There are several economic indicators which can be used to make a forecast about the performance of a company or an organization. In this case, we are discussing such hotel and casino as Caesar Palace. The first indicator is the annual percent change in real GDP. This measurement includes private consumption, governmental spending, and gross investment.
It can tell about the overall health of the countrys economy. According to Bureau of Economic Analysis, the real GDP grew by 2.5 percent (2011, unpaged). This change indicates at a positive trend in the countrys economy. However, organizations should not rely only on this index while making a macroeconomic forecast.
The second important measurement of economic vitality is Consumer Price Index or CPI. This index can help us measure the rate of inflation by showing the changes in prices of basic products and services consumed by people over a certain period of time.
The main peculiarity of CPI is that it focuses on a set of specific goods and services such as food, medical care, transportation, clothes, energy, and so forth (Bureau of Labor Statistics 2011, unpaged). According to the data published by the Bureau of Labor Statistics, this index increased by 3.5 percent. This information suggests that the cost of living in the United States grew during the last year.
Thus, one can say that the forecasts will not be favorable for organizations like Caesar Palace. The problem is that customers will have to spend more money on some essential consumer goods rather than on the services provided by Caesar Palace or similar companies.
The third valuable criterion is the rate of unemployment. It can tell about the purchasing power of the population in the country. In November, it fell by 0.4 percent; currently, it constitutes 8.6 percent of the total population (Bureau of Labor Statistics 2011, unpaged). In comparison with the previous year, this rate of unemployment has declined.
However, it still remains at a relatively high level, and this means that fewer customers can use the services offered by the company. Certainly, Caesar Palace targets mostly very prosperous customers. However, unemployment in the United States can produce only adverse effects on this organization.
Furthermore, when making a forecast about the companys performance, one should also take into account household income. It is a valid criterion that can help companies measure the purchasing power of the population.
According to the US Census Bureau, in 2010 the median household income was $ 49. 445 (2011, p. 6). In turn, in 2009, the median household income was $ 50, 599 (US Census Bureau, 2011, p. 6). Therefore, we can observe a negative trend. Most importantly, one can argue that the clients of organizations like Caesar Palace will fewer opportunities to use their services.
Finally, Caesar Palace should pay close attention to long-term interest rates. This index is particularly important because it helps to assess the availability of capital to American organizations. Special attention should be paid to the rates set by the US. Department of Treasure.
The thing is that they often determine long-term interest rates set by other financial institutions operating in the country. Currently, it is set at 2.11 percent (US. Department of Treasure 2011, unpaged). These data suggest that capital will be accessible during the next ten years. So, by looking at these five economic indicators, one can better predict future financial performance of the company.
Reference List
Bureau of Economic Analysis. (2011). National Income and Product Accounts. Web.
Chinas economic development has been recognised or accredited by most studies and economists across the world. In a short period of time, it has improved to become among the biggest economies across the globe and it is expected that by 2030, the Chinese economy may rise above that of the United States (Kambara & Howe, 2010, p. 13). Recognition of this rapid growth of economy is directed to its communist government that implemented various economic reforms and policies intended for economic growth and development.
Several international economic factors that contributed greatly to the rapid economic growth include foreign investors, foreign loans, international economy trade opportunities, foreign advice, available export market, investment, support to investors by Chinese government, and encouragement from Japan and other Asian tigers.
In 1978, China had the tenth biggest economy in the globe with a GDP of around US$160 billion, which was equivalent to 6% of the United States GDP in the same year (Holz, 2008, p. 1668).
By 2005, however, the economy of China had increased to around US$2.1 trillion, or 18% of the United States GDP, causing China to become the fourth biggest in the globe following US$12.6 trillion of the United States, US$4.6 trillion of Japan, and US$2.4 trillion of Germany (Holz, 2008, p. 1668).
In economy dimensions, China in 2005 was only exceeded by the USA, Germany, and Japan, and its portion in international economic development between 1995 and 2002 was approximated at 25 percent, matched up to 20 percent for the USA (Holz, 2008, p. 1669).
Since the commencement of economic reforms in 1978, China has provided a steady growth of around 9% every year (Saw & Wong, 2007, p. 1). To have a clear understanding of how China experienced rapid economic growth and what its position as a global economic power resembles, this paper provides a brief path of Chinas economic history.
It also provides the current position of Chinas economy in the world, reforms employed to achieve this development, and challenges faced by China when maintaining its steady growth. Some lessons that are very important to be adopted by developing countries are also discussed.
Chinas Post-1978 Economic Development
Some leaders started to reform Chinas designed economy into the market economy and allowed the country to open-up into international trade, export opportunities, foreign advice and international investment; all passing through Chinas government guidelines and supervision.
Objectives set by China aimed to enhance a keenly designed and directly monitored, but market oriented, economy that could attain the benefits of participation in the rapid-growing international economy.
The objective of Chinas post-1978 was fast-growing economic growth that is the same as the four Asian tigers, and China emphasised domestic instead of international or foreign benefit (Clarke, Murrell, & Whiting, 2007, p. 380).
After 1978, the government of China would carry on to possess and rule most economic and industrial zones in China; including transportation, production companies, financial services, energy, and communication sectors, which are important in the Chinese economic growth (Chow & Li, 2002, p. 251).
Private management of agricultural land was initiated through leases on long-term basis for farmers, and free market was initiated to minor entrepreneurs and those offering consumers commodities. International investors were also allowed to get involved in corporations with domestic businesses and ultimately to be capable of starting wholly-owned businesses under Chinese control in chosen regions of the Chinas economy.
In nearly all years since 1978, the internal economy of China has increased radically while a gradually greater percentage of the economy has inclined to possession of Chinese and foreign corporation investments, and to personal Chinese entrepreneurs, and individual foreign investors (Lin & Zhu, 2007, p. 211).
However, regulation of the biggest Chinese economic sectors, such as transportation, manufacturing, communications, financial services, and energy, has maintained continuously by the government of China, which provides limitations and regulations.
The economy of China has grown every year at a standard rate of eight to ten percent since 1978 and this development rate is almost unprecedented for derived and huge agricultural nation and brings about doubling of the Chinese economy after around seven years (Prasad, 2009, p. 105).
If the elevated rate of economic growth goes on, China is estimated to turn into the biggest economy in the globe by around 2025 relative to acquiring power equality. Until now, China has been capable of attaining its economic achievements without surrendering regions of sovereignty and has maintained its key industries and financial services mainly under its possession and regulation.
China has also continued to create its currency somewhat nonconvertible. All at once, China has turned into the biggest beneficiary of direct international investment in the globe, attains the second biggest foreign exchange reserves in the globe behind Japan (around US$ 1.2 trillion by the end of 2007), and currently believed to be the producing or manufacturing workshop for the world (Lin & Zhu, 2007, p. 211).
Difficulties and challenges exist that are related to Chinas latest economic development reforms, including oppressive government regulations, increasing competition with the foreign economy for limited energy and other essential resources, and misuse of environment. Most international analysts, though, consider that China will be capable of going on to grow at around 8% to 10% towards 2025 (Kwan & Yu, 2005, p. 45).
Current Economic Development State
By 2010, it was clear to international analysts and economists that China was poised to change from export reliance to development of a domestic market and economy. Wages were increasing very fast in all sectors across the country and Chinese government was requesting and intending for raised standard of living.
In 2010, GDP experienced in China was appreciated at $5.9 trillion and exceeded Japans GDP of $5.5 trillion, and turned into the second biggest economy in the world behind the United States (Chan, 2012, p. 61).
China is expected to be the biggest economy in the globe sometime in the beginning of 2020s relative to nominal GDP. China is the biggest creditor country in the globe and possesses around 20.8 percent of U.S. Treasury securities owned by foreign investors.
It has also emerged that knowledge economy and Noopolitik had grown to be critical issues of the PRCs economic policy in nearly every year since 200, where China portrayed evidently its transition to Innovated in China from Made in China, according to (Xu, 2010, p. 40).
While costs of commodities increased gradually, GDP of China returned to advanced growth rate and its economic system and structure steadily turned into market-oriented.
Guangrui and Rui (2011, p. 2) claimed that China, which became the second biggest economy in the world in 2010, can grow to be the biggest economy in the world in 2025, surpassing U.S., if existing trends are maintained.
Challenges experienced include income inequity and pollution, and Chan (2012) supported the idea above stating that China economy may grow to be the biggest economy in 2020.
Some other studies approximated that if through purchasing power parity, China will surpass U.S. in 2016 and by 2030, two-thirds of the middle class in the world will reside in China.
