How the economy functions in South How the economy functions in South Sudan Sudan UNIT 9

What I will do

• Investigate the role of individuals, businesses and government in the working of the economy.
• The importance of interdependence among countries on their economies
• Explore how the economy has a direct impact on trade and consumerism.
• Analyse why the economy has a challenging effect on employers and employees

What I will learn

• Meaning of economy.
• How an economy operates.
• The role of individuals, businesses and government in the working of the economy.
• The role of taxes in balancing the economy.
• Laws and systems affecting the management of the economy.
• Rights and responsibilities of consumers.
• Rights of employers and employees.
• Impact of local and national economy on consumers, employers and employees

The meaning and operation of the economy

The word economy refers to a process or a system of production, distribution and consumption of goods and services by different agents.

Transactions in an economy occur when different agents agree on the value or price of goods and services, usually done using certain currency.

Different countries have different currencies that vary in value due to different economic levels. In our country, people use the South Sudan Pounds as a medium of exchange.

South Sudan currency.

Factors for economic growth

Economic growth is driven by;

Production of goods and services

Natural Resources (gas, petroleum and other minerals)

Labour and capital.

Technological development,

Creativity and innovation have also impacted on economic development and growth of the world economies.

Political stability and legal systems

Activity 9.1

Group work

Q.1. Give some of the factors that can lead to economic growth in South Sudan,

Q.2. Identify the methods used to measure the economic growth of a country

Various methods have been developed to measure the economic activities of countries. These parameters include;

• Consumer spending• Exchange rate
• Gross Domestic Product• Stock market
• Interest rates• Government debt
• Rate of inflation• Rate of unemployment
• Balance of trade

• People in the market.(b) Exchange rates. Different aspects of economy.

The role of the government in the economy

Governments do not create economies but can influence which exchanges are outlawed or get favourable treatment. For example, the government can stop the importation of some commodities while waiving taxes on other commodities.

The role of the government in the economy include:

• Regulation. The government provides legal and social framework of doing businesses. For example, it can ensure that legal contracts for businesses are enforced through the court system. This helps to keep all people accountable when doing business.
• Competition. The government helps to maintain competition. Here, the government may enforce anti-trust laws to ensure that all businesses are able to favourably compete and offer products and services to consumers without feeling exploited.
• Correcting externalities. Externalities refer to effects of business decisions that can affect people or parties that have no say or control over decisions in the first place. An example is industrial pollution.

An industry can be producing an important product to the economy but creating a lot of pollution or waste. In this case the government sets policies to manage pollution by keeping it to acceptable levels.

• Provision of national security. The government has a responsibility of ensuring that there is political stability in the country. This will positively influence both domestic and foreign investors to establish their businesses in the country.
• Formulating fiscal and monetary policies. This refers to adjustment of the rate of spending and taxation by the government.

The role of individuals and businesses in the economy

Both individual citizens and business entities have a vital responsibility in the growth of the country’s economy. The following are some of the roles:

• They both provide goods and services that people need or want.
• Businesses provide employment opportunities to people.
• Individuals pay taxes that fund government operations.
• Individuals and businesses can influence government fiscal and trade policies.
• Individuals are consumers of products produced by both government and private companies.

Activity 9.2

Assignment work

• Discuss the role of an individual in an economy?
• What are the importance of taxes in South Sudan?

The role of taxes in balancing the economy

Sources of Government Revenue

The government generates most of its revenue by levying taxes on various entities and activities:

Individuals

Locals

Foreign businesses

State operations

Commodities

Transactions

Incomes

Types of Taxes

Taxes are generally categorized as either direct or indirect. The government must strike a balance across all these taxes to ensure balanced economic development.

Direct Taxes

These are taxes levied directly on taxpayers' income or profits:

Indirect Taxes

These are taxes levied on goods and services, production, or trade:

The importance of taxes in balancing the economy of South Sudan include:

• Taxes are important in supporting and developing government infrastructure such as road construction.
• Taxes can be used to cater for health services such as buying of drugs for patients hence improving the living standards of citizens.
• Taxes are used to fund general government operations such as payment of salaries to public servants.
• Taxes are useful for funding education projects of a nation such as, construction of schools and buying of learning materials for learners.
• Through taxation, the government is able to repay borrowed loans.
• The government of South Sudan uses taxes to cater for emergency needs such as outbreak of hunger and floods.

Management of the economy

Managing an economy needs laws and systems to make it more efficient and effective.

