Global Issues. Kristen A. Hite
Great Depression, which created the conditions that led to the rise of Hitler. With that idea in mind, it was agreed that trade among nations should be encouraged so that, it was hoped, prosperity would spread and economies would become more interdependent. In 1947, under the sponsorship of the United Nations, the General Agreement on Tariffs and Trade (GATT) was signed by about 20 countries. These countries, later joined by about a hundred others, conducted a series of negotiations to promote free trade by reducing tariffs and other barriers to trade such as import quotas. The success of these efforts is clearly shown in Figure 2.8, which shows that from 1950 to the turn of the century world trade rose from about $500 billion to nearly $6 trillion, then more than doubled in just ten years. By 2017 exports had risen to US $17.73 trillion, while trade in services reached US $5.28 trillion.47
Figure 2.8 World trade: merchandise exports, 1950–2015
Source: Based on data from World Trade Organization.
In 1995, GATT evolved into the World Trade Organization (WTO). The WTO was given the task of implementing the many agreements reached under the GATT negotiations and of setting up an arbitration mechanism to resolve trade disputes among its members.
The great expansion of international trade has created a highly interdependent world economy. That integration of the economies of many nations, combined with the proliferation of communication technologies that transcend national borders, and other factors, has been the main force in creating a new situation in the world called globalization. Globalization is mainly fueled by economic forces and sustained by new political, social, and technical integrative forces in the world today. Politically, international governmental organizations such as the United Nations, the International Monetary Fund, and the World Bank, along with regional organizations and agreements such as the European Union and the US‐Mexico‐Canada trade agreement, are playing an increasingly important role in global governance.
In 2000, part of the package of the adoption of the Millennium Development Goals included a need for rich countries to help poorer countries by reducing tariffs and quotas on the poor country’s exports. This push for “freer” trade was viewed as an opportunity to increase the extraction and production of materials, thereby increasing GDP.
Global Interdependence
The global economy is leading to the growing interdependence of the world’s people. Like many things, if not most things in life, it has positive and negative aspects and a critical reader should appreciate the implications of both.48
Positive aspects
The global economy has brought more wealth to both rich and poor nations. Although all nations have not benefited from the liberalization of international trade, “since 1950 there has been a close correlation between a country’s domestic economic performance and its participation in the world’s economy.”49 The United States had an unprecedentedly long period of economic growth and non‐Western countries and areas such as China, the Republic of Korea, Taiwan, and Singapore that also embraced global trade as an economic development opportunity have obtained relatively high levels of prosperity.
The formation of a global community has started. Nations around the world now face common problems, both economic and environmental, that they are working together to solve. More and more individuals are taking advantage of the new communication and transportation technologies to learn about and enjoy the whole planet.
As nations prosper in a global economy, economic interdependence helps promote peaceful societies (war can be disruptive to most forms of trade aside from weapons). New ideas and more international contacts could even lead to an improvement of human rights in some countries, especially those with a poor track records on human rights. It previously had this effect in some formerly communist states. If trade helps grow an economy in an inclusive way, hunger and crime rates are typically lowered and poverty is reduced.50
New products are available and often at a lower price than if they had been produced locally. New jobs are created, not just in the industrialized countries but also in many less industrialized nations. Jobs lead to the reduction of poverty. The World Bank reports that “there are almost no examples of countries experiencing significant growth without reducing poverty.”51
Negative aspects
The ease of transportation, of both people and goods, makes the transmission of diseases throughout the world easier than before. This became acutely obvious during the global pandemic associated with Covid‐19, which also illustrated the fragility of economies more dependent on steady streams of commerce through global supply chains. In the same way, rapid electronic communications and the huge number of people and goods moving through the world make criminal and terror activities more difficult to control.
Although it is true that increased production can cause more pollution, many argue that once nations become richer and reduce their poverty, they tend to clean up their environments.
A number of jobs are lost in rich countries when multinational corporations move some of their production or service facilities to less industrialized nations where labor costs are lower. It is true that many new jobs are still being created in the United States, fewer in Europe and Japan, but the type of available jobs may be changing and it is not easy for certain (particularly older) workers who have been laid off to qualify for them.
Some have argued that corporations are moving facilities to nations with less protective laws to escape the necessity of complying with stricter environmental and labor laws in their home countries. Rapid economic growth in countries such as China and India has led to major pollution of air, water, and land.
Cultural imperialism by the United States, with its corresponding undermining of local cultures, is increasing. A world traveler can frequent many cities and dine on Big Macs, fries, and shakes in any of them. The largest single export industry in the United States is not aircraft or automobiles but entertainment, especially Hollywood films.
The gap between rich and poor nations is growing. Some poor nations are being left behind economically and technologically. The shift to knowledge‐based industries is accelerating and creating an even greater gap. From 2010 to 2014, about 87 percent of people in the United States had access to the internet, whereas only about 18 percent of Indians did, and even fewer in Pakistan and Bangladesh.52 In 2014, 4.4 billion people still did not have any access to the internet – a quarter of these lacked any access to electricity.53
Because nations’ economies are so tied together today, an economic problem in one can spread to others extremely quickly. We saw that happening in the late 1990s when a financial crisis hit Thailand, Indonesia, Malaysia, the Republic of Korea, and other countries. Economic recessions and depressions also come with the dominance of the market. Capitalism has always had its cycles, and a “down” cycle can mean high unemployment and human suffering. Many of the fastest growing economies are tied to that of the US. If the United States goes into a period of slow or no growth it will affect many other countries whose wealth comes mainly from exports to the United