Liu (2010, p. 43) said that taking that the economies of both China and the United States have grown, in that order, by 9% and 4% in real sense that inflation rate experienced in China is 3.5 percent and the United States is 2.1 percent (the averages of the past 10 years), and that the RMB appreciates relative to the dollar by 3.5% annually (the average of the past five years), China would turn into the biggest economy in the globe by 2022.
During that period, the GDP of both nations will be around $25 trillion.
In 2011, the IMF cautioned that banks regulated by the government might be increasing inequalities that hinder growth and make the system seriously impacted.
In 2011, the IMF estimated that GDP of China (purchasing power parity accustomed) would surpass that of the U.S. in 2015, which shows that Chinese economic will have steady growth compared with the economic growth of the United States (Guangrui and Rui, 2011, p. 2).
Economic Reforms
The Chinese government expected that steady reforms implemented in the country would bring about major economic growth and enhance the standard of living. This expectation eventually became reality, and agricultural reforms were among the first reforms to be experienced. Agricultural reforms allowed farmers to maintain and sell some sections of their produce to some private units.
The government also implemented four exclusive economic districts along the coast to draw international investors longing to cash in on the minimal labour costs in the country. The intention was to arouse more advanced technology imports to the country and promote exports (Chai & Roy, 2006, p. 39).
China has commenced the process of economic decentralisation and local government has been assigned to have some economic control over different projects in Chinese provinces. They were approved to carry out and compete derived from the standard of free competition.
Some cities and coastal areas where selected as development districts and certified to trade openly or directly, and provided fiscal incentives to draw international investors. Price controls directed towards some goods were steadily reduced.
Theories that describe Chinas economic development are likely to reflect on the economic reforms as the biggest factor that allowed for this rapid growth. For instance, Swinnen and Rozelle (2004) believe that the formation of private venture in every sector of the economy and great saving rates are primary in the situation for economic growth in China.
Other case supporting economic growth in China include a huge underemployed labour eager to assume jobs for comparatively low wages with a cultural practice of behaviour, historical conditions, and adjusting rapidly to the advanced system rules.
Chow and Li (2002) assert that the increase of free trade and government incentives facilitated the current and rapid growth of economy in the country, and reforms were effective due to the implementation of non-orthodox economic policies.
China has attained the 1870s aim of wealth and power, and has created approach to foreign trade that has taken advantage of international trade, but passed up the East Asian crisis that took place between 1998 and 2000.
To date, China has also been capable of solving all economic growth difficulties and challenges, such as overstaffed state owned enterprises and bankrupt banks, from the advantages of economy of its more effective economic development strategies and principles, such as Chinas huge international exchange reserves, comparatively high real wage rate, excessive saving rates, comparatively high employment stages, and minimal inflation rate (Lardy, 2002, p. 39).
Factors Responsible for Chinas Rapid Economic Development
According to Clarke, Murrell, and Whiting (2007, p. 391), the economic development experienced in China can be attributed to two major issues: steady growth in productivity and significant foreign and domestic investments funded by internal savings and foreign investors.
The reforms implemented to control Chinese economy have raised economic competence and ability to obtain resources needed for the development of industrial and agricultural productivity. The benefits of output or productivity were because of the redistribution of resources in the sections or sectors that, before, were managed by the state, such as financial services, commerce, and agricultural sectors.
Agricultural Reforms
For Swinnen and Rozelle (2004, p. 414), Deng Xiaopings agricultural reforms are among the factors that contributed mostly in the growth of the Chinas economy, which started in 1979. China was reliant on change after three decades of planned economy with the management from Mao Zendong and this change derived itself from experimentation and pragmatism.
Chai and Roy (2006, p. 69) also stated that allowing the countrys economy to get exposed to international investors and commerce, as well as agricultural reforms, were the foundation for an economic reform that led the countrys economy to the market demand.
The fact that these economic reforms were adopted steadily donates notably to prevent economic crises in the initial phases of these reforms, together with being simpler to enlarge economic spending following the achievement of various huge harvests.
Export Sector
For Chinas case, another significant factor was the expansion in the export zone. The support for exportation is believed to be an essential device for economic development, especially in emerging economies. Through the history of Chinas economy, an emerging economies or developing countries may support their economic developments through putting more focus on human capital (Lardy, 2002, p. 39).
Through growth strategies intended at exports, a country can raise its output, employ its resources more economically, and boost its innovation of advanced technology. As the economy of developing country enlarges, it is likely to integrate itself effectively into global markets and this encourages more growth in economy.
In general, constructive factors existed in China that facilitated growth during the initial stages. Other essential conditions included quantity and quality of human capital, as well as a comparatively huge amount of decentralisation.
Woo (2009, p. 116) concluded that China is an example of a remarkable emerging country that experienced challenges in the past and projecting itself among the positions of the largest economies in the globe in a very short duration. All factors discussed were more supported together with increasing globalisation across the world, which raised the supply for Chinese commodities further.
Challenges Experienced by Chinese Government and Investors
Presently, the common challenges experienced by the Chinese government take place when stimulating domestic consumption and this domestic consumption increased after the implementation of economic reforms, but has been declining since 2000. In 2005, domestic consumption included just 39% of GDP of China, the least participation rate among the biggest economies across the globe.
In the United States, domestic or internal consumption made up 70% of GDP in 2005, just like China, and in England, they experienced 60%, while India had about 61%. Even Japan, recognized for its frugality of its people, had a domestic consumption of around 58% of its GDP in the same year as China (Pollack, 2010, p. 115).
In all difficulties experienced in China, some factors and issues that might most influence Chinese economic development are financial and corruption theory. Several effective entrepreneurs were successful not only by their personal value, but also by effects from government and political relations.
Several foreign businesses face challenges when starting business in China since its structures may be incompatible or not transparent adequately (Pollack, 2010, p. 115). Intellectual property rights, as well, unguarded because of China lacking a self-governing judicial structure. Inadequate law enforcement in China restricts the resourceful distribution of commodities in the economy of the country.
In the latest global recession, the Chinas principal trading partners are experiencing financial challenges, driving then to decrease importation of goods. This is placing force on the Chinese authority to change its policies for development of economic.
This is essential if China is to preserve it advanced rate of economic development and to bring other advantages to the population. These benefits include higher quality between urban and rural populations, safer drinking water and air, improved public medical care, and superior purchasing power of end users.
Lessons from Economic Development of China
The rapid growth of Chinese economy can be a better example to other developing countries around the world. Other emerging economies should learn to employ profitably different valuable factors of market globalisation, as they maintain control on the possible risks brought about by global market in emerging economies (Lin & Zhu, 2007, p. 211).
These challenges are also possible to be experienced by other emerging economies and so far, most components in economic reforms in China were induced instead designed.
The path that China passed through can offer a helpful lesson for planning and implementing economic reform policies in other developing countries where the heavy-industry-oriented approaches or other equivalent approaches have been implemented based on capital-scarce situations.
Positively, phases of development, cultural heritage, political arrangements, and financial structures are different from one economy to another throughout the countries. To be successful, real reform processes must take the primary situations of economy into consideration and use all positive domestic and outside factors.
Detailed design and series of economic reforms must not be imposed, but should be induced to provide effective transition (Lin & Zhu, 2007, p. 211). However, other than the broad advice of preserving political and economic strength and directing the economic reforms in a path-independent way, the above lessons can be helpful for a country imposing reforms in an economic scheme, which is close to that of pre-reform China.
Through Chinas experience, developing countries should apply grant independence to the micro-management section to enhance the incentive arrangement and make a new flow of resources through enhancing productivity.
They should permit the new flow of resources to be distributed by the independent enterprises outside the strategy and at market prices to the undeveloped areas or enterprises as they preserve the continued existence of older priority sector with the resources, which are still controlled by the state.
Conclusion
China has implemented economic reform policies that, in different ways, breach the rules of neo-classical economies and these reforms have been effective in providing rapid transition. Around the world some, including Western analysts and economists, debate whether China can maintain its record of success, and other debates focus on whether Chinas economy has really grown (Zhang, Xing, & Fan, 2008, p. 9).
However, World Bank analysts and other researchers consider that China will maintain its present effective path to growth at remarkable economic rates of no less than seven percent per year for another 25 years. China has also facilitated other Asian economies, for instance India, which has started to grow at around seven percent annually.
Other than having a complete sovereignty, China has also taken advantage of the more positive international economic setting.
Chinese sovereignty, and economic strategy, coupled with a highly sovereignty-respecting international economic setting, has from 1950 allowed China to attain its target of independent Chinese economic growth for the gain of China that had been greatly unachievable as from 1860 (Kwan & Yu, 2005, p. 45). In the next 20 years, China may recover its position as a largest economy in the world.
