A strict budget is essential for a company to follow, even when experiencing phenomenal profits, for several reasons (Boyd & Pitre, 2020):
Sustainability: Following a budget ensures that the company has a plan for allocating resources, and it helps to avoid overspending during a period of high profits. This helps to maintain stability and ensure the long-term sustainability of the company.
Financial Planning: A budget provides a framework for the company to plan for future expenses, investments, and growth. This helps to ensure that the company is prepared for unexpected events and changes in the market.
Risk Management: Having a strict budget helps minimize financial risk by ensuring that the company has a clear understanding of its financial situation and is prepared for unexpected costs. This can help to protect the company from potential financial problems in the future.
Increased Transparency: By following a budget, a company can provide greater transparency to stakeholders, including investors, employees, and customers, about its financial situation and the allocation of resources.
It is important to note that biases can significantly impact decision-making and lead to unethical or problematic outcomes. In budgeting, a bias towards greed can result in decisions that prioritize personal or organizational financial gain over other important considerations, such as ethical or social responsibility. This can lead to allocating resources in a way that benefits those in power or prioritizes short-term profits over long-term sustainability. Therefore, companies must have systems in place to minimize the influence of biases, such as implementing a transparent and accountable budgeting process with clear guidelines and objective criteria (Brewer et al., 2019). This helps ensure that the budget is fair and aligned with the companys values and goals and reduces the likelihood of greed influencing the allocation of resources.
Management greed can influence budget decisions by leading management to prioritize personal or organizational financial gain over the well-being and long-term success of the company. This can lead to decisions that prioritize short-term profits at the expense of investment in research and development, employee training and development, and other essential expenses. Additionally, greed can lead to budget decisions that overlook potential risks or ignore ethical considerations, leading to actions that may harm the companys reputation and long-term viability (Brewer et al., 2019). Companies must have a culture of transparency, accountability, and ethics in financial decision-making to prevent greed from influencing budget decisions.
The Marxist political economy, as developed by Karl Marx, is a distinct and independent philosophical branch of governmental policy that significantly diverges from traditional financial systems. Notably, traditional economics tends to concentrate on the resource allocation and study of markets, assuming that people act in their self-interest to optimize their well-being. On the other hand, the Marxist political economy perceives monetary growth as being shaped and regulated by the relations of production, mainly the correlation between employees and capitalists (Allan, 2019). In Marxs view, such a relationship is characterized by exploitation, where capitalists extract surplus value from subordinates via their control over the means of manufacturing and distributing commodities and services. Marxist political economy pragmatically impacts societal members by analyzing the capitalist system extensively, making them understand ongoing financial and administrative struggles, thus improving their welfare.
Research Interest
The research topic is regarding why the Marxist political economy is not traditional economics but an independent philosophical branch of political economy, and the results could be of interest to scholars and researchers, students, activists and practitioners, and workers and trade unions. Political science, sociology, business, and philosophy students seeking to comprehend the workings of capitalist communities and the obstacles they encounter could be interested in studying Marxist political economy (Campbell, 2023). The Marxist political economy could benefit trade unions and employees, aiming to understand the labor movements shortcomings and design strategies for enhancing subordinates working conditions and salaries. The examination of exploitation and extraction of surplus value provided by the Marxist political economy can assist in solving the obstacles workers experience in capitalist societies and mobilize them towards collective action.
Scientific Relevance
Contribution to Knowledge Base/Scientific Progress
The research results could be scientifically relevant since the study significantly expands Venezuelians knowledge base concerning the political economy. The research offers a critical analysis of the Marxist political economy and how it deviates from traditional economics, highlighting its philosophical foundations and independent status (Allan, 2019). Therefore, the Marxist political economy results in scientific progress and expanding individual experience by providing distinct and critical viewpoints regarding the correlation between society and the economy and informing policies that facilitate social and economic justice.
Contribution to Interdisciplinary Knowledge Gains
In addition, the study findings could be scientifically admissible since the Marxist political economy offers a framework for interdisciplinary insights gains, as it draws on and integrates perspectives from multiple fields, such as philosophy, political science, sociology, economics, and history. The research results could be scientifically relevant as the Marxist political economy provides a comprehensive viewpoint concerning capitalisms subject mode of production and concentrates on the relationship between political power and class struggle (Basu, 2022). Therefore, the research results can contribute to developing alternative approaches and models to studying political economy and economics and can challenge superior ideologies and assumptions regarding financial systems and society.
Argument and Hypothesis
The researchs primary argument is that the Marxist political economy is not traditional economics but an independent philosophical branch of the administrative financial system. The academic foundation of Marxist political economics offers a new perspective on the correlation between capitalism and governmental systems. Nevertheless, one hypothesis derived from the study argument is that the Marxist political economy operates grounded on multiple principles and assumptions contrasted to traditional economics due to its unique philosophical foundation concerning the capitalist system.
