A Level Economics 77: Macroeconomic Objectives

 Government policy objectives are the goals and targets set by the government to guide their actions and influence the direction of the economy. These objectives typically focus on achieving stable and sustainable economic growth, low inflation, low unemployment, equilibrium in the current account, and promoting social objectives such as reducing inequality and enhancing competitiveness.

Main Macroeconomic Objectives:

1. Low Inflation: Inflation is the rate at which the general price level of goods and services in an economy rises over time. Low inflation is a primary objective for governments as it helps maintain price stability and the purchasing power of money. Moderate inflation encourages spending and investment, but high and volatile inflation erodes consumer and business confidence and can lead to economic instability.

2. Low Levels of Unemployment: Governments aim to achieve full employment or the lowest possible level of unemployment in the economy. Low unemployment not only improves the well-being of citizens but also contributes to economic growth by increasing consumer spending and boosting overall productivity.

3. Sustainable Economic Growth: Sustainable economic growth is an essential objective to ensure long-term prosperity and improved living standards. Steady economic growth allows for more job opportunities, higher incomes, and increased tax revenues for the government. Sustainable growth is typically measured by the annual percentage change in Gross Domestic Product (GDP).

4. Equilibrium in the Current Account of the Balance of Payments: The balance of payments reflects a country's economic transactions with the rest of the world. Equilibrium in the current account means that the value of exports is equal to the value of imports, indicating a healthy and balanced trade position. Achieving balance in the current account is essential to prevent excessive reliance on foreign borrowing and maintain stability in the economy.

Promoting Social Objectives:

1. Reducing Inequality: Governments often aim to reduce income and wealth inequality within their societies. Policymakers use progressive taxation, social welfare programs, education and training initiatives, and labor market reforms to address income disparities and create a more equitable distribution of resources.

2. Enhancing Competitiveness: Competitiveness is crucial for the long-term growth and success of an economy. Governments work to create a conducive business environment, invest in infrastructure, promote innovation, and foster a skilled workforce to enhance the competitiveness of domestic industries in the global market.

Possible Conflicts and Trade-offs:

1. Inflation-Unemployment Trade-off: There can be a short-run trade-off between inflation and unemployment, as described by the Phillips curve. Policymakers may face the challenge of choosing between policies that aim to reduce inflation and those that aim to reduce unemployment in the short term. However, in the long run, this trade-off disappears, as attempting to keep unemployment below its natural rate may lead to accelerating inflation.

2. Growth-Inflation Trade-off: Policies aimed at stimulating economic growth, such as expansionary fiscal or monetary policies, may lead to higher inflation. Controlling inflation might require contractionary policies that could potentially slow down economic growth.

3. External Imbalance and Domestic Goals: Pursuing domestic objectives, such as high economic growth, could lead to imbalances in the balance of payments. For example, strong domestic demand might increase imports and lead to a trade deficit, affecting the equilibrium in the current account.

4. Competitiveness-Inequality Trade-off: Some policies aimed at enhancing competitiveness may lead to increased income inequality. For instance, labor market reforms that encourage flexibility and wage moderation may result in higher profits for businesses but could lead to stagnant wages for workers.

Government Efforts to Achieve Objectives:

Governments use a mix of policy tools to pursue their objectives:

1. Monetary Policy: Central banks use monetary policy to control the money supply and influence interest rates, aiming to achieve price stability and economic growth.

2. Fiscal Policy: Governments use fiscal policy to influence the economy through changes in taxation and government spending. Fiscal policy can be expansionary or contractionary, depending on the economic conditions and policy objectives.

3. Exchange Rate Policy: Governments may use exchange rate policies to manage their external trade position and support domestic industries' competitiveness.

4. Social Welfare Programs: Governments implement various social welfare programs, such as unemployment benefits, education subsidies, and healthcare services, to address inequality and improve social well-being.

Conclusion:

Government policy objectives encompass macroeconomic goals such as stable economic growth, low inflation, low unemployment, and equilibrium in the balance of payments. Additionally, they include social objectives like reducing inequality and enhancing competitiveness. Policymakers face trade-offs and challenges when pursuing these objectives, and they must carefully balance their policy choices to achieve overall economic stability, growth, and social well-being. Effective coordination of various policy instruments is crucial to ensure that both macroeconomic and social objectives are achieved harmoniously.

