Sierra Leone: Barriers to Economic Growth/Development

POVERTY CYCLE:
The most important factors that hold back the growth and development of poor, third world countries inequality and poverty. Poverty drains people of many daily options, such as education and proper nutrition. Furthermore, the infectious diseases that are aggressively common in Sierra Leone simply destroy the quality and quantity of the human resources. Inequality on the other hand, leads to national resentment and rebellious behavior, which consequentially causes democratic failures, ethnic violence, corruption, division of attitudes among the nation, etc. Basically, both, inequality and poverty prevent different forms of prosperity (economic political, etc.) in a country.
The Human Poverty Index (HPI)- it is a composite index that measures deprivation in three dominant factors, which are a long and healthy life, knowledge (education), and a decent standard of living.

FIGURE 1: Poverty Cycle

Sierra Leone- Sources of Economic Growth and/or Development

The 5 Elements of Economic Growth:
1) Natural Resources- natural factors, such as land, minerals, climate, etc. Also, their quality and quantity.
2) Human Resources/ Population- Vaguely speaking, it’s the quantity and the quality of labor in a nation. The quality would depend on some specific factors, such as dependency ratio, fertility rate, birth rate, death rate, etc.
3) Physical factor and technology factors- it’s the quality and quantity of goods, such as roads, machinery, etc…
4) Institutional Factors- a quality of the health care system, the banking system, etc.

My country: Sierra Leona
1) Sierra Leone is a nation that is experiencing a strong form of poverty, and therefore contains a highly undeveloped economy. Its unemployment rate is 65%, and it contains a highly destabilized form of government. Sierra Leone is extremely rich in natural resources; especially mineral resources, such as diamonds. In fact, internationally speaking, it is one of the top ten diamond producers in the world. It also has great, tropical climate, which is great for agricultural goods. However, due to the recent civil wars, grave instability in the federal government (corruption, self-interest, etc.), and the high levels of black market and crime, the country has simply been highly INNEFICIENT IN ITS PRODUCTION AND UTILIZATION OF THOSE GOODS.

2) The quantity of labor in Sierra Leone is considerable, but the unemployment rate is extremely high; it’s about 65%. Therefore, the quantity of laborers is not as grand of an issue, as the quantity of jobs available. The quality on the other hand, is a much more serious question. I will provide you with some essential statistics that will show the countries weaknesses in labor quality:

Birth Rate (per 1000 people): 46.3 per
Children Underweight rate: 9%
Dependency Ratio: 89 per 100
Life Expectancy at Birth (total population): 40.93 years
Total Expenditure on Health as % of GDP: 2.9%
Water Availability: 36,322 cubic meters

These simple stats tell us a lot about the quality of labor in Sierra Leone. After an observation of the statistics, it is evident that the people of Sierra Leone cannot even obtain their basic needs, such as food and water (water availability). Furthermore, the people are highly unhealthy; they are not only unable to obtain proper nutrition, but there is also a major lack of proper medication. This is especially strenuous, considering that these people experience some of the worst diseases, such as Aids. An average life expectancy in this nation is lower than 41, which is one of the worst expectancies in the world. People with such poor lifestyles are simply unable to provide a good quality of labor.

3) This is yet another area where Sierra Leone struggles. Being a third world country with poor labor quality, recent history of a struggling government, and factors such as corruption and high crime rate, Sierra Leone has very poor physical and technological factors. The countries GDP in dollars is 1.971 billion; there are individuals who could theoretically buy the entire nation. Much of this money goes into development, yet the country suffers greatly from a lack of a boost in industrialization. Simply put, the nation is unquestionably weak in its production of physical and technological factors, which creates a gravely inefficient form of production.

4) Since the quality of health is, in my opinion, top issue in this country, I will be focusing only dominantly on this factor. Sierra Leone is extremely weak in this area… as well. The people of the nation experience all kinds of unfortunate diseases, such as Hepatitis A and E, Typhoid Fever, Malaria, etc. there is even a high risk of an obtainment of a deathly disease from basic nutrition and water. Despite this, the % of the GDP that is actually used to improve the health care system is 2.9%. This may be highly unsatisfactory, but there is also a huge influence outside of the country, as many organizations focus on abetting the citizens of the nation, by providing them with medication, and/ or other forms of support.

CONCLUSION:
Out of the four elements of economic growth, I believe that the Institutional Factors of Sierra Leone should be the nation’s number one focus. As mentioned earlier, Sierra Leone is exceptionally weak in every economic growth category, so it has to start from the very beginning, in terms of prosperity.

