State system of the United Kingdom

 

The United Kingdom of Great Britain and Northern Ireland is a parliamentary democracy, with a constitutional monarch, Queen Elizabeth II, as head of State. The organs of government are: Parliament, the executive and the judiciary.

The legislature, Parliament, is the supreme authority. It comprises two chambers – the House of Lords and the House of Commons – together with the Queen in her constitutional role. The Queen has no real power, she reigns, but does not rule.

The executive consists of the central Government – that is the Prime Minister and the Cabinet and other ministers, who are responsible for initiating and directing the national policy, government departments, local authorities and public corporations.

The judiciary determines common law and interprets status and is independent of both the legislature and the executive.

The Government derives its authority from the elected House of Commons. A general election, for all seats in the House of Commons, must be held at least every five years. The Government is normally formed by the political party which wins the majority of seats in the House of Commons. The party's leader is the Prime Minister appointed by the Queen. He chooses a team of ministers, of whom 20 or so are in the Cabinet. The second largest party becomes Her Majesty's Loyal Opposition with its own leader and 'Shadow Cabinet'. The House of Commons comprises members from the constituencies in England, Scotland, Wales and Northern Ireland who represent people whose history and traditions differ.

The House of Lords is a hereditary chamber.

In Great Britain there is no written constitution, only customs, traditions and precedents.

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ECONOMICS AS A SCIENCE

The word ‘economics’ derives from the Greek word ‘oikonomika’ that means household management. Economics came of age as a separate area of study with the publication of Adam Smith's “The Wealth of Nations”. Adam Smith is often considered to be the founder of modern day economics because he was the first writer to outline and appraise the workings of a free market economy. Major economic thinkers include David Ricardo, Thomas Malthus, John Mill, Karl Marx and others.

Most economists define economics as a social science concerned with the production, distribution, exchange, and consumption of goods and services. Economics is the study of how goods and services get produced and how they are distributed. By goods and services, economists mean everything that can be bought and sold. By produced, they mean the processing and making of goods and services. By distributed, they mean the way goods and services are divided among people. Economists focus on the way in which individuals, groups, business enterprises, and governments seek to achieve efficiently economic objectives.

Given most goods are scarce, every society must somehow determine what goods to produce. Scarcity is the condition that exists if more of a good or service is demanded than can be produced. As human needs are virtually unlimited and resources are finite, most goods and services are, in the economic sense, scarce. In a free economy, allocation of scarce resources is controlled by the price mechanism. Through the market mechanism the production and consumption decisions of individuals directly affect the allocation of resources. When the market mechanism fails to provide goods and services efficiently and equitably – a situation called “market failure” – the public sector must provide assistance. Market imperfections must be overcome by government activity. In a controlled economy, central government has to decide how resources are to be allocated.

The major divisions of economics include microeconomics, which deals with the behaviour of individual consumers, companies, traders, and farmers; and macroeconomics, which focuses on aggregates such as the level of income in an economy, the volume of total employment, and the flow of investment. Both fields place a heavy emphasis on the individual or household as the basic unit of analysis, rather than the classes.

Microeconomics and macroeconomics frequently overlap. They include the sub-discipline of econometrics, which analyses economic relationships using mathematical and statistical techniques. Increasingly sophisticated econometric methods are today being used for such topics as economic forecasting.

Economics has always been controversial because it is used by individuals, businesses, and governments to make decisions. Economic agents often look around for an economic theory which confirms their prejudices rather than accepting that our understanding of how a system works is often imperfect. The ever changing nature of economics and the potential for entering a debate about causes, effects, and policy implications make economics so fascinating.

Oral Topic

KINDS OF ECONOMIES

Different kinds of economies have developed as nations have tried different approaches to solving their basic economic problems. Every country has an economic system to determine how to use its resources. The three main economic models today are 1) capitalism, 2) central planning, and 3) mixed economies. The economies of all nations mix elements from these main economic models. All real economies combine elements of capitalism with those of central planning. However, nations differ from one another in the extent to which they rely on the two approaches.

