Category: Free Essays

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Describe how a being a homosexual young girl with gender identity issues can generate prejudice and inequality in schools, and their effects on students’ personal and social educational experience.

Atkinson and De Palma (2010) are among the researchers who realise that there is increasing concern about homophobia in schools. This concern extends to young children in primary school. Recognising the link between homophobic and transphobic bullying, Ofsted were prompted in April 2014 to reissue their guidance on tackling the issue in primary schools (Ofsted, 2014). While Moffat (2014) lacks research evidence to back his assertion that children as young as five need to learn about homosexual and trans-people, he convincingly identifies the need for early intervention as the key to addressing homophobic and transphobic bullying in primary schools.

Being a homosexual pupil generates prejudice and inequality in schools through homophobic bullying directly against them, and this bullying is rife in primary schools. An illuminating, though worrying, study by Stonewall (2009) found that 44 percent of primary school teachers stated that children in their schools experienced homophobic bullying, name-calling or harassment. Citing a study by Rivers (2000), the teacher’s union NASUWT highlights a variety of examples of abusive homophobic prejudice experienced by lesbian and gay pupils in school, including from name-calling to physical and sexual assault. The NASUWT point to research by the Gender Identity Research and Education Society (GIRES) which shows that school children can also experience gender variance, thus making them potential targets for transphobic bullying. In the Stonewall study (2009), a significant 17 percent of teachers report that ‘girls who act like boys’ are bullied. Both Stonewall and the NASUWT understand that transphobic bullying is additional to, and different from, homophobic bullying: young homosexual girls with gender identity issues suffer the two-fold risk of transphobic as well as homophobic bullying. Such bullying is likely to cause low self-esteem and the risk of self-harm and suicidal contemplation (DCSF 2007). It is unclear how this learning support will fit in the emerging revised national framework for PSHE, nor how homosexual students with gender identity issues will be included in the pupil voice which the PSHE Association (2014) rightly asserts is needed in shaping schools’ PSHE curriculum.

Homophobic and transphobic prejudice and inequality also become powerfully generated within schools as institutions. One way this happens in primary schools is through the prejudiced and unequal treatment of homosexual and gender dysphoric pupils producing a culture of negativity around being ‘gay’. In the Stonewall study (2009), three quarters of the teachers reported pupils saying ‘that’s so gay’ or ‘you’re so gay’. One of the teachers sums up the negative culture: ‘At primary level to call another child gay is currently a term of abuse’. Another way is through staff and parents abusing their power to treat homosexuality and / or gender difference with prejudice and inequality: the NASUWT stress that homophobic bullying can be perpetrated by any member of the school community. The process of institutionalised prejudice and inequality gathers momentum when fuelled by the school community’s preconceptions of ‘normal’ behaviour. The view from one of the teachers in the Stonewall study (2009) is striking:

‘People seem to be very definite in their ideas of what a ‘proper’ boy or a ‘proper’ girl should do or be interested in. It takes very little deviation from these so called norms for a person to be singled out and picked on.’

Within the school community, the family, itself an institution, is a prime agent in the generation and ‘norming’ of institutionalised prejudice and inequality. We know from researchers such as Crompton (2006) that the family plays a key role in reproducing social class and class inequalities. Family behaviour develops habitus within children unconsciously from a young age (Dumais, 2002). Bourdieu (1974) explains the experiential cycle whereby the family habitus fundamentally structures experiences in school, and the school acts as a conservative force for inequality. School staff and parents, as well as pupils, are all influenced by their families while they perpetrate, and perpetuate, prejudice and inequality in primary schools. In this oppressive environment, it is likely that the reinforcement of ‘positive social norms’ recommended for primary school PSHE (PSHE Association, 2014) will exclude or further repress young homosexual girls with gender identity issues.

Atkinson and De Palma (2010) argue that educational policy and practice need to recognise and understand the Institutional heteronormativity which lies behind individual cases of homophobia in schools. In schools with a heteronormative power structure, heterosexuality and clear male / female gender identities and roles are the only accepted norms. In her useful summary of subjectivation and performative discourse in relation to power in schools, Youdell (2011) summarises how Foucault would see this kind of repressive power as originating from the state (Foucault, 1991, cited in Youdell, 2011). This power leads to institutions, including schools, regulating their populations and subjecting them to the state’s ‘normative criteria for judgment’ (ibid). The young homosexual girl may well be subjected to the school’s prejudicial ‘norms’, and even end up subscribing to them as a mask in order to derive identity and recognition. The name-calling she suffers is potentially as destructive to her own, real identity as it is to her emotions, since in this subjection, as Youdell (2011) goes on to explain through Althusser:

We are ‘called’, and as we turn to the call we accept it, allowing ourselves to be recognized in its terms, in order to be recognized at all. In this acceptance and recognition we become a subject within the terms of the call (Althusser, 1971, cited in Youdell, 2011).

Youdell (2011) takes the subjectivation process further, showing through Butler how subjection is itself a power which makes and dominates us as named categories of subject (Butler, 1997, cited in Youdell, 2010). For Butler these categories are ‘performatives’: ‘that discursive practice that enacts or produces that which it names.’ (Butler 1993, cited by Youdell, 2011). The named category of ‘gay’ produces or generates a culture of prejudice in the school around ‘being gay’, and can be blamed for doing so: since performatives can be seen as culpable in the process of subjectivation (Youdell, 2011).

In conclusion, it seems that it is not so much the young girl’s homosexuality and gender issues which generate prejudice and inequality. Rather it is the unequal power dynamic within the state and its educational institutions, fed by prejudicial family and class norms, which give rise to unfair treatment by the whole school ‘community’ towards children who are different.

References:

Atkinson, E., De Palma, R. (2010). The Nature of Institutional Heteronormativity in Primary Schools. Teaching and Teacher Education, 26 (8): 1669-1776

Bourdieu, P. (1974). ‘The School as a Conservative Force: Scholastic and Cultural Inequalities.’ In Eccleston, J., ed, In Contemporary Research in Sociology of Education, pp 32-46 Methuen, London.

Crompton, R. (2006). Class and family. Sociological Review, 54 (4): 658-677

Department for Children, Schools and Families (DCSF). (2007). Homophobic Bullying. Safe to Learn : Embedding Anti Bullying Work in Schools. HMSO.

Dumais, S. (2002). Cultural capital, gender and school success: The Role of Habitus. Sociology of Education 75(1) : 44-68

Moffat, A. 2014. CHIPS Challenging Homophobia In Primary Schools Available from: http://www.ellybarnes.com/wp-content/uploads/2014/11/CHIPS-Volume-5-Oct-2014.pdf [28 December 2014]

NASUWT. Tackling homophobic bullying. NASUWT, Birmingham.

Ofsted (2014). Exploring the school’s actions to prevent and tackle homophobic and transphobic bullying. Available from: www.ellybarnes.com/primary [28 December 2014]

PSHE Association (2014). How should I Teach and How? Available from : https://www.pshe-association.org.uk/content.aspx?CategoryID=1004

Rivers, I. (2000). Social exclusion, absenteeism and sexual minority youth. Support for Learning, 15(1) 13-18

Stonewall (2009). The Teachers’ Report : Homophobic bullying in Britain’s schools. Available from : www.stonewall.org.uk/documents/the_teachers_report_1.pdf [28 December 2014]

Youdell, D. (2011). School Trouble. Identity, Power and Politics in Education. Routledge, Oxon.

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Introduction

The purpose of this essay is to discuss effective pedagogies in education young people in the urban environment. By pedagogies I mean those methodologies concerned with teaching and encouraging learning. I will be looking at the dominant pedagogies in place in Britain and in the USA. I will also discuss the particular significance of these in the urban environment, and how inner-city school’s needs may differ from those of more rural schools.

It is worth noting here how we may define certain areas as being ‘urban.’ Britain is, on the whole, an urban country. But in their book Urban Schooling, Leslie Bash and colleagues write that beyond using common sense definitions of ‘towns’ ‘cities’ or ‘villages,’ an urban area might be identified as one where the population is high in proportion to the geographical area, and the housing dense. Urban areas are spaces of advanced economic activity, and also are defined by government/administrative/legal criteria. (Bash et al:1985:2)

But besides stating the type of geographical area concerned, the terms ‘urban’ and ‘urban schooling’ also imply a number of social concerns. Urban neighbourhoods have come to be understood, certainly as ones which have a high proportion of ethnic minorities, often as ones where poverty and disadvantage can be found, and ones where tension and inequalities are rife. It can be seen, therefore, that a link has been made in popular public understanding, between neighbourhoods in which there are many Black/Asian/Hispanic residents, and neighbourhoods where there is poverty, disadvantage and tension.

Bash et al write that urban schools reflect inequalities and tensions, because in the city the density of population and of numerous different communities make clearly visible these issues. (Bash et al:1985:49-50) Their definition of urban schools takes it as inevitable that they would be seen in this way. Walker, on the other hand, challenges the term:

The definitional looseness with which the term urban education is used conjures up images of dysfunctional educational and social institutions, acute levels of poverty, and high degrees of underachievement. The fact that some urban communities do exhibit these characteristics does not mean that education in all urban contexts must take place within dysfunctional institutions or be characterized by high levels of underachievement. (Walker:2003:5)

For the purposes of this essay, I consider it important that I discuss effective pedegogies for educating ethnic-minority children in Britain, and for educating those from working class backgrounds, and also that I discuss the issue of schools which are deemed to be ‘failing.’ However, I do not wish to assume that all of these factors occur in conjunction with one another. Further, as stated urban areas are ones in which numerous communities exist alongside one another. Urban schools provide education for a large number of white and middle class children, and also a good number of extremely bright ones – and so any pedagogical design should hesitate to accept the typical stereotype of children who attend urban schools as being none-white, and/or poor, and/or unintelligent. It is my view that the failing of past and current pedagogies have often been that they fail to acknowledge diversity. And so I will argue that effective pedagogies would be ones which use the diversity of children within a school to lead the design of a curriculum, rather than to try and force one set curriculum in spite of the students’ diversity.

Before I go on to discuss methods of teaching and educating which are at work today, I would like to outline some history of state-provided schooling.

In 1870, Forster’s Education Act made school compulsory in Britain, for all children between the ages of 5 and 13. Although it was a legal requirement that all children attend, though, schooling was not provided free of charge. Evidently, poor families were disadvantaged by this, and although the Act ensured that children were educated after a fashion, it did little to narrow the gap between the calibre of educations received by rich and poor.

Since the 17th Century, the church had been the only provider of formal education for poor children. Church-schooling had been pioneered in London, where the population was densest and so the need for education was highly visible. At this time, critics of the move to educate the poor argued that schooling was wasted on the working class. Children from poor families, the critics said, must get used to hard work and having to pay their own way. Even champions of schooling for poor children, seemed to be preoccupied with its advantages for the upper classes. Rather than being concerned with giving poor children a more equal chance in life, education was seen as a way of maintaining social control over the poor, and to ensure that poor children adhered to the desired social norms. (Bash et al:1985:14)

Parliamentary enquiries in the mid 1800s, indicated that the poor did want their children to be educated, and that as Britain’s cities grew and grew, the churches simply could not cope with the number of children to be schooled. And so, as the result of Acts like Forster’s, the government did become more active in ensuring all young people went to school. However, in Bash et al’s opinions, the system of schooling, by which the type of schools attended and the amount of education received depended on what the parents could afford, only perpetuated a culture in which working class children and middle/upper class children were poles apart. The authors state that, in their view, the British schools of the 1900s simply taught:

The urban working class child to accept his or her position in life.

2. A belief that urban schools for the working class were generally bad schools, with unintelligent children and uncaring parents.
3. A curriculum that discouraged independence of thought, encouraged nationalism (and by implication racism) and confirmed gender stereotypes. (Bash et al:1985:16)

The field of Urban Studies saw developments in both the USA, across Europe and in Britain during the 1960’s, and this was tied closely to the rise in urban education. The book Education and the City, edited by Gerald Grace, brings together essays from both Britain and the US, based on a number of cities including London and New York.
In 1975, urban sociologist Ray Pahl wrote that in all societies, metropolitan cities can be seen as an arena in which various social and cultural conflicts are played out. These conflicts appear in terms of economic and political factors, as well as in social and cultural interactions. Gerald Grace follows this argument in stating that metropolitan education is a crucial area of discussion, as urban schools are a space in which these conflicts have become clearly visible. Working class inner city schools make visible a wide range of cultural and pedagogic conflicts and contradictions. (Grace:1984:39)

In inner London in 1980’s, around 40% of school pupils were from ethnic minorities, and one in ten pupils’ first language was not English. The HMI report on Educational Provision in the Inner London Education Authority (ILEA) stated that

Significant parts of the area suffer from urban decay and some have changing populations. The ILEA is faced with a combination of problems to an extent probably unmatched elsewhere in England and Wales. (Morrell:1984:196)

Pedagogic writing has tended to be in a framework of deficit theory; the idea that urban education is deficient in various areas that might be expected of good education. (Grace:1984:39)

It would become apparent that judgements about whether a particular curriculum or a particular pedagogic approach was ‘working’ would be linked to conflicting socio-political ends and not simply to some consensual version of an educational or individual norm. (Grace:1984:40)

EDUCATION ON BOTH SIDES OF THE ATLANTIC

When George W. Bush came to the US government, he introduced the No Child Left Behind Act, which he declared to be the cornerstone of my Administration. Speaking when the Act was passed, in January 2001, the President said,

These reforms express my deep belief in our public schools and their mission to build the mind and character of every child, from every background, in every part of America. (George W. Bush, Jan 2001)

The Act is based on four ‘pillars,’ these being:

Stronger accountability for results

More freedom for states and communities

Proven education methods

More choices for parents.

