The Current State of the Post-Recession Global Economy - Research Paper Example

? The current of the post-recession global economy The current of the post-recession global economy Introduction Theglobal economy is characterized by the production and allotment of resources around the globe. These activities affect the livelihood of people either optimistically or negatively depending on the state of the economy. Changes usually take place throughout the globe during recession. Nations use sound economic policies to minimize the effects of recession. Weaver, (2010) indicates that trade should create a balance in the global economy. However, this is hard to attain because of the numerous forces that control the activities of the market. Additionally, there is always a shift in supply and demand. The needs of nations and individual differ making it complex to preserve the steadiness of the economy. An ideal situation can never exist in the world economy making recession inevitable. Consequently, the recession that took place in 2008 was expected. Recession has significantly influenced the global economy as apparent in trade, unemployment and relationship amid countries. The current state of the global economy after recession According to Foroohar & Schneiderman (2010), recession refers to a situation when the economy has experienced inflation for quite a long period. Recession affected most nations in the Western hemisphere in 2008. Before the recession began, Japan and the US were controlling most part of the global economy. Consequently, countries in the West were experiencing a boom in the property market. The rates of unemployment were at the lowest level for a long period, and banks were charging lower interest rates for loans. The decrease in lending rates contributed to the increase in investments. However, the gains came to a halt after the recession in 2009. Presently, the United States and Japan have limited control on the activities taking place in the global market. The two countries no longer influence trade directly because they are facing competition from China. The influence they had has shifted to countries like China, Brazil and South Korea. However, the US is still the global economic powerhouse. According to Avantika (2011), countries like India and Brazil are beginning to exert their influence on trade globally. As a result, growth is on the decline in Japan and America. This is making investors shift their plans by investing in developing economies. It is clear that Malaysia and Singapore are formulating innovations to counter the dynamics of trade. Concurrently, the US in coming up with policies to correct the decline of their economies. Consequently, the recent presidential debate in America focused on measures for reviving the global economy. According to Avantika (2011), there is stagnation in the growth of the economy of China at 7 per cent. This is a decline from the double-digit growth realized in the same time last year. This is an indication that the global economy is unpredictable. Schaeffer (2009) adds that uncertainties in the global economy have made nations readjust their plans. For instance, South Korea is deploying their resources towards energy production to avert the energy crisis. This is because most of the economic activities in the global economy are dependent on fossil fuels. Developing economies in Asia are opting to trade with African countries. This is affects global trade by reducing the demand of commodities from developed economies. Indeed, African nations have increased their demand for products from the markets in Asia. Besides, China is encouraging domestic consumption to reduce their dependency on exports. Moreover, China has reformed their pension scheme to cater for the needs of the middle-class citizen who constitute the majority in the populace. According to Neumark & Troske (2012), it is necessary to review trade policies for economies of Asian countries. New policies will bring changes in the healthcare and the education sector in developing economies. Disposable income for citizens in countries has decreased in the current global economy. This widens the gap between the wealthy and the poor. Additionally, governments are using fiscal policies in aggregating demand. Banks are witnessing a decrease in lending by investors following the recession period. Economies are reducing their demand on fuel products since overdependence on petroleum products is dangerous for the economy. The migration of workforce from a more productive region to the less productive areas is apparent in the post recession global economy (Rebalancing the economy, 2010). Currently, there is an escalation in the speed of issuance of bonds by financial institutions. Authorities are formulating trade initiatives policies that have minimal impacts on the activities of the economy. Besides, economies outsource some of their production to cut on costs. Outsourcing maximizes profitability for industries. However, it has negative impacts on the economy of the outsourcing country. Developing countries are lobbying for the review of global trade policies. It is clear that Mexico and Brazil have begun collaborating during trade to strengthen their bargaining power in the global economy (Avantika, 2011). Most of the decisions in trade focus on safeguarding the economies of the trading partners. For instance, China prefers trading with countries who have limited restrictions on trade. Subsequently, multinationals of Asian origin are reducing their activities in developed countries. Instead, they are expanding to developing economies like Brazil (Neumark & Troske, 2012). Presently, financial institutions in America are restricting the activities of foreign companies in the domestic market. The current instability in the world economy is attributable to the rise in fuel costs. Developing countries should change the role of governments in influencing the activities of the economy to create stability. Governments should formulate control measures for certain commodities in the market. Interestingly, certain governments have begun aiding the ailing the manufacturing industry. The case of the American government reviving general motors is a good example. Immediate effects of the recession The global economy witnessed an imbalance in trade immediately after recession. The supply of commodities in the market had exceeded the demand. Afterwards, the recession affected growth in the economy of developing countries. There was a rise in unemployment and leading to frustration. In America, there were reported causes of shutdown of firms and the automobile industry suffered significantly. According to Ravi, Mudit & Ernst (2009), there was a stagnation of growth in the entertainment industry during the recession. People are still feeling the aftershock of the recession that begun in 2007 until recently. Inflation in the American economy contributed to the recession that affected the entire globe. This affected the purchasing power of individuals. Despite the fall in the price of housing, few people traded in the property market. Debts of countries in the West increased (Ravi, Mudit & Ernst, 2009). Manufacturing companies in Europe chose to lay off some of their workforce. Only a few people could access credit faculties at the time of recession. Countries opted to import commodities because of the increase in production costs at the local level. Future expectations on the global economy According to Labonte (2009), developing countries will continue to experience stabilization in their economies and the distribution of income in middle class households will rise. This will lead to a reduction in the gap amid the wealthy and the poor in developing economies. Governments will come up with initiatives aimed at creating a balance in the economy. Moreover, leaders will formulate measures to cushion the economy from another form of recession (Avantika, 2011). Manufacturers will invest in the use of technology in order to cut down production. Conclusion Bodies that govern trade should ease regulations to prevent recessions in the future. World trade organization (WTO) should formulate policies that enhance fairness in trade. This is because the harmonization of trade policies will cushion the world’s economy from recession. Despite the difficulties in predicting the future prospects of the global economy, volatility in the global economy is expected to progress for some time. Governments should control the activities of economies to prevent recession in future. Lastly, the prices of commodities that demand energy in their manufacturing will increase. References Avantika, T. (2011). Global Recession and Determinants of CEO Compensation: An Empirical Investigation of Listed Indian Firms. Advances in Management, 4(12), 27-37. Foroohar, R., & Schneiderman, R. M. (2010). Stars of the Recession. Newsweek, 156(20), 34-37. Labonte, M. (2009). U.S. Economy in Recession: Similarities To and Differences From the Past: R40198. Congressional Research Service: Report, 1. Neumark, D., & Troske, K. (2012). Addressing the employment situation in the aftermath of the Great Recession. Journal of Policy Analysis & Management, 31(1), 160. doi:10.1002/pam.20622 Ravi, J., Mudit, K., & Ernst, S. (2009). Causes of the great recession of 2007–2009: The financial crisis was the symptom not the disease! Journal of Financial Intermediation, doi:10.1016/j.jfi.2012.06.002 Rebalancing the economy. (2010). OECD Economic Surveys: United States, 2010(15), 49-79. Schaeffer, R. K. (2009). Understanding globalization: The social consequences of political, economic, and environmental change. Lanham, MD: Rowman & Littlefield Publishers. Weaver, F. S. (2011). The United States and the global economy: From Bretton Woods to the current crisis. Lanham: Rowman & Littlefield Publishers. Read More