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Globalization of the World Economy: Gerard Piel, Moderator

SYMPOSIUM
THE GLOBALIZATION OF THE WORLD ECONOMY

Introduction

Gerard Piel, Moderator

Your Committee on Meetings put this morning’s symposium on the Globalization of the World Economy on the agenda of this meeting more than a year ago. At that time, our concern was to make sense of what we had all been hearing and reading about the relocation of power in the world to a new global marketplace. It appeared that the famous U.S. standard of living had to measure up to the test of whether it got in the way of our country’s international competitiveness. Now, this morning and for the last two or three months, we are hearing that the globalized economy verges on a collapse from which only the United States can save it. In either case, the globalized economy is there, and it affects our lives one way or the other.

In fact, this marketplace has been here for more than a century. it came into being with the industrial revolution, and it has grown global as the industrial revolution has gone worldwide.

This much the lay observer can tell about the globalized economy:

It has its own currency exchange that establishes the relative value of all the world’s currencies. Transactions on this exchange, sustained by the high-tech, high-capacity international communications system, proceed 24 hours a day at velocity exceeding a trillion dollars a day. That is 10 times the rate at which those transactions move consumer goods and investment capital across national borders.

Since the end of the Second World War, a diminishing number of ever larger transnational corporations have been doing the actual business of the globalized economy. At last United Nations count, 350 such enterprises produced and moved 30 percent of the total world output. That was bigger than the output of all the developing countries combined. About half of the transnationals are domiciled in the United States. They are transnational in that, characteristically, they have been doing more of their business and making more and more of their profit outside their country of domicile, In their respective realms of enterprise, they conduct, in much smaller number, a much higher percentage of the world trade; thus, 15 of the 350 transnationals conduct more than half the world food trade; three, four and, at most, five of these, the trade in each commodity.

Accountable only to their shareholders, the perhaps 2,500 ultimate decision-makers in this system decide which technologies are to go on line and where in the world to deploy its capital. They are the new captains of the worldwide industrial revolution. Presently they are making 80 percent of their direct investment in the developing countries in 10 of those countries, including China, with a combined population of 2 billion. The 20 percent goes to the rest of those countries, the poorest and least developed, with the combined and fastest-growing population of 3 billion.

That, in broad strokes and round numbers, is the anatomy of the globalized economy. From this picture—subject to correction and amplification—we turn now to the physiology of the system in its relation to the sovereignty of nations and the well-being of a world population on its way to 10 billion before the end of the century that is about to begin.

 

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