A Level Economics Essay 11: Current Account

"Germany runs permanent current account surplus" - Explain why some countries have long-term current account surpluses on their balance of payments.

In simple terms, the balance of payments is a record of all economic transactions between a country and the rest of the world over a specific period. It consists of two main components: the current account and the capital account.

The current account is one of the main components of the balance of payments. It records the flows of goods, services, income, and transfers between a country and the rest of the world.

1. Goods: The current account includes the balance of trade, which represents the exports and imports of goods. For example, Germany's current account includes the value of goods it exports, such as automobiles, machinery, and chemicals, as well as the value of goods it imports, such as raw materials or consumer products.

2. Services: The current account also incorporates the balance of services, which includes income generated from services provided internationally. This includes items such as transportation, tourism, financial services, and consulting. For example, Germany's current account considers the income it earns from providing services like engineering consulting or financial services to other countries.

3. Income: The income component of the current account accounts for the net income earned from investments abroad and investments made by foreigners within the country. It includes items like dividends, interest payments, and profits. For example, if German companies have investments in foreign countries and receive income from those investments, it contributes to Germany's current account surplus.

4. Transfers: The current account also incorporates net transfers, which involve flows of money between countries that are not directly linked to the exchange of goods, services, or income. Transfers can include items like foreign aid, remittances from overseas workers, and grants. These transfers can either contribute to or reduce the current account balance.

The current account balance is determined by the sum of these components. When a country's exports and income from abroad exceed its imports and outward income flows, it results in a current account surplus. This surplus represents a net inflow of funds into the country and indicates that the country is a net lender to the rest of the world.

Germany is known for consistently running a current account surplus, which means its exports and income from abroad exceed its imports and outward income flows. There are several reasons why Germany has been able to maintain this long-term current account surplus:

1. Export-oriented economy: Germany has a strong export sector and is known for its high-quality manufactured goods, such as automobiles, machinery, and chemicals. Its products are in high demand globally, allowing Germany to generate significant export revenue.

2. Competitive advantage: Germany has a competitive advantage in various industries. It has a highly skilled labor force, advanced technology, and a reputation for precision engineering, which makes its products highly sought after. This competitive advantage enables Germany to maintain a strong position in international markets and contribute to its current account surplus.

3. Savings and investment patterns: Germany has a culture of high savings and a focus on investment. Germans tend to have a high savings rate and exhibit a preference for financial security. This leads to lower domestic consumption and a surplus of savings available for investment, both domestically and abroad. The returns on these investments, such as profits and interest payments from foreign assets, contribute to Germany's current account surplus.

4. Strong industrial base: Germany has a well-developed industrial base that supports its export-oriented economy. It has a diverse range of industries, including automotive, machinery, chemicals, and pharmaceuticals, which provide a solid foundation for sustained export performance.

The current account surplus of Germany indicates its success in exporting goods and services, generating income from abroad, and maintaining a competitive position in the global market. However, it is important to note that persistent surpluses can have implications, such as currency appreciation, which can make German exports relatively more expensive and affect the competitiveness of other countries' exports.

The DWP has become Britain’s biggest debt collector.

Gordon Brown in The Guardian

Prime Minister Sunak talks about the need for “compassion” from the government this winter. But how far do social security benefits have to fall before our welfare system descends into a form of cruelty?

Take a couple with three children whose universal credit payment is, in theory, £46.11 a day. However, when their payment lands they have just £35, because around a quarter of their benefit has been deducted to pay back the loan they had to take out on joining universal credit to cover the five weeks they were denied benefit. And an extra 5% has been deducted as back payment to their utility company. According to Department of Work and Pensions (DWP) rules, money can be deducted for repayment of advance or emergency loans, and even on behalf of third parties for rent, utilities and service charge payments.

