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What Is the Best Way to Stimulate Economic Growth?

What we know about the global financial crisis is that we don’t know very much” Paul L. Samuelson.

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The historical examples of economic growth and downturns and economic theories propose different ways out and solutions to overcome the financial crisis and stabilize the economic situation in a country. I am not a professional economist or accountant but recent changes and transformations in our country affect all people in spite of their social class, gender race, or profession. I became interested in this topic two years ago when the first signs of the crisis became evident to the general public. Since that time, I have investigated the matter of economic growth and try to find (or identify) the best solutions to stabilize our economy.

From my two-year research, I can say that there is no ideal or single answer to the problem of economic crisis and fast economic growth. Procedures for improving internal economic controls have been developed by many countries, but only some of them were efficient and successful. The most popular approaches applied by France and Germany included an increase in middle-management personnel and greater use of professional economic consultants; interdivisional billing at the going market price (which sharpens competition on the national level); improved accounting and cost-control procedures; and devices to speed the flow of data essential to financial decision making. “There is a common understanding of the serious nature of the crisis, even if no agreement on ultimate causes and consequence, among a range of people with quite different politics” (Botz 2009). By these and other means modern federal administrations seek to rationalize operations, reduce financial costs, increase output and sales, and grow at the expense of rivals.

I can say that modern economies do not grow from the bottom up to the top down in a short period of time. In spite of such vivid examples as the Japanese economic miracle and Chinese growth, it took decades for these countries to achieve economic growth and prosperity. I rejected the idea of government interventions in the American economy proposed by Obama and reduced spending on societal security and other social programs. I can say that free from all but the most essential entrepreneurial responsibilities, the financial executives are far better able to concentrate on long-term financial strategies for growth and expansion, better able to determine whether a new service created by the research department uses enough of the company’s present resources, or will help sufficiently in the development of new ones to warrant its production and sale. In spite of government financial support proposed to some corporations only, it would be better to allow them to perform independently and accept all risks by themselves. Also, business corporations can better decide whether or not to go into new product lines, to set up new divisions for their production and sale, or to integrate these activities into an already extant division that is closely related to the new lines. In general, their essential functions are to synchronize, appraise, and determine general policy (Fishback and North, p. 32). American history tells us that government interventions could not improve the economic position of the country as they are directed towards some industries only depriving other industries a chance to compete on the national scale. Coordination by the central office of product flow through the several departments proved even more formidable. Fundamentally, the issue was to analyze intelligently a host of economic functions — including engineering and research as well as production, distribution, transportation, procurement of supplies, and investment -when the appraisals had to be made in several very different industries or lines of commerce. In addition, the making of long-term financial strategic plans not only required decisions bearing on the future use of existing facilities, employees, and funds, and the development of new resources in the business current lines, but also required financial decisions having to do with new lines of products and with the dropping or curtailing of old ones (Crowley n.d.). I found that the modern financial system created administrative problems that could not be handled by the exceedingly centralized types of organizational structure that by 1990 had developed to supervise the production of single articles or product lines. Because of the significance of technology and the new services to economic growth in the 20th century, one would expect to find a record of rising financial expenditures on research and development (Spulber, p. 87).

Current financial records do certainly show ineffective economic policies of the state, but given the purposes for which most such financial expenditures have been made, in general, they have probably not yielded the impact on economic growth that a more ideal set of purposes would have allowed. The most striking and real-life examples of the problems were cited by Botz (2009). The author states:

With private sector and public sector workers losing their jobs, more families would quickly exhaust their savings, lose their homes, and increasing numbers of those who rent would be evicted. The homelessness of working-class families would rise beyond the capacity of government and charitable institutions. The condition of the African American and Hispanic workers will be much worse than that of the white workers, and that will be quite bad.

This example shows that a real crisis in America was affected by the economic and financial manipulations of the government and its ineffective policies during the last 10 years. The example allows me to say that mass production held out the promise of economies of scale or reduced costs per unit of output over a wide range of output. To achieve production in high volume, however, required enlarged plant and equipment (Crowley n.d.). The latter, in turn, required not only financial feasibility, but the adequacy of business: not only must the nation’s stock of knowledge — and not least it’s administrative skills -react to the demands of more financial tasks, but capital markets must also respond. These responses, as the society shall see, were indeed forthcoming, and in the resulting discussion, I shall emphasize particularly the institutional financial changes that made the responses possible. It is rational to believe that these financial changes, together with the economies of scale flowing from the financial markets to manufactured goods in large volume, created most of the productivity gains realized during the period. The financial sources of demand for capital in the rapidly developed economy could not be more clear (Hughes and Cain, p. 87).

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The best policies that worked in other countries were the support of all types of business and reduced taxes for all citizens. Capital formation was financed, and finance required savings. In terms of economic theory, surpluses of capital can exist in mature economies only, and reforms are less attractive there than in areas of capital deficit. The example of 1930s in America showed that most of the investment went into municipal and other local bands, and into railroads and public utilities, although a few manufacturing firms were also among the recipients. English investors were the primary source of the flow (Crowley, p. 87). The issue is a difficult one both because of the number of financial forces that may have contributed to this result and because of the scarcity of our information about them. Among the many financial and economic factors upon which savings depend is the level of income; the degree of inequality in its allocation (the greater that inequality the larger the financial savings, since it is receivers of large financial incomes who do most of the saving); and a variety of conditions affecting the value of financial savings — including interest rates, the price level, living standards, and the financial effects of technological change upon available products and services (Heilbroner and Singer, p. 54). I found that the typical “poor” American family of today can buy as much food as the average American worker could buy 40 years ago, and, in addition, people have better housing, more clothing, furniture, heat, and high-quality medical care. 49 % of our officially poor families own automobiles. 500,000 own more than one car. In absolute terms, then, America’s economic growth has increased the level of material well-being of the “average” family.

The best solution for the American economy is to support production, financial institutions, and reduced taxes for all citizens. Yet because increasing affluence has led society to elevate its notions of what constitutes poverty, the relative position of the poor has changed hardly at all. I suppose that the productivity-enhancing issues of modern technology — which, once again, include the organizational and administrative changes in thinking and strategies I have just discussed — have been truly impressive, and there is hardly any nation in the world that would turn its back on the betterment of living standards that it has made achievable. This does not mean that great business and financial corporations promote efficiency and growth more decisively than smaller specialized firms. the financial crisis can be overcome by reduced taxes, social support policies, and reduced government interventions in the business sphere.

Works Cited

  1. Crowley, Obama should beware the growing anger in America. The Observer. 2009. Web.
  2. Fishback, P. V., North, D. C. Government and the American Economy: A New History. University Of Chicago Press, 2007.
  3. Heilbroner, R., Singer, A. The Economic Transformation of America: 1600 to the Present (v. 1) Wadsworth Publishing; 4 edition, 1998.
  4. Hughes, H., Cain, L. P. American Economic History (7th Edition) (Addison-Wesley Series in Economics). Addison Wesley; 7 edition, 2006.
  5. Spulber, N. Managing the American Economy, from Roosevelt to Reagan. Indiana University Press, 1989.

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