Economics

The economic concept of elasticity refers to the change in one economic quantity in response to another economic quantity. Moreover, we are interested in the magnitude that one quantity changes in response to another quantity that it is dependent upon. This is what elasticity measures. If the dependent quantity does not vary much when the first quantity is varied, we term their relationship as relatively inelastic. When a small change in one factor creates significant changes in another, then their relationship is considered highly elastic. Some examples of elasticities include the income elasticity of demand - which measures the response in the demand of a product following an increase in income of the products market - and the price elasticity of demand  which measures the demand of the product in response to price changes.
The importance of these elasticities to the leader of the firm is rooted in how these elasticities forecast the demand for the firms product. Managers should know how their product is seen by the market and what factors will greatly increase or decrease the demand for their goods. Knowledge of these elasticity factors will also help the firm in determining how they will position and promote their product against all competing and complementary products in the marketplace.
For example, products with negative income elasticity of demand are termed inferior goods. This means that as the individual person gets more income then he or she purchases less of the product as opposed to superior goods which the public purchase if their income increases. Being aware of this could help a manager many ways. If he knows that his product is an inferior good, then the manager can then make moves to increase his products visibility and marketing efforts towards less affluent communities  communities where demand for his product is higher according to the income elasticity of demand. The same is true for the opposite case, products which are purchased in greater quantities by wealthier individuals should be sold to wealthy individuals. Products with zero income elasticity could be marketed at the same strength across all income strata. The usefulness of the income elasticity of demand is all in knowing what segments of society have higher demand for the product.
If income elasticity of demand could help in marketing, price elasticity could help in pricing. The law of demand states that all products will have non-increasing demand as the prices go up While supply and demand tells us that the equilibrium price is the best possible state since at this point, demand equals supply this is beneficial only for the market. The equilibrium price and quantity does not have to be the point at which the firms revenue on the product is the greatest. The relevant question now is this will the company make more revenue by pricing above or below the market equilibrium price If the product has relatively elastic demand, then any small change in price will result in a great increase in demand. This means that the company would have more revenue by pricing their product lower since the lower per unit revenue would be compensated for by the increase in demand for the product. The opposite is also true. If the products demand is relatively inelastic, then even if the price is increased, the magnitude in decrease of demand is less than the magnitude in increase of the price. The company can therefore feel free to increase prices since the corresponding drop in demand will be compensated for by the increase in per unit price.

LONDON (Reuters) - Africa faces a surge in cancer deaths unless action is taken in the next decade to stem rising smoking levels in a continent where anti-tobacco laws remain rare, U.S. scientists said Wednesday.
More than half the continent will double its tobacco use within 12 years if current trends continue, the American Cancer Society (ACS) said in a report which found that 90 percent of people living there have no protection from secondhand smoke.
Some African countries have introduced smoking bans but most have not, and smoke-free public areas are rare.
For the first time in history, we have the tools in hand to prevent a pandemic, Otis W. Brawley, the ACSs chief medical officer, said in a statement with the report, which was presented at a cancer conference in Tanzania.
Smoke-free public places are one example of a low-cost and extremely effective intervention that must be implemented now to protect health.
Many developed countries have tightened laws in recent years to make smoking unacceptable or illegal in public places such as bars, restaurants, offices and on public transport -- as a way to protect non-smokers and to discourage the habit.
Secondhand smoke is known to cause cancer in adults and lung problems such as pneumonia in young children.
Over the past four decades, smoking rates have fallen in rich countries such as the United States, Britain and Japan, but have been rising in much of the developing world.
The ACS estimates that smoking will kill 6 million people worldwide in 2010 and 72 percent of those killed will be from low- and middle-income countries.
In a report published in August, it said that around 50 percent of men in developing countries smoke..
Within the last year, Kenya and Niger have brought in national smoke-free policies, the ACS report said, also noting that South Africa has had anti-smoking policies since March 2007 and has managed to cut smoking rates.
But the report listed many other countries which have not taken effective action, including the Democratic Republic of Congo, Ghana, Uganda and Nigeria.
In Abuja, Nigeria, for example, 55 percent of school students are not aware that secondhand smoke is harmful to health, and only 1 percent of Nigerias population is protected by strong smoke-free laws, the report said.
Twalib Ngoma, president of the African Organization for Research and Training in Cancer (AORTIC) which is hosting the conference, said smoking was increasing because the companies which used to target the West are now targeting countries like Tanzania.
Drive from the airport and you see a lot of billboards promoting cigarette smoking, he told Reuters. There might be small warning signs, but thats not enough to stop addicts from smoking -- and anyway a lot of people cant read.
The ACS called for more African governments to introduce anti-smoking legislation, and said other measures like charging high taxes on cigarettes had significant potential to cut smoking rates. Doubling the price of cigarettes by increasing the tax can lower consumption by fully 60 percent, it said.


Studies show smoking-related cancer deaths continue to worsen in Africa due to high consumption rate and since no further anti-tobacco policies from the government are being imposed to its constituents.  It has called the attention of American Cancer Society (ACS) to appeal for African government to cut the latters alarming growth rate of consumption, and of second-hand smoking as well, primarily by increasing taxes on cigarettes like doubling the price of cigarettes to greatly lower consumption rate by 60.
Taxes on cigarettes have been commonly used by states across the world for income-generating purposes.  But in recent years, charging higher taxes on cigarettes is used extensively in reducing cigarettes consumption due to health risks and abusive uses evident to active smokers, along with the negative effects to second-hand or passive smokers, as proven in the present situation in Africa where cancer deaths predominantly threatens the natives, and possibly become pandemic without proper precautionary measures.  Whatever motives a government has, with the study on price elasticity of demand of cigarettes, government can be able to determine the amount of tax increment to be charge per unit where companies can still operate on a reasonable market price and objectively reduce smoking. 
Price elasticity of demand measures the sensitivity of demand for cigarettes, like any other goods, after a particular change in its price.  With the basic principles of PED, products are elastic if minimal change in price results to drastic change in the demand quantity, these include  necessities and easily accessed products in the market while for inelastic ones, change in price affects only an insignificant change in the demand quantity, these goods consist of necessities, and no substitutes at hand.  In the case of cigarettes, demand is viewed to be more inelastic than elastic, despite its non-necessity and easy availability attributes, because of smokers habitual consumption and no other substitutes, even alcohol or drugs, can replace its incomparable benefits among end-users.
