Page 18 - Global Political Economy_Understanding The International Economic Order

THE NEW GL OBAL E CONOM IC ORD ER
economy, this book integrates these distinct modes of scholarly in-
quiry.

Changes in the World Economy
This book has been motivated largely by the huge changes in the
international economy that have occurred since 1987. The most im-
portant change, of course, has been the end of the Cold War and of
the Soviet threat to the United States and its European and Japanese
allies. Throughout most of the last half of the twentieth century, the
Cold War and its alliance structures provided the framework within
which the world economy functioned. The United States and its major
allies generally subordinated potential economic conflicts to the need
to maintain political and security cooperation. Emphasis on security
interests and alliance cohesion provided the political glue that held
the world economy together and facilitated compromises of impor-
tant national differences over economic issues. With the end of the
Cold War, American leadership and the close economic cooperation
amongthe capitalist powers waned. Simultaneously, the market-ori-
ented world grew much larger as formerly communist and Third
World countries became more willingto participate in the market
system; this has been exemplified by the much more active role taken
by the less developed countries (LDCs) in the World Trade Organiza-
tion (WTO). While this development is to be welcomed, it has made
the task of managing the global economic system more daunting.
Economic globalization has entailed a few key developments in
trade, finance, and foreign direct investment by multinational corpo-
2
rations. International trade has grown more rapidly than the global
economic output. In addition to the great expansion of merchandise
trade (goods), trade in services (banking, information, etc.) has also
significantly increased. With the decreasing cost of transportation,
more and more goods are becoming “tradeables.” With the immense
expansion of world trade, international competition has greatly in-
creased. Although consumers and export sectors within individual na-
tions benefit from increased openness, many businesses find them-
selves competing against foreign firms that have improved their
efficiency. Duringthe 1980s and 1990s, trade competition became
even more intense as a growingnumber of industrializingeconomies
in East Asia and elsewhere shifted from an import substitution to an
2
For a strong attack on globalization and its alleged evils, see Richard Falk, Preda-
tory Globalization (Oxford: Polity Press, 1999).
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