With gas and electricity likely to cost, at a minimum, £7 on cold days like today, and with a council tax contribution to be paid on top, they find that they have just £25. 80 a day left over, or £5.16 per person, to pay for food and all other essentials. Even if the Scottish child poverty payment comes their way, clothes, travel, toiletries and home furnishings remain out of reach. Parents like them are just about the best accountants I could ever meet , but you can’t budget with nothing to budget with. And that’s why so many have had to tell their children they can’t afford presents this Christmas. No wonder they need the weekly bag of food they get from the local food bank. But they also need a toiletries and hygiene bank, a clothes bank, a bedding bank, a home furnishings bank, and a baby bank.

The DWP has now become the country’s biggest debt collector, seizing money that should never have had to be paid back, from people who cannot afford to pay anyway. In fact, the majority of families on universal credit do not receive the full benefit that the DWP advertises. More than 20% is deducted at source from each benefit payment made to a million households, leaving them surviving on scraps and charity as they run out of cash in the days before their next payment. In total, 2 million children are in families suffering deductions.

Gordon Brown with workers at the Big Hoose multi-bank project, Fife, 8 November 2022. Photograph: Murdo MacLeod/The Guardian

When the money runs out, and the food bank tokens are gone, parents become desperate and ashamed that their children cannot be fed, and fall victim to loan sharks hiding in the back alleys who exploit hardship and compound it, and prey on pain and inflame it.

The case for each community having its own multi-bank – its reservoir of supplies for those without – is more urgent this winter than at any time I have known. Since the Trussell Trust’s brilliant expansion of UK food banks, creative local and national charities have pioneered community banks of all kinds offering free clothes, furnishings, bedding, electrical goods and, in the case of the national charity In Kind Direct, toiletries.

In Fife, Amazon, PepsiCo, Scotmid Fishers and other companies helped to set up a multi-bank. It’s a simple idea that could be replicated nationwide: they meet unmet needs by using unused goods. The companies have the goods people need, and the charities know the people who need them. With a coordinating charity, a warehouse to amass donations and a proper referral system, multi-banks can ensure their goods alleviate poverty.

But the charities know themselves that they can never do enough. With the state privatisations of gas, water, electricity and telecoms, the government gave up on responsibility for essential national assets. But now, with what is in effect the privatisation of welfare, our government is giving up on its responsibility to those in greatest need – passing the buck to charities, which cannot cope. Just as breadwinners cannot afford bread, food banks are running out of food.

Charities, too,are at the mercy of exceptionally high demand and the changing circumstances of donors whose help can be withdrawn as suddenly as it has been given. And so while voluntary organisations – and not the welfare state – are currently our last line of defence, the gap they have to bridge is too big for them to ever be the country’s safety net.

According to Prof Donald Hirsch and the team researching minimum income standards at Loughborough University, benefit levels for those out of work now fall 50% short of what most of us would think is a minimum living income, with their real value falling faster in 2022 than at any time for 50 years since up-ratings were introduced. And still 800,000 of the poorest children in England go without free school meals.

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I’m so cold I live in my bed – like the grandparents in Charlie and the Chocolate Factory
Marin

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When it comes to helping with heating, the maximum that any family will receive, no matter its size, is £24 a week emergency help to cover what the government accepts is the £50 a week typical cost of heating a home. From April, the extra payments will be even less – just £16 to cover nearly the typical £60 a week they now expect gas and electricity to cost. And then, as Jeremy Hunt says, help with heating will become a thing of the past.

One hundred years ago, Winston Churchill was moved to talk of the unacceptable contrast between the accumulated excesses of unjustified privilege and “the gaping sorrows of the left-out millions”. Our long term priority must be to persuade a highly unequal country of the need for a decent minimum income for all, but our immediate demand must be for the government to suspend for the duration of this energy crisis the deductions that will soon cause destitution.

Ministers have been forced to change tack before. In April 2021 the government reduced the cap on the proportion of income deducted from 30% to 25%. During the first phase of Covid, ministers temporarily halted all deductions. In April, they discouraged utility firms from demanding them, but deductions as high as 30% of income are still commonplace.

There is no huge cost to the government in suspending deductions, for it will get its money back later. But this could be a lifesaver for millions now suffering under a regime that seems vindictive beyond austerity. Let this be a Christmas of compassion, instead of cruelty.

