How The Economic Machine Works

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The global economy has changed significantly over the past few decades, in the way that it is organised and governed by collaborating nations. These changes have repercussions that not only affect the flow of goods and services between countries, but also the movement of people. As we've seen on occasions over the last century, too great a fluctuations in this international economic system can lead to a global economic crisis. 

Many people think that the global economy is controlled by governments of the largest economies in the world, but this is a common misconception. Although governments do hold power over countries economies, it is the big banks and large corporations that control and essentially fund these governments. This means that the global economy is dominated by large financial institutions. 

According to the world economic news, US banks participate in many traditional government business like power production, oil refining and distribution, and also the operating of public assets such as airport and train stations. This was proven when certain members of the US Congress sent a letter to the Federal Reserver Chairman Ben Bernake. Here’s an excerpt from the letter:

“Here are a few examples. Morgan Stanley imported 4 million barrels of oil and petroleum products into the United States in June, 2012. Goldman Sachs stores aluminium in vast warehouses in Detroit as well as serving as a commodities derivatives dealer. This “bank” is also expanding into the ownership and operation of airports, toll roads, and ports. JP Morgan markets electricity in California.

In other words, Goldman Sachs, JP Morgan and Morgan Stanley are no longer just banks – they have effectively become oil companies, port and airport operators, commodities dealers, and electric utilities as well.”

The functioning of the global economy can be explained through one word —transactions. International transactions taking place between top economies in the world help in the continuance of the global economy. These transactions mainly comprise trade taking place between different countries. International trade includes the exchange of a variety of products between countries. It ranges all the way from fruits and foods, to natural oil and weapons. Such transactions have a number of benefits including:

Providing a foundation for worldwide economic growth, with the international economy set to grow by 4% in 2019 (source: World Trade Organisation);
Encouraging competitiveness between countries in various markets;
Raising productivity and efficiency across countries;
Helping in the development of underdeveloped countries by allowing them to import capital goods (machinery and industrial raw materials) and export primary goods (natural resources and raw materials).