Global Economic Issues

Global economic issues originate from the economic and political processes associated with economic globalization. Economic globalization typically connotes the deepening connectedness of national economies brought about by growing international trade and cross-border investment. International trade, the transactions that enable goods and services produced in one national economy to be consumed in other economies, is the fundamental driver of economic integration. Trade has grown steadily since the end of World War II. In fact, international trade has grown more rapidly than world output, and as a consequence, independent national economies have become more tightly bound to each other. Whereas in 1955, only approximately 10% of total world production entered trade, today close to one quarter of the world's total output, approximately US$14 trillion in all, is produced in one country and consumed in another. National economies have become increasingly connected through these deepening trade links.

Multinational corporations, MNCs for short, are the most important economic agents of globalization. MNCs are corporations that own (wholly or partly) productive facilities in two or more countries. The creation of such cross-border corporate entities is a consequence of international investment. A firm becomes an MNC by creating a new or purchasing an existing facility in a foreign economy. The cross-border investments that create MNCs have exploded since the late 1980s. In 1990, approximately 20,000 MNCs were active in the global economy. The United Nations estimates that approximately 80,000 MNCs are active today. As a group, MNC activities account for approximately two thirds of world trade; their growth has thus been driven by and simultaneously drives the rapid growth of international trade. Until recently, approximately 95% of the world's MNCs were U.S., European, and Japanese firms. Emerging market countries were almost exclusively the recipients of MNC investment and practically never the home base of MNC parent firms. This situation has changed a lot during the last 20 years as a consequence of the emergence of MNC parent firms in East Asian and Latin American economies.