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THE GLOBAL ECONOMY. Changes, Trends, and Challenges for the 21 st Century. Kristin Bowles-Pierce USF/Career & Workforce Education EVT 7066.

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THE GLOBAL ECONOMY

Changes, Trends, and Challenges for the 21st Century

Kristin Bowles-Pierce

USF/Career & Workforce Education

EVT 7066

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Globalization is having a profound effect on the pattern and establishment of economic growth, stability, and development. The economic face of the world is transforming.

For some it will be the end of an era…for others it will be an incredible opportunity.

SOURCE: Stuart, J. (n.d.). Predicting Global Trends. Retrieved October 17, 2008, from http://www.alt3.co.uk/GlobalEconomy.htm

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The Global EconomyIntroduction

What is Globalization?

  • Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology.
  • Globalization has effects on the environment, culture, political systems, economic development and prosperity, as well as human physical well-being in societies around the world.

Globalization 101)The Levin Institute. (n.d.). Globalization 101. Retrieved October 18, 2008, from http://www.globalization101.org/What_is_Globalization.html

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The Global EconomyIntroduction

History of Globalization:

  • The term globalization first became widely used in the 1980s, but the concept stretches back decades, perhaps even centuries, through the trading empires built by Spain, Portugal, Britain, and Holland.
  • The strategy of Western states to build and strengthen international ties after World War 2 laid the groundwork for today's globalization.
  • For factors influencing globalization, please link to:

The Globalization Timeline, 1940-2005

http://new.gbgm-umc.org/media/missionstudies/pdf/globalizationtimeline.pdf

Globalization 101)The Levin Institute. (n.d.). Globalization 101. Retrieved October 18, 2008, from http://www.globalization101.org/What_is_Globalization.html

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The Global EconomyEconomic Changes: The Past

1950:

  • The shock of a great depression, two world wars, and restrictions on immigration led to little economic interconnectedness between countries.
  • The U.S. was the world's greatest economic power, producing 27% of the world's Gross Domestic Product (GDP).
  • The world's poorest economies were China and India, each making up only 4% of the world's GDP.

Farrell, D., Folster, C., & Lund, S. (2008). Long-term trends in the global capital markets. The McKinsey Quarterly. Retrieved October 14, 2008, from http://www.mckinseyquarterly.com/Long- term_trends_in_the_global_capital_markets_2100

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The Global EconomyEconomic Changes: The Present

2006:

  • Radical changes in communication and information technology, and stronger national commitments to globalization have led to international institutions and economic interconnectedness.
  • The U.S. share was only 22% of the global GDP.
  • The new emerging markets of China and India were experiencing unprecedented economic gains.

Farrell, D., Folster, C., & Lund, S. (2008). Long-term trends in the global capital markets. The McKinsey Quarterly. Retrieved October 14, 2008, from http://www.mckinseyquarterly.com/Long- term_trends_in_the_global_capital_markets_2100

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The Global EconomyEconomic Changes: The Future

2040:

  • Globalization could lead to the world as a supply base for talent and materials; industry boundaries may become blurred.
  • China could contribute more to GDP than the U.S. and its economy could become larger than that of the U.S., Western Europe, and Japan combined.

% Contribution to Global

Growth by Country, 2006-20

Source: Economist Intelligence Unit

Economic Intelligence Unit (2006, March). Foresight 2020: Economic, industry and corporate trends (). Retrieved October 15, 2008 from http://www.itvendorsdirectory.ca/Online-Resources/foresight-2020-economic-industry-and-corporate-trends-001.html

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The Global EconomyCurrent Trends

Global Financial Trends:

Investors outside Europe and the U.S. are increasingly shaping trends in financial markets.

  • Increased ties between the financial markets of the developed and emerging worlds.
  • The shift of financial weight in Asia from Japan to China.

Source: McKinsey Financial Institute

Farrell, D., Folster, C., & Lund, S. (2008). Long-term trends in the global capital markets. The McKinsey Quarterly. Retrieved October 14, 2008, from http://www.mckinseyquarterly.com/Long- term_trends_in_the_global_capital_markets_2100

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The Global EconomyCurrent Trends

Global Financial Trends (continued):

  • The Eurozone’s growing financial clout per the euro emerging as an international currency that could challenge the dollar.
  • The burgeoning financial role of Middle Eastern countries.
  • An unprecedented escalation in global energy and commodity prices, allowing for inflationary forces.

Farrell, D., Folster, C., & Lund, S. (2008). Long-term trends in the global capital markets. The McKinsey Quarterly. Retrieved October 14, 2008, from http://www.mckinseyquarterly.com/Long- term_trends_in_the_global_capital_markets_2100

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The Global EconomyCurrent Trends

Global Financial Trends (continued):

  • The emergence of capital sovereign wealth funds (state-owned funds) set up by oil-exporting countries to invest oil surpluses in global financial assets.
  • Petrodollar investors are the largest and fastest growing component of a broad shift in global financial market that includes Asian central banks, private-equity firms, and hedge funds.

Sovereign Wealth

Source: McKinsey Financial Institute

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The Global EconomyCurrent Trends

Global Employment Trends:

Globalization and rapidly changing technical progress continue to impact labor markets around the world.

  • Continuing massive work deficit in the world.
  • Five of ten people are
    • in vulnerable work situations.
    • living with their families, in poverty, despite working.
  • The ongoing world GDP growth will continue to have a low impact on job creation and on the decrease working poverty.

