Internationalization of the economy is a general concept referring not just to the foreign trade sector and the openness of the economy, but also to a broader set of issues such as world market integration (goods, services, labor, capital), the economic vulnerability to foreign nations (sometimes called mutual dependence), and the sensitivity to economic events and policies abroad (sometimes called economic interdependence). Such internationalization leads to increasing structural complexity in many dimensions. Markets become more extensive and heterogeneous; interactions between different parts of the economic system become more elaborate; and the direct and indirect information requirements of the economic system increase. The increased structural complexity has a strong influence on enterprises, whether they are formally multinational or domestic. It also has an important impact on governments since national economic policies must now be more closely coordinated with those of foreign nations if they are to be effective.

At several points in this study I draw attention to particular aspects of internationalization, for instance, increased immigration (Chapter 2), foreign ownership (Chapter 5), and the impact of foreign trade on domestic competition (Chapter 7). I spotlight the impact of internationalization on the weakening of the effectiveness of domestic monetary and fiscal policy in the next chapter and discuss still other aspects in the final chapter. In Appendix Note 8.11 relate the various concepts of internationalization with each other and briefly discuss some empirical work concerning the impact of internationalization on the U.S. economy.