Stabilizing Economics: Minimizing the Effects of Global Challenges

Economics is primarily a science based on statistics and their interpretations. However, economic theory does not always align with concrete facts due to its susceptibility to human behavior and psychology. The global economic outlook has been rather pessimistic over the past few years, owing to events such as trade wars among major economic powers and conflicts between nations, all of which have led to the breaking of the supply chain and a decline in the production of raw materials. As prices experienced an upward trajectory, there was a concomitant increase in inflation. These incidents have caused unexpected market fluctuations that obscure people's prospects, fostering pessimism. The Russian-Ukrainian War serves as a clear example, illustrating the tangible impact of economic challenges on a global scale.

The Russian-Ukrainian dispute led to a full-scale Russian invasion of Ukraine in February 2022, regressing the global economy due to Moscow's threat to cut off fossil fuel flow to Europe because they supported Ukraine. This event provoked reciprocal sanctions and embargoes between European countries and Russia. As a result, oil prices significantly increased in a short amount of time, which created a shock for European countries. The closing price of crude oil in U.S. dollars per barrel soared roughly 28.5% on average after two weeks of the official Ukraine invasion (Statista Research Department, 2023). On a separate occasion, the chip war between the U.S. and China broke out in 2015 when the U.S. restricted chips for the first time and extended those restrictions twice in 2021 and 2022, straining the relationship between the two nations. The U.S. has said the chip export restrictions aimed to stop China from obtaining technology that could have military uses. (Kharpal, 2023). These incidents show how a country's independent interests can shift the world's financial balance.

Global economic insurance is essential to prevent fluctuations and remove obstacles to a country's growth. Otherwise, countries may have to deal with unpleasant situations. A future global consortium involving all countries, similar to the United Nations, must ensure the supply chain of essential goods in foreign trade, such as grains, fossil fuels, minerals, and metals. By working with all consortium members, this constitution must ensure some degree of sustainability of trade worldwide without being adversely affected by global crises. Since this institution opposes exploitation, resource regions will become independent from the countries they are located in and will be managed by the consortium, ensuring supply continuity for all countries. This would also help protect the financial independence of countries, as they would not have a loss of income due to potential conflicts between nations, preventing the malicious usage of power.

Unwanted and unexpected situations may occur in global or local economics at any time. They always pose a threat to long-term optimism in the field. However, the constitution of such a consortium may help the world stabilize international economic conditions and alleviate the negative consequences of global challenges. World trade should be protected from the effects of such arbitrary affairs in the future in order to create an optimistic outlook.

Bibliography

Ghoshal, A. (2023) China bans export of metals needed for semiconductors amid US-china chip war, Computerworld. Available at:

https://www.computerworld.com/article/3701457/china-bans-export-of-metals-needed-for-semiconductors-amid-us-china-chip-war.html#:~:text=The%20US%20first%20imposed%20restrictions,restrictions%20were%20introduced%20in%20December (Accessed: 28 September 2023).

Kharpal, A. (2023) Nvidia warns more semiconductor curbs will end U.S. chipmakers’ ability to compete in China, CNBC. Available at: https://www.cnbc.com/2023/08/24/nvidia-says-ai-chip-export-curbs-to-china-will-hit-us-chipmakers.html# (Accessed: 28 September 2023).

Statista Research Department (2023) Crude Oil Price Chart 2023, Statista. Available at: https://www.statista.com/statistics/326017/weekly-crude-oil-prices/ (Accessed: 23 September 2023).