Is it true that there is no comparative advantage left for US, UK, Japan over developing countries? Do you agree with “World is Flat” assessment?
This is about Globalization. Decades before, economy was ruled by developed countries. There was a huge gap in standings between 3 powerful country and rest of the countries. Now the gap is reducing fast. “Playing Field” of economy is slowly become flat. And I agree with this.
If we see the global trend, then transformation from manufacturing economy to knowledge economy is pretty evident. Geography, Natural resources are becoming less important for economic advantage. Talent in the community of people is the key resource in this era. For Example, Oil countries definitely are powerful and have an upper hand in economy. Tomorrow if some small country comes up with invention of successful solution to replace petrol, crude oil; then this patent will have much higher economic advantage the actual petrol processing countries.
Asia (especially India and China) has opened a huge job market. Availability of cheap labor being a huge plus, jobs are moving across the borders from US or Western Europe. Both these countries have shown a phenomenal GDP growth.
Multinational companies in US and Europe are looking for newer markets – mostly in Asia. The important reason being large buying power. Thus these companies bring an international business and enormous foreign currency helping economy of third world countries. Multinationals try to integrate the financial market globally. They search for newer locations across the world in some top leading cities of developing countries.
Throughout the world, all the countries are facing intensified competition in this globalize economy. One catastrophic event any where across the world – can cause its ripples throughout in all the economies. All the share markets, stocks and financial structures are interwoven. The way 9/11 affected globally, tomorrow any major event Beijing, Mumbai or Singapore will shake the all leading countries’ stock market.
It would be an exaggeration to say that -No comparative advantage is left for US, UK or Japan over developing countries. But then the gap is exponentially decreasing day by day. Thus, if not completely flat – it is getting flatter n flatter day by day.
Reference: “World Is Flat” by Thomas Friedman
I read this book for my MBA course. There was a class discussion about “globalization” and I was the only student with “flat world” opinion. All rest seems to agree that none of the developing countries matter to business or to multinational companies. Kind of surprising for me! But then I am the only international student in class (if that matters) What do you think?
