New Economy and Globalization - Research Paper Example

New Economy and Globalization Table of Contents Introduction 2 Globalization 3 Globalization and the New Economy 4 Neo – Liberalism 4 Competitive Regionalism 7 New Economy, Globalization and the Service 8 Information and Communication Technologies 11 Developing Nations and the New Economy 12 Conclusion 13 References 14 Introduction It is rightly presumed that the only constant thing in the present world is the word ‘change’. With the significant developments in the arenas of information technology and communication process, the tricks and the terms of trade in almost all of the industries are fast changing. The industry has gained all the more pace. Globalization has played crucial role in this aspect. With the increasing influence of globalization, the world has become much smaller place to live in. The developments in information and communication technologies have impacted greatly as the consumers and the citizens are informed like never before. Such changes have increased the reach of the customers by considerable extent. With such changes, it can be inferred without much hesitation that the modern economy have experienced major shifts. In other words, it can be said that the globalization has greatly impacted upon the economy as the economy is also facilitated by the globalization. Therefore, it can be assessed that the new economy and the globalization are both complementary and supplementary to each other. Globalization There is little doubt that the term ‘globalization’ is one of the most used terms in the present industry. The exact definition of the broad term ‘globalization’ has never been above debates as often various writers and authors tried to define it very different ways that often tended to be mutually exclusive. In the year of 1999, T. L. Friedman defined globalization as “the inexorable integration of markets, nation-states, and technologies to a degree never witnessed before-in a way that is enabling individuals, corporations and nation-states to reach around the world farther, faster, deeper and cheaper than ever before . . . ., the spread of free-market capitalism to virtually every country in the world”. Again the other prominent definition of globalization includes that by M. Walters as the noted scholar observed that globalization to be a social process where the limitations of geography on social and cultural arrangements retreat and where people become increasingly aware that they are receding (Walters, 1995). Therefore, it can be assessed that the concept of globalization has increasing importance in the present day world. Globalization is also sometimes regarded as the process that has global linkages and that contributes to the global consolidation. The phenomenon of globalization has been at its best in the last twenty years or so and is considered responsible for such increase in the international collaborations. Globalization is a continuous process and have helped to increase competition in almost all the spheres of the industry which have contributed positively for the end customers as it has made the pricing competitive reducing the monopoly and also it has enhanced transparency by great extent. Globalization has always been observed as the weapon of capitalism as the socialist were found opposed to the process and therefore there is little doubt that the emergence of globalization has a lasting impact upon the modern economy. The new economy as it is called has been affected largely by the phenomenon as also it has impacted globalization. Globalization and the New Economy It has been discussed earlier that globalization has been impacting the modern economy by large. One of the significant observations in this respect is that the modern economy or the ‘new economy’ as it is called, is being greatly influenced by the knowledge processes. The new economy is basically the knowledge based economy and it is the knowledge process all across the globe that has been having the highest share in the new economy. Globalization has greatly supported the knowledge processes and hence the relationship of the new economy and the globalization is so intense. The relationship in between the globalization and the new economy can be grouped into two broad heads namely neo-liberalism and competitive regionalism. Neo – Liberalism The neo-liberalism of the new economy has major emphasis on the knowledge process. According to the scholars of the field, the neo liberalism has three important aspects namely: Technological developments – The unprecedented technological developments have called for massive availability of the industrial capital as well as the financial capital all across the world, overwriting the geographical boundaries. It is an open fact today that the financial companies and firms are the largest buyers of the information technology in the global market. Consequently, it can be understood that such developing technology has greatly supported the international transactions of financial instruments like currencies, equities, bonds and derivatives among others. Also, the advanced technologies have enabled the government and other regulatory bodies to sincerely monitor the transactions that take place in the international market. Such factors have positively contributed towards the worldwide availability of financial capital. The increasing emphasis upon the computer – aided – design and the computer – aided – manufacturing among the periphery of the computer network engineers have contributed towards the availability of