#148 Edeka explains globalization

In August 2017, German supermarket Edeka made a bold statement. For one day, the supermarket chain took all non-German products off the shelves. Instead of their favorite Italian pasta, Spanish tomatoes, Israeli oranges, Greek olives, Portuguese sardines, French cheeses, Japanese soy sauce, or Turkish grapes, Edeka’s customers found signs with statements such as “Things are pretty boring without diversity” or “This is how empty our shelves are without foreigners” instead. Clearly, Edeka, with about 26 percent market share the largest player among its competitors in Germany, intended to make a statement directed against racism, xenophobia, and the fear of the foreign. At the same time, it was also a statement for globalization. In a way it is a take on Sara Buongiorno’s 2007 book ‘A Year without ‘Made in China”. In that book, the author describes her family’s quest to live without products from China. It is not hard to guess that this was not only a difficult undertaking, but one that proved to be impossible to complete: a normal life without products that have “some degree of China” in them is simply not feasible. Hence, globalization is not necessarily a choice that individuals make or that governments can opt out of, it is a reality that consumers and corporations have created. And it has been long in the making.

But how long? Some would say that there was even an archaic form of globalization during the Hellenistic age, the time of the Roman empire, the Mongol expansion, and others. Others would argue that globalization is a thing of the relative recent past, starting with the return to peace after World War II, or even later after the General Agreement on Tariffs and Trade (GATT) was implemented, and advances in modern communication and transportation technology increased the pace of international trade. Yet others, such as Thomas Friedman whose 2005 book ‘The World is Flat’ brought globalization to the public stage, would argue that 1492 was the year that the big bang of globalization occurred, only surpassed in significance by the imperialist expansion of other countries, and the founding of the British East India Company in 1600. In a wonderful book, historian Timothy Brook (2008) uses paintings by 17thcentury Dutch painter Jan Vermeer (1632-1675) to decipher the signs of early globalization. Revealing fascinating detail after detail in Vermeer’s work, he takes us from the small Dutch town of Delft to trading stations in the wild vastness of Canada’s unexplored hinterland and the distant porcelain factories of China, clearly demonstrating how the global expansion of business may not be a recent phenomenon of the 21st century. Even early economists such as Adam Smith (1723-1790) or David Ricardo (1772-1823) today might see the new division of labor between Native Americans who traded animal skins for firearms with European traders contributed to globalization (although he never used the term in his lifetime). Before putting a stake in the ground, however, we should also look at the numbers: econometric analysis has shown that international trade only grew at about 1 percent per annum between 1500 and 1799 (O’Rourke & Williamson, 2004). It was a rare phenomenon that developed at a crawl only. Therefore, while it is certainly true that Columbus’ discovery of the Americas or Da Gama’s discovery of the route to Asia opened up new avenues of international trade, the simple exchange of goods across long distances or country borders probably only qualifies for a very limited view of globalization. True globalization, and thus the later stages of what Friedman calls Globalization 2.0 (1800-2000) and definitely, by his definition Globalization 3.0 (2000-present) really only occurred with the global integration of markets– when economic actors in different countries started to compete with each other, and when economies moved from the simple, bilateral trade of goods to an exchange of knowledge, capital, and services along globally integrated supply chains, all facilitated by technological advances in communication and transportation. It is the kind of integration that Georgetown professor Pietra Rivoli wrote about in 2005 when she tracked how a simple t-shirts traverses across countries and between economic actors from Texan cotton growers to global retail chains; or the type of integration that manufacturers of commercial aircraft skillfully leverage in search of the best suppliers and the biggest customers.

Depending on who you ask, today’s world economy has either entered or already fully arrived at that stage. While some authors believe that globalization is in full swing, others, such as Pankaj Ghemawat see the world economy in a stage of regionalization. I’ll leave that debate for some other time, but if you were a consumer looking for that jar of Nutella or that can of sardines at Edeka on that day last August, you experienced how far and deep globalization had gone.

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