Are Passive Industry Policies More Effective Than Anticipatory Industry Policies - Case Study Example

Are Passive Industry Policies More Effective Than Anticipatory Industry Policies? Name: Institution: Are Passive Industry Policies More Effective Than Anticipatory Industry Policies? Introduction Since the beginning of the global financial crisis in 2007, government institutions and industries around the world have initiated policies that are directed towards stimulating their economies (Taibbi, 2011). Governments in Asia, Europe and in the Americas that traditionally had eschewed industrial policies have resorted to numerous but selective interventions with the objectives of ensuring that their economies were not only revived but also improving in the wake of the global crisis (Hart & Tindall, 2009). The difference in the economies in westerns societies and those of emerging markets such as India and china lies in the decision to adopt passive or anticipatory policies in reviving their economies (Nayak, 2013). The main objective of this paper is to access the extent passive industry policies are more effective compared to the anticipatory policies. This will be discussed with the examples from the recent Global Financial Crisis which began in 2007. Passive industry policy vs. anticipatory industry policy Crisis management Passive industry policy is an approach towards the development of policies that takes away the power of choice from policy makers. Instead, this approach to policy heavily relies on the judgment and objectives of the individuals involved in the development of the policies (Taibbi, 2011). These are policies that are meant to handle industrial challenges when they occur. Passive policies are essential considering that they enable members of organizations to not only. Passive policies industry policies require very little or some cases no government involvement (Subramanian, 2011). The adoption of passive global policies by countries such as the United States such as general reduction in business regulations considering that such interventions are aimed at improving on the techniques through which more Americans can engage in business initiatives as a way of creating more employment opportunities (Hart & Tindall, 2009). The outstanding difference between anticipatory industry policies and passive industry policies lies on the fact that the former is more predictive and is not engaged in crisis management (DeLeo, 2014). Inasmuch as anticipatory industry policies are predictive measures that are often used to provide the effective solutions to possible societal challenges, it is important to note that there are times when such policies are less predictive of the actual situation and this may lead to a crisis as in the case of the global financial crisis of 2007 (Taibbi, 2011). This crisis which began in the US was a product of anticipatory industry policies that were developed by the US government to facilitate many American home owners in the acquisition of mortgages in the form of credit (Nayak, 2013). However, these home owners faced the challenge of repaying their mortgages and loss of confidence in the American home market by investors led to a credit crunch and a liquidity crisis (Nayak, 2013). From this argument it is possible to argue that unlike passive industry policies which act in accordance with the rules while solving problems, anticipatory industry policies failed to manage the crisis falsify their ability in sustainable development of the economy (Subramanian, 2011). Risks and benefits of the policy Anticipatory industry policies are considered to be based on a future. This is largely because for the economy of any country to develop it is necessary to predict a future and the initiatives that are to be conducted in the process of realizing an objective and this leads the government to strategic planning on the basis of long term goals (DeLeo, 2014). During the global financial crisis, different government around the world, especially in the banking industry, had engaged in the development of anticipatory industry policies that were aimed at ensuring that there were investment platforms that could provide investment opportunities to be able to raise their financial gains of these institutions (Wachter et al, 2014). However, the collapse of Lehman Brothers in late 2008 was considered the beginning of a new stage of the crisis (Hart & Tindall, 2009). Government began initiating problem solving techniques, by introducing passive industry policies as ways of rescuing major financial institutions considering the devastating fallout in the housing industry and the stock market (Yülek, 2014). Despite the continuity of many institutions to face challenges, especially on matters related to liquidity, the Australian government developed hands-on passive industry policy in the form of stimulus packages with the objective of jump starting the relatively slow economy (Wachter et al, 2014). While also engaging in the imitation of passive policies in solving existing problems, the US government developed a$700 billion proposal on how to rescue Wall Street investment bankers (Hart & Tindall, 2009). One of the objectives in the development of passive industry policies is the creation of friendly business environments. This is based on the assumption that business institutions are essential in the development of any economy (Subramanian, 2011). This therefore means that for nay society to be associated with meaningful economic growth it has a