Theoretical Assumptions/Empirical Observations
The argument and the hypothesis are grounded on multiple theoretical assumptions and empirical observations. The research argument is based on the ideology that the political and economic systems are intertwined and that the correlation between them transforms the world where people stay. Moreover, such an idea is grounded on the empirical observation that the economic and political frameworks are interdependent and that changing one structure repeatedly leads to transitioning to the other methodology (Campbell, 2023). In addition, the argument follows the idea spearheaded by Karl Marx regarding the relationship between political and economic systems that is unique and distinct from the traditional economics perspective. Therefore, based on empirical observation, the Marxist political economy has a distinctive philosophical foundation regarding the capitalist system and the view on society, which is different from the classical economics viewpoints.
Research Main Part
Venezuelas Case Study Using Marxist Exploitation Model to Explain Capitalism
Venezuela is one of the real-life case studies that address the issue of exploitation using the Marxian exploitation model. Hugo Chavez, a socialist president, ruled the country between 2004 and 2014, and the nation recorded a massive reduction in poverty and inequality (Basu, 2022). Government officials developed policies to redistribute wealth, including nationalizing particular industries, such as Owens-Illinois and Sidetur manufacturing plants, and increasing social spending to approximately $60 billion (Smart, 2020). Nevertheless, during the period, the governments expansionary fiscal policy resulted in high inflation due to increased money supply and budget deficit. The foreign exchange shortage created challenges in importing commodities, such as medicine and food.
Venezuelas capitalist oppression of workers can be analyzed using the Marxian exploitation model. From 2004 to 2014, the average nominal Wage escalated from $ 21 to $232 monthly (Smart, 2020). However, during that time, Venezuelas inflation was relatively 20% yearly, resulting in a decline in salary value. The wage value declined from approximately $440 monthly in 2004 to nearly $265 in 2014 (Basu, 2022). The workers added value increased from $60 billion in 2004 to almost $210 in 2014, and the total wages escalated from $20 billion to $70 billion (Smart, 2020). Therefore, using the Marxian exploitation model, the estimated surplus value level generated by Venezuelas workers during the period can be expressed as S=V-WS. The S is the surplus value generated by employees, V is the labor value, and WS is the total Wage paid to workers (Smart, 2020). Therefore, the surplus value (S=V-WS) is calculated as $210 billion minus $70 billion, which equals $140 billion. The surplus value created more profits for the capitalists under President Chavezs support. Table 1 demonstrates the surplus value created by the employee labor worthiness despite capitalists paying them low wages. On the other hand, figure 1 illustrates the ruling class peoples oppression of Venezuelas workers using the Marxist exploitation model.
Table 1: Surplus Value (Smart, 2020)
Year
Worker Labor Added Value ($ billion)
Total Worker Wage ($ billion)
Surplus Value ($ billion)
2004
60
20
40
2014
210
70
140
Figure 1: Venezuela Worker Surplus Value
The Marxist Political Economy and Traditional Economics Assumptions Regarding Political and Economic Systems and How they Deviate
Traditional or neoclassical economics is a subfield of political economy that concentrates on studying how political systems and economics relate and impact each other. In addition, traditional economics focuses on the workings of the financial market status and the allocation of resources. Conventional economics is grounded on multiple core assumptions. One of the essential presumptions is that people act in their self-interest (Chakrabarti, 2021). The neoclassical system assumes that politicians, including Hugo Chavez, make decisions based on what is best for themselves. Therefore, consumers purchase commodities and services, such as food and medicine, they value most, and producers sell products for the highest price (Gao, 2022). In addition, traditional economics perceives markets as the core mechanism for coordinating remunerative activity. The labor value created by the workers in 2004 stood at $ 60 billion, and their total wage was $20 billion. As a result, Venezuelan officials developed policies engendering effective allocation of resources, thus reducing poverty among citizens.
Furthermore, another fundamental principle of traditional economics is that the state or the government plays a limited role in the economy. As a result, neoclassical economics views politicians as facilitators of economic tasks but not active participants. The Venezuelan state officials mandate was restricted to establishing stable and predictable surroundings that reinforced remunerative activities, including safeguarding property rights and enforcing contracts (Campbell, 2023). Nevertheless, traditional economics presumes that the market monetary status inherently attains an optimal level if people have the freedom to pursue their self-interest, resulting in the effective allocation of resources. Neoclassical economics depends on various theories and models, such as supply and demand, which help determine the prices of products and services. For example, the wage rate value declined from $440 to $265, resulting in increased demand for food and medicine, with a low supply of commodities, meeting the interests of capitalists and not the citizens (Allan, 2019). The increased Vnezuelas government issues, such as a decline in foreign exchange, resulted in increased inflation, causing massive unemployment.
On the other hand, the Marxist political economy profounded by Karl Marx significantly critiques the capitalist system and argues that the financial and state administrative systems are interdependent and interconnected. The approach highlights that the state is regulated by the ruling class (politicians), who deploy their authority and power to further their interests and control the working class (Gao, 2022). In addition, the Marxist political economy critiques the capitalist system for highly resulting in the massive exploitation of the common laborers (Chakrabarti, 2021). For example, in Venezuelas case study, Hugo Chavez supported capitalists by exploiting common laborers. Even though the surplus value increased to $140 billion, which benefited the investors, the workers continued receiving low salaries of nearly $70 billion, causing an economic recession (Smart, 2020). The model emphasizes the essentiality of class struggle in modifying the political and economic systems, where politicians use their influence to maintain their positions. At the same time, typical workers grapple for a more equitable distribution of power and wealth.