International Labour Organization (2008, January). Global Employment Trends (978-92-2-120912-6). Retrieved October 18, 2008 from http://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/documents/publication/wcms_090106.pdf

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The Global EconomyCurrent Trends

Global Employment Trends (continued):

  • The services sector (42.7%) over took the agricultural sector (34.9%) in contributing to employment in the world.
  • The industry sector, which had seen a slightly downward trend is now in a slow upward trend (22.7%).

Sectoral Employment Shares, 1997-2007

Source: ILO Global Employment Trends Model, November 2007

International Labour Organization (2008, January). Global Employment Trends (978-92-2-120912-6). Retrieved October 18, 2008 from http://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/documents/publication/wcms_090106.pdf

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The Global EconomyCurrent Trends

Global Employment Trends (continued):

  • Labor productivity increase in all regions, except for the Middle East, with the highest increase in East Asia.
  • Demand for offshore labor by the developed world pushes up wage rates for some occupations in low-wage countries, but not as high as current wage levels for those occupations in developed ones.

International Labour Organization (2008, January). Global Employment Trends (978-92-2-120912-6). Retrieved October 18, 2008 from http://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/documents/publication/wcms_090106.pdf

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The Global EconomyCurrent Trends

Global Employment

Trends (continued):

Labor Productivity/Per Person, 1997-2007

  • The labor productivity gap between developing regions and the developed world continues to grow, even for well-performing regions.

International Labour Organization (2008, January). Global Employment Trends (978-92-2-120912-6). Retrieved October 18, 2008 from http://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/documents/publication/wcms_090106.pdf

Source: ILO Global Employment Trends Model, November 2007

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The Global EconomyCurrent Trends

Global Employment Trends (continued):

  • A continuing decline in the world’s employment-to-population ratio.
  • The decline is growing among young people (age 15 – 24) partially due to education and increased discouragement of young people to participate in labor markets.

Global Employment Trend, 1997-2007

Source: ILO Global Employment Trends Model, November 2007

International Labour Organization (2008, January). Global Employment Trends (978-92-2-120912-6). Retrieved October 18, 2008 from http://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/documents/publication/wcms_090106.pdf

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The Global EconomyCurrent Trends

Global Demographic Trends:

The world’s population continues to grow; however the overall growth rate is on a downward trend.

  • Growth in less developed countries is increasing more than five times as fast as that of developed countries.
  • The population is aging, and in developed countries, has already surpassed that of the 12-24 age group.

Source: United Nations, World Population Trends, 2004

Rosenburg, L., & Bloom, D. (2006). Global demographic Trends. Finance and Development, 43(3), . Retrieved October 18, 2008, from http://www.imf.org/external/pubs/ft/fandd/2006/09/picture.htm

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The Global EconomyCurrent Trends

Global Demographic Trends (continued):

  • The fastest growing segment of humanity today is the middle class. In China and India the middle class is growing. In Turkey, Brazil, Mexico, Ukraine and Brazil, a middle class is emerging.
  • The growing middle class will increase over the next decade from 30% of the world’s population to 52%.
  • The world's urban population is expected to grow by 1.8% a year between 2000 and 2030, almost twice as fast as the global population growth.

Rosenburg, L., & Bloom, D. (2006). Global demographic Trends. Finance and Development, 43(3), . Retrieved October 18, 2008, from http://www.imf.org/external/pubs/ft/fandd/2006/09/picture.htm

The Brookings Institution (2008, April 29). Moises Naim presents on Global Economic Trends. Paper presented at the meeting of the Global Young Professionals. Retrieved October 18, 2008 from http://www.brookings.edu/

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The Global EconomyCurrent Trends

Global Social Trends:

An" uneasiness” permeates the global economy as regions size up economic impacts on the world.

  • Degradation of the eco-system.
  • Uneven experience in the costs/benefits of globalization.
  • Widespread perception of governments as weak on both international and national levels.
  • Disquiet at scale, impact and governance of global companies.
  • Revival of faith-based affiliation in many cultures.

Department Of Economic And Social Affairs (2004). World economic and social survey (). Retrieved October 16, 2008 from http://www.un.org/esa/policy/wess/wess2004files/part1web.pdf

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The Global EconomyThe Challenges of the LAST 10 Years

  • 1998: Asian Currency Collapse
  • 2000: Dot.com Meltdown
  • 2001: Global Telecom Restructuring
  • 2001-2003: Impact of 9-11
  • 2007-2008: Rising Oil Costs
  • 2008: Sub-Prime/Financial Crisis

Carroll, J. (2008). Global economic trends: Which way forward? An interview with Jim Carroll (). Retrieved October 18, 2008 from http://www.jimcarroll.com/acrobat/Global-EconomicTrends.pdf

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The Global EconomyThe Challenges of the NEXT 10 Years

  • Poverty
  • Equitable Globalization
  • Climate Change
  • Education
  • Middle East
  • Global Governance

World Economic Forum. (2006). Global leaders prioritize key issues facing our world. Retrieved October 18, 2008, from http://www.weforum.org/pdf/AM2005/Global_Town_Hall.pdf

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Globalization is increasing the pace of change in the world. We are entering a period of significant and fundamental transformation.

How will this affect you?

SOURCE: Stuart, J. (n.d.). Predicting Global Trends. Retrieved October 17, 2008, from http://www.alt3.co.uk/GlobalEconomy.htm