What is an Economic System - Essay Example

What is an Economic System' An economic system is comprised of the financial mechanisms which are working not only within the country's own domains but also interacting with the economic regimes of the different economic world bodies and that of the other countries. All of these economic systems work with each other to promote international trade, financial systems, industrialization regimes and so on. Economic systems benefit the people in a broad sense but in essence these work to promote the basis of a country's economic problems and woes on a proactive basis. It looks to solve the issues which could crop up in the wake of the economic recessions, global downslides in stock markets, etc. For encouraging growth and prosperity, it is deemed significant to understand that funding alone could not be the sole savior for a newly industrialized economy. (Wallace, 1992) There needs to be proper micro credit and financial system in place so that the newly industrialized economy can get back on its feet in the wake of missing funding mechanisms. This indeed is the order of the day when it comes to the developing nations which are doing their best to turn the tide that is bent to be against them. In an economic zone, globalization plays a significant role at increasing trade on an international front which as compared to the global economy, is much faster and ahead of its time. Furthermore, we can predict an increase in the flow of capital that has been coming from the global regimes which might include for the foreign direct investment as being one part of it. Then there are the agreements which are signed on a global scale that eventually lead to world bodies like WTO, IMF and others. Global financial systems also come to light as their developmental work gets thumbs up. International transactions speed up as the world bodies like WTO, WIPO, IMF and the like play their role in a more coherent and active manner. Economic practices like global sourcing or outsourcing as we know of it, off-shoring and others increase courtesy the multinational concerns. In a changing capitalistic business environment which is spread all over the world, IMF has sustained itself on the principles of removing poverty right from the deep root levels. What this means is that the motto of IMF is to understand the psyche of the rich nations and to adopt policies which would make the poor and under-privileged member states to get back on their feet or to make them stand at a position from where they can reach ascendancy. This will harness their hidden strengths and provide avenues of strength so that problems could be brought to a halt at the earliest. IMF finds out the mechanisms through which these problems could be detected and then tries to ascertain the exact basis under which problems do arise. (Hughes, 2002) What this gives IMF is a pathway to block the way for the troubles that come in the way of the member states and also present a destination where these countries have to reach at a certain point in time within the future. The aspect of removing poverty from the member nations' economies is an interesting aspect since IMF has to take care of the profits and incentives of the rich nations as well whilst providing benefits to the already down-trodden nations. The international economic relations between different states and countries has promoted as well as saved the varied interests of the nations when it comes to the relevant discussion regarding the economic diplomacy. The superpowers of the world are focusing their attention on the well being of their respective economies whereby the production levels in these countries in relation to different goods and the provision of services has increased and got better in the years that have passed by. There is so much competition that a nation cannot stay at a place for a considerable period of time and it needs to evolve and change its direction every now and then. Economic diplomacy ensures that the countries remain on their toes to the ever changing market conditions and remain attentive to the industrial amendments which happen from time to time. Thus the countries carry out their external economic relations with the help of the tool that we call as the economic diplomacy. This is not a new phenomenon in the related contexts but surely one which will stick on for years to come in the field of economic development and prosperity of nations. The changing role of the nations in the wake of their joining different alliances and treaties like NAFTA, WTO, EU, ASEAN and the like suggests that there is constant upheaval on the domestic and international front and that the diplomatic activities will continue to suffice in the times to come. The integration of trade into the world economy has really proved helpful for the developing countries as they can promote economic growth, development as well as poverty reduction within themselves. World trade has been increasing at an average rate of six percent for the last 20 years, which is twice the rate of world output. The integration of the world economy with the help of trade has lifted the living standards of the people within these developing nations, which is a positive sign. Sustained and consistent economic growth requires policies that can open trade and investment with the rest of the world. There is proof to it and it is that there has not been a single nation that has achieved economic stability without being open to the world for trade. The global markets could be provided more benefits and incentives to understand their own selves and the industrial basis if they are given more room for interacting with the big wigs present within the domains of the WTO and for this to happen, there is a dire need to have a balancing mechanism in place. (Sampson, 2005) Since the world is shrinking with the changing times as there is so much advancement in technological concerns and the like, the requirement is to make sure that WTO delivers quantity rather than raising concerns which are not to the benefit of any individual, party, organization or country on the same token. Thus the society expects a lot of goodness coming with the help of building the comparative economic systems because it essentially solves the major chunk of the problems which are encountered by any nation. The society has a direct role within the whole conundrum and the manner under which the society is taken hostage under an economic recession is also something to ponder deeply. Economic disparities and the like could mar the financial systems which are present within any country and it is best advisable to make use of measures which could harness the growth potentials as well as provide back-up plans for the economic downturns. Personally speaking, I believe that an economic system holds the basis for any nation's progress. If it is not present, then there are maximum chances that a country could fall down on its feet sooner rather than later. Economic systems look to solve the problems left, right and center. A strong economy could easily make its way within the WTO, IMF, World Bank regimes while a slow-moving, dying economy could consider itself a lost cause within the global financial systems and international economic and trade concerns. All said and done, for the societal manifestation and that too in a very well documented manner, it is must to have a sound economic system in place and this can only happen if adequate measures are undertaken by the respective governments. Works Cited Hughes, Steve. Global Governance: Critical Perspectives. Routledge, 2002 Sampson, Gary. The WTO and Sustainable Development. United Nations University Press, 2005 Wallace, Iain. The Global Economic System. Routledge, 1992 Word Count: 1,278 Read More