Government Policy and Poverty Reduction

I recently read the IMF article, “Macroeconomic Activity and Poverty Reduction,” and found it quite revealing regarding the sources of poverty. I frequently thought of the countries of North Korea, Somalia, and Ethiopia while reading the article especially relative to the comment, “In most cases, sustained high rates of growth also depend upon key structural measures, such as regulatory reform, privatization, civil service reform, improved governance, trade liberalization, and banking sector reform. . .” (Ames, Brown, Devarajan, & Iquierdo, 2001, p. 1). Despite our complaints regarding the United States’ economy, we are fortunate to have good “key structural measures” that provide macroeconomic stability that enable the U.S. to avoid some the economic problems that afflict the aforementioned countries. Even though the U.S. has a poverty level of 14.3 percent (Smith, 2010) , the majority of the population appears to be in a nominal economic condition but that is not to say that 14 percent poverty is acceptable. There are, however, ways to lower this percentage.

There appear to be two major factors that contribute to poverty in the U.S.: lack of enough work hours available to poverty-level families, and lack of marriage in families. Heritage Foundation research revealed, “In good economic times or bad, the typical poor family with children is supported by only 800 hours of work each year: That amounts to 16 hours of work per week. If work in each family were raised to 2,000 hours per year–the equivalent of one adult working 40 hours per week throughout the year–nearly 75 percent of poor children would be lifted out of official poverty” (Rector, Understanding Poverty and Economic Inequality in the United States, 2004) , (Rector & Hederman, Jr., The Role of Parental Work on Child Poverty, 2003) . Therefore, macroeconomic policies that create jobs and encourage marriage in families with children will be effective in reducing poverty. 

Examples of policies that may contribute to poverty include legislation enabling the EPA to impose draconian regulation of CO₂. The regulations could add as much as $3, 000 per year to household costs of energy, clothing, food, and increased transportation costs all of which amounts to a tax on the poor. Conceivably, costs could increase to a point where companies move their production facilities, including jobs, from the U.S. to countries that provide lower manufacturing cost (Cuccinelli, 2011) . 

Since the economic crisis of 2008, the U.S. government has instituted a macroeconomic policy of using government funds, the “stimulus,” to extricate the country from the crisis but there has been frustration over the facts that the economy is still sluggish, the poverty level is high, there are not enough jobs that provide a sustainable living, and American businesses are not making significant investments toward growth. Yarbrough (2007) provided what I regard as a good explanation of why the 2008 stimulus package has proved unsuccessful: “. . . increased government spending crowds out private investment; that is, private investment spending falls by the full amount of any rise in government purchases” (p. 522). 

It appears that the macroeconomic policies in place prior to the 2008 economic crisis were adequate in keeping poverty at a low level in the U.S. but the crisis has intensified the problems contributing to poverty, subsequent macroeconomic policies have not improved the situation, and proposed policies may very well exacerbate the causes. 

References

Ames, B., Brown, W., Devarajan, S., & Izquierdo, A. (2001, August). Macroeconomic Policy and Poverty Reduction. Retrieved April 26, 2011, from International Monetary Fund: http://www.imf.org/external/pubs/ft/exrp/macropol/eng/index.htm 

Cuccinelli, K. (2011, April). Reasserting Federalism in Defense of Liberty. Imprimis, 40(4), pp. 1-5. 

Rector, R. E. (2004, September 15). Understanding Poverty and Economic Inequality in the United States. Retrieved April 30, 2011, from Heritage Foundation: http://www.heritage.org/Research/Reports/2004/09/Understanding-Poverty-and-Economic-Inequality-in-the-United-States

Rector, R. E., & Hederman, Jr., R. S. (2003, January 27). The Role of Parental Work on Child Poverty. Retrieved April 30, 2011, from Heritage Foundation: www.heritage.org/Research/Family/cda-03-01.cfm

Smith, D. (2010, September 17). Poverty Rate Hits 15-year High. Retrieved April 30, 2011, from Reuters U.S. Edition: http://www.reuters.com/article/2010/09/17/us-usa-economy-poverty-idUSTRE68F4K520100917

Yarbrough, B. V., & Yarbrough, R. M. (2007). The World Economy: Trade and finance (7th ed.). United States: Thompson South-Western.

