The gap between the rich and the poor had its beginning with the initiation of industrialisation. The acceleration of development of rich countries has resulted from the capacity to have imperial states. It is from this state of affairs that England has grown to be a super power while Asia and Africa are now reduced to producers of raw materials and markets of final products.
The economic inequality is as old as globalisation. The historical studies on this aspect of development indicate a relation between globalisation and disparity. This is shown by the lack of trend in economic disparity in the pre-globalisation period and the acceleration of disparity during and after globalisation. Globalisation is synonymous with economic liberalisation. The economic liberalisation that results from globalisation subjects economies to stronger and more intense market forces. It is imperative to note that in a highly competitive global market, weaker economies lose in competition and therefore experience decline of the economic progress.
The negative consequences of globalisation were not anticipated at its inception. Policy makers did not consider the possible inequality that would result from globalisation. The trend of growth of inequality has risen since the late 1800s when globalisation began. The rise in inequality has evidently been a threat to poverty reduction targets. This has necessitated the call for more adept pro-growth policies to help save the falling economies.
There is also the divergence of sources of inequality from usual sources with the new causes being linked more to the globalisation of world economies. The persistent nature of inequality has hampered poverty eradication measures. Causes of inequality being evident in Asia and Africa are identified as products of economic liberalisation. The economic reform policies made by Asian, India and Arab economies are their own undoing and the main course of their debilitated state.
The inequality that results from globalisation is more intense when comparing inter-country inequality with intra-country inequality. I am of the opinion that globalisation has different effects for intra-country inequality, which depends on the dimension of globalisation involved. The impacts also depend on the changes in policy that the countries make in acceptance to globalisation. In Asian and Arab economies, particularly after the Second World War, inequality accelerated because of the non-democracy, inferior education systems, and violent government institutions. The quality of governance varies in systematic ways. The European countries have better governments than Asian countries do. They are therefore more strategically ready to counter the negative effects of globalisation.
Currently, the trend of inequality is on the decline as more financial and commercial integration is endorsed. The stabilising role of governmental innovations has had a positive effect on reversing inequality with continued globalisation. In the case of smaller and lower income economy as most of African states, the threat of inequality is still real. This is mainly caused by natural causes, such as natural calamities, or by poor governance of these states and to a less extent by globalisation.
In conclusion, it is fair to state that globalisation and economic inequality are perceptibly related. Increased globalisation results into increased inequality. Globalisation has resulted in inter-country inequality but its impact on intra-country and income inequality is still questionable. Other causes of inequality are non-democratic governance, poor education policies and violence. Before, during and after globalisation, this difference in economic trend indicates the change in economic patterns of the world.
The present-day Lithuania is facing serious economic issues. The economy of the country is in a poor state and Lithuania also has to deal with the issues concerning emigration due to the economic problems. People have few education and job opportunities and they eagerly leave the country to pursue their life goals. There is extensive research on the matter. Many officials, researchers and educators have been discussing the issue, though there are still few (or even no) appropriate solutions to the existing problem. It is necessary to analyze major aspects of Lithuanians life to come up with the effective solutions.
Of course, it is crucial to look back and learn more about the countrys past. Lithuania faced a number of really serious challenges in the past. For instance, two of the most difficult periods (which have certain impact on the state even now) are the World War II and the Soviet rule which can be regarded as causes of the contemporary issues the country has to face.1 Snyder provides quite a detailed analysis of the events which took place decades ago, but still affect the contemporary Lithuania. Suziedelis provides a list of the most meaningful events in the history of the country, though analysis of these events and their significance is absent.2 However, the source is valuable as it helps focus on the events which have impact on the country. It can also help identify causes of the existing issues.
As for the existing issues, many researchers concentrate on the economic constraints of the country. For instance, Gibait-Kud~mien provides specific data which reveal the negative trends in the countrys economy.3 Admittedly, poor condition of Lithuanian economy can be regarded as one of the major reasons for emigration which has become quite an alarming trend.4 Reportedly, many Lithuanians are forced to move to other countries to get more opportunities. Many skilled professionals work as unskilled workers which is still better for them than working in Lithuania.5 It is also necessary to note that emigration has become a way out for many young people who tend to study abroad.6 Thus, the major aspects of the issue have been revealed.
It is necessary to note that existing works on the matter provide an in-depth analysis of the problem. The sources mentioned above add certain data and reveal different facets of the problem. The problem can be analyzed from the historical perspective and possible causes of the issues can be found. However, it is important to state that the available sources only focus on specific facts and do not provide a consistent analysis. The causes of the poor economic situation in the country are still in the air, so to speak.
Therefore, there is certain gap to be filled. It is essential to analyze available data to identify the roots of the contemporary economic constraints. It is necessary to identify real causes of the economic stagnation in the country. Admittedly, the world financial crisis did affect Lithuania immensely. Nonetheless, the countrys inability to cope with economic constraints and overcome the crisis cannot be explained by the aftermaths of the crisis. It is possible to look at the peoples mindset to understand why Lithuanians prefer leaving the country. It is also necessary to provide a proper analysis of the governments actions to identify erroneous policies which have led to the present situation in the country.
This memo explores the economic structure of Egypt and its composition. It also highlights the major economic sectors and their contribution to the Gross Domestic Product. Over and above, the memo gives figures of the macro-economic indicators in the recent years. Finally, the memo touches on the composition of Egypts imports and its trading volumes with the United States.
Egypt is a Muslim country found in the Horn of Africa. It is largely a semi-arid country though it is endowed with some very precious natural resources including oil and gold. Over the past few years, Egypt has been enjoying relatively stable economy with economic growth rate ranging between 4% and 5%.
Despite the recent political upheavals, Egypts economic structure remained relatively unshaken. Due to the strong manufacturing and service sector coupled with good government policies, Egypts economy is among the best performing in Africa and the Middle East. Egypt is a mixed economy with both the private and public sectors playing significant roles in the development of the economy.
Initially, agriculture constituted the largest sector in the economy of Egypt. Almost 90% of the countrys labor force was working in the agricultural sector until late 1960s.
However, in the 1970s the significance of agricultural sector in the economy of Egypt decreased drastically despite efforts that were directed at reviving the sector. In the year 2010 agricultural sector contributed a mere 13.1% to the Gross domestic product (GDP) compared to 87% in the 1960s (Sriramesh & Vercic, 2012). This has been attributed to the rapid expansion of the industrial sector, and the fact that less attention was paid to the sector by the government.
It should be noted that though Egypt has fertile soils, it lacks enough rainfall which makes the agricultural sector highly dependent on irrigation. Water for irrigation is harnesses from the rivers that have their sources in different countries, mostly Eastern Africa Countries. On the same note, the soils are highly saline which limits the quantities of agricultural produce. Egypt has highly invested in irrigation majorly the production of cotton for a very long time now.
In addition to cotton, Egypt also produces wheat, fruits, vegetables, rice, sugarcane and corn (Al-Din & El-Din, 2008). The agricultural sector is highly regulated and the government ensures that water for irrigation is used effectively. In addition, the government has the role of ensuring that food crops are also incorporated in irrigation schemes. Similarly, due to reforms that have been instituted by the government, disparity between local and international prices has been reduced.
On the other hand, the industrial sector plays a very crucial role in the modern Egypt. It should be noted that the industrial sector is very vital in Egypt and employs around 17% of the total workforce according to 2010 statistics (Sriramesh & Vercic, 2012).
To begin with, availability of oil has highly helped Egypt to build many industries which are employing a lot of people compared to the agricultural sector of the economy. Egypt manufactures automobiles which it exports to various countries both in Africa and the Arabic world. The sector has been growing steadily and has attracted foreign investors who partner with local firms thus increasing production.
On the same note, Egypt is among the largest producers of chemicals and fertilizers in the Middle East (Ahmed, 2001). Chemical production can be traced back to the 1970s, and has continued to grow significantly since that time.
