Online Custom «Economic and Political Environment of International Business» Essay Sample

Question 1

The proposal by President Obama to limit the amount of carbon emissions in the USA has considerable economic and legal challenges. Despite the numerous advantages that the American population stands to gain from the successful implementation of the proposal, a majority feel that it would result in unnecessary economic burden in terms of higher taxes.

The proposal by the president faces massive opposition from opposing groups such as the conservative advocacy group known as Americans for Prosperity. The main intention of the advocacy group is to oppose huge government expenditures that are likely to burden the American citizens through excessive taxes. In view of this, proponents of the group assert that Obama’s proposals are likely to increase the amount of taxes payable by the American families (Schwartz and Randall, 2003). Thus, the group opines that the contents of the proposal would without doubt increase the energy bills for the citizens, diminish the rate of economic growth, and result in the loss of jobs (Schwartz and Randall, 2003). The implementation of the proposal would require a vast amount of financial capital, which would require the Americans to shoulder a significant part of the burden. With this in mind, a majority of the mainstream Americans would probably oppose the implementation of the proposals in order to escape the burden of increased taxes and higher energy bills (Adams,  2012).

The implementation of the new proposed energy regulations may lead to a subsequent loss of employment opportunities. Millions of Americans work in industries that are energy-intensive in nature. Such industries include steel and iron coal-powered industries. These industries require extensive use of reliable and affordable energy such as coal energy to operationalize their activities. In view of that, the proposed amendments would drive them out of the market due to use of unsustainable energy sources such as electricity. As a result, a majority of the employees would be rendered jobless. It is obvious that the economic growth rate of the country will take a hit further, worsening the quality of life of mainstream American communities. Ignoring the economic interests of the people with a view of achieving environmental objectives, therefore, makes it economically illogical. 

Obama’s proposal comes on the backdrop of one of the most difficult and challenging economic times experienced in the country. Economic statistics indicated that the economic growth rate of the country has shrunk for the first time in a period of 3 years (McEachern, 2008). Therefore, the economists are pessimistic with reference to backing the implementation of the proposal on the limitation of carbon emissions. In addition, they feel that the implementation of the proposals would not result in any significant and meaningful positive impact on the environment (Ackerman and Stanton, 2008).

More so, resistance from members of the coal industry presents a potential embedment to the successful implementation of the carbon emissions proposal. Their desire to resist the move stems from the potential loss of jobs; therefore, the proposal poses a substantial threat to the existence of the industry. The subsequent loss of jobs would jeopardize the quality of life of many American families that are dependent on the coal industry. As a result, all the coals producing states have united to ensure that the proposed energy amendments are not approved (Hubbard et al., 2012). Additionally, the proponents of the proposal feel that cost of electricity would increase due to elimination of energy sources related to plant materials (Ackerman and Stanton, 2008). With a shrinking economy, increasing the cost of electricity would not be supported by the American people. Therefore, the proposal would face a significant hitch in terms of getting the approval from the American public (Harris and Roach, 2014).

Another chief problem that Obama’s proposal faces emanates from stakeholders of energy-intensive companies such as steel and iron industries. These industries make use of plant power in order to drive down the cost of production (McKinsey & Company, 2009). Thus, Obama’s proposal would have a negative implication in terms of affordability and reliability of energy costs. Accordingly, the adoption of the proposed energy amendments would drive out intensive-energy companies from the business as the operations become unsustainable. In addition, the energy-intensive companies might be forced to lay off some of their workers in order to continue being sustainable and reliable. For that reason, outlawing the use of plant power would impede the post-recession growth rate of the American economy, especially the steel and iron manufacturing industries.

Legally, the proposed amendments would face an uphill task, as competing interests would use the legal framework to challenge the regulation of the existing energy laws. Previous energy amendments such as the clean air Act of 1990 proved fruitless and less effective (McEachern, 2008). Thus, the courts could lawfully challenge the proposals based on failure of the previously proposed energy amendments. Proponents would thus cite previous minimal impact of proposed energy amendments with the intention of opposing the new energy program.

Furthermore, political goodwill would also play an important role in determining whether the program is successful or not. The process of implementing the proposed energy amendments is likely to take place after President Obama leaves office in 2017. Issuance of the final guidelines on the proposed laws requires a minimum of 2 years to affect the changes. In view of this, the implementation process would go on smoothly in case the Democratic Party retains the presidency. However, if a Republican candidate assumes presidential power, the implementation of the energy program will be based on current party positions. More significantly, the Republic party would probably repeal the EPA’s energy regulation policies in case it manages to take control of the White House, the House, and the Senate.

Accordingly, the ever-changing political landscape in contemporary American society makes it extremely difficult to have smooth implementation and integration of the new energy regulations. The suspect relationship that exists between the two biggest parties in American society provides a major challenge to Obama’s proposal. Furthermore, it would take a monstrous effort to convince the Republicans to back up the new energy proposals of Democrat government (Harris et al., 2015).

