SOME TRENDS IN THE WORLD ECONOMY AND THEIR IMPLICATIONS FOR INTERNATIONAL BUSINESS STRATEGY.

This article discusses trends in the world economy. The global recession of 1980-83 was the deepest since the Great Depression of the 1930s, but in 1984, the world economy experienced a strong recovery. Although no simple model can be a full explanation of this problem, the principal causal chain appears to be the following. It starts with the unprecedented size of the U.S. structural budgetary deficit that is projected to run at an annual level of $200 billion or more for the rest of the 1980s unless drastic steps are taken to cut expenditures and/or raise taxes. By feeding expectations of higher inflation rates, by threatening to "crowd out" private borrowing in capital markets, by forcing reliance on tight monetary policies, and by generating more uncertainty, the federal deficit has supported historically high real interest rates in the United States. The dominating trend in the world economy over the next quarter-century or more is the speed-up of an industrialization/innovation process that is creating a new global industrial map. The new global industrial map will create a business environment for multinational corporations that differs radically from the business environment of the quarter century following World War II.