The World Economy at the Start of the 21st Century - Case Study Example

International economy Student’s Name: Instructor’s Name: Course Code: Date of Submission: Introduction The international economy has grown tremendously due to global factors. The international economy can be recognized from the domestic economy in terms of the strategies and the way business is conducted. The developments in the 19th century have led to the development of international economy. The impact of international economy is that it helps to develop various economies as they can access the international factors of production (Torsten & Guido 2000). In this effect, this report will discuss the features of international economy as well as the factors in the 19th century that led to development of international economy. Features of international economy The international economy can be distinguished from domestic economy regarding the features that are exhibited in the international economy. The first feature of an international economy is more options of production. In the international economy there are many options of production which can be employed by various economies (Torsten & Guido 2000). For instance, despite the production processes which are used the same capabilities of production can be used somewhere else by other economies. In addition, the factors of production in the international economy are readily available and can be accessed by many economies. For instance, there is outsourcing of labor with relevant skills and this means that the production process can be altered with the aim of suiting the current needs by outsourcing the required services. Further, the international economy is characterized by intensification of international trade and flow of capital. After the World War 11, there has been increased integration of economy. This can be observed by the trade trends in the global economy. For instance, the industrialized economies managed to lower their average tariffs from 40% in the year 2946 to 5% in the year 1990s. This means that there was integration of economic activities between the developed and developing economies with the aim of stabilizing the global economies (Charles 2010). As a result of the international economy integration, there has been increase in intra industry trade. In addition, the developing economies like the economies from the East and Southern Asian countries have entered into the global economy successfully. Furthermore, the international economy is characterized by three main actors. These main actors in the international economy include multinational enterprises, global institutions and regional arrangements. From the resent research which was conducted, it was determined that there are about 60,000 parent firms which operate in the global economy. These parent firms have about 500,000 affiliates global and this means that international trade is characterized by the multinational corporations (Guillaume et al 2008). There are also international organizations in the international markets and they include International Monetary Fund which was formed in the year 1945 and World Bank which has more than 182 member states. There is also WTO which has the responsibility of managing the way business operations are conducted internationally. Regional arrangements like European Union and North American Free Trade Agreement (NAFTA) also form part of the global economy. In addition, international economy is characterized by the chances which are available to create new markets. The current international economy provides variety of opportunities which are available for smart minds that can be able to identify the opportunities and formulate strategies that can help to exploit the existing opportunities (Barry & Donald 2008). It has been realized that it is not lack of money that presents individuals from realizing their ideas but the ability to identify the opportunity and utilize the available resources so that they can exploit the opportunities. In this effect, international economy is characterized by variety of opportunities which can be taken up by the entrepreneurs to exploit and they require little investment. This makes international economy different from local economy which might have limited opportunities. Another feature of the international economy is the application of high technology like e business. Most of the organizations which operate in the international economy always apply the e business so that they can reach out the global customers. It is not possible to communicate the global clients without the application of effective technology (Geoffrey 1996). For instance, the access of the global suppliers is attributed with the ability to apply technology like e sourcing which helps to link the suppliers with the suppliers. As a result of this, it can be determined that international economy is attributed by the technology which is applied when compared to the domestic economy. Moreover, the international economy is characterized by large number of buyers and sellers who operate the businesses in the global economy. There will be no international economy if the number of customers and buyers is limited. This means that in the international economy there are many buyers and sellers as compared to regional or domestic economy (Guillaume et al 2008). This is because the international economy comprises of various small and regional economies which make up the international economy. As a result of the many buyers and sellers, there are opportunities which can be identified by entrepreneurs and take appropriate steps to exploit the opportunities as compared to local or small economies which have limited buyers and sellers. In addition, the international economy is characterized by lack of common culture. In the international economy there are many cultures since the business organizations come from different backgrounds with different ways of doing things (John 2000). Despite the different cultures, the international economy has not been hindered since there are international organizations which facilitate the international businesses. For instance, the EU has clear objectives of ensuring fair trade in the international economy. This means that culture has not been the hindrance to international economy. The international economy is also characterized by the ability to create equal playing ground for all economies. The opportunities in the international economy are not limited to economies with developed technology and science. Instead, the international economy provides equal playing ground for all organizations or economies (John 2000). The main concept in the international economy is the ability to offer unique products and services which can help to create competitive advantage. This means that the international economy has been regarded as one big economy and any good idea can come from anywhere in the world. In this effect, the international economy is characterized by providing equal playing ground for all the participants in the economy as long as there is innovation and there are new ideas which are developed. In this way, the international