Apart from the chemical and automobile manufacturing, Egypt has steel, electronic and domestic appliances industries, oil extraction and refinery factories as well as building and construction. The contribution of the industrial sector to the economy has also been increasing since the 1980s being 37% in 2010 (Sriramesh & Vercic, 2012).
On the other hand, the service sector has grown to be the highest contributor to the gross domestic product in recent years. Egypt has numerous tourism attraction sites which include the historical sites and good beaches that are well maintained earning the country a substantial income.
On the same note, the banking sector has also advanced due to liberations that were instituted by the government which modernized the banking system. Communication and information technology are also well advanced. Averagely the service sector contributes more than 48% to the national economy and employs slightly more than half of the total work force (Farah, 2009).
Egypt has a vibrant economy which is growing rapidly at around 5.3% per annum as per the statistics of 2011 (Sriramesh & Vercic, 2012). Additionally, the country has a huge population which was 78.238 million in 2010 and is growing at a significant rate making the countrys market capacity continue to expand (Sriramesh & Vercic, 2012).
However, the country is struggling with high rates of unemployment which stood at 9.7% before the political uprising. However, this figure rose to around 11.9% due to the political instability that was caused by the uprising (Sriramesh & Vercic, 2012). Like most countries, Egypts economy is operating on a current account deficit. In 2010 it had a revenue collection of $46.82 billion with a fiscal expenditure amounting to $64.19 billion yielding a budget deficit of $17.37 billion (Sriramesh & Vercic, 2012).
On the investments front, Egypt has one of the most dominant security markets in the North African region. In 2003 the Egyptian government increased its interest rates to counter the problem of foreign currency deficits. Unfortunately, private investment shrank warranting the introduction of a radical fiscal policy, and the government instituted pay cuts by nearly half.
In order to increase the disposable income of people and spur investment, a new tax law was rolled out in 2005 reducing the tax rate on income from 40% to 20% (Farah, 2009). In a nutshell, Egypt has made amendments in its laws in a bid to comply with international standards of doing business. By and large, this has made Foreign Direct investments conducive in Egypt enabling multi-national companies tap into the ever growing market in North Africa.
Egypt trades heavily with foreign countries, the United States being one of them. Foodstuff is one of the major imports of Egypt together with machinery, chemicals, wood products and fuels. Due to the fact that Egypt is a semi arid area coupled with the tendency of concentrating on cash crops by many irrigation schemes, a number of foodstuff are imported.
Currently, the United States of America is the largest trading partner of Egypt. The largest quantity of wheat and corn imports into Egypt comes from the United States. On the same note, Egypt also exports petroleum products, cotton and textile among other goods to the US. In the year 2009, the United States purchased 7.95% of Egypts exports while 9.92% of Egypts imports came from the US (Al-Din & El-Din, 2008).
Besides other commodities, Egypt imports most of its agricultural commodities due to the limitations on the volume of agricultural production. In this regard, milk and dairy products are also imported given that the local industry cannot produce enough milk to satisfy the entire population. Given the rate at which population is increasing, Egypt will require even higher quantities of dairy products. Currently, Egypt imports up to 900,000 tons of milk from different countries (Sriramesh & Vercic, 2012).
Arguably, despite the civil unrest that engulfed countries within the Middle East and its borders, Egypt is a country with fairly sound macro-economical policies that promote trade and investment.
Moreover, with surpluses that multi-national companies make, it has become increasingly important for firms to tap into foreign markets so as to increase their profit margins. In this regard, Egypt offers a very lucrative market for would be investors because it boasts good infrastructural support, an active service sector and a receptive consumer base.
References
Ahmed, A. U. (2001). The Egypt Food Subsidy System: Structure, Performance, and Options for Reform. Washington: International Food Policy Research Institution.
Al-Din, H. K., & El-Din, H. K. (2008). The Egyptian Economy: Current Challenges and Future Prospects. Cairo: American University in Cairo Press.
Farah, N. R. (2009). Egypts Political Economy: Power Relations in Development. Cairo: American University in Cairo Press.
Sriramesh, K., & Vercic, D. (2012). The Global Public Relations Handbook, Revised Edition. New York: Taylor and Francis.
Multinational organisations (MNCs) are big global companies that have a market presence in many parts of the world. The two main factors that distinguish these companies from other companies are their centrally controlled operations and their huge global presence (Jenkins 1987). Globalisation has recently brought a lot of attention to the role of multinational companies in the world economy. This attention emerged in the 1960s when different economies around the world started to experience increased foreign direct investment (FDI) flows from MNCs. Critics and proponents of globalisation have argued for (and against) the impact of these MNCs in the world economy (Drew 1995).
Critics say these companies have had a negative impact on their host economies, while proponents of globalisation say they have had a positive impact on the same (Held et al. 1999). After evaluating the merits of both arguments, this paper argues that MNCs have a more positive (than negative) impact on global economies. Evidence of this claim comes from the impact of these MNCs on wages, market structures, and foreign trade balances of national economies. This paper explains these indicators by analysing the effects of the companies on three economic indicators FDI inflows, wage rates, and technological development.
FDI Inflows
Latorre (2008) says MNCs have a positive impact on the global economy because they contribute to global capital movements. Similarly, Helleiner (1989) says the MNCs help to move the global capital from abundant capital countries (wealthy countries) to countries that have scarce capital (poor countries). Many scholars affirm this view. However, Mundell and MacDougall (early theorists who investigated the role of MNCs in this regard) have a different opinion (Latorre 2008). Mundell (cited in Latorre 2008) says host countries need to meet special conditions to benefit from capital influxes. Indeed, he used the Heckscher-Ohlin model to explain MNC influences in the global economy and found out that unless two countries have different factor endowments, multinational companies may have an insignificant effect on their host economies (Latorre 2008).
Unlike Mundell, MacDougall (cited in Latorre 2008) affirmed that MNC influences promote economic growth. He used a simple approach of evaluating the effects of MNC activities and found out that these companies lower the capital rent and improve the business climate of the host economies (Latorre 2008). In turn, host economies benefit from increased labour productivity and improved standards of living. These contributions give multinational companies a strong economic influence in their host economies (especially in developing economies). This influence allows them to start vital economic projects in developing countries, which could potentially have significant political and economic ramifications for host countries.
Although Byres (1972) affirms that MNCs may have a positive economic impact on their host countries, he says the economic sectors that align with their operations benefit from the companies, at the expense of other economic sectors. Therefore, through their activities, global companies promote dualism in developing economies. For example, many MNCs produce expensive products that create a stronger economic divide between the rich and the poor (Jenkins 1987). The same products also distinguish the urban population from the poor population. The divisive economic outcomes of MNC activities mainly premise on the mercantile view, which explains why critics view the interests of MNCs suspiciously. It says that these companies adopt their home identities by pursuing the interests of their parent companies in the global economy (Leornard 1980).
Therefore, because they are foreign agents, critics say their interests are often suspicious (Helleiner 1989). A similar ideology that explains why critics view MNC activities suspiciously is the revolutionary view. It says that because many MNCs have a lot of economic power, they could easily control a government and make it act on their behalf (Leornard 1980). Usually, governments that are under their control use public policies to advance the interests of these corporations. Thus, like the mercantile view, the revolutionary view also suggests that developing countries should treat MNCs as suspicious foreign agents. Although these views exist, multinational corporations promote FDI flows in the global economy.
Wages
Many researchers have investigated the impact of MNCs on the wage rates of their host countries (Latorre 2008). They agree that, often, MNCs pay higher wages than local firms do. However, as demonstrated by other researchers, MNCs also have a negative effect on the average wages in their host countries. For example, Latorre (2008) says big multinational companies have had a negative effect on the average wage rate of domestic workers in Venezuela and Mexico. Relative to this observation, researchers have used the knowledge capital model to expound on this relationship. They have found out that MNC activities increase the average wages of skilled labour and decrease the same measure for unskilled labourers (researchers affirmed this fact after conducting several studies in Mexico). Finland has also experienced the same effect (Latorre, 2008).
