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1. (2143.) The American financial crisis and its worldwide consequences

   The American financial crisis occurred in 2007, it is also known as a Global Economic Crisis, and many people are considering it as one of the worst crisis since The Great Depression. Which means it is very critical for America and other countries around the globe. This shook brought to many companies, and financial institution lack of liquidity or even bankruptcy. Government had to react; decision was to bailout many financial institutions (banks), which in long-term if they wouldn’t do it had huge impact on economy of USA. The crises mostly occurred in housing market, where many people were without place of living.
   Many of the financial institution occurred to have problems with liquidity. This had impact on housing market in America, and brought problems outside of the United States. . Because of this situation banks became to stop giving credits and international trade become slowing down. The financial crises in USA itself ended in 2009 thanks to help of Government and Central Bank which invented new monetary policy and started to give simulative packages to move the economy forward.
   The crisis was a result of complex financial products, high risk involvement, the rating agencies, and regulatory failing. Many people accuse for failure rating agencies and investors. In 1999 repeal of the Glass–Steagall Act (it is most often used to refer to four provisions of the Banking Act of 1933 to prevent commercial bank securities and affiliations between commercial banks and securities) there was no proper separation and any of regulatory practices to address 21st-century markets in USA.
   The trigger for crises beginning was 2005, in this time rising default on subprime and adjustable rate mortgages. Commercial banks began to give any potential house buyers credits, and process were growing and growing.
   In 1988 the US Federal Reserve slowly decreasing interest rate, which was attractive for foreign funds and created simple terms for credit condition. The money inflow created a bubble in USA economy. Thanks to these banks created many loans product on everything on easy conditions. This pushed America housing to boom. The numerous financial agreements and the housing price greatly increased this attract foreign investors to invest into American in housing developing market. As housing prices began to decline, many of the global financial institutions that had borrowed money and invested into building market had significant losses. According to the situation houses became to be worthless than mortgage. The total estimation of this loses is estimated in trillions of dollars.
   In 2011 the USA Financial Crisis Inquiry Commission had wrote in the report “the crisis was avoidable and was caused by: Widespread failures in financial regulation, including the Federal Reserve’s failure to stem the tide of toxic mortgages; Dramatic breakdowns in corporate governance including too many financial firms acting recklessly and taking on too much risk. An explosive mix of excessive borrowing and risk by households and Wall Street that put the financial system on a collision course with crisis; Key policy makers ill prepared for the crisis, lacking a full understanding of the financial system they oversaw; and systemic breaches in accountability and ethics at all levels.”
   Number of economist has been suggesting if liquidity wouldn’t continue that could affect the recession, or go deeper into crisis. Developing crisis was building global fear of collapsing economy. This crisis concentrated on biggest banks. All countries began to support financially; steady injection to help banks, interest rate had to be cut to help borrowers. United Kingdom was the first which began injection, but still that was just a begging of crisis because this injection supposes to heal financial sector. UBS economists wear expecting recession in 2 quarters Euro zone, in UK and USA 3 quarters. It was in 2006. Economist outlook was downwards: the forthcoming recession would be the worst since the early 1980s with negative 2009 growth for the USA and Europe very limited recovery in 2010 but not as bad as during Great Depression 1930.
   The Brooking Institution from Washington DC their priority is to provide practical information about Democracy of America, economics and welfare, security and seek for opportunities to all Americans. They created report about which estimate that Americans are responsible for more than 3rd of global consumption. They spend more than they were earning. People begun to panic and began to save money. This caused negative GDP in 1st quarter of 2009. This caused global decline in world GDP who trade with Americans like Germany, UK, Mexico, Canada, China and many others.
   The Global Financial Crises begun in 4th quarter of 2007. The TIME magazine wrote in 2009 that the crises ended in 2009: “More Quickly Than It Began, The Banking Crisis Is Over.” The official declaration of President Barack Obama was in 2010 during January “the markets are now stabilized, and we’ve recovered most of the money we spent on the banks.”
   Sources:
   http://en.wikipedia.org/wiki/2007%E2%80%932012_global_financial_crisis
   http://www.the-american-interest.com/article-bd.cfm?piece=907
   ww.brookings.edu/~/media/Files/Programs/ES/BPEA/2010_spring_bpea_papers/spring2010_greenspan.pdf
   http://www.time.com/time/business/article/0,8599,1890560,00.html

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2. (2142.) “The American financial crisis and its worldwide consequences”

   The global financial crisis of 2008 cost tens of millions of people their savings, their jobs and their homes. Without a question it had much higher impact on people’s life and what is more, will have more consequences for the entire world’s society that any other crisis that has occurred . The world we live in nowadays is far more interconnected thanks to the speed of information flowing around our globe. This process which we call globalization accelerated due to popularity of medias we are using nowadays: television, newspapers and especially internet, which minimized distances between remote parts of the Earth. In this essay I will provide the information how and why financial crisis happened as well as what were its worldwide consequences.
   There was no such recession in American economy since the Great Depression. This difficult period of time in United States history was solved due to New Deal and country’s interventionism provided by John Maynard Keynes. The longest prosperity period for American economy lasted from 1940’s until 1970’s. It is important to mention how banks were changing during that period of time. At the beginning of 50’s classic banks were forbidden to speculate with the societies’ money. That is why investment banks were created but they could only speculate with the owner’s money and were usually employing few bankers. Morgan Stanley had 110 employees and capital of $12 million in 1972 when in 2010 it was 50,000 people working for them and $50 billion. How it comes that in 30 years investment banking sector had such a rapid growth? This history starts in the White House were Ronald Reagan nominates a former CEO of Merrill Lynch Donald Regan a new Secretary of Treasure. The best description of the idea of how should the American economy look alike belongs to President Reagan: “the highest order of business sector is bringing back economic prosperity”. From this moment starts a 30 year period of further deregulation of financial sector. Presidential quotations goes even further in the future when Bush says: “everyone can have its own part of American dream”. The person who was persuading in following deregulation process was Alan Greenspan who was a Federal Reserve Chairman in four administrations of Reagan, Bush, Clinton, Bush Jr. – this is 20 years! There were several other bankers and economists who were obtaining similar thinking: former CEO of Goldman Sachs – Robert Rubin – Harvard Business School professor – Larry Summers. This decisions led directly into creation of massive players and from the end of 90’s hypothetic bankruptcy of any of such institutions could affect with a fall of the entire financial system. Milestone of the entire situation was a famous merger of Citicorp and Travelers Group which according to policies from 1930’s were illegal, however, Greenspan as a chairman of FED gave them a year dispensation. In that time a new policy was created which made the previous transaction legal again. This policy was called “Gramm – Leach – Bliley Act” and was created both by Rubin and Larry Summers. This merger affected with creation of the biggest financial group in the world’s history and made sophisticated path for future mergers.
   In this group of greedy sharks believing that whatever they do is right for the economy was one person who tried to regulate the system. Her name’s Broksley Born and was a chairman of Commodity Futures Trading Commissions which was supposed to control derivatives market. Still, strong lobby from bankers led by Larry Summers and supported by Greenspan made such move simply impossible. What is more in the year 2000 appeared an act forbidding regulations of derivative market. According to this absurd situations, financial crisis of 2008 was possible. Securitization made all products interconnected meaning: home buyers, lenders, investment banks, investors, rating agencies and insurance companies. Banks started to give loans to people who couldn’t afford that. For long term perspective it was a profitable business, however, in long term it lead to bankruptcy. This is how predatory lending of subprime loans dominated not only American, but also British market. It all affected with the biggest speculation bulb ever in history of human kind. United State public debt doubled, 30 million people lost their jobs and another 30 had to live under poverty line again. This crisis has easily modified into world economic crisis, affecting foreign industries in almost all countries on our globe.
   As we can see the problem of the latest financial crisis lied much deeper than we would expect. It was the system that was wrong and a groupthink syndrome of the bankers thinking that the banks are too big to fall. In such cases they predicted that FED will always support them with financial support. It’s a pity that in the modern world people working as financial engineers creating more and more complicated products were earning much more than a people creating a real value, products or service. This shows that neoliberalism has failed and as prove of such statement I will mention millions of people losing their homes, or jobs. Consumptions cannot be a long term medicine for the market and deregulations certainly don’t include the biggest disadvantage off human race – greed.

   Bibliography:
   1)Keynes, J.M., (1936) “The General Theory of Employment, Interest and Money”
   2)Kolodko, G.W., (2011) “Truth, Errors, and Lies: Politics and Economics in a Volatile World”, New York, Columbia University Press
   3) http://www.economist.com/blogs/freeexchange/2012/03/inequality-and-crisis

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3. (2141.) Panie profesorze, kiedyś na facebooku prowadziliśmy krótką dyskusję na temat marksizmu. Tym razem mam pytanie co Pan sądzi o poniższym artykule z The Guardian dotyczącym ostatniej dekady wzrostu gospodarczego w Argentynie (średnio 7% GDP rocznie) w kontekście antykryzysowych działań UE i strefy Euro? Czy zgadza się Pan, że fundujemy sobie drugą Argentynę z 1998 r? Czy politycy, ekonomiści oraz dziennikarze zwłaszcza telewizyjni, zwyczajnie cynicznie nas okłamują i nie sączą nam do głów trutki, która może doprowadzić nas na skraj załamania ala Argentyna końca lat 90tych? Pytam o to też w kontekście tego, komu zależy na na upadku PIGS oraz kto na tym najlepiej zarobi?

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4. (2140.) Economic crisis and its social consequences

   Today, with the growing process of globalization, the world is more interconnected than ever. That is why what started as American financial crisis affected all world economies and has far reaching global consequences. It has a powerful impact all over the world, even in the countries such as Poland, which thanks to the set of factors, managed to avoid the recession and reported economic growth in the recent years.

   As mentioned by Professor Kolodko on multiple occasions, what we often refer to as the current economic crisis has much broader effects. It touched the spheres such as finance and real economic output, but also, no less important, politic, social and value aspects.

   The beginning of the downturn started with the growing popularity of neoliberal ideas and the overextended freedom on the financial markets. The lack of control with the help of financial instruments, such as options and other derivatives, led to the introduction and growth of speculation. The negative externalities of those had a severe impact on liquidity of the markets, causing the slowdown and recession in many countries.

   What is equally as important, if not more, in my opinion, are social and political viewpoints. The figures show that the recession happened only in 2009, by almost 1%, and from then the global economy managed to recover and reach 4 percent growth rate. Although in cases of several countries we can observe the improvement, the rise of global output is not equally distributed. The fast growing emerging markets like China, India, Brazil, Mexico, Singapore or Vietnam to name some of them, became the motors of this increase. Moreover, what we experience in case of many developed countries, also United States, to some extent are jobless recoveries. This means that despite the fact that the economic situation seems to be getting back on track, the situation of 70-80 million people unemployed worldwide, failed to improve. (Kolodko G.W., 2011)

   Furthermore the neoliberals’ ideas led to the increasing inequalities. This is easily proven by the fact that there are few, small influential groups, that benefit from United States growth. In fact the income of many American has not increased in the recent years at all. The minimum wage, although thanks to democrats attempts was increased in 2007, is nominally equal to the Polish one, which means it is much lower in the real terms (Kolodko G.W., Truth, Errors and Lies, 2011). The inequalities were the further self sustainable with the increased need for cash loans and mortgages that supported financial sectors and the elites and became further stimuli for the economic problems. (The Economist, Inequality and crisis, The usual suspect, 2012)

   What is also very important social factor is that in the face of the crisis, people start to be more profit conscious and risk averse. Both investors and consumers tend to gather the capital and keep them in form of saving “for the better times”, avoiding investments and spending, because of being afraid of the future. Some of the investors, for instance the parent banks in the event of financial banks started to even withdraw capital from their foreign subsidiaries in order to enhance their liquidity (White T., Emerging Market Spotlight: Banking Sector in Poland, 2011). This can create the vicious circle that is difficult to overcome by the economy.

   The other important aspect of investors’ reaction to the crisis is their sensibility to the environmental and social issues. In the contemporary world, we could observe, the rise of environmental friendly business ideas. The “going green” buss words fast became the strategy of many businesses to differentiate themselves. However in the phase of the economic turbulence, many of these policies became neglected. The new investment in renewable energy was significantly lower in 2010 in both Europe and North America. The use of non-renewable materials is still impossible to maintain, though. (UN Environment Program and Bloomberg New Energy Finance, Global Trends In Renewable Energy Investment, 2011).

   Of course, it was inevitable, that the crisis with both economic and social consequences, reached also politics. The lack of trust in the government, especially in the post communist countries, and spreading all over the world neoliberal ideas, led to the governmental reductions before the downturn. However, when we take into the consideration the efficiency of dealing with the crisis in countries with the strong public sectors, such Finland, Norway or Denmark, it is clear that the lack of control is not an advantage when dealing with the turbulence. In fact it seems clear that what the market need today is governmental influence and control in order to maintain long term stability.

   However, the inefficiencies of the contemporary governments are clearly visible and one does not need to dig deeply in order to find them. This does not help with building up the trust and support from the society. For instance, American political paralysis, as Professor Kolodko referred to United States political situation, can be considered. It is clear to any economist that the only way to deal with the situation is to both decrease the governmental spending and increase revenue, by among others, reduction of budget gaps and increasing taxes. At the same time, upcoming election, keep the opposing parties from cooperation, stopping the recovery progress.

   Another example can be the case of Poland, where the current government leads the political campaign of “the green isle”, while it is clear that the country did not manage to avoid the crisis. Of course, when analyzing the figures, it is easy to come to the conclusion that the country was not affected as strongly as others, because it managed to avoid the recession, but the significant slowdown is impossible to miss. Poland is also dealing with the emigration problem and not decreasing unemployment, while the lower concentration on export can be reason for the slower growth than in other more export led economies. The political struggles made it more and more impossible to trust the government, which led many people to falsely believe, that a better choice does not exist when they go voting.

   The problem with solving political and social issues is that they are to the large extent build up on the values systems that cannot easily be changed. At the same time the current economic crisis and coming with it critique of the system, expressed in publications such as “A Failure of Capitalism” by Richard A. Posner, are the proves that the long term solution can be only possible if the roots are adjusted.

   It is clear that the contemporary world does not have a better alternatives for the markets than capitalism, however it is essential to avoid its radical neoliberal form. Instead the control mechanism need to be implemented and the public sector has to play more active role with the regulations. This can be achieved effectively if mechanisms of social cohesion and new pragmatism promoted in Truth, Errors and Lies are implemented.

   The economic crisis that the world had to face is one of the most important issues to discuss. What is often forgotten, although essential, is its social aspect and coming with it political and value crisis. In my opinion they may cause some serious obstacle on the way to full recovery and if not approached carefully may be more difficult to deal with, when impending financial and economic solutions. The turbulence on the market destroyed the status quo and created the grounds and possibility for change that need to be carefully managed in order to create the base for the better future.

