According to the neoclassical theory, unemployment is voluntary. The term voluntary unemployment means, according to the neoliberal view, that the person is not willing to work in the wage offered and prefers to remain unemployed (because s/he hopes to find soon a better job – job search), or that the employer refuses to employ him because his salary can not be reduced due to national collective agreements. Both the first and the second case reflect the inability of the market to operate under perfect competition either because there are monopolistic trends in the labor market or because workers have incomplete information with respect to vacancies. Consequently, the inflexibility of setting wages downwards and the lack of information lead to an unstable labor market equilibrium, i.e. in permanent unemployment. The solution promoted by the neoclassical theory is the creation of conditions for the existence of perfect competition, which will allow to the price-salaries mechanism to bring the market in equilibrium and eliminate unemployment.
Certainly the modern neoclassical approach for the labor market offered evener analysis on the rigidity of money wages and the lack of perfect competition in the labor market. The rigidity of money wages due, according to the theory of informal contracts (Azariadis 1975:1183-1202, Baily 1974:37-50) is due to the fact that wages and employment are determined at the micro level following an agreement of the company with employees that is achieved in an environment characterized by uncertainty and leads to an agreement among employees and employers for relatively low wages in exchange for the rigidity of money wages in periods of economic crisis.
According to the theory of efficient wages (Yellen, 1984, Perrot and Zylbererg, 1989 Perrot, 1984 and Plassard and Tahar, 1990) for the determination of the salary, it should not only be taken into account only the amount of work offered but also its quality as determined by the intensity of labor, labor productivity, etc.
The theory of negotiations (Calmfors and Driffill 1988:16-61) is an effort of the modern neoclassical approach to explain why the labor market is not competitive and to understand the development of trade unions and collective bargaining in the developed capitalist countries. The outcome of these negotiations is the increase in unemployment due to the rigidity that exists in the labor market on wages and employment, because the unions protect their members (insiders) from those who are from outside (outsiders).
Finally, according to the theory of labor market imperfections, the labor market is not unique. The existence of institutional factors in the labor market led the modern neoclassical approach to link the problem of unemployment to the duality of the labor market. The reduced mobility between the first sector of the economy (primary labor market) and the second sector of the economy (secondary labor market) is the cause of unemployment among people of the first, who refuse to engage in the work of the second.
An alternative approach to the duality in the labor market is the theory of Insiders – Outsiders (Lindbeck and Snower, 1989). According to this theory, people who are in the labor market (insiders) obtain and defend high wages through their unions, making it impossible for people who are outside the labor market (outsiders) to work.
The traditional neoclassical approach attempts to interpret unemployment as a phenomenon that is not related to development itself, but to external factors which it considers as a pre-given. It believes that unemployment is due either to failure to reduce salaries or to the existence of imperfections in the labor market. So, according to the neoclassical theory the weakness of the labor market to operate in conditions of perfect competition leads to unemployment. Hence the concept of flexibility highlights the key factor to solve all problems in the labor market. The employment policy, according to neoclassical theory, should aim to achieve greater labor market flexibility with the ultimate goal of creating the perfect competition, which will also lead to the solution of the problem of unemployment.
Summary of the neoclassical concept for employment policy The neoclassical theory was not specific in terms of employment policy because it believed that unemployment was a temporary problem, whose solution should be sought on market forces. Therefore, the neoclassical approach considered as most important the tackling of inflation through direct state intervention, and less important the reduction of unemployment, which would somehow happen automatically. According to the neoclassical view the reduction of inflation would stabilize the economy, which in turn would lead to economic growth and thus reduction in unemployment. Therefore, the neoclassical approach to reduce unemployment leads to a deadlock, since it regards unemployment as a secondary problem, which itself does not require systematic state intervention.
The refusal of the neoclassical theory to accept any financial support for the unemployed because it considers it as damaging is inherent with its perception of the role of state and the relationship of the economic with the non-economic. Considering that the economic (i.e. the allocation of the labor factor in the labor market and the production process) is completely independent and has nothing to do with the non- economic (i.e. the reproduction of the man and his labor force outside the area which the capital directly controls) directs state intervention only to the purely economic.
