McKinsey for Kids:

K-pop, culture, containers, and why

Asia’s where the action is

A common name for stuff is “goods.” Most goods can’t talk. That’s a shame: if they could, they’d have an interesting story to tell about their own journey to get to your room.

Most goods do tell us where they were made. Check out the labels on some of the items in your room—say, the tag sewed into your sweatpants. You’ll probably find you’re surrounded by some seriously globe-trotting goods.

When goods are bought and sold, that is usually dubbed trade. And trade these days is often global.

Your game console might have been made in Japan or South Korea, your sneakers in India. Your games and streaming shows might have been created in China or the United States. The rice you had for lunch might have been grown and packaged in Thailand. There’s a constant stream of global trade—moving materials, parts, and finished goods around the world. If you draw all those goods moving, they might look like rivers. Maybe that’s why they’re called trade flows.

Goods aren’t the only things that get traded. People can sell skills, too—think teaching, engineering, nursing, or consulting (McKinsey’s own specialty). Those are called services.

The other things you can buy and sell are ideas and fun—music or football matches.

So why does our stuff come from all over the world? Why is trade global?

Imagine you and your friends are at a picnic and you start playing “swapsies.”

Everyone might grab one of the ham sandwiches you brought. And you grab a cookie (or two!), an apple, and some lemonade that your friends brought.

Now imagine the same thing happening, but with countries: global swapsies. Some countries grow a lot of corn because they have the right kind of soil and climate. Others have large reserves of gold that are mined. Some countries are really good at making phones quickly and at less cost. And some might have a lot of people who are great at making movies.

It usually makes sense for each country to do what it’s especially good at and then trade—buy from and sell to—other countries. That way everyone ends up with the stuff they want and need, whatever they started with. That’s global trade.

Trade has become more global over the past thirty years. That’s because banks, big ships, and email, for instance, have made it easier to make, move, buy, and sell around the world. And that’s globalization.

As you see, there are lots of activities in global trade. Many of them link up, like a chain. That’s why the whole process of moving a product, service, or idea from start to finish is usually called the supply chain. Lots of us play a part in these supply chains:

While the label global trade may be recent, trading has gone on for thousands of years. Let’s go back in time:

The first global trades probably took place between people from the Indus Valley, in the area where you might spot Pakistan today, and Mesopotamia, in today’s Iraq. What did they trade? Well, it was difficult to transport goods back then—there were no trucks or even roads as we know them today, so traders would have focused on rare or very expensive stuff that was worth the trouble and would sell for a high price. Trading probably started in the Bronze Age (which began about 5,000 years ago)—so bronze was almost certainly traded, along with other precious metals, gems, and spices.

Traders didn’t have planes, trains, and automobiles back then, so how did they move goods? In the beginning, it was probably long trips on the backs of camels, horses, and elephants, and it was just on land. One very popular route was called the Silk Road:

As you can tell, Asia’s always played a big role in global trade. Let’s look at why.

In just the last 40 years, Asia started to manufacture a lot more goods and became known as “the factory of the world.” It was able to make things cheaply because it had lots of natural resources and many more skilled people eager to work in factories.

As millions moved from farming to take somewhat higher-paying jobs in factories, Asia industrialized quickly—the economies started making most of their money by producing goods. Industrialization led to urbanization, as workers needed to stay closer to factories, and that led to lots of new towns and more and more people in cities such as Bekasi, Indonesia; Hai Phong, Vietnam; Jamnagar, India; and Phnom Penh, Cambodia.

As people get richer from working, their “standard of living” improves. They can afford to buy more stuff, such as washing machines and computers, which might free up time or even help make them better educated and then able to earn more money. People might live longer because they have better healthcare. You could say that Asia has transformed global trade—but global trade has also transformed Asia.

It’s not all happy news, though. The speed of industrialization and urbanization has left many cities struggling to provide the housing, healthcare, and transport services that people need. It has created environmental problems, including more pollution and waste. And, in some places, the rich have gotten a lot richer, driving inequality.

While Asia may be a factory to the world, countries there now produce a lot more goods and services to sell within Asia itself. These days, a lot of the science, research, and design for new products happens in Asia. All of this adds to the “value” of the goods and services made in the region, which is good for the people who produce and sell them. Asia, with its diverse cultures, languages, and places to see, is also a strong force in cultural and tourism travel, which is its own kind of trade.

Of course, the many countries of Asia aren’t all the same. So we also like to describe them as four different Asias, depending on factors such as income and digital connectivity:

As Asian economies grow and connect, governments and companies face new challenges. How to grow businesses and economies, and provide good jobs and reduce poverty, without harming the environment? How to keep society and businesses running smoothly through a pandemic? How to really use and benefit from new technologies? How to make sure women, often half the population there, have as many opportunities to work as men? Again, McKinsey is helping companies and governments in all four Asias answer important questions like these.

Some fun facts—and they might surprise you:

Asia remains at the heart of a lot of global trade. As you grow up, do you think that will still be the case? Where will most of the stuff you buy in years to come actually come from? And how will it get to you? We think some of it will definitely be made by robots from recycled materials, delivered by drones. One thing is for sure: We will want better and different stuff, so the future of trade and supply chains will only get way more fascinating.