The global economy is a hot topic that we often hear about in the news, and many people understand the basics of it, it can also be a complicated topic.
If you’re wondering, “what is global economy?” we will discuss the basics and take an in-depth look to help you gain a better understanding.
Defining Global Economy
Sometimes the easiest way to understand a complex topic is to “unpack” a definition. While the global economy is a common term, the world economy has the same meaning; we will use the terms interchangeably while discussing the economy of the world.
Let’s take a look at the term “global.” As one might expect, this simply refers to countries throughout the world, such as China, India, and Canada. While “global” is a relatively straightforward term, “economy” is not.
In general, according to Merriam-Webster, the economy refers to the “production, consumption, exchange, and distribution of goods and services” by organized human activity. While this is a good starting point for explaining the economy, some people may expand on the term or describe it a bit differently.
So, in short, the economy of the world is economic exchanges between countries throughout the globe. This type of economy has been around for thousands of years. Depending on the goods and services exchanged and where they go, countries may benefit from the economic activity or may be negatively affected.
From the vehicles we drive, the clothes we wear, and even the coffee we drink, nearly everything we buy is part of the world economy. Even if the products and services are offered through a domestic (local or national) corporation, they most likely have a global connection.
Two Sides Of The Global Economy
It should come as no surprise that people view economic globalization with mixed feelings. While expanding an economy across borders can be beneficial to many countries, other countries continue (or begin) to face economic hardship. We’ll discuss some of the common pros and cons of the world economy.
Keep in mind that depending on your personal views, you may have different opinions when it comes to the benefits and disadvantage of a global economy.
Benefits Of A World Economy
Here are some benefits that are frequently discussed by economic experts:
Lower Prices and Variety of Goods
As consumers, we rely on goods from other countries because we simply don’t have all of the things we want and need in our own country, due to climate and geography. Since corporations are able lower production and wage costs, we are able to purchase our goods at a more affordable price.
A world economy also means that we have variety in the things we purchase, as other countries have the resources needed to manufacture a good when our country is unable. Even if you consider the food we eat on a daily basis, a majority of it would not be possible (or affordable) unless it came from other countries.
Creating Employment Opportunities
With an increase of production across the globe, there are more employment opportunities available to people who live in financially unstable countries. Many supporters of the world economy think that the economic growth is the answer to reducing world poverty. Ideally, the economy can help improve the standard of living all around the globe.
As well as creating jobs in other countries, the economy of the world makes it possible for citizens in other countries fill any “gaps” that need to keep up with supply and demand of a specific good.
Improving Cultural Relations
As countries work with one another to provide goods and services to the world economy, it is inevitable that countries might gain a better understanding of one another’s cultures. In the larger picture, this may help promote tolerance and open-mindedness.
Helping Other Countries Have Access To Technology
In the U.S., it’s difficult for many of us to imagine living in a country where technological advancement is limited. Sharing technology can help countries advance and get up-to-date.
Some Disadvantages And Common Complaints
Political climates can not only put a strain on international relations, but it can also negatively affect how smoothly the world economy works.
Jobs Are Taken Away From Capable People
An argument that is heard time and time again is that many people, particularly in developed countries like the U.S., feel as though jobs are taken away from them.
This argument alone generates a lot of controversies because while some job opportunities are given to people in third world countries, many people in developed countries have no interest in doing the type of work that is required to do the job.
Job Creation May Hurt Rather Than Help
While many people would like to see that jobs given to people in underdeveloped countries could help raise the standards of living and reduce world poverty, some workers experience barely livable wages, exploitation, social injustice, and unfair working conditions.
The world economy has a long history of contributing to environmental issues due to a variance in regulations. Climate change and other environmental concerns also play a large role in the health of the global economy.
When global warming contributes to major weather events we can see the livelihood of a country suddenly disappear, which can affect the goods that we receive from that part of the world.
As much as technology can help smaller countries, it can also lead to major competition among some of the leading countries in the world economy (such as China and the U.S.) and may even lead to the stealing of ideas.
Is There Balance In The Global Economy?
While the world economy benefits many countries across the globe, it is far from balanced and as we already discussed, depending on where you live this imbalance can positively or negatively affect you.
It may come as no surprise that the world market tables reveal that the United States and China are the leading economies and hold the largest shares in the world economy. The U.S. and China’s gross domestic product (GDP) is very competitive.
GDP refers to the monetary value of all finished goods and services that are produced in a country; GDP data is typically collected each year.
According to the latest data available from World Bank, the GDP of the U.S. was 18.57 trillion USD, and China’s GDP was 11.2 trillion USD. While technology continues plays a huge role in the success of the leading economies, there are factors like politics and environment to consider.
The Largest Industry In The World Economy
As we look at some of the leading economies in the world economy, many wonder what is the largest industry in the world. It’s difficult to get a clear answer as to what is the leading industry in the economy; much of it depends on how we define the economy.
If we look at the economy of the world as only human economic activity, as many of the traditional definitions of “economy” suggest, the number one industry may be food. While food is a staple and definitely a leading industry, we can see the imbalance in the economy as many countries continue to struggle with food insecurity.
Leading industries are best identified by each country. According to the World Atlas, the leading industry in the U.S. is real estate, but in China, manufacturing accounts for nearly 50 percent of its industries. Considering where the U.S. gets most of its goods, from electronics to clothing, manufacturing being the leading industry makes sense.
As you take a closer look at each country’s largest industry, you can gain a better understanding how the world economy works together (and how it could improve). Some will argue that among the industries like manufacturing, mining, and oil, the “true” leading industries include illegal drugs, human trafficking, and other black-market goods
Can We Balance The Economy?
While the world economy is far from being fair, perfect, or balanced, it works surprisingly well. There is always room for improvement, and there’s no clear or quick answer on how to make the economy better.
Striving to improve international relations, eliminate social injustice, and improving policies to protect the environment are just a few ways that could potentially improve the state of the worldwide economy, but it also depends on you, the consumer, and how you purchase the goods you need and want.