The Global Village: Connected World Drives Economic Shift

New convergence, interdependence profoundly changing world structure

More interconnectedness in global economy brings benefits, contagion risks

Global crisis requires supranational solutions, says IMF's Lagarde

As the world becomes ever more multipolar and interdependent, multilateral solutions are needed to fight the risks and reap the rewards of integration, Dervis says in Finance & Development magazine.

Good news and bad

The complex interaction of trade, capital, information, and technology is leading to a new global convergence, for better and for worse. The surge in information enhances human lives—improving health, education, and communication. Trade and financial integration have underpinned strong growth and job creation and helped narrow the gap between rich countries and poor.

Division between rich and poor countries is blurring as technology becomes global commodity that developing and emerging economies import

But, as we have seen from the prolonged global financial crisis, our interconnectedness carries grave risks of contagion as well as benefits. Small economies can bring down large ones, and a disaster in one country has ripple effects around the world. The September 2012 issue of Finance & Development looks at different aspects of interconnectedness, globally and in Asia.

The global village

People now are interconnected at a level never seen before in history, says Kishore Mahbubani, Dean of the National University of Singapore’s Lee Kuan Yew School of Public Policy. Technology—in the form of mobile phones, the internet, Skype, and computers—is saving lives and connecting lives.

But global supply chains mean that a disruption on the other side of the world can affect what cars one can buy from the dealer down the street. Travelers transmit disease across continents with a single plane ride. And global warming challenges all nations to work together.

Mahbubani says the global village increasingly requires a “new global ethic” to save it—global solutions to big emerging problems such as financial crisis, flu outbreaks, and climate change. He expands on these ideas in his forthcoming book, The Great Convergence: Asia, the West, and the Logic of One World.

The division between rich and poor countries is blurring as technology becomes a global commodity that developing and emerging economies import and adapt to catch up with advanced economies. Dervis looks at three fundamental shifts in the global economy that are...