In the foundational narrative of globalization, the world became “flat”—a seamless marketplace where the cost of distance plummeted to near zero, allowing commerce to flow effortlessly across oceans and continents. This narrative hinges on the transformative power of technology, which enabled global supply chains to link dozens of countries in the collective creation of everything from airplanes to sneakers.
The technological and financial revolutions of the past four decades were indeed staggering, creating an era of unprecedented internationalization. World trade multiplied nearly tenfold in dollar terms since 1981, approaching $20 trillion. Meanwhile, annual international capital flows, which stood at roughly $500 billion in the early 1980s, soared to over $3.5 trillion today, peaking dramatically before the 2008 financial crisis.
These seismic shifts were made possible by three interwoven revolutions: logistics, which dramatically reduced the cost and time of moving physical goods; digital communications, which enabled real-time, inexpensive management of complex international operations; and finance, which unleashed trillions of dollars across borders through deregulation and digital networks.
Yet, this post-war explosion of international commerce did not result in true globalization, where distance is irrelevant. It resulted in regionalization. The very tools designed to conquer distance—the monster container ships, the fiber-optic cables, and the SWIFT financial network—were overwhelmingly deployed to reinforce ties between neighbors rather than evenly across the globe.
The Logistics Revolution: Slicing Up Production
Before World War II, most international trade consisted of finished goods, such as cars or wine, moved entirely from Country A to Country B. After the war, this model shattered as companies realized they could “slice up manufacturing into discrete parts and processes.” This led to the rise of specialized production chains, or “global value chains,” where countries collectively create a single product. Today, approximately 80 percent of all trade involves raw materials or intermediate goods—parts that will be stamped, welded, or inserted elsewhere to create the final product.
The Box: Container Shipping
The most fundamental shift came from a simple piece of standardized steel: the shipping container.
In 1956, the concept of the standardized container was tested when a crane in Newark docks lifted the first steel box from a truck onto a ship bound for Houston. The uniform, stackable boxes revolutionized global logistics over the next two decades, replacing the cumbersome and unwieldy method of loading individual crates of cotton bales or bananas.
The standardization meant every container ship could be loaded and unloaded identically across the world. Crucially, the labor-intensive work of filling the boxes was moved away from the docks and into warehouses or factory floors. The impact on cost was profound: shipping costs per ton plummeted from $6 to $0.16. This transformation enabled companies to reliably source and purchase raw materials and components from much farther away. Today, millions of these containers circle the globe, carrying everything from electric switches to furniture.
The Speed: Air Cargo
While containers mastered the bulk movement of intermediate parts across the seas, the emergence of air cargo mastered the speed necessary for high-value or time-sensitive components.
The air cargo revolution began in the early 1970s with two key players:
Federal Express (FedEx): Launched by Fred Smith, FedEx aimed to speed up U.S. deliveries by operating its own dedicated planes. After a challenging start, FedEx established the one-time luxury of overnight delivery as common practice in the U.S. and Canada. Within a decade, dedicated planes filled with tens of thousands of packages crisscrossed the continent daily.
DHL: Founded by Adrian Dalsey, Larry Hillblom, and Robert Lynn in San Francisco, DHL focused immediately on becoming the world’s courier, initially connecting West Coast companies across the Pacific to outposts in Hong Kong, Japan, and Australia. DHL rapidly expanded to include parcels alongside papers, eventually merging with Deutsche Post to become the world’s largest logistics company. Annually, DHL now fills and ships over four million seabound containers and flies cargo weighing as much as one million cars.
The Digital Revolution: Managing Operations at a Distance
Cheaper transportation was only half the battle. To manage manufacturing processes “sliced up” and dispersed across continents, companies needed to coordinate operations efficiently across vast distances. The two decades following 1980 saw international communication transformed, making “easy, real-time, and nearly free connections” commonplace.
Communication Infrastructure
The backbone of digital connectivity evolved dramatically:
Fixed Lines: Underwater copper cables, which limited communications due to echoes, voice delays, and capacity constraints (fewer than ten thousand calls at a time in the 1970s), were replaced by fiber-optic cables. Fiber optics exponentially increased the volume of data and voices that could travel along each wire, boosting the number of possible calls from thousands to tens of millions simultaneously.
Mobile Networks: Mobile technology progressed rapidly:
- 1G (1980s): Enabled basic, uninterrupted connections between individuals, offices, and shop floors.
- 2G (1990s): Allowed texting and document sharing to proliferate.
- 3G: Increased speed, rivaling broadband, enabling users to see and hear people on the other end.
- 4G: Made the seamless streaming of big data possible.
- 5G (Current/Future): Promises sufficient power to instantly download movies, guide industrial robots, and drive autonomous cars.
The Financial Revolution: Following the Money
The physical and digital infrastructure for international production would have faltered rapidly without a parallel “explosion in international finance” that allowed torrents of capital to flow freely across borders.
The Shift from Capital Controls
Following the disastrous financial collapses of the 1930s, post-WWII Keynesian economists implemented capital controls to prevent speculative booms and busts. This consensus began to erode in the 1970s as market-driven neoliberal thinking, championed by figures like Milton Friedman, gained prominence.
Deregulation: After the collapse of the Bretton Woods system in the 1970s, many nations allowed their currencies to float freely. By the 1980s, most OECD countries had eliminated foreign exchange controls.
Digitization of Money: Digital technology provided the infrastructure for this newly liberalized capital. In the 1970s, major banks replaced the clunky World War II-era telex system with the faster, more secure SWIFT network. New systems like CHIPS (for dollars) and CHAPS (for pounds sterling) allowed electronic clearance of currencies, speeding international transactions exponentially.
The Regional Paradox: Proximity Triumphant
The historical record is clear: technology, finance, and policy created the capacity for global commerce to flourish. Yet, they did not lead to a flat world; they led to a concentrated, regional one.
The fundamental flaw in the “globalization” narrative is the persistent reality that moving things is still expensive, complicated, and time-consuming.
The Gravity of Distance
If distance truly did not matter, the average international sale should cover approximately 5,300 miles (the distance between two randomly selected countries).
The data shows a profound contradiction: half of what is sold internationally travels less than 3,000 miles. This distance—comparable to a flight from New York to California—is often insufficient to cross an ocean.
This reality proves that the spectacular improvements in logistics merely allowed companies to access slightly farther-flung suppliers and customers, without truly erasing geographic limitations.
The Power of Soft Advantages
Beyond transit costs, proximity provides crucial “soft advantages” that no digital tool—not Zoom, Skype, or Slack—has managed to erase.
Trust and Teamwork: Shorter plane rides for face-to-face meetings remain critical for building trust, resolving complex issues, and achieving genuine “teamwork.”
Cultural and Linguistic Ties: Proximity often means similar time zones, languages, and shared cultural cues. Nearly a fourth of all trade takes place between countries that speak the same language.
The Call Center Conundrum: The failure of offshored call centers is a prime example of the importance of these soft advantages. Many major companies, including Dell, Capital One, and JPMorgan, moved these offshored functions back home, highlighting that proximity sometimes outweighs wage arbitrage.
In sum, the global economic landscape is not a flat canvas but a deeply contoured one, characterized by three towering regional peaks—Asia, Europe, and North America. The technological advancements of the past decades did not flatten the world; rather, they provided the infrastructure for neighboring countries to connect more efficiently and deeply than ever before.
Next in the Series
From Coal to Currency — How Europe leveraged a continuous stream of treaties and diplomacy to build the world's most integrated and powerful economic hub.