An honest appraisal of the prospects ahead

We neither can nor should return to the world as it was before. What would happen to America and the rest of the world in the aftermath?

The United States will still remain the largest economy, but the way the world views America has changed, and China’s influence will grow. Even before the crisis the dollar was no longer viewed as a good store of value; its value was volatile and declining. Now, with the ballooning of America’s debt and deficit and the unremitting printing of money by the Fed, confidence has eroded further. This will have a long-term impact on America and its standing, but it has already generated a demand for a new global financial order. If new frameworks for governing the global economic system can be created, that would be one of the few silver linings to this otherwise dismal cloud.

Without a regular and full exchange of information, tax authorities in a given country don’t know what or who is escaping their net. For developing countries, there is an even more important issue—corruption. Corrupt dictators abscond with billions and park the money not just in offshore banks but also in some of the world’s largest financial centers, including London. The developing countries are rightly condemned for not doing more about corruption, but they also rightly criticize the advanced industrial countries for facilitating corruption by providing safe haven for corrupt officials and secret bank accounts for their money. If, somehow, the money is located, it is often difficult to get it returned.

The single most important idea in dealing with the aftermath of a crisis is a simple one: crises don’t destroy the assets of an economy. The banks may be bankrupt. Many firms and households may be bankrupt. But the real assets are much as they were before—the same buildings, factories, and people; the same human, physical, and natural capital.

In time, every crisis ends. But no crisis, especially one of this severity, passes without leaving a legacy. The legacy of 2008 will include new perspectives on the long-standing conflict over the kind of economic system most likely to deliver the greatest benefit. The battle between capitalism and communism may be over, but market economies come in many variations and the contest among them rages on.

6. Answer the questions using the material from Part 2 of the text “The Great Recession”.

1) What role does the government play in a market economy? 2) What is a public good? Use additional reference material to find more information about public goods. Share what you have found in a group discussion. 3) What are some of the socially unacceptable outcomes that efficient markets can produce? 4) Why is having good accounting systems vital for markets? 5) Why is transparency essential for markets? What happens if there is no transparency? 6) How will the USA and China stack up against the rest of the world after the recession? 7) What are some of the problems that corruption creates? Why can both developed and industrial countries be criticized for perpetuating it? 8) Does the author believe in a better future for the world economy? Prove your point.

7. Fill in the blanks with the words and word-combinations given below.

1) The individual ________ of the company, such as its equipment and property, may be more valuable than the company as a whole due to such factors as poor management or poor economic conditions. 2) ________ ________ involves selling the assets of a business individually at a profit. Managers of state-owned companies in countries like Russia and China have been known to sell the assets which they control leaving behind nothing but ________ to the state. 3) The National Assembly on March 6 passed a new property law removing limitations on ________ ________ ownership. 4) ________ are scattered throughout cities, allowing customers easier access to their accounts. 5) A ________ is a situation in which a business, individual or government offers money to a failing business in order to prevent the consequences that arise from a business's downfall, such as, for example, a huge jump in unemployment. 6) Homeowners will have less money to spend in their pockets after making higher ________ repayments and will be even less inclined to borrow at today's high rates. 7) A combination of very low ________ ________ and a loosening of credit underwriting standards can bring borrowers into the market, fueling demand. A rise in interest rates and a tightening of credit standards can lessen demand, causing a ________ ________ to burst. 8) A ________ ________ is the name economists give to a sudden reluctance among banks to lend money. 9) One or more of the organization's top leaders, including the ________ ________ ________, must be committed champions of the change. 10) The business of turning ‘hot’ money into legitimate tender is as old as crime itself, but it is only in recent years, largely because of the explosion of the drugs trade, that ________ ________ has become such a huge business.

Words and word-combinations: ATMs, chief executive officer (CEO), interest rates, real estate, bailout, assets, asset stripping, credit crunch, mortgage, money laundering, housing bubble, debts.

8. Find in the text three metaphors describing the state of economy and comment on them.

9. Translate into English:

1) Абсолютное большинство экономистов соглашается с тем, что современная экономика не может полностью обойтись без правительственного регулирования, но оптимальный уровень государственного регулирования экономики продолжает оставаться проблемой, представляющей интерес для экономистов. 2) Государство выступает как важный субъект экономических отношений и представляет собой совокупность организаций, наделенных правом и обязанностью устанавливать и защищать обязательные для других субъектов рынка условия экономической деятельности и перераспределять результаты их деятельности. 3) Для эффективного функционирования рыночного механизма в смешанной экономике государству необходимо предотвращать монополизацию рынков и регулировать деятельность естественных монополий. 4) Армия, правоохранительные органы, строительство дорог, общественно-полезные исследования, - все это типичные сферы государственной деятельности, которые финансируются из правительственных фондов. 5) Государство может также регламентировать некоторые виды деятельности, например, банковское дело. 6) Правительство выделило около 500000 долларов, чтобы спасти по­пулярный футбольный клуб. 7) Главная цель государственного вмешательства в экономику заключается в том, чтобы создать условия для политической, экономической и социальной стабильности развития общества. 8) Правительство выполняет следующие основные функции: производство общественных благ (например, поддержание общественного порядка, национальной безопасности, освещение улиц, установка и работа светофоров), устранение чрезмерного социального неравенства, регулирование «естественных монополий», поддержка макроэкономической стабильности, сглаживание циклических колебаний в экономике, создание и поддержание средств коммуникации и обеспечение доступа к информации. 9) Для выполнения вышеперечисленных функций правительство использует следующие экономические инструменты: систему налогообложения и дотаций, расходы из бюджета на некоторые виды товаров и услуг (здравоохранение, образование, правоохранительные органы) и др.

10. Express your opinion on the following statements.

1. “For the man who has everything there is now a calendar to remind him when the payments are due.” Anonymous
2. “He who sells on credit has much business but little cash.” Anonymous
3. “No man’s credit is as good as his money.” Ed Howe
4. “The surest way to establish your credit is to work yourself into the position of not needing any.” Maurice Switzer
5. “Never spend your money before you have it.” Thomas Jefferson
6. “Some people use one half of their ingenuity to get into debt, and the other half to avoid paying it.” George D. Prentice

11. Write an essay on one of the following topics.

1. “Income is something you can’t live without – or within.” Anonymous

2. “Small debts are like small shot; they are rattling on every side, and can scarcely be escaped without a wound; great debts are like cannon, of loud noise but little danger.” Samuel Johnson