Category: Economic

Introduction

Most of the organisations are sensitive to economic expansion; (upswings) and contractions (downswings or recessions). The notion of economic cycle, also known as Business cycle, explains the difference in economic activity level as observed in developed economy. This cycle is however divided into two; i.e. booms and recessions. Booms are linked with tough economy while recession is associated with a weak economy.

How General Motors is to Economic Expansions and Contractions

It is very important for general motors to keep proper books of account. It includes; balance sheet, trading profit and loss account, cash flow statement and statement of affairs. The company needs to do the following; to maintain proper books of account, ensure the accounts are in agreement with the book of accounts, and ensure sound accounting policies has been followed in the presentation and preparations of financial statement at the year end. The benefit of carrying out this activity is for the company to determine its financial position at the year end. General motors company will be able to determine if the business is running at a loss or not. An organisation can determine if the company is running at a loss or not by simply comparing the previous year account with the current years account. (Daniel J. Ikensons)

For instances, demand for General motors had fallen from time to time over a number of years. For example, if the demand for motors falls from 28% to 30%, the resulting difference should be fully investigated. This may be due to tradition auto making, as a result of idled plants and lazy workers. However, the auto makers and federal government are not supposed to base their policies on what is to happen during cyclical recession period.

Instead they should concentrate on demand for cars of 2010 and 2020s and be able to compare and analyze what might have caused the difference. After the recession the General Motors demand accelerated. However, during the recession period most of the creditors are expected not to lend any money to the debtors. Furthermore, if there would be any creditor willing to lend money to the General Motors, then it would be at a higher interest rate. In addition consumer are expected to reduce their level of borrowing to finance any car buying

Whenever the country experiences recession, Politians and the communities at large must weigh their ability to withstand the effects of recession. The economic fall causes a severe discipline that affects the inefficient, encourages all people to become much more efficient and it encourages invention and innovations,(use of technology ). Thus opening the door wide for Google Inc. This notion of economic cycle works well, but these activities can be devastated by the human costs. Failure f inefficient business leads to unemployment, investors with no money and the community becomes less stable.

Feds states that, if the rate of inflation increases as a result of recession, the market committee is required to formulate a monetary policy that will be centralised on mounting the demand of the economy. Feds further explains that; the only weapon of dealing with high rate of inflation is by reducing/lowering the interest rate. This will however, reduce the level of inflation, thus allowing the consumer to purchase more. More so, there would be high purchase made for motors since the consumer would have the accessibility to loans that will further facilitate their purchase of MGs. Where consumer purchasing power for motor increases, the level of motorists sold shall also increase, and as a result increase the profits made for that year.

Where the interest rate is high, it reduces consumer purchasing power for the motors, and thus reduces the amount of profit to be made by the company. Effects of recession are usually associated with inflation. Where theres high inflation rate, most business organisation tends to suffer since they have to incur more expenses. This at times is very expensive. If general motors makes constant payments by credit card, it may be difficult to know how much expense it has been incurred per month or annum. As a result, Motorists may find it difficult to pay off its credit card debts (Moulton, 1975).

How GM can adjust to, or cope with the prevailing, conditions

Regardless of the economic stability of the general motors, the company should be able to create a good relationship with both the suppliers and the customers. For instances, if the suppliers price shoots up, so is the companies (General motors) wallet too. Before the company experiences economic crisis, it is very important for an general motors company to be honest (this implies both the employer and the employees) to both the supplies.

Acquaint the customer with information about the crisis. Building a good connection with the supplier and the customer will help to form a mutual understanding to get you out of the situation if need arises. When price of vehicle hike as a result of inflation, you may request the suppliers to reduce the price of purchasing the required materials. However, if theres an increase of price at any moment, inform the customers of the percentage increase of the vehicle. This helps the consumer to be able have an idea of changes in price of the vehicle in the market (United Nations. Dept. of International Economic and Social Affairs, 2007).

A surprise visit should be carried out to assess the level of the employees and employers competence in the general motors department. By doing so, the department will be able to cope with future emergencies that are bound to occur in the course of its work. Understand the major contributors to your organisation and what extra baggages are. A business which plans its strategy more careful, it bid stability to the employers. It is very important to discuss with the employees about the plan of the general motors. Negotiating with the employees will prevent them from going to a more competitive market (Moulton, 1975). Where there is a decrease in sales of about 20 percent but you are not sure if you should let off 20 percent of the employees.

Conclusion

An alternative of this kind of situation in the general motors department shall be to reduce 20 percent of the employees earnings. If you consider paying all the cuts, it will be fallback in recession. Make sure all cuts off are fair and are understood by the employees. Where a general motors limited ranges from small to medium, it is very easy to meet with all the employees one by one. To explain to the employees what has caused their decrease in their salaries.

These will help the employees to know the motives of GMs. Give them a sample of how the check will look like after the cut off has been done. Be more ready for the recessions. Use the available opportunity you have to reduce any unnecessary costs in the organisation (Moulton, 1975).

References

Federal Reserve District (2009). Summary of Commentary on Current Economic Conditions. Web.

Moulton, H. G. (1975). Financial organization and the economic system. Wall Street and the security markets. New Jersey: Ayer Publishing.

United Nations. Dept. of International Economic and Social Affairs, (2007). World economic surveyAuthors, NY. United Nations Dept. of Economic and Social Affairs.

Output and Growth (Real GDP)

The period before the year 2007 was seen by many analysts as the most successful in modern times. The countries recorded impressive growth in output in comparison to the previous years. In the year 2007, a financial crisis triggered by the crash in the housing markets was the beginning of a continuous downward spiral for the economies. Before the year 2007, the four economies registered economic growth rates well above 2%. The US registered a growth of about 21/2% growth for the first quarter of the 2007. At this time the nominal GDP stood at about 14 trillion. Since then there was a reduction in growth rate.

Early in the year 2008, the growth rate was just over 1% and by the end of the same year, the countries were recording negative growth. The US recorded a 3% decline in the economy during the second quarter of 2008. Japan was also heavily affected registering a whopping 3.8% decline in output in the same period. This was attributed to the exposure of the Japanese economy to international markets especially the US which was facing major challenges. Canada registered the least decline of just over 2%. The main reason for this was the continued strengthening of internal markets as opposed to export orientation.

Reactions by respective governments have seen a gradual reversal of the situation. The governments applied aggressive expansionary fiscal policies geared towards stimulating the economy. The effects of these were felt at during the last quarter of 2008 when the growth rate was seen to take an upward turn. Therefore all the four economies are in the recovery process. It can however be observed that the US and Japan are recovering at the highest rates a fact attributable to the high level of interdependence among the two countries.

Productivity (Output per Worker)

Productivity is determined by the amounts of output an average worker is responsible for. The most important determinant of this indicator is the level of output a country operates. A high level of output means a higher level of productivity (Eveland, 2008, p23). Since the magnitude of the workforce was not significantly affected by the recession, the fall in output levels for all the four countries meant a fall in the level of productivity. Again of the four countries, Japan was the hardest hit. This is because the fall in exports which accounts for over 60% of Japanese output drastically fell as the American economy was struggling.