The NCLB website states, that:

Under No Child Left Behind , states are working to close the achievement gap and make sure all students, including those who are disadvantaged, achieve academic proficiency. (www.ed.gov/nclb)

Stronger Accountability for Results

Annual report cards are issued charting school’s progress; these reports are distributed freely to parents and communities. Schools whose achievements fall below standards set by the state, are required to provide extra after-school tuition, summer schools and so on, to improve student’s education. If no improvement is made in the school’s results after five years, dramatic changes are made to the way the school is run. The website does not explain what is meant by these dramatic changes.

Further, although these extra lessons are available to any pupils who wish them, the families of the pupil are required to pay for them. Only students from low income families, and in schools which have been under-performing for over three years consecutively, can gain government funding for these privileges.

More Freedom for States and Communities

The outlines given focus on flexibility in terms of allowing an individual school’s local district and state, to decide how money is spent. They may decide whether it would be more valuable to the school to hire more staff, or to provide further training for existing staff, for instance. There is no mention of increasing freedom for schools to decide on the curriculum for their pupils.

Proven Education Methods

Rigorous scientific research is used to prove certain pedagogies as effective. Children are tested annually to national standards, to ensure their ongoing effective education. But the website does not outline what these proven methods are. And, I would hesitate to assume that there are certain methods that will be effective for all young people in all communities, particularly in a society as diverse as the United States, in which one state will have an identity and culture very distinct from another.

More choices for Parents

In schools which fail to meet state standards for at least two consecutive years, parents may transfer their child to another public school within the district. This is also the case when a child has been the victim of violent crime inside school. Transport to the new school is provided by Title 1 funds.
Parents with children in failing schools would be allowed to transfer their child to a better-performing public or charter school immediately after a school is identified as failing. (www.ed.gov/nclb)

For one thing, the key phrase here is identified as failing. If a school’s performance is measured by pedagogies standardised by the entire state, if not the nation, this leaves no room for an individual parent or family to decide that a school is failing their particular child, whether or not it is meeting state requirements. Further, the statement contradicts ones made earlier, which say that in fact a child cannot be transferred until the school has been failing for at least two years. In two years of formative education in a failing school, the damage may have already been done.

Extra tuition must come from providers approved and registered by the state. What the website fails to conceal in its descriptions of these ‘advantages’ is that a parent’s ability to transfer their child to another school is considered to be a privilege rather than a basic right. And by restricting when a child can be transferred, and which providers may give children extra tuition, the government is increasing its control over education and maintaining parent’s lack of choice.

Walker has written that:

Scrutiny of recent federal and state policies, for example the school choice movement, privatization initiatives, and the federal No Child Left Behind Legislation clearly reveals a trend towards affixing the blame for educational problems on the schools themselves. ( Walker:2003:12)

In this view, she echoes the way that Bash et al described the education systems of early 20th Century Britain, and suggests that very little has changed! I believe that what is most central to these policies, is the assumption that there is one system of effective pedagogy, and one appropriate curriculum, which is correct and desirable for the entire nation. Any schools, and by extension any individual students, who find that these methods are not the most effective for them, are simply deemed to be failures.

I find similar assumptions at work on this side of the Atlantic. Tony Blair’s Labour campaign in the 1997 general education focused on ‘education, education, education’ as the key priority for the new government. The system of OFSTED inspections entails four-yearly inspections of every school in the UK, grading them on certain standards set for the entire country. Government-trained and regulated inspectors observe lessons delivered by every member of staff, and carry out audits on records kept within the school. Its aims, therefore, are to standardise the calibre of teachers in every classroom in the UK, and to increase accountability for a school’s systems of planning and administration.

In the case of a school failing its inspection, it is placed on a ‘warning’ list. The school’s management is advised on the areas in which the school is deemed to be failing. A further inspection is then made, a year later, to ensure that systems have been put in place to improve the school’s management, the teaching methods of individual members of staff, or whatever changes have been desired.

If the school continues to make no improvement, OFSTED has the power to remove members of school management, and ultimately to close schools down.

It has long been the case that a school’s achievements are judged largely on the number of passes gained in external examinations. I agree with Frances Morrell when she argues that, whilst no doubt exam grades are one valuable way in which pupil’s achievements can be objectively recognised, at the same time there are numerous other aspects of pupil’s development which cannot be tested by exam papers, and which should not be ignored. She writes that inspectors have often found that urban schools such as those in Inner London, stimulate qualities of creativity, of artistic expression, of articulateness, of initiative, co-operation and social concern among their pupils.

FORMING EFFECTIVE EDUCATION

Whilst pedagogical design for educating young people should, in theory, have individual young people themselves at its helm, I have found that education systems both past and present seem to focus more on social control and on reducing individual deviation from set social norm. The young people engaged in learning, and the methods by which they learn most effectively, seem to be secondary considerations compared to results tables and proven methods of gaining those results overall. Actual, individual young people have been lost in the midst of educational policy.

In the UK, Connexions is highly individualistic in that it offers individual students personal interviews, and schemes of consultation which take place outside of the school’s normal curriculum, and which aim to help the student find the most effective path for their own development. However, the scheme has focused almost entirely on students who are judged to be ‘underachieving,’ or in some way ‘disaffected.’ It is the resort turned to when something appears to have gone wrong. This assumes that there is one norm which all young people in school should aspire to, and that any students who do not ascribe to this are ‘underachieving.’ Rather than celebrating individuality, its systems seem to discourage it and to seek ways of minimising it; and getting the individual student back onto a more acceptable path of work or study.

Some questions that might be asked in designing ways of educating young people are,

How are young people’s identities influenced by their experiences of school?

How can young people’s own life experiences and situations be used to stimulate discussion and learning? And, similarly,

How might young people’s styles of learning, their motivations and perspectives be used to influence pedagogy?

Frances Morrell writes that education

has to proceed in the face of such social and economic disadvantage among its pupils, and in addition to this, a sensitive and flexible response has to be made to a whole range of cultural and ethnic traditions which characterise a varied and cosmopolitan school population. (Morrell:1984:196)

She argues that the practise of evaluating schools’ progress and planning their reform without taking into account their social and economic contexts, is flawed both factually and ideologically; it is clearly not only unscholarly but deliberately misleading. (Morrell:1984:196)

For her, positive discrimination is essential; schools should receive resources depending on their level of socio-economic disadvantage. She also champions parental involvement at all levels of schooling, including meetings in which school staff consult parents for their opinions, and regular newsletters to be distributed to parents. (Morrell:1984:201) She believes that greater involvement of the Manual Trade Unions in education would be greatly beneficial. As working class children may find themselves less close to the ethos of the school than their middle-class classmates, and perhaps less able to identify well with the teachers educating them, many can find that they gain a sense of lower worth that they carry with them throughout life. As they expect school to have little rewards for them, so they come to expect similar in their working lives. Morrell believes that the Trade Unions, who since their inception have worked to make the rights of working class people a visible priority, may be able to give many students a greater sense of belonging, and higher expectations of their own futures. (Morrell:1984:204)

Further, she encourages the employment of more specialist-language teachers; ones who can teach children in their own first languages; at the same time, the number of teachers of English as a second language should be increased as it is without doubt vital that all pupils do learn to be fluent in English.

Similarly, Bash et al believe that national curriculum has not reflected British society today, and has distorted history and society to a Eurocentric bias. They consider it crucial for young people to be offered options to learn Bengali, for example, or Punjabi, instead of French or German – especially if this is more useful in the community in which the student lives. They also echo Morrell in saying that children should be educated in their own first languages. To teach a child in a language they speak only secondarily is to immediately render them disadvantaged. (Bash et al:1984:101-102)

But still more essentially, in my view, pedagogy should be altered to celebrate and utilise the diversity of students in a school, rather than to battle it and try to enforce standardisation. Bash et al write that in this situation, pedagogy would need to recognise the validity of the pupils’ own experiences and use these for work, discussion and explanation. (Bash et al:1984:101)

Methods of educating young people must be open and flexible, and be prepared to change according to changes in culture and the influx of individual students in a school. To suggest that all schools and their curriculum should be standardised to one way of teaching, is in my view flawed. Ultimately, even if a curriculum is designed with good intentions, if it is conceived and delivered in a set way, it will only replace one form of domination by another. (Bash et al:1984:101)

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Challenges and Approaches
Introduction

In the modern age it is seen to be increasingly important that schools adopt inclusive education policies which support children, no matter what their individual needs (Department for Education and Skills: Qualifications and Curriculum Authority, 1999), in being able to attend their local school (Dash, 2006). Undoubtedly, there is still a good deal to be done to implement fully inclusive policies (Office for Standards in Education [Ofsted], 2004), although practitioners and educational establishments are much more aware of their responsibilities with regard to children who have special needs. The catalyst for this was the Every Child Matters initiative which emphasised the need for children to be taught skills which enabled them to remain healthy and safe, to be able to enjoy and achieve, to make an active, positive contribution and to be able to work towards being financially stable in their future lives (Department for Education and Skills [DfES], 2004a). This documentation, which culminated with the Children’s Act of 2004, built upon the work of the Warnock Report (1978) and the subsequent Education Acts of 1981 and 1996. These documents provided specific definitions of what it was to have ‘special needs’ and allocated responsibilities to specific bodies within local authorities for the first time. It became apparent that it was essential to provide children, and indeed families, with the skills necessary for them to be able to succeed (Knowles, 2009) which involved the removal of any/all barriers to learning (Booth et al., 2000) through the provision of integrated services (DfES, 2004b). Critical to children being able to participate fully and to experience a degree of success (Mittler, 2000), is practitioners’ of awareness of their approaches towards teaching children and the creation of positive learning environments (Corbett, 2001) which will facilitate equal opportunities for all in their classroom (Department for Education and Skills (DfES): Qualifications and Curriculum Authority (QCA), 1999; Disability Discrimination Act, 2001; Disability Act, 2001).

Although a good deal of progress has been made, there are still indications are that more needs to be done to facilitate the needs of individual children through personalising the curriculum for those who have special needs, particularly in the areas of literacy and key skills (Ofsted, 2004). Although it is acknowledged that all children, inclusive of those with Autistic Spectrum Disorder (ASD), must be afforded the opportunity to attend mainstream schools (Ainscow, 1997), there is a lack of recognition of the difficulties that practitioners face with regard to catering for the diverse needs of all children with whom they are faced in the classroom. This essay aims to highlight the needs and challenges of catering for those with ASD and discuss some of the strategies and approaches that are available for practitioners’ use in the classroom environment.

Definition of Terms

Autism has been described as a life-long disability which affects development which manifests in children during the first three years of their lives (Ritvo and Freeman, 1977), although for many their condition is not always immediately obvious, leading it to be referred to as a hidden disability (Rosenblatt, 2008). The root of the term is in the Greek autos or self and refers to the tendency for those who have the condition to isolate themselves from others and engage in self-centred thought processes (Volkmar and Klim, 2005). Its use was initiated by Bleuler, a Swiss psychologist, although the first descriptions of the condition were provided by Kanner (1943) and Asperger (1944). It was their opinion that the condition was present from birth, manifesting itself through characteristic problems such as difficulty with “… social interaction, verbal and non-verbal communication, and repetitive behaviors” (Autism Speaks, 2015a, para 1; endorsed by Frith, 2003; Evans et al., 2001) for which Wing (1988) coined the term the Triad of Impairments. It was the work of Wing and Gould (1979) and Wing (1996) which was the foundation of looking at autism as a spectrum of disorders, as a result of children being found to have difficulties across a diverse range of skills including those of social interaction, communication and imagination. The publication of the DSM-5 Diagnostic and Statistical Manual of Mental Disorders (2013) saw all autism disorders being merged into”… one umbrella diagnosis of ASD… [whereas] previously, they were recognised as distinct subtypes, including autistic disorder, childhood disintegrative disorder, pervasive developmental disorder-not otherwise specified (PDD-NOS) and Asperger syndrome” (Autism Speaks, 2015a, para 1). Worth (2005) also highlights the fact that those with the condition can have an excellent rote memory, an over sensitivity to sensory stimulus, a lack of coordination and difficulties with motor development.

