As the countries are getting closer and the globalization process becomes evident, the question regarding the global economy seems to be more urgent. The term ‘global economy’ highlights that the countries are connected economically. The process of globalization results in the fact that the countries’ economies become intertwined. It is beneficial for suppliers, manufacturers, and consumers as well. The Internet gives access to the buyers to different countries just in one click.
The modern world of trade is an example of the exchange of the global good1. To get deeper involved in the issue, the question regarding globalization and its impact on the wellbeing of the nations should be considered. It is worth noting that globalization is a beneficial process that is seen as the tool to reduce the poverty2. Although it might be very difficult to eliminate this problem, the reduction of the index of international poverty is a significant aspect.
Globalization contributed to the development of technology, which is profitable for companies and organizations around the world. As the countries become more intertwined, trade relationships become tighter and closer than earlier. The global economy is the result of the globalization process, and that is, side-effects of the process should be taken into consideration. First and foremost, there is a cultural threat.
Every culture is unique; nations try to save traditions and customs to keep the national identity. The globalization process brings peoples closer, and that is, the cultures mix creating a homogenous one. Because of globalization, the organizations face rigid competition that can be a disadvantage for small and developing companies; this automatically can lead to the destruction of local economies and depressing economic environment that can negatively impact other countries.
Despite all the innovations and advancements that the globalization process brings along, it should be stressed that the global economy and the world in general, face crucial challenges that impressively affect society. The interconnection is not only an advantage but a disadvantage as well. Several short-term issues can be self-correcting. Among such problems, the following ones can be considered as the most widespread, namely banking crisis, global and oil shocks.
Globalization consequently leads to certain risks of national economies. In most cases, the governments do not have control over the issue. Aside from offering more workplaces, advantages of international trade, the interconnection also brings some economic challenges. The most widespread problems are the following, namely inequality, unequal development of local economies, poverty, environmental issues, and limited regulation of the global market.
Every year, the world economy changes as it is affected by modern trends. The deeper involvement in the issue can be the stimulus forecasting events as the global trends follow the pattern. The oil shock was predicted in 2014, and the governments could react appropriately and take all the needed measures to reduce the negative impact on the economy3. The pattern of economic development can be observed and predicted by the experts who pay a lot of attention to the examining of the global market shifts and changes. According to several experts, the United States of America is the dominant country that influences the global economy.
China aims to receive the dominant position in the world arena, however, the slowly growing GDP expected to be an obstacle to the Chinese government on the way of meeting its goals and objectives4. The United States also influence the international trade market and countries like Germany, Japan, and China are highly dependent on the processes that occur in the American economic environment.
The next global trend that will impact the world economy is the rapid development of China. Although the country showed significant economic growth recently, extended the export, and received the niche on the global market, it should be pointed out that the government faces several economic issues and crises. The economic collapse in China consequently led to cheap commodities as China is the leading country in export. The economic environment of the country influences the condition of the global economy.
European debt crises harm the global economy. The high unemployment rate is an obstacle towards the development, improvement, and prosperity. The European Union faces several serious issues that demand a solution. The major problem is that the countries with different productivity and quality of the commodities compete in the common market. For example, Germany and Greece are members of the European Union; however, Greece cannot compete with Germany in terms of productivity. German goods have a competitive advantage in comparison to the ones made in Greece. This problem causes a high rate of unemployment and consequently leads to economic depression5.
According to the data of the International Monetary Fund, the economy of India has all the chances to experience rapid growth. India has more intense economic development than China. The recent findings suggest that 2016 will be beneficial for the country. India is now at the turning point that will bring the country to technological advances and improvement of the living standards. The surprising index can be explained by the demographics. India is believed to have a greater workforce than China, even though the population of China is the biggest across the globe.
The global economy in 2015 has controversial results6. According to the researchers, some countries experienced development and improvement, whereas other ones face some problems that were difficult to overcome. Maury Obstfeld, the chief economist of the International Monetary Fund, outlined some significant events for the global economy that occurred in 2015. The year was challenging for the condition of the world economy.
On the one hand, the United States of America provided a great number of workplaces and showed solid economic growth, however, on the other hand, the success of Europe and Japan is questionable. The vast majority of the developing countries, except India, show limited results in the improvement that leads to a decrease in price for the commodity and global revenue. The world economy is also affected by the political tension in the countries.
