Temporary crisis but forever responsibility

Introduction

The outbreak of the financial crisis was marked by the bankruptcy of Leman Brothers in Sep.2008. Quickly a series of chain reactions triggered strong social panic; finally, it had become a global crisis. Nowadays, more than a year has passed; there is still no one country can declare that it has recovered from the crisis. The effects of the financial crisis are hard to summarize now, because the world is still going through the pain it brought. 代寫留學生dissertation/留學生dissertation代寫   http://www.400190.com Thousands of firms, as the participants of the market economy, suffered from considerable damage. No matter what the firms engage in; No matter how size of firms are, even no matter where firms locate, they can not get away from the effects of the crisis (Kolko, Jed, Neumark, David, 2010). These firms have to take steps in order to survive; as a result, the reduction in the firm’s cost is becoming a common trend. People worry about if there is a possibility for firms to reduce costs while ignoring their social responsibilities (Rodríguez, Inda M., 2009). The article will discuss how the financial crisis affects firms at first; the following will be what these measures to reduce costs are; finally, it will be the description of the relationship between the reduction in the firm’s cost and social responsibility.

The effects of the financial crisis on firms

The effects of the financial crisis on firms are extensive and intensive. Even it is called financial crisis, it does not mean that it just brings effects to the finance. In fact, any industry involves in it. Many economists considered it as the most serious crisis since the 1929’s great economic depression. The market economy is dominant in the world economy; the free flow of capital and goods is the most important characteristic in the market economy. What is more, the relationship between capital and goods is interactional, once the flow of capital is poor, the flow of goods must be affected. It is well-known that the firms provide the society with goods and services, and the operation of firm must be dependent on capital (Hobdari, Bersant, Jones, Derek C., Mygind, Niels, 2009). Apart from this, the goods and services firms produce need to be purchased by consumers. The economic operation will be healthy if this cycle processes regularly; but the economy will be depressed if any part is blocked. According to the above theory, the analysis of the effects of the financial crisis on firms is as follows. Firstly, a large number of banks bankrupted, which made the firms can not get investments and consumers can not get loan from banks. The United States needs to be described specially. America is the greatest economy entity and the biggest trading nation in the world; do not forget that it is exactly the origin of the financial crisis. The bankruptcies of banks were from the bursting of the housing bubble and subprime lending crisis. Secondly, the philosophy Americans advocate is to spend before earn, the money they spend on housing, car and education is always loaned from banks, basically they do not have much savings (Raymond, Nate, Hallman, Ben, 2009). Another point needs to be noted, in the past years, the number of trade deficit of America has been amazing, which means Americans spent much money on buying goods and services from other countries. Try to think about, as the richest country and the biggest consumer, now it has no money to invest and consume, absolutely a series of chain reactions are not avoided. The reports that TV and Newspaper are filled with were about the rate of unemployment, GDP and CFI. Generally speaking, invest and consume are the two forces to drive the economic growth, the economy suffered from depression is normal when the two forces were no longer strong. Thirdly, economic growth of many developing countries is supported by the foreign trade. The size of international trade was meeting decline as the reduction of investment and consume, many enterprises can not receive orders, so they have to reduce the scale of production, even shut down. Through the above analysis, it can be seen there is a cycle made up of investment, production and consumption. Now the cycle was destroyed, so the production of firms lost motivation. The firms must do something to handle these difficulties they are facing.#p#分頁標題#e#

The measures to reduce costs

The first thing a firm wants to do is reduce costs when the economy is depression. As a matter of fact, it indeed is a good method to overcome predicament. This paragraph will discuss what the cost of a firm is made up and what the measures are (Heywood, Suzanne, Layton, Dennis, Penttinen, Risto, 2010). Management cost and production cost play important role in the whole cost of a firm, a firm should cut down from the two aspects. Firstly, wages to employees constitute a high proportion of management cost; it is obvious the fastest and most effective way to reduce management cost is to layoff (Colvin, Geoff., 2009). Rapid rising unemployment is exactly the result of large-scale layoffs and corporate bankruptcies; the high unemployment rate is the reason that people are with lower-income; lower-income leads the reduction in demand; finally a vicious circle formed (Russell, Dale W., Russell, Cristel Antonia, 2010). Secondly, the reduction in production cost, the normal way is to provide customers with less goods or services under the same money; another way is to use bad raw materials to produce or provide services, obviously corporate is trying to transfer the cost to consumers (Bonini, Sheila, 2010). The excessive high price is another reason to reduce demand; as a result, another vicious circle emerged (Epperson, Jerry, 2009). No matter what corporate did, the goal is to let consumers be the ultimate victims. Especially those firms with short-sighted and paying attention only to the interests before the eyes, basically they just hope to escape from the current difficulties. In fact, the financial crisis is a global crisis for every country and every person, moreover, it is not only the crisis about economy, but also it is the crisis about people’s confidence in the future. The damage of the financial crisis should be undertaken by every firm and every person who took part in the marketing economy.