   References:
   Kolodko G.W, (2011) Truth, Errors and Lie, New York
   Kolodko G.W, (2011) interviews, bankier.pl:
   http://www.youtube.com/watch?v=yX61RvS6c8o
   http://www.youtube.com/watch?v=BItIdICEHLk&feature=relmfu
   The Economist, Inequality and crisis, The usual suspect, 2012, http://www.economist.com/blogs/freeexchange/2012/03/inequality-and-crisis
   UN Environment Program and Bloomberg New Energy Finance, Global Trends In Renewable Energy Investment, 2011
   http://www.unep.org/pdf/BNEF_global_trends_in_renewable_energy_investment_2011_report.pdf
   White T., Emerging Market Spotlight: Banking Sector in Poland, 2011
   http://www.thomaswhite.com/pdf/emerging-markets-spotlight-poland-banking-september-2011.pdf
   http://www.euromonitor.com/poland/country-factfile

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5. (2139.) Economic crisis and its social consequences

   When we talk about Social consequences of the recent Economic Crisis that started in the U.S and later had far reaching consequences for the rest of the Globe it is important to answer the question how have things changed and where are we headed in this volatile world.
   The recent crisis has lead to protest against the financial sector which most view as unapologetic gamblers that by Excessive speculation and risk taking have resulted in the worst financial crisis since the Great Depression.
   This sentiment is reflected by the recent OCCUPY MOVEMENT that was conducted in 95 cities across 82 countries protesting rising inequality and social injustice.
   The recent crisis has also caused what the media has dubbed “THE ARAB SPRING” which has been a wave of demonstrations and protests occurring in the Arab world .
   To date, rulers have been forced from power in Tunisia, Egypt, Libya, and Yemen; civil uprisings have erupted in Bahrain and Syria and major protests have broken out in Algeria, Iraq, Jordan, Kuwait, and Morocco; and minor protests have occurred in Lebanon, Mauritania, Oman, Saudi Arabia.
   This recent state of Turmoil have been humorously attributed solely to lack of freedom and democracy and How people in the Middle East crave free speech after years of suppression from tyrants and dictators. This View has been embraced by most of the mainstream media and Anglo-Saxon newspapers that have engaged in marketing campaign proclaiming that the United States and other western democracies are shining beacons of hope that have inspired the populace of the middle east to achieve freedom and taken steps to ensure long term peace in that region.
   However most in the media have ignored the demographic changes and vast unemployment as enablers of the recent political crisis. An overwhelming proportion of the Middle East’s population now consists of young people under the age of 30, many unemployed. During the period 1996-2006, the labor force in Middle East and North Africa grew three times as much annually as in the rest of the developing world, resulting in one of the largest rates of youth unemployment in the world. In Jordan, for instance, more than 70 percent of the unemployed are under the age of 29 years. But while the demographics are evolving the economic structure remains rigid, unable to generate productive employment opportunities for new entrants to the labor force. Thus It Is important to understand the true context of this revolution Most people have a bleak outlook of the future and after years of frustration and hardship are blaming the only people they can blame-The Government.
   It is important to challenge ourselves by asking the question. Would the Arab Spring have taken place if there was no financial and Economic crisis?. Would people care about democracy if the unemployment rate among the youth would have been lower?.

   American Political Crisis
   When we talk about the financial crisis we must acknowledge the failure of not only the banking and the financial sector but the utter failure of political system. The United States embodies all that is wrong with “Modern Day politics”. With Both sides Gridlocked on every major issue from healthcare to tax reform finding an issue that both sides agree upon is Nothing short of a miracle. Furthermore increasing income inequality has further increased political polarization as both parties move further away from the centre in order to appeal to their base.
   This political polarization has led to increased division in the country about the different paths that both parties want to pursue.
   The Republicans have developed an ideology of helping the rich which they now call “JOB CREATORS” and “ENTRPRENEURS” .They have embraced the idea that by giving more money to the rich “JOB CREATORS” have more to invest in the economy thus creating more jobs for the general population. Furthermore Most republicans have joined the group known as “AMERICANS FOR TAX REFORM” by signing a pledge not to raise taxes in the future under any circumstances whatsoever . The republican party also supports further deregulation and removal of environmental and minimum wage laws.
   The democrats on the other hand argue for stricter financial regulation and reducing social inequality by taxing the rich.

   This gridlock has resulted in division along the lines of have and have nots. Most have already lost hope in politics and view Washington as a place of corrupt politicians that have established a model of crony capitalism where corporations and high net worth individuals can trample over the comma man through lobbying and campaign donations.

   European Debt Crisis
   Meanwhile across the Atlantic in Europe there is an equally high level of discontent though it varies among the different countries in the European Union. Most of the peripheral countries of the Eurozone (I.E PIGS) after years of deficit spending have now resorted to severe austerity in order to restore confidence in the international bond markets. This austerity has led to a downward spiral of wages, GDP, private consumption and employment. This has led to violent protests in some parts of Europe and has already led to change in political leadership in countries such as Greece ,Spain, Holland , Italy and with elections currently taking place in France where incumbent Nicolas Sarkozy is expected to lose the presidency to the Socialist candidate(Francois Hollande ). Increased unemployment and austerity has led to radicalization of European politics. Where in some of the countries political parties have resorted to an Anti- Immigrant and Anti-European stance in order to appeal to prejudice’s of the local populace. This radicalization also possesses a threat to the Basic Idea of the European Union which was supposed to bring long lasting peace to a continent that had been riddled with perpetual wars. This threat cannot be under estimated as this financial crisis has led to increased sense of Nationalism. Where in The Greeks blame the Germans and vice versa and this sense of loss of regional autonomy to the European parliament or the German republic has led to level of distrust not seen since the World War 2.

   In conclusion the recent financial crisis has exposed the instability of the modern world we live in. We live in a volatile world where the entire world is a giant tinderbox that can be set aflame with the slightest spark.

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6. (2138.) Poland’s reaction for the world economic crisis

   Poland as a Central Europe country, the country with huge and not entirely favorable to the Poles history. The country which hardly suffered from World War II. The only European economy that have avoided the late-2000s recession. And finally the country with huge potencial. Poland’s economy (I have to mention it is a high-income economy) is believed to be one of the healthiest of the post-Communist countries and one of the fastest growing economies in Europe.

   In September 2009, Polish National Bank, published a report “Poland and the global economic crisis”(“Polska wobec światowego kryzysu gospodarczego”). “The global economic crisis began bursting bubble in the property market in the United States in 2007, commonly assessed as the deepest global economic recession since the Great Depression of the late twenties and thirties of the last century.” The world economic crisis has caused a surprisingly strong repercussions on the economies of all countries. As I mentioned above Poland was the only european country which have avoided recession in 2009, achiving in the second quarter of 2009, which represents the bottom of the recession +1,1 % growth in GDP. According to Ministry of Foreign Affairs „Causes of high resistance of the Polish economy to the global crisis is the result of specific features of our financial sector, sustainable and diversified economic structure and an appropriate and balanced response of the government“. At this point the question arises, was it really a result of a well-exercised power in the state or just a fortuity due to (un)favourable circumstances such as fact that Poland is not really dependent on an export, weakening of the zloty or the relatively high labor market flexibility. However the fact that Poland is not exporting a great amount of goods is not a good sign. After a few years we are able to admit that crisis has affected mainly developed countries, a large share of the financial sector and exports in GDP, as well as less developed countries, largely dependent on foreign capital. So maybe after all we should stop for a moment and think if we really are the lucky ones.

   One could mention many causes of the global crisis. They are divided into macroeconomic and microeconomic ones. By macroeconomic causes we mean such as long-term low interest rates or accumulation of global imbalances. Flawed system of incentives, poor method of measuring risk, inefficient corporate governance, consumption over the possibility of income, increasing household indebtedness arising from the current consumption and the moral approval for non payment of debts are microeconomic causes. How Poland has responded to the global crisis? There are some opinions that there was no crisis in Poland, it is called „the slowdown“. Anyway the consequences are pretty substantial, such as GDP decline, closing or major reduction in economic activity by enterprises, the decline in consumption, increased unemployment, the decline in household income and changing consumption structure.

   During the crisis the most significant tool is a fast reaction. Even in 2009, government action focused on labor market. For example a more flexible shaping of working time, wage subsidies, subsidies for parking, financing the cost of training an employee, assistance program in the repayment of housing loan for unemployed were introduced. On the other hand NBP concentrated on “Confidence Package“ (“Pakiet Zaufania“). It aims to restore the efficiency of the financial market, improve liquidity on the domestic foreign exchange market, improve liquidity in foreign currencies, increase cooperation between banks and the central bank. This means more opportunities to borrow money at the central bank by commercial banks. As a result, more money in the market as a product targeted to a potential client. A number of activities has also taken the Financial Supervision Commission. So first of all an increased share of monitoring banks and sending recommendations to management and supervisory boards of banks in order to convince them as to the advisability of not paying dividends. Monetary Policy Council has significantly eased monetary policy. Despite high inflation, the Monetary Policy Council has repeatedly decided to lower the NBP interest rates, from 6% to 3.5%. Although the absolute certainty that there will be no raising taxes, VAT tax rised from 22% to 23%. There are also plans of extending the retirement age, which will hopefully soon come into force.

   It is difficult to say how Poland will emerge from the crisis, or as they say „the slowdown“, whether it will be an economic power or will suffer a lot . We need to keep our eyes open and observe, analyze what is happening around us. There are many of the pitfalls and manipulation around us. On the Internet, on television, in newspapers..

   Sources:
   Kolodko, G.W., (2011) “Truth, Errors, and Lies: Politics and Economics in a Volatile World”, New York, Columbia University Press
   Polish National Bank, (2009) “Poland and the global economic crisis“
   Ministry of Foreign Affairs, The Department of Foreign Policy Economics, (2009) “Polish Economic situation compared to other countries”

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7. (2137.) The American financial crisis and its worldwide consequences
   USA is the most powerful country with the first economy of the modern world. Its history and geographical location assisted the country to avoid bombardment and economic dislocation of the first and second world wars. The population nowadays reaches 313,847,465 people and its Growth Domestic Product is 15.04 trillion US dollars (according to CIA The World Factbook).
   Absolute role of the USA as a world’s leader determines the state of the world economy and especially on the first place it defines the role of world finances. The majority of the World’s Top 100 corporations are American. We can face them at every step we take – starting from fast food as McDonald’s, computer software as Windows, or transport mean as Boeing. But it is also the visible power of the US powerfulness iceberg. If we look deeply inside its economy we can discover the key role of transnational companies such as financial and industrial, and informational groups. Their activities are expanded on the whole civilized world.
   The financial crisis has occurred in USA in 2008 and then in half a year it has expanded into the whole world. The main reason of the crisis was the financial bubble on the mortgage market. The real estate market was involved as the majority of the commercial buildings have been bought through financial institutions such as banks, investing funds etc. Until 2008 any citizen that has not work even for one month was able to buy the house under the mortgage. All the banks were sure that everyone was able to pay them back as the real estate price was growing all the time.
   The new derivative securities were created when the mortgage credits were issued. These documents were accumulating free costs of pension funds, investment banks, insurance companies, corporations, private investors, and the most important part that foreign investors were involved. Simultaneously, the money that was received from derivative securities was invested in the world economy (securities, investment projects, speculative mechanisms).
   The whole financial pyramid begins to fall when the critical number of the debtors was not able to pay salaries with the given credits. Banks were returning costs from investment funds, investment funds were returning costs from financial market and financial market was demanding the return of costs from borrower. The series of the bankruptcy has appeared as a result. The most painful foe financial system was the bankruptcy of the investment bank – Lehman Brothers that was holding the world’s bigger rating AAA. The actual bankrupts were such companies as AIG and GM. 2008 year showed the imperfection of the world’s financial system that was based on the bank percentage.
   The most influential examples that show impact of the financial crisis in the USA were presented above. But it has not stopped in there but has expanded to the other countries in the world. Many people have lost their jobs, they were evicted from their houses due to nonpayment, they have spoiled their credit history. The whole world has reacted depending on the power of their own economies and the level of integration in world’s financial mechanism. The strongest financial result was decrease of the US sovereign rating from AAA to AA.
   European Union countries with the stable economy such as Germany, France, and Great Britain have also suffered from depreciation of their investments in USA and the most important reason is the increase of the EUR/USD ratio. The small UE countries such as Ireland, Hungary and mostly Greece have suffered a significant defeat. The BRIC countries that are developing (Brazil, Russia, India and China) have faced less influence of the crisis then others. The main reason of that are their powerfully growing economies. The local investors have great opportunities to invest their money. To take into consideration the GDP of the China is growing around 10 percent almost for 10 years.
   The third world countries and the post communist republics have faced the crisis in the most painful way. The government of this countries paid more attention to outer borrowing rather than the development of their own economy. For example the Ukrainian currency to dollar ratio has decreased from 5.0 to 8.0 UAH/USD; the banks have stopped giving loans and credits.
   As it says in “Truth, Errors and Lies” book: “The process of transforming savings into investment has become global…various segments of the independent capital market – banks, markets, investment funds, and a variety of speculators and investors – are globalized.” That show how everything is connected and if crisis has affected one sector it will influence the other one. It all has started in USA and has expanded to the other countries. According to the latest news the situation with US economy is getting slowly better but there are still many issues concerning some European countries.

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8. (2136.) The Economic Crisis and its Social Consequences

   I. Introduction

   The economic crisis modified the financial and political landscape in Europe. Its magnitude is exceptional. The negative consequences of this situation are strongly felt by the European citizens. In this work, we will analyze the reasons and effects of the crisis in the European Union.
   At the beginning of the year 2000, countries in the most difficult positions now seemed to be in rather good shape. In the European Union, people often spoke positively about the economic future of Italy, Spain, Portugal, Ireland or Greece. These countries became fully-fledged members of the euro-zone. As a consequence, they had the opportunity to acquire cheap credit in international capital markets and they obtained structural funds from the European Union. However, for different reasons, this seemingly optimistic situation did not finish well. The economic crisis started and this had various negative social consequences. For example, the unemployment rate is rising. Many people lost their jobs and have difficulties in finding new ones. The impact of the financial crisis is worrying and important. Even if certain countries are in a better position than others, everyone is affected in the modern world economy.
   Firstly, we will analyze the reasons for the economic crisis, how it has been started and why does it continue (II). Subsequently, we will discuss its social consequences (III) and conclude the essay (IV).

   II. Reasons for the Economic Crisis

   The European crisis is linked to the region’s inability to pay the debts that have been created. Five European countries (Greece, Ireland, Italy, Spain and Portugal) did not succeed in generating enough economic growth to offer a real guarantee of paying back bondholders. These countries are the most endangered but everyone in the world is affected by the crisis.
   The world economy has been growing slowly since the United States financial crisis that took place in 2008 and 2009. This has proved that the fiscal policies of many countries are inadequate. Greece has been spending a lot for many years and did not succeed in making necessary fiscal reforms. This country was one of the first to be affected by weaker growth. Because of the slow growth, tax revenues diminish which results in unsustainable high budget deficits. In 2009, the country could not hide anymore the size of its deficit which was more important than the size of its whole economy. This situation caused investors to request higher yields on Greece’s bonds to compensate for the risks they were taking. As a consequence, the Greek debt burden augmented even more. The European Union and the European Central Bank had to start bailouts. Subsequently, other European countries with an important debt burden have seen their bond yields go up and they began to have analogous issues to those of Greece.
   The European Union has acted rather slowly because, in order to make things happen, the consent of the 17 countries of the union is required. It took action through a series of bailouts which were received by Greece, Ireland and Portugal. The European Financial Stability Facility was also created to administer loans to countries which are experiencing financial problems.
   The European Central Bank also acted in order to help the region’s economy. In August 2011, it stated that it will buy government bonds if required, to prevent yields from attaining a level unaffordable for certain countries such as Italy or Spain. The European Central Bank offered the possibility of acquiring money through credit, for banks which had financial problems. This has been called the “Long Term Refinancing Operation”.
   The actions undertaken to resolve the issues that Europe is facing, were criticised as postponing the problems, and not giving a real solution. Moreover, Greece received financial help but it should be noted that countries such as Spain or Italy are larger than Greece and too much money would be required to save them.
   Some say, especially Germany, that fiscal austerity is the solution to the European financial problems. This country wants to impose higher taxes and to diminish spending in Europe Union’s smaller members. However, this is not necessarily the right solution because if countries spend less, this could lead to slower growth and slower growth results in lower tax revenues. The latter means that there is less money to pay what is due. As a consequence, countries that have a high debt burden would have problems to resolve this issue. Moreover, the idea that governments should spend less has led to public protests. This made it difficult to take steps that could help end the crisis. In 2011, many parts of Europe faced a recession which may be partly due to the austerity measures. The problem is that sometimes the wealthier countries seem to not have a choice because their citizens often voice their disagreement with the possibility that their money will be used to help other nations recover and, therefore, the solution for them is to tell poorer countries to diminish their spending.
   As it can be seen, solutions to the crisis are not easy to find. However, the sooner they are found, the better because of the important negative social consequences that the crisis has on European citizens.

