Economics

9 Pages 2250 Words

Over those 228 years it has provided billions of people with income, wealth, comfort and security. It has also brought pain and suffering to many.

We know that we cannot control it with precision, but we can influence it: through laws and regulations, taxes or subsidies, tariffs or quotas, government entry into the market or withdrawal from it, increasing or decreasing the money supply, and advertising. But the strength of that influence is not a constant, and its varying effectiveness leaves us with uncertainty. That uncertainty has increased since the end of the Cold War, marked by the fall of the Berlin wall, our symbol for the collapse of communism in Eastern Europe.

Before the fall of that wall the world was characterized by division. Its map could have been painted with three identifying colors: the communist countries, the Western nations, and the neutral nations. This political separation resulted in a limited flow of ideas, a limited flow of technologies, a limited flow of goods and services, a limited flow of capital, and a very limited flow of people.

The fall of the wall changed that. The new world that followed the fall is characterized by integration, not division. It encourages a free flow of ideas, technologies, goods and services, capital, and people.

According to the World Bank, “At the height of the Cold War in 1975, only 8 percent of the countries had liberal, free-market capital regimes. Foreign direct investment totaled $23 billion. In 1997, eight years after the fall of the wall, 28 percent of all countries had liberal economic regimes, and foreign investment totaled $644 billion. Thus, as the number of countries with free-market capitalism more than tripled, total foreign investment increased by a factor of 28.

We call this new system “Globalization.” It is the name given to “the integration of markets, nation-states and technologies throughout the world. Furthermore, that int...