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Labor and Globalization: The Economic and Political Reasons behind Globalization in
Relation to Migration and Labor within a Comparison between the First and Second
Waves of Globalization
Scott Abel
April 25, 2010
Globalization and Labor: Question Three
*During the nineteenth century, the globe integrated more so than any other time
up to that point in history with people, capital, and trade moving across the oceans of the
world in speed and quantities at hitherto unprecedented levels. Some political
economists ask if the globalization during the post modern era of the late twentieth
century and early twenty-first century resulted more so from financial and trade shifts
rather than population migrations, which helped spur the integration of the nineteenth
century and early twentieth century. These two waves of globalization spurred massive
growth in the overall global economy, which will be described in this essay. The wave of
globalization that started in the nineteenth century initiated from technological
innovation, economic liberalization, and political openness that permitted the mass
migration from Europe during this period. Mass migration was an important aspect of
the first wave of globalization, but occurred after the other reforms and advancements.
The wave of globalization initiated in the late twentieth century saw politicians loosen
capital flow restrictions, while allowing legal entry for few immigrants in comparison to
the first wave. This essay will argue that migration does not necessarily differentiate the
two waves of globalization, as it remains the last step in the process of globalization. If
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this comes to fruition, then the causes and characteristics of the two great waves of
migration are similar in structure and cause.
*The first great wave of globalization resulted from several different main factors,
which both state and non-state actors promoted. The following segment will generally
focus on the period that lasted from 1815 to 1914 with special attention paid to Europe,
but also the contributions of the Americas and Australia. The latter two may be grouped
as the New World for the purpose of expediency. The first paragraph examines the
importance of political reforms adopted in Europe essential for globalization and the next
paragraph will explore the importance of technological innovation for the increase sheer
volume and pace required for globalization. Finance and migration, the latter two topics
for the first wave of globalization, will focus more on the capital and labor transported
across oceans that defined globalization. The wave of globalization in the nineteenth
century was completely unprecedented and required a series of historic innovations not
yet seen in human history.
*European nation-states, particularly Great Britain, started the first great wave of
globalization during the nineteenth century as political and economic leaders realized that
their nations and firms would benefit greatly from open economic systems and less
political restrictions on trade and capital flows. Globalization required the end of the
wars that devastated much of the world throughout the eighteenth century and the early
nineteenth century, which obstructed free trade and raised logistical costs too high
(ORourke-Williamson 1-2). Great Britain gradually liberalized its trade at the end of the
Napoleonic Wars at the insistence of economists such as David Ricardo (ORourke-
Williamson 36-37). Such instances of liberalization included permitting the emigration
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of skilled laborers in 1825, allowing machinery exports in 1842, along with reducing
tariffs in 1833 and 1845. The repealing of the Corn Laws in 1846 symbolized the
liberalization of the grain trade, although the tariffs already declined 70% between 1815
and 1827 (ORourke-Williamson 37-38). The Cobden-Chevalier Treaty of 1860 required
the dramatic reduction of tariffs between Great Britain and France, which served as the
free trade model for the rest of the Europe and their colonies by extension. The United
States remained the only industrialized nation to keep high tariffs throughout the
nineteenth century (Oatley 14). Political liberalization of economies hardly remained
uniform throughout the century as many European states retreated from free trade during
the 1870s and 1880s (ORourke-Williamson 93, 105, 117). The open political system
initiated by Great Britain permitted the flow of goods and people throughout the world,
but this was not enough to create the extensive levels of globalization experienced in the
nineteenth century.
*Technological advancements, along with political openness, permitted people to
communicate and travel faster and cheaper than ever before in human history. Through
the use of the electronic telegraph, people communicated with each other across the
ocean in a fraction of the time it took during the age of sail. The steam engine allowed
people to rely less on the whims of nature to travel. Initially canals improved trade as the
completion of the Erie Canal in 1825 cut costs from transporting goods from Buffalo to
New York City by 85% (ORourke-Williamson 33). Later, railroads made intra-
continental shipping even cheaper, as it cost $30 to ship a ton three hundred miles in
1830 and it only cost $5 to ship a ton the same distance in 1900. Maritime shipping
prices and travel times also dropped as a transatlantic voyage often took a month and cost
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$10 a ton in the early nineteenth century, but eventually it only took a week at the price
of $3 a ton (Oatley 14). Various advances in maritime technology, particularly of the
screw propeller and steam engine reduced shipping times, while development of coaling
stations and the Suez Canals competition in 1869 extended the steamships range.