Criticism of the neoclassical theory of employment policy – Conclusion The neoclassical theory explains the problem of unemployment as a phenomenon which is not related to the capitalist development, but to external factors, which are taken for granted. It considers that unemployment is due either to the failure to reduce the salary or to the existence of imperfections in the labor market. So, according to the neoclassical theory, the weakness of the labor market weakness to operate in conditions of perfect competition result in unemployment. But the labor market can not be equated with any other product market because the commodity in the labor market is the labor force that differs from all other goods. Moreover, the value of labor power, except the costs for the entrepreneur is an element of active demand, it is a factor that contributes to the biological reproduction of the worker. Therefore, the salary can not be regarded as a mere price of a commodity, which could be compressed, depending on the supply and demand, below the survival lever of workers.
The role of the salary in determining employment and the unemployment level has been strongly denied by both the traditional Keynesian theory as well as by the modern economists meta- Keynesians. According to Keynes, the employment level is determined by the expected demand for the product and the technical conditions of production rather than wages (Arestsis and Skott 1995:43). Therefore, the reduction of the unemployment rate will come primarily from the strengthening of effective demand and not by reducing wages.
Linking the level of wages to unemployment cannot by itself explain the maintenance of high levels of unemployment. Other factors should be taken into account such as the relationship of wages to productivity, the level of prices, etc. (Sachs 1983).
Considering, however, unemployment as a phenomenon which is due to the lack of proper operation of market forces, its continuing increase cannot be understood and also what is the role of labor today. The neoclassical theory does not refer to the organization of the production process, nor to how this organization way affects the size of employment and hence unemployment. The emergence of new ways of organizing production which are based on flexibility, affects the level of employment and unemployment. The term flexibility refers to the two main aspects of the organization of production. First, it refers to the degree of adaptation of the production structure, which becomes possible due to the new forms of automation and secondly it refers to the degree of internal and external mobility, from task to task, both in terms of specialization and in terms of workplace conditions (Arestis 1986:84). But although the neoclassical employment policy aims at the proper operation of the market, it lacks the conceptual tools to understand the ongoing changes in the productive system and the labor market.
A further element that the neoclassical theory ignores is industrial relations. Industrial relations does not mean only the legal side of employment, as the neoclassical theory understands it, but a network of institutions that govern both the production and the reproduction process. The analysis in terms of industrial relations is particularly important because the form of industrial relations determines and is determined largely by the specific accumulation status.
The concept of labor market flexibility, as used by the neoclassical theory, (Bentolia and Saint-Paul 1992:1013-1053, Emerson 1988:775-817), is not suitable for a scientific analysis of today ongoing changes. By contrast, the theorists of the school of “Regulation” use this concept in a fruitful scientific manner according to the concepts of self respect and status of employment relationship, to analyze the process of socialization through work. They try to explain the development process through the relationship between the regime of accumulation and how the way to regulate. The tenant relationship is defined as the set of conditions that permeate the use and reproduction of the labor power, namely, the organization of the labor process, the mobility of the workforce, the formation and method of using the income of employees. A specific type of employment relationship corresponds to any status of accumulation. In the status of meta-fordism corresponds a new type of employment relationship: the flexible tenant relationship (Boyer 1989:55).
These analyses show that what characterizes the current era is the change of accumulation status and a mismatch between new ways of organizing the production process and the prevailing form of labor, which are seen in the problem of unemployment. The neoclassical approach for the employment policy is unattainable as long as it cannot understand the above changes.
In summary, it is observed that the ruling and the proposed employment policies are associated with a perception of the causes of unemployment. Consequently, the analysis of active and passive employment policies should be seen under this light.
According to neoclassical theory, the employment policy has to face the imperfections in the labor market. The Keynesian approach, considering that the labor market is imperfect by nature, it considers that the employment policy is a result of this apparent failure of the market to operate. Therefore, both the neoclassical and the Keynesian suggest that the employment policy is related to the optimal allocation of productive resources, especially of labor. The state, as an external subject, intervenes in the labor market to facilitate the achievement of the optimal allocation of labor. Both active and passive employment policies aim at better distributing labor inside the labor market.
These two economic theories demarcate the sphere of production from the sphere of reproduction and believe that the concept of full employment coincides with the optimal allocation of labor (as input) in the labor market (Chletsos, 1996:30).
The crucial question is whether employment policy (and other policies such as education policy, health policy, the policy of social insurance, etc.) is one of the components of social or this differentiation is false as far as a uniform policy on human entity exists.
