Changing Global Economy: Implications for Multilateralism Report

This report delves into the evolving landscape of the global economy, analyzing significant shifts and their impacts. It begins by discussing the recovery from economic crises, highlighting growth rates and GDP changes in major countries. The report then explores various factors influencing the global economy, including technological advancements, political decisions, and population growth. It examines the effects of weak aggregate demands, changing oil prices, and financial crises like the 2008 credit crunch. Furthermore, the report assesses the implications of these economic changes for the future of multilateralism, considering the growth of emerging markets and the need for effective government policies. It underscores the importance of understanding these dynamics for sustainable economic development and international cooperation.

HOW IS THE GLOBAL ECONOMY CHANGING?
WHAT ARE THE IMPLICATIONS FOR THE FUTURE
OF MULTILATERALISM FROM

Table of Contents
INTRODUCTION...........................................................................................................................1
DISCUSSION..................................................................................................................................1
Global economy changes............................................................................................................1
Factors that alter the situation of global economy......................................................................4
Implications for future of multilateralism from the changes in global economy........................8
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
The beginning of 2007 has changed the scenario of global economy. It has offered
conflicting picture of economic system which has created many challenges and opportunities for
the financial status of the countries (Stromquist and Monkman, 2014). Michael Spence has stated
that in the year 2007 economic crises situation were arisen, at that time many structural changes
has occurred which have altered economic state of nations. In such crises' situation, many
difficulties faced by the region, poor job opportunities, implementation of labour saving
technologies and globalization has changed the scenario of countries (Kelsey, 2015).
Current assignment will discuss the factors which are changing global economy
situations. Furthermore, implications of these changes for future of multilateralism will be
described in this assignment.
DISCUSSION
Global economy changes
After economic crises global economy condition has got down. People were not having
adequate job opportunities and it was very difficult for the population to survive their life. Over
the period of time economic has recovered. Over the past five years countries have grown by 5%
every year. GDP rate of world's largest countries have been changed a lot since 1980 to till now.
It is enjoying its growth performance (Kahler, 2013). Economy of US which is accounted almost
one third of world output has experienced its longest expansion.
After 2008 economy changes have been occurred globally. Economy changes are
determined by the living standards of the population. Over the period of time many technological
advancements have taken places which has increased job opportunities in the nations. It has
supported in improving per capita income of the people. This has supported in raising value of
economy globally (Pachauri and et.al, 2014). Earlier to 14th century there was substantial spike in
relation with income. National economy growth is calculated by output per unit of labour output,
percentage of working people. Over the period labour productivity has been increased.
Furthermore, technological advancement has supported in 80% improvement in long term
economy success (Bolt and Zanden, 2014).
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Illustration 1: Growth of world out 2013-2017
Source: (A World of Change, 2014)
After certain time in the year 2015 economy condition gets influenced again. Weak
aggregate demands, changes in oil prices, falling commodity prices were the major aspects
which has affected global economy to great extent. In the year 2016 it was projection of the
economist that economy will grow by 2.9% in 2016 and 3.2% in 2017 (Morrison, 2014).
It has been analysed that over the period of time annual percentage in respect to world
output has been changed a lot. In the year 2013 Output rate was 1.5% New Euro members have
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grown well. Graphs shows that onser of global crises' situation, there are many developing
countries which are generating more output as compare to developed nations. Between 2011-
2012 China has accounted one third output growth (Riahi and et.al, 2015). Due to weak export
demand least developed countries were experiencing modest slowdown in their economy
conditions. In the year growth rate of these least developing nations were 5.1% whereas in the
year 2015 it reached to 4.5%. Due to law output commodity prices were decreasing and weak
investment was taking place in these places. But Nepal has become the major place where
recovery has made surprisingly. In the year 2015 government ha made their efforts and has
increased construction after devastating earthquake. After that GDP growth has reached to 4.6%
in the year 2015, whereas it was only 3.3% in the year 2015 (Müller and Robertson, 2014.).
Illustration 2: Growth of worlds gross product and domestic products 2007-
2017
Source: (A World of Change, 2014)
Progress in the world economy condition has been very impressive. It is also expected
that over the period of time it will grow more. Rise in globalization has changed scenario of the
world. This has supported in expanding business across the world. This has increased overall
revenues of organization. Increase transportation facilities, communication facilities have
improved the situation of entire global economy (Müller and Robertson, 2014). Total global
financial assets have been increased from 250 billion from 70 trillion. Composition of
international financial flow has made changes in the portfolio equity investment to great extent.
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Over the period of time many countries have become able to work independently.
Agriculture production and export import business shave been grown well (Kupchan, 2013).
Development in emerging market has changed scenario of the market. Brazil, Russia, India,
China have grown well. It is the estimation of economist that economic activities will pick up till
the end of 2018. Projection shows that more government has made changes in its economic
policies which have affected the growth of the economy. After these changes overall condition of
the nations have been changed. World economy outlook has been published in which it has been
announced that till the end of 2018 investment will be increased and there would be positive
economic prognosis (Morrison, 2014). In the year 2008-2009 there were bad financial crises'
situation globally which was affecting per capita income of population. Due to which GDP has
been decreased to great extent. But after that changes in policies and market situation has
supported in improving economy condition after 2010. With the passing years performance of
the economy become stronger as per the report of IMF (International monitory
funds).Developing nations now are performing well and these developing countries have been
grown by 4.1% in the year 2016 (Stromquist and Monkman, 2014).
