Business, Community & Government

Understanding the Hyperglobalized World

Paul Krugman

Lesson time 14:56 min

Globalization has forever changed the way we communicate and do business. Paul discusses the transformative technologies that led to efficient global trade and the impact of those developments on our country’s economy.

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Topics include: Hyperglobalization Started With a Box • Our World in One Picture: The Elephant Chart • Rethink "Sweatshop" Labor • Measuring the Impact of Trade at Home: Factor Content • Trade Cuts Both Ways


The trade that existed in 1913-- people in England eating mutton from New Zealand-- countries made stuff, shipped it possibly 10,000 miles, and it was consumed someplace else. Your smartphone comes from China, but China is where it was assembled. The guts of the smartphone probably include a memory chip from Korea, a microprocessor from Japan. The design work was probably carried out in Silicon Valley. It's this elaborate supply chain, value chain that may actually cross major oceans several times before it finally shows up in your hand or in your home. What makes that possible? So long-distance international trade came about as soon as you had steamships and railroads. Transport costs became low enough to ship stuff long distances. But a lot of it is actually not so much literally the cost of shipping stuff as the transaction costs, the ability to coordinate stuff, the biggest innovation being the box containers. In 1960 when a freighter pulled into a port, lots of longshoremen clambered over it, took out bags of stuff, waded onto the docks, and all that. And that was pretty labor intensive. It took a lot of time. And actually keeping track of what was on the ship and where it was supposed to go was a pretty daunting task. Now a ship comes in. It's just got a bunch of boxes which are the size of a truck trailer sitting on the deck. And they've got barcodes on the side so that you can know right away what's in the container, which makes it possible to have these incredibly complex production processes that are spread across the globe and keep track of where things are. You know what's in that box. You know which train to put it on. I don't think anybody is ever going to make a movie featuring-- A "Ready Player One" type movie about freight containers. But it turns out that the freight container, the standardized freight container, is a transformative technology. The biggest event in the world economy over the last 30 years has been the rise of China, and to a lesser extent of some other developing countries. The biggest event within countries like ours has been the rise of inequality, the separation of the 1% from the working and middle class. If you want the story of the world since 1988 in one picture, it would be a chart devised by my colleague, Branko Milanovic. What Branko did was to say, step back, and let's think about this as the incomes of individuals wherever they live. Think about the global distribution of personal income, and what's been happening, and what's been the change in income depending upon where you sit. So one end, you have the poorest people in the world. And at the other end, you have the richest people in the world. What's been happening to income at different places there? It's a story that is not a simple one. Is the world growing more unequal or more equal? Actually, the answer is yes. There are two groups of people who have been seeing big gains. On the one hand, there's the global elite. The...

About the Instructor

For Nobel Prize-winner Paul Krugman, economics is not a set of answers—it’s a way of understanding the world. In his economics MasterClass, Paul teaches you the principles that shape political and social issues, including access to health care, the tax debate, globalization, and political polarization. Heighten your ability to read between the lines and decipher the underlying economics at play.

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Paul Krugman

Nobel Prize-winning economist Paul Krugman teaches you the economic theories that drive history, policy, and help explain the world around you.

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