The global economy: economic integration

Published on July 29, 2021   22 min
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Hi, my name is Mariano Torras. I'm Professor of Economics at Adelphi University in New York, and we're going to be doing a lecture series on macroeconomics.
The global economy. Economic integration. Up to now, we have mostly explored the economy at the national level. Even where we have considered other countries, we focused on how the economies were different, not on how they were integrated into a global whole. We must recognize that the 21st century global economy is, by most measures, far more integrated than in the past. Many economists consider it to be a product of a more general tendency toward globalization. All countries that trade with other countries are in some way integrated into the global economy.
But why do countries trade with each other? Without going into too much detail about it, countries gained by specializing into production of goods for which they have a competitive advantage. Examples of such advantages include a skilled workforce making a country competitive in electronics or other high-technology products, or a favorable climate in which to grow certain food items cheaply. Countries gained by specializing in such goods because it can produce in excess of what the country depends and then export the difference to other countries. The revenue that a country obtains from its exports could then be used to pay for imports of products that a country does not produce competitively. Consumers, for the most part,