Huwebes, Mayo 30, 2013

The Concept of Fiscal Policy by Jolito Ortizo Padilla


Managing the economy is a complex task. The annual budget, which is the most important statement of fiscal policy , is eagerly awaited and attracts much media attention as the overall outcome is a very clear indicator of the state of the economy.In this statement , the Finance Minister outlines the government's spending and taxation plans for the year ahead.The direction taken in the budget should give a clear indication of the government's macroeconomic priorities.

In principal, there are three types of budget:
  1. Budget Deficit -in this situation, projected government spending exceeds projected revenue from many forms of taxation.This is where the government sees the need to reflate the economy by increasing aggregate demand. Normally this is in response to a situation where there is a need to expand the economy in order to create more jobs and income.
  2. Budget Surplus- in contrast ,this describes a budget where government revenue from taxation exceeds the projected expenditure by the government on social protection, health, care, education , transport and so on. Here the government has identified a need to deflate has identified a need to deflate the economy by cutting back aggregate demand.This is normally in response to a situation where the rate of inflation in the economy is higher than the government feels to be appropriate. It could also be in response to a deteriorating deficit in the balance of trade.
  3. Balance Budget- as its name suggests, this is a neutral situation where projected revenue and government spending are equal. Within the budget though there is likely to be some re-allocation of taxation and expenditure.
As seen in the different types of budget, a government can deliberately alter tax rates and levels of government spending to influence economic activity.This is referred to as discretionary fiscal policy and can be used to influence aggregate demand. If a government wants to raise aggregate demand it will increase its spending or cut tax rates.Keynesians favor raising government spending because they believe this will have a bigger multiplier effect.This is because the rise in government spending,especially if it is on welfare payments, is most likely to benefit the poor who have a high marginal propensity to consume. In contrast, a cut in a tax rates may benefit mostly the rich who tend to have a low marginal propensity to consume.

A government can also allow automatic stabilizers to influence economic activity. These are forms of government spending and taxation which change, without deliberate government action to offset fluctuations in GDP. For example,during a recession government spending on unemployment benefits automatically rises because there are more unemployed people. Tax revenue from income tax and indirect taxes will in contrast fall automatically as incomes and expenditure decline.

Fiscal policy may also be employed to affect aggregate supply by changing incentives facing firms and individuals.In recent years , governments throughout the world have increasingly been using fiscal policy in this way to improve the competitiveness of their economies.

For fiscal policy to be effective it is important that the government can accurtaely estimate the impact that changes in government spending and taxation will have on economy. To do this they have a good idea of the value of the multiplier and an awareness of the possible side effects of policy measures. If governments underestimates the value of the multiplier , it may inject too much extra spending and thereby generate inflation and balance of payments problems. Fiscal policy instruments may also have undesirable effects. For example,a government may raise more tax in order to reduce aggregate demand. However , this may also have a disincentive effects and so reduce aggregate supply. This is true of progression taxation such as with income tax where rates increase as the level of earnings increases. Indirect taxes such as sales taxes and excise duties are regressive since they have to be paid at the same rate irrespective of income.

Some instruments of fiscal policy also suffers from significant time lags. Whilst changes in indirect taxes are relatively easy to effect, alterations in direct taxes and government spending take longer to implement and to work through the economy.

It can be difficult to raise taxation and lower government spending because of the political unpopularity of such measures and because of, in the case of government spending, the long term nature of some forms of government spending.For example, once a decision has been announced that the pay of government employees will be increased it would be difficult to reverse it and will commit the government to higher spending for some time.




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Lunes, Mayo 27, 2013

The Art of Delegation by Jolito Ortizo Padilla



Introducing our new Logo for the year 20013-2014

                             
Delegation is not an easy task.It involves behavioural as well as organizational and economic considerations,and it is subject to number of possible abuses. Effective delegation is a social skill. It requires a clear understanding of people- perception ,reliance on other people, confidence and trust and courage. It is important that the manager knows what to delegate , when and whom. Matters of policy and disciplinary power, for example, usually rest with the manager and cannot legitimately be delegated. Delegation is a matter of judgment and involves the question of discretion.

Delegation is also a matter of confidence and trust- both in subordinates and the manager's own performance and system of delegation. In allowing freedom of action to subordinates within agreed terms of reference and the limits of authority, managers must accept the accept that  subordinates may undertake delegated activities in a different manner from themselves. This is at the basis of the true nature of delegation. However , learning to put trust in other people is one of the most difficult aspects of successful delegation for many managers.