Developing countries may use Chinas experience and strategies to develop their economies. China has provided a better example to other emerging economies and foreign investments have greatly supported Chinese economic growth.
List of References
Chai, C & Roy, K 2006, Economic Reform In China And India, Edward Elgar Publishing, Massachussets.
Chan, S 2012, Faiths on Display: Religion, Tourism, and the Chinese State, The China Journal, vol. 4, pp. 57-78.
Chow, G & Li, K 2002, Chinas Economic Growth: 1952-2001, Economic Development and Cultural Change, vol. 51 no. 1, pp. 247-256.
Clarke, D, Murrell, P, & Whiting, S 2007, The Role of Law in Chinas Economic Development, World Economic Journal, vol. 6 no. 3, pp. 375-428.
Guangrui, Z & Rui, S 2011, Green Book of Chinas Tourism 2011, COTRI China Outbound, Beijing.
Holz, C 2008, Chinas Economic Growth 19782025: What We Know Today About Chinas Economic Growth Tomorrow, World Development, vol. 36 no. 10, pp. 16651691.
Kambara, T & Howe, C 2010, China And the Global Energy Crisis, Edward Elgar Publishing, London.
Kwan, Y & Yu, E 2005, Critical Issues In Chinas Growth And Development, Ashgate Publishing, New York.
Lardy, N 2002, Integrating China Into the Global Economy, Brookings Institution Press, Washington, DC.
Lin, S & Zhu, X 2007, Private Enterprises and Chinas Economic Development, Routledge, New York.
Liu, G 2010, Investing In Human Capital For Economic Development In China, World Scientific, Singapore.
Pollack, J, 2010, Chinas Taiwan Strategy: A Point of No Return? The China Journal, vol. 36, pp. 111-116.
Prasad, E 2009, Is the Chinese Growth Miracle Built to Last, China Economic Review, vol. 20, pp. 103123.
Saw, S & Wong, J 2007, Regional Economic Development in China, Institute of Southeast Asian Studies, Singapore.
Swinnen, J & Rozelle, S 2004, Success and Failure of Reform: Insights, Journal of Economic Literature, vol. 42, pp. 404-456.
Woo, W 2009, The real reasons for Chinas Growth, The China Journal, vol. 41, pp. 115-137.
Xu, C 2010, The fndamental Institutions of Chinas reform and Development, Journal of Economic Literature, vol. 3, pp. 37-83.
Zhang, X, Xing, L, & Fan, S 2008, Resource Abundance and Rgional Development in China, Economics of Transition, vol. 16 no. 10, pp. 729.
Most developed countries are opting to stop the aid they give to various developing countries. This is due to the fact that countries which were once colonies of various nations from the west are now economically stable. Many of the countries which depended on foreign aid for their development are now able to individually fund their projects.
Consequently, many developed nations have opted to reduce or even permanently eliminate the foreign aid. Britain is one of the countries that have announced its intention to stop its foreign aid to India by 2015. However, contrary to the expectations of many that India would get disturbed over that move, the reverse has been actually the case.
Reasons for Aid Withdrawal
It has been realized that developed countries which were once economically stable are now facing financial crises. On the same note, the donor countries have gone back to the drawing board to determine if actually the aid is as important as deemed, and if the aid achieves its expectations. Given the economic problems that are facing many developed nations, their economies need money to spend.
In this regard, these nations have to choose between giving aid to foreign nations and solving their own internal problems (Mandhana par 3). Therefore, emerging markets have found themselves on the receiving end when any decision to reduce aid is taken. On the same note, though India used to be among poor countries, it has now turned to be among the worlds economic power destinations with the ability to donate money to other low income countries.
Indias Take on the Matter
For a country that has been receiving aid since its independency, the information was expected to come as a rude shock. On the contrary, this information was not received by India as negatively as it would have been for developing countries due to several factors. To begin with, the amount of money that Britain has been injecting into Indias economy to fund various projects, is very little compared to the amount that India injects into the same projects.
On the same note, despite the economic difficulties that are facing almost every country in the world, Indias economy has been growing at an impressive rate for a relatively long period of time. As a result, India has been able to elevate its status to a lower middle income country (Mandhana par 7). Similarly, India can afford to donate to other countries for example, the Philippines, implying that India is not that poor. As put by the then Prime Minister, India does not depend on the foreign aid for its economic development (Mandhana par 8).
Repercussions of the Aid Withdrawal
Though India did not seem concerned about the announcement that the foreign aid will be withdrawn, there are economic repercussions of the decision by Britain. Firstly, though Indias economic growth is impressive, there are still a lot of people living below the poverty line (Mandhana par 15). These people highly depend on the aid from foreign countries for their basic needs. Secondly, Britains aid has highly influenced the health sector and its withdrawal will have significant implications.
Conclusion
The article brings into the forefront issues that are emerging between former colonies and their masters. Countries that were once dependent on foreign aid have now turned into economic giants and can no longer be considered as being underdeveloped. On the same note, it highlights the trends that are most likely to be taken by most developed nations, the United States of America being one of them. Developing nations should therefore take caution not to be too dependent on foreign aid because no one can tell what is in store.
As Asian countries continue to record impressive economic growth rates, economic power is slowly shifting from the west to the east. Among the countries that have registered high rates of economic growth is China. As a matter of fact, China has become an economic threat even to advanced economies like Canada, Germany and United States of America.
Due to its rapidly growing economy, China has enhanced its relationship with many countries most of them in Sub-Saharan Africa. However, this relationship has received mixed reactions from many people on whether it is beneficial or detrimental to Sub-Saharan Africa. Nevertheless, it is important to note that Chinas economic growth can boost and at the same time hinder economic growth in Sub-Saharan Africa.
The benefits that Sub-Saharan Africa receives from China are numerous. To begin with, China is slowly becoming Sub-Saharan Africas largest trading partner. This means that Africa has increased its sales thus increasing income which leads to economic growth.
On the same note, trading with China has led to increase in prices of raw materials that are produced by countries in Sub-Saharan Africa thus leading to expansion of Gross Domestic Product (GDP). Similarly, China gives Africa a lot of money inform of soft loans to help in development projects (Lanteigne 48). Additionally, China provides the technical support that is very scarce in Africa. This is quite crucial in propelling development of these economies.
Furthermore, China has comparative advantage over Africa in production of several commodities. Therefore, China brings cheap products into Sub-Saharan Africa. This increases affordability as well as freedom of choice among consumers. In addition, Chinas increased interest in Africa has revived the interest of other countries which had neglected the continent (Greenaway 111). As a result, the number of investors interested to do business in Sub-Saharan Africa has increased leading to economic development.
Unfortunately, this relationship is also detrimental to Sub-Saharan Africa. China gives its loans with a lot of restrictions including that labor should be imported form China. These types of tied loans usually benefit china more than Sub-Saharan Africa. On the same note, large numbers of people are migrating from China to Africa.
This leads to increase in population of Africa given the fact that Africas population growth rate is already very high. On the same note, the population increase exerts pressure on the already strained economies of Sub-Saharan Africa (Padayachee 394).
On the other hand, while cheap commodities from china are beneficial to Africans, they are also poisonous to the economy. Currently, the markets of Africa are flooded with cheap Chinese products which increase competition for locally produced commodities. Besides pushing many people out of business, the Chinese products are also killing local industries thus economically degrading Sub-Saharan Africa.
Similarly, China has compelled countries in Sub-Saharan Africa into being just exporters of unfinished raw materials (Morrissey and Evious 58). Income on raw materials is very low compared to finished products. This has not only led to the unwillingness of Sub-Saharan African countries to invest in industries, but has also hindered the probability of these countries to earn more.
The relationship between China and Sub-Saharan Africa is undoubtedly beneficial to both parties. However, the negative effects on the part of Sub-Saharan Africa should be given a second thought. China might not be truly concerned with the gains of Sub-Saharan Africa in their relationship. Therefore, Sub-Saharan Africa should not be blinded with the little aid they get. Instead, Sub-Saharan Africa should ensure that the negative effects are minimized if not eliminated.
Works Cited
Greenaway, David. The World Economy: Global Trade policy 2009. Hoboken: John Willey and Sons, 2011. Print.
Lanteigne, Marc. Chinese Foreign Policy: An Introduction. London: Routledge, 2009. Print.
Morrissey, Oliver and Evious Zgovu. The Impact of China and India on Sub-Saharan Africa: Opportunities, Challenges and Policies. Marlborough: Commonwealth Secretariat, 2011. Print.
