Global Impact of COVID-19 on the Balance of Economic and Political Power
The global outbreak of COVID-19 and the subsequent declaration of COVID-19 by the World Health Organization (WHO) as a global health emergency in January 2020 has caused a significant imbalance in the global economic and political powers. The first diagnosis of the virus in Wuhan, China has been followed by fast transmission of the virus to over 190 countries across the globe with focal points of the infection rapidly changing for China to Europe and now to the United States.
The outbreak of the pandemic has resulted in more than 2.1 million people across the world contracting the deadly viral disease with thousands of fatalities registered in different parts of the world (Sohrabi et al., 12). The economic sector has been hard hit. Based on the realism theory of international relations, the outbreak of COVID-19 can be understood as a factor that has been used by world political powers and economic giants to increase their political power and economic growth relative to others (Center for Strategic and International Studies 2). Both political and economic imbalance has been realized as possible consequences.
With the continued increase in the number of infections across the world daily, more than 80 countries have closed their borders to stop international flights from the countries that are hardly hit by virus infections. Several businesses have been closed and the population in many countries have been forced to self-quarantine. Governments have closed schools in all countries across the world and about 1.5 billion children have been forced to stay at home with their parents (Center for Strategic and International Studies 3).
Over the period from Mid-March 2020 to Mid-April 2020, the world economic structure and severe political imbalance have been experienced. Precisely, there have been rising cases of filed unemployment, insurance, and rising prospects of future economic recession. The rising prospects of future economic recession have led to an increase in the rate of unemployment across the world and this continues to harm global economic growth and goodwill.
COVID-19 and the WHO
After the declaration of COVID-19 as a world pandemic by WHO on March 11, there have been indications of a negative impact on global economic growth. For example, the global trade, as well as the Gross Domestic Product (GDP) of many countries, have been forecasted to decline sharply with a probability lying within the first half of the year 2020. The international economic and political structures have been imbalanced in terms of policymaking and trade activities.
Different sectors of the economy have been destroyed and severely affected such as the tourism and hospitality, the supply of medical facilities and equipment across the globe, the global value chains have been destroyed, consumer markets inconvenienced, financial and energy markets, transport sector, food as well as sports and recreational activities have all been severely affected(Fernandes 10). The effect of social distancing which is meant to enhance social interaction among people as a strategy to flatten the growth curve of the disease also has serious implications on business and the daily activities of people across the globe.
As a result of all these, the economic costs of survival have greatly increased across the world, with the situation being worse in developing countries.
Source: World Economic Outlook, International Monetary Fund, April 14, 2020
The outbreak and spread of COVID-19 have also had a significant impact on global politics. From a critical perspective, it is argued that the pandemic has severely changed the status quo of partisan politics in terms of political conversation and this has affected international relations and international political economies as well.
For example, superpower countries such as the United States of America have been accused, through President Donald Trump, of showing little concern and taking meager measures towards containing the pandemic (University of South Carolina 1). This accusation has farther shaped the internal politics of the United States and their trade relations with China, Iran, Russia, Syria, Afghanistan, Iraq, and North Korea. The politics of the pandemic have also affected the conversations between the United States and the United Kingdom on Brexit and other issues regarding the efforts of containing the virus.
The break of the pandemic across the globe can also cause significant changes in the national political conversations on matters such as healthcare provision and coverage and this can affect several health workers across the globe. For example, recently, President Donald Trump stopped financial support to the World Health Organization and this continues the hot debate on whether the United States is concerned about ending the pandemic across the globe.
Besides, this is likely to affect the healthcare systems across the globe farther affecting international relations (University of South Carolina 2). There have also been concerns on the rise of authoritarian governments across the globe that have used the crisis as an avenue to tighten their grip of political powers and this continues to shape global politics in handy.
In conclusion, the political and economic imbalance resulting from the global outbreak of COVID-19 can be explored and understood from the realism theory of international relations. While global agencies such as WHO strives to contain the virus, other superpowers and world economic giants such as the United States have refused to show concerns over the efforts aimed at containing the virus.
This is politics of supremacy which continues to make the virus spread uncontrollably in many parts of the world. With the steady shift in the viral epicenter from Asia to Europe and now in the United States within three months since its outbreak in Wuhan, China, there have been severe economic impacts and political orientation in terms of the political conversations between the United States and other parts of the world. The prospects of world economic recession are expected to be severe than the 2008-2012 world economic crisis. The worst is yet to come!
