What makes a strong economy?
It’s easy to think of economic indicators like gross domestic product (GDP), interest rates, unemployment rates, inflation, etc. These are all important in telling us what’s going on in the economy. However, a lot of this data is affected by what’s happening outside the country too. For instance, if a country’s political economy comes crashing down, you might expect its GDP to drop. But that might mean there’s no job growth, and so the unemployment rate goes up.
A strong national economy is also typically characterized by higher interest rates, being able to make more goods and services available to consumers, and being better able to withstand recessions when they do occur. A strong currency helps this along, by lowering import costs. The lower the import cost, the lower the price of imported goods increases in value, leading to a boost in demand, and hence, a boost to inflation. In a weaker country, lower interest rates mean lower spending power, with less money available to enjoy current consumer goods, and an increase in long-term debts. A weaker currency, on the other hand, boosts exports and leads to higher inflation.
A healthy economy needs a healthy consumption of goods and services, and rising consumer confidence. One way to achieve this would be through immigration. A major influx of either skilled workers or workers with skills that are in short supply creates a surge in demand for goods and services that people can buy now and finance their future needs. That leads to an improvement in the current account balance, rising inflation, and eventually, a stronger economy.
Another way to see a strong economy through migration is through guest worker programs. Typically, an employer in a country wants to hire a foreign national because of their skills. A guest worker is an economical solution when countries face shortages in certain industries, or when there is a deficit in overall economic growth. For example, when a country needs to expand its labor force to fill a construction job, a foreign national, such as a guest worker, can fill in the gap by performing tasks that are more suitable for his home country.
The next indicator that makes a strong economy is total fixed capital investment. Fixed capital represents all of the assets and liabilities created by an enterprise including plant, equipment, buildings, and land. An increase in fixed capital leads to higher economic freedom score. Specifically, this means that there are more resources available to businesses to make new products, hire new employees, and invest in projects. As capital becomes scarcer, it means that there are fewer opportunities for people to take advantage of new products, jobs, and ideas-all leading to less economic freedom.
Finally, another indicator that indicates a strong economy is the level of economic interaction and commerce. An economy that has a good combination of both free trade and outsourcing is typically one that is considered a strong one. In particular, if there are a high number of foreign-owned enterprises (FOBs) in the overall economy, it is expected that there will be a high number of cross-border exchanges. A high number of FOBs also means that there will be a high degree of integration, which means that goods and services can freely move across borders, reducing the costs and risks of transportation. Additionally, a small and highly diversified economy that is able to remain competitive in a changing global environment, is a good one.
In conclusion, achieving the goals of the International Monetary Fund and the World Bank on GDP growth, will require nations to embrace policies that promote economic freedom, economic growth, and greater prosperity. In particular, policies that will allow more EU member states to enjoy freer trade, and open their markets to international competitors, while discouraging barriers to trade between its citizens.
What makes a weak economy?
One of the answers to what makes a weak economy is this; a lack of investment. Private sector investment is important for any growing economy. It doesn’t matter whether it’s credit-driven or not. The key to any growing economy is having capital invested in the private sector. When there is a lack of investment capital available, there is little money available to make purchases in the private sector.
As it stands now, the most important asset of an economy is its dollar. When the dollar goes down, so does the strength of its economy. It is imperative that we stimulate the economy with more spending, especially by building bridges, renovating roads, and providing jobs for the unemployed. That is what makes a weak economy weak.
In addition to a lack of investment, a weak economy must also have low consumer confidence. Consumers are cautious due to worries about the state of the economy. They worry about the future of the stock market, the ability to make their payments, rising costs, unemployment, etc. When consumers have lowered their spending because they are worried about the state of the economy, this is what makes a weak economy weak.
One of the best ways to get the spending going again is to have a renewed commitment to infrastructure investment. A strong infrastructure means better roads, stronger bridges, more efficient hospitals, more efficient offices, and more manufacturing and other businesses. As long as the private sector is investing, then the private sector will be fueling the economy. Infrastructure and research and development investments will also boost the economy in general.
When it comes to strength, another factor is demographics. Baby boomers, which were the largest generation on the planet, are now approaching retirement. Many of this demographic are now having trouble finding jobs or doing those that they had always done, so they have to rely on public programs. When there are less people working, it makes it easier for businesses to get the labor they need. It is what makes a weak economy appear more robust.
The last thing that a country needs is instability. If there is instability, then it can cause problems with the exchange rate, inflation, interest rates, or even market crashes. All of these things can make it harder for a country to invest in the things that it needs to prosper. A stable government and a strong economy to make up for any weaknesses that a country may have. If a country has all of the above, it can use its strength to overcome any weaknesses.
It will eventually return to strength, and that is what makes a weak economy become a strong one.
Provided by Antonio Westley
Disclaimer: This article is meant to be seen as an overview of this subject and not a reflection of viewpoints or opinions as nothing is definitive. So, make sure to do your research and feel free to use this information at your own discretion.