Capitalism is an economic and political system in which private individuals and business firms carry on the production and exchange of goods and services through a complex network of prices and markets. Capitalism is based on free enterprise - that is, most of the resources needed for production are privately owned. Individuals and private firms determine what to produce and sell, and how to use their income. Capitalism calls for the ownership and control of all major businesses by private individuals.

The term 'capitalism' was first introduced in the mid-19th century by Karl Marx, the founder of communism. 'Free enterprise' and 'market system' are terms also frequently employed to describe modern capitalist economies.

The Scottish economist Adam Smith first stated the principles of capitalism in the 1700's. Smith believed that governments should not interfere in most business affairs. He said the desire of business people to earn a profit, when regulated by competition, would work almost like an 'invisible hand' to produce what consumers want. Smith's philosophy is known as 'laissez faire' (noninterference).

Throughout its history capitalism has had certain key characteristics. First, basic production facilities – land and capital – are privately owned. Capital in this sense means the buildings, machines, and other equipment used to produce goods and services that are ultimately consumed. Second, economic activity is organized and coordinated through the interaction of buyers and sellers (or producers) in markets. Third, owners of land and capital as well as the workers they employ are free to pursue their own self-interests in seeking maximum gain from the use of their resources and labour in production. Consumers are free to spend their incomes in ways that they believe will yield the greatest satisfaction. This principle, called consumer sovereignty, reflects the idea that under capitalism producers will be forced by competition to use their resources in ways that will best satisfy the wants of consumers. Self-interest and the pursuit of gain lead them to do this. Fourth, under this system a minimum of government supervision is required; if competition is present, economic activity will be self-regulating. Government will be necessary only to protect society from foreign attack, uphold the rights of private property, and guarantee contracts. The gravest problems of capitalism are unemployment, inflation, and economic injustice.

Many economies are based on the principles of capitalism. These economies are called free enterprise or free market economies because they allow people to carry out most economic activities free from government control. Even in these economies, however, the government owns some land and capital and exercises some control over the economy. The United States and Canada have economic systems that use relatively little government control. For this reason, their economies are often described as capitalist. Capitalism is also practiced in Australia, New Zealand, and many countries of Western Europe.

Central planning calls for government control of all major economic activities and government ownership of nearly all productive resources. The Soviet Union and many nations of Eastern Europe once relied heavily on central planning. Government officials made all key decisions about how goods were produced, priced, and distributed. The economic system used by these countries was referred to as Socialism.

Socialist economies experienced some success. Centralization enabled governments to focus their energies and rapidly industrialize their countries. Literacy and employment rates soared in these countries. In addition, income was distributed fairly equally. Therefore, the difference between the lowest and the highest wages was much smaller in Socialist countries than in capitalist countries.

The centrally planned economy created serious problems, however, because it was inefficient. State-set prices did not reflect the actual cost of production, leading to waste of resources. The planned economy also failed to provide high-quality goods and services and could not respond quickly to changes in consumer demand. In many cases, consumer goods and housing were in short supply, and state-run farms did not produce adequate supplies of food. The shortages occurred partly because worker, productivity and creativity lagged. Workers had little motivation to be productive because their wages remained about the same regardless of how much they produced. Problems in centrally planned economies include underemployment, rationing, bureaucracy, and scarcity of many consumer items.

All modern economic systems combine private ownership with government control. Sometimes called mixed economies, these systems attempt to eliminate inefficiencies inherent in capitalism or socialism alone. Governments, imbued with centralized control and the power to make legislation, set standards and taxes and may direct certain industries such as telecommunications or transportation, while private businesses control the remaining industries and generally thrive or fail according to the dictates of the market. In some cases, a public-private partnership may operate some industries. Under a mixed economy, the government may own such industries as banks, railroads, and steel. However, other industries are privately owned.

