Drivers Of The Global Economy
Globalisation
After WWII, international trade was seen to increase tremendously because of the globalisation issues. Following the defeat of the Nazis and the end of the second global conflict in 1945, the pace of globalisation increased leading to integration of people throughout the world. The entire world became more unified into a large single society that was functioning as one, especially business wise, due to the influence of globalisation. It included the combination of political, socio-cultural, technological and economic forces around the globe to work as a single unified system. Overtime, globalisation has increased the pace of economic integration of many economies around the world. Several trading blocs such as the European Union have been created because of globalisation thus enhancing the pace at which the different nations were trading and foreign direct investments were being made. The spread of technology, migration of people, capital flows and foreign direct investments, which have all played a crucial role in increasing the pace of growth of the global economy in the post WWII era, have been greatly enhanced by globalisation.
It is in no doubt that globalisation has greatly enhanced free trade around the world. This is a concept in business which promotes the liberty of individuals and organisations to sell and buy from whichever markets they prefer since competitive in the market increases business quality. This includes buying and selling commodities that are manufactured in foreign nations. Multinationals are thus less limited when it comes to the free markets, since they are able to target the international markets in which they can offer their services and products and compete with other players offering similar services and products from other regions around the world. In this respect, globalisation has played a major role in ensuring that free trade is accepted by several nations all over the world. Thus markets across the globe become more and more integrated.
Over the last 60 years, globalisation has greatly increased the rate at which people move across borders of several nations across the world. This has led to a massive transfer of several factors that are very crucial as far as increasing the growth of trade and foreign direct investment is concerned. Ever since the close of WWII, there is virtually no single nation around the world that can claim that all its residents are purely its citizens by birth. The massive movement of people across international borders has greatly increased the pace at which trade is carried out between nations as well as foreign direct investments. Following these migrations, individuals and organisations were now in a position of making trade decisions in a global perspective and the physical national borders of their countries no longer acted as barriers but as facilitators of international commerce. Individuals and organisations were in a position of investing in nations where they felt they can easily break even and attain their main objectives.
Technology and Communication
Technology has been a major factor that has led to the growth of trade and foreign direct investments in the global economy. One major aspects of technology that has led to increased global commerce and foreign direct investments in the post WWII era is increased speed of carrying out various transactions. The improvements that have been achieved in the transport world have made it quite easy for people and products to be transported from one nation to another. In the last half of the twentieth century, there were enormous advancements in the world of transportation. The two main modes of transport that have achieved economies of scale which have led to increased trade and foreign direct investments were air and water transport. The vessels which are used in these modes of transport were greatly improved in terms of capacity and speed, leading more people and products being ferried across nations within a relatively short period of time.
There were also substantial technological advancements in the world of communication. Comparing the modes of communication that existed before the ones that were utilized in post WWII, there is a great difference. Television displaced radio as the primary means of instant global communications, bringing knowledge about other places and peoples to every community. This eventually led to a lot of growth on foreign direct investments and commerce in the global economy. The later invention of cell phones and their subsequent use as the preferred mode of communication by millions of people around the world has had great impact on the international trade in several aspects. It made it possible for people to easily communicate with each other irrespective of ones location in the globe. This demonstrated that people could access cell phone services which are not very expensive for most people.
During the same time period, there came the information technology (IT) revolution which accelerated the processing and distribution of information and helped reshape the entire world to be more or less a global village. With the recent emergence of Internet technology, it has become very easy for people across the world to learn about and obtain the services and goods that are available in the international markets as well as advertise their own. Internet technology has had a great impact on the rate at which people learn about various opportunities existing in foreign nations that they can utilize to achieve their own objectives. With millions of people around the world accessing the Internet on a daily basis, this form of technology has proved to be a great factor in increasing growth in trade and foreign direct investments in the global economy in the modern world.