Challenges

One of the many challenges for ASD is its diagnosis, which necessitates the recognition of difficulties in each of the areas listed above. Worth (2005) makes the point that ASD is pervasive (it has an effect on all aspects of an individual’s life), developmental (begins in infancy and affects every area of development) and it is lifelong. Research into the condition (Szatari, 2003) indicates that there are a variety of factors which could influence it, such as specific genes (Foster, 2007; Autism Speaks, 2015a) although it is recognised that there is no one, definitive cause. Since the latter part of the last century there have been increased numbers of individuals who have been diagnosed with ASD but it is a matter of debate as to whether this is the result of a greater breadth within its classification or increased awareness and willingness on the part of medical practitioners to make an early diagnosis (Powell et al., 2000). Another challenge which those with the condition face are the misconceptions about how it can affect their lives. ASD can show itself in different ways – some have learning issues whereas others display talents and gifts which can be utilised (Sicile-Kira, 2013); talents include “… auditory memory, good ‘procedural’ memory (that is, being able to picture how to do things), visual special understanding, and visual motor co-ordination” (Siegel, 2003, p. 78). Autism Speaks (2015a) state that approximate 40% of those on the spectrum have average to above average intellectual ability, whilst others have significant issues which mean that they need to be supervised constantly. Currently, there is no medical test which can be used in order to diagnose autism, although specifically trained medical practitioners are able to conduct behavioural evaluations which are specific to autism. Typically, these are conducted with children below the age of three where children have been identified by parents and Early Years practitioners as lacking in their development. However, some individuals who have ASD are only identified later in life as a result of learning, emotional and/or social issues (Autism Speaks, 2015b).

Identification of the condition will enable practitioners to evaluate an individual’s strengths and weaknesses (Cross, 2004), ideally at as early a stage as possible. Communication is vital to the development of children, which makes the identification of issues critical (Cross, 2004) to their overall well-being. It is important that practitioners gather detailed information about specific individuals as opposed to working with generic information (Brooks et al., 2004) with regard to ASD. Schools are able to utilise standard tests such as the Cognitive Abilities Test (CAT) and the Wechsler Intelligence Scale for Children (WISC) to determine children’s general skill levels and verbal ability/performance, providing them with both information and insight into the issues which each child may face (Moore-Brown, 2006;Wittemeyer et al., 2012). In addition, dynamic assessment is a useful tool in order to develop personalised learning packages and approaches which cater for the needs of specific individuals (Moore-Brown et al., 2006; Reid, 2003). These need to be planned and reviewed on a regular basis, involving practitioners, parents and the children themselves in line with the specifications laid down by the government (Department for Education, [DfE] 2012; DfE/Department of Health, 2014).

Approaches

The strategies and approaches that can be employed by educators can target specific characteristics within individuals or follow a range of options in order to address a number of issues in a fixed period, although it must be noted that there is no single accepted way to approach the issue of ASD. Applied Behavioural Analysis (ABA) is a method which concentrates on pupil behaviour; it can be described as “… the science in which procedures derived from the principles of behaviour are systematically applied to a meaningful degree and to demonstrate experimentally that the procedures employed were responsible for the improvement in that behaviour” (Hudson, 2003 in Ollendick and Schroeder, 2003, p. 36 paraphrasing Baer, Wolff and Risley, 1968). This psychological approach seeks to amend learning behaviour to overcome set behavioural habits (Wolpe, 1985) through observing behaviour (Bailey and Burch, 2002) and applying positive reinforcement (National Autistic Society, 2015). Another method which makes use of behaviourist principles is that of Discrete Trial Training (DTT); it utilises a structured, routine forming approach to teaching and learning which allows learners to learn desired behaviour through following a distinct pattern in order to achieve their goals, even if stages needs to be repeated or there needs to be engagement with further trials in order to consolidate learning (Luiselli et al., 2008). It is important to both of these methods that parents also interact with their children, engaging in similar reinforcement routines at home, so that they are in receipt of consistent messages at the different environments in which they spend their lives.

An interactive approach is also adopted in the ‘Play Approach’, which enhances development through play by focusing upon the improvement of thinking skills and communication using symbols, signs and gestures whilst simultaneously improving their interaction with others in a social situation (Rogers et al., 1986). A key worker is involved in building a relationship with individual children with this approach, which is similar to the way in which adults interact with children whilst utilising Communication Approaches such as the Picture Exchange Communication System (PECS). This particular system is designed in order to improve learners’ interaction with those around them (Bogdashina, 2005) through using cards rather than language in its initial stages to indicate what it is they wish to say. As they become more confident, they substitute the card for a verbal interaction, thus building up their confidence and competence in using language. Social stories also encourage interaction with those around them, whilst addressing social situations and conventions which learners find difficult (for example, the need to shut the door when they are using the toilet). These stories are designed to describe a situation using where, what and why sentences which provide clues as to the right responses in a given situation, while simultaneously describing the feelings and reactions of the various characters involved in the story, in order that those with ASD can appreciate different perspectives (Plimley and Bowen, 2007). These stories become increasingly complex as children gain in confidence, to the point where they engage with the writing of social stories, which further enhances their communication skills.

Social skills can also be improved as a result of schools adopting a buddy system, which allows pupils to provide help for each other at particular times of the day which can prove problematic, such as before school, break and lunch times, during group work and in PE lessons (DfE, n.d.). Children’s behaviour in these situations and their approaches to others can be directly influenced as a result of their peers and practitioners approaching them in the correct way; for example, using simple language, being encouraging, talking directly with them, using diagrams and pictures to develop communication skills and utilising some form of home/school diary to aid communication between the school and parents/carers (DfE, n.d.). Learners’ ability to act appropriately in social situations is also improved by poor behaviour being challenged, and practitioners learning to identify triggers which are the catalyst for changes in behaviour. Learners also need to be provided with a means through which they are able to control their own behaviour; for example, utilising a coloured card in order to be able to take a ‘timeout’ to calm themselves and through adopting set routines which make ASD children feel comfortable in their environment (DfE, n.d.).

Conclusion

Every person who has ASD is different and the way in which their condition manifests itself is different. This makes providing for their needs problematic for practitioners in the educational environment as a ‘one size fits all’ approach will not provide them with opportunities for a truly inclusive education. It is evident that this creates enormous challenges for everyone involved in their education in a variety of different areas – cognitive development, social development and social interaction are all key elements of children’s learning which must be addressed in a systematic and clear manner for those who are diagnosed as having ASD. This requires dedication and application from both practitioners and parents to ensure that the children’s needs are recognised in the first instance, and subsequently catered for through the careful design and implementation of strategies which will enable them to find a place within the school community and society as a whole. It is important that everyone within the school environment/community is aware of the need to accept diversity in all its forms and that they are exposed to appropriate role models to demonstrate this attitude. This begins in classrooms, where teachers can foster tolerant attitudes towards those who experience difficulties and who are deemed to be ‘different’, and through a consistent application of the interventions that have been agreed with parents/carers and local authorities.

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Briefly outline Behaviourism. How does this theory aid in an understanding of disruptive behaviour, and what are the limitations of this approach?

Behaviourism

Behaviourism was the primary psychological paradigm of the early twentieth century and is characterised by the work of Watson (1913) and Skinner (1976). It is an approach to learning that focuses on observable and quantifiable behaviour and discounts the need to refer to mental processes (Pritchard, 2009). Knowledge is seen as a repertoire of behaviours that are largely passive, mechanical responses to environmental stimuli (Wray, 2010). In order to describe this knowledge, no reference to internal, mental processes are needed, and instead, someone is said to understand something if they possess the appropriate repertoire of behaviours.

Behaviourists believe that the aim of education is to provide learners with the appropriate repertoire of responses to specific stimuli. Information, in the form of the appropriate behaviour for a certain stimulus, is transmitted from the teacher to the learner and learning is described as “the acquisition of a new behaviour or the modification of behaviour as a result of teaching, training or tutoring” (Woollard, 2010, p. 1). Behavioural responses are reinforced through the use of an effective reinforcement schedule which breaks down material into a sequence of small tasks, consistently repeats the material, and provides positive reinforcement to correct responses (Skinner, 1976). As such, teaching methods includes techniques such as learning by rote, ‘skill and drill’, and question and answer tasks that gradually increase in difficulty, as these techniques are able to break down material into smaller pieces and allow for the consistent repetition needed for learning to take place (Wray, 2010). It is also believed that teaching should be carefully planned and systematic, regularly testing learners’ behaviours in order to monitor their progress and provide feedback on their learning (Cox, 2004).

Behaviourism as a method of teaching and learning content has received considerable criticism in recent years and has generally fallen out of favour, not least because of its disregard of what goes on within a learner’s head and its rejection of the importance of the mental processes the learner engages in (Bartlett and Burton, 2012). However, in the field of behaviour management, behaviourism is still an important influence and a number of behaviour management approaches and techniques draw from this field of psychology.

Behaviourist Behaviour Management

From a behaviourist perspective, all behaviour is considered to be a repertoire of responses to a particular stimulus. Appropriate responses can be taught and learnt through the use of an effective reinforcement schedule. Therefore, from this perspective, disruptive behaviour is considered to be an undesirable response to a set of stimuli, and children can be taught more desirable responses through the use of reinforcement. Using this basic theory, behaviourism has had considerable influence on classroom management techniques and the encouragement of appropriate behaviours in the classroom. Using a behaviourist perspective, Merrett and Wheldall (2012, p. 19) recommend using a ‘positive teaching’ approach to establish the context for appropriate classroom behaviour, characterised by the following five basic principles:

It is concerned with the observable, i.e. behaviour;
It is assumed that behaviour is learned;
Learning involves change in behaviour;
Changes in behaviour depend mainly upon consequences;
Behaviours are also governed by the contexts in which they appear.

This approach emphasises how appropriate behaviour can be taught and learned through the use of behaviourist principles. The teacher firstly identifies the behaviours that they consider to be desirable and those that are considered to be disruptive and undesirable and then communicates these rules to the learners. The teacher then rewards the learners who display the desirable behaviour, thus changing behaviour through showing the learners the positive consequences of displaying appropriate behaviour (Pritchard, 2009). Behaviour management approaches such as ‘assertive discipline’ follow a similar pattern. In this case, a series of rules are established, there are rewards for those who follow the rules and consequences for those who do not, and these rewards and consequences are consistently applied (Canter and Canter, 1992). Current government guidelines for the management of behaviour in UK schools also adopt such an approach (DfE, 2011).

Behaviourist principles can also be used to help understand disruptive behaviour once it occurs. From a behaviourist perspective, the understanding of disruptive behaviour does not require any consideration of the learner’s internal mental states or consciousness as it is believed that states such as belief, motivation, and satisfaction can be understood through an examination of the manifested behaviour (Woollard, 2010). Instead, an analysis of disruptive behaviour requires only an examination of the behaviour itself and the context in which the behaviour occurs with no reference to the learner’s mental processes. Behaviour is examined in terms of what comes either before or after the manifested behaviour using a model known as the ABC model, where:

Antecedent: what happens in the context prior to the observable behaviour;
Behaviour: describes what actually happens in observable terms;
Consequences: what happens immediately afterwards

Roffey, 2006, p. 8

It is believed that behaviour can be changed by either changing the antecedence to the behaviour or the consequences of the behaviour. Hastings and Wheldall (1996) numerate a number of advantages of this model of understanding disruptive behaviour. They suggest that it focuses the teacher’s attention on what the child actually does in the B aspect; the behaviour has to be systemically observed and recorded rather than simply labelling the behaviour under the general umbrella term of ‘disruptive’. Furthermore, the teacher’s attention is directed towards events within the classroom that s/he has influence over and thus, can change in order to effect change in the child’s behaviour. Thirdly, it is suggested that the ABC approach emphasises that the child’s behaviour takes place within a particular context and that their behaviour is both influenced by the environment and that their behaviour influences what happens next in the classroom. Finally, this approach provides links between the identification of undesirable behaviour, an explanation for why it occurs, and possible strategies for changing the behaviour.

Any attempt to change behaviour using this model should begin with the questions ‘What triggered the behaviour?’, in other words, the antecedence, and ‘How is this behaviour being reinforced?’, in other words, an examination of the consequences (Welsh Assembly, 2010). Antecedents to disruptive behaviour include both issues that the teachers can affect such as task difficulty, the learner’s engagement with the topic, the classroom seating arrangement, and their relationship with the teacher, as well as issues that the teacher has little control over, for instance the effect of the learner’s home environment on their learning. The ABC model suggests that teachers can use a number of preventative strategies to avoid disruptive behaviour by eliminating the antecedents to the unwanted behaviour, for example, the teacher can enforce rules through positive statements, they can give praise that is behaviour specific or they can change teaching to engage the interest of the learners (Gulliford and Miller, 2015).