Historically, the US economy is known to have a high level of productivity given the low unemployment rates. In the year 2007, the growth rate of the productivity level for the US was about 2% while Japan and the UK showed insignificant growth. However after the last quarter of 2008, things turned for the worse. All the four countries witnessed a reduction in productivity levels. Again Japan was mostly affected as the level of productivity fell by over 30% in 2009. Canada followed with about a4a5decline in productivity while in the UK and the US; productivity fell by about 11%. Recently, the four economies are pulling out from the recession. This only means increased levels of production and thus the productivity levels are in the increase. Among the four countries, Japan seems to be recovering fastest.

Inflation and Prices (CPI)

Of the four countries, Japan recorded the lowest inflationary rates in the period leading to the instabilities witnessed in 2007 and also the period after. The inflation rates for the four countries peaked in the period leading to the crisis. The US registered inflation rate of about 4.5% in late 2007, the UK recorded about 4.2% while Canada recorded just over 3% and Japan recorded the lowest rates at 2%. This is when the housing bubble burst.

The overvaluation in the housing markets triggered a sharp decline in prices. This is in tandem to the economic cycle. As economies sank into recession, deflationary pressures took a toll on the trend in market prices. The sharp decline in prices continued to the negative and hit the bottom in mid 2008. At this time, the US recorded a 1.8% decline while Japan recorded a decline of 2%. Canada recorded about 0.8% decline (Schmitt, n.d, par4).

The upward trend has gained momentum in the year 2009. The US is recording a very sharp turnaround in the movement of prices. This can be attributed to the aggressive expansionary monetary policies instituted by the four economies. The US was the first to institute the expansionary policies hence it is the leader in reversing the deflationary pressures. At the moment, inflation in the US is in the range of 2%. Japan, the US and the UK are following the trend. It is expected that the next few years will see inflation become an important variable of concern because if it remains unchecked, the economic gains made through the expansionary policies are likely to be eroded.

Labor Market (Unemployment Rate)

Unemployment rates are highly influenced by the level of economic activities in an economy. The level of output determines the level of employment in the economy. The economic boom witnessed in the period leading to 2007 had seen consistently low unemployment levels. The UK had an unemployment rate of about 5.2% in 2007. The recession resulted in a consistent increase in the unemployment rates. By January 2009 the rate was 6.4% and the rise continued to 2009 to about 7.9%. However, 2010 is seeing a decline in this rate to 7.8%. The US saw a rise in unemployment rates to about 10.2% in 2009 from about 8% in early 2007.

In Canada, the unemployment rate was estimated at 6% in 2007. The recession led to a rise in unemployment to over 9.5%. The rates have remained high at about 9.2% according to the statistics collected up to February 2010. The unemployment rate in Canada was 3.8% in 2007. The rates rose to over 5%. The recovery of the economy has caused a slight fall in the unemployment rates to about 4.9% (International Economic Trends, 2010, par3).

Assessment

The four economies are affected by the economic recession in different proportions and hence reacted in disproportionate scales. However they are all pulling out of the recession. All the indications are that the four economies are recovering given the successful application of economic stimulus plans. The UK and Canada have much stronger economies due the strong domestic demand in the two countries. The US faces strong challenges in improving the flow of credit and restructuring of the financial markets.

Future outlook

The economies are indicative of a bright future ahead. The economic stimulation is proving effective in reviving the economies. However, there are two main concerns especially for the US economy. The two issues are inflation and the high level of indebtedness. The expansionary monetary policies have led to a gradual increase in the inflation rate. The need to tame inflation may require an increase in interest rates a situation which could further curtail the flow of funds required for investment. Secondly, the high national debt is likely to lead to higher taxes in the future and this would be counterproductive (Mussa, 2010, par4). This thus requires the development of a proper exit plan not to destabilize the economy.

Reference List

Eveland J. (2008). Economic Indicators in Macroeconomics. TUI University.

International Economic Trends, (2010). Economic research Federal Reserve Bank ST. Louis. Web.

Mussa, M., (2010). Global Economic Prospects 2007/2008: Slowing to Sustainable Growth. Web.

Schmitt, E. (n.d.) National Income Accounting. Web.

Introduction

People of different origins characterized by race, language, and physique inhabit the world. The worlds major races include People of African origin, People of Caucasian origin, Asians, Arabs, and those with mixed races (Lie & Brym, 2006, 204).

These groups have diverse cultures characterized by both material and non-material aspects that make each of them unique. The most important factor however is the fact that all these people belong to the same species that make them collectively human beings. There may be some instances of conflict involving various groups of human beings.

However, behind the peaceful coexistence of the majority of these groups is the concept of cultural heritage and share humanity that operates on the simple belief that all human beings are equal. This has culminated in the formation of a social political and economic environment where all human beings are closely integrated for the benefit of all regardless of culture or race.

Better understanding

There can easily be discord between these peoples who live across different geographical places and time zones. Better understanding of different cultures ensures conflict is avoided. Better understanding of humanitys collective cultural heritage will help people appreciate other peoples beliefs and adopt them for their own benefit.

From Indigenous, people who are estimated to range between 250 million to 300 million, to people who have assimilated other cultures practices, understanding of each others backgrounds will help in fostering unity for the good of the future generations and survival of this world. Through this cultural collaboration, human beings will be able to easily exchange good cultural traits that their cultures do not have to strengthen ties and eliminate weaknesses that they may have (Tischler, 2007, p. 347).

Roles of cultural understanding

In academia, cultural understanding has helped in the growth of cultural literature and documentation of different peoples cultures in positive portrayal. Additionally cultural understanding has provided numerous opportunities for academicians in their pursuit for academic excellence. Outside academia, better understanding of cultural differences has helped the formation of global movements devoid of racial or cultural overtures. These movements are evident in trade, human rights, sports, and social life (Rapaille, 2007, p. 43).

The initiatives fronted by these movements have helped in the promotion of peace, development, elimination of social problems and ills like poverty, human trafficking, and violence against some groups. It has also helped highlight the plight of indigenous people some of them who have been saved from extinction. Cultural understanding has also helped foster worldwide unity against ills such as the proliferation of nuclear weapons, terrorism, and gender imbalance.

Better understanding of cultures has enabled formation of trade blocks by nations of different cultures that has had numerous ripple benefits of their peoples. For instance the formation of the North American Free trade Agreement and the European Union has changed the lives of hundreds of millions in the regions.

Latin America, which has more or less the same melting pot situation in the US, has benefited greatly from arrangements such as NAFTA. Similarly, Europeans who have distinct cultures have overlooked their cultural backgrounds and united for the good of their peoples (Kwok et al, 2002, p. 56).

Human rights is another area outside academia that has benefited greatly from better understanding of different peoples cultures. Its no secret that misunderstanding of the worlds cultures led to prejudices that laid the ground for the commitment injustices such as slavery and the holocaust.

However, improved understanding by leaders and the people involved in the injustices coupled by pressure from multiracial human rights groups helped end such unfortunate situations. The civil rights movements in the US best highlight the situation.

In todays world, sports has become big business as well as a big uniting factor between the worlds cultures. Better understanding of other peoples cultures has greatly benefited from sporting activities. Many people have had their lives changed through sport.

Sporting events such as the Olympics and FIFA world cup have been used to united hostile nations besides helping touch individual lives through initiatives such as One Goal for children. Many nations front multiracial teams whose members have roots from different parts of the world. Promotion of peace and appreciation of other peoples backgrounds has been greatly promoted by these activities (Kwok et al, 2002, p. 102).

