The document discusses recurring economic crises caused by government intervention and proposes solutions. It analyzes past crises in 1929, 1999-2001 and 2007-2010 which were exacerbated by emotional forces in a fragile system. A self-sustaining system is proposed where companies regulate each other through spontaneous order and social pressure, while governments act as facilitators instead of direct players to avoid policy resistance. Recommendations include increasing transparency globally and among diverse stakeholders through an open and participatory system.
Keynote - Paul De Grauwe, LSE, United KingdomOECD Governance
This presentation was made by Paul De Grauwe, LSE, United Kingdom, at the 11th Meeting of OECD PBO & IFIs held in Lisbon, Portugal, on 4-5 February 2019
Politics and Power in International Development - The potential role of Political Economy Analysis
Geert Laporte, Deputy Director, ECDPM
VIDC, Vienna, 30 January 2014
Political economy embraces the complex political nature of decision making to investigate how power and authority affect economic choices in a society. Political economy analysis offers no quick fixes but leads to smarter engagement.
AEC, KI a INESS v spolupráci s ďalšími partnermi organizovali medzinárodnú
konferenciu v rámci Free Market Road Show 2013 na tému Šetriť alebo
nešetriť: Zachránia Európu len úsporné opatrenia?, ktorá sa konala dňa 7.
júna 2013 v Bratislave. Ďalšie súvisiace informácie nájdete na
www.konzervativizmus.sk
AEC, in cooperation with the Conservative Institute and INESS, and in
association with international partners organized the Free Market Road
Show 2013 in Bratislava on June 7, 2013. More information at
www.institute.sk.
Keynote - Paul De Grauwe, LSE, United KingdomOECD Governance
This presentation was made by Paul De Grauwe, LSE, United Kingdom, at the 11th Meeting of OECD PBO & IFIs held in Lisbon, Portugal, on 4-5 February 2019
Politics and Power in International Development - The potential role of Political Economy Analysis
Geert Laporte, Deputy Director, ECDPM
VIDC, Vienna, 30 January 2014
Political economy embraces the complex political nature of decision making to investigate how power and authority affect economic choices in a society. Political economy analysis offers no quick fixes but leads to smarter engagement.
AEC, KI a INESS v spolupráci s ďalšími partnermi organizovali medzinárodnú
konferenciu v rámci Free Market Road Show 2013 na tému Šetriť alebo
nešetriť: Zachránia Európu len úsporné opatrenia?, ktorá sa konala dňa 7.
júna 2013 v Bratislave. Ďalšie súvisiace informácie nájdete na
www.konzervativizmus.sk
AEC, in cooperation with the Conservative Institute and INESS, and in
association with international partners organized the Free Market Road
Show 2013 in Bratislava on June 7, 2013. More information at
www.institute.sk.
Governance and Corruption in International BusinessIlan Alon
Reviews and presents an overview of corruption research in international business, highlighting particular moderators such as trust, regime type, and learning.
Trust and Public Policy - OECD. Presentation of main concepts and findings.OECD Governance
Presentation of the main concepts and finding from the OECD report "Trust and Public Policy: How Better Governance Can Help Rebuild Public Trust". For more information see oe.cd/trust-and-public-policy
1. Interestingly enough, while I wont stake a claim to any politi.docxjeremylockett77
1. Interestingly enough, while I won't stake a claim to any political party on this post, I have stood by one claim since I've been old enough to vote. I may not approve of the President or his actions; one thing is sure; I don't want his job either. I will take the same approach here. I believe government regulations could've helped prevent the major credit crisis of 2008 in many ways. However, as I have suggested, I don't necessarily have any full-proof ideas either. Regardless of the company, group, or entity, almost every organization has a series of checks and balances. For example, I can't help but wonder what condition people might be in without the formation of the FDA to regulate food and drugs to keep businesses in line (Seaquist, 2012). If you contemplate communist Germany during the rule of Hitler, aside from the mass genocide that spread through the area like wildfire, one more thing stands out. There was little to no freedom.
We, as humans, have proven that we are cyclical people. As mentioned, during WWII, many people had no freedom. From the opposite perspective, why do I need a babysitter when my wife and I go out to dinner? Primarily because the freedom otherwise given to a three and one-year-old would enable naive and creative minds to endanger themselves. There must be a balance, and there must be a group or entity with the power to prevent catastrophic issues like the credit crisis from happening. Having regulations in place would help both the greater good and businesses, although, at times, it may not seem like it. Looking back, I would be interested to learn if the investors and bankers that wanted a huge return on their money would do it all again had they known the impact of their actions prior to investing. Regardless of the situation, there must be a balance in all things. How do I know? Every single time I lose my balance, I fall.
