The global economy refers to the economy of the whole world in totality, involving the exchange of goods and services in the international arena. However, it is worth noting that the global economy also refers to the individual national economies that make the aggregate economy of the world collectively. The world economy is measured using various indicators such as the production capacity of a country, the level of usage or consumption of important raw materials as well as the level of expenditures between different departments of the organizations of any nation. Conversely, one of the most common factors that bind together and influence the trend of the global economy is the presence of human activities, which are related to economic activities. They may include aspects that deal with the control of the monetary terms that are spelled out when a country or international body is lending money to another country. Another important phenomenon that may affect the global economy is the process of evaluating goods and products when devising terms and conditions of international trade. There is a significant trade imbalance between developed countries and those categorized as developing. Normally, the industrial goods and products that the developed countries produce are given a higher economic value than the primary agricultural products, which are the backbone of the economy in the developing world. Therefore, such aspects skew the economies of the two respective types of countries. Apart from that, it is imperative to note that the contemporary surge in the rate of illegal goods and products entering the world market is another important factor that affects the global economy. Furthermore, this has given rise to the emergence of counterfeit goods and products in the market. As a result, the emergence of such market malpractices affects the global economy in negative ways.
Furthermore, the various incidences and aspects that affect the global economy have led to the emergence of theories and concepts that tend to explain their behavior. On the other hand, there are five main economic schools of thought that have emerged concerning the global economy that result from these incidences. All of them hold different but interlinked views and ideas about the occurrence of various economic phenomena across the world. They include the Marxist theory, the neoclassical theory, classical theory, the developmental theory, and the Keynesian theory. This paper will examine the book, “Economics: The User’s Guide” by Ha-Joon Chang, which expounds on most of these economic concepts. This book will act as an economic guide that can help to explain the various economic occurrences that take place in different countries. Therefore, this paper will discuss the various factors that affect the global economy. At this juncture, a closer economic research analysis study will be carried out in which the economic performance of specific countries will be evaluated. Finally, a photograph will be able to assist in giving a clear and vivid description of the manner in which various schools of economic thought are represented.
Concepts of Ha-Joon Chang Regarding Theories of Global Economy
Ha-Joon Chang developed several economic theories that assisted in revolutionizing the way people view the world economy. There are many controversial ideas that have been developed regarding the global economy (Chang, 2003). According to the author, international bodies like the World Bank and the International Monetary Fund play a great role in determining the global economy (Chang, 2003). The developed countries use their financial muscle to profit at the expense of the emerging or developing economies. For example, governments of the larger economies have the ability to assist their own economies by supporting the companies operating in their own countries (something that developing countries lack the financial means to do) even as they are the first to promote the concept of a free market. This was the key idea that he developed regarding the world economy (Chang, 2014).
According to Chang, there are several controversial issues surrounding popular world economic theories. The author does not regard economics as a science like a biology and physics. The many schools of thought that explain the global economic systems have their individual strengths and weaknesses. There are only three schools that explain the issue of the free market; namely neoclassical, Austrian and classical (Chang, 2014). The greatest challenge according to Chang is that the matters concerning economics have been left solely to the professionals and experts (Chang, 2014). It is therefore entirely possible to find people who are not professional economists who nonetheless have the ability to make sound judgments on matters regarding economics (Chang, 2014). There are diverse political and ethical underpinning every theory; a fact that makes it impossible to judge them objectively, unlike in scientific fields such as chemistry and physics, which provide clear cut answers.
Change also popularized the idea that there is no one right way of carrying out economic activities, especially in the fast-changing global world. According to the author, it is necessary to allow many economic theories to operate since they would give rise to diversity and different approaches to economic development. In this regard, he states, “we need to let 100 flowers bloom” and “have them cross-fertilize” (Chang, 2014). This means that if many economic theories and concepts are allowed to operate in the global world, people are likely to be better informed since each of the theories has its own strengths and weaknesses and can be assessed and used to solve economic challenges. There are no economic approaches that can be considered either better or worse than others (Chang, 2014). To be able to create innovative ideas and solutions, different economic theories need to be evaluated and blended together to aid in forming a superior approach (Dunning & Lundan, 2008). Chang advocates this approach by the fact that the world is full of complex issues.
Chang asserts that the possibility of cross-fertilization is very obvious and there have been very many attempts towards achieving the same and the results have been evident (Chang, 2014). There have been observable progress as a result of blending different economic theories and incorporating them into development activities.
