Could Stimulus Packages in the US, China and EU Prompt Long Term Economic Growth


Could Stimulus Packages in the US, China and EU Prompt Long Term Economic Growth

 

After the 2007-09 Recession, the stimulus packages supported by low interest rate tier 1 lending, tax breaks and initiatives were paramount to save the economies from total collapse. The real estate overcapitalization in the United States followed by immersive equity losses could not be overcome another way, the banks had to write off the accumulating bad assets, foreclosures, draining capital, etc. However, these actions prompted short-term economic growth, and spread some sense of optimism and security, thus the governments did not continue with their reforms to fix the reasons for the economic evil on the first place. The game was continuing as usual.

 

 

An appropriate evaluation of the reasons and the accelerators for the 2007-09 Recession should be considering the slowing to a margin other sections of many economies (called in this article markets) the US, many countries in the EU, partially Japan, etc resulted of moving and outsourcing of industrial production. Processes accelerated by the ongoing globalization and rising productivity, improving high technologies in manufacturing and the Internet, Chinas industrialization and breakup of the Soviet Block that gave the globalization of industrial production a totally new meaning, whereas well educated labor supported by infrastructure, high-tech machinery easy to handle, low labor pays, etc made the processes of moving and outsourcing irreversible, indeed. Hence, when the more developed countries’ markets were weakening, with very few exceptions, deficit, diminishing fiscal reserves and the following national debt were becoming irreversible, too.

 

What was supposed to be changed and enhanced by proper governments’ actions?

 

The role of small and medium investors, and undeveloped and underdeveloped markets (countries’ economies) should be changed in this new global marketplace, whereas, these are the one to diversify business, prompt employment, create the noise (1+f noise) in addition to the productivity, which was considered the fundamental market tool to boost economic growth and development. This new situation required fair market competition, consequencual of higher market security, which would provide market conditions for such.

 

The system of relatively high lending rates to small and medium businesses and investors, undeveloped and underdeveloped markets might change under higher security market environment of:

  • Firm business laws of contracting,
  • Unlimited liability corporate laws (not affecting investors, but the decision makers)
  • Enhanced insurance and bonding laws
  • Any other laws that remove the shady business environment

 

The US government and any other government of most developed markets, and the international organizations should enhance and change their business approaches to accommodate these new issues to set up longer term of economic development. The industrialization is not the only way to development, in these new conditions of industrial overproduction diversity is paramount.

 

The new stimulus measures used by the US and other governments would only bring long-lasting effect if the pointed micro and macro enhancements were processed too. Unless the recession time, the markets, now days, need longer term growth and development, thus the system of market balance of demand-to-supply should be maintained whereas market leaps should be taken. Stimulus measures were suppose to prompt such markets leaps, however markets/economies do not need makeup but serious surgeries.

2012 Joshua Ioji Konov  

 

  

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