A few basic economic and political questions [Archive]

Lyev

6th February 2010, 19:57

FSL

7th February 2010, 21:28

I'm going to sound hopelessly ignorant, but before I got into socialism and Marxism I never really thought politics that important, so 2 political questions:

1) What is proportional representation? (Is this what New Labour want, instead of the first-past-the-post electoral system? If so, what's the relevance of it?)

2) What does a hung parliament entail for Britain in the upcoming elections?

And now some economic questions:

1) What role does debt play in the world's economy? I read that the global economy rests on egg shells at the moment because America used to be the main world power taking loads of debt (left over from both world wars and suchlike) hence, partly, why they're the huge superpower they are today. But now they're one of the worlds biggest debtors (not sure about this, but they at least owe quite a lot of debt) and it's something to do with the rapidly growing economy of China.

2) EDIT: this was a question about the IMF and World Bank, but I found sufficient info about them on here, so the question has changed; what role does currency, and the stability of it, play in the global economy? Furthermore, how can the devaluing of the the British pound, for example, be correlated with the recent recession?

3) What are the repercussions (for normal, working people), beyond small business not having a chance, when vast multinationals like Wal-Mart make more money per annum than some developing countries?

I appreciate there's a lot of question here, so it's fine if you wanna just post a link to an article, or only explain one or two of them. I did have a little look on wikipedia, but I much prefer the answers I get on here, wikipedia not as easy to understand, or as engaging. Thanks everyone.

On politics:

1) It means that 40% of the votes get you 40% of the seats in a given organ. Probably, the fairest system. No idea on what new labor wants.

2) Not familiar with the term, does it mean a case in which neither party holds the absolute majority of seats? That would supposedly make it harder for the government to govern. But as all laws it would vote would be to serve the rulling class, that's actually a good thing and not really our problem. The danger of "lawlessness" is often brought up before election to effectively blackmail workers into voting for their policies, even if they disagree.

On economics:

1) First of all, governments as well as people borrow. And again, just as people do, they mainly borrow from banks. After the October revolution, soviet Russia refused to recognise any of imperial Russia's debt.

Debt does play a major role as long as we're moving in the confines of capitalism. Banks will lend you money much more expensively if they don't like you. So, a good bourgeois state will always seek to keep bankers happy.

Government debt is one of the two factors that make up a nation's trade deficit (the other being private debt).
Basically, it is X-M= (S-I) + (T-G).

This means that a country's net exports are equal to private and state surplus. The US by overconsuming and keeping savings low , by exporting capital and by having large state deficits is now dependent on imports. To finance these imports it gets more and more loans. This could prove a serious long term threat for the dollar. Dollar was picked as the foreign currency when the US was the world's most important and healthiest among capitalist economies. Today, this status is challenged.

2) Currencies also play a major role. Nowadays, most countries have their currencies sold and bought like most other commodities. So, if one country increases its exports by a lot, people will want to buy that country's currency (to import the stuff it produces). Higher demand for the currency means its price increases. Next year all of its products will be more expensive (as a result of the increase in the price of currency) so less people will buy them and its exports will decrease.

So, ideally, this way economies can always remain in a balance. Too many imports for example will increase the value of all foreign currencies (the country that is a net importer will see it's currency devalued). So, next year, imports will be more expensive and the economy will be brought to balance.

But ofcourse, this isn't what happens most of the time. As currencies are freely traded people are also free to speculate upon them. This means that often currencies don't reflect the real state of an economy, but only a distorted image of it. Currency speculation had a lot to do with Russia's crash in 1998.

The british pound was devalued because british products were not as wanted in other countries, so exports were reduced (people everywhere started consuming less). Also, because the british government had a large deficit that it financed by loaning money or using some of its foreign currency reserves. Of course, speculators saw that as a nice chance to make some profit, so they're also responsible.

3) Companies like WalMart are typical of the era in which we're in, the era of monopolies. There aren't any special repercussions, just that people should think again of who it is that governs them.