Essay economics for countries

Another potential benefit of economic growth for lower and middle-income countries is that it will attract greater inflows of foreign direct investment FDI. There are many potential benefits from inward FDI.

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These include the supply-side gains from investment in critical infrastructure in transport, power, energy, telecoms and education and health-care. FDI can also create more jobs in the formal economy which in turn will bring the government more tax revenue. However, many economists have cast doubt on gains from FDI.

They question how many new jobs actually go to domestic workers and point to the outflow of profits and non-payment of tax by some MNCs. FDI might contribute to environmental damage for example through rapid deforestation. A 3rd key reason why growth is important for developing countries is that it will increase tax revenues available to a government and help control their fiscal deficits and debt. Tax revenues depend on many factors including the basic incomes flowing to households and profits made by businesses.

If economic growth is sustained, an increase in tax revenues might help to fund higher levels of government spending on basic public services including better access to education and health-care. Greater fiscal stability might also give developing countries scope to weather external economic shocks and improve their credit rating making them less dependent on aid.

However there is no guarantee that rapid economic growth will lead to much higher tax revenues. In many countries there is endemic corruption and non-payment of tax. Developing countries need to focus on other objectives than economic growth — two important ones are controlling inflation and maintaining external balance.

Developing Countries Essay

Many fast-growing developing countries experience increases in inflation both from demand-pull and cost-push factors. High and volatile inflation damages growth by cutting real incomes affecting poorer families especially and hitting investment.


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One reason is that developing countries often have limited foreign exchange reserves and they may run into a currency crisis leading to a big depreciation of their exchange rate which makes essential imports expensive. However fast economic growth does not necessarily always lead to high inflation, particularly if a country is succeeding in raising labour productivity.

The current account is also like to go into bigger deficit if a nation is importing technology that will support LRAS in the future. On balance, the extent to which economic growth will be the dominant macroeconomic objective for emerging countries depends on where they are at their own stage of development. For nations such as Ethiopia, Vietnam and India, economic growth is crucial as part of their strategy to become mildly-prosperous middle-income nations in the years ahead and the meet the expectations of their fast-growing middle-class of consumers.

Equally, we have seen in China a decision in the latest 5-year plan to move away from a fixation on the actual rate of growth to achieving a better quality of growth which is more sustainable, balanced and inclusive, focusing in particular on lifting the standard of living of the bottom 40 per cent of their population. Growth does not guarantee development but development is hard to achieve without an expansion of real GDP. Therefore I would argue that for most developing countries, growth will remain the leading objective of monetary, fiscal and supply-side policies.

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Cart Account Log in Sign up. Economics Explore Economics Search Go. Economics Reference library. Evaluation However, economic growth in developing countries is not always inclusive. Evaluation However, many economists have cast doubt on gains from FDI. Evaluation: However there is no guarantee that rapid economic growth will lead to much higher tax revenues. Evaluation: However fast economic growth does not necessarily always lead to high inflation, particularly if a country is succeeding in raising labour productivity. Building the Evaluation - Final Reasoned Comments On balance, the extent to which economic growth will be the dominant macroeconomic objective for emerging countries depends on where they are at their own stage of development.

Subscribe to email updates from tutor2u Economics Join s of fellow Economics teachers and students all getting the tutor2u Economics team's latest resources and support delivered fresh in their inbox every morning. You're now subscribed to receive email updates! Print page. You might also like. Economics of Deforestation Student videos. Interventions to address environmental market failure Study notes.

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Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UK Essays. In todays increasingly multi-polar world, economics issues are gaining in relative significance. Therefore it is important to recognize and understand the changes taking place in the recent world economy, thereby developing appropriate policies which will assure global stability and economic prosperity. Although economic interdependence has always existed to some extent, technological advances of the last forty years and increasingly global nature of production have resulted in a quantitative and qualitative change in the degree of this interdependence.

Sustained economic growth has become increasingly dependent on freedom to engage in economic exchange and other activities across national boundaries. Economic interdependence is a relationship between two or more people, regions, nations or other entities in which each is dependent on the other for various economic variables such as goods, services, currency, financial tie-ups, etc.


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  8. Economic interdependence often occurs when all parties are specialized in the fulfillment of some requirements, and must trade with others for unmet requirements. This economic interdependence or economic integration centers on the four main economic flows that characterize globalization:. Goods and services, e. Labor, e. Capital, e. Technology, e. Foreign trade is the oldest indication of international economic interdependence. However recently, the rapid expansion of world trade at a rate higher than that of world output growth, and the changes in its relative composition and geographic distribution have contributed to and reflected the qualitative difference in the nature and degree of interdependence which has occurred over this period.

    Foreign direct investment FDI has become an increasingly important activity over the last twenty years or so. Foreign direct investment has become particularly important in the services sector. Although in earlier decades FDI was concentrated in raw materials and other primary products, today the main sectors are services and technology-intensive manufacturing. The dependence of countries outside this group on Triad technology is therefore very substantial and transfer of this techno-logy, generally through direct investment by Triad multinational enterprises, is of prime importance. Data communication services are one of the most rapidly expanding areas of economic activity.

    The rapid expansion of these new services can be expected to outstrip the growth of voice communications and, in the long run, they could become more important in absolute economic terms. The developments outlined in the preceding section have been instrumental in promoting the spread of new forms of corporate strategies at the international level. These strategies are based concurrently on cooperation and competition between economic operators engaged in various forms of joint value creating activity.

    The emergence of a global financial market is the most highly developed and pervasive aspect of economic interdependence. The advances in informatics and communications technology, within the last ten years, have permitted the development of instantaneous and continuous trading in currencies and financial assets across the world, thus creating the most truly global market. The new economic policy is regarded as the only strategy to cope with the problems of underdevelopment and unemployment in the long run.

    At present India is the sixth largest consumer of energy and the third largest consumer of oil and gas in Asia only after Japan and China. Cooperation between China and India are the common development of the Yadavaran oil fields in Iran. She has also extended their cooperation to regions like Africa where Indian and Chinese companies have cooperated in Sudan. Most of the petroleum products of India are imported from gulf countries.

    Thus the fluctuation in the petroleum prices in these countries affects the prices of petroleum products in India. This needs of energy by India reflect the new constraints of interdependence that India is confronted with in the era of globalization. However India will probably benefit from the new interdependence although it will introduce new constraints on her foreign policy. This clearly shows the dependence of India on other countries for its resources.

    The various forms of international economic make up an intensive and complex system of global interdependence. The interlink ages between individual economies are too strong and the momentum of globalization too great for the process to be reversed. In such a system, where wealth-creating activities are increasingly transnational, it makes sense to facilitate these activities by providing an open and stable world economic environment.