Corporate Social Responsibility Theory - Essay Example

Top of Form Bottom of Form ANALYSIS OF THE ARTICLE “NOWFORL ISLAND NEEDS A NEW GOVERNANCE MODEL” by Student’s Name       Code+ Course Name Professor’s Name University Name City Date Introduction Development is not an aspect of the economy that can stand on its own. It is dependent on several factors, both local and external. In the case of Norfolk Island, the self-governance system is an internal aspect of the economy that is playing a major role in pulling the island’s economy into the mud. Like the former administrator of the island said, the self-governance system is ludicrous and ill-conceived (Brodtmann, 2015, p. 1). Any good governance system should put the welfare of its people first, something that the governance model on Norfolk Island has completely failed to do. Since its conception about 30 years ago, Brodtmann (2015, p. 1) has expressed his lack of understanding of the relevance of the system. The system has failed to create job opportunities for its people, making several people to migrate to the mainland in search for jobs. This is evident in the variations in population, where the island had a total population of 2302 in the year 2011 and the population had dropped to 1600 by 2015. People are migrating in large numbers. The island depends on a shaky tourist industry, which seems to dwindle every year as the economic situation gets worse. This paper will analyze Norfolk Island’s economic situation and its governance model using two global economic theories. Corporate Social Responsibility Theory The corporate social responsibility theory is based on how firms work with people and communities in the society for the betterment of lives, environment and other factors that support production. The Heckscher-Ohlin international trade theory is based on how services derived from factors of production that cannot be moved are produced, distributed and sold. It is founded on both theoretical and empirical frameworks. Factors of production cost are different and the more they are scarce, the higher price they are able to fetch. However, in certain cases, the element of factor-price may be eliminated so that the factors are not tied to prices. In such cases, factors become independent and free to be mobile, for those that are not fixed. This is the exact situation in Norfolk Island, because the factors of production like labor and land are no longer valued. Therefore, they become mobile to move in and out of the island. They move freely without hindrances especially that the island is a territory of Australia. Policies have been at the center of the dilution of value of factors of production. The policies set by the administration have led to barriers to growth in the economy of the area. This, coupled with the lack of natural and other vital resources necessary for growth and development of the economy has led to continued deterioration of the economy. Either way, the Australian government has decided to come in strongly and establish mechanisms that would stop the enforcement of laws that inhibit economic growth and expansion. It is believed that with such laws in place, the economy is likely to improve and see some good times. Regulation by the Australian government may come I many different forms. For instance, the government may decide to take control or to strongly influence the executive and legislative arms of the administration. Another way would be to control the financial systems of the territory. According to De Serres (2006, p. 78), the stability of an economy is strongly linked to its financial system. Therefore, taking control of this system gives the controller a lot of power over the economy. The activities of the financial framework of any place encompass sensitive and vital activities, which are pivotal to the operations of the place. The Norfolk Island is unable to manage its affairs as far as economic matters are concerned as seen in its financial projections for the next few years. The projections show that the island will not be able to support its operations, something that could trigger a lot of instability and lead to economic disaster. If the Australian government extends its financial and tax systems to the territory, it will be able to serve its citizens in a better way and raise standards of living on the island. Additionally, controlling the island’s financial system gives allows the Australian government to maintain security and trigger growth. The island has potential to produce various products, but because of lack of investment, it remains poor and at the high rate at which people are deserting it, it will soon be an abandoned island. The land on the island can support production on a moderate scale and if people can be encouraged to shift to the mainland to create more room for production, then it could be hub for production activities. When manufacturing industry is established on the island, it will be a major employer for thousands of people from both the island and the mainland. Specialized labor shall be concentrated in the region for the companies to make use of. Unemployment will be eliminated and companies will export their products and services to international destinations, creating foreign income that may be used to better people’s lives and run the administration more effectively. Agriculture can also be done on the island so that it is located in one geographical area and leaving the other for the manufacturing sector to occupy. Agriculture brings in constant income while manufacturing brings in an expanding income that involves lower amounts of labor input, but yields more income. It is the profitability of this sector that makes most developed states to invest heavily into it. Literally any country that can be termed as developed has highly developed agricultural and manufacturing sector, although when a comparison of the two is made, it can be found that manufacturing contributes more to the national GDP than agriculture sector. Agricultural sector seems to be very dependent on the manufacturing sector for technological development. Technological advancement fuel production in agriculture and keep the industry up. In the Netherlands for instance, agricultural sector seems to perform very well because of the hard work performed by the technologists. Research and development are other important components that contribute to agricultural success and well-being in most developed states. The mode of economic regulation adopted by a government can determine how it achieves success in its operations. Different countries have adopted different approaches and the results have been different all together. For Norfolk Island, every aspect of the economy lies in the hand of the government, which is a very delicate situation