Reference ListÎ‘ÎºÏÏŒÎ±ÏƒÎ· Î¦Ï‰Î½Î·Ï„Î¹ÎºÎ® Î±Î½Î¬Î³Î½Ï‰ÏƒÎ· Î›ÎµÎ¾Î¹ÎºÏŒ – Î ÏÎ¿Î²Î¿Î»Î® Î»ÎµÏ€Ï„Î¿Î¼ÎµÏÎ¿ÏÏ‚ Î»ÎµÎ¾Î¹ÎºÎ¿Ï Azariadis, C.1975. Implicit contracts and unemployment equilibria, Journal of Economic Theory, pp: 1183-1202.
Arestis, P 1986. Wages and Prices in the UK: the post Keynesian view, Journal of Post Keynesian Economics, Spring, p:84.
Arestsis, P and Skott, P (1995) Conflict, wage relativities and hysterisis in the UK wage determination, Journal of Post Keynesian Economics, pp: 43.
Baily, N.M (1974) Wages and unemployment under uncertain demand, Review of Economic Studies, vol. 41, pp: 37-50
Bentolila, S, and Gilles (1992) The macroeconomic impact of flexible labor contracts
with an application to Spain, European Economic Review, No 36, pp:1013- 1053.
Boyer, R 1989. The eighties: the search for alternatives to fordism, Cepremap, No 8909, pp:55.
Calmfors, L, Driffill, J.1988. Bargaining structure, corporatism and macroeconomic performance, Economic Policy, No 6, pp. 16-61.
Chletsos. M 1996. Employment policy: from the reproduction to production process, paper presented at CSE’96 Restructuring the Left, July 12-14 1996, The University of Northumbria at Newcastle.
Emerson, M 1988. Regulation or deregulation of the labour market, European Economic Review, No 32, p.775-817.
Objectives Of Tarmac And Influence On Stakeholders Economics Essay
Formed in the early nineties, Tarmac is a multi-national company that operates in the construction industry. Its business activities is organised basically into three. These are: Tarmac quarry materials, Tarmac building products and Tarmac international.
Its mission is ‘to achieve the exceptional’ in its area of business and Tarmac accomplishes this by:-
propelling its business to be the leader in its sector
absorbing the right people with the right skills to operate in the business
motivating its entire staff to work together as a team and drive up efficiency
As a business that deals with people (its staff, customers and other stakeholders) on a day to day basis, it has a set of values in which all activities and decisions are based on. Some of Tarmac’s company values are:-
good team spirit
The Tarmac group thrives continually to deliver outstanding services to everyone. This feat is achieved strategically by focusing on five major objectives. These objectives are:
Market Development – Tarmac partners and work closely with key customers to make it have a large share of the market.
Costs Reduction – At Tarmac, they aim at procuring materials at reasonable prices and securing cost effective contracts to ensure the business does not die. Subsequently, efficiency is increased at this measure.
Engaging Employees – Tarmac’s structure promotes effective governance and avails opportunities to all members of staff to contribute their numerous ideas and expertise to achieve results. They do this using the employee suggestion scheme
Acting Responsibly – In order not to become a burden to the environment, the Tarmac group uses waste reduction measures like restoring quarries after use.
Assets Management – The flow of money within and without the company must be well managed. Hence, Tarmac uses a clear approach in managing individual accounts as well as the company’s corporate budget so as to continuously improve the Returns on Investment (ROI).
The influence of Stakeholders to Tarmac’s business Stakeholders’ influences are very important towards the success of a business.
Some of tarmac’s stakeholders and their influences:
Their employees- the influence of Tarmac’s employees cannot be over-emphasized. Notably, a workable organisational structure and culture is in place at Tarmac. This enables everyone to understand the business, their roles and responsibility. In addition, having a formidable team is key to beating competition, promote continuity and be successful in the business. Hence, Tarmac’s employees perform at a very high standard to make this happen.
Their suppliers- The input of suppliers could positively or negatively affect the business. Therefore, Tarmac ensures it communicate promptly with its suppliers so that the quality of products, standards of services, delivery dates, payment terms all conform to its own company policy.