   III. Social Consequences

   The importance of the impact of the crisis on European citizens is enormous. This can be seen in various countries. The discontent of people has been observed through public protests against the austerity measures in Spain and in Greece and the removal of the governing party in Portugal and in Italy.
   One of the social consequences of the economic crisis is the rise of unemployment. Hundreds of thousands of people lost their jobs in countries such as Greece or Spain. The extremely high rate of unemployment is the cause of financial disasters for many families. These disasters can be even worse when people do not get enough help from their governments. For example, Greece does not possess any formal system that aids young people to acquire a job or to enter a new position for those who lost one. Its social security system offers unemployment benefit only for 12 months and this is not an amount of money sufficient to live normally. As a consequence, many Greeks face the possibility of long-term unemployment and are considering leaving the country because of their financial situation.
   Another result of the economic crisis is the difficult situation of businesses in countries most touched by financial problems. They are affected by rising taxes, lack of financial means etc. The reduction of private consumption which is caused by the austerity measures is especially important in Greece where it represents more than 70 per cent of economic output. Many retail businesses are closing because people spend much less money. The businesses have to reduce the number of people their employ or diminish their wages.
   Finally, people are socially excluded. There is more and more of them who lost their homes, jobs or businesses. They search for social support and cannot get it. Non-governmental organizations become the only way for them to get assistance. However those organizations do not have the means to help every citizen. They have little financial possibilities and are often forced to close because of this. The reduction of government spending has disastrous effects even on the most vulnerable people. For example, in Greece, the government declared that it will diminish by 50 per cent state subsidies offered to disabled people which help them to buy necessary equipment such as wheelchairs.

   IV. Conclusion

   The difficult situation in the European Union affects the world financial system as a whole. It is, therefore, important both for the country experiencing problems and for other nations to resolve them.
   As we have seen in this paper, the crisis is far from being over. In Europe, measures were taken by the European Union and the European Central Bank to end it. A series of bailouts were performed to save countries such as Greece and Ireland. However, this did not end the issues but only postponed the necessity to find a “real” solution. The richer countries, propose austerity measures but these do not seem to be able to solve the crisis either. European leaders must act rapidly. As we have observed, the social consequences of the economic situation in certain European regions are devastating. The poverty and unemployment rate are rising. People lose their jobs, businesses and homes. The nature of the solution to the economic crisis is unclear. However, it is essential that the countries keep cooperating and searching together for the right answer. This must be the priority because of the gravity of the current situation.

   Bibliography

   – Economic Crisis in Europe: causes, consequences and responses edited by Paul van den Noord and István P. Székely;
   – Before and After the Economic Crisis: what implications for the European Social Model edited by Marie-Ange Moreau and Iryna Ulasiuk;
   – Work Inequalities in the Crisis: evidence from Europe edited by Daniel Vaughan-Whitehead;
   – Europe and the Financial Crisis edited by Pompeo Della Posta and Leila Simona Talani;
   – The Economic Crisis and European Integration edited by Wim Meeusen;
   – European Union and the Economic Crisis edited by Alexandre Defossez and rodolphe Muñoz;
   – Europe: financial crisis and security issues edited by Patrick Werthers;
   – L’Union européenne et les crises edited by Fabrice Picod;
   – Economic Crisis in Europe: causes, consequences and responses [Buti, Marco / EC DG Economic & Financial Affairs];
   – The Euro in the 21st Century: economic crisis and financial uproar by María Lorca-Susino
   The Lisbon Scorecard VIII – Is Europe Ready for an Economic Storm? by Katinka Barysch et al;
   – Monetary Chaos in Europe: the end of an era by Brendan Brown;
   – Le réveil des Démons: la crise de l’euro et comment nous en sortir by Jean Pisani-Ferry;
   – The Euro Area and the Financial Crisis edited by Miroslav Beblavý et al;
   – The End of the Euro: the uneasy future of the European Union by Johan van Overtveldt;
   – Completing the Eurozone Rescue: what more needs to be done? edited by Richard Baldwin, Daniel Gros and Luc Laeven;
   – Europe Will Work: but it needs to strengthen its governance, fix its banks and reform its structural policies Nomura Global Economics;
   – The Tragedy of the Euro (2nd ed) by Philipp Bagus;
   – Life in the Eurozone with or without sovereign default? edited by Franklin Allen, Elena Carletti, Giancarlo Corsetti; with a foreword by Josep Borrell Fontelles;
   – The EU Fiscal Crisis: forcing Eurozone political Union in 2011? by Graham Bishop;
   – Euro Crash: the implications of monetary failure in Europe by Brendan Brown;
   – Liberalism in Crisis? European economic governance in the age of turbulence edited by Carlo Secchi and Antonio Villafranca;
   – Financial Services Regulation in Europe (2nd ed.) edited by Etay Katz;
   – UK Economy: the crisis in perspective edited by Gabriele Giudice et al; The Last Shall be the First: the East European financial crisis, 2008-2010 by Anders Åslund;
   – First the Transition, then the Crash: Eastern Europe in the 2000s edited by Gareth Dale;
   – The Jobs Crisis: household and government responses to the Great Recession in Eastern Europe and Central Asia The World Bank;
   – Post-Crisis Growth and Integration in Europe: catching-up strategies in CESEE economies edited by Ewald Nowotny;
   – The EU and the Crisis – lessons learned [Advisory Council on International Affairs, Den Haag];
   – When Small Countries Crash by Scott MacDonald and Andrew Novo;
   – Boomerang: travels in the new Third World by Michael Lewis;
   – Preludes to the Icelandic Financial Crisis edited by Robert Aliber and Cylfi Zoega;
   – Meltdown Iceland: lessons on the world financial crisis from a small bankrupt island by Roger Boyes;
   – Why Iceland? How one of the world’s smallest countries became the meltdown’s biggest casualty by Asgeir Jonsson;
   – Frozen Assets: how I lived Iceland’s boom and bust by Armann Thorvaldsson;
   – The Greek Economy and the Crisis: challenges and responses by Panagiotis Petrakis;
   – Bust: Greece, the Euro and the Sovereign Debt Crisis by Matthew Lynn;
   – Understanding the Crisis in Greece by Michael Mitsopoulos and Theodore Pelagidis;
   – The Konstantinos Karamanlis Institute for Democracy Yearbook 2011: the global economic crisis and the case of Greece edited by Konstantina Botsiou and Antonis Klapsis;
   – Greece’s ‘Odious’ Debt: the looting of the Hellenic Republic by the Euro, the political elite and the investment community by Jason Manolopoulos;
   – Revolt and Crisis in Greece: between a present yet to pass and a future still to come edited by Antonis Vradis and Dimitris Dalakoglou;
   – Sustainable Politics and the Crisis of the Peripheries: Ireland and Greece edited by Liam Leonard and Iosif Botetzagias;
   – Ireland’s Economic Crash by Kieran Allen;
   – How Ireland Really Went Bust by Matt Cooper Understanding Ireland’s Economic Crisis: prospects for recovery edited by Stephen Kinsella and Anthony Leddin;
   – Misjudging Risk: causes of the systemic banking crisis in Ireland Report of the Commission of Investigation into the Banking Sector in Ireland. http://www.bankinginquiry.gov.ie/;
   – Ireland’s Malaise: the troubled personality of the Irish economy by Michael Casey;
   – The Bankers: how the banks ruined the Irish Economy by Shane Ross;
   – Bust: how the courts have exposed the rotten heart of the Irish economy by Dearbhail McDonald;
   – Ship of Fools: how stupidity and corruption sank the Celtic Tiger by Fintan O’Toole;
   – Enough is Enough: how to build a new republic by Fintan O’Toole;
   – Crise Mondiale: en route pour le monde d’après by Franck Biancheri.

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9. (2135.) The current economic crisis has continued to create many social challenges especially in the EU. It has caused a huge rise in unemployment, declines in economic activity and depressed housing markets in many countries. What is more, it has also caused more and more people to live below the poverty line. However, it has affected countries a bit differently and not all countries are suffering as much because of it. How much a country has been affected by the crisis depends on (among other things) how much national debt the country has; the rise in national debt caused by the crisis is forcing governments to make cuts in public spending and this has led to cuts in public health services and other similar services in many countries. Many people living in Europe and elsewhere are now facing hard times of austerity in welfare and health services.

   The current situation is worrying because more and more people are unemployed. In fact, in 2009 the European unemployment rate (9.3%) was higher than the OECD average (8.1%). This was a lot higher than in Australia (5.6%), for example, but in fact the same as in the US (9.3%). Naturally, there were huge variations between countries, but the figures have continued to rise ever since. This rising unemployment rate is the immediate social impact caused by the economic crisis. Especially young people aged 15-24 are affected because of the crisis. In fact, in Europe the youth unemployment (15 – 24 year olds) was as high as 20.2% in 2009 which is very concerning in my opinion since unemployment at an early age can result in becoming passive and in social exclusion of an individual.

   The situation in Spain is a lot worse than the European average: the unemployment rate of 15-24 year olds there was as high as 41.6% in 2010 which is a very severe problem. In fact, I personally think that the unemployed youth is a significant issue in many countries and policy makers should try to fix the problem with special employment programs. This is because the country’s future is in the hands of the young and if they get isolated from the society because of unemployment they are not able to contribute to the country’s economic growth. Of course, from the ethical perspective, having people suffering because of unemployment is not a good thing either.

   However, what is good is that luckily in many European countries there are policies to protect individuals against financial crises and market down turns. For example, in Finland and in Scandinavia many people are granted with generous unemployment benefits. Though, not all European countries have similar legislation that is protecting the jobless citizens as well as in these Nordic countries.

   It is clear that the economic crisis has affected negatively the GDP growth of many countries, though, how much the crisis has affected it varies between countries and how much a country’s economy relies on foreign trade. Also, especially in the US the crisis has affected the demographics of the country: the very rich lost considerably less than the other part of the population, which widened the gap in terms of wealth between the richest class at the top and everyone else in the demographic pyramid. So, the 1% who owned 34.6% of the US’s wealth in the year 2007 increased their share to more than 37.1% by 2009.

   Decline in wealth and decline in business investment and consumption are all linked to each other and these factors, whether they are declining or not, can be seen as the economic engine (along with government spending). In US between June 2007 and November 2008, the citizens lost about more than a 25% of their collective net worth, and this can be seen as an impact of the economic crisis. This decline in wealth is correlated with the above mentioned issues and therefore all in all is a complex phenomenon.

   According to an article “Impact of economic crises on mental health” published by the World Health Organization (2011), we can expect the economic crisis to produce secondary mental health effects that can increase alcohol and suicide death rates. It is a commonly known fact that mental health problems relate to poverty, deprivation, inequality and other economic and social determinants of health. Therefore, times when we have economic crises are very risky to the mental health and well-being of the citizens affected. Investment in crucial public services which are important for many peoples’ well-being can improve the economic and social determinants of health and the connected health disparities. In my opinion governments should response to these issues by implementing and upgrading accessible health services that would focus on primary care response.

   Economic shocks as the current economic crisis can affect education and health care systems in a negative way and destabilize public service budgets. However, it is clear that legislation for protecting social welfare is important since it can mitigate the mental health effects caused by unemployment. In my opinion it is extremely important for policymakers to take the well-being of the citizens into consideration while deciding on what kind of things to invest on because a good population mental health contributes to economic prosperity and productivity of a country, which makes it crucial for economic growth.

   In addition, poverty is increasing in the European Region which can be seen as an impact of the economic crisis. It has and continues to hit especially people with low income. During couple of years after the crisis started, the number of households in high debt has increased drastically as well as repossession of houses and evictions. I suppose that the economic crisis has also increased the exclusion of low-income people and people living near the poverty line in the EU. Economic pressure influences the mental health of parents which consequently affects the mental health of children and adolescents. Living in extreme poverty effects children’s cognitive, emotional and physical development, and these effects can have a lifelong impact on the well-being of these individuals. Therefore even during a crisis it is important for governments to maintain and support proper mental health care programs.

   According to the already mentioned article by WHO “…people who experience unemployment, impoverishment and family disruptions have a significantly greater risk of mental health problems, such as depression, alcohol use disorders and suicide, than their unaffected counterparts. Especially men are at increased risk of mental health problems and death due to suicide or alcohol use during times of economic adversity.” Also as can be seen in stats, in the EU, increases in national unemployment rates are directly linked to increases in suicide rates. Big increases in unemployment have been linked to about a 28% rise in deaths from alcohol usage in the EU.

   In conclusion, the economic crisis is likely to affect negatively health and particularly mental health of individuals, and in order to fight against this governments should:
   1. Implement active labor market programs
   2. Implement family support programs (like in Sweden as an example)
   3. Control the prices and availability of alcohol
   4. Implement or improve the primary care for the people that are at a high risk of mental health problems

   References:
   -Kolodko G.W., (2011) Truth, Errors and Lies, New York
   -Statistics for unemployment rate worldwide (by OECD): http://stats.oecd.org/Index.aspx?DataSetCode=LFS_SEXAGE_I_R
   -An article “A Financial Crisis Needn’t Be a Noose” written by Christina D. Romer and published on the New York Times on December 17, 2011
   -An article “Impact of economic crises on mental health” by World Health Organization (2011): http://www.euro.who.int/__data/assets/pdf_file/0008/134999/e94837.pdf
   -An article “Coping with crisis? Recession, mental health and social security” by ISSA (09.12.2011): http://www.issa.int/News-Events/News2/Coping-with-crisis-Recession-mental-health-and-social-security

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10. (2134.) Systemic Causes of the Economic Crisis

    The current economic crisis can be directly and indirectly linked to the United States. Understanding the root of the problem will require looking back at important historical events that happened in the United States and the policies which they passed during those times. Although the problem arose in the United States, it is the dependency that other countries have on the US and similar policies that lead to their following collapse shortly after. Another factor which has to be considered in the current crisis which never played a role in any previous crisis is credit; a deferred payment at a cost which has increased consumer spending and investments.

    It is unimaginable to even consider an advanced or emerging economy without the use of credit, this of course does not mean that it’s not possible it would just slow down growth in most economies. Since it is in human nature to satisfy our needs and wants sooner than later most people are easily convinced to take credit especially if banks are willing to hand them out readily. During the dot.com bust and September 11 Allan Greenspan from the Federal Reserve lowered interest rates to 1% to keep the economy going by making it possible for banks to give out credit for a very low cost.

    Afterwards, banks also started using leverage more. The side effect of this policy was that big investors (insurance companies, sovereign funds, mutual funds, pension funds, etc.) were no longer interested in the treasury bills which were believed to be the safest investment. Banks became very wealthy in a short amount of time since the leverage had large returns with low cost. The removal of the Glass Stegall act that seperated normal deposit banks and investment banks played a large role since smaller banks started to act like investment banks and started to create the risky investments that are explained later. The SEC (Securities and Exchange Commission) also removed all capital requirements for the largest investment banks, and thus enabled them to have more leverage and drive the bubble beginning in 2003.

    Since investors no longer were interested in treasury bills they had to find an alternative. Conveniently the investment banks helped connect the investors with mortgages. House prices had always been growing. This made it profitable for home owner’s to buy houses on a mortgage with low interest. While most people were out investing in their houses and becoming home owners (including people who did not qualify for credit) the investment banks were buying mortgages from the mortgage lenders.

    The banks then created CDO’s (collateralized debt obligation) from the mortgages, which categorized the mortgages into safe, okay and risky groups. When the CDO were receiving their payment from the home owners the “safe” group would receive all money first. The “okay” group thereafter started to receive the payments until all the loans are paid off. The “risky” group would usually be last to fill since they were owners less likely to pay leaving it with chance to not receive full payment, thus the highest rate of return. If mortgage payers would default this meant that the last group (risky) would be less likely to receive its full payments which is why they would have the highest rate of return. Investment banks then additionally insured the safe group and turned them into AAA investments. The large investors started to invest again. The “okay” groups of mortgages were sold to other banks and the risky ones to the investors that were willing to take more risk. Default’s in this system were not a problem since the lender would get the house and house prices were always growing.

    Lenders felt insured and then decided to add more risk to the mortgages. At this point people were able to get mortgages without down payments and proof of income; the creation of sub-prime mortgages. Thereafter most CDO’s didn’t receive their payments since most sub -prime mortgages would default. Most of the payments then turned into houses which were put on the market. Due to these turn of events there were more houses on the market then there was demand. Since house prices fell, home owners no longer were interested in paying their mortgages which were valued at more than their house was worth. The large flow of money into the CDO’s stopped causing these investments to be worthless. Investors, investment banks, lenders and brokers were all unable to pay back the large amount of money which they invested in these CDO’s. All this then lead to most firms to go bankrupt. The homeowner’s investments also become completely worthless, leading to the crisis.

    The amount of deregulation, greed and sub-prime mortgages all lead to the beginning to the crisis. Whether it was due to the greed of humans or the lack of understanding of such credit systems one important lesson can be taken from all this. Never try to create wealth with money that does not exist or barely has any chance of ever being there. It’s important not to lose sight of fact’s that occur and to act accordingly.

