ESSAY: evaluate the extent to which the success of emerging economies has benefited developed emerged economies?

Question 1

Definitions of emerging economies and emerged economies?

Answer 1

An emerging market economy is one in which the country is becoming a developed nation often driven by relatively high economic growth and a rapid expansion of trade and investment flows
-developed economies have already undergone mass industrialisation and have relatively higher GDP per capita levels

Question 2

How successful emerging economies have benefited developed economies??

Answer 2

• outwards FDI into developing countries provides new markets for developed countries to sell their goods, with the profits of the country ending up back in the domestic country
• emerging economies are home to a growing middle class market which further encourages investment due to the increased market for the developed countries goods
• emerging economies such as Poland and Hungary in the EU allow even broader trade partners for developed EU countries, and could see the reallocation of production towards areas of comparative advantage which helps developed countries specialise on their own goods
• increase dependency on financial services of developed countries by developing countries due to more and more people opening bank accounts and more businesses sourcing finance

Question 3

How successful emerging economies haven’t benefited developed economies??

Answer 3

• increased competition between developing and developed countries eg China is a developing economy able to produce and export their goods at the cheapest level due to the weakness of their currency, which makes it harder for developed countries to be competitive because there are stricter standards of payment for workers
• lower supply of workers from these countries because there are good enough jobs for high skilled workers in their own countries, reducing the LRAS increase of a country
• protectionist policies could be introduced which increases the prices of imports for developed countries, worsening quality of life to some extent
• outwards flow of capital towards developing countries rather than developed, so developed countries see less of the benefits of FDI

Question 4

What it depends on?

Answer 4

• how integrated the economies become, and do developing economies take over world trade by producing at lower costs eg china
• can developed countries exploit the benefits of outwards FDI
• will brands in developed countries be able to compete with growing brands in developing countries eg Alibaba