Identify and critically analyse THREE current issues that you think will influence the future of the global economy. Explain the rationale for your choices and draw conclusions from your analysis on the challenges of the global economy.
State of Technology and Its Impact on Global Economy
The shape of the global economy is highly influenced by external factors, behaviors of economic entities and the issues that are going at any given time. The economic principles and evidence have shown that each of the factors has multidimensional effects on the operation and status of the economy. Furthermore, rapid increases and improvements in some of the factors of the economy such as technology and population have also impacted on the pattern and the shape of the global economy as well. In addition to that, global migration, which is of a major concern to the global leaders and economists, can also shape the future global economy of the world as well. This paper aims at analyzing three of the major contemporary issues which have the potentiality to influence and shape the future global market.
The choice of the three contemporary issues has been done based on the closeness and relation of the issues with the global economics. For example, the state of technology which is extensively used in the modern businesses and other government activities. The use of technology not only eases the effort of the private and the public projects but it also brings down the cost significantly. Varoufakis (2015) stated that the state of technology and the effectiveness of the businesses and other economic activities go hand in hand. The global economy first experienced the use of technology with the invention of low-cost computers which reduced the human effort manifold. The increasing effectiveness through the use of computer also allowed the economy of the world to grow as well. Thus, state of the technology has been chosen as it has a direct impact on the global economy as shown by the past histories (Kelsey, 2015).
Apart from that, the choice of the population can also be justified as population directly related to the economic transaction of an economy. For example, the Indian and Chinese economy is so valuable to the global producers due to the fact that it has a high number of middle-class customers which can significantly influence the aggregate demand of the global economy. Additionally, the population and its growth are also related to the per capita incomes of the global economies as well that can reshape the overall future economic map of the world (Berger and Lester, 2015). Furthermore, global migration has also been included in the study of the issues as international migration is a serious issue. Besides, as per the empirical evidence, the in-migration alters the structure of destination economy that can have its repercussions on the global economic foundations and stability. Scott et al. (2016) highlighted that, migration profoundly impacts the supply sides of the economy, changes in which can lead to changes in another sector of the economy as well. Thus, migration has been chosen to be an important issue which can influence the future global economy of the world.
Population and Its Impact on Global Economy
The emergence of artificial intelligence and other technological advancements
The main motive of technological innovation or even the investment in the technological advancement is to reduce the human efforts for any kind of job. Adeleye et al. (2018) highlighted that there is a new tendency among the business leaders and owners to reduce the workforce and increase the reliance of the business on the technology in order to reduce both the cost of operation and the human errors. One such revolutionary invention in the field of technology is the artificial intelligence. The main concept of artificial intelligence is it does not requires a human to take the decisions for the machines that are being used in the production process. Grinin and Korotayev (2018) noted that previously, the inclusion of machinery in the production process reduced the requirements of labors to some extent. However, there were still requirements for a few labors as decisions at the base level of operation can only be taken by the humans. However, the concept of artificial intelligence completely removes the requirement of labors from the picture of production. Cohn (2016) stated that, as per the current behaviors and the pattern of preferences, almost 67% of the global companies are expected to internalize the artificial intelligence as it matures further in the future.
This can have a strong effect on the future global economy as labors are the building blocks of any economy. Gould et al. (2015) highlighted that labors work as interlink among different sectors of the economy such as primary, secondary and tertiary. The emergence and the increase in the use of artificial intelligence will reduce the value of human intelligence at the lower level of production. Following this, there is a huge chance of a reduction in the labor requirement in the overall global economy. However, Forsgren (2017) contrasted saying that, although the implementation and the use of artificial intelligence will reduce the labor requirement in some of the sectors of the economy, it will create new job opportunity in different other sectors of the economy as well. As per the figure provided in the study, by the year 2020, the artificial intelligence will eat up 1.9 million jobs mainly in the manufacturing sector. Nevertheless, the benefit that will be enjoyed by the other sectors of the economy such as healthcare, education will increase the job opportunity by 2.3 million thereby increasing absolute job demand in the future (Chiu, 2018). The proponents of artificial intelligence have also supported it saying that each technological advancement initially results in job loss and then eventually ends up creating more jobs for at other sectors of the economy thereby expanding the scope of the economy.
