Economic Performance of the United Kingdom and Italy - Case Study Example

Economic Performances of the United Kingdom and Italy Economic Performances of the United Kingdom And Italy Titus Rock Manickam Order No. 235578 06 August 2008 Table of Contents Introduction3 Unemployment...3 Unemployment in Italy...5 Balance of Payment: Italy...6 Balance of Payment: United Kingdom7 Conclusion...8 Sources.9 Economic Performances of the United Kingdom And Italy Introduction The comparison in economic performances of the United Kingdom and Italy using unemployment and balance of payment benchmarks reveals a gamut of social, cultural and regional uniqueness in both economies. A close study provides interesting facts. The UK is the 5th largest economy in the world and following closely is Italy in the 6th position. The 6th position is vulnerable and sometimes displaced by Canada or China. Unemployment As of June 2002, the figures show unemployment at 3.1% in the UK and 9.5% in Italy. Genderwise, unemployment among males stood at 3.4% and 8% for UK and Italy respectively, and for females at 1.3% and 14.4% for UK and Italy respectively. The stark contrasts in these unemployment figures reveal causative features in these two diverse European economies. The UK has a rich tradition of work culture resulting in high economic activities and thereby yielding low unemployment figures. The activities comprising employment turnover in UK is generally well coordinated ensuring better chances of employment for the unemployed while moving from one job to another in short period of time within the financial year. The job market is upbeat with healthy prospects for part time and contract employments. The availability of employment, however, does not per se serve as criteria for better quality economy. The parameters for economic excellence extend beyond the precincts of the employment factor. Advancing technologies, changing business practices, communication and information systems, globalization, etc. require adequate qualified and trained manpower. Manpower is the greatest asset in any economy. For this purpose, highly skilled personnel are given the place of pride in an enterprise, thereby ensuring better coordination and corporate results. The lack of adequate education and training among significant number of job seekers in UK to meet the growing demands of the industries is the mitigating factor in UK's economy. This factor is problematic for employers on the lookout for candidates possessing the right educational qualification and skills. Nonetheless, organizations such as Learning and Skills Councils (LSCs) have taken up the responsibility of providing ways and means for continually educating young adults over 16 years of age and also providing them with job-specific training. One of the major causes for unemployment in the UK can be attributed to the insufficient availability of prospective candidates possessing the right educational qualifications and skills. Other reasons may comprise job seekers' lack of motivation or disproportionate expectations. Still, other factors may relate to the job market situation of the day necessitating lay off, etc. Also, changing or leaving jobs for better prospects could leave some people without employment for some time. Advancing technologies is another reason for unemployment. Technologies and communication systems are changing the way we work the world over. Job competition in such situation causes employers to seek out hard working, efficient candidates for various posts leaving less efficient or motivated individuals jobless. (Tim Miller) Unemployment in Italy The unemployment scenario in Italy is spread unevenly along the lines of region, gender and age. Unemployment among the female workforce is approximately 14.4%. It is 8% for the male working population. Given the fact that Italy espouses conservative social values, many female young adults choose to stay home if safe and secure jobs are not available. Unemployment among the youth is a staggering 26% at the national level. It is 30% among female youths. In the south, the unemployment rate among youth is as high as 50%. It does pay to be old in Italy! Family owned small and medium size industries abound in Italy, notably in the northern region. These industries absorb relatives and acquaintances in large numbers, and this factor impacts public employment turnover figures as fewer job seekers need to register with the public employment service. An average job seeker is shy of menial jobs and would prefer to stay unemployed rather than suffer the ignominy of an occupation at the lower rung of the job hierarchy. The economic scene in the northern region is vibrant. There is a large variance in employment prospects between the prosperous regions of North Italy as compared to the poorer South whose economy is more agro based. The job prospects in the south are hampered with high rate of school drop outs and the mafia. In Italy, attitudinal problems prevent unemployed youths from taking up unskilled, low paying jobs. Balance of Payment Italy Italy has maintained a steady balance of payment since the past three decades. It cannot afford to be complacent as it has yet to work on teething problem with emerging technologies posing grave challenges to the older and younger generations. In 2007 Italy's GDP touched US $2,104.7 billion. Its per capita was US $33,540 in the same year. (Gross national income per capita 2007, Atlas method and PPP) Italy's economic scenario has been eventful after having