Category: Wealth

This paper is meant to analyze the book The Great Escape: Health, Wealth, and the Origins of Inequality written by an economist Angus Deaton in 2013. As the author claims, revenue disparity among different nations has amplified over the last three centuries.

Deaton gives the USA special attention, asserting that the extent of the nation’s disparity and its political troubles demonstrate the emptiness of the US claim of being a land of opportunity. The dynamics of disparity is particularly interesting.

The entire disparity of revenue is neither realistic nor advantageous, but the outcomes of disparity may be extremely harmful. The work’s vital geographical and historical background stresses the power of the message.

This work also offers a huge amount of smart statistical insights, causing the readers to imagine the cruel past, which the West has left behind.

In this book, the author fundamentally doubts the effectiveness of foreign financial aid, and demonstrates how the part of the global poor people are discovered not in Africa, but in booming, yet fundamentally uneven, economies of India and China. Simultaneously, author’s thesis is generally optimistic: humanity has made crucial progress while increasing its welfare.

In The Great Escape the author tries to tell the account of progress in profits and health during the past centuries. Through quite sincere preface, the author describe the experience of his own family to exemplify the book’s subject. The author’s father Leslie came into the world in a small village.

However, he attended night school to turn out to be a certified civil engineer, and then convinced teachers to educate his son.

Thus, young Angus and his sibling became the first children in the entire family to study at the university; nowadays, Leslie’s grandchildren live in “a world of wealth and opportunity that would have been a far-fetched fantasy in the Yorkshire coalfield” (Deaton Preface).

Angus’s father lived into his 90 year, and as the author mentions, his life story is one of enormous enhancements in health and financial security as Leslie’s parents passed away too young from illnesses, which could be cured nowadays.

Deaton uses the work of Robert Fogel in order to create his most significant point. He asserts that the influences of health and prosperity are self-reinforcing.

If an individual experiences reduced nutrition, he can face a trap when his possible profits are cut as he is physically exhausted to work, but with no work he cannot buy high-quality products.

At the same time, healthier people can work longer and more effectively, creating profits, which give them far better nutrition and wellbeing. Hence, better wellbeing and prosperity feed one another in this circle.

Generally, the future that the author predicts is a bright one as life is getting much better. Humans are generally richer than ever before. In 1820-1992, the percent of humans living in extreme scarcity globally fell from 80 to 25 percent.

The author treats the Industrial Revolution as crossroads in economic growth, turning over centuries of stagnation. Powers in Western Europe and the USA enjoyed evolvement at an unparalleled level. The development in those nations carried on accelerating after the Second World War.

After the war there were many pessimistic predictions concerning how human growth would cause the mass famine in the Third World.

However, by the most noteworthy features – how long humans live, what they are aware of, how healthy they are – current existing has never been better. It is worth mentioning that the situation is continuing to improve.

The author certainly understands that some readers will treat these arguments with skepticism. Hence, he deals with possible skeptics with comprehensive and thorough depiction of how life of people all over the world has enhanced. Life expectancy demonstrates 50% since 1900, and it is still increasing.

The author uses many graphs and additional data to support his point of view. He attributes better health of people to increased nutrition and control of illnesses via public health measures. Moreover, better sanitation and clean water lessened the spread of sicknesses.

Other programs, such as vaccination program also lessened infant mortality. Also, in spite of the resultant populace outburst, the quality of life has enhanced. The part of humans living on less than one dollar a day has dropped to %15, from nearly 40% as it was in the year 1981.

This work’s final chapter is dedicated to the impact of foreign aid on national evolvement (Deaton 267-325). Consistent with the author, aid does not merely have a positive effect on the national evolvement; actually, it delays it.

The author claims that financial aid prevents evolvement by breaking the necessity for administrations to be answerable to their people. The supporters of aid claim that the aid has to be substantial to help the nation. Nevertheless, Deaton believes that this approach can fail, as the trouble is not, in fact, a lack of sources.

He asserts that it is corrupt and unproductive organizations and politics that hinder country’s economic growth. Moreover, there are certain troubles with the approach to the structure of financial aid. Hence, Deaton joins other economists in disapproving financial aid.

He does not think that all sorts of aid are terrible. In fact, aid can save lives. Nevertheless, the advantages that financial foreign aid offers, should be estimated against its drawbacks, and Deaton thinks that aid damages countries over the long run (Deaton 267-325).

The book elaborates on one fundamental recommendation for assisting the poor countries: reduce the aid budgets.

Aid never promotes development. In fact, abundant aid is a way to growth, which may damage institutions – permitting rulers to do whatever they want without any approval as they do not have to tax local populace.

However, Deaton treats far more sympathetically aid directed at enhancing health, as that may address certain malfunctions of market provision. Deaton admits that foreign aid has saved many lives in poor nations by reducing childhood deaths from contagious illnesses.

However, even in health field aid’s role is restricted by the fact that it does not assist in creating the necessary fundamental health system. Prosperous nations’ investment in investigation, whose advantages would flow to the poorest states, could be especially helpful. Aid as knowledge rather than money is precious as well.

Thus, the author concludes that the record of external aid reveals no confirmation of any general valuable influence. Financial help weakens organizations, democracy and national prosperity. He claims that the foreign assistance has to be cut.

The prosperous nations should leave the evolving nations to grow using their own resources, in their own time, just as all developed states did. Deaton explains that if all circumstances for evolvement other than funds exist, resources will be gathered locally quite soon.

However, if the circumstances for evolvement do not exist at the moment, then aid will be unproductive and, hence, useless. In fact, other tools, such as immigration, trade liberalization, and subsidy reform do more to support the national development.

Principally, prosperous nations have to stop creating barriers in the way of the growth of poor states. Trade restrictions and farm funding put poor nations at a terrible position. The regulations on intellectual property rights should be modified so that they can never show favoritism against the poorest states.

Easier migration can be the most useful aid policy. The immigrants from all countries are better off than ever before. The money they send back home also enhances the economic situation in the state.

These flows of money, which are, in fact, larger than the flows of financial foreign aid, may allow recipients to demand more from their administration, enhancing own political power instead of weakening it.

Essentially, the author offers the readers three significant messages:

First of all, for the majority of humans on this planet, life is longer, better and wealthier than all previous generations could have expected.

