Tuesday, May 1, 2007
Globalisation: Growth of Economy
Article for economic globalisation:
http://www.msnbc.msn.com/id/17436057/site/newsweek/
Reflections:
The global economy has expanded tremendously ever since 1960s. In my opinion, there are 3 powerful trends that has caused this to happen and changed the whole global economic landscape.
Firstly, there is an increasing power of information and communications technologies. Next, countries have opened up their markets for economic expansion and thirdly, more and more multinationals are seeking out new markets and workforces. In short, these 3 powerful trends can be summarised into one word: globalisation.
World trade has exploded since the early 1960s. Between 1970 and 2004, the share of exports relative to global output has more than doubled and is over 25%. Furthermore, China and India has opened their economies and pursued an export-led strategy. In 2004, the global economy grew 4.7 percent, says economists at Goldman Sachs. Asia, excluding Japan, grew by 8.2 percent; Latin America by 5.6 percent and the United States by 4.4 percent. These are some evidence to show that the global economy has expanded ever since the 1960s.
However, with the current "explosion" of global economy, one of the biggest question to us is: is the global economy is stable? In the article above, the author has mentioned that "good times don't last forever. After all, the 1960s was followed by a decade of malaise."
In my opinion, this in an unanswerable question. This is because shocks are unpredictable. Therefore, we are not able to predict the stability of the global economy, mainly because we do not know what will happen for us to be able to guard against.
There are risks, however. For example, higher currencies for Europe and Japan could weaken their export competitiveness. This is because a higher currency will tend to make a country's exports more expensive and its imports cheaper. The United States, Europe and Japan already contribute to half of the global economy. Thus, if these three countries were to go into recession, other countries might follow.
Furthere, a good economic system needs a strong political framework. However, if we just look at the framework for the global economy now, we can tell that it is unstable. 20 years ago, only the United States and its Cold War allies contribute to the global economy. All the three policy objectives- economic, military and foreign- were overlapped. However, in today's context, the global economy now includes India, China and the former Soviet Union. Thus, more problems will arise as more countries are involved in the growth of the economy since there will be more personal objectives from each of the countries.
However, this can be proven wrong as globalisation has causes global cooperation and dependance. For example, the SARS outbreak has shown some global cooperation between countries.
In conclusion, I believe that the global ecomomy will continue to expand ever more greatly over the years in the near future. There have been questions raised about the stability of the global economy, but I believe that as long as countries continue to have a strong economic, political and social framework, these risks have a lesser potential to develop. It is probably too early to worry about such an outcome, let's all just enjoy the growth of the economy! (:
DONE BY: NUR ATIQAH ISMAIL, TA 2d'o6(:
Economic Expert
; i'm lovin' it
