Economic globalization refers to the process that world economies are becoming increasingly interdependent. It is widely believed that the first real historical phase of economic globalization started in the 19th century. As a turning point in this process, the Industrial Revolution brought the innovations in the transportation (i.e. railroads and ships) and the communication (i.e. underwater transatlantic cable), which facilitated the movements of people and goods. At the same time, the government also played an important role in the economic globalization. It supported the free trade by launching new laws to protect capital movements across countries, and encouraged international trade with low tariffs. As claimed by Huwart et al. (2013a), there as a sevenfold increase in the global trade volume during 1840 and 1913, indicating the rising interdependence of world economies.
The process of economic integration was interrupted by the two World Wars. Most Western countries’ exports were significantly curbed due to the First World War, whereas the US became one of the largest global exporters of agricultural products (Huwart et al., 2013a). During the inter-war period, international trade was inactive because of the tough policy on tariffs in Western countries. The globalization slowed down even further after the 1929 stock market crash. Europe was forced into turmoil, while the US tightened its trade policy. The Second World War destroyed the fragile
recovery in the 1930s.…