Economics

The relationship that exists between education and happiness has not been given much attention. Frey and Stutzer (2002, p.59) have confined themselves to alleging that the level of education, as such, bears little relation to happiness. Education is highly correlated with income .They continues to say that education may indirectly contribute to human happiness by giving a better provision for better adaptation to dynamic environments. But in the same breath it tends to take aspiration to a higher ground. It has for example been determined that when unemployment sets in, the less educated are distressed less than the highly educated. The main empirical and theoretical results on happiness and education are to be reviewed in order to provide arguments to support the educations positive effects on well-being.

Empirical studies have usually found positive effect on happiness on education, even after the income level has been controlled. The main reasons why education should improve happiness and the major determinants of demand of education are humans require a level of capabilities to make public appearance with confidence. Secondly, obtaining knowledge offers direct utility per se, just like a normal good. Also, education can be viewed as a signal information is revealed through schooling. People obtain indirect utility through having prestige. In addition promotion of job protection, employability and labor markets participation is achieved by education. Education is also correlated positively with earnings (Becker, 1994). It helps one to get more interesting jobs and accelerating promotions (Oswald and Blancflower, 1994), provides more independence and autonomy enhances participation in decisions and reduces routines (Albert and Davia, 2005). Finally, education has positive effect on health because more educated people are expected to lead healthier lifestyles, and they do visit there doctor as and when required.

There are a set of constraints that that limit access to education major one being family resources. The demand for education is higher when there are low lending rates, cheaper tuition fees, higher expected returns, and higher family resources. In addition parent imitation, territorial segregation and assertive mating can play a significant role in persistence in education intergeneration-wise.

Despite all the positive effects, the empirical evidence on the relationship between life satisfaction and education is not conclusive. Some studies (e.g. Oswald and Clark, 1996) have found opposite results after controlling the income factor, more people report a lower level of satisfaction. However two factors could influence the results. First, the level of education raises job expectations which are harder to fulfill. Over qualification for a job brings frustrations for people. When people hold lobs jobs that require lesser level of education than they are schooled, it can be considered a waste of resources and inefficient. Second, income dispersion increases with education level. Comparison between people who have the same education level but deferring salary scale can produce negative effect.

Education is one definitely one form of investment, having both non-economic and economic costs on one hand and benefits on the other. The comparative advantage of better education reduces with rise in the average education levels increase. When access to education is lower, the returns produced on education are higher. This is the most likely reason why Oswald and Clark (1996) find a negative effect on education on happiness.

The academic journey may extend to last the entire life of an individual depending on many varying factors, ranging from intellectual ability to an individuals zeal in academics. But what drives an individual to go to school and acquire formal education by means of reading up to thousands of pages most of which, like mathematics, they may find mind-cracking and hard to comprehend, leave alone to see their applications in real life Why go to school in the first place This is a question that has at least at some point in time lingered in the minds of most of those have gone to school and even those who havent and more importantly to researchers.

 But the reasons for obtaining formal education are known to all, or so it is perceived. Go to school, pass your examinations highly and eventually you will harvest the sweet fruits of education. There is little doubt that anyone has never been told or heard these words spoken about education. It is also widely accepted that formal education makes an individual a better person in general terms it is what makes the whole lot of difference between a civilized person (and society) and an uncivilized one. In other words, going through an education system is aimed at producing a well-rounded individual in skills and expertise capable of constructively taking part in economic production activities that will contribute to the overall well-being of the general society.

Arguably the most important element of formal education to an individual is the fact that at the end of many years of toiling in school, the person expects to be sufficiently rewarded by landing a high-paying job which will in turn give him financial prosperity. But is this usually the case This paper explores the role education plays in achieving life-satisfaction, and the general attitude towards education in the society.

Happiness
Many contemporary investigations of happiness are based on subjective determination of well-being. Researchers ask people about their present feelings and there hopes about the future. From this a yardstick of happiness is determined in a particular place and time. This kind of an approach is founded on the belief of existence of feeling bad and feeling good and that it can be identified and people talk about it (Layard, 2005, p.12-3). In the recent past, economists have become increasingly interested in the topic of happiness, triggered mainly by the publication of a paper by Richard Easterlin (1974), in which the author suggested how policy makers should maximize happiness as the main objective function instead of consumption, income and economic growth. As a matter of fact, self reported-happiness (average) was shown to be equal across poor and rich nations and that well-being is not necessarily raised by economic growth. By analyzing time series and cross section data for some selected countries, Easterlin observed that there was little correlation between the variables of interest (real GDP per capita and self-declared happiness). These unexpected findings are what is referred to as The Easterlin Paradox. Many other experiments carried out later have shown insignificant deviations from Easterlins findings.

What makes people happy
People give fairly consistent answers when asked to do so by investigators. For example, an influential study by Lane (2000) showed powerful links between companionship and subjective feeling of individuals well-being. It was found that people gain happiness through the kind relationships they have with other persons.

So does education bring us happiness The answer to this pertinent question lies in both yes and no. After attending school and passing ones examinations, a person is likely to land a good lob and have financial prosperity and achieve some level of happiness. Yet this does not guarantee the said individual eternal happiness. The person comes to realize that happiness is not achieved from just a single source.
Much attention has not been directed towards the relationship between happiness and education. Researchers such as Stutzer and Frey (2002, p.59) confine themselves to observation that an individuals level of education has little bearing to happiness. Rather, a high correlation between education with income has been established. By allowing a better and quicker adaptation to dynamic environment, education may contribute to ones degree of happiness. But with advancement in education comes higher aspiration levels (as explained by income adaptation theory). Yet another theory stresses the importance of comparative income rather than absolute income. Riches do bring happiness, provided you are richer than other people (Layard, 1980, p.737). It has been established that when the highly educated are hit by unemployment, they tend to become unhappier as compared to those with low level of education.

