Factors Influencing Shift toward a Global Economy - Coursework Example

Number Subject Name Lecturer’s Name Factors Influencing Shift toward a Global Economy Due date Date Submitted Factors influencing shift toward a global economy Introduction There is little doubt these days that the world is shifting towards a global economy and new geographies of economic activities are developing. Over the years, the word economy has been becoming increasingly interdependent. The globalization process has accelerated due to a number of factors, with most important being advancement in technology, trade liberalization, and international relations. There is enough evidence, from countries of different regions and different sizes, that as the process of globalization increases, their citizens highly benefits in form of accessing better-paying jobs, a variety of commodities, improved health, and lower prices. It is not a coincidence that over the past, most of the countries have been working on opening up their economy. The present paper set out a discussion on the role of advancement in technology, trade liberalization, and international relations in developing a global economy as well as setting new geographies of economic activities. Technological innovation Putting in mind that different governments have played a vital role in supporting the growing integration in several areas, the increasing growing interdependence has gained a great impetus from the technological advancement, which has facilitated to a reduction in communication and transport cost. According to the research conducted by Faitaihi (2014), technological advancement has drastically transformed the ease, quality, speed, and quantity of international flow of information and physical communications. In particular, multimedia communication and information technology are producing an acceleration of the change and shrinkage of the distance. Several studies suggest that over the past decades, communication and transportation cost has been declining drastically. The end of state monopolies leading to increased competition, especially in telecommunication sector has also attributed to the sharp drop in communication costs. Zhibiao (2012) observed that over the last three decades, there are two developments, which had been key to the globalization of information flows. These include computers, which have invaded thousands of households and, development and emergence of internet technologies. The former indicates that the role of computers has increased dramatically, serving not only as a tool for business and state organizations but also serving as a household electronic appliance for retrieving and processing information, communication, entertainment, and education. The latter bolsters a great leap in human and technical ability in assessing, interpreting, and using information. These two inventions have made the world appear as a smaller place. Computers have played an important role in increasing the number of internet users. Due to increasing use of internet, most of the organizations seeking to expand internationally have found online platforms as a convenient and cost effective channel to market their products. Through internet, one can be able to conduct research on foreign market. Such researches are important when making decision on whether or not to invest in a certain region/country. Nowadays, it is possible for a number of individuals to hold meetings from different geographical locations. With the new payment methods, transactions among inhabitants from different countries have increased. For instance, people can be able buy goods from Amazon and EBay, irrespective of the country there in as they only need a credit card or PayPal to pay online. Before such innovation, people were forced to travel to shopping stores. Thanks to technological advancement, entrepreneurs, particularly the multinational companies, have exploited the open markets as they spread production process all over the world. Gabriel and Mohamed (2011) by summarizing the work of many others claimed that opening the economic opportunities permits movement of capital, management, and technology from transnational corporations to host Country Corporation and entrepreneurs. As explained by Cheng, Johansen and Hu (2015), as national economies open, acquisition, and mergers between the business organizations in one nation by owners from other nations have become more common. It is worth to note that transnational corporations are not new economic agents, but what has happened is that technology has changed the manner in which they carry their activities across the world, as well as, increased their economic power. Basing on the survey conducted by Ming-Chang (2007) currently, the number of transnational corporations is estimated to be around 60,000 globally. Greater economic integration has not been the only relevant globalization aspect as advancements in technology have enabled instantaneous, inexpensive communication and massive information diffusion influencing the styles of culture, politics, and social organization. Alongside with technological globalization contributing to an explosion in exchange of information through the internet, it has also led to the creation of trans-national social networks and expansion of education opportunities. Information that had been held only by a few has become accessible to more diverse and wider audiences. It is worth to note that the relative ease of gaining access to information has increased the ability of the individuals to share views, making their demands to be known, becoming more aware of their rights and increasing their influence. Therefore, individuals are coming together to demand higher standard of behavior and improved level of services. Inferring from Kim (2011), social protests have changed, as they are no longer confined to local issues or one particular country; they have transcended national borders. Trade and investment liberalization Governments have been lessening restriction and regulations to increase trade activities in the economy. Popa (2014) claimed that most of the countries have realized that to some extent these regulations have been serving as a barrier to economic development. A number of countries have reduced the tax and duty imposed on capital goods, licensing restrictions, foreign exchange restrictions, bans on foreign products, procedural hassles, bureaucracy and investment restriction. Policies associated with trade liberalization open investment and trade