The world is connected to a global economy by a variety of factors and for a variety of reasons. The term globalization is often used to discuss this connectivity. In a global economy, countries integrate features of other economies into their own and become increasingly dependent on each other for economic growth.
The global economy started in the 1800s when humans started using mineral resources instead of plants as their primary source of energy and raw materials. Before 1800, plants and animals were the primary source of food, work, fuel and fiber.
Since energy usage was defined by how much could be grown at one time, it severely limited energy production and flow.
Once mineral resources started being used, these energy caps were lifted. There was a seemingly unlimited amount to draw from the Earth itself. This energy was more efficient and had plenty of room for expansion into new technologies. It was also cheaper to use in the beginning. This appeared to be an entirely welcome change as land previously used for energy creation could now be freed up to produce food, while cheaper fossil fuels lowered production and transportation costs.
Countries that have not used this new technology have simultaneously lagged far behind those that have. In the early 1900s, the dominant countries controlling 2/3 of the world economy were Great Britain, the United States, Germany and France. The economically less advantaged countries traded with the more powerful ones to obtain some of the free-flowing capital. This trade in minerals and fossil fuels, as well as the ease of transportation and communication, has begun to connect the world in ways unimaginable before. Powerful countries with few natural resources depended on economically smaller countries to supply the material that made them powerful in the first place.
- The global economy expanded during the late 20th century with the emergence of the Internet, the reduction of trade barriers, and the increase in capital investment in foreign interests. Countries traded debt with each other, both at the government level and as individual businesses such as banks and financial institutions. The internet has also allowed for greater ease of trading on foreign exchanges.
At the beginning of the 21st century, the global economy was linked through large flows of capital. Goods and services can be exported and imported. Labor was exported to countries that could offer more competitive production costs, or imported through migration. The capital was invested through investments in the global stock market or through debt swaps.
There is much debate about the positive and negative effects of the global economy. Those who support globalization argue that it spreads wealth to everyone and favors competition and therefore the improvement of products.
Those who are no global say it causes physical damage to the environment and has great human costs such as unemployment and poverty.