 

 

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Fundamental Considerations of Electronic Commerce

 

Electronic commerce (EC) is a relatively recent phenomenon in the history of business with the term first appearing in business vocabulary in the 1970s. EC became possible by the proliferation of inexpensive information technology (IT) devices and reliable telecommunication systems but despite the new technology, businesses had to change their idea of the retail business paradigm. Businesses had to realize that EC does not only have potential to generate new business, but rather, it changes the point of purchase.

Some of the macro-level considerations that should be addressed before launching an EC project, especially a retail project, is that customers need to trust the purchase mechanism or website, there must be an adequate product or service mix, the shopping experience must be convenient to customers, and there must be satisfaction with the purchase.

Trust is a particularly important issue because if customers feel that the EC system is unreliable or perceived to be too risky for monetary transactions, they will refrain from using it. As shown in Figure 1, the higher an EC system’s reliability and the lower the perceived risk, the higher the customer’s level of trust and the greater the success of the EC site.

 

Figure 1: Relationship of Reliability and Risk to Customer Trust

 

In addition to having access to an electronic delivery system, businesses had to clearly define how they planned to incorporate the new business channel into their existing operations. The EC delivery system, whether based on telephony or Internet, had be designed relative to the organization’s goals in order to ensure it interacted well with the way the organization was doing business; i.e. form fits function. Rupple (2003) suggested that the purposes of a successful EC site are, “. . . 1) promotion of product and service, 2) provision of data and information, and 3) processing business transactions” p. 28. With these purposes in mind, the successful EC site will satisfy the business need for electronically promoting a product, providing information, and providing appropriate transactions in a secure, reliable, and trustworthy manner.

 

Reference

 

Ruppel, C. U.-Q. (2003). E-Commerce: The role of trust, security, and type of e-commerce involvment. e-Service Journal, 2(2), 25-44.

The Auburn Creed

Today I discovered the creed of Auburn University and was stirred by its lucid, sensible message.  In my opinion, words such as these can help guide us to lead  more fruitful, productive lives and should be shared with friends and family.  Herewith, the Auburn creed:

 I believe that this is a practical world and that I can count only on what I earn. Therefore, I believe in work, hard work.

I believe in education, which gives me the knowledge to work wisely and trains my mind and my hands to work skillfully.

I believe in honesty and truthfulness, without which I cannot win the respect and confidence of my fellow men.

I believe in a sound mind, in a sound body and a spirit that is not afraid, and in clean sports that develop these qualities.

I believe in obedience to law because it protects the rights of all.

I believe in the human touch, which cultivates sympathy with my fellow men and mutual helpfulness and brings happiness for all.

I believe in my Country, because it is a land of freedom and because it is my own home, and that I can best serve that country by “doing justly, loving mercy, and walking humbly with my God.”

And because Auburn men and women believe in these things, I believe in Auburn and love it.

-George Petrie (1945)

http://www.auburn.edu/main/auburn_creed.html

Cultural Effects on Consumer Behavior

Consumer behavior is largely dependent on cultural factors consisting of mutually shared operating procedures, unstated assumptions, tools, norms, values, standards for perceiving, believing, evaluating, and communicating.  Cultural factors vary by country but become increasingly complex when people immigrate to foreign countries that have different cultural dimensions. In these situations, people are subjected to a wide variety of cultural reference groups that ultimately affect their purchase behavior. In addition, reference groups may consist of familial groups or external peer groups with each group providing specific and often conflicting information that affects purchase and consumption behavior.  In response, marketers must develop marketing communication that addresses cultural and reference group factors from both a domestic and global perspective.  To this end, marketers use market segmentation and micromarketing to develop customer-centric marketing messages with the goal of providing precisely defined marketing messages that satisfy consumer’s need for personal information regarding products and services so that consumers should be adequately stimulated to purchase the product or service being advertised.

