Discuss the Impact of Newly Industrialized Countries on the Global Economy Essay
The rise of Newly Industrialised Countries (NICs) such as South Korea has greatly increased the international division of labour - Discuss the Impact of Newly Industrialized Countries on the Global Economy Essay introduction. During early development of NICs, TNCs from developed nations utilised the cheap workforce and outsourced their manufacturing into NICs. However the main Research and Development sector remains within the parent countries. This has great impact on the world economy as the NICs benefits from rise in employment and helped the nations to become more developed.
The increased economic development of the NICs population means that there is an expansion in the market base of luxury goods as more people are able to afford them. However the allocation of unskilled jobs to NICs can leave an employment gap within the developed nations. This can leads to increased unemployment in the developed world. As the NICs become more developed they start to follow the same economic model as the developed nations and outsourced their manufacturing to other nations. This is due to the increased cost of labour within the country.
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Unlike most NICs, South Korea encouraged development of family owned TNCs called chaebols which become the major source of economic development within the country. Consequently, there are more foreign direct investments from these chaebols such as Samsung and SK into the other less developed countries. This greatly encouraged the overall increase in trade and investment into other part of the world other than the MEDCs which was the case before the rise of NICs. The rise of TNCs from the Newly Industrialised countries has also resulted in an increase in competition within the world economy.
NICs have also exerted more influence on the direction of the global economy as they are becoming more involved in international trading blocs and agreements. However, due to their rapid economic growth many NICs developed a relatively unstable economy in their early phase. Another issue is that NICs such as South Korea, who led an export driven model of development, will be heavily dependant on the economy of the target export country. This means that an economic issue will affect most of the NICs and resulted in bigger complications.
This is clearly exemplified during the Asian Crisis where South Korea national dept to GDP ratio doubled from 13% to 30%. Overall, the development of NICs has caused the global economic barrier to be reduced. This has resulted in an easier flow of capital, labours and investments into a larger part of the world. NICs helped to create a larger trade area, which resulted in the diversification and expansion of the global market. This help to further strengthen and stabilise the global economy and reduce the occurrence of economic issues.