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International Economics
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Most people would agree that the major economies of the world are more integrated
than at any time in history. Given our instantaneous communications,
modern transportation, and relatively open trading systems, most goods can
move from one country to another without major obstacles and at relatively low
cost. For example, most cars today are made in fifteen or more countries after
you consider where each part is made, where the advertising originates, who does
the accounting, and who transports the components and the final product. Nevertheless,
the proposition that today’s economies are more integrated than at any
other time in history is not simple to demonstrate. It is clear that our current
wave of economic integration began in the 1950s, with the reduction of trade barriers
after World War II. In the 1970s, many countries began to encourage financial
integration by increasing the openness of their capital markets. The advent
of the Internet in the 1990s, along with the other elements of the telecommunications
revolution, pushed economic integration to new levels as multinational
firms developed international production networks and markets became ever
more tightly linked.
Today’s global economy is not the first instance of a dramatic growth in
economic ties between nations, however, as there was another important
period between approximately 1870 and 1913. New technologies such as transatlantic
cables, steam-powered ships, railroads, and many others led the way,
much as they do today. For example, when the first permanent transatlantic
cable was completed in 1866, the time it took for a New York businessperson
to complete a financial transaction in London fell from approximately three
weeks to one day, and by 1914 it had fallen to one minute as radio telephony
became possible.
We have mostly forgotten about this earlier period of economic integration, and
that makes it easier to overestimate integration today. Instantaneous communications
and rapid transportation, together with the easy availability of foreign products,
often cause us to lose sight of the fact that most of what we buy and sell never
makes it out of our local or national markets. We rarely pause to think that haircuts,
restaurant meals, gardens, health care, education, utilities, and many other
goods and services are partially or wholly domestic products. In the United States,
for example, about 82.3 percent of goods and services are produced domestically,
with imports (17.7 percent) making up the remainder of what we consume (2011
James Gerber - Personal Name
5th Edition
978-0-13-294891-3
NONE
International Economics
Management
English
Pearson Education, Inc.
2014
USA
1-500
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