TUGAS B.INGGRIS BISNIS 2

ARTIKEL I :

"Alexander Field, Greg Clark, and Optimism about 7uthe Current Unpleasantness"

Why aren't we doing more to rebuild our infrastructure at a time when our needs are high and borrowing costs, labor costs, and other costs of infrastructure are at bargain prices? Not to mention the employment benefits that would come with enhanced infrastructure investment. And why aren't we doing more to shore up our financial infrastructure through new regulations and oversight of the banking sector so that the problems we are having presently are less likely to reappear? There have been some changes in financial regulation, but not enough, and the financial sector is doing its best to block any further progress in this area:

Alexander Field, Greg Clark, and Optimism about the Current Unpleasantness, by Eric Rauchway: On the jacket of Alexander Field’s new book A Great Leap Forward, my

colleague Greg Clark says this:

As we sit mired in the Great Recession, Alexander Field’s exciting reappraisal of the Great Depression offers surprising solace. By showing the Great Depression was coupled with the most rapid technological advance in U.S.

history, he fundamentally recasts the history of the 1930s. But he also offers hope that our own depression likely will have no long-run costs to the U.S. economy.

By measuring total factor productivity (TFP), or the improvement in productivity not accounted for by traditional inputs, Field finds tremendous gains during the Depression. They owe in part to private investment in manufacturing efficiencies, chemical processes, and other technical improvements. Historiographically, there’s a major payoff in showing that the vast majority of such innovation came during the Depression, not during the war.

But (as the bulk of Field’s book is devoted to showing) the productivity improvement owes mostly to construction transportation infrastructure – to the construction of roads, bridges, and all that made the modern trucking industry possible. Field even goes so far as to say the end of the golden age of productivity in the American economy in 1973 “coincides with [he does not quite say owes to] a tapering off of gains from a one-time reconfiguration of the surface freight system in the United States”.

And this massive public investment in infrastructure, which made possible the postwar suburbanization and boom, went along with financial regulation. Field attributes both the current crisis and that of the 1920s to “a failure to control, or really to be interested in controlling, the growth of leverage.” If we want to come out of the Current Unpleasantness with less than a Great Depression to show for it, we’ll have to see regulation that responds accordingly, he says. “If an even more serious crisis occurs within the next decade, it will be because the regulatory response ended up being less effective than that which was summoned during the New Deal.”

Which makes Field sound a lot less optimistic than Greg. The Great Depression turned out relatively well in the long run because we had not only significant private investment in R&D and other improvements, but also the New Deal – road-building and regulation. Do we have that, or anything like it, now?

Translater :

The Great Depression turned out relatively well in the long run because we had not only significant private investment in R&D and other improvements, but also the New Deal – road-building and regulation.

Depresi Besar ternyata relatif baik dalam jangka panjang karena kami memiliki tidak hanya investasi swasta yang signifikan dalam R & D dan perbaikan lain, tetapi juga New Deal - pembangunan jalan dan peraturan.

ARTIKEL II :

MONETARY

Monetarism asserts that monetary policy is very powerful, but that it should not be used as a macroeconomic policy to manage the economy. There is thus an apparent contradiction—if monetary policy is so powerful, why not use it, for example, to create more employment in the economy?

HISTORY AND BACKGROUND

First of all, it should be noted that monetarism was an attempt by conservative economists to reestablish the wisdom of the classical laissez faire recommendation and was an attack on the activist macroeconomic policy recommendations of the Keynesian economists. It is thus helpful to briefly examine the historical background against which monetarism developed as a new school of macroeconomic thought.

KEYNESIAN ECONOMICS.

Keynesian economics was born during the Great Depression of the 1930s. The classical economists argued that the self-adjusting market mechanism would restore full employment in the economy, if it deviated from full employment for some reason. However, the experience of the Great Depression showed that market forces would not work as well as the classical economists had believed. The unemployment rate in the United States rose to higher than 25 percent of the labor force. Hard working people were out in the street looking for nonexisting jobs. Wages fell quite substantially. However, the lower wages did not re-establish full employment.

Economist John Maynard Keynes argued that the self-adjusting market forces would take a long time to restore full employment. He predicted that the economy would be stuck at the high level of unemployment for a prolonged period, leading to untold miseries. Keynes explained that classical economics suffered from major flaws. Wages and prices were not as flexible as classical economists assumed—in fact, nominal wages were very sticky in the downward direction. Also, Keynes argued that classical economists had ignored a key aspect that determined the level of output and employment in the economy—the aggregate demand for goods and services in the economy from all sources (consumers, businesses, government, and foreign sources). Producers create goods (and provided employment in the process) to meet the demand for their products and services. If the level of aggregate demand was low, the economy would not create enough jobs and unemployment could result. In other words, the free working of the macroeconomy did not guarantee full employment of the labor force—the deficient aggregate demand was the cause of unemployment. Thus, if aggregate private demand (i.e., the aggregate demand excluding government spending) fell short of the demand level needed to generate full employment, the government should step in to make up for the slack.