Some researchers have found concrete evidence regarding the negative effects of MNCs on national economies. For example, Casson & Pearce (1987) say multinational companies have a negative spillover effect in developing economies. They base their findings on the negative effects of MNCs on wage rates in the Venezuelan economy (a sample study). In detail, they say the FDI inflows created by these MNCs have created inefficient production systems in the South American nation, thereby increasing production costs and decreasing national wage rates (Casson & Pearce 1987). Many researchers who have strived to highlight the negative economic impact of MNCs on national wage rates use economic indicators to draw political inferences about the impact of these companies in the global economic environment (Leornard 1980).
Many researchers have also evaluated the economic impact of MNCs by focusing on developing economies and evaluating how these companies affect income levels, standards of living, and market structures of such economies (Meier 1995). Based on their immense political influence, Leornard (1980) says multinational companies are powerful organisations that could easily affect national wage policies. Relative to this observation, Leornard (1980) says, As a matter of self-interest, multinational corporations will use their economic power in bargaining to extract concessions from governments on such matters as protection, tax rebates, investment allowances, choice of factory sites, and access to resources (p. 456).
Since many multinational companies do their business with elitist groups in these developing countries, critics accuse them of alienating people from their governments (Leornard 1980). In the same breadth of analysis, critics also accuse them of tying some governments to mutual circles of economic dependencies, which leave little room for wage negotiations (especially in developing countries) (Leornard 1980). However, Jenkins (1986) cautions people against highlighting the impact of MNCs on less developed countries through moral or value judgements because it is a normal business practice for such companies to conduct their business this way. Moreover, many multinational companies work in less developed economies to exploit the low wage rates that exist in these countries. However, he agrees that these companies have a huge influence in shaping their economic outcomes (Jenkins 1987).
Besides understanding the effects of MNC activities on individual wage rates, many researchers have also analysed the effects of the same firms on the average wages in the industry. Using the Venezuelan case study, Latorre (2008) established that the average wage increase among specialised workers counteracted the average wage decrease of non-specialised workers. Consequently, the South American economy experienced an overall increase in wages. This analysis shows that although MNC activities may have a negative effect on the wages of some workers, it creates an overall increase in industry wages (in the end).
Technological Development
As shown above, many studies that have investigated the role of MNCs in the world economy have explored this relationship by understanding how global firms influence economic growth. In line with this focus, many researchers agree that MNCs promote technological innovation as a way of promoting economic growth. This contribution emerges from the R&D investments that such companies make in their host countries. Many studies that affirm this view base their findings on US studies that show the positive role played by US MNCs in promoting economic growth, through technological innovation (locally and abroad).
For example, Latorre (2008) says MNCs have contributed to more than 31% Gross Domestic Product (GDP) growth in the US private sector. The same researcher says MNCs have contributed to about 74% of the total research and development (R&D) spending in the US (Latorre 2008). A broader outlook on the role of MNCs in promoting global economic development shows that, in the 1990s, these companies accounted for a GDP increase of more than 8%. This figure has recently increased to about 17.5% (Latorre 2008).
Based on the above analysis, researchers who affirm the positive impact of MNCs on national economies say host countries benefit from the technological spillover effect of these companies. For example, Latorre (2008) says the United Kingdom (UK) has benefitted from the spillover effect of US MNC activity in Europe. Although many researchers affirm this view, some observers oppose the idea that multinational corporations always have a positive impact on national economies (Latorre 2008).
For example, by focusing on the UK economy, they say, although MNCs have had a positive spillover effect on the European economy, the benefits accrued from their activities do not justify the cost incurred by the western European country in attracting foreign investment. (Latorre 2008) Other European countries, such as Lithuania have reported mixed results regarding the effects of MNC activities in national economies. Relative to this observation, Latorre (2008) clarifies that the positive impact of MNCs on this economy comes from forwarding linkages (the same positive outcomes do not exist in backward linkages).
Overall, Latorre (2008) says the technological benefits accrued from MNC activities exist in countries that have an absorptive capacity of the technology. For example, he says rich countries benefit from increased FDI inflows (from MNCs) because they have diversified economies, well-developed markets, and high-income levels. Therefore, poor countries may not experience the same technological spillover benefits that multinational companies bring. However, the views of Carkovic and Levine (cited in Latorre 2008) contradict this view because they studied the effects of MNCs on more than 72 economies and established that the levels of education, economic development, and trade openness did not affect technological transfer rates between MNCs and their host economies. Nonetheless, many researchers affirm the contrary. Based on this analysis, many countries around the world enjoy technological transfers from MNC activities.
Conclusion
After weighing the findings of this paper, we establish that MNCs have a mixed effect on national economies. This paper has mainly highlighted national wages, FDI inflows, and technological development as key economic indicators for MNC performance. Regarding the effects of MNCs on national wages, this paper shows that, although MNCs have a negative effect on the wage rates of unskilled workers, they have a positive effect on average national wage rates. Moreover, this paper shows that such companies promote technological development in their host countries. The companies achieve this outcome through increased R&D investments. Similarly, the same companies increase FDI inflows from wealthy economies to developing economies. Based on these factors, this paper affirms that multinational firms enhance economic growth in an economy.
Nonetheless, although this paper has strived to focus more on the economic effects of MNCs on national economies, it is important for future studies to investigate how political forces influence the economic outcomes of MNC activities in the global economy. Leornard (1980) supports this view by suggesting that the impact of MNCs on the global economy needs to have both political and economic dimensions (he says that Marxist and dependency analyses have eliminated all probabilities for people to understand the economic influences of MNCs without understanding their political impacts).
Liberals also share this view because although they see MNCs as apolitical in motivation, they agree that the corporations are powerful political forces, especially in developing countries (Leornard 1980). Therefore, while this paper concentrated on addressing the economic impact of such corporations, future studies should investigate the political impacts of MNCs with their economic impacts.
References
Byres, T, J 1972, Foreign resources and Economic Development, Frank Cass and Company, London. Web.
Casson, M & Pearce R, D 1987, Multinational enterprises in LDCs, in N Gemmel (eds), Surveys in Development Economics, Basil Blackwell, Oxford, pp. 90-132. Web.
Drew, J 1995, Readings in International Enterprise, Cengage Learning, London. Web.
Held, D, McGrew, A, Goldblatt, D & Perraton, J 1999, Corporate Power and Global Production Networks in Global Transformations: Politics, Economics and Culture, Blackwell Publishing, Oxford. Web.
Helleiner, G. K 1989, Transnational Corporations and Direct Foreign Investments, in H Chenery & T Srinivasan (eds.), Handbook of Development Economics, Elsevier, The Netherlands, pp. 1411-1480. Web.
Jenkins, R 1986, Third World Multinationals: Rhetoric or Reality, Journal of Development Studies, vol. 22. no. 2, pp. 458-463. Web.
Jenkins, R 1987, Transnational Corporations and Uneven development: The Internationalisation of Capital and the Third World, The Economic Journal, vol. 98. no. 393, pp. 1237-1239. Web.
Downer EDI Limited is an international company which operates in Australia, Asia Pacific and New Zealand. It is included in top 100 of the Australian Stock Exchange. Downer EDI Limited provides public and other private sectors with engineering and infrastructure management services.
Having considered the Annual Reports of the company from 2006 up to 2010, it can be stated that the company increased its revenue and financial power each subsequent year. Implementing different strategies as the result of the changes in the legislative and AASB Standards, Downer EDI Limited managed to remain a successful and frequently growing company.
The Australian Accounting Standards Board either implemented changes to the existing laws or created new standards which affected the operation of Downer EDI Limited.
