Global Economics

The global economics of today revolves around the issues of more trade liberalization, competition as a model of efficiency and the search for an intermediate between laissez-faire and too much state intervention which would help in achieving high rates of growth but not with sacrificing equity.

Global economics or the global economy can be defined as the homogenization of the world economy into single large economy with the advent of globalization. Globalization and the mechanisms of global economics are thus closely interconnected. We now have a rapid integration of world markets and demand and supply conditions in one corner of the world might have global repercussions. The example of the computer chip produced by China, designed by the USA and used in Korean computers conforms to the theory of globalization. Shortages in supply of any one of these components will affect the global production of computers. This might, in turn, cause the global prices of computers to fluctuate if Korean computers are believed to be the most widely supplied across the globe and having the most market share in computers world wide.

The essential feature of globalization has been the widespread diffusion of technology and technological developments across all the countries of the world. We can find almost all versions and improved models of cars, washing machines and laptops produced in the developed countries of the West or Japan available in the third world. This has led to a globalization of markets of all commodities across the world. Global economics as a study of the global economy concentrates itself on the factors of global supply and demand transcending mere national considerations. As mentioned earlier we now have a global market of sophisticated technologies whereby supply and demand conditions in any country will affect the global market. Globalization of world markets has also occurred in the cases of tea, coffee, raw agricultural products and textiles. It is common knowledge that the Kenyan tea has captured a major share of the world tea market and domestic policies affecting the production of tea in Kenya will drive up or pull down the global prices of tea. The Indian textile exports have also hit a hard patch with many trade barriers imposed by the developed countries artificially raising their prices in the international markets. This has in many ways induced the Indian government to pursue speedy devaluation of the Indian Rupee with respect to major world currencies.

Global economics as a perusal of “economics of the global economy†where we as consumers have complete information and access to all commodities produced anywhere in the world and producers, in a similar fashion, can reach out to every consumer in any corner of the globe, raises some serious doubts and questions about the efficacy of the purported benefits of the process of globalization.

Globalization is argued to bring about better productivity and higher amounts of produced outputs for all commodities across the world because of widespread diffusion of advanced technologies. Countries specializing in their areas of comparative advantage can also increase the world outputs of commodities. But the benefits of the process has not percolated down to the lowest level of society as the divide between the rich and poor is ever increasing in countries like China, India and Brazil. With rising income inequality, globalization has also thrown out many domestic producers of specific commodities being unable to cope with stiff competition meted out by low cost goods from abroad.

Global economics as an outcome of globalization has made the world much smaller and we have better connectivity across all the countries of the globe now. World governments now have the responsibility to fight issues such as global warming, AIDS prevention and racism in a cooperative manner which is plaguing countries across the world. This also comes under the purview of International Political economy (IPE). It is also argued that cross cultural differences are now getting erased and the culture of dominant world powers is imposing itself in all countries of the world as a form of neo-cultural colonization.