Refrigeration allowed agricultural nations to export animal products such as beef to
Europe. The advances in technology helped offset the price increases caused by the
return of protectionism in the 1870s (ORourke-Williamson 33-35). Such advances in
transportation and communication made globalization possible because the sheer volume
of goods, information, ideas, and people that could be exchanged became exponentially
higher than what it was during the eighteenth century.
*The first wave of globalization required change in the global financial system to
meet the demands for increase of transnational exchanges. In the late nineteenth century,
governments backed their currencies with precious metals to allow greater tradability on
the global marketplace. Nations backed their currencies in gold and silver or sometimes
a combination of the two. The greater tradability allowed, although not necessarily
caused, a growth of trade of 3.5% per annum from 1815 to 1914, which was three and a
half times faster than the previous three hundred years (Oatley 15). Western economies
did not exceed this growth in trade until the 1970s and it took some economies until the
1990s to grow that much (Jacoby 115). With war generally not draining capital from
most nations during the period, financing became available to develop infrastructure.
Foreign capital, whether it was goods or expertise, influenced the infrastructure of towns
throughout the world (ORourke-Williamson 2). The open financials system allowed for
investors and firms to spread capital around the world with a reduced regard to national
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boundaries. British investors devoted 10% of their income toward foreign markets in the
late nineteenth century, with other northwestern European nations close behind. The
capital from these nations allowed other places to develop infrastructure such as railroad
and telegraph lines (Oatley 15), thus making the world even more connected. European
financial capital and goods permitted the integration of the people throughout the world
thus furthering globalization.
*Migration held an important role in globalization by reducing population stress
in European countries and providing much needed labor to the New World nations and
territories that encouraged the arrival of new immigrants. The increased diversity of
people in major cities throughout the world was perhaps the most visible sign of
globalization in the nineteenth century. Accompanying the exchange of commodities,
migrants to new lands possessed the capability to change the very fabric of a society. For
example, as a result of the 1.8 million Irish emigrating to the United States between 1840
and 1860, a quarter of the inhabitants of New York City were born in Ireland by 1860
(Kraut 32). The emigration of the Irish helped relieve the societal pressures and made
labor more valuable in Ireland. After the Irish famine migration, the per capita income
for the Irish rose 1.3% per annum until World War I and it also allowed a rise in per
capita Gross National Product by 15 to 33% (ORourke and Williamson 148, 151). The
wealth dispersed throughout the population as agriculture wages rose 19 to 41% and
nonfarm wages rose from 23 to 52%, along with a decrease in rent prices by 33 to 55%
(ORourke and Williamson 151). The mass increases of the US immigrant population
required the establishment of an organized immigration authority to process and sort the
new immigrants. New York State established an immigration policy and procedure
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operating out of Castle Garden in 1855 that permitted healthy foreigners to enter the
country after simply registering (Kraut 36). The significance of this measure shows that
immigration required changes because of rapid increases, but also shows the lack of
immigration restrictions.
*Various New World policymakers created incentives for migrants to work in
their economies during the first wave until the demand for low-skilled labor decreased,
then New World governments restricted immigration policies. Argentina established
liberal immigrations policies that paid immigrants to cross the Atlantic and work there.
Australia established open immigration policies to all commonwealth nationals with the
exception of ethnic Chinese, paid a special tax to enter. Canada decentralized its
immigration policy and encouraged migration into the interior through lowering land
prices. Brazil, in need of low-skilled labor after the abolishment of slavery, paid for
immigrants to come. By the second and third decades of the twentieth century, New
World policymakers determined that their polities no longer needed the masses of low-
skilled labors and therefore tightened immigration regulations in. Argentina and Brazil
restricted their immigrations policies through reducing incentives and accepting fewer
immigrants. Australia adopted British immigration policies in the twentieth century. In
general, Anglo-Saxon nations discriminated against East Asian immigrants, by placing
severe restrictions on their immigration (Solimano 11-12). The New World simply lost
the incentive to allow more immigrants to join their workforce, which no longer needed
the masses of unskilled labor that it did just two decades earlier.