On the other hand, Polanyi states that there is a significant and complex intertwining between economics and politics. From his viewpoint, Polanyi argues that the market is part of the broader economy, while the economy fits into the larger society (Polanyi, 2001). His argument about the market economy is that it is not an end in itself but a means towards greater fundamental ends. Also, the author, much like Chang, believes that international institutions like the World Bank have been instituted in order to deceive the developing nations. In Polanyi’s opinion, such international institutions are tools of the developed world. They purport to “empower the less developed nations with one hand and take it away through the other” (Polanyi, 2001).
According to Polanyi, in the free market, laissez-faire capitalism does not bring a balance for the required balanced economic growth through the global economy, especially as it relates to the developing countries. The author explains that this is because the less developed nations have remained poorer and far less secure compared to developed nations. The greatest challenge that is left is whether to achieve a balanced global economic growth so that the world can redress the existing imbalances (Polanyi, 2001). Polanyi, like Chang, also asserts that economists fail to admit that the market systems sometimes require the intervention of the government in order to prevent market failures. He does not believe the market system is able to self-equilibrate (Polanyi, 2001).
The Classical Theory
The classical theory refers to the tendency of an economic system to regulate itself. In this case, the system is capable of achieving a stable GDP in a self-regulatory manner. Here, such achievements can only be realized when economic resources are employed in an intensive manner (Helrich, 2012). Therefore, any alteration in the expected economic performance comes as a result of the variation of the market system and forces. The mechanism system is referred to as self-regulatory as the level of GDP is maintained at the equilibrium in a natural manner (Wolff & Resnick, 2012). The classical theory always states that the real economic level and performance is usually close to the real GDP (Helrich, 2012). Some of the forces that are believed to cause variations to the level of the GDP include the economic factors such as the variation in the prices of products, the wages, as well as increase or decrease in the rate of interest. The real GDP is controlled by the level of total income that is generated by a country. At this juncture, the economy of that country is deemed capable of supporting and fulfilling various demands raised by the firms and the workers that work on those firms. As a result, according to this idea, the rate of achieving real GDP occurs naturally (Helrich, 2012). The economy is seen as an overall entity that can be able to support the attainment of the real GDP.
Nonetheless, the process of achieving that level of GDP can be a difficult undertaking. First, there must be sufficient revenues that can be used to attain a certain level of GDP (Helrich, 2012). Therefore, one of the most important aspects that must be met before such attainment is realized is that a proper formula of balancing between the income spent and saved must graph out.
The chart in figure 1 is a simple representation of the classical school of economic thought. First, the S-curve represents the aggregate savings. It usually slopes upwards, giving a clear indication that the interest rate indirectly proportional to the rate of the country’s saving. Thus, this means that a country tends to focus on saving when the level of the interest rate rises. The I-curve represents the level of aggregate investment. The curve depicts a downward sloping effect. This means that the rate of investment is inversely proportional to the interest rate level. People and businesses are more likely to invest when low-interest rates prevail in the market. The low-interest rates mean that the borrowing cost is usually low, thus, enticing more organizations and individuals to borrow money for investment. On the other hand, it is imperative noting that a gap may emerge, especially when the total savings increase while the interest rates remain constant. As a result, the aggregate investment remains lower than the total amount of aggregate savings. Therefore, this leads to an imbalance especially with regard to the attainment of the real GDP level. Under normal circumstances, therefore, firms should borrow more money for investment purposes when the interest rates drop. As a result, the gap will be mended as the real GDP of that particular country will be maintained. On the other hand, the reverse scenario creates the opposite situation as the firms are discouraged from borrowing funds for investment. Instead, they tend to save what they already have for the unforeseen future.
Chang claims that the idea of the free market may not be applicable, especially in contemporary society because there are many issues that play a part in determining the nation’s economy and consequently, the global economy (Chang, 2014). Classical economic theorists hold the idea that the market forces of demand and supply are the ones that determine the GDP of a country; a factor that contributes towards the global economy. This is a premise that has been refuted by Chang. According to him, there are additional factors that determine the growth of the economy such as political factors that can foster or hinder the economic development of any country. Chang posits that it would be impossible to separate the politics of any country from economic development (Chang, 2014). Therefore, as far as there are market forces, there will also be factors such as the policies that are made and implemented by the governments and that will contribute to either generating or marring economic growth. Chang sees the influences of politics in economic growth as facts that cannot be denied. In his works, Chang attempts to correct the idea of what the “free market” means. Polanyi, on the other hand, believes that a truly free market does not exist because there are many political influences that shape the economy of any country or society (Polanyi, 2001). In addition, many economies require rules and regulations so that they can function properly (Polanyi, 2001). The greatest challenge that Chang sees within the concept of the free market is the notion of its perfect operation; an idea that he states would not be true in the society. This is because for the market forces to be effective, they require the influence of government policies. Ironically, some of the policies injected by the government to aid in economic growth turn out to work against the growth and in turn contribute towards slowing economic growth and prosperity (Dunning & Lundan, 2008). In the long run, these policies affect the general global economic growth.