Being inelastic in nature, smokers are willing to buy cigarettes at any given price and in effect, cigarette firms raise its prices at extreme levels to gain bigger margins.  This is illustrated in Figure 1 graph below when producers significantly increase cigarettes prices (from p1 to p2), there would only be a slight decline on the quantity sold (from q2 to q1) which refers to the consumption rate of cigarettes.  However, the government still manipulates the pricing policies of manufacturers through imposing higher taxes on cigarettes, rather than let the latter take advantage on the price insensitivity of its consumers.   With this higher taxation rule, companies are forced to drop current ceiling on their selling rates, and may pass the additional costs enforced by government to consumers (technically termed as shifting the burden of the tax). As depicted in Figure 2, while demand for cigarettes is shown to be inelastic, excessive taxes add up on costs of cigarettes (p1 to p2), such increase in price results to a rise in supply as well (s1 to s2).


    However, government must be cautious in implementing higher taxes because it might hurt the tobacco industry if excessive taxes would mean additional costs and product demand will totally diminish in due course, despite its inelasticity side because of some factors such as disposable incomes, economic status, and time.  Rich countries and individuals with high disposable income are usually less responsive to changes in prices, compared to poor ones since their purchasing power is very low. With the poor economy in Africa, government must be really prudent in applying tax increases amount, because decline in consumption rate might eventually lower or lose the demand at large, where government revenues from import duties and excise taxes could go down in effect.  Likewise, increasing taxes could also be more discriminatory and disproportionate to earnings of the poor inhabitants, a concept of tax regression, where they pay more of the tax out of their low income unlike with high-income countries or individuals which are hardly distressed of such increases.  Also, cigarettes demand tends to be elastic in the long run, when consumers find it hard to cope up with rising costs after tax increases.  Other important issues consequential to tax increases that government should anticipate is the emergence of smuggling and bootlegging of cigarettes in the black market that could badly impact on government funding and cigarettes industry while consumers, especially the low-income groups, would shift to alternative markets offering cheaper items, normally goods traded illicitly and do not comply with taxation laws.

According to world economy statistics, Canada is rated as the tenth largest economy globally. Canadas per capita income is mainly boosted by the production sector but for the past few years Canadas good performance as compared to other countries in its peer group has declined. In the 1970s, its GDP per capita was gauged to be around 17,812, the fourth highest in the peer group, recording a B grade. The country worked on retaining this grade the following decade but it slipped into a C rating on average between 1990s and 2000s. On contrary, other countries in the peer group recorded a slip in their grades at the same time. However, this didnt mean that its per capita income was in decline. Relatively other countries like Ireland started pulling ahead of the pack shoving past Canada and narrowing the gap between the peer countries (Sherman). Countries with a lower record of income levelsneeded much more income to sustain their growth and to level with superior economies. 
Canada has a well developed agricultural sector that is rated as one of the worlds best and exports the agricultural products consisting mainly of wheat and various types of grains to diverse countries. The major importer of such agricultural products is the U.S although it exports to other European and East Asia countries. The agricultural sector was severely affected by the world recession and led to the decline of the countries GDP level (Sherman). On the other hand the Iris economy does not rely so much on the agriculture as was the case in the previous years, but now greatly depends on the industry and services sector.
Until recently, Ireland was the success among these countries. While Ireland currently ranks last on the overall economic performance list, one should not forget the fact that Ireland miraculously transformed itself from being among the poorest countries in Europe to the top best performers. After being rated as a D performer between 1970s, 1980s, and 1990s Ireland managed to climb up the ladder to a B grade country, propelling it to become one of the top three fast growing economies in the world. In the 1970s, the Gdp per capita income for Canada would double that of Irelandrelatively, by the year 2007 Irelands income per capita exceeded Canadas by US5,000 although the gap slipped to US3,700 in 2008. Lower labor economy and Irelands FDI-friendly environment certainly provided a strong foundation for growth and has since ignited the high growth experienced in Ireland lately (Sherman, 2008)
These close up meant there were certain factors contributing to the economic relationship between the two countries
Wages Ireland has the lowest labor costs than its peer group countries. Rating over 14, this means the competitiveness between Canada and Ireland is very low- a person will be more than willing to work in Canada than in Ireland so I would recommend that Canada is a good place to move business and work in. But this will mean the provision for wages accommodation and other benefits will need to be increased since the living conditions in Canada are relatively higher than in Ireland. More so the percentage level of the unemployed people is very low in Canada (8.7) as compared to Ireland meaning there is no ready and cheap labor like Ireland.
Financial system Although Ireland is boasting as on of the fastest growing economies in the world, the financial system in Canada is more promising and more stable. In Canada inflation is not commonly felt. There is a guarantee of working for two years without feeling the effect of inflation. Considering the almost wound up economic recession in Canada it is advisable to invest in Canada than in Ireland. The relationship between Canada and other trading nations is very good so a good network in terms of outside market is guaranteed.
GDP per capita, Interest rates and inflation rates. According to different sources the per capita between the two countries differ with Ireland topping both of them i.e. IMF rates Ireland 8th and Canada 13th in the world. The World Bank rates Ireland 5th and Canada 12th while CIA rates Ireland 9th and Canada 17th. Considering both cases Ireland seems to be performing well but lets consider that over 90 of Irish exports are generated by foreign investors. This means that Canada is more of self reliant than Ireland and is not congested by foreign investors. The lending and borrowing interest rates are also very competitive in Canada than Ireland. Inflation is also very low in Canada.
Canada is also one of the few countries which has ever hit a surplus of  10B having recorded a surplus of 14. This was very good news indicating that tax rates and borrowing rates are expected to lower further. Canada was among the first countries to walk out of recession. Its economy is already growing at a rate of 1.3 in the ongoing current quarter.
Conclusion it is really advisable to invest a production business in Canada considering good financial performance, its stability in economy and politics.

    There is no need to emphasize the world is in the midst of the worst financial crisis in recorded history. Majority of the global economies are still locked in the grip of the tightening credit crunch, many will say will last for several years. In the United States, the administration of current President Barack Obama is still wrestling with the effects of the recession that is still buffeting the country and trying to find ways on how to best deal with those affected by it and coming up with strategies to coax America out of the financial doldrums. What caused the crisis in the first place and was the collapse of the American economy a sudden event or did certain events lead to the collapse
    According to the National Bureau of Economic Research, the American economy slipped into the recession in December of 2007 (Chris Isidore). But the announcement did not come as a surprise to many Americans , as they had believed that the American economy was on its way down the road to a recession. According to the Bureau, one of the key factors that led to the recession in the American economy was the downturn of the labor market for 2008. Businesses cut their payrolls by more than a million jobs for the first 10 months of 2008. it was also expected that the American labor force will lose another 325,000 come November (Isidore).