The Marxist political economy is an alternative to traditional economics, which perceives financial development as a separate and unique framework that operates independently of the political system. The methodology offers a highly detailed comprehension of the relationship between the economic and political systems (Basu, 2022). At the same time, the Marxist economy critiques the neoclassical model for its narrow concentration on markets and its presumption that the financial framework inherently attains an optimal state. The Marxist political economy deviates from traditional economics in multiple ways grounded on fundamental assumptions and principles. One core concept of the approach is historical materialism, which spearheads that the mode of production determines societal development. The production method is transformed by how manufacturing means, such as capital and labor, are controlled and owned (Chakrabarti, 2021). In Venezuelas case study, President Hugo Chavez and the capitalists possessed and regulated workforce and wealth distribution, causing a class struggle between citizens and politicians.
The Marxist political economy varies from neoclassical economics by proposing a diverse workforce theory of value, which asserts that the worthiness of a commodity or service is determined by the amount of work utilized in the production process. The model indicates that the massive exploitation of workers in a capitalist system by the ruling class individuals results in manufacturing surplus value used to generate revenue for politicians (Basu, 2022). For example, in the Venezuela case study in 2014, the worker labor value was $210 billion, while they were paid total wages of $70 billion, creating a surplus value of $140 billion, which merited politicians and investors (Smart, 2020). The investors, who the administrative officials support, oppress the employees by paying them lower wages compared to the value of their labor (Dolderer, Felber, & Teitscheid, 2021). Due to the surplus value offered by the workers, they create profits for the capitalist class. However, class struggles arise as the laborers (Venezuelan workers) challenge improved salaries, working conditions, and political representation (Pearse, 2021). The escalation of status quo inquiries results in social upheaval, eventually overthrowing the capitalist class and establishing a communist system.
Another fundamental principle of the Marxist political economy is that it views the state as an instrument of class power. In a capitalist system, state officials serve the interests of the capitalist class instead of promoting the workers preferences. Therefore, politicians play an essential central duty in sustaining the control and the power of the industrialists over the means of production and ensuring the wealth acquired is distributed in a manner that fulfills the investors interests (Desai, 2020). For example, in Venezuelas case study, Hugo Chavez developed fiscal policies, including nationalizing the Sidetur steel manufacturing plant and increasing social spending to nearly $60 billion, making capitalists produce more medicine and food to sell to the citizens. (Smart, 2020) In addition, another fundamental assumption of Marxist political economy acknowledges the role played by ideology in transitioning the correlation between political and economic systems. The governmental representatives impose their values and ideas on the rest of the societal members, intending to exploit the workers and reinforce the control of the capitalist class. Even though there was financial growth in Venezuela, the natural capitalism instability resulted in the 2008 monetary crisis since the investors paid low wages to workers of $70 billion while they acquired a surplus value of $140 billion (Pearse, 2021). The systematic pursuit of profits in a capitalist system spearheaded by the ruling class results in an overproduction catastrophe, leading to unemployment and the deterioration of the living standards of the working class.
Another notable presumption of the Marxist political economy is that market mechanisms, including supply and demand, are inadequate to address capitalism issues. The Marxist political economy argues that while capitalists and the ruling class pursue revenue generation, capitalism results in the concentration of wealth to few people, spearheading increased widespread inequality and poverty (Chakrabarti, 2021). For example, in Venezuelas case study, the owners of manufacturing companies, such as Owens-Illinois, continued to receive more profits, as the surplus value increased from $60 billion in 2004 to $140 in 2014 (Smart, 2020). The Marxist political economy demands radical solutions, including establishing a communist system to address the capitalist issues. Nevertheless, neoclassical economics and the Marxist political economy serve as distinct branches of political economy that have diverse viewpoints on the relationship between political and economic systems. The Marxist political economy is a theoretical framework that suggests that the failure of capitalism is due to the increment of inequality between common laborers and government rulers (Pearse, 2021). Such a view showcases that economics and politics are inseparable since the countrys administrative system officials determine the wealth distribution methods.
In contrast to traditional economics, the Marxist political economy spearheads that economic factors transform the nations political processes and vice versa. The Marxist model indicates that the communitys financial base substantially determines its constitutional and legal superstructures (Gao, 2022). In the capitalist system, the production method regarding how the manufacturing means are controlled, possessed, and utilized to produce commodities and services is privately owned, with the ruling class seeking to pursue high profits (Chakrabarti, 2021). Therefore, in the capitalist economy, the bourgeoisie regulates the production, aiming to exploit the proletariats by paying them lower wages than their labor value. For example, in Venezuelas case study, in 2014, the total wages of workers stood at $70 billion, while the labor value was $210 billion (Smart, 2020). Investors typically influence the governmental processes to sustain their authority and regulate manufacturing resources and materials (Rioux, LeBaron, & Verovaek, 2020). As a result, the administrative representatives, including Hugo Chavez, serve the interests of the industrialists instead of meeting the demands of the working-class Venezuelans, causing unemployment and inequality.