following evidence in developing countries that state-led institutions and industries have continued to suffer success. On the other hand, market liberalization efforts have yielded some positive results in some developed countries (Jalilian et al., 2007, p. 4). Dynamics of Systems Theory Trade on Norfolk Island is inhibited by several factors that range from a lack of labor and land to poor administrative policies. The bad policies enforced by the administration on the island have continued to make Australia to contemplate about projecting its own power on the Island and take over certain functions of the Island. The island’s administration has failed to create jobs for its people, causing living conditions to be degraded severely. Unlike what Ruggiero (n.d, p. 1) suggests in his article about an economy made of two systems, the core and the periphery, the island seems to have none of the aforementioned systems well developed and mature. The island does not have any manufacturing region or an agriculture-intensive area. Simply put, there is no interaction of systems within the economy. Therefore, dynamics of systems is absolutely absent. In any country that applies the core-periphery model, one area is normally concentrated with companies and individuals who are specialized in agricultural activities while another area has firms that specialize in the manufacture of goods. Products resulting from the manufacturing sector should be used to propel the agricultural sector and promote competition. Any country that lacks these two sectors lacks innovativeness (Ruggiero, n.d, p. 1). Lack of innovation in Norfolk island is in direct line with the core-periphery theory in many ways. One of the ways is that people in Norfolk Island have consistently continued to migrate to the mainland to seek jobs because there are none on the island. Inventions are done by people. People need to be available to conduct research and ask the right questions so as to come up with answers to their answers. Since people continue to move into the mainland, they cannot take part in the development of the island. According to Schachter (2001, p, 1), one of the major reasons why people change the places they stay is to look for jobs. People need money to settle their bills and maintain their way of life. Governments have gone ahead to establish the minimum wages per hour or per month that employers are required to pay their employees. Employers found paying lower than the standard wage rate are usually punished through penalties (Anderson et al. n.d, p. 1-6). In serious cases, their business may be closed down. Without this ability people find no reason to stay in a place or create long-term attachments to it. This is the situation in Norfolk Island, as observed in people migrating to find sources of income elsewhere. According to Baldwin et al., (2003, p. 12) migration is also highly influenced by differences in nominal wages. People will always move to places where they can be paid more for their services. They remain on the move until they locate a place from where they can gain better salaries for services rendered. The population in Norfolk Island has been reducing as people migrate to the mainland. That trend will continue being observed until when the administration will be changed and jobs created to keep people in their home place. However, with the current system, that is hard to achieve because of the policies exercised by the administration. Failure to ask people for tax encourages laziness and kills innovativeness in many ways. If people are taxed, the government gains money to provide necessities beyond the basic. That is the role of any government to its citizens; provision of the best services that reflect how much the people pay in the form of taxes. People earn money from salaries and they spend it on one thing or another. In most cases, the salaries are spent in the place they are earned. The expenditure could be in the form of direct expenses like shopping and school fees or could be indirectly like in the form of taxes. Taxes are collected and used by governments to better public services (Baldwin et al., (2003, p. 12). Taxes are used to enforce the law and better administration tasks among many other functions. When used correctly, it keeps the government out of debt and offers room for thriving. This situation is completely absent in Norfolk Island because the government does not even collect taxes. Failure by residents to pay taxes makes the illegible for receiving Medicare and several other government-issued services. The services offered by the government are only meant for people who pay taxes that is, they contribute to the common pool from which the government draws to offer the services. A government that is led by forward-thinking individual should be able to recognize its mistakes and make necessary corrections before it runs out of time. Seemingly the Norfolk island government has not been able to do this since its governance system has been in place for the last over 30 years and nothing is being done to change it. It continues to burden the taxpayers whose millions of dollars are spent every year to keep the island afloat, but little returns come from it. This has started becoming a venture that is not profitable and the only way to avoid the expenses incurred on an annual basis would be to step in and help in changing the situation. Actually, this is an angle that the Australian government has been considering and in the near future it may opt for it. References Anderson, P., Bragg, J., Crain, S., Goddard, J., Grady, J., Jara, M., ... & Thornton, J. Advocating for Better Salaries and Pay Equity Toolkit. Baldwin, R., Forslid, R., Martin, P., Ottaviano, G., & Robert-Nicoud, F. (2003). The core-periphery model: Key features and effects. Public Policies and Economic Geography. Princeton University Press, Princeton. De Serres, A., Kobayakawa, S., Slok, T., & Vartia, L. (2006). Regulation of Financial Systems and Economic Growth in OECD countries: an empirical analysis. OECD Economic Studies, 43, 77. Jalilian, H., Kirkpatrick, C., & Parker, D. (2007). The impact of regulation on economic growth in developing countries: A cross-country analysis. World Development, 35(1), 87-103. Krugman, P. (1990). Increasing returns and economic geography (No. w3275). National Bureau of economic research. Ruggiero, A. Paul Krugman And The Neg: An Assessment In The Light Of The Dynamics Of A “Real World” Local System Of Firms. N.d. Retrieved 21/4/15 from http://people.umass.edu/curtis/academics/researchtoolbox/pdfs/Paul_Krugman_and_the_NEG.pdf Schachter, J. (2001). Why people move: Exploring the March 2000 current population survey (No. 204). US Department of Commerce, Economics and Statistics Administration, US Census Bureau. Read More