Key Aspects of the Global Economy
Features of Globalization
Globalization has four main features:
- International trade has grown significantly.
- A new organization of production has emerged.
- International financial flows are becoming more intense.
- Trade agreements between countries are becoming more intense.
What is a Multinational Corporation?
A multinational is a company that is present in several countries, performing part of its business in those countries. They depend on establishing subsidiaries of the main company, which operates from its country of origin.
Institutions of the Global Economy
The leading institutions of the global economy include the World Bank, the International Monetary Fund, the World Trade Organization, the G7, and the G8.
World Bank (WB)
Founded in 1944, the World Bank (WB)‘s objective is to reduce world poverty and improve the standard of living of the population. It provides loans with low or no interest to underdeveloped countries and makes donations to build infrastructure, implement educational projects, health initiatives, and more. It consists of 184 member countries (shareholders), the largest being France, the UK, Germany, the United States, and Japan. There are 24 directors.
International Monetary Fund (IMF)
Founded in 1944, the International Monetary Fund (IMF)‘s objective is to contribute to the smooth functioning of the world economy. The IMF avoids crises by encouraging more countries to adopt sound economic measures and provides loans to member countries in need. This organization consists of 184 members and has 24 executive directors. The five largest shareholders are Japan, Germany, the UK, the USA, and France.
World Trade Organization (WTO)
Founded in 1995, the World Trade Organization (WTO)‘s objective is to facilitate and promote international trade so that it is free and fair. It establishes the rules governing international trade and monitors compliance with trade agreements by 149 countries. Decisions are often taken by consensus among member countries.
The G7 and G8
The G7 is made up of the U.S., Germany, France, the UK, Italy, Japan, and Canada. The G8 is made up of the U.S., Italy, Canada, Japan, Germany, France, and the UK; Russia joined in 1997.
Major Centers of the World Economy
The great centers of the world economy are the United States, the European Union, Japan, China, and India. The most economically backward regions are Latin America, Africa, and South Asia.
The United States Economy
The United States far exceeds the value of production of any other country, accounting for over 20% of the world total. Many of its large companies are world leaders. The country values entrepreneurial spirit, invests heavily in research, has a wealth of natural resources and energy, and provides quality university education, enabling it to have highly skilled labor. It attracts significant foreign investments. The population enjoys one of the highest per capita incomes.
The European Union Economy
The European Union is the world’s leading economic power, but in many respects, it lags behind the United States. European unemployment is greater than U.S. unemployment. Not all EU countries are in the same economic situation.
Economies of East and Southeast Asia
Japan’s Economy
Japan is one of the richest countries. The Japanese economy recovers, supported by the sale of high-tech industrial products, automobiles, and consumer electronics. Its main problem is the scarcity of natural resources, which forces it to rely on other countries.
China’s Economy
China has become one of the main engines of the world economy. The Chinese government maintains the communist system but has also created special economic zones.
India’s Economy
India is following in China’s footsteps in terms of economic development.