.
From political uprisings in the Middle East to the exit of Great Britain from the European Union to new leaderships in Latin America and the United States, the geopolitical landscape continues to shift and turn in unpredictable ways—and the potential collapse of the global economy remains a constant threat. Despite the uncertainty these mega changes have brought about, however, global markets are actually rising to record highs, with the global economy estimated to grow up to 4% in the next year.
We are living in a time of buoyant global economic growth. While the world may appear fractured by geopolitical challenges, both individual countries and the world as a whole have seen tremendous economic growth in recent years. With a general sense of ease and optimism leading many to become confident in the future state of the global economy, the trend towards lowered interest rates, increased profits and a decrease in many risk factors may very well pave the road towards an even more successful global economic future.
The financial world is in better shape than it has ever been. Compared to the global economy during the early 20th century leading up to the two world wars, global markets in the last half-century have risen to astounding heights and have led to greater economic success in nearly every country. Indeed, even when compared to the 2009 financial crisis and the early risks of the Euro currency, the global economy in the last few years has continued to grow aggressively and has also remained surprisingly resilient to many external risks.
The extension and scale of the world economy produces many positive effects. Trade between China and Africa, for example, has increased from zero to over 200 billion dollars today over the span of 15 years, growing at an estimated 15% per year. Because of increased global trade, the spread of prosperity, education and other positive values have led to a general increase in wellbeing throughout the world.
The European Economy is regaining confidence in itself—but there still remain many challenges ahead. While the last 10 years have proven to be difficult for the European economy, recent political changes in the continent have revealed both challenges and opportunities moving forward. With the recent election of Emmanuel Macron in France, for example, positive labor reforms and a projected economic growth of 1.9% in 2018 reveal a promising future for France. Other issues—such as Brexit—however, have caused new uncertainties in the continent.
Demographic challenges with the pension system have led to political issues. With many pension systems throughout Europe ultimately having become unbalanced, those in the 45-55-year-old demographic face a future where pensions are at risk while the younger generation faces the danger of being unable to buy a house or find proper employment—all of which has led to a resurgence of the global populist movement.
Europe needs to focus on its fundamental strengths and its competitiveness. While most countries throughout Europe are doing well enough economically, it is vital for Europe as a whole to regain its competitive edge and focus on its fundamental strengths, such as its highly educated populations. This means having European countries switch from a traditionally defensive economic stance to one that focuses on more aggressive competitiveness. In order to do this, however, countries will need to focus not only on business and education, but also government policies and social issues such as migration.
The key to European competitiveness is reform. However, with the rapid rate of turnover of reforms in many European governments, many citizens have lost trust in the dependability of economic reforms. Therefore, it is the job of government to not only introduce reforms that can remain predictable over the period of multiple decades, but also ensure that these reforms are embedded deeply to guarantee they cannot be radically altered later.
From tax rates to regulatory parameters to increased focus on a solid workforce, current and future U.S. economic policy promises to bring a competitive edge back to the U.S.’s role in the global economy. As the U.S. slowly changes its policy, however, these new dynamics will undeniably cause reverberations throughout the world, and therefore, it is crucial that the US also ensures balance both at home and abroad.
Markets have reacted quickly to recent U.S. tax reforms. With the introduction of new tax reforms by President Trump, most businesses throughout the U.S. have seen a positive impact. With the influx of profit saved by these tax cuts, companies within the United States now have the ability to provide benefits to shareholders and reinvest in their own business, both of which will ultimately drive more interest in demand for employment, leading to a cycle of increased economic growth on both the individual and business level.
Global business flow will most likely increase within the United States. Because of lowered tax rates and reversing of certain regulations, the U.S. now has a much more hospitable environment in which global companies—such as those in manufacturing—can not only benefit financially, but U.S. citizens can as well due to increase in demand for employment. In this way, the United States not only becomes more competitive as an economy, but also more attractive as a destination for business.
The drawbacks to current U.S. economic policies. While some applaud the new U.S. tax reforms, worries about budget deficits and weak infrastructure throughout the United States has others concerned about whether the reforms will be able to impact the economy in positive ways long-term, or whether it will instead lead to new challenges moving forward.
Infrastructure is key to the future of the United States economy. Whether or not the new U.S. tax reforms aid business, it is undeniable that infrastructure will play a crucial role in the longevity of a healthy U.S. economy.
The United States is extremely inefficient in the approval process of new infrastructure. Whereas countries like Germany and Canada are often able to approve infrastructure projects in less than two years due to an abundance of regulations and laws that have been created to make the process more efficient, the U.S. often takes 10-15 years to approve new projects due to conflicting issues at all levels. In order to make this process more efficient, therefore, new laws and regulations need to be passed that can coordinate at all levels.
Both the public and private sector can work together on infrastructure. While the vast majority of infrastructure projects in the U.S. fall under the jurisdiction of the public sector, the Australian economic model can be used to demonstrate how the private sector can become more involved in these projects—while also turning a profit themselves. In the Australian model, for example, governments can take earning assets—such as those gathered from a bridge or airport—and sell that asset to the private sector, who in turn pays whatever they think it is worth. Additionally, the federal government also adds a tip to encourage local state municipalities to follow this same practice—usually at 115% of fair value for that asset—under the condition that they reinvest that money into building new infrastructure. Then, if the new infrastructure generates income, this revenue can be paid towards private investors or re-used for future infrastructure projects; if it doesn’t generate income, however, the public sector can finance the project through more traditional means.
Infrastructure is a universal positive. Ultimately, by investing in infrastructure, jobs can be created, pensions can be paid, revenue can be generated for the central government, deficits can be reduced and overall increased productivity can be had in the economy.
The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.