2. I recall the time when everyone seemed to be living above their means, purchasing homes that they could not afford, cashing in equity on said home, and then using the money to purchase additional items. This type of greed and unwise financial dealings gave birth to the destruction of financial markets. The credit crisis of 2008 often referred to as the Great Recession is by far one of the worst economic down turns of our time. “Excessive borrowing, lending, and investment were inextricably interconnected through a range of transaction structures derived from well understood techniques of securitization. Essentially, securitization is a transaction structure in which loans (such as loans secured by residential real estate, i.e., mortgages) are pooled together ("repackaged") as collateral underlying the issuance of securities, predominantly debt securities”. The event caused great financial lost and caused homes to decrease greatly in value. However, after every crisis, the question is posed “what can be done to prevent this from happening again?”
The government is ...
Taxation, Inflation and Public Debt Basic ModelPedroGeyer
In this essay, we present a model of optimal taxation, money creation, and public debt policies chosen by the ruling elite in a society with three social classes: the ruling elite, the middle class, and the poor. The ruling elite seeks to maximise their own utility while preventing rebellion or coups by the other social classes. We also consider the indirect effects of money creation and public debt on wealth redistribution and economic stress. Our results show that the ruling elite will seek to take as much wealth as it can, maintaining the other individuals at the edge of their tolerance. Thus, by providing insights into the trade-offs and incentives facing the ruling elite, this model can help inform policy, political choices, and thought.
Why is Economic Planning Important - Checking on CanadacqGin
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Introduction to Public Finance for Government.pptRasulShaban1
Public finance studies the role of the government in the economy. It is the definitive
branch of Economics which assesses the government revenue and government
expenditure of the public authorities and the adjustment of one or the other to achieve
desirable effects and avoid undesirable ones. Public finance is a subject which has the
distinction of intimate interaction between theory and practice.
Government, The Economy and We, The Peoplecoryhelene
We are living in a time of unprecedented public interest in the relationship between government and the economy. Americans are attentive--deeply concerned about the impact of the economic downturn and its implications for the future. But they are also wary. While they want government action, they are harshly critical of high profile steps such as bailouts, and nervous about spending and the deficit. Making real progress on a whole host of important economic policies, from reshaping Wall Street regulations to investing in the jobs and economy of the future, will require a more active role for government than the U.S. has seen in decades. Building and sustaining public will to support this engagement by the public sector is an underlying and foundational challenge.
This research summary offers an overview of insights and recommendations for creating a new public conversation about the role of government in the economy.
Economic environment – factors
The economic environment consists of microeconomic and macroeconomic factors.
Microeconomic factors
The microeconomic environment refers to things that happen at the individual company or consumer level.
Microeconomic factors do not affect the whole economy. Below are some microeconomic factors that may influence a business:
• Competitors.
• Demand.
• Market size.
• Suppliers.
• Supply.
• How you supply your goods, i.e., the distribution chain. For example, through retail stores, distributors, the Internet, etc.
Macroeconomic factors
The macroeconomic environment, on the other hand, refers to things that affect the entire economy. Macroeconomics is concerned with general or large-scale economic factors, such as:
• Unemployment
• Inflation.
• Interest rates.
• GDP growth. GDP stands for Gross Domestic Product. In other words, is the economy in recession, is it booming, etc.
• Taxes.
• Exchange rates, i.e., how much currencies are worth in relation to one another.
• How much discretionary income consumers have, i.e., income after paying tax, social security, etc.
• Levels of consumer confidence.
• Savings rates.
Business people cannot control their economic environment. However, they can evaluate conditions in the marketplace before deciding whether to proceed with a plan or project.
In this context, the term ‘marketplace ‘means the same as ‘market‘ in its abstract sense.
________________________________________
Economic environment vs. environmental economics
Do not confuse the term ‘economic environment’ with ‘environmental economics.’ Although they sound similar, their meanings are quite different.
Environmental economics, a sub-field of economics, is all about environmental issues. Since the second half of the last century, environmental economics has become an increasingly popular topic.
Environmental economics looks at the economic effects of local or national environmental policies across the globe. Particular issues include the costs and benefits of alternative environmental policies that deal with water quality, air pollution, and global warming.
Components of Economic Environment
Role of Private and Public sector matters a lot in order to get investment. Because when the investors invest money, they see industry growth and the role of private sectors in the economy.
