Western Living Standards - Essay Example

Module Will India and China Catch up with Western Living Standards? For a long time, the west has been the orchestrator of the models that the world adopts in setting up governments, institutions and aligning structural reforms. However, the 21st century proves to be a major hindrance to this superiority aspect making it difficult to continue holding on to this top position. The aim of economic structures adapted by the west was to industrialized the countries making them some of the best in the world. The goal was to recreate a platform for the realization of better economic and living standards for the people. Nonetheless, countries in Asia, more so India and China have shown resilience that even the west struggles to grasp. They are growing fast which leads to the proposition that they will soon catch up with the western nations. The economic growth of India and China is bound to take the world in storm, making it easier to utilize their structural reforms and economic growth to structure a new model for the world to adopt. Western prescriptions vs. Resilient Asian economies For the better part of the twentieth century, the west knew that the only way of gaining any advantage over them is by creating a platform that the rest of the world could only copy. Any country that copied the western prescriptions would prosper and stabilize, yet this obscured way of thinking did not hold any ground when the world needed to rise above the recessions that came thereafter (Levi 115). The western model seen as the most important part of civilization in the past was nothing more than a mere wish for the rest of the world. It was slowly fading away and new giant economies arose to fill in the gap and present new ideologies that work for the betterment of the society as a whole. The west was no longer an important force in the world economy based on their achievements. New economies were making them seem as if the past years were all inconsequential in meeting their immediate goals (Levi 116). India and China have set a mark that many countries see as the next determinant of what to expect in the economic world. These two countries are some of the largest economies in the world today, and China already surpassed the US as the largest economy in the world. India, on the other hand, is a great competitor for the ever-growing Chinese economy, and economists argue that it is going to beat China in the race to the top of the largest growing economy in the world (Levi 117). The one thing that will make it easier to rise to the top for the countries across the world to make it to the top of the growing economies is the amount of time they place in growing and making their structural reforms to work. Of late, the Indian government has made great strides in meeting the growing needs of its economy. Riley, in January 2015, noted that the IMF (International Monetary Fund) had seen a situation where India would grow faster than China by at least 0.2%. Riley quotes the IMF as placing the expansion of India’s economy at 6.5% compared to 6.3% for China. This shows that the US, with its stagnant economy, has to wither the effects of a growing Asian economic giant and work on mitigating any factors that could derail it from meeting its required goals. The important factor is working with the available statistics and looking for strategic partners who will assist in growing the economy even further. The reason for the Indian growth is the strong structural reforms that have been implemented in the past few years, allowing it to meet greater demands within its mandate (Levi 120). Further, the Chinese government, which has been a little adamant in coming up with structural reforms that will grow the country’s economy and expand its outsourcing attributes, has agreed to create room for change and see its economy advance. Importantly, the two countries have huge populations, something that provides them with cheap labor. The utilization of this growing labor is very essential in creating a platform for economic growth. Ideally, the two countries do understand that boosting their trading terms will be beneficial to them all. The trade attributes that define and determine the growth of an economy have further been boosted by lower oil prices, and the industrial and investment activities that emanate from better policy reforms have made these two countries near their growth capacity to that of the western countries (Levi 129). Just as Dawra and Phillip argued in 2013, the best thing for the Indian government was to make good use of structural reforms to meet the demands of the time. If the country was to improve its standing in the global platform, structural reforms were the best way of dealing with the growing competition. They also note that the west only presented 12% of the global population, while the rest of the 88% were looking for ways of being better and more developed in comparison to the west. The west held itself in high esteem, and that meant stagnating due to the level of development achieved. In reality, the rest of the world was working on improving their economies, while the west was lecturing the world on governance and economic pillars (Snowdon 22). Prosperity for the Emerging Economies The 20th century saw several countries increase and improve on their economies while many upcoming economies relied on the west for assistance. The west was hoping to continue remaining at the top while the upcoming economies were looking for ways of leading (Mankiw 246). The only way of looking at this was by recreating new platform where each economy would work on enhancing its reform agenda while working on a myriad of opportunities to revive their hopes of reaching the top. China managed to reach growth rates of 10% annually and economists argued that such high growth rates would certainly lead to some form of convergence with the rich economies (Mankiw 49a). The goal, as noted, was to ensure that the growing economies would at one time have better living standards, shift the balance of power, increase growth rates based on the raw materials present, and inspire many more countries to compete with those countries seen as the greatest in the economic ladder (Mishra). The best way of understanding that the economic attributes that made emerging countries seek for a convergence is by understanding the divergence that existed before. One of the best ways of doing this is by looking at the purchasing-power parity. In America, the