The global economy is the economy that exists between countries across the world and is usually represented by a single currency, such as U.S. dollars. It is the integration of the economies from different countries, creating relations between them. The global economy can also refer to the international spread of capitalism with few government restrictions across national boundaries¹. Critics claim that the free markets and free trade that are created by the global economy result in jobs being taken away from workers in wealthy nations while creating sweatshops in poorer nations¹. Another perspective is that the free movement of capital encourages investment in poorer nations and creates new jobs.
Globalization is an important concept in the global economy because it is how individual countries around the globe are interwoven, causing an event in one country to impact the state of another country. Over time, globalization has intensified because of the development of technology and communication. It has increased trading between different countries, resulting in people being able to sell their products all around the world. Correspondingly, consumers can purchase products that come from foreign countries.
Like most types of economic systems, a global economy has advantages and disadvantages. An advantage of a global economy is the improved quality of goods and services. Since products can move across borders, competition is created between producers, compelling them to produce high quality products in order to compete with other foreign producers. A global economy also creates economic growth because it creates a larger market for producers and a wider variety for consumers. A major disadvantage of a global economy is outsourcing, which is delegating labour from developed countries to developing countries in order to cut costs on labour¹.
1. Ragan, Chrisopher. Macroeconomics/Christopher T.S. Ragan, Richard G. Lipsey. – 13th Canadian ed.