Background Concepts and Relationships in a Globalized World

The United States has, historically, enjoyed a large degree of self-sufficiency in international economic affairs so that the ratio of exports and imports to gross domestic product is extremely low in comparison with smaller countries such as those in western Europe and in East Asia. There is, therefore, a tendency for US-trained economists and economic policymakers to downplay international phenomena in much of their thinking and to focus on closed-economy models. The ratio of exports and imports to gross domestic product in the United States has increased in recent years and the value of international financial transactions has also grown. There are many reasons. They include the liberalization of international trade, the greater freedom of international transfers of funds, the growth of foreign direct investments by multinational corporations and the end of approximate self-sufficiency in petroleum and other sources of energy. The word “globalization” has come to signify the greater interdependence of national economies. Some relationships must be spelled out. In addition, some of the issues of major concern to the subject matter of this volume are not a part of the mainstream of modern economic thought.