Global Economic Crisis and its Effect on Local Economy
The bursting of the real estate bubble in late summer of 2008 triggered a chain of events which have led to the severest global economic crisis since the end of the Second World War. And while some countries seem to have come out of the worst, the European Union appears to be on the way to a severe recession or even depression. The bond credit rates of most European countries continue to drop, while the leaders of the European Union still have not managed to find a solution for the debt crisis.
The economic crisis did not spare the United Kingdom either. Its effects have reached every aspect of economic life forcing many business owners to either reconsider their employment policy or even close their doors. The continuous debate about the importance of saving measures, rising unemployment rate and failure of the EU leaders to take concrete measures to solve the Eurozone debt crisis additionally increase uncertainty both among consumers and business owners which in turn further worsens the economic situation. Both the consumers and business owners cut their expenses wherever possible which, however, can have a disastrous effect on the economic recovery in the long term.
The forecasts for the European economy unfortunately are not encouraging and if we can believe the analysts, the recovery is going to be a slow and painful process. Many more businesses will probably shut their doors and many more people will lose their jobs before the world’s economy will turn upward, however, the best ones always get through difficult times and emerge stronger than before. There is no unique view on how to survive the crisis but cutting the expenses to the minimum most certainly will not help.
The world’s economy is more connected than ever before in history and every slightest disturbance on a global level has an instant effect on the local economy as well. On the other hand, this connection through globalization also gives locally based businesses an easier access to the global market and an opportunity to establish themselves in new markets. Succeeding in the international market may be more difficult than on a local level due to incomparably larger competition, however, there are also many types of businesses which would not exist in the first place if they would operate exclusively on a local level.
Considering that globalization is an irreversible process, business owners should take this crisis as an opportunity to become competitive on a global level. The western world no longer holds monopoly on knowledge, technology and innovation and to be able to compete with the developing economies, outsourcing manufacturing processes overseas will not work in the long term. The sale of most European products depends greatly on relatively high purchasing power which, however, cannot be maintained if the relocation of factories into the developing countries will continue at the current rate. The emerging economies offer many opportunities but they cannot replace the European market.