Economics is an evolving subject. Issues which were once hotly debated gradually fade from view and become insignificant over time. In their place we get new issues rising to the surface. These are some of the important recent development in Economics:
Increased Importance of Globalisation.
Globalisation is a fuzzy term. In a way globalisation has always been with us. Economies have traded with each other for many centuries. Not since Japan in the nineteenth century has a country been able to successfully pursue 'autarky' - self sufficiency. What has changed in recent years is the scope of global integration. Ripples in markets are invariably felt throughout the world. Communication and transport have vastly improved; this has helped give the impression that the world is much smaller and more closely connected. The multinational company is more prevalent than ever before. Globalisation affects many aspects of economics from competition policy to Monetary policy and agricultural policy.
Shifting Balance of Global Economy
In the post war period, the US economy was dominant. The old phrase 'when America sneezes, the rest of the world catches a cold' was very much appropriate. But, America's share of global output and global resources is declining rapidly. In particular, it is the two sleeping giants - India and China who are coming to play an increasingly important role in the global economy. This means we can no longer consider global economics from an Anglo- American perspective. We need to study and evaluate the implications of China and India's development.
Pressure on Commodities.
The world is used to dealing with a situation of abundant supply of raw materials. But, diminishing supply and growing demand threatens to change that. Oil prices are rising, partly due to speculation, but, partly due to the fact demand is simply rising faster than supply. In the short term the price of oil may fall, but, also it may continue to rise. In the long term, the prices of commodities like food, oil and metals could rise much faster than inflation affecting many issues for both developed and developing economies.
The past decade has seen recognition that economic development is impacting the environment in a possibly devastating way. In the past, theories of global warming and ecology were seen as fringe topics. Now they are seen as the greatest threats facing society - even if at the moment, we are unable to take effective steps to deal with the problem. In the future, it will be increasingly necessary to deal with environmental change. This challenges fundamental ideas such as the goal of society is to increase GDP. Maybe the goal is not to increase output, but, only increase GDP if the environment is secured.
The recent credit crisis, shows how financial deregulation and globalisation has contributed to many new problems, which leave economies vulnerable to financial speculation.
See: Rogue Economics by Loretta Napoleoni