    But the Economic Research Bureau did not categorically state what specific factors contributed to the American recession (Isidore). But the downturn in the housing market was one of the widely held reasons that the American economy nose dived into a recessionary mode. The breakdown of the housing markets boom cycle was begun with the decrease in the prices of the prices for new housing units by the third quarter in 2006 (Benjamin Powell 1). in the Case-Shiller Index,  the average for prices nationwide dipped by more than 30 from their high levels in 2006 through 2009. In other markets, the dive was more severe (Powell 1).
    Phoenix and Las Vegas took hits in the prices of the houses in their locales, decreasing to more than half of their value. Housing markets in California and Florida have experienced decreases in their markets by more than 40 percent. The decrease in the price of residences led to sudden upturn in the foreclosures of the houses owners. The financial indicator Dow Jones slid to less than 7,000 points in 2009 from their 14,000 level in late 2006. (Powell 1).
    The dive in the prices of houses from their highest levels took a significant share in the home building and home sales sectors. As earlier stated, the decrease in the prices of homes caused the increase in the foreclosures in the mortgage market, which led to the losses for banking institutions and the tightening of credit in the market (Isidore).  The housing bubble in the United States was created by the lax monetary program in the United States. This expansive monetary policy led to the birth of the American housing bubble (Powell 1).
    After the collapse of the  dot.com  bubble in the 90s and the  911 terrorist attacks, the Federal Reserve decreased the rate of funds to 2 percent from 6 percent and further lowered the number to just one percent in 2004. When the Fed raised the rate to 5 percent, the bubble in the housing market imploded (Powell 1). The link between the implosion of the housing market in the United States is seen as the main catalyst in the collapse of the American economy and the huge amount of debts used to fuel the growth of the bubble (Thomas Palley 2). But the question that can be posed in the scenario is if the economy required the presence of a bubble to continue the growth pattern of the economy
    If the context for the scenario is the need for the bubble, then the cause of the crisis is the macroeconomic framework that underpins the American economy. The state of the macroeconomic framework in operation at the time of the crisis will well lead to a discovery of the cause, as these principles have been in operation for the past quarter of a century. The first factor is the growth model being used by the United States and the pattern of income allocation and the creation of demand in the parameters of the American economy, the second addresses the American frame of foreign trade arrangements and the construction of the global trade relations of the United States in the confines of the global economic scheme (Palley 2).
    The forces in the macroeconomic level have contributed, albeit slowly, to the creation of the unstable economic environment. The instability can be seen in the bubbles in the economy, the increasing American load of debt, increasing trade deficits and  boom and bust  business cycles. But economic managers and researchers have willfully ignored the signs that have carried the American economy to the brink of ruin. These signs and actions have largely contributed to the collapse of the American economy (Palley 3).
    The crash of the sub prime housing market in 2007 is considered as the main trigger of the collapse, which was exacerbated by the flawed decision to allow the demise of Lehman Brothers (Palley 3). The contagion of the American sub prime crisis spread across the Atlantic. This provoked the insertion of significant amounts of liquidity into the market by the European Central Bank and the Federal Reserve. It is seen that since the primary trigger of the problem, the collapse of the American housing market, will not be resolved in the near future, the problem of the American recession is seen to last for some time (Koichi Haji 1).
    Many observers state that the best case in the current crisis is that the recession and its effects will bottom out by the second quarter of 2009. But even in that best case scenario, the current recession will be chronicled as the longest in the history of the United States since the Great Depression in the 1930s. In the opinion of Argus Research director of economic research Rich Yamarone, the good news in the entire affair is that the government has begun to initiate policies designed to address the current crisis. Just recently, representatives on Capitol Hill passed a tax rebate measure in the amount of  170 billion, designed to resuscitate the ailing economy (Isidore).   
    But the problem is not the amount but in the treatment of the problem. To the legislators, the problem seems to be solved by increasing the demand in the economy. Rather, it is the mismatching of the consumers preferences and the supply that the economy can deliver. Recovery will come when the preferences of the consumers and the supply capacity of the market is made to equate with one another. In the case of the housing bubble, money must be allocated to industries that can provide better satisfaction to the consumers rather than pump more money into industries that led to the collapse, hoping that these will placate the effects of the crisis on the industry (Powell 3).
    The response of the American leadership seems to mimic the experience of Japan  in its own housing market collapse. The government had initiated massive bailout programs and cut interest rates and a massive stimulus program was created. In like fashion, the American government gave out huge amounts of financial resources to companies with questionable credit ratings, such as Bear Stearns, J.P. Morgan and Fannie Mae and Freddie Mac. The process of letting the market determine the status of the institutions delayed the restructuring of the banks and the allowing of the market forces to take its course as to the final state of the financial institutions (Powell 4). 
    The Federal government, in particular the United States Treasury, Congress and the Federal Reserve have all acknowledged the severity of the crisis, and have begun the process of inserting trillions of dollars with the purpose of abetting the effects of the economy. This includes the  700 billion bail out program for Wall Street companies and other financial institutions and billions more to large American companies and borrowers. But in the opinion of Economic Research Institute managing director Lakshman Achuthan, the final cure for the recession is just letting the event run it course until it exhausts itself (Isidore).

Britain is credited with having been the first nation to industrialize in the world. History reckons England as the cradle of industrialization for having developed the first major industrial bases, notably mass production of various goods especially in the textile industry. In the 18th century, Britain experienced a rapid industrialization to become a leading exporter of manufactured goods. The textile industry became an important base for development of other industries and the development of urban settlements.  Britain developed a factory system which replaced the cottage system especially in the textile industry. Industrialization also led to development of urban areas and there were political and social changes that marked industrial revolution. Britain developed laissez faire political system of non-interference with industrial development and the government saw a number of aristocrats and capitalists fuel industrial growth. The wave of industrial revolution spread from Britain to other countries. However, the current trends in industrial development in Britain ascertain a growing trend towards shift from production of goods which has been the base for Britain economic growth, to the service sector.  The service sector has become an important feature of Britain economy although the country remains one of the largest manufacturers in the world.  However, this cannot be termed as deindustrialization but rather it is shift in alignment with the global demand. All over the world, there has been development of various economic sectors and service sector is arguably the largest economic sector coming after the manufacturing sector.  The shift in global manufacturing sector with emergence of low priced production economies like China may help to explain the shift in Britain as a means of adapting to the changing global industrial environment. Also, the trend in technology including increased mechanization of industries has left most people out of work which implies that the mere number of people working in the industrial sector cannot be used to predict the de-industrialization trend. Therefore, the shift to service sector in Britain can be explained in terms of the need to align with changing global industrial environment rather than de-industrialization.
