The new definition of economic development and the theories that attempt to explain why certain goods are traded internationally are developed in this article. The author emphasizes the influence of mercantilism, an economic philosophy, on different economic theories in particular way. The names of famous economists and scientists as Adam Smith, Ohlin, Heckcher, Leontief, Porter, Sachs and Shatz are mentioned in the text. The international product life cycle in the United States of America and the main special groups are examined in this article. The author also analyses the problem of economic situation in developing countries. The empirical research shows some of the theories of direct foreign investment.
В даній статті розглянуті нове визначення економічного розвитку та теорії, які намагаються пояснити чому відбувається торгівля певними товарами на міжнародному рівні. Автор підкреслює, зокрема, вплив меркантилізму, економічної філософії, на різні економічні теорії. В тексті згадуються імена таких відомих економістів, як Адам Сміт, Олін, Гексер, Леонтьєв, Портер, Сакц та Шатц. Міжнародний життєвий цикл продукту в Сполучених Штатах Америки та спеціалізовані угрупування розглянуті в даній статті. Автор також аналізує проблему економічної ситуації в країнах, що розвиваються. Емпіричне дослідження показує деякі теорії прямого іноземного інвестування.
Mercantilists think that nation trade aims at gold storehouses building. Later, Adam Smith showed that a nation would export goods that it could produce with less labor than in other nations. Then Ricardo proved that even though it was less efficient than other nations, a country could still profit by exporting goods if it held a comparative advantage in the production of those goods.
The idea that a nation would tend to export products requiring a large amount of a relatively abundant factor was offered by Hecksher and Ohlin in their theory of factor endowment. The international product life cycle theory states that many products first produced in the United States or other developed countries are eventually produced in less developed nations and become imports to the very countries in which their production began.
In the 1920s economists realized that economies of scale affect international trade because they permit industries of a nation to become low-cost producers without having an abundance of a class of production factors. As in the case of comparative advantage, nations specialize in the production of a few products and trade to supply the rest. The Linder theory of overlapping demand states this because customers’ tastes are strongly affected by income levels, a nation’s income level per capita determined the kind of goods they will demand. The kinds of goods produced to meet this demand reflect the country’s income per capita level. International trade in manufactured goods will be greater between nations with similar levels of per capita income. Porter claims that four classes of variables affect a country’s ability to gain a competitive advantage: demand conditions, factor conditions, related and supporting industries, and firm strategy, structure, and rivalry.
Special interest groups demand protection for defense industries and new firms. Others want fair competition. Companies will also demand that their government retaliate againg dumping and subsidies offered by their competitors in other countries.
In response to demands for protection, governments impose import duties (tariff barriers) and nontariff barriers, such as quotas, voluntary export restraints, and orderly marketing arrangements; and nonquantitative nontariff barriers, such as direct government participation in trade, customs and other administrative procedures, and standards for health, safety, and product quality.
For a number of reasons, GNP/ capita is a weak market indicator. Transactions worth billions of dollars go unrecorded because people do business in the underground economy, paying cash without demanding receipts and invoices. Exchange rates for converting economic data usually do not reflect consumer purchasing power. International institutions such as the World Bank and the United Nations have developed a method of comparing GNPs that is based on purchasing power parity.
Developing nations have certain common characteristics: unequal distribution of income, technological and regional dualism, large percentage of population in agriculture, high population growth, high illiteracy rate, insufficient education, and low saving rates. The human-needs approach defines economic development as the reduction of poverty, unemployment, and in equality in the distribution of income.
Governments are changing from using an import substitution strategy to one of export promotion to become less dependent on developed nations. Also, government are opening their borders to imports to force local producers to raise quality and improve prices so they can enter world markets. Managers of foreign-owned affiliates can be expected to export even though the multinational may prefer to keep exporting and the profits for the home office.