Complexities in Global Financial Crisis - Coursework Example

FINANCIAL CRISIS COMPLEXITIES Name Professor’s Name Institution Affiliation Course Code// Title Date Complexities in Global Financial Crisis Introduction Globally, most countries have faced financial crisis which may lead to social polarization and a resurgence of populism in the coming few decades. Different economies take different time periods in the recovery after a crisis. Many researchers have discussed the impacts and the complexities that arise after a country undergoes some financial crisis which has adverse effects in the reconstruction of the society, the business as well as the government. For instance, the Latin America experienced reconstruction in capitalism in the early 1970 through the 21st century. The crisis led to the social conflicts, neoliberals, and resistance politics groups emerged. Similarly in Brazil as slums were being upgraded, regimes in that country produced entangling neoliberals which was characterized by leftist populism with the modernist vision. Therefore this paper seeks to discuss the complexities involved after a financial crisis to both businesses and the government taking into consideration the past and the future. In a country like Brazil, the upgrading of slums was a project that was guided by spatial ordering that combined neoliberals and leftist populism. This was deeply rooted to a modernized approach of upgrading the city. Under democracy, the Workers party was made up of a popularist government that argued and believed that poor people had the responsibility of taking care of their own lives. According to Cammack (2000), the neoliberal view associated with citizenship came up as a result of the new urban programs. Additionally, democracy and neoliberization resulted to complexity which was intertwined in the production of urbanization in Brazil through a paradoxical way. Neoliberilism encompasses conceptualization of all the current trends in an economic perspective, both politically and socially (Cammack, 2000). Neoliberalism is characterized by the concern and the importance that is given to unregulated markets, retreat of populism, the unregulated markets, the increased privatization, social institutions as well as the cutbacks present in the public sector. However, Blokker (2005), argue that a more subtle form of the neoliberalism, has greatly dominated in institutions which support capitalism as well as the involvement of the nongovernmental agencies in the running of the public-private partnerships. This has always been the case since the 1990’s (Blokker, 2005). The post World war 11 led to the golden age known as capitalism and economic expansion. This period entered into a point of crisis associated with restructuring as well as transformation which resulted to capital accumulation that is commonly referred to neo-liberalism. The crisis of the 1970’s could not be solved by the social structure which focuses on accumulation within the Keynesian framework and context (Blokker, 2005). In this period, different projects were going global in various countries. Further, capital responded on the constraints brought about by accumulation which was earlier imposed by the nation and state countries such as Latin America. In the 1980’s and the 1990’s, bureaucratic elites overtook the state power in most countries in the world (Blokker, 2005). The bureaucratic elites utilized the power obtained from the state to reform and restructure neoliberal, by creating avenues of new ways to transnational capital in the world. During the same period the social forces shifted and favored the transnational capital as income shifted drastically from poor people to a new middle class and bureaucratic strata which created an avenue of global market as well, as fuelling growth in most areas within a country. However, profits declined in most countries during the temporal crisis of stagnation. Latin America faced a global crisis through the neoliberalism and stagnation. In the 1960’s and the 1970’s mass movements, populist projects and revolutionary struggles were eventually beaten back by elites through the later decades (Weerakkody et al., 2003). The twentieth century was faced by economic downturn which was experienced globally. This downturn was characterized by the debt crisis, the state repressions, the collapsing of the social alternation, government intervention as well as the rise of the neo liberal model. In this case, the upcoming projects still had internal contradictions. At the end of this period, most countries were in crisis and did not have a sustainable development. Ideally, most of the fragile political regimes were not able to contain tensions and social conflicts that were generated by polarization of this neoliberal model. However, the restructuring of the capitalism in the world, its transnational logic and the polarization and income disparity that exists between the rich and the poor , inequalities, marginalization as well as the deprivation that is taking place through globalization has adversely changed the way in which the social struggles that encompasses change will occur in the twenty fist century. Transnational capital provides an avenue of integrating the world into new circuits of accumulation, pre-globalization models and the forces that sustain these models. Additionally, it is through the economic integration that and neoliberal adjustments that tears down all the barriers involved in trade creates a common field to conduct trade across the national boarders (Weerakkody et al, 2003). Neoliberalism can be regarded as mechanism which adjusts economies globally through creating appropriate conditions and macroeconomic environment as well as the legal framework for productivity in the global economy. Taking an example of Latin America, the model of accumulation was based on populism, import substitution industrialization and market expansion domestically. This led to increased productivity capacity in the post world war II. However, the surpluses of the productivity were redistributed by elites through populist programs which ranged from social welfares in the form of subsidized consumption and increasing the real wages hence creating employment opportunities (Weerakkody et al., 2003). With regard to a Brazilian study, upgrading of the slums did not fully follow neoliberalism. Instead the project put an emphasis on the state welfare whereby the poor people were provided with cash transfers. According to the context, neoliberalism is indicated when those people living in the slums are