Global Economic Factors

Updated March 23, 2017

Globalisation is the reality of the modern world economy. A series of economic factors with worldwide implications have driven the trend toward world economic integration. An annual symposium in Jackson Hole, Wyoming, focuses on key factors affecting the American and global economies. The Federal Reserve Bank of Kansas City hosts the yearly gathering of economists, scholars and policy makers from around the world.


Global factors affecting the world economy include trade and government policies affecting trade, technology, the migration of labour and capital and environmental degradation.

World Trade

A key economic principle since the 19th century has been that trade benefits all parties involved. Since the 1990s, trade pacts such as the North American Free Trade Agreement (NAFTA) and organisations such as the World Trade Organization have done much to facilitate global trade in goods and services. Among the world's industrialised nations, most tariffs and other trade barriers have fallen, increasing consumer access to other nations' goods. Developing nations have more of a mixed record on trade barriers, but the trend appears to be moving away from protectionist measures. Most remaining trade barriers, even in the industrialised nations, exist in agriculture.


Advances in transportation and information technology have helped speed the availability of goods and services around the world. The Internet age, for example, has made it possible for American consumers to access products from Europe, Asia and other places with the use of a computer and an Internet connection. Some pundits have quipped that the world is becoming smaller. Communication technology is a major reason for this.

Labor and Capital Migration

Increased global trade has made products more mobile. Factors of production have become more mobile, as well. As transportation costs have declined over the decades, more workers have migrated to other countries for education and work opportunities. Examples include the migration of workers from Mexico and South America to the United States, and the migration of Africans and Eastern Europeans to Western Europe.

Capital migration is another key factor in the global economy. Multinational firms, in a continued drive to expand into new markets, have opened branches and production facilities around the world, going beyond the borders of the nations in which they started. One especially significant factor is the globalisation of financial services.

Environmental Degradation

The environmental impact of increased economic activity is a major challenge facing the global economy. Pollution is a byproduct of increased economic production and growth, and because environmental problems do not respect national borders, addressing issues such as climate change requires cooperation among business leaders and governments around the world.


Another key consideration for a global economy is that greater economic integration, aided by factors such as increased trade, migration and technology, means that economic crises are more likely to become global in nature, rather than being isolated to a specific region. The 2008 global financial crisis is an example. Originating in the United States after a collapse in the housing market, the problem went worldwide, in part because of the global nature of banking and finance.

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About the Author

Shane Hall is a writer and research analyst with more than 20 years of experience. His work has appeared in "Brookings Papers on Education Policy," "Population and Development" and various Texas newspapers. Hall has a Doctor of Philosophy in political economy and is a former college instructor of economics and political science.