Government Impact on Economic Growth

Monetary policies play significant roles in national struggles to improve development and growth in an economy, through expenditures and growth profile variations. Fiscal policies represent one of the major policies of the government that impact economic accomplishments by increasing taxation revenue and controlling cost levels. Based on the model developed by Keynesian, fiscal policies that can be expanded targets to fuel the economy by increasing costs or reducing taxes or both. If the plan fails, the government is expected to incur losses thus failing to achieve the projected rate of economic growth. Government expenditure signifies economic growth engine by contributing to the productive increase in a country’s economy, specifically, if the cost is utilized correctly on important distinct economic divisions. An economic recession may arise if there is a deficit in state’s budget. Some policymakers support the idea that government expenditures help boost economic growth while some are against it. The supporters of this idea argue that public goods like infrastructure and education aid the growth of the economy. On the other hand, the non-supports claim that the government is large and maximum expenditures slows economic growth. Therefore, government spending has both advantages and disadvantages.

Economic growth refers to the potential development of a country’s output or GDP. Economic development offers the insight to understand why growth rates differ from one country to another over time. This research paper evaluates the different effects of government in the economy. The study bases its explanation on theoretical arguments, recent literature reviews, financial evidence, and specific country examples. Additionally, it explains the process of data collection, findings, discussions, analysis and a conclusion.

The economic literature, particularly models of macro-economy warrants the presence of a link between GDP and government spending. The relationship of GDP and expenditure has attracted attention from various researchers and economists for numerous years and has been an intensely controversial subject. Economic theories in many instances do not instantly generate suitable solutions concerning government expenditures and economic performance. Certainly, most economists support the idea that low government spending in some cases boosts economic growth. According to Wagner’s Law of increasing states activities, expenditures of government grows incessantly, in its relative or absolute size, by communal achievements. With increasing rates of industrializations, there is an active improve in economic performance. Economists in support of Wagner’s theory believe that effective government involvement through saving and spending stimulates the need for services and goods in addition to financial stability and growth.

The Keynesian theory developed by John Maynard Keynes a British economist also gives a basis for the relationship between government expenditure and economic performance. Keynes believes that economic performance/growth of a country depends on increasing demands. Therefore, financial expenses of any state are not restricted to benefit-cost analysis. Based on Keynes argument government spending improves economic progress by introducing procuring control into the economy. Governments should reverse financial downturns by asking money from private companies and paying the debts via numerous programs of expenditure.

Various studies regarding government and economy have been conducted over the past years up to today. Under this section, different data from collected from the scholarly journals will be highlighted. Cooke studied the fundamental link between government expenditure and economic growth (GDP) in Sweden between 1960-2001. From his research, he realized that there is a strong relationship between GDP and government spending. In 2014 Olulu and his colleagues investigated the functional relationship of the expenses and financial progress in Nigeria between 1990 and 2004. From their results, the relationship between spending and monetary growth is inversely proportional. Additional comparative data collected to determine the relationship between government and economic growth is as shown in figure four. The figure represents the general performance of the United States and Europe.

Government expenditures in Sweden have been categorized into three parts investments, consumption, and transfers. Transfers refer to redistribution of resources other sectors in the country from public sectors, for example, pension systems, benefits of unemployment, etc. Investment expenses deal with constructing and acquiring long-term assets like hospitals, roads and buildings. Interest expenditures result from the debts accrued by the government. In 2001, sixty-percent of expenditure was transfers. Figure one shows the transfers, interests, and investments. Over the years, the economy of Sweden has increased significantly. Heightened economic reallocation stimulated the growth of the Sweden economy.

Figure four shows a comparative analysis of the United States and Europe expenditures. The diagram illustrates that the USA spends almost fifty-percent of Europe’s income. Big government sectors are associated with enormous government debts and taxes. The US economic progress over the past decade depicted a 50% increase more than Europe. Secondly, unemployment in the US has significantly decreased, thus having fewer expenditures than Europe. Many variables of policies play an impact on economic development. For example, over-structured job market possibly causes the high rates of unemployment in Europe. Feeble development estimated can be an aftermath of elevated levels of tax rather than government expenses/spending.  However, with the existence of these many limitations, there is a relationship between greater government expenses and deteriorated economic growth.

