Saturday, November 25, 2006

Who Controls the Economy?

Economists are facing a conundrum. National economies are falling more and more under the influence of globalization. In the recent past, the United States was the broker of the global economy, being able to flex its financial muscle to ease the pain not only in the US, but sometimes elsewhere in the world. That elevated the likes of Greenspan to economic godhood. Now however, the US is flexing, but the global economy is no longer responding the way it used to.

Welcome to globalization, where it is not only money that is flowing easily around the world, but so is labour, ideas and innovation. A brilliant idea in the US for example, could be funded by Europeans, for prototyping in India and cheap manufacturing in China. What control does governments now have? Individually, just about zero. Future macro economic policies will be dictated by the collective influence of national economies around the world. This is drives a world view with no past precedence. The future stability of national economies will depend on countries around the world being able to collaborate and work together. Almost sounds like we need a economic body like the UN.

Read more in BusinessWeek.

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