How Globalization uses “old tools of” Economics in New Ways


How Globalization uses “old tools of” Economics in New Ways

What really differs the most recent times of general outsourcing of industrial production to countries as China from similar occurrences of the past when such outsourcing was done to Japan is the magnitude of the Chinese marketplace, the ways Chinese Government balances market “demand-to-supply” in trade, employment, by using its governmentally run business, Social, Infrastructural and Fiscal policies instead of relying on the market forces only. In the past such approach could bring inflation, shortages and general dysfunction of exasperated and exaggerated employment, low productivity and generally low competitiveness. Similar to the Chinese policies were used by the Soviet Block Economies and is well know the consequences to these countries of constant economic struggle and underdevelopment, low standard of life and shortages. Thus, what is the difference of using similar approaches now-days when the experience of the past is nowhere functional?

Also, personal freedom was associated with economic development and advance in the past so what changed most recently for totalitarian country of China to manage consistent growth even where a single party government did not change, and personal freedoms in China are limited?

What is wrong with this new emerging picture of Chinese economy run by a communist government braking self adjusting dialectic economics of Capitalism however succeeding in maintaining consistent economic growth even in time of great recession and the rest of the world deepening into fiscal shortages and rising debt?

Well, lets go back to History: since ever known there were the rich and the poor, the having and the having not, the oppressed and the oppressors, the systems of government ships and the economics always protected the having and suppressed the having not, however in time the meaning of the having not have risen as needed for more educated employment consequently building the middles class that responded as a demand to the rising industrial production; throughout that time was built the known marketplace of supply-to-demand economy (notice please the place of supply); the having became very much dependent on the having not for market consumption to maintain the ever rising industrial production thus the “having” became more like of an abstraction then a reality because it was not anymore having objects or even capital but ‘having” was more like participation into a marketplace by owning and reinvesting into the motion of this marketplace, the motion of the modern day Capitalism. Prompted growing demand for industrial production, freedom of business (allowing shady business practices of easy business), opening of new markets around the Globe adding demand to the local marketplace, access o capital trough public financing and excessive concentration of capital which trickled-down immersive financial power, general individual freedom and well established rule of law, all of it made economics of Capitalism very vital to bring prosperity to the North Americas, Western Europe, South Asia and Japan. Long term growth of these economies was the envy of anyone in the world: opportunities to manage good life trough education and labor, to find ones place in the society responding to ones hard work and talents, to live in freedom of speech, to vote for your governments: what a staggering success of the modern day Capitalism! More individuals in the most developed countries had access to education and possible success stories then anywhere else. Thus how Capitalism and Personal Freedom were well associated to progress, opportunities, and finally personal success so important to anyone in the world. The contrast between the oppressed people in the Soviet Block and the free successful people of the Western Countries was the highest show of the rightness for the Capitalism ever. Soviet style economics had businesses and financial system run by the governments: low productivity, shortages, wasting of reassures was a synonymic with such economics. Suppressing individual freedoms, imposing strong dictatorships and control over all was their way.

However China was a part of he system where the said above refers to in full power: mismanagement, low productivity, wasting of recourses causing technological backwardness and shortages of goods and services were well practice there. So, why China runs constantly for the last 20 years economic growth with a Communist regime still in place?

While post communist countries are up to nowhere running into high unemployment, lack of consistent growth and high national debt, and like Russia expanding the contrast division between rich and poor, Social policies in these countries are reduced to minimum, hospitals are closed and pension age is expanded, lack of opportunities caused by budgetary cuts and fiscal shortages.

While the most industrialized countries are running into high national debt, high unemployment and very low growth if any, capital and industrial production that is the majority added to their GDP outsourced and moved away to…. China.

What is wrong with this picture indeed? Actually, everything is totally wrong: the whole ideology and the consequential system of economics of Capitalism, the whole mythology created in the Last Century does not properly explain and uses economic tools to balance “demand-to-supply” on the globalizing marketplace. Let’s put it this ways: the presently used system of economics of the trickle-down Capitalism, the Global Financial System represented by the World Bank, IMF and WTO and the Western Governments’ economic polities are well very wrong, because of the Globalization supported of rapid technological innovations, of well smoothed system for Global Investment, of ever rising Productivity, and of China, India and Vietnam’s entering into the Global competition for industrial production and capital services. Which new developments are very such for the entire history of the world and thus have never before being dealt with.

What really changed is the tip-off of a “supply-to-demand” into  a “demand-to-supply” balance of a Global marketplace, prompted by the globalization, high technologies, China’s huge industrial capabilities, and the rising individual expectations worldwide by the Internet, the established European Union, and the believe of more individuals of their entitlement to a better life.

But what really makes this change even harder to avoid is the already polluted Earth in needs for prompt actions of reduction of pollution and the already exhausting Earth resources which prompts toward renewable energies and energy preservation; in both these cases continuation of the industrial growth related only profit of mostly industrial production is not feasible and even not possible. The Utopia of perpetual industrial growth for maintaining Fiscal reserves by using current Global Financial System of lending approaches is economically inconsistent and just not possible. To preserve the Earth or to change into using renewable energies is a very expensive preposition such on a profit only based  competition will not function even under very strict Global regulation that could control environmental standards everywhere less such does not exist; in a starving for fiscal reserves world compromising environmental standards is a common practice, such on a purely return on investment will not function because in many cases renewable energy sources are very expensive requiring huge investment and the pay back is slim if none.

