Is inequality an inevitable fact of transition?

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According to Dan Ariely prof. of psychology and behavioral economics from MIT top 20% of the Americans have 85-90% of the wealth which is not astonishing for the most of educated people, but prof. Ariely also claim that bottom 40% of Americans have only 0.3% of the wealth which is quite shocking.[1] USA is probably the most outstanding representative of market economy and one may wonder what changes did socialist countries of the former Soviet Union experienced during the transition from a command economy to a market economy, from communist political system to democracy. It is natural to think that income inequality is an inevitable fact of transition and this issue had been discussed a lot lately by many researchers. There are number of studies and statistical reports on the income levels in CIS (Ukraine, Russia, Kazakhstan, Belarus, Azerbaijan, Uzbekistan, Turkmenistan, Georgia, Armenia, Tajikistan, Kirgizstan and Moldova) countries and we will use some of them to see the level of income inequality. It is also important to analyze the reasons for income inequality during the transition to market economy and onwards. Finally, it is crucial to see the gains and losses of inequality and transition.

GINI index map for CIS countries of 1987-1991

GINI index map for CIS countries of 1987 – 1991.

Let us consider the situation with income distribution in Russian Federation the biggest representative of CIS countries. We can see from the data given by Mihali Simai in his paper[2] that real wages in all CIS countries decreased on average by 50% and the income inequality in Russian Federation (i.e. the gap in income of the poorest 20% and the richest 20% of population) have been gradually increasing during the 1990 – 2001. Historical GINI index (which is used to measure the income inequality) for CIS countries in 1987 – 1991 and 2007 – 2011[3] supports our claim. We can see that since the beginning of transition GINI index had increased in most countries of the former Soviet Union, which implies that gap between incomes of the rich and the poor had become bigger.

 

GINI index map for CIS countries of 2007 – 2011

GINI index map for CIS countries of 2007 – 2011.

Knowing that the income inequality took place during the transition and onwards we should look for reasons. First of all one should take into consideration that privatization had become an important step on the way to market economy. In Soviet Union everything was mutual or belonged to the state and no one had property, but when the transaction started people started to privatize not only their flats and houses, but also industrial objects and plants in some countries (i.e. Ukraine). This process became a basis for income inequality because after the first wave of privatization there was rich owners of plants and industrial objects, medium income people (mostly the owners of medium size manufactures) and the poor – those who did not manage to privatize anything. Secondly, transition made entrepreneurship possible and smart, talented people who had enough luck started their businesses and formed a middle class, but there was few of such.[4] Finally, any competitive labor market should have an income inequality as well as unemployment to create incentives to induce greater effort. The vast diversity of different education levels, skills and efforts of workers had become a main reason for wage differentials.

Almost 15 years have passed since the beginning of the transition in the economies of the CIS countries and one can find a lot of cons and pros of inequality. Probably the most evident gain is that transition led to equality in opportunities through income inequality. Basically in democratic society of market economy there is more social mobility, it is possible to achieve anything independently on ones social background. On the other hand most countries experienced a significant recession during the transition and the living conditions of people in lower part of the income distribution had fallen far beyond standards of living.[5]

So, when talking about the market economy we should always keep in mind that market economy often implies income inequality, which had become a hot topic back in 1990’s during the fall of Soviet Union. Most countries of CIS (Ukraine, Russia, Kazakhstan, Belarus, Azerbaijan, Uzbekistan, Turkmenistan, Georgia, Armenia, Tajikistan, Kirgizstan and Moldova) experienced drastic increase in income inequality compared to the years in Soviet Union. These changes in income distribution were caused by privatization, creation of labor market with strong dependence between the skills and wages of the employees. Income inequality became an integral factor in the system of incentives in the market economies and gave birth to equality in possibilities. But the dramatic consequence of the inequality is that it may increase the proportion of poor people in the economy and decrease the overall level of happiness in the country.



[1] http://www.youtube.com/watch?v=u8Beo9YM_Pk
[2] Poverty and Inequality in Eastern Europe and the CIS Transition Economie,  2006 United Nations, Department of Economics and Social Affairs,  12-17
[3] http://data.worldbank.org/indicator/SI.POV.GINI?page=4
http://data.worldbank.org/indicator/SI.POV.GINI
[4] How Capitalism Was Built: The Transformation of Central and Eastern Europe, Russia and Central Asia, 2007, Aslund, Anders, 143 – 181.
[5] Income, Inequality and Poverty during the Transition from Planned to Market Economy, 1998, World Bank, Washington DC,  Milanovic Branco, 195 – 214.

