US Improvement of Economic Performance - Essay Example

In today’s global environment, the government does not have the same ability to improve a company’s economic performance as it once did because of a variety of outside influences. First of all, globalisation has made it more difficult for a country to rely on itself, as there are always other counties interfering and attempting to make some money for themselves. Secondly, Americanisation has become a significant problem for many developing countries, as the United States uses its political power in order to keep poorer countries poor. Thirdly, many governments do not have control over their populations, as crime syndicates control the economy, making it impossible for the government to improve the conditions of the majority. These issues are significant because they prevent many governments from looking out for their own country’s interests and forcing them to go along with the ideologies of others, which prevents them from improving the country’s economic performance, as “recently, many have argued that competitiveness is strongly influenced by government policy“ (Porter, The Competitive Advantage of Nations, 4). Michael Porter’s five forces of competitive analysis are the bargaining power of customers, the bargaining power of suppliers, the threat of new entrants, the threat of substitute products, and the intensity of competitive rivalry. This theory can be applied to how governments improve the economic conditions of their country in a variety of different manners, mostly due to their interactions with other countries, as “government actions can also dramatically increase or decrease the likelihood of international competition” (Porter, Competitive Strategy, 181). International trade is something that will always be debated because it is interesting to see who has the advantages and why. The most common manner by which to explain the advantages that certain countries have over others in trade in by using a comparative advantage model. There will always be different scales because of the various differences between countries’ finances, education levels, population, demographics, resources, and other factors. China, where “economic liberalization has registered great success without substantial political reforms,” (Feng 252) is a country that has traditionally been used for its labour, due to its extremely high population and its lack of good paying jobs. The variable in this situation is that Chinese companies are beginning develop their own products for distribution, which is a direct result of the government’s change in policy. One such company is Acer, which is a computer company. Acer is the world’s fourth largest personal computer manufacturer and it also builds servers, storage devices, LCD monitors, high-definition TVs, peripherals, as well as provides “e-business solutions for business, government, education, and home users” (About Acer). Acer also has developed a unique business model called the Channel Business Model which uses supply-chain management to ensure that new technologies, competitive pricing, and quality service are always readily available to the customer. Acer products are available in more than 100 countries and the corporation reached US$9.7 billion in revenues in 2005. This shows the China’s accession into the World Trade Organization will be a positive for the country. It will allow for entrepreneurs within the country to expand their horizons into more lucrative markets. This money, in turn, will be put back into the Chinese economy. Also, the borders will be opened up to more international investment. This investment will bring about more jobs and will, therefore, help stimulate growth in the Chinese economy. By moving towards a free market economy, China will be able to utilize its strengths effectively. These strengths are the pure population numbers that this country has and the number of people that it can contribute to the global workforce. By 2050, if this accession into the WTO is handled correctly by the Chinese government, China could become a superpower because with that many people, the odds of certain individuals creating something great is higher than in any other country. In this situation, the government has been able to effectively improve national competitiveness, as it has begun the switch from communism to capitalism and, therefore, its economy is growing rapidly. China’s emergence will bring the threat of new entrants to the marketplace and could bring a about a competitive rivalry with other countries as well. Another problem that governments run into is the Americanisation of government policies. The United States is often able to disguise its true intentions with a friendly, helpful attitude. What the American government did in order to promote the liberalization of the Egyptian economy was to increase the trade between the two countries by promoting the investment of American corporations in the country. What this does, however, is give the United States a significant competitive advantage, because “the coercive power of the state has been employed throughout most of history in ways that have been inimicable to economic growth” (North 14). By initiating this economic partnership, the United States has lowered the threat of substitute products in the area, as its corporations nearly hold a monopoly. This was seen as a form of economic cooperation between the two countries, rather than the dependency that had once been major in their relationship. The goal of this was to make Egypt open for international business, which they believed would make the country economically stronger in the future, while continuing to further the interests of American corporations in the region. This new partnership “consisted of various committees in charge of promoting private sector development. The committees included Economic Policy, Trade, Investment, and External Finance; Technology; Sustainable Development and the Environment; and Education and Human Resource Development. Some of the activities of the committee on Economic Policy, for example, involved providing technical advice on privatisation, WTO rules, intellectual property right protection, improving Egyptian capital markets, establishing government securities, improving sales tax rules and agricultural price liberalization” (Momani 94). The Presidents’ Council was made up of a group of American and Egyptian businesses and was aimed at furthering the trade partnership between the two countries. This council had a great influence on the trade relationship between the two countries and worked towards an actual trade agreement. In 1998, “Vice President Gore announced the new Trade and Investment Framework Agreement (TIFA), which extended the scope of the 1994 U.S.