Impressing are the attempts made by the Most Developed Countries’ Governments to curb on pollution and promote renewable energy sources, unless a closer look is taken in many almost everywhere in the poverty driven world where a single family may burn 15 m3 to keep a single room heated creating pollution as a small manufacture and cutting wood indiscriminately. Well the coal power generators are blowing pollution by the thousand tons, and the poor peasants are cutting and burning jungle to put small farms. It should be obvious that fighting pollution and expanding renewable energy sources comes after poverty is rooted out and after these technologies become economically comprehensive, but in a profit only based industrial production economics rooted into the modern day Capitalism such possibility is beyond comprehension.

To associate impractical usage of economic tools that lack flexibility in wealth distribution and redistribution, that ignore the importance Social and Infrastructural Expanses might have for balancing “demand-to-supply”, that treat economics as a “believe” and ignore needed practicality, that call for “austerity” and budgetary cuts able to hurt many families and mostly the poor and the minorities calling all of it economics and the global financial system, such policies are self-proclaimed idols lacking even common sense.

The main role of the Global Financial System is to balance Global “demand-to-supply” to avoid inflation instead of being a profit based lender as it is.

The world is not anymore appropriated by the ideologies of any, even (for very sorry) personal freedoms are becoming irrelevant for economic growth; the main and most important principle is that economic “tools” are to be used “as it comes: as it goes” so when Social and Infrastructural expanses are needed for distribution of wealth so let it be, when low interest rate loans and subsidies are needed to root-out  poverty and pollution so let it be, when Capital is needed to accomplish the above points so let it be issued by the Global Financial Institutions as far as it does not provoke inflation. In the same time when expanses and low interest rate loans are about to provoke economic turbulence action must be taken to curb on these so let it be.

To save individual liberties and freedom the economics should advance and provide people with employment opportunities, with access to the Global investment thus small investors and businesses to be able to benefit from the difference in standards of life elsewhere and profit from such, with business laws and regulation protecting them from fraud and damaging business activities that action will raise small businesses security and make them more finance-able.

The Globalization represented by China in its best uses “old” economic tools in basically new ways: it allow private ownership and business to prompt competition but at the same China puts heavy burden on Risk Management having them liable for their actions that generally differ from the West, China balance Private Business and Employment with Governmentally run Business and Employment to maintain pointed salary levels, China generally uses Social and Industrial Expenses to balance market “demand-to-supply”, China changes economic “tools” “as it comes: as it goes” adjusting to the contemporarily occurring issues: very flexibly and objectively.

Some people may argue that the constant growth of the Chinese economy is a result of the free enterprises allowed and the export to the US and EU markets and they could be right at the moment but in prospective China manage its economy under the circumstances therefore the needs at any moment would bring their practical actions. China is not in growth just because its huge marketplace, nor just because of the floating high technologies in manufacturing, nor even because of the floating capital from elsewhere but it is mostly because of the China’s pragmatic approaches in economics: the ways Chinese economy is managed is at its best.

So what about the rest of the world, if so much industrial production is moved and outsourced to China how the rest would manage their fiscal reserves and policies. The Capitalism and the existing Global Financial Structures work at its best when industrial growth is maintained with short self-adjusting recessions, because the lending system leverage on high interest rates, therefore if recession prolong and the growth (it must be mostly industrial) could much the needed to compensate the high interest rates and the accumulated trough these recessions debt then it is doomed to fail. Thus if neither recessions are any shorter nor industrial production is coming back nor industrial production would be able to be developed by many countries around the world then the current Global Financial System will not be able to handle the accumulated national debt by many countries, therefore its feasibility in the way as it works is to become and already is contra-productive indeed.

Many economists are totally opposing any major changes of the Global Financial System and how Global Business is conducted; they believe that small fiscal and monetary adjustments supported by the right governmental policies will prompt consistent Global growth and after the Most Developed Economies get out of the big hole of the last Great Recession  these will be followed by the Less Developed Economies: for these economists I would say just take a look at the last Great Recession, at China and at EU (at countries like Greece, Spain, Portugal and Ireland) and you will notice the difference this last recession was from the previous recessions in its hopelessness and debt, just take a look at the US and its deteriorating Middle Class that has not stop being reduced since the beginning of this Century for a moment, just take a look at the Earth environment being very polluted and into Earth’s exhausting recourses and then put all of this together and estimate how much economic growth is needed for that many economies to manage their fiscal reserves by not getting into general poverty, and one of the most important questions you should ask yourselves is if there exist real possibilities for industrial production that consists from the majority part of anyone GDP could be expanded under the recent condition so it can start adding enough fiscal reserves and to whom it should go first?

For more see: Market Economics by Joshua Konov.

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About Joshua Ioji Konov
email joshua.konov@gmail.com twitter joshuak2077

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