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Global Markets in a Fractured World
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April 20, 2018
From political uprisings in the Middle East to the exit of Great Britain from the European Union to new leaderships in Latin America and the United States, the geopolitical landscape continues to shift and turn in unpredictable ways—and the potential collapse of the global economy remains a constant threat. Despite the uncertainty these mega changes have brought about, however, global markets are actually rising to record highs, with the global economy estimated to grow up to 4% in the next year.
We are living in a time of buoyant global economic growth. While the world may appear fractured by geopolitical challenges, both individual countries and the world as a whole have seen tremendous economic growth in recent years. With a general sense of ease and optimism leading many to become confident in the future state of the global economy, the trend towards lowered interest rates, increased profits and a decrease in many risk factors may very well pave the road towards an even more successful global economic future.
The financial world is in better shape than it has ever been. Compared to the global economy during the early 20th century leading up to the two world wars, global markets in the last half-century have risen to astounding heights and have led to greater economic success in nearly every country. Indeed, even when compared to the 2009 financial crisis and the early risks of the Euro currency, the global economy in the last few years has continued to grow aggressively and has also remained surprisingly resilient to many external risks.
The extension and scale of the world economy produces many positive effects. Trade between China and Africa, for example, has increased from zero to over 200 billion dollars today over the span of 15 years, growing at an estimated 15% per year. Because of increased global trade, the spread of prosperity, education and other positive values have led to a general increase in wellbeing throughout the world.
The European Economy is regaining confidence in itself—but there still remain many challenges ahead. While the last 10 years have proven to be difficult for the European economy, recent political changes in the continent have revealed both challenges and opportunities moving forward. With the recent election of Emmanuel Macron in France, for example, positive labor reforms and a projected economic growth of 1.9% in 2018 reveal a promising future for France. Other issues—such as Brexit—however, have caused new uncertainties in the continent.
Demographic challenges with the pension system have led to political issues. With many pension systems throughout Europe ultimately having become unbalanced, those in the 45-55-year-old demographic face a future where pensions are at risk while the younger generation faces the danger of being unable to buy a house or find proper employment—all of which has led to a resurgence of the global populist movement.
Europe needs to focus on its fundamental strengths and its competitiveness. While most countries throughout Europe are doing well enough economically, it is vital for Europe as a whole to regain its competitive edge and focus on its fundamental strengths, such as its highly educated populations. This means having European countries switch from a traditionally defensive economic stance to one that focuses on more aggressive competitiveness. In order to do this, however, countries will need to focus not only on business and education, but also government policies and social issues such as migration.
The key to European competitiveness is reform. However, with the rapid rate of turnover of reforms in many European governments, many citizens have lost trust in the dependability of economic reforms. Therefore, it is the job of government to not only introduce reforms that can remain predictable over the period of multiple decades, but also ensure that these reforms are embedded deeply to guarantee they cannot be radically altered later.
From tax rates to regulatory parameters to increased focus on a solid workforce, current and future U.S. economic policy promises to bring a competitive edge back to the U.S.’s role in the global economy. As the U.S. slowly changes its policy, however, these new dynamics will undeniably cause reverberations throughout the world, and therefore, it is crucial that the US also ensures balance both at home and abroad.
Markets have reacted quickly to recent U.S. tax reforms. With the introduction of new tax reforms by President Trump, most businesses throughout the U.S. have seen a positive impact. With the influx of profit saved by these tax cuts, companies within the United States now have the ability to provide benefits to shareholders and reinvest in their own business, both of which will ultimately drive more interest in demand for employment, leading to a cycle of increased economic growth on both the individual and business level.
Global business flow will most likely increase within the United States. Because of lowered tax rates and reversing of certain regulations, the U.S. now has a much more hospitable environment in which global companies—such as those in manufacturing—can not only benefit financially, but U.S. citizens can as well due to increase in demand for employment. In this way, the United States not only becomes more competitive as an economy, but also more attractive as a destination for business.
The drawbacks to current U.S. economic policies. While some applaud the new U.S. tax reforms, worries about budget deficits and weak infrastructure throughout the United States has others concerned about whether the reforms will be able to impact the economy in positive ways long-term, or whether it will instead lead to new challenges moving forward.
Infrastructure is key to the future of the United States economy. Whether or not the new U.S. tax reforms aid business, it is undeniable that infrastructure will play a crucial role in the longevity of a healthy U.S. economy.
The United States is extremely inefficient in the approval process of new infrastructure. Whereas countries like Germany and Canada are often able to approve infrastructure projects in less than two years due to an abundance of regulations and laws that have been created to make the process more efficient, the U.S. often takes 10-15 years to approve new projects due to conflicting issues at all levels. In order to make this process more efficient, therefore, new laws and regulations need to be passed that can coordinate at all levels.
Both the public and private sector can work together on infrastructure. While the vast majority of infrastructure projects in the U.S. fall under the jurisdiction of the public sector, the Australian economic model can be used to demonstrate how the private sector can become more involved in these projects—while also turning a profit themselves. In the Australian model, for example, governments can take earning assets—such as those gathered from a bridge or airport—and sell that asset to the private sector, who in turn pays whatever they think it is worth. Additionally, the federal government also adds a tip to encourage local state municipalities to follow this same practice—usually at 115% of fair value for that asset—under the condition that they reinvest that money into building new infrastructure. Then, if the new infrastructure generates income, this revenue can be paid towards private investors or re-used for future infrastructure projects; if it doesn’t generate income, however, the public sector can finance the project through more traditional means.
Infrastructure is a universal positive. Ultimately, by investing in infrastructure, jobs can be created, pensions can be paid, revenue can be generated for the central government, deficits can be reduced and overall increased productivity can be had in the economy.
The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.