However, despite the teacher’s best efforts, it is highly likely that some children may still display disruptive behaviour on occasions. In this case, according to behaviourism, it is important to address the consequences of the behaviour as it may be the case that the undesirable behaviour is being reinforced by the reaction the learner provokes. For example, the child may behave badly in order to gain the teacher’s attention as, for some children, any attention, even negative, is better than no attention. Every time the teacher reacts, they are reinforcing the child’s disruptive behaviour. Alternatively, the child may be behaving badly in order to secure a reaction from their peers, and again, if this reaction is gained, the behaviour is being reinforced (Wray, 2010). Therefore, behaviourism advocates teaching learners new repertoires of behaviour and then reinforcing this good behaviour. Equally important, the undesirable behaviour should not be reinforced. Thus, reinforcement is the key aspect of this stage; however, it should be noted that, according to behaviourism, punishments and sanctions are not a part of the reinforcement schedule (Gulliford and Miller, 2015). Instead, positive reinforcement should be used as it is argued that pleasant experiences are more likely to help learners make the desired connections between specific stimuli and the appropriate response to that stimuli (Wray, 2010). Positive reinforcement can be given in three instances (LaVigna, 2000): a reward can be given when a learner chooses a preferred behaviour, known as differential reinforcement of an alternative response; a reward can be given when the learner chooses not to commit the undesirable behaviour, known as a differential reinforcement of the omission of a response; finally, a reward can be given when the learner displays a lower frequency of unwanted behaviour, known as a differential reinforcement of lower rates of responding. Disruptive and undesirable behaviour should be ignored as much as possible so as not to reinforce the behaviour (Wray, 2010).

Limitations of Behaviourism

While behaviourism continues to exert an influence over behaviour management techniques in today’s schools, it has also been criticised for its limitations. Some of these criticisms derive from the incorrect application of the approach. Martella et al. (2012), for example, suggest that behaviourist approaches to dealing with disruptive behaviour such as assertive discipline are often misused in practice as teachers often neglect the praise components and move straight to the punishments. As such, bad behaviour is being reinforced through the negative attention the learners receive and good behaviour is not being reinforced.

Other criticisms focus on the limitations of the approach itself. One major criticism of behaviourism is that it does not recognise the uniqueness of the individual (Vialle et al., 2005). In the educational context, Weare (2004) suggests that behaviourist approaches to behaviour management do not work equally with all learners, and they particularly do not work for those who may find it difficult to fit in with the behavioural demands of the learning setting because of reasons such as cultural differences, learning difficulties, and their emotional state. Therefore, it is argued that behaviour management should take a more holistic approach and should consider the child’s unique personal situation, their developmental level, cultural and social background and personality and characteristics instead of focusing on rigid norms of ‘acceptable’ and ‘unacceptable’ behaviour (Kay, 2006). Similarly, the behaviourist approach is also criticised for taking a simplistic approach to behaviour, largely derived from experiments on animals. Learners are considered to be passive recipients who react to various stimuli provided by the trainer, and who have little free will of their own (Wragg, 2001). This view of humans does not take into account the complex nature of human learning, and in focusing on only the observable behaviour, the learner’s cognition and thinking processes are ignored.

Furthermore, it is suggested that behaviour management techniques that focus only on behaviour and do not consider the mental processes of the individual are unable to change the learner’s cognition (Garner, 2009). This is because there is a focus on supressing bad behaviour rather than a focus on teaching learners new responses and changing long-term behaviour problems (Kearney, 2007). As such, it is suggested that behaviourist approaches have little long-term effect and do not teach learners the skills to respond to situations in more appropriate ways.

Finally, behaviourist approaches to behaviour management have been criticised for their focus on rewards and it has been suggested that such a focus can reduce a learner’s intrinsic motivation to complete tasks (Vialle et al., 2005). In other words, the learner learns not to value learning and good behaviour for its own sake, but for the extrinsic rewards they receive for behaving well and completing the tasks the teacher gives them. As such, the learner does not become a self-motivated learner, but is reliant on the approval and direction of the teacher.

Conclusion

In conclusion, the behaviourist approach suggests a basic ABC model for understanding disruptive behaviour through an examination of the antecedents and the consequences of the behaviour within the context in which it occurs. This approach also provides a number of suggestions for strategies for avoiding disruptive behaviour and dealing with it once it occurs. It would seem that behaviourism is a commonly used behaviour management approach; humans tend to use reinforcement in their general behaviour and research has shown that the vast majority of teachers use behaviourist principles in their behaviour management strategies (Wragg, 2001). However, given the limitations of this approach, it would perhaps be useful for teachers to be aware of different approaches to behaviour management so that the needs of each individual student can be met.

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Introduction

Reich (2010, p. 1) argues that economic growth leads to increased prosperity in the developed, emerging and developing world. The argument is focused on the negative effects of slow economic growth for the world and the environment. This article provides a unique perspective regarding the impact of growth on environment and approves of economic growth as an indicator of improving environmental and economic conditions of people throughout the globe. This essay provides a critique of the argument made by the writer in support of economic growth.

Critical Review of the Article

The importance of economic growth should be considered in context of the impact of growth on environment. It is observed that economic growth tends to negatively impact the environment during its initial phase but growth leads to positive outcomes over the long-term. The focus of governments is to first improve the economic well being of their citizens and as the economic conditions improve the regulatory authorities direct their attention towards improvement of the environmental conditions. This article correctly suggests that the negative impact of growth on the environment is the result of inadequate and poor implementation of international law regarding the protection of environment (Troy 2011, pp. 1-6).

The economic growth resulted in widespread damage to the environment in the developed world including the United States, Japan and the Western Europe during its initial phase; however, the introduction of strict environment regulation in these regions has improved the environmental impact of growth. The spread of education across the developed world has also raised awareness regarding the need for environmental protection and businesses have responded to consumer awareness by becoming increasingly concerned about their footprint on the environment. The consumers in developed world are not willing to purchase goods and services from businesses that fail to demonstrate corporate responsibility towards the environment. This does not imply that the negative impact of growth on the environment has reversed but there is substantial effort from the business community to develop processes and technologies that can result in a reduction in the carbon emissions produced by the business in order to support sustainable growth. Therefore, the article rightly suggests that government improve environmental laws after the population has reached a certain minimum standard of living based on economic terms (Yueh 2003, pp. 3-8).

The unprecedented economic growth over the past three decades has resulted in severe consequences for environment due to the carbon footprint of business on the surroundings. The growth of the airline industry has offered several benefits but at the expense of the environment due to the carbon emissions in the air. The airline industry is trying to reduce its carbon footprint but growth does imply increase in the demand for travel and increase in the overall emissions. This implies that, even when businesses aim to be socially responsible, growth continues to have a negative impact on the environment. Therefore, the proposition of the writer regarding the strengthening of the international law would require airlines to reimburse the damages to the environment and this process can be costly. It is also argued that economic growth automatically slows down in response to strict international law for the preservation of the environment (Kniivila 2007, pp. 23-26).

The regulatory authorities have been reluctant to adopt strict environmental legislation as this will lead to a slowdown in economic growth. The efforts to protect the environment are reduced by a slowdown in economic growth if examined in the context of the recent global financial crisis of 2008. This does not imply that the impact of business on the environment was not reduced due to a decline in economic growth over the period. This leads to the suggestion that a decline in the economic growth leads to a reduction in the damage on the environment but at the same time creates pressures that can reduce the efforts by the business community to protect the environment against their activities. It is argued that economic growth should be maintained at sustainable levels and unmonitored economic growth does not lead to benefits to the society. Therefore, the focus of the economies and business frameworks should be diverted to the adoption of growth strategies that create a sustainable environment (IMF 2011, pp. 18-26).

The critical review of the assertions made by the article and the economic literature on growth and sustainable environment lead to the suggestion that economic growth and environment tend to be competing objectives; however, the use of sustainable technologies is a step forward in the direction of reducing the impact of growth on the environment. The governments need to adopt a model of growth that offers sustainability to the environment and as suggested by the article the developed world has the resources and the capability to facilitate the protection of environment by promoting strict international laws and standards regarding the environment (ODI 2008, pp. 12-18).
A slowdown in economic growth is linked to the development of competing element between economic growth and the environment due to the reduced willingness of the middle class to contribute towards the protection of the environment through the payment of taxes. This argument mentioned in the article is conflicting as it is the wealthy capitalist and corporations that are causing damage to the environment and it is the purpose of the regulatory authorities to ensure that the burden of the taxation to support environmental rehabilitation to fall on the capitalists (United Nations 2011, pp. 33-37).

Conclusion

The critical review of the article and the literature regarding growth and environment leads to the suggestion that these are competing objectives and that it is the responsibility of the regulatory authorities to strengthen international law for the preservation of environment. The article argues that growth leads to the enabling of the government and the society to pay for the environmental needs of the country; however, this assertion fails to recognise the competing goals of growth and environment. The objective is to ensure the growth is responsible and regulatory authorities in the developed world should rely on a strong mechanism for ensuring that growth is sustainable.

Bibliography
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Reich, R., (2010). Why growth is good? Huffingtonpost.com., [internet] 17 Aug. Available from: http://www.huffingtonpost.com/robert-reich/why-growth-is-good_b_685311.html [cited 23/03/2012]
Troy, M., (2011). Working Paper: New indicators for tracking growth in real time. Washington DC: International Monetary Fund.
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Yueh, L., (2003). China’s economic growth with WTO accession: Is it sustainable? London: Royal Institute of National Affairs.

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Introduction

Following its election to power in May 2015, the British Conservative Government announced a Spending Review in which it set outs its vision for restructuring the UK economy, with the specific purpose of reducing the public deficit (Muinzer, 2015). A key announcement made in the Spending Review, and currently out for public consultation, is the proposal to make significant cuts to the solar power subsidy scheme which has been in operation for the past five years (Clark, 2015). Debate rages between detractors and supporters of the proposals of the possible economic and environmental impact of the changes. The purpose of this report is to discuss and evaluate the outcomes of the policy changes, should they be enacted from January 2016. The paper proceeds as follows. In order to understand the likely impact of the changes, it is necessary to appreciate the political, environmental and economic context in which the solar power subsidies were first initiated; thus, the opening section of the report provides an overview of, and background to the current policy framework, and a more detailed discussion of the proposed changes. Next, the economic impact of the changes is discussed, followed by an evaluation of the environmental changes. A brief conclusion summarises the paper’s key points.

An overview of the current and proposed policy framework

Support for solar power generation in the UK is comprised of two key subsidy packages – the Renewables Obligation (RO) scheme and the Feed in Tariff (FiT) scheme (Kay, 2015). The Renewable Obligations scheme is a broad package of support which places a duty on the country’s licensed electricity suppliers to source a certain proportion of their electricity from renewable sources including biomass, hydroelectric, wind power, tidal power and solar power (photovoltaic cells, also known as solar PV) (Wood and Dow, 2011). The obligation was initially set at 3 per cent, rising to 15.4 per cent in 2015. The current total subsidy that is available to RO generators is estimated at some ?500 million per year up to 2037 (Knowles, 2013).

The Feed in Tariff scheme is in essence a small-scale version of the RO (Kay, 2015). It was launched in 2010 and was aimed at providing subsidies for installations of solar power generation of under 50 kilowatts (kW) at the household and firm level (Cherrington, Goodship, Longfield and Kirwan, 2013). Under the terms of the scheme, firms and householders are rewarded with a payment for every kilowatt hour (kWh) of renewable power that they generate for use on their own premises, and additional payment for unused power that can be exported back to the grid and redistributed for use elsewhere (Allan, Eromenko, Gilmartin, Kockar andMcGregor, 2015). Although, like the RO, the FiT can be used to support the generation of power from a myriad of renewable sources, solar power is the technology that dominates the scheme. According to Kay (2015, p. 38), “Solar PV accounts for 98.8% of the installations under FiT since 2010 and 84.5% of capacity”.

Generally, both schemes have been highly successful, which, paradoxically, analysts highlight as the key driver for the proposed policy changes. Grubb (2014, p. 339), for example, argues that the FiT in particular has become ‘a victim of its own success’: the solar surprise combined unimagined rates of growth with rapid cost reductions”. In 2014, the UK capacity for solar PV increased by some 81 per cent – more than double that of the previous year (Kay, 2015). However, the government has announced that it can no longer afford to subsidise solar power production. In announcing the proposals, the Department of Energy and Climate Change (DECC) stated that

“If cost control measures are not implemented or effective in ensuring that expenditure under the scheme is affordable and sustainable, government proposes that the only alternative would be to end generation tariffs for new applicants as soon as legislatively possible, which we expect to be January 2016, while keeping the export tariff as a route to market for the renewable electricity they generate” (cited in Morales, 2015, online).

