Surveying the global marketplace: "half of Xerox's employees work on foreign soil and less than half of Sony's employees are Japanese. More than 50% of IBM's revenues originate overseas; the same is true for Citigroup, ExxonMobil, DuPont, Procter & Gamble, and many other corporate giants.".

• Author: Weidenbaum, Murray L.
• Position: Economics

A FEW YEARS AGO, an overnight frost occurred in Brazil. What followed may remind us of the lyrics to the old song: "The ankle bone is connected to the leg bone. The leg bone is connected to the knee bone.... " The global economy truly is interconnected. An official in Brasilia that morning announced an expected decline in coffee production. The news instantly reached the Chicago Options Exchange. The price of coffee futures began to rise. Traders in other agricultural products responded by bidding up their futures prices. Forecasts of commodity prices jumped around the world, triggering concern over rising inflation--and tightening by central banks. Traders started selling off bonds, driving yields and interest rates higher. Finally, stock prices fell. Just another day in the global economy.

The global marketplace has been around since ancient times. The Greeks and the Phoenicians traded all over their known world and invested abroad heavily. They called the results colonies. What is different today is more advanced technology and more open economies. It took explorer Marco Polo years to travel to China and back. Today, one can fly the round trip in a couple of days. Information can flow in a fraction of a second. In 1980, 3,000,000,000 minutes of international phone calls were made into and out of the U.S. Currently, the annual total is over 30,000,000,000.

Globalization--the increased movement of goods, services, people, information, and ideas across national borders and around the world--no longer is just a buzzword; it has arrived. There is substantial evidence for an increasingly global marketplace. World trade is expanding much faster than world production and crossborder investments are growing at a more rapid rate than trade. People in one country are more likely to be affected by economic actions in other nations in many capacities: as customers, entrepreneurs and investors, managers and workers, taxpayers, and citizens.

An example of the global economy is illustrated in a cartoon of an auto show. The customer asks, "Is this car made in the United States?" The dealer responds, "Which part?" The Pontiac with a General Motors nameplate was sold through the Pontiac dealer network. However, the car was assembled in Korea using components made mainly in Asia. In contrast, Honda models, produced in Marysville, Ohio, have many more U.S.-made parts--but they have a Japanese brand nameplate and are sold through the Honda dealer network. Which is the American car? Another example of globalization is furnished by the shipping label used by a U.S. firm: "Made in one or more of the following countries: Korea, Hong Kong, Malaysia, Singapore, Taiwan, Mauritius, Thailand, Indonesia, Mexico, Philippines." The label continues, "Exact country of origin is unknown."

Yet another way of...