Contribution of Businesses to Economic Stability or Instability - Essay Example

? CONTRIBUTION OF BUSINESSES TO ECONOMIC, POLITICAL, AND SOCIAL STABILITY By Location Businesses have the potential to affect the economic, political, and social stability of any society and the globe as well. Many researchers have strived to analyse how the political, economic, and social aspects affect businesses, but little has been done in a bid to define the potential of businesses to give rise to instabilities of the three aspects. However, there is available evidence that businesses and the policies that define business practices can have an overwhelming impact on the political, economic, and social stability. This paper will consider the effect of businesses on these three aspects, with the first section describing the ways in which businesses contribute to economic instability and or stability. Under this section, the global financial recession of 2008 will serve as a classic example of the potential of businesses to contribute to economic instability. Under the second section, a critical analysis of the contribution of businesses to political stability and instability will be discussed. The third section will consider the contribution of businesses to ether social stability or instability. Contribution of Businesses to Economic Stability or Instability Many economists have focused on describing the factors that affect the stability of the economy in different parts of the globe. The adoption of capitalism as an ideology in the business world brings out a clear picture of the dynamics that defined the business world. Capitalism is a system that favoured the rich countries that had the capital to invest, and served as a disadvantage to the lower class in any society that had to work as labourers with minimal wages. The bigger picture of the capitalism indicates that the establishment of free markets only serves to promote the interests of the rich. The rich countries have enjoyed the benefits of capitalism. On one side, capitalism has caused the economic stability of the wealthiest developed countries. This is evident from the analysis of the roots of capitalism in Europe and the trends that followed with capitalists occupying different territories. As Chang highlights in his critic of the capitalist system, it is evident that the opening up of markets promoted by capitalism has little benefit to the poor countries and has been the cause of the surging economic crises in these countries in the recent years (Chang & Lane2010, p. 34). Moreover, the capitalist system has only served to build several distinct capital systems that exhibit a level of competition. This competition only results in adversity that compromises the economies of some countries, while promoting the interests of the capitalist hegemony. After the recession experienced in the United States during the 1930s, it became evident that there was need for control of the business world. This led to the formation of different organizations that have been at the forefront of controlling the global markets and monetary systems. Evidently, these organizations have exerted a form of regulation of the international markets determining the ensuing business trends. Moreover, regional regulatory bodies that control the business trends in each region. Chang argues that the elimination of opaque financial products may foster a level of certainty concerning the future stability of the economy (Chang & Lane2010, p. 64). Evidently, it has proved impossible to ensure that each country and region maintain the openness and freeness of markets. Many countries have focused on the production of the opaque business products that have affected the stability of some economies. The 2008 financial recession reveals evidence that businesses have the potential of causing instability. The failure of banks was the primary cause of the recession. Prior to the recession, a few of the great banks controlled the financial system and had the security that they were not subject to failure. Moreover, many of the Americans had trusted the banks and were prompted to acquire loans from these institutions. Many of the banks invested in the housing business that seemed lucrative because many economists had predicted the price of houses would rise in the years that followed. Unfortunately, the prospects of the economist failed, with the prices of houses going down tremendously. This puts the big banks at an immense financial risk (Chang & Lane2010, p. 67). The failed housing investment resulted in big losses for these institutions. This affected the smaller financial institutions and the detrimental financial effects spread to all other economic sectors. The failure of the financial businesses had plunged the United States into an economic recession. This being the global hegemony of the globe, the financial recession affected the entire globe. This retarded the economic growth of many countries because of the hegemony and superior economic standing of the United States. This is the reason why Chang argues that the globe does not need an economist to predict the forthcoming trends because the business arena is fast changing. Moreover, the failure of their predictions is evidence that businesses can give rise to the economic instabilities and crises. After capitalism has presented its multiple ills, a new system of neoliberalism emerged. The concept of neoliberalism sought to establish a new balance of state and markets. The promoters of this system have placed emphasis on its emerging potential to undo the ills caused by the capitalist system. The concept of neoliberalism perceived as a viable solution of the failed system of capitalism and socialism. Although the failure of capitalism has received emphasis above, socialism presents similar flaws because it has resulted to economic instabilities at some point in the countries in which it is adopted (Chang 2007, p. 6) Despite the hopes bestowed on neo-liberalism, its application in the markets has caused financial instability in different regions. Asia is one has adopted neoliberalism to its detriment. In the spirit of neo-liberal thinking, some Asian countries have sacrificed the thriving investments to adopt prestigious business ventures such as aircraft manufacture. Analysts of this system have described such ventures as the main causes of economic instability in some countries (Bakan 2005, p. 6). On the other hand, businesses and investment ventures have been the platform on which many economies have stabilized registering immense growth in per capita measures. For example, businesses in Japan explain why it emerged to become an economic giant that threatened that posed a great challenge for the United States (Chang 2007, p. 5). The potential of innovation for businesses today have contributed to increasing profits and new ideas that have led to the stability experienced in some countries. Nations favoured by the existing market trends and that have the