Term Paper on "Current Economic Crisis"

Term Paper 5 pages (1921 words) Sources: 2

[EXCERPT] . . . .

society and organization follows its own norms, culture and hierarchy. When it comes to public administration, management and decision making becomes trickier as the stakeholder in question does not include entrepreneurs, employees and customers but instead the government, bureaucracy and the citizens. This becomes even trickier when it comes to a crisis citizen that has direct implications on government objectives and social welfare.

The recent economic roller coaster that went through twists and turns from 2005 to 2008, has led the economists worldwide to debate on issues concerning the economic agents that affect the overall economy of a country. Media has been involved in the coverage of economic debate shows such as Middle East Business Report, after the U.A.E economy went through severe setbacks due to debt crisis in Dubai. The U.S. recession paved way to world wide recession as the U.S. dollar being the international currency started to depreciate and the debt crisis started to become severe day by day. However, economists still differ in their opinions as the application of different economic theories to various economical scenarios pave way for different recommendations and opinions. The severe economic shocks such as the bankruptcy of Lehmann Brothers and AIG insurance, which forced the U.S. government to announce bail out plans, has led to a race of opinions and debates between economists as to whether such senile institutions should be protected or not. Everyone seems to get to the roots of the global economic disaster but none seems to be successful in providing a good reason for it. There have been summits held by the United Nations on resolving debt crisis of countries like Spain and U.A.E. Everyone from a college student to a senior economist is attempting to find a perfect answer to the recent economic meltdown, but there seems to be none that has been able to find it up till now. Even the holding of G. 20 summits and other conferences called on by World Trade Organisation seems to go down the drain. The downfall of huge American financial giants such as Lehman Brothers, AIG and Citi Bank have had huge adverse implication on American and global economies. Despite this, the U.S. government, ignoring its tight budget continued to release bailout packages for these senile corporate houses contradicting the idea of social theorists that public administration should be focused on serving the citizens rather than customers. As a result, taxpayers and small investors had to bare the burden of the fall out.

The government of United States of America has proposed a further cut in federal government spending. The government of United States of America states that the proposed cut is part of a short-term spending plan for the forthcoming fiscal term. Ever since the economic crunch has struck the country's economy, and business giants started to fall out of business, the government of United States of America increased its government spending to a substantial level. This was necessary given the rate with which unemployment levels were shooting up and GDP of the country was rapidly declining. While the increased government spending resulted in giving support to a lot of declining firms, it ended up increasing pressures on its current accounts. As a result, the existing Democratic government had to face severe criticism from the Republican opposition, who thought that the only solution to the declining economic growth is that the government should cut down on its spending. The science of economics suggests that scarce resources need to be efficiently utilized in order to achieve optimum outputs. Contrary to that, the opposition insisted that the government spendings are unproductive and continuing these spending would create an economic pressure on more productive economic activities.

Considering the economic and political pressures the president of United States of America signed a bill proposing short-term cuts on government spending. The proposed bill announced spending cuts on the U.S. Census Bureau, Emergency Steel Loan Program, Public telecommunication facilities and constructions and the National Park Service's Save America's treasure program. While some of these spending have proved to be unproductive, cuts in others have a tendency to have greater implications.

During an almost stagflationary situation, citizens expect the government and the bureaucracy to create employment and bring down inflation rate, thus moving towards economic stability. The government's economic policies on the other hand means that with spending cut down, more people are likely to get unemployed, and wage rates will further decrease. As a further result, consumption expenditures would decline and in turn economic growth will decline. The instable economy of the superpower had immense adverse effects on global economies, especially those of developing world, which had been largely dependent on U.S. aid. It had been observed that in many situations, the bureaucracy of U.S. preferred its own long-term objectives over social welfare and well being of its citizens and its allies.

The International Economy and World Trade Organization

Today there is no doubt that the creation of trade organizations such as World Trade Organization has served the international economy by creation of clear guidelines pertaining to abolishment of trade barriers between economies and promotion of free trade on a scale that lead the world to call this earth as the global village. Promotion of uninterrupted trade relationship across geographical borders could not have been possible without organizations such as World Trade Organization. As mentioned earlier, the primary focus of World Trade Organization is the abolishment of trade barriers between countries. In the current international scenario where arms race between countries has paced up to an unimaginable extent, the WTO can benefit the international economy by playing its vital role in creating mutual and friendly relations between rival countries. The WTO can ensure agreements between such countries on an equality basis which benefits both countries and the international economy (World Trade Organization 1999). The best example in the present day scenario is of the two geographical and political rivals India and Pakistan. If World Trade Organization plays its role in developing a trading relationship between the two countries, the promotion of international trade will benefit Pakistan by giving it the exposure to a market of more than one billion people. This would lead to increased export earnings and set up of industries on a vast scale, thus creating jobs in the Pakistani economy. The creation of jobs will be beneficial to Pakistan, as it will lead to an increase in the standard of living along with a decrease in social costs and other crimes in the country. On the other hand, its neighbour India will benefit from Pakistan's geographical neighbours, which include Iran, Afghanistan, China and Tajikistan. India would be able to benefit from Iran as it's a country full of natural resources and could help India in meeting its demand for oil and gas. However, since the WTO agreement requires all the signatories of the agreement to remove trade barriers, there is a risk that developing countries will suffer at the hands of developed countries that export high value commodities in return of importing primary goods. It is then the responsibility of the developed countries, not to exploit the economy of third world country and let them benefit in a sustainable manner. The bureaucracy of the developed countries including the U.S.A. sideline this factor and looks at its own long-term benefits in isolation. It must be noted that many American corporate houses have a supplier network in developing Asian economies. However, this indifferent attitude of American bureaucracy results in trust deficits between trading partners and in turn have an adverse effect on the American economy itself.

The Responsibility of Bureaucracy in Addressing the Issue

The recent economic crunch has created not only become a critical issue in economic terms but it has also created huge trust deficit between the citizens and the government. Many citizens now believe that the government has little concerns for social well-being of its citizens. Likewise citizens of developing countries that have been trading partners and political allies of the U.S. are also going through a similar trust deficit which is being reflected through the foreign and trade policies. In order to address this issue it is necessary that the bureaucracy works and plans towards strengthening the relationship with citizens and minimizes the trust deficits. The bureaucracy and the government at large needs to become more imaginative and has to take steps that give a message that the government prioritizes its citizens and social well bring over anything else.

When it comes to the international community, we need to talk about the global village that this world has become. However, the more globalized it has grown to be, the more doors it has opened for economic instability. The question arises about how the world can put their combined efforts to ensure a stable world economy. When we talk of economic stability, we mean an economy with low inflation, low rate of unemployment, a positive balance of payments and economic growth at a rate that is sustainable (International… READ MORE

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