Economics Essay

2698 words - 11 pages

EconomicsApproach to Economic Growth of East Asia and Latin AmericaIn a fast changing world market, it can be hard to keep up with competitive individual economies, and the world economy is fast becoming a cut-throat battlefield of desperate nations, industries, and markets, all vying for power over one another. Therefore, to properly understand the world economy as a whole, it is important to understand how individual economies are growing and changing over time. Gross domestic product (GDP) is the combined market value of any and all goods and services produced in a particular country within a period of time, and the change in this figure (per capita) is known as the annual rate of change of GDP, and is basically how economic growth is determined. Major economic growth is usually achieved as part of a long run cycle, and is generally the result of improvements in productivity, allowing higher outputs to be achieved, using the same (or less) inputs. Two of the major competing economies on the global scale are East Asia and Latin America; two economies which are very comparable with each other. Between the 1950's and the 1970's, the Latin American economy appeared to be booming, while the East Asian economy was struggling, with Jim Rohwer (1995) claiming that the average Japanese citizen was then earning one-eighth of the dollar income of their American counterparts (as cited in Shixue, N.D). Since the 1970's however, it appears the tables have turned, as East Asia now surges into a new age of development and economic growth, with a second generation of rapid industrialisation, allowing for per capita incomes to be nearly quadrupled over the past 3 decades (Leipziger & Thomas, 1993). In understanding the different levels economic growth between these two competing economies, we need to look at the different approaches to, and determinants of economics growth for each.The majority of growth divergence between the two regions began in the last quarter of the 20th century, with Latin America recording is lowest economic growth in the 80's and 90's during a period of ''economic reform'' following the ''lost decade'' of the 80's where GDP per capita fell by nearly 1% due to adjustments to a regional debt crisis. Meanwhile the unemployment rate for the region rose to 10% by the end of the decade. By comparison growth in GDP for East Asia was showing a 6% increase a year for the decade.There has been much discussion and comparison between the two regions considering their geographic similarities, both contain nations rich and poor in resources, but three major factors have been highlighted which determine the separation point for the two economies and can highlight the lagging economic performance of Latin America.The first is the continuing problem of Macroeconomic Instability in Latin America. Macroeconomic Stability is the attainment of long-term stability in the inflation rate, reduction in the interest rate and increase in the nations assets,...

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