Globalization and the Global Economy
The global economy can be a little frustrating because globalization and the global economy are terms that mean different things to different people. I have found that some people talk about the global economy and what they mean is the opening of markets and trade among nations—so that today you can buy products in a store that have been made everywhere around the world, and people everywhere around the world are buying products that we make.
That didn’t used to be the case, partly because transportation and communication technologies were inadequate and partly because there were a lot more political barriers and even wars going on that prevented people from trading with each other. But in the twentieth century—especially in the late twentieth century—there’s been a large-scale dismantling of political barriers to trade combined with a dramatic increase in communication and transportation technology that has opened up a new global market.
On the other hand, when people talk about globalization what they mean is the new institutions that have been created to manage this new world—institutions like the International Monetary Fund and the World Trade Organization. People often talk past each other because some people are thinking about problems and bad behaviors and things that need to be changed at the World Trade Organization, while other people are thinking about what a great thing it is that people on the other side of the world can have jobs making products that we use and that we can have jobs making products that they use.
The Good and Bad
So there are good and bad sides. The opening of trade so that people are able to exchange with each other is a good thing: welcoming all the nations of the world into the trade practices that, frankly, the West have been benefiting from by trading with each other for centuries. Now everybody in the world, or almost everybody in the world, has the opportunity to trade and have access to our markets and we have access to their markets. And that benefits both sides because when I sell something to you and you buy it from me, I benefit from doing that. I value the money more than I value the product I’m sending you. But you’re buying because you value the product more than you value the money. So we both benefit. And the expansion of markets has created an enormous explosion of wealth-creation simply by allowing us to engage in these beneficial exchanges.
This new world has created tremendous benefits by allowing people to connect with each other across what used to be insurmountable barriers of national difference and distance.
On the other hand, opening trade around the world requires the creation of a lot of new structures like the World Trade Organization and The International Monetary Fund. We could make an alphabet soup list of these organizations. Because they’re global transnational organizations, it’s not clear whom they answer to and it’s not clear what moral framework they use or what moral framework they’re supposed to use when they make decisions. It’s very difficult for anybody to hold them accountable for what they do and this naturally creates all kinds of problems.
I’m not sure there’s an easy solution to that, but we certainly don’t want to become complacent and say, “Well because global trade is good therefore we don’t want to be watching organizations like the World Trade Organization very closely for exploitative or unjust practices”—of which, frankly, there are quite a few. It’s so difficult to hold people accountable and human nature, in its fallen state, is always quick to look for opportunities to make a buck without doing anything good for anybody else.
This new world has created tremendous benefits by allowing people to connect with each other across what used to be insurmountable barriers of national difference and distance. At the same time it’s created some very difficult political challenges in holding these structures accountable. I think we haven’t yet figured out what is a long term solution for that problem.
Greg Forster is the author of Economics: A Student’s Guide.
The economy is a system of choices we make about all of our resources. Every choice we make is an economic choice.
With a Christian perspective, we can see the economy as a social web that God has created for people to serve each other with their work.
Human beings—as image-bearers of the God who made the world—are responsible to take care of the world and to use their time, talent, and treasure in everything they do for the Lord.