Early industrialization in Britain
Our understanding of the current shift in industrial trend in Britain cannot be complete without understanding the earlier industrial growth in Britain. Britain is considered as the mother of industrialization owing the early industrial revolution that took place in the 17th and 18th century. Between 1700 and 1800, there were major changes to took place in Great Britain that later came to be regarded as industrial revolution (Matthews et al., 2002 81). 
It all began in 1733 when John Kay invented the flying shuttle that revolutionized the textile industry.  This invention made weaving easier and faster on looms and helped cottage industries to process fabrics at a higher rater leading to a shortage in yarns.  In 1764, James Hargreaves also invented the spinning jenny which made it possible to turn many spindles at once.  There were further improvements with the invention of water frame by Richard Arkwrights in 1769. In 1779, Samuel Crompton perfected the spinning art through invention of spinning mule which had features of spinning jenny and spinning frame. It is these inventions and other that eventually led to a growth of a powerful textile industry in Britain and provided the base for developed of other industries.
The growth of textile industry led to the emergence of factory system which soon replaced the cottage system that had been used for decades.  Early industries in Britain were only based on cottages and had limited capacity both in technology, access to raw materials, and market (Matthews et al., 2002 161).  The revolution in textile industry enabled production in mass and hence the development of factory system. Apart from changes experienced in textile industry, there were also rapid changes in other industries. For example, metalworking, which had been previously practiced as a cottage industry soon changed to factory industry. The revolution was so fast that in few years, there were many factories which sprang up in various places.
Industrial revolution in the textile industry led to urbanization. The development of factory system made it possible to employ large number of people. People moved from rural areas and settled around factories where they worked. Although this was marked by poor housing and other social problems, it provided the bases for growth of modern cities.  Men, women, and children all worked in these factories, albeit under inhumane conditions.
The development of the textile industry catalyzed the growth of other industries. It led to development of steam engine. Steam engine was used in steam pumps which were mounted on iron smelting works too pump air into furnace to smelt iron. This helped in growth of iron smelting industry and also the growth of transport sector.  The steam engine was soon used to develop trains used in transportation of raw materials, people, and finished goods.  Steam engine was also used in mining coal in deep mines and helped in lifting coal the ground surface from underground mines.  The transport sector also rapidly development with the invention of Johan McAdam roads as required by the General Turnpike Act passed in 1773 by the parliament.
Industrial revolution in Britain brought about social, political, and economic changes. There was great advancement economically as people found livelihoods working in industries. There were political changes as government became involved in setting out working conditions especially with enactment of Factor Acts in 1802 and 1819. These acts were made to regulate working conditions especially in reducing child employment.  Rise of trade unionism can also be traced to the early industrial revolution. Unionization was considered paramount in fighting poor working condition and fighting for rights of industrial workers.
From Britain, industrial revolution spread to the rest of the world. First it spread to nearby countries like France, Germany, and others before spreading through migration to United States and other Britain colony. It can be argued that British colonialism was basically aimed at providing more raw materials to fuel the growing industry. Most Britons were employed in industries at home or abroad. Industrialization catapulted Britain to become the  most industrialized nation in the 18th and 19th century but today it is ranked 6th in terms of industrial production.
Shift to service sector
The momentum that marked early industrial revolution in Britain seems to have slowed down.  Rapid development of industries has slowed down and there is an eminent shift in industrial production in the country.  Although the country houses all sorts of industries from textile to aeronautical industries, it is evident the glamour and glare that marked early industrial revolution in the country is diminishing, not because the level of industrial production has gone down but the number of people working in the sector has substantially reduced and overall contribution of the sector to the country GDP has also reduced.
During the era of industrial revolution and in the first half of the twentieth century, the manufacturing sector was important to Britain GDP. However, its contribution to GDP has reduced over the years and the service sector is today the largest component of the GDP.  According to CIA fact book (2009) the service sector contributed 74.5 of the GDP in 2008 while the industrial sector contributed 24.2 and agricultural sector contributed 1.3.  This indicates that the service sector is the most important sector the economy.  After the Second World War, the manufacturing sector accounted for more than 40 of the GDP but this has substantially reduced over the years owing to declining output (BBC, 2002). The rise in the service sector has been attributed to the growing trend in the world economy where the service sector is emerging as the most profitable sector.  The development of the service sector therefore aligns Britain economy in line with the world economy. Although it may not have been declared an official measure of the economic growth, the services sector is currently an important indicator of the advancement of a country economy. It will be found that countries with larger service sector have an advanced economy compared to countries with larger manufacturing sector. However, there is a close interlink between service sector and manufacturing sector in the sense that both complements the other.
It is evident that although Britain is ranked number 6th in industrial production there has been a decline in the manufacturing sector in the country. This is generally attributed to two factors. First, there has been shift of industries from higher wage economies to low wage economies. Second, there has been unprecedented growth of the service industry and stakeholders who previously operated manufacturing firms could have shifted to service sectors. This explains that this change could be aligning with overall change in the global economy.  The following graph shows the decline in Britain industrial production since 1990

Adapted from BBC (2002)
The above graph clearly illustrates that the manufacturing sector in Britain has been on the decline.  The graph shows a dip in the manufacturing sector in 1991-1992 and then a sudden peak in manufacturing in 1994-1995.  This graph shows an unsteady growth in the manufacturing sector in Britain since 1990.  The worst trend is however recorded from 2000 where the graph shows a step dip in industrial production going below the 1992 levels.  Therefore it is evident that the manufacturing sector output has declined at an alarming rate since the turn of the century and if anything it paints a grim picture of the future of the sector.