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11. (2133.) Counteracting the global economic crisis: values, institutions, policies.
    When talking about the broad and complicated subject of economic crisis, it is important to mention ideas concerning neutralization of its consequences and prevention of future calamities. The current disturbance in the global economy requires not only to understand how it was initiated, but also how to counteract and draw conclusions from it.
    The Chinese proverb says: “may you live in interesting times.” These times are now- financial markets are in turmoil, China is rising as economic power, young people from Europe and America are protesting against, what they see as ineffective government and regulations. In next years the world will change even more- also thanks to changes, that will be made as an answer to the global economic crisis- in terms of values, necessary institutions and policies.
    The first step toward ending the crisis is to introduce new regulations, that would stabilize the market. Since 1980’s the American financial market has been experiencing a long period of deregulation. Although the obvious results of this move- the example can be the deregulation of savings and loans companies, that led to crisis in 1989, the process continued. Decade later, in 1990’s the new market instruments- derivatives, became increasingly popular. Although, their allies argued that they would stabilize the market, the opposite happened. Any attempt to regulate hedge funds was cut out by Commodity Futures Modernization Act. The new regulations should be introduced not only to order the rules for derivatives market but also to control large banks and financial conglomerates (Goldman Sachs or JPMorgan Chase), whose every errors would(and have) tremendous consequences.
    The next act to resist the consequences of the global crisis is to establish international organizations that would execute the new set of regulations. Such organizations would identify any emerging risk of instability in the market and protect consumers from unfair and abusive practices in the financial sector. This act would force companies to improve their transparency and fairness toward customers. During the financial crisis it is the customer that value most. Client’s confidence in many companies has dwindle in years 2006-2009 and it is priority to reclaim it. Although the satisfaction of customers should be in the interest of financial institutions, the current crisis proved, that the supervising organization is needed.
    It is important to stress, that, the institution should be international- the case of recession demands more than attention of one country. Counteracting the global financial crisis should requires rise in international cooperation, reforms and common regulation standards.
    Apart from creating new regulations and execute them, the economy needs stimulation to neutralize the influence of crisis. Good example of this practice can be observed in China. There, 4 trillion yuan have been spent on stimulating policy. The largest part of package was invested in developing infrastructure, mostly on transportation networks (railroads, roads, airports) as well as rebuilding areas affected by the Sichuan earthquake from 2008.
    Another areas supported by the fund are: health care, education and cultural development. The reaming part of stimulus package went to restructuring of the industry for it to be more energy-saving oriented, as well as ecologically friendly project.
    Through this moves, China effectively counteracted consequences of the global crisis. The package stimulated the domestic demand through enhancing the public expenditure. Besides the increase in expenditures, the government planned tax reductions (generally VAT reform).
    These steps: increasing expenditures and expanding the disposable income of households and companies, stimulate consumer and investment demand, give work for people and in case of building communication network- benefiting in the longer-run. When talking about counteracting effects of the global crisis, it is necessary to take these steps into account.
    The last issue I would like to rise in this essay is “value”. As professor Grzegorz Kolodko has written in his book “Truth, Errors and Lies”: “Everything is good in the right proportion.” Any country needs strong state and economic freedom. Some countries were limited in the latter until 1990’- among them also Poland. Poland in particular tried to apply neoliberal values and policies. However the extensive reform, that was supposed to transform Polish economy form central planned to that adopted in America, caused many unnecessary “shocks”. On other hand, China has never chosen the “neoliberal way”, balancing role of market and state, reforming market gradually.
    The idea of neoliberalism has failed during this crisis, showing that the free market can not work without help of state. The example of China shows, that to repel crisis, one need coalition of sate and market forces- not a domination of only one of them. That’s why, I think that countries around the world should abandon the idea of neoliberalism, which clearly has its flows, and try to adapt more balanced values and polices.
    To sum up, the four main points that should be altered to counteract the global financial crisis are:
    • new set of international rules, that would regulate the market
    • establishment of organizations that would execute new rules and control if firms comply with them
    • appropriate and effective stimulation policy
    • set of values and polices that, should guide country to balance of state and market forces
    However, the solution for the crisis are not bounded to this 4 points. There are more complex mechanisms and only time will show, which of them will be implemented and how well will we learn from current calamity to avoid future ones.

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12. (2132.)The American financial crisis and its worldwide consequences

    The ongoing American financial crisis has serious implications on the world and the world economy, as it reached and affected more than what most people would have imagined.

    The American financial crisis is mainly referred to the US subprime mortgage crisis. The bursting of the US housing bubble in 2006 led to adjustable-rate mortgages resetting to higher interest rates. With borrowers unable to pay, high default rates on subprime and adjustable rate mortgages. This in turn cause securities backed with these mortgages to lose most of their value, severely damaging financial institutions. The government bailouts follow as companies prepared to declare bankruptcy and regulatory reforms were carried out as America tries to recover from this financial crisis.

    The problem with the American financial crisis is that it does not just affect United States alone but rather the whole globe. Given the speed of globalization, the integration of the global economy in the last 2 decades, the downfall of the global financial leader pulls the rest of the world’s economy along. There is in fact a direct relationship between declines in wealth, declines in consumption and business investment.

    To break down what does this economic globalization means and how it affects the rest of the world. The huge investment banks with these asset-backed securities are multinational companies with branches and offices all over the world. Smaller banks from other countries make loans from these investment banks while companies out of America are dependant on loans from these smaller banks to run their business. Thus when the huge investment bank starts recalling loans to build up capital that needs to fulfill requirement after the making the losses, there is a domino effect all the way down to the small companies. Without the loans, the small companies out of America have no means to purchase new supplies and produce goods. Not just that families will have less income than before with companies put out of business, it also directly affect the other nation’s Gross Domestic Products when less goods are produced.

    This was witnessed by a drop in the level of the world’s real Gross Domestic Product from 2008 to 2009 (Sources: IMF, World Economic Outlook). As the saying goes, once bitten, twice shy. Investors around the world are more cautious on placing their investments in financial products, which see a reduction of financial activities across the globe. Without new investments, the banks would be unable to loan out money to companies at favourable terms as before, making conducting business difficult. Projected Gross Domestic Product growth took a hit too as various sectors were not deemed to recover as fast. So technically, the American financial crisis has caused the world to be poorer and not progress as fast as before.

    On a micro level, individual investors are also affected by specific events such as the bankruptcy of Lehman Brothers. In Hong Kong, more than 43,700 individuals have invested in low-risk mini bonds worth HK$15.7 billion. With Lehman filling Chapter 11 bankruptcy protection, these bonds dropped in value drastically, wiping out the savings of many individuals (some had bought these mini bonds with their savings as they are deemed as very low risk with high credit ratings given that it was backed by Lehman).

    As companies find it unprofitable to keep employees after the financial crisis, many of their employees are laid off as a result (4.6% in Jan 2007 and 10.0% in Oct 2009 in the United State, sources from Google public data). However, this does not just affect the United States. Overall, there was a higher unemployment rate across many countries resulted from the financial crisis both directly and indirectly (Source: Global Finance). Even when markets in developing countries were not as badly affected, a practice developed where American employees were asked if they would like to take a pay cut and transfer to an office overseas or be laid off. When the American employee accepts the transfer, it results in the loss of job for the overseas employee working for the American multinational company to make space for the American employee. The above example is purely from hearsay and not found documented, but I do believe it is possible and true.

    The world’s financial landscape definitely changed its shape after the American financial crisis. Echoes can be heard that the “Wall Street Model” is not the one to be followed and admired after all. United States, despite being the world’s leading economy, is losing its attractiveness to uprising countries such as the BRIC (Brazil, Russia, India and China), whom, with the exception of Russia, survived the global economic downturn very well (Source: Google public data). With trade turning their attention to the BRICs, these countries recorded strong performances upon world economic recovery in 2010 and were suggested by Goldman Sachs to eclipse the current richest countries in the world by 2050. According to International Monetary Fund, advanced eonomies accounted for only 35% of incremental global nominal Gross Domestic Product while emerging and developing economies accounted for the rest from 2007 to 2011. China alone was responsible for 24.38% of the global incremental GDP during this period. (Sources: IMF)

    The improvement of China as a financial power was witnessed by a Gross Domestic Product growth of 9.2% in 2009 despite a drop in global trade. IT had pumped more public investment into infrastructure development; sustainable development and construction of low-cost housing through the Chinese economic stimulus plan 2009. Its huge foreign reserve continued to grow through the financial crisis but at a slower pace (Source: China Daily, 2009). China’s financial might is further demonstrated by its huge purchase of foreign bonds, to finance other countries to continue their imports from China. The Chinese economy is likely to take advantage of the “failing” American model and further develop their own.

    In conclusion, the American financial crisis has slowed down the progress of the world, while affecting the very lives of citizens, even if the housing bubble or the banks with the asset-backed mortgages do not directly relate to them. By allowing the American financial crisis to happen, the Americans have shot themselves in the foot, creating higher unemployment while losing attractiveness to investors to upcoming economies like China and India. No doubt with sound policies by the United States administration will the Eagle rise from the ashes but this recovery will take time and America might not appear as the ‘land of hope’ in the future.

    Global Finance – Unemployment rates in countries around the world
    http://www.gfmag.com/tools/global-database/economic-data/10297-worlds-unemployment-rates-2006-2010.html#axzz1tzwlKQne

    China Daily – China sees 1st annual growth slowdown in 10 years
    http://www.chinadaily.com.cn/china/2009-01/13/content_739

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13. (2131.) The subject of the following contribution is to show the consequences of the global financial crisis in the United States. The word crisis is a term that still reminds us of the struggle which countries around the world had to win with a huge debt, rising unemployment, or the prevailing panic among citizens. Countries faced a huge challenge to overcome all their problems, and try to restore the economy to the state before the crisis.

    Carefully tracing the history of the crisis, we can find information about the first problems arise in the United States in the mid 90s. The ill-effects of the policy of the then President Bill Clinton, has led to a situation in which virtually every citizen of the United States could take a loan, regardless of the size of earnings. After the bursting of the 2001 Internet bubble stock market, lowered interest rates to 2%. This behavior started to encourage people to enter into mortgages with very low incomes. However, at higher interest rates, they were not able to pay the growing interest, and for this reason, the banks began to take over most of the property.
    In 2006, began to appear in the first stages of the crisis. Contracted loans by U.S. citizens, have become financial documents without any coverage. Banks started to experience huge losses. To prevent their bankruptcy, and especially the outbreak of the economic crisis, the U.S. authorities have requested financial assistance to countries such as Kuwait, Saudi Arabia, Japan and China. But it was a one-time assistance and did not stop the outbreak of the crisis, as banks around the world did not want to have to help each other, fearing for their future. Within a few months, many banks have announced their bankruptcy, some ceased its activities, and only some of them were rescued.

    In this situation, the problems in the finance department began to reflect on the world economy. Many companies are not eligible for financial assistance from banks, announced its bankruptcy, halting production and thereby freeing up thousands of employees. No savings, and rising unemployment still led to a decline in demand products. Many countries have reduced orders for exported products, but felt the same incremental increase in prices of imported goods. It all led to a drastic increase in inflation, which unfortunately were not prepared for the citizens of developing countries.
    According to many sources, in all countries affected by the crisis, the most have suffered the sectors of construction and real estate. Terrified, the situation in the world, citizens of countries were afraid to invest money in this sectors. Routinely tried to sell the shares of such companies, thereby resulting in a decrease in other activities that were on a the market.

    Countries such as Estonia, Hungary and Bulgaria recorded a massive drop in its economy. Latvia suffered the worst the crisis in comparison to these countries. In 2008, reached 0.3%, which indicated that Latvia’s economy is experiencing the greatest recession of the other European Union countries.
    In addition to Latvia, we can find as dramatically affected by the crisis, the country talking about Iceland. The biggest problem this country was the lack of ability to refinance short-term commitments by the three largest banks in the country. As a result, citizens and foreign investors wanted in one moment to withdraw deposits, which resulted in retention of financial liquidity of the country. Iceland continued to repay its debts to foreign companies or owners of deposits.

    In conclusion, we note that the financial crisis triggered by the United States, it was tragic for the countries in the world. He suffered not only the economies of those countries, but also the relationship between citizens and governments. By keeping a bad financial policy of the former President of the United States, the crisis has affected the institutions that operated throughout the world. Causing waves of redundancies and forced liquidation of companies. Through all these events decreased trust, pleasure, fear and frustration came from the people.

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14. (2130.) Systemic Causes of economics crisis

    Crisis in Europe, crisis in US, global crisis, economic crisis – these topics we used to hear for last few years almost every day if not every few hours. We see debates about crisis on TV, we hear it in a radio, we listen to politicians… it is a hot topic, very actual, isn’t it? People talk how to get out of it, deal with it but would like to focus on how it was started and caused by what, by whom. “Things happen the way they happen because many things happen at the same time” Grzegorz W. Kołodko used to say and this is true.
    For past decade The United States used to live beyond their means. In last 25 years USA spent around 7 trillion US dollars more they earned. It is a huge sum.
    In late 90’s (1997) when Bill Clinton was a president the Community Reinvestment Act was implemented. CRA in simple words was an action to secure poor part of the society and allow them to take loans, even though that before any bank wouldn’t give them a loan. This action was carried out to gain votes for Democrats, of course Clinton was one of them. Huge amount of hungry for goods society went to banks and got a credit. By Mass-Media they were called “NINJA” which meant to be a shortcut from “No income, no job, no assets”. Having everything on credit became popular and trendy. Credits were attractive, around 1-2% interest rate per annum but only in the first 2 years („teaser rate”), later it had to rise to make up the loss generated by these loans, there was no excuse. The ‘New’ look of the market was called “Sub-Prime”. Later on the FED decreases the federal funds rate for nearly 5%, from 6,5 to 1, loosing at the same time the monetary policy. The next station: problems and inflation.
    Successor or more likely the similar thinker was George W. Bush. Next law ideas were implemented such as social benefits, free medicines for retired part of the society and other privileges. Very rich policy of The United States of America caused a budget deficiency. After 9/11 world became sensitive about safety and terrorism and huge amounts of money were invested in military, wars and in helping conflicts in some parts of the world. Some sources say that the expenditures were followed by the level of 300 million dollars a day.
    Commercial banks were granted by Central Bank. Officially inflation was at the level of 4%, so in result banks used to give credits and loans for people who were in simple words insolvent – NINJA’s mentioned before. Low level of inflation was caused by increasing import of goods from Asia (China) and more or less constant price of barrel of fuel.

    Experts were saying that printing money in this situation, basing on current rules is not the way out of the situation and it is super risky.
    Inflation began, price of the fuel barrel drastically increased. Prices of real estate’s were rising to extreme values, generally the price of every good went up. In 2005 prices of houses and flats achieved its maximum, people were taking ‘teaser rates’ because they still believed that the price will still be rising and after 2 years price will be high enough that they will be wealthy enough to face the transformation low interest rate to market rates level or even higher percentage by taking new mortgage loan for already more worth real estate. It never happened. Prices went down and big part of society became insolvent. Two huge hedge funds bankrupted and crisis began to be not only the problem of US anymore.
    In 2007 FED decided to increase the interest rates of the credits due to inflation rate, nationalize bankrupting companies. It was probably a mistake. If FED wouldn’t do that the market might clean itself automatically and we could call it as a natural selection. Many wrong or let’s say not the wisest decisions brought economy to huge losses, especially in automotive industry, banks and many others.
    When it comes to analyzing the causes of the crisis we cannot forget about liabilities of US to the rest of the world. How it happened we might ask. It happened because market stock seemed to be in boom point, growing for many, many years and good situation of real estate’s industry. Americans believed so much in this myth, in these speculations that almost everyone had 100% trust and confidence in US government actions. No one was worried about the future, people got used to that since 1930’s, since last economic crisis US was growing, reaching top and nothing can happen to them, they thought that they are always step further than others. US began to sell its financial assets, stocks, shares, dividends, companies, real estate’s etc, but did they realize that China, Japan, Russia and Arab countries began to be the owners of national wealth and potential source of future income? I don’t think so, they didn’t care about the future, because they were so sure about being one step forward than rest of the world. The United States wanted to be a symbol of freedom for few dozens of years and Mahatma Gandhi says: “Freedom is not worth having if it does not include the freedom to make mistakes” and now US knows something about it.

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15. (2129.) Essay Economy and Politics of Global Crisis: the Economic crisis and its social consequences.

