What does it mean to have a global economy?

What does it mean to have a global economy?

Having a global economy implies interconnecting worldwide economic activities taking place among the community of nations. A global economy has several salient features including globalization in which the community of nations has been integrated through the global network of trade, communication, immigration, and transportation (Radieva, 2018). It also entails international trade in which nations exchange goods and services based on their comparative advantages and international finance in which money is exchanged at a faster rate between countries. Finally, the global economy entails global investment in which investment strategies are not constrained by geographical boundaries (Parente et al., 2018).

What Are the Benefits of a Global Economy?

A global economy is advantageous due to several reasons. First, it results in an increase in the flow of trade, capital, information, and people which leads to the economic development of individual countries and their people (Yeung, 2015). It also makes it easy for companies to gain easy access to new markets, diversifying their revenue streams through a large base of consumers. A global economy is an avenue for companies to also gain access to new talent (Hitt et al., 2016). Some specialized talent may not be available in a local market but through globalization, companies can hire talent from different countries. Another benefit of a global economy is that it enables consumers to access better quality products at lower prices. Due to the global competition of firms, they are forced to provide better quality products, and to be able to sell them; they have to make their prices affordable to the final consumers (Arkolakis et al., 2018).

What Problems Can Arise in a Global Economy?

Globalization presents several challenges. First, it requires high capital investments for companies to set up business in foreign markets. Besides the high capital outlay required, the required infrastructure may not be readily available. Globalization also increases immigration challenges as populations seek to move into other countries for social and economic opportunities (Gilpin, 2018). It has also been linked to a decline in local employment opportunities as companies move their operations overseas.