The main purpose of this report is to consider the transformations which took place in the accounting regulations, understand the changes of the national and international economic environment and summarise the information having stated how each of the changes influenced the company during different years.
An Analysis of Downer Groups Announcements across the 5-Year Reporting Period 2006-2010
Most of the actions provided by Downer EDI Limited were announced with the purpose to inform stakeholders about the nearest changes in the company organization, operation, financial structures, etc. Some of the announcements were price sensitive, others were not.
The price sensitive announcements in 2005-2006 reporting year were dedicated to the announcement of overall contracts in excess of $360 million which caused the companys successful completion, acquisition of group Duffill Watts King and Coomes Consulting, and a number of other contracts (Downer Group 2006).
2006-2007 was as successful as the previous one according to the announcements. Downer Group declared about successful secures in Pilbara, acquisitions in New Zealand, new funding agreements, new water industry contract and extension of the relationships with Foxtel, the increased rail capacity in Maryborough and other new rail projects, to PPP Financial Close, contracts with Xstrata and ARTC, Alliance with Roche Mining, etc. (Downer Group 2007).
Still, the company success was slowed down in 2007-2008 reporting year, according to the announcements. At the beginning of this reporting year, Downer Group announced about trading halt and sale of century resources. The appointment of a new Chief Executive Officer caused the changes in the contract between Downer EDI Mining and FMG.
Still, starting with the beginning of 2008 and up to the end of the reporting year on July 30, 2008, the company signed up a number of acquisitions and contracts which increased its net income.
Considering the media release headings of price sensitive announcements, the complete financial situation of the company can be followed, Downer EDI signs contracts worth over $1 billion , Downer EDI announces Alliance with Western Power , Downer EDI wins supply order for 19 locomotives , Downer EDI Engineering to purchase Astute Limited , Downer EDI completes refinancing of A$ Facility , etc (ASX 2008).
2008-2009 reporting year was full of contracts and acquisitions which increased Downer Groups net income in many million dollars. Thus, the new $200 m rail contract for QR, alliance deal with Xstrata, and completion of funding are the announcements which declared about the company stability and flourishing.
Additionally, much attention should be paid to NZ $1 billion Telco contract and to investment statement aimed at raising up to $100 million (ASX 2009).
During 2009-2010 reporting year, Downer Group expanded its business, secured $170 million on mining and over $400 million by means of new contracts. More and more money is earned by means of signing up new contracts and expanding its business. More and more new projects are announced.
Having considered Downer Groups announcements, it may be concluded that since 2005 up to 20101, Downer Group had been doing all possible to increase their investing power, sign up contracts with as many as possible suppliers and consumers of the services to increase their own income ().
Looking in the future, the company signed up contracts which price was abnormal, but they were worthy. It should be noted that working in many directions, Downer Group mostly wins, however, being scattered, it fails to run the whole business successfully.
The Impact of Changed Regulations on the Downer Groups Primary Financial Reports
Downer EDI Limited is impacted by Statement of Accounting Concepts (SAC 1) and (SAC 2) aimed at regulating the reasons and norms for providing annual financial reporting. These documents are considered to be the initial ones and have been added and changed from the day of their implementation (Public Sector Accounting Standards Board 1990).
The Income Statement, the Statement of Financial Position and the Statement of Cash Flow are considered to be the primary financial report sections and the changes in the accounting statements of these regulations (since 2006 up to 2010, the periods under discussion) affect the company performance greatly.
The main purpose of this section is to dwell upon the changes in the accounting standards and other regulations to consider their impact on Downer Group.
Accounting standards
The Statement of the Chase Flow was changed in 2007 (the regulation affected all the reports beginning with 1 January 2007).
Ten paragraphs were amended, one of which, devoted to cash flow statement format, was deleted, while another one, devoted to the aggregate amounts of the cash flows from each of operating, investing and financing activities related to interests in joint ventures reported using proportionate consolidation (Australian Accounting Standards Board 2007, p. 21), was added.
Paying attention to the fact that the Statement of Financial Position and the Income Statement are the primary financial reports of the Downer Group, accounting standards dedicated to them were developed only in 2009 with the remark that this standard should not involve the reports prior to 1 July 2009.
Thus, this document affects only the last Downer Groups report under discussion. This document has changed the performance of the company as it allows presenting the income statement as a separate displaying apart from the statement of comprehensive income (Australian Accounting Standards Board 2010, p. 34).
The Statement of Financial Position was presented in the RDR Early Application Only (Australian Accounting Standards Board 2010, p. 27) and it stated the information to be provided under this section. The main impact of this regulation is that it allowed the company to put financial position under a separate section and discuss in detail the information of the primary importance for the company (Downer EDI Limited 2010).
Concise Annual Report 2006-2007 (Downer EDI Limited 2007), Annual Report 2007-2008 (Downer EDI Limited 2008), and Annual Report 2008-2009 (Downer EDI Limited 2009) do not contain such information.
Other regulatory changes
Apart from the primary financial reports, Downer Group was influenced by other regulations. In 2006, the company prepared the report affected by accounting policy of construction contracts for the first time. This action materially affected Downer Group that year (Downer EDI Limited 2006).
The Share Based Payments Statement was changed (Australian Accounting Standards Board 2009), therefore, the further calculations were provided on the basis of the stated document. In spite of the fact that only several AASB new accounting standards are mentioned, they have been the most influential for Downer Group since 2005 up to 2010 reporting periods.
The Impact of the Economic Environment on the Downer Groups Past and Future Prospects
This part of the report is aimed at discussing the economic environment of Downer Group. In particular, it is necessary to show how various economic issues affected the performance of this company in the past and explain how them may influence it in the future.
Overall, Downer Group operates in different fields and markets; therefore, its performance can be dependent on many factors, especially the overall development of Australian economy and growth of different industries such as extractive industry. This argument will be further illustrated in the following parts of this report.
Significant economic issues affecting the group
One of the areas, which have always been of great importance to Downer Group, is the development of transport infrastructure, namely airports, railroads, harbors, and so forth. Such projects are usually funded by the government. Thus, the performance of this company can be affected by the willingness of the state to spend on rail or road infrastructure (Downer EDI Limited 2006, p. 24).
Such construction sources have been a continuous source of income for Downer Group, and its income can be affected by the availability of resources. It should be noted that in the last decade, the Australian government continuously increased in expenditures on road or rail infrastructure.
Currently, this figure numbers 6 billion dollars (OECD, 2010, p. 97). However, according to the Organisation for Economic Co-Operation and Development, the expenditures may decline in the next decade (OECD, 2010, p 97). This chart illustrates how the government spending will change in the next ten years.
(OECD, 2010, p 97).
This data indicates that to a large extent, the performance of Downer Group will be affected by the overall development of Australian economy and availability of financial resources. Again, one cannot accurately predict the amount of governments future investment in infrastructure, but this chart suggests that this organization should be ready for the possible decrease of their revenues.
Most likely, the Australian government will not change its attitude toward the infrastructure, but due to financial crisis, they may be forced to reduce these expenses. This is the main risk that the management of Downer Group should be aware of.
This is only one of the factors many influence this company. Another area which is of great interest to this organization is mining or extractive industry. In 2010 exploration management and drilling brought them 973.5 million dollars and this is a significant part of their income (Downer EDI Limited 2010, p. 7).
Hence, financial performance of this company is directly dependent on the efficiency of agricultural industry in Australia and willingness of domestic and international companies to work in this field. At the moment, mining industry contributes approximately 8 per cent of the countrys GDP; more importantly, at least 26 percent of total investment is directed in this particular area (Richards 2009, p. 214).
Under such circumstances, Downer Group can occupy a very strong position in construction market. The thing is that increased extracting capabilities of the country intensified the necessity for sea port and road construction. Hence, we can argue that this situation creates extra opportunities for Downer Group.
