Advantages of an Open Economy

Date: 2015-10-07; view: 903.

Greater Choice for Consumers: In an open economy, the domestic markets are merged with international markets and so the consumers are not limited to consume domestically produced goods and services. They can choose the best from the world market.

Increased competition and Lower Prices: A related benefit of an open economy is that the consumers have an increasing number of producers or goods and services competing for their business. Competition among producers results in lower prices and improved services. An open economy allows consumers to benefit from the lower labor and operating costs.

Expanded markets and Customer bases :The benefits of an open economy are not limited to consumers. Global interaction allows companies to gain access to customers in other nations. This motivates them to produce world class products, expand their business and customer base. American brands as McDonald's, Apple and Starbucks, plus Finnish communications giant Nokia, have established worldwide customer bases.

Global Investment Opportunities: For investors, an open economy expands the opportunities for investing capital. Investors large and small can choose to invest in known domestic companies, or they can invest in established industrial giants of other nations. Investors with an appetite for risk, meanwhile, can invest in the emerging markets of Latin America, Africa and southern Asia.In an open economy, financial and goods markets are closely related. To understand this relationship, we look at the savings and investment identity.

Gains from Trade :One of the key principles of economics is that trade benefits all parties involved. International trade involves interactions with other economies and is therefore possible only among open economies. English economist David Ricardo, argued that trade allows nations to specialize in producing the goods in which they have comparative advantages and trade with other nations to obtain goods in which other nations specialize. This in turn provides consumers with a greater array of goods from which to select.

A closed household economy is a society's economic system in which goods are not traded. Instead, those goods are produced and consumed by the same households. In other words, a closed household economy is an economy where households are closed to trading. This kind of economy is present, for example, in hunter-gatherer societies.

The production and consumption of goods is not separated as in a society with high division of labor.

The closed household economy contrasts with a barter economy, in which goods are bartered (traded against each other), and a monetary economy, in which goods are traded for money.

The closed household economy and the barter economy are together referred to as non-monetary economies.

Economic security or financial security is the condition of having stable income or other resources to support a standard of living now and in the foreseeable future. It includes:

· probable continued solvency

· predictability of the future cash flow of a person or other economic entity, such as a country

· employment security or job security

Financial security more often refers to individual and family money management and savings. Economic security tends to include the broader effect of a society's production levels and monetary support for non-working citizens.

In the United States, children's economic security is indicated by the income level and employment security of their families or organizations. Economic security of people over 50 years old is based on Social Security benefits, pensions and savings, earnings and employment, and health insurance coverage.

In 1972, the state legislature of Arizona formed a Department of Economic Security with a mission to promote "the safety, well-being, and self sufficiency of children, adults, and families". This department combines state government activities previously managed by the Employment Security Commission, the State Department of Public Welfare, the Division of Vocational Rehabilitation, the State Office of Economic Opportunity, the Apprenticeship Council, the State Office of Manpower Planning, and the State Department of Mental Retardation. The State Department of Mental Retardation (renamed the Division of Developmental Disabilities, House Bill 2213) joined the Department in 1974. The purpose in creating the Department was to provide an integration of direct services to people in such a way as to reduce duplication of administrative efforts, services and expenditures. Family Connections became a part of the Department in January 2007.

The Minnesota Department of Economic Security was formed in 1977 from the departments of Employment Services and Vocational Rehabilitation, the Governor's Manpower Office, and the Economic Opportunity Office, which administered anti-poverty programs. In 1985, State Services for the Blind was included in this department. In 2003, the Minnesota Department of Economic Security and Minnesota Department of Trade and Economic Development were merged to form The Minnesota Department of Employment and Economic Development.

Economic security, in the context of politics and international relations, is the ability of a nation-state to follow its choice of policies to develop the national economy in the manner desired. Historically, conquest of nations have made conquerors rich through plunder, access to new resources and enlarged trade through controlling of the conquered nations'economy. In today's complex system of international trade, characterised by multi-national agreements, mutual inter-dependence and availability of natural resources etc., Economic security today forms, arguably, as important a part of national security as military policy.

Economic security has been proposed as a key determinant of international relations, particularly in the geopolitics of petroleum in American foreign policy after September 11, 2001.

In Canada, threats to the country's overall economic security are considered economic espionage, which is "illegal, clandestine or coercive activity by a foreign government in order to gain unauthorized access to economic intelligence, such as proprietary information or technology, for economic advantage."

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