Another role that is played by better understanding of other peoples cultures is the promotion of social life. Practices like intermarriages that were previously considered a taboo have been broken down. There is increased intermarriages that has greatly encouraged unity.

Conclusion

With the introduction and advancement of technology, there is better cultural understanding among the peoples of the world. Furthermore, people can now easily share their cultural experiences and interaction is easy and fun. Prejudice due to lack of understanding of other people no longer play a part in deciding the fate of other people. There is more harmony among different people and peace is eminent more than ever, thanks to better cultural understanding.

References

Kwok et al. (2002). Culture and humanity in the new millennium: the future of human values. Hong Kong: Chinese University of Hong Kong.

Lie, J. & Brym, J. R. (2006). Sociology: your compass for a new world. Belmont. Thomson Learning.

Rapaille, C. (2007). The culture code: an ingenious way to understand why people around the world live and buy as they do. New York: Broadway Books.

Tischler, L. H. (2007). Introduction to Sociology. Belmont, Wadsworth Cengage learning.

Economics explains the agents as market actors such as consumers and organizations that influence a specific markets behavior. Conversely, the standard economic model assumes that individuals choose actions that optimize their expected utility. This paper investigates how players existence impacts economic agents behavior in various frequently studied corporate environments. Moreover, it intends to analyze the market behavior of organizations in monopolistic and competitive marketplaces, the way such environments affect the performance of an industry, and the benefits society gains from market competition.

The monopolistic market is a type of commercial organization that exists when an organization is the lone dealer of particular merchandise. As such, monopolies are described as an absence of competition within the marketplace that produces products and services. First, firms in such markets enjoy high profits due to a lack of competition; thus, they can charge prices above those existing in economic marketplaces (Thaler, 2016). For example, Microsoft Corporation had a monopoly on computer operating systems and software, thus making it generate significant revenue and becoming among the leading multinational corporations (Thaler, 2016).

Furthermore, in a monopoly, the firm can change the quantity of a product; thus, inelastic markets, the organization is expected to sell a significant quantity of the good despite its low price. Conversely, if the price is high, the company will sell a reduced quantity in a flexible marketplace. Firms in monopolistic markets set policies that focus on goods production and consumer satisfaction, thus preventing new entrants into the market. The organizations usually influence the terms and conditions of exchange, thus controlling the pricing of products (Thaler, 2016). Moreover, companies in such markets have patents over their products, preventing competition from developing similar products. Finally, organizations in controlled markets are usually the sole producers of the output of commodities and services.

Perfectly competitive markets are known as price takers because competing corporations compel them into accepting the prevailing balanced rate in the marketplace. If a firm in a completely economical marketplace increases its merchandise prices, it will lose its sales to competitors. Supply and demand in such markets determine the markets price rather than an individual producer (Thaler, 2016). The total revenue for a corporation in the market is calculated by dividing its total return by quantity. Simultaneously, the marginal income is analyzed by dividing the variation in profits by the change in capacity produced (Thaler, 2016). Therefore, a perfectly competitive company should be a small player in the overall market to regulate productivity without influencing the price and amount of goods distributed in the marketplace.

Moreover, an economical market is a hypothetical margin despite manufacturers in various businesses facing competitors who produce similar goods, forcing them to act as price takers. For example, in 2015, American corn producers established a standard rate of $6 per bushel, and farmers who endeavored to retail at $7 per bushel did not have any consumers (Thaler, 2016). Producers in the marketplace should also be vigilant while valuing their products as over-pricing may influence their profits to be either negative, positive, or zero (Thaler, 2016). Therefore, a firm in such a market should not sell its products below or above the equilibrium price.

Equilibrium price determination in the market is done through the process of interaction between marketplace demand and supply or the aggregate. Consequently, if the price, supply, and need are equivalent at any given time, then both the purchasers and traders remain satisfied. The seller will therefore trade what the consumers demand, and the customers demand what the retailers sell. Economies use the DD curve to explain price determination further since it outlines the buyers aggregate demand for goods at a specific price (Thaler, 2016). As such, the curve is the parallel sum of the individual demand curve for all the dealers. For example, from the DD curve, the price=P, the need for products is P₁G, thus at P=P₂, the marketplace demand will amount to P₂H.

Considering the regulation on demand, the consumer necessity curve is descending and dropping to the right, explaining why the marketplace demand curve, which is the sum of consumer requests, slopes to the right. Conversely, the SS curve represents the products market supply curve; thus, it denotes the horizontal summation of the wholesalers individual supply curve (Thaler, 2016). For example, from the SS curve, it can be concluded that if P=P₁, the distribution of goods is P₁F or at P=P₂, and the flea market supply will be P₂K (Thaler, 2016). Therefore, as the sale curve of retailers slopes downwards towards the right and the supply curve slopes upwards towards the right, the price of a product, P_0, will be obtained at the point of intersection, E.

The economic agents which influence competition have affected business profits in various ways. First, the competition provides consumers with the freedom and choice to make their own decision. As such, buyers loyalty to a specific company would mean that the company will experience increased sales of its products against that of its competitors. Second, it encourages innovation, reactiveness and helps companies to gain insights into the target market, and avoid complacency (Thaler, 2016). Despite benefiting organizations profitability, competition can result in prices being driven down, thus paralyzing their operations. Competition plays a significant role in capitalism; hence it directly influences the profitability of a firm.

Competition benefits a society when the group and individual interests and incentives are aligned. However, challenges may arise when consumers interests are different. For example, when a company forms partnerships with other competitors, prices are likely to rise, and the quality reduces, thus, influencing the change in consumption within a specific market. The competition also creates opportunities for citizens to enter the marketplace and establish businesses (Thaler, 2016). It creates employment and presents individuals with the choice of workplaces and employers. Moreover, competition boosts innovation within society. It encourages the invention of new products and services that can be used to solve current and future concerns within the global marketplace. Competition can help companies identify societys consumption gaps and develop new goods and services to meet those needs. It also reduces the need for state intrusion through control of commerce in competitive markets which do not adhere to government policies. Therefore, a free market that is competitive benefits customers and society and preserves individual freedoms.

In conclusion, economic agents such as consumers have a significant influence on both monopolies and competitive marketplaces. However, extensive research on the markets will help organizations understand the actors behaviors within the market and formulate strategies that will enable them to meet the buyers demands. Further research should be conducted on the perfectly competitive and monopolistic markets to understand each environments impacts on an organization fully.

Reference

Thaler, R. H. (2016). Behavioral economics: Past, present, and future. American Economic Review, 106(7), 15771600.

Introduction

The economic transition that Asian countries made in the past four decades are a surprise to the global economy. For instance, China is ranked the second most attractive location for foreign direct investment (FDI), while India was ranked fifth in the 2013 FDI report. The observed escalating growth in Asia is brought by the political stability major part the region has experienced in the past four decades.

The stability has led to the continuous upgrading of its institutions and the enactment of macroeconomics stable policies (Worm 22). Most Asian governments have recently created a harmonious community with developed rural areas, healthcare, security, and education. Asia is also gradually changing from an authoritarian Communist regime towards a democratic one (OECD 236). Moreover, the current population in both Asian giants like China and India can provide for both foreign and local industries a stable quality labor force for about a century. There is a constant rise in the middle class in both China and India and it will increase spending on household goods, education, and healthcare services (OECD).