The advancements in the world of communication over the last half century have made it possible for people around the world to learn about the cultures and traditions of other people, and thus manufacture goods and develop services tailored for those markets. This has led to further integration of peoples cultures and traditions making the international society to be more or less one community. For example, world English has become the de facto standard for global business communication. Individuals and organisations participating in the international community can more easily trade higher volumes of products in international markets since they are able to offer and deliver preferred products in such markets. Thanks to the advancements in financial markets made possible by innovations in the IT world, individuals and organisation can easily make international payments through various high-tech services offered on high-speed networks. As a result, making foreign direct investments to several nations around the world is quite easy. One does not necessarily have to travel physically to the nations he or she intends to invest their money in.
Trade Laws and Markets
In order to make international commerce and foreign direct investments a reality, governments all over the world have passed laws aimed at facilitating the necessary processes. Enactment of successive legislative steps over the last 60 years has greatly facilitated the rate at which organisations and individuals can make foreign direct investments in nations where they wish to invest their money. As an example, the euro became the single currency of the European Union in 2002 and is commonly used in 16 of the 27 member states. Such changes in laws have also made it easier for multinational companies to trade in several nations without violating the laws of such nations. Most nations have passed laws that have made it possible for their markets to be liberalised. Therefore, the prices of goods and services offered in such markets are largely determined by the forces of demand and supply and not the government interventions.
In nations that are very keen on attracting foreign direct investments to increase their economic growth, they have passed laws ensuring that very few licences are required by the foreign investors while investing in such countries. This practice and others have been adopted in many developing nations to make it easier for individuals and organisations to invest in foreign nations. Countries also ensured that it was also easier for the international traders to import and export various products. Through such practices, it became quite easy for people around the world to be supplied with the raw materials and products that are not locally available in their nations as well as export the excess of the same to other markets outside their nations.
International markets have also become major factors in promoting trade and direct foreign investments in the global economy and the strong performance of several multinational corporations all over the world.. The international markets provide the multinational companies with massive concentrated markets through which they can gain a lot more revenue and at the same time increase their profitability. This would not have been possible with the small limited local markets which existed before the second global conflict.
Competition and Media
Increased competition has played a major role in increasing the pace at which the international trade and foreign direct investments were growing in the global economy. Ever since WWII, nations, corporations and individuals have focused much of their resources in ensuring that they offer goods and services that meet the international standards so that they can be competitive in these markets. The ever increasing competition ensures that corporations all over the world are very keen on innovations and creativity to ensure that their products always meet the highly dynamic needs of the international society. Corporations have been subjected to intense competition arising from both the local manufacturers as well as the international ones. Therefore they have to ensure that they produce superior goods and services which will be competitive in the international markets. This has led virtually all corporations around the world to employ various research techniques which ensure that their products are not only of a high quality, but they are also affordable to their targeted consumers.
The international media has greatly evolved in the last 60 years. It has led to a generation of highly knowledgeable people with instant access to various events that are taking place around the world. Trade and investment opportunities in several parts of the world emerge every day. The international media has played a great role in creating awareness around the world of such opportunities as well as how individuals and corporations from any part of the world can take advantage of such opportunities. Without the international media, it could have been very difficult for individuals and corporations to know the availability of various opportunities and they would therefore make lesser investments away from the regions where they are physically located.
The international media has also been a major tool through which the international traders and investors can advertise their products and thus increase their market share in the international markets. The knowledge that is gained by various international traders and investors has been a major contributor to the growth of trade and direct foreign investments in the global economy. The international media has prompted competing organisations all over the world to compare themselves with the market and technological leaders in the market in which they are operating. Such comparisons lead such corporations to implement various changes and policies, which enable them to also contribute immensely to international trade and foreign direct investments.
Conclusion
As globalisation, technology, competition, international markets and media houses intensify their roles in the global economy, it will continue to grow. These factors have greatly enhanced the pace at which international trade and direct foreign investments take place. However, globalisation and technology have been the major forces behind the dramatic increase in growth of the international trade and foreign direct investments, although other factors cannot be ignored for they have also made smaller contributions. Multinationals continue to place themselves in suitable positions in order to take full advantage of the ever increasing global economy as the international markets become more and more integrated.