WK5PR

Participation Expectations.
In order to be eligible for the maximum score on this graded activity, the initial response to the discussion questions must be at least 200 words and be suitably supported (citations) with material from our our assigned textbook readings.  Subsequent comments to other students must "add value" to the discussion and should be approximately 100 words each in order to be considered "substantive" and therefore eligible for the maximum score

APA FORMATTING NOT NEEDED : Please keep the two post separate

Discussion Post #:1

Foreign Direct Investment

Imagine you are in charge of development for a developing country and were approached by a multinational corporation interested in locating in your country.

Identify some of the benefits and some of the costs to the host country from allowing a multinational corporation to locate in a country with a developing economy.  Discuss with your classmates if developmental assistance from world developmental agencies, such as the World Bank or the United Nations, would be preferable to private investment. 

Reference: Chapter 17, section 17.5: Help From The Private Sector: Multinationals.

Guided Response: Review several of your classmates’ posts and respond to at least two of them. In your reply, discuss how the concerns listed in their posts regarding private foreign investment could be alleviated through aide from world development agencies.    Carefully review the Discussion Forum Grading Rubric for the criteria that will be used to evaluate this Discussion Thread.

Peer Response #1: TM

As with any business venture, there are pros and cons to the situation.  We have to look at both the benefits and costs associated with a multinational corporation locating itself in an economically developing country. Often times economically underdeveloped countries are chosen by multinational corporations to access raw materials or to be close to local or regional markets for the products that the company cannot easily export.  The host country can benefit from these companies by increased capital, job opportunities and increasing foreign exchange.  Because of these reasons, developing countries encourage the multinational companies to locate to their countries.

The down side to this is that good jobs are often filled by foreign nationals and not the local workforce.  Because of this, the multinational corporation may not have any meaningful connections to the host economy. “It will then fail to act as a leading sector that spreads development to other sectors (Amacher and Pate, 2012)”.  If a multinational corporation comes into a country becoming the largest taxpayer, largest exporter as well as the major employer for that small country, that corporation may have more real power that the host government.

The World Bank mostly deals with developing countries offering long term, low interest loans to developing countries to promote economic growth.  The United Nations offers a more specialized multilateral aid programs like health, education and services to children.  A benefit to assistance from the World Bank as opposed to the private investments is that the World Bank has the ability to take repaid loans and recycle them to other nations and other projects.  The loans are paid off in stages as conditions that the bank imposed are met by the country.  “Typical conditions include reducing monetary expansion, increasing domestic tax effort, providing more basic services for people who are poor, and selling off or significantly improving the performance of inefficient state-owned enterprises(Amacher and Pate, 2012)”. 

Along with the government to government aid, direct foreign investment from private firms and individuals may benefit the country in its developmental efforts by supplying scarce capital.  Both multinational corporations and private firms have the ability to transfer capital to these underdeveloped countries to help with their need for economic growth.

The main goal is to help with economic growth in underdeveloped countries.  Listed above are many resources and the pros and cons to using such resources in the effort to help support and promote economic stability in underdeveloped countries.

References:

Amacher, R., Pate, J., (2012). Principles of Macroeconomics. San Diego, California: Bridgepoint Education, Inc.

Peer Response #2:RO

If I were in charge of development for a developing country and were approached by a multinational corporation. Interested in locating in your country. There would be some benefits and some of the costs to the host country from allowing a multinational corporation to locate in a country with a developing economy. One of the benefits of a corporation entering another country is an increase in capital for the host country. "An important resource for economic development in many countries is a flow of economic aid from governments and investments from companies in already developed countries." (Amacher & Pate, 2012).

Multinational corporations are a benefit to host countries. "The United states is a major contributor to the development programs of low- income countries. It concentrates its official development assistance through the United States Agency for International Development, which is part of the State Department and is in charge of U.S. aid to foreign countries. "Amacher & Pate, 2012). Many multinational organizations, World Trade Organization, World Bank, United Nations.