Works Cited
Center for Strategic and International Studies. “COVID-19: New Reality.” Center for Strategic and International Studies, 15 Mar. 2020,
Center for Strategic and International Studies. “The Global Economic Impacts of COVID-19.” Center for Strategic and International Studies, 10 Mar. 2020,
The University of South Carolina. “COVID-19 Impact: How the Pandemic is Affecting Politics.” University of South Carolina, 14 Apr. 2020
Fernandes, Nuno. “Economic effects of coronavirus outbreak (COVID-19) on the world economy.” Available at SSRN 3557504 (2020).
Sohrabi, Catrin, et al. “World Health Organization declares global emergency: A review of the 2019 novel coronavirus (COVID-19).” International Journal of Surgery (2020).
Over the past few decades, the global scenario has changed considerably with increased interdependence amongst nations and economies. This intertwining amongst nations and sharing of ideas and technology has been termed as “Globalization”. Globalization has been a buzzword of late, with heated discussions about its pros and cons. Some consider it to be a blessing for mankind while others take it as a curse. For some it has brought about material prosperity while others have become unemployed due to it. This paper tries to analyse the effect of Increased International Trade and Globalisation on the US economy. The first section discusses the pros and cons of Globalization while the second section discusses how globalization has lead to increased foreign trade. Thereafter, it discusses the effect of globalisation and increased foreign trade on the American economy.
Introduction
Trade is believed to have taken place throughout much of recorded human history, whether as barter or in exchange of currency. Till the 1800’s, trade was limited due to difficulties in transportation, communication and restrictive trade policies. However, in the mid 19th century, with advent of free trade and nation advantage concepts, trade started to pick up (Daniels & Sullivan, International Business and Operation). Although international trade has been present throughout much of history, for example Silk Route, its economic, social, and political importance have increased in recent centuries, mainly because of Industrialization, advanced transportation, globalization, multinational corporations, and outsourcing. Worldwide, countries are doing away with trade restrictions and lowering trade tariffs, thereby supporting free trade and making the world a global village (Daniels & Sullivan, International Business and Operation).
Globalization – Boon or Bane
The global economy is no longer an individual event and USA no longer plays the dominating role. This is apparent from the fact that ten years ago the World Trade Organization had only 80 members whereas now it has 153 members (WTO Data, 2010). Also countries like China and India are getting more bargaining power day by day. Globalization is the deepening relationship and broadening interdependence amongst the different countries of the world. The World Bank defines globalization as “the growing integration of economies and societies around the world.” This integration of regional economies into a global village has lead to increased international trade, investment, capital flows and technological advancements. Technological advancements such as the internet and cell phones have literally reduced the world to a Global village. Globalization has both its critics and it supporters. Some interpret it as a way of countries losing their cultural identities and becoming “Americanized.” Others see it as a way to reduce costs and to increase profits and efficiency. The debate over globalization is perceptible in demonstrations against the WTO in Seattle in the fall of 1999, against the Summit meetings in Quebec and Genoa and against several annual meetings of the IMF and World Bank. While on the other hand, supporters of globalisation look forward to a global village, linked together by the Internet, and enjoy the ever-increasing material well being (Daniels & Sullivan, International Business and Operation). The United States is seen by much of the world as the strongest supporter of globalization – in fact, as pushing it on everyone else. Over the years, globalization has resulted in increased foreign trade and capital flows, thereby contributing immensely to the domestic economy. In the 1990s, globalization and free trade, resulted in integration of China and the former Soviet bloc into the trading system thereby lowering inflation and opening new markets. However, as the emerging markets got stronger, the prices of commodities started rising immensely and competition from foreign workers lowered the average US wage rates. Jeffrey Garten, professor of international trade and finance at the Yale School of Management, points out that in 2000, the world’s wealthiest countries accounted for about 70 percent of the global economy, compared with 30 percent for developing economies. These rates are slowly but surely reversing. Thus, USA has seen both the positives and the negatives of globalization.