Rate of growth of GDP, GNP, and Per Capita Income, When the gross domestic product of the economy increases, it brings investment in the economy and show the growth of the economy to the investors.
Transport and Communication System helps to increase the growth of the economy. When the transport system will be good, it will increase the finished goods. When the communication system will effective, it will connect more people and will give them opportunities to do more business.
International Debt also matters in the growth of the economy. if the economy has more international debt, then the investors afraid to invest in the economy and vice-versa
Similar to System Analysis - Global Recession Study (20)
2. “Create a self-sustaining system by allowing companies to
regulate each other and ultimately themselves through
spontaneous order and social pressure.
Governments should act as facilitators and not as players in
order to avoid policy resistance”
Call to Action
3. Agenda
1. The Highest Order Issue
2. Stakeholders
3. Feedback Loop
4. Solution to the Main Issues
5. Recommendation
4. GOVERNMENT
MEDDLING
Need for more
SECURITY
OVERCONFIDENCE
GREED
DISTRUST
FEAR
1929: Stock Exchange Crash
1999-2001: Internet Bubble
2007-2010: Financial Crisis
Highest Order Issue: Government Meddling History repeats itself
Emotional Forces in a Fragile Economy
PATH
DEPENDENCY
MORAL HAZARD
INFORMATION
ASYMMETRY
Forces
LACK OF
TRANSPARENCY
5. Stakeholders ImpactMotivations
Government
Desire for Economic
stabilization
Lobbies Exert political pressure for
private interest
Federal Reserve under
Alan Greenspan
Desire for Economic
stabilization
Wrong fiscal policies
Lack of control
“Wall Street” Maximize clients’
portfolio return
Maximized “elites” profits
Rating Agencies
Give assessments on the
financial strengths of
Companies and Governmental
Entities
Misleading information to the
Public
“Voluntary” Stakeholders: did they act according to their “public” motivations?
Injects Stimulus Packages
&
Amends the Reinvestment
Act
Actions
Repeal of
Glass Steagall
(1999)
FED lowers interest
rates to 1%
(2003)
Subprime Mortgages
and CDOs
Gave an increased
amount of biased ratings
Open the doors for
“opportunistic” behaviors
Increase the power of banks
6. “Involuntary” Stakeholders: how were they affected?
Stakeholders
Externalities
affecting them
“Main Street” &
Entrepreneurs
Homeowners
Tax Payers & the
Public
Unemployment
Distrust
Bearing the cost of bailing out the
whole system
Devaluation of Houses
Housing market crash
Increased uncertainty
Demand stagnation
Less accessibility to credit
Layoffs
7. Feedback Loop: what are the main issues?
Government
intervention +
Gov’t Debt
Interest rates
-
+
Housing
Market’s
Lending
Subprime
+
+
Defaults
Investments
+
+
STAGNATION
+
-
STABILITY
- +
Increasing effect
Decreasing effect
Economic instability
Lack of Innovation
Breach of Public Trust
Main issues
+
Stimulus Package
Demand for
houses
+
+
TRUST
Economic
slowdown
+
-
+
8. New Role of
Government
Why not: Displayed inertia toward path
dependency
How: Facilitating and stepping into the field in
instances of “Black Swans”
Spontaneous Order
How: Involving Institutions’ diverse interests by
interaction on Supervisory Board
Why: Increasing accountability and reciprocal
check & balances
Social Pressure
How: Spreading an increased sense of
responsibility and accountability
Why: Social Pressure & Public Opinion
reinforces necessity for transparency
Economic Stability
How: Allowing constant and spontaneous
self-adjustment
Why: Rigid-rule based system promotes
path dependency
“Create a self-sustaining system by allowing companies to regulate each other and ultimately themselves through spontaneous order
and social pressure. Governments should act as facilitators and not as players in order to avoid policy resistance”
HOW do we tackle the main issues? And WHY?
9. “Create a self-sustaining system by allowing companies to regulate each other and ultimately themselves through spontaneous order and
social pressure. Governments should act as facilitators and not as players in order to avoid policy resistance”
Media & Public
Government
Government
Government
Companies within a Country
United Nations (UN)
Transparency
Interconnections
Transparency
Transparency
Closed system
Open system
Recommendation: how is the System Globally Sustainable?