*Globalization opened new opportunities for those wishing to leave Europe and
elsewhere for the United States to find work. Approximately three-fifths of the European
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emigrants who departed for the New World between 1820 and 1914 went to the United
States (ORourke and Williamson 119). Over a hundred year period from the 1820s to
1920s, roughly 40 million emigrants entered the United States to fill the demand brought
by the opening up of new territories and later development of mechanized industries such
as textiles, steel, coal and automobiles (Diner). Such a large pool of immigrants allowed
US authorities to remove those deemed unfit to enter, but these numbers only reached 3%
in 1916, along with averaging less than one percent between 1890 and 1929 (Kraut 4).
The net immigration number remains unknown as an estimated 30% returned home
between 1890 and 1914 (ORourke and Williamson 120). US legislation banned the
entrance of one nationality with the Chinese Exclusion Act of 1882, but otherwise had an
open immigration system. The United States took in many immigrants, but this trend
decreased immigration by the 1920s with the assistance of the National Origins Act in
1921 and 1924. The act created an immigration system biased against Southern
Europeans, Slavic peoples, and especially Asians (Diner). Even with a well-developed
economy, the United States, like other New World nations, severely restricted
immigration policy.
* Large numbers of immigrants crossed the Atlantic and other oceans to find new
work in the New World, altering the ethnic backgrounds of its people. The first wave of
immigration possessed the key effect of convergence in the global economy. New World
and European prices, especially grain prices, and real wages converged, although never
completely meeting and continued to do so until World War I (ORourke and Williamson
23-25). Advances in shipping allowed workers to find better wages in the New World,
whereas Europeans could sell their goods to most New World countries at global market
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prices. The growth of New World economies during the nineteenth and twentieth
centuries, often through resource extraction, attracted immigrants, which in turn helped
expand New World economies through their labor and demand for goods (Solimano 15).
Therefore, immigrants did not cause the first wave of globalization, but rather accelerated
it. Stability, movement of capital, and technological innovation permitted the first wave
of globalization. In time, migration became an important characteristic of as the first
wave of globalization as nations throughout the world became more ethnically diverse.
*The following section will examine the second wave of globalization and its
causes, along with its affect on trade, finance, and labor through the perspective of
political economy. The essay will also examine each of the three themes in a manner that
explains their development or lack thereof during the second wave of globalization. The
global recession of the 1970s and early 80s inspired confidence in deregulation of the
financial system, paving the way for globalization (Cerny 125). The election of
conservatives and the implementation of their ideology in the 1980s lead to the
reemergence of free-market policies and deregulation throughout the world, especially
with the United States and Great Britain (Cerny 129). Characteristics of the second wave
include exports of finished goods to other countries, but intermediate goods, components
shipped to another country to be developed and sold as a finished good, account for a
larger proportion of globalization (Milberg 2-5). Lower costs and greater flexibility with
the labor force aboard motivate firms to move elsewhere, in part because communication
and transportation are less expensive. Fewer unions and regulations regarding offshore
workforces convince many firms into moving production overseas (Milberg 6). The
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following section will examine the renewed market openness and its impact on trade,
finance, and labor with a particular focus on migration.
*In the late twentieth century and early twenty first century, global trade
flourished as a result of global de-escalation of trade regulation and customs. Global
trade of merchandise rose from a value of US$ 84 billion in 1953 to an astonishing US$
14 trillion in 2007 (Oatley 21). Certainly there were similar reasons for the development
of the second wave of globalization as there was for the first. In the post World War II
era, no conflicts have significantly reduced maritime trade for extended period of time.
The state regulates international trade by imposing duties, customs, and other regulations,
which allows it to control the importation of goods and services. Throughout the last
quarter of the twentieth century and into the twenty first, governments substantially
reduced trade barriers (Dicken 420). Governments justify the reduction in tariffs as free
trade may lower production and consumption costs, along with benefitting a majority of
the poor (Solimano 74-76). Besides the nation-state, international organizations such as
the International Maritime Organization and the International Civil Aviation
Organization set regulations for the security and safety of the crews. The deregulation of
international trade moved the world toward globalization, which means a more integrated
global system (Dicken 421). Without free trade and a deregulated global trade system,
globalization and tremendous trade growth could not exist.
