The Role and Function of Central Banks - Assignment Example

Assessment III, IV, V, VI

Unit III

The Role and Function of Central Banks

Central banks provide the regulatory framework for the banking system in every country. More importantly, they are responsible for printing currency and dictating terms of a country’s foreign exchange (De Grauwe, 2013). Another important role of central banks is developing a country’s monetary policy that monitors the circulation of currency within and outside national borders. In this role, the central bank regulates a country’s interest rates and sets out the national reserve requirements (De Grauwe, 2013). Moreover, central banks act as the last resort when it comes to lending money to commercial banks operating in a country.

Wealth Distribution

Wealth inequality is one of the most critical issues that confront national economies all over the world. Besides economic inequality being a social and moral issue, it is fundamentally a political matter that exerts immense pressure on governments (Piketty, 2014). It is on the basis of these characteristics that policy makers and economists in countries of the world are concerned on how wealth is evenly distributed among citizens. When wealth is unevenly distributed in a country, many social issues arise that potentially cause political ramifications. For instance, the gap between the rich and the poor is a direct consequence of uneven wealth distribution in a country, and this inequality is responsible for social issues, such as runaway crime, prostitution, joblessness, and so forth (Piketty, 2014). Regarding politics, the poor will always remain subjects while the rich become the ruling elite (Piketty, 2014). Despite gains in democracy, capitalism, which is the main cause of wealth inequality, creates a society where the rich keep on getting richer while the poor keep on getting poorer. With clear knowledge of these social and political issues can affect national harmony, policy makers and economists are always devising ways, such as implementing national economic policies on employment, to avoid social disorder.

The Pros and Cons of Market-Based and Government-Based Economies

The modern global society is characterized to a greater extent by a free-market economy. However, for centuries before modernisation set in, national economies were primarily in the hands of the government (Piketty, 2014). This was the case in regions where monarchs and kings held the reins of power. Towards modernisation, however, the battle between capitalism, which advocates for market-based economic policies, and socialism, which advocates for government intervention in markets, defined the mood of the global economy (Piketty, 2014). To fully understand how governments responded to these two market frameworks it is important to consider the pros and cons of each system.

Today, almost every country in the world pursues a market-based economic policy. This global embrace is premised on the advantages of this system in a country. Firstly, market-based economies provide incentives to producers and manufactures to produce and manufacture goods that the market demands (Piketty, 2014). This is because the market guarantees return that is commensurate to the level of production. Secondly, market-based economies encourage both producers and consumers to conserve resources that tend to be scarce (Piketty, 2014). In other words, there is minimal wastage in market-based economies. Thirdly, competition acts as a driving force in market-based economies, where producers' main concern is to create efficiencies by keeping production high and reducing costs. Fourthly, skills play a fundamental role in market-based economies, and this fact encourages citizens to acquire skills that prove useful in improving upward economic mobility (Piketty, 2014). Lastly, economic freedom is a fruit of market-based economies, where both producers and consumers are free to choose what to produce and when to consume, respectively.

However, market-based economies also come with some disadvantages, including social instability. One of the consequences of market-driven economies is that countries can potentially suffer from widespread unemployment as skills become integral in finding jobs (Piketty, 2014). Additionally, due to increased economic activities in the hands of private citizens, money supply tends to grow leading to fluctuations in inflation (Piketty, 2014). Wealth and income inequality are also two consequences of a market-driven economy, where capitalism become entrenched in the economic system.

With regard to market systems with government intervention, such as socialist economies, the main advantage includes government regulation of economic activities. It is important to note that the main problem with free-market economies, such as that in the United States, is capitalism, where the market decides policy rather than the government (Piketty, 2014). In contrast, government-based economies, such as that in China and other socialist regimes, markets are regulated by the government (Piketty, 2014). In that case, it is hard for evils associated with capitalism, such as wealth inequality to have a foothold. As far as disadvantages are concerned, government-regulated economies impede business growth due to lack of competition (Piketty, 2014). In other words, there is a lack of incentives to encourage private enterprise and, therefore, government-run institutions populate the economy. Another important disadvantage of government-based economies is that political ties rather than skill sets are the basis of upward economic mobility (Piketty, 2014). In other words, citizens in these economies have no incentives to acquire skills because employment is dependent on the individuals one is associated to in the country.

