World Economy

The late twentieth century has seen an unparalleled expansion of international capital. After years of competing blocs and capital restrictions, the floodgates have broken, and private investment has poured across political borders as never before. The commercial revolution was a period of rapid output growth, urbanization, population growth and technological innovation that affected the global economy. With the various contributory factors in the world economy such as globalization (Drainville & Sassen, 2003; International Labour Review, 2005), international trade agreements, economic cooperation, and technological advancements, it could be assumed that the world economy today is flourishing. But what is happening now is the other version of the story. With the emergence of different human conditions and overpopulation (Caldwell & Schindlmayr, 2002), political turmoil and instability, terrorism, and increase of oil prices, the world economy at present is slowing down but never ceases to recover its strength.

As a person who is an active participant of the society, aware of the background and current standings of the branches of the state, consumer of products, and contributor to the economy itself, I can say that indeed the global economy is deteriorating. However, notwithstanding the existing worldwide conditions affecting the world economy, I recognized the efforts of concerned world leaders and economists in improving its state. Therefore, we are at risk of economic crisis.

In a report released by the National Institute of Economic Review (2005), the global economy slowed down from 2004’s hectic GDP increase of 5.1 percent. Back in the year 2000, the global economic growth is characterized into two descriptions: “its staggering size and acceleration when compared with developments in previous centuries and its uneven distribution among different countries and regions of the world” (World Economic Outlook, 2000). After this economic milestone, the global economy demonstrated no signs and symptoms of development and progress due to some consequences of its immediate take off such as the war and the terror activities happening worldwide. The Committee for Worker’s International (CWI) (2003) reported that “the world economy is on the edge of a prolonged period of stagnation”. It also indicated that even before the incident of war in Iraq, the United Nations predicted "an escalation into military action would have even more profound negative economic consequences". As such consequence, the war speeds up the worsening of the global economy.

The three world’s leading economies – the US, Japan and Germany, are all either in or hovering on the threshold of recession (CWI, 2003). The United States of America in particular, the world’s largest economy, shows signs of slowing economy as the index of U.S. leading economic indicators fell due to oil price hike and slower job creation this year. Consumers are now deeply concerned about high energy bills and lagging employment according to a consumer survey (Torres, 2004).

Meanwhile, amidst these economical drawbacks, the global economy is still viable. The global efforts in reviving its once-upon-a-time strong and powerful stature are still workable. To show hope, the forecast of National Institute Economic Review illustrate signs of eventual survival. In a span of three years (2005-2007), the institute predicted a robust growth averaging nearly 4.5 percent annually. The following data from NIER are adapted to show the probable progression of the global economy.

* Global GDP will grow by 4.4 per cent a year in 2005 and 2006.

* Inflation in the OECD will rise from 1.7 per cent last year to 2.1 per cent in 2005, the highest since 2001.

* The United States will grow by 3 1/2 per cent a year in 2005 and 2006; inflation will rise to 3.2 per cent next year.

* Inflationary pressures will persist in the Euro Area despite weak growth of 1.3 per cent in 2005 and 1.9 per cent in 2006.

* Japan will grow by 2 1/2 per cent a year in 2005 and 2006, but prices will continue to fall.

With these promising data, the urgent solutions at hand are still imperative in its application. As a concerned citizen, the only thing that I can do to contribute to the possible solution that might help the world economy survive is my all out support in all the state’s effort of recovering it. This is the simplest yet most significant action that I may take. Basing to my own observation, I can suggest the following potential solutions.

* The continuous cooperation of international economic relations can uplift the weakening world economy. Policies must be created and implemented in favor to the progress of the economy. Policy coordination is also necessary. This occurs when countries agree to pursue economic policies intended to promote the welfare of all nations involved in the agreement (Holmlund, Bertil and Ann-Sofie Kolm, 2002).

* The strategic economic planning among leaders of states reinforces the programs of strengthening the economy.

* Heads of countries should start on their own territories. The government's role in providing the social, physical, and institutional infrastructure that allows competitive markets to function and in addressing market imperfections should be recognized.

* There should be constant attention given to the current trends and conditions occurring in all aspect of the global economy.

To sum it all, the world economy is definitely at stake. From its stable state up to its current condition, there is a need to recover it from its hectic situation. The global efforts of all leaders, economic advocates, as well as people are needed. Since the world economy is the foundation of every economic activity, its downfall creates a spillover effect among all economies. Thus, its own plague is the plague of all societies.

References

Caldwell, J.C. & Schindlmayr. T. (2002). Historical population estimates:

Unraveling the consensus. Population and Development Review, 28(2), 183-204.

Committee of Worker’s International (CWI) (2003). The World Economy: a

synchronized crisis. Retrieved February 22, 2006, from http://www.socialistworld.net/eng/2003/04/07economy.html

Drainville, A.C. & Sassen, S. (2003). Contesting Globalization: Space and Place

in the World Economy. New York: Routledge.

Holmlund, B. & Kolm, A. (2002). Economic Integration, Imperfect Competition,

and International Policy Coordination. Oxford Economic Papers, 54, 207-229.

Limits to Globalization: Welfare States and the World Economy (2005).

International Labour Review, 144(1), 122+.

The World Economy (2005). National Institute Economic Review, 194, 2.

The World Economy in the Twentieth Century: Striking Developments and Policy

Lessons (2000). World Economic Outlook. 149.

Torres, C. (2004). U.S. Shows signs of slowing economy. Bloomberg News. Media News Group, Inc.