Friday, February 09, 2007

The new global uncertainties:Defining globalization frontier(II)

The key question is why such global uncertainties do not affect global economy growth, or why defining globalization frontier does not affect either global growth , even though it seems that the global politics is currently not well connected with global economy .
Although It is hard to find answers to these questions I will try some of them :
a.- There is a trustable global trade institution ,capable of dealing with tough issues such as protectionism ,agricultural subsidies and unfair trade practices, such that global free trade will be applied sooner or later ,all over different kind of products .
b.- There is strong perception that capital flows are free from restriction, around the emerging markets economy .At the same time, the most important financial places count with a new currency (the euro),such that the portfolio diversification allow for greater investment opportunities and higher investment volumes. This higher investment level, push upward global economic growth prospect.-
c.- There are new players (China and India),on key productive and services sectors on the global economy, capable of maintaining its growth leadership at least for the five years to come,(average economic growth above 6,5 %)
d.- There is transition going on from an oil resource based economy, to a knowledge based economy, which can sustain economic growth while oil prices are above historical levels.-
e.- The eurozone is moving ahead to be the dynamic partner global economy needs, which means global economy growth (new players included)opportunities ,are somehow rotating from the US based industrialized economy type of growth .-
If all of the previous factors apply ,it follows that global uncertainties are not economics one by nature , but rather political and geopolitical . Thus the interesting thing, is that almost nobody doubt about free market global economy model as a viable alternative to induce global growth ,which by itself move growth expectation and investment upward . Sure, this could be considered to be the right interpretation of recent economic history But is it enough?. After all we have the challenge of global warming, which might also affect economic growth like a new constraint .
A second line of reasoning might goes this way: There is a lot of global endogenous factors arising from the greater availability of global information throughout internet, and global news media . Higher level of business opportunities information ,specially market trend information, make possible to take business decisions with a better risk scenario analysis, which may compensate all the other variables still unsolved .In other words, the five factors previously mentioned have created a set of special condition, such that creativity and innovation forces might goes on their own ,no matter the political and geopolitical implications of current state of affairs .-
The implications of this line of reasoning would be that we have global economic growth despite new global uncertainties, no just because of the new big players coming in, but because of more information available to detect business opportunities in such way that it would not have been possible without internet, fostering global endogenous variables to take an active role to explain global economic growth. It seems that there is a combination of exogenous and endogenous variables, which can explain global economic growth even with the new global uncertainties. Does it implicate that it does not matter how the new global uncertainties are solved ?. Quite on the contrary, it means that the implication of such global growth is still unknown , the dynamic of growth is one thing, the direction is another ,beacuse the is no global frontier defined yet ,therefore this is the challenge to cope with.-

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