Mortgage and Covenant Mortgage

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What is a mortgage? A few years ago, the word «mortgage» was known only to specialists, but today it has become a part of our lives. But, despite many references, yet many people do not realize what a mortgage is and even more people do not know what the covenant mortgage is. The answer to this question is:  this is the first responsible action in one’s person life to identify and realize his or her opportunity for buying own home.

The term «mortgage» is derived from the French word which meant «death contract. For the first time the term «mortgage» came into use at the turn of the VI-VII centuries BC in Greece, when they were called pole that was placed on the land borrower’s assets and contained the name of the creditor and the amount of the loan. In the event the borrower defaults in payment of the debt «mortgage» entitled the creditor to take borrowed part of the plot.

So, a mortgage today – is issued under the mortgage loan with the collateral, which is the basis of this credit is not transferred to the creditor, and remains the property of the debtor. The mortgaged property under the mortgage prohibition is imposed on the sale or renewal of it to another person until full repayment of the loan and all interest.

The covenant mortgage implies that the debtors relatives or any other person can buy the property which was bought for the money from mortgage if he or she will take the duty of repaying the remaining part of the mortgage. This term is vastly used in California and people in other parts of the USA usually do not know what the term “covenant mortgage” means.

Mortgage loan – is a long-term loan, were the borrower has to put in pledge the following kinds of real estate: apartments, residential home with land, business premises with the earth, the earth. Banks do not give mortgage loans every day. Dates when you can arrange a mortgage may different and depend on the bank and the type of loan program, the amount of the requested loan, and your ability to pay. The proposed time line for mortgages is mostly 3 – 5 years and 15 – 30 years.

Mortgage loans are issued by commercial banks, mortgage banks and credit agencies. Each commercial bank usually offers several programs with different mortgage terms and interest rates. But if you arrange a mortgage, you should always remember that you will immediately become the owner of the acquired property, and the loan and the interest is paid for your personal, rather than rental housing.


The Nuts and Bolts of Capital Punishment

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The controversy over the imposition of capital punishment still exists, and you can even attest to that through online essay writing. When United States was still Britain`s colony, death already served as lawful punishment. It can be said

Chair for capital punishment

that today’s generation is luckier because during the early times, cases like stealing fruits were already considered capital crimes. Meaning, you are literally dead once you are proven guilty of committing theft. But as Americans gained dependence, the criminal justice system was eventually amended to reclassify heinous crimes. Death sentence, however,

remained on the list of penalties.

Capital punishment is recognized as one of the most sweeping essay writing topics worldwide. Until now, the question whether death as punishment is effective and ethical, is argued. And if it is death penalty people are talking about, it is impossible to not pay respects to Italian criminologist and philosopher Cesare Beccaria, who roused public opinion on death penalty.

The Impact of Beccaria’s ‘On Crime and Punishment’

Beccaria’s ‘On Crime and Punishment’ was such a concise and powerful essay writing output that policy-makers used it as inspiration in drafting constitution. This is especially true in the case of United Sates, which was just beginning as a sovereign, when Beccaria’s creation was published.

Beccaria referred to the society as a law-regulated entity. According to him, people agreed to have their liberty constrained in exchange for protection. He emphasized that it is crucial to observe a clearly-defined set of penal code to maintain orderliness in the society. Beccaria also believes that everyone should be informed about the justice system. He sees it is necessary for the unlawful to be punished, but it should be done in a rational manner.

Ethical Issues on Capital Punishment

Capital punishment encompasses several issues, and one of which is morality, which also has several angles you can try to explore in your academic essay writing assignments. Digging deeper you may say that death penalty is somehow ironic, and confusing at the same time. And if you would only try searching online on random insights about capital punishment, you would see how diverse people`s opinions are.

Pros. Those who support capital punishment say that implementing such would bring about a safer and more peaceful society. Death sentence would help mitigate cases of criminal acts as would-be perpetrators become threatened. This is also favorable for the families of the accused as closure is easily achieved. This would also mean less expenditures for the government. Funds could instead be used for more worthy causes such as providing essay writing tutorial to the grassroots level.