Furthermore, the Marxist economy suggests that the correlation between political and financial frameworks is not static but dynamic and subject to change. The working-class struggle while fighting for improved salaries and political representation causes social upheaval, resulting in the establishment of communist or socialist systems (Pearse, 2021). In a communist structure, the means of production are publicly owned, and the manufacturing is geared toward the societal members needs instead of pursuing profit. For example, Hugo Chavez nationalized the Sidetur steel manufacturing plant to increase citizens wages. The working class fights the capitalist and ruling class to ensure they have job opportunities and are well-represented in the government to make them less vulnerable.
Neoclassical economics perceives the financial framework as a separate structure operating independently of the political system. The markets serve as the core mechanisms for coordinating monetary tasks. The traditional economics approach indicates that Venezuelas economy inherently attains the optimal level when investors pursue their self-interests. The mandate of government officials, such as Hugo Chavez, is limited to creating a predictable and stable environment that reinforces economic activities, resulting in the escalation of inequalities and political misrepresentation of minority groups. Neoclassical economics supports the capitalist system that continues exploiting the working class as the administrative officials do not help transform the financial system (Chakrabarti, 2021). For instance, in 2004, the labor value created by Venezuelan employees was $60 billion, and their total wage was $20 billion, resulting in a surplus value of $40 billion, showcasing that capitalists continued to exploit common laborers (Smart, 2020). The static nature of governmental representatives makes the ruling class sustain their authority and control the working class. The Marxist political economy is an independent philosophical branch of political economy as the model suggests that markets are not neutral, and the political and social factors, including the distribution of power and wealth, modify it.
The Marxist Political Economy Philosophical Foundations and How they Differ from Traditional Economics
The philosophical foundations of the Marxist political economy are rooted in critiquing neoclassical economics and comprehending the correlations between political and financial power. Notably, Karl Marx introduced the Marxist political economy, which provides a unique viewpoint on society and economics that deviates from the traditional approach (Desai, 2020). The Marxist political economy is fundamentally concerned with comprehending capitalisms development, origins, and functions as a social and historical system. The Marxist economy claims that the capitalist framework, a mode of production, emerged after the feudal era. The model is featured by labor exploitation, the concentration of authority and wealth to few investors, and the manufacturing of products for revenue generation than for usage (Pearse, 2021). For example, Hugo Chavez increased social spending to $60 billion in the Venezuela case study to support capitalists to continue manufacturing more food and medicine and record high profits (Smart, 2022). In contrast, traditional economics spearheads the capitalist ideological tool to oppress poor people by making government officials inactive, enabling individual selfishness and unfair business competition.
Capitalism is a naturally crisis-prone system characterized by cycles of financial booms and declines, ultimately resulting in the marginalization and impoverishment of the working class. The root cause of societal concerns includes increased contradictions among politicians needing to generate more profits, meet peoples needs, and maintain social stability (Desai, 2020). The Marxist political economy emphasizes the essentiality of social class in transforming financial relations and outcomes. Society is divided into two primary groups: the common laborers, who must work to survive, and the capitalist class, who owns the means of production. For instance, in 2014, Venezuelan workers accumulated a total wage of $ 70 billion, while investors acquired $ 140 billion in profit, causing unfair wealth distribution (Smart, 2020). Class division is the source of social disputes and struggles within capitalist societies, negatively affecting monetary growth. At the same time, traditional economics suggests that a community is a collection of households and individuals making rational decisions grounded on self-interest, and politicians have no power to regulate investors ventures (Pearse, 2021). The Marxist political economy emphasizes the essentiality of social change and political struggle to engender improved financial outcomes, improving the livelihood of communal members.
Research Findings
The Marxist political economy is grounded on independent philosophical foundations, including dialectics and materialism, that help make people comprehend the social, political, and financial forces shaping peoples history, distinguishing the model from traditional economics. Per the Marxist political economy, historical materialism holds that the societal monetary base, including the mode of production, determines the governmental and social superstructure of the community (Basu, 2022). Therefore, how people manufacture and distribute commodities, such as food and medicine, transitions into organizing their communal and public administrative institutions. In a capitalist society such as Venezuela, the relations of production are characterized by wage and labor exploitation by the capitalist class, which regulates and possesses the means of production (Dolderer et al., 2021). On the other hand, in traditional economics, the focus is on the individual and the choices that they make in the market. Neoclassical economists assume investors and politicians, including Hugo Chavez, act rationally in their self-interest and that the market mechanism, via the price system, allocates resources efficiently. The government-elected officials duty is typically limited to ensuring that businesses operate efficiently without interference to promote financial growth.
