Most of the world's economies are interconnected through the production, exchange, and distribution of goods and services. Image courtesy of Earl/Flickr.
In the world today, no country relies solely on itself to provide all the goods and services to its population. Instead, the world has achieved economic interdependence. Economic interdependence takes place when economies are so advanced that we no longer have to depend on ourselves for providing the basic needs of life. People now depend on other people to produce most of the goods and services to sustain life. And countries rely on each other to provide and distribute goods and services for consumption via global economic networks. The establishment of trade agreements and economic unions have helped strengthen the global economy, and solidify the economic interdependence of nations. Connections between culture and religion have helped nations exchange ideas and economic systems. Economic interdependence is one example of cultural diffusion. Innovations in transportation,especially, have helped stimulate foreign and domestic trade.
Before this happened on a global scale, it occurred at a regional scale. The presentation on the next page describes the role transportation has played in connecting the regional economies of the United States, helping to unify the nation's economy in the nineteenth century.
Look at the following chart to see how our levels of interdependence have changed over time. The world has moved from individual, subsistence economies to a global economy today.
Types of Economies Involved
200 years ago
People almost exclusively grew their own food.
People likely built their own homes or had work parties where neighbors helped
People almost exclusively made their own clothes.They were able to purchase cloth at the local mercantile, but they sewed the clothes at home.
Local economy involved exclusively
100 years ago
People still grew a significant amount of food at home.Green Grocers were available in cities, some canned goods were available
People could purchase a pre-fabricated home from the Sears Roebuck Catalog.This required less skilled labor to construct and was less expensive.
People would engage the services of a tailor or dressmaker who would construct clothes.Some clothes were available through catalogues.
Local economy supplies laborers
National economy produces goods
People usually purchase food from a local grocery store.Specialty stores exist to meet specific consumer requests.
Large building companies exist to provide housing.Housing is specialized and many options and price points are available.
Clothing readily available.Clothing is produced in many different countries. Many options and price points are available.