Thursday, October 18, 2012

Government fiscal bahaviour and Globalization of World Economy


Compiled by Mustapha Muktar, Ph.D

Department of Economics

Bayero Univeristy Kano

Government’s Fiscal Behaviour
Fiscal Policy
 
Fiscal policy involves the use of government spending, taxation and borrowing to influence both the pattern of economic activity and also the level and growth of an economy. Fiscal policy is a stabilization tool used to control and stabilize an economy. Fiscal policy therefore is a deliberate attempt by the government of a country or nation to stabilize economy using fiscal policy tools.
Fiscal policy is said to be tight or contractionary when revenue is higher than spending (i.e., the government budget is in surplus) and loose or expansionary when spending is higher than revenue (i.e., the budget is in deficit).
Objectives of Fiscal Policy
1.      To achieve price stability
2.      To achieve high rate of employment
3.      To reduce income inequality among citizens
4.      To achieve high rate of economic growth
5.      To achieve balance of payment equilibrum
Instruments of Fiscal Policy
1.      Government Budget/expenditure
2.      Taxes and taxation
3.      Wages and Salaries
4.      Subsidies and other concessions.
Fiscal policy in Developing Countries
The objectives of fiscal policy in developing countires like Nigeria are abit different because of the backwardness, therefore the need is to have self sustaining economic growth and stability in prices; specifically the objecitves are;
1.      To increase revenue surplus for development expenditure
2.      To increase agricultural and industrial production
3.      To reduce import of unnecessary items
4.      To provide incentives to savings and investments
5.      To boost economic growth
Measures of Achieving Fiscal Policy Objectives in Developing Countries
1.      Deficit financing
2.      Prioritization of development expenditure
3.      Provision of capital and credits
4.      Encouraging exports
5.      Encouraging of savings
6.      Public works programmes
 

 

 

 

 

 

 

Globalization and the World Economy

Introduction

Globalization refers to the trend toward countries joining together economically, through education, society and politics, and viewing themselves not only through their national identity but also as part of the world as a whole. It implied multiplicity of linkages and interconnections that transcend the nations and economies which make up the modern world system. Globalization is a process through which events, decisions and activities in one part of the world can come to have a significant consequence for individuals and communities in other parts of the globe. Alternatively, globalization might be characterized functionally by an intrinsically related series of economic phenomena. These include the liberalization and deregulation of markets, privatization of assets, reduction in state functions, and diffusion of technology, foreign direct investment, and the integration of capital markets. In its narrowest formulation, the term refers to the worldwide spread of sales, production facilities, and manufacturing processes, all of which reconstitute the international division of labor.

 

Economic "globalization" is a historical process, the result of human innovation and technological progress. It refers to the increasing integration of economies around the world, particularly through the movement of goods, services, and capital across borders. The term sometimes also refers to the movement of people (labor) and knowledge (technology) across international borders. There are also broader cultural, political, and environmental dimensions of globalization.

The term "globalization" began to be used more commonly in the 1980s, reflecting technological advances that made it easier and quicker to complete international transactions both trade and financial flows. It refers to an extension beyond national borders of the same market forces that have operated for centuries at all levels of human economic activity village markets, urban industries, or financial centers.

Some Indicators of Globalization

  • The value of trade (goods and services) as a percentage of worlds GDP increased from 42.1 percent in 1980 to 62.1 percent in 2007
  • Foreign direct investment increased from 6.5 percent of world GDP in 1980 to 31.8 percent in 2006
  • The number of minutes spent on cross-border telephone calls, on a per-capita basis, increased from 7.3 in 1991 to 28.8 in 2006
  • The number of foreign workers has increased from 78 million people (2.4 percent of the world population) in 1965 to 191 million people (3.0 percent of the world population) in 2005.

The growth in global markets has helped to promote efficiency through competition and the division of labor the specialization that allows people and economies to focus on what they do best. Global markets also offer greater opportunity for people to tap into more diversified and larger markets around the world. It means that they can have access to more capital, technology, cheaper imports, and larger export markets. But markets do not necessarily ensure that the benefits of increased efficiency are shared by all. Countries must be prepared to embrace the policies needed, and, in the case of the poorest countries, may need the support of the international community as they do so.

The broad reach of globalization easily extends to daily choices of personal, economic, and political life. For example, greater access to modern technologies, in the world of health care, could make the difference between life and death. In the world of communications, it would facilitate commerce and education, and allow access to independent media. Globalization can also create a framework for cooperation among nations on a range of non-economic issues that have cross-border implications, such as immigration, the environment, and legal issues. At the same time, the influx of foreign goods, services, and capital into a country can create incentives and demands for strengthening the education system, as a country's citizens recognize the competitive challenge before them.

Globalization implies that information and knowledge get dispersed and shared. Innovators either in business or government can draw on ideas that have been successfully implemented in one jurisdiction and tailor them to suit their own jurisdiction. Just as important, they can avoid the ideas that have a clear track record of failure.

Advantages of Globalization
1. Increased free trade between nations
2. Increased liquidity of capital allowing investors in developed nations to invest in developing nations
3. Corporations have greater flexibility to operate across borders
4. Easy flow of information and knowledge
5.Increased flow of communications allows vital information to be shared between individuals and corporations around the world
6. Greater ease and speed of transportation for goods and people

7.Reduction of cultural barriers and greater interdependence of countries

8.Increases in environmental protection in developed nations.

Disadvantages of Globalization
1. International bodies like the World Trade Organization infringe on national and individual sovereignty

2.increase the gap between rich and poor nations


3.Increase in the chances of war within and between countries as they vie for resources
4.Decreases in environmental integrity as polluting corporations take advantage of weak regulatory rules in developing countries
5.Increased unemployment of labour as machine displaces labour.
6.Increased likelihood of economic disruptions in one nation effecting all nations
7.Greater risk of diseases being transported unintentionally between nations

Globalization seems to be gathering more and more momentum as it has come to stay the question frequently asked about globalization is not whether it will continue, but at what pace?
Globalization has contributed a lot to the world today. It boosts countries’ economies, advance technologies and improve daily life of the people. But in the meantime whether it is a blessing or a curse has sparked much debate. This is because the benefit of globalization always comes with the drawbacks. Convincing argument can be made that globalization has led to advancement in technologies. This advancement has built the new world without boundaries. So, the communication can be made with any other parts of the world through technologies such as internet and telephone. Hence, ideas exchange can be done among intellectuals, journalists, scientists or ordinary people. As a result, the best ideas will be spread all over the world which led to enhance the world achievements.

However, there are some disadvantages of the globalization. The absence of boundaries of the world through technologies could create harmful to the people
through for example access to the bad and scandalous website in internet such as fraud, drugs and pornography could affect people minds.
There is no doubt that globalization has both good and bad effects towards people and the world. However, the disadvantages of globalization could be reduced if the responsible authorities provide best solution to curb these problems.

 

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