In Nigeria, the recurring budget expenditures have a stable development. The development expenses were steady between 2004 and 1990. Capital costs developments, on the other hand, are inconsistent. High rates of costs are observed in 2000, 2001, 2002, 2003 and in between 1990-1996, 1998-1999 the rates were constant. Monetary spending was very low thus the there was hardly any remarkable economic growth.

The expenditures of a government should be decreased. Currently, most countries have portrayed a fast increase in spending rates. Rates expenditure various countries have increased due to the need of investing more in national defense. States must employ a suitable fiscal plan centered on smaller government divisions. Economic restraints must be regarded as chances to develop a financial virtue from the financial needs. Many expenses of a government have negative fiscal impacts. To know if the government uses money responsibly, returns from foreign and local investments are high. In case the government’s return rates are lower than those of private organizations; economic growth will be slowed. The results for most countries indicates high spending rates with reduced economic growth.

The principle factor of the difference in expenditure and growth does not depend on the government size but how government investments are managed. Deficits and taxes decline economic progress. Some countries go to extreme extents of borrowing money from private companies and invest in less productive programs leading to delayed repayment, and thus debts pile up. Economic policies must concentrate on lowering the levels of spending and participate in successful projects.

The results acquired from different academic books are not enough to provide us with all the solutions/answers we need in about the topic at hand. Distinguishing factors that lead to economic decline may not be an easy task because economic growth is altered by various factors from time to time and country to country. Due to globalization, it is important to manage the spending of every country. Currently, it is very easy to capital and jobs to migrate to a foreign market. Sound policies returns are excellent, and the result of bad policies are costly. To further highlight the growth levels in the selected countries, governments should ensure that necessary capital management and expenditure are keenly managed to enhance the capacity of productivity.

Singapore’s high level of economic

In the past years, there has been an increase in the economic growth and development of Asian continent economy. Consequently, there has been both a tremendous and steady expansion in the economies of not only Singapore but also Korea, Taiwan, and Hong Kong. All the economic planners of the government regarding economic prosperity, more so in Central and Latin America, Eastern Europe, Africa, and some areas of Asia, focus so much on the development ways used in the four Tigers mentioned, hoping to learn from their doings.

For Singapore to propel her economic development, she had invested close to S$ 1.9 billion from 1990 to 1996. The investment was made through the National Computer Board (NCB) which she formed to get improved training and knowledge of those in the industries linked to IT. Additionally, Singapore committed another S$ 3 billion starting from 1995 to 2001. The best technology centers were formed such as the National Singapore University, the school of Science Systems, and some tertiary institutions were responsible for the clustering of advanced technology facilities that spearheaded Singapore’s economic development. In the undertaking of this assignment, the discuss seeks to provide some of major the factors that have enabled Singapore to achieve a high level of economic development, and this form the thesis statement for this paper.

First, following the establishment of effective technological institutions, to achieve a high level of economic development, in the 1989s, Singapore increased her manufacturing and financial operations. Singapore operated as the primary financial midpoint and hub of the Asian economic cycle regarding the productions of goods. The Riau and Johor places offered the labor required force for the processes of manufacturing. The situation was great since most of the neighboring areas were still suffering from low wage assistants with fewer skills, and this was a problem that Singapore managed so well. In 1989, a strategy for the formation of a financial collaboration amidst Malaysia, Indonesia, including Singapore was first stated. The financial collaboration acted as a springboard that facilitated Singapore’s economic growth.

Second, the SIJORI initiative began just in the first 1991s, headed by the (EDB) Economic Development Board of Singapore. Its main people were from Riau area of Indonesia, Singapore, and Malaysia. In this context, Singapore could profit from the local support since both provinces provided it with the most needed raw materials, workforce, and space. To keep Singapore good looking in the presence of new investors, EDB persisted in reviewing its tax incentive structure. The inventor condition was agreed upon in 1969, increasing the tax respite to a permanent year time. The tax reprieve attracted many investors to Singapore consequently enabling it to achieve high economic development.

