Growth of global instability of the world economy, Change in...

Growth of Global Instability of the World Economy

In the context of globalization, the global instability of the global economy is increasing.

The main reasons for this are the following factors.

First, , the cyclical nature of world economic development and the spontaneity of the world market system.

In the context of interdependence, the slowdown in growth and crises in one country easily spread to other countries, regions or to the world economy. Thus, globalization increases the instability of the world economy.

Second , the instability of the global financial system.

Financial instability today is one of the most acute problems of the world economy, capable at one time to destroy the successes achieved over the decades.

This is caused by several circumstances:

■ the introduction of new technologies, liberalization, the separation of financial flows from the real needs of the economy, internal tendency inherent in financial markets, the tendency to speculative behavior turns the entire financial system into a "casino where the game goes on worthless debts to which paper money has turned" . Financial liberalization and deregulation of the banking sector separates finance from international trade and investment. Far from perfection is the process of investing capital in the productive sphere; ■ Insignificant share of foreign investments of institutional investors of developed countries sent to developing countries (3-4% of UK foreign investments, 2% of US, continental Europe and Japan), is able to determine the economic situation of the developing world;

■ In the context of globalization, the world financial markets begin to determine not only the behavior of private investors and borrowers, but also influence the decision-making by governments of sovereign states.

In general, the globalization of the financial sphere forms a new global decision-making mechanism. The decisions made by the world collective investor are of decisive importance for the economic situation in many countries, especially developing ones. At the same time, the decision-making procedure does not ensure transparency, openness and objectivity.

In conditions of constant market pressure, support for domestic economic stability for most countries is extremely costly. Any economic decision of the government to protect the national economy from market pressures immediately translates into a sharp fluctuation in exchange rates and capital outflows.

On the whole, the problem of stabilizing the world financial system is today the most urgent task of the world economy.

Change in the role of the subjects of the world economy

Under the influence of globalization, the role of the main subjects of the world economy is actively changing today. This is manifested in the following.

The role of the state is changing. On the whole, the value of a single state, no matter what its potential, is decreasing. Liberalization, increased interdependence and scientific and technological progress limit the ability of states to independently determine their economic policies.

Developed countries retain the ability to monitor both domestic economic processes and the policies of international organizations and major international economic processes.

In developing countries, the state is objectively called upon to play an important role in compensating for the lower competitiveness of its economy at the micro level. In this regard, globalization, which reduces the role of states, often reduces the competitiveness of the national economy.

Thus, one of the main consequences of globalization - the narrowing of the independence and freedom of national governments in the conduct of their own economic policies - is generally a negative moment for developing countries.

The role of international economic institutions is growing. The Bretton Woods Institutions - the World Bank and the IMF - have a huge impact today on developing countries.

This is particularly evident in the world trade relations within the WTO. Existing agreements require member countries to comply with their national legislation and policies with international standards. The discrepancy may entail trade sanctions, which gives the WTO a strong lever of influence on the countries. Thus, an increasing part of the national economic policy is formed during the negotiations within the WTO, the IMF and the World Bank.

Concentration and monopolization of economic resources and power by transnational companies (TNCs) and transnational financial firms and funds is taking place. Today, TNCs control up to half of the world's industrial production, over half of international trade, about 80% of the world's patent bank and licenses for new machinery and "know-how".

They seek to connect to their production, financial, investment and trade channels.

Transnational companies, in turn, are driven only by the interests of making a profit, they are aimed at using the resources of countries, and not on their development. This is the conflict of interest between TNCs and governments of developing countries.

At the same time, having large resources and a strong lobby in the face of the governments of developed countries and international organizations, TNCs have a significant impact on the "rules of the game".

Thus, it can be noted that under the conditions of globalization, developing countries are exposed to the influence of developed countries, international organizations and transnational associations, which, in essence, do not meet the interests of their development.

The main problem of developing countries in this "big game" for defending interests lies in the fact that they are poorly organized.

Foreign-policy, foreign trade state structures of developing countries are not staffed by specialists of the required level. Relations with the research community are also poorly developed.

In contrast, developed countries, international organizations and transnational corporations are better coordinated, well-armed both at the national and international levels.

In this regard, for developing countries, their ability to collectively influence the creation of real mechanisms for realizing the possible benefits from participation in globalization is of great importance.

On the whole, in the context of globalization, the role of the state does not decrease as much as it qualitatively changes. Instead of protectionism of the national economy, the state's ability to ensure its competitiveness in the open world economic space, that is, the state strengthens the factors of the development of the productive forces-industrial and social infrastructure, science, education, effectively functioning market and state institutions.

Also We Can Offer!

Other services that we offer

If you don’t see the necessary subject, paper type, or topic in our list of available services and examples, don’t worry! We have a number of other academic disciplines to suit the needs of anyone who visits this website looking for help.

How to ...

We made your life easier with putting together a big number of articles and guidelines on how to plan and write different types of assignments (Essay, Research Paper, Dissertation etc)