Their customers- All Tarmac’s activity is geared towards its customer’s satisfaction. If they do not get the required satisfaction, that means Tarmac is not meeting up with its objectives.
Evaluate the extent to which Tarmac achieves the objectives of three stakeholders
Its Customers Satisfying the objectives of the stakeholders is critical to business success. In general, Tarmac regards that excellent service is important. It improves this by,
understanding customer needs
providing on-time deliveries
giving timely notification of delivery delays
getting necessary feedbacks and responding appropriately through the right channel to complaints and queries
Tarmac understands that every one of its customers and their purposes are different. It therefore uses its wide range of resources and skills, depending on each customer’s specific needs. Here in the UK, Howe Dell Primary School in Hatfield, Hertfordshire (on using ‘Termodec’ one of Tarmac’s numerous products) was awarded an ‘A’ rated Display Efficiency Certificate (DEC) – an award which only 0.5% of buildings in the UK have achieved. http://www.tarmac.co.uk/Termodeck/PR_ARatedDEC_301009.aspx
Its Employees Tarmac embraces internal creativity. Hence, it creates room for employee engagement and commitment. This in turn encourages and reward employees who contribute improvement ideas and actions. Also, opportunities abound for skills train and career developments.
Its Investors Tarmac does not receive any government assistance financially. It is a wholly owned subsidiary of Anglo American plc. It aims to provide shareholders and investors with a good return on investments (ROI).
In its Poland market in 2008, market conditions were favourable and it saved about $17 million which it used to offset financial weaknesses in France. Angloamerican.com/financial report2008
Explain the responsibilities of Tarmac and identify strategies employed to meet them.
Every business is responsible to the environment in which it operates.
The table below is an illustration on Tarmac’s responsibilities and strategies employed to meet them.
– promoting staff training and development
– ensuring employees health and safety
– complying with UK employment law regarding staff pay and work conditions
-encouraging employees to participate in its pension schemes.
The Customers and the Communities at large
-producing durable and low maintenance products
-re-using some of the customers wastes to produce recycled products
-engaging in rewarding community projects
-Returning of accounts annually
-Paying the right amount of tax
Give examples of two types of economic systems and explain how they attempt to allocate and make effective use of resources.
Economic Systems are set of principles and techniques by which a society decides and organizes the ownership and allocation of their economic resources. There are broadly two types:
Microeconomic system- studies the behaviour of individual components (firms, households, markets, workers) that make up the economy.
Macroeconomic system- considers the big picture. I.e. issues like business cycles, inflation, national growth, unemployment e.t.c.
Two examples of economic systems embraced in most countries today are Free Market (Capitalism) and Mixed economy.
However, irrespective of what system of economy is in place, most economies in the world today are faced with problems of allocating resources and using them effectively.
In allocating resources, the following questions are often asked:-
What goods and services will be produced-this question is influenced by demand and supply
What specific goods are produced and in what quantities-depending on the circumstances, the need to build more bridges may arise. Hence, more resources would be allocated for this cause.
How will the goods and services be produced-private companies or multinationals could be approached. The state could decide to take it up.
To whom will the goods and services be produced- purchasing more equipment to either prevent death rate of infants at birth or protect more old people from dying.
But, because resources are limited, it is paramount for economies to effectively use them. Some of the issues that influence effective use are:
Level of Technology: – The level of Information Technology (IT) infrastructure and skills available in an economy would go a long way in determining how effective that economy would use its resources. For example, Ghana is original owners of Cocoa but as a result of their technical inability for manufacturing, they then have chocolates sold back to them.
Geographical location: – Naturally, some crops grow in specific continents. E.g. rice is a major resource that can be found in the tropics. Hence, an economy that can produce 5 tonnes of rice and only requires 3 tonnes to meet the needs of its populace; would be said to have effectively used its resources if it exports the remaining 2 tonnes to economies in need of rice.
Human needs and taste: – From time to time, human needs changes. No wonder Adam Smith (1776), one of the pioneers of economics in his book on ‘The Wealth of Nations’ said that “Human wants are insatiable and the resources required to meet them are limited.”
The UK does not have Gold has one of its natural resources yet it uses gold in its jewelleries, in its clothes and in some of its building structures.
