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Analyzing the economic performance on a larger scale, where a large scale implies a state economy, the assessment of the strategies that can be deemed most effective can take longer periods. In that regard, the countries experimenting with the approaches in financial interventions can go through crises, unemployment, inflation, etc. On the other hand, it can be said that going through such a process of trial-and-error, can put in perspective the future of the economic environment of the country, in which the success of the economic performance can be adjusted to the specifics of the country. Nevertheless, stating that the association of economic performance can be individualized does not exclude the fact that successful or unsuccessful experiences of other countries can be utilized to select an approach that promotes successful economic performance elsewhere. In that regard, this paper analyzes two distinct positions on the factors driving successful economic performance and promotes economic growth. The positions are based on the articles Conservative Governments and the Economy, 1979-97 by Stephen Wilks, and Finance Unbound by Will Hutton, while the support for the preference for a particular position in the articles will be linked to the examples of Arabic countries.
The Absence of Government Interference
Although it can be said that both articles are talking about the same period of the same country, i.e. Britain, where they analyzed the ups and downs in the British economy from 1979 to the 1990s, the emphasis is different in each article, in terms of the most contribution to economic success. In Wilks’ article, although covering several points, one of the significant remarks was the shift in the government’s involvement approach from interventions to regulation. The changes in the government approach were accompanied by a transfer to the market economy, and a raised interest in business corporations. In that regard, it can be stated that there were many factors that contributed to Britain’s survival from recessions, recoveries, and largely taking one of the leading positions among other world economies. Nevertheless, the main focus in the context of this paper can be given to the effect of the changes in the nature of government involvement and corporate business.
The article argues that the involvement of the government in the industry is an inevitable aspect, which cannot be avoided. However, the nature of such involvement “have changed from interventionist or planning bodies such as the National Enterprise Board (abolished in 1981) and the National Economic Development Office (eventually abolished in 1992) to regulatory bodies such as OFFER (Office of Electricity Regulation) or SIB (Securities and Investments Board) (Lucas, 2000). If put the aforementioned statement in the perspective of the gradual changes in British policies, it can be said that the government focus solely on inflation regulation at the expense of the market, as a macro-economic policy, was changed toward making the success of the companies in Britain a national interest, which compared with the previous focus was a micro-economic policy. Nevertheless, it cannot be said that the focus on companies, as a “move from collectivism to capitalism via individualism” was free of regulation, rather than a re-regulation, in the search for the kind of capitalism that best suited that economic situation in the country. In regard to corporations, the issue was of major importance, as the company is the central institution of the market economy in Britain as elsewhere, and thus the improvements in the economy were directly related to companies, their individualization, and the prioritization of their position. Although a few regulations were nevertheless imposed, such as “environmental protection or product specification,” the main trend was in creating a favorable atmosphere for the companies to flourish, the results of which can be seen in the current economic environment in Britain. Accordingly, Wilks’s position of the autonomy of the companies can be also reflected through the approval of such actions as privatization and the reforms in the labor market. The influence of the first can be seen in that “[p]rivatization has eliminated the state-owned sector of industry”, while the contribution of the latter can be seen in that “[l]abour is also now a part of the market” (Lucas, 2000).
Consumer Spending
Similarly in Hutton’s article, the same sequence of events can be outlined, tracing the upward and downward movements of the British economy, approximately in the same period. In that regard, the changes in government involvement were also mentioned as a contributing factor in the economic environment. However, the focus can be seen as a little different in terms of the associations between an action, i.e. a policy, a strategy, etc, and its consequences. In that regard, Hutton’s focus was on the increase of consumer spending as a facilitator of economic growth.
The differences between the articles can be seen in that Wilks position in the deregulations and the initiatives performed by the conservative party, starting from Margaret Thatcher to John Major, are the policies criticized in Hutton’s article, and specifically the focus on the low inflation rates, and the fluctuations of government spending. In that regard, following Hutton’s position, he pointed out the costs at which the gains of low inflation were bought, such as the growing dilapidation of the public infrastructure to the erosion of the country’s productive base” (Lucas, 2000).
Hutton also pointed out the deficiencies of the strategies implemented by the conservative party, where decreasing public spending was linked to keeping the low inflation rate. The increase in the set interest rates resulted in that manufacturing fell by 14 percent and profits dropped by a third. Consequently, national output (GDP) fell by 5 percent, and the number of unemployed people as of 1983 increased by 2 million more than four years earlier. Accordingly, the positive shift in the economy was achieved not through the deregulations by the government, whereas argued by Hutton, private businesses were incurring private debt to finance their stimulation of the economy, the same that was done by the government; “[G]overnment, by deregulating finance, had privatized an enormous reflation” (Lucas, 2000). The shift was driven by the credit availability, promoted by the banks campaigning for further deregulation. Such availability increased the spending of the consumers, where the corresponding rise in the mortgage market led to that new rounds of income were generated, leading to that the boom was feeding on itself. Nevertheless, it can be said that such boom was temporary, in which the results were negating the previous actions of the government in supporting low inflation, while the increased consumption with indifference to investments might lead to new challenges for the country.
Reflection
Although the positions of the two articles are different in emphasis, it can be seen that they were not excluding each other. In that regard, the position of the government deregulation is closer to explain the success of the economic environment in Britain, and at the same time gives a more positive prognosis for the future. In that regard, increasing consumption as a temporary phenomenon can be seen as a temporary deception in which the activity is not supported by further investments. Taking the Arab countries as examples, the focus on deregulation, and the promotion of corporate individualism, is evident through the example of the United Arab Emirates (UAE), where the explanation of the growth can be seen similar to that mentioned in Wilks article in the case of Britain, i.e. the success of the private business is a national interest, the foreign investments are welcomed and considered as a significant addition to employment, technology, and productivity. Supporting consumer increase, without proper support through investments might lead to larger debts. In that regard, the options being non-exclusive can be seen in that the absence of government interference and the promotion of companies will eventually lead to an increase in consumer spending, which the example of UAE clearly shows.
Conclusion
It can be concluded that the positions covered in the articles are both interesting, in terms of presenting distinct views on the same economic environment and relating the outcomes to different factors. It can be seen that facilitation of growth through increasing the availability of credit, and accordingly, the consumer spending might create a representation of a successful economic environment. However, if such consumptions are not supported with other actions, such growth might turn into a temporary phenomenon.
References
LUCAS, M. 2000. Understanding Business: Environments, Routledge.
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