ABSTRACT
This chapter looks at the traditional links between rural areas and international capital, labor and product markets, the changes that have altered the nature of the world economy, the impact of these changes on rural communities, and the opportunities and problems created by the new global economy. One of the most significant events in the globalization was the Smithsonian Agreement, which replaced the traditional fixed exchange rates between developed-country currencies with a system which allowed the values of currencies to float against one another. This created a market for currencies, in addition to the markets for goods, services, and bank capital. In the 1970s, high demand, low wages, and inexpensive capital made it profitable for companies to locate more routine production activities in rural areas. However, international competition has made it more attractive for companies to locate outside of the United States, where the costs of production—particularly labor—are even less than in rural communities.
