Modern World Economy
The world economy is increasingly becoming a single economic unit.
Individual national economies are developing close linkages through trade,
capital investment, and financial institutions. Multinational corporations
spread their activities across national boundaries, and the international
banking system carries on banking activities throughout the world.
During the last two decades, while world output has been growing
about 4% per year, world trade has been growing about 8% and production
by foreign subsidiaries has been growing by some 10%. Export and import
shares of output have increased considerably in practically all industrial
sectors. A growing percentage of world trade is becoming intra-industry trade
(reflecting economies of scale and increased demand for differentiated
products) and even intrafirm trade by transnational firms (reflecting
decomposition of production activities around the world).
The inter-enterprise international division of labour influences relations
between the developed and developing countries primarily because the giant
international companies transfer certain labour intensive production phases
or whole production cycles to the developing countries where a cheap and
sufficiently qualified (literate, easily teachable) labour force is already
available.
The closer integration of developed countries steps up the further
progress of the division of labour and facilitates its better organization. The
major part of the world-wide demand for new machinery and equipment
that accelerate industrial-technological development is met by industrially
developed countries. International export of armaments continue to be an
important factor for increasing their exports as well.
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