Issues in Global Economy - Case Study Example

Introduction: Industrial Revolution was a major reason towards economic development and business growth across the world. It was actually the time when people started understanding the importance of manufacturing and industry rather simply relying on primary or agricultural economy. This not only created business opportunities but also led to mass urbanization as people were migrating from rural areas to cities for better employment and earning opportunities. The demand and consumption was rising since circulation of money brought wealth to many people thereby increasing their standard of living. In turn, more economic growth was observed and many new jobs were created. In other words, new companies, business organisations and enterprises joined the arena that not only resulted in healthy economic growth but also in stiff competition among existing entities. Businesses, therefore, started making innovations and developments in their production process and finished products so that they could differentiate their produce from the rivals in the same industry. Nevertheless, this competition benefited people in a way that they now had more variety of products at their disposal. The emergence of media, especially after popularity of ‘Penny Press’ was another reason that enhanced the knowledge of people about their surroundings while it also enhanced the flow of information. Businesses started understanding the importance of advertising, branding, research and marketing intelligence in order to ensure their survival, growth and sustainability. Also, they started producing highly sophisticated and modern machinery to speed up their operation and improve productivity. The media, especially newspapers, has also become popular by the end of 19th century. Finally, important inventions such as advent of Television and Internet in the 290th century helped introducing the world with an entirely new concept of globalisation that talks about international markets, international institutions (banks, universities, research centres and others etc.), global politics, justice, global culture etc. In short, people are closely knitted after recent advancements in internet and communication media and the subsequent improvements in circulation and sharing of information among people from different communities and geographic regions. The relationships among people and their frequent communication have also created enormous business opportunities after emergence of global markets that in turn have increased global trade (through imports and exports). This paper will demonstrate how technology, which led us to globalisation, has impacted global poverty. The paper will discuss about the use of technology, its benefits and how it has helped in either alleviating or increasing the poverty among both developed and developing economies. Technology and Poverty Paradox: Before starting with the impact of Technology on trade, I first would like to mention that Technology refers to use of any object, information system and database, invention or machinery to facilitate one’s business operation and get a competitive advantage over one’s industry rivals. In simple words, technology has remained a primary factor in increasing trade and providing facilities to consumers all across the world. This argument can be endorsed by the fact that employment and induction of latest machinery by manufacturing and production related businesses enabled them to produce want satisfying consumer products (including necessities and luxuries) with fewer inputs in lesser time compared to manual work process that was slow and creepy. Textile, Engineering, Heavy Machinery, Sugar, Cement, Plastics, Chemicals, Fertilizers, Oil Refineries and Exploration, Petroleum, Construction material, Electronics, Automobiles, Packaging and Printing, Property Development and various other sectors have recorded enormous growth after development and induction of latest and highly sophisticated state-of-the-art production plants. These manufacturing units have constantly produced new products, have increased their output substantially and supplied a variety of products to their potential customers across the globe. Use of information and Communication Technology (including Information Systems, tangible devices, internet and extranet) have completely altered the marketing strategies previously adopted by firms. Today, these businesses heavily rely on Television besides using Print (newspapers, journals, magazines, brochures and publications), Audio (radio), Internet (websites) and New Media (blogs, forums, digital communities like face book, twitter and my space, sign / bill boards etc.) to advertise and persuade their consumers thus changing their perceptions and consumption patterns. With immediate availability of these communication networks and information, these businesses involve in Marketing Research thus gaining relevant primary and secondary information about their micro (customers’ perceptions, demographics, lifestyles, attitudes and behaviors besides suppliers, competitors and human resources) and macro or external (economic, political, legal, environmental, socio-cultural, technological) environment. This bulk of information through technology is used to develop global and domestic business strategies, which was not possible even 50 years back. So, in this way, businesses have created a market by introducing their products to large pool of customers (from different classes) and increased the trade. Similarly, the advent of micro and mini computers followed by notebooks have enabled the entities to conduct their business operations smoothly and efficiently thereby creating new products (innovation and designing) and reducing their total business costs. Also, the availability of communication media and technology has now also given rise to a new concept of ‘Outsourcing’ (international division of labor in which same tasks are outsourced to cheap labor in low wage rate nations). This has also fostered the growth of ‘services trade’. Nevertheless, technology has resulted in advancements in financial / insurance sector and in software production and trade. In addition, technology has also stimulated the growth of primary sectors in a way that laboratories with modern equipments tend to develop seeds to increase yield per acre of crops. For example BT cotton seeds are extremely beneficial in increasing aggregate cotton production that in turn facilitates entire Textile sector (from ginning, spinning, weaving, processing