The Global Economy
Uploaded by joeydaprof on Jun 12, 2006
The Global Economy and Globalization - 2005
While there is a great deal of talk about the 'Global Economy' and 'Globalisation', they are often spoken of, as if everyone understands what is meant by the terms or, alternatively, as giant mysterious forces that control the world, that no one has any knowledge or understanding of. The aim of this paper is to examine the 'Global Economy' and 'Globalisation' and to see what is happening in these areas.
The Global Economy
The Global economy is the world economy. It is the economic activity going on in the world. It is the combined economic activity that takes place in each individual economy plus the activity between countries. It includes all production, trade, financial flows, investment, technology, labour and economic behaviour in nations and between nations.
Economists try to predict trends in the world economy by applying models that demonstrate how changes in certain economic variables or factors have affected the domestic or global economy previously. In our current economic environment these tools are becoming more limited. In recent years the state of the domestic and global economies have been largely influenced by non-economic factors. Factors that economists could never predict. These include the terrorist attacks of September 11th and subsequent terrorist attacks, the outbreak and spread of the Severe Acute Respiratory Syndrome (SARS) virus and the war in Iraq. These factors have had great influence on the state of the global economy in the last 4 years, and these, and similar events, will continue to do so into the future. The most recent factor to impact on the global economy has been the increase in the world price for oil and the subsequent and future rises in the price of fuel throughout the world. Uncertainty discourages consumer and investment spending and subsequently economic growth. Despite this the global economy grew 5.1 percent in 2004 but is expected to slow to 4.3 percent in 2005(Figure 1).
In the later half of 2003 and early 2004, global growth was averaging about 6 percent. In the second half of 2004 it began to moderate, accompanied by a significant slowdown in industrial production and global trade (Figures 1 and 2), reflecting both a return to a more sustainable pace of expansion and the adverse impact of higher oil prices. The IMF (2005) considers that the most...