    Beginning only in the financial sector, the crisis of 2008 has expanded everywhere in the world which has quickly become an economic crisis. Progressively, this crisis has affected firms, politics, workers families as well as households in all countries. In others words, the consequence of the crisis make this financial and economical challenge has become a societal one too. Indeed, “the global economy contracted by 2 per cent in 2009 in sharp contrast to the several preceding years of high growth in excess of 3 per cent annually (United Nations, 2010, 2011)”. As an example, the Global Output of Euro Zone has decreased of 4, 1% in 2009 whereas China knows an Output growth of 9, 1%.
    The crisis has affected the policy of governments that try to limit the effects of the crisis on their population. Nevertheless, the crisis has created severe social consequences in our societies due to the fact that it is not big companies who will pay the price of the crisis, but by the weakest and more vulnerable segments of society. But what are these social consequences? In this essay, I will try to deal with the most important social tendencies that the crisis brought. But what are these social consequences? In this essay, I will try to deal with the most important social tendencies that the crisis brought.

    The first social impact has been the increase of level of unemployment. Indeed, because the crisis has affected the market, private companies and public institutions have shed millions of jobs and reduce the hiring process in order to reduce cost towards the shrink of demand of products and services. As an example, in the European Union, the number of unemployed in this group of countries had risen by nearly 14 million over pre-crisis numbers, an increase of nearly 50 per cent. This increase in the numbers unemployed was far greater than in any other group of countries, more than double the increase of 6 million recorded in East Asia (International Labour Organization, 2011).

    In developing countries as China, the labor market was very affected by the decrease of demand but in a lower way than others countries because China has a growth of its national market whereas the others national markets has been decreased. In fact, China was not as dependent as upper level economies, which limited a little the unemployment tendency. It appears that not only the unemployment rate has increased, but also the incomes too. Because the demand of jobs was bigger and the offer of jobs limited in the labor market, workers faces a decrease of their salary because companies take advantage of the situation and/or have not enough money to pay bigger. Moreover, the outcomes made by companies were more and more unfairly shared between workers, shareholders and CE0s. There was also a paradox situation because despite the crisis, a lot of companies were very profitable but made massive layoffs.

    It has also change the quality of work because the level of vulnerable or informal employment has increased. Indeed, according to the OECDE, “as more formal sector jobs have disappeared, the informal economy and other precarious jobs have served as a major buffer for laid off workers”. One impressive example is the developing countries where the informal economy was up to 60% of the workforce which represents approximately 40% of the GDP. In advanced economies, the quality of work has decreased due to the facts that the level of part-time jobs grows significantly while full time jobs have decreased. The major victims of it are women and young people. Vulnerable employment constitutes a real burden for countries because it increase the deficit of countries because there is less of consumption (because the salary is lower), and create a negative circle for the economy. It is a real issue that made weaker the governments who have to find new way of reducing their deficits without “killing the economy”.

    The second main impact of the economic crisis is the decrease of quality of life. What does it mean? Because, incomes have decreased while poverty and unemployment have increased, it has affected the social system. This impact is multi-dimensional because it concerns health, education, social cohesion and conflicts. Look at the European Union today: Greece, Italy, Hungary and Spain have an incredible deficit and have taken severe measures in order to reduce it. However it has important consequences for citizens. Indeed, the health care system has been restricted in the majority of countries. For example, less and less medicaments are pay off and the cost of hospital and consultations have increased. It creates a social tension and makes governments weaker because it decreases their legitimacy.
    The economic crisis has revealed how weak is social protection system today, and how not sufficient it is to decrease the effect of the low of incomes. And worse access to health system has negative effects on the well-being on the citizens as well as the workers’ efficiency if we think in terms of profitability.
    For example, in Greece, treatment waiting times have increased further and many people are turning to street clinics that had originally been set up by non-governmental organizations for those outside the mainstream system. Médecins du Monde has estimated that the proportion of Greeks now seeking medical attention at such street clinics is around 30%. Before the crisis, it was only 3–4%. There have also been warnings of a rise in infectious diseases such as tuberculosis, malaria, hepatitis and HIV.

    There are also same cut spending in education system, which can be dangerous because it is a long term investment that cannot be forget. For example, in almost half of the countries in Europe, the education system has been confronted with new cuts as a result of the global economic crisis. Indeed, These cuts are in most cases as a result of a reduction in overall government expenditure on education, but in other cases as a consequence of tax reductions, or only in particular areas of education. Should we cutting as much as countries like Spain in the education system? I think it is not the answer because it is a short term vision. It affects the well being of the population as well. And it is the well-being of the population which will make the difference.

    The economic crisis has weakened the multi-social dimensions of our society. Indeed, it has been the trend to cut costs and reduce deficit, and only that. Nevertheless, such important sector as health and education should not be treated as the market because it affects the social cohesion of a country like we could see in Spain and Greece, or in Arab countries. When companies and banks are still profitable at the same level or better as before, the workers and especially the most vulnerable one have to pay the price. Maybe consider more the well-being of people rather than market way of thinking is a way of being more sustainable.

    Sources:

    • Arulampalam, Wiji, Paul Gregg and Mary Gregory (2001). Unemployment scarring. Economic Journal, vol. 111, No. 475 (November), pp. 577-584.

    • Awad, Ibrahim (2009). The Global Economic Crisis and Migrant Workers: Impact and Response. Geneva: International Labour Organization, International Migration Programme.

    • Bacchetta, Marc, Ekkehard Ernst and Juana P. Bustamante (2009). Globalization and Informal Jobs in Developing Countries. Geneva: International Labour Office and World Trade Organization.

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16. (2128.) Economic Crisis and its Social Consequences

    – Introduction of Economic Crisis and Global Financial Crisis 2008
    Economic crisis refers to the evaporation of large part of assets and values of the financial institutions and the economy. One of the most serious economic crises in the 20th century is the Global Financial Crisis in 2008. Due to the subprime mortgage crisis and burst of U.S. housing estate bubble in 2007, many financial institutions all over the world collapsed, including Lehman Brothers, the 4th largest U.S. investment bank, causing the most significant effect to the globe. With $619 billion in debt, Lehman’s bankruptcy filing was the largest in history, and its collapse contributed to the erosion of close to $10 trillion in market capitalization from global equity markets in October 2008, the biggest monthly decline on record at the time(1).

    – Social Consequences – U.S. and other countries
    The International Monetary Fund estimated that banks and other financial institutions faced aggregate losses of $4.05 trillion in the value of their holdings as a result of the crisis(2). In response to this, the U.S. government announced a $787 billion economic stimulus plan intended to limit the damage(3), while the governments of European nations raised the capital of their national banking systems by $1.5 trillion by purchasing newly issued preferred stock in their major banks(4). Despite the financial aid package, the U.S. unemployment rate still soared to a highest level of 10.6% in January 2010, implying the failure of the measure.

    As nations of the world are thrown into a debt crisis, the likes of which have never been seen before, harsh fiscal ‘austerity’ measures will be undertaken in a flawed attempt to service the debts. The result will be the elimination of the middle class. When the middle class is absorbed into the labor class – the lower class – and lose their social, political, and economic foundations, the would riot and rebel, which is regarded as social unrest. Protests broke out in countries worldwide. One example is the “Occupy Wall Street”(OWS) which began on September 2011 in Zuccotti Park, located in New York City’s Wall Street financial district. The main issues are social and economic inequality, greed, corruption and the undue influence of corporations on government. The slogan ‘We are the 99%’(5) highlighted the growing income inequality and wealth distribution in the U.S. between the wealthiest 1% and the rest of the population. The goals of the movements include a more balanced distribution of income, more and better jobs, bank reform, in addition to a reduction in the influence of corporations on politics, and forgiveness of student loan debt.

    Although more than 700 people are arrested, OWS is still ongoing and it spreads to over 95 cities across 82 countries such as Germany, United Kingdom and Italy(6). It even happened on the other side of the earth in Hong Kong, with establishing an Occupy camp outside the Asian headquarters of HSBC Holdings in Central on October 15, 2011.

    – Social Consequences – Greece
    With uncontrolled government spending, the impact of Global Financial Crisis is even more serious in Greece. The debt level increased to 127% of its GDP in 2009(7), creating the most-severe crisis since the restoration of democracy in 1974. Triggered by plans to cut public spending and raise taxes as austerity measures in exchange for a €110 billion bail-out, the Greek protests with series of demonstrations and strikes began on May 5, 2010. More than 60 demonstrations were being planned and it is still going on(8). At first the demonstrations were held in peaceful means, but later some turned violent, with young demonstrators hurling rocks and firebombs at riot police, smashing banks and storefronts. A man even set himself on fire inside a bank in the northern port city of Thessaloniki to protest his financial difficulties(9).

    – Conclusion
    The above events are just the tip of the iceberg. The ways of expressing the anger and desperation, especially for those performed by the Greek revealed that they have lost all the confidence towards their governments. With the incapability of the government in solving the problem, citizens are facing long-term austerity with high unemployment which will destabilize the social structure. There is a compounding effect when the both public and private services such as train, bus, and banking are hindered. If the situation is not resolved or even relieved, the impact to the economy will be disastrous. Even though countries can recover quickly from the crisis, they may not be able to return to the same growth path as before the crisis, thus delaying further the economic development process. Governments should take immediate and effective actions to radically deal with this problem, which is one of the most severe financial problems the world ever faced.

    References:
    (1)“Case Study: The Collapse of Lehman Brothers”. Investopedia. Retrieved April 2, 2009.
    (2)“I.M.F. Puts Bank Losses From Global Financial Crisis at $4.1 Trillion”. The New York Times. Retrieved April 21, 2009.
    (3)“US Congress passes stimulus plan”. BBC News. Retrieved February 14, 2009.
    (4)“The Great Crash, 2008”. Roger C. Altman, Foreign Affairs. Retrieved February 2009.
    (5)“ “We Are the 99 Percent” Creator Revealed”. Adam Weinstein, Mother Jones. Retrieved October 7, 2011.
    (6)“Occupy Wall Street protests go global”. Karla Adam, The Washington Post. Retrieved October 15, 2011.
    (7)“In 2009, Greek Debt-to-GDP was 127%; Target for 2020 is now 120%; Is this Progress?” Mike Shedlock, Mish’s Global Economic Trend Analysis. Retrieved October 31, 2011.
    (8)“Greek riot police, protesters clash during crippling strike”. MSNBC.com. Retrieved February 23, 2011.
    (9)“Horrifying moment a small business owner sets fire to himself outside bank after he was left riddled with debt in Greece’s failing economy” Paul Milligan, Mail Online. Retrieved September 17, 2011.

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17. (2127.) Economic crisis and its social consequences.
    As we all know, the economic crisis started in 2008 and is currently a major element in the news. From 2008 we were witnesses of global economic crises which touched some government’s immediately some after a while. But definitely as we are living in globalized world we can clearly see that all countries where harmfully influence by crises some directly some indirectly. As level of globalization is increasing every day also interdependency between regions and governments is also increasing. Now a day’s a lot of specialist are talking about how to deal with economic crises but none of them know how to react properly. They are explaining their opinions and their points of view but not provide any action. The reason for going through such serious problem is the instability of our economy. We all know that the financial crises is not only affecting rich and Eastern nations, nevertheless, it has also affected the developing countries and small emerging countries. After Mr. Grzegorz W. Kolodko explain us during his lectures health of economic system is very important and can drive undeveloped countries ahead however if governments will not provide accurate legal protection it can drive such a counties in to a dip financial turbulences.
    However poor courtiers without developed financial sector and foreign investment were not touch so strong as countries who had well developed financial sector. Good example could be Belarus which during crises noted only around 3 or 4 % decrease in their GDP. Of course then their devaluate their currency at level of 200% but in case of GDP crises did not influence Belarus so strongly. The nations which suffered the most are countries which were dependent from their export. As in case of Lithuania, Latvia, Estonia, happened and their GDP drop down dramatically. However I think these countries did not had such a strong negative crises impact on social life. Stronger social impact of a global financial crises had place in countries as US , UK, or other which level of foreign investment was high. I think for these countries society shock was tremendous. Because of huge change between philosophy before crises which could simply be shown by banks policy’s of giving loans to everyone even people who could not afford it. To situation in which to be able get the loan you have to delivered to bank all information about yourself and you still cannot be sure if you will get one. The rapid change was not fully understood by people who with draw conclusion that why to save if we can spend and still it goes well. Situation which have a bit common with US situation is Greece now. We can see that people cannot agree on reforms which will decrease their living standard. Because of stupid government who did not react faster on such a signs. And Society do not want to pay and decrease their standards of leaving just because of government wrong decisions. So it lead them to strikes and demonstrations which because of huge social pressure usually finished dramatically with distractible impact on the city. Social unhappiness is driven from uncertainty which is correlated with unknown future and disagreement for lover living standards. It is easy to understand for me because you can easy adapt to luxury but used to poverty would not come so easy and soft as luxury. Social unhappiness is extremely heavy to change, once it appear it’s stay for a long time in a people heads.

    Following situation can lead us as a people to think about democracy and government one more time with question in head what is wrong in now a day’s government’s and how we can change this certain point. For example why governments make wrong decision and lead country to almost bankrupt and they are not guilty like in case of Greece. If entrepreneurs do so they could get in legal problems . In extreme cases of porpoise violations responsible person could even go to prison for few years and politics who are spending millions and billions of euro on the left and right are untouchable and we cannot do them anything.
    There isn’t any one in the world, who can actually define the economy crisis and the could give a proper solution for this financial recession. The economy recession has created by several different social, political and economical factors. As we see the actual economy , political, and the social environment and the rapid fluctuation around it, we can say that current financial crisis is mix of general economy uncertainty. This uncertainty involve, unpredictable changes, high prices of power and energy, reduction in demand for products and also a uncertain government policies and regulations. Unknown effect of reusing our global resources and price which we will have to pay for them in the feature. Also spreading poverty will lead society to more radical actions and political movements which can be driven by socialists. As we know well such action can provoke some leaders and make them feel opportunity for action. As we know social unhappiness was more over a trig which was then lead us to second world war.
    We are living in one world and we all pay price for that. We can see that we are dependent not only from other countries and their governments such as US and China but also we are dependent form their economies. Markets react for changes in political and also other fields which make situation much more complex and unpredictable. Future is uncertain but we should not afraid off our actions but move forward with some conclusive points. Maybe in that way we will pretend markets as its strongly correlated social conditions before global destabilization on which the poorest will suffer the most.

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18. (2126.) Jeszcze chciałam nawiązać do krzywej Laffera. Wszystko to, co Pan Profesor napisał o jej przyczynach politycznych jest słuszne. Jak dla mnie ona nie ma w dodatku żadnego teoretycznego uzasadnienia. Żeby w ogóle ją potraktować poważnie, to powinien zostać przedstawiony dowód, dlaczego ona ma taki kształt. Dlaczego akurat taki wykres ma opisywać zależność wpływów do budżetu w zależności od stawki podatku. Przecież to jest wydumane, że przy stopie podatkowej 100 proc. wpływy spadną do zera. Trzeba by przedstawić dowód, że tak by się stało.
    A można sobie wypbrazić najróżniejsze funkcje opisujące wpływy podatkowe zależnie od stopy podatkowej, np. narastającej niemal liniowo, a od pewnego momentu logarytmicznie, albo też krzywej parabolicznej, tyle że w górę bardziej stromej, a w dół bardziej płaskiej, a może w ogóle wystąpiłoby coś w rodzaju pętli histerezy, czyli po innej krzywej by przebiegał wzrost wpływów do budżetu, gdy podatki by rosły, a po innej, gdyby malały.
    Jeżeli nie ma żadnego dowodu na prawdziwość krzywej Laffera, to ja i każdy może przedstawić swoją, równie wydumana krzywą. I dlaczego miałaby być gorsza.
    Laffer najwyraźniej nie uwzględnił, że podatki sa przecież zbierane nie po to, żeby je zbierać, ale z przeznaczeniem na cele publiczne i na redystrybucję. Nie ma powodu przypuszczać, że duża część społeczeństwa, szczególnie wobec rozwarstwienia dochodów, nie akceptowałaby płacenia 100 proc. podatków i rozdzielania tak zebranych dochodów po równo. I wtedy ci biedniejsi mogliby nawet donosić na bogatszych, którzy by chcieli uchylać się od podatku. Tak więc nie ma najmniejszego uzasadnienia domniemanie, że przy podatku 100 proc. nikt by go nie płacił.

