How Services Shaped the World Economy That We Know Today
Published: February 10, 2020
As global citizens, we are affected by the shift and movement of one another. There could be a phenomenon that’s happening on the other side of the world, and we can still be affected by it. Similarly, this could happen in an economic aspect as well.
One example of this is the 2008 global financial crisis wherein the deregulation of banks caused a major upset in the finances of both developed and developing nations alike. Due to that crisis, our world economy was deeply affected.
Simply put, the World Economy is the economy of all the humans in the world. And what makes this effective is the exchange of goods and services across the different nations of the world. There are several indicators to measure a country’s economy which are as follows: employment, industries, energy, trade, communications, transport, and military.
According to the International Monetary Fund (IMF), there was a slow pace of growth last 2019, but the global economy is projected to have a reasonable increase this 2020. Furthermore, trade barriers and business sentiments are a few of the challenges in which the global economy faces, however, services are here to strengthen and reform global alliances.
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The Services Economy
A large part of our lives is driven by services. Services are responsible for how we eat, how we buy things, and even the mundane transactions we do. With our need for services in our daily lives, it became possible for a services economy to be created. As a result, the demand allowed for an exchange of services on a global scale.
For a country to have a service economy, the services should generate more value other than sectors like manufacturing and agriculture. This development is similar to the 19th century movement wherein the manufacturing economy surpassed the agricultural economy. Nowadays, the service movement is catching up with the goods economy and that could be positive news among developing nations. Even developing nations that have a strong agricultural background can have the potential to become a developed nation despite the lack of presence of the manufacturing industry.
The Role of Outsourcing in the Economy
Outsourcing as a service plays a huge role in the global economy. In fact, it’s beneficial to both the service provider and the client. Locally, the host country’s economy increases every time a foreign country contracts an outsourcing service. As for the foreign outsourcer, there’s this connotation that the nationals are losing their jobs over outsourcing. However last 2016, in the US, only 1% of all the jobs lost were lost due to outsourcing. And the rest were lost mainly because businesses closed due to high operating costs. Through outsourcing, more jobs can be created to focus on core aspects of the business since outsourcing non-core operations save a ton of overhead and transform fixed costs into variable costs. Moreover, outsourcing is a two-way street where emerging nations and established nations meet to trade productivity.
The world is indeed shaped by services. Be it simple or complex, all countries are affected by the need for services alike. In the end, it’s up to us to use services as an efficient tool for the betterment of the nation we are representing and for the global economy.