1 / 34

Chapter 12 Domestic Economy

Chapter 12 Domestic Economy. Focal questions. What are Britain ’ s principal natural resources? (P204) Why is the City of London known as the world ’ s leading international financial centre?(P204, Slides14-21)

griffith-wyatt
Télécharger la présentation

Chapter 12 Domestic Economy

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Chapter 12 Domestic Economy

  2. Focal questions • What are Britain’s principal natural resources? (P204) • Why is the City of London known as the world’s leading international financial centre?(P204, Slides14-21) • Why do you think there have been different attitudes towards nationalisation and privatisation in Britain’s economy since the end of the Second World War? (PP206-7) • How do you understand the relationship between the British Government and Britain’s economy? (PP207-8) • How are consumers protected in the United Kingdom? (P210)

  3. A1 Introduction • ‘mixed economy’ • Privately owned (most) and state owned (major services such as health) enterprises • Government involvement: social welfare policies; laws to regulate industrial relations • Nationalisation & privatisation

  4. A 4 The Mixed Economy cont • Nationalization • the acquisition of private companies by the public sector • Privatization • the return of state enterprises to private ownership and control

  5. Nationalisation & privatisation (P206) • Why nationalise? • The public interest • Not profit-oriented • Government-appointed directors & government involvement in long-term policy • Autonomous management of daily affairs

  6. By the end of the 1970s Margaret Thatcher Primary objective: to beat inflation “ In politics if you want anything said, ask a man. If you want anything done, ask a woman”

  7. Nationalisation & privatisation • Why privatise? • Efficiency • Profit-oriented • Decreasing government involvement • The free market: consumers, goods, services, prices, manufacturers, providers of services

  8. Inefficiency of nationalised industries • “Proxy-owners” in state-owned industries: politicians; affecting commercial decisions • Nationalized industries: no need to succeed; dependence on government, not market: no incentive

  9. Inefficiency of nationalised industries • Failure to harness self-interest • Incurment of losses on a grand scale—tax raise: 83% top rate on earned income, 93%, savings income

  10. Privatisation—advantages • Efficiency: lower prices, better services • Participation of ordinary people • Access to private capital markets • Less government intervention, less political pressure • More sources of capital • Competition: incentive for better performance of state-owned industries

  11. Privatisation—disadvantages • Good management of nationalised industries: no need of privatisation (theoretically?) • Labor relations: interest of workers • Co-ownership: worker-shareholders—how much do they weigh?

  12. Economic sectors • The Service industries (health care, hospitality, real estate and food chains) • Financial services (banking and insurance): big revenue earner; London: overseas branches of financial organizations • Industries: a steady decline since the 1960s; 20% • Agriculture: 60% of the total food demands of the nation • The Oil, coal and natural gas reserves: considerably high; 10% of the national GDP

  13. A 2 Natural Resources & Infrastructures (P204) • Highly developed & efficient main road and rail network and airports-- excellent infrastructure pp 203-204 • Natural resources • Principal resources at present -- oil and gas in the North Sea, on the coast of Scotland • Large amount of coal, but has been kept for future use • Manufacturing: still important • Services, industries such as chemicals, electronics, etc: important & successful

  14. A 3 Finance • The financial institutions • Banks • Building society • Insurance companies • Stock exchange

  15. The Bank of England • Nationalised; operated on behalf of the government • Controls the currency; sets interest rate; acts as banker both to the government and to the commercial banks • Monetary policy and financial policy • Integrity and value of the currency, stability of the financial system; the effectiveness of the financial services sector

  16. London: March 2002 296 branches and subsidiaries of foreign banks 1/3: from the Euro area Foreign banks: 50%+ of UK banking sector assets, £3,500+bn The UK banking sector: cross border bank lending - 19% of the world total BANKING A 3 Finance

  17. Largest in Europe Third largest in the world Net premium income of £157bn Main skill centre for world insurance business Global market leader in aviation and marine insurance; combined market share: 23% A 3 Finance • Insurance: 2001

  18. FOREIGN EXCHANGE April 2001 Largest in the world Daily turnover: of $504bn, 31% of global turnover ＞ New York + Tokyo A 3 Finance

  19. UK: World's largest fund management centre $2,460bn of institutional equity holdings in 1999 Assets managed on behalf of domestic and overseas clients： £2,800+bn in 2000 London: leader in the management of overseas clients non-domestic portfolios FUND MANAGEMRNT A 3 Finance

  20. SECURITIES DEALING Number of foreign companies listed on the London Stock Exchange: second (No.1: NY) In the first eight months of 2002, turnover in these companies booked in London: 56% of all trading in foreign companies around the world Turnover in Euro-area stocks: 2/3 of all foreign equity trades booked in London London: major centre for the international bond market A 3 Finance

  21. Regional Household Income Comparison 2006

  22. Beneficial ownership of UK shares: end 2006

  23. Private Enterprise • The single proprietorship • Easy to set up • Owner: full control • limited amount of capital -- small businesses • All the legal and financial responsibilities

  24. Private Enterprise • Partnerships • Larger amount of capital; bigger • Each partner: legally liable for all the debts of the firm, even if incurred by the activity of another partner Such businesses can raise larger

  25. Private Enterprise • Co-operatives • Mainly in the retail trade • Their customers who pay a minimum deposit on a share in the business • Vulnerable in the face of the intense competition Such businesses operate mainly

  26. Private Enterprise • Joint stock companies • Large amounts of capital • Transfer of ownership: easy (shareholders selling shares to anyone else) • Risk: Some unscrupulous company promoters may fraudulently try to raise funds for their own ends from the public. (Source: An Introduction to the UK Economy by Harbury and Lipsey )

  27. Limited Liability • Limited Liability • An investor’s liability to debt is limited to the extent of their shareholding • 100 £1 shares: bankruptcy—greatest loss, £100

  28. A 5 The Role of the Government • Growing government influence (P207) • The two World Wars: the proportion of income from economic activity devoted to government expenditure -- sudden increases • Dropping after each war: 46% in 1981 & 1982, 38% in 1983, a slight rise in the early 1990s (economic downturn), 39% in 1998 • To reduce the share of public expenditure of GDP

  29. Taxation & Government Expenditure • Where does the government get its money from? • Stock exchange • Taxation -- Direct and Indirect Taxes • Direct taxes –national insurance contributions, income tax (a ‘progressive taxation system), corporation tax (paid by companies) • http://www.statistics.gov.uk/CCI/nscl.asp?ID=7363

  30. Taxation & Government Expenditure • Indirect taxes: (P208) • VAT (VAT was introduced following Britain’s membership of the EEC: a percentage of the money raised is contributed to the European Union budget.) • Duties on alcohol, tobacco, petrol, etc.

  31. A 6 Consumer“Student’s expenditure” (P 210) • Around half of the expenditure: “essential items” • Eg. accommodation, food, bills and household goods and course expenditure • A larger contribution to tuition: course expenditure -- a higher percentage (the government) • Students who lived at home with their parents vs students living independently: a quarter of the amount on housing

  32. Outlook for the UK Economy • Treacherous times ahead • Profit warnings remain high. • Companies stop short. • Household goods, home construction, general retailers, personal goods, etc affected • The credit crunch

  33. Real GDP quarterly growth

  34. http://www.economywatch.com/world_economy/united-kingdom/ • http://www.statistics.gov.uk/cci/nugget.asp?id=1552 • http://www.statistics.gov.uk/cci/nugget.asp?id=107 • http://www.statistics.gov.uk/CCI/nugget.asp?ID=192&Pos=6&ColRank=1&Rank=144 • http://economicsguide.blogspot.com/

More Related