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14 Standard of Living

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14 Standard of Living
A standard of living is the level of wealth, comfort, material goods and necessities
available to a certain socioeconomic class or a certain geographic area. The
standard of living includes factors such as income, gross domestic product
(GDP), national economic growth, economic and political stability, political and
religious freedom, environmental quality, climate and safety. The standard of
living is closely related to quality of life.Other factors commonly associated with
the standard of living include:
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Class disparity
Poverty rate
Quality and affordability of housing
Hours of work required to purchase necessities
Gross domestic product (GDP)
Affordable access to quality healthcare
Quality and availability of education
Incidence of disease
Infrastructure
National economic growth
Economic and political stability
Political and religious freedom
Environmental quality
Climate
Safety
An example of a high standard of living is a wealthy person who can buy anything he
wants.
An example of a low standard of living is a poor person who does not have enough
food or water.
Quality of Life
Quality of life is a more subjective and intangible term than standard of living. As
such, it can often be hard to quantify. The factors that affect the overall quality of
life vary by people's lifestyles and their personal preferences. Regardless of
these factors, this measure plays an important part in the financial decisions in
everyone's lives.
Some of the factors that can affect a person's quality of life can include
conditions in the workplace, healthcare, education and material living conditions.
Factors that may be used to measure the quality of life include the following:
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Freedom from slavery and torture
Equal protection of the law
Freedom from discrimination
Freedom of movement
Freedom of residence within one's home country
Presumption of innocence unless proved guilty
Right to marry
Right to have a family
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Right to be treated equally without regard to gender, race, language,
religion, political beliefs, nationality, socioeconomic status, and more
Right to privacy
Freedom of thought
Freedom of religion
Free choice of employment
Right to fair pay
Equal pay for equal work
Right to vote
Right to rest and leisure
Right to education
Right to human dignity
15 The role of privatization in the development of the economy
Privatization is the process of transferring an enterprise or industry from
the public sector (government)to the private sector. For example, if an individual
or organization purchases all the stock in a publicly-traded company, that
effectively makes it private, so that process is sometimes described as
privatization. Privatization is an ongoing trend in many parts of the developed
and developing world. Proponents of privatization maintain that the competition in
the private sector fosters more efficient practices, which eventually yield better
service and products, lower prices and less corruption. On the other hand, critics
of privatization argue that some services -- such as health care, utilities,
education and law enforcement -- should be in the public sector to enable greater
control and ensure more equitable access. For some countries, privatisation is part of
the process towards moving away from a state-dominated economy towards a mixed economy .
Good examples include China, India, Chile, Ethiopia and Vietnam.
What are the main arguments for using privatisation as a growth and development strategy?
Efficiency: Supporters of privatisation believe that the private sector and the discipline of market
forces are a better incentive in the long run for businesses to be run efficiently and thereby
achieve improvements in economic welfare. Privatisation may also lead to less corruption.
Innovation: The private sector may be more innovative than the state (public sector) and this
might be a factor leading to a more dynamic economy which is less reliant on state subsidy and
other forms of financial support.
Income from asset sales: Selling off industries can generate increased revenue for the
government which might then be used to help fund increased spending public and merit goods.
Investment: Some state-owned enterprises are privatised and then go on to launch an initial
public offering on the stock market to raise fresh capital. This in turn might lead to higher capital
investment than when the business was state owned which creates jobs and increases the
productive capacity of the economy. The Solow growth model highlights the importance of
capital investment for emerging countries wanting to achieve faster growth.
Smaller fiscal deficit: State sector industries (state owned enterprises) often make heavy losses
which lead to an increase in the fiscal (budget deficit) and high levels of government debt.
Privatisation can therefore lead to a reduction in the deficit and means that the government will
have less debt to service leading to lower interest payments. In turn, this might lead to a lower
tax burden on businesses and households which could stimulate growth.
Lower prices and higher real incomes: A state enterprise may employ surplus workers which is
productively inefficient. Increased efficiency and productivity will eventually lower prices for
consumers leading to higher real incomes and an increased ability to save.
16. 17 The essence of the state budget
The state budget (Government budget) is the main financial plan of the country, the balance of income
and expenditure of the state. The state budget is drawn up by the government and approved by the
high legislative bodies. The most important parts of the state budget are its revenues and expenditures.
revenue part – shows the sources of budget funds;
expenditure part – shows the purposes for which the funds accumulated by the state are directed.
State budget revenues:
Taxes on income of legal entities and individuals
Revenues from the real sector (income tax)
Receipt of indirect taxes and excises
Fees and Non-Tax Charges
Regional and local taxes
State budget expenditures:
Industry
Social politics
Agriculture
Public administration
International activity
Defense
Law enforcement activities
The science
Health care
Balanced budget - a budget in which the ratios of income and expenditure are equal.