Global Migration and Its Impact on Global Economy
Therefore, as a direct consequence of the implementation of artificial intelligence, the labor demand can go down immediately. This claim is also supported by the proponents of the artificial intelligence as well; hence there is no doubt that till 3-4 years after the implementation of artificial intelligence, there will be an increase in the unemployment throughout the world. It is important to note that this decrease in the demand for labors may have some of the chain effects over the other parts of the global economy thereby consolidating the near future economy of the world with high unemployment rate throughout the world. Burke et al. (2015) highlighted that the reduction in the labor demand is more likely to harm the economies of countries whose service sector dominates the GDP. Therefore, countries like the USA, India, Singapore, Thailand and other smaller economies are expected to experience a high layoff. Apart from this, the future global economy may also get affected by the high unemployment rate in the smaller economies such as Monaco, Hong Kong, Bahamas, Slovenia and many more.
Service Sector as Percentage of Nominal GDP
Antigua and Barbuda
Table 1: The countries with high reliance on service sector
(Source: Haas and Westlund, 2017)
According to Thrift and Amin (2017), these small economies have a great importance in the global economy in the sense that it stabilizes the global aggregate demand of the world economy. Apart from that, many of the global organizations having a strong presence over most part of the world also employ labors from these countries as well. In the case of an increase in unemployment in these countries, not only the economic performance of the respective countries will worsen, but the aggregate demand will also lose the harmony as well. Besides, the shrunk economy of these countries may also reduce the trade volumes of the other countries who are important trade partners. For example, Bahamas currently import 529 million USD worth of machinery and transport equipment from countries like Germany and France (Schandl et al. 2016). The unemployment and the reduction in the per capita income of Bahamas will then impact the production and export of countries like Germany and France as well. Therefore, the implementation of the artificial intelligence or any other technology that lowers the requirement of labor may influence the future economy of the world.
The influence of increasing population of the world
The population of the world is a great concern for not only for the economist but for professional for most of the discipline of study. One of the major problem associated with the population explosion that is projected to happen before the year 2030, is the shortages of capacity to meet the needs of the people of the world. Apart from that, with the increase in the population of the world the nonrenewable resources are also expected to be depleted at a very fast rate. Furthermore, the uncontrolled population growth of the world may also limit the flexibility of the economic entities of the world as population growth can also give rise to the degradation of the environment. Hettne (2016) stated that according to the projection the increase in the population is mostly for the case of developing countries. Countries like Japan and Italy on the other end of the spectrum that, according to the projection is expected to experience a reduction in the population of the respective countries.
Impact of Artificial Intelligence on Labor Demands
Nevertheless, the increase in the population of the world has the capability to increase the overall aggregate demand of the world economy. According to Faulconbridge et al. (2016), the increase in the population of the world may increase the number of middle-class people in a greater proportion. Therefore the direct impact of this will be felt in the increased economic activity of the global businesses through the increase in the demand. Apart from that, the increase in the population of the world can also give rise to the expenditure of the government as well. Countries like India and China whose population is increasing at an alarming rate also have the liability towards the transfer payments. Coupled with the unemployment that may set in the economy in the future due to the use and the implementation of newer technologies these excessive burdens may reduce the government expenditure towards the infrastructure development for the increased population as well. Thus, increasing population can hamper the infrastructure development throughout the world especially in the developing countries. However, increase in the population of the world can lead to restructuring the housing sector of the world. Van den Berg (2016) stated that housing sector of the world is the most volatile sector which reduces the likeliness of the investors to invest in the housing sector. Therefore the sector has fallen into a vicious trap. The increase in the population of the world can assist the housing sector to recover from the lack of investment. Therefore, there may be changes in the preferences of the investors of the market which can boost the housing industry.
Besides, as per the study of environmental economics, the increasing population of the world may also lower the life expectancy at birth in the emerging economies and the developing countries. This can also be attributed to the resulting incapability of the government to develop and maintain the infrastructure for the increased population. Human Development Index (HDI) that measures the standard of living of the people includes the health and safety standards as a factor as well. Thus, any kind of reduction in the health sector may also impact the HDI especially in the case of developing nations. The health status of the overall global economic entities is also in danger due to the risk of an epidemic that can result with the increase in the population of the world. According to the data of world health organization, the environmental degradation along with the lack of proper nutrition may result in malnutrition of around 3.7 billion people of the world (Metcalfe, 2018). Therefore, given the lack of opportunity to earn due to the projected increase in the unemployment, the increase in population may result in mass poverty throughout the world.
