Dear Fellow Students
I would be glad to help you answer questions on
the economy in view of the current presidential
campaign. I will try my best to explain in simple
terms so that fellow students of your class and
you can understand.
To begin with a presidential campaign aims at
appealing the voters to vote for the candidate.
The issues that are of concern to the voters usually
cover healthcare, education, employment and taxes
etc. which affect the general public in their
daily lives. However, as a president, the candidate
has to take the picture from a broader perspective
that reflects the benefits of the whole nation.
For this reason presidential campaigns usually
cover very broad based issues that are difficult
to understand unless we think over them from different
angles.
Take for example the issue of how the economy
can affect the public interest. Before one answer
the question "what is the public interest
and what its goals are" one must understand
what the factors that affect the public interests
are. Clearly, it is the economy and its efficiency.
Economic efficiency is achieved when the resources
of the nation are fully utilized and exchanged.
Here resources mean people, capital or money,
land, and natural resources such as oil reserve.
The US must put these resources to use in projects
that it would benefit the nation as a whole and
at the same time satisfy the individual needs.
For example by creating jobs so that its people
resources are employed. This would increase the
employment level and people would have higher
purchasing power. When people have purchasing
power, demand for goods and services will go up
and companies would enjoy higher profits for investment
in other projects to produce even more goods and
services for people.
This cycle goes on unless stopped by the government
or other external sources such as taxes, barriers
to trade, and economic disasters such as war or
natural disaster hits such as cyclones or hurricanes.
Senator Kerry's campaign aims to achieve this
status of the economy. The cycle would reverse,
if for example people are required to pay high
taxes. When people who are not earning enough
are required to pay taxes, they have lesser purchasing
power; they would not buy goods or services and
therefore companies go bankrupt which affect the
economy. This has been the case of President Bush's
problem (Kerry 2004; Bush 2004)
Full utilization means that the resources have
been used to produce as much value as it should
be. For example if a company invest money in a
project that cost $ 2000 for profit/ returns of
$200 or 10% for one year then the capital is considered
to be production efficient. But if the project
cost $2000 and the returns is only $150 dollars
due to inefficient labor or taxes then the money
is considered to be inefficiently utilized. This
has a negative effect on the company because it
would have to shut down the division that produces
less goods or cut down salaries to achieve the
same $200 profit.
Economic efficiency also depends on the exchange
efficiency. A country may have more of some goods
A while other countries may have more of some
goods B and C. For this reason they exchange with
each other. The number of goods exchanged depends
on the value each country places on the good.
For example winter coats may be more valuable
to an American as compared to an African. For
this reason Africans stand to gain more by selling
winter coats to Americans as they would fetch
more money value in the market.
Exchange efficiency can be achieved when the market
or the place where traders buy and sell goods,
allows the freedom to exchange. A free and open
market therefore allows countries to trade with
each other through regulations that promote even
more exchange. Not only will the local companies
benefit but the public as well. Both the presidential
candidates have focused on this fact and agree
for an open market economy (Kerry 2004; Bush 2004).
However, when there are more opportunities in
the market, there is more competition. Competition
is good for the economy because it attracts more
companies to invest and increase in the quality
of products. It also leads to higher profits because
companies will always aim for efficient resource
utilization. This way the free market operates
on its own or through the "invisible"
rule of demand and supply without the government
intervention. On the other hand, with higher profit
comes greed and unfair trade. The Enron episode
for example have shown the US public how greed
for higher profits can make high paying company
leaders to eat up profits. The people, in the
process, do not get the desired wage neither do
they get quality of goods. The market therefore
goes towards inefficiency. President Bush for
example believes that the market relies on efficient
resources.
In the US there is not enough skilled labor force
especially in the IT industry. Bush believes companies
should be encouraged to seek their own resources
within or outside the country. For this reason
subsidies or tax cuts should be given to these
companies so that the industry grows. Kerry on
the other hand believes that the government should
trust the market to generate skilled labor through
education and training.
He believes that eventually the US could have
as skilled labor resource as any other country
in the world (Kerry 2004; Bush 2004). However,
both of the candidates must realize that a country's
government should have regulations so that they
can regularly check on the market. The government
should also have plans to solve economic problems
such as the Iraq War and Terrorist Attacks which
affect the economy. It should have regulations
that would help the economy to bring it to the
normal efficiency level. This is important for
the interest of the public.
I hope this extensive explanation of public interest
and economic efficiency helped you understand
the presidential campaign.
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