Padayachee, Vishnu. The Political Economy of Africa. London: Routledge, 2010. Print.
Investigating the global environment in which organizations operate is very since it acquaints one with different business environments. So as to tackle this task, I shall try discus: economic systems and resource allocation; the impact of industrial policies and social welfare initiatives; and the impact of macroeconomic policy measures and the influence of the economy on Europe-based organizations and stakeholders. I shall then make recommendations.
Economic Systems and Resource Allocation
So as to build the correct decisions in allocating resources, one has to bear in mind three things, one after the other. These include the type of goods and services to create, how to create these goods and services, and who will be the customer (shown in fig 1). The verdict on what goods to manufacture will depend on what clients want to obtain. After deciding on the commodities to manufacture, then one needs to select suitable methods of production and identify suppliers. Lastly, one needs to establish the consumers of the commodity.
Fig 1: Decision making while allocating resources.
Different Economic Systems
Sort of Economy
Decisions on:
Production
Prices
Ownership
Market Economy
Market demand shown by customers determines production.
The demand and supply in the market influences prices.
Persons are at liberty to buy or sell resources. There exist many types of an individual property. Clients have a wide variety of products and services to select from.
Traditional Economy
Society creates its own commodities depending on its traditional necessities.
Prices are not always applicable. Societies are accountable for their individual necessities, leaving less or no room for exterior exchange.
Typically, products are owned by societies. Hence private ownership lacks.
Mixed Economy
Makes efforts to create what persons want and what the community deems necessary.
Clients majorly influence the prices though basic services are controlled by the government.
A blend of private and public tenure. Government is in control of communal lands.
Planned or Command Economy
Production is done in relation to strategies stipulated by the government.
Government planners control suppliers and prices.
All resources, including land, are owned by the government. Clients lack a variety of products and services to choose from during buying.
Table 1: Economic Systems (Harrison, 2005)
Different states employ different types of economic systems, influenced by their economic structures. Currently, there are four types of economies, as shown in Table 1. They include a mixed economy, command or planned economy, traditional economy and market economy (Harrison, 2005).
To begin with, a mixed economy is usually influenced by both public and private sector bodies. In this type of economy, prices are usually determined after a consensus is reached between the two sectors. When it comes to price reduction, it employs the Maximum Retail Price (MRP). Moreover, key decisions like exchange and interest rate placements are usually carried out by the entrusted bodies of the government.
A study by Sloman (2002) identifies Sri Lanka as one of the countries that employ a mixed economy. In Sri Lanka, the mixed economy is commonly referred to as a balanced economy, since a fair pact between the private and public sector exists in the economy. In this case, neither the private nor the public segment dominates the economy. However, the government is always made aware of the private sectors actions. Moreover, nearly all infrastructure services, such as education and medical services, are normally supported by the government.
Different from the United Kingdom (UK), Sri Lanka sustains a Maximum Retail Price (MRP) rather than employing the price lowering strategy. This ensures that every vendor observes the set price margin. The financial flow of the state and key exchange and interest rates are controlled by the central bank of Sri Lanka, where extra services such as credit loan interest rates are placed by personal financial bodies upon a mutual accord with the government. The key source of revenue in Sri Lankas government is taxation. These taxes are, in turn, invested in the societys wellbeing.
Second is a command economy, also called a planned economy. Here, the government exercises its full power over the economy with the private sector having little or no influence. Exchange rates, interest rates, prices and all supplementary financial dimensions are influenced by the governments decisions.
Third, in a traditional economy, the youthful generation pursues the footsteps of its older generation in selecting its business. A small change in model and volume of production may occur in this type of economy. The traditional economy was widespread during the early years of existence. At present, this type of economy is hardly employed due to industrialization.
Finally, a market economy is typically controlled by the private segment, where competition is additionally perceptible. However, the government participates in making vital decisions like price and interest rate determination by employing the price lowering principle. The UK serves as a good example of a state that employs the free market economy type of economic system in its resource allocation (Hill, 1991). Here, a major section of the economy is privatized through all vital decisions are strongly influenced by the government.
The UK government controls the UKs economy by employing theories of price lowering, reduced taxing and market liberalizations. Regardless of how free the market is, the private sector lacks complete influence over the UKs price-setting policies, unless under supervision by the government. The governor of the bank of England supervises UKs interest rates so as to control inflation. Though the UK is usually strong in its competition character, the Competition Commission (CC) controls and supervises all competitions, through eradicating competition defaults such as price conflicts, so as to improve UKs competition profile.
Impact of Industrial Policies and Social Welfare Initiatives
Industrial policy and social welfare policy have dissimilar aspects, diverse motives and dissimilar impacts on organizations. I will talk about the impact of each of these policies independently.
Industrial Policy
Industrial policy has a vast impact on the running of organizations and the placement of goods and services in the market. So as to tackle this topic, I shall first analyze the broad impacts of the industrial policy and then demonstrate its use in various industrial aspects including new products, competition, and training and skills for employees.
The government impacts most organizations by giving them financial support, following the industrial policy. The government also performs indicative planning which entails identifying industrial fields that face challenges associated with goods supply and restrictions of access. In addition, the government, through the industrial policy, can promote or hinder the development of new industries, especially by making entry of novel firms hard. The government can also achieve this by enforcing product standards that entail a specific level of safety; placing limitations to alien organizations; and promoting domestic organizations that exist in the market.
New Products
The government influences the adoption of novel products in definite areas. For instance, in pharmacy, the government inspects all fresh drugs and medicines ahead of entry into the market; however, it is important to note that each nation has its own principles on this. The government also controls the food industry. Firms that work in this field experience great difficulties whenever the government imposes changes in tools or the product mix that they employ in production. At present, there is a big debate on the safety of genetically tailored goods.
Competition
As a consumer, supplier and supervisor in the assorted economy, the government can cause substantial pressure to put up with the competition in an industry. At times the government investigates the formation of industries so as to ascertain that competition subsists, by use of the competitive industrial policy. At present, the competitive industrial policy has acquired a new agenda that aims at enhancing factors that form the states competitiveness. This is being done by decreasing non-wage service overheads; investing in corporal and human resources so as to promote small and medium enterprises; supporting new inventions; enhancing infrastructure, and strengthening copyright and patents regulations so as to motivate the development of fresh commodities.
Training and Skills
There exists a training and skills policy that ensures workers get numerous chances to enhance their skills at all heights through education and training, usually funded by organizations or agencies.
Social Welfare Policy
According to BPP Learning Media Ltd Business Essential: Business Environment (2010), social welfare policy attempts to guard and directly enhance the standards of living. The social welfare operates from two viewpoints. In the first viewpoint, social welfare is partially involved in improving social services and welfare conditions. In the second viewpoint, it influences a range of matters that are far beyond the dealings of the government. At present, the welfare policy influences the task of the state in promoting equality and offering services that are aimed at supporting deprived groups in society.
A study by Grant (1999) reveals that social welfare policies have four impacts which include: lessening earnings insecurity with regard to earnings losses; lessening insecurity with regard to uneven and extraordinary spending; lessening income deficiency; and allocating private hand-outs and tax loads reasonably. The study also lists two extra social impacts to which social welfare expenditure can contribute, that is, a decrease in income disparity and enhancement of the social and political atmosphere.
Other impacts of social welfare policies include augmentation in production resulting from enhanced health, education and economic protection of the labour force; augmentation in production resulting from more successful macroeconomic steadiness; productivity impacts; labour supply impacts and resource reallocation impacts.
The Impact of Macroeconomic Policy Measures and the Influence of the Economy on Europe-based Organizations and Stakeholders
The UK administration influences the economy in three chief manners which include: interest rate and taxation policies; public expenditure on goods and services; and general organizations policies. Currently, the UKs economic policy is making efforts of attaining several goals, but the three key goals are: economic development; to be in a position to offer employment to the augmented population with the aim of elevating living standards; and to acquire price stability (Russell and Healthfield 1999).
Conversely, there are two key policies the UK government employs so as to influence the economic condition of the state. These two key policies are fiscal policy and monetary policy.
The fiscal policy entails the utilization of government expenditure, taxation and solicits to control both the design of the economic activity and also the height and increase of cumulative demand, employment and production. Conversely, monetary policy entails the utilization of interest rates to manage the height and rate of increase of summative demand in the economy.
In Europe, the Bank of England is entrusted with the chore of upholding reliability and worth of the currency. The Bank practices this objective via the utilization of monetary policy. In particular, this entails upholding price steadiness, as required by the inflation goal placed by the government, as a qualification for achieving a broader goal of sustainable economic development and elevated employment.
