Category: Essential Economics for Business: Ch 01

Posted on

The Kibbutz – the last bastion of global capitalism?

The kibbutzes in Israel have always been renowned as a system where everything is evenly shared. However, with the news that Israel’s oldest Kibbutz has agreed to essentially privatise itself and start paying people according to ability, it seems that the reach of capitalism and the market system is now almost total. What alternative systems are left to organise and allocate resources? With most forms of socialist organisation more or less discredited as an efficient way of allocating resources, it seems that globalised capitalism is all that is left. However, in the article from the Guardian below Timothy Garton Ash argues that capitalism may, by its very nature destroy itself.

Global capitalism now has no serious rivals. But it could destroy itself Guardian (22/2/07)
Israel’s oldest Kibbutz votes for privatisation Guardian (20/2/07)

Questions

1. Describe the changes that have taken place in the system used to allocate resources in the Degania kibbutz.
2. Assess the reasons why the Degania kibbutz has decided to pay members according to ability.
3. Discuss the validity of Timothy Garton Ash’s argument that global capitalism is in danger of destroying itself.
Posted on

Guns to caviar – measures of prosperity

News articles can give us the impression that the world is both more warlike (with fighting in various countries) but also more peaceful and prosperous. To try to explain this confusion, an American economist with the Teal consultancy group, Richard Aboulafia, has developed a unique index; the Guns-to-Caviar Index. By mapping how much the world spends on fighter jets (guns) against how much the world spends on executive private jets (caviar) for the last 17 years, Aboulafia has given us an interesting view of the state of the world.

Obscure Economic Indicator: The Guns-to-Caviar Index MSN Slate(14/12/06)

Questions

1. What is meant by a production possibility frontier.
2. Draw a production possibility frontier to illustrate the underlying theory behind the Guns-to-Caviar index. Use the diagram to illustrate the changes that have taken place in the index during the 1990s and the early part of this century.
3. Critically assess whether the Guns-to-Caviar index can really help explain changes in the current geopolitical/economic climate.