Trading in Asia

Trading in Asia has an equal number of challenges and opportunities. For example, Chinese economic strategies have at times conflicted with rules, norms, and institutional arrangements in the global economic order (Freeman, Lardy, and Mitchell 17). Its role in the global trade system is passive and sometimes disruptive. Presently China is experiencing a domestic backlash over the governments cooperation with foreign countries and international institutions.

The Chinese anti-globalization phenomenon explains to some extent the Chinese attitude toward the world economy (Freeman, Lardy, and Mitchell 17). One of the major challenges the emerging Asian giants face is the financial market volatility, brought by the predictability of tapering of the US quantitative easing (QE). Emerging economies like India that run large current account deficits are prone to capital outflows risks. In fact, India and Indonesia were the major cause of financial instability in the third quarter of 2013 (OED 25).

Carrefour Business Level Strategy

Carrefours business-level strategy depends on the three core values of freshness, variety, and low prices. Its prices are not only to give it a competitive advantage but also provide essential means for its survival. Carrefour promotes its products on a daily basis, with the catching line of refunding its customers if they would find cheaper prices elsewhere. The business has moved a notch high in providing shuttle services and playing fields for its customers. This strategy of treating their customers has made them ahead of their competitors (Hitt, Ireland, and Hoskisson 78). Carrefour respects the choice of its customers and provides them with a freedom of choice among the variety of commodities offered in its hypermarket.

Carrefour Global Level Strategy

In its entry in Asia, Carrefour relied on a small number of expatriates, with a wide knowledge of the local markets. Carrefour also applied a multiple store format as a part of Asian market entry. The company began by establishing the required infrastructures in its hypermarket beachheads. This strategy was to assist it to have joint ventures to help the company gain knowledge in the international markets (Spulber 238).

The company then used its partners infrastructures to set up hard discount stores and supermarkets. This strategy led to Carrefour cost economies, through a share in procurement, logistic, marketing, and other general activities. In China, Carrefour divided its activities into 4 regional markets to assist in addressing the differences in customer tastes and preferences (Spulber 238). The timing was another strategy is used. Carrefour entered the international markets, especially the Asian market before its competitors. Carrefour usually located their retail shops or chose sites situated at the center of large catchment areas.

This is different from its competitors choice of downtown sites. Carrefour reduces the cost of production by a third. Carrefour also reduces its price through its large economic scale. Its strategy of increasing the number of stores makes it surpass its competitors in the profit accrued.

Works Cited

Hitt, Michael, Duane Ireland and Robert E. Hoskisson. Strategic Management: Competitiveness and Globalization, Concepts. Mason: Cengage Learning, 2008. Print.

Freeman, Charles, Nicholas Lardy and Derek J Mitchell. Chinas Rise: Challenges and Opportunities, Danvers: Peterson Institute, 2009. Print.

OECD. Economic Outlook for Southeast Asia, China and India 2014 Beyond the Middle-Income Trap: Beyond the Middle-Income Trap, Paris: OECD, 2013. Print.

Spulber. Global Competitive Strategy, New York: Cambridge University Press, 2007. Print.

Worm, Verner. China: Business Opportunities in a Globalizing Economy, Portland: Copenhagen Business School Press, 2008. Print.

Introduction

The Kenyan economy is making an upward move after an economic basin in 2011 (The World Bank 3). According to recent statistics, the Kenyan economy recorded a 5 percent economic growth in 2012. The countrys economy is stabilizing due to a number of reasons.

These include a drop in interest rates, an increase in tourism, and a reduction in inflation. The prudent approach to stabilizing the economy is good news for international trade, especially with the bordering countries (Zepeda 1). In the past decade, Kenyas imports have recorded a steady increase as opposed to exports. This shows that the balance of trade for the country is not in its favor. To enhance the balance of trade, there is a need to make various changes to the trade barriers.

Analysis

The initiation of free interregional trade would be a prudent approach in stabilizing the Kenyan economy. To begin with, with a free interregional trade, the Kenyan economy stands to benefit. For instance, Kenya is a country that extensively depends on agriculture as an economic activity. Most Kenyans are involved in agriculture, which is a source of income for many families. However, most of the produce lacks a ready market.

This increases the losses incurred by these farmers, especially when dealing with perishable produce. However, with the enhancement of interregional trade, the market for these products will swell. This will give the farmers and people involved in agriculture an opportunity to sell their products over the borders. With a broader and ready market, the farmers and other producers will have an upper hand in making greater progress. As such, there will be a reduction in the losses incurred by the people involved in farming and agriculture.

The value of products and services increases when they are transported from one place to another. Apparently, the enhanced transport and infrastructure in Kenya is an encouragement to interregional trade between Kenya and its neighboring countries (Winston and Castellanos 1). As a result, the farmers will feel the importance of free trade, when they garner higher income from their occupation. This will enhance the economy of Kenya, as it will have a greater exchange of products to other countries. As a fact, this will be a relief to the Kenyan economy, as the balance of trade will improve.

According to the money exchange markets, the Kenyan shilling is relatively stronger when compared to the neighboring countries. Therefore, this will be an advantage to the Kenyan economy, as the superiority of the shilling will lead to better economic growth. In such instance, the farmers and producers will have a better bargain in the markets, as they will be trading goods at a higher rate when compared to a single market, where the shilling is standard. In addition to this, it is noted that the tax rates on the borders discourage people to indulge in trade.

For instance, when taxes are levied on the product, the farmers have to impose the costs on the consumers. This heightens the pricing of the products, which makes it hard to trade. Economically, when the prices of a commodity increase, the consumers will have to reduce the consumption rate. Therefore, when the taxes are retracted, the prices of the product will be stable. As such, consumers will have a higher amount of disposable income to spend on produce. As such, they will increase their consumption rate, since the pricing has reduced, when compared to the past.

Conclusion

In conclusion, the free interregional trade will be a prudent approach in ensuring Kenya has a great deal in enhancing the growth of the economy. The producers in the country are likely to exploit the new markets, which will lead to growth in the sale of produce. This will enhance the balance of trade, as the country will have increased the quantity of produce leaving the country. Therefore, it is prudent to enhance the free trade between Kenya and the neighboring countries.

Works Cited

The World Bank, Kenya Economic Update: Walking on a Tightrope. Rebalancing Kenyas economy with a special focus on regional integration. 2012. Web.

Winston, Shelley and Carolina Castellanos. Trade in East Africa. Finance and Development 48.4 (2011): 56. Print.

Zepeda, Eduardo. The Doha Round and Kenya: Good and Not So Good Lessons. Brazil: International Policy Centre for Inclusive Growth. 2010. Print.

Economics involves how human beings make decisions through comparing alternatives. Besides, it is divided into two; microeconomics and macroeconomics. Microeconomics focuses on an individuals action within the economy, while macroeconomics centers on the overall production, unemployment, inflation, and government deficits (Rice University, n.d.). The two complement each other to give an overall perspective on the economy. Moreover, there are many theories used to describe the economy. They include; the Keynesian, Capitalism, and Friedmanite. Keynes advocated for increased government expenditures and lower taxes to stimulate the economy (Koehn, 2011). In addition, Friedmanite believed in societys prosperity within free markets (The School of Life, 2014). Additionally, Adam Smiths economic theory focused on making the capitalist economy more useful and humane (The School of Life, 2014). He thought that the following factors would help accomplish Capitalism, including specialization of work, consumer capitalism, and education. This paper discusses the role of economic theories in the economy.

