Introduction
The western countries are the most governing and powerful countries in the world, but there are economic pressures from the Far East countries since the past decade to provide stable results in terms of finance. In the beginning of the 21st century the western countries were able to withstand all the economic slowdown like the crumpling of stock market, the 9/11 attacks, the Katrina hurricane in 2005 and the war against Iraq; however during the same time the far east countries like the Republic of China, Philippines, Thailand and many more caused a threat to the economy of the western world.
Unemployment is a financial breakdown that is seen in almost all the countries, and it varies depending on the population. Is it the high percent of unemployed people causing the economic meltdown in western countries? Though the unemployment rate in US was at its peak in 2007, it has gradually decreased in the recent years and according to the Bureau of Labor Statistics (2013) the current unemployment rate in US stands at 7.8%. An overview of the unemployment rate was provided in the Trading Economics (2013) which states that among the major worker groups, the unemployment rates for adult women (7.3 percent) and blacks (14.0 percent) edged up in December, while the rates for adult men (7.2 percent), teenagers (23.5 percent), whites (6.9 percent), and Hispanics (9.6 percent) showed little or no change.
The labor market in the western world is very fluctuating as many companies outsource their work to the fast east countries to cut down on the cost and save the overheads. These companies hire people to work at a very low wage that hits the employment rate. Can we ensure to receive good quality products from these Far East countries? It is a debatable question as there are products out in the market produced by these Far East countries that have worked well. The companied that outsource enjoy tax breaks in their business. The developing countries like China and India enjoy the benefits of the outsourced jobs. How will the Far East countries benefit with outsourcing? This is supported by Hira.R and Hira.A (2005, p.49), In a bold move Siemens, the German industrial conglomerate, announced that they were moving most of their 15,000 programming jobs from the United States and Western Europe to China, India and Eastern Europe. This move was mainly done to save company costs.
There can be many factors that account for the economic strength of any country like the Gross Domestic Product (GDP), International transactions, Industrial Production and Consumer Price Index. But, can we only consider these factors to strengthen the economy? As stated by Fishback (2007, p.3), the stability of the government is a key feature of successful economies, and instability leads to uncertainty about the future that threatens individual decisions and retards investment. There must also be bureaucratic improvements supported by official forgiveness in terms of taxes and personal money sent out to other countries. It has been stated by Johnston (2005, p.209) that such moves, particularly if coupled with simplified and more predictable taxation, will eventually bring capital back into the legitimate economy, help finance higher and more regularly paid bureaucratic salaries, reduce incentives to administrative harassment, and help bring black markets in from the cold. The economic indicators must be evaluated and tracked regularly to check how they affect the nation’s economy.
More recently The World Bank (2012) stated that China is now the world’s largest exporter and manufacturer and its second largest economy. How has China become a supreme power and a risk to the western countries in a short period of time? The country faced a slow growth and unemployment in the early 21st century because of layoffs in companies and heavy debts; however the policy makers stressed to create a new economic policy that emphasized to decrease the unemployment rate by balancing the income between the rural and the urban.
The rise in the unemployment rate is due to the fact that the youth taking up higher studies instead of working, companies shutting down the units because of global competition, many call centers moving their operations to the Far East countries to cut costs. How do the Far East countries maintain and increase the economy? Wallace (2010, p.108) states that “China’s unique blend of market capitalism and neo-communism has given China a gigantic comparative advantage over the United States”. Globalization has conflicting effects that has resulted in more industrialization in the Far East countries and creation of multiple jobs in various sectors. Do the wages provided in any country hold any relevance to the economy? Yes, the low level wages drive the economy and it varies in different countries. As mentioned by Flath (2000, p.124), Rather than a single minimum wage that is the same for all industries, and locales as in the USA, Japan’s statutes empower the prefectural governments to set separate, differing, industry-specific minimum wages.
Conclusion
The economic growth of the Far East countries has already posed a challenge to the western world. What steps can the western country take to maintain the first position if the Far East countries rise? As proposed by Laffer and Moore (2010, p.283), beyond fixing the past mistakes, we need to implement proactive reforms that strengthen each of the four grand macroeconomic kingdoms: fiscal policy, monetary policy, trade policy, and incomes policy. How does the public policy help in the economy? One view expressed by Marx & Salverda (2005, p.157) is that in public policy the upgrading of skills demanded in the labor market is broadly recognized as the determinant of the competitive strength of the European Economy.
References
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