One of the most interesting features of discussions about educational reform is the almost total absence of meaningful conversation around what may make people happy and their well-being. In its place a lot of debate in form of how it may lead to growth of the economy, which has already been observed to often have a negative effect on peoples prosperity and happiness, takes place. Reforming education would be difficult if we fail to challenge and cherish the human heart that is the source of human teaching(Palmer, 1998, p.4).  He continues to argue that not much will be achieved unless the question of aims is addressed.

Until recently aims-talk figured prominently in educational theory, and most educational systems had some sort of statement of aims. Today much discussion in market democracies is dominated by a concern with standards - and the reason given for this emphasis is almost always economic. If we have to believe that individuals should have the chance to live fulfilling and happy lives then this simply will not work.

We both need to rescue aims-talk - and to infuse it with a concern for flourishing, he continues.
In the 1970s, cognitive psychologists began studying judgment and economic decision making. These studies took a different approach from the ones suggested earlier. They took expected-utility maximization and Bayesian probability judgments as benchmarks, and used conformity or deviation from these benchmarks as a way to theorize about cognitive mechanisms. Important psychology of this sort was done by Ward Edwards in the 1950s, and later by Amos Tversky, Daniel Kahneman, Baruch Fischhoff, Paul Slovic, and many others. Because the output of this research often consisted of psychological principles or constructs that could be expressed in simple formal terms, this sort of psychology provided a way to model bounded rationality which is more like standard economics than the more radical departure that earlier researchers had in mind. Much of behavioral economics consists of trying to incorporate this kind of psychology into economics.

A good illustration of how the economic predictions are improved by cognitive psychology is prospect theory which was proposed by Kahneman and Tversky as an alternative to the established expected utility theory. The core principle in prospect theory is that people adapt to hedonic sensations in making decisions rather than the overall economic sense, and therefore, utilities are determined by gains and losses from some reference point, rather than by overall wealth. Many studies suggest behavior toward losses and gains is different in two ways. First, losses are disliked  as much as two times equal-sized gains (loss-aversion), and secondly people often seek risk in the territory of losses when they can break even (i.e., they reach the their reference point), while they avoid risk in the gains domains (the reflection effect). In addition, in expected utility theory, attitudes toward risk are expressed solely by curvature of the utility function. In prospect theory (and many other alternative theories), risk attitudes are also influence by nonlinear weighting of probabilities-for example, a person could buy a lottery ticket, even if her utility function for money outcomes is concave, if she overweighs the small chance of winning. Indeed, the hypothesis that small probabilities are given too much weight (which is backed by many experiments) can explain why people with concave utility for gains would love high-skewness lotteries with a tiny chance of winning, and also explains why people who gamble over losses would nonetheless buy insurance against small chances of disastrous losses.

The objective of producing a highly knowledgeable individual is attached little meaning. People aim to go to the most reputable schools not to get the best education but to increase the chances of securing the best jobs available. This fact is aggravated by employers who generally show a bias towards alumni of certain reputable schools and overlooking those from other schools during the process of recruitment of staff. Prospect theory  by Kahneman and Tversky captures this scenario very well the decisions people make when choosing what career path to follow and which college to go to is purely hedonic, driven by prospective gains and losses rather than the general wealth the system is designed to instill in individuals.

In conclusion, education has an important role in life of humans by indirectly and directly contributing positively on self-esteem, self-confidence, and derivation of pleasure from acquiring knowledge. But focusing on economic growth through acquisition of education alone will run the risk of depressing the happiness of many members of a society significantly. The acquisition of general knowledge and skills-though paramount, is not good enough. Educators and trainers have a basic but critical role in molding dispositions. That is to say people need various virtues or dispositions in order to be happy and flourish. They are able to fit all that into a single coherent whole.

Comparing current economic crisis and Great Depression
The current U.S economic crisis that begun August 2007 has plunged the country into a very dangerous phase in the U.S economic performance (Hilsenrath and Paletta, 4). The great decline in stock market which reduced spending and wealth among people resembles to the great economic depression (Katz, 10). The Great Depression was an economic recession that eroded stock market wealth and eventually spilled to other sectors of the economy (Hilsenrath and Paletta, 4).  During the Great Depression, it has been recorded that Dow-gold ratio reduced substantially to a lower of 47 percent, most similar to the 42 percent experienced in the current crisis.  The enraging crisis also foresaw crippling of most financial institutions due to bad loans and many banks had to freeze lending from 1929.  There has been similar experience in the current crisis as the credit markets are on verge of collapsing.  In 2008, sum credit in financial institutions has reduced by more than 250 percent while bad debt level has gone below 350 percent market (Waggoner, 1).

The two crisis have shown similarities when comparing the trends in real estate.  Like in the 1929 Great Depression, there has been a great overvaluation of the real estate. Problems in real estate have been the main factors contributing to the current crisis (Delong, 2).

Under the global monetary system, dollar is converted with gold which means all the over currencies are only converted to gold or the Pound. However, this has become completely different since the dollar which is converted to gold has not been able to meet monetary conditions for conversion to gold standard which has destabilized world monetary system (Petrov, 2). Government response to the crisis is similar. In the current crisis, the United States government has signed a multibillion economic stimulus package totaling to 700 billion. This was a similar strategy which was taken in the Great Depression but in both economic crises, the economic stimulus package has not lived to its expectations (Stewart, 2).

It is still acceptable to say that the current economic crisis resembles the great economic depression of 1929 because the high rates of unemployment that was witnessed during the depression has also affected the United State economy where many people have remained jobless and retrenchment rates have been at its peak. The current rate of unemployment stands at 6.1 percent which is even below the 1992 rate which was 7.8 percent. Similarly those still employed are under fear of loosing there jobs people anytime if efforts towards recovery does not succeed (Waggoner, 3).  It is said that unemployment rate hit 10  for the past two years. Research shows that the job crisis in America reached a point where both the underemployed and unemployed stopped searching for jobs and the rate of those looking for full time job but they could only get part time job reached 17.4 . The rates of job crisis in America is said to be the highest figures in the world and continuity of such trends in America will certainly change the new generation and the life course (peck, 2).

