Financial Stability and Maintenance Equilibrium in the Economy - Essay Example

Financial stability and maintenance equilibrium in the economy is what every industrialised government covets to establish. Any disruption may cause an economic as well as social upheaval of sorts in lamentation to instability. At an instance of instability in Europe, its serves as a caveat to future disgruntle ness. For example, the 19th century was the epitome of wide spread movement that constantly rearranged the political boundaries of Europe and motivated thinkers to search for new inventions. The nationalist movement or the pride for one's ethnicity that encourages the formation of a nation- which was stimulated through inequity and fiscal ineptitude of that government- permeated in every aspect of European life. Bread riots flourished all over France which erupted into French Revolution in 1789. The bourgeoisieas well as proletariot engaged in political upheavel of France to stabilize the economy and other national essentials. Equity and financial stability are the essentials to what the citizens of Europe needed. In this dissertation, the United Kingdom's economic and Gross Domestic Product (GDP) will be analysed in its infrastructure and effectiveness to its subjects in the 21st century. Then, there will be a brief synopsis of another country's economic status in comparison with the UK. The British government economic endeavour after World War II is to construct a strong economy and a fair society. Under this goal, the government hopes that its subjects may revel in monetary opportunities under the ambience of security. The government has through litigation allowed the Bank of England to be sovereign in its relegation of annuities and managerial policies. This decision culminated with new fiscal rules and the diligence of officials to reduce the national debt has engendered a resilient cornerstone for economic stability for citizens and their posterity. The growth of nation's GDP in 58 consecutive quarters is a testament to that fact. (http://budget2007.treasury.gov.uk/page_01.htm) The government has depicted in its diligent effort to promote equity and flexibility. This establishment ensures that all citizens have the advantage to experience economic flourishment. In the century's eccentric transformation in global economy in terms of technology, production, and trading methods, especially in Europe, U.K. economists believes that the economy must brace itself for changes in livelihood and culture. The economists are confident in the litigation enforced will prepare the economy for such changes. The lassie-faire policies will subtly promulgate competition to steer individuals, business, and communities to embrace the changing global environment. First of all, the British government maintained macroeconomic stability. That is, to create a breeding ground for progress, investment, and entrepreneurship, the government has committed to "2.5 per cent each year in real terms on average between 2007-08 and 2010-11." The government has diligently made concessions to promote economic stability and policed banks into abiding to the regulations and suppress the rise of inflations. These activities aforementioned have stimulated the 58 quarter GDP growth. According to the Budget 2007 Report for the public finances, there has been a surplus in GDP in the current economic cycle which serves as testimony to the government adherence to the "Golden Rule." Also, the public sector of net debt is forecasted to stabilise below 40 percentile. The government's maintenance of the net debt is strengthened by the execution in the sustainable investment rule. With established stability, the UK can undertake new challenges opportunities afforded to them by their discipline. To ensure policies befit the tenuous nature of global economy, one must eliminate any pragmatic miscues in interpretation or "the statistical fog" of the status of the economy. "Successful monetary policy depends on having good information The statistical fog surrounding the true state of the economy has proved a particularly potent breeding ground for policy errors in the past. Improving the quality of national statistics may be the best single way of ensuring that the MPC responds effectively to challenging times ahead." - Bank of England publication, electronic source Therefore, the accuracy of data is essential for maintenance of macroeconomics. Also, the consistency of procuring reliable data is a merit to those constituencies that dispense such data. Its utilisation will be enhanced after the test of time deems the information acquired is reliable. Globalisation has graced and changed the economic environment which forces nations, like the UK, to proliferate new strategies to uphold and contest with the level of productivity of the era. The exigency for such measures is critical to play an economic role in the global economic market and search for new ventures that may hold fiscal advantages. The UK The reformation of the business tax system has constructed an atmosphere for productivity to revel. Reformation of corporate taxation has made the system viable to venture into. This is done by reducing the main rate of corporate tax by a difference of 2 per cent. This will enhance competitiveness companies. The government will coax growth via investment by jettisoning the restraints on cash liquidity and improving the capital allowances system. These allowances will be symbolising the suppression of inflation. Also through investment, the solidification of equity in the tax system will provide incentive for small businesses to trust adjunct larger companies to reinvest. Finally, such reinvestment will stir innovation by the increase tax credit rates of in subsidies such as R&D Corporation. "One way