“Arguments surrounding the size of government are often posted in terms of their effects on economic growth” (Labonte 20).
A country with a strong economy is a country with an effective government and strong momentum when it comes to the transition and process of business and marketing. The development of a nation depends largely on its economy including the distribution of income to working citizens, the growth of industries inside the country, strong investments, and a strong employment status. However, it is difficult to ignite a chain effect of development for a strong political economy. Take Poland and Hungary for example, Poland’s economic development is on a positive streak for many years now, “Poland’s overall economic performance has been impressive over the last decade” (OECD 10). The main factor for the country’s economic improvement is the boost in employment. A higher employment rate means a lower poverty rate. However, things are a little different for Hungary. “Hungary has existed from recession in early 2013” (OECD 10). The cause of this is the decline of employment resulting to the higher rate of poverty. A country with a large statistics when it comes to poverty is a country with a struggling government. There are several solutions for this problem and that can be traced to the management of economy in a country or what they call monetary policy. This is more than just a policy, it is a strategy to solve the problem of weak economical power. However, monetary policy can be tricky because yes it will surely benefit the government but it might inflict a burden to the citizens who purchase everyday supplies for survival which price rates might increase due to Monetary policy. So one can say that Monetary policy may lead to inflation in the economy or in other words the increase in price rates to generate more from the government money for the government. However, an effective monetary authority can overcome the inflation threat by countering it with great decisions when it comes to developing the large industries of business in the country. For example, a government can promote create better opportunities for Business Process Outsourcing (BPO) for the sake of the economy and employment rate. More BPO companies means the increase in job vacancies that welcomes deserving individuals because of their own ability, not according to their diplomas or achievements in school.
Economic Transition – The Holy Trinity
For a country to achieve great economic growth it is important to always consider the Holy Trinity for economy, “transition was intended to compromise the Holy Trinity of stabilization, liberalization and privatization” (Ellman 595). To sum up the three key components, Stabilization is possible with a balance between the exchange rate and incomes policy to reduce inflation and the possible rise of price rates. Liberalization is to get rid of hanging or added price rates to the original price rates of products, in other words removing price control. Liberalization also focuses on establishing an equilibrium between supply and demand, or better, a bountiful demand and low demand. Out of the holy trinity, liberalization should be the top priority because it is the first step in developing the economy by focusing on helping the people better access to the goods necessary. Liberalization played a huge role for Hungary during the 1900s. The country shifted from a socialist economy to a market economy. The government developed structural and political movements to alter the economic flow of the country for the better. Lastly, Privatization is giving or transferring the management of giant industries to private companies rather than the government being burdened. Talking about privatization, Western European countries are the leading nations with strong private companies managing the biggest industries in the world. A state government has its hands full with the problems concerning the security and welfare of the people. “The proposition that private ownership is economically more efficient than state ownership” (Roland 2). However, privatization raises major controversies especially if the private companies failed to improve the stability of economy. Privatization is a huge risk that the government needs to think about before engaging on. Democracy will benefit greatly from privatization if done right because the task of economic responsibility is divided by cities.
Poland is in need of major privatization because of the aftermath caused by failed reform movements. Poland needs to adapt a market economy so the country can make better decisions with the production and distribution of their goods and services. So far, Poland manages to achieve the impossible through strong private firms, active international trade, balanced priced system, and rising employment rate. However, a market economy is still a goal Poland. “Poland has so far achieved a form of market socialism” (Poznanski 206). In the case of Hungary it doesn’t solely focus on the business and marketing side rather than the blossoming tourism of the country that attracts millions of visitors from other countries. Hungary has Budapest, Esztergom, and other great tourist destinations. Going back to that statement earlier in the paper stating that Hungary managed to alter it economic transition from a socialist economy to a market one. A market economy goes great with the country’s tourism momentum because access to the products and services of the country is affordable. The privatization condition in Hungary is a huge, however, instead of local private companies controlling the major industries in the country, it is mostly owned by foreign companies which can be considered good and a bad thing because Hungary doesn’t have full control and can’t influence the industries. Hungary’s agriculture and small-size businesses also boost the country’s economic growth. Poland and Hungary are both within the Central Eastern European region. According to scholars and analyst, “it is impossible to guess what the future will bring” (Kornai 208). This is directed to the uncertain future of all the countries within the region and whether their economic growth would be positive or devastating. This statement is true because the condition of these countries is very imbalance.