The economic crisis in America forced president Franklin D. Roosevelt and the congress of the time to create FDIC with an aim of providing the federal state guarantee of deposits so the inception of FDIC in America granted people with certain amount of money guarantee of their money and those who deposited their finance with FDIC were very certain that their money was safe even if bank failure occurs (FDIC, 1).

How U.S economic crisis is different from the great depression
What need to be reflected first is that the 1929 occurrences were termed as a depression while the current situation in America is a recession. Scholars have said that the current economic crisis in United States is unlikely to culminate into the 1929 great economic depression. Some of the notable differences between the two include the following

During the economic depression the dollar was devalued relative to gold. Currently, there is absence of gold standard that serves as a restriction to the amount of money supply that can be expanded since the gold standard was abolished in 1971 thereby making the restriction of the dollar being tied to gold standards a nightmare in today world (Krugman, 3).

 During Great Depression, America economy was not ridden by bad debts as it is today. Currently, U.S economy has introduced credit cards that never existed in 1929. Similarly national debt and deficits in money available for spending was significantly lower than it is today where Americas debt is largely owned by foreigners who may easily devalue the dollar through selling dollar reserves and treasury bonds a decision that may lead to an international war.

Although the economic crisis has caused pain in America economy for instance collapse in financial market, overvaluation of real estate, fall in energy prices, collapse of industrial centers and existence of recession in many sectors of the economy there are hopes that some cities will recover much better than before the occurrence of financial crisis since there are almost fifteen areas in the economy that are still expanding such as oil and natural resources (Florida, 4).

Similarities between japans crisis of 1990s and the U.S Economic crisis
The financial market stress that hit American economy resembles Japanese market crisis after 1997. Its recorded that various banking institutions and securities greatly affected financial markets thereby leading to increased crisis in the banking system of the two countries. Likewise asset market was greatly hit with no indications of bottoming out which is similar to American real estate market. It is also indicated that great losses were noted in the financial market where cases of bad loans were prevalent and this is said to have held the recovery of Japan economy (IMF, 1).

In both economies, the economic crisis led to decline in consumers consumption habits since prices for goods were unaffordable thereby making consumers to minimize their spending potential with a view that in the near future prices will fall due to decline in demand. The period between 1980, Japanese monetary authorities flooded markets with liquidity so as to enhance the business to cope up with the rising value of Japanese yen. The excessive flow of money in the economy by 1990s led to immediate increase in the market value of equities and land since many investors directed their finances in real estate business (Posen, 6).

Differences between japans crisis of 1990s and the U.S Economic crisis.
Although the crisis in America and Japan were spearheaded by weak regulation and easy credit, policy makers argue that Japanese crisis looked larger than the American one because Japanese crisis stretched and affected the asset prices which were believed to be three to four times bigger than the American (Peck, 2). The banking crisis in the two economies shows that the American crisis was quite uncharacteristic since it shows household profligacy whereas the Japanese banking crisis comprised borrowing of finances by firms. In Japan for instance the sum bank losses on bad debts was almost 20 of the gross domestic product between 1993 to 2005 (Dick, 2008).

Trends shows that policy response to the crisis in America were quicker and this made America move into the second of and manageable fiscal stimulus package. The U.S took quicker steps to revive the banks through the use of public funds within one year while Japan took eight years to recapitalize its banking systems (Mikitini, 2000).

The lesson learnt from Japanese economic crisis is that the buying habits of consumers changes negatively when the rate of inflation is very high thus consumption rate of consumers decreases because they anticipate that prices of the products and services will fall in the near future where the will be able to buy at low prices and make some savings (Delong, 8).

It can be said that current governments came up with a number of policies to counter the effects of economic crisis for instance in America the federal reserve system kept the interest rates very low and expanded supply of money in the economy. Similarly many governments adopted the policy of reducing payments on housing loans. The strategy by federal government to inject more money into banking system in 2004 to 2006 helped increase the targeted federal money to more than the normal rate of 5 which reduced demand for houses thus fall in prices for houses hence solving the bubbles in the real estate management. Federal government also began bailing companies and banks that were collapsing such as GM, AIG and Chrysler and this helped to stimulate recovery of many banks and companies (Gene, 3).

In a global economy like the one we live today, businesses have transcended borders and firms operate with less restriction. Favorable business regulations enacted by various governments have enabled many companies to grow and establish presence in many territories and regions. Their operations spanning in different nations has earned them the title multinational corporations. One such industry is the auto industry. Though dominated by various players, some are have an upper hand than others.

General Motors, Toyota and Ford are some of the companies. The emerging economies of Asia like china and India offer the best mining ground for the companies and a look at their strategy will offer an insight into what the formula of their success has been. Diversifying into the Asian market is a worthy investment for any multinational company especially the motor industry. For instance general motors made a loss of over 10 billion in its North American operations while it made over a billion in profits from its Asian operations. That alone underscores its strategic importance of Asia.

Auto industry
Toyota, General Motors and Ford control a big share of the global auto market. Toyota for along time overtook general motors as the preferred car maker in the U.S. General Motors and Ford on the other hand has ventured into Toyotas backyard in Asia. The only common factor is that all of them are car makers. Other factors vary significantly. All the three companies manufacture pick ups, private cars and commercial vehicles. They come in different names which correspond with the cars features and markets. All the companies have shown great innovation but Toyota seems to be a head of the pack.
 There a close competition between the three as reflected by their sales figures. The graph below shows the market share that each control in the Asian region.


Asian operations
Asia auto industry is still young with a lot of potential. One factor that any business considers, especially auto makers is the fact that Asia has one of the largest populations in the world. Both china and India whose populations are bigger than any other countrys in the world are located in the continent. Its important to note that due to its population, India is the second fastest growing car market in the world after china. Chinas market is the most promising. Less than 20 in 1000 Chinese young stars drive compared to 900 in 1000 Americans. Forbes estimated in 2007 that the purchasing power of the Chinese will grow by 10 while that of Indians will increase by 5 (Butcher ,1). These sections of the populations have been the target of the auto makers. They represent the middle class whose strength is growing in Asia by day. Therefore it makes a lot of sense to court them and produce tailor made products that they can easily afford.