in which the authorities can promote systemic stability is by being clear about their objectives and demonstrating that they are acting to achieve them. In Transparency and financial stability, Prasanna Gai and Hyun Shin argue that greater transparency, in general, acts as a discipline for policy-makers and financial market participants. For policy-makers, the discipline derives from the desire to preserve and enhance reputation; whereas, for the private sector, discipline tends to be imposed through market prices. However, disclosures can be a two-edged sword, particularly with respect to financial stability. If a financial institution or system is fragile, the provision of information can act as a lightning conductor that co-ordinates and channels the pessimistic expectations of market participants. The authors argue that a central bank can guard against this threat by presenting its analysis of financial stability and its policy stance as a whole regularly and in a coherent format. Thus financial stability reports, for example, can be of some assistance in trying to guard against short-run market movements brought about by incentive or information problems affecting private economic agents." -Bank of England publication, electronic source As aforementioned, the validity of information is important for businesses. Also, the disclosure of information can affect the level of stability of an economy. If informational analysis is mishandled in any way, the wrong message may be sent and be a harbinger to disaster in markets. Accountability is stressed among constituents that provide these data. Many analysts have noted negative connotations in a good GDP. Noise pollution may seem irrelevant but can have drastic effect on the population. Noise pollution at first glance will seem as insignificant. However, as research has shown, noise pollution has had a powerful impact of the lives of people. Noise has always been a problem for Europeans since the ancient times. Juvenal, a satirist Roman poet, seemed to take notice of the nuisance. He once wrote "carts clattering through the winding citiesthe sick die here because they can't sleep." (www.savethis.com, Associated Press) Another French author Marcel Proust loaded his room with cork to dull the clamour of the streets of Paris. (Same source, Internet) As one would expect, the Industrial Revolution catapulted Europe and the United States in production frenzy. Thus, the large level of production increased the noise levels in Europe. The increase of goods spurred the interest of faster transportation. Therefore, the rise of railroads sprung all over Europe to satiatethe need of quick transportation. Furthermore, this increased the noise levels of Europe. In today's era, planes as well as automobiles has joined the factories and railroads in the noise contribution. France's GDP experienced high periods of success and employment increase in 1997 to 2000. Unemployment during the same allotted time decreased steadily without stimulating inflationary incentive. The period of economic excellence was influenced by a promising external environment, encouraging monetary conditions, management of wages, tax cuts, and supportive monetary conditions. However, in the wake 9/11, the tragic attacks on the United States political and financial enterprises, consumer confidence in France shattered and the mitigation of financial revision plans began increasingly. This placed France's economy in the doldrums. In wake of fiscal difficulties, ethnic riots sprung up in objection to financial difficulty and protest of discrimination. On November 7, 2005, chaos spreads all over France and claims a life of a civilian. The French government is calling for additional 1,500 police reserves to aid the 8,000 police officers on duty to provide some sense of security after of weeks of civil unrest. (Mark Landler) This unrest is caused a select group of Islamic youngsters fueled by their nationalistic pride to protest biased treatment they as well as their parents residing in France is receiving. An Islamic website called to arms all Muslims to join their fight. "Teach them that we are a single nation and if a single member is touched, all the others will erupt like a burning volcano." (Landler) Rioting and turning over of cars has now been for several days a common visual of France on the television. The rioters feel that this violence is necessary because the government do not provide respect for immigrants. They feel this lack of respect is caused by their ethnicity. One rioter claimed, "It is the attitude of the police. People here don't feel they are a part of the political system. There only recourse is to violence." (Landler) The rest of Europe is watching how this unrest being dealt with because they are experiencing minute but copycat riots. Europe, especially France, is no stranger to this kind rioting. This nationalistic pride has been repeated occasionally throughout Europe two centuries ago. As this analysis has shown, the economy of country is not commodity but an essential aspect that should be judged to rate the well-being of its people. As you have seen, if the economy of a nation below standard, its social status will fair well. Therefore, a good economy is what all countries desire to have and revel in. Bibliography: Esler, Anthony, Elizabeth Gaynor Ellis (1999). World History. New Jersey: Prentice Hall Landler, Mark, and Craig S. Smith. (8 November, 2005) French Officials Try To Ease Fear As Crisis Swells. The New York Times Electronic sites: http://www.bankofengland.co.uk/publications/news/2004/129.htm www.savethis.com http://www.bankofengland.co.uk/publications/inflationreport/infrep.htm http://www.hm-treasury.gov.uk./media/997/55/pbr04data_169.pdf http://budget2007.treasury.gov.uk/page_01.htm Read More