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ADVERTISING

To advertise means to tell people publicly about a product or service in order to persuade them to buy it. Advertising – the techniques and practices used to bring products, services or opinions to public notice for the purpose of persuading the public to respond in a certain way toward what is advertised. Most advertising involves promoting a good that is for sale, but similar methods are used to encourage people to drive safely, to support various charities, or to vote for political candidates. In many countries advertising is the most important source of income for the media through which it is conducted. The media are all the organizations, such as television, radio, and the newspapers, that provide information for the public. In the ancient and medieval world such advertising as existed was conducted by word of mouth. The first step toward modern advertising came with the development of printing in the 15th and 16th centuries. In the 17th century weekly newspapers in London began to carry advertisements, and by the 18th century such advertising was flourishing. The great expansion of business in the 19th century was accompanied by the growth of an advertising industry; it was that century, primarily in the United States, that saw the establishment of advertising agencies. Advertising agency is a company that designs and makes advertisements for other companies. By the 1920s advertising agencies could plan and execute complete advertising campaigns.

There are some principal media for advertising. Newspapers can offer advertisers large circulations (circulation – the average number of copies of a newspaper or magazine that are usually sold each day, week, month etc) and the opportunity to alter their advertisements frequently and regularly. Magazines may be of general interest or they may be aimed at specific audiences (such as people interested in computers or literature) and offer the manufacturers of products of particular interest to such people the chance to make contact with their most likely customers. The most pervasive (existing or spreading everywhere) media are television and radio. Advertisers can buy short “spots” of time to promote their products or services. Advertising spots are broadcast between or during regular programs. For advertisers the most important facts about a given television or radio program are the size and composition of its audience. The size of the audience determines the amount of money the broadcaster can charge an advertiser, and the composition of the audience determines the advertiser's choice as to when a certain message, directed at a certain segment of the public, should be run. The other advertising media include direct mail, outdoor billboards, posters, and etc. Advertising is on some occasions too intrusive (affecting someone's private life or interrupting them in an unwanted and annoying way).

There is no serious disagreement over the power of advertising to inform consumers of what products are available (can easily be bought or found). In a free-market economy effective advertising is extremely important and necessary to a company's survival, for unless consumers know about a company's product they are unlikely to buy it. For an advertisement to be effective its production and placement must be based on a knowledge of the public and a skilled use of the media. A career in advertising is a difficult one. Good advertisers are in great demand. Advertising agencies serve to organize complex advertising campaigns. The effectiveness of advertising campaigns is based on research into consumer behaviour and demographic analysis of the market area. [Demography is the study of human populations and the ways in which they change] Advertisers combine creativity in the production of the advertising messages with canny scheduling and placement, so that the messages are seen by, and will have an effect on, the people advertisers most want to address. Given a fixed budget, the advertiser faces a basic choice: he can have his message seen or heard by many people fewer times, or by fewer people many times.

In criticism of advertising it has been argued that the consumer must pay for the cost of advertising in the form of higher prices for goods; against this point it is argued that advertising enables goods to be mass marketed, thereby bringing prices down. It has been argued that the cost of major advertising campaigns is such that few firms can afford (to have enough money to buy or pay for something) them, thus helping these firms to dominate (to have power and control over) the market; on the other hand, whereas smaller firms may not be able to compete (to try to be more successful) with larger ones at a national level, at the local level advertising enables them to hold their own. Finally, it has been argued that advertisers exercise an undue (more than is reasonable, suitable, or necessary) influence over the regular contents of the media they employ – the editorial stance (an opinion that is stated publicly) of a newspaper or the subject (the thing one is talking about or considering in a conversation, discussion, book, film etc.) of a television show. In response it has been pointed out that such influence is counteracted, at least in the case of financially strong media firms, by the advertiser's reliance on the media to convey his messages; any compromise (an agreement between two contracting parties that is achieved by both of them accepting less than they wanted at first) of the integrity of a media firm might result in a smaller audience (the persons reached by a publication, radio, TV, etc.) for his advertising.

 

Answer the questions:

1. What is advertising?

2. What are the principal media if advertising?

3. What are the main factors that determine the effectiveness of advertising?

4. Why is advertising often criticized?

5. Does advertising increase or decrease prices?

 

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