The UK economy has undergone structural, financial, and political change over the last thirty years. Different ideologies and policies have served to shape the relationship between government and economy in varying directions. Some elements, such as state intervention, have remained as a point of debate. Other factors, like globalization, have just recently developed. The policy of UK governments as a whole has been shaped quite heavily by major economic events during this period, and the legacy left by the Conservative and Labour governments can still be seen today. Using a range of sources and my own knowledge, I shall asses the critical elements of the relationship between government and economies over the last 30 years, and their relative importance.
The context of this relationship is concerned with the theory of political economy. This is the idea of rationality and growth of the ‘free market’ (a market in which there is no economic intervention and regulation by the state, except to enforce private contracts and the ownership of property). First, it is key to outline the characteristics of the relationship the government and the economy share. Clearly, a government influences the way an economy works via it’s policies. The government uses two branches of policy, fiscal and monetary. Fiscal policy entails government spending whereas monetary policy involves manipulation interest rates. Both policy instruments are designed to achieve growth. The attempts of a government to influence economic activity in the national economy are defined as macro-economic measures. Macroeconomics can be described as ‘the study of national economics’ (Morrison 2002, p.60). Even the government itself is run as a typical business in a free ma...
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...ound will ever be successful. Monopolies were the created of privatization, but deregulation was a creator of nationalization. This has seen a fine line having to be struck between the government’s roles in the economy. Globalization has seen individual firms within an economy boost their status and influence, in turn, shutting out government power in their respective economies. Different parties have brought their respective philosophies into power in the UK. Enterprise, freedom of choice and increased competition in individual markets has been the driving force in most action taken by government during this period. In my opinion, it is fair to say, that the UK economy and the UK government have undergone structural, political and geographical change, which has led to Britain maintaining a stranglehold in the battle of the developed and developing economies.
The Island of Mocha in the video is an example of a traditional economic system evolving into a market system. Every person plays a key role in this traditional system. They had fisherman, coconut collector, melon seller, lumberman, barber, doctor, preacher, brownies seller, and a chief. The Mochans got sick of trading goods all across the island just to get the things that they want or needed. The Chief decided that they would use clam shell for currency instead of trading.
According the book, The General Theory of the Employment, Interest and Money, Keynes argues that the level of employment is not determined by the price of labor but by the spending of money on collective demand. Also, he argues that it is wrong to assume competitive market will deliver full employment. Likewise, it is wrong to believe that full employment is natural, the self-correcting and equilibrium state of a monetary economy. In contrast, under employment and under-investment are natural states to be seen unless active measures are taken. Also, he argued that the lack of competition is not the fundamental problem and measures to reduce unemployment by cutting wages but ultimately futile. He points out that there is no self-correction property in the market system to keep capitalism going. A badly depressed economy could remain in stagnation unless some alternative of capital spending is found to revive it again. The only source of stimulation is the government. Therefore, the government...
Despite its size, only 190 pages, the authors address the basic concepts of economics while also applying those politically and for personal finance decision making. Those basic concepts include scarcity, gains from trade, marginal decision-making, profit management, income growth, and Adam Smith’s invisible hand theories are all discussed within the first part of the book; allowing readers to understanding the concepts, Gwartney applies the same concepts to the creation of wealth and the importance of competition, private property, open trade, monetary stability, and lower taxes. This book educates its audience by evaluating our economy and government mechanisms without the overpowering display of charts, formulas, and graphs; which you would typically see in a textbook allow...
Giudice, R, Kuenzel, R & Springbett, T 2012, “UK economy: The crisis in perspective.” Abingdon; Routledge.
Only what to produce and how to produce, since distribution is not the task of economics.
During this essay I shall look first broadly at monetary and fiscal policy and subsequently examine the position within and attitudes towards Europe, an issue which, by its very nature, must have a profound effect on the direction of a nation's macroeconomic policy. Their styles of leadership of course diverge greatly which is a significant factor in the differing culture of the times. Finally I shall examine the how the attitudes of the two Prime Ministers differed towards industrial policy. I shall attempt to demonstrate that macroeconomic policy remained largely consistent through over the Conservative time in office, however Major took much greater interest in the microeconomic policy which had been largely ignored under Thatcher.
Keynesian school of thought has been widely in application in the modern day. The markets have frequently veered off the rail and necessitated governments to interfere (Fazzari, and Variato, 1994). John Maynard Keynes is one of the most influential economists of the modern day. In his book on the general theory of employment, we realize that the private sector decision making sometime leads to imperfections in the market and, therefore, there is a great need for the governments to interfere to correct them (Keynes, 1937). Some of the imperfections that we witness in a market controlled by the private sector include monopolies, unemployment, black markets, cartels as well as hoarding. There is thu...