Asian car makers led by Toyota have been eating into American car manufacturers markets for quite sometime now. And the trend does not show signs of abetting.  Toyota hybrid model like the Prius have had huge success in the United States. The same has been replicated elsewhere in Europe and Asia. Like Toyota, Ford motors has done exceptionally well in the production and sale of hybrid vehicles globally. In 2004 its hybrid sales stood at 24,000 globally. The figure was projected to be 250,000 by the year 2010. But it still needs to cave a niche as big as Toyotas and general Motorss in Asia. Toyota has taken advantage of this technological gap to up its business in the Asian region. General motors Operating in Asia is a tricky affair fro general motors and ford considering there are a host of Asian auto makers who offer nearly the same quality products. General Motors has dominated the North American market for along time while Japan has dominated the Asian market.

The following graphs represent their total yearly sales in the United States in the last three years.

Graph showing yearly sales of the three auto makers in the united states(figures in 000,000s).
General motors has been the market leader in north America but in the year 2009, that position was taken by Toyota amid General motors and fords financial woes.

Strategies
The low cost of labor in Asia is one attractive factor that has enabled the companies to carry out successful operations in Asia. China Thailand and India seems to be the launch pads for the American auto makers, in Asia. . In 2005 ford president Bill Ford announced that the company had long-term expansion plans in Asia and Thailand was going to be the main engine of that growth (business in Asia, 1).

Manufacturing or production capacity seems to be the determinant factor in how successful operations of car makers in Asia are going to be. All the companies have announced plans to build more manufacturing plants in the countries while Toyota has an advantage in its native Japan. General motors have relied on its manufacturing capacity as a plus in Asia. A series of manufacturing plants have been set up in Asia to serve the growing market. In 2008 GM chairman announced a new manufacturing plant in Bangkok Thailand (Fuller T, 1). Ford on the other hand has split its manufacturing in Asia by establishing two manufacturing plants in the Philippines and in Thailand. A third plant is due in 2010, the company announced in 2009

Partnership with regional car maker is the main strategy that the American car makers as well as the Japanese one have used to penetrate in the region. Ford has also upped its Asian niche through some acquisitions like the 1979 acquisition of Japanese car maker Mazda. Through Mazda ford also acquired a stake in the South Korean car maker KIA.

Though some of the technology is sourced from the United States, most of it is obtained with collaboration from the Asian partners. General Motors makes use of its original technology as well as from its partners in Asia. It has a research center in bungalow in India with over 800 engineers and 100 scientists. In 2003 Toyota opened a quality and deign center in Melbourne Australia. The center employs 150 people and is used to fine-tune other models for the Asia pacific region (I start, 1). There is still a Toyota technical center that is based in Thailand and employs 290 people. It serves the region by designing and modifying spare parts made in Japan and meant for the region.

Compared to its competitors, General Motors and Toyota, Fords presence in Asia has traditionally been much smaller. Its operations have been confined to countries like Malaysia, Singapore, Hong Kong, the Philippines, Taiwan and lately china. In Taiwan, Ford has had a joint venture with Lio Ho since the 1970s. Ford began assembly of cars in Thailand in 1960, but withdrew from the country in 1976, and did not return until 1995, when it formed a joint venture with Mazda called Auto Alliance. By 2002 general motors was registering phenomenal growth and general motors hoped to be one of the biggest auto makers in Asia. Ford initially had problems growing in Asia because they had not focused on the regions two biggest markets India and china. Ford had a slow Chinese operation because of its dealership locations. The underdeveloped western provinces provided little support to customers and spear parts had to be imported eating into profits. Unlike general motors whose plants are located near shanghai. Part of its strategy is moving its headquarters from Thailand to china.  Then Ford is now working to consolidate manufacturing in four regions. It also seeks a more cohesive regional approach instead of country-by-country operations, and is working to enhance the Ford brand. Ford has to its customer service complimentary customer service inspection. That ahs a lot of people going for its products compared to its competitors.

All the auto companies discussed here have formed subsidiary companies that help in running their operations in Asia. General Motors operates in Asia through GM Asia Pacific Holdings, LLC. It runs operations through its subsidiaries, designs, manufactures, and markets vehicles. It has manufacturing and assembly operations in Australia, China, Indonesia, India, and Thailand (business week, 1). Toyota on the other hand runs its Asian operations through the Toyota Motor Asia pacific pte ltd (tmap). It is established as a wholly-owned subsidiary of Toyota Motor Corporation (TMC) to coordinate and facilitate Toyota vehicles and vehicle parts, as well as to provide Management Services to related companies in the region. The headquarters are based in Singapore.

 The three companies have taken advantage of the free trade areas in Asia to establish market presence. On that front Ford seems to have maximized most. It has declared that Thailand china and India are the most critical elements in its strategy for growth in Asia. Leadership through innovation will steer Ford through the next century in Asia. The Philippines plant manufactures cars while the Thai plant manufactures pickups. This plant manufactures meant for the South East Asia market. The companys strategy was tailored to take advantage of low duties under the ASEAN Free Trade Area (AFTA) scheme. The agreement too allows Thai-made pickups to be exported throughout Southeast Asia (Asia in business, 1). Similar to general motors Ford has seen a decline in sales in the mature markets of North America and Europe while the Asian market has shown real potential for growth. They have too focused on cutting costs as the main strategy in ramping up their profits in the region and the world (business in Asia, 1).

Recognizing the importance that the Indian market has on the overall Asian operations, Ford began production in 1998 with its Ford Escort model. It was later replaced by locally produced Ford Ikon in 2001. The Fusion, Fiesta, Mondeo and Endeavour have been added to its product line.