Second, obvious disparity within prosperous nations may be a hazardous issue. The author ties together the concept of Pareto optimality – the concept that some alteration reflects an enhancement if as a minimum one human being is feeling better.

This concept has been treated as the idea offering justification for trickle-down theories, but merely due to the fact that economists have used it narrowly to profits rather than to general social welfare.

In fact, disparity can be justified, but not the degrees of disparity in America nowadays, which weakens public services and provides the small interest groups with excessive lobbying control. The hazard is not merely to the happiness of the deprived citizens, but to general democracy and development.

Powerful and rich upper class has choked off economic development before, and they can do it again if they are permitted to weaken the organizations on which international evolvement depends.

Third, foreign aid is, in fact, a part of the dilemma, not the resolution. The author discusses other options, which might be more successful, embracing eradicating obstructive trade limitations, facilitating the temporary immigration and offering incentives for drug organizations to invest in medicines for certain diseases, for instance, malaria (Deaton 267-325).

To sum up, in his book, Deaton doubts the effectiveness of foreign aid, and portrays how the greater part of the global poor people are discovered not in Africa but in the flourishing, yet fundamentally uneven, economies, such as China and India.

At the same time, author’s thesis is generally optimistic: humanity has made crucial progress increasing its welfare.

This book is especially successful in two dimensions: it dedicates lots of attention to the thorough clarification of the measurement of dissimilar wellbeing features and ties among them; and the restrictions of what one can conclude from dissimilar features in terms of their causes and effects, given the accessible data and approaches.

This work avoids the intellectual disputes in economics, instead concentrating on offering the facts in an obvious and wide-ranging way. Hence, the book is mostly accurate and not controversial excluding the final two chapters.

Works Cited

Deaton, Angus. The Great Escape: Health, Wealth and the Origins of Inequality, Princeton, Princeton University Press: 2013. Print.

Introduction

In every economy, the main objective of the policy makers is to achieve development within the country. Many countries have employed various ways in order to achieve their development goals. In their efforts, the main target of the public policy makers is to bridge the gap between the poor and the rich.

The gap between the poor and the rich is the major criterion that is used to measure the position of an economy in terms of development. The more the disparities among the poor, the high is the level of poverty in an economy. Despite of the efforts employed by many organizations in promoting development, disparities among the poor still remains extremely high.

Many policy makers have been advocating for sustainable development as the best way to promote development within an economy. However, this has been opposed on the ground that sustainable development robs the poor world of the possibility of convergence with the rich world.

Discussion

Sustainable development can be viewed as the process where the resources are utilized in such a way that it promotes preservation of the environment while meeting the present as well as the future needs¹. The advocates of the sustainable development are determined to realize the economic environment where development efforts include environment protection, social progress, and economic growth. The main concern here is to avoid environmental degradation for the sake of the present as well as the future generation.

In the contemporary world, the question of globalization has raised critical issues on environment raising the need for a sustainable environment. The rate of environmental degradation has increased significantly, the fact which has raised the concern of the policy makers.

Although sustained development has paved way for convergence between the poor and the richer world, it has in some cases resulted in increased inequalities among the people. It has led to increased gap between the poor world and the rich world. This is because majority from the poor countries over rely on the natural capital as their main source of livelihood.

Sustainable development and poverty; Environmental issues

As already noted, the main goal of the policy makers in every economy is to promote development. Many economies have employed sustainable development policies in order to achieve their development goals effectively. However, sustainable development may contribute to increased difference between the poor and the rich².

Sustainable development can be seen to increase disparities at various levels. First, it creates disparities at the personal level where some individuals get richer. Sustainable environment also increases disparities at regional level as well as at the national level.

According to the international trade arrangements and specifications, more emphasis is given to the protection of biodiversity, ozone layers and desertification through adoption of sustainable growth³. However, these international arrangements have paid very little attention on the strategies of harmonizing trade as well as environment trade and development⁴. As a result, these policies have led to increased disparities among the poor and the rich countries.

Most less developed economies relies on the debts from the developed organizations in order to meet most of their needs. In most cases, the lending economies tend to be pushed in adoption of the strategies promoting sustainable development⁵. Such pressure denies the developing countries the power to make independent decisions. As result they may end up being forced to adopt strategies that do not maximize their benefits.

Strategies of sustainable development require a significant amount of both institutional and human resources⁶. Therefore, a poor country is adversely affected if it chooses to use some of these funds in implementing sustainable development strategies. In most cases, these economies are faced with difficulties in their effort to meet the basic need of its citizens. Therefore, shifting fund to sustainable development may therefore lead to increased poverty within a country.

According to the principles of sustainable development, countries are required to replenish their natural resources faster than they are used⁷. Most developed countries are able to achieve this because they have diversified economy. On the other hand, poor or developing countries over rely on their natural resources as the backbone of their economies⁸.

Therefore, it is very difficult for the poor countries to replenish their natural capital at a higher rate because they have not diversified on their economic activities. This implies that these organizations will adversely be affected by the policies of sustainable development. The poor countries will become poorer because they over rely on the natural resources. One of the most important roles of sustainable development is to facilitate economic growth within an economy. However, this does not guarantee equitable distribution of resources.

There are no significant linkages between poverty and natural capital. However, some people are inclined to the conclusion that the poor are more destructive to the environment than the rich. This implies that we can still have sustainable growth or the growth that does not lead to environment degradation and still have majority of the people living in poverty.

Therefore, the government must not only facilitate sustainable development, but also emphasize on equitable distribution of resources. In most cases, economic growth is only felt by the rich in the society. This increases the disparity among the people.

Many people have argued that there is a need to have a development process which focus more on the institutional and cultural development, where more emphasis is granted to the stakeholders who include family, individual, community and both private and public sectors⁹.

All these groups must be given the opportunity to give their views on development issues. In such a case, each group will be represented in the decision making process. As a result, this will facilitate the convergence of the rich and the poor in the society. On the other hand, sustainable development will not always guarantee equity in the distribution of resources.

As already noted, sustainable development leads to economic growth. Since different places have different types of resources, this encourages disparities between different regions. As a result, the differences among the people from various regions increase¹⁰. For instance, some regions may have more resources than others.