The Marxist political economy concentrates on the essentiality of historical and social context in transforming economic growth. The monetary behavior of people is modified by the communal relations into which they are integrated. At the same time, another fundamental and unique philosophical concept that informs the Marxist political economy is dialectics, a method of inquiry of comprehending the conflicts within political, social, and financial phenomena (Rioux et al., 2020). The contradictions within the capitalist system are inherent, eventually resulting in a downfall when working-class people adopt a communalist framework while fighting for inequality in the distribution of wealth. Due to the indispensable support for the capitalist group, the politicians make it challenging for the workers to acquire technological and material resources, which government officials must avail to the societal members. The immense control and ownership of such resources limit the production of commodities and provision of services, creating a monopoly market where few ruling classes have much wealth accumulation.
Conclusion
The Marxist political economy is not traditional economics but an independent pholosoåphical branch of political economy because it critiques the neoclassical financial system approach of capitalism. Neoclassical economics perceives capitalism as an inherent concept governed by supply and demand laws, which merits societal members by encouraging innovation and monetary growth. Government officials are not actively protecting citizens from unfair competition, resulting in unemployment and market inequality. The Marxist political economy indicates that financial results are not determined independently by market forces but by other factors, including the role of state officials, class power, and the level of control by industrialists.
References
Allan, B. B. (2019). Paradigm and nexus: Neoclassical economics and the growth imperative in the World Bank, 19482000. Review of International Political Economy, 26(1), 183-206. Web.
Basu, D. (2022). The logic of capital: An introduction to Marxist economic theory (3rd ed.). Cambridge University Press.
Campbell, M. (2023). Capitalism in the UK: A perspective from Marxist political economy (4th ed.). Taylor & Francis.
Gao, Y. (2022). A reflection on postwar neoclassical economics: The shift from general equilibrium theory to the new microeconomic theories. Modern China, 48(1), 29-52. Web.
Smart, S. (2020). The political economy of Latin American conflicts over mining extractivist. The Extractive Industries and Society, 7(2), 767-779. Web.
The purpose of the original settlements of Virginia and Massachusetts was very different. Virginia was founded as a commercial venture by the London Company in 1607 (Chet, 2019). Its primary purpose was to make a profit, as the settlers were expected to find gold and other resources to bring back to England.
Discussion
The economy of Virginia was based almost entirely on the production of tobacco, which was in high demand in Europe. This resulted in a plantation-style economy in which wealthy landowners held most of the wealth and power. In contrast, the Massachusetts Bay Colony was founded in 1630 by the Puritans (Mullin & Kotval, 2021). Their primary purpose was to create a religious community that followed their moral, social, and spiritual values. This resulted in a unique economic structure compared to that of Virginia. The settlers of Massachusetts relied mainly on subsistence farming and fishing. In addition, they engaged in small-scale trade and commerce, but there were other focuses of their economy.
The cultural values of Virginia and Massachusetts were also quite different. Virginia was essentially a hierarchical society, with a great emphasis on the idea of noblesse obliges, which meant that the wealthy landowners had a responsibility to their tenants and laborers. In Massachusetts, on the other hand, the Puritans believed in the importance of hard work and the equality of all people before God. This resulted in a much more egalitarian society. Finally, Virginia and Massachusetts had very different purposes at the time of their original settlement, reflected in their respective economies and cultural values (Cui et al., 2022).
Conclusion
Virginia was founded as a commercial venture, while Massachusetts was founded as a refuge for the Puritans. Virginia had a plantation-style economy and a hierarchical society, while Massachusetts had a subsistence-based economy and a more egalitarian society. The two settlements differed in many ways and achieved unique goals.
Mexico, a member of several economic integrations and regional trading agreements, has been actively participating in initiatives aimed at deepening its economic integration with other countries and increasing trade. While Mexicos membership in various agreements has helped to boost its economy, it has also faced challenges such as increased competition and pressure to lower labor standards. The Bank of Mexico is the countrys central bank and is responsible for managing its monetary policy, while the government is responsible for fiscal policy decisions on spending and taxation. The present essay will analyze some of the outcomes of recent inflation in Mexico, the countrys economic integration, as well as possible forecasts related to inflation and exchange rates in the country.
Mexicos Economic Integration and Forecasts
Mexico is a member of several economic integrations and regional trading agreements, including the following:
North American Free Trade Agreement (NAFTA): Mexico, the United States, and Canada signed the NAFTA agreement in 1994, which eliminated tariffs and increased trade among the three countries. This agreement helped Mexicos economy grow and attracted foreign investment, but also led to some job losses in certain industries as companies moved their operations to Mexico to take advantage of lower labor costs.
Trans-Pacific Partnership (TPP): Although the United States withdrew from the TPP under the Trump administration, Mexico remains a member of the 11-nation agreement, which aims to deepen economic ties and boost trade among the participating countries.
Pacific Alliance: Mexico is one of four founding members of the Pacific Alliance, a regional trade bloc that also includes Chile, Colombia, and Peru. The bloc aims to increase trade and investment, promote economic integration, and enhance competitiveness among its members.
Mercosur: Mexico is an associate member of Mercosur, a South American trade bloc that includes Argentina, Brazil, Paraguay, and Uruguay. Mercosur aims to promote free trade, encourage economic integration, and boost competitiveness among its members.