Marketing
Cost of their products has been the derailing factor in the Asian operations. Boosting production and cost friendly policies seems to be one of the main strategies being employed by the car makers in Asia. Japanese and Korean auto makers like Suzuki and Hyundai have done better in Asian markets that General Motors and Ford because of pricing (MSCNBC, 1). The companies responded by launching a series of affordable cars to the Asian market with India specifically in mind.  Ford Motor Co. is the latest to launch its first made-for-India compact car. The Figo goes for 349,900 (7,690), and Fords first car designed and priced for the mass Indian market. Its manufactured by the Indian plant. It will be distributed through out the south East Asian region .General motors too recognized that fact and have since launched mini cars that are price friendly in Asia. General motors launched the mini Chevy car in India while Ford Motors launched the mid-sized Fiesta model in India.

All the car makers have adopted a customer focused marketing strategy that aims at pleasing the customer with almost tailor made products. In its customer service strategy General Motors has numerous service dealers centers like 800 in china while Toyota has 500.

Toyota is a prime example of how customer focused service and marketing can be used to net clients in Asia. The strategy stresses on positive influences of vehicle ownership and quality. On the core of it Toyota has used a marketing principle of targeting the potential customer and the present customer (Guyes, 8).  Toyota applies universally the principle of lean production system that has enables it produce efficient cars. USA Today once described Toyota as being a state of the mind much as it is a car maker. It underscores the importance that people have come to attach to Toyota quality.

Partnerships have been the lead strategy that general motors has employed to establish its presence in the market. Besides, there have been acquisitions and merges together with joint ventures with financial services providers. General Motors have acquired stakes in Subaru, Isuzu, Suzuki and Daewoo.

Additionally general motors purchased a manufacturing plant in Vietnam giving it strong presence in the Asian market. (Andrea Wielgat 1). On 4th December 2009 general motors signed a 50-50 joint venture with SAIC Motor forming the General Motors SAIC Investment Limited (PR-Inside, 1). The venture strengthened general Motorss standing in the Chinese market and according to the deal gave the two companies a better footing in leveraging their resources in Asia s emerging markets. The companies already have a strategy in place to rejuvenate sales in India which is poised to be the worlds most populous country.

Ramping up operations especially in emerging markets like India is still a dependable strategy from General Motors in Asia. The company chairman reiterated that as recently as 2008 while launching the mini Chevy car in India. As a way to scale down its manufacturing costs, the company sources its manufacturing equipments from India

Employee organization
Most of the employees are hired locally in the countries where manufacturing takes place. Labor is only imported where necessary to fill gaps on technical expertise but the aim of employing local is to make the companies have a local face rather than being seen as foreign firm. Ford and Toyota are family businesses and though they are run professionally the chairmen and presidents tend to be from the family line. Currently, Bill Ford is the president of Ford Motors Co and Akio Toyoda for Toyota.

In Asia where Toyota rules, general motors has instructed its employees to follow the kaizen principle of continuous improvement. Its Asian workforce is not well compensated like the one in North America safe probably for the top manager. Benefits like medical care have not been extended to the workers to the level of their North American counterparts.

Toyota holds regular training seminars and workshops for its employees and manufacturing affiliates. In 2006 it held in Thailand which was attended by the president of the country.

Criticism
Car makers have recently been in the news for all the wrong reasons. Toyota which was seen as an icon of quality in the market is on the verge of loosing that reputation due to the numerous recalls that were instituted by the car maker. Some aspects of quality were ignores hence compromising safety of passengers. General Motors and Ford are emerging from painful episodes of restructuring and bailouts that have changed the perception of their images among the public. Quality issues had clearly bee overlooked and expansion and spending practices queried. Toyotas motor president has been forced to come out to apologize to the customers over the recall fiasco.

Though not directly, Asian governments have enacted numerous laws that have enabled the companies to do business successfully. Occasionally the heads of government or their representatives attend company functions. When General Motors was launching its mini Spray in India the countrys prime minister was present to witness the occasion. In Thailand the president has been present in many of the GM and Toyotas functions, this shows political favors indirectly given to the Corporations. Although it has been difficult to pinpoint the players involved in corruption scandals in those firms mostly the Multinational companies bribe and coerce policy makers in those countries through middlemen to influence and change policies which favor their companies operations.

Although they are an integral part of the economy in terms of creation of employment the multinationals mostly exploit the labor in terms of wages and in fact they are often accused of tolerating modern day labor slavery by creation of the sweatshops like companies.

The thorny issue of global warming has been blamed on the Auto-Industry by developing cars which pollute the environment and instead of focusing on magnitude of the damage they cause to the environment they are only driven by profits.

Conclusion
Multinational corporations play an important role shaping various countrys economies and peoples lives. They have been accused of misconduct in the past, allegations which some times are true. Because of the interdependent nature that exists between the economies people and the companies a workable framework has to be created so that a win-win situation is achieved. These firms in the Auto industry are without a doubt Multi National Corporations as they do not only operate in two or three countries but their operations span into almost all continents in the world. The Multinational Corporations are financial behemoths taking into consideration the amount of budget and finances they control. Firms like GM and Toyota have bigger budgets than some countries in the world and also the Asian region. With this financial muscle it is definitely easy for the firms to easily control and influence the policies of the country regarding their investment in those countries of operations.

Despite criticism which the Multinational always get which others are mostly justified the influence and their importance into those countries cannot be simply ignored. The firms employ thousands of people directly who in turn support their families economically and improve the social status and their well being and the ripple effect will be felt across the country. The firms contribute a lot in social development in corporate social responsibility. They also do contribute a lot to the economy of the country through taxation which is usual very high in comparison with local firms. As much as important their contribution is to the local economies they operate the Multinational are known to have a tendency of flouting and twisting rules to their advantage and they sometimes cause great damages in pursuit of making abnormal profits. These are tendencies which need to be discouraged and stopped to ensure the firms are positively contributing to the society and economies at large.

The United Kingdom with London as its capital is considered as one of the most globalised nations in the world. London is one of the major financial centres of the world economy other than New York and Tokyo. The UK economy comprises of the economies of nations like, England, Scotland, Wales and Northern Ireland. During the period of British Empire, the economy of United Kingdom was considered as the largest in the world and it was first to initiate the industrial revolution. There had been a significant decline in the UK economy after that but still by purchasing power parity it is the sixth largest economy.

