Emerging Economies Growth and International Trade Networks
Emerging Market economies have experienced rapid growth in the 21st century. Developing nations like China and India, amongst others, have experienced exponential growth over the past decade. This economic growth has led to better living standards, such as raised income and increased labor efficiency. Economists are interested in figuring out what was responsible for this growth, and how we can sustain it so that these countries can continue to experience the benefits for its citizens.
The article mentions that opening the door to global trade is one of the main reasons why these developing countries have grown so much in recent years. By expanding their network of trade partners, developing countries can offer goods and services to both a wider range of potential consumers and in a larger quantity. This heavy increase in both demand and quantity supplied is known as “economies of scale”, a concept that large firms and countries rely on to increase profits, and ultimately expand.
It is important to note that the growth of these economies has recently been stunted, because of the saturated global trade network. In addition, these developing countries’ education systems cannot keep up with the economic growth, which can lead to painful recessions when the global economy slows down. Ironically, the current struggle of emerging market economies is a direct consequence of their extreme growth and economic expansion.
This article relates to the concept of graph theory that we have covered in lecture. By expanding their global trading networks, smaller developing countries were able to reach more and more connections over the past decade. The trade networks helped these countries spur GDP growth through the production of low-cost goods. With more connections in the international economic network, a country can find more opportunities to grow.
Article:
http://www.economist.com/blogs/economist-explains/2014/09/economist-explains-9