While globalization brings the world closer together, it also increases difficulties in managing economic relationships. The global market system, centered on ideals of capitalism, has become highly integrated and interdependent, often transcending traditional state boundaries. This global economic system dates back to the sixteenth century with the rise of European expansionism and the development of mercantilism, which, in turn, led to the emergence of liberalism. Within this system, states were encouraged to specialize in producing and exporting goods for which they had a comparative advantage. Britain, for the most part, dominated this system as a hegemon until the late nineteenth century, fostering a system of free trade as defined by capitalism and comparative advantage. However, the intensification of economic and political rivalries in Europe, isolationist policies from the United States, and unrest and revolution in Latin America, Africa, and Asia undermined the stability of this system. Twice the world devolved into a state of war, which left the global economy in complete shambles.

Following World War II, a new economic approach framed the Bretton Woods system that emerged. It included the establishment of three key international organizations: the International Monetary Fund, the World Bank, and the General Agreement on Tariffs and Trade (now the World Trade Organization). International trade was predicated on the principles of reciprocity and nondiscrimination, with the aim to get countries to eliminate preferences and protectionist policies by extending most-favored nation status to all trading partners. The United States soon replaced Britain as the dominant state in this system, and new countries in the Global South entered the stage as they gained independence from their colonial powers. Many of these developing countries came to feel manipulated, ignored, and left dependent upon the more industrialized states, an idea encapsulated in dependency theory. These countries called for a New International Economic Order to be established; however, this new order never came to fruition and most Global South states had to adhere to many of the established rules and principles in order to engage in the global economy.

Economic pressures and developments in the latter half of the twentieth century further changed the game. Many leaders of developed countries supported neoliberalism and promoted free market capitalism, while leaders of less-developed countries asserted that policies of conditionality undermined their economic progress. Several critical events unfolded during this time period, including the oil crisis of the 1970s, attempts by the United States to have other countries liberalize their economies in the 1980s, the fall of the Soviet Union in the 1990s, the integration of Europe, and the rise of transnational corporations around the world. The global economy is becoming more competitive and complex and countries scrambled to continually adjust. Russia, China, India, and many developing countries are finding new opportunities and are becoming major players as developed countries outsource and offshore business practices to these locations. Japan, Europe, and the United States are facing difficulties, such as fragile political environments, deficits in their current accounts, and bursting bubbles. Many analysts have argued that the twenty-first century may witness the emergence of a new global economy dominated by non-Western powers.