The Travels of a T-Shirt - Government Subsidies - Essay Example

The Travels of T-Shirt-Government Subsidies A subsidy as an economical term falls under the larger umbrella of trade. Trade is a fiscal term defined as the exchange of goods and services for money. In governmental subsidies, in most cases, the government does a cut in expenditure to costs for the ordinary citizens. Governmental subsidies henceforth in one way or the other involve an international aspect of the trade. International trade refers to the sales that cross juridical borders. International trade is, therefore, the exchange of goods and services across international borders.

In various countries, international trade represents a substantial share of Gross Domestic Product (GDP). In agreement with government subsidies, this form of government intervention reduces the cost of production and encourages the producers to increase output. Government intervention/producer subsidies are of various forms. An example is state subsidies. State subsidies are financed from general taxation or by borrowing (Schuster, 2006). Government subsidies cause various productive firm’s supply curve to shift to the right.

The amount spent on subsidy by the government is equivalent to the subsidy per unit multiplied by total output (Day & Schoemaker, 2005). A direct subsidy commonly offered by a government to supplement consumer’s demands has the effect of boosting demand. This results in an outward shift of demand. Examples of subsidies include an input subsidy, bails, fiscal assistance (loans and grants), government grants to cover losses made by business and a guaranteed on the factor cost of a product. Subsidies make sense in various demand and supply situations of the economy.

The travels of T-shirt in Global Economy represents some of the scenarios in which subsidies may play a crucial role in the examination of market forces, power and politics of world trade (Rivoli, 2015). The overall international trade topic is a very crucial topic to discuss in the abstract though when this topic is focused on a single product, it is easy to be dealt with (World Bank Group, 2011). Subsidies in the international trade in most cases dwell with specific products. Only in extreme cases in the world economy do subsidies deal with conglomerate products.

Through the story of travels of T-shirt, globalization advocacy is portrayed critically as the major issue behind international trade and individual country’s economy development (Prono, 2006). The competitive economic markets and increased living standards at the expense of the maximum and minimum wage bills among different countries make subsidies a better option for the improvement of individual citizen’s living standards (Butters, 2005). In summary, politics plays a major role in the world economy.

Politics and economy are two sides of the same coin thus economy cannot do without politics and vise-versa. World markets should, therefore, not be misinterpreted as an entity of globalization, but a political structure. In the global market economy, the world systems culture presents a critique to the developed economies’ tendencies to control the developing or undeveloped economies. This is a better example for understanding subsidies. While subsidies are good to the overall population, it affects the production in terms of reducing demand while increasing supply.

This is because, in cases of governmental subsidies, individual producers will be affected in one way or the other. ReferencesButters, R. (2005). Teaching the benefits of capitalism. Retrieved from http://www.learningace.com/doc/269514/6e8e71a234c31342375639ed1e54f2a3/buttersDay, G., & Schoemaker, P. (2005). Scanning the periphery. Harvard Business Review, 83(11), 135148.Prono, L. (2006). Foreign direct investment. Encyclopedia of World Poverty. SAGE Publications.Rivoli, P. (2015). The travels of T-shirt in the Global economy: An economist examines the markets, power and ploitcs of the world trade (2nd ed.). Hoboken, NJ: Wiley.

Schuster, J. (2006). International trade. Encyclopedia of World Poverty. World Bank Group. (2011). The vision of the World Bank Group [Digital Slideshow] http://digitalmedia.worldbank.org /slideshow/? Slideshow id=201