As from 1997, the Bank of England has had outfitted sovereignty in the location of interest rates. The Bank seeks to achieve the governments inflation goal, presently, 2.0 per cent for the user price index- by placing interim interest rates. Interest rate choices are usually received by the Monetary Policy Committee (MPC) during monthly conferences (Smith, 1999).
The impacts of Monetary and Fiscal Policy on the European Economy
There are a number of dissimilarities in the economic impacts of fiscal and monetary policy, on the constituents of national output, the efficiency of the two types of policy in summiting the governments macroeconomic goals, and besides, the time delays expected before the fiscal and monetary policy adjustments can take effect.
Effects of Policy on the Composition of National Output
Monetary policy is habitually viewed as a product of a dull policy tool, touching all sectors of the economy though in diverse ways and with an uneven impact. Conversely, fiscal policy can be beleaguered to impact certain groups such as augmentation in means-tested remuneration for little-income households, decrease in charge of corporation tax for small and medium-sized enterprises and investment grants for enterprises in specific regions.
Monetary Policy Expansion
Reduced interest rates will result in an augmentation in business and consumer capital expenditure, both of which boost national revenue. Since investment expenditure results in bigger capital stock, revenues in the future will as well be elevated via the impact on the long-run aggregate supply curve (LRAS).
Fiscal Policy Expansion
An increase in fiscal policy, or else an augmentation in government expenditure, add straight to aggregate demand (AD) but if funded by senior government sponging, this may end in elevated interest rates and reduced investment. The net effect, by regulating the augmentation in government spending, is the same augmentation in existing income. Nevertheless, since investment expenditure is reduced, the capital stock is lesser than expected, so that prospect incomes are lesser.
Time Lags of Monetary and Fiscal Policies
Monetary and fiscal policies in the UK vary in the pace with which every one of them takes effect. This, in turn, greatly impacts the European economy.
UKs monetary policy is normally flexible. Interest rates can be altered every month, and emergency rate alterations can be done in between conferences of the MPC, whereas alterations in taxation take much time to arrange and execute. Since capital investment necessitates planning for the prospect, it usually takes much time before reductions in interest rates are converted into augmented investment spending. On average, it takes more than six months before the impacts of changes in UK monetary policy are experienced.
The impact of augmented government expenditure is felt as soon as the payments occur and interrupt direct and indirect taxation supply into the economy quite rapidly. Nevertheless, significant time may lapse in between the resolution to assume a governments spending program and its execution.
In my view, the best way of evaluating a global economy of a country can be obtained by evaluating the economic, legal, political, social and the technological situation of a state.
Evaluating the political position of a nation entails analyzing the power of political parties in that particular nation. Only two key political parties do exist in the UK. The two parties include The Labor Party and Liberal Democrats (Smith, 1999). These parties possess great power in the UK government. Thus any key decisions made by these parties do affect organizations in the UK.
The economic features present in the UK are suitable for running organizations. A study by Grant (2011) reveals that the rate of the UKs inflation was in last year was 4%. This figure indicates that the economy of the country is quite stable since the deviation was negligible. Thus, running an organization in the UK can offer a good opportunity for development.
The social aspects of the UK are also very favourable. The state has a high-quality welfare policy that takes care of individuals living in the nation. The welfare ensures that people in the UK live in good standards by offering relevant services.
Technological in the UK Is also advanced. This means that business organizations in the UK can use modern technological tools to run their enterprises. Finally, the legal policies of running organizations in the UK, for foreigners, have lately changed. The nation is powerfully supporting English natives to initiate enterprises. This has made it quite difficult for foreigners to initiate enterprises in the UK. Each of the factors discussed above possesses an immense impact on organizations that were established earlier on and those that are entirely new.
Recommendations
Before allocating resources, it is important for one to consider the type of goods and services to create, how to create these goods and services, and who will be the customer. Every organization should adhere to the industrial policy and have a well-established social welfare policy. Industrial policy aids in the attainment of expansion goals while social welfare policy attempts to guard and directly enhance the standards of living. Finally, the UK government should be very keen on its economy since the UK economy influences interest rate and taxation policies; public expenditure on goods and services; and general organizations policies.
References
Grants, S. (2011) Economic growth and business cycles, studies in the UK economy. Oxford: Heinemann.
Guler, I., Guillen, M. and MacPherson, J. (2002). Global competition, institutions, and the diffusion of organizational practices: The international spread of the ISO 9000 quality certificates. Administrative Science Quarterly, 47(3), 507-531.
Harrison, M. (2005) Economic Systems. London: Sage.
Peter, B. (2010) The effects of EU climate legislation on business cycles. New York, GKI Economic Research Co.
Current situation in the world is rather unstable. The crisis which has occupied the whole world still echoes on some countries. Even though most countries have managed to recover from crisis and to continue developing their economies, some problems still appear. Huge international companies have already recovered from crisis and overcome all the consequences.
However, it would be unfair to think that the changes which occur in the economy of the country do not affect it any more. The current economic climate affects all the companies which operate in the world. Moreover, it should be stated that operating at the international arena, business has to be subjected to various economic and political laws which sometimes may differ from the domestic ones.
Looking at the current situation in the modern world, it is possible to state that many problems have remained. There are such difficulties as continued jobs crisis, absence of the long run activities for combating the crises (only short term actions are taken), debts of many countries and the absence of the assuredness to cover those debts, policy paralysis, etc. (World Economic Situation and Prospects 2012, 2011).
Each country has its own difficulties and operating at the international arena General Electric should consider all the problems, create a short term strategy for meeting the countrys needs and reflect on the current economic situation in the world, and form the long term plan for development paying attention to the current economic climate.
General Electric
General Electric is the company which changes the world. The companys motto is GE Works. Across businesses and industries, brilliant, connected machines like the GE Evolution Locomotive are changing the way we work (General Electric, 2012).
Working in four absolutely disconnected niches, energy, technology infrastructure, capital finance and consumer and industrial, the corporation has an opportunity to change the whole world. Each sphere the corporation deals with General Electric benefits from. The closest competitor of the company is Citigroup, Inc. which has twice less market capacity than General Electric does.
The revenue of the General Electric is three times higher than that of Citigroup, Inc. Therefore, the affect of the General Electrics activity is higher and the influence of the economy on the company is greater. It should be stated that the company works with financial operations, therefore, the economy of the world affects the company as well as the General Electric can affect the world economy. The company is directed at leading, building, and investing. These three spheres are aimed at creating stable income to the company.
According to the website of the corporation, General Electric is building the world by providing capital, expertise and infrastructure for a global economy , is constantly working to make the world a healthier place by supplying the healthcare technology that saves nearly 3,000 lives every day , moves the world in the safest, fastest and most efficient ways possible , and powers the world with the cleanest, most advanced technologies and energy solutions (General Electric, 2012).
Coming out of all these functions, there are many long term goals the company pursues, however, these long term aims are impossible without completing the short term expectations.
Current economic climate
The world economy is on the brink of another recession (World Economic Situation and Prospects 2012, 2011) United Nations assure, however, there is a hope that nothing is going to change. There are a lot of factors which point to this problem. Speaking about the current economic situation in the world, it is possible to underline the following aspects. First of all, the current labor market remains in crisis.
The unemployment rate is too high and the actions which are taken in the direction of reducing the unemployment rate are ineffective in a short term period (World Economic Situation and Prospects 2012, 2011). Many actions have been taken, however, it is impossible to solve the problem so far. Therefore, the unemployment rate may be reduced only in a long run period. It creates some problems for the companies at the present time.
Second, the economies of the European Union (EU) and of the United States of America are closely interconnected. These countries play a major role in the world economy.
The failures and success of these countries are important. Therefore, now the economic climate in these countries is supporting as even though the short term period does not guarantee solving all the problems, the economies of the countries have been stabilized and the world economy is going to be effective in the long term period (World Economic Situation and Prospects 2012, 2011). Therefore, these are two main factors which may affect the development of the General Electric in the long term and the short term periods.
Short term effect of the current economic climate on General Electric
Unemployment is one of the main conditions which may affect the General Electrics. Unemployment leads to serious economic problems in the countries. Low wages and the reduction of the human opportunities are important (Summers, 2008). The General Electrics is the corporation which cares for its employees, and when the world tendency is directed at the reduction of the wages due to the economy problems, the company is unable to ignore the issue.
Unemployment is the problem which affects the General Electrics in a short term period. However, we speak about this issue as about the problem which may be solved only in a long term period. Why does it happen? In a long term period the problem of unemployment is going to be decided or at least considered. But in a short term period the problem of unemployment cannot be solved, therefore, this macroeconomic problem affects such huge corporation as the General Electric.