International Trade
One important effect of globalization is the increased interdependence among nations which has demanded increased liberalization of markets, the dismantling of almost all trade barriers (Lee, 2005; Czinkota and Ronkainen, 2007). As a result, the forces of globalization have necessitated trade liberalization (Martin, 1993), leading to increased international trade, not only in good and services but also currency and capital. Ever since independence, America has been a supporter of Free Trade. In 1988, USA signed a Free Trade Agreement with Canada that progressively eliminated tariffs over a ten‐year period, thereby making Canada USA’s premier trading partner. Further, in 1994 the Mexican Government, in pursuit of market reforms, signed the North American Free Trade Agreement (NAFTA). The passage of the NAFTA agreement signalled the continuing support of U.S. policy‐makers for the worldwide march toward free markets and further economic globalization (Paul. S Boyer, 2001). The above agreements lead to immense increase in trade and greater market efficiency. However, by 1999 USA had a huge trade deficit of around USD 200 billion (Paul. S Boyer, 2001). The trade boom of the 1990’s had ended in a recession marked by serious job losses and the nations policy of “free trade” was being questioned. President George W. Bush insisted that America’s economic future lay with the global economy, but early in 2002 political pressures led him to slap import duties on cheap foreign steel. However, he was forced to withdraw it in 2003 due to retaliation against US exports and WTO sanctions (Paul. S Boyer, 2001)
Globalization MBA
Competition and Business Restructuring
International competition goes hand-in-hand with globalization. A company that has been very successful in the domestic market may suddenly find itself facing competition from a yet unheard of company from the other end of the globe. Survival in this new business environment calls for improved productivity, reduction in costs, up gradation in technology and advancements in supply chain management (O’Reilly, E., & Alfred, Diane., 1998). For example, In the 1980s American automobile manufacturers began losing market share to Japanese competitors who offered American consumers higher quality cars at lower prices (Brewer, G., Managerial Accounting). However, from the consumer’s point of view, increased competition promises greater quality, reduced prices and a greater variety of goods and services. China’s entrance into the global marketplace has proved that globalisation leads to competition and changes the business environment. For example, from 2000 to 2003, China’s wooden bedroom furniture exports to the United States increased by more than 233% to a total of $1.2 billion. During this same time, the number of workers employed by U.S. furniture manufacturers dropped by about a third, or a total of 35,000 workers (Fishman, T., 2005).
In a 2002 speech, the Economic counsellor to the US Embassy, Mr Lee Brudvig, said, “We have not resisted the free flow of money, goods, services, and ideas. Rather, we have subjected our companies to market competition and limited the role of government on the whole to that of facilitator, regulator and, when necessary, safety net provider. As a result, we have seen a massive reorganization of business structures. Whereas in 1960 manufacturing accounted for 27 percent of GNP, by 2001 it had dropped to below 15 percent.” The changes brought about by technology and productivity is causing both markets as well as organisations to undergo restructuring.
Labour Market Developments
An important trend in labour markets in the advanced economies has been a steady shift in demand away from the less skilled toward the more skilled (Slaughter, M., & Swagel, Philip., 1997). Studies have shown, for the advanced economies as a whole, that trade with developing countries has led to about a 20 percent decline in the demand for labour in manufacturing, with the decline concentrated among unskilled workers (Swagel, Philip., 1997). This trend has produced dramatic rises in wage and income inequality between the more and the less skilled. In the United states, wages of less-skilled workers have fallen steeply since the late 1970s relative to those of the more skilled (Slaughter, M., & Swagel, Philip., 1997). According to a study conducted in 2007, the impact of trade flows in 2006 increased the inequality of earnings by roughly 7% (Bivens,J., 2007). The study goes on to prove that although “liberalized trade” is a win-win proposition for nations, it reduces the income of most workers. Workers employed in industries directly in competition with low-cost imports from abroad can expect to see immediate job dislocation and/or downward wage pressures.
The rise of labour abundant nations, like China and India, has increased the global labour pool. The price of labour-intensive commodities falls as a result of this increase in the global labour pool, and these falling prices harms the labour in professional-abundant nations like the United States. DVD Players, clothing and call centre operations, all provide examples of reduction in prices due to expansion in the global labour pool (Slaughter, M., & Swagel, Philip., 1997). Outsourcing and offshoring, has further increased unemployment and decreased national earnings. 22-29% of the U.S. workforce has been rated as potentially offshorable over the next one or two decades (Blinder, 2006). The implied loss due to offshoring would push these wages well below the 1979 levels, completely undoing the entire increase in these wages over the past three decades. The trade adjustment assistance (TAA) program has been formed as a way to compensate globalization’s victims in the United States. In 2006 TAA allocated $655 million in income supports for workers harmed by globalization, and, another $200 million for training. As quoted by Bradford, Grieco, and Hufbauer in their study, “While the gains from increased trade generate a permanent rise in income, the associated losses are temporary. Nevertheless, they are very real, and are concentrated on a small fraction of Americans”.