The central bank of UK is the Bank of England or the old lady, which was founded in the year 1694 but nationalized in 1946. The bank regulates the financial system of UK by maintaining and controlling the fiscal and monetary policies. The banks main objective is to provide stability to the financial system of UK and maintain a healthy economy. The bank also maintains and manages the gold reserves and the foreign exchanges of United Kingdom.

Economic pressure on UKs inflation
During the recent economic crisis, the economy of UK faced the pressure and had to regulate its policies to combat the menace. At the later part of 2008, Bank of England had cut down the rate of interest to 1 and expected it to drop to about 0.5 in the successive years. In 2008, the budget deficit of UK was 5.3 of its GDP and was expected to rise in the next year to about 11.3 of GDP. The inflation rate rose to 3.6 in the year 2008, but it was expected to decline as the result of economic crisis in the recent future. The CPI of UK stood at 2.9 in the year 2009, indicating the decline due to economic collapse. The 3-month Treasury rate also dropped from 5.5 in 2008 to 1.3 in the year 2009. The economic crisis and recession had led its impact on the unemployment rate of UK, which rose to 6.3 in the later part of 2008 and is likely to grow to around 8-10 in the coming years. There were almost 2 million unemployed personnel in UK in the year 2008 and is expected to be 2.5 to 3 million in the coming years. The current account deficit of UK was US 186 billion, which was the third highest in the world. UK also has a huge trade deficit in terms of manufacturing, which needs to be sorted. The CPI had risen to 3.5 in January 2010 from 2.9 in December 2009 and the Government had targeted to keep it around 2. The Bank of England had taken some policy measures in their recent announcement regarding these issues to combat the crisis and stabilize the economy of UK.    

Objectives and practice of monetary policies in UK
The main objective of Bank of England was to provide stability to the financial system of UK and maintain a healthy economy. According to the Bank, macroeconomic stability can be maintained by altering the transmission mechanism regarding the monetary policies. Due to the latest financial crisis, the supply side of the economy of UK had experienced a temporary halt, which can easily turn into permanent unless there is a strong recovery of demand in the market. But the strong recovery might also result in an economic slack whose outcome will be an unusual low inflationary rate in the economy. Similarly, a stalled economy will result in a high inflationary rate.

Mr. Paul Tucker, the Governor of Bank of England, in his speech had addressed this issue and also stated that the bank is uncomfortable about the present CPI of 3.5 in January 2010, which is short living and the outcome of rise in VAT. After the recession, the banks key policy rate might be lower and the risk-free rate might be increased for future demand regulation. Hence, to offset these higher charges, which might be imposed by the bank, the bank would set low rate of interest as that of the present rate of 0.5. The bank also claims that the interest rates might be the lowest in the history of the bank. However, before the economic crisis the interest rate used to be around 5 and it would take some time to regain that position.    
  
Conclusion
The economy of UK had been unstable due to the recent financial crisis and recessionary effect. The supply side of the economy has been experiencing a halt with dried down demand. The unemployment rate is also rising and the employed section had experienced wage cuts. In this scenario, the Bank of England had to regulate its monetary policies, which might sound a bit harsh but the regulations are for general welfare and should be welcomed. The new policies would have significant impact in stabilizing the economy of UK and will help in balancing the rate of inflation.

Protectionism is an economic policy which the government uses to regulate imports to a country. The methods used in protectionism are tariffs, restrictive quotas and other mechanisms. The main aim of protectionism is to protect the domestic market from foreign competition. Free trade is discouraged by many countries since it creates intense competition to the domestic markets.

Gains from Trade are the benefits that nations derive from engaging in international trade. Trade between two or more countries is beneficial and countries have adopted the system of international trade to benefit from the global trade. Countries can produce commodities according to the comparative advantage. This has led to specialization by many countries. Prices in the international trade are regulated by forces of supply and demand. The competition in the international trade forces the firms to offer quality commodities in the market and prevents monopoly of some firms.

Globalization has been brought about by the issue of international trade. International markets create specialization of countries and provides a variety of commodities in the market for customers to buy .

Balance of trade deficits occur when the value of imports exceeds that of the exports. The country pays more for the imports than it receives for the exports. Balance of trade surpluses occur when the value of exports exceeds the value of imports. The country gains from trade since it receives more money from selling its products abroad than the cost of importing commodities from other countries .

Conclusion
International trade benefits countries and promotes globalization. Countries need to practice some amount of protectionism to hinder competition from international companies. For a country to benefit from trade, the exports should exceed the imports bay value.

Federal Reserve System (the Fed) is the central bank of the United Sates. The bank was founded in 1913 by an Act of Congress. The members of the bank are Board of Governors in Washington and 12 Federal Reserve District Banks (Chang, 2003). The Fed is independent from the government. This means that the monetary policy of the Fed is protected from political pressures.  The Fed regulates the economic activities of the country and regulates the financial institutions (Grivoyannis, 1999).

Monetary policy
This is the process through which the monetary authority of a country controls the supply, availability and the cost of money in an economy. The main aim of a monetary policy is to create economic growth and stability of a nation (Jones, 2002). The tools used in a monetary policy are either expansionary policy or the contractionary policy. An expansionary policy is used to expand the supply of money in an economy while the contractionary policy reduces the money supply. Open market operations are used as the main tool for executing monetary policy. The amount of money circulating in the country is regulated through the monetary policy. There are financial instruments used in regulating the amount of money in supply in the economy. Such instruments are treasury bills, company bonds and foreign currencies. To the contrary, the fiscal policy uses government tools to regulate the economy of a country. Such tools are the government expenditure, government borrowing and others (Grivoyannis, 1999).

In the United States, the Fed established the Federal Open Market Committee (FOMC) to make the monetary policies for the country. FOMC members meet every six weeks to set the fed funds rate. FOMC has currently set a fed funds rate of between 0 and 0.25 percent. The low rate has been maintained due to the low GDP growth rate and the unemployment that have affected the economy since the year 2007. A contractionary monetary policy has been maintained by the FOMC to ensure economic recovery after the 2008-2009 economic meltdown (Beckner, 2008).