responsibility of ensuring that its institutions lower the cost of doing business. This can be facilitated through streamlining the tax policy as this will encourage investors to incorporate their resources in numerous developmental initiatives (Wachter et al, 2014). After the adoption of the first and the second stimulus packages the Australian economy became one of the most insulated economies compared to other developed countries in the US. These stimulus packages were basically based on passive industry policies that were focusing on solutions to the existing financial challenges within the country (Savona et al, 2011). One of the main objectives of the stimulus packages was to fight against the rising trends of inflation within the country (Subramanian, 2011). Anticipatory approach to the development of industry policy is often based on the notion that it is logical for policy makers to engage countermeasures that predict the possible occurrence of a phenomenon considering that is essential in not only saving time but also the resources (Kolb, 2010). Anticipatory industry policy is considered as a move towards embracing a proactive approach to the making of policies which is opposed to the development of policies that aims at responding to emerging and blossoming issues that could have caused significant ills to the society (DeLeo, 2014). Inasmuch as the predictive nature of the anticipatory industry polices are preventive measures to challenges that are facing any society, such as the Global Financial Crisis, the ability of any country to succeed in its endeavors to resurrect its economy, it will be essential to develop passive industry policies as in the case of Australian stimulus packages during the global financial crisis of 2007 and 2008 (Kolb, 2010). Looking ahead, as is the requirement of anticipatory industry policies, is an essential aspect in the development of any economy (Yülek, 2014). However, it is also important to understand the prevailing circumstances and develop effective solutions prior to the development of future measures. This means that passive industry policies are definitive of the direction to be taken in the development of anticipatory industry policy (Savona et al, 2011). Cross- country concerns Through anticipatory industry policies, countries have been able to engage in long-term planning processes as techniques of fostering better business relationships over defined and undefined periods (Wachter et al, 2014). The ability of different countries to recognize the decisions made in different jurisdictions is an essential in anticipating regional challenges has proven to be of benefits to different countries (Subramanian, 2011). An orientation towards intergovernmental systems in the case of the European Union has generated the view that constituencies can be created to help in monitoring, planning and reacting to different policies that affect the future relationships among the countries concerned (Suter & Herkenrath, 2012). Unlike the anticipatory industry policies that focus on future relationships, passive industry policies focus on the roles of different variables in improving the business environment of countries within a specific bloc (Suter & Herkenrath, 2012). This is geared towards the improvement of personal incomes and the provision of more employment opportunities as a strategy of introducing a more inclusive approach towards developmental initiatives (Savona et al, 2011). Following the Global Financial Crisis, various countries have been engaged in the development of policies directed towards economic gains. This has been facilitated by policies that streamline the procedures of generation employment opportunities (Kolb, 2010). Policy makers across regions such as the US, the European Union, and those of the Asian continent are engaged in the development of multilateral trade rules that are accompanied by the development of passive industry policies seeking to redefine international best practices that are considered necessary following the crisis era experience.in addition, different governments are currently engaged in selective economic activities (Suter & Herkenrath, 2012). Conclusion Passive industry policies and anticipatory industry policies are considered essential in the development of any economy. However, this is largely defined by the prevailing circumstances and the ability of the economy to engage different apparatus in the process of solving prevailing challenges. Despite their importance, passive industry policies are considered effective than anticipatory industry policies considering that the latter is founded on predictive aspects of the society and this may fail to actualize in the event that the said activities do not actualize as predicted. This makes the passive approach more operative considering that it explains and provides solutions to the existing economic challenges. References DeLeo, R. (2014). Anticipatory Policymaking: when government acts to prevent problems and why it is so hard. Northeastern University Hart, P. ., & Tindall, K. (2009). Framing the global economic downturn: Crisis rhetoric and the politics of recessions. Acton, A.C.T: ANU E Press. Kolb, R. W. (2010). Lessons from the financial crisis: Causes, consequences, and our economic future. Hoboken, N.J: Wiley. Nayak, S. S. (2013). The global financial crisis: Genesis, policy response and road ahead. New Delhi: Springer. Savona, P., Kirton, J. J., & Oldani, C. (2011). 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