Financial Market Globalisation
Financial globalization has been one of the most important trends in the world economy in recent decades. Financial globalization has been one of the most important trends in the world economy in recent decades (Lane and Milesi-Ferretti 2003). International financial liberalization was also accompanied, in a
somewhat chicken-and-egg causal relationship, by the abandonment of the Bretton Woods system of adjustable exchange rate pegs and the shift to floating exchange rates among the major currencies or regional currency blocs (Eatwell 1996). When currency fluctuations are considered, it is the exchange rate between the US dollar and the euro that gets the most attention. This not only reflects the size of the respective economies using these two currencies, but also the fact that the US dollar is the most widely traded currency today. That’s because it effectively serves multiple roles: as an investment currency; as a reserve currency for many central banks. According to an IFSL research conducted in April 2007, the US dollar was involved in 86% of foreign exchange transactions, followed by the euro (37%), which proves its importance (Safar, L., 2008). The report further states that foreign currency trading increased by 70% in 2008 compared to 2004. This increase in currency trading makes it imperative for companies to learn to deal with exchange fluctuations and how to benefit from all situations. The US dollar has fallen since January 2004 against the euro as well as against most major European and Asian currencies. This has caused many companies to introduce a “fluctuation clause” in their contracts to protect themselves from losses due to exchange rate fluctuations and has also lead to the development of many financial instruments to help companies hedge their currency risks. However, times such as these when the dollar becomes weaker often works well for US producers with a larger proportion of their costs being in dollars but selling worldwide. International revenues not only translate to higher US-denominated revenues, but they also contribute to higher margins which can be achieved globally (Safar, L., 2008). For example, Q1 2008 for instance marked a milestone for Google, whose international revenues exceeded US revenues for the first time. Revenues from outside of the United States represented 51% of total revenues in the period, compared to 47% in the first quarter of 2007 and 48% in the fourth quarter of 2007. In Q2 2008, this had increased further to 52%. According to Google, “Had foreign exchange rates remained constant from the second quarter of 2007 through the second quarter of 2008, our revenues in the second quarter of 2008 would have been $249 million lower.” (Safar, L., 2008). Nothing can be predicted with 100% accuracy when it comes to exchange rates, and the only thing that can be safely said is that there will be no “business as usual” when it comes to currencies.
Political and Institutional Changes
According to CIA Global Trends 2015, 2000,” The rising tide of the global economy will create many economic winners, but it will not lift all boat. It will spawn conflicts at home and abroad, ensuring an even wider gap between regional winners and losers than exists today. Regions, countries and groups left behind will face deepening economic stagnation, political instability and cultural alienation. They will foster political, ethnic, ideological, and religious extremism, along with the violence that often accompanies it.” One of the most important and necessary features of the current process of globalization is the proliferation of international organizations. Scholars point to the emergence of expanding web of international treaties and institutions, which regulate and adjudicate on matters of interstate behaviour. The number of international organizations rose from 61 in 1940 to 260 by 1996 (Barnett 2002:110). Since 1995, when the World Trade Organization (WTO) was formed, transnational corporations have increasingly influenced political leaders to push international trade laws in the same direction of liberalization and deregulation. In addition, existing international organizations like the IMF, the World Bank and the GATT/WTO have transformed their roles substantively, gaining further powers and responsibilities (Camillery and Falk 1992:94-7; O’Brien et al. 2000). The United States has enjoyed a position of power among the world powers, in part because of its strong and wealthy economy. Due to this reason, the United States enjoys considerable bargaining powers in the WTO and World Bank. With the influence of globalization and with the help of The United States’ own economy, the People’s Republic of China has experienced some tremendous growth within the past decade, and now enjoys as much bargaining power, if not more, as USA. If China continues to grow at the rate projected by the trends, then it is very likely that in the next twenty years, there will be a major reallocation of power among the world leaders. China will have enough wealth, industry, and technology to rival the United States for the position of leading world power (Fishman, T., 2005).