Factors that alter the situation of global economy
Economic growth is much more associated with the advancement and progress in the
economy situations. It can be defined as increase capacity of producing goods and services in
order to give strength to the financial condition. It is the long term, expansion in production so
that individual needs and be fulfilled and person s can live a healthy life There are many factors
which have altered situation of the global economy (A World of Change, 2014). Each country
aims to make their economy stronger but it is only possible when government makes effective
legislation and utilize resources well. Economics try to analyse rout cause of the problems so
that supply, demand, prices, production, costing can be favourable.
Economic growth is the positive change in level of production so that more investments
can be done and more revenues can be generated by the nation. In the year 2010 telecom industry
has contributed well in economic growth of the country (Kupchan, 2013). There are many
elements which helps in changing the situation of economy. One of the main factor is
technological development. It involves production through scientific methods and instruments. It
is the best element through which wastage can be minimized and resources can be utilized in
effective manner (Stromquist and Monkman, 2014). Over the period of time developing and
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developed nations have worked on improving their technologies. United Kingdom and United
State have given advance software to the industries. This has helped in increasing production
capacity and generating more revenues. By this way these firms are become able to pay more tax
to government which has improved employment opportunities sin the countries. It was the major
component which has contributed well in the economy development of the world after 2007
financial crises (Kelsey, 2015). This technological advancement has helped in increasing
production with limited resources.
Political factor is another main element which has altered economy situation of the world.
Participation of government in formulation of policies impact on the economy growth. For
example BRIXIT was the main issue where government has taken decision to exit from Europe.
It was the biggest decision which has affected economy of the United Kingdom. After separation
from the Britain, overall condition of UK got changed. At that time authorities had to make new
trade agreements and new investors were required (A World of Change, 2014). By this way
overall condition of the country changed drastically. Initially people were not having proper job
opportunities and persons those who were employed in Britain's firm were terminated from their
organizations. It has decreased employment opportunities and per capita income of the
population got decreased. But effective new government legislation has supported in the
development of UK. Authorities have made new trade agreements with other nations. It has
raised import and export business of the country. By this way foreign currency and reserves have
been increased in the region. It was the best contribution of the UK government which has
supported in improving economy value of the United Kingdom (Pachauri and et.al, 2014).
Population growth is the major factor which impacts on economy condition and change
the situation of the economy. If any country has large population then it may affect economic
development of the nation. Population growth can be positive and negative for the nation and
global economy condition. If there is more people than more efforts are required to improve their
life (Kahler, 2013). India and China are two main regions which are on top in terms of
population. In such condition government has to put more efforts to increase employment
opportunities, develop infrastructure in these nations. It affects the economy condition of the
locations. High population increase pressure because of limited resources. More people means
more food is required , more health care is required and more investment is required to improved
educational services. Rate of economic growth can be defined as increment in real GDP.
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Demand and supply are two main elements which impact on the economic growth of the nation.
If country is unable to meet with the demand then it may affect its development (Stromquist and
Monkman, 2014).
Illustration 3: UK economic growth
Source: (Factors affecting economic growth, 2017)
Aggregate demand gets affected by changes in interest rate, asset prices, real wages,
value of exchange rates. In such condition overall foreign revenues get decreased. In such
condition financial condition of the nation gets decreased. If interest rate in low then it will
encourage more investments. 2009-2016 was the era in which interest rate was low. After 2007
financial crises' government has put more efforts to minimize interest rates so that borrowing can
be cheaper (A World of Change, 2014). It helps in increasing investment which has supported in
improving economic condition of the country. In the year 2008 credit crunch has influenced
banking sector to great extent. It was the condition where country has faced sudden shortage of
funds condition which has affected lending and investments. Due to this condition interest rate
has been increase and it has turned the situation into financial crises condition. It was occurred
due to defaults in mortgages loans. Property prices of US got decreased and due to this banks
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have to face many issues (Kelsey, 2015). It was the situation of America. Many American banks
have given mortgages loans to the people those who were not having adequate income and were
having poor credit score. In the year 2007 interest rates of the banks have been increased, by this
way inflation has taken place. Now mortgage payment shave become more expensive for the
population ad bankers as well. Now people those who have taken loan from the financial
institutes have to face ballooning mortgage payments. Most of the people have default to pay
payments on time (Pachauri and et.al, 2014). This has created funds shortage condition. It was
the biggest threat to the US economy because it has created financial crises situation n the nation.
Most of the medium size firms got bankrupt. This credit crunch in UK has affected its economy
condition badly. It was the major factor which has altered global economy.