Unit IV

Difference between Authoritarian and Democratic States

Authoritarian states are, in essence, one-party states and are characterized by a ruthless political leadership, where dictatorship ensures that presidents rule indefinitely (Ansell & Torfing, 2016). In other words, top political leadership, such as presidents, in authoritarian states are in most cases unchallenged, and this is the reason that most of them tend to rule for extended periods of time. The only way to change government under such states is through political or military coups. In contrast, democratic states are characterized my multiparty democracy where countries hold general elections after a period of time, say five years (Ansell & Torfing, 2016).

Four Characteristics of Political Culture within Democratic Societies

There are four main characteristics of features that define democratic societies. These include population, territory, sovereignty, and government (Ansell & Torfing, 2016). With regard to population, democratic societies are characterized by a national population that makes up the citizenry (Ansell & Torfing, 2016). Historically, people all over the world are identified by their nationality; that is, the country where one is born is a defining feature of global existence. As far as territory is concerned, every country of the world has defined national boundaries that are protected by its military institution (Ansell & Torfing, 2016). Any foreign elements that cross these borders without authorization are deemed enemies of the state. Regarding sovereignty, every country of the world is independent of foreign manipulation (Ansell & Torfing, 2016). It is important to note that one of the evils of colonization was that it denied colonies their sovereignty; however, today, every country is free to decide its political, economic, and social fate without undue foreign interference. Finally, the government is the primary institution of authority and governance in every country of the world (Ansell & Torfing, 2016). On the basis of these four features, the United States stands reasonably on all four. Approximately 300 million Americans make up the national population residing in 50 different states (Ansell & Torfing, 2016). The territory of the US is defined and its neighbours, who include Mexico and Canada, are known. On sovereignty, the US Constitution stipulates the independence of the country, including the functions of both the federal and state governments. Lastly, governance in the US exists on both the federal level, with the President heading the federal government, and state level with governors heading the state governments.

Three Waves of Democratization

The history of global democracy can only be fully understood by analyzing the progress of democratization in global politics. For this to happen, it is critical to consider the three waves of democratization that have taken place on a global scale. Simply put, the three waves represent the evolution of democratic theory in national governance. Since its founding in Athenian democracy, democratic governance has become institutionalized in most countries of the world (Ansell & Torfing, 2016). Analyzing the three waves of democratization is critical in forming an understanding of the extent to which democratic theory has impacted contemporary governance. The first wave, which happened to be the longest and most torturous for states, took place in the 19th century, where countries such as England, began to embrace democratic ideals through the establishment of the rule of law (Ansell & Torfing, 2016). Indeed, this move saw the King of England and the aristocracy become subjects of the law something that was inconceivable some years earlier. For the first time in the history of England, the King was now accountable to the English Parliament (Ansell & Torfing, 2016). Despite such progress, however, the civil society did not attain independence of institutions until the early 20th century.

Concerning the second wave, which took place after the Second World War, countries, such as Germany, became modern sovereign states (Ansell & Torfing, 2016). However, there were few challenges to the democratization process in these countries. In Germany, in particular, the coming to power of the Nazi regime nullified the principle of universal suffrage that had become part of national governance in 1991 (Ansell & Torfing, 2016). Austria, Italy, Greece, and others from Europe also experienced moments of democratization with few hiccups now and then (Ansell & Torfing, 2016). Lastly, the third wave of democratization, which has lasted to the present, has seen democracy become an essential political concept all over the. For instance, the United States, which is the second biggest democracy after India, pursues a majoritarian democracy, where political leadership is determined by simple majority in presidential elections (Ansell & Torfing, 2016). Countries like Belgium and Switzerland, on the other hand, use a consensus model to choose their top political leadership (Ansell & Torfing, 2016). Put simply, the three waves of democratization have seen the evolution of political leadership to the contemporary times, where presidential and parliamentary systems of government have replaced monarchy (Ansell & Torfing, 2016). Further, multiparty general elections have replaced the hereditary regimes, and decentralization of power and authority has replaced centralized governments (Ansell & Torfing, 2016). In this light, therefore, it is right to suggest that the three waves have positively impacted contemporary governance throughout the world.