Therefore, there is a need to have more strategies that will promote equitable distribution of resources across the regions. This will help in bridging the gap between the poor and the rich in the society. For instance, the government can promote social equity by using the tax charged on resources to provide social services.

In order to bridge the gap between the poor and the rich in the society, there is a need for a shift in the development strategy¹¹. For instance, more emphasis must be put on the formal and informal institutions that brings together public sector, private sector, community, individual and family¹².

However, sustainable development should be used in providing the direction for this strategy. This strategy must also ensure that the family, individual and the society are at the centre of these issues. Therefore, the problem at hand will be handled from the people’s perspective. Therefore, the stakeholders will be in a position to come up with appropriate policies that promotes equity and well being in the society.

The Role of Sustainable Development in Converging the Poor and the Rich

Sustainable development has helped to bridge the gap between the poor and the rich. As already noted, sustainable growth helps an economy to maintain its natural capital as it realize its development goals.

In most cases, when there are natural disasters resulting from natural capital degradation, the most affected people are the poor in the society¹³. In this case, sustainable development contributes in promoting the convergence between the rich and the poor in the society.

Sustainable development plays a significant role in tackling some of critical global issues like inequality, poverty, hunger and environmental degradation¹⁴. These are the main goals under which sustainable development is based. All these strategies have a significant contribution in bridging the gap between the rich and the poor.

Sustainable development advocates have been arguing that it leads to increase in employment levels. Low employment level is one of the main problems that have been facing a number of organizations in the contemporary world. High unemployment levels leads to increased discrepancies between the poor and the rich¹⁵. Poverty can significantly be reduced by increasing the level of unemployment in the society.

Sustainable development also leads to significant economic growth. In most cases, economic growth goes hand in hand with high living standards.¹⁶ Therefore, sustainable developments will help to improve on the living standards of the poor in the society. Consequently, every person will be better of through the economic growth. This has significantly helped in bringing convergence between the rich and the poor.

Solution

As already noted, the main issue that is facing many economies in the world today is to bridge the gap between the poor and the rich. However, differences between the rich and the poor persist to increase. There is therefore a need to come up with a sustained development plan that promotes the equity between the rich and the poor.

In order for the sustainable growth to facilitate equity within the society, it is advisable to ensure that there is close partnership with all the parties involved in promoting sustainable development strategies in order to ensure that they develop development programs at the local level. When the local people are involved in making critical decisions that touches them, it is easier to come up with the best measures that does not affect the well being of the local society.

As noted earlier, most of the poor people depend on the natural resources as the source of their livelihood. As a result, they are more likely going to be affected if the use of these resources is restricted. Therefore, it is necessary for the policy makers to solve the problems of such families before putting restriction measures on the use of natural resources. By so doing, the gap between the rich and the poor will be bridged.

While promoting sustainable development policies across the world, it is advisable for the parties responsible to consider the economic positions and environment and then come up with appropriate policies. Poor countries cannot do without exploitation of their natural capital. Therefore, it is advisable to consider the feasibility of various sustained development policies before implementing the same. This will ensure that the strategies applied do not lead to more poverty but rather reduction in the gap between the rich and the poor.

Conclusion

This discussion has clearly revealed the position of sustainable development in convergence between the poor and the rich world. Although sustainable development has contributed to economic growth, it does not guarantee equitable distribution of these resources.

In order to achieve equitable distribution, there is a need to integrate appropriate strategies that will facilitate equitable distribution of resources among the people from different regions. It is also advisable to include individuals and the society in the decision making process. This will ensure that all development strategies reflect the needs of the society. This will promote equitable distribution of the resources.

On the other hand, sustainable growth advocates argue that sustainable development has significantly contributed in reducing the gap between the rich and the poor in the society. Through sustainable development, an organization is able to reduce the level of unemployment in the economy. High level of employment helps in bridging disparities among the people.

Bibliography

Anonymous, Summary of the Workshop on Poverty Alleviation and Sustainable Development: Exploring the Links. 2001. Web.

Elliott, J., An Introduction To Sustainable Development, New York, Routledge, 2008.

Faucheux, S., O’Connor, M. and Straaten, J, Sustainable Development: Concepts, Rationalities, and Strategies, New York, Springer, 1997.

Gechev, R., Sustainable Development: Economic Aspects. U.S.A., University Press, 2005.

Mawhinney, M., Sustainable Development: Understanding the Green Debates. Wiley-Blackwell, 2002.

Nomani, Z., Environment, Sustainable Development and Globalization. 2007. Web.

OECD, Sustainable Development: OECD Policy Approaches for the 21^st Century..U.S.A., OECD Publishing, 1998.

Organization for Economic Co-operation and Development, Sustainable Development: Critical Issues. Danvers, MA, OECD Publishing, 2001.

Rao, P. K., Sustainable Development: Economics and Policy. Wiley-Blackwell, New York: Wiley-Blackwell. 2000.

Riley, J., Macroeconomics / International Economy. 2011. Web.

Rogers, P., Jalal, K., and Boyd, J., An Introduction To Sustainable Development, Earthscan, London, 2008.

Shah, A., Sustainable Development. Web.

South African Development Community, Environment and sustainable development. 2009. Web.

Stokke, O., Sustainable development, Routledge, New York, 1991.

Sustainable Africa, Environment. 2001. Web.

Footnotes

• ¹ Z., Nomani, Environment, Sustainable Development and Globalization, 2007.
• ² J. Riley. Macroeconomics / International Economy. 2011.
• ³ Anonymous. Summary of the Workshop on Poverty Alleviation and Sustainable Development: Exploring The Links. 2001.
• ⁴ South African Development Community. Environment and sustainable development. 2009.
• ⁵ A. Shah, Sustainable Development.
• ⁶ A. Shah, Sustainable Development.
• ⁷ S., Faucheux, M. O’Connor, and J. Straaten, Sustainable Development: Concepts, Rationalities, and Strategies. Springer, New York, 1997.
• ⁸ Organisation for Economic Co-operation and Development. Sustainable Development: Critical Issues. OECD Publishing, Danvers, MA, 2001.
• ⁹ Sustainable Africa, Environment. 2001.
• ¹⁰ P. K.. Rao, Sustainable development: economics and policy. Wiley-Blackwell.New York, 2000.
• ¹¹ P. Rogers, K. Jalal, and J. Boyd, An introduction to sustainable development. U.K: Earthscan, 2008.
• ¹² R. Gechev, Sustainable Development: Economic Aspects. University Press, U.S.A., 2005.
• ¹³ J., Elliott, An introduction to sustainable development. Routledge, New York, 2008.
• ¹⁴ M., Mawhinney, Sustainable development: understanding the green debates. Wiley-Blackwell, 2002.
• ¹⁵ O., Stokke. Sustainable development. New York: Routledge, 1991.
• ¹⁶ OECD. Sustainable Development: OECD Policy Approaches for the 21st Century, OECD Publishing, U.S.A, 1998.

