Global economy – definition and meaning

The global economy is the world economy or the worldwide economy.

It is all the economies of the world which we consider together as one economic system. Put simply; it is one giant entity. It is also the system of trade and industry across the world that has emerged due to globalization. In other words, the way in which countries’ economies have been developing to operate collectively as one system.

The term has two meanings:

  1. The economy of the whole planet, i.e., global GDP. GDP stands for Gross Domestic Product.
  2. The way the world is today, with countries’ economies so intertwined and interdependent that they all seem like parts of one whole. That ‘whole’ we call the ‘global economy.’

When we say ‘We live in a global economy,’ we are describing how intertwined countries’ economies currently are.

According to BusinessDictionary.com, the global economy is:

“Worldwide economic activity between various countries that are considered intertwined and thus can affect other countries negatively or positively.”

Global economy - definition and examples
There is a growing movement today against globalization from both sides of the political spectrum. Many people in the advanced economies say that the current global economy keeps their wages low.

Global economy – the economy of the world

The global economy or world economy is the economy of the world. Some people say the two terms do not have exactly the same meaning.

  • We measure the global economy separately from national economies.
  • The world economy is simply an aggregate of all the separate countries’ measurements.

However, this is a very loose difference, i.e., many people use both terms interchangeably.

We live in a global economy

When people use that phrase what exactly do they mean? Does it mean that any economic activity today occurs across the planet whereas before it did not? Does it mean that all economic activities occur at a significantly faster pace than they used to?

Are we saying that our society has changed so much that one country cannot separate itself from other nations anymore?

According to David, W. Cooney, editor of Practical Distributism, the answer to all the questions above is ‘no.’

Cooney writes:

“I submit that the global economy is really nothing more than the fact that the banking industry and some very large companies have expanded to the point where they don’t really have any national loyalty.”

Banks, Cooney claims, hold no national allegiance because their only interest anywhere is to make a profit.

Giant multinational corporations claim to have nationalities. However, their operations are global, and their national claims are hollow. They national allegiance forms part of a marketing strategy in their home countries. Multinational corporations are companies that have businesses, staff, and premises in several countries.

Multinational companies love free trade agreements, Cooney adds. They love them because they can then fire expensive workers in their home country and replace them with cheaper workers elsewhere.

As more and more companies sell beyond their borders, the need for effective global marketing has increased significantly. Global marketing refers to planning, producing or creating, placing, and promoting a company’s products or services in the worldwide market.

Video – The Global Economy

This Financial Times video talks about the economies of several countries and regions. It begins by comparing the US economy with those of the BRIC countries, i.e., Brazil, Russia, India, and China.

The meaning of ‘Global Economy’ in this video is different from the examples in the article above. In this video, the term refers to how economies compare internationally.