From his analysis, Chang also holds the view that if several economic theories were to converge; they could be favorable if integrated together since they can work together. For instance, Marxists, Classical and Keynesians all subscribe to the notion of a class-based view of the economy.
The Neoclassical Theory
The neoclassical theory is an economic concept which determines the set of goods, income, and output distributions that can be found in the market. The market forces of supply, as well as demand, are highly imperative especially when determining the neoclassical theory. The neoclassical theory is highly dependent on the concept of the rationality of choices being made by the firm or an individual (Wolff & Resnick, 2012). The theory is also based on the process of hypothesizing utility maximization. Normally, some of the factors that are deemed significant entail the evaluation of the cost of production, as well as the information regarding the production factors (Wolff & Resnick, 2012). It is worth noting that the neoclassical theory is highly regarded among many contemporary economists.
Nonetheless, it also significant understanding there are three main assumptions that are usually held with regard to the neoclassical theory (Wolff & Resnick, 2012). First, there are differences in terms of the rational preferences that are held by individuals (Wolff & Resnick, 2012). At this juncture, such preferences are usually held whenever it comes to the determination of the outcomes, which can be identified, as well as the determination of the values that are associated with such outcomes. Secondly, another important assumption that is usually held is that there is an optimization of the rationality concept as well as the optimization of the profit realized by the firm (Wolff & Resnick, 2012). The third assumption concerns the behavioral aspect of individuals. Here, it is believed that individuals portray different and independent behavior whenever the relevant and full information is being exhibited.
As such, those assumptions have led to the development of a new concept called the “problem of economics.” This means that the employment of labor will lead to the maximization of the production utility (Steffen & Gore, 2008). However, it is important to understand that other assumptions exist as well. For instance, the concept of profit maximization plays a key role especially during the process of determining the “theory of the firm.” On the other hand, the demand curves derivation may be used to improve the market, as the understanding and marketing the consumer goods and products. On the other hand, the market supply, as well as the demand for products especially among the individual and firms are deemed to be aggregate. As a result, the interactions that exist between these market factors are important in determining the price and output of different products. Therefore, the equilibrium price, as well as the distribution of the income is necessary for determining the final output of the market. Furthermore, the movie will also be important in determining income distribution. Some of the factors that emerge as important factors, especially in the determination of the market output and demand of the firm’s products, include marginal productivity.
As a result, the neoclassical theory of economics focuses more on the need to observe the equilibria. In this context, the term equilibria refers to the various solutions offered by the agents that tend to maximize different problems. Here, other factors such as the market regularities, which control the economy of a country, provide an in-depth explanation of aspects such as the methodological individualism. In such a case, the occurrence of different economic phenomena tends to occur according to the mode of occurrence of different sets of agents’ behavior. Therefore, there is a lot of emphasis on the need to deal with various forces that affect the microeconomic aspect of a country. On the other hand, there is less stress on the importance of institutions that culminate in multiple behaviors of individuals. Apart from that, the theory also concentrates on determining the economic subjectivism as other important factors that may lead to different market behaviors as well as the economic output.
Chang states that the neoclassical school of thought has been one of the dominant theories in the field of economics. One of the strengths of this school of thought is the fact that it can provide scholars and other individuals interested in economics with the necessary tools to analyze challenges and problems related to global economics (Chang, 2014). It adds value to economics by making it possible to understand the problems of given structures (Chang, 2014). On the other hand, it has been argued as ineffective especially when attempting to understand how politics, ideas, institutions, and technologies, which define that structure, evolve over time. According to the neoclassical school of thought, politics and economics should be regarded as separate entities, a view that Chang does not hold. According to Chang, politics, and economics are inseparable. The author holds a similar view to that of Hayek, who saw politics and economics as working harmoniously.
