Integrated And Interdependent Global Economy - Essay Example

Integrated and interdependent global economy Contents Introduction page 3 2. Interdependence of world economy page 3 3. Importanceof interdependence and integration on economic development : page 4 4. Population and economy : page 5 5. Out sourcing and offshoring : page 5 6. Globalization and economic development : page 6 7. Concerns about interdependence of economy : page 7 8. Conclusions : page 7 9. References : page 8 Introduction Economic integration is an ongoing process which has started even before thousands of years. Globalization and Liberalization has revolutionized the whole concept of economy. Earlier most of the countries were mainly focussed on how to utilize the domestic resources effectively in order to boost their economy. As per the current trends, countries are now looking at external economies as well in order to strengthen their economic growth. The interdependence of economies is evident as we have seen in the case of current global economic crisis. Though the economic crisis has started in America initially it spread all over the world immediately because of the interdependence of global economy. “One of the defining characteristics of the world in which we now live is that, by most economically relevant measures, distances are shrinking rapidly. The shrinking globe has been a major source of the powerful wave of worldwide economic integration and increased economic interdependence that we are currently experiencing.” (Hole & Wyoming, 2006) Most of the economists are agreed upon the need for an integrated international economy, many of them have still concerns about the possible threats, such an interdependent global economy can provide. Interdependence of world economy “Dramatic improvements in supply-chain management, made possible by advances in communication and computer technologies, have significantly reduced the costs of coordinating production among globally distributed suppliers.” (Hole & Wyoming, 2006)Technological advancements happening at some part of the world can affect the whole world economy in general and the domestic economy in particular. For example, the introduction of Windows operating system by Microsoft has revolutionized the computer world not only in America, but the whole world as well. In most of the countries Windows is using as the primary operating system on computers. The administrative and commercial sector has benefitted immensely by the Windows operating system in many ways and thus it contributed to the economic development as well. Importance of interdependence and integration on economic development It is not possible for a country to utilize all its resources effectively if they do not possess ample technology of infrastructure facilities. They can depend foreign companies on a mutual benefit basis to exploit their domestic wealth. For example, the immense oil resources of the gulf region have been utilized effectively by the gulf countries with the help of western countries and hence they have economically developed to a higher degree. If they refused to allow foreign participation, their oil wealth might have been wasted. “Interdependence, integration and inclusiveness – are building blocks towards lasting prosperity and peace. At the same time, increased deregulation of the financial system, opening-up of financial services, and liberalization of the capital account in Asian countries has strengthened financial and macroeconomic interdependence” (Kuroda, 2005) The proposed project of bringing natural gas to countries like Pakistan, and India from Iran is an example for interdependence. These pipelines will be beneficial to both India and Pakistan since both of these countries experiencing severe energy shortage in their domestic sector. “The Iran–Pakistan–India gas pipeline, also known as the IPI pipeline or the Peace pipeline, is a proposed 2,775-kilometre (1,724 mi) pipeline to deliver natural gas from Iran to Pakistan and India.” (Iran–Pakistan–India gas pipeline, 2009) Population and economy “The emergence of China, India, and the former communist-bloc countries implies that the greater part of the earths population is now engaged, at least potentially, in the global economy.” (Hole & Wyoming, 2006) Rapid growing population was the biggest threat for economic developments in heavily populated countries like India and China earlier. But the family planning procedures adopted in these countries has effectively controlled the balance between birth and death rates and hence the stage for economic growth has been well set by these countries. In fact India and China were the two countries which effectively escaped from the current economic crisis because of the diversified economic policies followed in these countries. Private participation has not been allowed in many of the critical sectors of these countries and hence the current recession has not affected them much. The Indian public financial companies like banks were never allowed to invest heavily on foreign institutions. Out sourcing and offshoring “Rather than producing goods in a single process in a single location, firms are increasingly breaking the production process into discrete steps and performing each step in whatever location allows them to minimize costs” (Hole & Wyoming, 2006) As per the earlier trends, organizations were limited their operations in a specific country where they originated irrespective of the lack of resources there. But globalization has opened the doors of infinite possibilities widely open for them and hence most of them are now engaged in outsourcing and offshoring processes in order to exploit the cheap labour market and also the resources of other countries. “Outsourcing is mainly related to low-skill, blue collar manufacturing jobs out of the United States and towards low-wage countries, such as textiles to China, athletic shoes to Philippines, steel to Brazil, electronics to Malaysia and Taiwan and so on. However, as the global economy slowed after 2000 and corporate profits slumped, many U.S. companies moved also their white-collar knowledge-based jobs to developing countries to benefit from lower costs” (Pomoni, 2009) Globalization and economic development “The 21st century seems likely an age of globalization, technology innovation and human awakens on cosmic mind. It is expected that "global syndromes" or global disparities will be appeared in the human society.” (Dr. Onishi, 2008) Though globalization has succeeded in making the people aware of the need of collective growth, still political problems, terrorism, internal agitations and political concerns have retarded the progress of collective economic growth. Most of the left parties all over the world are still looking suspiciously at the interdependence of economies since they are afraid of some kind of a hidden agenda in this concept by the capitalist countries. They believe that globalization and liberalization policies are implemented by these capitalist countries in order to exploit the wealth of poor countries. But in reality the China like socialist countries were blessed immensely by globalization compared to capitalist countries like America and Britain. “As countries become increasingly interdependent, we must all turn our attention toward further integrating economies and making the benefits of growth inclusive, so that nobody is left behind.” (Kuroda, 2005) Concerns about interdependence of economy “Further progress in global economic integration should not be taken for granted, however. Geopolitical concerns, including international tensions and the risks of terrorism, already constrain the pace of worldwide economic integration and may do so even more in the future. And, as in the past, the social and political opposition to openness can be strong” (Hole & Wyoming, 2006) The end of cold war era though helped super powers to concentrate more on economic terms, increased terrorism and conflicts between countries definitely retarded the growth towards an economically prosperous world. The tensions between India and Pakistan, America and Muslim radical groups, and Israel and Palestine are still a big concern for the global peace and economic development. Conclusions In conclusion, Interdependence of economy and economic integration is a subject still at its early stages of development. Though theoretically economic integration or economic interdependence concepts are believed to be the best solution for the economic development of the world as a whole, it needs to be studied more based on practical experiences in future. References 1. Hole Jackson & Wyoming, (2006), Global Economic Integration: Whats New and Whats Not? Retrieved on May 25, 2009 from http://www.federalreserve.gov/newsevents/speech/bernanke20060825a.htm 2. Kuroda Haruhiko,( 2005), “Interdependent, Integrated, Inclusive: Asia in the World Economy” Retrieved on May 25, 2009 from http://www.adb.org/Documents/Speeches/2005/ms2005038.asp 3. Dr. Onishi Akira, A New Frontier Science of Economics: Global Model Simulation Retrieved on May 25, 2009 from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1198943 4. Pomoni Christina, (2009) How the current U.S. economy affects global outsourcing Retrieved on May 25, 2009 from http://www.helium.com/items/1264319-how-the-current-us-economy-affects-global-outsourcing 5. Iran–Pakistan–India gas pipeline, (2009) Retrieved on May 25, 2009 from http://en.wikipedia.org/wiki/Iran-Pakistan-India_gas_pipeline Read More