time line :
The soviet union and the NAM ( thrid world countries ) nations lagged behind the world in technology and productivity . Their export market stagnated and their gdp mostly comprised of domestic consumption ( except China ) .
In the meanwhile : the western countries enjoyed a high growth rate and high advances in technology .
Soviet union collapses , so do many countries dependent on it , including India .
IMF and other institutions force the third world countries , esp. in asia to open ( liberalize ) their markets ,
The products from developed countries flood these markets adversely affecting domestic production in the short run .
The tech crash occurs in us , at the same time , indian IT talent is recognised as being cheap and fairly effective in combating y2k , thus attracting teh western companies towrds outsourcing , thus transporting jobs to india and eventually to other destinations ,
Iraq and afghan wars take toll on finances of western world , resources are diverted towards wars , thus impeding growth and productivity ,
Indian , chinese and other third world companies acquire technology and with the help of cheap labour , start exporting their low priced goods in the western market .
Many western companies close down due to competition from these companies .
Western countries avoid ill effects of excessive imports by borrowing huge amounts of money to increase consumption ,
People fail to pay their debts leading to banks failing and govts taking over banks in the western world .
meanwhile , india , china and other countries grow at fast rates , transferring waelth from west to east .
the scarce resources are facing huge demand pressures as the people in developing countries also demand their share of prosperity and the developed world is unwilling to reduce consumption .
Thus, increasing prices of such resources .
Banks and other companies have been bailed out by govts and now govts are in debt .
Now govts should either default or reduce consumption .
Exports by Developing countries to these countries are affected negatively in varying degrees , but not very significantly .
Western Govts' dilemma (eg. Greece ) :
if they default , no one will trust them anymore and their currencies lose value .
if they reduce spending and consumption , the gdp contracts and their reducing their bargaining power and clout in the world .
Countries like Germany were saved as they maintained their high level of competition through use of high tech to maintain better quality and lower costs .
Huge exports of expensive high tech products ( especially to developing countries ) kept their cash counters ticking unlike the other losers .
This is not very comprehensive and people are invited to add more to it ,
Edited by alisayyed, 11 November 2011 - 01:50 PM.