potential to thrive amidst the existing competition has been able to foster economic growth. This highlights that businesses have the potential to cause both economic stability and instability. The sole purpose of opening up businesses is to create a platform for boosting economic growth. It is unfortunate that the adopted ideologies of capitalism and neo-liberalism have not delivered even benefits to all the countries, and have only favoured the wealthy nations. Although these systems advocate for the opening up of markets, such efforts have compromised the economic standing of the poor countries, and those not favoured by the existing market trends. Contribution of Business to political stability/instability Evidently, businesses exert a form of impact on the political structures existing on the globe today causing instabilities at some point. Capitalism and neoliberalism described above concern markets, the state, and power (Cairns & Martyna 2008, P. 70). The emergence of capitalism focused on exploiting both business opportunities and seizing power, a factor that has defined the political alignment existing on the globe today. Business and power have formed a complexity that has defined the political systems that exist on the globe in modern day (Chang 2007, p. 34). The impetus demonstrated by capitalist hegemonies in investment and establishing business trends that favour them has resulted to increased political instabilities. Many of the capitalists have seized power in their regions gaining political superiority, but with the intentions of benefitting from existing business trends. The complexity between business and power became more evident in the politics that governed the cold war. The United States Has sought to maintain its hegemony position in the globe in order to reap maximum benefits from its ability to control international business policies (Harvey 2007, p. 16). A country like Russia that advocate for the socialism business model have had unending crises in the United States that has promoted the capitalist business model. The conflicts between capitalism and socialism business ideologies have resulted in a unique global alignment that has contributed to the existing global political instabilities (Matthew 2013, p. 87). Moreover, the concept of neo-liberalism business model has had its flaws. A clear illustration is the case in Iraq. The United States sought to exert its control of the country’s economic system in 2004, in retaliation to the waged war. After occupying the territory, the United States sought to exploit all the opportunities within in its favour, and publicized all the business sectors under its control, leaving the Iraq government with the oil business only. The years that followed saw the dwindling of the Iraq economy, a factor that aggravated the political instability. A similar case occurred in Chile in 1973 with United States exerting the neo-liberalism model of control and seizing both political and business power Chile (Harvey 2007, p. 10). This robbed Chile of its freedom as a nation, resulting in a terrible political dependence, which results in instability. The instability existing in Africa has resulted from unfavourable business trends and exploitation by business giants converting these countries into poverty. On the other hand, businesses have the potential of restoring political stability. Compromised trade agreements and unhealthy competition may cause a rift between nations that indulge in the trade. Formation of treaties that redefine the agreement and adherence to such treaties may foster the thriving of businesses and restore political stability. In cases where political instability results from economic barriers, businesses may form viable solutions that boost the economy of the nation, and afford it a level of independence. Such independence resulting from business success is sufficient to afford a nation a level of stability. Businesses and Social Stability The stability of any society depends on the wellbeing of the state. Since there is an undeniable correlation between the state and the markets, businesses have the potential of determining the stability of any society. Moreover, social stability depends on the economy, and as described above, businesses are crucial determinants of the economy (Cairns & Martyna 2008, P.54). The capitalist and socialist business models adopted by different countries in the globe are the benchmarks that define the social welfare. Evidently, capitalism has adverse effects on the lower class people in any society because they labour for the capitalist with minimal wages and under compromised conditions as they promote the welfare of the rich (Johnson &Turner 2010, p. 54). In many capitalist societies, the gap between the rich and the poor has only widened and this causes social instability. The case in the United States, which is a leader in the capitalist system, managers receive a higher pay that does not reflect the work they do. In the same societies, the capitalist business model indicates that some workers earn too little (Davis 2006, p. 89). Evidently, a gap exists between the rich and the lower class, a factor that defines the United States social instability. Businesses may also cause social instability if they fail and a recession occurs. The middle and lower classes face the adverse effects of a recession as evident in both the 1930, and the 2008 financial recessions (Davis 2006, p. 67). On the other hand, businesses have the potential of promoting social stability if they act to boost the economy. Globalization has resulted in the stability of the society in the countries where the formula of globalization has worked. Innovation and investment have served to stabilize the economies of some societies, and offer services to the people, promoting social stability. This is the reason why many societies are struggling to apply the right formulas and maximize innovation to promote social stability. Conclusion Evidently, businesses have the potential of contributing to the stability or instability of the economic, social, and political scenes of the world depending on the models applied. The globe has been working towards globalization, but some of the models adopted have only resulted in instability in the three sectors described in this paper. Capitalism and neo-liberalism present their benefits and flaws. They have contributed to both stability and instability in different countries. Bibliography Bakan, J 2005, The Corporation, London , Constable & Robinson Ltd: Cairns, G & Martyna, S 2008, A Very Short, Fairly Interesting and Reasonably Cheap Book aboutInternational Business, London: Sage. Chang, H & Lane, A 2010, 23 Things They Don’t Tell You about Capitalism, London, Random House. Chang, H-J 2007, Bad Samaritans, London, Random House. Davis, M 2006, Planet of Slums, London: Verso. Harvey, D 2007, A Brief History of Neoliberalism, Oxford, Oxford University Press. 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