Global Capital Formation

What factors influence Capital Formation?

Global Capital Formation is influenced by many factors and the balance shifts from time to time depending on a number of factors.  Balance of power is shifting and within this context energy is the key factor. The industrial revolution brought about major changes in society and also needs a supply of different types of energy – all countries need an increasing supply to remain competitive.  How societies use and need energy will affect their economic wealth and balance of trade.

Who are the major Players?

Russia is now a dominant player as they have big reserves of oil and gas.  As emerging economies, India and China need energy and capital to stay competitive in the global markets. As a result of a global recession, funds that would normally be available for investment are being kept within nations and lending practices are getting more conservative.  This has most definitely affected capital intensive projects. In the global capital formation race, more countries will have to compete for fewer resources and economic recovery will vary for individual countries.

Some of the key factors that will define how energy and global capital formation impact future development are:

  1. Globalization is no longer viable:  More countries are becoming nationalistic and a total reframing of societies is under way. Countries are trying to protect their depleting natural resources to tilt the balance of trade in their favor.
  2. Population Decline:  Population numbers across the world have been rising steadily and expected to decline due to poverty and pandemics. This is going to affect asset values, mass population movements and also political stability in countries.
  3. Failure of Old, established institutions: Most post World War II institutions like the UN and NATO will be defunct.  Much of the funding for many international initiatives is already evaporating.
  4. New Sources of Funding:  Since many countries are keeping capital at home, local projects will be more viable.  This will have an adverse impact on countries which need global capital for investing in infrastructure and scientific research.
  5. Decline in Sources of Information: With a decline in funding for research and lower educational standards, people will not be able to function at their peak capabilities. 

It is very important for every country to invest its resources well and also to know that the world is connected in every way.  Investing in one’s own country and other countries will ensure good development.