How is the world organized economically?

The evolution and history of man has been a product of our changing demands for survival. Before humans are capable of a more advanced use of tools, we were gathering food (hunting, fruit/plant gathering) for survival. The prehistoric activities of man are demanding as it often involves migration and defense against predators which discovered population growth. After the ice age, since meat preservation became difficult (without ice) and lands can be cultivated, agriculture was invented. Regions that were able to progress to agriculture earlier became great civilizations. Most regions with higher abundance in natural resources and biodiversity often do not progress to this stage until later centuries. This was why countries in the northern hemisphere were able to progress faster than those in the southern hemisphere and in tropical conditions because they did not have the need to progress to agriculture earlier.

Civilizations in the middle east where the first civilizations were born graduated to agriculture with the use of neolithic tools. Because man can settle in one place, they often choose a place more suitable to agriculture, which paved the way of concentrating a population to one place creating a civilization.

People in those days farm only what their family needs for survival- subsistence farming. Since tools were simple in those days, families also had to provide for their own. With a bigger population concentrated, many harsh conditions such as water shortage were encountered which encouraged the population to organize and centralize leadership. Early governments were formed to solve economic issues such as water shortage and land disputes. Later, irrigation systems were invented to increase production of harvest. Taxation was laer introduced by Egyptians. However, total output of a household may not be enough for their daily survival because of varying factors. This encouraged barter. Some households are more efficient (least costly, more expertise) in tool making or goat raising than other households that are better at cultivation. So they bartered usually according to their relative marginal utilities. The differences in skills and expertise caused the social divide among the rich and the poor. Because of increasing population, some families were displaced and can no longer hold their own land. Some employ themselves in slavery.

Since gold and other metals were the most demanded (most exchangeable in barter) items in barter, the Lydians invented coins that later became the legal tender of transactions. This started the money system that we know today. Because of coins, trade expanded. Many civilizations travel for trade.

As populations and political power grew. leaders find the need of military expansion for more resources and wealth. Many warring tribes and civilizations seek territorial control which ensures economic and military control. Many dominant civilizations were able to control most of Europe but not as organized as the Roman empire. The roman empire organized economic logistics across conquered lands by building roads, infrastructure and postal and transport system. The Roman empire did not focus in agriculture but in gold and other precious stones. They were the first close counter part of the "conquistadors".

In the middle ages, feudalism was the dominant economic system. Sadly, there are economies still following this system. The monarchs found a way to win more political power among their allies. Only the privileged few, those who were close to the monarchs, owned lands. The rest had no choice but to work for them. The common people suffered for they did not have the incentive to produce optimally but they were getting less than what they work for. This widened the inequitable gap between the rich (monarchs and lords) and the poor (farmers and craftsmen).

When the crusades brought back the lost culture of ancient Rome and Greece which were preserved and diversified by Arabs and the east, many merchants sought the opportunity to get as much classical culture back to Europe. In addition, the mongol empire opened possible trade routes from Asia. Renaissance, "rebirth", of the celebration of being human added the recognition of the relationship of man with God. The middle class was able to rise at this time because of their power in trade and culture, downgrading the monarch's absolute power. Businesses can now flourish among the common people and not only limited to royal dealings. Interests in trading with the east grew as spices, silk and porcelain proved to be products that cannot be easily replicated. Because of trade, Europe has become a sponge that applied shared knowledge to their own technology and infrastructure. European kingdoms also sought the opportunity to widen their perspective in business by exporting as much products to boost their gold reserves for military funding- the way of mercantilism. Early European nations pitted against each other for a quest to gain more gold for power; thus, the traditional thinking of patronizing own goods or exports against competing goods or imports.

Knowledge and technology especially Philosophy from the east were able to penetrate European borders. People began to think beyond what the Church has been preaching about the world. Because of the reawakening of interests in philosophy, people began to ask questions which paved the way to the idea of conquest. When the Ottoman Empire grew and took control of trade routes from East Asia, European nations were were not able to get enough supply of spices to preserve meat in the summer. So, the price of spices went up, hurting their gold reserves which motivated exploration of new trade routes through the seas.