Nonetheless, one should bear in mind the supplies of minerals are going to be exhausted sooner or later, and this will produce very adverse affects on this organization. Certainly, it is not going to happen in the near future, but this possibility should not be neglected; otherwise this company will be very vulnerable to the changes in economic environment.
The third economic factor, which may influence this company, is the price of oil and gas. For at least fifty years, Downer Group has been closely cooperating with gas and oil sector (Downer EDI Limited 2011). Downer Group provides them with engineering and construction services. Cooperation with gas and oil sector is of great importance with these companies.
Yet, one should take into account that such cooperation can be fruitful only on condition that oil prices remain high. Provided that they decline, Downer Group will no longer be able to derive profit from working in this area. Furthermore, this organization will be strongly affected by the changes in demand for oil and gas (Taylor 2006, p. 9-28).
It is hardly possible to predict other the fluctuation in oil prices, and one can say how they will change in the next decade. Of course, Downer Group only assists oil-extracting companies; its technical capabilities can be required by other organizations. However, the decline of their profitability will have very adverse effects on this company.
This is one of the reasons why Downer Group invests more in the development of renewable energy technologies which can play a key role in Australian economy. We can say that Downer Groups attempts to diversify the sphere of its interests in order to minimize possible economic risks.
Among other economic factors, which are of great significance to the company, is the competition that they have to face. This organization holds its operations in very saturated markets in different countries, and they have to contest with both domestic and international companies that specialize in construction, technology development, consulting, and so forth.
Only in-depth expertise in these areas enables Downer Group to occupy strong positions in these markets. Other economic forces that shape the performance of this organization are the cost of labor, taxation rates, the degree of governmental intervention into economy. Downer Group operates in New Zealand, India, and China (Downer EDI Limited, 2011).
On the whole, the governments of these countries do pursue the policy of protectionism, and this company is able to benefit from such a situation. Currently, economic forces are mostly favorable to this organization, but they cannot be controlled in any possible way. The most important issue is that their economic health is strongly connected with the financial performance of various industries and companies.
Downer Group provides them with technical solutions, and if these companies do not succeed, the services and expertise of Downer Group may no longer be necessary. This is the main danger that the company should avoid.
The companys past performance in reaction to the economic issues
In the previous years, Downer Group was able to benefit from various economic changes. For instance, the governments decision to invest in road infrastructure helped them increase their revenues.
In 2006, the company made several important acquisitions which enabled them to become a leading road constructor in Australia, in this case, we need to speak primarily about the acquisition of Emoleum the company that specializes in bitumen and asphalt paving (Downer EDI Limited 2006, p. 44).
During the last five years, increasing governmental attention to infrastructure produced very beneficial effects on their financial performance. The same thing can be said about the growing importance of Australian mining industry and active participation of domestic and international companies (Richards, 2009, p 214).
Overall, we can say that the management of Downer Group has always tried to adjust this company to the changing economic environment. As it has been said before, they try to expend their sphere of interests and invest capital in different areas such renewable energy or telecommunication.
There are several rationales for this diversification of their services. The management of Downer Group understands that various economic factors have brought many benefits to their company, but they also realize that such a situation can change sooner or later.
The future economic health of the group
While assessing future economic health of Downer Group, one should take into account two very important circumstances. On the one hand, its financial performance is directly dependent on various economic factors which can hardly be controlled by this company. For instance, we can single out the amount of governmental expenses, the performance of extractive industry, prices for oil or gas and so forth.
This company is strongly related with various industries, and its profitability is affected by their successes or failures. Thus, on the one hand, we can argue that its positions are very vulnerable. Nonetheless, Downer Group has a very diverse sphere of interests; they invest in many different areas, like renewable energy, communications, environmental management, international network development and many others.
This diversity of interests can greatly benefit Downer Group because the areas in which they invest will play a very important part in Australian and international economy. In this case, the ability of the management to allocate resources will be the key to their economic health.
During the last decade, macroeconomic environment of Downer Group greatly contributed to their growth, but this organization should be ready for the possible changes. Judging from its current strategies and reaction to the changing environment, one can say that Downer Group will retain competitive position.
Conclusion
Having considered the situation in Downer Group during 2006-2010 reporting period, it is possible to conclude that the company development may be considered by means of its annual reports, announcements, and changes in economic environment and accounting standards.
First of all, it should be mentioned that operating in different spheres of business, transportation, energy, oil, etc. the company success depends on many factors. External factors are important as well as internal ones.
The changes in the economic environment worldwide and in the country along with the amendment of accounting statements and other legal regulations may cause positive and negative effect on the operating of the company.
Second, widespread of the company interests can result in the following, if one sector the organization fails, then it succeeds in another one. Therefore, the company always remains in winning position and even if one sector stops bring profit, Downer Group can always shift to another manufacturing and get the most of it.
The changes in regulations and accounting standards influenced the financial reporting on the company. Still, those changes can be considered as positive ones. The Statement of Financial Position and the Income Statement were not the part of accounting standard up to 2010, however, they were Downer Groups Primary Financial Reports.
The changes in the accounting standards allowed the company organize their documentation and annual reports better, informing the stakeholders about the most significant changes in the company operating.
The conclusion may be drawn about the future of Downer EDI Limited on the basis of the considered information. The company stands firmly and it is proposed to increase its income in general, even though such spheres as oil and road construction may become unprofitable.
Richards, J. 2009, Mining, Society, and a Sustainable World, Springer, Melbourne.
Taylor, M. 2006, Managing enterprise risk: What the electric industry experience implies for contemporary business, Elsevier, New York.
United Nations Organizations 2009, Economic and social survey of Asia and the Pacific; 2009: Addressing triple threats to development, United Nations Publications, New York.
Globalism refers to the participation of countries or states in international affairs such as trade, science, and business. Countries participate in international alliances such as peace and trade agreements. Globalism is a concept that puts the interests of the world before the interests of individual nations. It has several advantages and disadvantages. Globalism has stimulated economic development in countries that have embraced it. However, it has affected the economies of developed countries. For example, it has led to loss of jobs and business opportunities in developed countries. Globalism explains the inter-connections and patterns that exist among countries in the modern world. It affects nations from social, economic, and environmental dimensions.
One advantage of globalism is movement of ideas and knowledge from one country to another. An example is diffusion of scientific knowledge between nations. For example, due to globalism, many nations have successfully eradicated diseases such as polio and Small pox because of access to scientific knowledge. These countries manufacture drugs that cure those illnesses. Professionals from developed countries carry scientific knowledge to developing countries and as such contribute towards scientific development. On the other hand, people carry new cultures and lifestyles to other countries and thus bring change. For example, different religious beliefs are spread throughout the world because of globalism.
Despite the benefits, globalism has drawbacks too. These include loss of jobs, deterioration of infrastructure, and transfer wealth, which have resulted in high rates of unemployment. The United States has lost its sovereignty as the most powerful economy in the world. Due to globalism, the U.S. has relinquished some of its economic powers to organizations such as World Trade Organization, World Bank, and the International Monetary Fund. The economy has also suffered due to international alliances such as the free trade agreement. Globalism has led to mergers between the U.S. and other states that do not have a minimum wage limit.
As a result, many Americans have lost jobs because workers in other countries are willing to work for very low wages. This has led to high rates of unemployment that have created a global labor pool in which workers who work for low wages are favored and get jobs more readily. Availability of jobs has improved the living standards of workers in foreign countries and worsened the living standards of American workers who cannot compete effectively. American corporations have also turned to cheap labor from foreign countries thus denying many Americans jobs. International industries have dominated in many areas and surpassed the U.S. Globalism has led to deterioration of the sovereignty of the U.S. as an economic superpower.