Government spending has become a hot topic of debate after economic recession of 2008 but it’s still a controversy among the economists. Some economists favor role of government in the economy for balance of economic shocks, whereas others consider that government generate shocks and instability in economy. Keynes was first who introduced government involvement in economy after the recession of 1930. Theories of Keynes regarding the government spending have again taken attention in the financial crisis of 2008 in America, which has spread all over the world through trade openness. This financial crisis has decreased the economic growth and employment rate in whole world especially in the developed countries. Thus some economist suggests that
During the ‘70s Margaret Thatcher used neoliberalism and a tendency toward free-market economy to help her country.Thatcher was a leader of the Conservative party leader who valued neoliberalism.When the U.K. is in a period of recession they have a tendency to swing right and go toward privatization and market economies. When the Labour party has control of the government there is a swing left and there tends to be more nationalization of industry.When situations start to get better the governments start to go toward a central alternative.
During her sovereignty which lasted eleven and a half years (May 1979-November 1990), she turned Britain upside down with her policies of fighting inflation, tackling the unions, intensify the British image in foreign affairs, the memorable privatisation and popular capitalism idea and many more. Though the pursue of those policies outcome high unemployment percentage and a lot of strikes from the public, Thatcher’s arguments on behalf for those alterations was the stressed importance of change in social attitudes in order for successfully compete with the rapidly developing world. Some of the noticeable new attitudes that persist in Britain to this day can be summarised as efficiency, entrepreneurialism, competition and independent responsibility. Thatcherism has served as a catalyst to the formation of the modern “Western/Capitalist culture” that has affected the everyday life of so many around the world.
The spending by the government has elicited controversial discussions regarding how to ensure that the economy is affected positively. The government spending is a bad way to stimulate the economy. This issue is described by various persons especially the impact the government spending has on the economy of the United States of America. The point of discussion of this paper focuses around the quote made by Thomas Sowell, an American economist and a political philosopher.
During the Winter of Discontent in 1979, Britain had high inflation rate, an income tax rate of 83% and more people were becoming unemployed. There were controls of price, dividend, currency and wage. The government accounted for about 30% of the work force. The state controlled most major industries such as British Aerospace, British Airways, British Telecom, British Steel, British Leyland, the British National Oil Corporation, Associated British Ports, Cable and Wireless, Rolls Royce. But when Margaret Thatcher was elected Prime Minister in 1979 she used outstanding political skill and will and she reversed Britain’s socialist direction and moved the economy to embrace a free enterprise. From an article via the website of the Reason Foundation in 2006, Thatcher stated: “We understood that a system of free enterprise has a universal truth at its heart: to create a genuine market in a state you have to tak...
The government plays a vital role in making business policies. For example, the UK government in 2014 budget the government has introduced a rise of 40% in the tax. As a consequence, the lending interest rate falls but the taxation is still high. Since 2010, the growth of GDP in UK was at -11% and by 2013, the GDP growth was at -6.6%, this is a good indication though it is at slowest rate.
Our lives are greatly affected by our culture, ecological environment, political environment and our economic structure. The overarching method of organizing a complex modern society relies heavily on the founding economic theories regarding method of production, method of organization, and the distribution of wealth among the members of. This paper, specifically deals with the views and theoretical backgrounds of two dominant theories of the past century, Keynesianism and Neo-liberalism. Our social economic order is product of the two theories and has evolved through many stages to come to where it is today. The two ideologies rely on different foundations for their economic outcomes but both encourage capitalism and claim it to be the superior form of economic organization. Within the last quarter of the 20th century, neo-liberalism has become the dominant ideology driving political and economic decisions of most developed nations. This dominant ideology creates disparities in wealth and creates inequality through the promotion of competitive markets free from regulation. Neo-liberal’s ability to reduce national government’s size limits the powers and capabilities of elected representatives and allows corporations to become much larger and exert far greater force on national and provincial governments to act in their favour. Hence, it is extremely important at this time to learn about the underlying power relations in our economy and how the two ideologies compare on important aspects of political economy. In comparing the two theories with respect to managing the level of unemployment, funding the welfare sates, and pursuing national or international objectives, I will argue that Keynesianism provides far greater stability, equ...
The appropriate role of government in the economy consists of six major functions of interventions in the markets economy. Governments provide the legal and social framework, maintain competition, provide public goods and services, national defense, income and social welfare, correct for externalities, and stabilize the economy. The government also provides polices that help support the functioning of markets and policies to correct situations when the market fails. As well as, guiding the overall pace of economic activity, attempting to maintain steady growth, high levels of employment, and price stability. By applying the fiscal policy which adjusts spending and tax rates or monetary policy which manage the money supply and control the use of credit, it can slow down or speed up the economy's rate of growth in the process, affecting the level of prices and employment to increase or decrease.