Introduction

Correlation coefficient analysis is used in exploring relationship(s) between variables where there is interest in examining the strength of a relationship between variables. A correlation coefficient is a numeric measure of the amount of strength of the association or relationship between variables.

In this case, the variables are GDP per capita, economic freedom and property rights. The current case study aims to look at the statement, “the nations’ wealth appears to be highly related with a level of economic freedom and property rights” and establish its consistency or otherwise with the collected data.

Consistency or inconsistency of the statement with the data

The table below shows three countries that had the highest GDP per Capita value, Economic Freedom, and also Property Rights. The table also shows the countries with the lowest GDP per Capita value, Economic Freedom, and also Property Rights.

Source: Author (2012)

From the above table, it can clearly be seen that there exists a strong relationship between a nations’ wealth (GDP per Capita), Economic Freedom, and Property Rights. From the economic performance of the selected countries, it can be observed that increase in economic freedom results in increased GDP per Capita. Similarly, increase in security of a person’s property results in increased GDP per Capita.

Therefore, there is a positive correlation between the dependent variable (GDP per Capita), and the Independent variables (Economic Freedom and Property Rights). This means that an increase in the independent variable results in an increase in the dependent variable resulting in positive correlation. However, the correlation between GDP per Capita and Property Rights is stronger with a correlation coefficient of 0.8045 compared to the lower correlation coefficient of 0.6860 between GDP per Capita and Economic Freedom.

Countries that have free economic freedom and the most secure freedom rights have large GDP per Capita. This can be Denmark has the highest GDP per Capita ($47,284.65) and also the most secure property rights (8.2). This country also has a high index economic freedom coming second to USA with an index of 8.2. Increased security in property ownership and rights of use means that people are more confident of the future and can invest without fear of loosing their property and hence investment.

This will therefore spur growth and results in the growth of a nation’s wealth (GDP per Capita). At the same time, secure property rights regimes means that more new investors whether domestic or foreign will be willing to invest in the country. This will result in growth in the GDP. When people feel insecure about their property, they do not invest and in extreme cases may even to get out of earlier investments resulting in a decline in GDP per capita.

This was the case in Uganda when the dictatorial government of Id Amin seized foreign owned property (of mostly immigrant Indians) consequently plunging Uganda in an economic crisis that has yet to recover fully. Economic freedom does not only make trade easier, but also allows healthy competition. This completion is good because it ensures that high quality products that are affordable to the customers are in the market.

This will therefore result in increased GDP per Capita. Economic freedom is also associated with reduction of the process of licensing of new enterprises. This removal of unnecessary barriers to trade encourages new people to venture into business resulting in increased GDP per Capita.

The debate regarding the sovereign wealth funds (SWFs) has drawn the attention of many financial regulators. Sovereign wealth funds are governments’ acquisitions of financial assets located across the world. The returns from the assets are usually more than the returns earned in markets free of risk.

In the contemporary world, the popularity of sovereign funds have grown exponentially with their net worth estimated to be more than three trillion dollars. Besides, it is important to recognize that SWFs constituted high percentage of all mergers and acquisitions witnessed at the onset of 2008. They also contribute hugely to the money injected in foreign assets.

The size of the funds has increased tremendously as countries seek to increase the returns from such funds. In fact, they are growing at a rate of approximately 24% annually. Although the idea of SWFs is not entirely new, their growth has sparked concerns especially among politicians and financial analysts at the helm of international financial markets.

The rationale is increased lack of transparency in these funds. While politicians are using the funds to change macroeconomic perspectives of their respective countries, regulators highlight the increased need for accountability. As such, the article tends to explore the validity of the concerns raised in the context of sovereign wealth funds.

There are two explicit ways in which governments are increasing returns from sovereign wealth funds. First, it happens through exportation of commodities. Countries engaging in exportation of commodities are willing to invest in SWFs owing to their increased need to cushion their markets from fluctuation.

These fluctuations occur during booms and downfall of markets. As such, financial analysts have found out that the likelihood of commodity exporters to place their money in SWFs is three times more than in countries that do not export commodities. In addition, such non renewable resources as oil have forced countries to liquidate their value through the funds.

Second, countries with huge fiscal and balance of trade have also increased their tendency to invest in SWFs. The countries invest in such funds to keep their exports competitive in international markets. Economists explicate that the concept of sovereign funds are effects of macroeconomic imbalances.

Policy concerns

To deal with these growing concerns of sovereign wealth funds, the article highlights policy issues that need to be addressed. In particular, the author points out that there are apparent worries that have gripped investors regarding their potential effects on corporate governance.

In addition, other fears entail protectionist backlash. At the outset, it is important to recognize that the transparency of SWFs has reduced tremendously over the years. Many sovereign wealth funds fail to reveal their financial information making it hard for regulators to control them.

The countries’ objectives of acquisition of international financial assets have switched rapidly and many financial analysts say that the manner of acquisition reflects strategic interests of various countries. This is in opposition to their main objectives of accumulating high returns.

Thus, their intentions are vague to many people and financial investors who agree that the concept of counterparty surveillance would have turned them more transparent than now. With all these factors surrounding the sovereign wealth funds, they provide a thriving ground for corruption and manipulation of financial policies.

As American financial analysts would agree, the rise of authoritarian regimes in Asian countries which have continued to acquire numerous international financial assets is a big worry. In authoritarian regimes, there is an increased incentive to invest through SWFs more than in a democracy.

