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Prospective on the World Economy

There will be more uncertainty up ahead. Many would like to hear a more favorable forecast but based on the facts, there will be more turbulence up ahead for the world economy and a smooth ride may well exist only in fantasy land. The basis for this assertion can be found in the study of globalization, free trade agreements, and mankind’s dependence on non-renewable resources to fuel economic growth. The confluence of these three factors will make it extremely difficult for poor countries to experience freedom from poverty and all its negative consequences.

This is merely the beginning because from this point forward even citizens from affluent countries will never be able to find the assurance that they can be freed from overwhelming debt and the nagging fear that tomorrow their jobs were already outsourced overseas. Overview The world economy can be understood through the lens of globalization. Although it was pointed out earlier that globalization is one of the major root causes of the global economic depression it must be made clear that in itself globalization is not really the main issue.

National governments need to manage the forces that come with globalization but there is really no need to be paranoid about it. Thus, globalization is simply a contributing factor but it is not the main reason why the human race is suffering from the effects of poverty and inequality. Yet in the initial phase of the study the discussion must start from having an overview of the interconnectedness of national economies and this is where globalization comes in.

According to Bordo, globalization is not a new thing. In fact there are those who will contend that as early as the 14th century this planet already experienced the effects of globalization. The establishment of international relations for the purpose of trade was made possible by technological breakthroughs especially in transportation and the related skills needed to travel long distances. When Christopher Columbus discovered a new route westward he practically made a way to connect East and West.

Although the groundwork for globalization was started in the Medieval Age it was not up until the 18th century when mankind felt the full impact of technological breakthroughs not only in transportation and communication but also in the mechanization of work. This includes assembly lines in factories as well as the ability to exploit mineral resources hidden beneath the ground. The technical capability of mining resources for metallurgy as well as the extraction of fossil fuel to run machines and locomotive ignited the Age of Industrialization.

The Age of Industrialization exposed businessmen to the idea of mass production and the methods of increasing profit by minimizing cost. It is indeed cheaper to manufacture an item by the dozen instead of making one single item from scratch. This is made possible by the expert use of human resources, a good understanding of how to utilize labor as well as the ability to gather resources cost-efficiently. The transformation of sleepy towns into urban centers prompted many to leave the countryside and move into cities.

This is the beginning of social transformation whose effects can still be felt today. While the industrialization of Europe and the United States was a significant part of human history, its impact was only fully understood in World War II and in the post-war period. After the Second World War, Allied victory as well as the forces of globalization paved the way for a new social order – one in which the United States, France, and Great Britain strengthened their roles as world leaders in international politics as well as the global financial system.

After the war the United States of America was one of the richest nations in the world and together with other rich countries belonging to the Allied faction they began issuing debts and the U. S. Dollar became the guiding force of international finance. Decades later the world will come to realize how unstable the world economy has become. The final unraveling of the world economy came when various world trade organizations decided to remove trade barriers.

The historical basis of free trade agreements can be traced back to the colonial times when Western superpowers were able to exploit the natural as well as human resources of their respective colonies. In the 20th century colonization was no longer in vogue but the benefit of using the resources of Third World countries is just so difficult to resist. This is especially true when it comes to multinational corporations working hand-in-hand with national governments to assure the incumbents that free trade agreements will generate more jobs while at the same time reduce the cost of manufactured products. Seeing the Future

It does not require a clairvoyant in order to see into the future. A careful historical study will reveal that economists and national leaders of the past had to deal with similar problems. For one, the effects of globalization were already felt a long time ago but it is only in this century when more effective tools of monitoring became readily accessible. The Internet as well as improvements in telecommunication made it possible for laymen to know what is going on beyond the border. It is also possible to get a better grasp on migration issues and budget deficits – terms and concepts that used to be the exclusive domain of experts.

Based on the current economic turmoil as well as the pattern of economic boom and bust of the past one can say with confidence that history will repeat itself. The global economy may experience relief but only for a moment. In due time, the next generation of Americans will relive the same unpleasant experience of losing their money in the stock market, foreclosures, joblessness, and failing businesses. The basis for this assertion is the combined effects of globalization and free trade agreements.