Adam Smith, the father of Capitalism, introduced capitalist ideas such as the division of labor and employee productivity. He put forward the proposal of a free market system with the government playing a minimal role in the economy (The School of Life, 2014). Additionally, Keynes argued that a government should deploy fiscal and monetary measures to help neutralize the effects of economic recessions and depressions through government expenditure (Koehn, 2011). Hayek argued in support of Capitalism and free markets as society was driven by innovation and entrepreneurship (The School of Life, 2014. These theories show the role of government in ensuring financial stability. However, the authorities intervention should be minimal so that the economy does not suffer actual inflation rates, leading to businesses bankruptcy. Free market capitalism is suitable for any economy. It allows the company to trade freely with little state interference and ensures no monopolies hence market equality and justice.

In conclusion, economic theories like Keynesian, Friedmanite, and Capitalism help solve a nations economic issues. However, the free market capitalism theory ensures all businesses stability and equal allocation for all companies under the same economic conditions with little government interference. Free market capitalism focuses on benefiting all individuals and should be adopted to reduce injustices and the vast wealth distribution gaps.

References

Koehn, N. (2011). The tale of the dueling economists. The New York Times.

Rice University. (n.d.). 1.2 microeconomics and macroeconomics  principles of economics. BCcampus Open Textbooks  Open Textbooks Adapted and Created by BC Faculty.

The School of Life. (2014). Political Theory An Inquiry into the Nature and Causes of the Wealth of the Nations by Adam Smith [Video]. YouTube.

Having worked in a privately-owned equity firm for five years before joining my family business recently, the global economic crisis has changed my perception in various matters relating to business, economics, and investment. The financial crisis started being felt in the year 2007. It has been commonly known as the credit crunch, the most significant recession since the 1930s, and other names. The most considerable trigger factor for it was the liquidity shortfall in the banking system of the United States of America. Many negative ramifications have been felt at the onset of the global financial crisis. The collapse of large institutions has been experienced, and the bailout of some of them was imminent. Stock markets experienced a nose-diving in their prices and their performance index hitting the lowest low. This could be attributed to the fact the focus was drawn from investment expenditure to consumption expenditure. Even as all these have come to pass, for me, and how I wish others to, vital lessons have been imprinted on my financial intellect.

Initially, I was of the opinion that it would call for low policies and a long period of time to bring down a critical business. Since then, though, my thinking has been changed. Failure of essential companies was witnessed as economic activity slackened. This included mostly those in the financial services sector as central banks had to be bailed out of the financial quagmires haunting them. The American dream called for people to stay in good houses, have good cars, have happy families, and live wealthily. In the quest to achieve this, mortgage companies went on a rave to sell-out houses with repayment due in awhile. As a business, I have learned that not every mortgage could be beneficial. In fact, several of them have significant shortcomings. As a firm, a proper evaluation of the mortgages and the terms thereof is essential to measure the actual long term effect on the sustainability of the business.

My attitude towards the capitalization of firms was also influenced. I have now got to a point where I do not necessarily look at firms success in terms of their capitalization but by the activity of the capital that is in place. Growing up for me was interesting as I would much desire to work with firms that had the highest equity standings in the market. However, the happenings of the global economic crisis have made me focus more on the return on equity as opposed to the level of equity as such. In our business, for example, we have got to a point where we have given much emphasis not on the level of our equity but on how much return our equity is able to offer.

On a grand scale, I had placed over-reliance on the financial institutions in terms of them providing me with financial advice. At the onset of the global economic crisis and the fall of several financial institutions, my perception of the accuracy of the data that they provide has begun being influenced in the negative. I no longer view them as the ultimate sources of my financial advice. Instead, currently, I juggle the information from research firms, economists, partners, friends, and other entrepreneurs about the trends in the market, where to invest, and when. This is a new position that I, together with my business, have taken following the happenings of the economic crisis and the fall of some of the financial institutions which in themselves are to provide this financial advice anyway.

My perception of the stock market was that it was one with the lowest risk profiles and risk-averse investors need to consider it any day. However, at the onset of the meltdown, it hit me that it was equally a loss bound market, and significant for that matter. This perception that I did build was informed by the lowered investor confidence in the stock market and the resulting flight of capital from the market.

Our business was previously going in for loans and other financial instruments with very lax requirements. This is not to say that currently, we do opt for those financial instruments that are so stringent but that my perception of stringency in terms of offering credit has been changed. As a firm, we have to vet properly all the applicants who need items on credit from us. We currently, to a great extent, look at the capacity and collateral that our customers offer before we can get into credit arrangements with them. The view is two way. We also do not simply jump into credit facilities because the restrictions appear to b bearable. Instead, the hidden, unseen ramifications of our facilities are informing our credit borrowing. This was reinforced by the fact that between 2001 and 2003, the rates of interest had been lowered from 6.5% to 1.0%. This was a contributor to the economic crisis.

From my economics point of view, my perception was that by lowering the rates of interest, it would be possible to attract more borrowing and hence investments that are bound to expand the level of growth of the economy. I used to relate to the prices that our firm does offer. A lowering of prices would attract more customers and hence a heightened activity in our business. This, however, is not the case anymore. This is because the occurrence of the economic crisis led to a decline in the rates of interest with a significant focus on reducing deflation. This was later not to happen and consequently changed my perception about lowering the prices of my products. I now have to be absolutely sure, having carried out market research, that by my lowering of prices, automatically, sales revenues will hike.

My perception of external sources of finance for an organization has been influenced. I currently do not advocate so painstakingly for external sources of finance for the business. This is because, during the economic crisis, there was a growing deficit in the current account of the US balance of payments. The Americans went ahead to borrow much from abroad, and this caused the bond prices domestically to rise. This, in effect, led to the interest rates sky rocketing. I now feel that in as much as offshore borrowing has advantages to it, proper consideration has to be accorded to domestic lending first. As an institution, I try much to focus on the internal source of finance first before getting into the other external sources of finance. Lately, for example, I consider plowing back of profits to be more convenient than entering in a finance lease as a source of finance. As a business, I got to realize that stringency in according credit could well imply that the loan is not as bad as it seems. This stringency is meant to ensure stability in the financial institutions and the economy at large, which in essence affects me as a small business entity.

My perception of credit sales seems to be undergoing an overhaul after the happenings of the global economic crisis. This is because subprime lending is a significant contributor to the global financial crisis. More mortgages and loans were given out to persons who had a poor credit rating. As a firm, I find it challenging to be totally sure who is creditworthy in the firm and who is not. The rate of default in the products sold on credit may make me suffer much more than the benefits that I am to get from the credit offer. As a firm, instead of using resources to expand, my perception is that I will be incurring much to cover up for the cases in default. My previous thinking was that as more loans are given out, investments are bound to grow further and hence the growth of the economy. However, the lending, as I now view it, should be given selectively to firms that are able to not only repay but also put the funds to fair use.