Corporate social responsibility

Corporate social responsibility does not have an authorized definition, but generally speaking, it refers to the mode of operation of enterprises to meet or exceed the ethical, legal and public standards, the enterprises are required to take into account the effects of commercial activities on stakeholders. The concept of corporate social responsibility is based on the strategy of sustainable development, apart from themselves interests, and the interests of society and environment should be paid the same attention. Corporate social responsibility has got more and more attention with more and more commercial activities stepping into people’s lives. The explosion of the financial crisis pushed firms into an awkward situation, the balance between social responsibility and economic interests was broken down. Maybe it was not hard for a form to figure out the balance between responsibility and interests before the financial crisis. Because the company surely could undertake the responsibility if the operation of the company is excellent, but if not, which is the better choice for the company? After the financial crisis, many companies chose themselves interests rather than the social responsibility. Therefore, rising unemployment and rising prices are full of people’s life (Lindgreen, Adam, Swaen, Valérie, 2010). A hot problem had entered into the public’ eyes: does it mean the corporate social responsibility is doomed to end when corporate puts more emphasis on the reduction in the costs? The answer to the question is not easy and the consistent answer is not likely to appear. Even through there is no one answer could be unanimously approved; everyone can draw his or her answer, and just needs to tell people why he or she thinks about like this.#p#分頁標題#e#

The answer to the above question

The emergence of the financial crisis was not an accident; moreover, it was not the first time to happen to the world. Many people still remember the 1929’s great depression and the Asian financial crisis at the end of the last century. So the financial crisis is not a monster and the difficulty the world can not defeat, these countries and firms have learned lessons from the past crises. The past of financial crisis is just a matter of time; the answer of this paper is that there is no way to end corporate social responsibility. It can not be denied that the layoffs of some enterprises actually aggravated the rising of unemployment and CPI is always at a high point. Enterprise certainly has right to take some methods to reduce the costs, like layoffs or advance in price according to the real operation. However, the freedom of firm is not free at all; the behavior of enterprises must not exceed the tolerance level of the community, or the chaos will be difficult to control. On the contrary, someone is taking the financial crisis as a great opportunity to foster a good corporate image while other people are afraid of this. Whether believe it or not: crisis is always pregnant with opportunity. For many companies, now is the great time to display their strength and take social responsibility. Staffs and consumers need support from these firms rather than being their scapegoats; after all, they are not responsible for the crisis. These firms who gave up social responsibility in order to purely pursue reducing costs finally lost the confidence from staffs and consumers. A firm is supported by staffs and customers, the philosophy and culture many successful multinationals set up and develop are based on the two points (Reagan, Bobby, 2009). Maybe someone would think that it is easy to say but hard to do, it is too difficult for a firm to think about social responsibility when it is facing the pressure to survive (Artiach, Tracy, Lee, Darren, Nelson, David, Walker, Julie, 2010). That is right, just these big companies could easily stand the pain the financial crisis brought, but a small company will win more respect and confidence if it takes courage to overcome the pain without neglecting the responsibility.

In the marketing economy, any firm is unique whether it is small or big; they can play their roles, regardless of what the circumstances like. The only difference between them is that a small firm must pay a higher price in order to survive. Any multinational grew from a small firm, the reason they accomplished achievement is that they understood that they just were parts of the society no matter how the scale of them were (Maon, François, Lindgreen, Adam, Swaen, Valérie, 2010). As the part of the marketing economy and the society, they should undertake corporate social responsibility, including: protection of environment; make donation to society; benefit for employees; the best products and services to customers, and so on. It must be admitted that the financial crisis really is the most serious experience the world economy went through. The minimum costs can not promise that the firm could go over this; collaboration of many aspects is the best solution to the financial. A firm has no possibility to overcome the crisis alone; a country also can not. The collaboration between firms, between countries and Between enterprise and customers will be successful. Therefore, the point about the responsibility of firms is doomed to end is too pessimistic. In fact, some statistics show that the world economy has have the signs of recovery from the financial crisis, as the title of the paper shows the crisis is temporary and the responsibility is forever. The last thing a firm does should not give up corporate social responsibility. There is one point needs to be explained, the content of corporate social responsibility is complicated, moreover, its meaning is continually upgraded by the procession of the society. So corporate social responsibility is not only ended, but also it will become more and more. But the firms do #p#分頁標題#e#代寫留學生dissertation/留學生dissertation代寫   http://www.400190.com not need to worry about the problem, because the cost the firms spend on the social responsibility must be returned (.Du, Shuili, Bhattacharya, C. B., Sen, Sankar, 2010). Any firm must remember the title ‘Temporary crisis but forever responsibility’. Do not forget the responsibility they should take as the part of the society when cut down the costs of the firms. It is not a good and successful firm to transfer the damage to staffs or customers.
 