10. Members of the Supervisory Board of the Institution
Government
Government
Government
United Nations (UN)
Transparency Transparency
Transparency
Recommendation: Increase diverse Stakeholders’ participation
Union Representative
Main Street Representative
Wall Street Representative
Member of Federation of industries
…
Board Members of the Company
11. GOLDEN GATE TEAM 8:
ARIANA RIZZATO, FREDY ANDRANGO, ISRAEL NAVA, SIMONE SCHMALZBAUER, SHEKHAR
BHARAT SINGH, SUGAR EVELYN BITONGGA
“Create a self-sustaining system by allowing companies to
regulate each other and ultimately themselves through
spontaneous order and social pressure.
Governments should act as facilitators and not as players in
order to avoid policy resistance”
Call to Action
Editor's Notes
Thank you for allowing us to present in front of you today.
As the United Nations, you have the power to change this failing system.
We, as representatives of Main St. feel deprived of our hopes, robbed of our dreams, and we demand change!”
And this is HOW we are going to do this…
by creating a self-sustaining system allowing companies to regulate each other and ultimately themselves through spontaneous order and social pressure.
Governments should act as facilitators and NOT as players, in order to avoid FURTHER policy resistance.
Today we will be guiding through our recommendation by addressing the following
SO NOW LETS START BY UNPACKING THE HIGHEST ORDER ISSUE....
PEOPLE ARE AFFECTED
Because we have seen that history repeats itself, and we know that GOVERNEMENT MEDDLING LEADS TO FURTHER FRAGILITY OF THE SOCIAL ECOSYSTEM:
Because of a path dependent approach, driven by past solutions, the government fails to see the underlying causes of crises.
This information asymmetry leads the government and the public to be blind to the actual actions leading to collapse.
There is a moral hazard when the government creates over reliance on government, allowing banks to greedily fail without ramifications through a lack of transparency.
Creates a false sense of security.
Government meddling in times of crisis creates a short term sense of security but in the long run can breed overconfidence, greed, distrust, fear and in turn comes back to further government meddling.
But Governments’ decisions are moved by Public’s feelings.
WHO ARE THE PLAYERS?
AND did they act according to their public motivations?
INTRODUCE the stakeholders, WHAT were their public motivations, WHAT did they do, and WHAT were the results.
Government: as with all governments they want economic stabilization,
so they inject stimulus packages and amend the reinvestment act opening the doors to opportunistic behavior
AND who was affected?
EVERYONE
And what happened?
Answer: externalities
WHAT were the ISSUES?
More government intervention leads to these three issues:
instability, breach of trust, and stagnation ultimately leading to a plunge into recession.
WE START with the stimulus package,
which led to an increase in government debt,
then the federal reserve lowered interest rates in order stimulate the economy,
THIS sent signals to the market which increased the demand for houses
increasing housing market lending
sending MORE signals to the market to further lending
however, after a time delay, there are no more buyers,
SO THEN they created subprime mortgages.
who were underqualified and unable to pay...
INCREASING defaults
leading to economic slowdown
and a decrease in investments
which led to loss of trust of the public
which FURTHER slows down the economy,
leading to uncertainty of the market,
which stopped people from spending,
adding to stagnation and decreasing stability
and THUS leading back to government intervention.
As seen in the case, these are the issues that led to the collapse of the housing market, from there we see that there were additional issues that reinforced the economic collapse.
HOW do we tackle these issues?
Our Feedback Loop displayed three main Issues: INSTABILITY, STAGNATION and LACK OF TRUST
How can we tackle these issues?
First, we promote the creation of an Socio-Economical Environment which nourishes a self-adjusting SPONTANEOUS ORDER aimed at increasing accountability of companies and creating a check and balance system among them by encouraging diverse Institutions to address their differing interests.
We will use SOCIAL PRESSURE to keep the companies in check, as the Public - through social media - will be the watchdogs, relating what they know to increase transparency.
This will create an Antifragile System to avoid the stagnation stemming from Path dependent approaches.
Ultimately, in order to achieve this we need to create a new role for Governments. They should act as facilitators…referees rather than players.
How will this System be Globally Sustainable?
By creating an german style of governance.
We put the companies in the driver seat, creating checks and balances by which companies regulate each other, rather than relying on the government which can foster opportunistic behavior.
In this system, the United Nations would work with governments to give a uniform framework of governance.
Individual governments would act as an additional monitor, only intervening as a safety net and also working with an entity to enforce transparency and prevent fraud.
Encompassing it all would be the media and the public, guiding the process and creating the ultimate transparency for these systems.
WHO would constitute these boards?
Our ideal Supervisory Board would consist of diverse institutions with diverse interests, in order to create a balance and facilitate unbiased checks.
Closing the gap between the interests of government and companies, companies and people.
BY