Compare and contrast the socialist path to development Essays

Compare and contrast the socialist path to development Essays Compare and contrast the socialist path to development Essay Compare and contrast the socialist path to development Essay Compare and contrast the socialist way to development with mention to any two 3rd universe states. Cuba and Vietnam present us with two interesting and absorbing states seeking to follow the socialist way to development. The socialist way to development can be contrasted with the capitalist way to development. The first can be defined as economic development without capital, the 2nd as economic development with capital, where capital is money and merchandises which can be consumed. Although this is possibly an simplism, it provides a orderly heuristic tool by which we can compare and contrast the waies taken by Cuba and Vietnam. A job presents itself at the beginning in utilizing this definition of development A popular step of development is normally gross domestic merchandise per capita ( GDP ) of population, which is a step of capital, and hence non suited as a socialist step. In the absence of another step, nevertheless, we will follow this step, but with an explicitly historical prejudice. Comparison and contrast can so be made over clip, with mentions to historical events in each state, saying when they happened. The socialist way to development has its beginnings in the work of Karl Marx, a German philosopher whose chief part was likely the labour theory of value, which states that economic value is derived non from capital, but from the labor required to make the capital. Failure to mensurate capital in this manner leads to disaffection of labor, he says, and finally socialist revolution. In Cuba the socialist revolution happened in 1959, led by Fidel Castro, who introduced socialism from 1960 onwards. His first actions were to nationalize all big farms, or convey so under public ownership, and take all foreign ownership of belongings, largely US belongings. In 1991 Cuba had a GDP per capita of US $ 1580, which is has non yet surpassed, because of the diminution in economic activity with other socialist states. The consequence of nationalizing all big farms was to centralize production and to distribute it every bit amongst all Cubans. By making so, Castro removed competition amongst husbandmans, who now had to farm to run into with formal political programs. Equally significantly harmonizing to Marx’s philosophy, was societal policy, which led to Cuba developing better lodging, wellness and educational policy than anyplace else in the Caribbean. Cuba now has more physicians per capita than about anywhere else in the universe, a lower infant mortality rate than most states and a lower pupil to teacher ratio than France, Germany, the United Kingdom or the United States. Although officially still a socialist democracy, Cubans are progressively abandoning the rigorous Marxist philosophy of public ownership of the factors of production, in favor of a mix of public and private. President Castro maintains that Cuba is still ruled with socialist ideals, with the Central Planning Board he established in the 1960’s still running five twelvemonth programs that set monetary values of all economic factors. Cuba relies on international monetary values for its exports, nevertheless, most peculiarly for its rich nickel resources. It might be argued that because it is an island, Cuba is more able to maintain its philosophy pure, but because it is non economically self-sufficing, the state must trust on international economic sciences to bring forth factors on its land. By contrast, Vietnam has land boundary lines with other states, with whom it engages in trade, most notably with China, the state possibly most responsible for its socialist civilization. Historically, Vietnam has been socialist since June 1976, when the communist North united with the South to go a one-party province. Prior to this, the North had been socialist since the licking of the Japanese in the 2nd universe war, which occupied Vietnam and allowed the Vichy French to administer. Full blown socialism was non possible until the terminal of the Vietnam War and the licking of the American oppositions to socialism. Vietnam’s GDP per capita was US $ 435 in 2002. This compares unfavorably with Cuba, nevertheless Vietnam is a preponderantly agricultural economic system, and it is possible that its economic system is more socialist as a consequence. The ground for this is that Vietnam’s land is publically owned, like Cuba’s, but because Vietnam does non hold Cuba’s natural resources independent of the land, socialist ownership is much more recognized by the Vietnamese public. For case, between 1997 and 2001 Vietnam’s production of Piper nigrum and java, whose growing relies on the land, developed by 338 % and 100 % . Of Vietnam’s labour force, 65 % is employed on the land, hence Marx’s labour theory of value is clearly applicable ; in this state, with so many