Mexicos participation in different economic integrations and regional trading blocs has been beneficial in terms of promoting greater economic integration with other countries, fostering trade growth, and attracting foreign investment. Although it has also encountered some challenges, such as heightened competition from other nations and pressure to lower labor standards. Nevertheless, Mexico continues to actively engage in these economic agreements to enhance its economic prospects.
Mexicos monetary policy is primarily managed by the Bank of Mexico, which is the countrys central bank. The Bank of Mexico sets interest rates in order to achieve its inflation target, which is currently 3% with a tolerance range of +/- 1 percentage point. The central bank also manages the supply of money in the economy through its open market operations. Mexicos fiscal policy, on the other hand, refers to the governments decisions on spending and taxation.
The Mexican government has been working to reduce its budget deficit and public debt, while also implementing reforms aimed at increasing tax revenue and improving the efficiency of government spending. Due to inflation surpassing the target rate of 3% with a +/- 1 percentage point set by the Bank of Mexico, the central bank has taken action (Reuters, 2023). It has raised its key lending rate by 650 basis points to reach 10.50% during the current tightening cycle; this cycle started in June of 2021 (Reuters, 2023). As of February 9, the central Bank was considering another interest rate hike at its next monetary policy meeting (Reuters, 2023, par. 7). According to Trading Economics global macro models and analyst expectations, the inflation rate in Mexico is forecasted to reach 6.46 percent by the end of the current quarter. Looking ahead, the Mexico inflation rate is predicted to trend around 4.00 percent in 2024 and 2.00 percent in 2025 ( Mexico inflation rate, 2023). Expected changes in inflation rates in Mexico can be influenced by various factors including economic growth, supply and demand dynamics, monetary policy, exchange rates, and global economic conditions.
Mexicos currency, the Mexican peso (MXN), is considered to be easily convertible. This means that it can be easily exchanged for other currencies, allowing for international trade and investment. The Mexican peso is widely traded in international currency markets and is one of the most actively traded emerging market currencies (Reuters, 2023). Mexico has a relatively open economy and has pursued a policy of currency convertibility since the 1990s, which has helped to promote trade and investment flows into and out of the country.
Making economic forecasts about exchange rates is extremely difficult, because they are highly influenced by various macroeconomic and geopolitical factors, and it is not possible to predict their future movements with certainty. Therefore, any exchange rate forecasts should be taken as mere estimates and not as a guarantee of future performance. For instance, the latest 2023 forecast for the USD/MXN pair predicts that it will maintain stability with an average of 20.00 in 2023 and 2024. However, it is always best to keep an eye on current economic indicators and stay updated on the latest news to make informed decisions about currency exchange.
Conclusion
To conclude, Mexicos membership in different economic integrations and regional trade agreements has had a beneficial effect on the nations economic growth and expansion, including greater trade and foreign investment. The Bank of Mexico, as the countrys central bank, holds a crucial position in managing the monetary policy and adjusting interest rates to keep inflation in check. Despite the forecasted inflation rate to trend around 4.00% in 2024 and 2.00% in 2025, according to predictions by Trading Economics, the Mexican peso is seen as easily convertible and is frequently traded in international currency markets. Predictions for currency exchange rates are difficult to make, as they are influenced by various macroeconomic and geopolitical factors, and any forecasts should be taken as mere guesses.
There is no doubt that capitalism has proven to be the most efficient model for economic relationships so far. However, with the consistent focus on expansion and profit increase, which companies are expected to pursue in the capitalist environment, the opportunity to support vulnerable and marginalized communities is reduced substantially (Edwards, 2014). In Irrational Exuberance, a chapter in his book Civil society, Michael Edwards insists that the integration of philantrocapitalist principles will allow addressing the described inconsistency. Defined as the framework that seeks to employ capitalist ideas in a manner that allows for non-profit activities within the market system, the concept of philantrocapitalism is believed to be the framework that will give credibility to the notion of capitalism in the present-day socioeconomic and sociopolitical setting (Edwards, 2014). In order to convince his readers, Edwards (2014) tells a story of philantrocapitalism being deployed in the real-world context. Specifically, the narrative that Edwards (2014) introduces is that one of the smaller organizations that do not have a global reach, such as the ones of Google and Microsoft. Nonetheless, the arguments that Edwards (2014) deploys are quite convincing in his plight to promote philantrocapitalism as one of the means of minimizing the harm that capitalist activities cause.
The problem of capitalism forcing organizations to focus solely on profit and neglect the needs of vulnerable communities is undeniable. However, one will also have to admit that capitalism represents the most functional and effective model for economic operations and trade relationships within the global context (Edwards, 2014) Therefore, Edwards (2014) concern regarding the detrimental effects that capitalism inevitably produces on vulnerable communities is quite legitimate. In turn, the notion of philantrocapitalism as the means of compromising between the pursuit of corporate profit and the focus on the needs of vulnerable groups appears to be a logical solution to the observed situation. Arguably, one could claim that philantrocapitalism is a contradiction in itself and, therefore, a notion that is unsustainable in the context of economic relationships. Specifically, maintaining a notion of supporting others by reducing the extent of a companys profit might seem counterproductive and, therefore, impossible by capitalist standards. However, viewing the specified change as a sensible alteration needed for organizations to retain their social status and currency, one could argue that philantrocapitalism represents a sensible compromise in the environment of the global economy (Edwards, 2014). Therefore, supporting philanthrocapitalism and encouraging its further development should be seen as a rational step to take.
