The rise and advancement of information technology with increased communications across the world has made individual economies merge into the world scene. Individual economies which were previously isolated from each other, are now influenced more by each other’s actions and policies and the situation in the global markets which in turn help them to frame their own policy measures.
Global market economy or global economy means a place where all the economies of the world merge and transactions of goods and services are carried on at the international level. The domestic prices of individual products fall in line with the international prices, now determined by international demand and supply of that commodity.
Global equity market was influenced when the Indian stock market crashed a couple of months back having far reaching effects on the NASDAQ as well as Dow-Jones index. Global Market Economy or where all the economies come together is also termed as globalization meaning increasing global connectivity and integration and interdependence between the individual countries’ markets.
Globalization also implies increasing integration of the technological, political, economic, social and cultural spheres of the countries of the world. We can see more and more interest in world politics in India than ever before and Indian culture being marketed across the world. With more and more interaction between the developed and developing countries, domestic economic policies are also heavily influenced by what the more powerful foreign partners are doing. In a way, globalization is said to have the damaging influence of promoting the culture of the developed economies and thrusting it on the traditional values of the developing world. This is unknowingly taking the form of neo-colonization.
Global market economy functions on the emergence of worldwide production markets and a broader access to wide range of products for companies and consumers. It also entails lower restrictions on the movement of goods and services across the globe. Thus cartels and tariffs are also gradually phasing out. But simultaneous free movement of labor between countries is not taking place due to strict immigration laws put in place by many of the economies. Globalization is also said to bring about a rise in employment in the developing nations with companies in the developed world outsourcing their functions due to low cost labor available. “Intellectual Property Rights” are also getting more recognition across the world.
Global markets like the crude oil market are having a tremendous impact on the world economy. Crude oil touched almost $70 a barrel which resulted in trade deficits in countries such as India. With greater assimilation of the world cultures and improved standards of living supposedly achieved as a result of globalization, benefits of these are only limited to the privileged few in the developing economies already reeling under poverty, illiteracy and unemployment. Globalization brings global markets and the concomitant global competition to the fore. This sometimes throws the previously protected domestic producers out of employment and worsens their condition. Thus the influence of the global market economy is not always beneficial to the less developed countries where the poor are made poorer while the rich get richer.
The share of the USA, once considered to the highest in the global economy, has declined to 25% with newly emerging economies such as India, China, Vietnam and many others of South East Asia catching up. For the past few years the USA has had inadequate domestic savings to meet its growing investment needs. With increasing FDI flows, this is being reflected in the current account deficit which is currently at 6%-7% of its Gross Domestic Product. This is also accompanied by trade surpluses of the growing economies who want to invest in the USA.
After all, Global Financial markets are said to be stable at present recuperating shocks in different parts of the world and flight of capital can be seen from the developing to the developed world. With many countries moving towards full capital account convertibility, India is also following suit.