“What is the global economy? Illustrate and explain its’ evolution. Is it good, bad or a bit of both?”
World economy refers to the economy of the world. World economy includes economy of each country and somehow each country’s economy relates to each other. The basic concept behind the world economy is the globalization. In the last few years, the concept of globalization increased that leads the countries to have the international business that not only improves the economy of the country but also improves the economy of the world. With the passage of time, the globalization increased causes more and more trade between different countries.
In short, “world-wide economy is the economy of different countries along with economic activities between the countries that can affect the countries negatively or positively. It is basically, an exchange of goods and services between the countries of the world regarding money or monetary terms. The terms, international and global economy, are somehow different, and they are measured differently. They are measured differently and are different from national economies. The global economy is an aggregate of a national economy (Economist.com, 2013).
Global economies have also shaped the economy into the new look. Now the countries have become a global village. They can freely trade with each other and improve their GDP. It is important to note that global economies have provided new shape to the economy now economies are closer to each other. They can now share their resources for the production of efficient products. It is due to global economies and their emergence.
Advantages of global economy
Asdvantages of the global economy are not difference because the economies and people living there. Global economies have provided ways of using resources and labor of different countries. It has provided and improved efficiency of the products. Global economies have merged economy together. With the help of globalization, people are now able to choose from a list of different products. Consumers are now able to get their desired products in fewer costs. Global economies have provided opportunities to the companies to grow in international markets. Now companies can easily start their businesses in other countries. It is also good for the prosperity of the country because it increases employment opportunities and production opportunities.
Global economies have increased competition in the market. Now it is difficult for local companies to compete with international companies with a high number of resources and capital. Meanwhile, it provided new ways of thinking too small businesses. Now local businesses can learn different lessons from strategies of international companies. Due to an availability of international labor, companies are now able to produce products at competitive prices. Companies can improve their market shares.
Global economies also provided new ways of employment to the people of developing countries. They can go and earn as per their will. It also improved the economies. Now a large percentage of GDP is obtained from exports of services and products. Now investment has the wide variety of opportunities. They can select from global investments. It helped developed countries to improve their GDP growth. Global economies have also helped to the developing countries. They can import products and services from developed countries because they are not able to go through high capital expenditures of production.
Disadvantages of global economy
Globalization is not good for small and local businesses that have limited resources and market share. Global economies are not providing the good impact on developing countries. It is extracting their skilled labor and resources from developing countries. Global economies have created the monopoly of those countries that are rich with resources and technology.
Evolution of world economy:
Phase one of the industrial capitalization started in the eighteenth century. The structure of capital accumulation was created in this century to reduce the transportation cost. It was focused on the development of industries in the United States and Europe.
In the history, the economy of the world improves due the increased in development by the west. While the other struggled to have the stable economy. However, there were many reasons to have the poor economy like World War I and World War II that lead the countries to face the devastated and poor condition. It took a lot of years and time and hard world of many people in improving the economy of the country and taking part in the world economy with the help of trading system in monetary terms.
In the 19th century, the concept of globalization and trends were increasing leading people to have trade internationally at a global level. Hundreds of years ago, people were entering the world of global economy, by exchanging goods and services. However, there are many benefits of global economy, the condition of the country and structure of business in the country improves that lad the people to have better standards of living.
` To improve the standards of living people started to move towards the western countries like Europe, America, and the United Kingdom etc. because these countries are the one who has the stable economic condition at that time. The abrupt change, in the world economy, occurred due to the World War I. It collapsed the world, international economy. The condition became worse after the World War II. From the year 1950 to 1960, the concept of globalization decreased as compared to 50 years before (Presencing.com, 2015).
Economies of the countries with the own good and services, every society or country, has its economy, which is decided regarding the behavior of the people. However, economic evolution or economic changes can be there when there is the innovation in the products and the services. There is the need to update the economy and the aspect related to the economy, with the passage of the time, so that there could be betterment and so the country moves with the world. The countries need to consider the changes in the market so that betterment can be their evolution.
