The Global Economy
>From Wikipedia, the free encyclopedia (Redirected from Global economy) Jump to: navigation, search <http://upload.wikimedia.org/wikipedia/commons/8/8b/Merge-arrows.gif> It has been suggested that this article or section be merged with World economy. (Discuss) The rise of technology has allowed our environment to be characterized as a global one. "The global economy gave business the ability to market products and services all over the globe. It has also allowed them to develop partnerships and alliances throughout the world, which has become essential for success in today's business." (1) Contents * 1 Advantages * 2 Disadvantages * 3 Economies of Scale * 4 The Global Economy * 5 See also * 6 References [edit] Advantages There are numerous advantages to the shift to a global economy. The major one still remains to be a company's ability to maximize economies of scale. The breaking down of global barriers allows companies to benefit from the largest and cheapest workforces, raw materials and technology. For example, "many North American publishers actually write and produce much of their software in countries such as India and Pakistan." (1) Other advantages that companies benefit from include: the opportunity for smaller companies to expand globally quicker, having more choices when recruiting a workforce and lastly the opportunity to target a larger customer base (which translates to greater earning potential). [edit] Disadvantages The major disadvantage for a shift toward a global economy is the loss of domestic jobs. Larger, more established countries such as Canada and the United States cannot compete with the low wages that such as Mexico and Pakistan offer. This is the reason why a majority of products/services such as Gap and Nike have moved their factories overseas. This shift has not only increased the unemployment rate but it has also caused large corporations to exploit third world workers, in particular, children. Other disadvantages include: trade barrier issues, currency problems, the possibility of increased transportation cost and lastly the possibility of language barriers. [edit] Economies of Scale Economies of scale represent a particularly important source of increasing returns. Economies of Scale are unit cost reductions associated with a large scale of output. (2) In many cases international trade results in a country specializing in the production of a certain good, and if economies of scale results, than the output of that good expands and therefore the unit cost will decrease. To fully realize the benefits of economies of scale, the good in that area must be a substantial proportion of the total world demand. This is because in many cases the world market is only able to support a limited number of firms in a certain country. The world market determines their level of support by the product demand and also by the number of other countries in the world that have that are producing the same product. A recent example of this would be the EU banana dispute and the European Union has been forced by the WTO to decrease their levels of subsidies going to their former colonies. By decreasing the EU funding the WTO is trying to create a more level playing field for the rest of the banana growing regions so that true economies of scale can emerge..(2) [edit] The Global Economy The Global Economy has virtually no boundaries. Companies of any size can sell their products all over the world, and cater to buyers all over the globe. Consumers can purchase goods from almost any country that has a communication network, preferably the internet. As stated in the Management Information Systems textbook, the Global Economy "is one in which customers, businesses, suppliers, distributors, and manufacturers all operate without regard to physical and geographical boundaries."(1, page 8) This increase in globalization has created many new opportunities, such as niche markets, and requires everyone to keep up with globalization in order to stay competitive. As David Shane points out in his article entitled "Youth must learn skills to succeed in Global Economy", "Technology and trade separate the economy into two camps -- those with the skills to participate in the global economy and those who lack them."(3) Shane indicates that advances in technology are giving developing countries the ability to compete directly with developed countries in terms of education and skills. With the ever increasing Global Economy and widespread use of the internet, people and businesses are realizing that they are often competing with people around the world for contracts and business deals. The Global Economy has created an environment in which many large corporations are becoming transnational firms. This trend has developed in to a worldwide 'race-to-the-bottom' where companies are so focused on staying competitive that they often outsource production to developing countries with the lowest labour and economic standards.(3) These transnational corporations often lobby their government in order to gain access into these developing countries. Unfortunately, many developed countries have protectionist policies that do not enable developing countries to export their goods into developed markets. Trade barriers more often create economic problems in the Global South, as compared to the North. With the advancement of the internet and technology, their will likely be an increase in the reduction of trade barriers. The Global Economy will continue to expand, and the changing trade barriers will create new and different opportunities than the ones many businesses are faced with today. [edit] See also * World economy * Globalization [edit] References * (1) Haag, Stephen. Management Information Systems, second edition. * (2) Hill, Charles. Competing in a Global Marketplace, fourth edition. * (3) Indystar.com, accessed March 20, 2005, [1] <http://www.indystar.com/articles/5/230662-8625-021.html> Retrieved from "http://en.wikipedia.org/wiki/The_Global_Economy"; Categories: Articles to be merged | Economics _______________________________________________ Marxism-Thaxis mailing list [email protected] To change your options or unsubscribe go to: http://lists.econ.utah.edu/mailman/listinfo/marxism-thaxis