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Influence of Cultural Reference Groups on Consumers.

 

The elements of culture consist of mutually shared operating procedures, unstated assumptions, tools, norms, values, standards for perceiving, believing, evaluating, and communicating. Culture is a macro-level perspective of a population whereas cultural reference groups are a micro-level perspective of specific clusters of and individual people within the culture. This is especially important for consumer-oriented marketing because reference groups because they form the lens through which consumers view advertising messages and products.

Cultural characteristics are country dependent and research has shown that consumers within a specific culture tend to interpret and react to marketing information differently from other cultures which means marketers should use culturally matched advertisements to induce consumers to act. For instance, consumers in countries like Japan or China are high in collectivism (Hofstede’s low Masculinity value) and  react to advertisements differently than consumers in countries like the U.S. or England where there is a high degree of  individualism (Hofstede’s high Individualism value). The cultural problems are compounded when people migrate to a country that has different cultural values because their reference group orientation changes as they are acculturated to the resident country’s culture thereby modifying their purchasing and consumption behaviors to conform more to the resident country rather than to their country of origin.

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The Electronic Commerce Life Cycle

     Electronic Commerce is the use of the Internet or non-traditional forms of electronic marketing between a company and its customers, suppliers, or other business partners.   Electronic Commerce is also known as e-commerce or e-business but for the purpose of this discussion it will be referred to as e-commerce or EC. Through e-commerce we can use a PC or smartphone to connect to the Internet and conduct business, manage email, purchase a plethora of products, and acquire research information virtually anywhere in the world.  This powerful capability is ubiquitous and dependable but has had a problem-plagued growth that was overcome in only about the last five years.  E-commerce, however, has gained consumer trust and global usage, and businesses are investing heavily in its future.

    Throughout the history of the United States, innovations in business and commerce have had a temporarily disruptive effect on the economy starting with the introduction of mass retail purchasing in the post-Civil War era, to mail-order shopping, big-box discount stores, to e-commerce.  From its Pre-Internet stage to the present, the Electronic Commerce Life Cycle has had a startling effect on worldwide commerce. Despite its fitful start and tumultuous growth, EC has opened new avenues of product acquisition and information retrieval that are efficient, convenient, and cost effective.  Bruce McDougall declared, “Electronic technology has changed the way we think about money and monetary value.  It’s changing the way companies organize themselves and do business. . .”

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Human-Computer Communication in Electronic Commerce

An important consideration for creating effective electronic commerce applications is for developers to be fully cognizant of the nature of human-computer communication relative to customer service.  Humans, by nature, need to interact with other people especially when we are experiencing stress or trying to resolve a purchase-related problem; leaving a message with a computerized messaging system or working solely with an automated system can exacerbate the stress. 

In the 1990s I worked for an IBM business partner selling and installing banking telephony-based interactive voice response (IVR) systems.  Typically, we would place the IVR systems in front of the human-manned call center.  The plan was to have the IVRs handle the mundane calls thereby allowing the call center reps to devote their time to more complex issues.  Customers, however, disliked the arrangement, so many banks placed the computers behind the call center in order to handle call overflow.  Now here is where it becomes interesting: The bank’s customers loved having a human rep answer the initial call but quickly wanted to be transferred to “the machine” to transact their banking business. The net result was that the IVR’s were doing exactly what we had originally planned for them to do but the only difference was that customers wanted to talk to a human first.

I frequently remind my colleagues that the reason we have computers and electronic commerce is because of people. In order to develop more effective applications we must focus on people first and info systems second. 

There are times, however, that I feel like a voice in the darkness.