It is proposed that subsidies to the solar power programme will be reduced by up to 87 per cent from January 2016 (Morales, 2015). The budget for support for assistance on renewable installations is likely to be capped at ?75 million pounds to March 2019, and end thereafter, while subsidies under the FiT programme would fall to 1.63 pence per kWh from the current value of 12.47 pence (Newbery, 2015).

The economic impact of the policy changes

Discussion on the economic impact of the policy changes has been focused on the microeconomic impact (specifically pertaining to the solar power industry itself), and the wider macroeconomic impact. At the microeconomic level, it is argued that the survival of the embryonic, yet burgeoning solar power industry would be under threat if the proposals were to become reality (MacAlister, 2015). Firstly, industry analysts are anxious of a ‘rush’ on the solar power market caused by the establishment of a target date for the cuts to the FiT scheme. Demand for solar installations are likely to surge among those seeking to get cheap installations before subsidies are removed (MacAlister, 2015). For instance, even though the policy proposals have not been confirmed or implemented, industry supplier Energy My Way is now calling on consumers to “get solar panels on your roof before 31 December 2015 to lock in the Solar Feed in Tariff for 20 years” (Eades, 2015, online). Accommodating such enormous demand in such a small amount of time can cause a drop in the quality and performance of installations, which may lead to supplier closures (Eades, 2015).

There is also the possibility of closures arising as a consequence of lowered demand for solar power installations and the job losses that may ensue (Mathieson, 2015). The lowering and removal of subsidies will make solar power less competitive relative to alternative forms of power, including both renewables and fossil fuels (Reid and Wynn, 2015). This will likely spur consumers that are considering switching to renewable energy sources to make the switch to cheaper sources, and will convince others not to make the switch at all. For instance, Mathieson (2015) points out that the current, subsidised cost of solar PV works out at around ?80 per megawatt hour (mWh), which is considerably more expensive than fossil fuels (around ?50 per mWh). Lowering, and eventually removing the subsidies will increase the real, and opportunity costs of solar power relative to fossil fuels which could kill the industry altogether. For this reason, the industry trade body, the Solar Trade Association has called for governmental support for the industry until 2020, after which it believes that it will have the capacity to operate without state support (Solar Trade Association, 2015).

However, some commentators have argued that the lowering, and eventual removal of subsidies will actually encourage greater competition in the wider clean energy sector. Newbery (2015), for example, argues that a mature, efficient clean energy sector must be self-reliant and self-sustaining and should operate without state intervention and support. He argues that a market based scheme, such as the auction scheme which characterizes the carbon market, would encourage suppliers to improve investments in technology, to innovate, to lower costs and to act more competitively. Over time, this would strengthen, rather than weaken the economic performance of the industry, and its contribution to the wider economy.

At the macroeconomic level, it has been suggested that the lowering and eventual removal of subsidies for the solar energy industry will free up public funds that can be better used elsewhere to help the government to achieve its goal of repairing public finances (Kay, 2015). In 2013, the subsidy programme cost the British taxpayer some ?650 million; the equivalent figure in 2014 was ?850 million (Morales, 2015). Under its Levy Control Framework, the government did set a spending cap of ?7.6 billion on subsidy expenditure by 2020-2021, but DECC analysis found that the number of solar farms that have so far been established is so great that the cap is expected to be exceeded by some ?1.5 billion (Clark, 2015). This money, it is argued can be used to help reduce public expenditure, or can be invested elsewhere to boost the economy (Newbery, 2015; Reid and Wynn, 2015). Furthermore, it is argued that the removal of subsidies will spur greater investment in solar power by the private sector, which is a source of more productive capital than public finds (Newbery, 2015). However, commentators have pointed out that these cost savings must be balanced against the possibility of the British government having to pay the European Union (EU) a fine for failing to achieved its legally mandated goal relating to the reduction in carbon emissions. If, as the government itself predicts, 1 million more tonnes of carbon dioxide (CO2) are emitted per year (due to falling demand for solar power microgeneration installations), the government should expect to pay a fine in the region of ?610 million by 2055-2056 (Bennett, 2015).

The environmental impact of the policy changes

The British government produced its own environmental impact assessment report which outlines the likely consequences of the proposed policy changes on take up of small, medium and commercial scale solar power (Department for Energy and Climate Change, 2015). The impact assessment report highlights that the changes will likely result in a lowered capacity for small-scale renewable microgeneration. The availability of subsidies has been directly responsible for the installation of around 3.3 gigawatts of renewable power capacity over the past five years, and 83 per cent of that added capacity has come directly from solar power technology (Morales, 2015). The cutbacks to the feed in tariff payments are expected to lead to a reduction of more than 6.1 GW of renewable energy capacity by 2020-2021, with the largest drop expected to come from the solar sector (Department for Energy and Climate Change, 2015). It is envisaged that around 890,000 fewer households will decide to install solar panels over the five years after the changes come into force.

The likely environmental impact of the proposals has been widely discussed by the green lobby both in the UK, and across Europe more widely. These bodies argue that the developments are likely to have adverse knock on effects for carbon emission levels and the ability of the UK to reach its carbon emissions targets (a lowering of total carbon emissions by 2050 by 80 per cent below 1990 levels) (Bennett, 2015). This is because, as discussed earlier, the reduction and removal of subsidies amounts to an increase in the cost of solar power production relative to alternative methods of energy production, which will disincentivise households and businesses from taking up solar power microgeneration activities, and could lead to a relative increase in the use of fossil fuels (Solar Trade Association, 2015). This could cause an increase in the total level of CO2 emissions coming from within the United Kingdom’s borders. One mid-range estimate is that around 1 million more tonnes of carbon will be emitted every year (Bennett, 2015).

Conclusion

The proposed changes to the policy framework for solar power subsidies is currently out for public consultation. The consultation will end on October 23rd 2015. It is therefore not possible to state with any accuracy what the future political, economic and financial framework for solar power will look like. However, the analysis presented above suggests that the impact of a lowering and eventual removal of subsidies for solar power technology at the both the small-scale and the commercial scales is likely to be substantial. However, the economic impact could be positive or negative. The very existence of the solar industry could be under threat; alternatively, the industry could be encouraged to become more efficient and competitive. The performance of the British economy could be enhanced, but this could be mitigated by the need to compensate the EU for failing to meet carbon reduction targets. The environmental impact could also be devastating if demand for solar power installations and solar PV capacity are reduced.

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Introduction

This paper will examine the social welfare and economic implications of the recent 2015 referendum on Greek bailout conditions offered by the ECB and IMF, starting with and examination of the history behind the crisis, the resulting series of financial bailouts along with the conditions imposed and their economic and social welfare ramifications, and the potential irrelevancy of the recent 2015 referendum on the actual outcome of the negotiations.

The Background to the Greek Debt Crisis

The Greek debt crisis essentially started in late 2009, after economic reports about the Greek government’s current deficit and debt levels made clear that the Greek government had deliberately under-reported their current deficit and financial situation in 2008 and 2009, with the deficit at the end of 2009 estimated independently at 12.5% of Greek GDP, twice the amount reported by official Greek governmental figures during that time (Simitis, 2014). These issues were further exacerbated by the revelation that Greek sovereign debt exceeded the 91.4% of Greek GDP previously reported, and actually stood at 126.8% of total Greek GDP due to a number of debts and liabilities within the Greek public sector that had been over-looked during the previous reports issued by the Greek Ministry of Finance (Simitis, 2014). These discrepancies in reporting raised serious concerns over Greece’s ability to accurately report its current financial situation, and the resulting sovereign debt ratio of 128% of GDP raised serious questions over the government’s ability to meet its current financial obligations (Ardagna and Caselli, 2014). The results of the revelations, occurring during the aftermath of the recent global financial crisis, led to a downgrading of Standard and Poor’s credit rating of Greece to BB+, a rating which indicates a significant possibility of default on borrowing (Standard and Poor, 2015). This caused the interest rates of 5 year bonds issued by the Greek government to rise to 5.385% in November 2009, a figure 1.42% higher than the average rate of all other similar Euro-zone government bonds during that time (Simitis, 2014). This also occurred at a time where the Greek government was running a significant structural deficit, with governmental spending at 53.2% of GDP, and public revenue of only 37.8% (Ardagna and Caselli, 2014). In other words, only further borrowing would be able to sustain the current level of Greek public services, borrowing which had just became exponentially more expensive to maintain.

Given the developing crisis in the Eurozone, the European Central Bank (ECB) chose to step in and offer assisted bailouts and loans using funds appropriated from other EU member states and the IMF (Baimbridge and Whyman, 2014). To this end, the Commission, the ECB and the IMF established the European Financial Stability Fund (EFSF, 2015). The EFSF issued a bailout loan of ˆ110bn in 2010 to the Greek government, which came with the condition that tight austerity measures be put into place, including a number of cuts across a broad spectrum of public services and a series of tax increases to boost governmental revenue (Ardagna and Caselli, 2014). Similar conditions were given to other recipients of bailout loans from the EFSF, including Ireland and Portugal, who as of 2014 have successfully reduced their national debt levels and current account deficit to that specified by the bailout conditions (Baimbridge and Whyman, 2014). However, the Greek government was hit with a further recession in 2011, with GDP growth contracting by 9.6% in the 4th quarter of 2010, and then a further 10.4% fall in the 1st quarter of 2011 (World Bank, 2015). The continuing economic problems faced by Greece were due to a number of factors, including a severe fall in revenue from both tourism and shipping due to the global economic crisis, two of Greece’s most important industries, and significant discrepancies between total taxes owed and total tax revenue, with total tax income in 2012 being ˆ51.99bn, against the expected ˆ110.79bn as reported by a State Audit Council report (Argitis and Nikolaidi, 2014).

These conditions meant that Greece was unable to continue to meet its financial obligations in 2012 and again faced the possibility of sovereign debt default, requiring another bailout loan to be made by the EFSF of another ˆ130bn, with additional conditions attached that required Greece to cut public spending by a total of ˆ3.3bn by the end of the year, followed by further cuts of ˆ10bn by the end of 2013, and again in 2014 (Ardagna and Caselli, 2014).

The Ramifications of the Imposed Bailout Conditions

The austerity measure conditions that were included as conditions on the two separate bailout loans to the Greek government were met with strong resistance from the Greek populace, and a number of anti-austerity demonstrations and riots occurred throughout the country in 2010, 2011 and 2012 (Simitis, 2014). The public reactions to the suggested austerity measures have been suggested to be responsible for the Greek government’s delay in more fully and efficiently implementing the necessary austerity measures and tax collection reforms necessary to close the gap between public spending and revenue (IMF, 2014).

Despite the social and economic issues resulting from the Greek populace’s resistance to the bailout conditions, in 2014 the Greek economy appeared to be on the road to recovery, with improved economic performance and growth across the Eurozone driving recovery in both the tourism and shipping industries, and the achievement of a structural surplus, mainly due to a series of stringent cuts to governmental spending and public services, including the closure of the state-owned broadcasting company ERT (IMF, 2014). These improved economic conditions allowed Greece to once again issue government bonds on the private equities market since the initial bailout had been implemented, allowing the Greek government a much-needed source of finance to cover any future spending gaps, with Greek government-issued 5 year bonds being traded at interest rates of 4.95% in mid-April of 2014, at their lowest rates since the start of the 2009 debt crisis (IMF, 2014).

An early parliamentary election was called in late 2014 after the current parliament was unable to vote in a new President for the 2015-2020 term with a parliamentary majority (Ardagna and Caselli, 2014). The Syriza party, which had been highly vocal in recent years about their lack of support for the austerity conditions imposed on Greece by the IMF and ECB, won a near majority and formed a coalition with a minority right-wing party in order to have the Syriza party leader Alexis Tsipras elected to the Presidential position. Upon gaining office, Mr Tsipras stated his refusal to respect the current bailout conditions imposed by the EFSF, with the intent of renegotiating more favourable terms (Ardagna and Caselli, 2014). The ECB and IMF responded by suspending any and all aid payments to Greece until either the existing deal was upheld or a new mutually-acceptable deal was agreed upon.

The resulting uncertainty caused significant economic and social upheaval within the country; the Athens stock exchange experienced its worst loss in total value in the following week since the 2011 recession, while interest rates of Greek bonds rose sharply in the private market, eventually reaching a peak of 24.19% in early June, severely reducing the newly-established governmental ability to raise finance in the private equities market (Dellas and Tavlas, 2013). The resulting economic uncertainty caused a run on Greek banks, where customers were desperate to withdraw all their cash to protect against the risk of a banking industry collapse, which ironically severely increased the likelihood of such a collapse occurring (Mankiw and Taylor, 2014).

In response to this socio-economic panic, the government issued a series of capital control measures that restricted the current opening hours of Greek banks while only allowing daily withdrawals of ˆ60 from personal accounts either through the bank or ATM (The Economist, 2015a). The government also placed restrictions on foreign transactions and foreign currency trading, to prevent Greek investors from transferring their funds to a currently more stable currency. However, these measures only served to deepen the social welfare issues within the country, as the number of foreign imports dropped dramatically due to the restrictions placed on foreign transactions, including in a number of key areas such as medical equipment, medication, food and farming materials, leading to severe social welfare issues during the negotiation period (The Economist, 2015b).