If revenues and expenditures in the budget differ, then the deficit or budget surplus. The budget
deficit is the amount by which government spending exceeds its revenues. The budget surplus
is the amount by which state revenues exceed its expenses. The surplus is quite rare, most
often there is a budget deficit. That is, for the implementation of all expenses it is necessary to
find additional funds. These funds come from sources of financing the budget deficit.
Sources of financing the budget deficit Internal financing: issue and sale of securities (bonds
and bills) budget loans received from budgets of other levels use of central bank funds External
financing: sale of securities in the global financial market loans from foreign banks and
international financial organizations foreign government loans Together, internal and external
financing make up the total amount of funding.
Budget revenues are generated from tax and non-tax types of income. Tax revenues are
federal, regional and local taxes and fees, as well as penalties and fines, as provided by tax
legislation. Non-tax revenues are: income from the use of state or municipal property; income
from the sale of state or municipal property; revenues from paid services provided by state and
local authorities; fines, compensation; income received from budgets of other levels of the
budget system in the form of financial assistance and budget loans.
Budget expenditures of all levels are divided into current and capital. Capital expenditures are
the costs of innovation and investment activities. They include the costs of: investments in
accordance with the approved investment program; funds provided as budget loans to legal
entities; the cost of the overhaul of state property; costs associated with expanded reproduction
Capital expenditures make up the so-called development budget. The order of its formation is
determined by federal law.
Current expenditures of budgets - expenditures that ensure the functioning of government bodies,
local governments and budget institutions
Budget expenditures are made in the form of: appropriations for the maintenance of budgetary
institutions; funds to pay for goods, works and services under state or municipal contracts;
transfers to the public; budget loans; subventions and subsidies; investments in the authorized
capital of existing or newly created legal entities; loans to foreign countries; funds for
maintenance and repayment of debt.
18 Currency policy
Monetary policy is the macroeconomic policy laid down by the central bank. It involves
management of money supply and interest rate and is the demand side economic policy
used by the government of a country to achieve macroeconomic objectives like inflation,
consumption, growth and liquidity. The primary objective of central banks is to
manage inflation. The second is to reduce unemployment. Monetary policy is referred
to as being either expansionary or contractionary. Expansionary policy occurs when a monetary
authority uses its tools to stimulate the economy. An expansionary policy maintains short-term
interest rates at a lower than usual rate or increases the total supply of money in the economy more
rapidly than usual. It is traditionally used to try to combat unemployment in a recession by
lowering interest rates in the hope that less expensive credit will entice businesses into expanding.
This increases aggregate demand (the overall demand for all goods and services in an economy),
which boosts short-term growth as measured by gross domestic product (GDP) growth.
Expansionary monetary policy usually diminishes the value of the currency relative to other
currencies (the exchange rate).[5]
The opposite of expansionary monetary policy is contractionary monetary policy, which maintains
short-term interest rates higher than usual or which slows the rate of growth in the money supply or
even shrinks it. This slows short-term economic growth and lessens inflation. Contractionary
monetary policy can lead to increased unemployment and depressed borrowing and spending by
consumers and businesses, which can eventually result in an economic recession if implemented
too vigorously
19 The role of industry in economy
Industrialization plays a vital role in the economic development of
underdeveloped countries. these are some of its most important effects.
1. Increase in National Income
Industrialization allows countries to make optimal use of their scarce
resources. It increases the quantity and quality of goods manufactured in that
company, which makes a larger contribution to gross national product (GNP).
2. Higher Standard of Living
In an industrialized society, workers' labor is worth more. In addition, because
of higher productivity, individual income increases. This rise in income raises
the standard of living for ordinary people.
3. Economic Stability
A nation that depends on the production and export of raw material alone
cannot achieve a rapid rate of economic growth. The restricted and fluctuating
demand for agricultural products and raw materials—along with the
uncertainties of nature itself—hampers economic progress and leads to an
unstable economy. Industrialization is the best way of providing economic
stability.
4. Improvement in Balance of Payments
Industrialization changes the pattern of foreign trade in the country. It
increases the export of manufactured goods, which are more profitable in
foreign exchange. But at the same time, processing the raw material at home
curtails the import of goods, thereby helping to conserve foreign exchange.
The export-orientation and import-substitution effects of industrialization help
to improve the balance of payments. In Pakistan in particular, the exports of
semi-manufactured and manufactured goods resulted in favorable trends.
5. Stimulated Progress in Other Sectors
Industrialization stimulates progress in other sectors of the economy. A
development in one industry leads to the development and expansion of
related industries. For instance, the construction of a transistor radio plant will
develop the small-battery industry. (This is an example of backward linkage.)
In another case, the construction of milk processing plants adds to the
production of ice cream as well. (This is forward linkage.)
6. Increased Employment Opportunities
Industrialization provides increased employment opportunities in small- and
large-scale industries. In an industrial economy, industry absorbs
underemployed and unemployed workers from the agricultural sector, thereby
increasing the income of the community.
