World economy

GLOBAL INTERDEPENDENCE

Not only does business rule the roost within national economies, but it also makes them interdependent. Most of what we eat, drink, wear, drive, smoke, and watch is the product of firms that are now global in their operations. Many of the firms now operate in lots of countries on all continents. Increasing numbers are owned by shareholders in many different countries. Indeed, most governments around the world have facilitated corporate-led globalization by pursuing policies that enhance the ability of corporations to move their products, money and factories around the globe more quickly and with less impediment from regulations. New and proposed regional and global trade and investment deals aim to lift even further the remaining economic barriers across borders. The debates are erupting across college campuses, in labor unions, church basements, parliaments, and city halls, and at millions of dinner tables around the world. This is a healthy development because for decades government policy around the global economy was shaped by a few people, many from the corporate sector, who were quite insulated from the public. Nowadays we live in the world where peoples and countries are increasingly intertwined.

The global system is becoming a tightly knit web in which a change in any part of the web has significant effects on the others. The wealth, security, and general welfare of almost all nations are interrelated. For example, fluctuating oil supplies affect economic productivity, trade balances, interest rates, and employment throughout the world. The growing interdependence of world social, economic, and ecological systems makes it difficult to predict the consequences of social decisions. Therefore, there is a growing consensus among the leaders of most nations that isolationist policies are no longer sustainable and that such global issues as combating global warming, controlling the spread of nuclear weapons and protecting the world’s monetary system from wild fluctuations can be accomplished only by all nations acting in concert.

The world economy is rapidly becoming a single economic unit. Individual national economies are developing closer linkages through trade, capital, investments and financial institutions. The interaction of the countries’ national economies is based on the International Economic Relations (IER). Therefore, there are three main cross-border flows: goods and services, finance, and people.

Although globalization has occurred for centuries in each of these spheres, it is going through a period of rapid change. Understanding the dynamics of today’s global economy requires some knowledge of what came before.

STAGES OF THE GLOBAL ECONOMIC DEVELOPMENT

XV – XVI centuries – the Age of Exploration. Great discoveries. World colonial system. Manufactures. World market.   XVII – XIX centuries – Colonial division of labor. Industrial revolution.   XIX – XX centuries – International Division of Labor (IDL). Scientific progress. World financial system. Interdependence of all countries’ economies.     Economic crises: 1910 – 1930 World War I. Socialist revolution. Great Depression.   1930 – 1940 World War II. Reconstruction of World Economy System.   1950 – 1960 World Colonial Collapse – New Division of Labor.     1990 - The Modern Stage of the World Economy

From the Vikings to Marco Polo, people traveled great distances to reach new worlds, often bringing home exotic foods, spices, crafts, and other riches. Beginning in the late fifteenth century, European powers financed explorations to what become known as Africa, Asia, and the Western Hemisphere. For hundreds of years Chinese and Arab traders piled routes across Asia, the Middle East, and Northern Africa.     Within years, explorations turned to conquest, and colonial authorities directed movements of goods, capital, and people into a new colonial division of labor. During the centuries Spain, England, France, Portugal, Belgium, the Netherlands, Germany, Italy and later the USA and Japan rearranged economic activity in much of Asia, Africa, and Latin America. The transformation of most colonies into exporters of one or two minerals or agricultural products twisted these economies into dependence on products over whose price and marketing they had no control.   Stock markets around the world collapsed, banks went under, and trade flows collapsed as nations erected protectionist barriers.   The architects of the post-World War II global economic institutions wanted to set in place barriers against a similar collapse. The vision was to create public international institutions to anchor each of the three pillars of global economic activity: Production – World Bank. Finance – International Monetary Fund. Trade – GATT, succeeded in 1995 by the WTO.     The basic division of labor has changed radically. 1. Market Leaders.The richer countries of Europe and North America along with Japan, Australia, and New Zealand. 2. Big Markets. China, Korea, Taiwan, India, Indonesia, South Africa, Turkey, Brazil, Mexico have become large-scale manufacturers of a broad range of products. 3. Would - Be Big Markets.Greece, Portugal, Chile, Colombia, Venezuela, Thailand, Singapore, Philippines, Malaysia have become electronics, clothing and service centers. 4. OPEC Nations.These are oil-exporting countries. Venezuela and Indonesia are also OPEC members. 5. Former Soviet bloc Nations.These have shifted from socialism to deregulated market economies and suffered great difficulties in competing for foreign investment with Asia and Latin America. 6. Raw Material Exporters.About 40 countries. 7. Least Developed Countries.About 60 countries, mostly all in Africa are very poor.   The world economy is becoming a single economic unit with its benefits and costs, winners and losers.

THE MODERN STAGE OF THE WORLD ECONOMY

GLOBALIZATION

Globalization is the closer integration of the countries and peoples of the world which has been brought about by the enormous reduction of costs of transportation and communication, and the breaking down of artificial barriers to the flows of goods, services, capital, knowledge and people across borders. Globalization is powerfully driven by international corporations, which move not only capital and goods across borders but also technology. It has helped hundreds of millions of people attain higher standards of living. However, globalization has become the most controversial issue of our time, something debated all over the world. There is discontent with globalization. On the one hand, globalization can be a force for good – the globalization of the economy has benefited countries that took advantage of it by seeking new markets for their exports and by welcoming foreign investment. On the other hand, the countries that have benefited the most have been those that took charge of their own destiny and recognized the role government can play in development rather than relying on the notion of a self-regulated market that would fix its own problems. Hence, for millions of people globalization has not worked. Many have actually been made worse off, as they have seen their jobs destroyed and their lives become more insecure. Today, globalization is being challenged around the world.