Chang is critical of the neoclassical school of thought because he believes that it provides poor solutions to the kinds of challenges and problems that he has observed in the society (Chang, 2014). For instance, he is skeptical that neoclassical schools could be used to assist developing countries in industrializing and developing their economies. He was also interested in understanding the long-term working of dynamics and how new industries would be created while wiping out others (Steffen & Gore, 2008). He sees neoclassical economics as a weak school of thought mainly because it does not provide sufficient solutions that would be sufficient to provide solutions to the curiosity he held.
Marxist Theory of Economics
The Marxist theory is mainly used to determine various forces and trends, which affect the socio-economic activities within a country. The theory was developed by the German philosophers Fredrich Engels and Karl Marx (Bowman, 2007). The theory concentrates on the relationships that exist between different social classes and the levels of conflict that emerge between the two on a regular basis. The material interpretations and the development of the historical aspects are two factors that were emphasized during the development of the concept (Bowman, 2007). They are deemed to be highly important facets that lead to the social transformation of a community.
Some of the most significant economic aspects that were used especially during the description of the Marxist theory were the sociopolitical and the economic concepts. The Marxism theory is highly critical of the conflicts that arise as a result of the emergence of capitalism. On the other hand, it also tends to give an explanation of the many struggles that people from different classes face as a result of the changes in the economic systems. According to the Marxism theory, there is a surge in the rate of conflict especially due to the differences that exist between the societal classes. The two classes referenced are the bourgeoisie and the proletariat. The former is made up of the highly influential people who control the means of production. They use socialized and mechanized means of production to increase the overall productivity. This class is made up of the private owners who disproportionately benefit from the surplus profit that the proletariat class achieves when they are providing labor. The proletariat is responsible for providing cheap labor to boost total production. There are several ways in which the two social classes can be contrasted (Bowman, 2007). First, the bourgeoisie is depicted as the agents of impunity that have continued antagonizing the proletariat. According to the Marxist theory, the result is social unrest and even a full-fledged revolution of the proletariat. The move may lead to the establishment of the new economic concept, which is called socialism theory (Bowman, 2007).
Marxist theory advocates for the application of socialist concepts especially in the ownership of the production factors and equal distribution of resources based on every worker’s contribution (Bowman, 2007). Furthermore, the theory lays the groundwork for carrying out the process of creating organized production that is especially directed towards the utilization of such resources. However, the Marxist theory eventually evolved into a new form of a theory called communism. This advanced Marxist theory advocates for a stateless, classless society that is humane. Such a society is based on communal ownership of the production resources, as well as a society that is based on social justice.
The Marxist theory also focuses that the process of upholding the concept of humanism, which is important especially during the process of improving the economy. It is important to incorporate compassionate policies that focus on human dignity whenever a country is trying to advocate for more economic, as well as environmentally-friendly ideas.
Chang does not support the Marxist view of a utopian society and the concept of the value of labor. However, Chang also held the idea that the Marxist idea of capitalism can be varied in several ways (Chang, 2014). Many proponents of free-market economies are against limited liability companies. However, Marx saw the concept as an issue that would take capitalism to another level (Chang, 2014). In his view, Chang sees the evolution of labor regulation in Britain as one of the best examples of Marxist ideas 150 years after he developed the theory. On another side, Chang also perceives Marx as having known the interaction between the forces of production (technology) and the relations of production (institutions).
Developmentalism is an economic theory that holds that there is one major viable approach that the developing countries can use to advance themselves economically. The idea of the theory advocates for developing countries to foster varied and strong markets within the country. In addition, they should impose strong barriers to imported goods through mechanisms such as charging high tariffs on imported goods (Wiarda, 2010). The school of thought gives the idea that development is the key concept of economic prosperity (Wiarda, 2010). Developmentalism holds several tenets that make it an original idea. One of its basic tenets is that the government of any country can claim legitimacy through the successful management of its economy (Wiarda, 2010). Secondly, for a country to be able to advance its national interests, governments must be able to use their authority through both their entrepreneurial and governmental powers to increase the chances of developing their respective economies. Thirdly, in order to form strong and sustainable economic success, politics should be detached from economic activities (Wiarda, 2010). The separation is a key factor that contributes towards balancing the needs of the state and forming strong and sustainable economic ties. Furthermore, it is important for the nation’s government to utilize capitalist mechanisms to advance its national interests in the international arena (Chang, 2014). As previously mentioned, Chang disagrees that politics and economics can be detached from each other. Instead, he sees politics as important facets of economic issues of countries (Chang, 2014).