This happens in two folds. Chiefly, there is an increased room for corruption and lack of accountability in dictatorial regimes. In addition, the policymakers are able to make unpopular decision relating to SWFs without any dissent emanating from their population. Some of these decisions yield high returns in the long term.

This model where the authoritarian regimes are able to suppress dissent has enhanced the ability of the countries to make high returns and increase their strategic interests in comparison to a more transparent economy. Are these concerns valid?

The arguments provided above lack clear empirical foundation. While many of them insinuate that SWFs are detrimental to the financial markets, there have been instances in which all participants in financial markets stand to gain. In particular, such sovereign funds as Blackstone have gained immense returns by investing in China.

Sovereign wealth funds seem to be in line with other similar funds. It is therefore important not to single out the funds as the riskiest given that pension and endowment funds are increasing their assets’ acquisition in developing countries. As such, the growing concerns over the funds are unfounded. Besides, SWFs have been known to increase technological development of domestic and home countries.

Nevertheless, leverage exercised by countries over SWFs has been typical of the international markets. For instance, the threat by Muamar Gaddafi (the former leader of Libya) to withdraw the country’s sovereign funds from African states due to their disinterest in the idea of African unity was seen by financial analysts as a misinformed decision that would paralyze the international markets.

The act however did not have any significant effect in policy frameworks. The rationale is that such threats only yield effects under specific situations. Besides, it is important to notice that research shows that such threats have no capability of forcing countries to assume specific decisions. Although the growing acquisitions of funds may bring about comparative advantage in the long-term long term, it remains unseen.

To increase the validity of potentially harmful effects of sovereign funds, international institutions such as IMF have attempted to provide ethical guidelines.

However, the failure of countries to agree with the provisions unanimously has been apparent. However, sovereign funds remain important sources of both authoritarian and democratic regimes across the world. This is despite the apparent difference in SWFs of the two sets of regimes.

The article points out that the difference between sovereign wealth funds located in democratic and authoritarian regimes is the lack of transparency which might have a detrimental effect.

Are the SWFs the same? Yes. The rationale is that there have been many steps in the international markets to be able to comprehend the policy frameworks of authoritarian regimes making the SWFs the same regardless of the nature of political regimes.

In America, the growth of sovereign wealth funds may compromise the country’s ability to remain within the principles of democracy as the country may result to the tendencies of other players in the financial markets. The increase of the funds is a revelation of America’s weak macroeconomic policies. Importantly, the direction that sovereign funds have taken may influence American foreign policy in a great way.

The rationale is that the country may see the need to review it democratization policies owing to its inability to provide an equal platform amongst countries venturing in sovereign wealth funds. Coupled with the fact that the authoritarian regimes especially those that are in the Middle East have reaped immense benefits from SWFs , the countries may have gathered immense influence to counter the advancement of democracy by the Americans.

Further, consolidation of funds by authoritarian regimes in addition to growing dissent of Americanism may frustrate the efforts and objectives of prescribing democratic regimes in such countries.

It is critical to consider SWFs within the context of changes that are typical of contemporary world. In particular, it is advisable to reflect on changes in technology, policy and international markets.

Besides, change of power distribution among countries in the world ought to serve as the lens through which financial regulators and monitors analyze the sovereign wealth funds. Importantly, globalization of financial markets has further complicated the concept of sovereign wealth funds.

Summary

In sum, sovereign wealth funds reflect the continued acquisition of international financial assets by countries across the globe. There have been numerous concerns that surround the increase of sovereign funds. These concerns include lack of transparency and sovereignty of countries participating in international markets. Nonetheless, in line with articulations of the article, the concerns lack firm foundations.

Indeed, the author points out that there is no significant difference between sovereign funds in authoritarian and democratic regimes. The author however reveals that the exponential growth has clearly shown that there are macroeconomic weaknesses in European and American markets. This may influence their ability to influence other countries, which ultimately means a change in their foreign policies.

In his book The Wealth of Nations, Adam Smith makes several important claims about the functioning of economic and tries to explain the welfare of the society can be improved. His central thesis is that countries should increase the value and productivity of their labor in order to promote the welfare of citizens. To some degree, this goal can be achieved by removing trade barriers or making market more open.

Even though Adam Smith’s ideas have been disputed by many thinkers, they have shaped the way in which many governments and economies work. Moreover, his views remain relevant to modern societies. In order to elaborate his argument, Adam Smith first focuses on the role of money. First of all, the author challenges a popular opinion, according to which money and wealth are “considered as in every respect synonymous” (Smith, 248).

He does not agree with the idea that rich country should only accumulate silver and gold. The author urges people to remember that this view of wealth completely overlooks such things lands, consumable goods or houses that are also important for the wellbeing of the society.

Furthermore, he objects to the idea that such metals as gold and silver should not be carried away from the country because such prohibitions only impede trade and prevent people from maximizing their wealth. To a great extent, Adam Smith views had profound implications for the strategies of many governments.

The discussion of money and its functions helps Adam Smith introduce such concepts as productivity, free market, and comparative advantage. First of all, the author notes that some countries can manufacture some products better than others and at a lower cost. For instance, he mentions that is more prudent to import wine from France, rather than encourage its costly production in Scotland (Smith, 265).

At this point, he introduces such a concept as “natural advantage” of a nation (Smith, 265). Among such advantages, one can distinguish climate or geographic position. On the whole, Adam Smith enabled people to look at economic relations from a different angle. His work demonstrates that the well-being of a nation greatly depends on people’s ability to create extra value.

Furthermore, the author points out that protectionist policies can be destructive and irrational. Adam Smith creates a very powerful analogy in order to illustrate his argument. In particular, he says that “the shoemaker does not attempt to make his own clothes, but employs a tailor” (Smith, 264). Similarly, people buy goods that can be better manufactured or produced by someone else (Smith, 264).

This example is supposed to illustrate the benefits of open markets. Thus, the government that erects trade barriers limits the choices that are available to the citizens. Thus, the welfare of the nation greatly depends on the ability of a nation to use its natural advantages. In turn, the presence of competition forces manufacturers to improve their work and make better offerings to buyers.

Therefore, Adam Smith succeeds in showing that the wealth of a nation should not be reduced only to money. Instead, people should pay more attention to the ability of the industry to create additional value and raise effectiveness of manufacturing. Furthermore, governments should focus on the welfare of citizens, rather than only production. On the whole, the works of this thinker has contributed to the evolution of economic science.