and ready made garments). Similarly, new seeds are developed by agricultural experts for various other crops including Sugarcane, Rice and Wheat etc. High agricultural production not only enhances the trade volume of these crops but also it enables in producing intermediary products and supplying raw material to manufacturing business. The end result is that Trade increases. Now, I would like to throw light over the impact of technology over poverty. Poverty refers to a situation where people are deprived of basic necessities such as food, shelter, health, clothing, work and education. It must be highlighted that today’s advance / developed Western (such as Britain, Germany, Italy, France etc) economies and United States of America were the initiators of industrialisation process so they benefited most from these technological advancements. Indeed, these nations developed technology to reinforce their manufacturing sector. Without any doubt, these nations developed their infrastructure and boost trade thereby reaping mammoth financial gains. This economic boom created enormous business and employment opportunities, hence poverty in advance economies reduced substantially during 19th and 20th century. Moreover, these nations also formed top quality educational institutions to meet their industry’s demand for educated and skilled workers (white collar jobs). Also, they imported man power (cheap labor availability) from less developed countries to sustain their secondary sector growth and meet excessive labor demand. Their consumption for oil skyrocketed during last two centuries. In addition, the organisations from these countries identified opportunities and commenced their global operations by making investments in other nations. As these nations depend heavily on imported oil, the surge in international prices also increased their power tariffs and resulted in inflation (higher prices for commodities). However, their growth continued as they are pioneers in technology and heavy machinery production so they continued creating jobs in both secondary and tertiary sectors. It is worthwhile to mention the fact that today, this economic development of past two centuries has led to extremely higher wage rates in developed economies and production of various consumer goods have become financially unfeasible. Manufacturing sector, comprising of consumer goods and other household products, is contracting as industries are unable to compete with products from emerging nations where costs of doing business is extremely low. Therefore, the developed world has undertaken massive automation and mechanisation (use of machines, robots, automated assembly lines that reduce the use of human resources) so that they could restore their competitiveness against firms from emerging economies. The outcome of this strategy is that more jobs in productive sector were lost thereby intensifying the unemployment percentage. Multinational and Supranational organisations from Japan, USA, UK, Germany, France, Italy etc. are now shifting their production facilities to emerging India, China, Malaysia, Indonesia, Mexico, Pakistan, Turkey and other densely populated countries because of poverty and cheap labor availability. Secondly, these nations have a large pool of buyers who maintain an interest in foreign brands and products after globalisation and internationalisation of trade. The investments from these multinationals and foreign businesses, equipped with latest technology, in manufacturing and agricultural sectors of less developed nations have created employment chances and jobs for hundreds of thousands. These companies have also focused on developing infrastructure (rail, roads and utilities), communication networks and technological base in these emerging nations so they could produce and export their products to their home nations, besides meeting demand in host countries. China, Malaysia and India are among the major emerging economies that recorded the growth rate of between 5 - 13% in past 6-8 years as they attracted Foreign Direct Investment from technologically rich nations. In addition, governments of these developing nations have also taken into account the importance of technology and thus formed a great number of educational, IT, technical and vocational institutes to stimulate its use for economic growth. This has enabled the above mentioned countries in creating employment opportunities for their citizens, in providing health and shelter facilities. Hence, the circulation of money has increased over years due to their GDP growth that has assisted significantly in dealing with the menace of Poverty. The poverty rates as estimated in graphs below will provide us some insight over the issue discusses above. The pie chart above shows that 20% of our world’s poorest population consumes just 1.5% of world’s resources whereas almost 77% resources are under strong hands of only 20% rich. Remainder is used by middle income groups. Source: http://www.globalissues.org/article/26/poverty-facts-and-stats As far as the Poverty statistics are concerned, it must be pinpointed that penury in East Asia has reduced to18% in 2005 compared to over 75% population living on $1.25 or above during 1980s. The economic boom in China has triggered this improvement since more than 600 million Chinese came out of vicious circle of poverty due to FDI and growth. In other populated economies like India, Pakistan and Bangladesh, poverty has come down from 40-50% on average to 25-35% in 2007. African region, however, failed to showcase any improvements as the situation has deteriorated further because of negligence of world authorities. (World Bank Poverty Facts, 2010) Conclusion: Concluding the above, it is justified to say that developed WEST has used technology for mechanisation and automation in recent years to substantiate their competitiveness by becoming highly productive and cost efficient producers, which has resulted in considerable job losses in recent past. In contrast, the developing Asia and third world countries have attracted investments from western companies, financial giants and international players, which not only brought employment and money but also introduced locals with latest technology. These emerging economies, in turn, have tried to imitate the industrialisation process of West and to induct new technology for their economic welfare and well being. In short, technology has remained quite helpful in Poverty alleviation. 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