United Kingdom
Form of Government : Constitutional Monarchy
Total GDP : $2.387 trillion (2013 est.)
Per Capita GDP : $37,300 (2013 est.)
Economic Growth Rate : 1.8% (2013 est.)
Unemployment : 7.2% (2013 est.)
Total GDP : $2.387 trillion (2013 est.)
Per Capita GDP : $37,300 (2013 est.)
Economic Growth Rate : 1.8% (2013 est.)
Unemployment : 7.2% (2013 est.)
The United Kingdom is a constitutional monarchy by continuing the tradition of monarchy which is the oldest form of government in UK. Constitutional monarchy has the Sovereign as a Head of State but the ability to make and pass legislation resides with an elected Parliament. The head of the UK government is the Prime Minister. He is the one that is responsible for all policies and choices. The goal of this type of government is to have strong economy country and to continue the tradition. The Sovereign reflects the national identity, unity, pride, and sense of stability and continuity. UK’s economic goals are lowering the inflation rate by 2%, increasing the economic growth, but, not inflationary growth, reducing unemployment, and avoiding large deficit on current account balance of payments.
United Kingdom is the third largest economy in Europe. The core factor that enhances the GDP growth in UK is services including banking, insurance, and business services. In 2008, when UK faced recession due to the global financial crisis, BROWN (Labor) government supported economy to stabilize the financial market through “nationalizing parts of the banking system, temporarily cutting taxes, suspending public sector borrowing rules, and moving forward public spending on capital projects”.(World Factbook) UK has Central Bank as the Bank of England.
In the UK, monetary policy that is operating by affecting the interest rate, the price at which money is lent is given to the Central Bank. It has independence in marking interest rates and the government can only set it at the target of 2% inflation. The Central Bank’s Monetary Policy Committee informed that they injected money directly into the economy through purchasing assets which meant the monetary policy that relied on price to be shifted toward the quantity of money in 2009. In 2010, Government’s fiscal targets for the current Parliament was the fiscal mandate and supplementary target. The Central Bank tries to regulate the inflation by setting the interest rate. Some of the fiscal policies that UK is performing on are financing key areas of government spending, altering the distribution of income and wealth, providing a welfare state safety-net for families, managing the macroeconomic cycle, improving country’s competitiveness, and tackling market failures through intervention. When there is economic recession, the government reduces corporation tax, national insurance tax, etc that would bring up the economy. UK is performing well in overall with economic policies and systems as they try to back up their economic difficulties.
https://www.gov.uk/government/how-government-works#who-runs-government
https://www.gov.uk/understand-how-your-council-works/types-of-council
https://www.cia.gov/library/publications/the-world-factbook/geos/uk.html
http://www.infoplease.com/encyclopedia/world/great-britain-government.html
http://www.bankofengland.co.uk/Pages/home.aspx
http://www.economicsonline.co.uk/Managing_the_economy/Fiscal_policy.html
South Korea
Form of Government : Republic of Korea
Total GDP : $1.666 trillion (2013 est.)
Per Capita GDP : $33,200 (2013 est.)
Economic Growth Rate : 2.8% (2013 est.)
Unemployment : 3.2% (2013 est.)
Total GDP : $1.666 trillion (2013 est.)
Per Capita GDP : $33,200 (2013 est.)
Economic Growth Rate : 2.8% (2013 est.)
Unemployment : 3.2% (2013 est.)
South Korea is a Republic that encourages economic freedom. It is the country that illustrated one of the most outstanding growth in a very short amount of time through becoming a high-tech industrialized economy. The close relationship between the government and business encouraged this economic growth. For instance, the government has enhanced the "import of raw materials and technology at the expense of consumer goods, and encouraged savings and investment over consumption”.
The Bank of Korea operates independently from the government; however, it reveals that government has helped the economy when the economy faced a crisis. South Korea’s ultimate goals is to lower the unemployment rate, increase the economic growth, and regulates the fluctuations. According to Article 1, Clause 1 of the “Bank of Korea Act”, the economic purpose is to “contribute to the sound development of the national economy by pursuing price stability through the formulation and implementation of efficient monetary policy”.
The Bank of Korea insists that the price stability is the most significant factor of their monetary policy. BoK, not only considering price stability but also maintaining financial stability and they adopted inflation targeting based on consumer price inflation as for the framework of the monetary policy. The Monetary Policy Committee of BoK controls the Base Rate through observing “the monthly price movements, domestic and overseas economic and financial market conditions”. South Korea operates open market as a instrument of monetary policy as the central bank deals in securities with financial institutions in the open markets.
When South Korea faced economic crisis due to many different reasons, there were many efforts to recover the economy. For instance, the president Park Chung-hee invested on policies reforms which encouraged domestic savings and international trades. The government helped through subsidies and low-interest-rate loans into family-led chaebol which benefited the firms to grow internationally. This economic policies or decisions, indeed, evoked economic growth and made South Korea one of the strongest economic nation. Currently, the president Park is trying to reduce regulation to spur investments and raise household income to improve consumption and to reduce privately held debt.
http://www.bok.or.kr/eng/engMain.action
https://www.cia.gov/library/publications/the-world-factbook/geos/ks.html
http://www.foreignaffairs.com/articles/140335/marcus-noland/six-markets-to-watch-south-korea
http://www.heritage.org/index/country/southkorea
In conclusion, taking consideration of both countries economies and government system, I believe South Korea has implemented the most preferable economic policies. South Korea maintained a appropriate relationship between the Bank of Korea and the Government. What I liked about the country’s economic policy was if the economy is working efficiently, then there would be no government’s regulation or interruption. However, when the economy is in recession or in depression, government helping out the situations by controlling the interest rate and encouraging people’s purchasing power seems very efficient. Moreover, I was impressed on how South Korea recover its recession as soon as possible. I think to an extent, governments should only try to manipulate the economy when there is a recession or depression as South Korea did. Then, like South Korea, a country would have positive economic growth.