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19. (2125.) Szanowny Panie Profesorze

    Czy byłaby możliwość, aby napisał Pan jakąś dłuższą krytyczną notkę na temat tzw. szkoły ekonomii austriackiej – np. o tym jak szkoła ta widzi bankowość (postulat wolnej bankowości – prywatne banki ze 100% rezerwy złota; ewentualnie bez rezerwy, ale z prawem do emisji własnego pieniądza, bo to rynek ma “zdecydować” co dobre – czy z rezerwami czy bez rezerw) i obecny kryzys (że to wina FEDu jako de facto banku centralnego, niszczącego “wolny rynek”). Osobiście jestem przeciwnikiem tej szkoły, niemniej chciałbym zapoznać się z krytyką tego podejścia w Pana ujęciu (sam nie jestem ekonomistą). Myślę, że warto o tym napisać, bowiem wielu młodych ludzi daje się nabrać na propagandę “libertarian” o “wolności na wolnym rynku” i nie tylko nie zauważa problemów neoliberalizmu, ale chce go w jeszcze bardziej skrajnej postaci.
    Pozdrawiam.

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20. (2124.) What are the causes of the Economic Crises in the Eurozone?
    Its roots touch deeper than only the situation in the E.U. and as a matter of fact we can say that they resulted from the domino effect that began in the United States at the culmination point by the year 2008. Major financial institutions and well-known banks like Bank of America or City Bank were saved by the government that “printed money” and issued treasury bills. The side effects of inflation could be more than perceived by the Americans and not only. Unfortunately the Government was not as generous with every institution. The bank Lehman Brothers collapsed due to the vast number of so called “toxic papers” and this has been one of the forces that have driven us to the situation in which the global economy was few years ago and with which E.U. and Eurozone is struggling nowadays.

    The global crises did not only result in a domino effect, affecting the globe beginning by U.S and by arriving to Europe, but it had as well a scale effect of consequences.
    Problems with bank’s customers who were not able to repay the loans they have taken in the bank, and the “toxic papers” in possession of which were banks that had a meaning on national scale, provoked an impact not only on national level but as well international. Additionally to the effects of the economic crises from The U.S., every country in the Eurozone has its own crises. As an example I would like to briefly describe the five most affected countries by the economic crises, which are on one hand Spain, Portugal and Ireland, and on the other hand Italy and Greece. The distinction is significant due to the fact that the crises are provoked and reflected in those countries in a similar but not exact way.

    On one hand it is relevant to discuss the example of one of the fastest developing countries in the Eurozone and an example of effective and efficient utilization of European Founds, Spain, that was highly affected by the economic crises. Planned development and new investment, construction boom, low property prices, low rates of unemployment and loans, resulted with in extensive level of construction by 2005 (Spain was constructing more than Italy, France and Germany together!). Given the mentality of the people and the fact that decisions were made “for today” without thinking of the future, loans that in 40 years could not be repaid, were taken by a vast number of people who were wishing for a better life. This situation is perfectly illustrated by the following Spanish video on the YouTube channel: http://www.youtube.com/watch?v=N7P2ExRF3GQ.

    In addition to this, many of the national companies began to transfer their production from Spain, Portugal or Italy to countries like Poland or other new E.U. countries, where the service was much cheaper. This resulted in an increase of unemployment in the origin and a decrease in unemployment in the destination place.

    Moreover the situation in Spain has been replicated in Portugal and Ireland. The fact that “Portuguese companies has been financed by Spanish banks” (http://business.time.com) has a major effect on the chain relationship between those two countries. The prognosis for Ireland unfortunately is similar that the one in Spain and Portugal, due to the fact that its debt and borrowing sector is similarly structured.

    Spain and Portugal are in the situation where speculators have the opinion that the countries will follow the steps of Greece. For the entire Eurozone this is an unacceptable situation, due to the pressure that relays already on the entire E.U. The question that we need to ask ourselves is, if the Eurozone is able, and if it ever will be ready, to go through the “Greek” process once again, but with a different country?
    On the 26th of April 2012, the rating agency S&P have lowered from A to BBB the Spanish rating. This shows how difficult the situation is.

    An interesting issue, but for a separate discussion, is the situation related with the rating agencies. All three most known are private institutions, which in my opinion provokes a pathologic situation. In 2008, a couple of weeks before the collapse of the Lehman Brothers Bank, all three rated the bank with the highest rating. How is that possible? Did none of them realize about the up-coming crises? How is it possible that some countries still have high ratings which they dunnot deserve? In my opinion, an international rating agency should be formed and composed of specialist of the highest level. Only the evaluation of such institution should be taken under consideration, rather than the evaluation of private institutions.

    On the other hand the Eurozone is facing the situation in Italy and Greece, but before I slightly take my opinion on this issue, the main question we should ask ourselves, is why ever Italy and Greece entered the E.U and why did they become part of the Eurozone?

    As we can read in the article “Italy and the Global Economic Crises” by Roberto Di Quirico from the University of Cagliari, “In Italy, the global crisis has impacted on a system that had deteriorated following twenty years of political instability and economic decline. So, it has only worsened conditions in a country already in crisis. The circumstances responsible for Italy’s decline and the avoidance of structural reforms have also prevented attempts to use the global crisis as a stimulus for rescuing the country and reforming the system. These circumstances are the long-term effects of the early 1990s collapse; of widespread corruption, the absence of any new project for economic growth, and, more generally, the lack of a governing class able to spearhead thoroughgoing reform.” (Bulletin of Italian Politics Vol. 2, No. 2, 2010, 3-19 “Italy and the Global Economic Crisis” Roberto Di Quirico (University of Cagliari))

    In Greece the situation is moreover the same and as a matter of fact, if the government would provide the European Commission with their real financial documentation probably we would never feel such a weight on the shoulders of the Eurozone.

    On this background, Poland seems to be in a much more attractive situation, of course only on the first sight. Why is it like that? Because if we contrast the time that normally it should take us to gain competitive advantage over countries like Spain or Italy that already have major economic problems, and the time that it realistically will take, we would understand that we are not using even the half of our potential.

    The government of Mr Donald Tusk is trying the hardest, in their opinion, to make Poland the “Green Island” the longest possible. What is the strategy to finance the state in the time of crises? To increase the retiring age. Will this help in any way? Well, in my opinion not at all. With the retiring age we have now in Poland we have a balanced situation. Increasing the age will only take the possibility for younger people to appear earlier on the job market. As a contrast it is worth mentioning the uniformed services where employees retire after 15 years of service and due to the fact that they still can work, they take a half-time job.

    Looking from the strictly administrative side as well we see discrepancies in the actions undertaken by the government, whereas instead of lowering the number of new employment in the public administration, PO decides to increase to a large, unnecessary and costly one.

    In my opinion PO did not accomplish their electoral promises. Mr Roztowski instead of wakening the national economy is freezing it. The increase of 4% of GDP does not give anything while it is contrast with the galloping rise of prices, increased price of life and increasing inflation. It can be that for Mr Roztowski, or the international institutions, this situation on paper looks good, but in reality Poland is going exactly in the same wrong direction as Spain, social stratification is higher and there is no exaggeration in the opinion that Poland A and B exists. Perhaps, from the administrative chairs or from Warsaw perspective, some dunnot perceive it.

    In this case I must say that I am not wrong that we dunnot use our potential fully. We could develop 7 or even 8% and the inflation could be lowered, but because the opposition of PO is PiS and weakened polish left, of which the majority of people, if I can say so, are “afraid” of, PO can use its potential in the field that they specialize in, which is the political marketing and PR, in order to find themselves in a situation where they dunnot need to introduce almost any reforms and the public opinion will most likely choose them anyways because no one else could “provide” the people with better options to choose from. This might change in 10 or 15 years with the new generation, but until that time, I think that unfortunately we will be on the same place, and being in the same place while time is passing, nowadays is a synonym of stagnation.

    What will happen in the nearest future and how will the situation of Europe develop? We dunnot know. What we know for sure is the fact that every country in the Eurozone has its own politics and economy. A lot will depend from the countries like Spain, Portugal and Italy and how their situation will develop. E.U. and its financial institutions are not able to “pull” them out of the crisis. Maybe, the Eurozone will be dissolved? Maybe it will be better that countries like Spain, Portugal or Italy will step outside of the Eurozone in order to use their national currency, which would give them the possibility to use other mechanisms? In this particular situation the pressure laying on the Eurozone would be much lower. That’s one of the reasons that on the background of those countries, Poland is “lucky” to have kept its own currency. If strategically things would go differently, we could argue if Poland would still have an competitive advantage over many of the Eurozone countries.

    Some say it is better for the above described countries to step outside of the Eurozone. This would provoke development in both, the countries affected by crises and stepping outside and the Eurozone itself. This, one hand can help those countries and work as a competitive advantage, on the other hand the inflation could increase drastically and this would result in an even more critical situation.

    The darkest scenario described by others, presents a futuristic vision of the disintegration not only of the Eurozone, but as well of the E.U. Maybe, only the Schengen Zone will exist? The reasons of such opinions are described above.

    Looking at the actions of the present politicians in the E.U. the situation does not fill with optimism. Future has a lot to offer and everything will depend on how well we will be able to plan rationally, effectively and efficiently our strategies in order to develop together into a better E.U., for us and for the next generations.

    (Estimado Señor Profesor, lo siento por haber escrito mas que las mil palabras, pero el tema era tan interesante y extenso, que apenas pude resistirme en caber en las 1.800 que escribi. Atentamente, Inez)

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21. (2123)
    Globalization and its influences on the economic growth

    Globalizaton is a phomenom that has been evolving and developing at a highest speed since the 1980´s. The principal consequences of the globalization have affected the financial enviroment, but also, through different channels, the effects have also been noticed in the real economy.

    The most important aspect needed for the globalization is the liberalization, and there is a postive relation between this and the economic growth. However we should be careful, as liberalization is not the sinonim for globalization. Globalization also needs of other factors to be posible. The concept of globalization includes integration, internationalization and liberalization, being the second an immediate consequence of the third. Globalization refers to the increase of the global relations through the international cash flows. Internationalization in the financial aspect is the capacity for bying and selling transnational assets without impediments. Therefore, internationalization requires a process of globalization. Integration means the vinculation to a country or a group of countries to the international capital markets. Integration means the vinculation to a country or a group of countries to the international capital markets. For the financial markets to be integrated it is necessary the posibility to act in not domestic markets without any kind of restrictions. The basis of globalization of the financial markets is the capacity to move a big amount of capital from one market to another in a quick way and without restrictions. The problem is the existance of barriers. Liberalization is the process to eliminate the barriers. There are two kind of barriers: direct and indirect barriers. The direct barriers are the ones created by the authorities to have control over the international financial activity. Indirect barriers are factors that can stop the international economic activity allthough they were not created with that objective. These factors can for example be the asymetry of information or the cultural differences.

    It is difficult to finally culminate the process of globalization, but there are two main factors that can be helpful for it. The first one is the spectacular development of communication and information technologies. This has been necessary because the financial liberalization would not have been enough if the transnational transition could not have been done without excesive aditional costs. The second factor is the increasement in the number of institutional investors and in the amount of their transactions. These investors have been a great financial resource and also information resource that have helped act in a global environment. As investors grow higher in number and they become more clearly visible there is the possibility to reduce the capital.

    As mentioned before, the main factor for globalization is the liberalization, but there are other factors that acompany this and that at the same time are different channels that conduct to economic growth. Technologies, that make posible the economic activities in the global scope is one of these factors. As well as the existence of financial engeniere that makes posible the asumption of risks. All of these will increase the competivity in the different financial markets. This stronger competitivity will mean that the thrats of the financial activity of a country moving to foreign markets nd the opportunity to adapt to the level of these other foreign markets will both have a positive effect on the economic growth of the countries. Anyway it is important to take in account the possible existence of reverse causality. The integration process can create inhibition in the economic growth due to the fact that international financial integration can increase the volatility of the financial magnitudes. This risk has as a consequence that the investment on research and development will be limited and so the long term economic growth.

    In resume we can say that the main factors of globalization that have a direct impact on the economic growth are the reduction of barriers, direct and indirect, the international diversification of the risk, the increase of the international flows of capital, as well as the increase of the cash flows in the international markets and the international banking development. All of these factors put together build the concept of Globalization. At the same time these factors constitute the two principal dimensions that lead to the direct channels through which the financial development has a direct impact on the real economy, and therefore on its growth. The reduction of costs of capital will make possible that a bigger number of real investments and in a more efficient market the investors will evaluate projects and choose those one that seem more promising. This better way of assigning capital will insure the economic growth because the total productivity of capital will increase. This increase of productivity of capital is more associated to the economic growth.

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22. (2122.) Mariusz, /3020/. Należy pamiętać, że średni koszt wydobycia baryłki ropy /brutto/ na globie z dostawą do rafinerii wynosi około 7 dolarów za baryłkę. W krajach takich jak Irak, Arabia lub Iran wynosi ona 1 dolar. W rejonach trudnych więcej. Nikt nie odpowiada gdzie podziewa się różnica między wydobyciem a ceną sprzedaży,średnio 100 dolarów na baryłce. Jest to gigantyczne oszustwo trwające od czasów Rockefellera. Cena prawie 6 złotych za litr benzyny w Polsce jest czystym przestępstwem.

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23. (2121.) Main features of contemporary globalization

    What is globalization? Many people misunderstand its real meaning and is saying that our world is being globalized. The truth is that the world is not globalized, cause the word world already means globe. Globalization is in fact the process “of rapidly changing reality – not only economic, but also cultural, social, and political”( Kołodko,2008, p.78). `

    In my view, the most vital and general elements of globalization are: integration, interdependence and liberalization. However, globalization has already gone through many phases and the ones I mentioned are connected with the whole, ongoing process of globalization lasting for hundreds of years. The contemporary era of globalization has some explicit features and is mainly characterized by exceptionally fast innovation and technological progress. We are facing now continuous scientific-technological revolutions.

    The first aspect, that I would like to discuss is accelerated pace of global trade that is growing much faster than the global GDP. Soon after 1980, the integration of many countries sped up and due to appropriate regulations, many trade barriers were abolished and the international trade became facilitated a lot. Besides, “open regionalism” has developed what allowed non-discriminatory trade among members and non-members of specific regions. Much bigger variety of products and services became tradable thus the volume of traded goods has increased considerably. Moreover, the modern transport revolutions, containerization, much larger use of air transportation, saves lots of time and make the transport costs smaller and the international trade more intensive. Easier communication appeared between sellers, buyers, middlemen and brokers. We can see that in the current era of globalization innovations in digital technology, combined with broadened, innovated means of communication and declining transportation costs have significantly risen the possibility of global production and exchange of goods.

    Furthermore, the current era of globalization is characterized by almost free capital flows what has also made trade much easier. Technological innovations, easiness of electronic transfers, widespread using of internet facilitate a lot processing and transmitting the information and international transactions in goods and services. As Professor Kołodko pointed out “to an increasing degree, saving, borrowing and investing take place in a system of global interconnection”. Everything that is saved in one place, will be spent in another. Sizable amounts of capital flow now from developed, industrialized economies in Europe to its previous colonies as well as rapidly developing countries in Latin America, or Australia. Developing countries and emerging markets became a target of investors, since they have a vast room for growth.

    New technology spreading very rapidly is another vital feature of contemporary phase of globalization. Not only new products are being created much faster than ever before but they are also rapidly reachable for the larger number of people than ever before in the history. Continuous innovations in communication and information technology, wide spread of internet and mobile phone use and the ability to use it and adapt it, influenced and changed the way businesses work around the world. We are facing easier access to information, resources, business ideas. Banks, markets, investors, financial and nonfinancial institutions depend on each other highly and are more and more globalized. We can notice a trend of increasing interconnections between capital markets. What is also worth highlighting, many countries in order to get more ideas, are co-operating with each other considering technological progress and help each other in the adaptation of technology. They have a common and unified goal in the growth and development of all countries, they desire to generate power, wealth and knowhow and contribute to higher level of productivity.

    Another essential characteristics of current era of globalization is rising migration of people. We are almost in the phase of nineteenth century great migration wave. Along with the openness of the borders, communication infrastructure expansion, rapid spread of ideas and flow of information, decreased costs of travelling as well as increasing sense of knowledge, we can observe a tendency towards strong migration on a unprecedented scale. Millions of people travel legally or illegally longer distances and adapt more quickly to different cultural and economic environments. Differences in the level of earnings and standard of living conditions and the demand for a cheaper labour result in high migration in all the continents from poorer to wealthier countries, thus from South to North and East to West. People are simply searching for a greater opportunities for economic success. The migration trends are furthermore streamlined by rising number of tourists every year as the standard of living in many countries has increased significantly and therefore the travelling all over the world is facilitated.

