Some Aspects of the Transformation of the World Economy and the Risks To Its Future Dynamics

The transformation of the world economy over the past two decades has been manifesting itself in various forms. On the one hand, there is an increasing interdependence of the world economy, which is a manifestation of the depth of the globalization process, mainly thanks to the expansion of information and communication technologies and the greater degree of the liberalization of the world economy. On the other hand, there is an increasing scale of contagion effects, where a crisis in one country or region is transmitted to the rest of the world quickly. The transformation of the world economy is also reflected in the growing influence of emerging economies both in terms of their global trade shares and their contributions to global economic growth. Despite a favorable growth dynamics over the past years, the current situation and the short-term outlook of the world economy are indeed gloomy. The multiple crises, which include oil, food and external imbalances, have led most of the advanced economies to converge to a recession. The current global slowdown is also accompanied by policy dilemmas as governments in the vast majority of countries have been scrambling to come up with the right economic incentive schemes to avert a protracted recession. Nonetheless, unlike previous crises, where countries used to choose policies unilaterally (including protectionist policies), now the world seems to favor coordination as opposed to protectionism, as the latter would mean the termination of the globalization process.