people deducing their income from publically owned land, there is improbable to be much force per unit area for democratic elections, because people will understand their economic endurance is guaranteed by socialism which values their labour independently of the land value. In developmental footings, Vietnam is much more a 3rd universe state than Cuba, because of this agricultural labor force. Phan new wave Khai, the Vietnamese Prime Minister, is no longer required to continue socialism under the 2001 fundamental law. This most recent of the five fundamental laws requires the Vietnamese authorities to protect the rights of Vietnamese life abroad. As the leader of the authorities, Phan van Khai and his predecessors have non been required to construct socialism since 1980, when socialism was dropped from the fundamental law. In May 2004 the agribusiness and rural development curate, Le Huy Ngo, was dismissed from the authorities for leting corruptness in his ministry. The parliament, elected since 1992, played a big function in his dismissal. The contrast with Cuba, which does non keep elections, is uncomparable. In decision, we can summarize by stating that the way to development in Cuba and Vietnam has greatly changed since the origin of socialism. Karl Marx’s socialist theories have been mostly superseded by capitalist steps of development, if non capitalism itself, because of the democratic and international force per unit areas which favour economic over socialist development. The 19th century that gave birth to socialism relied mostly on agricultural laborers to transport out its socialist revolutions, which are antithetical to development, hence likely there is no true socialist way to development.

The Function of the Federal Reserve System in the US Economy

The Function of the Federal Reserve System in the US Economy When countries issue currency, especially fiat currency that is not specifically backed by any commodity, it is necessary to have a central bank whose job it is to monitor and regulate the supply, distribution, and transacting of currency. In the United States, the central bank is called the Federal Reserve. The Federal Reserve currently consists of the Federal Reserve Board in Washington, D.C., and twelve regional Federal Reserve banks located in Atlanta, Boston, Chicago, Cleveland, Dallas, Kansas City, Minneapolis, New York, Philadelphia, Richmond, San Francisco, and St. Louis. Created in 1913, the history of the Federal Reserve represents the federal government’s   ongoing effort to achieve the goals of any central banking system - ensure a secure American financial system by maintaining a stable currency backed by the benefits of high employment and minimal inflation.   Brief History of the Federal Reserve System The Federal Reserve was created on December 23, 1913, with the enactment of the Federal Reserve Act. In crafting the landmark legislation, Congress was responding to a series of economic panics, bank failures, and credit scarcity that had plagued the nation for decades. When President Woodrow Wilson signed the Federal Reserve Act into law on December 23, 1913, it stood as a classic example of an all-too-rare politically bipartisan compromise balancing the need for a consistently regulated centralized national banking system with the competing interests of established private banks backed by a strong â€Å"will of the people† populist sentiment. Over the more than 100 years since its creation, responding to economic disasters, such as the Great Depression in the 1930s and the Great Recession during the 2000s, have required the Federal Reserve to expand its roles and responsibilities. The Federal Reserve and the Great Depression As U.S. Representative Carter Glass had warned, years of speculative investments led to the disastrous â€Å"Black Thursday† stock market crash of October 29, 1929. By 1933, the resulting Great Depression had resulted in the failure of nearly 10,000 banks, leading newly inaugurated President Franklin D. Roosevelt to declare a banking holiday. Many people blamed the crash on the Federal Reserve’s failure to stop the speculative lending practices quickly enough and for its lack of an in-depth understanding of monetary economics necessary to implement regulations that might have lessened the devastating poverty resulting from the Great Depression.  