Long term effect of the current economic climate on General Electric
Success of the economies of the European Union (EU) and of the United States of America is the economic climate which may assist the corporation in a long term period. One of the main strategies of the General Electrics is the redeployment opportunities (GE Global Growth & Operations, 2012). The positive economic climate in the countries mentioned above opens the doors before the corporation.
The rates of euro and dollar in the modern economy are very important, therefore, there is no need to enter the international market without being assured in the stable development of the European Union (EU) and the United States of America as the failure may occur.
Considering the expectations of the General Electrics, investing, building and leading remain the main directions of the company development in a long term period. The absence of the crisis in the mentioned countries and their stable development are the guarantees of successful development in General Electric.
It is obvious that the economic climate is measured by the public good and the successful development of the economy is important. The long term effect is considered in this case as the economy of the country is not that simple. Either a positive effect is caused or a negative one, it is impossible to consider the issue from the short term period as nothing seems to change.
Of course, the economy changes occur, but people do not feel it that fast and the corporations do not as well. Thus, the affect of the changes in the world giants of the economic climate are going to be experienced only in a long-term period (Impact of the current economic and financial crisis on potential output, 2009).
Conclusion
Therefore, it may be concluded that the economies of the European Union (EU) and of the United States of America affect the General Electric greatly. Even though there are many smallest problems in the world which may affect the corporation development, unemployment rate is the most serious one.
These two problems have been considered as the most important ones which may influence the development of the General Electric in a short term and in a long term periods. Having considered these issues in detail, it is possible to state that the correct planning and successful leadership in the corporation are able to overcome all the difficulties and leave the company a winner in any situation.
Indias financial system, the major economy in the earth in terms of buying power, is going to touch novel heights in upcoming years. By 2035, India is forecasted to be the third major financial system of the earth just after US and China. It is prospected to grow to 60% of the range of the US financial system.
This thriving financial system of today has to bypass through many stages before it can attain the present milestone of 9% GDP (Bosworth & Collins 2007). The account of Indian economy can be broadly divided into three stages: Pre-Colonial, Colonial, and Post Colonial.
Discussion
Indias Economy during the Pre-Colonial period
In this pre-colonial stage is where the financial record of India ever since Indus Valley Civilization to 1700 AD can be classified. Throughout Indus valley civilization, Indian financial system was very well urbanized. It had very high-quality trade associations with other parts of the humankind, which is obvious from the coins of a variety of civilizations established at the location of Indus valley (Roy 2002).
Prior to the initiation of East India Company, each village in India was an independent body. Every village was economically sovereign as all the financial wants were satisfied inside the village.
During Colonization
The advent of East India Company broke the Indian financial system, as there was a mutual reduction of capital (Srinivasan & Tendulkar 2003). The British used to purchase unprocessed supplies from India at cheaper charges and refined merchandise was traded at superior than standard cost in Indian markets. Throughout this stage Indias allocation of world revenue reduced from 22.3% in 1700 AD to 3.8% in 1952.
Post- Colonization
Once India got sovereignty from this colonial law in 1947, the procedure of rejuvenation of the financial system started. For this, different strategies and systems were invented. The first five-year plans for the expansion of Indian financial system came into completion in 1952. These five-year plans, initiated by Indian administration, concentrated on the wants of Indian financial system.
If on one hand farming acknowledged the instant consideration, on the other side, manufacturing zone would be urbanized at a quick speed to give employment openings to the rising populace, and to remain rapid with the expansions in the world (Twomey 1983). Ever since, Indian financial system has come a long way. The Gross Domestic Product at aspect cost, which was 2.3 % in 1951-52, reached 9% in fiscal year 2005-06.
Indias Economy Development rate
Since 1980, India has observed a stable increase in its development rate. The Hindu growth rate estimated at 3.5 to 5.5% was pursued by the policy move away from extreme controls and limitations on personal venture towards steady decontrol (Srinivasan & Tendulkar 2003). Between the years 1988 and 1989, the development rate augmented to 10.5%.
Since 1980 to 2002, the financial system of the country was 6% and up to the year 2007, almost 8%. Before the reforms of the 1990s, India survived mainly by borrowing from other external sources (Broadberry & Gupta 2005). The increase in development rates started in the 1980s, and the 1990 reforms only speeded up the procedure.
The broad-based and deeper reforms in the mid-1990s increased the GDP growth rate to an average of 9% (Srinivasan & Tendulkar 2003). The countrys sales overseas and trade in, were $18.14 billion and $24.07 billion correspondingly, in between the years 1990 and 1991.
In 2006, the countrys exports arrived at $120.3 billion to develop into the 28th leading goods exporter, and imports arrived at $174.8 billion to develop into the 17th foremost goods importer of the globe. Indias allocation in world goods exports, after increasing from 0.5 % in 1990 to 0.8% in 2003, crossed to 1% in 2005 (Delong 2003).
This boost owed to the increase in Indias exports at more than twice the pace of development of humanity exports from 2005. Indias noteworthy export development in current years was due to positive external improvements and home policy plans. Imports services have been rising faster than goods trade.
The allocation of services in the entire external trade improved from 21.5% in 1990 to 27.4% in 2006 (Bosworth & Collins 2007). Recent research show that Indias entire service exports positioned at $73.8 billion to become the 10th foremost service exporter with an allocation of 2.7% of world service exports.
Additionally, India is ranked 13th among foremost service importers with a contribution of 2.4% of world service imports. Totally, service imports quantify to $63.7 billion more than the 15 years in subject, while Indias services exports improved from $4.6billion in 1990 to $73 billion in 2005, more than a 12-fold rise (Ahluwalia 2002).
The Gandhi policy
In the middle of Indias flag, there is a spinning wheel, a figure employed by Gandhi to disapprove English material imports underneath colonial law and to show the dignity of a culture of small-scale farming and commerce. For much of its sovereignty, Indias financial system was presided over by the values of the spinning wheel, with catastrophic economic and societal effects (Delong 2003).
Since then, India is still under pressure to move further than Gandhi-era economics, and lift its customary of living.
Indias current progress in the direction of economic development stems from the alterations undertaken after the 1991 financial catastrophe, which raised India from decades of sluggish growth under communist law and offered a chance to advance living circumstances in the huge deprived country (Parthasarathi 1998).
The current growth has been inspiring, among the uppermost development rates in the earth. Immense figure of the worlds unfortunate live in India, and will depend on its prospect expansion to conquer poverty, since the current growth is not sufficient. Definitely, immense steps have been taken toward improvement on trade, and industrialized policy (Roy, 2000).
The fiscal system, considerable development has been made in reducing deficiency, and India has a rising and flourishing middle group. Nevertheless, much remains to be done since the government interferes where it need not, in everything. from petroleum mining to nightclubs, and fails to control the essential services that it should like, civilized roads, a steady power allotment infrastructure, and excellent primary education.
Important steps in Indias economy impetus
Trade liberalization, monetary liberalization, levy improvements and opening up to overseas reserves were several of the significant steps, which aided Indian economy to achieve impetus. The financial liberalization initiated by Man Mohan Sigh in 1991, then finance Minister in the administration of P V Narsimha Rao, confirmed to be the springboard for Indian financial modification movements.
Challenges faced by Indian economy in 2006-07 fiscal years
In order for the Indian financial system to uphold its present status and to achieve the goal of GDP of 10% for fiscal year 2006-07, Indian financial system has to conquer many challenges. They include:
Populace outburst: This is one of the factors consuming into the achievement of India. According to 2001 census of India, the populace was 1,028,610,328 rising at a speed of 2.11% roughly. Such a huge populace puts lots of pressure on financial infrastructure of the state. Therefore, India has to manage its growing inhabitants.
Poverty: As research indicates, 36% of the Indian populace was living under the deficiency line in 1993-94. However, this number has reduced in current times but some key steps are required to be taken to eradicate deficiency from India.
Unemployment: The rising populace is pressing hard on financial capital as well as occupation chances. Indian administration has started a variety of systems for instance, Self Employment Scheme for Educated Unemployed Youth, but this is confirming to be a drop in the sea.
Rural urban divide: India lies in rural community. Even today, when there is a lot of relocation into towns, 70% of the Indian populace still resides in the rural. There is a very star distinction in speed of countryside and town development. Unless there is a fair growth, Indian financial system cannot grow.
Projected Financial Transformations
The continued and premeditated financial transformations are the ones that can conquer these challenges (Ahluwalia 2002). They include:
One, upholding financial regulation of the economy, two, orientation of communal spending towards regions in which India is faring poorly for instance, health and education sectors, third, initiating of transformations in labor regulations in order to produce more service chances for the rising populace in India.