"Sanctions are Economic Weapons of Mass Destruction, We Must Carefully Consider their Consequences" Raghuram Rajan

 

Premier Foods accused over 'pay and stay' practice

By Laura KuenssbergChief correspondent, BBC Newsnight

Premier Foods, one of the UK's biggest manufacturers, has been asking its suppliers for payments to continue doing business with the firm.

One supplier said the practice - known as pay and stay - was like "blackmail".

Newsnight understands the struggling company has received millions of pounds from its suppliers in this way.

Premier Foods said it was confident the scheme did not break any rules under competition law. The government said it was "concerned by recent reports".

The company, which owns brands like Mr Kipling, Ambrosia, Bisto and Oxo, demanded the payments from suppliers across the country.

Newsnight has seen a letter sent by chief executive Gavin Darby, dated 18 November.

'Nominated for de-list'

He wrote: "We are aiming to work with a smaller number of strategic suppliers in the future that can better support and invest in our growth ideas."

He added: "We will now require you to make an investment payment to support our growth.

"I understand that this approach may lead to some questions.

"However, it is important that we take the right steps now to support our future growth."

But when a supplier raised questions in an email about the annual payments, another member of Premier's staff replied.

"We are looking to obtain an investment payment from our entire supply base and unfortunately those who do not participate will be nominated for de-list."

One of the company's more than 1,000 suppliers, Bob Horsley, said he had been "taken aback" to receive the letter.

Scared to speak out

Mr Horsley, who has had a maintenance contract with Ambrosia in Devon for more than 10 years, said: "I think it's like blackmail.

"What they are saying is 'unless you pay this money, you can't do the work'."

He has decided not to pay and risk losing the contract.

"I'm just a layman but I can't see how that is right."

Another businessman said Premier had previously asked for more than £70,000.

"They know you can't afford solicitors to fight them. I'd never pay anyone for work."

Another said: "It's like a gun held to your head."

Many businesses are scared to speak out for fear of losing their contracts.

'Unjust'

Premier Foods has reduced its number of suppliers dramatically in the last 12 months.

In 2013 it made a similar approach to some of its suppliers.

The practice of pay to stay is not unheard of in manufacturing and retail.

After a competition inquiry, tighter rules were issued for the supermarkets under the Groceries' Code.

But that applies to the relationship between supermarkets and suppliers, not manufacturers.

Liesl Smith, from the Federation of Small Businesses, said: "This is the first time that we have ever seen anything so blatant... in this very direct way before.

"We think it is unjust, it is not competitive and it is not helping the supply chain.

"Premier Foods certainly don't value their suppliers, it's crippling small businesses.

"It's not just going to affect the business owners, it will affect staff as well."

'Support crucial'

Premier Foods told Newsnight: "We launched our 'invest for growth' programme in July last year as part of a broader initiative to reduce complexity in support of plans to help turnaround the business.

"This included a commitment to halve the number of our suppliers and develop more strategic partnerships focused on mutual growth.

"The programme requires our suppliers to make an annual investment to help fund our growth plans.

"In return, our suppliers benefit from opportunities to secure a larger slice of our current business.

"They also stand to gain as our business grows in the future."

It added: "In the current challenging environment, the support of all of our suppliers is crucial.

"We have had a positive response from many who are actively engaging in building a new partnership with us, including many small companies."

Newsnight understands many suppliers have paid a total in the low millions so far.

Competition law states that in some cases, pay to stay can be against the law.

Premier Foods is confident its scheme is within the rules.

Labour bid

But concerns about the wider problem have been raised with the regulator, the Competition and Markets Authority, and this week with the government.

Labour tried to amend the law recently to make the practice explicitly illegal.

Toby Perkins, the shadow business minister, said: "Labour pushed to outlaw companies charging to stay on their supplier list.

"But, alongside steps to prevent customer late payment, they were rejected by the government.

"Building a stronger economy relies on free and fair markets, but where unfair practices emerge, government should be willing to take action as today's revelations appear to expose."

A spokesperson for the Department of Business Innovation and Skills said it was a "hugely important issue" that ministers were taking "very seriously".

"We are concerned by recent reports, and are consulting to assess the evidence so we can establish what more we can do.