With reference to this theory, Chang believes that developing countries as having the ability to take the necessary tools required for them to attain development. Developing nations can create and at the same time participate actively in regulating political and economic relationships, which can ultimately be used to reach successful industrialization (Chang, 2014). This is an important concept that can be used to initiate development for less developed countries. The developing countries should focus on the activities that are likely to bring long term development, engage seriously on institutional innovation and adaptation that are likely to achieve these long-term goals (Chang, 2014). From Chang’s viewpoint, the developmentalists provide theories that are vital towards understanding the larger context of innovations on technology (Chang, 2014). He asserted that the developmentalists’ economic theory would be integrated with the Schumpeterian where the developmentalism would provide the theories that would assist in understanding the bigger picture of the technological inventions and innovations. On the other hand, the latter would be used in the provision of theories that would explain in detail the progress of technology.
Keynesian economic theory, developed by John Maynard Keynes, deals with government economic spending and the effects that such practices have on both the inflation and the output (Harcourt & Kriesler, 2013). According to Keynes, there are certain practices that can assist the government in dealing with global recessions and even pull the global economies out from depression (Harcourt & Kriesler, 2013). Some of the techniques that he advocated were lowering taxes to stimulate demand and increase expenditures by the government. The resulting impacts that Keynes’s ideas generated gave rise to the concept of “Keynesian Economics” (Harcourt & Kriesler, 2013). It refers to the concept of taking all possible measures to aid in the optimal performance of the economy through the intervention of government policies (McMichael, 2011). Keynesian economics looks at the short-term intervention strategies put in place by the government to aid and maximize its development. For example, the US was able to successfully recover economically in the aftermath of World War II through heavy spending. During the Kennedy and Johnson Administrations in the 1960s, several major Keynesian economic theories were applied in order to restore the economy and generate greater economic growth. Some of the government policies that were applied included major tax cuts in the year 1964. This contributed to major economic growth. As a result, the Keynesian economic principles were taken as more valid than the laissez-faire measures previously used by the US government.
Chang appreciates the fact that Keynesian economic theory has contributed immensely; more so when integrated with other theories such as behaviorist schools (Chang, 2014). A cross-fertilization of both theories, according to Chang, would give rise to rich ideas in the new field of behavioral finance (Chang, 2014).
Real-life Application of the Different Theories Mentioned Above and in different Countries’ Economics Scenarios
What are the Economic Dimensions of the Crisis in Syria?
The state of the Syrian economy serves as an ideal example that can be expounded based on different schools of thought as described throughout this paper. For instance, over 80% of the population of Syria lives in poverty (Wakim, 2012). Furthermore, around 20% of the total population lives in abject poverty (Wakim, 2012). This means that a small percentage of the Syrian population controls a huge percentage of the Syrian economy. This includes the ruling elite among the Syrian government. This is the principal reason the country continues to face the worst humanitarian crisis in recent times (AUC, 2015). The Syrian economic dimension can be expounded and explained based on different schools of economics (Wakim, 2012). First, the current turmoil can be explained by applying the Marxist theory. In this case, the ruling class of the Syrian government would represent the bourgeoisie group that has tended to hold the majority of the Syrian into a vicious cycle of poverty. As a result, the majority of the Syrians, proletariat, had been left to suffer from little to enjoy in terms of equitable distribution of national resources. The result is the current civil war that has sought to oust the Bashar Al Assad regime. The majority of Syrians would prefer a government that considers the interests of its citizens (Wakim, 2012). Some of the economic factors that have led to the culmination of the Syrian civil war include the widening of the income gap and the skewed nature of the government contracts. There is a high rate of nepotism and corruption, which tends to favor the few elites. The majority of the Syrian population is left to earn salaries that are too low to support them. It is imperative to note that the backbone of the Syrian economy is the crude oil sector, which generates enough revenue that could be equitably shared among all of its citizens in a manner that would meet the needs of the people. On the other hand, it is imperative to understand that the crisis in Syria can be analyzed on the basis of another economic school of thought. In this case, the neoclassical theory is applicable in the Syrian economy. It has been argued that outside forces, including the West and Russia, have been exacerbating the crisis in the country. For example, the Western powers have been funding the rebel groups while the Russian government continues to prop up the Assad regime, creating a never-ending cycle and paving way for ISIS. In any event, the economy of the country has continued underperforming with instances of stalling of some key sectors. Thus, this aspect can be elaborated on the basis of classical economic theory.