trained on the importance of upgrading their home structures so as to live better lives. Further, in the upgrading of the slums, open tenders were also available whereby the private companies were contracted to perform tasks in the projects. The private sectors developed some social programs which otherwise were the government responsibility. This clearly shows the neoliberal form of governance where the government responsibility has been overtaken by the private sector. In this case context, neoliberalism is manifested in the renewal of the urban project whereby at the end of the project, the poor people in the urban center are great beneficiaries. Further, the project demonstrated left populism as the private sector and the state had to hold frequent meetings to clarify the strategies used in upgrading the slum. This provided an avenue for the slum dwellers to air their grievances. These participatory meetings were a strategy to ensure limited disruption to the project and ensuring that the project was not subject to the populations’ opinion. According to (Chow et al., 2007), neoliberal policies can be defined as legacies of policy regimes, inherited institutional framework, the regulatory practices as well as the political struggles. In this context, neoliberalism is exhibited in the entangled public private responsibilities in the autonomous citizenship with ideologies of decision making with regard to the urban space hence producing a spatial ordering regime which impacts the resettlement of the slum population. In a broader perspective the financial crisis complexities has challenged and affected businesses, the government and the civil society. Global financial crisis has posed challenges to markets, the international organization and the civil society. Further, the search for appropriate responses to the global crisis is notably impossible without the involvement of the societal structures. These structures are mainly based on solidarity, tolerance as well as the human rights which are essential in the civil society. Global instability is the most visible factor in the dimensions of the crisis. It involves political, environmental and cultural reverberations which are of great demand in the development of the society. The financial global crisis has negatively impacted the development strategies in most countries which have led to both social and economic imbalances. Further, poor countries and the developing countries are the most affected by the crisis and restoring the economic equilibrium is complex for them. This instability has extended to countries in their different stages of development through geographical diversity putting emphasize on a systematic character in the crisis. This condition implies that most countries have demonstrated unsustainably in terms o0f the globalization model. The globalization of financial systems has extensively modified the nature and the world’s economic dynamics. This dynamics include; market deregulation, mobility of capital both domestically and internationally, financial innovations and the volatility of the interest rates (Chow et al., 2007). These factors have limited the reach to macroeconomic policies and hence are responsible to the crisis involved in the balance of payments. This has impacted the employment rates across the world whereby the unemployment rates have increased due to economic uncertainties. The rates of unemployment have limited the access to social rights especially for the marginalized groups which includes women, the youth and the vulnerable social groups in the society. Consequently, the high rates of unemployment reciprocate to increased crime rates in the society. In situations where the youth lack employment to cater for their needs they end up committing crime to meet their basic needs. Further, in economies whose the labor force is the youth who are unemployment, and then the dependency ratio is high as the working class is depended upon to provide for the unemployed. In other situations, unemployment may result to social conflict and conflict in the families due to the financial status of the family members. Additionally, in the productive sector, the employment rates have drastically declined due to loss of confidence in the economy in the industrial and agricultural sectors. This unemployment which is a consequence of uncertainty has resulted to structural unemployment in the service sector. This, on the other hand creates social tension in the society as a result of the financial crisis. Further, demographic trends which are as a product of technological progress lead to rapid changes in the transition of skills and qualification that are required and are compatible with the current labor market. The technological progress creates an avenue for innovation and creates a substantial growth in the development of new activities. However, countries fail to render policies especially by prioritizing educational policies that may assist the youth in adjusting into the new changes in the productive economy. This limits post crisis development therefore reducing the demand for compensatory policies. Moreover, the reduction in the growth rates of the economy lead to less responsibility attitude in conservation of the environment. Failure to take care of the environmental resources, leads to worsening of the societal problems. This further leads to the emergence of development obstacles in the long run. The more the crisis deepens, the higher the levels of inequality within the country and between countries in other development stages. The financial crisis has an impact on the population that live in absolute poverty. This means that as the prospects of growth declines, then the higher the rates of diseases, hunger, drug trafficking, wars and conflicts, these problems are already the norm of lifestyle in this type of population. In a research conducted by FAO (1998), there are twenty two countries which experience natural disaster and food crisis. Further, this particular countries lack insufficient capacities in terms of capacity to respond to these phenomena and crises. Failure to conserve the environment, leads to adverse climatic conditions which increases the climatic phenomena as portrayed in a consumption model. Intensive use of the natural resources leads to pollution of water, air and land, as well as devastation of the forests which results to reduction in the availability of clean water and the loss of biodiversity. Contemporary, extreme climatic events increases inequality as the production is unsustainable and most of