Quick History of Sierra Leone’s Internal Conflict:
The history of Sierra Leone is full of rebellions, and civil wars. In 1996, Sierra Leone, for the very first time, managed to establish a democracy, as Ahmad Tejan Kabbah won the right for the presidency by 59.4% of the votes. However, in 1997, a violent military coup (lead by Lieut. Col. Johnny Paul Koroma) overthrew President Kabbah and his civilian government, and started a decade long reign of terror, mercilessly killing the citizens, crushing the economy, and obliterating institutional factors such as health care and education. This cruel rule was officially declared over in 2002, due to external aid from the West and the United Nations. In May 2002, Kabbah was reelected as the President of the nation, and the government again established a democratic form of government.

As can be seen, the nation has only recently recovered from the conflict and established a stable, democratic form of government. However, there is still an enormous quantity of damage that is still left behind the civil war. For example, the war caused the destruction of over 1,270 primary schools, which left a 67% of all children out of school in 2001. On top of this, the health care system greatly dissipated, as hospitals and clinics were destroyed by the rebels, and the banking system completely vanished. Now, it is crucial for the government to construct a strong education system, as well as the health care system, because this would improve the quality and the quantity of labor. Education would provide the nation with more skilled workers in their fields, while a good health care system would battle the pathetic expectancy rate of the country, letting less people experience the infectious epidemics of the nation. Eventually, I believe that with better institutional factors, the nation would be able to gradually improve the technological and physical factors. More skilled laborers and a larger quantity of them would improve the efficiency and quality of those same factors. Hence, institutional factors, in my opinion, are the

AOL Plans on Cutting One-Third of Its Workforce

This article talks about AOLs, a large internet media company, plans for the future. Specifically, it is planning on letting go of one third of its workforce, about 2,300 workers, in order to cut down its costs. The company estimated that they will be able to save an estimated 300 million dollars anually, but they will lose 200 million in the first half of next year.

This will be highly damaging for the already suffering economy for several reasons. First, the layed off workers will add on to the already extremely high unemployment rate of the United States. Second, since more people are without jobs, there are less consumers on the market. So, there will be a further decrease in expenditure, which will lower the United States GDP.

http://money.cnn.com/2009/11/19/technology/aol_job_cuts/index.htm

U.S. Gas prices Drop as Drivers Cut Back

This article basically talks about the currently dropping oil prices in the Unites States. With the badly damaged economy, consumers are now trying to save money by either not driving at all, and using substitutes such as trains and buses, or by simply decreasing their driving, which consequently drops their expenditure on oil. Furthermore, the dangerously high unemployment rate only further decreases the demand for oil, hence causing the price decrease of oil in U.S.

However, when the refiners cut their production of oil, they might be cutting some of their costs, but they are also hurting themselves in the long run. This is because by decreasing oil production, the refiners have to decrease their working force. This only causes further unemployment in the United States, wich means that more consumers will neglect the consumption of oil. This would mean that the oil prices would have to be dropped even further, causing a further decrease in the working force of the refiners. Overall, this chain reaction, or a cycle, will only further damage the U.S. economy.

http://money.cnn.com/2009/11/22/news/economy/dberg_gas_prices/index.htm

Nuclear Renaissance… Not Dead Yet.

This article basically talks about how the idea of building many power plants for energy usage is actually not dead, but on “life support”. Building these plants was a huge plan and a realistic idea a few years back. However, the many combinations of challenging events, such as the diminished economy and the democrats winning the election lead to this idea not being actually implemented. 

 

However, this idea is making a definite comeback, because as the greenhouse gas bill keeps increasing, the billions of dollars of the tax payers money will be used to construct these power plants. Many experts believe that this is the best course to take, as this will create a dependable and a cheaper source of energy for the people.

Not surprisingly, there are many critics who are against this idea. Their main argument is that it will create a more dangerous environment for the nation, and it is not the most efficient way to use the countries money.

http://money.cnn.com/2009/11/02/news/economy/nuclear_renaissance/index.htm?postversion=2009110217

 

Advantages and Disadvantages of Protectionism

Strengths of Protectionism

– One strengh of protectionism is that it keeps the domestic economy flowing. Since there is a decrease in imports, domestic firms have less competion, and so are able to continue.

– The domestic economy also strengthens, because the unimployment rate will be minimal. This is because the domestic firms are able to produce and sell more goods with a lot less difficulty, giving firms less incentive to decrease its cost by decreasing its work force. The people with jobs will keep consuming, allowing a flow of the economy.

–  Protectionism allows the green, fledgling firms to function and develop at a decent rate, because these firms are not pressured by the foreign, more expirienced firms. The fresh firms can growuntil they themselves are able to complete in international markets, promising positive aspects for the domestic conomy in the future.

– Protectionism also prevents dumping. This is where foreign, grand economies enter an economy and sell their goods at a price lower than the costs of production. Consequently, the consumers of that specific economy are spending more, than the consumers in the overseas areas.