The explosion of the financial crisis

As the most serious financial crisis since 1929’s economic recession, it broke out in September 2008, marked by the bankruptcy of Lehman Brothers. Laura D Tyson (2008) believed that this financial crisis was not an ordinary credit crisis and just like the depression in the early 90s of the last century, the continuing economic recession will be longer and more serious caused by the crisis. The world economy is still experiencing the pain of financial crisis, even through more than a year has passed. The United States is the largest economic entity in the world and is the origin of the financial crisis, the damage the U.S. economy is going through is tremendous, particularly in international trade of the United States. The following will discuss how the financial crisis has an effect on the international trade of the United States from import and export, then analysis of the relationship between international trade and GDP, finally, proposes a theory: the financial crisis is not just a challenge for the United States, but also the opportunity to change the trade balance.

Effects of financial crisis on the imports in the United States

Robert Mundell (2009) pointed that the financial crisis is actually a collection of three crises: first, the sub-prime crisis; second, bankruptcy of Lehman Brothers and its chain reactions; third, the global economic crunch. The global economic crunch manifests in the reduction of the scale of international imports. The United States is a country with great imports. Because the manufacturing industry’s proportion in the U.S. economy is far less than the service industry, a lot of things the American people need must import from other countries. As a result, The United States is always imports more than exports in the international trade. The arrival of financial crisis makes U.S. imports decline heavily. The following points show how the financial crisis affects U.S. imports. First, U.S. consumer over-depends on residents’ liabilities to financial institutions. In general, Americans do not have much savings, the concept they advocate is to spend more than. The money Americans spend on houses, cars, tourism and educations always get loans mainly from banks. After the financial crisis, U.S. financial institutions have been caught in financial crisis. The size of credit is reduced leads that Americans lost support from banks; the decline in consumer demand is inevitable. Therefore, the scale of imports is shrunk. Second, Consumer demand also relies on the people's real incomes and expecting incomes. Rising in unemployment reduces people’s incomes and disposable incomes are becoming less and less. Americans must tighten current consumption when they are facing these huge pressures (Mandel, Michael, 2009). So it is not strange that imports are shrunk. Low-income consumers are the relatively big proportion in the demands of imports. Moreover, their dependants on banks are greater. The reason of Sub-prime mortgage crisis is because the U.S. financial institutions provide low-income people with excessive. Financial institutions will strengthen risk management and improve the consumer’s credit after the financial crisis, Raghuram Rajan (2009) required financial institutions to maintain sufficient "contingent capital" consumers with low-income would be excluded out of these bank’s lists. Fourth, the financial crisis caused crash to the stock market; the wealth Of the Americans is further reduced, which also bothers the demands of imports (Muller, Aline, Verschoor, Willem F.C, 2009).#p#分頁標題#e#

Effects of financial crisis on the exports in the United States

Rogoff (2009) pointed that The U.S. economy was going through a long-term and large trade deficits and government budget deficit which ultimately overwhelmed the U.S. financial system in the global economy. Exports are also affected by the financial crisis, but there is a point needs to be explained, the impact of financial crisis on exports is less than that of imports and exports always are greater than imports in the U.S. international trade. The financial crisis began from America, quickly spread out all over the world. The world market is a whole with each country involving in it, the decline in U.S. imports is the reason that other countries’ exports reduced. In particular, the developments of the national economy of many developing countries are supported r by exports, and then they import those products and services they are not able to provide by themselves from developed countries, like the United States. Their imports demands from America inevitably suffered from decline; absolutely exports of the United States went through relative reduction. Friedman (2006) believed that deficits would be corrected by free markets as floating currency rates rise or fall with time to encourage or discourage imports in favor of the exports, reversing again in favor of imports as the currency gains strength. From another point of view, the financial crisis is stimulating exports of the U.S. Devaluation of U.S. dollar is well known(Gongloff, mark,代寫留學生dissertation/留學生dissertation代寫   http://www.400190.com 
2008), one of the results of devaluation is to make the relative prices of American goods decline in the international market. The decline in prices leads stronger competitiveness of American products. Finally the expansion of exports is achieved.