There are several current key economic indicators that Fed reported on January 27 this year. The inflation rate CPI-U increased by 0.1 by the end of last year. The price index for all items increased by 0.1 last year. Fed has also reported that the unemployment rate has remained at 10 percent. The industries which had reduced employment rates were construction, manufacturing and wholesale trade. The sectors which increased employment are the help services and health care. Towards the end of the financial year 2009, the real GDP increased at a rate of 2.2. Federal funds rate will be maintained at a rate of 0 to 0.25 percent in 2010 (Beckner, 2008).

The meeting held on 27th January 2010 by FOMC was optimistic that the US economy is to recover from the recent problems which have affected the global economy. The monetary policy established by FOMC was to increase the availability of money and reduce the cost of borrowing money to increase the accessibility of capital to investors. The aim of the monetary policy is to promote the economic goals of the nation (Nowak, 2007).

The Employment Act of 1946 established the economic goals of the nation. The act suggests that the economy of the US has the goals of promoting maximum employment, production as well as purchasing power of the people. The Fed was given the mandate to establish the monetary policy by the Federal Reserve Act of 1913. FOMC has reported that the economic activities have started to increase since the beginning of this year. It has also stated that employment has increased but has not yet reached a sustainable level. Household expenditure is increasing at a good rate but has been affected by the weakness in the labor market. Other factors affecting the expansion of house hold expenditure are low housing wealth, moderate income growth and the tight credit in the economy. Expenditure by businesses on equipment and software is increasing. Employers are still reluctant to increase more employees into their systems due to the fear of another economic crisis. Sales and inventory have been improved by many organizations since the year 2008. The banks have continued to reduce their lending activities after the 20072008 economic crisis which hit most of the banks. However, the financial market conditions have supported economic growth over the period. The rate of economic recovery has been moderate. FOMC has anticipated a gradual economic recovery over time through the stability in the prices for many commodities (Nowak, 2007).

FOMC suggests that labor market has started to increase and that expenditure in household expenditure has increased moderately. The expenditure on equipment and software has continued to rise up while the inventory stocks are being aligned with the sales. FOMC anticipates a low chance for inflation to occur in the near future. However, the labor market still remains weak and income growth is low. Other current negative aspects about the monetary policy are that the housing wealth has remained low and that credit is still tight. Investors have reduced investment in structures. Employment is constant since employers have stopped to hiring (Shull, 2005).

The policy action by the committee is to maintain the economic status the same. FOMC has resolved to maintain the interest at a range of between 0 and  percent for the financial year 2010. It is anticipated to increase the rate when the economic conditions will improve. New policies will continue to be formulated to enhance the lending capacity and the growth in the housing market especially after the economic meltdown of 2008. The Fed has resolved to purchase 1.25 trillion agency mortgage securities. 175 billion of agency debt will be repaid by the Fed to create stability in the mortgage market. The committee will carry out these transactions moderately to ensure a good transition in the mortgage market. To support financial stability and economic growth, Fed has decided to wind down its Term Auction Facility. The strategies involved offering 50 billion in 28-day credit on 8th February. 25 billion in 28-day credit is scheduled to be offered on 8th March (Beckner, 2008).

The policy statements are voted upon by the FOMC members. Unlike in the past meeting where the voting on the federal funds rate has been unanimous, during the recent meeting, only one member voted. This is because the members feel that there has been a sufficient change in economic and financial conditions in the recent years. The FOMC members feel that the extension of the 0 to  federal funds rate is not sufficiently enough due to the major financial and economic changes that have taken place in the economy.  The low fed funds rate should not last for a long period of time and FOMC should adjust this rate (Shull, 2005).

The economic meltdown of 20082009 required the Federal Reserve to intervene. The crisis had been caused by subprime mortgage lending which created huge losses to banks after many debtors defaulted. The mortgage sector has been adversely affected by the crisis and fed has taken adequate procedures to ensure the industry has retained its position. The monetary policy issued by FOMC during the latest meeting had the agenda to reconstruct the mortgage industry (Beckner, 2008). The banking industry was also affected by the crisis and fed has established measures to reconstruct the industry. FOMC has established favorable interest rates to the banks to allow them pick up after the crisis. All financial institutions have been regulated to avoid similar crisis in future (Beckner, 2008).

The policy actions discussed by FOMC during the 26-27 January 2010 meeting were to adjust fed fund rate target, that is, whether to increase, decrease or remain the same. The rate was maintained as before, 0- percent. During the meeting, fed suggested several reasons to maintain the low fed funds rate target as low as possible. The reason was the persistent economic weakness the country has experienced over the past years.  FOMC has stated that the economic recovery is moderate and a strong recovery will be achieved in the near future. To increase the funds to the banks for issuing loans, FOMC suggested that the government should buy government securities. Federal Reserve has mostly used open market operations to promote its monetary policies. The main target of FOMC is to maintain the fed funds rate as low as possible (Beckner, 2008).

Douglas Norths Nobel Prize Lecture in 1993 is entitled Economic Performance through Time. His lecture particularly highlights the role of economic institutions, with time as an important element, in affecting economic performance in the hope of contributing aid for economic policy development in the future. Norths lecture is an important contribution to the expansion of the study of the economy. The lecture is deserving of the Nobel Prize because he produced a very important and useful theory of institutional change that has significantly contributed to the advancement of studies on economic performance. It has also helped explain some of the overlooked realities in formulating effective policies for economic development. His lecture serves as an essential addition to the body of knowledge on how the economy evolves.

In the lectures introduction, North defines economic history as the performance of economies through time. Norths lecture is focused on the importance of institutions and time in determining economic performance, something that North claims to be usually overlooked when developing economic policies. To start off the discussion, the author provides an analytical modification of the neo-classical theory that we have today. He explains that the neo-classical theory is deemed to be inappropriate or not enough to produce the right policies that could encourage economic development. This is because, although the theory can explain the operation of the markets, it could not provide an understanding on how the economy develops. The neo-classical theory includes erroneous assumptions that economic institutions and the element of time are not important. The framework that North lectures modifies the rationality assumption of economic performance and includes the element of time as a consideration.

