rewrite

Sichong Ye

ID: 1477207

Econ 197

Economic growth is slowing down

Globalization contributes many advantages to the global economy. The global boom

is the result from globalization. Economy had a rapid growth after 1990s. But the

globalization also carries some problems to the economic. As a result, the economic

growth is slowing down in recent years.

In the article The steam has gone out of globalization, the author states that the

globalization is leading our economy to a new era called “slowbalisation”. The economy

has a robust growth during the golden age of the globalization in 1990-2010. But the

economic growth rate become slower in recently years because the benefits from the

globalization is almost used up. The cost of shipping has stop falling, multinational firms

find a hard time survive in both global markets and the local markets. Meanwhile

activity is shifting towards service, which is harder to trade across the borders. Those

are the factors cause the slowbalisation. And globalization remains many issues that

slow the economy down in the recent years.

First, the decline of the total investment in the market caused the economic growth

to slow down. Investment is a very significant factor that effect the long-term aggregate

supply. If the long-term aggregate supply doesn’t increase, the rise in the aggregate

demand will cause inflation but not economic growth. Moreover, the high geopolitical

risk makes firms unwilling to put investment in countries and industries that carry high

risk. In the article, “global value of cross-border investment by multinational companies

sank by about 20% in 2018” (Slowbalisation, page 2 para 3). And the decline in the

payoff of from the investment also slow down the economy. Globalization bring the

Sichong Ye

ID: 1477207

Econ 197

production cost significantly lowered than before. But after the cost of shipping has stop

falling and the labor cost can not be reduced, firms can not lower the production cost

anymore therefore lower the total payoff from investment. This means a country need

to put more money in the investment in order to reach the same economic growth as

before, which is not sustainable (Ip).

Since the benefits from the globalization become less significant, trade conflict

between two countries become more ordinary in recent years that reduce the chance of

cooperation in economic and slow down the economic. Country like the United States is

now putting more attention to the domestic economic growth rather than the global

economic growth. Trade conflict between U.S. and China is the trigger for the latest

slowing (Ip). Moreover, the high tariff set by the U.S. government even hurt its small

domestic business because of the increasing cost in production (Guo). As a result, trade

behavior between countries will become more regional.

The divergent monetary policies between America and the rest of the world will

hurt the economy in the emerging markets. The Federal Reserve has already raised the

interest rate 8 times while the European Central Bank has no plan to rise their interest

rate (The world economy, page 1 para 3). And China on the other hand, is having

relaxed monetary policy in order to offset the outcome from trade war. The current

situation that strength the dollar in the world and makes it harder for emerging markets

to repay their debts (The world economy, page 1 para 3). A measurement indicates that

emerging markets account for 59% of world’s output. Therefore, a financial crisis in the

emerging markets will definitely slowdown the global economy and even lead to a

Sichong Ye

ID: 1477207

Econ 197

recession.

In conclusion, decline in investment, trade conflict and the crisis in the emerging

markets are some of the problems carried by the globalization when its benefits the

economy less than before. And the global economy is stagnating because of that.

Sichong Ye

ID: 1477207

Econ 197

measures of global integration

From this chart we can see eight measures of GDP are in retreat or stagnating.

Sichong Ye

ID: 1477207

Econ 197

Works Cited

Ip, Greg. “The Global Boom, Barely Begun, May Be Over.” The Wall Street Journal, Dow

Jones & Company, 24 Jan. 2019.

“The Steam Has Gone out of Globalisation.” The Economist, The Economist Newspaper,

24 Jan. 2019.

“The next Recession.” The Economist, The Economist Newspaper, 11 Oct. 2018.

“Globalisation Has Faltered.” The Economist, The Economist Newspaper, 24 Jan. 2019.

Yuwei Guo. “slowbalisation” Economic Rhetoric: Using Economic Theory and Empirical

Evidence in Arguing Policy. UC Santa Cruz. Santa Cruz. 23 January 2019. Lecture.