Economic Rationalism and its Impacts on the Consumers - Essay Example

Economic Rationalism Student’s Name: Instructor’s Name: Course Code: Date of Submission: Introduction Economic rationalism is defined as the economic policy which was developed by the Australia government to ensure primacy of the markets. This means that the economic policy requires that the business environment should be determined by the market forces and little government intervention. The economic rationalism policy in Australia began in the year 1980s and 1990s and it is also referred to as neoliberalism (News weekly 2001). The basic principle behind the economic rationalism is that markets can be regulated better by the market forces rather than the policies and regulations which are formulated by the government. In this effect, this essay will discuss that economic rationalism in Australia has left the consumers better than they were before. From the economic rationalism development in Australia, the consumers have been left better than before the economic reforms took place. To start with, one of the reforms that have taken place in Australia as a result of the economic rationalism is the changes in electricity changes. One of the reforms which took place in the Victorian electricity market is the privatization system. The privatization of the electricity system was important for the consumers because of the various benefits that they enjoyed. This is one of the strategies that were employed to ensure that the consumers were able to access quality services due to health competition in the electricity industry. The public ownership strategy was abandoned and the supply of the electricity was privatized and this encouraged competition (Reserve Bank of Australia 1997). The end result was that the customers benefited due to low prices which were charged for the electricity since the consumers were able to access better services hence economic rationalism benefited the consumers of electricity. The other principle that was behind the economic rationalism in Australia is the trade policy that was developed. The trade policy was concerned with the removal of trade barriers to international trade meaning that there was that international organizations investing in Australia. This means that the trade policy encouraged the international trade whereby the global organizations also invested in the economy of Australia (Kristnguyen 2011). In this way, the economic rationalism helped to improve the business activities and health competition in different industries meaning that healthy competition improved the quality of services which were provided to the consumers. Like discussed above, the government of Australia was able to privatize most of the organizations which were owned by the government and this means that the various industries were opened up for the global competitors. In this way, the global organizations were able to enter into the Australian market thus improving the way business operations are conducted. Therefore, the consumers were left better since there was healthy competition, hence improving the quality of services as well as the prices charged for the services. Before the economic rationalism, the business regulation was very high due to government policies. The impact was that investments were discouraged from being developed. The policies which were formulated by the government were not favorable to local and foreign investors (Tom 1996). The results were high unemployment and slow economic growth. The government intervention was therefore the policy that discouraged many investors from investing into the Australian economy. However, with the development of the new government policy regarding the economic rationalism there were economic liberalism and this means that the barriers to economic development were abolished and this helped to improve the development of many businesses (Tom 1996). The impact of economic liberalization on the consumers is that the consumers were assured that there were quality products and services hence their needs and expectations were achieved. This is because effective competition ensures that there is effective pricing thus benefiting the consumers. The other benefit of the economic rationalism to consumers in the Australian market is that it helped to ensure that there was deregulation of the financial system. This implies that the management of the financial system was deregulated and financial organizations were developed (News weekly 2001). The influence of the financial system deregulation is that there was low interest rate which means that the consumers can access the financial facilities like loans to carry out their daily activities. On the other hand, the lower interest rates that were charged as a result of the financial deregulation mean that the consumers can be able to be charged effectively since the lower interest rates also influence the price of the products. There was foreign capital investment and this means that the investors can access the financial facilities to make their investments. There were loans which were provided to families, farmers and small business and this helped to develop the Agriculture sector (Ah Chee 1997). Therefore, the consumers were left better as a result of the economic changes which took place after the economic rationalism since they were able to access the essential products and services especially from the Agriculture sector. During the economic rationalism period, the National Competition policy was