known world both politically and economically. The
global penetration of common methods of trading,
accounting, construction and manufacturing,
together with the coverage of a third of the world’s
land mass (with influence evident in every part
of the globe) resulted in the emergence of an
integrated economic system that for the first time
could be called global.
It is interesting to note the debate that arose
in recent years regarding the relationship between
investment and return within the British imperial
system. Some have argued that the net flow of
wealth within the British empire was outwards,
from the metropolis to the colonies. While making
a definitive judgment on such a complex matter
remains a challenge, it is probably correct to
observe, at least qualitatively, that the engineered
products of industrialised Britain at the time
had few substitutes or competitors anywhere in
the world. This makes it difficult or impossible
to assess their true value by comparison with
equivalents, but suggests that it should be
placed appropriately high. In addition, one should
not neglect the future benefits of economic and
financial integration and the development of local
structures and organisations. Some of these
advantages became apparent in economies such
as India and China many decades later.
Avner Offer [2] opens his review on the subject
with the question; “Was the British empire an
asset or a liability?” He continues with the
quotation from Adam Smith, who thought the
“the American colonies were an asset, but… the
effort to govern them from London was a folly”.
These observations place into context the earlier
comments about the full spectrum of benefits of
the globalised market, and lead us to the subject
of the emergence and effects of the globalised
financial institutions.
tBy the start of the 20 th century, a global
financial system was in place. Its existence
was necessitated by the fact that large scale
engineering projects were undertaken in places
far removed from the investors, be it individuals
or organisations. The scale of the projects, such
as the construction of major canals, required the
involvement of multiple investors, and that, in
turn, motivated the creation of financial market
with instruments such as shares and bonds.
Information was also required by the investors to
allow them to make qualified judgments about the
value of projects, commitments, etc.
An important role in international trade and
finance is played by the national currencies and
their exchange rates. Fixing these rates with
respect to some reference provides stability for
the currency market, such as the classic gold
standard prior to 1934, and during the 25-year
period following World War II, when a system of
fixed exchange rates pegged to the dollar prevailed
[3]. The modern de-regularised world offers greater
flexibility and flow of funds, but sometimes at the
expense of massive swings of exchange rates, as
seen in the late 20 th and early 21st centuries.
A l t ho u g h t his int r o d u c es a d di t io nal
uncertainties for companies operating globally, it
also increases the room for manoeuvre, as far as
planning and operations are concerned.
Globalized Manufacturing
In the course of the 20 th century the world
witnessed the progressive involvement of
new territories and populations in the global
economic process. This expansion was driven by
the relentless requirement to reduce costs and
improve competitiveness. Recognising situations
where labour costs constitute a substantial
fraction of the total manufacturing expenditure,
large and small companies sought the possibilities
of moving some of their production to locations
where labour was cheap and readily available.
The longer term consequences of such a