WHAT IS GLOBAL FINANCE?

» industrial economies: the 23 most industrialized countries, including

the US, Canada, Japan, Western Europe, Australia, and New Zealand;

» developing countries: some 130 nations in Latin America, Asia,

the Middle East, and Africa. Some countries in this group have
enjoyed substantial growth in recent years, so there is now a subcat-
egory of ``newly industrializing countries'' (NICs) including such
powerhouses as Hong Kong, Singapore, South Korea, and Taiwan;

» transitional economies: 28 countries of the former Soviet bloc that

are now trying to develop market economies.

INTERNATIONAL BUSINESS

International trade had always been important, but during the last
20 years countries have become markedly more interdependent. A
widespread restructuring of economies to adapt to freer trade and
capital movements, and in response to the collapse of the USSR, is
occurring. While this presents many new opportunities for business,
it is by no means certain that the process is irreversible. As we will
see throughout this book, there are many forces and issues that are
directly or indirectly resistant to globalization. Although some believe
that multinational companies (MNCs) are a major factor in driving
further globalization, others argue that MNCs are actually much more
closely tied to their countries of origin than is generally appreciated,
and that they tend to pursue national, rather than global, objectives
(see Chapter 9, The Myth of the Global Corporation). There are also
worries that globalization could increase the wealth gap between rich
and poor nations.

KEY LEARNING POINTS

» While microeconomics looks at the ``trees'' of units such as

individual businesses and households, macroeconomics looks at
the ``forest'' of a whole economy.

» The theory of comparative advantage is the essential argument

for free trade it states that free trade benefits all partners, even
those who are ``absolutely'' more efficient.