As time passed, the scheme was as far as supporting Singapore’s’ small firms for manufacturing. Moreover, the scheme resulted in the creation of profits to institutions who offer services to the existing businesses. Besides working from side to side with the provision of tax collection, the government looked forward to providing other supporting institutions. The same law ruled over savings in places with no private skilled people. Many approved companies emerged in the transportation and economy sectors. The Companies took care of establishment of budgetary services and ongoing of substantial progress and non-physical procedure promoted economic growth in Singapore.

Third and finally, the law of Singapore noticed the condition of labor in the area, focused on offering a safe working environment that could bring new investors closer. With the help of Labor Act, issues between employers and the employee would be solved, and disagreements prevented. In 1971, National Trade Union Congress was formed by law as the only whole county labor combination to supervise wage issues and employment. The facilitation of the employment processes and wage issues fueled economic growth in Singapore.

Does it Take Three to Tango? Russia, China and US Relations

Russia, China and US Relations

What does it mean “to tango?” Well, this metaphor can be seen in a good and a bad way. Technically speaking, the tango involves a variety of moves made by two partners. Sometimes, the moves may be in tandem – other times, they may be moving in the complete opposite direction.

Like when couples brawl, make up, fight again, someone sleeps on the couch, and then they get together again. This dance is tense – but at the same time, it makes you wonder: what will happen next?

The Political Tango

Since the first world wars, there were several tangos. Russia fought together with the Allies of World War I, making a team with the United States in their fight against Germany. In World War II, Russia once more fought alongside the United States – pushing back the Axis force.

During the Cold War, their tango started taking yet another direction. Russia and the United States were making different, opposite moves – this time, one against another. But this is also where the tango took a third “person” – namely, China.

At first, China danced with the United States – leaving Russia to watch their tandem dance. They were all in synch – until China started going through a civil revolution of their own. Russia started doing the “opposite” tango again with the United States.

A new republic was founded in China – and the country started to dance again. This time, however, it was Russia who stepped in. After China and Russia have formed an alliance, they were going after the United States with new forces. It was a “teasing” dance, where everyone showed off their moves – although there were also several “jumps” that made the war into a violent one.

The dance was long – and the moves were very complicated. The “dancers” became tired, and they decided that the dance should come to an end. This is when a summit was called to sign a truce. For now, the world should be at peace – at least, for a little while.

The Tango Continues 

Once more, these three powers show that the tango is not the same just with two “people” – and Russia, China, and the United States once more began  to dance. Russia had its presidential election in 2018, China had its 19th Party Congress, and Trump was beginning his second year as president.

This, obviously, paved the way for new relations between the nations. Vladimir Putin and Xi Jimping already had a close personal relationship – which means that they would dance in tandem at this point. They would do joint military exercises, energy agreements, and joint economic development to make both nations grow stronger.

Trump, on the other hand, started this tango again, in the opposite direction. The US saw Russia as a “rival force” – which is why the nation started working on its military power. It eventually became a dance of “my moves are much better than yours.”

At this point, you could say that the US moves make Russia and China dance much better together. The new trading taxes from China to the United States put China at an economical pressure – creating more common ground with Russia this way. The fact that US warships keep sailing through the South Sea of China doesn’t make things any easier.

At this point, however, Trump is at least trying to restore relations with Russia. When the two presidents met at Helsinki, they alluded to the possibility of an alliance. Talking about the past collaborations between the countries, they agreed that two nations with great military power should not be in conflict with each other – but in alliance with each other.

There are, however, people that believe this to be unlikely. During a discussion at Carnegie-Ttsinghua Center, several scholars discussed the future of the nations – as well as the future between them. They believed that Russia would always try to aim higher – with Putin mainly focusing on making Russia a leading power. While still trying to maintain a peaceful line, Russia and the United States are still in a rather tense relationship.

In the meantime, the relationship between China and Russia is getting stronger. While China may still fear the implication of an alliance, the fact that the United States is stepping on both their tails is actually pushing the two states closer and closer.

The Conclusion?

This is just as a tango should be: several moves in tandem, others in opposition. Each move is a consequent of the other – which will reach to the final dance. At this point, we can’t say for sure how their tango will end. China and Russia are in synch, and they are getting better. The United States is trying – but it still trips every now and again. What we do know is that every dancer is at least trying not to step too much on the other one’s toes.

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