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UK government policies in response to the emerging financial crisis in 2008 may undermine credibility and transparency and sugge - Essay Example

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UK Government Policies in Response to the Emerging Financial Crisis in 2008 Undermining Credibility and Transparency BY YOU YOUR SCHOOL INFO HERE DATE HERE UK Government Policies in Response to the Emerging Financial Crisis in 2008 Undermining Credibility and Transparency The UK government response to the financial crisis started in 2008 absolutely undermined credibility and transparency in the country…
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UK Government Policies in Response to the Emerging Financial Crisis in 2008 Undermining Credibility and Transparency BY YOU YOUR SCHOOL INFO HERE DATE HERE UK Government Policies in Response to the Emerging Financial Crisis in 2008 Undermining Credibility and Transparency The UK government response to the financial crisis started in 2008 absolutely undermined credibility and transparency in the country. UK government intervention included injection of considerable financial capital into the private sector in exchange for maintaining a long-run equity stake in the organisations where capital was infused (Simpson 2009). The equity agreement for small banks was 100 percent, with larger banks such as The Royal Bank of Scotland and Lloyd’s at approximately 70 percent; costing the government approximately ?37 billion thus far (Simpson). However, in 2013, the Bank of England warned that UK banks would require nearly ?25 billion in additional capital in order to improve current economic weaknesses in the economy (Worldwide Invest 2013). The aforementioned illustrates that government leadership is ill-equipped with knowledge of the fundamentals of fiscal policy in which original capital injections to save banks from substantial losses did not correct the problems with the economy associated with the recession. The UK government attempted to modify the concept and ideology of a free market economy, giving it more authority and influence in governing the banking system. This is the mobilisation of power resources (available government capital) to force a modification of behaviour of the private sector (Hales 1993). UK government representatives, without the necessary academic foundations of economic policy development, attempted to manipulate frenzied economic policy without taking into consideration the broader needs of UK stakeholders through this form of unethical self-protectionism. As a result, unemployment rates increased in the UK. In 2008, 17.4 percent of households were jobless, but in 2010, this figure spiked to 19.4 percent (Statista 2013). The United Kingdom is a monarchic democracy. However, in a democratic nation, representatives are elected by the people and society maintains the majority of influence over government actions and accountability. Barrett (2011) identifies that in order for a legitimate democracy to exist, it must maintain equality, transparency and accountability. The UK government, therefore, stripped itself of credibility and implemented a variety of highly unorthodox economic policies without adequate representation from UK society. Government representatives likely understood that providing “appeals to balance of power logic” are completely unable to rally public support for “expensive and risky ventures” (Markey 1999, p.145). It is quite common for government representatives in a democratic nation to illustrate that the government will work diligently to provide equal allocation of resources to satisfy all consumers. However, in the mad rush to develop new economic policies to avoid banking institution collapses, the government did not provide the appropriate transparency in their actions and recognised that balance of power arguments would not foster social support. Therefore, as another effort toward government self-protectionism, they shrouded capital injections and other new fiscal objectives until these actions had been completed. The International Monetary Fund warned that “broad public consensus” would be needed to make a substantial adjustment to fiscal policy (Schifferes 2009, p.2). However, government apparently did not agree, but developed its own policies that challenged international sentiment, further reducing trustworthiness of the competency and integrity of UK government officials. On September 30, 2008, the Irish government guarantees to the UK government that it will provide regular deposits within UK banks for a period of two years (The Telegraph 2009). This altered many years of economic sovereignty in the United Kingdom by working collaboratively with other struggling European economies. This represents a fundamental shift of internationalising economic policies and placing more fiscal reliance on the capital from other nations to stabilise the national economy. Upon entry into the European Union, the UK was allowed to sustain its own currency even though the EU treaties expected member countries to remain politically and legally committed to the single Euro currency (Foreign & Commonwealth Office 2013). The new inter-dependence between neighbouring European nations involving globalisation of capital investments is challenging decades of economic sovereignty and further causing UK government to consider a new currency union with Scotland, so long as Scotland agrees to limit the boundaries of its own economic autonomy. Again, this reduces the credibility of the UK government as a competent and compliant organisation as new and fundamental shifts in economic policy erode the integrity of a government dedicated to conform to treaties, democratic ideology, and social concepts of equality. As illustrated, the government’s response to the 2008 recession has substantially changed economic policy in the United Kingdom. The method of capital injection into the national banking system coupled with the establishment of new reliance on foreign depositors has made it difficult to continue to internalise economic policy in the country. Lack of transparency and lack of credibility are outcomes of these actions. References Barrett, R. (2011). States in the evolution of democracy, p.1. [online] Available at: http://www.valuescentre.com/uploads/2012-06 19/Stages%20in%20the%20evolution%20of%20democracy.pdf (accessed 18 December 2013). Foreign & Commonwealth Office. (2013). Minister for Europe’s speech at European Parliament Office. [online] Available at: https://www.gov.uk/government/speeches/minister-for-europes-speech-at-european-parliament-office (accessed 17 December 2013). Hales, C. P. (1993). Management through organizations: The management process, forms of organization and the work of managers. London: Routledge. Markey, D. (1999). Prestige and the origins of war: returning to realism’s roots, Security Studies, 8(4), pp.126-172. Schifferes, S. (2009). IMF praise for UK recession plan, BBC News. [online] Available at: http://news.bbc.co.uk/2/hi/business/8059861.stm (accessed 17 December 2013). Simpson, D. (2009). The recession: causes and cures, Adam Smith Research Trust. [online] Available at: http://www.adamsmith.org/sites/default/files/images/stories/the-recession.pdf (accessed 20 December 2013). Statista. (2013). Amount of workless households* in the United Kingdom (UK) April-June 2000 to April-June 2013 (as a percentage of all households) [online] Available at: http://www.statista.com/statistics/282569/percentage-of-workless-households-in-the-united-kingdom-uk/ (accessed 19 December 2013). The Telegraph. (2009). UK recession: timeline of how the British economy has been hit. [online] Available at: http://www.telegraph.co.uk/finance/recession/4320827/UK-Recession-Timeline-of-how-the-British-economy-has-been-hit.html (accessed 18 December 2013). Worldwide Invest. (2013). UK banks need almost $38 billion in capital. [online] Available at: http://worldwide-invest.org/content/182-UK-Banks-Need-Almost-38-Billion-in-Capital (accessed 20 December 2013). Read More
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