Unit 23: During a downturn, to what extent should the government intervene in the economy, by crating demand or jobs? What are the economic arguments against such governmental spending?

In an economic crisis, should governments rescue banks that have taken too big risks and large companies in old industries or rather invest in new, efficient start-ups in innovative new industries? Which companies in Russia are too big to go bankrupt?

1) First of all, it’s crucial to mention, that there to ways 2 ways of government intervention. First is fiscal policy, which includes taxation and expenditures. Second is monetary policy, which consists of regulation of exchange rates and money supply.  However government has some ways to regulate the economy during upturns and downturns, we should take into account the fact, that when economic times are good or when people feel confident about their future, they spend and run up debts. But at certain point, spending has to slow down and debts have to be paid. People are getting worried about the possibility of losing their jobs and in the near future they tend to start saving money and consuming less, which leads to a fall in demand and consequently a fall in production and employment. In this terms, here comes a government solution: launching public sector job to increase employment.  Let's consider this question from Keyns' and Freedman's point of view. John Keyns recommended governmental intervention in the economy, to counteract the business cycle. During an upturn, governments could decrease their spending or increase taxation. During a recession they could increase their expenditure or decrease taxation, or increase the money supply and reduce interest rates so as to boost the economy and increase the output, investment, consumption and employment.  Monetarism economists insisted that money is neutral, meaning that in the long run, increasing the money supply will only change the price level and have no effect on output and employment. The argued that governments should abandon the attempt to manage the level of demand in the economy. The monetary policy really worked for many years, and argument that markets should be allowed to operate with a minimum of governmental intervention, took place. But it was till the 2008, when subprime crisis occurred. Many companies and banks went bankrupt. And Keynesianism suddenly came back.  2) It's controversial question because on one hand it 's important to bail out banks in terms of saving people's trust. Besides, closing old industries will lead to an unemployment. On the other hand investing money in new industries can give a high return in the future. To choose the right way to overcome economic crisis you should think long-term. Anyway, you have to find an optimal solution.

Unit 24: Some economists argue that corporate social responsibility goes against the principles of profit maximization. Can you explain why?

When Milton Friedman says “The business of business is business”, it assumes the most shareholders want to maximize their profit. But what we can observe now is the rise of sociable responsible investment, so it shows that more investors do care about social and environment standards. In meeting customer’s needs companies should maintain reasonable prices and every product should be of high quality. To be responsible to employees, working conditionals should be clean, orderly and safe and moreover, employers must respect the dignity and recognize the merit of each other.

Than companies should be responsible to the communities and stockholders by bearing fair share of taxes and maintaining in good order the property and carrying on research, developing innovative programs and purchasing new equipment.

CSR proves that businesses are getting along better with environmentalists. Nowadays many companies acknowledge environmental problems and try doing something (for example, planting trees or drive hybrid vehicles) to offset emissions and negative impacts on nature