The central issue underlying Keynesian thought was that those individuals who have incomes demand goods and services and, in turn, help to create jobs. The government should thus find a way to increase aggregate demand. One direct way of doing so was to increase government spending. Increased government spending would generate jobs and incomes for the persons employed on government projects. This, in turn, would create demand for goods and services of private producers and generate additional employment in the private sector. Keynesian economists thus recommended that the government should use fiscal policy (which includes decisions regarding both government spending and taxes) to make up for the shortfall in the private aggregate demand to reignite the job creating private sector. Keynesian economists even went so far as to recommend that it was worthwhile for the government to employ people to in meaningless jobs, as long as they were employed.

The Roosevelt administration did follow Keynesian recommendations, although reluctantly, and embarked on a variety of government programs aimed at boosting incomes and the aggregate demand. As a result, the Depression economy started moving forward. The really powerful push to the depressed U.S economy, however, came when World War II broke out. It generated such an enormous demand for U.S. military and civilian goods that factories in the United States operated multiple shifts. Serious unemployment disappeared for a long period of time.

Modern Keynesians (also, known as neoKeynesians) recommend utilizing monetary policy, in addition to fiscal policy, to manage the level of aggregate demand. Monetary policy affects aggregate demand in the Keynesian system by affecting private investment and consumption demand. An increase in the money supply, for example, leads to a decrease in the interest rate. This lowers the cost of borrowing and thus increases private investment and consumption, boosting the aggregate demand in the economy.

An increase in aggregate demand under the Keynesian system, however, not only generates higher employment but also leads to higher inflation. This causes a policy dilemma—how to strike a balance between employment and inflation. According to laws that were enacted following the Great Depression, policy makers are expected to use monetary and fiscal policies to achieve high employment consistent with price stability.

Second, fiscal policy is ineffective in influencing either real or nominal macroeconomic variables. It has little effect, for example, on either real output/employment or price level. Thus, the government can't use fiscal policy as a stabilization tool. Monetarists contend that while fiscal policy is not an effective stabilization tool, it does lead to some harmful effects on the private sector economy—it crowds out private consumption and investment expenditures.

Classical economists did not see any role for the government. As market forces led to full employment equilibrium in the economy, there was no need for government intervention. Monetary policy (increasing or decreasing the money supply would only affect prices—it would not affect important real factors such as output and employment. Fiscal policy (using government spending or taxes), on the other hand, was perceived as harmful. For example, if the government borrowed to finance its spending, it would simply reduce the funds available for private consumption and investment expenditures—a phenomenon popularly termed as "crowding out." Similarly, if the government raised taxes to pay for government spending, it would reduce private consumption in order to fund public consumption. Instead, if it financed spending by increasing the money supply, it would have the same effects as an expansionary monetary policy. Thus, classical economists recommended use of neither monetary nor fiscal policy by the government. This hands-off policy recommendation is known as laissez faire.

Translate:

Keynesian economists thus recommended that the government should use fiscal policy (which includes decisions regarding both government spending and taxes) to make up for the shortfall in the private aggregate demand to reignite the job creating private sector.

( Ekonom Keynesian demikian dianjurkan bahwa pemerintah harus menggunakan kebijakan fiskal (termasuk keputusan mengenai baik pengeluaran pemerintah dan pajak) untuk menebus kekurangan dalam permintaan agregat swasta untuk menyalakan kembali pekerjaan membuat sektor swasta ).

An increase in aggregate demand under the Keynesian system, however, not only generates higher employment but also leads to higher inflation.

(Peningkatan permintaan agregat di bawah sistem Keynesian, bagaimanapun, tidak hanya menciptakan lapangan kerja yang lebih tinggi tetapi juga menyebabkan inflasi lebih tinggi ).

Second, fiscal policy is ineffective in influencing either real or nominal macroeconomic variables. It has little effect, for example, on either real output/employment or price level.

( Kedua, kebijakan fiskal tidak efektif dalam mempengaruhi baik variabel makroekonomi nyata atau nominal. Ini memiliki pengaruh yang kecil, misalnya, di kedua tingkat output / pekerjaan atau harga riil ).

Thus, classical economists recommended use of neither monetary nor fiscal policy by the government. This hands-off policy recommendation is known as laissez faire.

(Dengan demikian, ekonom klasik direkomendasikan penggunaan baik moneter maupun kebijakan fiskal oleh pemerintah. Ini rekomendasi kebijakan lepas tangan dikenal sebagai laissez faire ).