Globalisation - "Describe the main features of the global economy and examine the nature and extent of interdependence between economies."

Essay by wildtigerHigh School, 12th gradeA+, March 2004

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The 'global economy' describes the inevitable process of increasing integration between different economies to create a worldwide global village. This not only means that international influences may have a large impact on aspects of economic activity, but because of this interrelation, synchronization between economies may also occur. This has been clearly illustrated by recent trends, particularly after the September 11th terrorist attacks, when the world's largest economy dubbed the "growth engine" United States experienced a downturn in their levels of economic activity. Due to this close linkage between economies, any changes to one economy may have a ripple effect on others, demonstrating this synchronization. The US's downturn in 2000-01 has affected many other large economies such as Japan, China and many European countries to have the same effect. Recently in late October 2003, there have been speculations that factors causing the global economies' sluggish growth such as the Iraqian War, the oil prices hitching up, and the SARS outbreak in Asia are all threats that have dropped away (SMH 28/10/03).

These are good indications that the US may pick up growth, the forecast for 2003 being from 1.5% to 4%. Due to the heavy dependence on the US recovery, and the view that the global economy is recovering, it may affect countries to raise interest rates (the Reserve Bank of Australia tightening the monetary policy by raising the cash rate by 0.25%) in November 2003 in order to promote growth.

In addition to the synchronizing nature of the global economy, there are several features of a global economy. These are increased flow or trade between economies due to deregulations and breaking down of trade barriers, financial flows between economies and longer term financial investments, growth of technology, and to a lesser extent, labour market changes. Due to these factors, it...