 

Weakness of Protectionism

– There are also weaknesses in using the system of protectionism. For example,  protectionism can cause a retaqliation reaction from other countries, ruining the relationship of the two nations. This is a major issue right now between the United States and China. U.S. put restricitons on the Chinese tires, so China retaliated by putting up barriers against different U.S. goods, such us their chicken. This hostility decreases the specialization level of the two nations, harming their economy. 

 

– Also, protectionism prevents nations from maximizing their specialization level, using up factors of production moronically inneficiently. 

Two Benefits of International Trade

One benefit of international trade is that different economies will be able to obtain a variety of goods, through spacialization. Different countries spesialize in the production of different goods, due to the difference in the recources that it contains. So through specialization, one economy will be able to obtain a certain product/good that it is domestically unable to produce, or has a difficulty to do so, by trading something it actually specializes in. For example, Japan specializes in the production of “technological” goods, such as cars, and electronics. However, it has a great difficulty in domestically producing agricultural goods, such as wheat or rice. Therefore, it can trade the goods its most productive in producing (electronics, cars), with another country that specializes in the production of agricultural goods but has a problem with technological goods. This way, both countries benefit by obtaining the necessary goods, causing an economic growth and a greater economic flow, through international trade. To be more specific, consumers benefit because they now have a larger range of goods to choose from, and producers have much larger markets.

Another benefit of international trade, is the improvement of relationships between countries. Through international trade, countries will not only benefit by obtaining an economic growth, but they will also expirience positive attributes through their learning of another countries underpinnings. These underpinnings could be different factors, such as a different cultural, or a different political perspective. So, when one country learns of another countries cultures and policies, they have less incentive to go to war, or even posses some sort of milder grudge. Therefore, international trade is also necessary, for the establishment of camaraderie  and influence between different nations.

Banckruptcy of Lehman Brothers

 Quick Background:

Lehman Brothers Holdings Inc. was one of the oldest, largest and most infuential investment banks in the world. On September 15, 2008, LB shocked the intire world by declaring bancruptcy and ending it’s 160 years of financial service. Actually, the investment bank filed for bancruptcy protection, but neither any of the other large corporations, nor the U.S. government itself abetted it through a bail out, causing arguably the biggest bancruptcy in history.

Reasons for Bancruptcy:

Being one of the largest investment corporations in the world, Lehman Brothers immensely invested into real estate. Abandoning exclusiveness, It started landing large sums of money (for housing purposes) to citizens with bad credit, meaning that their majority would not be able to pay the bank back. Unfortunately for both, the borrowers and the lenders, the global economy expirienced a sub-prime mortgage crisis,  while the interest rates were constanty increasing. These borrowers could not keep up with their constant payments and so their houses were eventually taken away and forclosed, causing great misery for both, the citizens as they were left homeless, and the economy as the overall expenditure decreased. The Lehman Brothers ened up loosing about 60 billion dollars, because not only were they unable to get most of their money back from the borrowers, but they also were not able to resell the obtained real estate property. This is because the current economic depression left the demand and value of real estate dangerously low.

Another reason for this investment banks bancruptcy is the fact that when it started to experience some grave, economic losses, other large corporations got intimidated and as a result, ended all of their transactions with the Lehman Brothers. This, along with the sub-prime mortage crisis, and the frequently rising interest rates, caused an eventual realization that the LB was threateningly close to bancruptcy, and so needed to file for a bail out. However, even after LB filed for bancrupty, the U.S. government decided to simply let it to crumble, until it was forced to declare bancruptcy.

1.1 Computing:

How will I face the challenge of distraction?

 

Dr. Anthony is always gliding around the room. Therefore, I will make sure that Im not going on distractive sites, such as facebook. I am not exactly an expert when it comes to computers, so I have to work extra hard on staying focused to get the final score that I want. This means that I have to be extra attentive and hard working, since I am already at a disadvantage compared to other students. 

 

How will I face the threat of loss or damage?

 

I was extra careful in terms of safety for my computer. First, I bought a decent computer from my father for only a hundred dollars. So, if it gets lost or broken, I it wouldn’t be that critical. I also made sure to buy a petit computer. This way, I could put it in my bag and cover it up with soft covers to make sure it doesn’t break.

What I Find Interesting About Taxation.

I always knew what a tax system is and how it worked. For example, I always knew there was an Income tax, which takes away a portion of a persons income and goes to the governments budget as tax revenue. However, I have always been oblivious to the fact that there are different types of tax systems, so this was a learning experience to me.

What I found most interesting about tax is the fact that an indirect tax is not always fair for everyone. For example, there could be a set tax on a good. It may seem fair that for everyone who is buying the good, because they all pay the same amount. However, the people with a smaller income are actually paying more, since this good would amount to a larger portion of their income.