Development of the Global Economic System

This chapter focuses on the globalization of industrialization and divides it into three phases, with a major emphasis on history, including the the changing of world powers and the story of colonization, as well as the establishment of new institutions like the International Monetary Fund and the World Bank. Professor Sachs talks about the distinction between first, second, and third world countries. This distinction was established in the 20th century related to countries' affiliations with the United States or the Soviet Union, and therefore with their market-based, centrally-planned, or protectionist economies. Sachs explains how the world moved towards a more globalized economy over time, especially using the case of China and the fall of the Soviet Union. New international trade agreements, such as the World Trade Organization, as well as the technology revolution, led to increased globalization. The balancing of the world economy with the new achievements of Asia in technology are transforming geopolitics and trade.

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