The status of world economies varies from country to country. Rich nations normally enjoy a flourishing economy whereas poorer nations have to survive trying to meet their basic needs. Recession has no doubt made a dent on the economy of the rich nations as well, but under normal conditions well-to-do countries, such as the US, enjoy a higher standard of living as compared to developing or under-developed countries.
What’s the world economy scenario?
The world economy grew by about 5.2% in 2007 – China (11%), Russia (8%), India (9%). Situation appeared quite good for the world economy at the beginning of 2007. Of course, the global economy also was faced with the risk of stagflation of the 1970s style.
At the beginning of 1970s, the emerging global markets of China, Russia, India and Brazil (the BRIC countries) had been showing a growth rate of 7%to 10% for several years. The property as well as stock market booms had brought much prosperity to North America and Europe. In the Middle East as well as Africa much investments were on and Japan was also recovering from its deflationary phase.
Under developed and developing countries depended upon the well-being of the developed nations. Now Asian countries such as China and India are also trying to make it on their own steam. No doubt, their large population is holding them back from progressing well.
How recession affects the global economy?
The present recession has left both the developed and developing countries in the lurch. The US, otherwise a prosperous nation, is facing a financial crisis with rampant unemployment. Federal funds are being diverted to rescue banks and companies suffering from heavy losses. This has not been appreciated by taxpayers at all.
The recession in the US has also affected other world economies, particularly, developing ones, such as, India. Here also, banks are not supplying loans to investors, thus affecting investment. Unemployment is very high. People have just been laid off or are settling for lesser salaries.
Mortgage holders in the US are facing serious financial crunch and are faced with negative equity.
Rise in prices
Inflation has affected many economies. Oil prices have gone up and the prices of essential commodities have also gone up. The developing economies are definitely finding it difficult to feed their millions. Rice and food grain have doubled between 2007 and 2008.
Now In India, the rains have failed this year, thus adding fuel to the fire. The farmers are facing acute water shortage and are unable grow their crops. Naturally, the prices of food commodities have shot up. Many live below the poverty level and are unable to have a square meal a day. Such setbacks affect their living standards further, which happen to be very pathetic.
Rise in unemployment
Presently due to the recession even the developed countries are facing unemployment. Developing economies have always faced unemployment due to their over population and lack of proper technology to tap the natural resources to their maximum.
Stagflation refers to a condition whereby inflation coexists with economic stagnation. There are less growth opportunities. Prices continue to increase with less supply of commodities. The present era, according to economists is a stagflation era. The 1970s faced such situation.
Demand has been on the increase and one is concerned whether the earth’s resources are reaching a state of depletion. The view held is that more investments must be made in renewable energy in order to avert stagflation.
Rich nations are getting richer whereas the poorer nations are suffering from excessive malnutrition and poverty. World bodies are trying to help these poorer nations financially, yet the problem does not get resolved. War, internal strife and extremist activities are keeping nations apart. A global world is yet to emerge. The white racial superiority still persists, although US President Obama’s election indicates that there is a growing trend towards anti-racism.
The world is faced with an economic crisis now. It is better to realize that one must conserve the natural resources and avoid extravagant expenditure. The gap between the rich and the poor nations must be bridged. Unnecessary spending should be avoided. Yet recession is a temporary phase. Once it is over people will return to their normal spending habits.