Global Market

A market is an institution that allows participants to exchange goods and services, in the process setting standard prices of exchange. Historically, market-places were situated in a physical location limiting involvement to participants who could physically be in that location at a given time. The idea of a global market or markets is linked to the concept of economic globalization, a problematic term that suggests a process heading toward, or an outcome already achieved, linking economic actors wherever they are physically located on the globe. This requires that the marketplace is no longer situated at a physical location, but is a virtual medium of exchange utilizing network technologies to link participants. Defining how we understand the terms global and market and the necessary conditions for the functioning of a global market is crucial to determining whether what is a theoretical ideal type exists in reality.

The market part of global market suggests symmetry in power relations between participants. The image of a market invoked by economic theory is of multiple individuals coming together as buyers and sellers, with no single agent having the power to determine prices. At its most de-territorial, the global part of global market implies that geographical location and distance between actors should be, or is becoming, irrelevant to the process of exchange. Therefore, exchange should be equally likely between agents that are situated on opposite sides of the world as between those situated next to one another (given nonprohibitive transport costs). This definition of the term global suggests instantaneous connections forming between buyers and sellers in every part of the globe. To be global, either buyers or sellers, or ideally both, would need to represent every part of the globe.

A nonterritorial global market must overcome certain informational problems that are more easily addressed in a physical marketplace. First, the products or services being traded must be standardized, with specifications available to all participants. Second, trust (which previously may have been based on a personal familiarity built on the common legal, social, and cultural backgrounds of actors) must now be based on a shared confidence that every party will adhere to the contractual rules of the particular virtual market. Third-party service providers are central to this process, providing information on transacting parties (for example, universally recognized credit ratings), and facilitating the transaction itself (for example, through the provision of insurance and [Page 355]holding or escrow accounts). A global market is arms length for transacting parties' knowledge of one another, but reduces the physical and reputational barriers of entry of a physical marketplace to the ability of participants to create confidence in other parties that they will fulfill market rules and follow particular transactional mechanisms.

Having constructed an ideal type definition of a global market, we can ask whether any real world markets fulfill these criteria. Markets that span national territorial borders certainly exist in raw materials, energy, agricultural produce, manufactured intermediate and final goods, financial capital as either direct bank loans or foreign direct investment (FDI), financial assets such as shares, bonds, and national currencies, complex hedging or speculative instruments labeled derivatives, and other financial services such as insurance. Markets in many other services may be said to exist, but are extremely difficult to trade without a physical presence local to the purchaser. Global firms often provide a local presence; but where markets for such services exist, from a buyer's perspective they may be considered local rather than global. It is problematic to argue that there is a global market for labor, but for certain specialized occupations, such as informational technology or health care, there is state-supported competition between developed countries for skilled labor, and hence, an international market. Whether the international markets listed fit our ideal type definition of a global market is questionable.

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