Economy
Where We Are Today
The formal world economy has grown exponentially over the past half century. Gross World Product (GWP) has increased more than seven fold, from some $6 trillion US in 1950 to $47 trillion US in 2001 (CIA World Fact Book).
This expansion has occurred in parallel with a series of shifts in types of economic activity – first away from agriculture toward hard goods manufacturing, then toward soft goods production, and most recently, toward services. These changes reflect the increasing value of educated people.
At the same time, the economy has increasingly “globalized” as materials, labor, and capital have freely moved across borders in search of markets and investment opportunities – a trend that greatly accelerated after the end of the Cold War and the development of market capitalism.
This combination of growth and increasing globalization has raised the material standard of living in most industrialized nations, and in a few developing nations, but has also generated or exacerbated a number of problems.
The benefits of economic expansion have been very unevenly distributed, both within and among nations. Roughly half the world’s people live on less than $2 a day and neither benefit from nor participate in the global economy to any significant degree. The gap between the rich and poor has also widened significantly in many industrialized nations, including the United States.
Economic activity is still largely based on “throughput” – the constant extraction and processing of natural resources, which itself has been increasing exponentially, causing damage to the environment, driving deforestation, extinction of species, global climate change, and even disrupting the earth’s basic carbon, nitrogen, and freshwater cycles.
Economies have always been subject to disruptions. However, the economy is increasingly interconnected and complex, and therefore susceptible to serious disruptions that effect many more people around the world such as “Black Monday” in the US stock market, the Asian “implosion” and resulting capital flight of the late 1990’s, or the global slump exacerbated by September 11, 2001 terrorist attacks on the United States.
Many negative impacts of economic activity, including pollution and resource depletion, are ignored (“externalized”) by accounting practices. This has created an impression of unlimited economic growth, while not accounting for ecological and social deficits such as the loss of natural capital due to environmental degradation and the loss of traditional cultures due to increasing globalization.