Introduction of Global Economy
The global economy has been formulated to many definitions. As a basic one that has been defined as the increasing integration of fragmented national markets for goods and services into a single global market. For instance, in a national market, the materials, labors, whole process of production, selling service and so on that are all within a country. By contraries, in such a global market, companies may from country A, conduct research and development in country B, take orders in country C, and sell wherever there existence demand regardless of the customer’s nationality. (Answers. Com, 2008)
Nowadays, global economy has been promoted by the rapidly growth of globalization, what impulses more international trades and events, enhances countries’ corporation and communication, reduces tariff barriers between nations, accelerates development of technology etc. Once again, “A global economy is one whose strategic core activities, including innovation, finance and corporate management, function on a planetary scale on real time” has been expressed by Carnoy. (Carnoy, 1999)
History of Global Economy
Global economy had started from 1800 when the system of global capitalism took shape once the British economy went ‘underground’ and began to draw its energy and, increasingly, its raw materials from mineral resources. (Shahid Alam, 2003) There are three phases of the new mineral-based global economy: the first phase was in a small number of core areas (French, British, Germany and United State) during 1800 to 1913, the second phase was in the late 1940s when the world economy opened the door of other countries’ economy (Asian) except core countries, however the power decentralized from core to the periphery, and then the third phase was starting in 1980s, when the power recentralized in the core countries. ((Shahid Alam, 2003) In general, the global economy has had been developed and diffused through World War 1 and 2, and in the past decades, it persistently growth under the expansionary condition. In particular, American economy has managed an enviable combination of steady growth and low inflation in the past 2 decades, who plays an important role in world core countries.
Current Situation of Global Economy
The recent situation of global economy does not like that optimism as previous, what shows a sign of decline of world economy. As a previous, the data shows world real GDP has been rapidly raised from 1.9% to 3.9% during 2002 and 2006, which also shows the both growth in developed and developing countries. (United Nations, 2008) However, after several years of strong growth, the world economy is now facing some serious challenges in supporting its brisk pace. Currently, the growth of the global economy moderated somewhat from 3.9% in 2006 to a nonetheless robust 3.7% during 2007. The baseline forecast of the United Nations for growth of 2008 global economy will decline to 3.4%, but the condition of risks are ominously much larger than last year, such as the deepening credit crisis in major developed market economies, as well as the continuing housing bubbles in the United State of America, the declining value of the United State dollar vis-à-vis other major currencies, the soaring oil and non-oil commodity prices are continuous increasing and the persistence of large global imbalances will all threaten the sustainability of global economic growth in the coming years. Furthermore, the steep rise in food and energy cost is compounding the existent risks, particularly in view of the unfolding food crises, which throws a threat to social and political stability. (United Nations, 2008)
World economy apparently presents it as a business circle, a long period of rising incomes and improving living standard would always be followed by a big, bad recession. Following analysis presented the main forces and impacts to slow down the global economy...