"We are also consulting on whether the biggest companies should be required to report publically on whether businesses need to pay to be on their supplier lists."

Newsnight understands that the regulator, the Competition and Markets Authority, is reluctant to commit resources to an investigation unless more businesses are willing to come forward.

WikiLeaks publishes STRATFOR intelligence emails

Ellen Branaghin The Independent

Monday, 27 February 2012

Whistleblowing website WikiLeaks has started to publish more than five million confidential emails from a global intelligence company.

The emails, dated from July 2004 and late December 2011, are said to reveal the "inner workings" of US-based company Stratfor.
The group said the emails show Stratfor's "web of informers, pay-off structure, payment-laundering techniques and psychological methods".
WikiLeaks claims the company "fronts as an intelligence publisher", but provides confidential intelligence services to large corporations such as Bhopal's Dow Chemical Co, Lockheed Martin, Northrop Grumman, Raytheon and government agencies, including the US Department of Homeland Security, the US Marines and the US Defense Intelligence Agency.
At a press conference in London today, WikiLeaks founder Julian Assange would not reveal where the emails had come from.
"We are a source protection organisation," he said.
"As a source protection organisation and simply as a media organisation we don't discuss or speculate on sourcing."
The documents are believed to have come from loose-knit hacker group Anonymous, which claimed to have stolen information from the firm in December.
WikiLeaks said the material contains privileged information about the US government's attacks against Julian Assange and WikiLeaks and Stratfor's own attempts to subvert WikiLeaks. The group said there are more than 4,000 emails mentioning WikiLeaks or Julian Assange.
But today Mr Assange said more information would emerge in the near future: "We have looked most closely at the actions against us, the bigger story is likely to come out of this probably in three or four days' time."
Mr Assange said: "Today WikiLeaks started releasing over 5 million emails from private intelligence firm Stratfor based in Texas, the United States.
"Together with 25 other media partners from around the world we have been investigating the activities of this company for some months.
"And what we have discovered is a company that is a private intelligence Enron.
"On the surface it presents as if it's a media organisation providing a private subscription intelligence newsletter.
"But underneath it is running paid informants networks, laundering those payments through the Bahamas, and through Switzerland, through private credit cards.
"It is monitoring Bhopal activists for Dow Chemicals, Peta activities for Coca-Cola.
"It is engaged in a seedy business."
Mr Assange said Stratfor was using the secret intelligence it had paid for to invest in a wide range of "geopolitical financial instruments".
"This makes News of the World look like kindergarten," he added.
Mr Assange said the exposure of the emails was part of a long history WikiLeaks has had in exposing the activities of secret organisations.
"The activities of intelligence organisations increasingly are privatised and once privatised they are taken out of the realm of the Freedom of Information Act, of US military law and so they are often used by governments who want to conceal particular activity.
"But Stratfor is simply out of control.
"Even as a private intelligence organisation it is being completely hopeless in protecting the identity of its informants, or even providing accurate information. It is engaged in internal deals with a financial investment firm that it is setting up.
"It really is some type of Enron where there is not even proper corporate control within the organisation."
WikiLeaks said it had worked with 25 media organisations to investigate and information would be released over the coming weeks.
The group said the emails expose a "revolving door" in private intelligence companies in the US, claiming Government and diplomatic sources give Stratfor advance knowledge of global politics and events in exchange for money.
"The Global Intelligence Files exposes how Stratfor has recruited a global network of informants who are paid via Swiss banks accounts and pre-paid credit cards," the group said.
"Stratfor has a mix of covert and overt informants, which includes government employees, embassy staff and journalists around the world.
"The material shows how a private intelligence agency works, and how they target individuals for their corporate and government clients."
WikiLeaks accused Stratfor of "routine use of secret cash bribes to get information from insiders", and claims an email from chief executive George Friedman in August 2011 suggested his concern over its legality.
In it, he wrote: "We are retaining a law firm to create a policy for Stratfor on the Foreign Corrupt Practices Act.
"I don't plan to do the perp walk and I don't want anyone here doing it either."
The group said: "Like WikiLeaks' diplomatic cables, much of the significance of the emails will be revealed over the coming weeks, as our coalition and the public search through them and discover connections."
It said Stratfor did secret deals with dozens of media organisations and journalists - from Reuters to the Kiev Post.
"While it is acceptable for journalists to swap information or be paid by other media organisations, because Stratfor is a private intelligence organisation that services governments and private clients these relationships are corrupt or corrupting."
The group said it has also obtained Stratfor's list of informants and, in many cases, records of its payoffs.
PA

Journalist opens a Public Register of income. I wish all others follow.

