The Global Economy

For years the globalisation process has determined the development of the world economy. Many companies invest abroad, founding subsidiaries there or taking holdings in already existing firms. Cross-border trade in goods and services has increased prosperity in the majority of countries. The growth in world trade would have been unthinkable without the dismantling of duties and other obstacles to trade under the auspices of the General Agreement on Tariffs and Trade (GATT) and the World Trade Organisation (WTO). Since countries’ economies are ever more intricately intermeshed, the economic situation in one country increasingly affects its trading partners. Germany, with its strong exports, is particularly dependent on the state of the world economy.

 

The countries which have profited most from globalisation are those which have opened their markets. Yet despite the obvious advantages of the international division of labour, many countries continue to isolate themselves. Industrialised countries use trade barriers and subsidies to defend themselves against cheap agricultural produce from developing countries, preventing the latter from raising their standard of living. The poorest nations are often unable to hook into the world economy, lacking as they do a reliable infrastructure and growth-oriented economic policies. Many of these countries continue to be dependent on development aid.