After thinking about whether developmental assistance from world developmental assistance from world developmental agencies. Such as the World Bank or the United Nations, would be preferable to private investment. I think developmental assistance such as the United Nations, World bank. Would definitely be preferable to private investment.

Reference:

Amacher, R., Pate, J. (2012). Principles of Macroeconomics. San Diego, California: Bridgepoint Education, Inc.

Discussion Post # 2:

Economies in Transition

The movement in the direction of a market-based system with freely determined prices, competition, profits, private ownership, and other features of capitalism is not simple.  Discuss some of the challenges associated with an economy transitioning from socialism to capitalism.

Reference: Chapter 20, section 20.1: World Economic Systems, and section 20.2: Transition to a Market System.

Guided Response: Review several of your classmates’ posts.  Respond to at least two of your peers by discussing the benefits and the costs of privatization of an economy.  Pose questions that may assist your peers in extending their thinking

Carefully review the Discussion Forum Grading Rubric for the criteria that will be used to evaluate this Discussion Thread. 

Peer Response #1:GT

Some of the challenges that may arise during a transition from socialism to capitalism may differ from country to country. However, "the reason for the shift is the demonstrated superiority of a market system in satisfying consumer wants, providing incentives, and minimizing the need for bureaucratic controls" (Amacher & Pate, 2012). Unfortunately, this transition can also cause a challenge with consumers' in regards to inequalities and insecurities. Part of this transition is by gearing towards privatization, which basically is "an important first step in moving to a market economy; which then, transfers ownership of enterprises from the government to the private sector" (Amacher & Pate, 2012). A noted challenge in moving towards privatization is the interest of the public such as public services [e.g. Hospitals] since people may feel they would receive lesser care because the industry may be ideally focused on higher profits rather than the care of their patients. Although, privatization tends to lean more towards positive effects in social welfare, not every country may benefit from such transition since countries such as “China, India, and European (Central & Eastern) countries in the transitory economy have confronted policy issues that have risen such as open competition with foreign firms and poor environmental quality owing to the failure to control industrial pollution” (Xu & Lee, 2015). Having said that, transitioning our economy to gear towards capitalism has its pros such as economy growth as well as more freedom towards our economy; however, the cons can become an issue when the firm becomes a monopoly, which means that they hold the wild card; in other words, the power to increase prices. Moreover, it may “weaken the power of the market and the security of property rights because a majority of the population can use the government to redistribute income or to change property rights to their own benefit” (Amacher & Pate, 2012).

References

Amacher, R., Pate, J., (2012). Principles of Macroeconomics. San Diego, California: Bridgepoint Education, Inc.

Xu, L., & Lee, S. (2015). Strategic Privatization with Tariffs and Environmental Taxes in an International Mixed Duopoly. Hitotsubashi Journal Of Economics, 56(1), 135-154.

Peer Response #2:SB

           One of the challenges that the book mentioned was that people “were wary of privatization because of fears of unemployment and an uncertain future” (Amacher & Pate, 2012).  The one things about socialism was that people were often assigned jobs, so they had the job security, but not a choice in what job they would perform, so less freedom. This reminded me of the time I watched “The Hunger Games” and how each district was assigned a job according to the resources that capital produced. They did not have a choice to be a baker, when the whole district mines. When the change is made to capitalism “workers are free to move about but they are not guaranteed a job” (Amacher & Pate, 2012). And under pure capitalism, if you do not work, you do not eat. Pure capitalism reminded me of the saying “give a man a fish and he eats for a day. Teach him how to fish and he eats for life.” Under pure capitalism, you are responsible for maximizing your own profit, as well as when you take a loss. Socialism on the other hand thinks that “the pursuit of profit is an inappropriate goal “(Amacher & Pate, 2012), and they condemn the exploitation of workers under capitalism, just as Karl Marx and his Marxist views.

 

Amacher, R., Pate, J., (2012). Principles of Macroeconomics. San Diego, California: Bridgepoint Education, Inc.

Two Separate Discussion Post

Must Complete both and use the classroom text as well