Analysts argue that this has been attributed to years of underinvestment (Moore and Briscoe, 1999 39). This is generally contributed by many factors including internal and external factors. Unlike other countries, Britain has not been in a position to attract internal and foreign direct investors which puts a question on the prevailing government policy.  However, analysts points out the emergence of low waged economy in Asia especially China which has attracted a large number of foreign investors. While Britain continue with high wage policies which are meant to align with standard of living in her cities, countries like China have taken advantage and propagated low waged economies, tax breaks, and generally low cost production economies attracting thousands of investors.  As can be seen in the graph below, there has been decline in investment in the manufacturing sector in the country since 1990s.  This has dealt a blow to the continued reinvention of the manufacturing sector.

Adapted from BBC (2002)
The decline in the manufacturing output in UK has also led to a decline in employment in the sector. At the turn of the nineteenth and twentieth century, the manufacturing sector was the largest employer in Britain but it has been overtaken by the service sector. About a hundred years ago, more than seven million workers were employed in the manufacturing sector but today, this number has drastically reduced to about three million. Of the 31.2 million people in the Britain labor force, only 18.2 work in the manufacturing sector while more than 80.4 work in the service sector with about 1.4 working in the agricultural sector (CIA Fact book, 2009).  However, research shows that about 2.4 million jobs in the service sectors are supported by the manufacturing sector which ascertains the relationship between the two industrial sectors. As can be seen in the graph below, the rate of employment in the manufacturing sector has been on the decline over the years since 1970s

Adapted from BBC (2002)
 The above graph shows that the total employment in the manufacturing sector has systematically reduced over the years to its low in the turn of the twentieth century. This has been attributed to the declining level of investment in the sector which means there are few new jobs which are being created in the sector.
In apparent shift in the global economy, there has been evident change in the industrial establishment in the country. Emergence of new industries has showed a patterned change in production and employment. For example the aerospace industry which is relatively new in the economy having been established after the First World War it today one of the largest employer in the manufacturing industry with more than 100,000 employees.  Although mechanization has reduced employment, faltering rate of employment can be attributed to declining investment which means that there are fewer new jobs that are being created in the sector (Matthews et al., 2002 198). There are some industries which have declined over the years and have been replaced by more profitable industries. For example the industries which fueled industrial revolution including steel, coal mining, textiles, and others have reduced over the years and have been replaced by efficient and less labor intensive industries like pharmaceuticals, electronics, and others. This partially explains the reduction in the number of employees in this sector.  However,   relocation of industries to low wage economies can also be pointed out as a major factor leading to reduction in employment in the sector (Rowthorn and Ramaswarnyl, 1997 12). Most industries have relocated to Asia, South America, and few to Africa where cost of production is relatively low compared to Britain.
However can this phenomenon be explained
It is difficult ascertain whether Britain is experiencing de-industrialization or aligning to global market demand.  In its definition, deindustrialization is described as social and economic change which signifies removal of industrial capacity in a country, especially considering the heavy industries, and marked by a shift to service sector (Kucera and Milberg, 2003 192). Although there are many definitions that befit deindustrialization, the shift from industrial capacity to service capacity as a percentage of total GDP output put across a sound meaning.  Considering this definition, Britain can be considered to be experiencing a decline in industrial output and at the same time it is aligning its economy to the global market trend.
As was highlighted earlier, the global market is experiencing unprecedented change and most countries are now gearing towards development of service based economy. All over the world, the service sector is contributing a larger part of world GDP and therefore this phenomenon is not peculiar to Britain alone.  Apparently, Britain has been moving in line with the development in the world market where the demand is leaning more on the service sector compared to manufacturing sector. The government has also moved in line with demand in the world market to implement policies that are geared towards supporting the service sector.  Therefore the government efforts in developing policy framework that supports the service industry is in line with the global economic trend and does not in any way signify  lack of support for the manufacturing sector.  Although Britain is experiencing deindustrialization, this has been necessitated by the trend in the global business environment where the demand is leaning towards the service industry.
Conclusion
Britain was the first country to experience industrial revolution in the world.  This was necessitated by a number of inventions especially in the textile industry which formed the base for industrial revolution. Form Britain, industrial revolution spread to other countries and later all over the world.  For many years, the manufacturing sector has been an important sector of the Britain economy but this has substantially changed since the second half of the twentieth century. Years of low key investment in the manufacturing sector has reduced the overall manufacturing output and employment. Reduction of the manufacturing sector has been attributed to different factors including emergence of low wage economies in China and the rise of the service sector.  Although Britain is experiencing deindustrialization, the shift towards the service sector has been attributed to change in global business environment.

Behavioral economics is one single most influential and dynamic area in the current economics. Applying some insights from psychological science(s) to the economic models so as to understand better the economics decision making, the behavioral look has provided new and important ways for the economists to understand why different people make different choices that they make. The purpose of this paper therefore, is to explain how behavioral economics rescue the economic man from the selfishness in which he finds himself.


Economic man is an imaginary perfect rational person who maximizes hisher economic welfare or being and achieves the consumer equilibrium by thinking marginally all the time. The importance of this concept is hinged in the theory of consumer behavior in which real people function such as this fictional entity. On the other hand, economics is a group of ideas and conventions put together by different economists which they accept and use to reason along with. It is mainly a culture of doing things mainly by the economists. Behavioral economics therefore represents the transformation of such culture and it is a field of economics that study how decision-making process influences reached decisions in any organization as well as in any individual.
The axioms of the consumer choices that underlie the economic man ensure that he, the economic man, is minimally rational and consistent in the choices that he makes because he always prefers more of a thing to less and he is able to efficiently allocate his low income among numerous things that he desires so as to enable him achieve a global utility maximum. In a standard welfare model, habits and culture are assumed to take a fixed position or at least change slowly during a given time period so that the cultural context of the Homo economicus economic man does not enter the analysis stage. The way tastes and preferences are formed is assumed to be outside the purview of economics because they are not matters of dispute (Stigler and Becker, 1977).
According to Veblens (1898), an Economic man is a homogeneous (Uniform) globule of desire full of self interest. Self-interest is defined by different economists as all things that are intangible and tangible to human beings (Solow, 1993) but in practice the real meaning of utility is radically narrowed down to mean the consumption of goods in the market. Any increase in the welfare is equated to the increase in the economic output. The Economists are aware of public goods, intransitivity, Veblen effects and interdependent utilities but all these real-world phenomena are very difficult to include in the general equilibrium framework that currently dominate the economic policy recommendations.
