Economic Development in the Age of Globalization
Economic development is a broad term, but it simply means growth of the economy. Economic development can only be realized in the region through adoption of favorable policies. Such policies in most cases aim at adopting or promoting the use of new technologies or approaches to improve people’s quality of life. These policies mostly revolve around development of infrastructure, health, security of the people, education, and human capital among other initiatives. The aspect of economic development dates back to the 1940s. Immediately after the First and the Second World Wars, the American leadership at that time began contemplating seriously on ratifying policies that would spur economic growth. Globalization, on the other hand, is a process through which people, organizations and governments interact and integrate through global trade and investments with the help of information technology. This paper examines the reasons behind the emergence of economic development policies, the consequences of these policies and how economic development policies relate to developed countries, such as the US. In addition, the paper analyses how economic policies relate to developing countries, such as China, and the countries of sub-Saharan Africa.
The Reasons behind the Emergence of Economic Development Policies
From the conclusion of the World War II, there has been drastic growth in most nations of the world. This is attributed to various factors with globalization playing a crucial role. First, the rise of international integration with globalization led to the appearance of economic development policies and even continued revision of the old policies. Global integration is the closeness of different nations. This allows interchange of ideas between the participating countries, and creates an impact on economic development. Economic integration led to the emergence of economic development policies, an example being the trade policies of the different countries. In this interconnected world, it is not easy for a country or any region to isolate itself economically. Therefore, in this case economic integration or globalization gives countries a platform to exchange data that is crucial in the formation of new economic policies (Ghura, 2012).
Secondly, with a gradual increase in human population, there was the need of coming up with guidelines that would help in economic development. Reese & Fasenfest (2004) note that the development of a given economy depends on the population. Proper policies geared towards a nation’s economic growth should, therefore, consider its population. The decline in population of some Asian countries such as South Korea led to the rapid economic development. The decrease in the number of people is mostly attributed to the fact that it is easier for governments to cater for lesser people than larger populations such as those of developing nations. Such policies aim at controlling the country’s population or using the population density of the people advantageously for economic development.
Third, the creation of economic bodies such as trade block between countries of the same region or with political closeness led to the establishment of economic development policies. These policies aim at controlling the economic interactions between the participating nations, and ensuring that there is mutualism and not that one country benefits more than the other. They also aim at ensuring that nothing comes up to interfere with the political and or economic relations between the nations (Fischer & Thomas, 2011).
Fourth, the wake and birth of industrialization led to the need of creating policies to ensure that these sectors flourish and add to the economic basket of the nations. After the Second World War, most countries started focusing on industrialization, and this led to the emergence of new industries.
Production of goods required presence of raw materials and the end products needed to reach diverse markets. With the wake of globalization, the inflow of raw materials and outflow of end products have become easier. However, there is a need to regulate how goods are imported and exported in these countries, thus, the birth of policies to govern the export-import flow. The emergence of such a policy is to ensure that the country’s economy is favored at large by the exports and that the imports are not a burden on the financial state of the nation.
Fifth, the emergence of new technologies in the globalization era has led to the birth of economic development policies and continued revision of the policies as technology changes. This is to ensure that the nations are updated on what happens in the economic world as well as to enhance the livelihood of people intensively through technology. Technology is of fundamental importance in ensuring that the people’s standard of living is of high quality. An important technological development impacting to a large extent on people’s living standards is telecommunication. According to Renert (2004), communications aid in exchange of information and even conducting transactions at different places in a short period. This is critical for economic development and, hence the reason for many nations to come up with policies that favor technological advancement as a part of economic development policies.
The Consequences of Economic Development Policies
According to Bartik (1991), the outcomes of economic development can be estimated in terms of the levels of the economic activity in a particular region. The consequences can be viewed in terms of wealth, the output of businesses in the given area, the gross product of the region, the individuals’ personal income and the jobs and type of work in the area. Any of the above can be in a position to explain the economic development of a given region (Tobbin, 1988). The indicators also show the improvement of well-being of people which is usually the biggest goal of the economic development efforts. The benefits of the user in the economic development, as well as the social impacts, may comprise of the valuation of the amenity changes or the life factors’ quality. Such quality of life factors and the changes in amenity involve issues about safety, health, air or nose quality, as well as recreation (Bartik, 1991).
The consequences of economic development may give rise to the fiscal effects, which comprise of the changes in the government revenues as well as government expenditures. The economic development impacts on the total business wealth, personal income or sales can impact on the revenues of the government by contracting or expanding the base of tax. Lin (2012) considers that the consequences on employment the associated levels of population can impact the expenditures of the government by varying or altering the demand for the public services. The following can be viewed as the consequences of economic development policies.