Reference
Edwards, M. (2014). Irrational exuberance. In Civil society (pp. 81-89) (3rd ed.). Polity.
Estimating expected returns is crucial for the investors, as it helps to make informed decisions. Expected returns help to anticipate the profit or loss from an investment in a situation of uncertainty (Magni, 2020). Investors can estimate returns from either one investment or a portfolio investment based on historical performance (Magni, 2020). Expected returns are calculated based on predictions for different scenarios in the development of a company. For instance, if we consider different economic condition as possible scenarios, expected return will be calculated using the following formula:
Apart from expected returns, investors also calculate the standard deviation of returns to determine the volatility of possible returns from investment. The standard deviation as a square root of the variance. The formula for variance is provided below
Assuming a scenario company faces a 20%t chance of a poor economy, a 40% chance of an average economy, and a 40% chance of an above-average economy with estimated returns of 10%, 18%, and 30% correspondingly, the expected returns can be calculated the following way:
Now, using the total estimated return, the standard deviation of the investment can be calculated:
Thus, the calculations demonstrated that the expected return for the company was 21.2%, while the standard deviation was 7.76%.
Calculating standard deviation helps to determine risks of investment. In particular, the higher the standard deviation, the wider is the spread of possible returns, which implies higher uncertainty (Beers, 2022). In other words, the higher is the standard deviation, the higher are the risks of investment (Beers, 2022). Investors tend to have different tolerance to risk, which implies that calculating investment risks is crucial for all types of investors. While some investors can tolerate more risk with a chance of higher return, others have lower risk profiles, which implies that they prefer lower risks rather than having a chance at higher returns.
It should also be noted that standard deviation may depend upon numerous factors or condition. The example provided is a simplistic model that includes only three possible variations of one variable. However, there may be other variables that can affect expected returns, such as financial market conditions, market sentiment and expectations, interest rates and currency risks, labor costs, policies, regulations, and taxation (Magni, 2020). Portfolio managers take into consideration all the possible risks before making an investment.
References
Beers, Brian. (2022). How Is Standard Deviation Used to Determine Risk?
Magni, C. A. (2020). Investment Decisions and the Logic of Valuation: Linking Finance, Accounting, and Engineering. Springer International Publishing.
Dermontti Dawson was a former Pittsburgh Steeler who appeared in the NFL from 1988 to 2000. Despite a successful career, he experienced significant financial issues and declared bankruptcy in 2010, having around $70 million in debt (Andrew, 2022). Overinvestment in real estate, according to his instance, is a primary source of post-NFL bankruptcy. To better prepare for a career after football and retirement, he should have diversified his funds and not relied too much on one asset type (Kapoor, 2022). He should have also considered investing in low-risk, low-cost index funds, which might have helped him accumulate money.
Discussion
Additionally, it would have been wise to adopt a more conservative approach to investing in the real estate market by seeking out investment opportunities in which he had a controlling share. If he had done so, he would have been better positioned to manage his resources and make decisions in his best interests. He should also have hired appropriate financial and legal advice to aid him in navigating challenging investment decisions and protecting his assets from legal judgments.
Mark Brunell is a former NFL quarterback who spent 17 seasons with the Packers, Jaguars, Saints, Jets, and Redskins. He filed for bankruptcy in 2011, owing $24.8 million in debts after earning an estimated $50 million during his career (Andrew, 2022). He made the blunder of significantly investing in high-risk ventures such as mega-mansions and real estate investments. He should have divided his investments to avoid becoming bankrupt by relying on more than one asset kind.
Conclusion
In particular, investments in low-risk assets like mutual funds and low-cost index funds may have delivered steady returns. He should have also sought expert advice before investing, which may have saved him money. Furthermore, he could have adopted a more conservative approach to real estate investments, investing in less expensive structures with a better chance of producing consistent rental revenue. Finally, a broader investment portfolio and competent advice may have helped him better prepare for retirement and prevent financial catastrophe.
One of the basic laws of nature is the cyclicity of life. As the need to improve business sustainability increases, many companies adapt this cyclicity to their processes and conditions. Thus, by using the circular economy approach, firms are able not only to reduce their negative impact on the environment but also to leave a positive ecological footprint. The purpose of this paper is to list some companies implementing the cradle-to-cradle framework and discuss their unique solutions.
Discussion
The first business that utilizes the principles of circular economy is Shaw Industries. The firms focus is on material health, product circularity, clean air, and climate protection, water and soil stewardship and social fairness (Hartline, 2021, para. 2). One of its latest unique solutions is the creation of a new carpet tile collection called Reverse, constructed with EcoSolution Q100 yarn. This system offers 100 percent post-industrial recycled content allocated from waste minimization and collection efforts (Hartline, 2021, para. 7). Shaw Industries effectively addresses the cradle-to-cradle tasks and milestones by using materials considered waste in the past, which is an approach many other firms should pay attention to.
