We are living in our own reality show that has been a nightmare for at least the last year, and probably will be so for many more years. Although it seems the world has changed dramatically in a relatively short period of time, it is more likely a result of the logical progression of historical events over the last twenty or so years.
In that time, we have witnessed shifts towards a broader marketplace for goods and servicess--—a global economy where we become more readily subject to the competitive impact of the labor force, taxes, environmental prohibitions and laws of other countries around the world.
Consider these significant historical events:
• The demise of the Berlin Wall (1987) causing more countries to embrace democracy and capitalism as their paths to freedom and opportunity combined with the reunification of Germany (1990) resulting in an expanded work force and new economic strength for greater European economic growth.
• The Free Trade Agreement between the United States and Canada (1988) removing significant trade restrictions and liberalizing conditions for investment across borders.
• The European Union formed (1993) and the 27 member states collectively becoming a formidable economic and political union forming a single market with a standardized set of laws promoting the free movement of people, ideas, goods, services and capital, and providing Europe with a 30 percent market share of the gross world product.
• The World Trade Organization consolidating agreements formed under the General Agreement of Trade and Tariffs (1995) reducing tariffs as well as barriers to free trade among over 141 countries around the world making the global marketplace a reality.
• The fast growing developing economies of Brazil, Russia, India and China—known as the BRIC nations—embracing global capitalism (2001), having one quarter of the world’s land and 40 percent of the world population, and becoming the fastest growing economies in the world.
Each of these events led us closer to interdependence, wherein our economic well-being is substantially connected to that of other nations around the globe; our problems cause ripple effects in other countries and vice versa, so much so that it is becomes difficult to discern a single origin of any market phenomenon.
There is no turning back; things will never be as they were. For decades, the United States has reaped huge benefits as the number one importing nation in the world of free trade. Yet, over the same period, our economy has suffered and been diminished as manufacturing facilities have moved out of the U.S. to cheaper labor markets around the globe.
Unfortunately, we have also increasingly relied upon those countries that reap the benefits of our consumption to purchase our public debt. Our current economic malaise has swollen our public debt to the highest levels since post World War II.
Americans have no choice but to work harder and smarter. It is time to think differently. There is no more business as usual; we must examine how things have changed and will keep changing. We need to know more about our global economy and the developments in technology which hasten the occurrence of change. Practically speaking, we need to adjust our costs of doing business and our business models so that we can compete more effectively.
To succeed, we must outwit, outplay, and outperform our competitors.
[Check out the following sources to see just what our position in global economics looks like today!]
Chart (left) US Net International Investment Position: en.wikipedia.org/wiki/File:Nettoauslandsverm%C3%B6genUSen.PNG
Chart (right) Percentage of World GDP (last 500 years): http://www.visualizingeconomics.com/category/gdp/