industrial capital all across the globe. The facilities like Electronic Data Interface (EDI) and that of the revolution called internet have enabled the managers and the executives to follow the happenings of the entire world sitting in front of the computer screen. All these factors, certainly proves the fact that knowledge processes have been much crucial in the formation of the new economy and phenomenon of globalization has augmented such happening. Development of all groups – One of the most important aspects of the new economy has been the overall developments of all the parties that are involved with such process. As it has been discussed above that the new economy has been greatly influenced by globalization and is truly transnational in nature, hence it is prudent to estimate the firms and the corporations that are operational have to remain flexible and adaptable to the different situations and circumstances in which they operate to take the advantages that arise. With such mechanism in place, the firms benefit greatly and it is almost certain that such could never been possible if globalization would not have taken such a major shape. As the firms benefit immensely because of the globalization, it is also true that the workers and the employees of such corporations also gets benefitted in the long run. The workers can negotiate better agreements for them and also the companies initiate continuous training and development for the human capital to keep them aligned with the latest developments. It helps in overall development of the firms as well as the employees. The customers are also in the win – win situation as the tremendous competition in terms of product as well as price helps them to gain the best deal. As a result, it can be assessed that the twin factors of globalization and the new economy has assured developments for all the concerned parties. Role of the governments – It has been observed with due sincerity that the role of the government has major shifts in this era of globalization. In the new economy, it is the market that decides the price of any good or service depending upon the demand and supply of the goods or services. The absolute control of the government that was experienced in the earlier days is no longer observed. Yet, the governments have all important roles in terms of stabilizing their currencies and ensure higher savings. Many of the experts are of the view that the stable prices and the increased savings are the private interests of the parties. But the fact that such phenomena can only generate better environment for investment cannot be overlooked. In the market economy of today, the foreign investments in lieu of both foreign direct investments (FDI) as well as foreign institutional investments (FII) are channelized only to those nations that have ambience conducive to growth and investments and in that regard, stable prices and higher rate of savings are quite crucial (Smith, n.d.). Competitive Regionalism The above analysis of the relationship in between the globalization and the new economy emphasized on the fact that the space and environment of the production does not matter much in this era of continuous globalization. Rather, knowledge holds the crucial place. But the believers of the competitive regionalism oppose the view point of the neo-liberalists of the new economy. In fact, according to this school of thought, is still very important for having a set region dedicated to the competitive firms. The believers of this idea are basically of the view that it is important to have the knowledge based industry but also it is crucial to have industrial hubs as it facilitates sharing of resources and outputs which becomes beneficial to all the concerned parties. Therefore, the followers of the competitive regionalism are also often termed as the populists. Having large number of firms operational in a concentrated area is beneficial for the workers as they can get alternative employer quite easily. Similarly, the firms can also trace large pool of talents in the near location of their geographical periphery. Having intact geographical base is also helpful to the supervisors and the managers along with the general employees as the informal exchanges among them essentially contributes to advanced work relations. Having production facilities near the markets enable the global corporations to practice the methods like ‘just in time’ that benefits suppliers as well as buyers. The availability of research labs in close proximity to the industries are also many a times beneficial to the concerned quarters. Therefore, there is almost no doubt that such clusters of corporations are still important for the new economy and even amidst the tremendous influence of globalization (Smith, n.d.) New Economy, Globalization and the Service The basic difference in between the new economy and the old economy has been that of the knowledge based processes and industry. As knowledge has come up as the major point of distinction, the other important differences have been the factors of communication. The new economy is essentially based upon the pool of the talented and educated professionals empowered by modern methods of communication. Therefore, service sector has been the prime focus for the players of new economy where as it was the manufacturing processes, dependent upon the fossil fuels that ruled the old economy. The service oriented industry of the new economy is basically the output of the partnership of the business and the government along with the non – profit organizations. It