Final Paper - MGT 457

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Running Head: ECONOMIC DEVELOPMENT OF NATIONS

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ECONOMIC DEVELOPMENT OF NATIONS

Economic Transition

Cheryl Harris

Walsh College

Economic Development of Nations

The European market enlargement has reached its last phase. The highly advanced nations have closed their negation process: in the transition process, the post-communist are to some extent similar to the modern economic systems and the democratic nations regarding their structural and cultural perspective. Structural adaptation entails basic behavioural as well as institutional cultures in the developed western nations. Culture, in this case, can, therefore, be referred to as the system of values that align people’s characters and approach to their surroundings (Wild and Wild, 2019. P.112). Economic culture is thus a representation of the economic values and beliefs, which directs the economic behaviour.

Changing from the centrally planned economy to the market economy is considerably challenging and it presents a lot of challenges to a firm or nation. It requires the standardization of the behavioural and the normative patterns as well as the institutional structure in favour of the existing situation. The challenge is more intense when considering the core of culture. More obstacles may be experienced if a critical mass of relevant modern economic values and political democracy are not achieved. Most of the transition countries lack enough amount of inner force to cultivate democracy with little interest from the elites in power (Wild and Wild, 2019. P.113). There has always been a cultural clash when different economies meet to transact in a common market like the situation of Daewoo Motors from South Korea. The rigid hierarchical structure is a significant threat to economic transition.

Summary of the article: A Chinese recession would be detrimental to the world. Here's how.

Cultural difference in various nations acts as a significant challenge in the economic transition in countries like China. The global market culture is restricted to changes, therefore, it did not accommodate the decline in the China currency, the renminbi, which has complicated the Chinese stock market and forced the government to troll trading in the country. The cultural difference, in this case, refers to the incompatibility between the Chinese currency and the global market conditions. There is a challenge on the management of the domestic and the global economic obligations of China. The growth model of the Chinese economy had shifted from the investment based on external demand economy that relies on domestic consumption. Changing such economic transition without realizing a sharp decrease in the economic growth would be a daunting task for any nation, especially to a complex economy like that of China (El-Erian, Obama, & Global Development Council, 2018). In most cases, the economic transition reduces the dependence on the government with much focus on the incentives, personal responsibilities as well as rights. A Chinese recession could again make the situation worse. (Rogoff, 2018)

The Chinese policies were much ahead of the market, which in turn led to a situation of financial unsustainability an implication to price reduction in the market. Thus, the challenge for adjustment has grown over time with the Chinese firms unable to market their large volumes of products and support more expansion for more capacity. This means that the economy has lost employment opportunities, growth as well as wage boosts (El-Erian, Obama, & Global Development Council, 2018). Therefore, the action has reduced the ability of the government to maintain the prices of inflated assets and control situation of credit distress. The devaluation of China's currency is a common trend with both the advanced and emerging economies. A Chinese recession could again make the situation worse (Rogoff, 2018). According to the article, China has a better future despite the possibility of inadvertently raising the global financial instability because the devaluation of its currency would affect the growth in other countries.

References

El-Erian, M. A., Obama, B., & Global Development Council. (2016, January 11). How will China's economic transition affect global growth? Retrieved February 2, 2019, from https://www.weforum.org/agenda/2016/01/how-will-chinas-economic-transition-affect-global-growth/

Rogoff, K., (2018, November 12). A Chinese recession would be detrimental to the world. Here's how. Retreived February 2, 2019, https://www.weforum.org/agenda/2018/11/the-global-impact-of-a-chinese-recession/

Wild, John J.; Wild, Kenneth L.. (2019) International Business: The Challenges of Globalization (Page 112-113). Pearson Education. Kindle Edition.