7. Greater Specialization of Labor
Industrialization promotes specialized labor. This division of work increases
the marginal value product of labor. In other words, specialized labor is more
profitable. The income of a worker in the industrial sector will be higher on
average than that of a worker in the agricultural sector.
8. Rise in Agricultural Production
Industrialization provides machinery to the farm sectors, including
technologies like tractors, thrashers, harvesters, bulldozers, transport, and
aerial spray. The increased use of modern technologies has increased the
yield of crops per hectare. The increase in farmers' income boosts economic
development more generally.
9. Greater Control of Economic Activity
Industrial activity is easier to control and regulate than agricultural activity.
Industrial production can be expanded—or cut down—to respond to the price
and cost of, and demand for, a product.
10. Larger Scope for Technological Progress
Industrialization provides greater potential for on-the-job training and
technological progress. The use of advanced technology increases the scale
of production, reduces costs, improves the quality of the product, and
ultimately helps to widen the market.
11. Reduction in the Rate of Population
Growth
In a somewhat roundabout way, industrialization leads to smaller families.
Surplus workers migrate from the farm sector to industries, which are mostly
situated in urban centers. Cities have better sanitation facilities, and health
care is more widely available there. Through the adoption of family-planning
measures, people reduce the rate of population growth overall.
12. Increased Savings and Investments
Because industrialization increases workers' income, it also enhances their
capacity to save. These voluntary savings stimulate economic growth. By
cumulative effect, they eventually lead to the further expansion of industry.
13. Provision for Defense
If a country is industrialized, it can manufacture arms and ammunition that are
necessary for its own self-defense. A country that depends on other nations
for its arms supply will eventually suffer, and may face a serious defeat.
Pakistan's two wars with India should open its people's eyes to the importance
of this issue.
14. Lesser Pressure on Land
The establishment and expansion of industries lessons excessive pressure on
land, which is caused by the agricultural sector's labor force.
15. Development of Markets
With the development of industry, the market for raw materials and finished
goods widens even within the country.
16. Increase in Government Revenue
Industrialization increases the supply of goods for both external and internal
markets. The exports of goods provides foreign exchange, as we know. In
addition, the customs excise duties and other taxes levied on goods increase
the revenue of the country's government. The income tax received from
industrialists also adds to the revenue stream of the government, and is
eventually spent for the welfare of the country as a whole.
20.21 Industrialization in Azerbaijan
First industrial mining of oil in the world that happened in Baku in 1848, is considered the
beginning of industrialization in Azerbaijan. Rapid increase of oil extraction volumes in the second
half of the XIX century stimulated this process resulting in the establishment of oil-related industrial
sectors and infrastructure. In the mid XX century industrialization started spreading to Azerbaijani
regions and new industrial cities had been established at the time. During the 1970-1980’s large-scale
investments had been allocated for industrial development and a great number of large industrial
enterprises established. Unfortunately, the crisis which hit Azerbaijan after the collapse of the Soviet
Union and the occupation of Azerbaijani territories by Armenia exerted its negative influence on
industry as well. As a result, the volume of industrial products decreased dramatically.
Nevertheless, successful restoration of political and economic stability soon improved the situation
of Azerbaijani industry, which started to grow again in 1997. After gaining independence,
Azerbaijan attracted large volumes of foreign investment in oil and gas sector. At that time, most of
industrial enterprises were privatized. Since 2003, industrial growth is being observed. Effective
measures have been taken in order to resolve energy supply issues, which are of vital importance for
industry. Azerbaijan turned from an importer of natural gas and electric energy into the net
exporter. In a result of implemented policies the industry has entered into the new phase of
development, and as a mark of this phase the year 2014 in Azerbaijan was announced “A Year of
Industry” by H.E. Ilham Aliyev
23 .24.26 .25 The necessity of agrarian reforms.
The primary crops produced in Azerbaijan are agricultural cash crops, grapes, cotton, tobacco, citrus
fruits, and vegetables. The first three crops account for over half of all production, and the last two
together account for an additional 30 percent. Livestock, dairy products, and wine and spirits are
also important farm products
Agrarian Reform is very significant for the economy of any country because
more than half of the population is employed in the agricultural sector. Agriculture
is the main source of livelihood especially for the developing countries. Reforms
are important because they protect the rights of the farmers . It is normally done
by the government where they redistribute the agricultural land among the
farmers of the country. It also concerns the processing of the raw materials that
are produced by farming the land from the respective industries. First, agrarian
reform has had a limited impact on land inequality and rural poverty; second, concerted
peasant mobilization is fundamental to overcoming landlessness; third, the nurturing of
a culture of co-operation and the culture of solidarity are vital to making co-operatives
viable; fourth, co-operative formation is inherently a political and conflictual process;
fifth, interpersonal and group conflicts obstruct co-operative formation; sixth, the
incorporation of principles of conflict management into co-operative formation is
essential to overcoming internal conflicts; and seventh, the state has to play a major
role in supporting agrarian reform by providing access to financial, educational,
technological, and human resources.
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