ECO531 Managerial Economics and the Global Economy : Governing of an O

Government should play active role in managing short run instability in the economy caused by unemployment and inflation problems”.

 

To address the above statement, you will need to support your discussion and view(s) by showing the evidence upon which they are based. Such evidence may include the economic policies of country (ies) chosen for illustration, what the governments have specifically done in order to achieve macroeconomic stability. Some of these evidences presented may be open to several interpretations; hence you should try to demonstrate why a particular argument is preferable to other interpretations in supporting your point of view.

Government refers to a system that is instrumental in governing of an organized community. Government acts as a means by taking recourse to which the policies can be determined and the organizational policies can be enforced (Leigh and Blakely 2016). It acts as system that helps in social control and government has the right to enforce laws. This essay discusses about the role that governments play in managing instability that occurs in economy. It discusses about the economic policies of various countries that have been able to achieve the macroeconomic stability of the different countries.

The unemployment existing among the youth paves the path for political violence in a country. It has been found that the countries having highly educated people are more prone to the factor of political violence. The government of a country can take recourse to policies and programmes that can help in reducing the unemployment rate and pave the path for political instability in a country. Inflation is indicative of sustained increase in proce of the goods along with services within the economy over that of a course of time. Inflation discourages the aspect of investment and pave the path for the shortage of the goods that pave the path for political instability in a country.

Governments played a pervasive role in 19^th century in establishment of institutional conditions that helped in occurrence of Industrial revolutions. According to Niskanen (2017), governments were instrumental in reducing risks related to private transactions by the promulgation of laws which limited the aspect of entrepreneurial liability. Governments at low end of spectrum in relation to socio-economic development used inter-related process of economic along with social transformations. The countries that are least developed includes the African countries along with least developed country within Asia. These countries hardly had any kind of development of that of market institutions along with national policies and suffer from unemployment. The statistical results for this group have brought out the fact that government should build up social capital for managing the instability occurring in these countries. It has been argued by Warner and Sullivan (2017) that government can promote increase in size of professional along with entrepreneurial middle class for brining stability in these economies caught by the inflation problems. The government should remove the educational impediment that can help them in entering into the middle class occupations. The government can promote commercialization in relation to agriculture and invest in that of human resource development for bringing about improvements in these kinds of economies.

Research has brought out the fact that economic growth can be fostered in the low-development group by the dualistic development of the modern primary sector. According to Fine (2018), the developing of the primary exports provoked the transformation in the social structure within the rural areas. It encouraged diffusion in relation to market economy and brought about a reduction of that of the traditional tribal customs. It can be said that promoting industrialization played important role in explaining the inter country differences that occurred in relation to growth rate. It can however be stated that industrialization did not act as primary force that was responsible for the economic growth of these countries. It has been stated by Papanek (2018) that industrialization was achieved in these countries by the establishment of power-driven factories and large scale factories. It should however be stated that they were managed by other foreign countries. The governments of these countries have to eliminate the social barriers that can factor mobility.

Intermediate group comprised of the countries which were inter-mediate in relation to economic degree of the institutional development. The countries belonging to this group can be said to be geographically diverse and it includes the countries of Algeria, Iran, Syria, North Africa, India and Pakistan. The countries that were included in Inter-mediate Group from Latin America were Bolivia, Ecuador and Surinam. According to Lau, Choong and Ng (2018), these countries had unbalanced social transformations that have paved the path for social tensions in these countries. The ineffective governments that these countries had have made these countries politically unstable and they suffer from the brunt of unemployment. Statistical results have brought out the fact that investment in relation to the physical infrastructure accounted for the inter country differences that occurred in the rate of the economic growth. Government should focus on providing the physical conditions that can help in the promotion of initial stage of the industrialization in these countries. It has been argued by Timmermans (2017) that the government can foster increase in variety of the consumer goods and encourage domestic processing of the natural resources that can help in the development of economy in these countries. Government should be instrumental in building up domestic banking system by the adoption of policies that can help in boosting the private savings. The government in these countries should not depend too much on that of inflationary finance but they should up the tax institutions by increasing ratio of the government revenues to that of GNP. The government can create the conditions for that of Lewis type process for transfer of the resources by raising productivity in relation to agriculture. The government has made agriculture responsive to that of the economic initiatives by the expansion of degree of the commercialization. It reduced proportion of population that was engaged in that of subsistence agriculture in order to bring about the development in these regions. The government can reduce incidence of that of sectoral cleavages in relation to technology in order to develop these countries. The governments in these countries have invested in infrastructure along with education for the development of these countries for removing the incidence of unemployment in these countries.

The high group countries are those that are economically advanced and who have advanced socio-institutions. These countries have gained political independence for more than a century and they are ahead of intermediate group in terms of the social achievements. This group includes the Latin American nations, Mid Eastern countries and the East Asian countries of South Korea, Japan along with Taiwan. Leadership commitment has been an important factor that has helped in paving path for development for these countries. According to Richerson et al. (2016), leadership commitment has helped these countries in achieving autonomy that have helped in the fostering of dynamic comparative advantage and solve the inflation problems. It however requires the shifting of state support among the industries that has led to the injuring of some groups and it has benefitted others at the same time.