The 2015 Referendum

After a series of negotiations with the ECB and IMF that failed to reach agreement on the conditions of a new deal, Mr Tsipras, the Greek President, called for a public referendum on the proposed conditions put forward by the ECB and IMF in the latest meetings of June 25th. The announcement was made on June 26th, with the referendum to be held on the 6th of July (The Economist, 2015c). This is an incredibly short length of time to ruminate on a complicated issue, one which could have profound effects for the social, political and economic future of one’s country. The referendum paper itself also does not contain any details on the June 25th proposals, it merely asked whether the respondent is willing to accept them or not in a straightforward Yes or No ballot (The Economist, 2015c). Mr Tsipras, who campaigned for the No vote, listed those proposals during his campaign, including a controversial suggestion to raise taxes on tourism-related income that was later retracted by the ECB on June 26th, the day Mr Tsipras called the referendum (The Economist, 2015c).

Despite the public excitement surrounding the referendum itself, it is clear that the referendum was a tool that would have failed to provide a welfare maximising outcome regardless of the result. As Arrow (1950) notes, it is impossible for a ranked-order voting system with three or more options to provide a welfare-maximising solution that satisfies three criteria of fairness; first, that each individual holds a set of ordinally-ranked preferences that do not change with the introduction of alternative options; that the final outcome should satisfy the majority of voters; and that no one individual has dictatorship power over the vote. While the referendum at first appears to be a ranked order voting system with only two options, which would negate the relevance of Arrow’s Impossibility Theorem, the options themselves are not clearly defined. The majority No vote of 61.3% (BBC, 2015) merely rejected a specific set of conditions which were already irrelevant and out-dated at the time of the referendum. The results did not indicate whether those voters wish to accept different conditions, or to exit the Eurozone altogether, suggesting that there were more than two reasons for choosing one of the options that voters were inherently unable to express. Thus, those who voted No while expecting it to lead to a Greek exit from the Eurozone or a rejection of all further austerity measures would be ultimately disappointed.

The referendum was also biased in terms of Arrow’s (1950) fairness criteria in one major way; there was indeed one individual with dictatorship power over the vote itself. The referendum results were merely used to gather public opinion on an out-dated bailout condition offer; the results were not legally-binding, and in the event of a Yes vote Mr Tsipras would still be free to return to the negotiating table and attempt to renegotiate further with the ECB and IMF (The Economist, 2015c). The referendum was clearly used as a means for Mr Tsipras to gain leverage during negotiations in the case of a No vote, potentially to imply that Greek voters would support withdrawing from the Eurozone altogether if necessary, though as noted those voters would end up disappointed along with the rest who voted against further austerity measures, as despite the referendum results Mr Tsipras agreed to a further ˆ86bn bailout from the EFSF on the 14th of August, with 4 main conditions to the deal: a structural surplus of 3.5% of GDP to be met by 2018; a series of pension system reforms intended to cut public sector pension spending ( a condition with serious social welfare implications for the elderly and retired); reforms to labour and product markets to increase competitiveness; and a series of banking sector reforms intended to recapitalise the private banking sector (Wearden and Fletcher, 2015).

Conclusion

The 2015 Greek Referendum bailout conditions referendum was never capable of offering a welfare-maximising solution for voters; in fact, it barely offered any social, political or economic solution at all. Voters rejected a set of conditions that had already been altered at the time of the referendum, and were subsequently presented with a new bailout deal containing further harsh austerity measures such as cuts to public pension funding. It is doubtful whether the results of the referendum actually offered Mr Tsipras additional leverage in subsequent negotiations, but it is clear the Referendum results had little impact beyond this meagre measure

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Executive Summary

The World Trade Organisation represents the unifying global association that brings divergent economies, legal systems, customs, internal policies and political systems into a sphere whereby a common ground in terms of a level playing field is established for all member nations. Favouritism, special interest, and other imbalances are eliminated to bring the term globalisation into a uniform as well as universal context. As is expected, the World Trade Organization has defined rules, regulations, procedures and processes to ensure this level playing field remains level, regardless of the size, influence or resources of its differing members. And therein lies the reason as to why it has been effective. And while there are critics who have their individualistic opinions and comments, some well-founded, and others not, no one has proposed another forum to improve upon and or replace the WTO, which dispute its imperfections, functions!

The preceding represents the organisation that the Russian Federation is seeking admission to. Such has been a process that has entailed over a decade and is still not concluded. The reasons for the aforementioned shall be examine herein, as well as the changes, modifications and other facets that the country is being called upon to modify in accordance with accession rules. Given the past history of the Russian Federation, the transition to a market economy has and does represent substantive changes with regard to internal policies and practices impacting upon all areas of the country’s economy. Such transitional changes have been successfully broached by China as well as Vietnam and other former communist states, so the challenge facing the Russian Federation has precedent. This examination shall delve into the aforementioned accession process with respect to the Russian Federation, looking into the country’s most dominant and important industrial sections to gauge the impact the process has, is having and will have in terms of impact.

Chapter 1 – Introduction

In order to understand the context of the World Trade Organisation as well as its impact on Russia, and its industries, notably oil, gas, and construction, one must delve into the broad area of world trade in general as a foundational understanding for this examination. Globalisation has been utilised as a format to discuss as well as explain many issues, world trade of course being a major component of the foregoing. Mann (1993, p. 9) provides a broad understanding of the complexities and context of globalisation through his statement “In major transitions the fundamental interrelations, and very identities, of organisations such as ‘economies’ or ‘states’ become metamorphosed. Even the very definition of ‘society’ may change.”

The broad reference in terms of globalisation as provided from the preceding points to the need to clarify this catch phrase as used by academia, politicians as well as journalists, and economists concerning its reference in terms of this examination to distinguish it in the context of utilisation. In its general sense, globalisation represents a short method “…of describing the spread and connectedness of production, communication and technologies across the world” (Smith and Doyle, 2002). The context that we utilise globalisation in this examination refers to the processes “…of reducing barriers between countries and encouraging closer economic, political, and social interaction” (Tabb, 1999). Globalisation is also described as “…the creation of international strategies by organizations for overseas expansion and operation on a worldwide level.” (BNET, 2007). As a word, and concept it, globalisation, entails the technological achievements in the fields of travel and shipping, airplanes, communications and data transfer, production and outsourcing, marketing and communications, regional trading organisations and trade blocks as well as economics that has called for the increased recognition of expanding the visions of countries, governments and multinational corporations to include the world view (Berger, 2005, pp. 33-38). It, globalisation, is the processes that refer to increased global interconnectivity as well as integration with respect to economic, social, cultural, political, technological, and ecological practices as countries and companies must utilise a common ground to make their products, goods, services, and ideals acceptable on the world stages in response to other countries and companies competing to expand their influence and economic power (Raskin et al, 2002, pp. 15-13).

Theodore Levitt is generally credited with coining the phrase ‘globalisation’ in 1983 through his book “The Globalization of Markets” (Harvard Business School, 2006), however, the term, globalisation, can be traced as far back as 1944 with the ending of the Second World War. There are historians as well as economists who indicate that the process of globalisation is a centuries old phenomenon that tracks the process of human expansion, and civilisation which over the past fifty years has intensified dramatically, taking on a more structured foundation that is underpinned by economics, and the needs for uniformity (O’Rourke and Williamson, 2001, pp. 1-7). An while globalisation, and politics are interrelated, as a result of governmental involvement, Shaw (1999, p. 1) advises that “…politics has been seen as secondary to globalisation; political institutions, forces and ideas are generally believed to be responding to phenomena which are located primarily in other social realms”. This view is also shared by Gray (1998, pp. 34-54) as well as Hirst and Thompson, 1996, pp. 23-41). They explain that globalisation is a reflection of economy, sociology as well as culture, along with philosophy, which has been demonstrated through history in terms of expansionism in the ancient as well as medieval worlds, with politics as the secondary facet. Nicholson (1999, p. 23) amplifies the foregoing in stating that “…there were big population moves from Europe to America, both North and South, followed by the equally large but involuntary movements of Africans to the Americas (prior to 1770, more African slaves than Europeans went to the Americas …”, and that “…Europeans opened up sea routes to India and interactions began even if they were not always welcome …”. The point of the preceding as well as what follows in terms of globalisation, is to illustrate how deeply embedded it is in the global economy as an historical fact that has taken on increased intensity in the twenty-first century.

The impact, in terms of increased trade, brought about by globalisation is illustrated in the decrease in poverty rates as shown by the following:

Table 1 – Decrease in Global Poverty Rates
(World Bank, 2006)

Area Demographic 1981 1984 1987 1990 1993 1996 1999 2002 Percentage Change 1981-2002
Less than $1 a day 57.7% 38.9% 28.0% 29.6% 24.9% 16.6% 15.7% 11.1% -80.76%
Less than $2 a day 84.8% 76.6% 67.7% 69.9% 64.8% 53.3% 50.3% 40.7% -52.00%
Less than $1 a day 9.7% 11.8% 10.9% 11.3% 11.3% 10.7% 10.5% 8.9% -8.25%
Less than $2 a day 29.6% 30.4% 27.8% 28.4% 29.5% 24.1% 25.1% 23.4% -29.94%
Less than $1 a day 41.6% 46.3% 46.8% 44.6% 44.0% 45.6% 45.7% 44.0% +5.77%
Less than $2 a day 73.3% 76.1% 76.1% 75.0% 74.6% 75.1% 76.1% 74.9% +2.18%

The preceding represents a critical facet in understanding the contribution of globalisation to the increase of living standards through trade, and increased economic activity, which benefits developed as well as under developed countries.

Within the context of this examination, the following points to the importance of world trade in terms of Russia in comparison with the rest of the world:

Table 2 – Growth in the Value of World Merchandise Trade by Region, 2000 – 2005
(World Trade Organization, 2006)

As shown by the above, the annual global percentage change in terms of exports during 2000 through 2005 averaged 1 percent, with Russia recording an average growth rate of 18 percent. More telling is that during 2004 and 2005, Russia recorded a percentage increase of 35 and 33 percent, respectively, while the global average increase during those years was 22 and 13 percent. The following Table provides closer insight into the foregoing.

Table 3 – World Merchandise Exports by Region
(World Trade Organization, 2006)

Russia’s share of world trade between 2000, and 2005 increased by 18 percent in comparison with a global increase of 10 percent, with the country’s increases during 2004 and 2005 recording increases of 36 and 28 percent respectively compared against global trade increases during those years of 22 and 13 percent. The foregoing is the backdrop in terms if understanding the importance of global trade as well as its impact on the country’s economy as shall be further discussed in following chapters.

Chapter 2 – Literature Review
2.1 The World Trade Organization

The World Trade Organization (WTO) sets forth governing principles and uniformity regarding “… the rules of trade between nations at a global level …” (World Trade Organization, 2007a). It represents the primary international organisation to aid in the promotion of free trade through its foundation of rules governing the process on an international level to provide an equitable playing field that is applicable as well as just, and fair to all nations (Free Trade and Globalization, 2007). Organized in 1995, the WTO is the outgrowth of understandings as well as practices that began from the failed International Trade Organization in 1948 (World Trade Organization, 2007b). That attempt was a result of the ‘General Agreement on Tariffs and Trade’ that was created as a result of the Bretton Woods Conference representing a segment of the larger plan for economic recovery in the aftermath of World War II (Hoekman and Kostecki, 1995, p. 1).

Its origin, GATT “…can be traced to the U.S. government’s Proposals for the Expansion of World Trade and Employment …” that was subsequently forwarded to all countries (Srinivasan, 1998, p. 9). The Soviet Union represented the notable exception in terms of accepting the preceding invitation, which had also elected not to join the World Bank (Srinivasan, 1998, p. 9). The council oversaw deliberations that resulted in a total of 123 bilateral agreements covering 50,000 items that were negotiated in over 1,000 meeting, which resulted in the General Agreement on Tariffs and Trade being adopted on 18 November 1947, and signed by 23 countries (Srinivasan, 1998, p. 9). The foregoing was formalised in 1947 at the first meeting of the Economic and Social Council of the United Nations held in Havana, Cuba, and said Proposals for the Expansion of World Trade and Employment were adopted unanimously (Srinivasan, 1998, p. 9). At that meeting the Economic and Social Council of the United Nations “…appointed a preparatory committee for the conference consisting of the United States, Norway, Chile, Lebanon, and the fifteen countries invited by the United States for tariff-reduction negotiations. The Soviet Union again chose not to participate in the deliberations of the preparatory committee” (Srinivasan, 1998, p. 9).