Crime and Terrorism
At the end of the 20th century, a new phenomenon appeared—the simultaneous globalization of crime, terror, and corruption, an “unholy trinity” that manifests itself all over the world. This unholy trinity is more complex, however, than terrorists simply turning to crime to support their activities or merely the increased flow of illicit goods internationally. Rather, it is a distinct phenomenon in which globalized crime networks work with terrorists and both are able to carry out their activities successfully, aided by endemic corruption. Crime groups and terrorists have exploited the enormous decline in regulations, the lessened border controls, and the resultant greater freedom, to expand their activities across borders and to new regions of the world. The United States has been one of the worst sufferers of this new “global” terrorism. Since September 11, 2001, numerous resources have been shifted in the United States and elsewhere from addressing trans-national crime to fighting terrorism. It has increasingly become clear, that for a nation to advance, it has to keep its crime and terror activities in check.
Cultural and Other Issues
The growth of cross-cultural contacts has helped the United States participate in a new World Culture. It has helped Hollywood reach remote corners of the world while at the same time Bollywood has reached out to the Americans. Globalization has also lead to greater international travel and tourism thus greatly benefiting the tourism industry. WHO estimates that up to 500,000 people are on planes at any one time. (WHO Data, 2009). In 2008, there were over 922 million international tourist arrivals, with a growth of 1.9% as compared to 2007 (UNTWO Data, 2009). Globalization has also increased the number of illegal immigrants entering USA. The Rockridge Institute argues that globalization and trade agreements affected international migration, as laborers moved to where they could find jobs. The Mexican government failed to make promised investments of billions of dollars in roads, schooling, sanitation, housing, and other infrastructure to accommodate the new maquiladoras (border factories) envisioned under NAFTA. The 1994 economic crisis in Mexico, which occurred the year NAFTA came into effect, resulted in a devaluation of the Mexican peso, decreasing the wages of Mexican workers relative to those in the United States. Unemployment, corruption, low wages and few opportunities cause Mexican laborers to look for greener pastures and migrate illegally to the United States.
Conclusion
Globalization leads to increased international trade and reduction in trade barriers, which is beneficial for all the trading nations. Increased globalizartion has increased competition in the global economy, making it tougher for organisations to survive, and leading to greater productivity, efficiency and quality. This has in turn lead to the rise of countries like China and India, which are rich in labour. Due to the rise of labour abundant nations, the US labour market has suffered with fewer jobs being available for unskilled workers and lowering of wages. Further, outsourcing and offshoring have lead to loss of jobs and unemployment. In order to establish a set of trade rules and monitor the trading nations, institutions like WTO, IMF and World Bank have gained in importance. The United States hold a very important place in all these institutes, due to its strong economy and political power. Thus, it has a huge bargaining power when it comes to trade regulations. Overall, globalisation has affected America both positively as well as negatively but it is primarily due to globalisation and increased trade that America has a strong economy today.
References
Bivens, J., 2007, Globalisation and American Wages: Today and Tomorrow,
The author examines the effect of globalisation on wages and predicts what the future is going to be, based on mathematical models.
Blinder, Alan. 2006. Off-shoring: The next Industrial Revolution. Foreign Affairs magazine.
Boyer, P., Foreign Trade, U.S., The Oxford Companion to United States History.2001.Encyclopedia.com.
Boyer, P., Global Economy, America and the., The Oxford Companion to United States History. 2001. Encyclopedia.com. Accessed on 22 Apr. 2010 at
Daniels & Sullivan, International Business and Operation, 11th Ed, Pearson Education
Eatwell, John. 1996, International Financial Liberalization: The Impact on World
Development, Office of Development Studies, Discussion Paper Series (September). New York: United Nations Development Programme.
Fishman, T., 2005, How China Will Change Your Business, Inc. magazine,
O’Reilly, E., & Alfred, Diane., 1998, Innovations in Technology and Globalization,
Slaughter, M., & Swagel, Philip., 1997, Does Globalization lower wages and export jobs?, IMF Report,
UNWTO World Tourism Barometer (World Tourism Organization) 7 (2)
This report is an analysis of operating business in the international economic environment. Having knowledge of the international business environment is of most importance for modern managers as all major business concerns are dealing worldwide for all types of business transactions and second thing is that almost all business are or desiring to be globalized. Hence a manager must have knowledge about these factors of international business environment.
Definition of International Economic Environment
One system all over the world which only used for the trade internationally among the developed and developing countries is called International Economic environment. It is a sub-field of economics that is concerned with environmental issues. Environmental economics is distinguished from ecological economics in that it emphasizes the economy as a subsystem of the ecosystem with its focus upon preserving natural capital. On the other hand, International Economic Environment means the environment in different countries, with conditions similar to the home environment of the institutions, influencing decision-making on capabilities and resource use.