Notably, three main reasons led to the three waves of democratization including economic reasons. The Great Depression is an example of factors that contributed to the democratization process. Secondly, the tyrannical rule had become rampant, and this had created social inequality in most societies. As a result, democracy was seen as the only way to rectify the ills of society. Lastly, the world was quickly globalizing, and democracy was seen as the only political system that had global legitimacy.

Unit V

Difference between a Unitary State and a Federal State

The main difference between a unitary government and a democratic government is on how the government is run. While government operations in a unitary state are centralized (that is a central government is in control of all functions of national governance), in a democratic state the government is decentralized (Carnoy, 2014). In other words, government functions in democratic states are devolved into the local regions, and this creates regional governments. However, these regional governments remain accountable to the central government.

Principles of Constitutional Design

Every country of the world has a constitution that sets out the terms of leadership and citizenry. As such, writing a constitution is one of the most defining moments in a country’s political, social, economic, and cultural history. The principles of constitutional design exist to ensure that constitutions are written with the highest level of care and political will. Firstly, the constitution must be put in writing, where every component must be both brief and simple without sacrificing meaning and sense (Carnoy, 2014). Secondly, everything that cannot be enforced as law must be omitted during the writing of the constitution (Carnoy, 2014). In other words, the constitution is a legal document, where every line and sentence must have legal interpretations. More important, the constitution must stipulate clearly who, what, where, how, and when regarding every component therein (Carnoy, 2014). Drafters of the Constitution must anticipate beforehand how the legal fraternity might twist language to take exploit sentences that are not clearly defined in the constitution. This allows the constitution to be a watertight document worthy of its reputation and recognition (Carnoy, 2014). Consequently, every provision in the constitution must serve a purpose; in other words, the constitution must not be merely a collection of words and thoughts but must be enforceable in society.

Indeed, given the preceding principles, the US Constitution is a national legal document that is enforceable in law and which stipulates the relationship between the government (federal and state) and the citizenry. Having survived more than 200 hundred years, it is quite right to suggest that the US Constitution meets all the principles of constitutional design.

Four Functions of Political Parties

Multiparty democracy is one of the most visible features in the political environment of most countries all over the world. Besides China and other socialist countries, every another country of the world is characterized by the presence of a political atmosphere where several political parties compete for national governance. In this light, therefore, it important to consider the main functions that these political entities play in national governance. Firstly, political parties are responsible for identifying and selecting persons to be nominated as candidates for various national offices (Carnoy, 2014). In a democratic context, every presidential election is characterized by several candidates competing for votes of the populace. However, each of these candidates does not elect themselves; rather it is the political parties under which they campaign that identify and nominate them for the candidature. In the just-concluded US presidential elections, for example, the President-elect Donald Trump was nominated by the Republican Party while the losing candidate Hillary Clinton was a nominee of the Democratic Party.

Another role of political parties is to mobilize votes for their presidential nominee (Carnoy, 2014). Again, in the just-concluded US presidential elections, just like presidential elections in other democratic states, the parties with presidential candidates are responsible for conducting national and grassroots campaigns to win votes for their candidates. To a greater extent, the candidate who wins the presidential elections emerges from political parties with the greatest economic and social power to mobilize voters across the state. Facilitating governance is another critical function of political parties (Carnoy, 2014). Indeed, political parties are considered to be governments in waiting. In some countries, the major opposition party is considered the alternate government. Even though only one political party produces the president in the US, for example, both Republican and Democratic Parties produce other leaders across the nation including state governors and Congress members. As such, all political parties in a way help to institute national political leadership.

Finally, political parties, especially those in the opposition, act as eyes of the public in checking the excesses of the ruling government (Carnoy, 2014). This watchdog role puts political parties on an almost equal footing; that of serving the interests of the public. In the US politics, the party that fails to form the national government has the role of monitoring the party running the government. Some of the ways that the parties not in power control the government is by interrogating bills that the government introduces into the national Parliament for adoption. In fact, debates in national Parliaments exist as a mechanism for interrogating every move that the government makes in the course of its reign. For example, members of the US Senate who come from the party not in power have an important duty of opposing what they see as an attempt by the party in the authority to institute policies that might hurt the US public or jeopardize the interest of the US in the international front. These policies might include those to do with domestic economic policy or foreign policy. Declaring war is one of the decisions that must get Senate approval due to its potential to hurt US citizens, both at home and abroad, as well as US interests globally.

