Free «5000 Pound Gorilla in the Room» UK Essay Sample
The essay concerns a “5000 pound gorilla in the room”. In the essay, it is mentioned that nobody notices this gorilla, even if it is so huge. We are speaking about the financial and economic crisis of 2008. The essay presents the view of Paul Krugman concerning this topic. It should be mentioned that the economic crisis resulted from the state policy and analytic prognoses that were actually based on false data.
There is a need to say that during the period from the World War I till the 1960s, the theory presented by Keynes had gain popularity over the economic world. The theory explains the grounds and key principles of the positive economic development and proper intervention into the international economy. Its position was considered to be the ground for the economic science in the West. In 1918, John Maynard Keynes generated his General Theory of Employment where he underlined the main characteristic features of economy of that period and made suggestions concerning improving of state and international economy. His work was based on the historical conditions and research of similar objectives.
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Keynes announced the need of governmental intervention into the state economy in order to gain certain control over the market activity. Government should not be over the market; it should play the role of the mediator of competition and have certain control over its development.
Thus, certain directions that should be under control of government can be named:
- Monetary policy. Control and regulation over the monetary supply;
- Fiscal policy. Government budget should be used in order to organize properly the business cycle of enterprises;
- Employment policy. Government should serve as employer of the last resort to manage unemployment and keep it on the certain level.
Keynes had his own view on the main tools and strategies that influence the direction of the economic development. He used to underline that economic development could not be properly predicted. Thus, it is the process that is beyond expectation. When speaking about the results of economic development, it could be compared with the risks taken in the casino.
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The point of view presented by Keynes did not become the common opinion of the scientific society concerning economy and its development. His opponents presented the theory of the “efficient market”. The theory underlines the increasing positive results of economic development caused by the analysis of proper information about it.
One more position concerning the main reasons and grounds of the economical and financial crisis of 2008 was announced by the freshwater economists. They refer to a specific segment of economists who get their education in the universities of the United States. They have a rather specific understanding of the world and state economy and are considered to be the representatives of the neoclassical purists. They idealize the economy itself and people who create this economy. They believe in the existence of rational people and pure economy. It should be underlined that the practical economy differs from the theoretical grounds presented in scientific works.
There are a lot of mistaken ideas concerning the key principles of the economic development. Thus, a strong believe in the existence of efficient financial markets that operate without any control from the side of government blinded the most prominent economists and led to the most significant financial and economy crisis. Economy could not exist without certain control from the side of government. For example, free market competition could lead to monopoly without control of government. Proper stimulation of economic growth could lead to efficient activity of enterprises and increase of total profit.
We need to realize that economic development should be the matter of concern not for scientific society only, but for every member of society. Daily labor could be considered a part of the state and international economy. Personal well-being and level of life depends on the entire economic situation. To show its significant role, it is better to present the results of past mistakes that led to losses of more than six million of jobs and a huge increase of the unemployment level.
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There are certain benefits in the process of developing national and international economy. However, there is no need to start from the scratch as a lot of researches and attempts to improve economy were already made. The most important thing to do is to learn from the past mistakes and use this experience in order to direct all the powers to the progress in this sphere.
Paul Krugman has presented an interesting, rational and scientifically supported point of view on the present situation with the development of economy. He did not pay attention to the fact that extreme recessions and depressions may have essential value for the national and international economic development. We are speaking about the ground of survival for the capitalist systems in the present conditions.
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Thus, deficient demand could be epidemic for the development of capitalistic systems and lead to contradiction of economic production. Unfortunately, these aspects could increase the stock panic, recession and depression. Thus, the circle of the economic development would repeat in case if no changes are made.
That is why there is a need to speak about certain changes in the main features of these systems. The main changes concern private ownership and control over investments. Moreover, private profit as the tool of motivation needs to be the top priority for the government and separate enterprises.