with the rest of the world. There is no a single country that has accomplished economic success, without being involved with other countries. It is without a reasonable doubt that artificial barriers in the form of public policy intervention (such as import tariffs) have been a key hindrance to trade liberalization. Countries have interests in such measures because they serve as a means of protecting the domestic firms from foreign competition. Further, their importance in revenue generation cannot be overlooked. As natural barriers such as transport cost declines and advancement in manufacturing technologies creates new competitive threats, most of the countries have seen the importance of trade liberalization since organizations are competing on cost, quality, flexibility, and speed. Berggren and Nilsson (2014) claimed that after the Second World War protectionism emerged only giving way to gradual liberalization, consisting of rules- based multilateral liberalization and unilateral liberalization. Since then, there had been a number of issues restricting the creation of an international economy including financial assistance, trade barriers, piracy, and infringement of intellectual property rights. Therefore, more countries are coming together to form unions, which advocate free trade or revised trade terms which favor trade among the member countries. A good example of such organization is the European Union, which comprises 28 countries located in Europe. Another example is World Trade Organization, which offers an international platform to a number of countries to discus greater free trade regimes. According to the research conducted by Hariharan and Rangan (2012), World Trade Organization actively play big role information of bilateral agreements on less restricted trade in commodities and technology. As explained by Claudia and Mihaela (2014), with increased unions, different leaders are able to formulate different strategies on how they can improve their economic conditions. Openness between industry and government leaders is important as it contributes to shared resources and knowledge. International meetings and summits held between leaders help in sharing trends and insights that can benefit all the parties involved. Karadagli (2012) observed that almost all countries are encouraging foreign direct investment. FDI is recognized as vital for developing and emerging markets. Organization requires expertise and sophisticated investors' funding to go global. Several studies suggest that even the developed world requires cross-border investment. Most of their investment is through acquisitions and mergers between mature companies. In most instances, it involves International Corporation, which are refocusing or restricting on core businesses (Zinkina, Korotayev and Andreev, 2013). In response to this, countries are streamlining their trade policies to encourage foreign investors. This includes all moves that are geared toward establishing a stable business environment such as maintaining political stability and reducing bureaucracy and procedures required one to set a business. Further, it is essential to note that firms are seeking to go global (using strategies such as exporting) to gain a competitive advantage on economies of scale. Other feels that they have already saturated their home market. Thus, they have to look for new markets to grow. Another motivating factor is firms want to enjoy resources in others countries. Thus, they have to establish businesses there. All these factors have facilitated to creating an international economy. International relations International relations have been an exceptionally significant aspect in the formation of global society. Through international relations, different countries have been establishing agreements and treaties to ensure that their citizens are able to go about their daily task in an amicable way instead of engaging in conflicts with their neighbors. This has significantly increased the economic activities, especially trade between the inhabitants of different countries. As explained by Reklaite (2015) positive economic relations encourage effective trade policies. This has been important in gaining access to new and larger market shares, as companies are able to establish new entities or sell their good in the foreign countries. Along with transport of commodities along international borders, individual are able to move without or with little restriction across the borders of the countries which share a good international relationship. This involves both permanent and temporary migration. As the ease of moving from one country increase, the number of transactions among the inhabitants increases as well. This is not only common with the people since recently the amount of goods which are moving from one country to the other have increased. Following this, most of nations are focusing at producing goods that they have a comparative advantage and import the rest. The rate at which companies are outsourcing has also increased. This has increased overall production in the world. According to the research conducted by Suplico (2008), international relations also influence the formulation of border control policies. Countries frequently face international issues that are large for any single country or at times continent to solve alone. Good examples include terrorism, pandemics, and environmental concerns among many others. All these issues have adverse effects to the country’s development. For instances, most of investors prefer to establish business in politically stable environment thus a country that experience frequent terrorism attack will not attract investors. It is through cooperation, countries are able to come up with solutions to such problems as this allows them to share a pool of resources and relevant information. Conclusion In the world today, the importance of international economy cannot be ignored. Both countries and individual members have played a role in the formation of a global economy. From the analysis of the above, there are three major factors, which are associated with globalization. Firstly, the advancement in technology has reduced communication and transportation cost making the world smaller. Secondly, in pursuit of economic growth every country has been working on improving its trade terms leading to trade liberalization. Thirdly, most of the nations have been keen in maintaining good international relations. 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