Recent Trends In International Political Economy

RECENT TRENDS IN INTERNATIONAL POLITICAL ECONOMY

THE RISE OF VIRTUAL STATE

==в-Ñ"The way states controlled resources has changed.

==в-Ñ"Previously land was considered as a source of production and power and there was obsession for land by states and powers. To acquire more and more land to enhance power and the only way to capture land was wars and conflicts.

==в-Ñ"Over the years things (trends) are changing the focus is shifting from LAND to CAPITAL and LABOUR and farther more to SKILL or MIND.

==в-Ñ"As land is immobile factor of production on the contrary Labour, and Capital are very much mobile factors of production.

There are Two Types of Labour Mobility:

(a) Geographically: In case of perfect competition labour will move any where in the world. But Political and social factors are limiting the labour mobility.

(b) Jobs: If a person can perform different jobs perfectly there can be a perfect mobility in jobs. But when more are the skills required the less is the Job mobility.

Over The Years There Are Three Types of States

1) ==в-Ñ"Expensenest States: Primary Sector Production, England is considered as role modal.

2) ==в-Ñ"Trading States: Secondary Sector Production, Japan is considered as role modal.

3) ==в-Ñ"Virtual States: Tertiary Sector Production, Hong Kong is considered as role modal.

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Time Line:

==в-Ñ"First the MILITARY dominance was ruling the world and land was considered as main factor of production from 16th to 19th century.

==в-Ñ"Then in late 18th or early 19th century focus shifted to Industrial Revolution that declined the importance of Land and raised the importance of Capital and Labour

==в-Ñ"In first half of 20th century the prices of primary products declined to 40% in relevance to manufacturing goods in the world market.

==в-Ñ"and there were adverse terms of trade for LDC’s.

==в-Ñ"Now the only dominating factor in the world is MARKET. And who so ever has edge in it will rule. So in this manner we are moving to VIRTUAL STATE.

==в-Ñ"As when focus shifted from Land to Labour and Capital there was a chance for small states to flourish. Like in the example of Japan, Germany etc.

==в-Ñ"When Labour & Capital Productivity increasesпЂЈ=в-Ñ"There is increase пЂЈ in manufacturing of goods =в-Ñ"Which leads to increase пЂЈ in Trade.

==в-Ñ"In the contemporary world the only objective of states is the grater share in the international market and all these states are called Trading States.

==в-Ñ"In case of Trading States Japan is the roll modal.

============в-Ñ"Now the trends are even changing.

==в-Ñ"First states used to manufacture the goods in there own territory and then shift it to the desired country, but this trend changed over the time and now production is based in the foreign country for foreign market. As in the example of NestlÐ"© in case of Switzerland which has 98% of its investment out side to its territory.

==в-Ñ"Virtual Corporations: There are organizations which have no production capacity or zero production capacity. These organizations have the head but there are other firms and companies which form body for them. These companies have different departments like Design, Research, Marketing, Legal Section, etc but production department is not there.

==в-Ñ"Maintaining the level of output or increasing output without increasing any input. Or we can say no production capacity or zero production capacity. As the organization has the head but there is no body hence such corporation is called Virtual Corporation which only provides Concept, Design, Research, etc.

==в-Ñ" Downsizing: A Virtual Corporation fallows Downsizing (slim down, cut back, economize, scale back, downscale, rationalize, etc). And advantages of Downsizing are:

1) It increases efficiency.

2) It increases productivity.

3) It increases competitive capabilities.

Efficiency: Best possible allocation of resources. Maximum output with minimum input.

Equity: Best possible distribution of resources.

VIRTUAL STATE

Similar to Virtual Corporation national economies also fallow the Downsizing trend and these states are known as Virtual States. Most efficient economies possess limited production capacity. Best examples are of Hong Kong, Korea, Japan, Singapore, etc.

==в-Ñ"Hong Kong got independence in 1997. Before that British were ruling them Politically and Legally but Economically Hong Kong was independent as one nation two systems. Today Hong Kong is politically governed by China but economically Hong Kong is governing China and the entrepreneurs of Hong Kong own most of the investment in main land China.

MODAL OF VIRTUAL STATE

The Modal of Virtual State suggest that all Virtual States Must Fallow Downsizing.

1) Political and Economic Strategies: Must be towards Downsizing, strong and tight political control with open economic policies (Economic control at home & economic access abroad).

Example: Of Singapore suggest that their is a tight political control domestically but they have inflow of foreign production factors (lose economic control). As in case of Korea and Japan most of their production is abroad. Similarly in case of Switzerland NestlÐ"© has 98% of their investment abroad. And in Foreign Direct Investment UK is equal to USA both having 20% of their production