Question

2020 has been rough to world’s economy so far. NAFTA has turned to USMCA and BREXIT happened at the turn of the decade. J. Bolsonaro a conservative figure has come to power in Brazil and Parliament in Ottawa has seen more seats slipped away from the Liberals towards the conservatives. All of these actions have the common ground for nationalism and isolation right at the time we need unity more than ever to fight the man made disasters such as climate change, pollution, and the pandemic. Nations separating from each other and running for their own good regardless of the overall goodwill of the international community. Discuss how these actions and behaviours can cause havoc in international scale and what will be the aftermaths of such actions.

Answer 1

These actions and behaviours will cause reduction in free trade and, new employment opportunities will reduce. For example most of the countries output was being driven by exports and remittances received from abroad. But now, as exports decline, countries such as US, Germany those have huge industrial capacities, these capacities will go unutilised because exports have declined. Because of this the economic growth might decline and countries will have limited capacity utilisation which will lead to less output and lower chances of growth picking up, this capacity has been sought by seeking greater debt, ability to pay such debt reduces and government's have to ultimately rescue such firms, which leads to greater government expenditure.

People will start consuming locally produced goods and this will lead to less economies of scale, as the country which had economies of scale would have been able to export it at a cheaper price, wherein the world economy would have benefited. This will lead to less migration which would lead to decreased labour productivity as migrating population could have increased per unit output because of their skill. This eventually leads to reduced output generation and countries earning less on account of this.

With ever increasing population, decline in output would lead to reduced per capita income and more people being unemployed. This will lead to more regional disparity and national concerns moving away from climate change, pollution to decline in the standard of living.