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Mechanisms to Ensure the Economy of the Future in the Context of the Global Change

11/06/2023| By
Roman Roman Kuzma
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Abstract

The article examines the economy mechanism concept and basic principles. The problems and prospects for the implementation of the new technologies in global economy are identified. The mentioned research in this article is based on relevant scientific papers. Based on the analyzed sources, current trends are studied. That analysis allowed to forecast the directions of the future economy’s development.

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Mechanisms to Ensure the Economy of the Future in the Context of the Global Change

Roman Kuzma

Abstract: The article examines the economy mechanism concept and basic principles. The problems and prospects for the implementation of the new technologies in global economy are identified. The mentioned research in this article is based on relevant scientific papers. Based on the analyzed sources, current trends are studied. That analysis allowed to forecast the directions of the future economy’s development.

Keywords: global economic mechanism, population growth, global warming

Introduction

Newest technologies are driving society’s further development. Post-industrial society in the globalization era comes through continuous changes. The new opportunities for progress are emerging as well as the new threats.

Research Problem

The definition and study of the economy mechanism concept occupies an important place in modern global economic science. The trends of the global economy’s development are very important and the forecast of such a process has become a topic for many scientific papers.

Research Focus

The purpose of the study is to analyze the trends in the development of the global economy in the long-term perspective.

Research Aim and Research Questions

The subject of the study is to define the main problems of the global economy and the ways to overcome the challenges/

Research Methodology

The methodological basis of the study is the general dialectical method of cognition and the general and private scientific methods based on it, as well as logical means of cognition: analysis, synthesis, induction, and deduction.

Research Results

The term "economic mechanism" is a relatively new phenomenon, it has evolved over the past 50 years. Nowadays economic mechanism is considered as a set of ways of management and interaction of subjects, the target function of which is rational economic management and formation of stable regularities in economic development. The concepts of "economic mechanism", "economic institute" and "economic law" are interrelated, forming an integral logical chain [3].

Nevertheless, in today's globalized environment, we have to talk about the global economic mechanism (GEM).

Post-industrial society, which began to take shape in the second half of the twentieth century (and up to the present day) can be most clearly characterized by the following elements: intellectual capital, knowledge, and innovation are driving social production. Automation, robotisation, and digitalization dominate in all industries [10].

The most promising technologies to transform the GEM are believed to be the so-called SMART technologies: industrial engineering and process automation, robotics, data processing and storage systems, blockchain, artificial intelligence, virtual and augmented reality, cloud technologies, content marketing, dispatch control and data collection [11].

A three-dimensional development system based on the SMART concept Components-Characteristics-Economy is expected to maximize the use of competitive advantages of each particular economic region for the overall economic development of the country. Improving the standard of living of the population by increasing the results of economic activity is considered to be the main aim. Implementation of technologies and innovations in the development of society, in particular, in the field of training, professional development of the workforce, raising public awareness, and increasing the share of people who keep pace with technological progress. Taking into account the environmental consequences of decision-making and the impact of these decisions on the environment in the long term [12].

The negative impact of modern industry on the environment, and its consequences, is one of the greatest threats to the global economy, especially in the long term. Destruction of primary tropical forests, the world’s most biologically diverse ecosystems, released 2.64 billion tons of carbon, an amount equivalent to the annual emissions of 570 million cars. The planet lost an area of tree cover larger than the United Kingdom in 2020, including more than 4.2 million hectares of primary tropical forests, according to data released today by the University of Maryland. Brazil (1.7 million hectares of primary forest loss), Democratic Republic of the Congo (DRC) (490,000 ha), and Bolivia (277,000 ha) topped the list [4].

The greenhouse effect, as an inevitable consequence of the emission of carbon dioxide into the atmosphere and the simultaneous deforestation, is the cause of global warming, which carries the germ of a global ecological – and economic – catastrophe.

The severity of heatwave and drought impacts on crop production roughly tripled, from losses of 2.2 percent between 1964 and 1990 to 7.3 percent from 1991 to 2015. Overall, European crop yields still increased in the period, by almost 150 percent between 1964-1990 and 1991-2015 [5].

Table 1 shows the accumulated emission of carbon dioxide into the atmosphere from 1900 to 2050 (forecast) in gigatons and the associated warming in degrees Celsius compared to 1850 [6].

Another problem is the world's population growth. The simultaneous aging of the population, resulting in higher living standards, poses a threat to the economy. In 2022, the world's population reached 8 billion and continues to grow as does life expectancy, which has reached 72.8 years. By 2050 these numbers should reach 9.7 billion people and 77.2 years, respectively [7].

Table 1

Year \(\mathbf{CO}_{\mathbf{2}}\) \[\mathbf{℃}\]
1900 200 1.25
1950 700 0.3
2000 1700 0.8
2020 2450 1.1
2030 2900 1.4
2050 4350 2.15

Figure 1 shows the indicators and prospects for population growth, life expectancy, accumulated carbon dioxide emissions, and increase in the Earth's surface temperature.

Figure 1

A hallmark of globalization is the increase in trade among emerging markets. In 1990, 60% of trade was between high-income countries, 34% was between high-income countries and emerging markets, and only 6% was between emerging markets. In 2012, the ratios were 31%, 45%, and 24%, respectively. In East Asia and the Pacific, the share of the population with incomes of $1.25 a day or less, dropped from 77% in 1981 to 14% in 2008. Meanwhile, the share of the population living in extreme poverty in sub-Saharan Africa was practically unchanged at 51% and 49%, respectively.