Hungary’s Struggle in the 1990s
Before, during, and after the World War II, Hungary’s biggest crisis is directed to their natural resources. The need for goods during those days is extreme and the supply is very weak. Because of that Hungary resorted to agriculture which was its own headache because of the war at hand. It was a tough call for Hungary when the country decided to focus all of its effort into developing the major industries and leaving behind the small industries for better economic growth. The main industries in Hungary these days are automotive products within the country and the distribution to other countries. There are over 600 automotive companies in the country employing over 100,000 individuals. One active problem with Hungary is that the government is more inclined and motivated with political factors rather than economic ones. Most economist and scholars believe in the power of Capitalism to cure a country plagued with weak economic power. Capitalism is privatization, free enterprise for private companies. Capitalism can result to healthy competition between private companies which will be beneficial because of the generated resources and money. Hungary’s attempt for reforms only resulted to risky economic platforms that are hard to manipulate and foresee in the near future. Hungary is still struggling up to these days but the country already had a glimpse of the perfect strategy and that is political and economic support for major and small industries in the country.
The Success of Poland throughout the Years
Poland’s mission to achieve a strong market economy is starting to take its toll because starting from 1990, the country did a remarkable job flourishing its free market and deep structural reforms for the government created a chain effect to other essential factors, mainly to the economy. “Poland during the 1990s was the poster child for a successful transition” (Jackson, Klich, and Krystyna 1). The threat for Poland right now is being stock on a middle-income trap, wherein the economic growth stays on the mid-section of the bar. Poland these days is striving for innovation to fully harness their manufacturing industries and human skills for a more effective production of goods and services distributed to the locals and to other nations as well. In Poland, machineries companies, coal mining, and chemicals are the primary arsenal of the country’s economic boost.
Poland’s government is a representative Democracy while Hungary’s administration is a functional Parliamentary Republic. A Democratic country is in need of strong free enterprise market without the interference of the government. However, there are circumstances wherein the government needs to take action to aid private companies in performing a better job. First is the monitoring of the credibility of these private companies because it is possible for a country with major industries controlled by greedy companies. So rather than serving as pillars for the company, private companies are focused on generating money by forcing their goods and services to the people with unreasonable quality and quantity. The government should also do something about the income tax collected from employees monthly. A Democratic regime wherein the initial decision lies within the public to choose the right individual for a position is prone to either great success or downfall. It is true that in a market economy, government officials doesn’t have control over the major industries, but they can influence or contribute so much to these private companies to amplify the economic performance for the welfare of the public. Let us take Philippines for example, this country is rich in natural resources yet it is still included in the list of third world countries. The primary disease is the corruption that occurs in the land almost daily by government officials. Money for the people is stolen leading to more poor people and to make things worse, these poor individuals result into immoral acts just to survive. A country needs to recognize their most rich resources and focus on advocating these resources by better production and distribution. The problem these days with most countries in terms of economic is that they have a huge amount of debt to other country. These conditions opens a lot of limitations and shortcomings, not to mention the development of Economic is hard. Right now, the countries with the strongest economic power is United States of America and China. In USA, the manufacturing industries of major goods are the biggest in the country. For China, it is chemical fertilizers, cement, and steel manufacturers who are in the front line. However, the future for these two countries is starting to look terrifying because China’s economic growth is starting to slow down and USA’s import and export condition is in different grounds with the imported goods increasing and the exported goods declining. In the near future, Japan which is the third country with the biggest economy to take the place of USA because of one important attribute, innovation. Yes, USA is truly more advanced compared to other countries, but it has made major mistakes by asking for assistance from other countries just to sustain its major economic loss.
Global Issues
The most threatening scenario in the near future for Earth is the demand for food. These days, the demand for food is starting to increase, relentlessly. Even major countries like USA and China are having a hard time keeping up. What if in the coming years, the demand increase more, the supply suffers an all-time low, and the population grew rapidly? It would be a chain effect or domino effect if most of the nations failed to do something about food security. “Lack of sufficient, safe, and nutritious food has significant impacts on health” (Mcdonal 2). This will reflect badly to the welfare of millions of people in the world.
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