Works Cited

Smith, Adam. An Inquiry into the Nature and Causes of the Wealth of Nations, New York: Digireads.com Publishing, 2009. Print.

Introduction

The current disparities in wealth have been in existence for many years. The gap between the rich and the poor started to widen due to the emergence of industrialization. Inventors of various technological components monopolized their inventions. This enabled them to accumulate enormous wealth (Portes 1).

This article examines two authors namely George Henry and Carnegie Andrew and how they argue about wealth accumulation and its effects. Their ideas on the effects of accumulation of wealth in the development of America are indeed conflicting.

For instance, Henry believes that accumulation of wealth by a few individuals negatively affects America. However, Carnegie exudes confidence that there are myriads of positive effects when individuals are allowed to accumulate enormous wealth.

Analysis

According to Henry (Portes 2), the true wealth of an individual should be limited to the individual’s ability. Other factors (such as monopolies) that allow certain individuals to accumulate mass wealth should be discouraged. He believes that the difference in the innovativeness of individuals is not as large as the gap that exists between the poor and the rich (Portes 3).

In addition, he supports his argument with case studies of millionaires who existed during his lifetime. He describes the way those millionaires accumulated their wealth. From his analysis, it is evident that several wealthy people employed high levels of manipulation, monopolization, and fraud to acquire their riches. He asserts that all human beings have the ability of becoming rich.

However, the current gap between the rich and the poor coupled with individualism has made it almost impossible for the poor to acquire wealth. He advocates for government regulations on the amount of wealth that can be owned by an individual. In his paper, he also philosophically asserts that the true wealth of Americans should almost be equal.

Henry’s perspective is a complete contrast to Carnegie’s point of view. Carnegie believes that Americans who are being allowed to accumulate wealth allow better economic development. He envisages that the spirit of individualism encourages competition and self-actualization (Portes 2). Moreover, he has no problem with Americans accumulating wealth.

He perceives it as a normal occurrence in humanity since an individual’s social status is dependent on effectiveness and. He offers explanations on the relevance of wealth accumulation and how it has helped to further the industrial revolution in the country.

In addition, he believes that if Americans’ freedom of wealth accumulation is restrained, the developments realized so far will be significantly affected. His opinion is based on the natural human instincts of an individual’s success rather than group success.

The efficiency of Americans will be downgraded if individualism is prohibited. Furthermore, he argues that most Americans may not realize their full potential. Therefore, the accumulation of wealth from Carnegie’s point of view is seemingly better for the sake of all Americans.

The two authors agree to some extent that the emerging gap between the poor and the rich should be addressed. However, they offer different methods of addressing the growing disparity between the poor and the rich. To begin with, Carnegie believes that nobody should acquire riches using fraudulent deals. However, he advocates for incentives so that all Americans can be enabled to accumulate enough wealth.

This is opposed to direct wealth redistribution. He offers several measures such as increasing training facilities and educational support that will enable the poor to bridge the gap between them and the rich. Additionally, he advocates for active utilization of the accumulated wealth. In addition, he proposes the initialization of government policies that compel the rich to help the poor in society.

This contradicts Henry’s perspective who believes that the available wealth should be distributed among all the Americans. He suggests that this is the only way that equality can be realized in the American society. Furthermore, he narrates that the accumulation of wealth is a means of manipulating of government processes. He compares it with the way judiciary has been manipulated for long as a result of accumulated wealth.

The rich people use wealth to acquire almost everything they need including justice. In order to avoid such occurrences, he suggests equitable distribution of wealth among the Americans. Carnegie rejects this proposal by arguing that wealth distribution will not solve the problem since it is a temporary solution to the challenge.

He believes that redistribution of wealth will eventually result into emerging cases of the rich and the poor due to the management styles of those who own property. This is opposed to Henry’s suggestion.

Analyses of the two authors’ arguments confirm that that they agree on the problem that is facing Americans, namely the growing gap between the poor and the rich (Portes 8).

While Carnegie trusts that the two diverse groups will always exist and nothing can be done to bring everything on the same level, Henry is emphatic that all Americans can be equal provided that the necessary measures are put in place to tackle the disparities. Carnegie suggests that very little can be done in terms of uplifting the poor people.

Redistribution of the wealth will downgrade the achievements that were made during industrial revolution. The revolution was a success because individuals were allowed to obtain maximum returns from their contributions. Hence, it encouraged competition for resources and eventually enhanced development (Portes 10). The acknowledgement of excessive wealth accumulations because of capitalism and individualism is quite intriguing.

The author advocates for wealth accumulation but believes that there should be a maximum amount of wealth that an individual can posses. He points out on the available mechanisms that can be used to redistribute wealth. The most common mechanism is the distribution of wealth to family members.

He note that this option of wealth redistribution may be ineffective since individuals may not be willing to share their wealth with family members before they die. Besides, most people die without the proper documentation on wealth distribution.

One of the solutions offered is that in cases where individuals own massive wealth, they should use the same to uplift the society during their lifetime. He is against cases where individuals’ wealth is used to help the society when the actual owners are already dead. This offers no room for appreciation of the help offered and therefore, it limits the number of people who are willing to give back to the society (Portes 13).

To recap it all, the arguments posed by the two authors are indeed substantial although some recommendations may be unrealistic. However, both of them are advocating for all Americans to be rich. Henry believes that all Americans are wealthy but they have been denied their riches, while Carnegie emphasizes that the rich should use their wealth to develop a platform for bridging the gap between the rich and the poor.

Works Cited

Portes, Alejandro. Social Capital: Its Origins and Applications in Modern Sociology. Annual Review of Sociology 24(1998): 1-24. Print.

Robert Kiyosaki’s book is a financial masterpiece that offers advice on how to achieve financial independence regardless of one’s level of education. The book was published at the time when many people debated the relevance of higher education about attaining success in life. Colleges equip students with knowledge and skills that enable them to pursue careers of their choice. However, they do not equip them with knowledge on how to attain financial independence.