Cons. Those who firmly disagree on death penalty argue that it has not been proven yet that the procedure lessens criminality rate. They believe there are more humane alternatives to capital punishment such as life imprisonment without the possibility of being awarded a parole. They also view death sentence as more of fostering retribution than solving crimes.

To conclude, people can only expect to see more essay writing endeavors focusing on capital punishment as long as somebody smells half-baked justice in the society.


Cons of Wind Energy

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cons(a)           Intermittent Power Source

The electricity from wind is normally dependent on the speed of wind and its availability. For instance if the wind does not blow or if the speed of wind is low, there is little or no electric power since the turbines will not turn. In addition, if the speed of the wind is too high then it might damage the turbines which automatically create electricity shortage.   Most of the wind farms are normally situated in sites that have greatest winds and this means that they are often found in remote locations far from urban areas that require more electric power. These problems can be solved by using power generated from other farms simultaneously and also through storage of the electricity generated by use of batteries. The intermittency of wind power can also present additional costs for the power grid as additional backup power plants are required.

(b)           Danger to Some Wildlife

Wind turbines that are used to generate wind power can pose threat to birds and bats through disturbance to breeding grounds, disturbance to staging and foraging birds and disturbing impact on migration or flying birds. Studies have shown that 40,000 birds and bats are killed each year in the United States by wind turbines (Miller & Spoolman, 2008). However the deaths are negligible when compared to the number of birds and bats that have died after crashing against windows and buildings. Wind farms located on coastal strips can disturb breeding and resting of birds such as geese and waders. The problem is currently solve by redesigning of new wind turbines since the wind turbines that are responsible for these deaths were built twenty tears ago (Andersen, 2007).

(c)            Noise Emissions and Visual Impacts

Wind energy production is a nuisance if sited in places with high population or in coastal areas. This is because wind turbines emit noise due to the mechanical and aero- dynamical nature that is dictated by the wind speed. The shadow of the rotating wind turbines can be an inconvenience to the people who live near such wind generating power farms and some people also consider wind turbines as unsightly. Wind turbines can also interfere with electromagnetic communication systems by reflecting electromagnetic waves and hence interfering with telecommunication links. The problem of noise emissions is currently solve through developing of more efficient wind turbines and the issue of shadow intrusion can be rectified by locating the wind turbines three hundred meters away from houses. Planning of wind farms in areas where the wind turbines cannot interfere with electromagnetic communication systems is also a solution to the above problem.


Pros of Wind Energy

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pros(a)           Climate change Mitigation

It is evident that the burning of fossil fuels releases greenhouse gases like carbon dioxide and methane while some greenhouse gases are in the atmosphere naturally. The emission of greenhouse to the extent that the natural process of the earth cannot contain them as led to increase in greenhouse concentration in the atmosphere. The greenhouse gases have also overwhelmed carbon sequestration by plants and hence there is increased temperature in the surface of the earth.  This increased warming of the surface of the earth and the atmosphere is known as global warming or global climate change. Research indicates that the resultant effects of global climate change as result of combustion of fossil fuel include rise of sea levels, melting of glaciers, change in rainfall patterns and increased incidences of catastrophic storms. Wind energy is therefore a perfect remedy for climate change for it is an alternative energy source that does not emit any greenhouse gases (Fitzgerald & Voege, 2010).

(b)           Renewable Energy source

Wind energy is a renewable source of energy and it can be harnessed as long as the person or a country wishes without running into depletion. Just as highlighted above under history of wind energy, the use of wind power started over a thousand of years ago and it is still being used. The energy from wind is eternal and cannot be exhausted unlike other energy sources like fossil fuels which are non renewable. Since wind is produced by variations in atmospheric temperatures, rotation of the earth, the effects of land and sea and differentials in weather patterns, wind will continue to be produced forever and it will never run out. The inexhaustible nature of wind makes it a potential alternative energy source and hence it can help to diversify the energy sources of a country (Asplund, 2008). The current fossil fuels that many countries use for energy production are depleted while wind energy is not as it is in abundance.

