The video presented in the module tries to analyze various aspects of economics. The video is based on three grounds: the U.S economy, impoverished countries, and Opportunity International's role in ensuring that poverty levels in developing countries are reduced. The narration admits that although the U.S. economy is excellent, that is not the case with other countries. That is the main reason why Opportunity International has taken the initiative to provide microloans to individuals to start businesses. As a time of the narration, Opportunity International had managed to provide its services in 28 countries. Opportunity International believes that the economy plays a massive role in how businesses are done hence influencing the distribution of wealth. It is because it is through the economics of a country that resources are used to produce goods and services and distribute them to competing individuals and groups.
Poverty is a big thing that needs a lot of tools apart from creating business to be eliminated. When people are empowered, they can start some of these tools, such as schools, to lift people's lives. Through his book The Wealth of Nations, Adam Smith advocated for an economy where people are given ownership of land and resources so that they can run businesses. As such, he believed that this would help in the creation of wealth. His Invisible Hand theory meant that once people had enough resources, such resources would be beneficial for all. Opportunity International has a real example of Smith's theory (Rothschild, 1994). Through financing of Opportunity International, a client was able to grow a daycare in Uganda into a school that is now beneficial to the whole community. Another case is that of Pamela, who, through going into the business of mushroom, can cater to her family on top of employing a hundred employees. She has also been able to pass the skills to many other women.
Opportunity International is trying to empower capitalism, where the factors of production are individually owned and operated for profit. Through capitalism, the world's wealth, including that of the U.S, has been created. Capitalism enables an economy to have a free market where buyers and sellers determine the number of goods to produce and what price to sell those goods. The forces of supply and demand determine a free call to create the market price. Another form of economic system is socialism, where the government operates most basic businesses. The same government has to meet most of the needs of the people. However, such an economy is characterized by heavy taxation; hence, people do not have the incentive to work. It leads to human resources being transferred to other economies in the process of brain drain.
The third form of economic system is communism. In this system, the government owns almost all the factors of production. Hence is the primary decision-maker in matters of economy. Socialism and communism are not effective in ensuring rapid wealth creation. Most economies, therefore, have adopted the system of mixed economics where both the aspects of free markets and that of the government's interventions are used to ensure that economies are sound. The United States operates in a mixed economy system. The U.S. government comes into the economy through fiscal policy and monetary policy. Through the budgetary policy, the government puts in tax incentives to either encourage or discourage business. The monetary policy determines the amount of cash circulation in the economy. These interventions are carried out even by the U.S. government due to the inevitable business cycles of boom, recession, depression, and recovery. Opportunity International plays some of the roles that the U.S government plays in the other impoverished economies to ensure that those economies enjoy the stability of the U.S economy.
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Rothschild, E. (1994). Adam Smith and the invisible hand. The American Economic Review, 84(2), 319-322.