In an attempt to save the environment from excessive carbon emissions and make us go green, a levy was imposed. This levy is known as the Green Levy. Recently, there have been choruses about whether the introduction of this levy will really check polluters. Parties concerned have made projections that this will bring positive changes in the long run. But there are sacrifices involved because the green levy will have impact on businesses and the wider community.
Impact of Green Levy on Transport and Tourism Industries -Employment: Businesses in these sectors may want to lay off some staff to meet the cost of paying this levy or as a result of low patronage which in turn will affect sales. On the other hand it may be an avenue for the government to create more jobs. The government will look into creating green levy committee companies and people can take up jobs in this area.
-Value Added: It is natural to think that an increase in price of a good or service will lead into an increase in the value of that good or service. This is not necessarily the case because a cab man may increase the fares of a journey from £10 to £15 as a result of an increase in fuel prices. And this does not guarantee that the journey will be more comfortable.
-Personal Income: Households will be forced to adjust their budget to meet the challenges of this levy. Some may have to pay through their nose to embark on holidays and some may even boycott them. In addition, electricity costs will also be an issue in a particular household.
Impact of Green Levy on the Wider Community -Health Issues: Scientists believe that if the environment is carbon free, there will be less air pollution and sicknesses arising from it will decrease. Therefore, the government will not have to spend extra to address this issue.
-Recently in Cumbria, Cockermouth- UK, there was a heavy and persistent down pour which led to the destruction of numerous properties, bridges and loss of life. Environmentalists believe this heavy flooding was caused by flow of hot and moist air.
– It will also be shocking to know that prices of commodities may go up. This in view of the additional costs of transportation (input) sellers will put on commodities for them to meet their business output.
Evaluate the impact of one macroeconomic policy on organisations and stakeholders.
Fiscal policy is one macroeconomic policy. It is a policy in which the government tends to use its budget and taxation to manage the economy. In the diagram overleaf we will see how this can have effect (positive or negative) on organisations and stakeholders.
From the diagram above, a policy to decrease income tax will naturally lure people to work and may also make workers to put more effort into work. This will generally lead to an increase in organisational dividends; and the government needing to spend less in its budget on social benefits.
Consequently, if interest rates and tax rates where to be increased, businesses will post more profits. Government’s revenue will increase and will be able to provide more public services but Stakeholders have to reduce consumption, pay more on mortgages e.t.c.
Importantly, a very good measure in using this policy is needed. This is because it goes a long way in determining how an economy adjusts in terms of ‘recession and boom’.
The perfect competition model is generally based on the following assumptions:-
Many buyers and many sellers- this means that each business/firm is too small in relation to the entire market. On this note they can not affect the market price but will have to accept that price (price takers).
Sellers sell products that are homogenous i.e. each business/firm output is understood to be identical
Consumers have perfect knowledge of the market and will shop anywhere since all products and prices are the same
Businesses are in competition; hence, there is free entry and exit. Also resources are accessible to all firms.
Note: In the real market world, the stock exchange market (SEM) is the only place that shows the characteristics of a perfect competition.
The effects of Demand and Supply to a firm/business short run and output in a competitive market
From the diagram above, Ms (market supply) meets Md (market demand) at P1 (equilibrium price). The firms absorb this price because they are price takers. In this type of market, each unit of item sold is constant; hence, AR (Average Revenue) equals MR (Marginal Revenue)
In practice, market structures tend to deviate from this model by employing some of the following measures;
Introducing incentives: in a perfect model consisting 3 sellers (A, B and C) selling the same product (laptop), seller C may attempt to generate sales and deviate himself from sellers A and B by giving a free laptop bag on any laptop bought. This is common in the retail sector.
Psychological pricing: this is a situation where a particular seller sells his product at £9.99 instead of a general price of £10.
Advertising: most businesses today attempt to pull more customers to themselves. They do so by giving free or discount vouchers on certain products. For instance in the LONDON METRO newspaper, MC Donald’s puts discount vouchers for people to buy their Big Mac Burger at a discounted price.
Give three examples of how organisations respond to market forces
Demand and Supply are the traditional market forces that can also determine the path of a business. This duo tends to cause a Push and Pull effect on business organisations. Assuming there is a scenario where there is increase in the demand of a commodity. The push analysis naturally means that resources will be pushed (i.e. supply increased) towards meeting this increase in demand problem without necessarily considering what has brought about the increase in demand. This implies that resources pushed may not be properly allocated to solve the problem.