Since then, the improvement in the world economy appeared as compared to in the past. The main reason behind this change is the increase in the technology, monetary policies, government rules and regulations and international trading policies. These changes, lead the countries to have an international flow of business. If a country has international business, it improves the economic level of the people and structure of the country as well as an industrial condition of the country.
In 19th and 20th century, technological change played the important role. On the other hand, the lowering the cost of international trade lead the countries to have more expansion of business without any problem and restriction like a large amount of money for transportation. In the 10th century or the half of 20th century, countries started to have restrictions and change in policies like government policies and terms and conditions that lad the countries to have limited trade in other countries. In short, it affected the business greatly. It was the major threat to the world economy as well as the industrial condition of the countries (Grinin & Korotayev, 2013).
Increased in the transportation cost was discouraging factor for the industrial or businessperson. Limited trading between the countries and change in policy, term, and conditions were discouraging for the international trade. After that, the increased in the tax, restriction, and change regarding trade by the international country worsen the condition of international trade and globalization (O’Rourke & Williamson, 2001).
Is it good, bad or a bit of both?”
Global economies have both characteristics. They also contain advantages as well as disadvantages for the countries. Global economies have created many advantages for the countries like it created job opportunities for the people. Developing countries are there to show that job opportunities to their citizens. The rate of inflation in these countries is very high, and their labor is getting lower rates by exchange of their services. Now people are able not to earn money by going into other countries. It has also created the exchange of culture of different countries.
It has also provided workforce diversity to the companies. Global economies have provided new ways of expansion to the companies. Now they can expand to the other countries freely and produce their goods accordingly. Organizations can also outsource their production in countries where labor is cheap. Global economies have provided opportunities to the organizations to produce cheap but quality products. Developed countries are rich with innovation and technological development. Companies operating in developed countries can also move towards developing countries for the purpose of expansion (Dunning & Lundan, 2008).
It is also the biggest advantage of global economies that companies can also produce efficient goods and services for the customers. Global economies have more advantages and benefits as compared to disadvantages. Global economies have also increased the production in countries. It has also improved their foreign exchange. Now the companies can earn foreign exchange with the help of global investments.
It is important to note that global economies have also provided the better choice to the consumers. Now the consumers can select from the large variety of products and services. It also increased competition. This competition has provided opportunities to the countries to improve their technological development. Now international companies can improve their competitive advantage. They are improving their skills and capabilities to compete with each other.
Global economies have also created the trade in the new look. Now the countries can freely trade with each other. Many countries have signed free trade agreements to facilitate import and export. There are few disadvantages of global economies evolution. One disadvantage is that it is not good for developing economies. Global economies evolution has only improved wealth in developed countries. It did not provide any advantage to developing countries. It is not good for small businesses as they have limited resources and capabilities.
It is concluded that global economies have evolved with the passage of time. Now it is not difficult to transfer labor and products from one country to another. Evolution of global economies has provided new progress in the countries. It has also improved the performance of companies. Meanwhile, it has also increased competition. It is concluded that global economies development has both advantages as well as disadvantages but its advantages are more.
Dunning, J. H., & Lundan, S. M. (2008). Multinational Enterprises and the Global Economy. Edward Elgar Publishing.
Economist.com. (2013, September 23). When did globalization start? Retrieved October 15, 2016, from http://www.economist.com/blogs/freeexchange/2013/09/economic-history-1
Grinin, L. E., & Korotayev, A. V. (2013). Evolution: Development within Big History, Evolutionary and World-System Paradigms. ООО “Издательство “Учитель.
O’Rourke, K. H., & Williamson, J. G. (2001). Globalization and History: The Evolution of a Nineteenth-century Atlantic Economy. MIT Press.
Presencing.com. (2015). Economic evolution. Retrieved October 15, 2016, from https://www.presencing.com/ego-to-eco/economic-evolution