*Both the nation-state and international firms have moved decisively toward a
more deregulated globalized society. The United States and Great Britain liberalized the
airline industry beginning in the 1970s, with the United States deregulating the domestic
airline industry in 1978. The 1990s saw deregulation throughout the global airline
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industry (Dicken 422). The shipping industry consolidated itself through mergers and the
purchasing of shipping firms. For example, Maersk bought Nedlloyd in 2005 to become
the worlds largest container operator. The expansion of some firms has resulted in the
diversification of functions which allows for other firms to purchase all logistical services
from a single firm (Dicken 422). With deregulation and transnational corporate
integration, the world moved closer toward globalization and freer trade.
*Rapid advancements in technology guided the world toward the second wave of
globalization in the twentieth century. Rapid science and technological advancements in
information and communication technologies permit a more integrated globe (van Ginkel
23-24). Information may be communicated from opposite sides of the planet almost
instantaneously because of technology, whereas advancements in transportation allow
goods to move efficiently from all over the planet. Technology gives much of the world
more options and allows the global population to grow (Sirindhorn 39). Extensive
growths in populations permit many nations not to need low skilled labor migrants from
other nations. Technological advancements permit the world to globalize through
developments in communication and transportation, which permit goods and information
to flow quickly and efficiently across oceans.
*A critical part of the second wave of globalization includes financial
deregulation and increased openness that allowed financial markets to both soar and
crash. With developments in the capital market in the last two decades of the twentieth
century, vast sums of capital can move around the world in nearly an instant (Jacoby 94).
Globalization enhances social inequity throughout, by allowing the wealthiest investors
to become far wealthier as post 1980 lassiez-faire policies. The liberalization allowed an
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unprecedented growth in the financial markets from the existence of $12 trillion in 1980
to $140 trillion in 2005 (Jacoby 95-96). For the United States and Great Britain, the
financial sector accounted for roughly 15% of Gross Domestic Product and around 40%
of aggregate corporate profits (Jacoby 97-98). As part of globalization, deregulation of
the financial markets allowed such high growth, but what allowed deregulation? In
reaction to stagflation, firms lobbied politicians to deregulate the financial markets. The
lobbyists succeeded and the Carter, Reagan, and Clinton administrations successfully
repealed financial regulation such as the Glass-Steagal Act (Jacoby 107-109). Financial
deregulation helped loosened the capital markets, which assisted the world move closer
toward globalization as capital could help develop foreign nations as in the first wave of
globalization.
*In the first wave of globalization, migration played an important role for global
integration, although it may not have been the prime reason for economic globalization, it
permitted people of varying cultures to live with each other in foreign lands. In
comparison to the first wave of globalization, the percentage of people migrating during
the second have has been small. During the last two decades of the twentieth century,
there were only 7.5 million migrants per decade (Solimano 4). In the United States, 7%
of the population consisted of immigrants from 1871 to 1920, whereas the latter half of
the twentieth century legal immigrants consisted only of 2.5% of the total population.
Why have governments, particularly the United States and other developed nations
attempted to block this aspect of globalization? Politicians tend to see allowing more
migrants into nations as not politically beneficial, whereas business leaders seek other
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means to exploit cheap labor. The following section will attempt to explain why
documented migration is so low for the second wave of globalization.
*Technological innovation allows for firms to remain more competitive in the
global market by permitting firms to cut labor costs through offshore outsourcing or
offshoring and relinquishing employees. Technologic advancements allow for goods
to be produced in one country and sold on the market of another on a large scale.