    I have already mentioned some core economic and social aspects of the current phase of globalization. However, globalization has many dimensions. The last but not the least important feature of current phase of globalization I want to mention concerns culture. Culture is being globalized and it has its positive as well as negative aspects. We are facing widespread homogenization of culture. Progressive Westernization or even Americanization of culture can be seen all around us. Poorer societies from developing countries are taking over the style of developed societies. Ways of life, habits and customs, patterns of family life, beliefs, norms and values, consumption styles are being globalized. Cultural unification got faster due to technological advancements which streamlined previously mentioned migrations of people, intense tourism development, expansion of infrastructure as well as development of global media. Culture is moving beyond borders and people have bigger access to foreign music, movies, clothing or food. They are sharing values, ideas and are forming new kind of behavior. However, although different cultures are interacting with each other, individuality each of them is beginning to fade. Globalization of culture is still an ongoing process but we can be sure that it will not be completed since people want to have a sense of belonging to a specific community, feel secure and have their own place on earth which will shape their personalities.

    To conclude, we can see that technological progress has significantly influenced both the pace and scale of globalisation in many dimensions during the contemporary era of globalization. However, it has not always a positive influence on our lives. We cannot be sure what effects the contemporary phase of globalization will occur by the end of the day, since this process did not come to an end and still remains a puzzle for us.

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24. (2120.) Witam Pane Profesorze.
    Czy mógłby Pan przybliżyć kwestię tak gwałtownego wzrostu cen paliw? Czytałem artykuł, iż jest on spowodowany wzrostem w Chinach i Ameryce Południowej, co skrzętnie wykorystują producenci. Mamy zatem do czynienia ze spekulacją?
    Pozdrawiam.

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25. (2119.) Globalization and its influence on economic growth
    In economic dimension globalization is perceived as the expansion of the capitalist system, the growing area of the globe and the transformation of local economies into a single global system. Financial globalization has been largely supported by information technology development process that allowed the electronic transfer of funds and making business transactions around the world in real time. A significant contribution to the process of globalization has made the rapid growth of multinational corporations, which often have a budget higher than the budgets of small countries, and largely beyond the control of national governments.

    This aspect of globalization is also presented as the globalization of production. We are dealing with the extension of the market on the rock world and the abolition of borders between the respective economies. In many ways it is a similar process to that developed in a hundred years ago, with one exception an incomparably faster is the expansion of finance capital. Within minutes or even seconds, can travel from one end of the world to another. Contributed to the progress in electronics and as a result of the technological revolution, the creation of new means of communication and the emergence of new services in this area.

    A significant contribution to the process of globalization has made the rapid growth of multinational corporations, which often have a budget higher than the budgets of small countries and largely beyond the control of national governments.

    In terms of information globalization big part in this takes media through which information from every corner of the world come to us very quickly.

    Something is happening at the one part of the world and in a couple seconds we could easily receive information about concrete situation or event. Enormous impact in this has development of the internet and finally cultural and demographic dimension.

    In my view, the impact of globalization on the world economy has its pros and cons. At the beginning I would like to say about the positive aspects of this phenomenon.

    The occurrence of globalization in the economy contributes to the competitiveness of enterprises, force effectiveness, flexibility and innovation management. What is more it leads to the general decline of goods and services value, allowing their wide availability.
    Globalization has a positive influence on culture and communication. This is due to the development of mass and individual means of communication and increased easiness of travel. Thanks to this we could quickly spread the consumption patterns and ideas for the organization of the modern world. Cultural transmission is addressed from rich to poor.The poorest tend to imitate the richer in terms of level and lifestyle.

    We can also notice some cons that briefly present negative impact of globalization.
    It reduces the role of the state, both in the organization of economic activity and also role of a sovereign political entity. In countries with stabilized democracy increasingly there is lack of involvement of individuals in public life.

    To sum up my consideration on how globalization influences on economic growth we could noticed that globalization same as any other process has its pros and cons.

    Nevertheless, I think that as result of globalization more societies want to cover lower expenses, whereas attain greater benefits it should meet several conditions such as: cater to a larger extent the needs of poor people and provide stable and harmonious development of world.

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26. (2118.) The globalization of world economy is complicated multi-problem that constantly generates numerous scientific discussions and now it does not have an unambiguous interpretation. Today, the existence of globalization as a phenomenon is not in doubt. At the same time it is difficult to give the scientific definition of globalization. As Professor Grzegorz W. Kolodko says:
    “Globalization is one of the buzzwords, continuously used and often abused; most often without making an intellectual effort to define this notion…” “…no universal definition of globalization exists. Authors define this notion in various ways. A historian, an anthropologist, a sociologist or an economist, each defines globalization differently.”
    Globalization is the subject of heated theoretical debate not by accident, because the ambiguity of the processes, inevitably affects its perceptions. That is why this topic is so relevant. Globalization differs with the distribution of close relationships and interdependence between countries on almost the entire globe. In modern science, globalization is seen as an advanced stage of internationalization of various social life aspects: economic, political and cultural. At this stage internationalization gradually covers the whole international community, reaching a global scale. This is not just a territorial extension of internationalization. Globalization provides the interaction of the various countries with new properties and new strength. Some researchers believe that globalization is a movement of internationalization of public relations to a higher degree of development.
    Technological revolution was the impulse for the emergence and development of globalization. A beginning of the globalization is associated in time with the transition of industrialization in developed countries into a post-industrial phase of development. The rapid development of global information system has a particular importance. Information (economic, financial, political, scientific and technical) acquired a great importance for the entire world economy and especially its international sector in the modern world. Information and communication systems make it possible to conclude economic agreements at any time regardless of location of the agreements’ agents. Internet plays an important role in this process. World Information Network provides the globalization of capital and decentralized concentration of production and labor.
    An increased amount of different information is required nowadays because of the growing scale of economic activity, broadening general frameworks of global markets (commercial, financial, intellectual property, etc.) service markets, companies and investment projects for decision-making in the medium- and especially in long-term. The processes of globalization cover this specific area as well. There is not only fast-growing world market for information technology, but also market of international information (various databases) which in itself is valuable and precious commodity and moreover requires constant renewal and updating. None of this had place before.
    The formation and progressive growth of financial markets (foreign exchange, equity and credit) is a also a brand new phenomenon of contemporary globalization processes which has a huge impact on the whole sphere of production and trade in the global economy.
    The formation and rapid development of supranational institutions in the world economy is also an important side of globalization. The presence of transnational capital makes it difficult or even impossible to make independent regulation of domestic markets. This means that not a single country today can plan its economy without considering the world economic situation and cannot ignore the strategic policies of transnational corporations. Earlier an economy of virtually every country formed a system that could renew itself, and now only the world economy as a whole form such a system.
    Contemporary globalization has its own features that distinguish it from the other global economic processes. These features are:
    – Strengthening the relationship of all activities of the countries in the socio-economic sphere, politics and culture. A significant role in this respect belongs to international organizations, particularly the UN system and regional integration organizations.
    – Universalization of international economic relations, in particular, the following:
    – Implementation of common international standards in all areas of international economic activity (trade, credit and foreign exchange activities, etc.);
    – Using the same criteria in macroeconomic policy;
    – Harmonization of requirements for tax policy (in particular, a unified approach to the establishment of the customs legislation).
    Globalization is an objective and rigorous process. In general, it should be regarded as positive because it brings together national economies into a single organizational unit, and thus increases the efficiency of the global economy. Modern globalization promotes the convergence of not only the economies but also cultures of different people and facilitates the establishment of mutual understanding between them. However, this process is accompanied also by accumulation of serious problems which have to be solved are faced not only by individual countries, but also by all mankind. Global problems, if they cannot be resolved, threaten all the humanity. Problems such as Peace and Disarmament, Energy and raw material problem, Environmental problem concern not only scientists and heads of states, but also broad social strata of the population.

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27. (2117.) Neoliberalism and the world economic crisis

    The current world economic crisis is in my opinion more difficult to deal with and will have more severe consequences for the mankind than the crisis’s which have already happened. The world as we know it now is far more interconnected than it used to be. According to Canadian futurist Herbert McLuhan it has become a “global village”. Thanks to the mass use of television, computers and internet the information flow accelerated and it “shortened” the distance even between remote countries. This process of spreading similar technological, political, cultural, social and economical trends is often referred to as globalization. In the economy for example, globalization means the increasing role of the international corporations, while in politics it simply shows that western democracy patterns become more and more popular worldwide. Neoliberalism is one of such patterns and it is also the one that contributed to the current crisis.

    First let me magnify the background of neoliberalism. The United States, as prof. Grzegorz Kolodko once stated, were the cradle of neoliberalism (Kolodko, 2011). Neoliberal free-market economy proposal was the answer to the Keynesian model from the after-war period that implied completely opposite view. During the times of the Great Depression John Maynard Keynes, the famous English economist from the beginning of the XX Century, in his book “The General Theory of Employment, Interest and Money” proposed an increased government intervention as a solution to the problems of recession and unemployment in the US. He thought that “demand creates supply” and the markets cannot naturally come to equilibrium, instead they have to be regulated. With the higher government spending on investments (lowering interest rates decreased investment expenditures) it was possible to hire more people and lower the unemployment. The Keynesian model succeeded in bringing countries from the recession. The moment the situation improved and the economy got back on track, the society could feel the increase in financial stability.

    People are funny beings – when they are no longer in danger they seem to be looking for another one. The safer they feel, the more risk are they willing to take. Who needs a government when the economic situation and moods in the society have improved? Therefore the neoliberal policy took place of the Keynesianism and it limited the influence of the government on the economy and created more incentives for private investors. People are in most cases also greedy, so the more they get the more they expect to receive in the future. Creation of financial markets and introducing derivative instruments such as options, forwards and futures caused pure speculation on the value of commodities (gold, cuprum, oil), stocks and currencies. Apart from those, the debt instruments play an important role and they, namely mortgage-backed securities, are one of the reasons of the world financial crisis. Since we live in a neoliberal free-market economy and believe that the market will somehow reach the equilibrium, we accepted the fact that one could borrow the money from the bank at a high interest rate for 20-30years, that he or she is supposed to pay back in the future together with the principal amount. However, how can we be sure that borrowers will be able to pay their debts? It has occurred that the US economy could not sustain the burden of financial disequilibria and great public debt, and growing frustration among the society, stemming from the rising inequalities of income and wealth (Kolodko, 2011). Moreover, because the US is globally connected with other economies more than any other economy in the world, it caused them to suffer as well. It applies mainly to the European countries that have a strong correlation with the American market, but also Asian countries – especially NIE (newly industrialized economies, which rely heavily on export and external demand). The United States are known to be the greatest importer of goods and China is the greatest exporter to US.

    The world financial crisis caused the financial markets deregulation and private sector shrinkage, because of debt that was bought by the state to rescue the banks. Also the amount of goods traded decreased by approximately 12%. The crisis had its consequences not only in the financial sphere (fluctuating currency exchange rates), but also in the social and political areas. Corporations in order to cut costs had to make many people redundant, which raised the unemployment and increased inequalities in the society. When there is a greater discrepancy between the disposable income, those who have lower revenues are not satisfied and may feel socially excluded, and just like trade unions go on strike. This often creates opportunities for populist political parties in the opposition to the government. They use bad situation in the country to show the weaknesses of the ruling party. They promise everything one possibly could promise and what the society in the time of crisis would like to hear, hoping to win the next elections… The game between the opposing parties is always a never-ending story.

    In the neoliberal world everything is possible. There seem to be no boundaries, which is what the society wants. However, is it really good for the society? There is a question rising whether the government should play a more active role. It is hard to answer, because there are both countries with big governments and those with small governments that were successful prior to the crisis. But nowadays as the story from the past seems to have repeated, people feel insecure again because of current crisis and are afraid of the future, therefore they want the governments to rescue them. They are slowly revolting from the free-market economy. In my opinion, the bigger government is a better guarantee of stability, less disproportions and equal distribution of goods. Countries with big government influence, like Norway, Sweden or the Netherlands that I have recently visited, seem not to have suffered as much from the crisis as the United States did. This gives a time for reflection, that maybe during the prosperity we should give more credit to the government and receive more in turn, instead of exploiting it to the end.

    Sources:
    Keynes, J.M., (1936) “The General Theory of Employment, Interest and Money”
    Kolodko, G.W., (2011) “Truth, Errors, and Lies: Politics and Economics in a Volatile World”, New York, Columbia University Press

    http://earthpages.wordpress.com/2010/09/21/mcluhan-marshall-herbert/
    http://www.economist.com/blogs/freeexchange/2012/03/inequality-and-crisis
    http://www.economist.com/blogs/freeexchange/2012/03/trade

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28. (2116.) Neoliberalism can be described by the quote of Margaret Thatcher: “There can be no liberty unless there is economic liberty”. The ideology is based upon the market ability to self monitor and create the efficient resource allocation mechanisms. At the same time it stresses the importance of supply and production in order to satisfy arising needs.

    Thanks to the importance of the two fundamental values of freedom and individualism in the United States and United Kingdom culture neoliberalism became popular in these two ideology leading countries 1970’s and since then with the rise of globalization it started to spread all over the world. The time of the political and ideological turbulence (fall of socialism in CEE) created the set of favorable conditions that allowed the neoliberalism to spread in the following years. For instance in case of Poland, after prime minister’s Mazowiecki inaugural speech promoting social market economies the pressure of foreign advisors led to the shift in the policy to the neoliberalism approach (Kolodko G.W., Truth, Errors and Lies, 2011, p.213).

    There is an argument that neoliberalism evolved from ideology and policies to the “current set” of capitalism, emerged as a result of shortfall of Keynesian theories and stagflation (Saad-Fiho A., “Neoliberalism in Crisis, A Marxist Analysis”, 2009). However, it is clear that the current crisis had a significant influence not only on the finance and economic output, but on the politic, social and value aspects as well. The critiques of the current system, expressed in publications like “A Failure of Capitalism” by Richard A. Posner, make it clear that the current crisis proved the inefficiency of neoliberalism ideas.

    Neoliberalism basic idea is to open local economies to global market and provide the grounds for global competition, which should become incentive to increase productivity and efficiency. The advantages of increased competition include wider range of choice of products and services available to the consumers as well as decreasing prices. However it is clear, when we analyze the current market that the perfect competition is not feasible. Instead as an economic commentator Charles Hugh Smith states in one of his interviews the vast majority of the global capital is controlled by banks and international corporations. Instead of reducing the inequalities the neoliberalism strengthen them by increasing the share of capital received by the most affluent, while as proven in Truth, Errors and Lies, the real income for the majority of Americans has not increased recently, although the country has expanded due to its position as dollar issuer and lack of decrease in working time in contrast to Europe. Instead the benefits of growth are granted to the few, leaving the masses in the poverty and promoting the idea of greed and inequality.

    Furthermore neoliberalism calls for breaking the governmental control of capital flow and ownership of local assets. Decreasing the government size and involvement is definitely not a solution, and instead of improvement it can aggravate problems further. As professor Kolodko stated in one of his interviews, making the state the public enemy to deregulate financial markets and make it possible for influential groups to capture bigger share of capital is not the right way of functioning of the future world. Although the expansion of the private sector and reduction of public sector is definitely desirable, the crisis emphasized the necessity of government involvement in these processes as well as the importance of control of economic activities.

    One of the most important aspects of crises, that the individualism encouraged and that need further control is finance, including leverage, derivative and debt piling instruments, which create the possibility of speculation and market manipulation. In the recent events in the financial sector’s Warren Buffet’s reference to the derivatives as the “financial weapons of mass destruction” gains more merit than ever.

    Moreover, when it comes to the size of the government it is important to point out that not the smallest government are being the most effective their operation and satisfying the public needs. As an example we can consider social market economies of the Nordic countries. With the strong governments, public sectors and welfare systems, they manage to create not only functionality, but also public satisfaction, although the tax rates are significantly higher than for the rest of European countries. Another example of the positive impact of government is creating conditions for developing market economy in South East Asia.

