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Unformatted text preview: With globalization, however, the world is moving from hundreds of
national economies toward one large world
economy. In a world of one, it does not make
sense to speak of different economic systems.
It makes sense to speak of “the” economic
system for that one world economy. And, the
42 Chapter 2 Economic Systems and the Global Economy economic system that best describes what is
happening in the world economy is free
enterprise or capitalism. QUESTION: What specifically is the dif- ference between a national economy and
a global economy?
ANSWER: Think of an invisible string as
connecting you and everyone you have an
economic relationship with. If you buy
something from someone, a string connects the two of you; if you work for someone, a string connects you. Now, perhaps
the best way to think of a national economy is to think of strings only linking
those people who reside in the same country. In a world or global economy, however, strings link individuals with people
in their own country and in other countries too. In other words, their economic
relationships extend beyond the nation’s
borders. In the past, a few strings
extended outside of country borders, but
only a few, and for a long time the strings
only went to certain countries. With globalization, more and more strings, a seemingly unlimited number of strings, are
being connected across borders. And, these
strings are being connected between people in more and more countries. 02 (030-053) EMC Chap 02 11/17/05 4:13 PM Page 43 Movement Toward
How did we come to live in a global economy? Did someone push a button years ago
and start the process of globalization? No,
things don’t happen that way. Early History
Globalization did not just occur on the
world stage two decades ago. The world has
gone through different globalization periods.
For example, during the period from the
mid-1800s to the late 1920s, globalization was
occurring. Some people today refer to it as the
First Era of globalization. In some ways, that
world was a freer world when it came to the
movement of people than the world today, as
evidenced by the fact that many people
moved from country to country without a
passport, which was not required.
This early era of globalization was largely
ended by the two world wars (World War I
and World War II) and the Great Depression.
Even though both the Great Depression and
both world wars were over by 1945, globalization did not start anew. The Cold War
essentially divided the world into different
camps (free vs. unfree, capitalist vs. communist), which led to relatively high political
and economic barriers. The visible symbol of
these barriers—the Berlin Wall—separated
not only East from West Germany but one group of countries living under one political
and economic system from another group of
countries living under a different political
and economic system. Recent Causes
Several factors have led to the more
recent period of globalization. Let’s look at
a few of the most frequently mentioned
The End of the...
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This document was uploaded on 01/16/2014.
- Winter '14