The age of conquest opened many doors for economic expansion for the European states. In a continent where many states are closely together and where territorial disputes were most frequent, expansion to different parts of the world was the alternative solution. Maintaining a colony in a less advanced civilization yields more economic benefit. When the black plague wiped out a huge number of Europeans, colonies were able to cover for labor losses and sustain production. Monopolies flourished during the colonial age. To control the economies of scale and mass production for the European demand, many fertile lands in colonies were invested in specific harvests; thus, hurting the food supply of the colonized.

When the use of coal to convert many forms of energy became widespread, many economies including the colonizers entered the age of industrialization. Production of goods became faster. With more resources to spare, thanks to their colonies, total output outnumbered the output demanded by the population. Imperialists export goods to potential markets; however, found it more profitable to dump in colonies (huge population). In the opening of Suez Canal, trades between the east and west grew which also complicates the growing number of transactions overseas. As a result, a sophisticated financial system backed up with a more established banking system paved the way to easier investment across countries. Capitalism became more competitive. More firms entered industries such limiting the market power of state monopolies. Monopolies were later deemed inefficient and unfavorable compared to a competitive market.

Some countries realized that the new capitalism allowed more disparity in society making the rich richer. Thus, the rise of communist and socialist ideas. During this period, economic functions were regulated by governments more so to socialist countries. In the aftermath of the first world war, Germany economy suffered from heavy sanctions imposed by the league of nations. The heavily regulated financial system of states suffered as many economies were not able to recovery from the destruction brought by the world war. At the time of the Great Depression, many countries abandon the gold standard as their currency plunged. Germany was in a dire state and sought a solution in the leadership of Adolf Hitler, another war.

The war helped in the recovery of nations such as the United States. Women were given more opportunities to work in factories to support the war of men. Demand for mass production of weapons increased the productivity of many nations. The major contribution of the war was the advancement of technology that could later be applied from warfare to the commercial market. Examples are the nuclear project and the jet engine which was early developed by the Germans later in the war. Morale is an important factor for victory. US started a media campaign to boost the morale of the soldiers through film making and print ads.

In the aftermath of the second world war, the world financial system re-organized; thus, allowing more financial and loan movement among countries (with the establishment of IMF and WB). Countries adopted a more deregulated and free system. This also started the movement for financial aid which plays a big role in foreign policy and economic development today. Imperialist countries soon realized the strict compliance of international rights and standards and slowly left their colonies. Also, the colonized were beginning to be fully aware of their rights which made it too costly to control civil unrest.

Media also evolved during the war. Print ads and film became a powerful force to manipulate emotions as tried in the war. It played a big role in stirring impulses in the age of consumerism. And in the post war world, economies were increasingly becoming dependent of oil. This allowed the perfection of the cartel as an economic structure for oil producing countries, especially in the Middle East. The dependence can bring a new shock to any economy. Just as what happened to the US in the oil embargo. The economy suffered.

Protectionist policies were proven costly by many economists. A country may gain more when specializing on goods relatively cheaper than the others than producing every good that the economy demands. This is the principle behind free trade- Comparative advantage. Many people disagree with the optimism of free trade for it raises many questions about neocolonialism. Protectionists fear that upon opening to trade, poor countries will just feed multinational corporations more power and money leaving local industries to suffer. However, some argue that upon opening to trade, countries have the opportunity to develop and improve household income for it stimulates more production and more jobs. But with the American culture and media dominating foreign markets, developing countries will find it hard to keep up in a globalized world.

Abundance in any type of factor of production makes that abundant factor cheap. To maximize profits for economic efficiency, many firms opt to take advantage on cheaper markets for labor, capital and other materials. One example is the labor transfer for outsourcing companies to India, China, Guatemala and the Philippines. This opened the debate of freer mobility of factors across boarders through integration. Global Ties have been increasingly important especially in the internet age where information, knowledge and services can be easily transferred across borders virtually.

With the complexity of economic and financial systems, world economies are woven together in an interdependent relationship. In order to progress, a country must not turn away from the global trade. Economic globalization becomes more sophisticated in the presence of cultural politics and wars. Economic motives must be kept hidden to not attract too much international opposition. So politicians usually plant plots about security tensions to make sense of a military move that is economically motivated.