is implied in the new economy that people select for the location at the outset and then look for job unlike the old economy where jobs were followed by people. The above points along with the globalization have contributed towards higher trade liberalization and almost costless transactions. The costless transaction in turn led significant rise in the mobility of capital globally. The new economy has experienced certain significant changes which includes that the production sites are nowadays closer to the market areas. The global sourcing has essentially made the cost of labor much cheaper. In the newer economy, also it is found that the foreign exchange reserves are getting back to the home country and there are considerable returns in the investments made in the developing nations. In order to get the full benefit of the new economies, the corporations are not only banking upon the BRIC (Brazil, Russia, India and China) nations but also on the high risk nations like South Korea and Angola. It has been estimated that behind such dramatic rise of the developing nations, the middle class of those countries played the most crucial role. It is further observed that the middle class is all set to become more powerful as by 2025 in India, they would be influential by at least ten times. In Brazil, it is observed that 69% of the total consumption is consumed by the ever growing consumption (Adelaja, 2009). Information and Communication Technologies Information and Communication Technologies (ICTs) have been the major driving force for the new economy. The developed information and communication technologies have four fold contributions towards the new economy namely financial depth, external openness, pro-competitive market rules and fiscal efficiency. In the present world of tremendous competition, the choice of policies can change or shape the entire environment. In order to implement the best of the information and communication technologies, it is presumed that the financial depth is required by the firms of the new economy for the purpose of investment, innovation and transformation. The external openness i.e. the global engagement and knowledge transfer contributed phenomenally towards the transformation and innovation. The third factor of pre-competitive market rules also initiates transformation in the arenas of products, labor markets as well as the business. Fiscal efficiencies assist to free the resources for the purpose of human development through efficient activities. It can be well said that transformation is the most crucial success factor for the new economy. The onus lies upon the players of the new economies to integrate the structures organizational policies, the transforming information and communication technologies and the human resource to male mark in the changing economy. One should also consider the all important factor of globalization as an important aspect for such integration (Mann, 2002). Developing Nations and the New Economy It is almost a proven fact that the multi – national corporations of the western world are relying more upon the developing nations and their economies rather the western economies. There are considerable reasons for such happenings. If one looks back to the recent financial recession and the global meltdown, he or she can find at ease that the developing nations were least affected by those. Amidst every odd, the nations like India and China still could maintain their rate of growth. Much of the credit goes to the strong regulatory norms of those countries. Also, it is true that major forms of work that such countries are entrusted upon involve that of outsourcing. It cannot be denied today any more that India has come up as one of the major outsourcing hub of the information technologies for most of the major IT companies of the world. Similarly, China has penetrated in to the markets of the production outsourcing. The cheap labor in those countries with the well trained, skilled and knowledgeable work force are the significant factors that have erupted as the crucial factors for the success of the developing nations in the new economy of today powered by globalization. Conclusion The adaptability and the flexibility are two most important buzz words of today. The corporations of the new economy should be all set to initiate advantages of the changing terms of trade. The industry of today is basically based upon the knowledge based processes and the factors of globalization and allied processes have rendered the work force more informed and talented. The service industry has been higher sought industry compared to the manufacturing processes. The factor of information and communication technology also has undeniable influence over the new economy and the globalization. References Adelaja, S., 2009. Globalization, the New Economy, and New Strategies for Economic Development. Michigan State University. Retrieved 03 February 2010 from http://www.landpolicy.msu.edu/modules.php?name=Documents&op=viewlive&sp_id=920 Mann, C., 2002. Globalization and Shared Prosperity: Opportunities and Challenges of the New Economy. Institute for International Economics. Retrieved 03 February 2010 from http://www.iie.com/publications/papers/mann0502.pdf Smith, T. (No Date). Globalization and the New Economy. Iowa State University. Retrieved 03 February 2010 from http://www.public.iastate.edu/~tonys/23%20LP6.pdf Walters, M. (1995). What is Globalization? The Globalization Website. Retrieved on 03 February 2010 from http://www.sociology.emory.edu/globalization/issues01.html Read More