21.6 Globalization and Trade

Global trade has existed since ancient times, but it was limited. New technologies and the European age of exploration set off increasing trade and contacts around the world and set the stage for modern globalization. Globalization is the process by which national economies, politics, cultures, and societies become closely linked with those of other nations around the world. Economists use the term to refer to the growth of international investment and financial markets that reduces the control that individual nations have over their own economies. Since the 1980s, the pace and extent of globalization has developed dramatically.

This textile plant in India represents one of the many industries that have migrated from European and North American countries to the developing world.

Objectives

• Summarize the impact of globalization on the modern world.
• Describe the role of international organizations and treaties in expanding trade.
• Analyze the costs and benefits of globalization.

Key Terms

• globalization
• interdependence
• outsourcing
• multinational corporation
• World Trade Organization (WTO)
• protectionism
• bloc
• sustainability,

Global Interdependence

Several events in the 1980s and 1990s are closely linked to the rise of globalization. First, economic reforms in China led to increased foreign investment. Second, debt led many Latin American nations to institute reforms that opened the region to trade and investment. Third, the collapse of communism in the Soviet Union and Eastern Europe reconnected these economies to global markets. Finally, new information technologies accelerated the exchange of information and made the world feel more connected.

Working in the Global Economy

Rich and poor nations have become increasingly interdependent. Interdependence is the dependence of countries on each other for goods, resources, knowledge, and labor from other parts of the world. The nations of the global North control much of the world's capital, trade, and technology. At the same time, they depend on the developing world for many resources.

As the global economy grew, many companies in industrial nations began to outsource jobs to the developing. Outsourcing is the practice of sending work to outside enterprises in order to save money or increase efficiency. Many companies in the developed world outsourced technological jobs to India, Russia, China, and the Philippines.

Table of Contents