Terms of International Economic Environment
There are three terms to spread out all over the world of International Economic Environment. If any countries want to be world trader he must follow the three terms to be real international trader.
Competitiveness.
Monetary.
The Law of One Price
There are also other two conditions must be satisfied before international economic exchanges can become beneficial for all involved. The sustainability of ecosystems on which the global economy depends must be guaranteed. And the economic partners must be satisfied that the basis of exchange is equitable; relationships that are unequal and based on dominance of one kind or another are not a sound and durable basis for interdependence. For many developing countries, neither condition is met.
Elements of Economic Environment
The elements of International Economic Environment are more important. It has five elements. Every elements is described below,
Economic Conditions: – Economic Policies of a business unit are largely affected by the economic conditions of an economy. Any improvement in the economic conditions such as standard of living, purchasing power of public, demand and supply, distribution of income etc. largely affects the size of the market. Business cycle is another economic condition that is very important for a business unit. Business Cycle has 5 different stages viz. (i) Prosperity, (ii) Boom, (iii) Decline, (iv) Depression, (v) Recovery.
Following are mainly included in Economic Conditions of a country:-
Stages of Business Cycle
National Income, Per Capita Income and Distribution of Income
Rate of Capital Formation
Demand and Supply Trends
Inflation Rate in the Economy
Industrial Growth Rate, Exports Growth Rate
Interest Rate prevailing in the Economy
Trends in Industrial Sickness
Efficiency of Public and Private Sectors
Growth of Primary and Secondary Capital Markets
Size of Market
Types of International Economic Environment
It has two parts:
Microeconomic
Macroeconomic
Microeconomic part means focuses on the recent economic environment and the effect of location on business and performance. The Macroeconomic part means focus on the broader or spreader economic environment and the world economy as all in all.
International economics system
International economics is concerned with the effects upon economic activity of international differences in productive resources and consumer preferences and the international institutions that affect them. It seeks to explain the patterns and consequences of transactions and interactions between the inhabitants of different countries, including trade, investment and migration Such as:
Finance system: International finance system explains and researches the spread of money over the international financial markets, and the impacts of the exchange rates.
Trade System: Which studies products, goods, and services all over the world boundaries and it makes some policy to spread up its trading system.
Monetary Macroeconomics System: this factor research capital and macro flows all over the world.
Analysis of International Economic Environment
Economic Environment means the effect of the working on the business all over the world. It studies trade system, policies, structure, and nature of an economy, level of income, distribution of income and wealth etc. The economic environment explains the economic conditions of any countries where the international organization operates. The features of economic environment are related to the all economic activities effects. The roles of international economic environment are increasing gradually day by day. Cause it has various types of system which are explained above the report. It has many organizations like World Bank, WTO, and UN etc.
We can accurately grasp the characteristics of international marketing environment, determine whether the enterprise market opportunities, can select the appropriate target market, can develop the appropriate marketing mix strategy. In other words, the correct assessment of the international marketing environment, to conduct international business success is the basis for marketing activities. Generally, the larger impact of international marketing activities is mainly economic, political, legal and cultural environment. Enterprises to enter the market of a country, we must first analyze the country’s economic environment. A country’s economy through the market size and economic characteristics of the two factors are reflected in relatively prepared.
Characteristics of the international economic environment
International economics environment is worldwide sector. It has some own characteristics which help anyone to fine out the conditions, rising and declining of economy of any countries of the world. It helps them to find out the lickings of their economic system. International economic environment play role of its system into every country. It has own Trade Centre, like WTO. Annually it presses its growth and declining reports. Some bindings are given to those countries. All business sectors services are provide to that country.
Importance of Economic environment
The most general and important consequence is that we naturally and automatically give priority to the economy (the household of man and part of the socio-economic environment) over ecology (the household of our planet, which constitutes the natural environment), when it should be obvious (were we not blinded by our familiarity with and dependency on the status quo) that for medium and long-term human survival it has to be the other way around. Day by day the importance of the economic environment is increasing.
Challenges of International economic environment
A related characteristic of market economies that is relevant to managers concerns the nature of property ownership. There are two pure types-complete privet ownership and complete public ownership.
Nowadays there are many challenges to overcome all obstacle of developing world economy. But there are four challenges go ahead as a main features. Four challenges are now main factor for us.