First, there is a strong correlation between the politics of the country and economic performance. In this case, the Assad regime holds absolute control over the economy as it is the main determinant of the overall performance. On the other hand, the GDP performance of the country defies the natural market forces of supply and demand. In short, it tends to be highly dependent on the external forces that mainly end up affecting the livelihood of the population. Therefore, it is important to understand that there is a need to integrate both the Syrian government and other important sectors to work together towards ensuring that there is a general improvement of the economic performance of the country. On the other hand, as the country slides further into chaos, Assad should to the honorable thing and resign, which would allow a new government to be formed in order to restore the economic performance of the Syrian people and their country. In fact, the Syrian crises and the eventual downfall of its economy is a perfect example that demonstrates how politics and governance are inseparable from the economic aspect of a country. Thus, in order to improve the economic performance of the country, policymakers need to come up with proper and effective measures to create economic stability (McMichael, 2011).
What were the Key Factors in the Development of Cooperative Economies Denmark and the Basque Country?
The economic history depicting the actual occurrence of various economic activities in Denmark also provides another important platform for evaluating how various economics theories can be applied. There are various factors that are interlinked and that have defined the future path of the economy of Denmark (Noorderhaven et al., 2015). Nonetheless, one of the most important aspects to note about the economy of the country is that it is one of the top performers globally. This is due in no small part to the fact that the resources and wealth are equitably distributed among Danish society. In fact, it has among the highest standards of living in the world. For instance, the country has one of the highest income distributions and a very narrow income gap. In addition, the per capita income of Denmark is also one of the highest globally. For instance, according to the International Monetary Fund, Denmark ranks 21st in terms of GDP per capita. During the 19th Century and the early 20th century, the Danish economy was mainly based on the agrarian (Noorderhaven et al., 2015). Nevertheless, by the middle of the 20th century, the agricultural sector was overtaken by the industry as the main provider of employment opportunities for the majority of the country’s citizens (Noorderhaven et al., 2015). Thus, the new development of economic growth puts great emphasis on the application of the develop a list theory. It understood that the only way that could bolster the overall success in terms of per capita income and other important economic factors was by embracing development ideas. In this case, the industrial sector was one of the most desirable sectors that could enhance the overall success and improvement of the economy of a country or a state. Therefore, the Danish government makes important strategic moves such as investing more in the industrial sector to create a spur in the overall economic performance. Furthermore, the partial application of the neoclassical theory could be another significant facet that led to the spurring of the Danish economic boom. In this case, the government considered various factors such as the wages that the general workforce earned as a result of the labor they provided to the agents of production (McMichael, 2011). Therefore, they found out that the industrial sector had more lucrative opportunities as compared to the agricultural sector.
The Basque refers to the country that borders France and the Republic of Spain. It is important noting that the Basque country is guided by the principles of nationalism (Gurrutxaga, 2008). As a result, most of its economic principles are affected by the Marxism theory especially when it comes to the distribution of the country’s resources (Gurrutxaga, 2008). First, the country is composed of an autonomous community, which means that there must be an application of the concept of socialism to ensure that the economy is self-sustaining (Gurrutxaga, 2008). Therefore, most of the resources are controlled by the national government for the benefit of all. There no concept of a free market as the government, among other external forces, ends up affecting and controlling the national economy.
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Why has Participatory Budgeting exploded in Authoritarian China?
China is one of the nations that are developing at a very high rate. Despite this, the country has continued using authoritarian methods, especially when determining various aspects of national importance such as budget appropriation (He, 2011). In this case, the country has resorted to using authoritarian rule tendencies especially in determining the overall performance of the economy. Nonetheless, this measure has tended to explode as a result of ignorance or turning a blind eye especially towards other external important factors that affect the performance of the economy. In short, China is based on the socialism ideologies that Karl Marx advocated for. This theory tends to emphasize the use of means that will enhance equitable distribution of the resources between the rich and the poor, which is one of the most difficult challenges to achieve (McMichael, 2011). In fact, the aspect has led to the stalling of China’s economic growth as the economy tends to disregard any efforts that are aimed towards controlling it.
The global economy has been defined as the economy of the whole world in totality. There have been many attempts to conceptualize the global economy. One of the prominent authors in the field of global economic theories is Ha-Joon Chang. He provided a critical view of global economics by presenting an analysis of several schools of thought on the global economy. The theories he critiqued include neo-classical, classical, developmentalists, Keynesian and Marxism. One of the major ideas he held was that it is difficult to separate politics from economics, due to the influence on the government’s policies. He also held the idea that no economic theory holds supreme. He asserts that different economic theories can be blended together to produce a quality economic principle that deals with the inherent weaknesses present in the individual theories. These theories have been applied in different areas of the world and have been successful.