A register of journalists' interests would help readers to spot astroturfing

Pieces paid for by lobby groups would become apparent if, like me, other writers opened a public registry of their interests

• 
• • George Monbiot
  • guardian.co.uk, Thursday 29 September 2011 21.00 BST  

Expenses submitted by David Heathcoat-Amory MP for horse manure.
 
Journalists are good are dishing it out, less good at taking it. We demand from others standards we would never dream of applying to ourselves. Tabloid newsrooms fuelled by cocaine excoriate celebrity drug-takers. Hacks who have made a lifetime's study of abusing expense accounts lambast MPs for fiddling theirs. Columnists demand accountability, but demonstrate none themselves. Should we be surprised that the public place us somewhere on the narrow spectrum between derivatives traders and sewer rats?

No one will be shocked to discover hypocrisy among hacks, but there's also a more substantial issue here. A good deal of reporting looks almost indistinguishable from corporate press releases. Often that's because it is corporate press releases, mindlessly recycled by overstretched staff: a process Nick Davies has christened churnalism. Or it could be because the reporters work for people who see themselves, as Max Hastings said of his employer Conrad Black, as "members of the rich men's trade union", whose mission is to defend the proprietorial class to which they belong.

But there are sometimes other influences at play, which are even less visible to the public. From time to time a payola scandal surfaces, in which journalists are shown to have received money from people whose interests they write or talk about. For example, two columnists in the US, Doug Bandow and Peter Ferrara, were exposed for taking undisclosed payments from the disgraced corporate lobbyist Jack Abramoff. On top of the payments he received from the newspapers he worked for, Bandow was given $2,000 for every column he wrote which favoured Abramoff's clients.

Armstrong Williams, a TV host, secretly signed a $240,000 contract with George W Bush's Department of Education to promote Bush's education bill and ensure that the education secretary was offered slots on his programme. In the UK, a leaked email revealed that Professor Roger Scruton, a columnist for the Financial Times and a contributor to other newspapers, was being paid £4,500 a month by Japan Tobacco International to write on "major topics of current concern" to the industry.

These revelations were accidental. For all we know, such deals could be commonplace. While journalists are not subject to the accountability they demand of others, their powerful position – helping to shape public opinion – is wide open to abuse.

The question of who pays for public advocacy has become an obsession of mine. I've seen how groups purporting to be spontaneous gatherings of grassroots activists, fighting the regulation of tobacco or demanding that governments should take no action on climate change, have in fact been created and paid for by corporations: a practice known as astroturfing. I've asked the bodies which call themselves free-market thinktanks, yet spend much of their time promoting corporate talking-points, to tell me who funds them. All but one have refused.

But if I'm to subject other people to this scrutiny, I should also be prepared to expose myself to it. So I have done something which might be foolhardy, but which I feel is necessary: I've opened a registry of my interests on my website, in which I will detail all the payments, gifts and hospitality (except from family and friends) I receive, as well as the investments I've made. I hope it will encourage other journalists to do the same. In fact I urge you, their readers, to demand it of them.

Like many British people, I feel embarrassed talking about money, and publishing the amounts I receive from the Guardian and other employers makes me feel naked. I fear I will be attacked by some people for earning so much and mocked by others for earning so little. Even so, the more I think about it, the more I wonder why it didn't occur to me to do this before.

A voluntary register is a small step towards transparency. What I would really like to see is a mandatory list of journalists' financial interests, similar to the House of Commons registry. I believe that everyone who steps into public life should be obliged to show who is paying them, and how much. Publishing this register could be one of the duties of whatever replaces the discredited Press Complaints Commission.

Journalists would still wield influence without responsibility. That's written into the job description. But at least we would then have some idea of whether it's the organ-grinder talking or his monkey.