In conclusion, it is evident that Obama’s proposed energy amendments face formidable challenges in a bid to have them successfully implemented. The process requires backing from the legal framework, political and economic backing. However, mainstream American society seems uninterested and resistant to the implementation of the new energy regulation programs. Subsequent adoption and implementation of the new energy regulations would result in the loss of employment opportunities for the people working in the energy-intensive sector. Decreased employment opportunities would inevitably lead to a slower rate of economic development, leading to harder economic times. Additionally, the affected economic entities are determined to use all the legal mechanisms to ensure that the program fails at its first hurdle. Hence, revising the laws to come up with the all-accommodative version would ease the existing levels of resistance, hence leading to a successful implementation process, regardless of the political government in place (Schwarz and Randall, 2003).

Question 2

The control of negative economic externalities involves all the mechanisms used to minimize the impact of a producing or consuming a given good or services on third parties. The use of direct intervention mechanisms is advantageous because it improves the level of performance as well as maintaining the spirit of fair competition in the market. Collectively, the providers and the consumers are subjected to equal laws and regulations thus eliminating the economic externality of fraud (Loucks et al., 1998).

 In view of this, third parties would be probably affected in case of presence of fraud in state created markets. There are no possible positive externalities associated with fraud on any type of markets. Fraud is only intended to benefit the few individuals with malicious intentions while causing considerable loss to the third parties. Direct regulation would therefore play a crucial role in minimizing the impact of negative externalities on third parties. More importantly, it would ensure that the negative side effects are limited to the participating parties (Loucks et al., 1998).

On state created markets, fraud is likely to have far-reaching consequences on many people hence the need to regulate the externality through the use of direct intervention mechanisms. Cases of fraud cannot be mitigated successfully using the third parties. Therefore, it is prudent that the government puts direct regulation policies in place in order to minimize the impacts. The implementation of regulatory laws would remedy the problem of fraud and prevent widespread negative effects on the consumers (McEachern, 2008).

Direct regulation would be an improvement because it would make clear to the persons perpetrating fraud that the process is outlawed and forbidden with the main aim of addressing the negative economic externality. By doing so, state enforced agencies would protect the third party individuals likely to bear the blunt of fraud on state created markets. For that reason, it is essential to correctly put direct regulation mechanisms in place. Incorrect implementation of the direct intervention mechanisms would lead to the development of inefficiencies on the state created markets. For example, if the regulation policies are too oppressive, participating companies are likely to resort to less efficient methods in order to achieve their goals and objectives. On the flipside, the consumers may suffer due to provision of poor quality goods and services. On the other hand, if the government fails to mitigate the negative economic externalities using direct regulation mechanisms, the problem of fraud might become extensively pronounced thus causing immense suffering on the consumers. Thus, the use of direct mechanisms is advantageous to the economic players both in the short and long-term period.

Although direct regulation is difficult to enforce and implement correctly, it would help minimize the impact of fraud on the consumers. Some of the direct regulation mechanisms that the government would use while controlling fraud on state created markets include command-and-control regulation. Therefore, the government would come up with state-imposed standards, outright bans as well as use of process requirements that would correct the issue of fraud in the markets (Loucks et al., 1998). Additionally, the use of direct intervention mechanisms would result in decreasing the practice of fraud in state created markets since it entails implementation of a collective action. A collective action ensures that all the players on the market are subjected to the same laws thus creating a level playing field for all. In addition, it assures the consumers that the undesirable behavior of fraud is eliminated from the market. The standards put in place are designed to improve the performance of the providers of goods and services

Thus, it improves the consumers’ level of confidence and trust of state created markets, hence leading to greater transaction of more economic activities. Some of the direct intervention mechanisms that the government may use to improve the level of efficiency include increased taxation and implementation of outright bans. For example, if some activities are proven to be fraudulent, the government has the mandate to outlaw such activities through imposition of outright bans. Elimination of fraud ensures that the markets are free from fraud thus improving the efficiency of the process of provision of goods and services.

In conclusion, the use of direct intervention mechanisms would improve the level of efficiency on state created markets by eliminating all forms of fraud. The use of direct regulation policies leads to elimination of negative market externalities through provision of a level playing ground for all stakeholders involved. The established standards are free and fair to everyone; hence, it eliminates the problems associates with a selective and biased approach. More importantly, direct intervention mechanisms ensure that unscrupulous and fraudulent traders are driven out of the market, hence protecting the interests of the consumers. Moreover, state created markets are predominantly presumed to be inefficient and corrupt. The public does not have any affirmative assurance in which the affairs of these markets are. Therefore, direct regulation policies would help instil the consumers with a sense of confidence in the state created markets. For that reason, such policies would improve the level of efficiency and quality of services offered by the state created markets (Loucks et al., 1998).