Different subjects explain the economic man in different terms pointing to the same meaning. For instance, biology explains the economic man as a selfish gene while regarding it as a concept that is used to explain the overall selfishness of any living thing especially man and for the direction of evolution. Richard Dawkins with his evolution theory coined this term in his book titled The Selfish Gene (Dawkins, 1976) as a notion of competition, struggle for survivalexistence, natural selection and survival of the fittest in his idea of genes as self replicators. In a teleological account, evolution of the biological life is explained as being driven by these replicators, genes. The conclusion drawn here is that the successful replicators are very selfish that otherwise they would not replicate successfully. In order to protect and preserve their replication process, these genes create avenues of self-preservation in form of living things, their bodies and minds. From this type of reasoning, Dawkins (1976, p. 2) concludes that human nature cannot be anything but selfish as its very essence is composed of very selfish units in the name of genes. Later, Dawkins expanded his biological research by considering these genes as self-contained wholes things.
But, as Maynard Smith states in Barlow (1991, p. 195), this Selfish Gene does not contain any new facts but rather offers a new world view. The basic to this view is the notion that competition and the virtuousness of the selfish behavior of biological units are rife in ever being. It is from this view that the biologist Ghiselin (1974, p. 247) writes concerning the species and nature that natural economy is competitive from start to the end .This can be seen in the impulses which lead an animal to sacrifice herself for another turn out to have their rationale in gaining more advantage over a third animal especially where it is in her own interest. Therefore, every organism can reasonably be expected to aid her fellow organisms yet if given full chance to act in her own interest, nothing but speed will restrain her from brutalizing, from murdering, from maiming her mate or child.
This perspective of the biological world replicates the economic perspective of human nature as being openly self-centered, rational in being consistent in choices they make and characterized by selfishness which is constrained by expediency. Strong intellectual thoughts in both economics and biology see the market economy as being full of utility-maximizing individuals without room for cooperation other than for a single individual to gain the immediate advantage over other individuals.
With the above explanation, there are three areas that tend to look at the economic man in a bid to get him out of his selfishness. These areas include the neoclassical economics, the human behavior and the behavioral economics. The criticism of these three areas against each other really explains the demerits of the economic man and the associated selfishness to each other.
In the neoclassical economics, economics is the study of the way resources are allocated to their uses. In this school of thinking, economics is said to be the study which considers human behavior as a relation between alternative ends and scarce means. Virtually every neoclassical economist is a positive economist though there are a number of positive economists that are not neoclassical in nature. Therefore, neoclassical economists consider the study of resource allocation as scientific and not a normative study. In addition, a neoclassical economist believes that free markets always bring about efficient resource allocation.
With this understanding, neoclassical economists have made a number of assumptions. Depending on the definition that one can prefer, it can be said that economists are more interested in the resource allocation in nature and causes wealth of nations or perhaps something different. Irrespective of all these, all such things depend on the actions and decisions of people. Therefore, so as to get started, economists made or make some assumptions about people and about how individuals act and how they decide how to act. However, the economists have not as a rule based these assumptions on the psychological views of human minds. Rather, most of them have started from an assumption that few modern psychologists might support. This assumption is that human beings individuals are highly rational and self-interested selfish. Many neoclassical economists assume that human beings make their choices in a way that gives them the best possible advantage(s) especially given the circumstances that they face. Such circumstances includes such things as the prices of the resources, goods and services available, scarce income, limited and localized technology for transforming such resources into finished goods and services, taxes imposed on them by their organizations, regulations by their governments and other objective limitations on the choices that they make.
In Strict terms, neoclassical economics does not just assume that real and concrete people are rational and self-interested as it may seem. Rather, many economists assume that the economic systems work as if they consist of the rational and self-interested persons. People exists in all sorts ranging from sneaky and altruistic to smart and dumb but if the average is an individual that is rational and self-interested, then the system most definitely will act as if human beings in general were self-interested and rational. The basis of neoclassical economics assumes that deviations from the rational self-interests are random and therefore will cancel out making the system to act as if every person is rational and self-interested. As a consequence, neoclassical economics studies the economic system that consists of rational, self-interested persons.
However, it is known that there are some examples of non-self-interested behavior of human beings who for instance give to the church and who sacrifice themselves in other ways -- and common sense suggests that human beings are often irrational chumps.
There are two very issues here to closely scrutinize. The first one is that human beings are at times altruistic. One can not avoid concluding that people sometimes act on ethical values making it hard to see how the selfishness of this majority can cancel out this self-sacrifice of many others. Therefore, people often act on non self interested values but whenever they do so they act on their own values and not of the government or some philosopher(s) or the economist that is observing. This might be called a rational individualism rather than a rational self interest.
What is left then is the rationality if human beings are not always self-interested. A broader neoclassical economics presumes that human beings choose things in a way that best advances their own values, altruistic or self-interested. The critics of the neoclassical economics sometimes argue that economics is an apology for self-interest.
We can therefore note the behavioral approachs criticism to the neoclassical economics that man is always selfish and self centered. The behavioral approach indicates that not all people are self centered since many individuals act on behalf of other people. This indicated that it is not true that all people are selfish. Rather, some are and it should not be generalized that all human beings are selfish to conform to the economic man.
However, human behavior is not always selfish and behavioral economics rescues economic man from the selfish gene. In other words, the behavioral economics criticizes the neoclassical economics whether people are always rational or not. The neoclassical economics is at times criticized for its normative bias against human beings especially on their assumption. In this perspective, it does not lay more focus on explaining the actual economies instead of describing a utopia in which Pareto optimality applies.
The assumption that human beings act rationally can be seen as ignoring very important aspects of the human behavior. Many people see the economic man to be very different from real people. Majority of the economists, even contemporary economists, have criticized the model of economic man. Neoclassical economics assumes people to be the lightning calculators of pleasures and pains, who oscillate like the homogeneous globule of desires of happiness under impulses of stimuli which shifts about an area but leaves then intact. Large organizations might come closer to the neoclassical ideal of maximizing profits but this is not necessarily seen as desirable whenever it arises at the expense of negligence of the wider social issues. The response to this argument is that neoclassical economics is more of a descriptive statement rather than a normative one. It therefore addresses such problems with the concepts of private against those of social utility.
Many critics of behavioral economics typically insist on the rationality of the economic agents. They contend that the experimentally observed behavior is not applicable to the market situations as the learning opportunities and competition ensures at a close approximation of the rational behavior. Equally, many others note that the cognitive theories like the prospect theory are models of decision making and not generalized economic behavior hence are only applicable to the sort of once-off decision problems that are presented to experiment the survey respondents.
