Why a Global Economy is a Myth

world-economyTo have a global economy would be one of the greatest achievements in human history.  All countries regardless of their social and cultural difference would share the same business and economic system rules.

We would have uniform business contract rules (we do now with Incoterms), uniform environmental regulations, one money supply and one legislative body administrating our world economy.  We would be one economic system.  In addition because we are in a world economy cost would be somewhat equal throughout the world.

While having the same rules may seem possible we could never have costs be equal throughout the world.  Physical resources are scattered throughout the planet earth, add in the different social and cultural values that help determine business regulation of each country and that is why we could never have uniform costs in a world economy.  Because costs are different it has tremendous effects on not just what is made but where it is made.

There are three main categories of economic studies, micro, macro and international.  Microeconomics is focused on the study of business efficiencies to maximize profits.  Macroeconomics is focused on management of a country’s economy and international economics focuses on how each country’s economic systems interact with one another for stability and mutual benefit.

When I was ascertaining the definition of a world economy the basic thought between many researched definitions is inter-dependency between each country’s economic systems.  Unfortunately, my conclusion is the world economy reference is nothing more than a business slogan.  The slogan is referencing microeconomics, the ability for business to reduce cost by using cheaper labor cost resources available throughout the world.  Using foreign labor to support domestic services is not trading with another country.

Businesses are now dependent on other countries to maintain budgeted labor cost structures to align with their net income goals.  This has led to a significant decrease in the number of domestic professional service sector jobs available.  High unemployment has affected the Talent Lost group members along with entry level professional workers.

There are simple solutions to the problem however some implementations of these solutions can be complex.  It involves embracing the concept of a world economy, with a twist; we are no longer discussing the efficient allocation of physically resources.  America has reached a stage in capitalism where a brain is the predominate resource and our problems stem from the fact that brain resources are available throughout the world.

That is why we need to establish labor rate equilibrium between countries.