The global economy has more than doubled in the last two decades to USD85.91 trillion in 2018, according to the World Bank.
What is the global economy
The global economy is an economy in which wealth and resources move across national borders. The movement also includes goods, services, people, skills, and ideas.
A country deals with the global economy through international trade and capital flows. The development of technology also allows the flow of information from one country to another.
Globalization has increased with:
Globalization leads to greater efficiency of economic resources. Companies can take advantage of cheaper labor in developing countries. These developing countries can adopt a developed country’s technology to build their economies.
Information technology is taking a prominent role
The internet and information technology enable more intense trade and production. We can sell products, locally and abroad. Companies big and small can utilize the internet. With globalization, the market is wider, but competition is also greater.
Technological progress also disrupts conventional business models. Some industries, such as newspapers and retail, have been hurt by the presence of new digital business models.
The emergence of new economies
China, Indonesia, India, and several other developing countries have emerged as a new power in the global economy.
The government plays a role in international business
Some governments support domestic companies, both directly and indirectly. Many state-owned companies have expanded overseas. That is one form of government participation in the international business.
A growing global value chain
Transnational companies try to take specific advantages from each country. For example, some countries have abundant raw materials supply and cheaper labor costs. The companies break down the production process in various countries to exploit those benefits.
Homogenization of culture
Globalization also transmits ideas, meanings, and values from one country to another. People are starting to adopt trends from other countries.
Global economy challenges
A connected global economy can also have negative consequences. Among the issues of adverse effects are:
Source: Global Economy: Meaning, Characteristics, Challenges
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