Fourth, is by restructuring of farming sector, introduction of novel expertise, dropping agricultures reliance on heavy rain by increasing ways of irrigation, and lastly, introduction of fiscal transformations, including privatization of several communal sector banks.
Why there is a distinction between pro business and pro market policies
Pro business and pro market modifications do not create equally exclusive sets. Otherwise, policies that develop the proficiency and output of the present firms, the alleged pro business policies, are a necessary constituent of the neoliberal, pro-market alteration packages.
A dispute exists on whether Indian strategy modifications and development accelerations of the precedent 25 years are best understood as a move in the direction of a pro-business direction or a pro-market point (Twomey 1983).
Under the pro-business outlook, the government gave favors to the significant private segment, which set free savings and development, but has fundamentally led to oligarchic entrepreneurship (Prakash 1976).
By distinction, the pro-market viewpoint sees the combination of concentrated limitations and exterior liberalization as the chief driver of amendments in financial performance, working by means of sensitive aggressive pressures on firm performance.
Indian commercial region, however, is standard in as much as the vibrant affiliation is similar to that of developed countries. Indias economy at the end of the 1970s was so strongly prohibited that liberalization on roughly any face was definite to improve competence, and would have been suggested by reform-oriented economists (Basu & Maertens 2007).
Furthermore, it was the existing political financial system of alterations rather than any bright comprehension that pro-business rule modification would lead to huge and permanent payoffs that accounts for an incomplete spotlight of the policy transformation on the current firms. In the 1980s, politicians were still frightened of being perceived as turning away from communism.
Therefore, they chose small policy alterations to huge ones, and secret ones to obvious ones (Balakrishnan 2010). Consequently, they decided to go for the alterations that could be initiated severely within the obtainable policy structure rather than those concerning an alteration in the structure itself (Prakash 1976).
As predicted, the changes outstandingly included aptitude extension by the accessible firms, regularization of aptitude that had been formed secretly, broad twisting of products under the accessible endorsed aptitude, and better admission to introduced raw resources (Delong 2003).
Conclusion
In reference to the above research, India is on its way to become the third most industrial nation in the world. Though this is projected, the country seems to have come a long way in order to balance its economy. Before the 1990 reforms, the economy was performing well but much of the performance was enhanced by borrowing finances from other resources.
However, the 1990 reforms seem to have boosted this and now India is steadier in terms of its financial basis. India opted to create a pro-business environment as opposed to a pro-market one, whereby a healthy society of private entrepreneurship and some inspiring companies were formed.
This liberation of commerce, joined with small-scale entrepreneurship is likely to uphold escalation in the 6 to 7% range; but hastening development will need actions that are more drastic. This region is now certain enough to push for more modification, but its authority should not be overrated.
References
Ahluwalia, MS 2002, Economic Reforms in India since 1991: Has Gradualism Worked, Journal of Economic Perspectives, vol.16, pp. 67-88.
Balakrishnan, P, 2010, Economic Growth in India, Oxford, Oxford University Press.
Basu, K, & Maertens, A 2007, The pattern and causes of economic growth in India, Oxford Review of Economic Policy, vol. 23, pp.143-167.
Bosworth, B, & Collins, SM 2007, Accounting for growth: comparing China and India, Cambridge, Mass, National Bureau of Economic Research.
Broadberry, SN, & Gupta, B 2005, The early modern great divergence: wages, prices and economic development in Europe and Asia, 1500-1800, London, Centre for Economic Policy Research.
Delong, B 2003, India since Independence: An Analytical Growth Narrative in Rodrik, D (ed). In Search of Prosperity: Analytical Narratives on Economic Growth, Princeton University Press, Princeton.
Parthasarathi, P 1998, Rethinking Wages and Competitiveness in the Eighteenth Century: Britain and South India, Past and Present, vol. 158, pp. 79-109.
Prakash, O1976, Bullion for Goods: International Trade and the Economy of Early Eighteenth Century Bengal, Indian Economic & Social History Review, vol.13, pp.159-186.
Roy, T 2000, The economic history of India, 1857-1947, New Delhi, Oxford University Press.
Roy, T 2002, Economic History and Modern India: Redefining the Link, Journal of Economic Perspectives, vol.16, pp.109-130.
Srinivasan, TN, & Tendulkar, SD 2003, Reintegrating India with the world economy, Institute of International economics, Washington D.C.
Twomey, MJ 1983, Employment in Nineteenth Century Indian Textiles, Explorations in Economic History, vol. 20, pp. 37-57.
Nowadays China plays one of the most important roles in the global economy. In the short time since the middle of the 20th century, economic growth increased rapidly due to industrialization. Despite the profitableness caused by the development, the wealth is still available only for a small number of people, and the majority of the Chinese population cannot afford such ordinary things as education and medical care. These facts depict that Chinese development has an ambivalent nature, and it proves that the present-day political policies have many issues that need to be resolved.
Poverty and Wealth in Postsocialist China describes how the Communist policy that was implemented in the 20th century caused the emergence of social inequality. Together with the economic growth that was achieved by industrialization, the country faced great poverty increase. The fast-moving development can be explained by the interaction between institutional practices of the socialist decades and deep engagement with the market rules of global production ( Poverty and Wealth in Postsocialist China 4). Industrialization and privatization were crucial for the economic evolvement and creation of the social divide in the country. For example, in the middle of the 20th century rural farmers in China were denied the opportunity to leave farming for industrial work , they also were necessarily condemned to the lowest income strata ( Poverty and Wealth in Postsocialist China 8). Rural migrants face discrimination in the cities when they move there in search of work. The inequality also affected women, who are usually paid less. The most significant issue caused by privatization became the inaccessibility of medical services and education.
Francis Fukuyama and Zhang Weiwei in their dialogue discuss the problems in the governmental policies that require improvements. One of the biggest issues is the increase in population. The industrialization makes people from the countryside move to the cities in search of the profit. Fukuyama notices that it can cause challenges in the future, and he claims that economic growth will slow in the next generation ( The China Model par. 78). In his turn, Weiwei claims that the modern policies have problems that are recognized by society and government, but still, China has its own way of development, which is based on a holistic tradition ( The China Model par. 46).
The social and political reforms that took place in China in the recent past were fruitful regarding the economy. Nevertheless, the government now encounters the problems of inequality and poverty. The current problems make it clear that the government needs to pay more attention to public opinion and need to change the developmental models that would be more beneficial for the majority of the citizens.
Works Cited
Poverty and Wealth in Postsocialist China: An Overview. Studies in Social Inequality: Creating Wealth and Poverty in Postsocialist China. Ed. Davis, Deborah and Feng Wang. Stanford: Stanford University Press. 2008. 3-19. Print.
The China Model: A Dialogue between Francis Fukuyama and Zhang Weiwei. New Perspectives Quarterly 28.4 (2011): n.pag. NPQ. Web.
Economics can be defined as the study of how scarce resources are utilized by people either individually or collectively. A specialist in the study of economics is referred to as an economist. A number of reasons have been advanced in the study of economics not necessarily by economists only (Ashby, p. 1).
Importance of understanding economics
The study helps to clear any anxiety that may arise in the day to day life experiences. This anxiety may be prompted by various aspects such as interest rates and fluctuation of prices. This helps in avoiding unnecessary stress that would have been caused by lack of understanding of the economic changes that take place.
It equips one with skills that are helpful in making informed choices even in the choosing of leaders. In this case, an individual can assess the potential leader with a policy that will address social issues like education, health, poverty, and employment among others. Thus, an understanding of economics will improve ones life and those of the people around in general (Ashby, p. 4).
Basic concepts in economics
For an individual to have a comprehensive understanding of economics, it is important to understand the related concepts. In this case, one should be knowledgeable about economic concepts. Thus, there are various terms and concepts that are used in economics. Descriptive/positive economics is a term used in reference to an analysis done by economists. This term explains and tries to predict the choices that individuals are likely to make and the reasons for their choices.
In such a prediction, the economists may give their opinion on what choices the people should make. Such a practice is referred to as normative economics . When an economist does a study on the performance of an individual, that is termed as microeconomics . On the other hand, if the study is concerned with the performance of a whole entity such as the state, it is called macroeconomics .
Though economists cannot predict with a guaranteed accuracy, most often, their results reflect the correct position of a given matter. This can be attributed to the fact that economists deal with large numbers of people, and thus getting the average of how they will respond is not hard.
