The paper "Effect of Economic Rationalism on Australian Consumers" is a great example of a business case study. Economic rationalism policies were promoted in Australia in the name of public interest, economic growth and the free markets (Beder, 2006b). In the 1980s, Hawke/Keating governments adopted this concept that was also continued in the 1990s by the Howard government. Garnaut (1994, p. 53) concurs that numerous efforts were made to lower import restrictions and reduce tariffs, reduce taxation for high-income earners and government deficits, as well as deregulation of financial institutions.
These efforts affect the ability of consumers to obtain goods and services. The aim of this essay is to find out the effect of economic rationalism on Australian consumers. Economic rationalism and Australian consumers Beder (2006a) defines economic rationalism as the replacement of Australian government services and functions operating in the market with those provided by private profit-seeking firms. These changes gave rise to privatization, reduced spending, regulation and taxes, and deregulation of financial and labor markets, smaller government, free trade, and deregulation of business activities. Pusey (1991) argued that economic rationalism was a dogma in which money and markets were believed to outdo functions of law, bureaucracies and governments.
According to the author, there was no need for endless political debate since this topic generates more insoluble conflicts. However, Stone (1992) was optimistic about economic rationalism in the sense that markets provide more satisfying answers to questions regarding consumer choices and preferences. Total well-being is rapidly advancing due to market forces that actual influence of controllers, bureaucrats or politicians. Beder (2006b, p. 65) observes that the floating of the dollar, business deregulation, and privatization were structural reforms intended to enhance industrial competitiveness, productivity and economic efficiency. According to Whitwell (1994), to begin with, economic rationalism draws on neoclassical economic theory.
Neoclassical vision is the underlying ‘ vision’ of the economy (ibid). The author assumes that the unregulated capitalist economy has an inherent tendency of moving towards the equilibrium where supply and demand are in balance. However, Blandy (1993) argues that though the system is self-correcting, there are ‘ distortions’ and ‘ rigidities’ that hinders the attainment of equilibrium. Edwards (1993) agrees that in moving towards equilibrium, there are inherent changes in relative prices that will affect consumers.
The author also acknowledges that prices change not only affect the prices of services and goods but also interest rates and wages. In Australia, the neoliberal policies engendered by economic rationalism caused a massive consumer demand that was not at pace with production capacities. Consequently, economic growth slowed as profits from investing in production declined. Neo-liberalism precluded the possibility of governments feeding demand through government spending. For example, consumer demand increased the availability of bank credit to consumers (Torbat, 2008). This positive change temporarily ensured improved consumer spending and economic growth in Australia.
In order to sustain economic growth, Gupta (2008) observes that the US had to cut interest rates to promote consumer borrowing. Kelsey (1995) argues based on the neo-liberal theory that markets are the most moral and efficient way of providing services and goods in society when freed from state interference. However, current neo-liberals admit that the role of the state in providing a ‘ safety net’ and enforcing the rule of law is limited (Edwards, 1993). Consequently, there will be a dismantling of regulations limiting corporate powers and severe reduction in the provision of services by the state in sectors such as health care and education.
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