Illustration 4: Economy growth of United Kingdom
Source: (The great recession 2008-13, 2017)
Due to this credit crunch issue, recession situation has arisen in the UK in the year 2008-
2009. It was considered as slowest recovery on records. Due to this issue shortage of liquidity
got arisen and financial instability has been decreased. This has resulted fall in exports and it has
affected wealth negatively (Kupchan, 2013).
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Furthermore, land, power, transportation, communication play significant role in capital
formation. It increases availability of per workers in the nation which supports in increasing
labour ratio. If productivity is increasing then it can support in growth of economy to great
extent. It is the element which impact of economy development of the nations. It is essential that
ll people are fairly involved in production process (Riahi and et.al, 2015). This is way that can
improve value of currency to great extent. By this way overall revenues in the country can get
increased.
Implications for future of multilateralism from the changes in global economy
Changes in economy has implications for the future. Technological development has
changed the economy of the world. Due to changes in technologies and advancement in technical
software industries have become to increase production. It is the making factor which has
supported after economic crises' situation (A World of Change, 2014). With the development In
technologies business have improved their production capacity. By this way output has been
increased which has generated revenues of the business. Continuous development in
technologies will impact positively on the economy growth of the nations. Changes in this factor
helps in minimizing cost and wastage which has increased overall revenues of the firms.
Globalization is changing the scenario of countries. There are many firms which are
expanding their business across the world (Morrison, 2014). This can boost financial position of
the regions. Due to globalization, foreign reserves can be increased in the nation. It can be better
for the world to give strength to the global economy. Improving political conditions and more
stable political conditions can be positive for the development of globe. By this way developing
countries world be able to enhance their revenues. Better trade agreements, effective legislation
can help in enchaining revenues of the country. This would be positive sign for the globe. It can
help in increasing employment opportunities in the country (Bolt and Zanden, 2014).
Increase in population is the main element which impact on the economy of the nations.
If population gets increased in the same manner then country will require more resources and
will have to invest a lot in order to fulfil their demands. In such condition developing countries
will not be able to get success and develop their economic condition. Increase number of
population will create burden on the authorities (Müller and Robertson, 2014). They will have to
invest more resources. In such condition over all growth may get negatively affected. On other
hand decrease in population can be beneficial for the global economic growth. Because of
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balanced number of population government will be able to provide adequate employment
opportunities to the people. This will help in raising growth of the global economy (A World of
Change, 2014).
Demand and supply is two factors through which country innovate more new services.
Supply based on demand. Global economy is the developing economy it in terms of industries.
In this global era there are many industries which provides goods and services.
Such as hospitality, telecommunication, production, technology industries all those industries
gives revenue to the government. Through which government make innovative and development
strategies regarding country (Bolt and Zanden, 2014). Every company and industry get their
revenue through population. Consumers are the key factors of the companies. It generates
revenue and demands for the particular product and services. This process helps global economy
for development. Apart from this political factors, this component influenced by the government
changes. These political factors affect the demand and supply of product and services. Political
factors includes changes in interest rates inflation rates. It affects the purchasing power of the
customer. Overall high crises would affect the company growth through which country reduce
their economy rates. Furthermore, positive effects give high business growth and provide high
revenue generate in the global economy in the future. Overall development of technologies and
industries would give positive impacts on future generation. Apart from that more demand and
supply helps to generate new firms and company, so it helps to develop overall economy in the
future (Stromquist and Monkman, 2014).
Future of global economic growth will definitely be impacted by the changes made in
interest rates and legislations. Growth or downfall of the financial sector- This is the sector
which will mostly be impacted by the changes in interest rates and it will eventually impact the
future economic growth. Rise in the interest will provide benefits to these sectors because they
will receive more amount on the investments. For examples bank. This will make the global
economy grow. Decrease in the interest rates will bring disadvantages for the financial market.
Lower rates will bring less amount to them. Growth of the global economy will be decreased by
this (Kahler, 2013). Budget deficits- It is amount when cost of the government exceeds from
their revenue. Budgets deficits are the impact of major legislations which are enforced by the
government of the country. It occurs when government do not receive the amount which they
had invested on something. It will eventually bring the major impact on the future global
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economic growth. It will make them invest less amount at the global level which will make their
economic growth decrease (Müller and Robertson, 2014).
Budget surplus- Changes in the legislations can also lead towards the budget surplus. It is
amount when revenue exceeds from the cost of the government. It makes some growth in the
future of the global economy. It means government can invest more at the global level which
definitely bring some growth in the economy at the global level too (Stromquist and Monkman,
2014).
These are some impacts which will be brought with the changes in interest rates and
legislations on the future economic growth. These impact should be handled very carefully to
make the global economic conditions stable which will be beneficial for all.
CONCLUSION
From the above report it can be concluded that global economy has been changed over a
period of time. Changes in political norms, technological advancement, globalization has
drastically impact on the overall financial position of the nations. Developing countries and
developed nations now both have capabilities to raise their output. Credit crunch 2007-2008 was
the drastic situation which has emerged recession condition in the nations. After that liquidity
problems have arisen. But positive legislation, strong trade agreements, technological
advancement can support in giving strength to economy.
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