ABSTRACT
THE CURRENT AGE OF GLOBALIZATION in the last 50 years is actually the second great wave of globalization of international trade and capital flows. The first occurred from 1870 to 1914, when international trade grew at a 4% rate annually, rising from 10% of GDP in 1870 to over 20% in 1914, while international flows of capital grew annually at 4.8% and increased from 7% of GDP in 1870 to close to 20% in 1914.1 With the coming of World War I, the first Age
of Globalization came to an end, leading to what Rajan and Zingales (2003a) have referred to as the "Great Reversal." Given the economic and political nightmares that followed the Great Reversal, in the fading days of World War II, the victorious allies decided to create a new international system to promote world trade and prosperity, which resulted in the establishment of two new international financial institutions, the International Monetary Fund (IMF) and the World Bank, and also the General Agreement on Tariffs and Trade (GATT) whose successor organization is the World Trade Organization (WTO).