PPP is close to $53,000, in Britain $36,000, in China $12,000 and in a country such as Ethiopia it is at $1,200 (Mankiw 250b). This means that the countries at the top would always remain as such, and the poor would continue working on themselves to reach these economic heights. In the years between 1940 and 1990, most of these developing countries were clogged with political issues that made it difficult to promote economic development, lagging further behind (Levi 149). Countries such as South Korea and Singapore are amongst the few that were able to improve on their economies and remove the tag of the poor economies from their status (Mankiw 52). However, after 1990, many more countries showed resurgence, and countries previously written off such as Brazil, Mexico, India and China began making headlines as the new countries to watch. Over the years, the world knew that only the Americans could conduct businesses across the globe and benefit from them. The ascending nature of Toyota made it easy to achieve the main ideals of the Chinese, breaking the barriers that the west had placed for the foreign companies (Mishra). The likes of GM that were supported because they were American by nature were no longer appealing to the global community. People were now aware that the Americans were selling a façade that would burst in their face if they did not look for the main attributes that led to the growth of the economy, just as the developing and emerging companies were doing (Mankiw 255b). In fact, the millennia saw debt-stricken rich countries such as America experience scant growth and the financial crisis made things worse. The goal of the developed nations was to keep the gap between the rich and the poor countries bigger but the pace of convergence was not stoppable since America was slowly fading out of the international picture (Mishra). The wars it engaged in were no longer part of an agenda they could maintain, and this meant decreasing their participation in world trade. Most of the money was present in the way, yet the economy was facing an uphill task despite the growing unemployment and increasing standards of living (Levi 266). China and India did not lag behind when it came to taking advantage of this slow down in the American economy. They offered alternative opportunities to all other trading partners and assured them of good market for all their products. In return, the two countries maximized on the raw materials they possess to attain all the assistance they could get to manufacture and produce finished goods. The countries also came up with outsourcing industries that would provide alternative services to the companies aboard. The use of the internet and the ability for these two countries to maximize on the developing and advancing technology made it easier to achieve these feats (Blaug 85). The governments were also keen on growing the local talents, and opening of the borders for business was one of the main attributes that characterized the new society. The goal was to allow new skills, technologies and talents into the country to help nurture the budding entrepreneurs and open up the market to new traders (Levi 285). This would see an increase in multinational companies that would be run with the assistance of the local people, hence grow talent from the locality. It was also a chance for the locals to learn new ways of engaging in business activities, something that would assist them build new businesses and improve on the economy. Foreign direct investment would also increase and allow the country to benefit from several quarters (Mankiw 259b). Incidentally, investors, economists and monetary bodies are spelling doom for the rich economies such as America and Britain yet look confidently at the emerging markets, showing a shift of power. The new balance has made it easier for western investors to look to the east for investment opportunities, something that was ignored in the past (Mishra). The east promises more hope in comparison to the western nations. The two countries are also coming up with new measures that aim to create open economies so as to benefit them from the growing international trade (Blaug 96). Though China has been reluctant, joining the world trade organization has made it relax its rules and ensure that it factors in other foreign traders for the sake of growing its economy. India has also embarked on similar attributes, which opens it to other companies for the sake of developing many of the local industries. In essence, the growing need for supplies of raw materials and labor has led to an increased trading session between various countries, and these two countries are taking advantage this (Mankiw 129a). In conclusion, the only thing that could derail the Chinese and the Indians from reaching the living standards of the western countries is the realization that the world is not as convergent today as it was in the early 2000s. The economies grew very fast in the early 2000s, but it seems as if the elasticity is slowly threatening to derail the expected growth. However, if the countries capitalize on their strengths, it will be easy to maximize on this growth and improve the living standards of their citizens. The question is whether this will happen eventually. Hopefully, the structural reforms will not stall because their implementation will be the main hope the countries will have in maintaining a better understanding of the development process. Works Cited Blaug, Mark. "Endogenous growth theory". In Snowdon, Brian; Vane, Howard. An Encyclopedia of Macroeconomics. Northhampton, Massachusetts: Edward Elgar Publishing, 2002. Print. Dawra, Preeti & Thomas Philip Joji. India should act on Structural Reforms to Catch up with China Diplomat-Turned-Author and Educationist Kishore Mahbubani on Emerging Trends in Asia and the World. 01 Nov. 2013. Web. 11 Mar. 2015. Levi, Maurice. The Macroeconomic Environment of Business (Core Concepts and Curious Connections). New Jersey, USA: World Scientific Publishing, 2014. Print. Mankiw, N. Gregory. Macroeconomics. New York: Worth. 2007a. Print. ---. Principles of Economics. New York: Cengage Learning. 2014b. Print. Mishra, Pankaj. The western model is broken. 14Oct. 2014. Web. 11 Mar. 2015. Riley, Charles. India to Overtake China as Worlds Fastest Growing Large Economy. 21 Jan. 2015. Web. 11 Mar. 2015. Snowdon, Brian and Howard R. Wane. Modern Macroeconomics - Its Origins, Development and Current State. Boston, MA: Edward Elgar, 2005. Print. Read More