Discuss the impact of Newly Industralised Countries (NICs) on the global economy

Newly Industrslied countries, are just that, they are countries that have recently started to move forward with an industrial revolution, the newest ones are said to come under the anagram BRIC (Brazil, Russia, India and China) this huge economies have large impact on the global economy and that is what I am going to discuss within this essay.

Firstly, these NICs are often used as the workshop for the world, due to their nature they have cheap labor costs this becomes very attractive to western TNCs has it allows them to drive down costs, increasing profit and demand (as they can lower the price per product.) This has a positive effect on the global economy as it boosts trade, a key example of a western TNCs is Dyson who moved from Wiltshire to Malaysia in 2005 as a way of reducing their costs, this worked saving them almost £10million a year. This indeed has a multiplier effect as the company then has more profit, which means it is able to expand, creating more jobs, which means they have more money to spend thus benefitting the world economy as a whole. However, a question can be arisen about what level of exploitation takes place, lots of people are still paid minimal amounts of money and treated terribly often working long hours in dreadful conditions. Furthermore, increased imports often mean there is a fall in the use of domestic products, for instance if we all look around about what clothes we are wearing the majority will be imported, little made within the U.K. this can have negative effects on British manufacturing for instance the move of TNCs to the east has caused many towns to enter poverty for instance, Rochedale now see’s massive poverty and is struggling with employment. Although, as the NDCs start to develop they go past the industrial point on the Rostow model and start outsourcing their own manufacturing this causes non industrialized countries to start moving forward, a key example of this would be the asian tigers starting foreign direct investment in countries such as Brazil - this new workshop for the world will again develop. This process continues around the world causing constant development. 

NICs also offer a new market for trade, this is because of large growing economies meaning that people from new non western markets have a disposable income. This means that more goods can be sold around the world, for instance the Shenzhen free trade zone within China is one of the largest of its kinds in the world, they encourage foreign imports reducing tariffs which means that western MDCs are a lot more likely to trade, this means that more jobs are created, as their are lower tax’s. Shenzhen has one of the largest sea ports in the world, and see’s goods coming in from all around the world. This means that goods from around the globe are able to be traded, this along side low tax’s stops inflation from taking place. This has a huge positive influence on the worlds economy as the price of goods does not rise thus people keep buying. This has huge impacts on the worlds economies as the country of the products origin has more jobs created which has a multiplier effect, and the country of destination will have more products coming in which can be sold. However, there is a question over how reliable these NDCs are, for instance with huge amounts of growth crash is often enveitable E.G. 2008 credit crunch, thus if exporting countries become reliant on this new market, and the market then crashes they have nowhere to sell their product. This can lead to mass profit loss and loss of jobs which of course has a massive negative implication on the worlds econmies

To conclude there are indeed negative and positive impacts of TNCs on the worlds economies, on a whole one must comment that they are positive, creating jobs, helping countries develop and indeed improving the worlds economies. However, one cannot ignore the negative implications.