Global Economy Essay

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The global economy refers to the sum of all the commercial relations between economic agents whether they are state or private or of other mixed forms. This distinctive concept of the global economy comes from globalization theorists and researchers who have identified globalizing corporations and their local affiliates, not states, as the dominant economic forces in the world today. Theory and research on the global economy has focused on several interrelated phenomena, increasingly significant since the 1960s. The transnational corporations (TNCs) have attracted an unprecedented level of attention in this period, not only from academic researchers but also from activists in the fields of human rights in general and child labor, sweatshops, and environmental justice in particular.

The novelty of theories of the global economy, in the sense used here, originates in the proposition that capitalism entered a new, global phase in the second half of the twentieth century. By the new millennium the largest TNCs had assets and annual sales far in excess of the Gross National Products of most of the countries in the world. The global scope of TNCs and the formal ownership (though not control) of their share capital through pension funds etc. have also expanded dramatically.

The globalization of cross-border finance and trading can be fruitfully analyzed in terms of the progressive weakening of the nation-state and the growing recognition that major institutions in the global economy, notably transnational financial and trading organizations, are setting the agenda for these weakened nation-states. Since the disintegration of the Soviet empire from the late 1980s, the struggle between capitalism and communism has been largely replaced by the struggle between the advocates of capitalist triumphalism and the opponents of capitalist globalization. Many theorists have discussed these issues within the triadic framework of states, TNCs and international economic institutions. From this perspective, the global economy is dominated by the relations between the major states and state-systems (USA, the EU and Japan), the major corporations, and the international financial institutions (World Bank, IMF, WTO, supplemented in some versions by other international bodies, major regional institutions, and so on). This has stimulated interest in who runs the global economy.

State-centrists argue that the global economy is a myth because most major TNCs are legally domiciled in the USA, Japan and Europe, and because they trade and invest mainly between themselves. Against this conclusion, proponents of the global economy argue that an increasing number of corporations operating outside their countries of origin are actively engaged in developing global strategies of various types, as is obvious from the contents of their annual reports and other corporate publications. While Marxist and Marx-inspired theories of the inevitability of a fatal economic crisis of the capitalist global economy appear to have lost most of their adherents, at least two related crises have been identified. The first is the simultaneous creation of increasing poverty and increasing wealth within and between societies (the class polarization crisis), not to be confused with Marx’s emiseration thesis which failed to predict significant increases in wealth for rapidly expanding minorities all over the world. The second is the unsustainability of the global economy as it is presently organized (the ecological crisis).

Bibliography:

  1. Dicken, P. (2007) Global Shift, 5th edn. Sage, London.
  2. Sklair, L. (2001) The Transnational Capitalist Class. Blackwell, Oxford.
  3. Sklair, L. (2002)  Globalization:  Capitalism and Its Alternatives, 3rd edn. Oxford University Press, Oxford.
  4. Strange, S. (1996) The Retreat ofthe State. Cambridge University Press, Cambridge.

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