A global market economy is one in which the economies of different countries in the world are interconnected. This has increasingly become the case in recent times, thanks to the technological advances that have improved communication and allowed countries from far corners of the globe to have economic relationships with each other. As a result, the global market economy generally means that the conditions in one country can have tangential effects on many others. Supply and demand laws that govern market economies also dictate that the availability of products will reflect on worldwide prices of those products.
In the past, it was possible for countries' economies to operate in a type of isolation. What happened, for example, in a country in South America had little bearing on a country in Europe. Computer advancements and overall technological improvement has resulted in all of the disparate economies of the world becoming bunched together in one overall economic picture. For that reason, individual countries always have to be aware of the global market economy and how it affects their own fortunes.
The defining factor of the global market economy is the interconnected nature of all the countries of the world. When the economies are in harmony in this manner, a period of economic stability and prosperity will generally be felt in most countries throughout the world. By contrast, a crisis in one of the major countries in the world will likely have negative repercussions all over the globe.
It is important to understand that the factors that affect local market economies will also govern the global market economy. Chief among these factors is the law of supply and demand, which stipulates that the demand for products will affect the way in which they are produced, and production levels will, in turn, weigh on demand. For example, a worldwide shortage of a specific product will increase demand and drive prices for that product up all over the world. Only when production is increased will some sort of worldwide equilibrium be reached.
While a global market economy implies a kind of unanimity in economies across the world, it does not mean that all countries will weather worldwide economic tumult in the same way. Some countries may be better suited to withstand any global economic calamity, whether through the resources it possesses or by the strength of its own economic initiatives. In those ways, an individual country can achieve some independence from the global economy.