In the book, Kiyosaki faults the education system by comparing the levels of the financial success of his two dads who gave different advice on attaining financial independence. Kiyosaki argues that pursuing higher education does not guarantee financial independence because wealth creation requires certain skills and knowledge that are not taught in college. According to him, the most important aspect of wealth creation is the application of financial knowledge, which is rarely acquired in institutions of higher education.

To pass his message effectively, Kiyosaki uses case studies of his two dads who had different levels of education, as well as wealth. One of them was his biological father, who had attended college and was well educated, employed, and financially unstable (Kiyosaki 8). His biological dad was the poor dad.

The other dad pursued education only up to the 8^th grade. However, he owned a successful business and was very rich. He was a rich dad. The book represents the reality that is evident in American society today. The poor dad was highly educated and had a well-paying government job. However, he struggled with debts and had no investments.

On the other hand, the rich dad owned a business and had several investments that generated income. In American society, many people who have higher education find jobs to support their families and own few or no investments. They live from paycheck to paycheck. In contrast, many of the people who did not go to own college businesses and other income-generating investments. Their knowledge of various investment options gives them an edge over people with little financial knowledge.

I have learned several lessons from the book that I can apply in my life for the attainment of financial independence. First, it is important to understand that higher education does not impart the necessary knowledge and skills needed for the attainment of financial independence. Therefore, every individual should be financially literate and regard it as a personal responsibility. Financial literacy can be attained through reading financial books, journals, essays, and articles to increase one’s financial IQ.

Second, the book can be applied in life by using the information it contains to make financially sound decisions. School education teaches students how they can acquire knowledge and skills to work for money for the rest of their lives. Lack of financial literacy results in poor financial decisions that lower the probability of attaining financial independence. This lesson is provided through the life of the poor dad who works for money. Third, the book provides knowledge that can be used to differentiate between assets and liabilities.

The poor dad was struggling financially because he owned many liabilities while the rich dad was financially independent because he owned numerous assets (Kiyosaki 43). The knowledge gained from the book can be used to choose investments that are worth investing in. For instance, with adequate knowledge of taxes, opportunity costs, and the dynamics of owning a house as an investment, it becomes easy to make wise financial decisions.

Fourth, Kiyosaki offers detailed information regarding investment in bonds, stocks, mutual funds, income-generating real estate, and businesses that do not require the daily presence of the owner. This knowledge can be applied in life about choosing investments that generate income and appreciate over time. Kiyosaki simplifies several financial terms that are important in finance and investment. For instance, he explains the meaning of retained earnings, net income, compound interest, mutual bonds, stocks, and royalties.

The book was relevant because it taught me how to gain financial independence through investing in assets. The author offered invaluable advice that can be applied in life. Examples of such advice include reduction of liabilities, lowering expenses, investment in assets rather than liabilities, generation income from assets rather than jobs, benefits of avoiding luxury, and how compound interest works. To make the changes that the book taught me, I would lower my expenses, save more money, and invest in income-generating investments.

Also, I would increase my knowledge regarding basic financial principles that are essential for the attainment of financial independence. I can relate the book to my life because it offered advice that is needed when investing.

For instance, I have the urge to lower my expenses, save some money, and invest in stocks. About my career, the book increased my financial knowledge by discussing financial terms such as liabilities, assets, investment, owning a business, and compound interest. The information will be helpful in the advancement of my career.

Works Cited

Kiyosaki, Robert. Rich Dad Poor dad: What the Rich Teach Their Kids about Money that the Poor and Middle Class Do Not. New York: Plata Publishers, 2011. Print.

Keynes begins his argument by comparing the Ricardian economic analysis with Marshall’s economic-views. According to Keynes, the Ricardian analysis focuses on long term equilibrium while Marshall sought to refine the former economic principle. However, the article notes that both the Ricardian analysis and Marshall’s principles recognize the existence of fundamental uncertainty in economics.

The author also notes that modern economic scholars have made contributions that seek to unravel the uncertain factors in the course of economic progress. Some of these factors include unfair competition, monopoly, and capitalistic dynamics. Keynes argues that the uncertainties that are addressed by key modern economists “are known more or less for certain” (Keynes 1).

Consequently, fundamental uncertainties are the expectations that are impossible to calculate and quantify in exact actuarial terms. Keynes also argues that the element of probability is meant to reduce the aspect of fundamental uncertainty. Other economic concepts that have a direct influence on fundamental uncertainty include Benthamite-calculus and its influence.

According to Keynes, when making economic decisions uncertainty issues play a big role. Therefore, human beings do not have a definite idea of what the consequences of their actions are. Keynes argues that even though it is possible to ignore the more unlikely consequences of individual actions, time and chance factors might make them important. Nevertheless, at times, human beings are intensely concerned with these fundamental uncertainties.

When the concern that stems from uncertainties is heightened, it has a direct impact on human economic actions. According to Keynes, wealth is an economic factor that has a direct connection to fundamental uncertainty. Wealth creation strongly depends on economic forecasts and future results. All decisions concerning wealth accumulation are related to fundamental uncertainty.

Keynes notes that the principles that help human beings to make decisions in an uncertain world are not necessarily the ones that distinguish “what is known for certain from what is only probable” (Keynes 1).

Uncertainty in the context of decision-making principles refers to the events whose probability cannot be scientifically calculated. Therefore, making decisions in an uncertain environment requires individuals to overlook the influence of what they do not know. Individuals will often follow their instincts and act while basing their actions on known economic theories.

The writer claims that human beings have devised ways of making decisions in times of uncertainty. According to Keynes, these ways are meant to give ‘uncertain-ways’ economic validity. One of how individuals make decisions in an uncertain world is by assuming that the present is a reliable guide when making future predictions. Individuals tend to ignore unexpected future changes when making decisions.

Another way in which individuals make future decisions is by relying on the current state of affairs and assuming that trends can only change if something new and better comes along. Keynes also argues that individuals recognize that their judgment is ‘worthless,’ and they tend to rely on the views of the rest of the world. When individuals dismiss their judgment and rely on that of others, they are often under the assumption that the rest of the world is better informed.

This behavior highlights the need for human beings to conform to the average or majority economic behaviors. Keynes notes that “the psychology of a society of individuals, each of whom is endeavoring to copy the others leads to what we may strictly term as a conventional judgment” (Keynes 1).

