The politics of deficits, surpluses, borrowing and debt Essay - 1

The politics of deficits, surpluses, borrowing and debt - Essay Example A diverse empirical literature is provided by research based on industry level-data [Rajan and Zingales 1998; Wurgler 2000], time-series research [Neusser and Kugler 1998; Rousseau and Wachtel 1998, 2000], and econometric investigations that use panel techniques [Beck, Levine, and Loayza, 2000] supports the view that financial systems are essential for economic growth. While a strong relationship exists how sound and well-functioning financial markets impact economic growth, Beck et al raise a critical question: ‘How did some countries develop well-functioning financial systems, while others did not? Why do some countries have particular laws and enforcement mechanisms that support the operation of free, competitive financial markets, while others do not?’ (2001, p.2). Particularly, why do some countries post huge budget surplus amounts while other states suffer prolonged effects of massive budget deficits? According to Petersen (1999), governments face the fundamental issue of using credit and raising funds in the present that will be repaid in the future with interest, a cost just like any other economic choice. Governments usually borrow in order to finance deficits (easier than to raise taxes), stabilize the economy in the short term and invest in productive infrastructure and economy upskilling in the long-term. Foreign borrowing allows a country to invest and consume beyond the limits of current domestic production and, in effect, finance capital formation not only by mobilizing domestic savings but also by tapping savings from capital surplus countries (Narayanan 2002). Petersen notes that national governments face more options in this regard because it has control over the money supply as well as the operation of the banking system and credit markets than its local counterparts but argues that the more open that national economies have developed, â€Å"the more even those opti ons are curbed by the workings of the international economy†

Advantages and Disadvantages to Kraft Foods Case Study

Advantages and Disadvantages to Kraft Foods - Case Study Example Therefore, if Kraft Foods starts producing healthier products, it will establish positive relationships with different stakeholders. The move will also depict that the company is committed to corporate social responsibility (Lussier 2008, p. 223). On the other hand, the company is likely to lose some of its customers because the new versions of chocolate will have a different taste. Notably, the esteemed customers of the company have been consuming its products because of their unique taste. However, lowering the calorific value of the chocolate versions will alter the product taste. Many customers may not like the new taste. The company will also incur new costs in production. Worth noting is the fact that the company will need to source ingredients that will be used in the production of lower-calorie chocolates. In addition, the company will need to spend on advertising and promotion strategies in order to introduce the new versions into the market. In my opinion, the UK government is likely to introduce legislation that will require taxation of high-fat food products like chocolate. Since the government has experienced the financial burden resulting from medical costs associated with the high morbidity cases resulting from obesity, it is likely to take new measures. The government is also concerned about the health of children and adolescents who are more affected by high-fat food products such as chocolate bars. Therefore, there are higher chances that the government will intervene (Lussier 2008, p. 223). Denmark repealed its fat-tax law after the realization that it contributed to increased consumer prices for the high-fat products. The tax did not motivate companies to produce healthier products. On the contrary, the tax law increased consumer prices, and the consumers had to bear the financial burden.