was a colonial possession of the Netherlands.
Growth of Multinationals
- Businesses and entrepreneurs built the first global economy.
- There was a new scale and durability to business structures created during the 19th century.
- 1820s - Businesses began to make international investments.
- These investments were sustained without the benefit of monopoly rights.
- During the 1830s, British merchants and bankers formed specialized "overseas" banks.
- This facilitated banking activities into colonies (e.g., Australian, Canadian, and the West Indies).
- Entrepreneurial firms began to establish factories across borders.
Foreign Direct Investment (FDI)
- In 1914, Western Europe (as a region) and Britain were the dominant sources of global FDI.
- FDI was distributed globally, with Latin America and Asia being significant host economies.
- Half of the world's FDI was invested in natural resources.
- A third of FDI went to services like financing, insuring, transportation, and commodity/foodstuff sectors.
- Multinational Manufacturing was mainly concentrated in the industrial economies of Western Europe and North America.
Diversification of Organizational Forms
- Entrepreneurs recognized opportunities in the rapidly globalizing world economy.
- Firms like Siemens and Singer began by adding value to products in their home markets, and later expanded internationally.
- Internal managerial and technological competencies helped sustain these investments.
- Firms employed diverse organizational forms in foreign markets.
- Many ventures were established solely to operate in foreign countries. These were termed "free-standing companies."
Free-Standing Companies
- Thousands of British and other European firms were created exclusively for international operations, with no prior domestic business.
- They were legally incorporated in their home countries.
- Typically small, with a head office, a board of directors, and a few clerical staff.
- Primarily focused on natural resources, services, or processing.
- Many British firms were actively engaged in operations within the United States.
- More than 3/4 (75%) of the 200 Dutch companies in 1914 operated in Indonesia (then known as the Dutch East Indies).
Policy Environment
- The absence of significant international wars reduced the risk of cross-border business.
- The spread of international property law ensured virtual worldwide protection of property rights.
- 17th century bilateral commercial treaties sought protection for alien property and reduced trade risks.
- The established rights of 19th-century foreigners' property could not be taken without full compensation.
- Uncompensated seizures were considered robbery.
- The principles of these laws were supported by European governments and enforced globally.
Drivers of Multinational Growth
- The spread of modern economic growth accelerated the search for raw materials, foodstuffs, and markets for manufactured products.
- The Industrial Revolution in Britain led to capital-intensive industries like chemicals, machinery, and packaged food products.
- Chemicals and electrical production consumed substantial amounts of raw materials (copper, aluminum, zinc).
- The automobile industry developed in the early 20th century, requiring materials like tin for solder and alloys for bearings.
- Petroleum emerged as a substitute for coal, used in trains, steamships, and early automobiles.
- The rapidly growing US market and resources attracted European countries needing markets and resources
Liberal Economic policies
- Government involvement in economic activity declined.
- Most governments treated overseas firms similarly to domestic firms.
- Mid-century saw a partial shift away from this liberalism.
- The McKinley Act of 1890 increased US tariffs on foreign goods.
- The average tariff on protected commodities was 50%. Foreign firms responded by opening their own factories domestically.
Improvements in Transport and Communication
- Increased railroad speed and reliability (1830s).
- Improvements in sailing ship technology resulted in lower freight costs.
- Steamships further expanded trade.
- Construction of the Suez Canal (1869) shortened the route between Europe and Asia.
- The opening of the Panama Canal (1915) further reduced sea journey times and costs.
- The telegraph revolutionized communications (1852-initially between London and Paris).
- Trans-Atlantic cable connections were established (1866-1872).
- This facilitated communications across Europe and with Australia.
Appearance of New Types of Firms
- 18th-century firms were predominantly small, family-owned enterprises.
- Owners were typically held personally liable for all business debts.
- The largest enterprises of the 18th century were chartered trading companies.
- 19th-century legal reforms allowed for new corporate structures.
- Limited liability allowed for larger capital raising.
- Limited liability became fully available in Britain in 1861.
Emergence of the Modern Industrial Enterprise
- Industrial enterprises played a critical role in creating technologically advanced, fast-growing manufacturing sectors.
- Advances in technology and markets were crucial in this modernization process.
- Innovations in transportation and communication (railroads, telegraphs, steamships, cables) made possible the mass production and marketing of goods.
Globalization Challenged and Reversed (1914-1950)
- The start of World War I marked the beginning of the end of the first global economy.
- By 1914, only Britain, the Netherlands, and Denmark remained free-trading countries.
- A backlash against immigration occurred, with the US starting controls around the 1880s.
- In 1901, Australia implemented a policy that nearly halted immigration from Asia and the Pacific islands.
- World War I ushered in significant economic instability.
- Following WWI, countries experienced economic crisis (eg recession).
- The Great Depression ensued in 1929.
- A major worldwide economic shock occurred.
- US real GDP dropped significantly.
- Unemployment rose in developed countries.
- Commodity prices plummeted, severely impacting developing countries.
Backlash against the Global Economy
- National concerns regarding company ownership increased during WWI.
- Governments seized assets of enemy companies.
- The Russian Revolution in 1917 led to the seizure of foreign property.
- Xenophobic policies and political nationalism gained popularity in the 1920s and 1930s.
- Governments in developing countries questioned foreign dominance over their natural resources.
- The Mexican nationalization of oil companies in 1938 was a key example of this trend.
Trade Protectionism Spread
- After WWI, trade protectionism increased substantially, notably in the US.
- US tariffs reached record highs by the early 1920s (Fordney-McCumber tariff).
- Australia, India, and Latin American countries adopted tariffs, quotas, and other trade barriers.
- These measures aimed to protect domestic industries and encourage import substitution.
- The Great Depression (1930s) created a worldwide collapse of the international trading system.
- The Smoot-Hawley Tariff Act in the US further exacerbated the depression.
- Many nations adopted protectionist measures.
Backlash against Migration
- During World War I, passport usage became compulsory in many countries, including the US.
- Restrictions on entering and leaving countries accompanied the increased use of passports.
- Other restrictions and visas were also implemented.
- In the 1920s and 1930s, many countries restricted immigration, further impacting global interconnectedness.
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Description
Explore the factors that fueled globalization during the Industrial Revolution, including the impact of imperialism and international trade. This quiz covers the dynamics of labor mobility, capital flows, and the economic policies that shaped global markets. Test your knowledge on the historical events that contributed to the rise of multinational trade.
