ABSTRACT
Everybody talks about the ‘world economy’. It is indeed the new reality. But it is quite different from what most people – businessmen, economists, politicians – talk about. Here are some of its main features, its main challenges, its main opportunities.
In the early or mid seventies – with OPEC and with President Nixon's ‘floating of the dollar’ – the world economy changed from being international to transnational. The transnational economy has become dominant, controlling in large measure the domestic economies of the national states.
The transnational economy is shaped mainly by money flows rather than by trade in goods and services. These money flows have their own dynamics. The monetary and fiscal policies of sovereign national governments increasingly react to events in the transnational money and capital markets rather than actively shape them.
110In the transnational economy the traditional ‘factors of production’, land and labour, have increasingly become secondary. Money too, having become transnational and universally obtainable, is no longer a factor of production that can give one country a competitive advantage in the world market. Foreign exchange rates matter only over short periods. Management has emerged as the decisive factor of production. It is management on which competitive position has to be based.
In the transnational economy the goal is not ‘profit maximization’. It is ‘market maximization’. And trade increasingly follows investment. Indeed trade is becoming a function of investment.
Economic theory still assumes that the sovereign national state is the sole, or at least the predominant, unit, and the only one capable of effective economic policy. But in the transnational economy there are actually four such units. They are what the mathematician calls ‘partially dependent variables’, linked and interdependent but not controlled by each other. The national state is one of these units; individual countries – especially the major developed non-communist ones – matter, of course. But increasingly decision-making power is shifting to a second unit: the region – the European Economic Community; North America; tomorrow perhaps a Far Eastern region grouped around Japan. Third there is a genuine – and almost autonomous – world economy of money, credit and investment flows. It is organized by information which no longer knows national boundaries. Finally there is the transnational enterprise – not necessarily a big business, by the way – which views the entire developed non-communist world as one market, indeed as one ‘location’, both to produce and to sell goods and services.
Economic policy is increasingly neither ‘free trade’ nor ‘protectionism’, but ‘reciprocity’ between regions.
There is an even newer transnational ecology. The environment no more knows national boundaries than does money or information. The crucial environmental 111needs – the protection of the atmosphere, for instance, and of the world's forests – cannot be met by national action or national law. They cannot be addressed as adversarial issues. They require common transnational policies transnationally enforced.
Finally: while the transnational world economy is reality, it still lacks the institutions it needs. Above all it needs transnational law.
