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US Debt Limit and Effect of Oil on the Global Market - Essay Example

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"US Debt Limit and Effect of Oil on the Global Market" paper identifies to what extent experiences with globalization show that markets are ultimately at the mercy of states in international relations, the paper also describes the Euro Crisis and experience from Asia. …
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RЕ3 Question 7 and Question 7 Name of Student: Name of Course: Name of Instructor: Date of Submission: Question 7 and Question 7 Question 4 To what extent do experiences with globalization show that markets are ultimately at the mercy of states in international relations? Globalization had opened domestic markets to the global markets, leading to the increased economic and social interdependence between states. This has led to a state where the markets are at the mercy of states involved in the international relations. The following section will analyze several experiences on the global markets which indicate this. US Debt Limit The most recent experience in the global market is with respect to the US dept limit/ ceiling. On this point, it is worthy taking an insight into the US debt limit. The United States government has over time plunged the county into debt so as to fund its operations such as the long wars in Afghanistan and Iraq among other domestic operations (Masters 2013, p.1). As at May 2013, the debt stood at $16.699 trillion (Masters 2013, p.1). If the debt hits the limit, US would not be able to support its operations, hence leading to the crushing of the country’s economy. On this point, it is important to acknowledge that the United States is one of the economic giants on the globe. As a result of this, it is expected that any negative economic trend on the county would impact heavily on the global market (Pessin 2013, p.1). There is a common saying that if the US sneezes, countries in the 2nd world countries cough while the 3rd world countries catch a cold. As a result of the speculations of the pending US shut down, the dollar (which is the standard currency used in global transactions) fluctuated impacting heavily on the global markets. The speculated US shutdown would also impact heavily on China and Japan, which are the largest financiers of the US debt. A negative impact on the economy of the two Asian economic giants would also impact heavily on the global market since they have a big stake on it. From the discussion of the US debt ceiling above, it can be acknowledged that global markets are dependent on the states involved in the international relations. Effect of Oil on the Global Market (Middle East) Oil is one of the commodities in the global market which has the potential to make or break the global economy. On this, it can be acknowledged that the global market is over dependent on oil as the main fuel and source of energy. Taking an example of the experience on the global market during times of instability in the Middle East and other oil producing countries in the world, it can be acknowledged that the states have a significant influence on the market (Eliot 2011, p.1). During the instability periods in Iraq, Iran, Afghanistan and Kuwait, which includes the times during the US led war on the states, it can be acknowledged that the oil process rose to an all time high. This in turn impacted heavily on the cost of production of the global market leading to an imbalance of trade on the market. In the recent uprisings in Arabic countries, there was a significant rise in oil prices leading to adverse effects on the global market (Eliot 2011, p.1). From the above, it can be acknowledged that the global markets are dependent on the states involved in the international relations. The Euro Crisis The Euro crisis is yet another recent experience which shows that the global market is dependent on the states involved in international relations. On this, it is important to highlight that the Euro crisis is characteristic of the Euro Zone, a union of countries in Europe which Use the Euro as the legal standard tender. The Euro crisis arose from the inefficiency of the economic policies to increase the efficiency of the Euro zone. On this point, it is worth noting that the Euro Zone accounts for about 17% of the global economy, hence a crisis on the region has a significant impact on the global market. The Euro Zone has affected the global market heavily, especially in the third world countries which have placed their debts on some of the countries which are engulfed in the crisis. The crisis is moving progressively from one country to another. With adverse effects of the crisis already experience in Greece, Cyprus Ireland, sprain and Portugal, it can be acknowledged that the global market is highly influenced by the member states which are involved in international relations. Experience from Asia Over time, Asian countries have progressively risen to be major players in the global market. Taking a case study on economy of Asian countries, it can be acknowledged that there is a special thing in their international relations which have enabled them to withstand the challenges posted by the global economic crisis. A closer look at practices in the international relations in the country, one cannot fail to identify the strong trading ties, business networks and relationships which exist in the Asian countries. Ideally, the concept of Guanxi, which upholds the need for strong business relationships and networks, is a key component of international relations in Asia (Gong, He & Hsu 2013, p.363). As a result of this, the countries have been able to create a good market within themselves and also on the global scene. From the discussion of the experiences above, it can be acknowledged that the markets have a strong dependence on the states involved in international relations. References Eliot, L., 2011. Middle East Crisis May Leave World Over and Oil Barrel, The Guardian, Retrieved on 31st October 2013 from http://www.theguardian.com/business/2011/feb/07/economics-oil-inflation-middle-east Gong, B., He, X., & Hsu, H., 2013 Guanxi And Trust In Strategic Alliances, Journal of Management History, Vol. 19, No. 3, pp.362 - 376 Stracca, L., 2013. Our Currency, Your Problem? The Global Effects Of The Euro Debt Crisis, European Central Bank, pp. 1-33 Masters, J., 2013. U.S. Debt Ceiling: Costs and Consequences, Council on Foreign Relations, Retrieved on 31st October 2013 from http://www.cfr.org/budget-debt-and-deficits/us-debt-ceiling-costs-consequences/p24751 Pessin, A., 2013. US Debt Default Would