-Egyptian Partnership for Economic Growth and Development. U.S. Trade Representative Charlene Barshefsky highlighted that ‘entering into a TIFA with Egypt marked the first step toward creating freer trade between our two countries, and established the basis for stronger economic ties to bolster our joint efforts at further peace in the region’” (Momani 95). These policies, while appear to help on the surface, actually prevent the Egyptian government from expanding its economic influence. The country will only ever become as wealthy as the United States allows it to, which prevents the government from improving the economic conditions of the country on its own. This shows that the American government has attempted to improve national competitiveness, but may have done so the wrong way, as it has alienated much of the world with its practices. A third problem that has prevented many governments from improving the economic conditions in their countries is corruption, since the “government’s most basic role in an economy is to achieve macroeconomic and political stability“ (Porter, Porter on Competition, 245). This is especially prevalent in South America, as drug lords and other criminals are able to do whatever they want and accumulate great amounts of wealth in the process. The political and economic problems in Latin America cannot be attributes to one source in particular. It is a complicated problem that these countries will have trouble changing mainly because those who hold most of the power in the region do not want change. A small percentage of the population holds a great percentage of the money in these countries and with that money comes a great percentage of the power and “the short-run distributional consequences of the laissez-faire agenda tend to favor the rich” (Cardoso and Helwege 70). The urban elites and the oligarchic landholders dominate the region financially and their power expands into political realm as well. Bribes, corruption, and the drug trade are major problems in Latin American countries and they are, a lot of the time, what keep the elites on top. What this does is take away the bargaining power of suppliers, as everything is controlled by the elites. While there are external problems, such as an inconsistent market on exported goods and the enormous loans given by First World banks in the past, the problems of Latin America can be attributed to internal sources. The internal problems, such as corruption, low minimum wage, a large military involvement, very little job security, and the fact that it is so difficult to get credit, make Latin America a difficult region for its inhabitants to live in Latin America has a very elitist society. These elitists are the people who are at the top of society like oligarchic landholders, political leaders, and corporate leaders. It is estimated that in Venezuela “the wealthiest 10 percent of the population receive close to 50 percent of the income, while the bottom half of society only get about 4 percent of the income” (Prevost & Vanden 101). They are also helped out by the low minimum wage, which eliminates the bargaining power of the consumer. In these elites are the people who have the power to changes things in Latin America, but choose not to because it would hurt their financial interests. If an elitist happens to start paying his workers more and changes the landscape of the system, pressure from other elitists quickly brings him back to the pack, if he is lucky enough to survive. These elitists also have the money to pay off politicians and other government workers in order to get the development deals they want. There is also a belief in Latin America that “an elite should lead, decide, dictate, or otherwise rule” (Prevost & Vanden 121). Many of the agricultural elites are involved in the drug trade, which is a highly corrupt sector of the Latin American economy. Since it is mainly up to the military to stop the flow of narcotics, the rich drug producers simply give the military a cut of the profits, which greatly reduces the risk of the entire operation. It has been argued that the “inequality of wealth and disparity of power and influence are Latin America’s greatest curses and are the root of many of the developmental, social, and thus political problems that continue to plague the region” (Prevost & Vanden 106). It is impossible to resolve many of the political and economic problems when the systems in these countries are so corrupt and when so few people hold so much of the power and money. As the world becomes theoretically smaller, it has become much more difficult for a government to improve a country’s economic progress because there are so many external factors present. This is important because “globalisation will increase the impact which national policy will have on domestic living standards” (Archibugi and Michie 4). Governments are not permitted to focus on their own goals, but must rather be aware of the goals of other countries around them as well. Powerful countries are constantly attempting to expand their influence, which means that weaker countries will have to go along with their policies in order to avoid being crushed. In many countries, crooked elites hold more power than the government because of the money they possess, which ties the government’s hands completely. Through each of these examples, it is possible to see that while “integration into the world economy through international trade is a safe way to increase prosperity substantially,” (Miller 42) is also impacts the ability of governments to improve their economic performances has diminished over the past two decades because of external factors that these governments have little control over. Works Cited About Acer. “Overview“. Viewed 4 December 2007. http://www.global.acer.com/about/index.htm Archibugi, Daniele and Michie, Jonathan. Technology, Globalisation and Economic Performance. Cambridge: Cambridge University Press. 1997. Cardoso, Eliana and Helwege, Ann. Latin Americas Economy: Diversity, Trends, and Conflicts. Boston: MIT. 1995. Feng, Yi. Democracy, Governance, and Economic Performance: Theory and Evidence. Boston: MIT. 2003. Kripalani, Manjeet and Engardio, Pete. “The Rise Of India: Growth is only just starting, but the countrys brainpower is already reshaping Corporate America”. Business Week. 8 Dec. 2003. Viewed 29 November 2007. http://www.businessweek.com/magazine/content/03_49/b3861001_mz001.htm Miller, Max. Worlds of Capitalism Institutions, Economic Performance and Governance in the Era of Globalization. New York: Routledge. 2005. Momani, Bessma. "Promoting Economic Liberalization in Egypt: From U.S. Foreign Aid to Trade and Investment". Middle East Review of International Affairs. September 2003. Vol. 7. No. 3. PP. 88-101. North, Douglass C. Institutions, Institutional Change and Economic Performance. Cambridge: Cambridge University Press. 1990. Porter, Michael E. Competitive Strategy. New York: The Free Press. 1980. Porter, Michael E. Michael E. Porter on Competition. Boston: Harvard Business Review. 1979. Porter, Michael E. The Competitive Advantage of Nations. New York: The Free Press. 1990. Prevost, Gary and Vanden, Harry E. Politics of Latin America: The Power Game. New York: Oxford University Press, 2002 Read More