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√ The Definition of the Global Economy and Its Impacts (Full Discussion)

Definition of the Global Economy and Its Impact (Full Discussion) – Generally understanding of the global economy known as the revolutionary system that allows any entrepreneur to invest money anywhere in the world. The current global economy is known as economic globalization. There is also a brief definition of the global economy or economic globalization as a life economy globally and openly, without recognizing territorial or regional boundaries between one country each other. The investment side of trade and move towards the liberalization of world trade and investment as a whole.

Definition of the Global Economy and Its Impact (Full Discussion)

Today the global economy or economic globalization is closely related to free trade. Free trade is now known as the term free trades. Free trades or free trade seeks to create a wider trading area and remove obstacles that are not smooth international trade.

Understanding the Global Economy

So understanding of the global economy is a process of economic and trade activities where there are many countries in the world which is becoming a single and increasingly integrated market force without territorial barriers or boundaries country. The globalization of the economy means that there is a need to remove all boundaries and obstacles to the flow of goods, services and capital.

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Embodiments of the Global Economy

In the process of its activities, below are several manifestations of the global economy, including:

  • Globalization of production
    The globalization of production carried out by several countries aims to lower production costs.
  • Globalization of financing
    Global companies in this case have access to obtain loans or carry out investment activities (both in the form of portfolios and direct) in all countries in the world.
  • Labor globalization
    Globalization is characterized by the presence of foreign workers. Global companies in this condition will be able to utilize workers from all over the world according to their level.
  • Globalization of information networks
    There is also a form of information network globalization that can be seen in the people of a country where it is easy and fast to get information from various countries in the world with advanced technology.
  • Trade Globalization
    In the field of trade, globalization manifests itself in the form of standardization and reduction of tariffs and the elimination of non-tariff barriers. So that trading activities and competition become more stringent, fast and fair.

Positive and Negative Impacts of Economic Globalization

From the embodiment of each of these global economies, of course, there will be impacts that will occur in the form of positive impacts as well as negative impacts. The following are the positive and negative impacts of the global economy, including:

Positive Impact of the Global Economy

Increasing global production
This increase in global production can be through specialization and trade. There are also factors of world production that can be used more efficiently. Thus world output will increase and society will benefit in the form of increased income, which in turn can result in increased spending and savings.

Increasing the prosperity of the country
The global economy through a freer trade activity allows the people of various countries to import more goods from abroad. This makes consumers have more choices of goods. And also consumers can enjoy goods at lower and better prices.

Expansion of the domestic product market.
With the existence of a global economy, freer foreign trade allows each country to get a much wider market than the domestic market.

Obtain more capital
Capital that can be obtained from foreign investment and mainly enjoyed by developing countries due to a lack of capital and educated and experienced experts.

Providing additional funds for development in the economic sector.
Development in various other sectors is not only developed by foreign companies, but mainly investment from domestic private companies.

Negative Impacts of the Global Economy

Inhibiting growth in the industrial sector.
The existence of a global economy causes developing countries to no longer be able to use high tariffs to protect newly developing industries (infant industries). Thus, relatively free foreign trade creates obstacles for developing countries in advancing the industrial sector.

Complete Understanding of the Global Economy and Its Impact

The balance of payments is bad.
The global economy increases imported goods. Conversely, if a country is unable to compete, exports will not develop. This condition could worsen the balance of payments.

The financial sector is increasingly unstable.
The flow of portfolio investment (capital) which is getting bigger is one of the effects of globalization. Investment in this case mainly includes the participation of funds from abroad to the stock market.

Deteriorating prospects for long-term economic growth.
If the things stated above apply in a country, then in the short term its economic growth will become unstable.

Maybe until here first our discussion about Complete Understanding of the Global Economy and Its Impact, I hope the above article is useful and can add to our insight. That is all and thank you.

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