Traditional economists are also very skeptical of the survey based techniques which are put to use extensively in the behavioral economics. Economists typically emphasize on the revealed preferences over the stated preferences from the survey in determining the economic value. Experiments and surveys should be designed very carefully so as to avoid systemic biases and lack of incentive compatibility.
Some economists on the other hand dismiss these criticisms claiming that the results are reproduced in various situations and nations which can lead to good theoretical insight. Behavioral economists on the other hand have incorporated these criticisms by focusing more on the field studies as compared to the than lab experiments. Some economists therefore look at this split as the fundamental schism between the experimental economics and the behavioral economics. However, prominent experimental and behavioral economists overlap some techniques and approaches in giving answers to common questions.
In addition, many other proponents of the behavioral economics have taken note that neoclassical models many times fail to predict the outcomes in the real world context. Behavioral insights can therefore be used to update the neoclassical equations and the economists have noted that these revised models do not only reach similar correct predictions as the traditional models but predicts correctly some outcomes where the traditional models fail.

Dubai is one of the leading best global markets in the world. Both developed and developing countries have ventured in Dubai to trade on their goods and services. The growth and development of market structures in Dubai is as a result of borrowing from international communities. Financial aid by other communities has led to the payment of debts at a rate of one hundred percent of the Gross Domestic Product. The market is developing at a very high rate such that there is flooding of goods in the market and also the demand for these goods has also increased (New Now, 2009). The market policy in Dubai is run on credit basis whereby buyers get goods or services and make payments at a later date.
Proposal of Dubai to delay payment of its debts across many markets of Persian Gulf has led to a debt crisis. The delays led to a rise in the cost of shielding government notes from Saudi Arabia.  Property bonds also led to increased period of maturity making it so hard for investors to put trust in the financial systems of Dubai. This procedure has led to development of complication during collection period and it has resulted to accumulation of debts that are not paid thus the market collapse. This is one of the major challenges that have led to debt crisis in Dubai. The stock markets are not left behind in this type of marketing strategy and the value of stocks in the Stock Exchange Market has lost value (Jacob, 2009).  The current situation in the whole world about economic crisis has also led to development of stock crisis in Dubai.
Putting down strategies to run business is very critical because this allows business to survive in the entire competitive global market. One of the most important strategies is to ensure that the debts are reduced by controlling borrowing and encouragement of customers to make payments on cash basis.  Once the debts cannot be paid fully, they then become bad debts and this is an expense to the company. Dubai deals mostly in importation of motor vehicles and it is well known for a good  trading in the stock markets but the accumulation of debts has led to existence of problems that cannot be resolved easily causing allot of challenges to the market and lives of many households.
Macroeconomic view of the Dubai Crisis
    The author of this paper tries to discuss the reasons that led to development of debt crisis in Dubai in respect to macroeconomic views. The crisis in Dubai can be expounded well by looking it in the perspective of macroeconomics. Debts in a business are a normal way of carrying on transactions in the market place. However, macroeconomic theory does not advocate for this process. Indeed, there are some macroeconomic theories that support the use of debts as a way of converting them into cash.  The macroeconomic aspect of debt crisis in Dubai covers a wide range of explanations as to how this crisis happened and its impact in economy (Schuman, 2009).  For instance, in the past weeks, most Americans had focused their view on Turkey but most financial markets in the entire world were faced by debt crisis in Dubai leading to their collapse. The crisis in Dubai started during a short period of holiday but its effects were not as adverse as most how the business people had speculated. There was speculation of a bail out by Abu Dhabi Central Bank which had promised to issue a statement about Dubais financial institutions such as Barclays bank, Standard Chartered and HSBC.
    Liquidity of banking system in any particular country is essential for monitoring the flow of money in the economy. As it was speculated, the government failed to guarantee the payment of sixty billion US dollars causing many local markets to tumble. Failure by the government to honor payment of this debt was the beginning of Dubais crisis and the crisis has spread even to the local markets. Dubai officials saw sixty billion US Dollars as very little debt that could not have any impact on the entire market but their sediments were wrong because the collapse of the neighboring markets was as a result of this unpaid debt. This has led to many unanswered questions to many investors from different corners of the world (Cochrane, Harif, 2009). Global investors who had rushed to invest in the markets of Dubai are now counting losses and also the economy has collapsed as a result of this crisis.
    Other global markets like in London had almost forty four billion pounds lost as a result of Dubai debt crisis. To show how serious this crisis had on many global markets, the FTSE 100 index lost more than one hundred and seventy points as many investors had moved away from London to other markets in the world. France and Germany were not spared by this crisis particularly in the sector of car industries. The big share holders in these companies started to withdraw their membership because they feared the any effects of stocks collapse in many stock markets owned by individuals along the Gulf region. By this time, the problem had spread in many parts of the Gulf region and other neighboring cities creating a problem of mistrust and collapse of stock markets.
     Most markets in Dubai had taken some steps that led to the restructuring of its state owned company that has the highest number of shareholders (Dubai World), but there was a  in payment of the company liabilities that amounted to fifty nine billion US dollars. Delays in payment of these debts led to risk of loosing the value of Dubais currency against other currencies in the world. Financial markets were affected by these conditions and equities in the stock exchange markets were also affected. United Kingdom sterling pound for instance was affected adversely because it traded at its weakest point ever in the history of British exchange rates. The value of sterling pound against euro was very weak and many investors could not dare take a chance of investing in Dubais financial markets (Jacob, 2009). Economist and other strategists announced the extent to which most UKs banks had mounted a lot of pressure to financial institutions of Dubai.
     There are concerns that the holding company in Dubai, that is, Dubai world is seeking for any bank or any other financial institution that can offer aid to settle down these debts to continue on with normal operations. This announcement has led to many investors move out from getting frustrated as a result of the crisis created by accumulation of debts. According  to a certain market provider of information in Dubai, the price that investors are supposed to pay as a way of protecting them incase of such crises has risen because the situation is worsening day by day. There are also speculations that Dubai is taking a step of standstill from operations for a period of not less than six months and there is no investor who can take such chances. It is a problem that is affecting Dubai markets and other neighboring markets. The problem began as a minor one but its current effects are even bigger than it was expected. Analysts argue that if this condition is not contained, many financial markets in the entire world will collapse leading to a major global crisis.
    According to business world, Dubais debt crisis has threatened most of the known global financial markets like in New York. The crisis has led to a change in the way banks operate. For instance, some banks have reviewed the terms and conditions of giving its customers loans and this has affected the ability of nations to recover their economy. Financial institutions are mostly affected by this crisis because Dubai is in search of any potential financial institution ready to settle down its debt. Many commodity and stock markets have collapsed in New York, Asia and London as a result of investors fleeing to United States where there are better grounds for investment.