Unit VI

Differences between Social Movements, Interest Groups, and Political Parties

Firstly, social movements take many forms and include diverse entities, including political parties and interest groups. However, unlike political parties and interest groups which are mostly institutionalized (Berry, 2015), social movements arise out of necessity and are short-lived (Fominaya, 2014). For example, the Battle of Seattle of 1999 was a social movement dedicated to anti-globalization (Fominaya, 2014). Political parties, on the other hand, are vehicles through which governments come into power (Carnoy, 2014). In other words, political parties facilitate national governance. As far as interest groups are concerned, their main role is to fight for the benefit of their members or those of the public by lobbying legislators.

Difference between the Three Types of Interest Groups

The US is characterized by multiple interest groups cutting across sectors. However, these interest groups can be categorized into three: professional associations, labour unions, and public-interest groups (Berry, 2015). Professional association, such as the US Chamber of Commerce and the National Association of Manufactures, fight for the rights of their members (Berry, 2015). It is important to note that politics is deeply entrenched in the national system of any country, including the business world. It is for this reason that the economic fraternity forms associations to agitate for the rights of their members, particularly in the national and state levels. As far as labour unions are concerned, workers play a major role in the economy of any country (Berry, 2015). Unfortunately, the political class does not seem to take into many conditions the plight of workers in their countries. It is for this reason that labour unions, such as The United Automobile Workers and the American Federation of Labour and Congress of Industrial Organizations (AFL-CIO), exist in the United States (Berry, 2015). Lastly, public-interest groups, such as Greenpeace which fights for women rights, and Friends of the Earth Action which fights for environmental protection, exist to fight for the interest of special groups or entities (Berry, 2015). In most cases, public-interest groups fight for the public good.

Personally, I believe public-interest groups wild the most power in influencing US politics. This is because, in most cases, these groups are not sectarian, but rather they represent a majority of the US population. As such, they tend to wield a lot of power when it comes to the mobilization of the masses both at the national and grassroots levels.

The Reason for the Widespread of Social Movements

In the last several decades, social movements have become quite common globally. From the United States to Europe to Asia to Africa, social movements have become popular vehicles for agitation. While the issues leading to social movements in different parts of the world may differ, the impacts of these movements are almost similar. In the developed world, most of the social movements arise out of concern for public good, such as environment and animal right protection (Fominaya, 2014). Still, others emerge as a result of agitation regarding global trends. The Battle for Seattle protests of 1999 in New York, for example, happened out of concern on the effects of globalization (Fominaya, 2014). Indeed, major countries of the world were embracing globalization by adopting international policies that had great ramifications on the environment and other sectors; Trade agreements had become common between countries without due concern for their impacts on local populations (Fominaya, 2014). These trends result in mass demonstrations, especially during international conventions, such as the World Economic Summit.

In the developing world, however, most social movements arise out of frustration with government policies and other evils associated governments in power. Entrenched corruption is one of the factors that lead to social movements in African countries (Fominaya, 2014). Recently, a section of South African held anti-corruption protests against incumbent President Jacob Zuma across in the City of Pretoria. Apparently, President Zuma had misappropriated state funds in building a personal palatial residence at a time when millions of South African youths were unemployed.

Another factor contributing to the rise of social movements is tyranny. Still, in Africa, the Arab Spring that swept across the Aran world saw Libya, Egypt, and Tunisia hold massive protests again the ruling regimes (Fominaya, 2014). In Libya, the late Muammar Gaddafi had held reins of power for decades and was regarded a threat to the stability not only of Libya but the entire African continent. Indeed, most dictators in Africa, such as Idi Amin of Uganda and Mobutu Sees Sseko of former Zaire (now the Democratic Republic of the Congo) were deposed due to their tyrannical rule.

In the Asian continent, lack of democracy is the main factor contributing to increased social movements. China is one of the few countries of the world that have refused to let go communism, and this is a great impediment to freedom of the masses in those countries. The 2014 Umbrella Revolution was one of the biggest pro-democracy rallies to take place in China in recent years (Fominaya, 2014). In Ukraine, the Orange Revolution of 2004 resulted out of frustration with the ruling regime. The same applies to the Rose Revolution of 2003 in Georgia which was a pro-Western rally against Russia’s interference in the internal affairs of the country (Fominaya, 2014). Indeed, the widespread global embrace of democratic ideals appears to be a contributory factor to social movements.