The total employment gives the picture of the number of additional jobs that are created by the economic development. According to Ghura (2012), the number of full employment is the most popular way of measuring the consequences of economic impacts because it is proved to be the easiest to count rather than using the large figures such as millions of dollars. However, this consequence of the economic development does not reflect the quality of employment that these opportunities offer. Moreover, the total number of employment cannot be compared to the public costs that attract these jobs easily (Reinert, 2004).
Aggregate Personal Income
Fischer & Thomas (2011) regard that when the levels of payment, as well as the additional number of workers hired rise, the total personal income also goes up. The rising of the aggregate personal income happens as a consequence of the economic development policies. Either of the above conditions occurs as an impact of the growth of the business revenue. However, the measure of the aggregate personal income as the consequence of the economic development policies may be not reasonable (Todaro & Smith, 2012). The reason why this is not reasonable is that this is an understatement of actual impact of income as long as there also exists the profit (some net business income), which is generated and paid out as dividends to the local owners of the enterprise. The net business income may also be reinvested locally in the equipment, labor training or buildings. The reinvested net business income may also further improve the economic base of the area.
Value added is usually the equivalent of gross domestic or gross regional product. The value added can be categorized under the income economic development policy that measures the full effect of income. It shows the picture of the total wage income and the profit of the corporate that is generated in the region. The value added as a consequence, however, can be an overstatement of the actual income effects (Ghura, 2012)
The business output is also referred to as the revenue of sales volume. It is the widest measure of the economic activity, as well as the consequence of the economic development policies. The output of the business generates the largest numbers, and includes the full level of the business revenue. It pays for the costs of the materials as well as the costs of labor. It also generates the net income of the enterprise, which are the profits (Reinert, 2004).
The values of properties are also used to measure the consequences of the economic development policies. They reflect the wealth and income that is generated. However, the property values cannot be added to the income and/or to the value added because it will result to double counting. According to the property economic development policy, the values of property may arise in accordance with the increasing demand for property. The demand for property may be as a consequence of increasing the total personal income or the profits (Bartik, 1991).
How Economic Development Policies Relate Developed Countries, Such As the US
The US is one of the major economies of the world. To achieve this status, top-notch policies need to be put in place to ensure economic development. The economic rise of a given nation depends wholly on the guidelines put in place to ensure this. The free trade policy of the US, for example, has predominantly impacted positively on the country’s economic development. The prosperity of the American nations rests on the structure of international trade. The competition levels in the open market has drastically led to better products, good-paying jobs, a rise in investments and saving levels and establishment of newer markets. From the 1990s, the United States has experienced a dazzling growth of its economy with an increase of 23%, and an increment of the Gross Domestic Product (GDP) of the nation by 2.1 trillion dollars, therefore, impacting on the citizens wealth by greater than five thousand five hundred dollars (Lin, 2012).
Education policy is also one of the major contributors towards the economic development of a given nation. The better education systems of developed nations, US being an example, have influenced economic development (Ghura, 2012). Education is a fundamental necessity for each economy as it increases the number of skilled labor. A clear picture of how better education policies impact on economic development can be achieved through comparison of the education systems of developed and developing nations. The supreme quality pre-school policy is estimated to give a result of a 2 trillion dollar increment in the US GDP by 2080 and this will greatly be attributed to the increase in the skilled labor population and, therefore, economic independence among the people (Lin, 2012).
How Economic Development Policies Relate To Developing Countries, Such As China, And the Countries of Sub-Saharan Africa
The state of underdevelopment or slow development is mainly attributed to many factors that include poverty levels, politics, and availability of resources among others. These factors also affect the process and the quality of policy making (Todaro & Smith, 2012). The implementation of policies depends on the economic status of the nation. According to Reinert (2004), developing countries such as the African nations have low economic status especially in terms of finances leading to poor education systems, relatively poor trade in terms of exports, poor infrastructure, and low standards of health especially in the rural settings leading to poor work output among others.
Economic development is a broad scope and involves the implementation of various policies that aid in raising the people’s quality of living of a given nation. As seen in the already developed nations, proper policies play a significant role in economic development. However, implementation of some of this policies may depend on the financial power of the country, for example, transport systems will be better only if a nation has the proper finances to sponsor its creation. Globalization, on the other hand, has substantially achieved a goal in improvement of economic development. Developing countries with the help of globalization are adopting best policies from developed countries. This is expected to transform the economies of developing countries.