For example, the economists conduct analyses on how some people will react in a same scenario and then draw a conclusion of a larger group of the population. This has been used over time for the study of suppliers of goods since they will most often want the same result of greater outcomes. The same applies to buyers and sellers. However, the practice of these different players has to be regulated. In this case, the government develops regulation parameters for this purpose.
Troublesome terms
Some terms used in economics are troublesome. This is especially the case to those who have little or no understanding of what these terms mean. For instance, the term economists self interest is more often taken negatively to imply a negative aim by the economists. However, it connotes the study of an issue so as to get relevant information that a conclusion can be based on by an economist (Ashby, p. 9).
There are other economic terms that are misunderstood by individuals. For instance, profits is another term that is often misunderstood to mean undeserved gains. However, the term should be understood to mean a financial return to those investing in a business. It is well known that no one will want to venture into anything that is not gainful. Therefore, business people make business investments with the hope of reaping profits.
Economists also differentiate between accounting profits and economic profits . In this case, the accounting profits are normally lesser than the economic profits. Accounting profits are further subdivided into necessary profits, which include total costs and economic profits, which refer to an excess of the expected profits.
Other terms that are most often used by economists include price , market value and average revenue . All these are used in reference to the amount a given product sales. Another differentiation made by economists is that of demand and want . The former is that which a person is willing, ready, and able to have whereas the latter refers to the things that are just desired.
The term efficiency is used in two respects related to production and allocation. Productive efficiency refers to the cost of generating one unit of output. On the other hand, allocative efficiency refers to how well the economy utilizes factors of production. The factors of production include resources, labor, capital and entrepreneurship.
Visualizing possibilities
Opportunity cost emerges in every choice that one makes including a choice not to spend (Ashby, p. 19). This is the basis of the common saying that there is nothing for free. This aspect can be illustrated by the graph of a production possibilities frontier. Under this, it demonstrates that the economy can satisfy demand if factors of production are managed properly.
Market Basics
This refers to the factors that do influence the decision of a buyer when he or she is in the market. The first aspect that comes is that of price. The buyer is bound to assess if the price quoted by the seller of a given product is consistent with the value he or she stands to gain if that commodity is purchased. Factors such as the buyers tastes and preferences play a big role too (Ashby, p. 34). The buyer will most often buy a product when its price is low.
There are different factors that affect decisions that are made in the market. All the market players have different situations that face them. The buyer has to assess the price expected to pay and compare it with what he or she stands to gain. Nevertheless, the seller too has in mind how he acquired the said product from the supplier. The seller also thinks of how much he will gain if he sold the product at a given price (Ashby, p. 43). These are self interests that shape the decisions of the market players.
Demand and supply
In most instances, a buyer will buy a given product if its price is low. The buyer will always see that it is in his self interest that he gains from a product by incurring the lowest possible cost (Ashby, p. 38). In addition, buyers find it easy to buy a limited amount of a product per period during a time when the price is higher.
On the other hand, the suppliers face a big challenge in fixing the price since they lack the advantage that the seller will have of assessing the reaction of the buyer on mention of the price. An excess supply situation will arise if the suppliers fix a very high cost of the product (Ashby, p. 43).
Ordinarily, supply and demand affect tangible commodities like agricultural products, which are sold in a number of commodity exchanges across the globe. Bodies like the Chicago Board of trade and Tokyo commodity exchange foresee this process of exchange. The offers of demand and supply apply to these exchanges and the traders fix the prices so as to balance supply and demand.
Tastes, preferences, ones income, and the products price affect the demand level. Shifting of the demand curve illustrates this aspect. Supply is also affected by changes in demand. Factors that move the supply curve to the right include increased number of suppliers while issues like technological breakthroughs will move the curve downward (Ashby, pp. 63-68).
Imperfect markets
Imperfect markets refer to an aspect that emerges in the market. This is when the point of agreement of a products price is supposed to be reached at willingly by the seller and buyer in the market. This point is referred to as the equilibrium point (Ashby, p. 60). The price that is agreed by the buyer and the seller often apply to the entire community. However, it is only determined by the buyer and seller. These make the market an imperfect place since it lacks allocative efficiency
Stocks versus Flows
Whereas supply can be taken as a flow of product into the market, demand can be looked at as a flow of products leaving the market. Supply and demand are thus flows of amounts of products supplied and those demanded whose magnitude is affected by buyers, sellers and producers. In a market led economy, price adjustments is used to regulate the flow of demand and supply which are otherwise independent of each other (Ashby, p. 71).
Market Equilibrium
This refers to the point of agreement between buyers and sellers such that, neither feels displeased with what he or she gets. The equilibrium price is that which supply equals demand. This reflects the current market reality of relative scarcity of products. Demand and supply conditions play equal roles in determining the equilibrium price.
Thus, both buyers and sellers are involved in this exercise. Finding the equilibrium price guards against product shortage and surplus of a given product. This helps both the market players since suppliers cannot sell more than what people are demanding (Ashby, p. 71-80).
Resource misallocations
Society depends on resources that are scarce and need to be distributed properly so as to satisfy the demands of society. Therefore, maximization of the net profits gained ought to be practiced by all market stakeholders.
Proper allocation of resources prevents dead-weight loss, which involves losing potential benefits to no one. In order to have a fulfilling market, some factors ought to be left undisturbed by external forces. That is why government intervenes in determining market prices destabilizes either the supply or demand of a given commodity.
For instance, after the Second World War, production shifted to military related materials and it took the intervention of the government to introduce rationing and universal wage control that helped prevent impending inflation. In general, prices do reflect the underlying reality that is present in the market. Thus, policies that are in line with the market realities should be implemented (Ashby, pp. 82-92).
Conclusion
Economics is a critical subject in the society. It is an arena that studies the forces that drive people to make certain choices. It is a helpful in one area to society since it gives people the basis of forming their choices.
In economics, there are other factors that come into play such as demand, supply, and opportunity cost among others. The buyer and seller in the market place develop varied opinions that are inclined to eachs self interest. There is no perfect market since they all lack inclusiveness of the entire community in decision making related to the setting of prices.
Works Cited
Ashby, David B. How markets work. Lake Oswego, Oregon. EconAnalytics, 2011. Print.
Microfinance institutions (MFIs) are able to provide banking services to populations who were previously considered unbankable due to factors such as low transaction costs, close proximity to traditional clients, and ability to pool resources together with the view to spreading risks for the borrower and the lender (Hailu par. 1-4).
As suggested by this author, MFIs maintain low transaction costs in terms of opening bank accounts, over-the-counter transactions, loan access and loan repayment regime, thereby ensuring that the poor in rural and urban areas are included in the financial services sector. In maintaining proximity, it is known that most conventional banking institutions in the developing economies are located far away from towns and villages and the transport costs required to access them may be unaffordable for most poor people (Hailu 3). As such, MFIs have stepped in to provide the much needed financial services to people in their villages and neighborhoods.
Additionally, MFIs can provide banking services to people who were previously considered previously unbankable due to deployment of structural and operational platforms that depart substantially from the way business is conducted in conventional banks. For example, most MFIs use traditional networks and peer reviews that are predicated on trusting relationships of borrowing groups to determine the creditworthiness of potential borrows (Hailu 4). This implies that loans are secured through joint liability and no collateral is needed for individual borrowers to access loans apart from their membership to a particular group. When a member of a particular group fails to repay the advanced loan, other group members are collectively held responsible in line with the principle of spreading risks for the borrower and the lender.
Expanding MFI Sector & Economic Development of a Developing Country
The MFI sector plays a significant role of empowering the poor in rural and urban areas of a developing country to access a platform where they can pool their meager incomes and assist each other to grow by starting small enterprises. Available scholarship reports that, although most people in the developing economies earn less than US$ 1 a day, the evolving MFI sector has facilitated extension of credit to this group of the population and therefore contributing to the economic development of these countries (Hailu 6).
MFIs also play a significant role in spurring the economic development of a developing country as they often contribute to the formalization of the informal sector by ensuring that small enterprises are able to access cheap loans and other financial services which cannot be guaranteed by the conventional banking sector (Hailu 9). Providing such services is the right way to go in the realization of economic development, as most of the people in developing countries are employed in the informal sector and most economies in these countries are supported by proceeds from the informal sector.
Finally, it is documented that there exists minimal evidence to show that access to financial services is the silver bullet to the reduction of poverty and facilitation of economic development in developing countries. Although it is a well known fact that MFIs not only empower people economically and socially, but also allows them to better integrate into a countrys economy and proactively contribute to its economic progression, it is still not yet clear if the dynamics of access to financial services can be trusted to spur the economic development of a developing country in the absence of other variables such as opportunities, education and awareness.