The second business integrating the methods of circular economy is Method Products. According to Kopnina (2019), one challenge that cradle-to-cradle companies face is the need to combine sustainable practices with customer needs and demands. Method Products successfully achieves this goal: the firm never trades the functionality or design of its products for eco-friendliness, deciding to focus on all these tasks. In 2017, the company created dryer sheets that became the first to receive cradle-to-cradle certification (MBDC, 2017). The unique formula of this product allows Method Products to be sustainable by reducing waste and also meet the needs of its clients.
Conclusion
To conclude, the methods of the circular economy seem to be quite efficient for many businesses. While it might be challenging to combine customer satisfaction and sustainability objectives or create a product using materials that were considered waste decades ago, many companies efficiently meet these aims. As a consequence, it may be insightful to study their successes and understand better how cradle-to-cradle approaches work and lead to enhanced brand image.
Kopnina, H. (2019). Green-washing or best case practices? Using circular economy and Cradle to Cradle case studies in business education. Journal of Cleaner Production, 219, 613-621.
Recently, the stock market has become one of the most interesting and main instruments for investing and raising capital by companies and investors. Most companies use the advantages of stock markets to attract public funding for business development. Thus, it is important to discuss how companies and different investors choose to use the stock market today in detail.
In most cases, company leaders and financial specialists decide to use the stock market in order to attract more resources and raise the existing capital. Thus, capital increase can be done through initial public offerings as well as subsequent offerings of shares on the market (Elfenbaum, n.d.). Then, companies can use the funds raised from selling their shares on the stock market in order to finance their current and future projects, expand their business, pay off debt, and pay dividends. In addition, listing shares on the stock market can also increase a companys visibility and attract new customers and investors.
Investors also use the stock market to develop their strategies, effectively use available financial resources, and distribute risks. According to Elfenbaum (n.d.), today the Internet allows many people to become investors, and they usually purchase stocks, bonds, options, and other securities to attract assets and increase profits. Depending on the strategy and needs, investors can buy short-term and long-term investments, as well as invest in various markets and companies, depending on their value. As a result, the stock market provides companies and investors with many opportunities for development and improvement of their business. In addition, stock markets also help investors make informed decisions and maximize their profits with reference to the analysis of companies profitability and future trends.
Securities play an essential role in the structure of the market economy, as they are an analog of money in the form of a document. Possession of them gives the right to receive a certain amount of funds or certifies property ownership. One type of security is stocks, which provide the right to receive part of the profit from the activities of the joint-stock company. There are different types of stocks, and owning each has its advantages and disadvantages.
A joint-stock company can issue common and preferred stocks. Common ones give the right to vote at the general meeting of shareholders. As a rule, the price of common stock is formed from the future income that its owner can receive. They can usually get their share of profits only after paying dividends on preferred shares. Moreover, one can pay dividends on common stocks only after payment of taxes, interest on bank loans, replenishment of reserve funds, and other expenses (Petty, et al., 2015). Therefore, one of the disadvantages of common stock over preferred ones is that the payment of dividends on common stock is not guaranteed immediately. Unlike preferred stocks, it depends on the results of commercial activity and the amount of profit received.
Preferred stocks have the properties of both stocks and bonds, and their owners have the right to a part of the corporations property. Unlike ordinary stocks, the owners of preferred ones receive a fixed income, the amount of which is determined immediately after their issue. Settlements with preferred stock owners are carried out in the first place before settlements with owners of ordinary ones. In addition, preferred stocks, as a rule, are perpetual securities, although in exceptional cases, they may have an expiration date. The companys founders can extend the preferred stock owners rights and allow them to exchange for ordinary stocks if necessary (Petty, et al., 2015). This possibility increases the investment attractiveness of the asset, as the expansion of rights reduces the risk. The owners of preferred stocks have an extended list of rights and receive a fixed income.
The rights conferred by ownership of preferred and common stocks are a determining factor in defining their value and investment risk. Therefore, the issuer can buy back the issued preferred stocks from the investor at any time. They can be exchanged for an equivalent number of common stocks or cash. In addition, the investor immediately receives the invested capital, which reduces the level of risk to a minimum. Their sensitivity to risk depends on what rights are granted to one or another class of preferred stocks (Petty, et al., 2015). The issuer can arrange the rights of the owners of preferred stocks in such a way as to attract investors on the most favorable terms. In turn, investors need to examine the company whose securities they plan to purchase.
Having studied the features of common and preferred stocks, it is clear that the latter are more attractive for investment and involve a lower level of risk for investors. For investors, the wide range of rights preferred stocks provide is proportional to the opportunities to satisfy their yield requirements. Moreover, payouts on preferred stocks are fixed, so investors, in this way, insure themselves against the risk of losses. In addition, preferred stock is convertible, meaning it can be exchanged for common stock or cash at any time. This feature protects investors from jumps in the market when the level of interest changes and, as a result, minimizes risk.
Reference
Petty, J. W., Titman, S., Keown, A. J., Martin, P., Martin, J. D., & Burrow, M. (2015). Financial management: Principles and applications. Pearson Higher Education AU.