The relationship between international trade and GDP

International trade for any country is necessary, because there are always something it can provides by itself. Lawrence, H. Summers (2000) believed that the future well-being of the world’s people in large part would depend on how the ongoing process of global integration worked out. International trade exactly is the force to urge global integration. The effects of international trade on different countries are different. The economic growth of some countries mainly depends on international trade, so the scale of international trade has greater impact on GDP. The GDP of other countries is mainly driven by domestic demand, so the scale of international trade has less impact on GDP. In addition to the extent of dependent on the international trade, the structure of the international trade should be paid attention on analysis of the relationship between international trade and GDP. The total volume of international trade consists of exports and imports, so the greater the total volume of international trade is does not mean the greater its contribution to GDP is (Santiso, Javier, 2008). The meaning of import is buy goods from other countries while export refers to sell products to other countries. It is called trade deficit when imports are bigger than exports. On the contrary, people name it trade surplus if exports are bigger than imports. It is obvious that the number of trade deficit is the loss in the international trade while the number of trade surplus means the benefits from the international trade (Florio, Anna, 2010). Generally speaking, trade surplus is the phenomenon a country would like to see. In fact, the balance of imports and exports is the ideal result for a country. John Maynard Keynes (2000) was much preoccupied with the question of balance in international trade. In details, a country will be vulnerable if trade surplus is excessive (Udomkerdmongkol, Manop, Morrissey, Oliver, Görg, Holger, 2009). Because its economy is easily affected by the fluctuation of the international market and changes of other countries economy, the extent of economic independence is poor. Once the global economic crisis happens, this blow will be hard to imagine.#p#分頁標題#e#

Challenge and opportunity for the United States

Balcerowicz (2008), Polish Celebrated Economist, thought that it should be noted that the U.S. economy has extraordinary flexibility, including the labor market account. Therefore, the U.S. economy has greater anti-seismic capability than most developed countries in Western Europe. In past years, the United States has been kept trade deficit with a few major trading partners, like China (Prasad, Eswar S, 2009). In fact, America often undergoes the huge imbalance of trade even the scale of international trade is great. After this financial crisis, GDP growth is negative; the rate of unemployment is increasing; the national income is cut down (Altman, Roger C, 2009). The U.S. economy and people’s living standards have been greatly damaged; the U.S. government is carrying out large-scale economic stimulus plan in order to improve economy. The proportion of imports and exports is changing with the contraction of international trade (Schmidt-Hebbel, Klaus, 2009). Warren Buffett (2006) said: ‘The U.S trade deficit is a bigger threat to the domestic economy than either the federal budget deficit or consumer debt and could lead to political turmoil... Right now, the rest of the world owns $3 trillion more of us than we own of them’.Because the impact of this financial crisis on import is greater than export; trade deficit is tending to be reduced. Maybe this is a good opportunity to change the structure. At present, America could take advantage of the pain this financial crisis brought to adjust the economic structure. First, Americans should shift their understanding about consume after the pain of financial crisis, statistics indicate that more Americans are will to save money other than deficit spending. Second, the economic strength of the United States itself can make it out of the shadow of the financial crisis, the government can help these big banks and big companies out of the difficulties through economic stimulus plan. Third, the downward in the value of the dollar makes the goods of United States more competitive in international markets; exports can be a certain degree of stimulus compared with the decline in imports. Fourth, the U.S. government will strengthen supervision of financial institutions, in this process; a number of severely deficit-ridden, insolvent and hopeless-in-making-up-deficit enterprises will be eliminated(WEBER, Rolf H., GROSZ, Mirina, 2009). A. Michael Spence and Gordon Brown (2009) suggested that establish an early-warning system to help detect systemic risk No one denies that this financial crisis is a catastrophe, especially Americans. They have been through a very long hard time since the outbreak of this financial crisis. However, every coin has two sides, on the other side of pain; maybe it is a chance to urge the reforms and improvement of U.S. economy.

Conclusion

The loss this financial crisis brings to the world is difficult to estimate, because it is still going on. It is too early for any country to declare that it has recovered from the crisis. The origin of the financial crisis is the bankruptcy of a large number of investment banks, and then a series of chain reactions emerged: the bankruptcy of investment banks leads to the reduction of investments, the reduction of investments leads to the cutting down of production, then the rate of employment is becoming low, depression of the demands of people with lower-income resulted in the decline of the scale of international trade. This is a cyclical process, No one country can survive as long as it participates in the international market. The economic law is that more international trade makes national economy more affected (Tsai, Pei-Jung, 2009). The other rule is that the more powerful the country’s economic strength is, the shorter the time of getting away from the crisis is. This article is the description of the effect of the financial crisis on the U.S. international trade, as well as international trade is how it affects GDP. Even through Friedman (2005) and other economists have pointed out that a large trade deficit (importation of goods) signaled that the country's currency are strong and desirable, a long-term trade deficit should not be neglected. Finally this view is got that although the financial crisis for the U.S. international trade is a blow; it is also an opportunity to change their trade structure.#p#分頁標題#e#

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