China Economy: In this ultra-modern world, Chine is the big fact. Socialist, Scientist, researches that next era China overcomes USA and European economy.
Politicization of global economy: Politics is the main factor nowadays. Now every country is violated by political violence all over the world. Everyone wants to become higher than another one. So these types of economy are the challenges for the modern economic environment.
Poverty, inequality and insufficiency: Almost all over the many countries are live under the poverty line. There have no proper system and capital to improve them. However, inequality and insufficiency of the products and working system they are not developed. So, it is the challenges for it.
Greenhouse effect: Greenhouse effect is now an n important discussion all over the world. Economic environment is totally effected by this. So it is the fact.
Theme of global business environment
Shift in the locus of power from North to South
The locus of global economic, political, and demographic power has been shifting from the Global North (broadly speaking, developed countries) to the Global South (developing countries). Although this shift has been taking place for decades, the new intensity with which it is occurring and the changing implications that it has for business will shape the global business environment in the coming years.
For businesses, supply chain structures are less likely to follow the “make in developing, sell in developed” paradigm. Additionally, in a globalized talent pool, educated workers are coming from new places, so companies must raise the bar or get left behind. Furthermore, the entrance of new competitors means that some threats may not even be on the radar.
New models of consumer engagement
With ubiquitous connectivity, universal access to knowledge, and an increasingly global consumer environment, companies are being forced to redefine how they engage with consumers. These trends can be double-edged swords. Connectivity in social media, online mobility, mobile payments, and augmented reality offer new ways to market products and services to consumers, but they also add complexity and competition. Access to knowledge and broader globalization can create consumer opportunities, but the former creates intense price pressures, and the latter can cause organizational complexity—both of which combine to squeeze profitability.
Many companies are already at the forefront of engaging the new consumer, while others are still lagging behind, or worse, attempting to shoehorn outmoded concepts for consumer engagement into electronic avenues. Companies can gain an immediate advantage with the following strategies:
Invest in electronic and social media-based consumer engagement. This applies not only to consumer products companies and retailers but also to businesses in other industries.
New paradigms, changing business models, and constant innovation
From research and development (R&D) and consumer engagement to product design, manufacturing, and corporate governance, the paradigms that have defined business are changing. Technology-enabled global operations transformed R&D functions during the information technology revolution; now, educational achievements in developing countries and aging populations in established markets are changing them again. Technological advances on the horizon, such as three-dimensional printing, will change established manufacturing methods just as computer-aided design and automation did 20 years ago.
Redefinition of the social contract
In both developed and developing countries, citizens are demanding more from their governments, and governments are facing challenges in meeting their needs. The events in the Middle East illustrate citizens demanding greater representation and accountability from their governments, enabled by ever-present connectivity. The forms of government that are—or were in place are proving to be unequal to the task. In the developed world, constituents are insisting on more protection from various forms of volatility, be it economic, health, or security. Governments in these countries, however, are constrained by rising debt, changing global governance models, and a talent deficit. Some countries, such as China, are struggling with both sets of problems. As governments worldwide face new demands and new constraints, a wholesale reevaluation of the social contract is taking place.
The global war for talent
Changing global demographics combined with governments’ disparate ability to invest in education have caused a shift in the composition of global talent. Talent is increasingly located in developing markets, both in numbers (younger, growing populations) and in skill sets (more university degrees, especially in science and engineering). The global recession has accelerated this trend, with many developed countries reporting a reverse brain drain—highly skilled emigrants leaving their host countries to return home, where capital is more plentiful and growth rates higher, to find work or start businesses.
At the same time, technology has made global collaboration more prevalent, and changing business models and business needs have made knowledge workers more valuable. Product cycles are becoming shorter and technological competition more intense, placing greater pressure on companies to keep pace by identifying and cultivating the best minds. The result of these new and accelerating trends is a global war for talent that will determine which companies, and governments are able to innovate and prosper and which ones will simply follow.
MBA Project International Economic Environment
This situation presents risks and opportunities. Highly networked companies are able to take advantage of a growing pool of global talent and, by doing so, raise the bar for their competitors, including the less well-networked. This heightened level of competition means that all companies, including today’s innovators, need to be alert to changes in the competitive landscape for talent. In addition to locating and connecting with the most talented people, companies will face greater pressure to retain the most talented employees. Retention mechanisms and core human resources skills will become increasingly important to keeping high-value, high-performing workers. The policies of various geographic locations will have to be scrutinized to choose countries that offer fewer restrictions on the migration of highly skilled workers.