The experts claim that the attention of the experts in 2016 should be centered on certain aspects. The first one is the development of China. The next issue is the refugees that move to European countries from Syria and Iraq. The refugees influence the labor market and affect the local economies. However, it is worth pointing out that the refugees are not the single problem in the European Union as the unstable political and economic situation in Turkey, Jordan, and Ukraine is also the point of concern. The accent should be laid upon the regulation and control of the international trend7. Liberalization of the market is the burning issue that is discussed during the Doha round.
Poverty is considered to be an aspect that influences the development of the global economy adversely. According to recent statistics, more almost half of the people in poverty live in developing countries. This fact should be taken into consideration and solved. Jim Yong Kim noted that:
Developing countries should focus on building resilience to a weaker economic environment and shielding the most vulnerable. The benefits from reforms to governance and business conditions are potentially large and could help offset the effects of slow growth in larger economies8.
The global economy is a multifaceted term that cannot be characterized positively or negatively. I do not profess to be an expert regarding the subject, but I am strongly convinced that the global economy is a combination of both. The world and humanity develop every day; it is an unstoppable process. Globalization is a phenomenon that gains momentum and consequently affects not only the world economy but the locals as well. There are several advantages that the globalization process brings along; however, it should be stressed that the side-effects cannot be eliminated. The world faces an abundance of economic issues that are essential for solving.
In conclusion, it should be pointed out that the globalization process consequently leads not only to eliminating barriers between people and nations but between the economies of the countries as well. The organizations like the WTO were created to regulate the trade flow between the nations and it has a beneficial effect on the prosperity and safety of the countries. 2015 was a challenging year for different courtiers; however, the United States of America remained powerful and successful in terms of the economic environment. India experienced rapid development and received the chance to enter the global market. The world economy is influenced by all the processes that the countries face. The examination of the trends and the possible outcome can contribute to the improvement of the economic condition and elimination of financial shocks.
Bibliography
Audretsch, David, Erik Lehmann, Albert Link, and Alexander Starnecker. “Introduction: Technology Transfer in the Global Economy.” Technology Transfer in a Global Economy 39, no. 1 (2012): 1-9.
Cheung, Yin-Wong, and Guonan Ma. Asia and China in the Global Economy. Singapore: World Scientific, 2011.
Claessens, Stijn, Simon Evenett, and Bernard Hoekman. Rebalancing the Global Economy: A Primer for Policymaking. London: Centre for Economic Policy Research, 2010.
Fasenfest, David. “Global Economy, Global Dialog.” Critical Sociology 40, no. 2 (2014): 171-172.
Freytag, Andreas. Securing the Global Economy: G8 Global Governance for a Post-crisis World. Farnham: Ashgate, 2011.
Gagain, John. Visions for the Global Economy Economic Growth, Global Economic Governance, and Political Economy. Bloomington: IUniverse, 2012.
Simonyan, Rafik. “On Developing Trends in the Global Economy.” European Researcher 76, no. 6 (2014): 1079-1085.
Spilsbury, Richard. Global Economy. Chicago: Heinemann Library, 2012.
Footnotes
- Andreas Freytag. Securing the Global Economy: G8 Global Governance for a Post-crisis World (Farnham: Ashgate, 2011), 118.
- John Gagain, Visions for the Global Economy Economic Growth, Global Economic Governance, and Political Economy (Bloomington: IUniverse, 2012), 56.
- Richard Spilsbury, Global Economy (Chicago: Heinemann Library, 2012), 45.
- Yin-Wong Cheung and Guonan Ma, Asia, and China in the Global Economy (Singapore: World Scientific, 2011), 117.
- Stijn Claessens, Simon Evenett, and Bernard Hoekman Rebalancing the Global Economy: A Primer for Policymaking (London: Centre for Economic Policy Research, 2010), 154.
- David Fasenfest, “Global Economy, Global Dialog,” Critical Sociology 40, no. 2 (2014): 171.
- Rafik Simonyan, “On Developing Trends in the Global Economy,” European Researcher 76, no. 6 (2014): 1081.
- David Audretsch, Erik Lehmann, Albert Link, and Alexander Starnecker, “Introduction: Technology Transfer in the Global Economy,” Technology Transfer in a Global Economy 39, no. 1 (2012): 7.