developed. The competition policy was concerned with ensuring that competition was made effective among various industries. However, to achieve this, the privatization concept was also reviewed. The government policy which hindered the entrance of new organizations into various industries was abolished and this improved competition among the business organizations (Whitwell 1990). The reason for deregulating the competition was to ensure that the consumers benefit from the competition and also will help to benefit the organizations themselves. Competition is healthy in any organization as it ensures that the organization is growing and the consumers benefit from the competition policy. For instance, deregulation in the Agricultural sector left the economy of Australia boosted. The boost in the production sector ensured powerful supermarket chains which were important in slashing the prices for the produce which benefited the consumers (McLean 2012). The consumers therefore benefited in terms of supply and effective pricing of the produce from the farmers and this can be concluded that consumers have benefited greatly from the economic rationalism which happened in the years of 1980s. The free trade policy which also developed during the economic rationalism also helped to benefit the consumers in terms of free trade tariffs. The government intervention in business activities was eliminated and the business activities could be conducted freely. The quarantine regulations weakened during the economic rationalism. One of the efforts of the free trade that were experienced is the movement of the companies to offshore and protection or any assistance to organizations was abolished. In this way, there were many entrants into various industries (Pusey 1991). The free trade encouraged fair competition among various organizations and the main beneficiaries of the free trade were the consumers in terms of pricing and effectiveness of the services which are provided to the consumers. On the contrary, some economists argue that economic rationalism has affected the consumer negatively. In the first place, economic rationalism has led to inaccessibility of essential services to the consumers. This is because the government owned organizations are subsidized and due to economic rationalism the customers have been affected negatively (Sheil 2000). The cost of acquiring essential products and services is high due to privatization of the organizations which were initially owned by the government. In this way, some of the people cannot access essential services since they are costly. The deregulation of the market means that there is privatization and this means that liberalization of the market means that the organizations are concentrating on how they can reap more profits. This means that the quality of the products can be assured but the pricing can be too high for the essential services and this can affect the quality of life of the consumers as they cannot afford essential services (Fenna & Tapper 2012). Other economic sectors like health cannot be deregulated as this will compromise the security of the people. In this effect, it can be argued that economic rationalization has left the consumers better despite the few drawbacks which are associated with economic rationalism. Conclusion This essay has discussed the economic rationalism and its impacts on the consumers. The economic rationalism took place in the years of 1980s and has affected the consumers either positively. The main developments that have taken place after the economic rationalism include privatization of services. For instance, the electricity system was deregulated and this improved the provision of services to the consumers. In addition, the national competition policy also improves the quality of services provided to the consumers. Free trade also helped to eliminate the barriers to international trade and improved the quality of services to the consumers. Therefore, economic rationalism has left the customers better in terms of pricing and quality of services which are provided. References Ah Chee, D. (1997). Good practice means self-determination. A case study from central Australia. Paper presented to ANTA’s ATSIPTAC Network Exchange, Canberra. Fenna, A & Tapper, A. (2012). The Australian welfare state and the neoliberalism thesis. Australian Journal of Political Science, 47(2), 155–72. Kristnguyen. (2011). The ideology of the market-economic rationalism, retrieved on 9th May 2015 fromhttps://kristpnguyen.wordpress.com/2011/09/14/the-ideology-of-the-market- %E2%80%93-economic-rationalism/ McLean, I. (2012). Why Australia prospered: The shifting sources of economic growth. Princeton: Princeton University Press. News weekly. (2001). A history of economic rationalism in Australia, retrieved on 9th May 2015 from http://newsweekly.com.au/article.php?id=487 Pusey, M. (1991). Economic rationalism in Canberra: a nation-building state changes its mind. Melbourne, Australia. Reserve Bank of Australia. (1997). Privatization in Australia. Reserve Bank of Australia Bulletin. Sheil, C. (2000). Water's Fall: Running the Risks with Economic Rationalism. Annandale, NSW: Pluto Press. Tom, V. (1996). Economic rationalism VS the entitlement consensus. retrieved on 9th may 2015 from https://www.cis.org.au/images/stories/policy-magazine/1996-spring/1996-12-3-tom- valentine.pdf Whitwell, G. (1990). ‘The triumph of economic rationalism: the Treasury and the market economy’. Australian Journal of Public Administration, 49(2), 124-40. Read More