Question

The retreat of the advanced economies from the global economy – and, in the case of the UK, from regional trading arrangements – has received a lot of attention lately. At a time when the global economy’s underlying structures are under strain, this could have far-reaching consequences.

Whether by choice or necessity, the vast majority of the world’s economies are part of a multilateral system that gives their counterparts in the advanced world – especially the US and Europe – enormous privileges. Three stand out.

First, because they issue the world’s main reserve currencies, the advanced economies get to exchange bits of paper that they printed for goods and services produced by others. Second, for most global investors, these economies’ bonds are a quasi-automatic component of portfolio allocations, so their governments’ budget deficits are financed in part by other countries’ savings.

The advanced economies’ final key advantage is voting power and representation. They command either veto power or a blocking minority in the Bretton Woods institutions (the International Monetary Fund and the World Bank), which gives them a disproportionate influence on the rules and practices that govern the international economic and monetary system. And, given their historical dominance of these organizations, their nationals are de facto assured the top positions.

These privileges don’t come for free – at least they shouldn’t. In exchange, the advanced economies are supposed to fulfill certain responsibilities that help ensure the system’s functioning and stability. But recent developments have cast doubts on whether the advanced economies are able to hold up their end of this bargain.

Answer the following question?

What is the article all about? Why retreating from globalization would destabilize the world economy?

Answer 1

The article is about the increasing the advanced or developed economies exiting multilateral trading aggrement such as UK ' Brexit" and USA pulling out of TIPP.

Retreating from globalization will destabilize the world economy for following reasons:

1) the currency of these advanced economies dominate the transactions occurring. In a sense the currency of these economies are the world currency. The retreat of such advanced economies from free trade agreement will lead to reduction in trade due to imposition of various regulations. This reducing the size of world economy and destabilizing it.

2) the financial market rules and regulations determine the stability of the world economy.. with countries retreatingvwill be majorly concerned about their own economics and not about the potential effect of their actions in the other economies.

3) The relationship between these countries and the institutions such as IMG or world bank may get impacted when trade in these countries fall.

4) Their relationship with the small countries are hampered and the trade pacts are done away with and trade regulations in terms of tariffs and quotas influence the size of world economy negatively by increasing disintegration between world economies.