Article Summary

Sirkin’s article “Africa’s Hidden Wealth of Business Opportunities” makes an effort to encourage investors to consider making investments in Africa. It begins by noting that while most of Africa has been considered unsuitable for investment in the past due to poor leadership and infrastructure some regions are making progress to change this perception. It goes on to suggest that the perception may have been fueled by the poor portrayal of the continent in the media. Also, it provides data from the equities market and other sources to highlight the often ignored statistics from the region.

Implications for Professionals Involved in Strategic Management

One of the major implications that the article appears to portray is the resilience of the African economy. In the report, the information provides evidence of the fact that the performance of African equity markets has been improving for a long period. In addition to this, the article goes a step further to indicate that this performance continued to be sustained even as the global economy went into a recession. This ability to continue growing despite a turn in global economic activity appears to imply that investors should give the region a chance and consider investing their money in the region.

In addition to this information, the article continues to provide data on the GDP of several nations within the region that are considered above the expectations within the region. These statistics provide would-be investors with information that can help them form a decision on the economic potential of the region. In addition to this, the article provides some information on the sales data of the major companies in the region.

To further stress the importance of this implication the article continues to provide information on the fact that globalization is a trend that has affected regions all over the world. As a result therefore the African economies and their populations are beginning to take steps to rise out of poverty. Based on this position the articles imply that it would be wise to begin changing perceptions about the continent and explore its potential for economic growth.

To reinforce this position the article continues to provide statistics that are useful in pointing out the potential and current position within various African equity markets. It indicates the performance in these markets in comparison with other popular markets and the fact that the big businesses identified in the region post large profits contrary to what the regional image may suggest.

The article also goes on to indicate that given the position within African politics one approach towards the market must include giving due consideration to changing cultural and political perceptions within the region. It notes that despite the favorable data from the region investors must be cautious owing to the underlying trends associated with the region. This states is because not everyone in the region is bent on change.

This suggests that numerous underlying concepts could deter potential investors from achieving their initial objectives. In line with this, the article provides some advice to investors suggesting that they should be prepared to build grassroots support. This position can be taken from the suggestion that the region requires additional knowledge to secure investments made. It would appear that the concluding implication of the article is that for the developed world to continue ignoring the region may be a serious mistake as globalization continues. This is about the trends that have seen the economies of some parts of Asia and Latin America blossom.

Work Cited

Sirkin, H. L. (2011). Africa’s hidden wealth of business opportunities. Web.

The passage under analysis is taken from the work written by Adam Smith. The name of the work is “An Inquiry into the Nature and Causes of the Wealth of Nations”. The book is commonly known as “The Wealth of Nations”. The passage can be found in the middle of Chapter VII of the Book I entitled “Of the Natural and Market Price of Commodities”. Adam Smith wrote the book in 1776. The author of the work was an outstanding philosopher and one of the first economists who contributed significantly to the modern development of the economy. The book was written at the beginning of the Industrial Revolution. It defined general notions that promoted the development of the economy. Nowadays, Smith’s ideas are classified as the classical economy.

Adam Smith wrote his book at the beginning of the Industrial Revolution. The Industrial Revolution should be regarded as the watershed moment in the history. It has changed the world dramatically. Industrial revolution commenced in the United Kingdom and soon expanded in the other countries of Western Europe. The primary change during that period concerned the substitution of the ways of productions. Thus, machines replaced people.

It was the age when the intensive usage of water and steam power began. Factories started using coal and other fuels in their work. According to historical evidence, people were against such drastic changes as far as they were afraid that they would be left without work. However, the later data showed that the standard of living of most people increased with the progress of manufacturing. New employment opportunities appeared, and the general income of people arose. The Industrial Revolution was followed by a substantial growth of population. The rapid progress led to new challenges concerning the proper division of labor force, the activities of free markets, and revenue-related issues.

Adam Smith provides readers with his understanding of the nature of the economy in “The Wealth of Nations”. The work comprises of five books. In the first two books, the general idea of the author refers to the division of labor. Smith emphasizes the significance of labor division and pays attention to the fact that it makes the nations prosperous. The author explains that the division of labor leads to the situation when every employee has to conduct the particular task, and it makes the work more efficient. In these books, Smiths also dwells on the nature of money and pricings. In the third book, the author proceeds to the description of the evolution of societies and their economic growth. In the fourth book, he criticizes the mercantilism and introduces the notion of gross domestic product.

Finally, in the fifth book, Smith describes the role of the sovereign or government in the economy. Before the part under consideration, the author contemplates the nature of natural price and market price. He demonstrates the way the availability of particular commodities and the demand influence the price. After the passage, Smith writes about the impact of market fluctuations in price.

The passage under analysis is a sum of the ideas that have been mentioned before. Also, the extract does not only concludes but gives new directions for investigations. That is why it is significant for the paper. Thus, Adam Smith writes about the demand and quantity of commodities in the market and the way they influence the price. Smith states that “in some employments, the same quantity of industry will, in different years, produce very different quantities commodities”¹. Then, he proceeds with examples proving that fact. For instance, the same amount of workers produce the same quantity of cloth annually, but the same amount of employees do not always produce the same quantity of corn or wine. The passage under analysis is central to this notion. However, the last sentence refers to the alternations in the market. It presupposes that the issue is not fully investigated and gives a hint about the following development of content.

“The Wealth of Nations” is of great significance for the modern world economy as far as it is the first book about free markets and labor division. Despite its importance, there are a few flaws in the book. Adam Smith dwells on his understanding of pricing. However, he fails to give a profound explanation of pricing. Smith’s theory of value is the second aspect that is not exactly clear and does not fall under the current understanding of value. The author considered that the word “value” had two different meanings. The first meaning was “value in use” while the second – “value in exchange”.

Smith failed to understand the paradox of water-diamond that presupposed the problem with the high cost of diamonds and their extreme uselessness in comparison to water. Besides, some scholars argue that there is no “invisible hand of the market” described by the author. What concerns the very passage, I do believe that it is still of great significance for the economy. Smith manages to provide profound examples to prove his opinion. The book has much more accomplishments rather than failures. Adam Smith’s understanding of economy became vital for modern business.

Bibliography

Smith, Adam. The Wealth of Nations. London: Harriman House Limited, 2007. Web.