Between 1948 and 1994 GATT represented the only multilateral regulating body covering world trade in terms of uniform rules, requirements and measures, until it was replaced by the World Trade Organization in 1995 (Hoekman and Kostecki, 1995, p. 36). For the sake of clarity, GATT represented a set of rules for the conduct of international trade that operated without a solid institutional basis, having no provisional secretariat (UNESCO, 2007). In understanding GATT it is important to be cognizant that it, GATT, was a provisional agreement in terms of its legal status whereas the World Trade Organization, along with its agreements are permanent as well as mandatory (UNESCO, 2007). Another important distinction between the two is that GATT concerned itself only with the trade in goods, whereas the World Trade Organization covers trade in services, termed General Agreement on Trade of Services, trade related to intellectual property, which is called TRIPS as well as the trade in goods under GATT 1994, an updated version of the original GATT agreement of 1947 (UNESCO, 2007). In the World Trade Organization, its agreements are multilateral covering all member states, whereas under GATT the agreements were plurilateral, meaning selective (UNESCO, 2007). Finally, the World Trade Organization has a dispute settlement system that operates in a faster as well as more automatic methodology than the system under GATT, importantly, the WTO rulings cannot be blocked by any member states (UNESCO, 2007). The following provides a summarised illustrative timeline of GATT and the WTO:

Table 4 – Timeline of GATT and the WTO
(Crowley, 2003, p. 43)

Consisting of 150 member nations, from its original 23, the World Trade Organization oversees an estimated 97 percent of all global trade (Crowley, 2003, p. 42). The progress of the organisation in aiding in the increase of world trade as a result of the uniformity of its agreements, measures, and dispute resolution is shown by the following:

Diagram 1 – Growth of Trade Among WTO Members and Tariff Decline, 1946 through 2001
(Crowley, 2003, p. 44)

Reasons that are attributed to the foregoing success are found in the fact that the World Trade Organization represents reciprocity as well as non-discrimination. Reciprocity is the procedure in GATT negotiating rounds whereby a country offers to reduce a trade barrier, and a second country reciprocates through offering to reduce one of its trade barriers (Crowley, 2003, p. 44). Non-discrimination refers to equal treatment. The preceding means that if one country offers a tariff concession, and or benefit to another member of GATT, said tariff concession, and or benefit must be offered to all GATT members (Crowley, 2003, p. 44). The foregoing two principles, reciprocity and non-discrimination, are termed by Bagwell and Staiger (2001) as the key reasons why the WTO has been successful in its role as the international arbiter of trade.

In understanding the importance of the preceding, a brief discussion of tariffs within the WTO is in order. Tariffs are another form of tax, which raises the price consumers must pay for an item (goods), and either brings an imported item into price parity for a country’s domestically produced goods, or raises its price to make it more expensive in relationship to domestically produced goods (Adams et al, 1979, pp. 35-49). In the instance of smaller countries, they benefit from unilaterally lowering their tariffs as they are unable to affect the price of goods sold on the global market (Adams et al, 1979, pp. 35-49). In fact, raising tariffs for a small country would result in its being worse off as a result of the loss of welfare to consumers as transmitted by the higher prices resulting in a loss of efficiency in the market as a result of consumption distortion. In the instance of larger countries whereby their goods comprise a goodly share of the global market, a change in tariff pricing upward constitutes a different effect. This is reflected in the following figure:

Diagram 2 – Impact of a Tariff on a Large Country
(Crowley, 2003, p. 45)

The resulting scenario is more complicated. In the instances of a large country import demand represents a large share of the global market (Crowley, 2003, p. 45). As a result, the imposition of a tariff by a large country reduces import quantity demand, and causes global prices to fall (Crowley, 2003, p. 45). In terms of trade the preceding makes a country better off as it now can purchase imports at a lower price on the global market (Crowley, 2003, p. 45). While the consumer pays a higher price on the imported good, the total welfare of the importing country is better off as government earns tariff revenues, and import competing producers thus earn higher profits (Crowley, 2003, p. 45).

In terms of the preceding illustration, a key point that needs covering is the burden of the tax (tariff) resulting. The consumers in the subject large country pay a higher cost for the goods that are imported in this instance when the illustrative tariff is imposed, however they do not pay the full burden of the imposed tariff (Crowley, 2003, p. 45). The imposed tariff created a condition whereby the falling world price of the good impacts the foreign exporters who receive a smaller payment, thus the exporting country loses a portion of its purchasing power in terms of the global market in this scenario that worsens its trade (Crowley, 2003, p. 45). As a result some of the cost of the indicated tariff is off loaded onto the foreign producers in terms of the lowered price they receive (Crowley, 2003, p. 45). The foregoing is termed a ‘beggar tariff’ as the foreign producers suffer losses (Crowley, 2003, p. 45). The utilisation of this type of tariff by a large nation results in the importing country being better off, and thus the exporting country being worse off (Crowley, 2003, p. 45). Furthermore, the preceding produces what are termed as ‘inefficiencies’ in the global trading system that overall cause the net effect of said tariff to become negative as it produces inefficient distortions in production in both nations (Crowley, 2003, p. 45).

The net / net of the foregoing is that the imposed subject example tariff is not good for the global economy as a whole, however, it benefits the importing country. The end of World War II provides an example of the preceding as many countries had high tariffs, which did not benefit the countries, and or consumers (Crowley, 2003, p. 45). Cooperative action on the part of countries as found under the WTO has increased the balance of good actions in terms of the foregoing dilemma. GATT, represented and represents the mechanism via which the short sighted self-interest equation has been balanced. GATT, and its reciprocal tariff reductions provided and provide such a mechanism (Narliker, 2003, pp. 12-14). In understanding the picture of global trade flows Hoekman and Kostecki (2001, p. 9) advise “Global trade flows are dominated by exchanges within and between the three major regions of the global economy (the so-called triad): Europe, North America, and East Asia. The principles and disciplines of the GATT helped governments to liberalize trade and to resist pressures for protection” the foregoing has aided in fostering increased integration of the world’s economy as a result of heightened trade levels.

The centrepiece of the preceding is the World Trade Organization, which also works with the International Monetary Fund, the World Bank as well as Regional Trading Blocks, and member government nations. The complexities of world trade, developing nations, and nations ascending to membership in the WTO brings with it economic, social, institutional, policies, and monetary ramifications whereby the WTO does not operate in a vacuum. The process of globalisation in today’s terms means closer cooperation between various multilateral institutions in the critical roles of policy formulation as well as the differing elements constituting economic policy frameworks. The preceding means the participation and support along with assistance from the World Bank as well as the International Monetary fund in aiding developing, and ascension countries in meeting the rules, and policies to become a member of the WTO.

In understanding the role of the World Trade Organization it is important to note that it does not define, and or specify outcomes for trade policies, it establishes a framework (Srinivasan, 1998, pp. 38-41). An example of the foregoing is provided by Article XXIX, Article 4 of the WTO, which aims “…to clarify the conditions under which a regional arrangement, free trade area, customs union or interim arrangement that, after a transition period, may give rise to a customs union or free trade area that is compatible with the GATT” (Landau, 2004, p. 88). The Article continues “…any preferential agreement between developed countries or between the latter and developing countries containing tariff preferences on a defined number of sectors is, on principle, compatible with the WTO. These arrangements must satisfy Article 4 of Article XXIV, in that they have been created in order to facilitate trade and not to form new trade barriers against non-member countries” (Landau, 2004, p. 88). It, Article XXIV, aims at ensuring regional trade arrangements result in the creation of trade as opposed to diverting it, and seeing that adverse effects are reduced to their minimums (Landau, 2004, p. 88). In addition Article XXIV “…stipulates that customs duties and restrictive trade rules must be eliminated substantially on all sectors of trade originating from the territories of the regional area” (Landau, 2004, p. 88). The main objectives of the World Trade Organization are, 1). Transparency, 2). Coherence, and 3). Tariff Negotiation via which it guide the process.

2.2 The Russian Federation

The Soviet Union, now known as the Russia Federation, represents a landmass that is four times the size of Europe, but having less than half of Europe’s population, and by comparison it is as large as the entire continent of North America (Summer, 1943, p. 1). The Union of Soviet Socialist Republics came into being in 1917, signalling the “…Stalinist revolution of planned industrialization and collectivisation …” (Summer, 1943, p. 48). And while the change in regimes was dramatic, many things stayed essentially the same (Summer, 1943, p. 48):

the “… great centralisation of power …”,
the “… enormous range of state action …”,
the “… massive bureaucracy …”,
the “… extreme emphasis on the army …”,
the “… drastic use of force and the secret police …”, and
the “…semi-deification of the leader or sovereign …”

In understanding the Soviet Union, one must be cognizant of four major facets that aid in the explanation of the preceding (Summer, 1943, p. 49):

“…the problem of governing an immense area and a multitude of peoples with relatively low material and cultural standards …”
“… the problem of defence …”
“… the impossibility of a complete break with past customs, attitudes of mind and feeling, and ways of doing things …”, and
“… the communist view of the state …”.

Lenin’s contribution to Russia was the doctrine of communism that provided “…the goal of communism and the vision of man new made – and a revolutionary method – the dictatorship of the vanguard of the proletariat organized through the Communist party and linked up with the masses through the soviets” (Summer, 1943, p. 49). “The idea both of party and of soviets was new to Russia in 1917, but they are the two institutional bases upon which the revolutionary regime has been built up” (Summer, 1943, p. 49). One of the outgrowths of the new Russia was the development of the largest militarised economy ever seen (Gaddy, 1996, p. 1). The preceding is important in understanding the context of the former Soviet economy, and the implications inherent in its ascension to the World Trade Organization. The military represented a “…process that affected the very nature of the system in both its political and economic dimensions” (Gaddy, 1996, p. 1). The foregoing is explained by Gaddy (1996, p. 1) as supported and fed by “Continual references to a military threat from without, intensified immensely by the campaigns of glorification of sacrifice and patriotism surrounding the victory in World War II, played a major role in creating and perpetuating the climate of secrecy and control that was necessary to justify unquestioning acceptance of Communist rule”. It is important to understand that the militarist nature of the Soviet Union severely impacted, affected and underpinned the economic system within the country.

The post – Soviet era in Russia has changed that underpinning, most notably the removal of restrictions on individuals (Gaddy, 1996, p. 1). The military industrial sector of the economy has been drastically reduced, with the armaments sector producing a very small portion of what it did in 1991 (Gaddy, 1996, p. 1). The importance of the preceding is that two out of three Russian workers who were engaged in military, and or weapons production in a system whereby militarisation represented the manner in which the State restricted free choice and allocated the country’s resources into its priority sectors (Gaddy, 1996, p. 1). While the foregoing is seemingly an issue of the past, the fact is in economic terms it is very much a part of the present, and thus germane to this examination of Russia’s economy, and its accession into the World Trade Organisation. The foregoing understanding with regard to the lingering effects of public debt was brought forth by Shutaro Matsushita (1929, p. 5) in the late 1920s through his analysis of “The Economic Effects of Public Debts”, where he brought forth the concept of ‘forced loans’ or obligations. The preceding represents when the state undertakes to pursue a path of economic debt. The following reference does not specifically apply itself to the status of events in the Soviet Union, yet its implications in terms of economic consequences is apparent (Matsushita, 1929, p. 85):

“When these government notes are suddenly issued, there is an increase in the medium of exchange, without any commercial necessity for such an increase, — in other words, there, is an inflation of the currency. Prices will rise, commercial relations will be disturbed, and creditors will suffer severely. Prices rise because there is an augmented supply of money to carry on exchanges, without any necessary increase in the commodities to be exchanged. Commercial relations are disturbed because merchants and manufacturers must readjust themselves to the, sudden rise in the prices of goods. Creditors suffer, because the same nominal amount of money does not have as much purchasing power as before. Moreover, as is always the case in a period of rising prices, wage-earners suffer because the rise in wages always lags behind the rise in prices.”

The size of the Soviet Union provides the country with a broad breathe of natural resources. At 22.4 million square kilometres the Soviet Union is almost four times the size of Europe, and only slightly smaller than North America (countrystudies.us, 2006). Given its vast expanse of land the country traverses a broad range of topography, thus providing it with exposure to differing types of natural resources as a result of the preceding. The country accounts for an estimated 20 percent of the global production of oil and natural gas, with large reserves of both (countrystudies.us, 2006). These reserves generate hard currency for the country, along with its vast reserves of “… iron ore, manganese, chromium, nickel, platinum, titanium, copper, tin, lead, tungsten, diamonds, phosphates, and gold …” as well as huge timber reserves located in Siberia (countrystudies.us, 2006). This underpinning of vast natural resources is the core from which Russia is able to build its new economy in the face of the collapse of the Soviet Union.