    Therefore as it is stated in “Truth Errors and Lies” there is a need for the creation of the new interventionism instead of continuing on the neoliberal path. The conflicts between various economics groups as well as the fundamental conflict of maximizing individual profits and the social well-being should be moderated in order prevent the economy from following the same vicious circle.

    All in all, in my opinion it is clear that neoliberalism was one of the factors stimulating the recent financial crises. The idea of free market led to the deregulation of the financial markets and loss of the control, which allowed the inventors to ignore severe risk exposition in exchange for higher profits. Margaret Thatcher stated “It is not the creation of wealth that is wrong, but the love of money for its own sake”. The greed and its promotion by neoliberalism caused the irrational macroeconomic decisions, which led to the failure of the whole system.

    Therefore I fully agree with professor Kolodko that only the combination of government and market can create an efficient solutions and help to change the situation for the better.

    References:

    Kolodko G.W., (2011) Truth, Errors and Lies, New York
    Saad-Fiho A., (2009) “Neoliberalism in Crisis, A Marxist Analysis”
    Wołk-Łaniewska A., Neoliberalizm Na Śmietnik, Pragmatyzm Na Świecznik, interview with prof. G. W. Kołodko
    “Neo liberalism & Washington Consensus”, On edge With Max Keiser, 11.11.2011, interview with Charles Hugh Smith
    http://www.globalissues.org/article/39/a-primer-on-neoliberalism, 21.04.2012

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29. (2115.)
    This paper is an essay dealing with the issues of Globalization and regional integration. The main idea is to discuss whether these two matters are complementary, as a synergy, or on the contrary, in total contradiction.
    Firstly it is important to point out that globalization is not, as many people my think, a characteristic of our present history, nor its definition. It is actually the increasingly important and fast process by which: people, culture, and especially economic means tend to enter into a tight interdependent relationship. Meaning: the increasingly important connection of cause to effect and vice-versa, all around the “globe”, in the domains of culture, labor, and generally speaking economics.
    Regional integration is a similar process on the cover. It however differentiates by the scale of its application, namely the gathering of a limited number of countries instead of the “world”. More importantly, it is characterized by the implementation of adapted regional institutions and rules, aimed to govern the named region in the areas of: commerce, economy, labor, ecology and politics for instance.
    As notions such as “good” or “bad” are relative to one’s position and various factors defining his person and mind, we shall only observe how these models/processes function and drag conclusions in terms of outcomes. These outcomes can be: qualitative, quantitative, potentially good, potentially bad, but in the end it is to each individual’s mind to decide.
    To make it clear, I will organize contradictory issues first, and those who tend towards a possibility of synergies, second. I will then express my personal point of view on this problem as a conclusion to the statements made in parts II and I.

    As stated in the introduction, globalization is the process by which: people, culture, and especially economic means tend to enter into a tight interdependent relationship. The fact is this process goes mainly by the spread of these factors around the world, following, most likely, capitals inflowing into developing countries from developed countries. The underlying fact here is: this spreading process is nothing else but the spreading influence of capitalism and rules of free market. Knowing that capitalism cannot exist without ground democratic rules, such as freedom (exception made of China where freedom is regulated), this implies as well the spread of the occidental model of democracy. Most of people would agree saying: democracy is socially the most just and fair model ever invented by man kind, and even the skeptics can be told: anyway there is no better alternative so far. The underlying problem here is a simple observation of the different, jet similar, social situations in what we call developed/advanced countries.
    Just as communism: democracy is founded on basic citizenship equality rules, implying no citizen is above another. Just as communism, this idea is fundamentally wrong. Knowing that every human being is biologically and mentally unique, and that democracies’ rules on evenness of chances give the opportunity to each citizen of failing or succeeding in any domain, this implies inequalities of status “at the end of the day”. In France for instance, the 10% most rich citizens have average revenue 6 times more important then the 10% poorest. Moreover, alike the above explanation, the most developed countries in the world seem to have a lot of problems implementing their own ideals into their own lives. This includes: social security, income security, justice at all levels, health in terms of healthy food etc. Additionally, most developed countries struggle with economic and employment issues. The point being: Is it really advisable and wise to pass out, or in some cases “force through” this democratic and capitalistic model as it is in the present moment, knowing that at some point it can harm more then do good.
    Whether it is in developed or developing regions of the world, many countries have decided to gather in local organizations. This regional integration under “one banner” can be ruled by specific organisms set up for this purpose, such as in the E.U. or simply rely on different governments cooperation such as the MERCOSUR for instance. So far the most developed regional integration is the European Union. Although individual countries still govern, many rules, regulations are set in common to protect, or to be advantaged when it comes to globalization. It takes into consideration social matters, cultural matters, but mainly economical matters.
    Following pure economical logic if there were no barriers to entry the EU, a massive wave of migration would start from all over Africa, Asia, and South America resulting in a surplus of labor within Europe. This would result in a Labor price drop in Europe due to surplus, and a rise in labor price in the remaining developing regions due to shortage. The world’s labor market would find its equilibrium point. In terms of public finance, this wouldn’t be a good operation for the emerging countries, because they would have much less labor to develop their countries, and insufficient labor tax revenue to build a viable social security on the one hand. On the other hand it would flood Europe with unnecessary labor force, create additional unemployment, and seriously threaten its identity and culture. Moreover such a massive immigration would surely result in big communitarisme. This phenomenon already exists in Europe with increasingly big communities, especially those coming from very different cultures; encounter big difficulties integrating in their host land. It unfortunately constitutes already one big barrier to regional integration, because there is no understanding and even a fracture between the hosts and the “new citizens”. Therefore European countries are obliged to prevent clandestine passage into the E.U. and by doing it, go against globalization, but along with maintaining its own culture.
    From the point of view of culture, meaning history, the E.U. together with other institutions are keeping and subsidizing different monuments and historical sites in order to keep heritage as it is. This effort enables the prevention of historical monuments been sold to outside investors who do not mind about keeping such places in shape.
    Also related to culture, but more often known under the economic problem, is fierce international competition. One of the numerous harmful consequences of globalization is the overcoming/choking of small commerce and harmful consequences on the culture. As a vector and consequence of globalization the international flow of capitals enabled many important giant retailers and other businesses, mainly from the west, to invade “uncivilized” markets as well as their developed neighbors. The positive outcome is: it gives the local population the choice in terms of products, and thereby varies their food, and overall accessibility to goods, not mentioning the natural drop in prices as a direct consequence of competition. There are significant drawbacks however. The first being: it is likely to kill convenience stores, that in most cases are part of the general culture, the food culture, and guaranties a certain national/local soul. Another con is the ways these distributors produce the products they sell. For instance concerning local products. In the French Bask Country used to be manufactured typical local shoes called “espadrilles”. Last summer I went to buy a pair in a supermarket. I noticed the price went down by 10€. I turned it around and read “Made in Bangladesh”. This situation is not a novelty, and price drops are good for our wallets, but I felt rather guilty when I heard on the radio a week later that 125 people lost their jobs when the plant producing these shoes closed in a the nearby village. In this kind of situation regional integration can be really useful. Firstly because it can apply a moderate protectionism by means like taxes and regulations to protect local products from products produced cheaper somewhere else. Secondly, because it facilitates the sale of these products within the region, which would be very difficult if a single country was applying mere protectionism by itself. This kind of actions then goes against the globalization process but helps its own regions survive, at least on the short term.

    There are two simple ways of seeing regional integration. One way is to consider it as a organized coalition against the “quantitative threat” that represents the global economy’s output, and the preservation of some sectors of the economy that otherwise would disappear.
    The other point of view can be that it is an organized association working on strengthening its position in the global market by using “qualitative opportunities”. The latter meaning: all the available resources (technologies, patterns, methods…) and creating new ones to be competitive together for and against globalization.

    The process of Globalization is not only a source of unwanted symptoms. It also creates great opportunities and not only from the economic point of view. A factor that has consistently contributed to globalization is the world of transports, and more specifically aviation. Thanks to sharp global competition, civil aviation prices have consistently dropped during the past three decades. This results in helping increasingly more people: to discover, learn and understand other people’s mentalities and points of view, discover new places, and eventually broaden their way of thinking.

    Now from the economic point of view, regional integration can be an advantage. Nowadays, 4 out of 10 of the strongest countries in the world are European, namely: Germany, France, GB and Italy. This position is the result of many decades of colonization, industrialization, technical and technological advancements, not mentioning mass consumerism. Yet, observing how BRIK countries are evolving fast and strong, it is not hard to imagine that one day, in the near future, our “old” Europe is going to turn into “elderly” Europe, and our leadership position will be lost. In this (very likely to happen) case scenario Europeans do not want to stand-alone all by them selves. The solution of initiating a regional integration named European Union. This initiative has the advantage of forming a light shield around the European market, and forming a sort of “cocoon”. Not only it protects the European market from various invasions (relative idea), but also it leaves space inside it to trade in a convenient way.
    Firstly, it broadens horizons of small industries within the union that maybe couldn’t afford selling abroad for tax and currency reasons, (or simply weren’t competitive enough compared to cheap labor countries) and now instead of one domestic market, they get easier access to 27 “domestic” markets.
    Secondly, money transfers have been simplified. The fact that 17 out of 27 countries within the zone have the same currency makes it much easier to trade for Europeans, but also for non-Europeans. 15 years ago, a Chinese exporter would probably go nuts fixing his prices, because he would have to take into consideration the value of the Yuan relative to the Deutschmark, the Frank, the Italian pound, and the Austrian shilling. Nowadays with the Euro, it makes it much easier for him to just base himself on one exchange rate.
    Thirdly, following the logic of the Euro, Regionally integrated countries are much easier to trade with. The entry taxes and regulations are mostly common. Therefore a Brazilian coffee trader will have it much easier selling to Europeans than to South Asian countries for instance.

    Another point that makes regional integration interesting, dealing with globalization, is economic sector renewal. It is generally understood that globalization is responsible for destruction of some industries. This occurs in the U.S. and in Europe because of cheaper production costs on some imported products from low production costs countries that knock locally made products off their domestic market. This causes factory closures, additional unemployment, and frustration to the people. Unfortunately, the E.U. can not be an unbreakable barrier. What it can do however is subsidize new industries, new ideas, use past experience and create new economical segments, or sectors. This isn’t exclusivity, because, as we all know, any country can do that. The way this kind on program is driven is unfortunately dependent on the scale of operations, and of course, on the scale of the funding allocated to it. Therefore the bigger effort inputted, the better result. The best example to this is sustainable development and renewable energy consumption. Knowing that this sector was almost inexistent 15years ago, we now use over 13% of renewable sources of energy in our overall energy consumption in the E.U. This is the result of European directives and funding, combined with national directives and funding.
    This “federalization” of interests (political, financial…), Still raises the essential question of interdependence. In the case of the E.U., political and financial interests are so tightly interdependent and linked, that it is very unlikely that any country would dare, and risk, starting a war within the E.U. Therefore we can say that in this particular case the regional integration is a sort of peace guaranty. In this regional integration it is more a synergy with globalization, because armed conflicts are one of the biggest threats for most businesses.
    Unfortunately it isn’t always the case. When interests are negatively correlated, the result can be that two camps clash. For instance, Iran is currently seen as a “liability” or even a threat, from the point of view of the E.U. and the West, on the other hand it is seen as an “asset” by Russia and China. In this case globalization is a constructing vector of such situation since it creates interdependence. This interdependence is good as far as it maintains peace for the good reasons. But when wars are avoided for reasons based on interests, human moral is than violated.

    Most of regional integrations are an initiative aimed to enhance economic development, such as the E.U. and the NAFTA, and others have vocation for peace such as NATO. The construction processes differ since every organization is unique. Some are more bureaucratic than others, and therefore require more time and organization. Overall their mission statement is positive, but the application is not always as well executed as they say.
    It is hard to say whether regional integration and globalization are contradictory, or on the contrary synergetic. They are in fact complementary. Regional integration would probably not exist as we know it if it wasn’t for globalization, because it is aimed to weight more in the global economy and be stronger, but also protect its members from it to a certain extent. Globalization on the other hand would homogenize the world economy and erase any sort of specificity if it wasn’t for regional integrations such as the E.U. that protect its heritage.

    Bibliography:
    http://www.touteleurope.eu/fr
    http://www.mindfully.org/WTO/2006/Household-Wealth-Gap5dec06.htm
    http://www.inegalites.fr/spip.php?article190&id_mot=78
    http://www.ofce.sciences-po.fr/pdf/ebook/ebook121.pdf
    http://www.lepoint.fr/economie/les-inegalites-de-revenus-globalement-stables-en-france-depuis-les-annees-80-06-12-2011-1404266_28.php
    http://www.actu-environnement.com/ae/news/energie-renouvelable-part-mix-consommation-brute-14528.php4

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30. (2114.) Globalization has led to closer ties between the world’s nations. Today basically all countries participate to some extent in this process, more or less.
    The expansion of business and investments outside domestic market has established an interaction not only in terms of trade, political ties or cultural exchange but also it has led to the fact that certain countries become, often less developed, dependent on foreign investment and are heavily dependent in fields of export.
    A vast majority of businesses from industrialized countries prefer to locate their plain processes in developing countries, due to lower production costs or attempts to avoid law restrictions.
    This allows inhabitants in poorer nations to some extent adapt new technology and increase the local employment rate and somehow to improve their standard of living and generally to catch up with the quality of life of richer countries.
    In Turth, Error and Lies (Grzegorz Kolodko), the author clearly refers to the remarkable world demographic issue. We must constantly take into consideration the large size of human population and control the world economy. It says it is hard to predict the future, whereas it is necessary to try to predict the mass of significant problems that the globalization will bring. Referring to the previous economic transformations in human history, it will solve some problems while creating others.
    This is what for sure the globalization will bring. We can now see that in many industrialized countries that certain type of jobs are slowly vanishing since the opportunity costs are much more profitable in other parts of the world , for example mass production in European Union versus China.
    Many employees are losing their jobs due to decisions concerning moving production to a cheaper alternative, like China in this case.
    This results in lower contribution the Gross Domestic Product of a certain country since less money is created and spent in a given economy. It becomes much more common that firms withdraw their capital from the domestic market into a cheaper country, creating the possibility for poorer countries to catch up with the developed ones, while making people jobless in another country when deciding to withdraw.
    In my opinion countries within the European Union or North America have to stress in the fields as innovation, knowledge and technology in order to sustain attractive and make a certain contribution to the globalization that might not be that simple or available elsewhere but on those two, so far wealthiest continents. However, the problem would appear if a certain country would solely be dependent on a few sectors in their economy. A crisis within a given industry would firstly hit the economy of the country significantly whereas foreign economies relying on this particular sector, whether in terms of consumption or investment, would have consequences that in the next stage would nearly affect all economies of all nations. A small wealthy country that is a successful exporter of oil might suffer heavily economically as natural resources gets fully exploited, whereas the major importing countries may experience issues relating to lack of oil or increase in prices when the government is establishing new trade agreement.
    The phenomena of globalization is disputed whether it should perceived as a positive or negative process, since if it is effecting someone positive it has also to affect someone negative.
    Referring further to the book Truth, Error and Lies (Grzegorz Kolodko), the described paradox of the liberalization of movement of capital between nations whereas the labor remains bound into the particular nation contains good reasoning. If there is an economic globalization, there should not be any restrictions for people to move across the borders between nations, since this way of thinking is relatively contradictory.
    This is a clear contradict since the globalization process is much more becoming exploitation than what formally is tended to be described as globalization. If there is no restriction of flow of capital, neither should there in fact be any for people born to this world.

    I regard the movement of capital abroad as something positive, since foreign investment contributes to another nations wealth and enable for further economically development. Migration is also something that I rather consider favorably since people have the freedom and ability of picking a place that appeals to them.
    Today the ongoing globalization is rapid and changes all patterns due to the constant change in technology and new channels of communication. Additionally the possibility to move from one destination to another is much simpler than it has been so far. All of it has made the flow of capital and people between nations very hard to control and sometimes even to measure.
    Globalization has become uncontrolled and something has to be done related to this. It will not be fair if some countries will have much more economical advantages than others.
    Therefore, the ongoing globalization tends to give a certain double standard feeling since the restrictions of movement of people between nations is visible.
    However there is no such restriction with capital.
    This gives the overall impression that the mechanism of globalization is quite unfair and that there have to more improvements worldwide. In order to change this there should be a much more control and overseen on how today’s world envolving.

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