2194X_05_ch1_p001-026 - The International Economy and...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
The International Economy and Globalization Chapter 1 I n today’s world, no nation exists in economic isolation. All aspects of a nation’s economy—its industries, service sectors, levels of income and employment, and living standard—are linked to the economies of its trading partners. This linkage takes the form of international movements of goods and services, labor, business enterprise, investment funds, and technology. Indeed, national economic policies cannot be formulated without evaluating their probable impacts on the economies of other countries. The high degree of economic interdependence among today’s economies reflects the historical evolution of the world’s economic and political order. At the end of World War II, the United States was economically and politically the most powerful nation in the world, a situation expressed in the saying, ‘‘When the United States sneezes, the economies of other nations catch a cold.’’ But with the passage of time, the U.S. economy has become increasingly integrated into the eco- nomic activities of foreign countries. The formation in the 1950s of the European Community (now known as the European Union), the rising importance of multi- national corporations in the 1960s, the 1970s market power in world oil markets enjoyed by the Organization of Petroleum Exporting Countries (OPEC), and the creation of the euro at the turn of the twenty-first century all resulted in the evo- lution of the world community into a complicated system based on a growing interdependence among nations. Recognizing that world economic interdependence is complex and its effects uneven, the economic community has made efforts toward international coopera- tion. Conferences devoted to global economic issues have explored the avenues through which cooperation could be fostered between industrial and developing nations. The efforts of developing nations to reap larger gains from international trade and to participate more fully in international institutions have been hastened by the impact of the global recession on manufacturers, industrial inflation, and the burdens of high-priced energy. In the past 50 years, the world’s market economies have become increasingly integrated. Exports and imports as a share of national output have risen for most 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
industrial nations, while foreign investment and international lending have expanded. This closer linkage of economies can be mutually advantageous for trad- ing nations. It permits producers in each nation to take advantage of specialization and efficiencies of large-scale production. A nation can consume a wider variety of products at a cost less than that which could be achieved in the absence of trade. Despite these advantages, demands have grown for protection against imports. Pro- tectionist pressures have been strongest during periods of rising unemployment caused by economic recession. Moreover, developing nations often maintain that the so-called liberalized trading system called for by industrial nations serves to keep the developing nations in poverty.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 09/30/2009 for the course INTB 3353 taught by Professor Prodan during the Spring '08 term at University of Houston.

Page1 / 26

2194X_05_ch1_p001-026 - The International Economy and...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online