Differences in the Effects of Recent Economic Crisis on Citizens of the UK and Russia - Research Proposal Example

Differences in the Effects of Recent Economic Crisis on Citizens of Developed and Developing Countries (UK and Russia) Instructor’s Name: Date: Introduction It is nearly undisputable that the recent economic crisis can be considered as one of the most devastating economic crises since the 1930s Great Depression. According to The Economist (2011), economic crisis refers to a term that is broadly applied to a number of situations where a country experiences a sudden or gradual slow down or downturn in the economy. An economy that is facing an economic crisis is characterized by declining GDP, rising or falling prices because of inflation/ deflation, and liquidity drying up among other characteristics. The Economist further notes, economic crisis is often brought about by financial crisis, that is, a situation in which assets or financial institutions lose a large part of their value, suddenly. The following other reasons have been cited to cause the crisis: one, asset- liability mismatch where risks that are associated with an institution’s assets and debts are not aligned appropriately. Two, regulatory failures where there have been insufficient financial regulations by the government. Thirdly, contagion has been cited as another cause where financial crises spread from an institution to another (Centre for Economic Policy Research, 2011). The recent economic crisis had adverse effects both short- term and long- term in most of the economies across the world. The most notable effects included; stock markets around the world witnessed downturns, national governments were forced into bailing out banks, some large financial institutions collapsed, and it resulted to increased unemployment rates among other effects (The Financial Times, 2010). The crisis had different effects on citizens of different countries depending on a country’s level of development. This research project focused on the effects of recent economic crisis on citizens of developed and developing countries, specifically the UK (developed country) and Russia (developing country). The research used both qualitative and quantitative research methods. Literature Review The effects of the recent economic crisis were widely felt across the world. Developed and developing countries alike were affected by the crisis as pointed out by Chossudovsky and Marshall (2011). Developed countries that had been experiencing favorable economic situations started to record worrying trends that prompted fears in some quarters of economic collapse. The financial institutions suddenly started to lose large portions of their value (Chossudovsky & Marshall, 2011). In response to the crisis and its possible dire consequences, the governments of the developed countries such as the UK and the US began injecting capitals in these institutions with an intention of fixing the crisis. The institutions on their part began to take measures towards fixing the crisis; some banks began cutting down their interest rates and reduced lending among other measures (Wide Angle, 2010). Concerning developing countries, some of them had seen strong economic growth prior to the economic crisis but the crisis resulted to significant slowdowns to their growth. Velde (2009) argue that the growth downturn in developing countries would be attributed to falling commodity prices, remittances sent from their Diaspora citizens, trade, and fall in investments. As a result, developing countries experienced stark implications such as the increased number of people living below the poverty line. Devine (2009) points out that the economic crisis affected UK citizens’ lives in a major way due to the huge size of the economy. The effect was mostly concerning job losses and housing crisis. Since most companies aimed at cutting costs of operations in order to stay afloat during the crisis, most employees in those companies were laid off. Getting new employment was equally difficult since there were very few companies being set up. Additionally, most citizens were unable to pay their mortgages and banks were unwilling to offer new mortgages hence causing housing crisis. In Russia, Mankoff (2010) notes, the crisis affected the Russian citizens in a number of aspects. He notes that, because of the crisis there is a likelihood that there would be a decline in the population since life expectancy has been reduced since the government is not able to meet the health and social needs of the citizens, adequately. Besides, the crisis diminished the disposable income of the Russian citizens due to increased inflation that pushed the cost of living upwards; citizens could no longer meet their needs adequately nor be able to save sufficiently thus translating to reduced investments hence possibility of shift towards poverty by increasing population. This problem was compounded by reduced declining foreign direct investment and exports, which led to rise in rates of unemployment since Russia is an export- dependent economy (Mankoff, 2010). Research Questions The following questions were provided through questionnaires to people in two countries under study namely; the UK and Russia. The questionnaires were issued randomly to the respondents in the market places of these countries. The respondents to the questions were of different age groups ranging from 18 to 67 years. Also, they were of different social status. Questionnaires were different to the respondents in with respective name of the country placed in the questions, as the questions sought to get response from the perspectives of citizens of a developed country (UK) and of citizens of developing country (Russia) because their experiences were different. However, there were similar questions asked to respondents of both countries. Questions for the UK/ Russian citizens were the following: i) In your opinion, what could be the major cause of the recent economic crisis? ii) How did you realize that the crisis exists? For example, is it through media, friends, relatives, or had a personal experience? iii) In a scale of 1- 4, where do you rate the effects of the economic crisis to you on the following; wage/ salary, transport costs, cost of food, education, health, and cost of communication. iv) How did you respond to the crisis? v) How did you see your friends, neighbors and relatives respond to the crisis? vi) Do you think the government responded appropriately to the crisis; that is, did it sufficiently cushion its citizens against the adverse effects of the crisis? vii) Which spheres of life of UK’s/ Russian citizens do you think were affected mostly by the crisis? viii) In an event such a crisis occurs in the future, do you think the government and the people will be well- prepared to respond to it than in the previous one? Research Design The philosophy used in this research was Realism. This philosophy was chosen because it is based on the belief that the existence of