The past several years have seen economic upheaval around the globe. While some of the major contributing factors were unpredictable, others have been looming on the horizon since the Industrial Revolution. Regardless, they have left us with some of the biggest economic challenges the world faces today.
1. Climate Change
Rising temperatures pose a major threat to the prosperity of our global economy, not to mention our planet’s entire diverse and delicate ecosystem. Increasingly frequent and destructive natural disasters in the Indo-Pacific region alone account for more than $100 billion annually in related costs, according to the APEC Regional Trends Analysis. Meanwhile, the Organisation for Economic Co-operation and Development (OECD) reports that air pollution accounts for non-market costs in the trillions annually due to increased health expenditures and agricultural yield and labor losses.
Dominic Ng, 2023 Chair of the Asia-Pacific Economic Cooperation Business Advisory Council, has led the group in developing policy recommendations that consider potential climate change implications in economic growth plans. Such recommendations include supporting market-based policies, trade in environmental goods and services and renewable energy, and initiatives that leverage private sector capital, ingenuity, and leadership.
2. Supply Chain Disruptions
Included in the development of sustainable infrastructure is a revamped supply chain system. Supply chain disruptions of this decade have wreaked havoc on the global economy, arguably paying its largest toll on the value of the dollar. While the pandemic brought production and transportation to a screeching halt, it didn’t have the same effect on demand. Skyrocketing inflation has pinched the pockets of everyone, from grocery shoppers to manufacturers in the U.S. and abroad.
Now, years after the initial shutdown, supply still hasn’t caught up to meet demand. With prices on the rise across verticals, inflation has tightened both consumers’ and businesses’ grips on their wallets. While the initial cause of such disruptions has largely subsided, business leaders will need to focus their energy on designing systems that can buffer against similar crises in the future.
From improved safety protocols of domestic businesses to the facilitation of open international trade, elevating supply chain resistance should be a top priority in guarding against future economic instability
3. Stunted International Trade
International trade is one of four major contributors to GDP, according to Eric Van Nostrand, acting assistant secretary for economic policy for the U.S. Treasury. It sits alongside private final domestic purchases (PDFP), government consumption and investment, and the change in private inventories as one of the major points economists monitor to gauge and predict economic health.
Amidst the COVID-19 shutdowns and the domino effect they’ve continued to have on business supply chains, it’s no surprise that both imports and exports have been dropping dramatically. Increasing international imports and exports is a crucial opportunity to accelerate global growth.
While increased imports provide both businesses and consumers with less costly goods — and therefore help slow or reverse inflation and improve overall quality of life — it also means nations exporting goods enjoy an uptick in production and capital. The impact increased trade can have on the global economy shouldn’t be overlooked and is the reason APEC has made advancing a fair, open, and inclusive trade architecture one of its primary goals in its efforts to revitalize the global economy.
The Path Forward
With many challenges facing the global economy today, it’s up to the business leaders of the world to come together to develop and execute strategies to reshape the physical, sociopolitical, and economic landscape of the coming decades. Between investing in the talent and technologies that can reverse the environmental crisis, building business solutions that can buffer against future supply chain disruptions, and backing policies that promote open and fair international trade, U.S. policymakers and business leaders have the power to reinstate economic vitality across borders by coming together to build stronger, inclusive, and interconnected economies.