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Saturday, June 9, 2012



The world economy has been emerging as a global or transnational economy. A global or-transnational economy is one which transcends the national borders unhindered by artificial restrictions like Government restrictions on trade and factor movements. Globalisation is a process of development of the world into a single integrated economic unit. The Transnational economy is different from the international economy. The international economy is characterised by the existence of different national economies the economic relations between them being regulated by the national Governments. The transnational economy is a borderless world economy characterised by free flow of trade and factors of production across national borders.

Drucker in his New Realities observes that in the early or mid seventies � with OPEC and President Nixon's floating of the dollar � the world economy changed from being international to tran snational. According to Drucker, Che transnational economy is characterised by, inter alia, the following features

1. The transnational economy is shaped mainly by money flows rather than by trade in goods and services. These money flows have their own dynamics. The monetary and fiscal policies of sovereign Governments increasingly react to events in the international money and capital markets rather than, actively shape them.

2. In the transnational economy management has emerged as the decisive factor of production and the traditional factors of production, land and labour, have increasingly become secondary. Money and capital markets too have been increasingly becoming transnational and universally obtainable. Drucker, therefore, argues that it is management on which competitive position has to be based.

3. In the transnational economy the goal is market maximisation and not profit maximisation.

4. Trade, which increasingly follows investment, is becoming a function of investment.

5. The decision making power is shifting from the national state to the region (i.e., the regional blocs like the European Community, North American Free Trade Agreement, etc.)

6. There is a genuine � and almost autonomous world economy of money, credit and investment flows. It is organised by information which no longer knows national boundaries.

7. Fina lly, there is a growing pervasiveness of the transnational corporations which see the entire world as a single market for production and marketing of goods and services.

There are, thus, many factors which tend to promote the transnatlonalisation of the world economy. The multilateral trade negotiations under the auspices of GATT/WTO have been liberalising trade and investment.

A growing proportion of the world output is traded internationally and the faster growth of trade, than the GDP, is bringing about world economic integration. This economic integration is reinforced by the massive cross-border capital flows. The progress of the regional blocs increasingly integrate the regional economies.

M.Phil Scholar
Department of Commerce
Periyar University, Salem-11

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