This is why experts believe that the Pull approach is a more dynamic way in responding to these market forces. In this approach, organisations consider themselves as part of the problem. Hence, they can measure carefully the amount of resources (supply) needed to meet demand. A typical example is Tesco Plc which uses an adaptive (Just in Time) system. This system takes into account age, sex, quantity and time an item is purchased.
Below is an illustration of how TESCO responds to the forces of demand and supply. With this system, they constantly meet the demand of baked beans and ensure supply is made through the appropriate channels.
Customers in demand of Baked Beans go to Tesco
-Shelf (Customers pick up Baked Beans)
-Till (Customers pay for baked beans. Sex, age, quantity and time are noted)
-Stock Control gets the signal. Information is processed and passed to the warehouse
TESCO On the other hand, stakeholders could be forces affecting a business. An organisation might simply need to encourage its employees to be more creative. In 1999, George Bauer, as Credit CEO at Mercedes-Benz developed what is regarded as the Bottom up re-organisation. Employees were asked without fear to team up, cut costs, improve services and device ways to make them more competitive. He promised not to make anyone redundant. The results were not farfetched. Their assets increased and they ranked first in the automobile industry in customer satisfaction.
The anti-competitive issues from the article “Sky’s ITV stake anti-competitive, regulator”.
The 17.9% purchase of ITV stakes by Sky was seen by the public and other players in the industry to be anti-competitive. This development, judged by several competition law experts’ means that Sky could inhibit growth in ITV. In fact, they added that Sky would become a major influence in shareholders meetings and thus be malicious in casting votes towards the overall progress of ITV.
Virgin Media who were interested in merging with ITV thought that “Sky should not be allowed to remain in a position whereby their motives of buying into ITV should be questioned”. http://news.bbc.co.uk/1/hi/business/7023326.stm
However, as part of their functions, the Competition Commission stepped into the issue did their findings and gave some remedies of what they think is appropriate. That:-
Divesting their shares may not be sufficient in addressing the issue
Sky should perhaps not participate in the shareholders meeting
Sky should not discuss significant issues affecting ITV to other shareholders
Sky should transfer their shares to un-biased trustees
The roles of the Competition Commission in the UK
The Competition Commission is one of the independent public bodies that help to ensure ethical competition amongst business organisations in the UK for the benefits of these organisations, customers and the economy at large. Their roles are channelled into three major areas. These are:
In Mergers- like in the case of Sky and ITV explained above. If one of the companies has a dirty motive, they look into it and may stop it or give remedies if it will not promote competition.
In Markets- They interfere in a market where an unfair monopoly appears or competition is restricted in that market. Sometimes in the construction market, bigger companies use their financial powers and buy-off smaller companies so that they only can get contracts. This could end up becoming chaotic and the Competition Commission will get involved.
In Regulated sectors things are supposed to be done by law. If anomalies occur in these regulatory systems or arguments ensue between parties behind these regulations the Competitive Commission set in to sort issues.
Discuss the importance of international trade and Global markets to the UK economy.
Key definitions: Trade is said to have taken place when goods and services are sold or bought.
International among different nations or countries
International trade when goods and services are exchanged by people or businesses in different countries, we say that international trade has taken place. This makes it possible for countries to specialize in their production strengths. They concentrate on producing items that makes them more competitive and exchange them for profits or other products they need or want.
Of what importance is international trade to the UK economy?
In the UK, the emerging concepts of industrialisation and globalization, the uncontrollable effects of demand and supply, geographical differences have largely triggered international trade.
International trade has created structural change and promoted productivity in the UK.
Some businesses whose products are at the decline stage can use the advantage of international trade to export to developing countries where they can make huge profits
International trade has brought openness and increase in the amount of foreign investments the UK attracts.
International trade in some sense has raised skill levels in some sectors to make it have a more productive work force. For instance, most African countries send some sick people to the UK to receive treatments or undergo surgeries. This implies that industries in the health sector must attain some certain level to meet the international standard.
There is a great level of increase in banking services are a result of international trade. Most less developed countries have faith in UK banks and are saving here.
This diagram illustrates the UK growth in commercial services in 2008.
WTO Members share in world commercial services trade in 2008
Clearly, the UK ranked second on the chart which is brilliant compared to other countries.