Risk of International Business
In every sector risk is compulsory. Then no one stay behind the sector although he knows it is not good. In the international economic environment sector also have many risk. Most of the important risk is included below. To develop in this sector you should mind it.
Operational Risk
Political Risk
Technological Risk
Economic Risk
Financial Risk
Terrorism Risk
Strategic Risk
Planning Risk
Social Risk
Important of Studying International Economic Environment
By studying following gaudiness, everyone will be able to know what the main factor of International Economic Environment is. Without it no one can find out which countries are poor or rich. Following are the importance and objectives of studying International Economic Environment:
Increasing awareness of the one country political policies and economic system
Learning the system of improving relation through appropriate communication
Identifying the other developed countries economic policy
Changing the Economic Market
The future of any institution depends on its law, rules and regulations and depending on economic, social and technological sector. Whether it’s emerging markets like China or Brazil impacting sales and production, demographical situations changing buyer’s behavior and challenging service models, companies need to adapt to turn threats and challenges into opportunities. Under this plan, the economic impact has to be estimated by the regulator. Usually this is done using cost-benefit analysis. There is a growing realization that regulations (also known as “command and control” instruments) are not as distinct from economic instruments as is commonly asserted by proponents of environmental economics. E.g.1 regulations are enforced by fines, which operate as a form of tax if pollution rises above the threshold prescribed. E.g.2 pollution must be monitored and laws enforced, whether under a pollution tax regime or a regulatory regime. The main difference an environmental economist would argue exists between the two methods, however, is the total cost of the regulation.
Relationship to other fields
Environmental economics is related to ecological economics but there are differences. Most environmental economists have been trained as economists. They apply the tools of economics to address environmental problems, many of which are related to so-called market failures—circumstances wherein the “invisible hand” of economics is unreliable. Most ecological economists have been trained as ecologists, but have expanded the scope of their work to consider the impacts of humans and their economic activity on ecological systems and services, and vice-versa. This field takes as its premise that economics is a strict subfield of ecology. Ecological economics is sometimes described as taking a more pluralistic approach to environmental problems and focuses more explicitly on long-term environmental sustainability and issues of scale.
Environmental economics is viewed as more pragmatic in a price system; ecological economics as more idealistic in its attempts not to use money as a primary arbiter of decisions. These two groups of specialists sometimes have conflicting views which may be traced to the different philosophical underpinnings.
Another context in which externalities apply is when globalization permits one player in a market who is unconcerned with biodiversity to undercut prices of another who is – creating a race to the bottom in regulations and conservation. This in turn may cause loss of natural capital with consequent erosion, water purity problems, diseases, desertification, and other outcomes which are not efficient in an economic sense. This concern is related to the subfield of sustainable development and its political relation, the anti-globalization movement.
Environmental economics was once distinct from resource economics. Natural resource economics as a subfield began when the main concern of researchers was the optimal commercial exploitation of natural resource stocks. But resource managers and policy-makers eventually began to pay attention to the broader importance of natural resources (e.g. values of fish and trees beyond just their commercial exploitation; externalities associated with mining). It is now difficult to distinguish “environmental” and “natural resource” economics as separate fields as the two became associated with sustainability. Many of the more radical green economists split off to work on an alternate political economy.
Environmental economics was a major influence for the theories of natural capitalism and environmental finance, which could be said to be two sub-branches of environmental economics concerned with resource conservation in production, and the value of biodiversity to humans, respectively.
Conclusion
The International Economic Environment is now an important demand for every country to make up them as a development country in the world. The article considers culture, religions of people from various countries, traditions, customs, which from the multicultural environment of international economic activity. Every manager should have through understanding of International Economic environment, only then he can drive the organization to the path of success. All over the world, all countries differ in conditions of: Stage of economic development, economic environment etc.
References
Balasubramanian, Arun: Towards a Philosophy of Environmental Education Regional Institute of Higher Education and Development, Singapore.
Sankar, S.: Environmental Economics, Margham Publications, Chennai. P. 7.
Robert N. Stavins: “environmental economics,” The New Palgrave Dictionary of Economics, 2nd Edition. Abstract & article.
UNEP: Guidelines for Conducting Economic Valuation of Coastal Ecosystem Goods and Services
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