Strategies Government use to manage the economy include:

• Promoting income equality between people and gender.
• Introduction of new communication technologies for efficient management of tax collection and government expenditure.
• Increased standardisation of accounting practices and introduction of new financial markets to manage capital movement from South Sudan to other countries.
• Introduction of political support for privatisation, competition and agreements to lower trade barriers and to open up borders for trade interdependence.
• Increasing trading activities between people and businesses creating more competition hence production of higher quality goods and lower prices for consumers.
• Encouraging domestic borrowing to finance government operations.
• Exempting poor people from paying taxes. Such exemption is defined by law.
• Creating employment for the citizens to increase their purchasing power.
• Implementing government and state budgets by looking at priority areas like health, infrastructure and education.
• Enhancing public-private partnerships in investing in various sectors of the economy.
• Passing legislations to tackle corruption and other economic crimes and fraud.
• Activity 9.3
• Group work

Q. Discuss strategies used by government to manage the economy of a country.

The meaning and aspects of global interdependence

This is where countries depend on each other for various things. This creates mutual dependence at global level.

The major contributor of global interdependence is importation and exportation of goods and services.

Aspects of global interdependence

There are three major aspects of global interdependence. These aspects are economic, social and environmental aspects.

• Economic aspect. This refers to cross border economic activities by which people coming from different countries conduct business through huge investments and flexible markets.
• Social aspect. This refers to effects of globalisation on the life of people, families and societies. This deals with issues of working environment, employment of foreigners, culture, security and social protection like employment inequality.

Environmental aspects. The earth is home to humans, humans have needs. These needs are met by using earth’s resources and every human has the right to use these resources. Such as clean, safe and healthy environment.

To attain global interdependence, the world has come together to fight environmental degradation which risks sustainable development and existence of human and his or her eco-system. This has been achieved through United Nations climate conventions for environmental conservation.

Some of these conventions are:

• The Kyoto Protocol on Climate Change 1997
• The Paris Climate Agreement 2015
• The Bonn Climate Convection 2017

These conventions seek to create a global concern for climate change which is greatly global interdependence and world economy as a whole.

• Activity 9.4
• Individual assignment
• Q1. Make notes on different aspects of global interdependence
• Q2. Explain the problems facing the economy of South Sudan. Write at leas t two pages and share with a friend.

Responsibilities of individuals and governments towards global interdependence

Both individuals and governments have a role to play on global interdependence.

There are some government factors that may have an impact on global interdependence. These factors include:

• Establishment of foreign investment policies to regulate operation of foreign businesses in a particular country.
• Establishment of market tariffs which involve the deductions of custom duties on goods imported from specific countries. When the tax levied on imports is reduced there is a growth of business because the operational cost has been brought down.
• To promote global interdependence, institutions of governance have taken the following steps to attract foreign investors:
• Improvement of financial policies that adhere to global policies of conducting business. This promotes trust between foreign investors and a specific country.
• Strengthening of banking systems, transparency on financial transactions and adequate supervision and regulation of financial markets.
• Construction and improvement of infrastructure such as roads and airports to ease the logistic of doing business.
• Protection of domestic – young industries. These industries are important for they ensure continuous supply of goods and services in case multinational companies pull out of the country. This industries need protection from being bullied by stable international companies through unfair competition.

Challenges facing global interdependence

Global inter-dependence is facing numerous challenges as the world moves forward in becoming a global village. These challenges may include;

regional integration and differences in trade agreements.

Proportion of population with access to proper sanitation is another great challenge to many.

Demographic trends of different regions also affect global interdependence.

Demand for sustainable development and climatic conservation threatens global interdependence.

Lack of enough infrastructural facilities such as roads and housing due to increasing urbanisation has negatively impacted on global interdependence.

Glossary

• Economy–The system of production, distribution, and consumption of goods and services.
• Consumer–A person who uses goods or services.
• Consumerism–A theory that states that an increase consumption of goods is economically beneficial.
• Competition–A business relation in which two or more parties compete to gain customers.
• Consumption–Utilisation of economic goods and services to satisfy needs.
• Externalities–Effects of business decisions on the people.
• Fiscal policies–Government policies which deal with budget, taxation and borrowing.
• Tax–Money paid to the government for various operations.
• Commonwealth– Refers to all countries that are former colonies of Britain
• Globalisation– The process where people become integrated through free trade, free transfer of capital and labour in the world.