Technology often permits firms to perform services in foreign nations that previously
would have been performed by a domestic firm (IMF 161). Examples of the types of
jobs offshored by some firms include Information Technology, Knowledge Process
Outsourcing, and Research and Development (Gereffi and Fernandez-Stark 2). Wage
inequity and a decrease of demand in unskilled labor may be attributed toward
technology, as advanced nations seek to constantly adapt to new technologies. With the
ongoing information revolution, many places seek skilled labor to best adapt to the
evolving global system (Solimano 15-17). Firms may also use technology to lower the
overall cost of labor by replacing the functions of people with technology, which has
been particularly present in Anglo-Saxon nations (IMF 170, 172). Technological
advancements help facilitate the relocation of firms from more expensive regions to less
expensive ones.
*Developed nations witnessed firms expanding overseas or contracting other
overseas firms to provide goods and services for sale in developing nations. Nations with
large labor markets such as China, India, and former Easter Bloc nations reformed
political and economic systems into relatively open market regimes. These reforms,
along with the removal of trade barriers in other nations allow goods and capital to flow
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across borders, along with a four fold increase in the global labor pool for many firms
(IMF 161). Many of these developing nations have reduced labor costs, where firms
may hirer laborers for reduced compensation, while sometimes maintaining certain levels
of talent (Gereffi and Fernandez-Stark 17). Nations most benefitted by service offshoring
include nations with large inexpensive workforces that have a colonial past involving an
English-speaking nation (Gereffi and Fernandez-Stark 18). Political and economic
openness in developing nations allows for firms to employ inexpensive workers from
large labor forces, while transferring goods and services previously in developed nations
into developing nations.
*Offshoring constitutes a significant proportion of the loss of jobs in developed
nations, but that does not necessarily account for a majority of developed nations job
losses. The gross output of non-industrial and aggregate intermediate offshoring has had
only moderate increases in developed nations since the 1980s, with the Netherlands
leading at 12% ranging with the United States and Japan with only 2-3%. As
manufactures are more easily traded than services, they have taken the brunt of
offshoring. Manufacturing offshoring in the G-7, Australia, and the Netherlands has
grown from 6% in 1980 to 10% in 2003, with Japan at the lowest with 4% and Canada at
the highest with 25% (IMF 164-165). As a result of labor globalization and technological
advancements, skilled laborers have observed a smaller income share or proportion of
overall income in relation to the rest of the economy (IMF 178-179). Globalization
benefits laborers by giving their wages greater buying power through less expensive
services and goods, even if the laborer in the industrialized world loses a significant
proportion of his labor share (IMF 179). Offshoring remains relatively low relative to the
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overall economy but this may change as its growth is higher than trade as advanced
nations find it increases productivity and decreased costs (IMF 180). Offshoring hurts
the domestic advanced nations labor force, although it may be mutually beneficially for
most. Offshoring also constitutes a replacement for migration as it requires firms to
move to nations with cheap labor, rather than the other way around.
*Although the United States witnessed decreases in immigration in relation to the
golden age of immigration by limiting legal entries and denying access to more
immigrants, the US immigrant population continues to remain a large portion of the
workforce because of undocumented immigration during the second wave of
globalization. In recent years, developed nations permitted few immigrants to enter their
nations, which results in the amount of people living in a country where they were not
born at historically low levels (Goldin and Reinert 157). Illegal immigration, however,
has flourished in the United States as one estimate places document and undocumented
immigrants as 15% of the US labor force but that number is lower than other developed
nations, which tends to average around 20% according to a 2007 study (IMF 175). In
total for both developing and advanced nations, there has been a lesser demand for
immigration than imports of material goods from 1990 to 2005 (IMF 163). Advanced
nations tend to prefer accepting skilled immigrants during the second wave over unskilled
(IMF 164). During the second wave of globalization, wealthy nations such as the United
States have economies that utilize large numbers of immigrants for inexpensive labor.
*The trend of proportionally small immigration populations in industrialized
nations may disappear, regardless of immigration policy. Nearly one third of The United
States population growth depends on net immigration and is projected to grow to 86% of
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population growth by 2050 (Day). Illegal immigrants numbers rose from 3.3 million
1992 to 5 million in 1996 (Solimano 5). By 2000, that number grew to 7 million (CBO
viii). Undocumented migrants in the United States totaled 12.5 million in August of
2007, but fell a year later to 11.2 million because of the Great Recession of 2008
(Preston). Illegal immigrants, however, do not count for how politicians regulate
migration as they neglect laws enacted by governments. Although the latter part of the
twentieth century witnessed a decrease in migrations, particularly in the United States
relative to the late nineteenth century, immigrants will account for an increasing
proportion of the United States population. If US census predictions about immigration
become reality, all the main characteristics of the first wave of globalization would be
replicated in the second wave of globalization.
