The Changing Global Economy Essay Example for Free

The Changing global Economy EssayThe argument for globalisation is an argument for International trade. Classical liberal economists have endlessly argued for the ease movement of all factors of production. Adam Smith had declared that nations have absolute advantaged that they leverage to erect cheaper and more than efficient production processes. David Ricardo argues in his theory of Comparative advantages that countries must utilize their relatively more abundant factors of production more intensively to produce higher levels of turnout. All this results in higher out site and therefore the world stands to gain through increased trade. Factor mobility run fors to stabilization of prices that result from goods and services despicable from one locating to another where the factor is scarce and fetches higher returns. Those who are against globalisation and trade habitation their debates on the infant industry argument which believes that small domestic players get adve rsely assumeed when voluminous foreign firms compete. The other argument they make is that that imports travail shifts of production where firms locate to foreign lands and cause unemployment. It is besides believed that globalisation leads to the dumping of suffering quality or toxic goods across the border.Reliance on imports leads to dependence, and exports cause injury to locally available resources that get diverted to foreign markets. Globalisation is also analysen as a phenomenon where the free flow of money and currency makes domestic economies extremely vulnerable to volatile foreign investments. This could lead countries to balance of payment difficulties and cause events such as the East Asian crisis in the mid nineties. What results is a situation where every minor turbulence in large economies like the US causes severe evince to developing and under developed economies.2. Huntington and the crash of civilizations Huntingtons famous hypothesis states that in the modern world, the clash of ideologies will convert into a clash of cultures. He argues that the cutting world order will see greater examples of conflict between various cultures of the world. His thesis is seen as a justification of the US war against Islamic nations and its aggression against countries like China. These clashes would come from a conflict that emanates whenever differing cultural paradigms come into contact with individually other and compete for global resources.The end of the cold war, according to Huntington, is the end of conflict based on ideology, where the capitalist and the communist bloc were engaged in war. This conflict ended with the collapse of the USSR and the coming tear of the Berlin Wall. Today, the emerging economies of the world are resurrecting fast and eroding the huge share in vulgar Domestic Product (GDP) of the world that is now held by the western countries. These new and emerging economies are place to nearly of the cultures of the world that are all opposed to the dominant western thought. This opposition would give deepen to global conflict.This is the conflict that Huntingdon terms as the Clash of civilizations that emerges in a world that is globalising at a fast pace. This globalisation is bringing together people from various cultures and this would manifest in a betrothal for domination. This then would cause conflicts among cultures. Huntingtons hypothesis has been debated endlessly and there are as many voices reinforcement the argument as there are that characterise Huntingtons theory as mischievous. 3. Institutional arrangements For a free parsimony, there are certain pre conditions that must be met.These are the protection of property rights, observation of contracts, law and order and a competitive environment. These pre conditions are met when these are institutionalized. These institutions then enable markets in any state and cause efficiency in market transactions and therefore result in g rowth. some(prenominal) of these institutions are put in place by the government by way of regulatory bodies and practice of law forces. Some of these institutions are created simultaneously by a society as it evolves. Markets function best when free and perfect information is available to all players.Competition in an economy comes out of the lack of barriers to admittance and exit from the market. Laws and policies that enable such an environment are all referred to as institutional arrangements. In most markets there is asymmetry of information and a differentiated access to factors of production. Such a situation prevents an economy from operating at full potential. Those states that ensure the existence of such institutions are the ones where sparing growth shares place to its full extent. Weak institutional arrangements favor some players in a market and adversely affect the rest.Market based solutions to such problems are usually the most sustainable and efficient mechan isms. This gives rise to poor governance structures and cause imperfection. It is not always the state that brings about these institutions. Sometimes institutional arrangements evolve and take firm roots in markets. Such informal institutional arrangements provide players with an eco system that enables innovation and growth. 4. Shifts in the world economy The two factors that clearly set apart the last 25 years of economic growth in the world are the collapse of the Soviet Union and the fast paced changes in technology. twain these events have lead to a globalised world where trade has more than quadrupled. Technological changes, especially the strides made in communication technology and transportation have enabled the world to shrink and become a global village. proceeding are now possible at lightning speeds, at the click of a mouse, between two entities find out in different corners of the globe. What has also been seen is the spurt in trade in services, and such was not the depicted object with the world earlier where all trade was for goods.Free trade has improved the chances of poor countries to enter new business internationally, and allow their firms to buy and sell various commodities and services. Domestic rules and standards become significant and issues such as restrictions on imports, exports, tariffs and duties become significant. (Ohmae, 1999). In all this the new entity that has emerged is that of the Multi National Corporation. MNCs today typically operate in several countries, where the source of raw material is one nation production takes place in a second country, assembly and packaging in a third and sales in a fourth.This has enabled firms to grow in size and shape and allow economies of scale to reduce costs of production and therefore prices. close to nations in the last 25 years have made currencies convertible and have ensured that internationally concordant norms and polices are put in place. A large credit for this goes to th e World Trade Organisation that has put in place a multi lateral agreement that allows for free trade between members. The MNC has leveraged these changes to emerge as a significant player in world economics.References 1. Clarke, G.and S. Wallsten, (2004), Has the Internet Increased Trade? Evidence from industrial and Developing Countries, World Bank Policy Research Working Paper 3215. 2. Edwards, S. (1989a), Openness, Trade Liberalization and stinting surgical procedure in Developing Countries, Working Paper No. 2908, NBER, Cambridge Mass. 3. North, D. (1990), Institutions Institutional Change and Economic Performance Cambridge University Press, Cambridge. 4. Ohmae, K. (1999) The Borderless World Power and Strategy in the Interlinked Economy. New York Harper Business.