My attitude towards business partners, customers, and other stakeholders in business has changed since then. Trust is essential in place, but currently, I think care before trust is also vital. One previous trading with a partner should not warrant me to accord them my utmost faith as it were. This is because another cause of the global financial crisis, which at great length started in America, was increased predatory lending. These loans would state that the rates of interest would be 1% but, in essence, be made adjustable. The results of such rates were that the loans would be overpaid. This was majorly carried out by unscrupulous businesses. With this knowledge, it just hit me that not every company out on the street, offering attractive rates on loans should be approached. As I lay down my capital structure planning, I will only focus on reputable institutions that have been rated and recommended by at least a firm of my caliber.

Dynamicity in an institution is quite essential. This is a lesson I have learned thanks to the causes of the global economic crisis. During the periods when the effects were beginning to be felt, the regulatory framework was so sluggish and could not keep up with the pace at which financial innovation was moving. Currently, as an individual, I believe that one needs to continually look at what environment I am surrounding them analyze how well they can cope in the background without having to suffer much in the course of life. This is the same case for the organization. My view is that they each need to have a center of research that will continuously keep in check movements in the macro and micro constituents of the environment. Although I initially knew that proactively establishing policies and regulatory frameworks in an organization is essential, the magnitude of the systems had not been keenly reflected. Wrong policies have the effect of causing a ripple down impact on all aspects of the organization.

My personal perception of financing has also been affected. I feel that households need to keenly approach their consumption. Families need to focus more on investment consumption, even if they do have white-collar jobs. In America currently, the consumption trends are veered towards commodities that are not able to produce other goods or services. My view is that if each household could identify an investment opportunity, invest in it, spend five years growing it, then find total financial freedom after that, that would be better compared to the current trends. Households are not willing to forgo current consumption for future incomes. They instead do this and end up in much debt. This was one feature of the housing bubble in the global economic crisis.

Thinking about it, these houses were not being used for the production of other goods and services, and therefore the point is that the economy remains at less than full employment. Financial innovation, which refers to the development of new financial products, which are meant to increase the diversity of investments, was also to blame for the global economic crisis. Examples of these innovations include adjustable rate mortgages, subprime mortgages, and credit fault swaps were examples of such designs that resulted in the situation. The negative repercussions caused by the innovations have caused a mind to change in me. Initially, I was of the opinion that inventions have to be taken up by organizations for prosperity. Later I have come to the understanding that innovations need to be approached with caution.

Lately, I was thinking about venturing into online trading of currencies. This was because a friend told me that it could make up to a thousand dollars in a day. On second thought, I remembered the happenings of the global economic crisis. One other cause of the crunch was the incorrect pricing of risk. I thought about the danger posed for me to get these thousand dollars and tried to price it. There was a possibility I could also lose a thousand dollars in a day. That sealed it for me. I was not going to venture into it anyway. Prior to the economic crisis, participants in the market did not aptly measure the risk attached to several financial instruments and therefore linked the wrong levels of interest rates. AIG represents one of such firms that did insure debts held by other institutions whilst utilizing credit swaps. Unfortunately, the firm had not attached the correct levels of risk to such a venture; hence the hit it faced due to high default rates. My risk pricing attitudes have changed since then. The insurance concept had also changed when I realized that the vulnerability of insurance companies to bankruptcy was not as far fetched as I used to perceive it.

My personal attitude towards economic forecasting has just changed, like my attitude towards weather forecasting changed several years ago. Who is telling the truth and who is not? This is the big question to be answered. I currently feel that much of the forecasts that we have are so subjective with hidden agendas behind them. Some people are most likely to give projections with speculative motives behind them so that they could benefit from the gains arising. My renewed view of points was facilitated by the poor economic forecasting that was also blamed for the financial crisis. Varying arguments about the recession were brought about by the heterodox economists. On the other hand, the mainstream economists could not predict it; they simply spoke of a great moderation happening. This aspect has made me view business prospects in a different light. Not all the economists projections are close to reality. I have come to believe that all considerations brought about by all the staff that is involved in the firm should be placed into care.

In conclusion, the happenings of the global economic crisis to be have brought invaluable insights that I would forever live to appreciate. As a business person, I believe that the management of my business will call for the utilization of all the available information in the market and other sources like the sources and effects of the global economic crisis. I also believe that for an economy to develop, it takes a sum total of all the practices by the firms that constitute the economy. Lessons that we learned from the crunch should help us together with the generations to come to avoid reckless ways that could well bring the globe to depression, let alone a recession.

Introduction

In December 2020, economists were predicting that there would be a huge decline in GDP in early-2021. This was based on the surging numbers of new COVID-19 infections. Nonetheless, economic stability was observed in January and February, and this has in part been propelled by significant consumer spending. This is a mark of confidence that has been imbued by the governmental relief aid, the noteworthy decline in new daily COVID-19 cases, and the rollout of the vaccines (Davidson). Herd immunity is expected to have occurred by mid-2021, and governments at all levels will have lifted most of the restrictions.

A significant number of economists expect as much as 7% economic growth in 2021. This is unprecedented as it never even happened following the Great Recession of 2007 to 2009. The massive stimulus packages are believed to have helped in boosting spending. Together, the $900 billion packages that were passed in December and the new $1.9 trillion one will ultimately result in Americans having $1.5 trillion to spend. So far, remarkable spending on cars, clothing, appliances, and the future has been witnessed. The overall sales for January 2021 rose by 5.3% (Davidson). If the trend continues, experts suggest that the gross domestic output will be a lot bigger than it would have been the case without the COVID-19 pandemic.

The daily cases of new COVID-19 infections declined from an average of 250,000 in January to 68,000 by mid-February. This translated into a reduced number of hospitalizations throughout the country. The positive news had an effect on peoples behavior, particularly because they also had money to spend. They were emboldened to visit eateries and other retail outlets, and indeed, a number of states and cities have been prompted to ease the restrictions. Bars and restaurants had an average revenue increase of 6.9% in January. This trend will continue because, like Morgan Stanley, the disposable finances will have increased to $2 trillion by March (Davidson). In essence, decreased fear, access to money, and eased governmental restrictions are bound to spur growth.

Gregory Daco indicates that there are challenges ahead, and these include the long-lasting effects of lost businesses, unemployment, and the possibility of people dropping out of the labor force completely. Individuals, private establishments, and governments have a role to play in facilitating job creation in new fields and spheres. There should be federal assistance targeting a broad range of areas (Davidson). Research on vaccines and medication should continue, especially to counter the new contagious virus variants being reported.

Impacts of Article

Introduction

At the time when the first human case of COVID-19 was reported in December 2019, its social, political, financial, and economic impacts were unknown. The negative consequences became apparent as the disease started spreading throughout the world. During the initial stages, and considering that it was an unknown disease, with no vaccine and reliable medication lacked, there was significant panic across the world. Individuals started isolating themselves even before governments instituted lockdowns and other measures to limit intermingling. Indeed, they were looking up to their governments to provide pertinent information on how they could keep themselves, relatives, and friends safe.