faced disastrous times during the two world wars and the consequent task of stabilizing it. The wars drained Italy's economy for the first half of the 20th century, and the country had to resort to high taxation and fiscal measures thereafter to stabilize the economy. (Ben Gladstone) After achieving sustained growth during the latter half of the 20th century, it slowed down post-1980s. Italy's present balance of payment has shown marked improvement after suffering double digit deficits in the 1990s. The strength of Italy's economy lies in its highly sophisticated manufacturing units. Ninety percent of the economy relies on small and medium scale industries. Each small and medium scale industrial unit employs up to 10 persons. The sizable presence of unorganized labor is one of the contributing factors to the high level of unemployment figures in Italy. Political stability and economic reforms play significant roles in the overall robust balance of payment position. However, there is the perceptible need to push reform measures in the south. Travel and communication infrastructure is in place to boost economy and social mobility. Italy's economic strength lies in its north region which has robust industrial presence. South Italy is agro based and fares poorly economically due to high rate of school drop outs and presence of mafia. (Italy - Economic analysis of government's policies, investment climate and political risk) Balance of Payment: United Kingdom Traditionally, the United Kingdom has been one of the top players on the global economical scene for over half a millennium. Its dominance as a colonial power for most of this period has given this nation a clear lead economically which it has exploited prudently and is now enjoying the fruits thereof. In 2007, UK's GDP was US$ 1300 billion, and per capita was US$ 42,740. (Gross national income per capita 2007, Atlas method and PPP) The strength of United Kingdom's economy is based on its service and finance sectors, and its offshore investments. The bulk of income received is from offshore investments. The returns from its inland investments are not as impressive as its offshore investments. The economy also gains as a result of close UK's close coordination with data providers and users, acting on their problems and suggestions, and consulting professionals. (Balance of Payment Statistics, p13) The United Kingdom has all the hallmark of a very successful corporation. It is one of the leading members of the European Union. It has a sound international presence. Its political clout continues to be viewed with respect. Its administration system continues to be the role model for other nations, especially the democracies. However, it appears that the spending habits of the average UK citizen are extravagant, resulting in a deficit budget.The other reason for the deficit in UK's economy year after year is its strong pound currency which triggers more imports. However, the deficit is kept at low, manageable level at about 2%. UK's economy is strong on direct investments on global scale, helping it to retain healthy balance of payment despite the ever-present deficit. UK's investments on the global scale through shares and bonds are providing her healthy returns. (UK balance of payments gap falls) Conclusion Italy and the United Kingdom have their unique traditional and cultural identities. They have their strong and weak areas, resources, opportunities and their own complexities and problems. On the issues of unemployment and balance of payment, the UK has an edge on the issue of unemployment having a better human resource utility approach. As regards balance of payment, the issue is too complex to arrive at clear conclusion on who is better placed. By and large, Italy appears to have fared well on account of its epochal turn around from a disastrous start from the ruins of the war to an enviable economical position just one short of the UK. On the whole, it is the dominance of the English language which appears to give UK an unassailable lead over any other nation. Sources: Balance of Payment Statistics, A Conversation with John McLenaghan, Recently Retired Director of the Fund's Statistics Department, http://www.imf.org/external/pubs/ft/bop/news/pdf/1296.pdf Ben Gladstone, Comparative analysis of employment and skills in Greece, Italy and the UK, European Institute of Social Sciences (EISS), August 2002, kent.ac.uk/keep/.../Comparitive analysis of employment and skills.doc Bill Jamieson, An Illustrated Guide to the British Economy, Chapter 9, Britain and the EU, Euroknow, http://www.euro-know.org/articles/bandeu/bj1.html#top Giuseppe Bertola and Pietro Garibaldi, The Structure and History of Italian Unemployment, November 2002, http://www.personalweb.unito.it/giuseppe.bertola/ItalUnemp.pdf Gross national income per capita 2007, Atlas method and PPP, http://siteresources.worldbank.org/DATASTATISTICS/Resources/GNIPC.pdf Italy - Economic analysis of government's policies, investment climate and political risk, The McKeever Institute of Economic Policy Analysis, http://www.mkeever.com/italy.html Italy, UK Trade & Investment, https://www.uktradeinvest.gov.uk/ukti/appmanager/ukti/countries_nfls=false&_nfpb=true&_pageLabel=CountryType1&navigationPageId=/italy Tim Miller, The Causes of Unemployment in the UK in 1994, http://www.economic-truth.co.uk/alevel/unemploymentcauses.pdf UK balance of payments gap falls, BBC News Channel, Wednesday, 27 September 2006, http://news.bbc.co.uk/1/hi/business/5384342.stm Read More