The New Global Economic Order

On Agust 17 1988 the cash strapped Russian government announced that it would devalue the nations currency and default on part of its foreign debt. News of the decision rocked stock markets around the world. Witihn weeks the dow jones Industrial Average, a key index of the value of the new York stock Exchange (NYSE) the world largest-plunged 1,800 points. Just seven years earlier, in Agust 1991, a dierhard band of hard line communist saized president of the union of Soviet Sicialist Republics (USSR). For aa while it seemed that the USSR still a mammoth, nuelear armed superpower. Was about to slide back into hardline communism. But if the world trebled its stock markets did not even notice. The NYSE barely moved on the news of the coup, or the later news of the coups defeat. Why the difference? Why did russias currency crisis matter to stock markets while the political crisis of its predecessor the much larger and stronger USSR-did not? Why did events halfway around the world in 1998 have such a resounding effect on the united sates? The reason is the global economy. In 1991 the global economy was just emerging and held only a fraction of the power it commandes by decades end. In 1991 too, the USSR was an isolated giant on the brink of collapse, barely in touch with the international economy trough trade or investment. By 1998 Russia was deeply involved int the global economy, able to borrow worldwide but unable to pay its debts. When it finally caught cold, Wall Street sneezed. The Russiann default was not an isolated incident. It was preceded by the collapse of the economnies in Thailand, Indonesia, and Malaysia and followed by a currency crisis in Brazil. This rapid Succession of crises triggered widespread fears that more economies could soon fall and alerted a suddenly attentive world that a new global economic order had arrived. The global economy is changing not only the way the world does business but also the way it lives and governs itself. The global economy is still very much a work in progress, presenting challenges to economists and politicians alike. Many analyst believe tha the emerging global economic order, like the Industrial revolution 200 years before it, is an epoch-making event that will fundamentally alter the world. Peter Drucker a leading management consultant has called the new era of the global economy the age of social transformation. Every few hundred years in

western history, there occurs a sharp transformation. Within a few short decades, society rearranges itself-it was worldview: it basic values: it social and political structure, its arts its key institution. Fifty years later there is new world. Globslization is cathchall term for many processes that are at the heart of the global economy.The spread of instant global communications the rapid growth of international trade, global capital markets ( markets in wich national currencies are traded) an d foreign investmen and the emergence of a new breed of global corporation. The global economy is the product of all these thins, and more than the sum of them. It is a revolution that enables any entrepreneur to raise money anywhere in the world and with that money, to use technology communications, management, and labor located anywhere the entrepreneur finds them, to produce good of services that can be sold anywhere there are customers. The global economy has been building for 25 years, since the early 1970s. But it burst into public view only in the 1990s. when the end of the cold war (the post 1945 struggle between USSR and its aliens and the united states and its allies) fundamentally challenged the claim of communism,diluted the draw of socialism, and enabled supporters of open markets to proclaim the superiority of capitalism. Many nations that formerly followed the theories of german social philosopher Karl Max abruptly abandoned tha philosophy bringing virtually the entire globe into the orbit of the market. The global economy s different than the preceding international economy, which took much of its present from the 17th and 18th centuries with establishment of nation states. For hundreds of years nation promoted foreign trade to increase their wealth and power, but rarely hesitated to limit such trade when it was perceived as harmful. The new global economic order is unique in its sheer scope, size, and speed. Its ability to leap borders, to treat the world as one market and the nation state as though it does not exist.