Although they were acting in good faith, some governments sought to reassure their citizens that the outbreak was manageable. That was not really the case at the time, as there was a need to undertake in-depth research studies to understand the disease. Valuable time and opportunities were lost in early 2020 because the need for testing and contact tracing were largely ignored. The confidence that people had in their governments ability to handle the challenge waned as it became a full-blown pandemic. With time, there was a lot of skepticism as to whether the economy will ever recover and if normality will resume. According to Davidson, experts had expected challenges to worsen in 2021. This article, therefore, makes the audience hopeful that recovery is likely to happen soon.

Social Perspective

Risk perception had already caused a significant change in peoples social life, and this was before governments-imposed restrictions. Individuals started showing reluctance to mingle as freely as they did before December 2019, and this is understandable, bearing in mind that physical proximity increases the risk of transmitting the disease. Corona-phobia has led to a remarkable impairment to daily life, with many people showing signs of crowd anxiety (Davidson). Sharing physical spaces, particularly with strangers, is a matter of concern, and some have preferred isolation to endanger themselves.

The subsequent lockdowns have meant that individuals cannot meet and socialize with their friends, that is, even if they believed they could take the necessary precautions. Consequently, restrictions result in mental and psychological distress, a scenario that will have long-term consequences. For example, it has been noted that some of the people who were vibrant, innately motivated, and ambitious are no longer willing to remain as part of the labor force. Hesitation is even more pronounced for those required to acquire new skills and to start recently developed careers.

Apparently, the upheaval triggered by COVID-19 has made individuals become pessimistic about life itself. A significant number of them feel as if they must relearn everything they thought they knew. Such a person may not be as socially and emotionally balanced as they were before the pandemic started. The sentiments of Davidson are encouraging, and those who contemplate them are likely to be inspired to start perceiving life positively again. In essence, there is hope, and the government has indicated its willingness to help the citizens persevere in the challenge.

Political Perspective

Just as COVID-19 has disrupted individuals social life, it has disturbed their political views as well. First of all, leaders at all levels of government were and are still being blamed for mishandling the crisis. Some of the accusations are true, although others are caused and/or heightened by frustrations. Moreover, the anxiety has made people fiery, and this is particularly when it is compounded by lockdowns. For example, when those who had lost their jobs were told over and over again that the government was to blame, they were convinced. The vaccines had not been developed, and hence there was considerable uncertainty as to when millions of struggling Americans would be gainfully employed again.

At a time of crisis, people tend to look for leaders who would make decisive changes. A significant number of Americans did not see that in their current leaders, and besides, there was hostility between the Trump administration and the media. The continuously negative media reports firmly established the view that the federal government had not just failed but also lacked a plan to bring the society back to normality. This was depressing, and Americans felt helpless because COVID-19 had affected them personally (Davidson). Having relatives, friends, and neighbors who had lost their lives and others without the means of livelihood made the experiences personal. Changes in leadership were conceivable, and it is probable that the Democrats won the Presidency, the House of Representatives, and the Senate because the Americans believed the Republicans had let them down.

Financial Perspective

With over 20 million people out of work at the height of the crisis, Americans were facing serious financial challenges. Roughly a third of all citizens maintain no savings, and hence any emergency always leaves them in a vulnerable situation. Therefore, the COVID-19 pandemic has been particularly derailing for those who were already struggling with low wages before the crisis. Indeed, this is why experts argue that the inequality was exacerbated. There had been a lot of anxiety when it appeared as if the problem would last at least until 2023. Nevertheless, Davidson argues that the current indicators depict a different scenario, and this is because recovery is expected in 2021 (Davidson). This momentum is noteworthy because when the crisis happens, it often takes several years (sometimes even decades) to reach the pre-disaster levels.

The stimulus packages, unemployment benefits for millions of Americans, and increased federal supplements have led to trillions of dollars being availed to individuals across the country. They are now confident about spending this money, and with views such as those expressed by Davidson, people can be hopeful that there will be numerous job openings in 2021 and beyond. Indeed, fast growth is being predicted, and economists also indicate the likelihood of employers increasing the wages in order to attract qualified personnel. This development will mean that Americans will be empowered to meet not just the basics but also other things they may want. Individuals and families can now make plans for the future with the belief that they can afford to meet those objectives.

Economic Perspective

Although economists have predicted an economic recovery and a high growth rate, some argue that it could trigger a recession. This is in part due to the amount of money the government is availing to the citizens and the high wages companies are likely to start paying when job opportunities increase. It is noteworthy that the rate of unemployment is falling in an unprecedented degree (Davidson). People could be employed and earning wages higher than was the case before the crisis and still not be in a position to secure their needs.

Economists insist that the government should continue offering more stimulus packages. Gregory Daco argues that, indeed, about $2 trillion should be allocated to long-term spending on not just the areas which have been most affected by the pandemic but also on climate change and infrastructure as well (Davidson). The argument has a credible basis because the stakeholders are not trying to simply return to the situation as it was before December 2019. Besides, the world will be transformed by the pandemic, and for example, some jobs will disappear as others are emerging. Considering that America is a capitalist economy, and it is difficult to tell what those new jobs will entail, it is imperative to spur economic growth through infrastructural development.

Just like is the case with the other stakeholders, the government has a role to play in sustaining economic growth. Davidson suggests that the government is able and willing to step in with federal assistance, particularly for those who wish to shift their career lines. This is important as some of the jobs may never be recovered. Economies around the world are undergoing transformation, and Americans must not spend resources, time, and effort trying to return to the traditional model.

Conclusions and Recommendations

Conclusions

The initial predictions were that the social and economic derailments caused by COVID-19 would continue, at least for a few years. Indeed, economists hardly expected that a significant recovery would be achieved in 2021. Nonetheless, the situation has changed a lot quicker than it was anticipated. Davidson argues that in a few months, it is probable to have economic growth, which is higher than it would have been the case had the pandemic never occurred. Nonetheless, this success will have been achieved as a result of the governmental efforts to lessen the impact of the crisis. Americans are now hopeful about the future even though some traditional aspects of life and work may change, particularly with the emergence of new careers.

There have been two stimulus packages already, and more initiatives are being planned still. It has been determined that these measures are important, especially considering that millions of Americans have been out of work for a significant period of time. The governments effort to facilitate them with a means of livelihood is imperative. Authorities have started to ease the lockdowns, and this is informed by the fact that vaccines have been developed and they are being rolled out successfully (Davidson). The infection rate is also declining, and Americans are confident about venturing outside. This trend will help restaurants and other businesses to increase their sales. Therefore, it seems likely that a sense of social and economic normality will resume in 2021.

Recommendations

The government should continue supporting the citizens and private businesses until the crisis is resolved. If this is not the case, a significant number of Americans may suffer from depression and anxiety, and their social lives, as well as the capacity to work, could be compromised. The citizens should always be convinced that the government cares about them and that those in authority are doing everything possible to cushion them from the setback.

The government and those in positions of influence should continue to encourage the citizens to get vaccinated. This process will accelerate herd immunity and make it possible to lift almost all restrictions. The length of time it takes for Americans to get inoculated is directly proportional to the duration that will elapse before it is safe to resume normal day-to-day activities. Everyone should understand that it is mutually beneficial to undergo this process as soon as possible.

A significant number of Americans are hesitant about changing their careers, and particularly so due to the way the current crisis has been depressing. Nevertheless, changes are bound to happen, and it is erroneous to resist rather than embrace them. There is a need for federal assistance, and other stakeholders with resources and know-how ought to offer their assistance. If all parties work harmoniously, the economic, financial, political, and social impact of the pandemic would be mitigated.

