Business world of tody nd he lso mentions tht the mrkets re more open thn before
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World Trade Organisation
Changes in the political environment and the technological development are factors that both have changed the opportunity for countries to trade services and products. It is easier for us to transfer information and transport the services and products around the world.
Fisher slightly describes advantages and disadvantages of globalization. He talks about different benefits and changes such as the new technology and its effects in the business world of today, and he also mentions that the markets are more open than before. He describes that the opponents of globalization claims different disadvantages, such as companies moving their production to countries where it is easier for them to produce without caring about labour laws, and that WTO and other organizations are undemocratic and that underprivileged people’s interests are neglected.
One section in Australia that has benefited by the globalization is the wine industry. It is a huge business and Australia is famous all over the world for the different wines the domestic companies produce. Since Australian wine is as popular as it is, the industry is benefited when the trade barriers and tariffs are reduced. It is easier for the different wine companies to enter new markets and to increase the sales. According to facts from the Australian government website Australia is “one of the top wine-producing countries in the world”. They exported almost the double volume of wine compared to what was sold domestically. The government helps the entire wine industry in Australia in forms of reducing barriers of trade. Countries that Australia exported the largest volumes of wine to 2006/2007 were United Kingdom and United States but also Canada, Germany and New Zealand were all large markets.
A section that has been disadvantaged by the globalization could be all the workers in the different domestic industries that choose to move the production overseas. If Australian companies expand overseas and move their production these workers will compete even
more when it comes to all the jobs available within the country. The domestic supply of labour will be higher than the companies demand and this will increase the unemployment. According to Homan domestic companies will look at the opportunities overseas and come to establish their production in other countries. The wages domestically will decrease since there are fewer jobs than usual for the workers to apply.
Unemployment
One of the greatest factors in our economy today is unemployment. Unemployment is the labor force participants that have inability to find jobs. There are certain exceptions to being unemployed such as woman who devotes her time to being a housewife or a person who is doing charity work and donating their time. An important rule of thumb before discussing how unemployment affects our economy is to remember that, to get the maximum out of the available production capacity we need to reach full employment.
Before I get started on discussing how unemployment effects our economy I would like to show some interesting statistics. According to the Government 6.5 million people are unemployed, 5.5% of people are unemployed, and 12% of people are below the poverty line. But according to the infamous Michael Moore up to 13 million people are unemployed, up to 11% of people are unemployed and 20 % of people are below the poverty line. As you can see, the United States Government has totally different numbers than Michael Moore. This is because the government can not account for everyone in their country. People without homes can not be counted as homeless because there is no way to contact all of them, or not count them twice.
The types of unemployment are cyclical that is related to the business cycle, falling GDP growth, and workers who are laid off due to falling demand for labor. Iit is caused also by declining aggregate demand. Then there is structural that is a mismatch of labor skills with the offered job vacancies. It is cause by economic reforms and new technologies such as the car industry and by workplace downsizing and tariff or quota cuts. Frictional is another type of unemployment and is from people moving jobs or looking for their first job or rejoining the work force, this is just normal labor market turnover. Seasonal unemployment is self explanatory; examples would be Christmas jobs or fruit pickers.
Arthur Okun measured the relationship of the production possibilities curve and unemployment. Okun’s law can be stated as saying that for every one percentage point by which the actual unemployment rate exceeds the «natural» rate of unemployment, there is a 2 to 4 % «GDP Gap». That is, unemployment above the inflation-threshold unemployment rate corresponds to real gross domestic product below potential output.
When a country is facing unemployment problems there are certain opportunity costs for it’s citizens, which means the economy is not running on full production frontier. These opportunity costs are lower living standards, consume resources, no production contribution. A decline in labor market skills for the long term unemployed and finally lower wage growth.
One of the reasons so many people are unemployed is DOWNSIZING. Downsizing is laying off a lot of people all at the same time. It is mostly done to increase company profits. For example AT&T laid off 40,000 people and made $16 million and IBM laid off 60,000 people and made $2.6 million. During the late 1990′s, many large companies started downsizing, but then the news caught hold of it and it made headlines all around the United States. The cover of Newsweek had mug shots of CEO’s with the title «Corporate Criminals».
I would like to go now into more effects of Unemployment economically and socially. First off higher unemployment causes lower real GDP, reduced national income and lower living standards. Economic and social hardships are suffered by families of the unemployed. There is also a social stigma attached to unemployment. The longer a person is unemployed the harder will be for them to ever set foot in the productive world again.
The increase in the taxation burden as taxpayers must fund the social security payments. It can also lead to a less equal distribution of income. Other social costs include the rising crime rates, family breakdowns, loss of dignity, drug use and alcoholism.
U.S. Financial System
Corporations have the need to raise capital for a number of reasons. Smaller firms need capital to start up operations. Larger firms need capital to expand operations and to finance inventory. There are various ways in which a firm can raise capital through the financial system and numerous individuals and entities that can assist a corporation in this crucial venture.
Start-up firms and small businesses petition investors for what is known as venture capital. Venture capital comes from wealthy investors, usually a group, who see the potential for growth in smaller businesses. In the early 1990’s the Securities and Exchange Commission (SEC) expanded its role to assist small businesses. The SEC made it easier for small businesses to raise capital through public stock offerings.
Corporations also raise money to finance debt. Businesses sell bonds to investors in order to raise money for working capital and capital expenditures. The corporation agrees to pay back the principal plus interest, therefore making the investors creditors. Bond holders are able to sell bonds to others before they are due. Selling bonds are beneficial to corporations because, in addition to raising capital, bonds also have much lower interest rates that are tax deductible. The down side is that corporations must make interest payments regardless of whether they turn a profit. This often is not an option for smaller businesses.
Larger corporations that exist as public companies can also sell bonds in order to raise capital. Public companies can issue preferred stock along with common stock. Preferred stock is a higher-ranking stock than common stock and preferred stock holders have a greater claim to a company’s assets and earnings. Holders of preferred stock may also have dividends paid before holders of common stock and these dividends are paid at regular intervals, whereas common stock dividends are only paid out when a board of director’s decides to make a payout. Preferred stock often has no voting rights, however, as opposed to common stock. Preferred stock is usually offered to investors, where as common stock is usually offered to employees.
Another means of raising both short and long-term capital is through international markets. According to authors Stanley Block and Geoffrey Hirt (2005), “When the markets are good, money is cheap and easy to find, and when the markets are bad, money is hard to find and relatively expensive. The world economic markets often move back and forth between the two extremes”.
Short-term markets, or money markets, consist of securities that will mature in a year or less. Money markets provide short-term funding for the global financing system. Treasury bills and commercial paper are bought and sold in money markets.
Corporations may also use more traditional methods for raising capital by borrowing from banks and other established lenders. Businesses that require financing for inventory often borrow from banks. Firms can use retained earning, or profits, to raise capital. Depending on the size of the corporation some or all of a company’s profits may be held back for further investment before issuing dividends.
Corporations often look to investment bankers to handle many of these functions. Investment bankers typically have a solid background in finance and economics and are specialists in financial analysis. These bankers act as intermediaries, or middle men, between corporations looking to raise capital and investors. Investment bankers oversee the issuing of bonds, manage selling a company’s stock and advise corporations on acquiring and merging with other companies.
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