 During this period of crisis, US dollar was very strong against other currencies and investors turned to United States for investment.  In addition, the banks in United States had no interest.  There were some minor effects felt by investors in the US but due to the movement of business men and women from Dubai to United States, financial markets got a lot of boost. The effects of Dubai debt crisis led to banks stopping issuance of loan to their clients. Business was not normal in many banks because they feared that the chances of getting back the loaned amount was very minimal (News Now, 2009). Due to the collapse of banks and other financial institutions, many employees were left jobless and the government could do nothing about it. Although of late many banks are lending customers some money, there is that risk of failing to recover the whole amount and thus banks nowadays are trying to avoid it completely.
    The crisis caused the US dollar to be strong against euro and sterling pound but it traded at low rates against Yen which was a good show that financial markets had started to experience some problems. Dollar traded lowly against yen for a period of almost fourteen years when Japan started to buy dollars and sell yen as away of making the dollar recover from the slump experienced by many banks. As per information by Goldman Sachs, many banks in British experienced the highest amount of loss during this period. For instance, Standard Chartered made a loss of one hundred and seventy seven million US dollars and HSBC made a loss of six hundred and eleven million US dollars in form of loan debt (Jacob, 2009).
Since the economy of Dubai had shown signs of improvement, construction of infrastructures and other facilities were at the top gear. Many contractors had seen as a good opportunity to invest in but after a short period of time, the situation turned the other way round. For example, South Korea construction firms have many pending projects in Dubai as a result of this crisis. It is estimated that about three billion US dollars are yet to be paid. Many markets have developed in the neighboring cities of Dubai despite of the crisis but they are yet to be affected by this crisis. In Latin America and Asia, the performance of financial markets is said to be better than that of United States.  This problem has however been a challenge to those investors who want to put their capital in Dubai and other countries because the effects are being felt through measurement of countries Gross Domestic Product (Cochrane, Harif, 2009). The crisis is therefore not health for the development of economy and advancement of business strategies in many global regions.
Expected future problems of Dubais debt crisis in surrounding countries and United States
    Debt crisis has had many problems to the economy of its neighboring nations and United States. Most countries have taken the advantage of the rapid growth of economy in Dubai and its efficiency in the financial systems but they were caught unaware by the collapse of the financial system. Failure of government to pay for debts that had accumulated due to delayed payment was the beginning of financial markets collapse. New York City, London, Asia, Latin America, United States and other European countries are amongst the most common nations that felt the heat of Dubais debt crisis.  Emerging markets in Dubai has also attracted different types of investors who in turn have been affected by this crisis. An investor wants to put his or her capital in a project that will pay back within the shortest time period possible but when the project turns out to take longer time, then it is not a worthwhile for investment (Schuman, 2009). This is what happened in Dubai whereby many individuals and corporations had seen opportunities and rushed to exploit such opportunities only to get negative results at later period of time.
     Real estate market is another area that will be affected in future by this crisis. Many individuals or corporations have taken loans in form of mortgages to invest in real estates. Since the loans are issued at low rates, every body is guaranteed of getting some money to build houses for rent. Constructing many houses has led to flooding of market and the houses loose value. The security of the mortgage is basically the houses and since they have no value in the event of financial crises, it becomes so hard for banks to reclaim back their loans. This is an area which many banks did not put into consideration while giving out loans and it has reached a point where the government is the only organ that can save this issue. Alternatively, central bank of Abu Dhabi that owns most of the oil fields in Middle East can pledge to settle down the mortgages.
    Dubai debt crisis if not put under control will lead to collapse of the economy. The economy of any particular country is very much important especially when it comes to issues of debt settlement like loans and mortgages. When the debt accumulates from a long period of time, it becomes very difficult to pay it unless there is aid from strong financial systems or the government intervenes. Dubai has been supporting the development process and has enhanced many developing countries to invest highly in various sectors of production. Many  people  from  China, Africa, Europe, Japan and the neighboring areas work in  Dubai and the money they get as salary is send back to their native countries to support their families (Jacob, 2009). This has aided in the growth of economy by way of buying goods, services and through payment of taxes.  Therefore, the crisis in Dubai in future will affect the rate of economic growth in countries that have their people work in Dubai. The entire world is watching on the situation in Dubai and if it is not corrected after a period of say five years, the growth of economies in other countries will also be affected.
     Another major effect of the crisis in Dubai that will be felt in future is about changes in life style of many people around the world. The collapse of stock markets in Dubai and other economies will have a very great impact in the lifestyles of many individuals.  A good example is a situation where by individuals are employed in stock market exchange and other financial institutions. When these institutions collapses due to accumulation of debts, then the employees are send home because there is no work and perhaps no money to pay them. This definitely will affect the lives of these people because of lack of money. Those who are lucky enough might get jobs in other firms but the standard of living will have to change (Cochrane, Harif, 2009). The allowances given to these employees will be cut and thus the families of these employees will be affected in future. The rate of crimes is seen to be on the rise and poverty level also increases as a result of debt crisis.  Developing countries are the major victims of these problems because once there is a break down in the supply of money, it becomes very difficult to catch up with investment in their own countries that has no enough resources to support the economy.
There are some impacts associated with Dubai debt crisis in United States and other foreign countries. Like in the Qatar, it has been investing about 6 billion capital in many banks of Dubai as a way of promoting economic growth but it is faced with some challenges like securing of fields that are rich in gas. It is a nice way of increasing the confidence level of many neighboring and other foreign countries.  There is this issue of providing cheap ready market for goods and services that are found in other global markets (News Now, 2009). The stock market in Dubai is also the best in the surrounding area although foreign currencies tend to bear a very big blow in many markets of the world. US dollar during this time of crisis was very strong against the yen and this led to many investors changing their style of investment in Dubai and shifted to United States of America. This is one area that led to the spread of benefits to the United States. While other countries were feeling the effects of crisis, American on the other hand had fully benefited from this situation.
    In discussion therefore, this paper has been about the problems associated with debt crisis in Dubai, impacts of the crisis in neighboring countries and the US. The impacts are too effecting and there is a need to control this crisis for better future in the economic growth in both developing and developed nations. However, we can rationally accuse the weak financial parameters and guidelines over the fueling process of this crisis.