In 1990, high-income countries accounted for 70% of world GDP, with the European Union accounting for 28% and the United States 25%. By 2019, the share of high-income countries was projected to decline to 46%, China's share from 3% to 18%, and India's share from 3% to 7%, while China's GDP per capita relative to the U.S. was projected to fall from 2% in 1980 to 24% in 2019 [1].

Discussion

Technology, especially communication technology, is and will continue to be the basis for integration.

Globalization, which preceded World War I (and to some extent caused it) is mentioned as one of the risks; the same threat is evident in today's world [1].

In 2023, these gloomy predictions have partly materialized; a survey of leading economists indicates that in the short term (the next 3 years) they believe that deepening geoeconomic rivalries and tensions are more than likely, and highly unlikely, the emergence of disruptive technology or a general increase in global economic activity [8]. This may cause the crisis of the existing system of economic relations and productive forces. This crisis is caused by the emergence of a new type of productive forces, which is still in its infancy and is based on the latest, including promising, technology. The growth of the Earth's population, the welfare of densely populated regions, the gradual aging of the population and global warming, which is only the most visible manifestation of the ecological crisis - all these phenomena are a threat to the existing system of trade and economic relations.

In such circumstances is not excluded the growth of state influence on the economy, which may manifest itself in the following forms: structural policy, indicative planning, fiscal policy, monetary policy, price regulation of the economy, anti-monopoly policy [2].

One cannot also deny the possibility of the collapse of the modern global market, the shutdown of the GEM, and the large-scale armed conflicts associated with it.

In the inevitable crisis of today's GEM, the following technologies are key to its transformation:

a) the revolution in information and communications technologies;

b) the materials revolution;

c) biotechnology, including agricultural;

d) new fuels;

e) nanotechnology [9].

Conclusions

  1. Global economic mechanism is a set of ways of management and interaction of subjects, the target function of which is rational economic management and formation of stable regularities in global economic development.

  2. Today's global economic mechanism is in crisis, driven by the growth of population number, life expectancy, living standards – and the impact of industry on the environment.

  3. The emergence of a new science and technology-driven global economic mechanism will be associated with the disintegration of the current one into regional economic mechanisms and their competition, which may manifest itself in armed conflicts on an appropriate scale.

  4. The development of key technologies (the revolution in information and communications technologies, the materials revolution, biotechnology, including agricultural, new fuels, nanotechnology) can mitigate the progress of the global economic mechanism crisis.

References

[1] Imf.org. [Online]. Available: https://www.imf.org/external/russian/pubs/ft/fandd/2014/09/pdf/wolf.pdf. [Accessed: 10-Jun-2023].
[2] Osvita.ua. [Online]. Available: https://ru.osvita.ua/vnz/reports/gov_reg/18587/. [Accessed: 10-Jun-2023].
[3] “Экономический механизм: определение, классификация и применение,” Cyberleninka.ru. [Online]. Available: https://cyberleninka.ru/article/n/ekonomicheskiy-mehanizm-opredelenie-klassifikatsiya-i-primenenie/viewer. [Accessed: 10-Jun-2023].
[4] R. Butler, “Global forest loss increased in 2020,” Mongabay Environmental News, 31-Mar-2021. [Online]. Available: https://news.mongabay.com/2021/03/global-forest-loss-increases-in-2020-but-pandemics-impact-unclear/. [Accessed: 10-Jun-2023].
[5] A. Bottollier-Depois, “Europe’s heat and drought crop losses tripled in 50 years: study,” Phys.org, 01-Apr-2021. [Online]. Available: https://phys.org/news/2021-04-europe-drought-crop-losses-tripled.html. [Accessed: 10-Jun-2023].
[6] “Climate change 2021: The physical science basis,” Ipcc.ch. [Online]. Available: https://www.ipcc.ch/report/ar6/wg1/. [Accessed: 10-Jun-2023].
[7] United Nations Department for Economic and Social Affairs, World population prospects 2022: Summary of results. New York, NY: United Nations, 2023.
[8] “Chief Economists Outlook: May 2023,” World Economic Forum. [Online]. Available: https://www.weforum.org/reports/chief-economists-outlook-may-2023?gclid=CjwKCAjwm4ukBhAuEiwA0zQxk147kl3k3tLoPajbfjMBMjUevQ-rEpqZ_LUEvDv2700VLf8pHfOaDxoC6oIQAvD_BwE. [Accessed: 10-Jun-2023].
[9] Oecd.org. [Online]. Available: https://www.oecd.org/futures/35394025.pdf. [Accessed: 10-Jun-2023].
[10] V. Yemelyanov and L. Kozlova, “Особливості реалізації концепції SMART-спеціалізації в Україні,” Pub. Adm. and Reg. Dev., no. 6, pp. 777–801, 2020.
[11] M. Sychevskiy, L. Deineko, O. Kushnirenko, O. Tsyplitska, and O. Deineko, “Implementation of smart specialisation for regional industrial development,” in Proceedings of the III International Scientific Congress Society of Ambient Intelligence 2020 (ISC-SAI 2020), 2020.
[12] О. І. Васильєва and Н. В. Васильєва, “Концептуальні засади впровадження SMART-технологій сталого розвитку територіальних громад,” Інвестиції: практика та досвід, no. 7, pp. 86–89, 2018.
Submitted by11 Jun 2023
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