Delegation involves subordinates making decisions. For example , as Guirdham points out: "A strict separation of manager and subordinate roles sends the message to workers that they are only responsible for what they are specifically told to do. Managers who neglect to, or cannot delegate are failing to develop the human resources for which they have responsibility.

Mistakes will inevitably occur and the subordinate will need to be supported by the manager, and protected against unwarranted criticism. The acceptance of ultimate responsibility highlights the educational aspect of the manager's job. The manager should view mistakes as part of the subordinates training and learning experience, and an opportunity for further development. "Even if mistakes occur, good managers are judged as much by their ability to manage them as by their successes".

Notwithstanding any other consideration. the extent and nature of delegation will ultimately be affected by the nature of of individual characteristics. The ages, ability , training , attitude , motivation and character of the subordinates concerned will, in practice , be major determinants of delegation. An example,is where a strong and  forceful personality overcomes the lack of formal delegation. An example is where a strong and forceful personality overcomes the lack of formal delegation; or where an inadequate manager is supported by a more competent subordinate who effectively acts as the manager. Failure to delegate successfully to a more knowledgeable subordinate may mean that the subordinate emerges as an informal leader and this could have a possible adverse consequences,and for the organization. Another example, and potential difficulty, is when a manager is persuaded to delegate increased responsibility to persons in staff relationship who may have little authority in their own right but are anxious to enhance their power within the organization.

The concept of ultimate responsibility gives rise to the need for effective management control over the actions and decisions of subordinate staff. Whatever the extent of their delegated authority and responsibility, subordinates remain accountable to the manager who should , and hopefully would , wish to be kept informed of their actions and decisions.Subordinates must account to the manager for the discharge of the responsibility they have been given. The manager will therefore need to keep open the lines of delegation and to have an upward flow of communication. The manager will need to be kept informed of the relevance and quality of decisions made by subordinates. The concept of accountability is therefore an important principle of management. The manager remains accountable to a superior not just for the work carried out personally but also for the total operation of the department/ section.This is essential in order to maintain effective coordination and control , and to maintain the chain of command.

The manager must remain in control.The manager must be on the lookout for subordinates who are concerned with personal empire building than with meeting stated organizational objectives and prevent a strong personality exceeding the limits of formal delegation.We have said that delegation creates a special manager -subordinate relationship and this involves both the giving of trust and retention of control. Control is, therefore, an integral part of the system of delegation. However, control should not be so close as to inhibit the effective operation or benefits of delegation.
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Biyernes, Mayo 24, 2013

Mobile Phone Manners by Jolito Ortizo Padilla




Since in parts of the developed world almost everyone has a mobile phone and copes with the ever increasing range of facilities and services with very little difficulty, I shall limit my remarks to suggesting ways in which we can all make the best use of mobile without inconveniencing others ( or indeed endangering life and limb!).

  • Never use a mobile while driving a car-there is a considerable evidence that even with a hands-free system the distraction , both physical and mental , caused by operating the phone causes accidents.
  •  Always switch your mobile off when in a cinema, theatre or social gathering.

  •   Always switch your mobile off when in a hospital , surgery or in a plane.People do not seem to realize that the mobile interferes with essential equipment and electronic systems, and again there is increasing evidence that several plane crashes have been caused by interference to flight control systems.

  • Consider those around you. As Jolito Ortizo Padilla of GA Consultancy commented,"At its most basic level, all rudeness is selfishness.With mobile phones this most commonly takes the form of thinking that you are moving around in an impenetrable bubble".

  • If you must keep the mobile on in public place or on a bus or train, turn the ring tone down or preferably switch it to vibrate rather than ring.

  • Similarly, don't text with your keypad tone set or loud, or pass time by going through your entire ring tone collections.

  • Don't shout. Why is it that people seem to assume that their words are not being transmitted with the aid of microphone? And even at normal volume , be aware that people can overhear you. Use discretion when discussing personal or sensitive business facts or conversations on public transport or in a public place.Otherwise, at best you could appear very foolish and at worst you may be betraying secret company information.

  • Don't pay too much attention to your mobile, especially on a date or in the company of others. Accepting calls or spending the entire time with your eyes fixed on your mobile as you read or send yet another text message is extremely rude.

  • And finally, take care when using your mobile phone in the street to remember to look where you are going! And if you are using a hands-free system in the street be aware that passers-by when catching sight of you apparently talking to yourself may draw conclusions!