Modernity has many benefits because it promotes equity among nations in the world. However, it has affected nations that were described as economically superior. Modernity has given developing countries an opportunity to compete with developed countries at an international level. Developing countries are gradually catching up with developed countries due to factors such as globalization and advancements in technology. As many nations embrace modernity, the living standards of people improve. The future of modernity depends on the willingness of countries to share resources and collaborate in different fields such as science and art. Advancements in technology and science have created hope for a better and brighter future. Countries need to embrace modernity fully in order to enjoy economic, social, and cultural advancements.
Basically, political economy and in particular Marxian economics, the concept of exchange value is traditionally employed to define one of the core aspects of a commodity. Some of the correlated concepts are price, use value and value. This shows that a product has; a value, an exchange value, use value and a price.
These attributes have an extensive history ranging from the era of Aristotle all the way to the period of David Ricardo. However, the entry of Marx concepts tilted the earlier concepts of exchange value.
From an economic perspective value is presented as the worth of either goods or services as set or determined by the existing markets. However, this observation does not hold the real formulation of what is in essence defined as value. For years economists as well as other social scientists have attempted to link and estimate the significance of value in relation to individual.
Similarly, this approach has over the years been extended to both goods and services being exchanged. Hence, such approach saw the development of such dynamic concepts as value in exchange as well as value in use. Thus, examining the argument presented by Kalman Applbaum in the article Pharmaceutical Marketing the concept of value is correlated to marketing and branding.
As the article asserts individuals are willing to pay higher prices for a brand than for a helpful product (Applbaum 0446). This concept is thus widely employed by pharmaceutical companies. The core objective of such approach is to create more earnings from a brand value than from the products. What this means is that brand value dictates what the greater society consumes.
Equally, this same approach is well illustrated by the manner coca cola brand is marketed. Basically, the brand value seems to be more profound than the product itself. This indicates that value can be measured as the set price of the given products. However, in regard to the argument presented by neoclassical economists, the value of any product is correlated to its price in relation to the free and competitive market.
And the value is thus determined by the demand of the product relative to the market supply. Examining the approach etched in the pharmaceutical industry it can be argued that the market demand surpass the supply and this has played a critical role in establishing what is in essence value. In relation to value in use as well as brand value, these firms have opted to embrace the concepts developed by neoclassical economists.
Thus, the elements of value are not linked to improving the innate consumption of humans but rather to attain the greatest profitable margin. The principal features which drive such an approach can be explained by the fact that brand value has over the years been used as the vehicle by corporations tied their hope (Applbaum 0447).
Hence, this has resulted in a situation whereby brand value supersede the need for satisfying the innate needs of humans through provision of what anthropologists defines as human value. The scope of brand value is thus echoed by Robert J Foster in his article The WORK OF THE NEW ECONOMY: Consumers, Brand, and Value Creation.
The author observes that consumers tend to go for popular brands while the product manufacturers through elaborate marketing strategies exploit this window presented by brand value (Foster 708). Equally, this results in value creation which rests on brand value rather than on the product itself.
Though, Foster seems to suggest that the creation of new values begins with innovation; it is evident that the natural flow of market demands creates values. Thus, in an economic perspective the intensity of value is compactly determined by price as well as the price attached to products whether goods or services.
Another notable aspect examined by Foster revolves within the context of satisfying what is defined as surplus value. This concept is defined by Marxian theorists as a notion that attempts to define and explain market instability in regard to capitalism.
Thus, this posits that human labor forms the foundation of economic value. Thus, exploring the argument presented in the article we find that the concept of surplus value is definitely less examined. This can be linked to the fact that modern corporations are more concerned in making profits rather than satisfying the market values. Hence, the creation of brand values which are becoming more potent than value in use.
Comparing the explanations brought forward by both Foster and Applbaum it is evident that the concept of use value is less considered in the current society. This is elaborated in the manner diverse organization are anchoring on massive marketing without examining the aspects of use-value which is in essence the qualitative characteristic of value, that is, the solid manner in which a product satisfy human needs.
Perhaps that is why Graeber argues that when we are talking of use value we tend to think that we are dealing with definite attributes such as tons of, dozens of or meters of (442). Basically, he notes that use-value correlated to commodities becomes real when the given commodity or product is used or consumed. According to Graeber the concept of value is predominantly defined differently economists (443).
To his observations the concept of value have been restricted to market theories which are designed to produce mathematical satisfaction in relation to allocating limit resources while pursuing profits. In essence, the core argument in his article suggests that the concept of value is based on market convenience rather than on satisfying the human needs.
Hence he attempts to draw a parallel between what the anthropologists think of values and what economists take as value. From such an observation we are brought to the same sentiments voiced by Foster and Applbaum, exchange value seems to be the determinant factor in regard to what is assumed to be all inclusive.
Thus, the scope of neoclassical economy is brought as being the modern measure of value, this approach assumes that human approaches calls for allocation of available resources in pursuit of limited resources. Yet exploring the dynamics of use value, brand value as well as surplus value, this concept fails to satisfy the innate needs of man.
What this demonstrates is that the diverse economic projections witnessed have evolved to be restricted to the available resources or markets without exploring other regions of improving on value.
As noted in the article The Work of the New Economy the diverse attributes of what is defined as value can be said to be tied to profits This is also established by the massive marketing investments which have overtaken the noble cause of production.
It ought to be noted that marketing is essential in building brand value and this has gone to the limit of misleading the consumers who rarely identifies the use value of the given product or services.
Graeber, Value Foster, The Work of the New Economy Applbaum, Pharmaceutical Marketing have all accepted that the scope of value is money-priced. This seems to be due to the emerging market demands which are not fully satisfied.
Hence, the dynamics of value are not treated as processes of enhancing social well being rather the concepts of value are left to the domain of traditional social scientists. Thus, it becomes difficult to establish in essence what the core purpose of value is in the growing neoclassical economy.
In conclusion, it is evident that the scope of value is the most disputed feature in regard to political economics. This can be allied to the fact that the hypothesis of exchange which rests on the porch of science happens to be the bridge linking problems allied to economics to problems social in nature. And this happens to be the pointer of exiting from the theoretical manipulation affecting the whole sphere of human economy.
More so, its conceptual nature makes an objective approach quite complex for all those who have ventured into exploring the aspects of value in regard to human economy. Thus, the concept of market values in regard to exchange values though essential presents a mountain of queries than answers.
As established by Graeber the concept of value compactly left behind as the political economists are more concerned with developing attributes that are profit oriented in regard to labor, pricing and distribution. And this seems to be the foundation laid by those advocating for neoclassical economy, that is, capitalist markets.
Works Cited
Applbaum, Kalman.Pharmaceutical Marketing.Pls Medicine 3.4. (2006):0445-0447.
Foster, J Robert. The work of new economy. Cultural Anthropology 22.4 (2007):709- 729.
Graeber, David. Value: anthropological theories of value. A handbook of economic Anthropology. Oxford: Edward Elgar Publishing, 2005.
The government, as the national body of governance and control of the national resource and interests, is charged with the responsibility of ensuring success in all these affairs. The government in itself can never rely on its own ability to cater to the society as a whole without involving the various stakeholders, including those in the nongovernmental sector. The government, in effect, sets or rather abdicates various duties to various groups or individuals who do the research and advice it accordingly. The government, in effect, acts as required to implement the findings from the researchers.
The government, through the very precious information that it receives from the field people, sets up legislations in the form of policies (Shen et al., 2009). Policies are the actions that are taken by a governing or rather an administrative body of a state with respect to issues. This is done in a way that is in accordance with the law or the institutional codes and customs. Policies act as guidelines for the government and its people.
One such body that researches and advises the government accordingly is the economic researchers. The Economic Research Service is the main body that informs and enhances economic policies in both the public and the private sectors. The economic research service creates or rather develops policies centered on the areas of National resources, food, rural development, and even agriculture. In order to be successful in this venture, professional social scientists and economists must be involved. They develop and discharge varied information that includes information from other disciplines in the field of science. Therefore, from this information, the private and public sectors can carry on with their businesses in a more accurate and precise manner.