Countries with High Reliance on Service Sector
The depletion of the natural resources of the world also has the risk to increase along with the increase in the population of the world. Knox et al. (2016) stated that, the use of natural resources in the modern economy is extensive. In shortages of natural resources coupled with the inability and the flexibility of the organization to come up with new alternative can result in a horrific situation in the distant future. Borissenko and Boschma (2016) highlighted that the impact of the increase in the population of the world would exponentially increase. At the beginning that means within 5-10 years from now the increase in the population would favor the producers resulting in a constant increase in the GDP of the world. However, the hidden momentum of the population growth may disrupt the operation of the economy eventually leading to a global economic mismanagement and epidemics.
The influence of migration on the future global economy
The migration also is one of the serious issues that are being faced by the world. Wojcik (2018) pointed out that while one part of the world is leading a prosperous life and saving heavily for the future, a part of the world population is finding it tough to make the ends meet. In some of the cases this is due to the political turbulence and in some of the cases, the increasing population has reduced the flexibility of the government. In addition to that religious fundamentalists are also reducing the productivity of the workers and destroying the infrastructure of the country that is directly affecting the lives of the countrymen. Again, international job opportunities are also compelling the workers to live their lands and travel to another country. All these forces together are giving rise to the international migration of the world. According to the data of international migration report of 2016, the international migration has increased 49% from what it was in the year 2006 (Panayotou, 2016). Besides, given the recent situation in some part of the world and the expected job opportunities, the international migration may continue to increase in the near future too.
There are a number of positive and negative impacts of increasing international migration which can influence the shape of the future global economy. Increased international migration helps in the social and the cultural development through the inclusion of all the cultures of the world. Therefore, the discrimination and lack of opportunity that makes a huge number of populations worse off may go down in the near future. However, the risk of increased turbulence and intolerance is also associated with greater mixing (Shouman and Khattab, 2015). Any kind of turbulence is always known to be the most important reason for the reduction in the investment inflow. Therefore, increase in the migration can indirectly reduce the investment throughout the world in the future.
Population Growth and Its Impact on Aggregate Demand
In addition to that, the international migration can also set the foundation for the cosmopolitan lifestyle throughout the world in the future. Meara (2015) highlighted that the behaviors and the patterns of the customers influence the operation and the products of the commercial companies. Therefore, a cosmopolitan lifestyle in a most part of the world due to an increased mixture of a different culture may lead to standardization of economic activity and product portfolios. However, in this context, it is also important to understand that, cultural influences in the regional economies will cease to exist thereby establishing stronger and connected global economy of the world. However, Faulconbridge et al. (2016) contrasted that, the migration may also create economic inequality among the different geographical locations of the world. One of the main reasons for the international migration as discussed above is the increased job opportunities. For example, the USA has a lot of companies that provide job to the international labor forces. Therefore, most productive workers of any region escape the root and travel the other part of the world due to brain drain. The economic improvement by the productive labor accrues to the destination economy offering nothing to the economy from where the employees belong. Therefore the difference between the economic prosperities is increasing. In the future, the international migration is expected to increase which may pave the way for greater inequality among the people of the world.
Therefore, there are a number of contemporary issues that can influence the global economy in the future. These involve the technological advancement, increasing population of the world and the international migration. As per the study, the influence of increasing population is more devastating than the other two issues. This is due to the fact that, the positive impacts of increasing global population is less than the negative impact that it has on the future global economy. The increasing population which has been projected by many of the studies can put the global economy at a halt. Apart from that, the other related impacts of increasing population such as that of incensed resource depletion may, in turn, harm the global economy in the future. Although it is expected to contribute to the increased aggregate demand of the global market, it may eventually end up putting the global economy into stagnation in the future. However, the other two issues are also not much insignificant. The implementation of artificial intelligence may immediately increase the unemployment of the world workforce. Although as per the study, its ultimate impact is debated due to the existence of differentiated opinions, it is a common consensus that immediate impact of implementation of artificial intelligence will reduce the employment of the global population. Apart from that, the issue of international migration also has the ability to increase the gap between the different parts of the world in terms of economic performances. However, it may also standardize the economic activities of the whole world increasing the social inclusion irrespective of the cultural background. Therefore, overall, the issues discussed in the study will shape the future economic structure of the world though the impact on different economic agents from different dimensions.
Impact of Population Growth on Infrastructure Development
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