Lots Of Agony To Come As The Global Economy Hangs By A Thread

global economy

Abel Nyarangi

Release Date

Monday, June 4, 2012


One of the most asked questions people ask is whether the global economy is heading towards a massive crisis? It is important to note that the world economy is driven by the gradual liberalization of world trade and also the liberalization of the emerging economies such as India and China.

The future of the global economy is a dilemma to many governments around the world. The U.S economy is throttling backwards from growth just like the economies of other countries. The last decade, leading from the 90's brought us globalization. Globalization can be defined as the interconnectedness of world economy, but now the global economy is skating on the ice. Starting from the crisis that began in the United States back in 2007, now the Euro crisis is pulling the world underwater. The Euro crisis is primarily characterized by huge debts that need to be serviced and the revenue that is meant to service those debt is shrinking.

Globalization has been advantageous to many countries. This can be evidenced by the revenue generated by blue chip companies who expanded their markets overseas. It is important to note that globalization is a double-edged sword. As the global economies started to synchronize, the benefits that resulted from the diversification of corporate revenue in geographical manner so as to shield themselves from regional downturns have dwindled.

The global economy is hanging on a thread and therefore more agonizing periods are yet to come. Recent US jobs report have indicated very poor jobs growth. This is the situation not only in the U.S, but happening globally. The top five economies in the world have experienced their manufacturing sector dwindling in growth. Negative side effects of the global economic synchronization are going to be felt because when one country slips into a recession more countries normally follow. This is fuelled by globalization as the global supply chain is becoming more and more intertwined everyday.

More agony is likely to come as the Eurozone debt crisis spills over into world markets creating a similar scenario to that of the U.S subprime fiasco which infected the world financial markets. It is important to note that the Eurozone represents the second largest global economy.

It is quite worrying that the monthly job payrolls have reached a standstill and are likely to contract in the coming months. This will worsen the unemployed ranks that are already swollen. For instance, in the U.S more than 14 million people are unemployed.

It would be unfortunate that the economy would fall into the recession again due to the negative economic momentum. There is very little fiscal or monetary policy that can save the situation in the short run. The worst it surely does seem is yet to come.

Editor-in-Chief's Note: Abel Nyarangi is a freelance writer with MNI Alive

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