Have Global Impact, Experts Say, Voice of America, Retrieved on 31st October 2013 from http://www.voanews.com/content/us-debt-default-would-have-global-impact/1766115.html Question 7 Does the wealth of rich states require the poverty of poor states? Looking back at history and also analyzing the current economic trends on various countries in the world, it can be acknowledged that there is no one time that all countries have been on the same economic level. There have been heated arguments as to whether the wealth of rich states requires the poverty of poor states. The answer to this question is yes and not. The following sections will present the two sides of the scenario. The wealth of rich states requires the poverty of poor states This stand proposes that the wealth of rich states requires the poverty of poor states. In order to explain this point effectively, it is important to take note of the changing global economic states from region to region. The changing economic state of countries is follows the economic development curve where a country is certain to experience depression once it hits maturity. During its times of depression, the economies of other countries mature, hence creating other rich countries. This leads to an ever changing economic state of various countries in the world. On this point, it is worthy taking note of the declining economic prowess of the west. It can be acknowledged that there has been a drastic change of power from the west to the east (Lecture Notes 2013, p.1). Asian countries have been experiencing high growth rates as compared to western countries leading to the creation of great economies in the east. As at now, it can be acknowledged that China is slowly rising to being the largest economy in the world, replacing the United States of America which has occupied this position for the better part of the past centuries. Looking back at history, it can be acknowledged that Egypt was once an economic powerhouse in the world. At this time, Egypt controlled the world’s economy and was instrumental in great innovation such as glass manufacture, wring and architecture. The decline of Egypt gave way to the Roman Empire which was able to control great sections of the world both politically and economically. At this time, the Chinese were slowly developing and taking the world’s economy fast. Historical data has various data to show the Chinese were actively involved in world trade. The building of the Great Wall of China, which is one of the oldest manmade landmarks on the world, is a manifestation of the economic and political might of the Chinese. After the Chinese came the western countries who rode on the famous agrarian and industrial revolutions to achieve great economic prowess. The western countries then discovered America and invested heavily in the country. Although they enjoyed great economic benefits from the country; they also fast tracked America’s path to economic success. After many years, the United States’ economy overtook that of any other country in the world and the country has been on the top of the world since then. In order for a country to develop its economy, it has to engage in various activities which require for other countries to be poor (Lecture Notes 2013, p.1). On this point, it can be acknowledged that a great part of the wealth of European countries was gotten from the colonization of other countries for instance in Africa, America and Asia. From this, they were able to use the resources of their colonies to improve their own (Gardener 2012, p.1). On this, the poverty of the colonies was a requirement for the wealth of the colonialists. In modern world, there are claims that rich countries have used their economic might to impose conditions and also cause instability in poorer countries so as to exploit their resources. From the arguments above, it can be acknowledged that the wealth of rich states requires the poverty of poor states The wealth of rich states does not require the poverty of poor states This argument proposes that the wealth of rich states does not require the poverty of poor states. The arguments for this case are that each country has an ability to dictate its course of action hence ultimately influencing its economy directly. Currently, it can be acknowledged that globalization has opened up different countries of the world to each other; giving them a chance to learn from each other in a constructive manner. On this point, it can be acknowledged that the economic growth of countries like India and Japan have taken a very short time as compares to economies of such countries such as Britain. From this point of view, it can be appreciated that the wealth of rich states does not require the poverty of poor states. According to David S. Landes in his book ‘The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor’, the wealth or poverty of a country is influenced by culture, climate and management (Holcombe 1999, p.1). In his book, Landes argues that the poverty or wealth of a country is not an accident but instead is a combination of various aspects specific to that country alone. On this point, it is important to acknowledge that most of the poor countries in the world are faced by great management problems which in turn lead them into poverty (Hopper, Tsamenyi, Uddin & Wickramasinghe, 2009, p.470). Giving an example of Africa, it can be acknowledged that the resource rich region has been dragged into poverty by bad governance. From the above position, it can be appreciated that the wealth of rich states does not require the poverty of poor states. Concluding, it can be appreciated that the wealth or poverty of nations is a factor of both the activities of wealthy countries and the internal aspects specific to the poor country. References Holcombe, R., 1999. The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor by David S. Landes The Ultimate Road to Wealth Is the Adoption of a Market Economy, The Freeman, Retrieved on 31st October 2013 from http://www.fee.org/the_freeman/detail/the-wealth-and-poverty-of-nations-why-some-are-so-rich-and-some-so-poor-by-david-s-landes#axzz2jI33EoYE Gardener, L., 2012. Building Colonial States in Africa, Retrieved on 31st October 2013 from http://www.oxfordscholarship.com/view/10.1093/acprof:oso/9780199661527.001.0001/acprof-9780199661527-chapter-2 Hopper, T., Tsamenyi, M., Uddin, S., & Wickramasinghe, 2009. Management Accounting In Less Developed Countries: What Is Known And Needs Knowing, Accounting, Auditing Accountability Journal, Vol. 22 No. 3,pp. 469-514 Lecture Notes, 2013. The Decline of the West Read More
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