Four stages of Economic Development
This semester I am auditing Global Economy at the UT Dallas. The teacher is a brand-new professor. By the third class, she said her computer was not fully set up. She could not print anything yet. Olina came for the first two classes. She decided that she would not take this class any more since she could not stand the teacher.
I felt that the third class was becoming more interesting. In this class, the brief history of globalization was introduced. In old Europe, the society was divided among the kings, nobles, and peasants. The nobles traded among themselves. They used marriage to solidify their relationships. Later the merchants came along to trade luxury goods bought from far away places. Later, the mercantilism took over the society started by financing wars to secure trades and materials supplies. Colonies were established by the European power over other parts of the world. Countries like India, many southeast countries, Africa, America were become colonies. The mercantilism has developed to the multinational corporations in this new globalization process.
The class spent quite long time to list the pros and cons of the multinational corporation. Most of the discussions about the pros and cons were very basic. However the discussion about China was furious. Many believed that China would wage wars in order to secure natural resources. Some believed that China would pursue peaceful developments. My assessment is that most of the students have very limited understanding of China. Most of the negative comments about China were emotional ones.
The class also discussed about the four stages of economic development – factor driven, investment driven, innovation driven, and wealth driven.
In the factor driven stage, one of the four factors of economic production – land, capital, labor, and entrepreneurship is the main drive for new economic activities. Many developing countries are still in this stage.
In the investment driven stage, there are many opportunities for economic developments. It’s like gold is everywhere. If you can invest some capital, money can be made. The Internet development in the 1990s was like this stage.
In the innovation sage, basic investments were in place already. In the United States, heavy investments in software and computer technologies were placed in the years between 1995 and 2000. Since the investments were too heavy, economic slowdowns were followed in the next two years. Now innovation driven economic development is in place to digest the early investments. South Korea is more or less in the innovation-driven stage.
In the wealth driven stage, the main economic activities are concentrated around the wealth creation. Mergers and acquisitions are the main way to recombine the means of production. Huge wealth is created or destroyed in this process. Recently many well-run corporations have been taken private. One of the premier pipeline company Kinder Morgan is bought by private equity with about $17 billion.
Different countries were in different stage of economic developments. Multinational corporations have to cope with these differences in order to fully utilize the economic potential power of each country. Most current multinational corporations are headquartered in advanced countries such as the United Sates, Western Europe, and Japan. Increasingly, companies organized in Korea, Taiwan, and other emerging economies are coming to the multinational corporation status.
After class, I met Olina and Richard at Starbucks near 75 & Campbell. We discussed further about this subject. Richard said he had accepted a new challenging project in Texas Instruments to develop an advanced microchip in wireless communications. His work is to develop a wonderful device to balance the quality and speed in communications at the same time. Some college has aired their opinions about this project. HP today has such a system which costs $40,000 to produce. However, Richard has to design such a chip costs in the hundreds or tens dollars.
I felt that the third class was becoming more interesting. In this class, the brief history of globalization was introduced. In old Europe, the society was divided among the kings, nobles, and peasants. The nobles traded among themselves. They used marriage to solidify their relationships. Later the merchants came along to trade luxury goods bought from far away places. Later, the mercantilism took over the society started by financing wars to secure trades and materials supplies. Colonies were established by the European power over other parts of the world. Countries like India, many southeast countries, Africa, America were become colonies. The mercantilism has developed to the multinational corporations in this new globalization process.
The class spent quite long time to list the pros and cons of the multinational corporation. Most of the discussions about the pros and cons were very basic. However the discussion about China was furious. Many believed that China would wage wars in order to secure natural resources. Some believed that China would pursue peaceful developments. My assessment is that most of the students have very limited understanding of China. Most of the negative comments about China were emotional ones.
The class also discussed about the four stages of economic development – factor driven, investment driven, innovation driven, and wealth driven.
In the factor driven stage, one of the four factors of economic production – land, capital, labor, and entrepreneurship is the main drive for new economic activities. Many developing countries are still in this stage.
In the investment driven stage, there are many opportunities for economic developments. It’s like gold is everywhere. If you can invest some capital, money can be made. The Internet development in the 1990s was like this stage.
In the innovation sage, basic investments were in place already. In the United States, heavy investments in software and computer technologies were placed in the years between 1995 and 2000. Since the investments were too heavy, economic slowdowns were followed in the next two years. Now innovation driven economic development is in place to digest the early investments. South Korea is more or less in the innovation-driven stage.
In the wealth driven stage, the main economic activities are concentrated around the wealth creation. Mergers and acquisitions are the main way to recombine the means of production. Huge wealth is created or destroyed in this process. Recently many well-run corporations have been taken private. One of the premier pipeline company Kinder Morgan is bought by private equity with about $17 billion.
Different countries were in different stage of economic developments. Multinational corporations have to cope with these differences in order to fully utilize the economic potential power of each country. Most current multinational corporations are headquartered in advanced countries such as the United Sates, Western Europe, and Japan. Increasingly, companies organized in Korea, Taiwan, and other emerging economies are coming to the multinational corporation status.
After class, I met Olina and Richard at Starbucks near 75 & Campbell. We discussed further about this subject. Richard said he had accepted a new challenging project in Texas Instruments to develop an advanced microchip in wireless communications. His work is to develop a wonderful device to balance the quality and speed in communications at the same time. Some college has aired their opinions about this project. HP today has such a system which costs $40,000 to produce. However, Richard has to design such a chip costs in the hundreds or tens dollars.
posted by Unknown at 10:10 AM
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