The duty of this agency is set upon four major divisions.
Information services
Market and Trade economics
Rural economics and resources
Food Economics
The Economic research service (ERS) persons then disseminate their very vital information through various avenues that include articles in journals, published reports, the ERS website, verbal or oral briefings, amongst many other modes of dispatching information.
Objectives
This research paper is aimed at dissecting and looking into the functions of the Economic research services body and observing the specific areas that the government has performed unsatisfactorily towards implementation. Apart from the insight into the various areas where the government has failed to implement policies fully, the paper also suggests various approaches that can be taken in order to obtain relevant solutions to the problem.
Significance of the study
The various policy propositions projected to the government by the Economic Research Service providers are very vital for national development purposes. Failure of the government to oversee success in the implementation of the details provided by the body is quite frustrating to the efforts of the body.
Government inefficiency and proposed policy suggestion
The rural area is a rich region in terms of viable resources, which can be utilized for national gains. The rural communities, on the other hand, have a variety of distinctive resources that can provide a wealthy base for economic development. The natural resources such as mountains, rivers, valleys, forests, and even wildlife provide unique job opportunities to rural communities. Occupants of the rural regions have very high chances of being self-employed since they are presented with a chance of venturing into entrepreneurial activities. Activities like agriculture are high-income earners for individuals who actively engage in it. Wildlife availability also acts as a reservoir of the nations heritage (McCuiston, Wooldrige, & Pierce, 2004).
However, harnessing these resources and using them for economic and financial gains has presented many challenges to the inhabitants of the rural regions. This is basically as a result of various reasons. One of the major problems facing this group of persons is the low population density. The rural areas have continuously lost their populace to the urban areas as a result of the rampant rural-urban migration.
Another problem facing rural areas is poor infrastructure. Infrastructure in the form of roads, for example, is dilapidated and unfavorable for economic development. Apart from the problems in transportation, communication also presents a major challenge. In the modern world that we are in, communication is necessary for economic vibrancy and success. Communication is also accompanied by technological advancement, all with the intent of economic development.
The rural communities are still faced with the problem of a single job opportunity. These people rely on a single type of employment, all in the name of agriculture. To make it worse, their agricultural practices are still wanting in terms of technological advancement. This community is most cases also depends on government funding for their upkeep. All these factors prove that these peoples earnings are meager and insufficient to cater to their financial needs effectively. These sources of income are not only small but also seasonal.
The fact that there are few people also suggests insufficient workforce and inadequate economic output. The reason why the tax revenues are lower in the rural areas is that the lower average income per person. It is because of this reason that there are fewer allocations in terms of resources (amenities and services) in rural areas.
The rural areas have very limited access to financial resources. This is major because of the very poor access to financial institutions. These institutions include banks and micro financiers. Poor access to financial resources translates to a lack of funds for starting viable business ventures or even expanding the existing ones.
These challenges facing the rural areas and thus maiming economic development have, to some extent, been identified by the Economic Research body and presented to the government to be looked into. However, due to some reasons, these issues have not been tackled effectively. There are various proposals presented to the government on how these challenges can be equally tackled and counteracted.
The first parameter that the Economic Research body has continuously identified is the population density problem. The rural areas are experiencing an overwhelming rate of rural-urban migration. People find the rural areas unattractive. This problem can be tackled through making the rural areas attractive. This can be done through various government-initiated programs such as the rural-roads construction programs, rural electrification programs, plus many other such rural-development oriented programs.
In order to attract the population to move towards rural places, the government has to look into the housing situation in these regions. Poor housing condition is reason enough to inspire the influx of people into urban places.
Growth of the population would even inspire industrial development since the industries would be assured of labor services being available in their industries. Establishing an industry in an area deficient in the labor force has never been a wise strategy when considering industrial production. Apart from the population density, improvements on the natural infrastructure would also attract industrial development.
In order to succeed in practicing technologically based agricultural activities, rural farmers require very vital information. The government should educate the farmers on current agricultural practices. This would help them break away from the traditional modes of farming that are time-tested and proven to be deficient. The extension officers, who are well trained and highly capable of training farmers, can provide this information. Engaging in technologically inspired agriculture would basically translate into bigger and quality agricultural harvests.
Conclusion
From this review, it is quite evident that most of the problems haunting the rural community have very effective solutions, which, when implemented, can address the issues to their finality. The government needs to look into the various poverty litigation propositions that have been presented by the Economic research services as the advising body on issues of economic development.
Government inefficiency can be hugely blamed for continuously poor development activities in rural areas. Economic researchers have repeatedly expressed their frustrations at the slow rate at which their policy proposals are being handled (Mcuiston et al., 2004). Equitable regional development is an essential measure in ensuring regional balance in terms of economic viability. Problems haunting the rural areas can be dealt with fair and squarely if the government fully implements its policies regarding rural economics and resources. These resources, when fully harnessed, would not only benefit the rural population but would also trickle down and benefit the whole nation. The Economic Researchers work of directing government policies is strengthened when their propositions are considered and implemented.
References
McCuiston, V.E., Wooldrige, B. R., & Pierce, C.K. (2004). The Economic Researches and The Development Policies, Human Resource Development review, 25(1), 73-92.
Shen, J., Chanda, A., DNetto, B., & Monga, M. (2009). Money, Financial markets and the Economy, Journal of Comparative Economics, 20(2), 235251.
In general, the economy of most States in the United States of America has been experiencing irregular fluctuations. The observed abrupt economic changes could probably be due to the rapidly changing economic trends of the global economy. These economic changes can also be attributed to changes of economic policies within the United States as well as in the local Federal States as each States adjusts its financial planning to meet the needs of their respective population. As such, each Federal State in the U.S displays its unique economic indicators although the overall feature of such economic indicators can be more or less similar to those of the United States national economy (Forgue & Garman, 2011).
In our case, we will digress extensively into the performance of local federal banks with St. Louis Federal Reserve Bank located in St. Louis City serving as our reference local federal reserve bank. St. Louis Federal Reserve Bank shows the key economic indicators in details for the most recent past, thus we can interpret this basic financial information so as to ascertain how the economy is doing currently. Moreover, appropriate determination of the current federal States economic situation can give us an insight in prediction of the future economic status of the U.S Federal States as well as for the National U.S economy.
Basically, there are six main economic indicators and these are also the key ones that St. Louis Federal Reserve Banks has highlighted on: because any precise determination of the economic status of any state or nation relies primarily on these six factors. According to St. Louis Federal Reserve Bank, Real Gross Domestic Product (GDP), Consumer Price Index (CPI), Industrial Production and Interest Rates are considered as some of the major economic indicators useful for evaluating the economic status of the States. In addition to the above four economic indicators, the bank includes change in Non-Farm Payroll and Unemployment Rates as significant economic indicators useful determining the national economic trends (Rittenberg & Tregarthen, 2008).
Real Gross Domestic Product is usually the principal factor used in determination of the national economic status through calculation of the States or countrys per Capita Income. However, Gross Domestic Product of the U.S is influenced greatly by aspects of inflation since there are sev3eral factors considered. Some of the factors considered in calculation of the GDP are the countrys foreign investment, imports and exports in addition to local domestic consumption (Clark, 2011). Therefore, precise determination of national economic is based on the Nations Real Gross Domestic Product. According to the U.S Department of Commerce: Bureau of Economic Analysis, the current national Gross Domestic Product stood at 2.8 percent which was a large increase from 1.8 percent recorded in the 3rd quarter of 2011.
This indicates that the United States national product and services output experienced a remarkable increase (Garvin, 2011). This was probably due to the significantly reduced U.S current account deficit which was recorded to decrease to $110.3 billions, a decrease of about $14.4 billion in the 4th quarter of 2011. Similarly, the U.S foreign investment was observed to have changed greatly from the 3rd to the 4th quarters of last year. The major reason for such great changes could be attributed to the fact that the value of foreign investment in the U.S was evaluated to have exceeded the U.S investment in foreign countries.
