The causes and consequences of the international movement of factors of production

The last century was characterized by a real breakthrough in the international movement of factors of production. This is due to many reasons, but first of all we should mention the growing need for business expansion, its rationalization, conquest of new markets. The end result of all these efforts is to increase profit margins while reducing costs.

Income and expenses

First we need to understand what are the factors of production, how they affect the overall economic situation, what their funds are, and how they make a profit. So, economic science distinguishes the following factors of production: land, labor, capital; Later, some economists added entrepreneurial abilities to them. Each of them brings a corresponding income, called a factor income. For example, the income from labor will be wages, from the ground - rent, capital is able to bring a percentage, and entrepreneurial abilities, with proper application, bring profit. All the economic systems of the world in modern science are usually called the world economy, this emphasizes their close relationship and the impossibility of an isolated existence. And since they are united in a global structure, then, accordingly, the movement of the factors of production is already taking place not in the national but on the international scale.

Economic Measuring Instruments

One of the indicators of economic development is the productivity of factors of production, that is, the costs of various resources for a given unit of time for the production of a given quantity of product. The lower the cost, the higher the productivity. Each factor of production, as a rule, has a master who has the right to dispose of them at his discretion. If you have a certain profession, then you can offer the employer this type of service; It is undoubtedly in the interests of each owner of the resource mentioned - to sell his abilities as much as possible, which in the global market structure is one of the reasons for the international movement of the factors of production of this direction. Capital also crosses the interstate borders in search of the most favorable conditions, while it needs to differentiate it as a physical one, i.e. Equipment, and financial - cash. So, the movement of this factor of production is mainly carried out at the expense of investments in a foreign market. This, too, has an explanation, because labor costs, as well as environmental requirements in developed countries, require significant costs. It is easiest to bring production to developing countries and to reduce total costs.

Global market

The motive of the international movement of factors of production, as has become clear, is the search for the most suitable business background. Entrepreneurial abilities are able to bring their owner a high profit, but for this you need to direct them in the right direction. Each businessman seeks to get the most profit at the lowest cost. Of course, this is not always possible, and in this case the talents and grasp of a business man are manifested. He sees benefits not only in the market conjuncture, but also in the future. It has become commonplace for large multinational companies to turn to the services of hired managers - they are developing the strategy of firms. Here, the interests of external managers - as free business units - and owners of corporations across the world intersect. This is the source of the international movement of factors of production already in the form of entrepreneurial abilities. The land does not cross the borders of states, its movement is connected only with the change of the owner. This phenomenon can in part be called the movement of this factor of production.

The result of all the above-mentioned trends was the emergence of a complex economic world system of needs and ways to meet them.