Business, Politics & Society

Understanding the Hyperglobalized World

Paul Krugman

Lesson time 14:57 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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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...


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Comments

RJane @.

The Electoral College hired Trump to be the CEO of United States and U.S.president, who did not have experience in politics. Americans must realize that it was the Electoral College that hired and elected Trump. The Electoral College is fully responsible for Trump’s presidency because they hired/elected Trump.

RJane @.

Trump did not have career experience in politics. However, the Electoral College (part of the U.S. government) chose and elected Trump to be the president, who had no experience in politics. I hope Trump is learning about trades, laws, rules and other important things inside politics and implement his learning to the advantage and benefit of the American people, not his business associates (including politicians) and their corporations/companies.

Craig K.

So, the main objective with 'balancing trade' today appears to be 'checking' the oppressive ( and not so invisible ) 'hand' of the centralized economies of countries like China, who subsidize their industries and then 'dump' their products on other nations, causing disruption (unemployment). Centralized ( state run ) economies pose a specific threat to normal ( or even mixed ) market economies. At some point, those disrupted economies will either need to take measures to defend themselves or radically adjust. And in the meantime, how do you do all of this and still keep the world economy running without too many problems? While I thoroughly believe that Donald Trump knows absolutely nothing about trade, he maybe on to something here....

Pisko

WTO n FTAs r run by the main economies, 2 favor the main economies, intensifying inequality between n within countries. Again, economies r controlled by lobbys that don't care about Bangladesh's development through trade, nor generating unenployement in the USA. The root of the system malfunction is prior to trade n hyperglobalization n I'll post it as a question in the "office hours" section soon 2 c what u all, specially Paul thinks about

Norm C.

The lesson is good. The links suck. As much as I like ladies in lingerie, it makes it hard to read the articles.

Bharat C.

https://hbswk.hbs.edu/item/the-truck-driver-who-reinvented-shipping - If anyone wants to read about the 'Containers' story of the shipping.

ArthurTong T.

@ 2:35, they made a pretty decent podcast! It's literally called 'Containers'!!

TL Y.

Some scholars suggest that the real reason for Trump to begin a "Trade War" with China is that he cannot afford the middle class in China to become richer. Trade allows America to be better off, But that volume of trade allows China to earn more than America in term of %. Why does Trumpy want to build a wall? The future government can easily overthrow any policy he makes.

Robert G.

I think if we balance our trade, sell natural resources at market prices and help in trade and manufacturer development. We need schools to teach trades no just academics.

Robert G.

The math is easy once you know and practice it. Otherwise, you lose if you don't practice. I think subjects like math, music, and languages, require practice and repetition to master but after you go so far it gets easier.