A country, United Federation of Republics, has a population with a low standard of living and high poverty levels. The government is attempting to curb this trend by improving the economy. The methods proposed were on four pillars. The first pillar is to allow markets take over. Abolish previous government price controls and let markets set prices. The second component involves lowering household spending. Lowering household expenses will be accomplished by inspiring families to save instead of devote it to consumption goods. The third pillar entails a reduction of the monopoly of ideas by removing patents for ideas. The final pillar involves limiting population growth by imposing penalties for persons with more than two children.
Market takeover and removal of government control on prices may not improve living standards. This plan involves the government removing price control measures and allowing the market to set prices. The intention of this move is to allow competition to drive the prices of essential commodities to make it more affordable thus improving living standards. This plan will not work in promoting improved living standards in the long run. Without government control of prices, monopolies can take advantage of their market to increase the prices of goods without concerns of consumer rights. The government can improve on this plan by limiting price control to basic consumer needs and allowing market control over highly competitive sectors (Australian Government, 2015).
Lower household spending is a good way to kick-start the economy and improves living standards. The government encouraging people to lower household spending and saving more will help in economic growth and eventually lead to an improved standard of living. By reducing expenditure and increasing savings, taxes on interest income will reduce from savings in banks and stock. The reduction of these taxes and reduced spending will promote faster production growth among the people. Living standards will improve as a result.
Reduction of monopoly by removing patents is a short term solution that is not sustainable in improving the economy. The third component of the plan to boost economic growth and improve living standards calls for the removal of patents on intellectual property. Abolishing patents will not serve the purpose of improving living standards because of it being unsustainable in the long run. Patents encourage innovations and enable small enterprises to attract investors. Patents also encourage research and information sharing. If patents are abolished, prices of goods and services might fall because of the lower cost of setting up businesses without the extra cost of patent implementation. However, most enterprises will lose the ability to attract investors leading to stagnation in businesses. To address the shortcomings of this idea, the cost of licensing should be reduced, or a cost-sharing scheme should be set up (Bourne, p 78 2015).
Limiting population growth is a good way of improving living standards in the country. A proposal that seeks to limit population growth by imposing penalties on families with more than two children was agreed upon by members of the panel of stakeholders consulted. This proposal will undoubtedly help in economic growth and improvement of living standards in the country. A reduction in population will lead to fewer people competing for jobs, meaning an increase in wages. Living standards will further be promoted by a reduced population because there will be better prices on primary commodity because of the smaller market. A small population encourages sustainable economic growth and better standards of living.
Rating and Summary
On a scale of 1 to 5, this plan by the stakeholders in the economy of UFR gets a 3. The plan is slightly above average. This rating is because the ideas put forward will lead to economic growth, but some like the abolition of patents and removing price control measures are short-sighted and would result in more harm than good. The plans of population reduction and lowering household spending are viable and may lead to long-term solutions to the poverty levels in the country. Sustainable economic growth is essential for improving living standards of people in a country.
Australian Government. "Economic Benefits of the Patent System | ALRC." Australian Law Reform Commission | ALRC. N.p., n.d. Web. 19 July 2015.
Bourne, Ryan. "Cutting spending would boost the economy and raise living standards." the Guardian 31 Jan. 2015: n. pag. Print.