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Microeconomics Midterm Essay

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1. Globalization and modernization Globalization is the greatest push to modernization. Mult-nationals move to countries which do not have industries in the process they create job for local people thus creating development. Economic globalization is the spread of neoliberalization and capital inspired consumerism which becomes an engines of economic of a country. As multinationals move from one country to another they create a world where each country becomes independent over another. To explore globalization we have to look at the last 50 years and analyse the importance of globalization. Globalization, as it exists today, rests largely on the shoulders of neoliberal economics and the global entrenchment of capitalism as the dominant economic system in the world. Neo-liberals put all of their faith in the distributive capabilities of the invisible hand of the free market, and believe that business was inherently good and that government bad. The government was longer interested in the provision of welfare but existed to stimulate the capitalist economic market. The United States under Ronald Reagan was thus described as the ?greatest of the neo-liberal regimes? (Hobsbawm 1994). Accordingly The essence of neo-liberalism, its pure form, is a more or less thoroughgoing adherence, in rhetoric if not in practice, to the virtues of a market economy, and, by extension, a market-oriented society.

While some neo-liberals appear to assume that one can construct any kind of ?society? on any kind of economy, the position taken here is that the economy, the state and civil society are, in fact, inextricably interrelated (Coburn 2000). How did neoliberalism, the dominant political and economic ideology of the West . 2. Micro-economic theories relating to economic development The economic theories that relate to economic development that been covered in this class include: the purchasing power parity theory, comparative theory, supply and demand theory, income theory, visa version theory, quantity of money theory, classical and Keynesian theories of income and employment theories. These theories jointly are the basis of economic development of a country. Considering the two major theories classical and Keynesian theories they explain how economic development takes place in a country. 3. Benefits of globalization Economic globalization has come with many advantages and disadvantages. One of the benefits of globalization is the flow of investments across borders.

However many developing and underdeveloped nations are reeling from the pressure to clear debts, intense illiteracy, unemployment, poverty, influctural underdevelopment. To overcome this it is believed that direct investment is required to uplift the standards of these nations. Therefore direct investments cannot exist without globalization. On the other hand apart from globalization of flow of investments there is also a benefit of outsourcing of labour which ensures remittances are to this developed countries. It is no doubt that there is a link between globalization and economic development today. Critics of globalization argue that this phenomenon is thinly disguised neo-imperialism and actually represents an insidious attempt to spread Westernization and Western concepts of capitalism, exploitation and greed across the globe. World systems theorists would argue that globalization does nothing more than entrench the dominant economic position of the developed countries of the West while perpetuating an unequal global distribution of wealth thus ensuring the continued subservient status of the developing countries of the world, within the current global economic system. Global economic institutions such the World Bank (WB) and the International Monetary Fund (IMF) often bear the brunt when it comes to criticizing the global economic system and the state of global affairs. These organizations are routinely criticized as being anti-democratic, exploitative in nature and often as agents of Western imperialism. Members of the anti-globalization movement represent a backlash against the dominant economic ideologies of our time including capitalism and neoliberalism as the economic order of the day. Proponents of globalization argue for that many criticisms of globalization are unfounded. Accordingly, they point to the fact that there is a wholesale lack of evidence for many of the claims put forth by anti-globalization activists and argues that capitalism and neoliberal economic principles have benefited people all around the world, including those in the so-called Third World. The embrace of capitalist ideals by nearly all of the countries of the former Soviet Block is seen as evidence of the appeal of neoliberalism and capitalist economic principles (Hobsbawm 1994). Consider the current economic financial crisis, it has spread all over the world although it has began sub prime crisis in US and the whole world is suffering because of globalization.

Globalization was a cause for spreading the crisis at this speed to other part of the world. Most of the leading economies are suffering from this crisis. There is fear that the current crisis may be the worst in the history. Before the crisis actually spread the stock markets all over the world has touched the peak. Then it was nosedived to almost 50-60% down of its peak in the month of December 2007 and January 2008. The crude prices also touched the peak of $147 a barrel and then crashed to $ 28. Many people lost their jobs and many of them, defaulted their loans. This has aggravated the crisis. Governments worldwide are announcing economic packages to come out from the current slowdown. 4. Primary insights of micro-economics relating to globalization and economic development. The items that we covered which is applicable to globalization and economic development they include the supply and demand, global economy covers a most important element in globalization. It explains the importance of international trade and the flow of resources across the borders. There is also specialization among nations which I have learned.

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