This is exacerbated by the world’s dependence on fossil fuel to run factories, supply electricity and move the transportation industry. Focusing first on globalization and the lifting of trade barriers, one can see not only the promise of reduced prices but also the other side of the coin which is the exploitation of resources by the dominant society over another. It is like the days of colonization being experienced anew in the 21st century, only this time there are no kings and queens but multinational companies and dominant economies dictating how Third World countries should behave.

These puppet masters are able to get away with it because they control the money desperately needed by developing countries to join in the global game of supply and demand of goods and services. It is true that prices went down but at what cost? What is the price to pay so that middle-class families in the suburbs can continue using manufactured goods? The exploitation of human resources in developing countries is not very much evident when merely consider the finished product.

The Nike sneakers and the quality but cheap apparel coming from Asia and Latin America may be the bottom line but if one will examine the effect of low wages and the transfer of jobs from home to abroad the ugly side of globalization and free trade agreements will begin to surface. Firstly, the poor workers given pitiful wages will receive an amount enough to help them survive but not to improve their lives. Collectively, the whole nation of poor wage earners will become so utterly dependent on superpowers like the United States and the U. K. for financial sustenance.

If these countries are buried in debt then they will not be able to climb from the pit that they help dig. The international financial system is biased towards the West and will assure that the lender will benefit from the transaction between debtor and financier. Those who control the money will continue to lord it over those who have no access to funds. But this is just the beginning. By transferring factories and outsourcing jobs overseas countries like the United States are taking away employment for its own citizens and therefore increasing unemployment rate. Thus, one can see a double-edged problem.

Those who are in the Third World are slaving away in exchange for small wages while citizens in highly industrialized nations are out of job and therefore could not afford the manufactured goods coming in from abroad – even if prices are already made so low due to free trade agreements and outsourcing. This is a nightmare for economists and national leaders. If the global economy can be likened to a system that distributes goods and money all over the world then the system has clearly bogged down. There is less demand for manufactured goods because there is less spending power both here and abroad.

As a result factories are being closed down creating a chain reaction of events that greatly affected even the most prudent and most established investors. This is the reason why banks are closing down when these types of institutions are the ones that should remain standing in an economic downturn. In the good old days even if factories could no longer operate and could no longer pay their loans, the banks hold the collateral for the said debts and at the end of the process of foreclosure banks will still be able to make money. This is no longer possible especially when businesses are going under in quick succession.

It is truly a financial mess that can only be solved if drastic measure will be adopted. This is easier said than done because in order to solve this huge problem, countries like the United States and UK will have to make adjustments. This may take the form of reduced earnings for CEOs of multinational corporations as well as the bankers that are in control of the financial sector. It is a prospect that is difficult to imagine because this kind of behavior is only possible in fairy tales. Bibliography Alam, Shahid, M. “The Global Economy Since 1800. ” Available from

http://www. counterpunch. org/alam07262003. html. Internet; accesed 02 May 2009. Bernis, Gerard. “Globalization: History and Problems. ” Available from http://www. ismea. org/asialist/Bernis. html. Internet; accessed 02 May 2009. Bordo, Michael. “Globalization in Historical Perspective: Our Era is not as Unique as we might Think and Current Trends are not Irreversible. ” Available from http://econweb. rutgers. edu/bordo/Nabe. pdf. Internet; accessed 02 May 2009. Comelo, Anibel. “Globalization of Trade: Reflections on NAFTA & GATT. ” Available from http://www.

hartford-hwp. com/archives/25a/012. html. Internet; accessed 02 May 2009. Dayal, Jaya. “NGOs Challenge U. S. Economic Dictates to Third World. ” Available from http://www. hartford-hwp. com/archives/25/002. html. Internet; accessed 02 May 2009. Ludden, David. “A Very Long Term View: Globalization Since the Fourteenth Century. ” Available from http://www. sas. upenn. edu/~dludden/global1. htm. Internet; accessed 02 May 2009. Smith, Adam. “Wealth of Nations. ” Available from http://www. hartford- hwp. com/archives/25/035. html. Internet; accessed 02 May 2009.

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