Ã‚   In response to the Great Depression, Congress passed the Banking Act of 1933, better known as the Glass-Steagall Act. The Act separated commercial from investment banking and required collateral in the form of government securities for Federal Reserve notes. In addition, Glass-Steagall required the Federal Reserve to examine and certify all banking and financial holding companies. In a final financial reform, President Roosevelt effectively ended the long-standing practice of backing U.S. currency by physical precious metals by recalling all gold and paper silver certificates, effectively ending the gold standard. Over the years since the Great Depression, the duties of the Federal Reserve expanded significantly. Today, its responsibilities include supervising and regulating banks, maintaining the stability of the financial system and providing financial services to depository institutions, the U.S. government, and foreign official institutions. How Does the Federal Reserve System Work? The Federal Reserve system is overseen by a seven-member board of governors, with one member of this committee chosen as the chairman (commonly known as the Chairman of the Fed). The president of the United States is responsible for appointing Fed chairmen to four-year terms (with confirmation from the Senate), and the current Fed chair is Janet Yellen. (The regular members of the board of governors serve fourteen-year terms.) The presidents of the regional banks are appointed by each individual branchs board of directors. The Federal Reserve system serves a number of functions, which generally fall into a couple of categories: first, it is the Feds job to ensure that the banking system stays responsible and solvent. While this does sometimes mean that the Fed has to work with the three branches of government to think about explicit legislation and regulation, it more often means that the Fed works in a transactional sense to clear checks and to act as a lender to banks that want to borrow money themselves. (The Fed does this mainly to keep the system stable and is referred to as the lender of last resort, since the process is not really encouraged.) The other function of the Federal Reserve system is to control the money supply. The Federal Reserve can control the amount of money (highly liquid assets such as currency and checking deposits) in a number of ways. The most common way is to increase and decrease the amount of money in the economy via open-market operations. Open-Market Operations Open-market operations simply refer to the process of the Federal Reserve buying and selling U.S. government bonds. When the Federal Reserve wants to increase the money supply, it simply purchases government bonds from the public. This works to increase the money supply because, as the buyer of the bonds, the Federal Reserve is giving out dollars to the public. The Federal Reserve also keeps government bonds in its portfolio and sells them when it wants to decrease the money supply. Selling decreases the money supply because the buyers of the bonds give currency to the Federal Reserve, which takes that cash out of the hands of the public. There are two important things to note about open-market operations: first, the Fed itself isnt directly responsible for printing money. Printing money is handled by the Treasury, and there are multiple channels by which the money gets into circulation. (Sometimes, for example, the new money just replaces worn-out currency.) Second, the Federal Reserve doesnt actually create or issue the government bonds, it just handles them in secondary markets. (Technically, open-market operations could be conducted with a number of different assets, but it makes sense for the government to manipulate the supply and demand of an asset that was issued by the government itself.) Other Monetary Policy Tools Although not used nearly as frequently as open-market operations, there are other tools that the Federal Reserve can use to change the amount of money in the economy. One option is to change the reserve requirement for banks. Banks create money in an economy when they loan out customers deposits (since both the deposit and the loan count as money), and the reserve requirement is the percentage of deposits that banks have to keep on hand rather than lending out. An increase in the reserve requirement, therefore, restricts the amount that banks can lend out and thus reduces the money supply. Conversely, a decrease in the reserve requirement increases the number of loans that banks can make and increases the money supply. (This, of course, assumes that banks want to lend more when they are allowed to do so.) The Federal Reserve can also change the money supply by changing the interest rate that it charges banks when it acts as the lender of last resort. The process by which banks borrow from the Federal Reserve is called the discount window, and the interest rate that the Federal Reserve charges is called the discount rate. When the discount rate is increased, it is more expensive for banks to borrow in order to cover their reserve requirements. Therefore, a higher discount rate causes banks to be more careful about reserves and make fewer loans, which reduces the money supply. On the other hand, lowering the discount rate makes it cheaper for banks to rely on borrowing from the Federal Reserve and increases the number of loans they are willing to make, thus increasing the money supply. Decisions regarding monetary policy are handled by the Federal Open Market Committee, which meets approximately every six weeks in Washington in order to discuss changing the money supply and other economic issues. Updated by Robert Longley