I OFTEN watch a lot of economic content creators, and in many of their videos, they talk about the global economy.
Now, it’s important to point out that this is an abstract concept in the sense that economies have always interacted with each other to some degree or another all throughout history. What has changed is the proliferation of institutions that facilitate economic integration, and the formal promotion of those institutions by public as well as private bodies.
But economic activity does not exist in a vacuum. It needs security, stability and trust, and those are running low these days, both domestically and internationally.
Under such circumstances, I think that the global economy will only continue to slide down for a very long time. The wider circumstances that allowed globalization to grow in the 90’s is gone, and seems to be headed in the opposite direction.
Consider this analogy. You have a million pesos, and you want to start a business in a growing city. The only problem is that that the growing city also has an ongoing gang war and the possibility of a new one in the foreseeable future. To make matters worse the city has demographic issues.
Also, the political situation is causing friction among the different communities, and many analysts believe that recession may be coming. Are you going to risk your capital? Or are you going to keep it in your bank account?
This analogy gives a good description of the state of the global economy today. Now, there is hope that artificial intelligence and technology can stimulate growth, but, again, in the background lies geopolitical, demographic, environmental, sustainability and domestic problems. These problems have always existed, sure, but not to the same level they are now, and I doubt they can be solved.
China’s intellectual and technology property theft. Russia’s war in Eastern Europe. Various Black Swan Events Western countries may have their ideas for keeping global stability, but I am almost certain that the BRICS countries will not go along with them, and that’s one more reason why the global economy, as understood during the age of globalization, is probably not going to last.
Politics trumps economics. War trumps economics. Demographics trumps economics. Group identity trumps economics.
The only reason why the global economy is still chugging along is that it’s being subsidized by large organizations. Once that’s gone, I think we can expect to return to a world where economics is determined regionally, not globally./PN
