"Global economy" has become more than an ambiguous catch phrase in the post-industrial 21st century. It is a way of life that is vital to the success of most industries and industrialized societies. This paper takes an extensive look at the global economy and its implications for 21st century societies and various national and local economies.
Keywords Corporate Responsibility; Global Economy; Globalization; Multinational Corporation; Outsourcing; Trade Deficit
Industrialist and automotive wizard Henry Ford was not known for his political activism. Still, during the first World War, Ford decided to assemble a group of pacifists to bring aboard on a "peace ship." The delegation would travel to Europe to help coax world leaders to cease their fighting and help bring American troops home. When he and the peace ship returned to the United States, Ford was asked how his peace mission went. "I didn't get much peace," he said, "but I learned that Russia is going to be a great market for tractors."
A well-trained businessman or businesswoman will always seek out the best market for his or her goods or services. When the second World War came to an end, the nations of the world became closely linked politically, socially and economically. Suddenly, new markets emerged across oceans and borders and savvy entrepreneurs could take advantage. After the fall of the USSR and the end of the Cold War, this trend became a phenomenon, as countless corporations focused on expanding their business to markets in virtually every corner of the planet.
The "global economy" has become more than an ambiguous catch phrase in the post-industrial 21st century. It is a way of life that is vital to the success of most industries and industrialized societies. This paper takes an extensive look at the global economy and its implications for 21st century societies and various national and local economies.
The Evolution of the Global Economy
Throughout human history, trade has been a staple of existence. As humanity settled into geographically defined regions and, later, nation-states, the exchange of goods and currencies has remained a consistent element, regardless of borders. In the 13th century, Marco Polo reported a thriving international relationship between the Chinese city of Hangzhou and the rest of the region — a trade industry that operated according to an oft-repeated saying: "Vegetables from the east, water from the west, wood from the south, and rice from the north" (Griswold, 2002). In the 15th century, the King of Denmark ordered a "toll" be established in the Oresund Strait (the gateway to the Baltic Sea), ensuring that the multitude of Western and Eastern European trade ships paid a small tax to travel to and from their trading partners. Sparse records indicate a thriving trade network that operated as early as the 16th century in the sprawling Ottoman Empire (Katsumi, 1999).
Inter-regional trade is a practice that dates back millennia; thousands of years before the birth of Christ. Trading parties evolved — from nomadic tribes to civilizations to nations and onward to the modern "nation-state" — and as they changed, so too did the nature of such relationships. Arguably, one of the most significant political developments was the centralization of systemic power — the establishment of central governments, economies and other social institutions under singular leadership structures — introduced after the Treaty of Westphalia in the mid-17th century. With the definition of these independent countries came the determination of their individual goals and interests, including their economic needs.
It may be said, therefore, that the international community's political development over the last four centuries has coincided with the evolution of economic systems. In fact, it may be said that political systems and their respective economic systems are linked. In this vein, evolutionary transitions to one will inevitably influence the other. During the course of the last few decades of the 20th century and continuing into the early 21st century, such transformations have occurred. However, whereas most of the previous developments have been initiated on the political front, the impetus is economic in nature, necessitating concurrent political modification.
Obsolete National Economies
As transportation, communication and manufacturing technologies have made it easier than ever to conduct business around the globe, many view the concept of a national economy as something of a dinosaur. A truly modern economic system, it has been argued, is one that does not use nationality as its root (Suter, 2006). In this sense, the nation-state is likely in need of a major evolution of its own to accommodate for this significant economic change — the merger of sovereign national economies into one, singular "global" economy.
Spurred by a continuing system-wide trend of moving away from nationally-based commerce and toward a unified worldwide market system (known as "globalization"), a global economy may be defined as an integrated international economic system characterized by unrestricted cross-border movement of goods, services and labor ("Define global economy," 2008). This paper next takes a more in-depth look at the characteristics of a global economy and its impacts on the international community.
As stated earlier, the evolution of international political systems and the globalization of economic institutions and practices have become extensively connected. The changing face of the nation-state, coupled with the increased tendency for business enterprises to eschew governmental processes and instead connect directly with overseas partners, provide evidence of the strong link between the global economy and the relevance of the modern state. An important characteristic of this connection is the fact that in many cases, the forces that make one side strong rely on the flexibility of the other side. Arguably, one of the most visible examples of this concept is the market.
In general, markets are barometers of the strength of a given system. They are also delicate environments, capable of strong reaction to sound (or detrimental) public policy. Even in the most stable of political systems, the introduction of a new statute, regulation or administrative change may trigger a significant positive or negative market response. This volatility is enhanced when the market is not localized to one system but instead is expanded to include multiple states and systems. Therefore, globalized market stability and/or growth relies on political stability. In light of this fact, the health of a given market requires that participating governments demonstrate fiscal discipline and sound economic policy (International Monetary Fund, 2007). In other words, globalization fosters political stability.
In addition to a sense of political equilibrium, the global economy also presents options. It is only logical that with more actors participating in a market system, more products and services are available. With more players, more choices exist for participants. Many markets are dominated locally by one or two major players. In the eyes of many market experts, for example, the US has shown great power in high technology and information technology, while one of Europe's greatest assets is financial management institutions.
In a global economy, however, many more options become manifest. The continued jelling of the European Union, for example, means greater competitiveness in the global economy. European telecommunications, transportation and environmental protection systems have burst into the international spotlight, giving direct competition to regions that had previously enjoyed dominance in such industrial arenas. The European Union, however, is not alone — China and India have also entered the global marketplace, providing their own competitive financial planning, technological and other commercial goods and services that are comparable with those of participants who had previously held a strong advantage (Bogdanova & Orlovska, 2008).
Competitive markets also have a benefit for the consumer. In addition to providing a greater number of high quality products, the very fact that there are more such goods and services on the market means lower prices for the consumer. Additionally, the fact that participants in global markets do so to ensure greater returns (and avoid the burdensome regulations and restrictions experienced in more local economies) means that the global economy manifests lower tariffs, greater regulatory flexibility and, as suggested above, more stable policymaking practices (Fisher, 2006). In the end, not only is the quantity of products and services increased, but the availability of such products and services is enhanced for the long-term.
There is a sociological benefit to an increasingly globalized economy as well. In many cultures, some subgroups are left in a disadvantaged position. In many countries, women, ethnic minorities and other social groups have often been left behind...
(The entire section is 4120 words.)