Problems Stemming from the Economic Crisis and Potential Recovery - Research Paper Example

The policies adopted by the governments are aimed at enhancing sustainable economic growth by ensuring that the structural and macroeconomic causes of the recession are addressed. Through adoption of effective policies that ensures the stability of the supply side of the economy, macroeconomic benefits would ultimately emerge. First, they ensure fiscal sustainability since they add credibility to the borrowing demands by the government. Secondly, they enhance redeployment of resources due to the fact that they use the opportunities that emerged after the structural changes that emerged after the recession.

One of the implications of the recession was the reduced level of research and development (R&D). This was due to the contraction of the retained earnings which is the major source of financing R&D. In addition, many financial institutions have become more risk averse thus making it hard for companies to get external funds to support their research and development initiatives (OECD 12). . In order to encourage development of new industries and to promote the spirit of entrepreneurship that is important in addressing the negativities of recession, most governments have emulated two essential strategies.

First, governments have encouraged the growth of firms by reducing the administrative costs incurred by companies during their establishment. This also involves establishment of more favorable conditions for restructuring of poor performing companies. Secondly, government authorities have adopted easing of liquidity problems faced by small companies. In order to solve the liquidity problems, governments emulated strategies such as reduction of tax, factoring of tax receivables as well as export credit (OECD 8).

Human investment Increasing investment in people is another strategy that is adopted by government authorities. This entails improving training and education so as to prepare individuals for the emerging job opportunities in various industries. Some of the policies emulated by government authorities include, improving educational infrastructure system, integrating ICT and provision of school programs that encourage innovation (OECD 21). In addition, the economic recession is used by government as an opportunity to undertake reforms in higher education.

Implication of economic recession on performance of General Motors Company General Motors (GM) is a US based automobile company that was largely affected by the economic recession. For example in 2007, the company lost $50 billion, while in 2008 the stock value of the company reduced by 76% (Emily and Phil 34). In its effort to enhance the performance of the