Corruption reduces the efficiencies of the operations of the market economy and a loss of direct foreign investment in countries where participation in corruption is how business is done. Politicians and government officials worldwide receive bribes valued between $20 billion and $40 billion annually. Companies that participate in bribing can face reputational damage and loss of investors. According to the World Bank, 0.5% of GDP is lost due to corruption each year. Corruption makes the poor poorer.
Meaning that the number of people working is undetected. The downside to this is the macro economic policies are likely to be too expansionary and social policy too excessive. The second issue is these underground economy wages are escaping taxation which causes a loss in tax revenue. Lastly it shows that the citizens and the government have an unhealthy relationship. The taxpayers are not happy with the public services from the government and seek help with out having to pay taxes.
Due to the wide disparity between the rich and the poor, people who are working as lower class e.g. cleaners, security guards may not earn enough to satisfy their basic needs, while people who are working as higher class e.g. professionals are having their luxurious life. In the view of this phenomenon, minimum wage is introduced to narrow the wealth gap between the rich and poor. However, there are many controversies over the implementation of minimum wage claimed by the economist, especially on the effect of unemployment.
Subsidies and price supports have existed for centuries, but now they are incredibly wasteful and completely outmoded for world markets. Subsidies, fostering the protection of domestic industries have a negative effect on employment, the budget deficit, and other economic aspect. The economic implications of subsidies are significant. Government subsidies given to the private industry usually end up hurting the economy. A subsidy sponsors unprofitable business enterprises and often favors one firm over another.
Companies can grow faster in a developing country than they can in a MEDC which has more competition, and with company growth comes increased investment from the company in machinery and workers, which increases consumption and an increased level of employment, who work for the company. This initial entrepreneurship leads to a multiplier effect with the new workers spending their income, due to increased disposable income and this leads to greater consumption from the workers. The investment into machinery and workers leads to an increased gross domestic product, the value of output from domestic based companies. Foreign investors would be attracted to the developing country due to the high rate of economic growth and the increasing GDP, and the investment comes as an injection into the circular flow of income, and increased foreign investment can further increase the speed of growth for a company, possibly allowing the company to expand to other nations in the long run. The increased entrepreneurship
Corruption in the Government (Point) A political challenge that Venice had faced is its corruption in the government. (Example) An example of corruption in the government is that the Venetian Government suspended the salaries of civil servants to finance wars, resulting in some nobles being poor. Poorer nobles sold their votes to richer nobles who wanted to be elected to government. (Explanation) This resulted in incompetent men gaining important leadership posts, which meant that Venice began to have inefficient governments with leaders who were concerned with only their own interests and not Venice, and hence made decisions which were for their own and not Venice. This lead to Venice’s downfall as the policies made were not suitable for the country’s needs.
Many may argue that the falling economy and the wealthy not wanting to share their shares is to blame for the raising rates of poverty here in the states. Poverty of course, has a lot to do with money and income but underneath that it is has a deeper story. Stories of how different people are suffering from it and how they are managing to live day by day. It almost seems as if it’s a foreign nation of its own and you only understand the concepts if you are in it. There is no doubt that here in America we are dealing with one of the greatest economic downfalls.
The welfare state directly causes poverty as Murray points out that the generosity of the welfare state creates a dependency culture and a work shy underclass who are prepared just to live off benefits without ever working thus the welfare state undermines personal responsibility and self help. Also, the welfare state indirectly causes poverty. This is because the high amount of tax, which funds the welfare state, hinders entrepreneurs to create new jobs. However, the New Right view has been highly criticised because the welfare state and the minimum wage help to protect workers from employers exploiting them. Without the welfare state, there would be a large gap between the rich and poor.
How capital and labor are combined is central to how much output is produced. To increase the output with given inputs, productivity needs to increase through innovations. Innovations are often brought to the market and diffused through the economy by young entrepreneurial firms. New smaller firms often choose more risky product introduction strategies compared with more established firms. They fail more often, but they also successfully bring riskier high-impact innovations to the market more
Outline the features of globalization and analyse the impact of globalization on the standard of living in the global economy. Globalization, is an important characteristic within the contemporary economic environment, and has undoubtly provided a significant stimulus to economic growth for participating economies. The term globalization refers to the process of increased integration between different countries and economies and the increased impact of international influences on all aspects of life and economic activity. The drive for globalization has resulted in greater economic growth globally, through the opening up of barriers to international trade, yet this increase in world output is often associated with detrimental effects in relation to the stability of a national economy, being susceptible to the ups and downs of the international business cycle and also both positive and negative effects on the standards of living or quality of life with in a nation. There are many dimensions to globalization, and it is often difficult to categories an economy as being globalized, yet there are several key indicators of integration between economies; these include: • International trade flows • International financial flows • Growth of investment flows b/w countries and the transfer of technology • The movement of workers b/w countries Whilst economic growth is one of the most obvious features of globalization, the driving force for world economic growth and economic growth within individual economies, is the growth in international trade flows.