Advantages of globalization

- New foreign firms may hurt protected state-owned enterprises but they can also lead to the introduction of new technologies, access to new markets, and the creation of new industries.

- Opening up to international trade has helped many countries grow far more quickly than they would otherwise have done. International trade helps economic development when a country’s exports drive its economic growth.

- Foreign aid, another aspect of the global world, for all its faults still has brought benefits to millions, often in ways that have almost gone unnoticed: education projects have brought literacy to the rural areas or, for instance, irrigation projects have more than doubled the incomes of farmers lucky enough to get water.

- Globalization has reduced the sense of isolation felt in much of the developing world and has given many people in the developing countries access to knowledge.

- Because of globalization many people in the world now live longer than before and their standard of living is far better.

Thus globalization is progress; developing countries must accept it if they are to grow and to fight poverty effectively.

Disadvantages of globalization

- The critics of globalization accuse Western countries of having pushed poor countries to eliminate trade barriers, but kept up their own barriers, preventing developing countries from exporting their agricultural products and so depriving them of desperately needed export income. The result was that some of the poorest countries in the world were actually made worse off.

- Western banks benefited from the loosening of capital market controls in Latin America and Asia, but those regions suffered when inflows of speculative hot money (money that comes into and out of a country, often overnight). The abrupt outflow of money left behind collapsed currencies and weakened banking systems.

- A growing divide between the “haves” and the “have-nots” has left increasing numbers in the Third World in dire poverty, living on less than a dollar a day. The actual number of people living in poverty has actually increased by almost 100 million. This occurred at the same time that total world income increased by an average of 2.5 % annually.

- Africa plunges deeper into misery, as incomes fall and standards of living decline. Other countries simply cannot attract private investors. Without this investment, they cannot have sustainable growth.

- If globalization has not succeeded in reducing poverty, neither has it succeeded in ensuring stability. Crises in Asia and in Latin America in 1997-1998 threatened the economies and the stability of all developing countries and appeared to pose a threat to the entire world economy.

- Globalization and the introduction of a market economy have not produced the promised results in Russia and most of the other economies making the transition from communism to the market. The contrast between Russia’s transition (engineered by the international economic institutions) and that of China (designed by itself) could not be greater: while in 1990 China’s gross domestic product (GDP) was 60 % that of Russia, by the end of the decade the numbers had been reversed; while Russia saw an unprecedented increase in poverty, China saw an unprecedented decrease.

Finally, the environment has been destroyed, as political processes have been corrupted, and as the rapid pace of change has not allowed countries time for cultural adaptation; massive unemployment has been followed by longer-term problems of social dissolution – from urban violence in Latin America to ethnic conflicts in other parts of the world, such as Indonesia.

Globalization is power?

Thus globalization has been the most pressing issue of nowadays. “We cannot go back on globalization; it is here to stay. The issue is how can we make it work” (Joseph E. Stiglitz, winner of the Nobel Prize in Economics). If globalization continues in the way that it has been in the past, if we continue to fail to learn from our mistakes, globalization will not only succeed in promoting development but will continue to create poverty and instability. Without reform, the backlash will mount and discontent with globalization will grow.

Globalization is a powerful force that has brought enormous benefits to some; however, millions have not enjoyed its benefits, because of the way it has been mismanaged, and millions more have ever been made worse off. The challenge today is how to reform globalization, to make it work not just for rich and the more advanced industrial countries but also for the poor and the least developed countries.

The International Forum on Globalization has developed a broad alternative vision for global economic rules and institutions which does not reject all international trade and investment. But rather than being viewed as ends in themselves, trade and investment should be seen as means for promoting ideals such as equality, democracy, good jobs, a friendly environment, and healthy communities. These are ten core principles for sustainable societies:

1. New democracy. The principle of new democracy means creating governance systems that give those who will bear the costs the vote when decisions are being made.

2. Subsidiary. Authority of more distant levels of administration is subsidiary (subordinate) to the authority of more local levels that allow opportunity for direct citizen engagement.

3. Ecological sustainability. Economic activity has to be ecologically sustainable.

4. Common heritage. Common heritage resources: natural resources, culture and knowledge, public services – constitute a collective birthright to be shared equitably by all.

5. Diversity. Cultural, economic, and biological diversity is essential for a healthy, sustainable, and viable community.

6. Human rights. Governments should not only focus on civil and political rights but should also guarantee economic, social, and cultural rights to their citizens.

7. Jobs, Livelihood, and Employment. Sustainable societies protect the rights of workers in the formal sector as well as the great number of people in the informal sector or underemployed.

8. Food security and safety. Nations are stable when their people have enough food, and can produce and provide their own food.

9. Equity. Social justice among nations, within nations, between classes, ethnic groups, men and women.

10. The precautionary principle. When a product or practice raises potential threats to the environment or public health, governments should have the right to take preventative actions.

READING COMPREHENSION

1. What stages of the global economic development might be distinguished? 2. How long did the Age of Exploration last? 3. How has the International Division of Labor in XIX-XX centuries contributed to the development of the world economy? 4. For what reasons were the public international institutions (World Bank, International Monetary Fund, GATT) created in 1930-1940? 5. How has the basic division of labor in 1950-1960 changed the world economy compared to colonial division of labor in the XVII-XIX? 6. What makes the world economy a single economic unit? How would you describe the Modern Stage of the World Economy? 7. What are some of the main advantages of globalization? 8. What risks does globalization face? 9. What is the alternative vision for global economic rules and institutions adopted by the International Forum of Globalization? 10. What 10 principles should be observed to make societies sustainable?

Дата добавления: 2015-11-16