reality is independent of observers. In this project such a belief was needed to avoid subjectivity which may interfere with the credibility and objectivity of the research’s outcome Sobh (2006). In addition, the research used deductive research approach so as to benefit from the holistic view of the economic crisis. Deductive research approach enables the researcher to reason his works from more general to the more specific hence getting a broader perspective Burney (2008). In addition, deductive research methodology is based on testing theory and not generating theory as with inductive research methodology. In this research, various economic theories that have so far been developed with regards to economic crisis will be applied in order to find the answers to above stated research questions. Some of the theories to be applied in conducting this research include the following; Max and Keynes’ theories on unemployment and effective demand that has been associated with economic recession in most countries Keynes’ theory stating that economies are economically unstable making full employment unattainable unless there is a boost from government policy and public investment Keynes’ theory regarding fall of the main pillars (consumer spending, investment, and net exports) being the cause of recent economic recession in the world. Deductive research methodology requires an in-depth understanding of various concepts regarding a particular topic. Such concepts are then applied logically in deducing an argument either in support or against the same. In such a paper, there are many concepts that have been developed hence their understanding will be vital in analyzing UK and Russia with respect to effects of recent economic recession. Therefore, in most cases testing of theories in deductive research methodology rely significantly on quantitative research methodology. Quantitative data obtained from secondary sources as explain in data collection techniques below will be applied in analyzing the effects of recent economic crisis in developed and developing countries with UK and Russia being the respective case studies. Data Collection The research used secondary data to obtain the information regarding the differences in the effects of recent economic crisis on citizens of the UK and Russia. Specifically, data was obtained from various internet sources that contained information relating to the effects of the crisis on the citizens of these countries. Thereafter, the results were compared in order for the differences to be obtained. Secondary data was more relevant since it provided detailed and up- to- date data relating to the research topic. Other than secondary data, primary source of questionnaires were applied in collecting sufficient data in order to help justify results from the secondary data. For instance, people from different social groups having varied incomes levels were administered with questionnaires on effects of financial crisis on their wages or salary. In asking this question a scale of 1 to 4 was used where 1 represented significantly; 2- not significantly; 3- not affected; and 4- got a pay rise. The results obtained from the questionnaires were analyzed. Analysis The data collected from secondary sources indicate that UK citizens were mostly affected on employment and housing, while the Russian citizens were affected on employment, life expectancy, and disposable income. In addition, the data showed that on average, there were 11% job losses and 17.8 % were affected by housing crisis in UK. In Russia, job losses recorded were 23%, life expectancy reduced by 3.3% and disposable income plunged 6.7% during the economic crisis period. It can be observed that in the long- run, Russian citizens will be affected more by the crisis compared to the UK citizens. Effects on UK citizens Job Losses Housing 11% 17.8% Effects on Russian Citizens Job Losses Life Expectancy Disposable income 23% 3. 3% 6.7% Conclusion and Summary It is evident from the research that indeed the recent economic crisis had numerous and far- reaching effects to the citizens, financial institutions, and the governments. Particularly, the research has shown that citizens were greatly affected by the crisis. Also, it is clear that the citizens were affected regardless of whether they were in developed or developing countries. For instance, in both countries citizens; both countries witnessed job losses. However, it can be observed that Russia as a developing country bore more effects of the crisis in the long- run compared to UK which is a developed country. The contrast is an indication of the difference between the developed countries and developing countries; the developed countries have highly- developed economic structures compared to developing countries and the impacts of economic crisis are short- lived since they have ability to bounce bank within a short time. Recommendations In order to prevent future economic crisis and minimize its effects on citizens in an event that the crisis is inevitable the following recommendations have been made: i) Governments across the world should formulate and implement laws and regulations that will reduce the possibility of financial institutions plunging into financial crisis hence protecting citizens from the effects of such crisis. ii) Governments and other stakeholders should provide sufficient social safety nets to cushion the citizens against the effects of economic crisis in an event the crisis are inevitable. iii) Adequate investments should be made in developing countries to improve the long- term wellbeing of their citizens who are often hard- hit by effects of economic crisis when the crisis occurs. References Burney, S. (2008). Inductive & Deductive Research Approach. Retrieved November 14, 2011 from www.drburney.net Centre for Economic Policy Research. (2011). Economic Crisis. Retrieved November 14, 2011 from www.voxeu.org Chossudovsky, M., & Marshall, A. (2011). The Global Economic Crisis: The Great Depression of the XXI Century. Retrieved November 14, 2011 from www.globalresearch.ca Devine, K. (2010). How Will the Economic Crisis Affect People’s Lives? Retrieved November 14, 2011 from www.socialistreview.org.uk Mankoff, J. (2010). The Russian Economic Crisis. Retrieved November 14, 2011 from www.i.cfr.org/content/publications/Russian_Economy_CSR53.pdf Sobh, R. (2006). Research Design and Data Analysis in Realism Research. Retrieved November 14, 2011 from www.emeraldinsight.com The Economist. (2011). Economic Crisis. Retrieved November 14, 2011 from www.economist.com/topics/economic-crisis The Financial Times. (2010). In Depth: Global Financial Crisis. Retrieved November 14, 2011 from www.ft.com/indepth/global-financial-crisis Velde, D. (2009). The Global Financial Crisis and Developing Countries: Taking Stock, Taking Action. Retrieved November 14, 2011 from www.odi.org.uk Wide Angle. (2010). Economic Crisis in a Globalized World. Retrieved November 14, 2011 from www.pbs.org/wideangle/ Read More