The Future of the World Economy
Contents |
Commentary
The Globalist Perspective
The pessimistic globalist Increasing regional conflict and depleting resources will cause countries retreat in to a more isolationist mindset marked by closed markets, rejection of climate change warnings and powerful countries exert pressure on poorer ones through superior military and financial and technological control. MNC’s and financial organizations will expand and concentrate power and influence free from regulation. Global inequality will increase.
The optimistic globalist Continued economic growth in Asia Pacific countries as well as BRIC will create a new middle class that will eliminate the trade imbalances between western consuming countries and the export focused developing countries. Increasing educational access will develop into greater demands for democratic reforms and awareness of impeding global crises such as climate change. As no one country can claim Superpower status, the US, Russia and China and others are impelled to negotiate in good faith at the WTO and Climate Control talks and no longer dictate policy and terms at the IMF or World Bank. Countries decide they want to maintain the benefits of a market economy but agree to new regulatory and global tax agreements and enforcement will deter MNC’s from relocating to low wage, low tax and low regulatory environments. Instead they will focus on developing new employee skills and innovation to drive new revenues in a market driven world economy.
The reality will fall somewhere between the two and at times will incline towards one or the other. For the next 10 years I tend towards the slightly pessimistic after which more positive aspects of globalization exert themselves through regulated yet efficient markets
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- A shift in the global economy is unavoidable and is directly linked to the economic power shift towards growth and emerging markets.
- The US will remain one of most powerful players but opinions of the likes of China, Mexico and Brazil will have to be taken into account more and more. This will put pressure on the global decision-making, so far driven by agendas of ‘mature’ countries.
- Economic policies are driven by politics. The differences between mature slow growth and new fast developing markets will probably make reaching the consensus on international level more difficult.
- Environment, inequality and market speculation are should be tackled on an international level through stricter regulations.
- There is a lot of talk about countries’ needing to introduce capital and exchange controls which can lead to protectionism. On the other hand, some of the fastest developing economies did have capital controls at one stage or another to protect markets from speculative investment and to protect exchange rates and asset markets. (see http://www.guardian.co.uk/commentisfree/cifamerica/2011/jan/31/economy-economics )
- Another challenge is the discrepancy between opening borders for trade and closing them for migrant workers, which is now happening within the EU.
I think changes are unavoidable and necessary to avoid further market speculation and crashes. Flexibility and relevance of these regulations are important. I don’t think inequality can be eliminated through any processes but environment is something that should be on the agenda and could be tackled through a concerted international effort
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Colleagues have given some interesting possibilities of future prognosis. This deregulatory free market concept is in many ways a leading ideology of the contemporary world and in the next decades an abandonment of this doctrine could be expected, as dissatisfaction with its ability to reach equilibrium rises (which is once more confirmed during the financial crisis), but also as discontent with growing inequalities and protest against profit originated elites is more and more present.
When trying to look in the future, it could be helpful to question some of the scenarios that occurred in the past as well. Although one should avoid over-simplification, it is amusing to observe the analogy between some of the major cultural, economic and political milestones in the recent history. Take for example development of the steam engine in 1760s that led to 18th and 19th century industrial revolution, which of course helped the shift from feudalism to capitalism. On the other hand, we could ask ourselves if the 20th century invention of the computer and the development of information technology will cause one more shift in the today’s main economic and political system and if yes, in what way.
Almost simultaneously with the mentioned technology uprising, there is an occurrence of a post modernistic discourse which represents a reaction against confidence in objective or scientific truth; mistrust of the grands récits of modernity, visions of perfection achieved through evolution, social improvement, education, or the deployment of science; denial of any fixed meaning, or any correspondence between language and the world, or any fixed reality or truth or fact to be the object of enquiry[1].
Likewise, a romantic view of the world as a reaction on the industrial revolution, valued individual experience and intuition, rather than the orderly, concrete universe and preferred a belief in idealism, as opposed to the exponents of realism and rationalism. An emphasis on nature rather than science was also a characteristic[2].
But sometimes it is impossible to keep things as they are and as idealism and rationalism somehow alternate, maybe after an era of many ideologies, finally a common sense will prevail.
Wrap Up
The late twentieth century has seen the emergence of global economic processes of an unprecedented scale becoming deeply enmeshed with national and local economic processes. The nature of these processes has radically changed the costs and benefits of particular economic activities and national economic strategies.
According to Jonathan Perraton* what is needed is imaginative proposals for governance of global markets to deal with inequalities and global market failures; in other words, an effective institutional setting to accommodate for the new and changing global reality.
Economic globalisation is a contested process and it has been accompanied by a significant internationalisation of political authority (as governments cooperate with others in decision-making). This multilateral system institutionalises a process of political coordination amongst governments, intergovernmental and transnational agencies – public and private – meant to realize common purposes or collective goods through making or implementing global or transnational rules, and managing trans-border problems. However, it is scarred by the enormous inequalities of power, and remains a product of the inter-state system. It has nonetheless created the infrastructure of a global polity and new arenas through which globalisation is promoted, contested or regulated. At present, further reform and integration of institutions is desirable (particularly to address the decoupling of trade issues from environmental and labour issues). The task of political economy in an era of globalisation is to adapt existing theoretical tools to explain these developments and to suggest what policy tools may be effective for managing them.