Exportation in the UK has grown as a result of international trade. The table below illustrates the level of export of the UK to 20 countries around the globe from (2001-2008).
Whole World Exports – Top 20 Trading Partners 2001 to 2008 General Trade £ Millions 2001 2002 2003 2004 2005 2006 2007 2008 USA
For further information please refer to Notes on the website: http://www.uktradeinfo.com/index.cfm?task=TradeDataNotes
From the table above, it is seen that export to china is growing. It increased from 3,781 000 in 2007 to 4,870 000 in 2008. This is about 13.9 % annual growth rates.
Global markets these are peculiar markets around the world divided into trading blocs and should not be confused with international trade. Interestingly, there are so many trade blocs that have emerged in our world today. Amongst these are:
APEC- The Asia-Pacific Economic Co-operation
AU- The African Union
NAFTA- The North American Free Trade Agreement
EU- The European Union
The EU of which the UK is a member is an important and largest trading bloc in the world today. Apart from accruing a large GDP, it is the largest importer of Agricultural products from developing countries. It also operates as a cartel and consortium and sets free trade for its member states.
Importance of the European Union to the UK economy
Indirectly, the UK funds the United Nations and gives grants to least developed nations because it adds to the purse of the EU.
The UK benefits free trade amongst other members of the EU. i.e. trading is tax free
The UK would be able to buy commodities at the EU set price which may be relatively cheaper than what she would buy them normally.
The European Commission’s policies on competition have freed some UK businesses from unfair monopoly from other businesses elsewhere.
The impact of two policies of the European Union on UK business.
The European Union broadly has two policies. These are:
These policies aim is to bring together nations in the European region, promote oneness amongst its people, strengthen industries facing problems and uphold the concept of a single European market.
Under this policies are the:
Regional aid policy- here richer countries are expected to financially fund poorer countries. The monies generated are given to least developed nations to help them improve on their Technical knowhow, modernise their farming, improve lives in the rural areas, and solve problems of prolonged unemployment e.t.c. Other objectives of this policy is to improve employment levels in developed countries, promote territorial co-operation and bring to parity economic or social problems shared among neighbouring communities.
Impact on UK Business Organisation -employment laws are set to be fair in all sectors. This include whether people should work on bank holidays or not.
-If a UK business has a branch in an EU country experiencing political instability, this business may suffer (the lives of the workers is at risk and the structure could be attacked or pulled down )
-Charities in the UK are able to help less developed countries
Common Agricultural Policy (CAP) – this policy was created in 1957 to increase the agricultural productivity amongst member state and to secure the availability of food supplies during the war. After undergoing several reforms, the CAP functions as a protectionist to local producers by introducing import tariffs and providing subsidies.
Impact on UK Business Organisation -Local farmers will receive high patronage because people will avoid paying import tariffs on importation.
-Exportation and productivity would be highly promoted
-the UK is seen to be paying too much to this cause. Hence, tax- payers might be under pressure to pay more.
The potential economic implications of the UK entry into the European Monetary Union (EMU)
The European Monetary Union (EMU) emerged in the nineties after leaders of member states of the European Union surged to lock their different currencies into one unit. This arguable idea will make different national governments give up independent control of their national currencies, exchange rates and interest rates. After passing through many stages and scrutiny, the Euro was born.
Anyways, from the UK perspective, there have been various arguments about its entry and participation in the use of the Euro. Many parties right from Tony Blair’s administration believe that joining the EMU will mean the loss of the pound’s superiority. Whereas others think that it is ideal because a single currency amongst EU member states will bring currency stability than individual currencies are now.
Moreso, some politicians cited that economic conditions in the UK might be different to that of other European countries at some point. Hence, one monetary policy set in the European Union headquarters may not be suitable to solve the UK problems.
What about businesses and consumers? Will they be affected? Experts opined that if the Euro is adopted, Consumers will find it easy to travel within the Euro countryside. They will neither have to change money nor be subjected to paying banks commission charges. On the other hand businesses will be liberated from huge costs that they normally have to pay to insure themselves against the threat of currency fluctuations. And there will be greater efficiency in doing trade with other member countries with a uniform currency.
Well, it is easier said than done. It will be interesting to see whether the people at the helm of affairs of the UK polity shall come off the fence about this issue soon.