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Analyze the impact of globalization on the economic development and standard of living in an economy other than Australia.

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Introduction

Analyze the impact of globalization on the economic development and standard of living in an economy other than Australia. Globalization is the progressive integration of national economies, leading to the removal of both natural and artificial barriers to the movement of goods, services, resources and finance between nations. The process of globalization involves economic integration, world trade and financial flows, the increasing spread of technology, the growth of financial markets and products, the different directions of flow of investment portfolio and direct investment, and the movement of labor resources between countries. Different nations have been affected in different ways by globalization, depending on their degree of development and the extent to which they are open to the flows of the world economy. The growth of the global economy has increased the opportunity for investment by breaking down national boundaries. This has facilitated the worldwide introduction of new technology, although technology has spread at different rates in different regions. Increased globalization, facilitated by a reduction in trade protection and increased financial deregulation, has meant that changes in trade and financial flows can have significant effects on a national economy. As a result many countries have become export focused and now rely upon foreign funds to finance economic expansion. This has also meant that national governments must consider to a much greater extent the international consequences of domestic economic policy. China is a newly industrialized country (NIC) as it is experiencing rapid increases in manufacturing and economic growth. This increase was sudden in the last quarter of the twentieth century, to begin leaping across the development gap between developing countries and high income countries. With a population of 1.23 billion people, which is 22% of the worlds population, what happens in China tends to affect the rest of the world. On the 11th December 2001 China joined the World Trade Organisation (WTO). Members of the organisation receive the benefits of having access to the markets of fellow members and bear the costs of opening their own domestic markets to foreign competitors. ...read more.

Middle

As both countries are using their resources more efficiently, trade will lead to higher standard of living than would be otherwise possible. This is compared to absolute advantage where a country would have an absolute advantage in the production of a good when it can produce more of that good with a given amount of resources than another country. Protection which is undertaken by the government is design to prevent free trade. This can be done to protect infant industries, ensure there are employment opportunities in the domestic economy, prevent dumping, reduce a countries dependency on foreign producers and limit the level of the trade deficit. Protection is needed in Australia as Australian workers cannot compete against low-wage countries without suffering a reduction in wage rates. Also if one country resorts to protection another country may retaliate, with the original country losing an export market and suffering increased domestic unemployment. Methods of protection include tariffs, subsidies, quotas and embargoes. A tariff is a tax imposed by the government on imported goods. Tariffs make the imported item more expensive and therefore less competitive with the locally produced item. Tariffs raise revenue for the government and cause resources to be reallocated from efficient industries to inefficient and uncompetitive industries. Through the introduction of a tariff, there is a redistribution of income away from consumers and importers towards domestic producers and the government. A quota is legally imposed to control the quantity of a good that can be imported into a country over a given period of time. For some products there is a quota tender system whereby importers pay the government for new quotas. Quotas on imports are often more effective in providing protection for domestic producers than tariffs because once the import quota has been filled further imports are prohibited, and producers are guaranteed a share of the domestic market. Globalisation can be said to have been beneficial by increasing economic growth, living standards and general economic conditions. ...read more.

Conclusion

Economic growth was slower. At this time it would have probably been more beneficial for the People's Bank to exercise a more expansionary monetary policy by increasing credit and the money supply more rapidly. The Chinese government was trying to raise aggregate demand following the financial crisis by increasing expenditure on the building of infrastructure. Instead of financing expenditure by issuing bonds, the government could have financed some of the projects by issuing more money, or non-interest baring government debt. Fiscal policy consists mainly of setting the amount of government expenditure given the level of government revenue, which is determined by the tax structure and the economic conditions. A need for fiscal policy has developed since economic planning became less important and market forces were allowed to determine aggregate output. The Chinese Government has previously signalled its intention to maintain the fiscal stimulus it has been using to strengthen the country's economic growth rate over the past few years. For China to have economic growth it needs to maintain an annual GDP growth rate above 7% to create jobs for the tens of millions of new jobseekers who enter the labour force every year. Between 1990-98 China showed an average real GDP growth of 11.1% this was one of the highest in the world at the time. China's GNP per capita was $US 3105 in 1995. China had a Human Development Index (HDI) ranking of 98 in the world in 1997 out of 174 countries. Its HDI was at 0.701. In the 30 Provinces rankings ranged from the highest HDI value in 1995 with Shanghai at 0.885 to the lowest ranking in Tibet with 0.391. China's life expectancy in 1997 was 69.8 years. This ranged from 75.2 years in Shanghai to 59.8 years in Tibet. China's adult literacy rate was 82.9% in 1997. Out of the provinces Beijing had the highest with 92.1% and Tibet the lowest at only 38.5%. China's Real GDP per capita (PPP $US) was 3,130 in 1997. This ranged from 10,901 in Shanghai to 1,121 in Guizhou. ...read more.

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