economy can be characterized by the above features which are unique from other economies. Factors that led to the development of an international economy in the 19th century The international economy developed greatly in the 19th century because of the sharp decline in the transportation costs. The cost of doing business in the international economy was high until the 19th century when the transportation costs declined due to reduction and elimination of the trade barriers which affected the transportation of factors of production from one economy to another. The taxes on the international trade were initially high but during the 19th century the taxes and trade barriers were eliminated and this made it easier to enter into the global economy (Anne 2006). As a result, the cost of products was low as compared to the cost of transportation which was initially the opposite hence encouraged international economy (Heins 2008). The change began in UK which provided effective leadership in the elimination of the trade barriers and this provided base for many economies in Europe to follow and the cost of transportation fell drastically encouraging international economy. In addition, in the 19th century there was a boom in the technical change or technology which was developed in the developed economies and this improved the economic developed. The technical change developed and this led to the introduction of electricity and its applications as well as effective communication and transport (Anne 2006). In addition, the introduction of the electric rail made it easier to transport products and the cost of transportation also declined. Through development in communication, data was shared by the parties in the international economy. In this effect, the technical changes led to the development of international economy. The computers were introduced in the 19th century and they helped to improve the communication between businesses in the international market. Technology contributed a great deal to the development of international economy. Liberalism after the World War 11 contributed to the development of the international economy. After the World War 2, most of the economies managed to interact and there was freedom of doing business globally since there were industrialized democracies. In the 19th century, there was ruse in economic nationalism and due to the war many economies converged together with the same interest. For instance, United States and Britain converged and they think that global economy should operate within the principles of the market (MacKenzi 2010). As a result of the convergence of the various economies, international economy began to build since resources were pooled together by the economies. During the 19th century, many economies managed to eliminate their trade barriers which affected the development of international trade positively. The elimination of the barriers to international trade meant that organizations were able to extend their business operations beyond borders and this contributed to the development of the international economy (Arne 2001). The wars also built strong reserves for foreign exchange which facilitated the development of the international economy. This means that there was free mobility of labor and skills among the economies contributing to the development of international economy. The trade agreements which were formed in the 19th century after the World War 11 also contributed to the development of international economy. This was part of the international trading systems which were put in place to ensure internationalization. For instance, the General Agreement on Tariffs and Trade which was formed in the year 1947 contributed to the international economy. It helped to develop policies that were applied when entering into international economy hence promoting unity and fair business operations (Gordon & Simon 2002). These international regimes have managed to promote openness in doing business in the international economy and this influences the business operations. Furthermore, the industrialization technology which was developed in the 19th century helped to promote mass production. Many economies globally managed to employ industrialization and this led to mass production which led to increased to increased production (Rondo & Larry 2003). This means that production costs were kept low but the production capacity was increased leading to excess production. This means that the organizations were able to enter into international markets so that they can find market for their products. In the 19th century, there was increased demand for unskilled workforce. This is because there was industrialization and the factories required employees who were semi skilled or non skilled. This led to outsourcing of the semi skilled workforce and in the process there was international economy where the required skilled can be met (MacKenzi 2010). As a result, there was development of the international economy. Conclusion The international economy developed mainly in the 19th century. The international economy has features which can be identified from other markets. The main features in the international economy include economic integration, allocation of e business technology, include many buyers and sellers and there are three main players who include international regimes, multinational corporations and regional arrangements. In the 19th century, international economy developed because of the industrialization and technical change as well as technology developments which helped to reduce the cost of transportation. The trade barriers were also eliminated thus encouraging the international economy due to low cost of transport which was initially very high due to developed of trains and steam engines. References Anne, O. K. (2006). The World Economy at the Start of the 21st Century, retrieved on 23rd April 2015 from https://www.imf.org/external/np/speeches/2006/040606.htm Arne M. (2001). "Global Income Inequality - Beliefs, Facts and Unresolved Issues¿, World Economics, Vol. 2, No. 3, pp. 87-108. Barry, R. W & Donald, A. W. (2008). The Oxford Handbook of Political Economy, Oxford UP. Charles, E. L. (2010). Politics and Markets: The World's Political-Economic Systems, Macmillan, London. Geoffrey, J. (1996). The evolution of international business, Routledge, London. Gordon, B & Simon, V. (2002). The Development of Modern Business, Palgrave, Basingstoke. Guillaume, D., Matthias, M & Kevin, O. (2008). "Globalization University of Oxford, Department of Economics. Heins, V. (2008). Intergovernmental Organizations in International Society: Struggles Over Recognition, New York. John, G., I. (2000). After victory - institutions, strategic restraint, and the rebuilding of order after major wars, Princeton University Press, Princeton. MacKenzie, D. (2010). A World Beyond Borders: An Introduction to the History of International Organizations, Toronto. Rondo, C & Larry, N. (2003). A Concise Economic History of the World, 4th edition, Oxford University Press, Oxford. Torsten, P & Guido, T. (2000). Political Economics: Explaining Economic Policy, MIT Press. Read More