From another perspective, the Real Gross Domestic Product of majority of the United States federal States was found to have recorded a significant increase as compared to its value in 2009 and 2010. The real gross domestic product was recorded to be 2.6% and 2.5% respectively. As such, the U.S economic status has been recorded to have improved greatly currently, although a slight decrease was noted during the transition from 2009 to 2010. Therefore, the U.S national economy is expected to rise significantly in future according to positive changes in real gross domestic product (Hitcher, 2011).
Consumer Price Index (CPI) has also been observed to take an upward trend due to the increase in the volume of consumer purchases. Owing to the perceived U.S economic growth, the Consumer Price Index has also increased currently unlike in the past two years. According to the United States Department of Labor Bureau Statistics, purchases of consumer goods such as clothing and food stuff increased two folds from the year 2010 to 2011. Moreover, healthcare, transport, education and energy sectors were observed to improve to an appreciable extend. Therefore, due to the current trends of Consumer Price Index, the economy of U.S is expected to record further growth in the foreseeable future. This will be so because the U.S has established a stable and consistent consumer market. The consumer purchasing power has improved to a high level. The current U.S Consumer Price Index is viewed to as the most impressive compared to that of the previous years (Rittenberg & Tregarthen, 2008).
On the side of Industrial Production, the U.S economy could have experienced a great economic regression if it were not for that rapid improvement in industrial production recorded in 2010. The current industrial production is showing signs of increase in future. This great improvement has contributed significantly to the U.S real gross domestic product.
Interest rates seem to have decreased greatly according to the ten-year treasury statistics. Similarly, the 3-months treasury statistics shows a significant interest rates decline in 2011 contrary to an interest rates increase recorded in 2010. Therefore, this decline in interest rates indicates economic growth.
Consequently, non-farm payroll as well as unemployment changes indicate a significant growth of the U.S economy (Clark, 2011). For instance, the non-farm payroll was recorded to improve particularly in 2011. On the other hand, unemployment rate decreased greatly during the same year. Basically, increase in non-farm payroll accompanied by decrease in employment rate indicates economic growth.
In general, U.S economy is doing perfectly good. This is due to the evidence provided by the six major economic indicators. That is, increased real gross domestic product, Consumer price index and industrial production (Garvin, 2011). In addition, interest rates and unemployment rates are currently low with non-farm payroll hitting the highest mark.
Therefore, the economy of the U.S is experiencing significant economic growth. If the current economic trends are maintained, it appears U.S will enjoy a flourishing economy. However, it is important to note that, unless much effort is made to streamline the U.S economic growth: the current economic indicators may change their trends unexpectedly. Highly effective economic strategies are required to ensure sustainable national economy.
Finally, the U.S economy has realized a steady and consistent growth trends particularly in 2011. Therefore, the current impressive national economic growth is expected to be experienced in the future. In fact, great economic growth is anticipated in the next few years according to current trends of economic status. As such, a healthy economy will be the ultimate result of the United States endeavor to create a stable national economy with significant impact on global economy.
References
Clark, C. L., (2011). The American Economy: Historical Encyclopedia. Santa Barbara: ABC-CLIO Press.
Forgue, R., & Garman, T., (2011). Personal Finance. Stamford: Cengage Learning.
Garvin, P., (2011). The United States Government Internet Directory 2011. Lanham: Bernan Press.
Hitcher, J. R., (2011). Financial Valuation, + Website: Applications and Models. Hoboken: John Wiley & Sons, Inc.
Rittenberg, L., & Tregarthen, L., (2008). Principles of Microeconomics. New York: Flat World Knowledge.
The concept of developmental state can be understood as a union between economic and political policies whereby each one them operates hand in hand to drive economies forward. Concurrently, policies that are aligned to developmental state cannot be executed or implemented without taking into account political objectives and interests of regime in power (Verena & Rocha, 2007, p. 531).
This implies that it is impossible to implement principles of developmental state in in the absence of effective political regimes and legitimate institutions since consolidation of different political forces is required to facilitate effective reforms (Verena & Rocha, 2007, p. 531).
According to Verena and Rocha (2007, p. 542), economic policies that seek to improve potential of the supply-side in an economy are very significant in promoting growth of markets and industries and consequently accelerates the growth of real national output.
However, to promote the role of supply-side in an economy, deliberate economic and political policies by a government must be present to promote product and labor markets. Verena and Rocha (2007, p. 542) underscore that deliberate supply-side policies tend to increase competition and promote efficiency and subsequently reverse challenges of development state.
The first strategy that can be used to promote supply-side policy is privatization of state-owned businesses (Verena & Rocha, 2007, p. 538). In UK, deliberate political and economic reforms have facilitated privatization of public- sector institutions such as British Gas and British Aerospace (Schwab, 2009, p. 32).
More recently, the wave of New Public Management has seen more public sectors privatized in a move to make them more competitive and profitable (Schwab, 2009, p. 64).
On the same note, markets liberalization has been praised for its effectiveness in minimizing challenges in developmental state (Verena & Rocha, 2007, p. 541). Consequently, the UK government has recognized the role of liberalization in the economy for its tendency to increase market supply and hereafter reduce prices (Verena & Rocha, 2007, p. 542).
Apparently, the recent political reforms aimed at deregulating higher education sector as proposed by Lord Brownie was aimed at increasing competition among academic institutions and consequently bring prices down as well as improve the quality of education (Schwab, 2009, p. 102).
According to Verena and Rocha (2007, p. 549), developmental states have been accused of anti-competitive practices whereby some price-fixing cartels apply dirty tactics to prevent free market entry as firms attempt to preserve their monopoly status in the economy.
However, the UK government has enforced deliberate political and economic policies to promote tough competition policies to enable businesses to operate in a competitive environment and therefore ensure their effectiveness in the economy (Schwab, 2009, p. 64).
Moreover, supply-side policies must be adjusted to permit free international trade. As a matter of fact, free international trade amidst the wave of globalization is very crucial to a nations economy owing to the fact that global competitiveness improves costs and drives consumer prices down (Verena & Rocha, 2007, p. 550).
The recent economic and political reforms in UK show that the country is committed towards expansion of free international trade. For instance, UK as a member of World Trade Organization is committed towards liberalization of international trade, and to portray her commitment, UK has opened avenues for free trade within the European Single Market (Schwab, 2009, p. 44).
As exemplified above, deliberate supply-side policies aimed at improving quality and quantity of labor are very significant in the economy and such a move has the potential of eliminating some challenges of developmental state (Verena & Rocha, 2007, p. 532).
In UK, the deliberate move to accommodate labor migration and flexible retirement policies that allow older people to postpone their retirement are aimed at promoting flexibility of labor and as a result, minimize risk of structural unemployment (Verena & Rocha, 2007, p. 550).
According to Verena and Rocha (2007, p. 542) flexibility of labor has positive economic effects to an economy. On the same note, current reforms in UK that demoted the power enjoyed by trade unions have been responsible for decreased industrial strikes. For this reason, industrial relations have improved significantly (Schwab, 2009, p. 48).
In a nut shell, although it was not possible to thoroughly explore the deliberate economic and political policies that have promoted the effectiveness of developmental state, it is evident that deregulation, reduction in trade union power, reform on unemployment and privatization polices have contributed positively to development of various world economies.
However, in spite of the gradual improvements in some economies like that of Britain, some weaknesses still persist in various sectors and this hinders their effectiveness in the face of increased competition heightened by impacts of globalization.
References
Schwab, K. (ed.). 2009. The Global Competitiveness Report 2009-2010. Geneva: World Economic Forum.
Verena, F. M. & Rocha, A. 2007. Developmental States in the New Millennium: Concepts and Challenges for a New Aid Agenda. Development Policy Review, 25(5), 531-552.