the affected population lack the essential resources that facilitate the social infrastructure. Despite the effects of complexities in the civic society there are possible remedies to the problem. Countries should uphold objective of the Millenium Development Goals, strengthen democracy and redistribute wealth and income to promote equity. Countries should also establish global framework to sustain the growth of the economy and come up with policies to curb food insecurity and unemployment issues. Additionally, the country should encourage state support for civil society organizations. This will facilitate transparency and accountability in the society. Financial crisis complexities impact business in number of ways. In a business perspective, the impact of complexities depends on how long a country has taken to recover from a recession. One of the major effects of complexities in the businesses is unemployment. Complexities as a result of financial crisis can lead to some firms declaring bankruptcy leading to their closure. In such a case, employees of that particular company, automatically becomes unemployed. Additionally, most of the firms lay off some workers so that they can cut on cost and remain stable in the financial crisis. In 1980, the level of unemployment in the UK rose to over 3 million and even up to date, the number rises during periods of economic financial crisis (Chow et al.,2007). Further, most firms fail to employ new workers due to lack of confidence in the economy. In addition to the decline in employment rates, complexities results to low wages to the workers. As most businesses seek to cut on cost, the casual workers often face a wage cut off despite the rising cost of living. Further, some of the permanent workers may face a reduction in the working hours hence they are forced to work as part time workers which reduces their salaries. Complexities associated with global financial crisis may result to less borrowing of the business from the banks as the interest rates tend to be high and most banks lack sufficient credit to offer to the customers. In that context, most businesses are unable to expand hence causing stagnation of the economy. This results to economic problem as there is minimal circulation o0f money which leads to high cost of living. As the businesses perform poorly, there is a substantial reduction in productivity. This may be as a result of a decline in the motivation of the employees or a decline in the output. Unemployment may have negative impact on an individual health due the stress associated with zero income and the high economic costs of living. In the contemporary globe, the complexities associated with financial crisis have an impact on the government in that, the government expenditure increases substantially. As a result of unemployment, the government spends on welfare payments for instance income support to sustain the unemployed. As the businesses go bankrupt and the productivity is low, a countries’ revenue falls. This result to a budget deficit since the government is spending more than its revenue. This may result to government debts which stagnates the economy resulting to retardation of the economy. During financial crisis, the government bonds tend to fall. Most people during this period tend to save more, other than spend. This is a phenomena that was experienced in the UK in the year 2008 and 2012 (Chow et al., 2007). Additionally, the complexities result to a decline in the output which leads to a lower investment, prolonged lower investment can damage the productivity of the economy in the long run. As complexities emerge in the financial instruments and the structures of the financial systems, the complexities result to overall, uncertainty in all aspects: the business, the society and the government. Despite the impact on the three main areas there are consequences in the policy making which are as result to complexity as it becomes difficult to determine a policy that will last longer in solving the financial crisis and less subjective to economic changes. However, there are possible remedies to complexities. There is need to have transparency in the financial regulation as this is a prerequisite for efficient and effective financial markets. There is need to have a clear understanding of the complex dynamism in the structure of the economy as constant tests will assist in constant reexamination of the structure. Robustness is also essential to strengthen financial institutions so that they can withstand economic shocks. This can be done by increasing capital and liquidity requirements. Additionally, despite robustness of the financial systems, the structures need to be shaped in accordance to the systems. These complexities can also be limited through the standardization of the existing financial instruments. The standardization will benefit the systems in that transparency will increase as the behavior of the products will be more predictable. This therefore reduces the uncertainty. Further, the standardization will allow efficient trade. Conclusion In summary, weak economic recovery following a global financial crisis fuel social polarization. The complexities of global financial crisis have effects on business in that most of the business reduce their production and lay down workers so as to minimize the costs. The civil society is also faced by crisis in the essence that most of the people are unemployed and the cost of living is high. This forces the people to commit crime as a way of survival. Further, the government spends more during financial crisis resulting to debts as the expenditure is higher than the revenue. However, policy and other strategies can be put into place to limit the impact of complexities in the economy. References List Cammack, P., 2000. The resurgence of populism in Latin America. Bulletin of Latin American Research, pp.149-161. Blokker, P., 2005. Populist nationalism, anti-Europeanism, postnationalism, and the East-West distinction. German LJ, 6, Chow, D.S., Humphrey, C. and Moll, J., 2007. Developing whole of government accounting in the UK: Grand claims, practical complexities and a suggested future research agenda. Financial Accountability & Management, 23(1), pp.27-54. FAO, I., 1998. World reference base for soil resources. World soil resources reports, 84, pp.21-22. Weerakkody, V., Currie, W.L. and Ekanayake, Y., 2003. Re-engineering business processes through application service providers: Challenges, issues and complexities. Business Process Management Journal, 9(6), pp.776-794. p.371. Read More