Before 911, the most serious impact on day-to-day life in the West might arguably have been a result of globalization. But globalization and its effects are still an issue: “The recent gyration in the prices of oil and other primary products was related to concerns about the Iraq war and terrorism and masks the trend of falling prices.”
The former vice minister for international affairs in Japan’s Finance Ministry thinks that there is a general trend towards global deflation caused by the information and life sciences revolution and globalization.
Cheap goods from China and India may once again account for nearly half the world’s production after almost 200 years. He argues, however, that if deflation hits the US it will be nothing like as destructive as during the 1930’s.
“The world is shifting from an era of structural inflation to one of deflation, in which prices for most manufactured goods and tradable services fall rather than rise…
…But the new wave of price falls has more in common with the mild deflation of the 1880s – which was associated with big productivity gains – than with the Depression of the 1930s…
…First, a wave of rapid technological innovation centered on information, telecommunication and biotechnology is changing economic and social systems in a fundamental way. This can justifiably be called the Third Industrial Revolution, as it is comparable to the industrial revolution of the late 18th century and to the second surge of technological progress in communication and distribution in the mid-to-late 19th century…
…Second, globalization has been dramatically altering the patterns of production, distribution and transactions. The re-emergence of former economic powers, particularly China and India, is helping to drive this increase in productivity and output…”