* Illegal immigration, however, does not count for how politicians regulate and
therefore many governments including that of the United States are particularly selective.
The United States immigration policy focuses on multiple characteristics of immigrant
applicants. The foremost goal of American immigration policy remains to unite families
divided by national borders. US immigration policy also focuses on allowing entry of
workers with advanced skills or degrees, refugees, and immigrants from nations that have
historically sent few people to the United States (CBO vii, 6). In 2004, the United States
permitted 406,000 immigrants to be with their immediate family by providing visas and
permissible admissions. Furthermore, the United States allowed entry for 214,000 entries
for those sponsored by family members already in the United States (CBO viii). The
Immigration and Nationality Act Amendments of 1965 eliminated the previous quota
system (CBO 1). US Immigration policy set the 2006 flexible immigration cap at
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675,000 immigrants permitted into the nation a year. In 2004, the United States
permitted entry for 946,000 immigrants (CBO 2). The policy of allowing entry to skilled
laborers and those already with connections to people already living the United States
ensures that the documented immigrant population remains prosperous and socially
stable. US immigration policy neglects those seeking to enter the country with limited
labor skills and the economic demand for cheap labor in favor of who are more likely to
establish themselves well.
*If so many jobs are in demand, why are politicians refusing legal entry to
migrants without skills or connections already to the United States? US policymakers
form a system that permits immigrants to enter who has a fairly reasonable chance of
succeeding financially perhaps to avoid the creation of impoverish and unassimilated
communities. Politicians create strict immigration laws to appeal to populist protection
causes that scapegoat immigrants for domestic problems based on emotions and
unsubstantiated claims (Cerny 122, 169). Populists argue immigration causes job
competition that drives down wages and working conditions for native-born Americans
(McCauley). Despite attempts by politicians to close national borders to immigration,
economic incentives for migration provide reasons for people to travel to other nations
for work (Cerny 122). Protectionism prevents mass low-skill immigration out of concern
over the conditions of the poorest in society, which remains the reasoning likely behind
strict immigration laws throughout the globe.
*The United States is hardly the only nation with strict immigration policies.
According to the Organization for Economic Cooperation and Development (OECD),
most nations prefer high skilled immigrants to enter over the past few decades.
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Governments rarely recognize the needs of low skilled immigrants within the recent past,
but this may change as the expenses for enforcing migration rules become too high. The
establishment of temporary worker programs fails to permanently fix the problems
created by illegal immigration or the demand for cheap labor. If the writers of the
International Migration Outlookhave their suggestions implemented, OECD nations
would create legitimate avenues of migration, means of recruitment, and ways to verify
legal statuses (OECD 3). Advanced nations tend to have tight restrictions on the
immigration of unskilled labor or temporary worker programs, but politics regarding low
skilled labor may change in the favor low skilled immigrants.
*Multiple conditions must be in place for globalization to integrate the nations of
the world. The political atmosphere must allow the massive flow of goods and services
around the world, technology must be sufficiently advanced to facilitate communication
and transportation, finance must allow the development of infrastructure, and hoards
people must migrate across national borders. If the first wave of globalization may serve
as a model for the second, massive migration happens after globalization becomes
entrenched deep enough and enough jobs are available. The similarities between the two
waves do not destine the second wave to repeat the first, but rather, the first wave may act
as a guide to our understanding of the second wave. One similarity between the two
waves includes how recently industrialized nations control labor. Rural peasant girls and
women fill Chinese factories to work in highly constrictive environments that control
their lives. Such scenes reminisce of nineteenth-century New England of the United
States, which involved similar workers confined to textile mills. Ultimately, the demand
for low price goods and services drives globalization, whereas liberalization and
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technology facilitate that demand making the characteristics of the two waves of
globalization similar. Although it remains too soon to determine if the second wave of
globalization will include massive migrations as in the first, past events and current
projections make the event likely.
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