6 Insights on International Economic Development
Economic development is a series of processes and strategies which countries and organizations utilize to increase domestic and international economies. How development strategies are implemented tend to differ depending on organizational goals, as well as the overall condition of the global economy. For example, currently, America is seeking to improve its economy by having the Federal Reserve tighten its budget, Europe is concentrating on mending issues surrounding migrant and debt crises and China is attempting a financial reform to improve its weakening financial stability. With global economic powerhouses focusing on domestic repairs, many industry experts wonder how the international economy will fare in coming months. Although there are no guarantees with economic issues, taking a deeper look at the following six areas can help international relations professionals develop a better understanding of current international economic development trends.
Free Trade versus Protectionism
Protectionism is a policy aimed at regulating trade in a country by enforcing tariffs that protect domestic producers from being shutout by excessively cheap imports. Free trade, on the other hand, is a policy that suggests that there ought to be no barriers on international trade. Traditionally, free trade is considered an asset of the international economy, and the World Trade Organization (WTO) is currently working to repeal barriers limiting free trade. If barriers are revoked, the international economy should see a significant boost as countries would be able to trade freely without domestic limitations.
Peaking International Growth
China failed to properly handle a collapsing stock market bubble in 2015, the U.S. Federal Reserve is engaged in an ongoing cycle of rate hiking, and the economies of Russia and Brazil are in a constant state of fragility. With some of the leading domestic economies struggling, questions arise on whether the international economy has reached its peak and has any further room for growth. The answer to this question is still unclear, but 2017 will be a critical year if the global economy hopes to make an upturn.
Growing Pains in Emerging Markets
At the moment, there are key emerging economic markets in South Africa, Malaysia and Turkey. Each of these countries are currently facing the compound stress of domestic corporate debt in an economy where the U.S. dollar is only growing stronger. In Turkey, for example, the country is currently experiencing domestic economic stress due to political uncertainty regarding the conflict in Syria. If these emerging economies fail, it could produce massive ripples throughout the global economy due to the imbalances caused by crashing domestic markets.
The Impact of Global Warming
Climate change is a growing concern across a number of industries and organizations, yet it is especially concerning for domestic and international economies. According to a recent study, more heat results in fewer crops, impacts overall worker productivity and causes alterations in domestic and individual income. In fact, the study projects that by the end of the century there will be a 23% decrease in global incomes as a result of climate change. However, not every country will be negatively impacted by global warming, as northern countries are predicted to benefit from rising temperatures. As a result, many industry professionals predict that global warming could lead to a restructuring of the international economy as northern countries, such as Russia, take advantage of increased crop and trade requests.
Populist Challengers Pose a Threat to European Economies
With several political shifts resulting from a number of newly elected officials, Europe is currently facing economic challenges as both sides of the political spectrum battle for economic control. In France, Greece and Spain, the general public has become skeptical of austerity policies as they believe that, at this point, enough spending cuts have already been made. Greece in particular is frustrated by financial cuts as they attempt to work out of their massive debt crisis. To assist with working out of their crisis, Greek government officials have invited leaders from countries such as France and Spain to Athens in order to aid in the formation of an anti-austerity alliance. Such an alliance could be of benefit for the international economy if major European countries are able to find economic stability.
Brexit and United Kingdom (U.K.) Markets
The British vote to leave the European Union (EU) resulted in financial uncertainty and a slowdown of the country’s economic activity. In particular, the purchasing power of the British pound took a heavy blow and the impact on domestic and international businesses within England has not been spread evenly. Facing a situation with limited options, U.K. businesses may be forced to significantly decrease imports due to the decline of the British pound’s purchasing power against other currencies. As a result, the international economy may struggle due to economic imbalances, specifically exporters benefiting from declining domestic costs while importers struggle with increased expenses and declining revenue.
With international events constantly carrying the ability to impact global markets, international relations professionals need to continually enhance their understanding of international economic development by monitoring and analyzing ongoing progress within the industry. It is important for industry leaders to remain knowledgeable of upcoming trends and insights to stay ahead of the curve and work toward positive economic development.
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