Works Cited

Davidson, Paul. Remarkable outcome: Big gains are likely for the economy this year even as COVID-19 damage lingers. USA Today, Web.

Introduction

The Federal Republic of Nigeria is a country located in the western part of the African Continent. It borders Niger to the North, Cameroon to the East, and Benin to the West, and its capital is located at Abuja. Lagos City is the most populous city not only in Nigeria but also in Africa. Nigeria is the most populated country in Africa and the seventh most populous country in the whole world. Its population is estimated at approximately 206 million inhabitants as of 2019 (Falola et al., 2020). The paper is going to tackle the economic evolution and the current economic status of Nigeria.

Country Overview

Agriculture is one of the main contributors to the countrys economy. Among the food crops produced in Nigeria are yams, yataro, and cassava as the primary food crops in the South, and sorghum, millet, cowpeas, and maize in the North. Rice is an important staple food for most Nigerians. Palm trees and rubber trees in the South, and peanuts, cacao trees, and cotton in the North are the cash crops produced in Nigeria. These cash crops are exported to foreign countries, and the revenue obtained from them facilitates economic growth.

The country also has several industries, both modern and traditional, that contribute to the economy. The modern industries in Nigeria include steel mills, pulp and paper mills, petrochemical plants, and aluminum smelters (Oburota & Ifere, 2017). These industries are an addition to existing industrial sectors, such as tourism, textile, tobacco, beverages, and cement industries, controlled by foreign investors. All these industries contribute immensely to the economy of Nigeria.

There is a significant disparity between the rich and the poor regarding income and wealth distribution in Nigeria. According to Oxfam, the five wealthiest Nigerians, including the richest man in Africa, Aliko Dangote, have a combined US $ 29.9 billion wealth (Ndubuisi, 2017). However, 40% of Nigerians (approximately 83 million) live on less than a dollar a day. Furthermore, the countrys PPP GDP has tripled from the US $ 175 million in 2003 to the US $ 630 million in 2018 (Ndubuisi, 2017). This shows how the economy of Nigeria has grown with time.

Political History

The Federal Republic of Nigeria was a British colony that gained its independence on October 1, 1960. Two Nigerian freedom fighters led the independence movement. These two were Nnamdi Azikiwe as the President and Abubakar Balewa as the Prime minister (Israel & Okpalaeke, 2017). The independent country achieved its full status as a Republic on October 1, 1963. After a brief period of happiness resulting from the independence, Nigeria started manifesting the weaknesses it had as a country (Israel & Okpalaeke, 2017). There were constant conflicts and mistrust among major ethnic groups in Nigeria motivated by ethnic competition, inequality in education, and economic inequalities.

There were attempts to unite the conflicting regions to form a unitary government, but they all failed. In 1967, Eastern Nigeria under General Ojukwu decided to secede and form the sovereign republic of Biafra (Onuoha, 2018). This marked the beginning of a civil war that ended briefly in 1975 with the overthrow of Gowons Government and General Murtala Mohammed Governments installation, which brought reforms. The two most dominant political parties are the Peoples Democratic Party (PDP) and All Progressive Congress (APC) (Igwe, & Amadi, 2021). APC is a coalition of political parties that came together to remove PDP from power (Sule, Sani & Mat, 2018). Furthermore, the Nigerian Government legislated the Land Use Act of 1978 to ensure land accessibility to all farmers. However, many reforms in the act are yet to be implemented.

Economic History

Nigeria has always depended on petroleum and natural gas as the primary source of revenue for the Government. In the 1970s, petroleum contributed 87% of the countrys export and 77% of the Governments revenue (Matemilola, 2017). Currently, 40% of Nigerians live below the poverty level as the agricultural sector remains in crisis (Akindola & Ehinomen, 2017). The main currency used in Nigeria is the Naira which the Central Bank of Nigeria issues. The currency has been devalued severally since 1980. The countrys main exports include crude oil, cocoa beans, and rubber to the European Union countries, India, and the US (Ndubuisi, 2017). In contrast, the main imports are automobile, textile, paper products, chemicals, and food from the US, China, and the EU (Matemilola, 2017). Thus, the Nigerian economic history is characterized by diverse players which contribute to its current state.

The Current State of the Economy

The countrys economy is affected by several challenges in its growth. These challenges include inadequate infrastructure, insufficient power generation and supply, and over-reliance on petroleum for government revenue. The Nigerian economy is also burdened by an enormous foreign debt that requires millions of dollars to service. The Government has introduced customs regulations to encourage economic growth in the country by emphasizing locally produced goods (Ogunleye et al., 2018). Three foreign countries are interested and involved in the economic affairs of Nigeria. These are the United States, China, and, to a lesser extent, Russia, which is interested in its nuclear energy (Sertoglu et al., 2017). Therefore, it is crucial to note that various foreign countries have expressed their interests towards Nigeria.

Economic Growth

Nigerias economy has been growing considerably since the installation of the civilian government in the mid-1990s. However, despite economic growth, the wealth distribution is unequal as only a few individuals control an outstanding share of the economy (Nyoni & Bonga, 2018). While the proportion of poor Nigerians has decreased slightly, the population has grown by 54.3% since 1970 (Olayungbo, 2019). This population increase has led to the rise in people living below the poverty levels (Dauda, 2017). Thus, it is important to note that the Nigerian economy has grown considerably over the past few decades.

Recommendations for the Government

The government of Nigeria can take specific strategies and policies to help it ensure economic growth and equal income and wealth distribution among its citizens. Firstly, the government can work on the diversification of the economy. This will help the country prosper economically, even during instances where the oil prices decline. Secondly, the government can enhance its security to attract more investors. The threat of security by the Boko Haram militia has threatened several potential private investors from investing in Nigeria (Ighobor, 2018). Lastly, the government can develop the right monetary policies to ensure easy accessibility to credit facilities for small and medium enterprises.

The Road Ahead

There needs to be a significant change in behavior of the various foreign powers interested in Nigeria. First, they need to avoid giving aid to the country with some demands guaranteed to the aids. They should also reduce their active involvement in the countrys economic affairs as it has led to a deeply divided country. They should make their intentions right and work towards alleviating poverty among the poor Nigerians. When these countries adopt these new behaviors, there will be a positive change in their economic growth and citizens living standards.

I expect the population of Nigeria to grow more than it is right now. There may be approximately 242 million inhabitants by the year 2030, and the poverty levels may also rise by around 7%. This is because the growth in the economy is not tantamount to poverty eradication, as highlighted above. Consequently, I hope that the Nigerian government will diversify its economy, improve its security and infrastructure, and develop viable monetary policies. This will help in the development of the economy and the eradication of poverty in the country.

Conclusion

The economy of Nigeria has grown over the past decades and emerged as the largest economy in Africa. This has been motivated by several factors, such as privatizing formerly state-owned corporations and private and foreign investments. Consequently, petroleum has been the most significant contributor to the countrys economic growth. However, issues like insecurity, inadequate infrastructure, and unemployment have impeded the development of its economy in the past few decades. Solutions to these challenges include creating employment opportunities for the youths who are the majority, improvement of infrastructure, and enhancing security.

References

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