I imagine that you are curious about the workings of the global economy because you want to know how it affects you. I am too, mostly so that I can short the next recession and get rich. Whatever your reason for curiosity, the economy of the world is very important and interesting to understand.
A Global Economy. How can I simplify it? Let me give you a scenario:
You own a box selling business. You are doing well and making a profit. You hear of a box company in India failing. Businesses in India now have a high demand for boxes. You see an opportunity to grow and you make more boxes and sell to those businesses in India and make a lot of money.
This is a global economy interaction. To understand Globalization, lets expand that scenario:
Along with the wildly successful box business, America has thousands of other businesses. If all of these businesses were to follow the box business path and sell to or buy from businesses in other countries, then we’d have Globalization.
Whether or not this is good depends on where you are in the economy.
For business executives and owners, this is great! According to Michigan State University Finance Professor, Zoran Ivkovich, cheap labor and resources from other countries offer lower cost than American labor and resources. So, being smart, business owners buy from those lower cost countries.
In life, this occurs: 53 percent of manufacturing companies outsource to other countries. Consider this; a java programmer in America gets paid $60,000 per year, a java programmer in India gets paid $5,000 per year. Nobody in their right minds would hire an American programmer if they could hire an Indian programmer. The smart finance move is outsourcing but for the common worker, though, this move spells doom.
Industrial workers in America as well as some economists believe that globalization isn’t all that great.
The economists worry about our vulnerability to foreign economic shocks. The more connected we are to other countries’ economies, the more susceptible our economy is to rise and fall as theirs do.
Industrial workers worry about job availability for them. Their worry is warranted because between January 2000 and December 2014, 5 million jobs have been moved from America to other countries.
Seems like American politicians are between a rock and a hard place with this issue. My personal idea for solving this problem is to promote globalization and encourage more Americans to get jobs that can’t be easily outsourced. We have the opportunity to do that due to our high-level education. Hopefully now you know enough to form your own opinion on a global economy. Now let’s do something about it.