One of the goals of this lecture is to contribute a theory on the movement of the economy that could evaluate analytically the way that economies grow or move as time passes by. North discusses in his lecture how institutions form the incentive structure of a society and how political and economic institutions determine the performance of the economy. He also emphasizes in his lecture the reality that time is a factor that covers the learning process of people thus, it affects the way these institutions evolve.

Norths work is both thorough and well written because he carefully explains point by point the role of institutions to mans decision making capabilities. In one part of the lecture, he focuses on defining the nature of institutions and how they really influence economic performance in order to establish their role in the way the world operates. Institutions are the man-made constraints of human interaction, such as rules and laws for the formal setting and behavior and conventions for the informal setting that determine how a society is run and defines the incentive structure for societies and specifically economies. Political and economic institutions are major key players of the development of the economy and the actions that take place in the interactions in the society.

After clearly defining the role of institutions in the performance of the economy, North further ponders on what initiates institutional change and how these movements impact the whole economy. This part of the lecture is one of the most important highlights of his work. He describes the nature of institutional change in order to explain why some economic policies are effective for one country and senseless for another. Change is triggered by the evolving needs of the economys key players and whatever bargaining power they have to secure good contracts. To further explain his idea, North notes in his lecture all the key players of the economy that greatly affect the nature of institutions, namely entrepreneurs and the organizations. The former refer to individual persons while the latter are groups of people who are brought together by a common trait, interest, or objectives and are usually very influential in the growth of the economy. Organizations are the result of whatever opportunities institutions make possible for the people because they are dependent on what is allowed by the law or the norms of behavior. According to North, it is the interaction between institutions and organizations that shapes the institutional evolution of an economy. The relationship of institutions and organizations dictates the well-being of the economic movements in a society. Sometimes, rules are reconstructed and standards of behavior are modified to pave way for the continuous changes in the economy. Individuals and organizations usually engage in altering contracts to improve their status in life and to match the growing choices and decisions brought about by economic changes. When this happens, institutions change or adjust based on the requirements of the altered contracts.

North places significant emphasis on the relationship of institutions in the decisions or preferences of the key players in the economy because this is a major factor in establishing what contributes to the performance of the economy. Yet, North does not also miss out why it is important to also understand the nature of human learning. He stresses that development is only achievable with learning, and the beliefs and abilities that people hone through the education they get either genetically or through daily experiences are crucial in dictating how they form their contracts and how they use rules or norms in the economy. He also emphasizes that time helps collective learning to be acquired and utilized.

Norths lecture stresses that having a cognitive approach to economic institutions helps people improve their understanding of the past economic performance. An institutional approach to economic history, one that understands the relationship between institutions, technology, and demography in the process of economic changes, could make a complete theory of economic performance possible. Since altering institutions is a very complex matter because economic institutions have different functions from political institutions, economic history will help people to assess what contributes to economic stagnation or failures. This would make them more learned in comprehending the direction of the performance of their economy. North notes that there were other economists before that related the crucial connection between institutions, transaction costs, and neo-classical theory and that these are topics that are not new yet also insufficiently dealt upon. In his lecture, North simply expands the idea that since transacting is costly in the world we are living in, therefore, institutions really matter in the economic performance of the society. One of Norths most significant contributions revolves around the fact that if formal rules of one economy are forced upon another societys economy that has different informal norms and enforcements, this would not necessarily result in good economic performance. Quite the contrary, it could even lead to further downfall of the countrys economy.

However, North also asserts in his lecture how informal institutions, such as the conventions of people, can be favorable to economic growth even when formal institutions are unstable.

Norths work is important because it introduces the institutional or cognitive approach in evaluating the economic problems and policy development measures of contemporary time. He mentions in his lecture that this is where the neo-classical theory fails. Towards the end of the lecture, he enumerates several implications of the approach he developed in his work. First, he reiterates that the combination of institutions, which are composed of formal rules and informal norms, and the characteristics of their enforcement are the significant reasons for the form of economic performance. He highlights here how the formal rules used by the superpower nations of the world fail in third world countries because they do not have common informal norms of behavior. The second implication tells readers that an essential part of development policy is the creation of polities that will create and enforce efficient property right.

Accumulated education, institution formation, and belief systems that have developed through time are essential because they shape how people would decide and make choices for the economy. Lastly, North emphasizes in his work that the key to a long-running growth trend in the economy is adaptive efficiency. Therefore, economic history and assessment of past economic events help create a better understanding of economic performance.

The discussion presented by North in this lecture has been further developed by other economists and philosophers. His theory has been used in several other studies and has also been expanded to match the movements of the economy since the lecture won the Nobel Prize in 1993. Norths explanation about institutions has been exceptionally important to several other research studies related to economic growth. Even more than a decade after this lecture, his definition of institutions is still being cited and used, such as the study of Daron Acemoglu and associates in 2004 entitled Institutions as the Fundament Cause of Long Run Grown which makes use of Norths description of institutions in their study that applies to the situation in Koreas divisions and the European colonization in the 15th century. They further expanded on their study where North and other scholars of economics lacked in theory development such as the lack of crucial comparative static results that could explain other elements of economic institutions that North did not tackle in his 1993 lecture.

Norths theory is useful in any part of the world. M. Idrees Khawaja and Sajawal Khan of the Pakistan Institute of Development Economics, Islamabad also used Norths theory on institutional changes in their 2009 paper entitled Reforming Institutions Where to begin which they claim has the most widely cited definition of institutions. They reviewed Norths work in their paper and expanded it as well to provide a more contemporary version of the theory.

Douglas North is a renowned name in the field of economics because of his theory that has proved to be useful and informational. His work has encouraged the cognitive approach of the theory of institutional change that has explained and helped tremendously the analytical evaluation of economic performance. At the end of his work, he emphasizes the need to continue conducting research in order to enhance economic theories for the future. He ends his work with the hope that his Nobel Prize would be an additional encouragement for the enrichment of economic theories.