The government of these countries have involved themselves in promoting the aspect of industrialization and raised productivity in relation to agriculture. The governments in these countries have adopted the industrial policy that has promoted comparative advantage from that of resource intensive to that of labour- intensive manufactures. During the era of 60’s variety in relation to consumer goods was expanded that was produced domestically within the power-driven factories. According to Verhoest et al. (2016), East Asian countries along with Brazil have reached stage where they were exporting the consumer goods but they were not exporting producer goods at that point of time. The progressive change can be implemented by formulating the changing international trade along with the commercial policies. Infant-industry protection should be given to main sectors but it should be gradually withdrawn. It should be replaced by the pressures along with incentives in relation to export. It has been argued by Bourne et al. (2014) that agricultural technology has been implemented in these countries that helped in boosting home-demand for that of the domestic manufactures.

It has been brought out with the help of estimates that the unemployment rate within Singapore has edged up to 2.1 percent in September quarter of 2018 and it was the highest jobless rate since fourth quarter of the year 2017. The government of Singapore should take recourse to demand side policies that can help in reducing unemployment in Singapore. The government in Singapore should pursue the expansionary fiscal policy that can help in decreasing unemployment taking place in Singapore. Supply side policies can be undertaken by the government of Singapore that can help in reducing the incidence of unemployment in the country. National Environment Agency of Singapore should take recourse to management models that can help Singapore in dealing with political instability taking place in the government. The government in Singapore should work with unions that can help in making Singapore politically stable.

Studies conducted have revealed the fact that public finance measures that were implemented in the European countries have performed very poorly in stabilizing the economies. It has been found that the fiscal policies have exacerbated the economic fluctuations and the inflation problems instead of moderating them. It has often been found that fiscal contractions have taken place in the period of that of low growth and the fiscal expansions have occurred at the time of the economic booms. It can thus be said that discretionary fiscal policies have acted in pro-cyclical manner that have contributed to that of economic instability. The fiscal policies in the European countries have behaved in an asymmetrical manner with that of increase in expenditure. The downturns were not followed by the expenditure cuts but by tax increase at the time of the expansion. This has resulted into strong increase in relation to tax burden and share of the government within GDP. It has been revealed that in some member states the budget balances have been improved less at the time of the upswings less at the time of the upswings than that of deterioration at the time of the downturns. According to Van Dooren, Bouckaert and Halligan (2015), it helps in pointing out the asymmetric reaction of the fiscal policy to that of economic fluctuations. Significant deficit bias took place in 1990 and the chronic deficits peaked above that of 5 % of the GDP for average of countries that joined euro area at a later stage. Single monetary policy can help in the maintenance of price stability within euro area that can help in facilitating economic outcome within Member states. National fiscal authorities being able to perceive behavior of single monetary policy can help in undertaking actions that can pave the way for “co-ordinated” policy outcome.

Government plays an important role in determining policies and enforcing of the organizational policies. Economic growth can be brought about within low development group by taking recourse to dualistic development of modern primary sector. Building up of social capital by the government can manage instability within the ambit of these countries. It has been argued by Pollitt and Bouckaert (2017) that the government can involve itself in promoting the enterpreneurial middle class for the purpose of bringing about stability in these kinds of economies. Intermediate group includes the countries that have unbalanced social transformation that gives rise to social tension within these countries. Ineffective governments have made these countries unstable in relation to politics. Governments in these countries can consolidate domestic banking system that can boost the aspect of private savings. High group countries are indicative of those countries that are advanced from the economic point of view. Progressive change can be instilled in these countries by taking recourse to commercial policies. Protection should be afforded to the main sectors that can help in flourishing the economy in the countries belonging to high group.

References:

Bourne, R.R., Jonas, J.B., Flaxman, S.R., Keeffe, J., Leasher, J., Naidoo, K., Parodi, M.B., Pesudovs, K., Price, H., White, R.A. and Wong, T.Y., 2014. Prevalence and causes of vision loss in high-income countries and in Eastern and Central Europe: 1990–2010. British Journal of Ophthalmology, 98(5), pp.629-638.

Fine, B., 2018. The political economy of South Africa: From minerals-energy complex to industrialisation. Routledge.

Lau, L.S., Choong, C.K. and Ng, C.F., 2018. Role of Institutional Quality on Environmental Kuznets Curve: A Comparative Study in Developed and Developing Countries. In Advances in Pacific Basin Business, Economics and Finance (pp. 223-247). Emerald Publishing Limited.

Leigh, N.G. and Blakely, E.J., 2016. Planning local economic development: Theory and practice. SAGE publications.

Niskanen, J., 2017. Bureaucracy and representative government. Routledge.

Papanek, G.F., 2018. Pakistan's development: Social goals and private incentives. Harvard University Press.

Pollitt, C. and Bouckaert, G., 2017. Public management reform: a comparative analysis-into the age of austerity. Oxford University Press.

Richerson, P., Baldini, R., Bell, A.V., Demps, K., Frost, K., Hillis, V., Mathew, S., Newton, E.K., Naar, N., Newson, L. and Ross, C., 2016. Cultural group selection plays an essential role in explaining human cooperation: A sketch of the evidence. Behavioral and Brain Sciences, 39.

Timmermans, A.I., 2017. High politics in the Low Countries: An empirical study of coalition agreements in Belgium and the Netherlands. Routledge.

Van Dooren, W., Bouckaert, G. and Halligan, J., 2015. Performance management in the public sector. Routledge.

Verhoest, K., Van Thiel, S., Bouckaert, G., Lægreid, P. and Van Thiel, S. eds., 2016. Government agencies: Practices and lessons from 30 countries. Springer.

Warner, M. and Sullivan, R. eds., 2017. Putting partnerships to work: Strategic alliances for development between government, the private sector and civil society. Routledge.