From 1927 through 1987, the economy of the Soviet Union operated under the foundational premise as set forth by Joseph Stalin, “…with only incidental modifications made between 1953 and 1987” (countrystudies.us, 2006). The control of the Soviet economy under Stalin represented the utilisation of the ‘Five Year Plan’ that represented the means for the country to marshal its vast resources into materials for production (Ilin et al, 1931, p. 18). It was a backward country compared to Europe, primarily Britain, France, and the United States with relatively no internal infrastructure, factories, transportation systems, cities, and industry. The policies of the ‘five year plan’ have been argued as being one of the most effective means for pulling the then backward Soviet Union out of the eighteenth century, and into the twentieth century as it was such a vast undertaking (Ilin et al, 1931, pp. 27-31). In order to solidify their power the socialists had to find a means to implement real progress within the country as a demonstration of the vision, success, and foresight of their system in addressing the massive problems of the country In addition to the pressures from within, there were external pressures as represented by capitalists countries which were impacting upon internal pricing structures as a result of Russia’s inability to compete in terms of productivity, and market efficiencies (James, 1937, pp. 197-207). The ‘five year plan’ represented a means via which the state could plan the progress of the country as well as administer its control policies, and solidify its absolute power. It, the five-year plan, represented “…the chief mechanisms the Soviet government used to translate economic policies into programs” (countrystudies.us, 2006).

For over sixty years the Russian economy was controlled by the state under the principles of centralised planning, which represented virtual control over all aspects of production, investment as well as consumption (countrystudies.us, 2006). The central planning concept also served to enable the country to marshal its resources quickly, as demonstrated by the invasion by Nazi forces. But, the problems of centralised planning, and its abuses were also evident in that Soviet industry was able to purchase raw materials such as oil, coal, and natural gas at prices that were below the global market levels, thus encouraging waste, and inefficiencies (countrystudies.us, 2006). The appointment of Mikhial Gorbachev as the General Secretary of the Community Party in 1985 is hailed as the beginning of the demise of the Soviet Union as a result of his reform policies of glasnost, democratisation and most of all perestroika (Graham, 2007). Glasnost (1990) represented a policy that called for openness, maximisation of publicity, and transparency concerning the activities of the state, along with the implementation of freedom of information (Bettaux et al, 2004, p. 8). The preceding was put into effect by Gorbachev in an effort to reduce the internal corruption at the head of the Communist Party as well as government, and Central Committee (Bettaux et al, 2004, p. 10-14).

Democratisation in Russia, as brought forth by Gorbachev, implied increased public discussions, primarily on cultural as well as economic issues, along with the increased interaction of leaders of the Communist party with the populace, and some liberalisation of personal freedoms and censorship relaxation (Ross, 2002, pp. 18-20). Gorbachev stated in 1989 that the“… republics’ rights of sovereignty were largely formal in nature. Up to now”, and he noted, “Our state has existed as a centralized and unitary state and none of us has yet the experience of living in a federation” (Kux, 1990, p. 2). Of all of Gorbachev’s policies, perestroika is credited with becoming the unintended cat.

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Introduction

As economies continue to integrate due to globalisation and formally closed economies like India and China march toward total liberalisation, entrepreneurship is on the increase. A close analysis of developed and industrialised economies indicates a common denominator that stands out amongst all of them. This is the most important role played by entrepreneurship and entrepreneurs in such economies. This phenomenon has proved to us that if an economy is to develop fully, entrepreneurship should be allowed to flourish. Therefore it is the objective of this paper to critically analyse the impact of entrepreneurs in any given economy. In this paper the writer will identify and discuss the many benefits afforded to an economy through entrepreneurs and entrepreneurship and the disadvantages of the same and draw conclusions on the overall impact of the entrepreneurs.

Innovation

Individuals often resort to entrepreneurship for one of the following reasons; they find a market niche and have the solution to profit from such niche; they have been unable to find suitable employment or a suitable means of income and therefore have resorted to using their creativity to generate an income for themselves; or they have the technological know-how and the financial resources (or able to source all of the above) necessary to generate income by satisfying a need in the marketplace. Irrespective of which of the above led an individual to become an entrepreneur it is clear that innovation and creativity is the driving factor and therefore, it can be stated that the biggest impact of entrepreneurs to an economy is the innovative contribution that they make.

Job Creation

As stated in the previous section, one of the main reasons that individuals tend to become entrepreneurs is because they are unable to find suitable jobs. As a result, by being enterprising, creative and finding a market niche, not only are they able to generate an income for themselves but also to employ other individuals in their business operations. Therefore, one of the most positive impacts that entrepreneurs make on an economy is job creation and the reduction of unemployment levels. In developed countries we see that almost 40 – 50% of the workforce are employed in small and medium scale business enterprises that were started up by very enterprising individuals. Likewise in countries like India, we see that millions of women have been able to pull their families out of poverty through self-employment and entrepreneurship that has been made possible by different Non-Governmental Organisations and due to the availability of such resources through micro finance etc. Africa is another good example of small scale entrepreneurs helping to reduce poverty and helping many to avoid destitution. Therefore based on everything that has been stated above it is apparent that entrepreneurs can cause a great degree of impact on an economy through job creation and income generation.

Increased Competition

Another positive impact of entrepreneurship on an economy is the increasing level of competition as new entrepreneurs join the fray in existing domestic markets. While one may venture to say that this will only lead to market saturation, the upside of such a phenomenon is that it causes all the players in the market to re-evaluate their operational capabilities, increase value addition, lower costs and become more efficient. Thus it can be stated that competition reduces the likelihood of monopolies and oligopolies in the marketplace and is beneficial to the customer and the economy as a whole.

Increased Productivity

One of the advantages of increased competition in an economy is that individuals and firms continue to source methods that can better improve their operations, use resources more efficiently and most importantly reduce costs while adding value. All this often results in an increase in productivity in an economy and an increase in the gross domestic product (GDP), which is indeed a benefit for the economy. While opponents tend to state that when productivity increases the unemployment can often increase, thus reducing the positive impacts, it is the opinion of the writer that increased productivity leading to increased unemployment will then cause more individuals to be creative, find niche markets, become entrepreneurs and begin generating more employment opportunities, thus re-inventing the wheel and driving the economy forward.

New Markets

As stated in the previous section increased competition in the marketplace can cause saturation and as a result many entrepreneurs maybe driven to seek new markets for their products and services or adapt market penetration tactics. Either way such a phenomena of increased competition, which ultimately causes individuals to look for new markets, can be considered as a positive impact on the economy. Therefore, entrepreneurs can be considered to play a very important role in the economy. As integration of economies continues due to globalisation, entrepreneurs often tend to look for markets that are outside of their domestic sphere thus generating foreign revenue and increasing the prosperity of the economy as a whole. While this may be a very simplistic explanation of the impact that entrepreneurs make on an economy, it is also safe to say that the employment generation, increased competition, market expansion, market penetration and sourcing new markets all result in income generation that ultimately help an economy to become more prosperous, drawing millions out of poverty and generating funds for social welfare activities that ultimately uplift the living standards of its citizenry.

Negative Impacts of Entrepreneurs

The single largest negative impact of entrepreneurs on an economy is the plundering of resources, which can have a disastrous effect on the environment. While such negative impacts are mitigated to some extent in developed economies due to the enforcement of environmental protection standards and regulations, this is not the case in developing economies. Further entrepreneurship requires a certain degree of business knowledge and know how, without which entrepreneurial ventures can often fail, which can also cause many financial hardship that in extreme cases can even lead to destitution.

Social Entrepreneurship

Today we see the realm of social entrepreneurship growing exponentially which is a very positive sign and has helped to draw millions out of poverty, decrease unemployment, decrease the number of people dependent on social welfare and all in all uplift the living standards and quality of life of millions. Further social entrepreneurship initiatives are also often seen as ‘green initiatives’ that take into consideration the impact on the natural environment and therefore strives to keep this at a minimum. This increases awareness about such issues, avoids the plundering of natural resources and conserving the environment wherever possible. Therefore, it can be stated that the negative impacts of entrepreneurs on an economy can be mitigated to some extent through social entrepreneurship.

Conclusion

Based on everything that has been discussed above it is apparent that the positive impacts of entrepreneurs on an economy, far outweigh the negative impacts. Job creation, reduction in unemployment levels, increased competition, opening new markets, increasing productivity, foreign income generation and poverty alleviation are some of the positive impacts that entrepreneurs have on an economy. However, this is not to say that there are no negative impacts such as the wastage and plundering of resources, yet taken as a whole it is apparent that the entrepreneurs positively impact an economy.

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Question: The Herfindahl Index coefficient and Gini coefficient are tools used in the analysis of industry concentration. Giving examples, assess their respective contribution to our understanding of industry structure.

A numerical approach to understanding economic structures has been the basis for the development of the Herfindahl-Hirschman Index and Gini coefficient. The concentration and industry structure are easily conceivable from a combination of these two indexes. The Herfindahl-Hirschman Index measures the size of the top 50 firms in the industry relative to the market. This comparison is in the form of a sum of the squares of their market shares. The primary basis behind the index is to understand the existing market structure based on the relative market shares of the top 50 (or all, if less than 50) firms. The coefficient will tend to be very high in case there is an oligopolistic market structure in which a small proportion of the firms will be holding large market shares.

However, if the market is such that the top 50 firms have small and roughly equal market shares, the coefficient will be very low. The difference between the two market structures is easily understandable by looking at the value of the coefficient. An oligopolistic market will generally have an H-H index of above 1800. This would mean that the market is concentrated and the top 50 firms have a significant majority share of the market. An industry with an H-H index of between 1,000 and 1,800 is assumed to be moderately concentrated i.e. there is a fair degree of distribution of market share with a few firms standing out slightly above the others. A market with just one firm serving the entire market (monopoly) will have an index value of 10,000. The minimum index value is of course close to zero assuming a perfect competitive market. The differences in these index values explain a lot about the industry and are often used to estimate the division of wealth between firms.

The Herfindahl-Hirschman Index of the automobile industry in the U.S. is in between 1,800 and 10,000. This is because of the fact that the industry has a lot of large players with significant market shares. However, the use of the Gini coefficient is more pertinent in measuring the distribution of wealth between firms in an industry.

The division of the US automobile industry is also supported by the Gini coefficient. Intuitively, the Gini coefficient is a measure of the relative dispersion of wealth in an industry. It measures the level of inequality of distribution of wealth in an industry. A Gini coefficient of 0 signifies perfect equality of wealth meaning that all firms in the industry have equal wealth. However, a perfect inequality of wealth is denoted by a Gini coefficient of 1. While theoretically it is impossible to have industries with Gini’s of 0 and 1, the extent to which they are close to either of these benchmarks denotes the concentration of the industry.

The US automobile sector has a Gini well above 0.5 denoting that the industry is concentrated and there is significant inequality of wealth amassed by the automobile firms. The combinatory use of the two indexes gives a clearer picture of the degree to which different firms have a share of the market and the extent of income equality (or inequality) relative to a perfect equality of wealth distribution.

Question: In the market for air travel, why might a high degree of price discrimination lead to an improvement in both allocative and technical efficiency, and yet a reduction in consumer surplus?

A high degree of price discrimination in the airline industry results in an increase in the producer surplus. This is because of the fact that a producer is able to capitalize on the prices that the consumer is willing to pay instead of the equilibrium price for the market lying above the equilibrium.

is price methodology would raise allocative efficiency because the airlines will be using the appropriate consumption bundle on the consumers’ indifference curve. This would lead to maximizing utility in terms of each individual using the airline’s service; Instead of maximizing output for the airline, it would mean reaching the optimum production level.

The phenomenon of discriminatory pricing is also known as labelled as perfect price discrimination because of the fact that it matches a perfect competition market also completely. The optimum quantity for the airline would form the isoquant line while the budget line for the production would be denoted by the isocost line. The price discrimination strategy would mean that the budget line would meet the optimum production quantity i.e. the isocost would equal the isoquant. This would denote the optimum quantity which would however reduce the consumer surplus instead of raising it.

This phenomenon can be explained by the fact that the supply curve in this strategy would change for each consumer. The supply curve will be higher or lower for each consumer depending on the price discrimination level; they would be matching the customers’ characteristics. Thus, this would result in an increase in the producer surplus at the expense of the consumer surplus.

While the total surplus would remain unchanged, a portion of the consumer surplus would be converted to the producer surplus. This is the basic reason for a decrease in the consumer surplus even though technical and allocative efficiency may be rising. The technical efficiency would rise because of the price discrimination strategy: the output of the airline would increase even though the inputs would remain the same. This increase in technical efficiency is complemented by allocative efficiency. The rise in allocative efficiency can be explained by the fact that the consumers’ measure of the utility of the airline’s service would increase.

The price discrimination strategy would enable the airline to charge different prices to each consumer based on their utility. Since the prices would be matching the utility of the customer, the net utility derived from producing the optimum quantity (where isocost would equal isoquants). The following graph displays this phenomenon:

Thus, it is possible for an airline to improve allocative and technical efficiency using a price discrimination strategy and at the same time experience decreasing consumer surplus.

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