(c)            Clean, safe and Pollution Free

Wind energy produces a clean and safe fuel as it does not produce air or water pollution. This is because during the production of wind energy there is no combustion of fossil fuel and hence no toxic or poisonous gases are released into the environment. Wind energy is also safe because it contributes to the reduction of health risks that are associated with other conventional energy sources. For example burning of fossil fuels results in soot pollution and it estimated that pollution from coal fired plants account for 23,000 premature deaths in the United States every year.  The only death that has been recorded in relation to wind energy production was when a German skydiver flew off course and parachuted into a wind plant (Fitzgerald & Voege, 2010). Apart from lung disorders such as asthma and bronchitis that are related to fossil fuel combustion, the emission of sulfur oxides and nitrogen oxides from coal and oil combustion has some serious environmental effects. When the sulfur oxides and nitrogen oxides mix with atmospheric water and air, they form sulfuric acid and nitric acid which later fall as acid rain. Wind power is therefore a pollutant free energy source and hence Eco- friendly.

(d)           Surrounding Land is Usable

The setting up of wind turbines for energy production is normally done over an extensive geographical area. Since wind turbines are usually large and tall structures, they are normally spaced wide apart from each other in the wind farms. As a result, there is usually large tract of land between the wind turbines which can be used for other purposes. The wind generation land can be used for agricultural purposes such as farming or for livestock grazing. Furthermore farmers can lease out their lands for wind power generation and obtain additional income while still carrying out agricultural activities on such lands.  Wind towers can offer a substitute income for oil depleted wells as evident in Texas where many farms are turning to wind towers as the solution (Asplund, 2008).

(e)            Economical

Wind energy is economical because it is free and also it has low operational and maintenance costs compared to power from fossil fuels. Although the initial cost for installing wind turbines is higher than fossil fuel generators, the operation and maintenance costs for wind farms are lower than those for fossil fuel power plant. For example the operating and maintenance costs for wind farms commissioned between 2000 and 2005 was only 0.85 cents per Kilowatt-hour while for fossil fuel power plants it was 0.81 cents per Kilowatt-hour with exclusion of fossil fuel purchase costs. Wind energy therefore does not have expenses for fuel purchase during its operational phase and also has minimal operating and maintenance expenses. Wind power can reduce the reliance of countries to foreign oil imports and also help to reduce the health and environmental costs that are caused by pollution. Wind energy is hence a more economical alternative energy source for worldwide power generation than from fossil fuels that are costly to produce (European Wind Energy Association, 2009).


Wind Turbines and How it Works

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Wind turbineWind energy is harnessed through the use of wind turbines which are normally mounted on towers. Horizontal axis wind turbines and vertical axis wind turbines are the two types of wind turbines that are normally used. The wind towers are usually erected twenty meters high or more above the ground for maximum harnessing of wind energy since there are stronger winds at these heights. Wind turbines are therefore used to convert the wind power into wind energy and eventually to electricity. A wind turbine is composed of three propellers mounted on a shaft to form rotor and the rotation of the rotor applies the principles of Bernoulli Effect.  When wind blows over the propeller blades, a region of low pressure is formed on the bottom of each blade. The low pressure region formed at the downwind side of the blade causes the blade to move towards it and subsequently causing the rotor to turn. Consequently the side of the propeller blade that is on the frontward side experiences a much lesser force. This unequal pressure in the propeller blades causes the rotor to spin and eventually turning the generator for electricity generation (Fitzgerald & Voege, 2010).

Conversion of Wind into Electricity

The spinning of the tower produces kinetic energy which is converted to electricity via the generators. The kinetic energy from the rotor is converted to electricity by use of magnets situated in the generators.  Inside the generators, the magnets move over a stator, this consists of numerous coils of wire and hence producing alternating current (AC) electricity. The alternating current (AC) electricity is then converted to direct current (DC) electricity which can eventually be used to store the electrical energy in batteries or in the grid interactive inverter for power supply in the main grid.  For maximum electricity through this system, it is advisable that the wind turbines to be situated in places where there are no interferences and ideally they should be situated at the country, farm lands or at the coast where there are minimal interference to the wind speed. The amount of wind that is harnessed and converted to electricity depends on the size of the turbine and the speed of the winds (Dodge, 2006).


Source of Wind Energy

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windThe radiation from the sun is absorbed by land and the sea and in turn leading to the warming of the surrounding air. As warm air rises and cool air descends, convection current is produced due to the difference in the temperature gradients and hence wind is developed. For example at the equator, the solar radiation causes warm air to rise allowing cool air from the north and south to descend in.  The rotation of the earth determines the regions where high and low winds occur over an extensive area in the global scale. The seasonal variations such as winter, spring and summer also affects wind reliability because it dictates the speed and strengths of winds. Wind energy can therefore be effectively harnessed in regions where there are strong and reliable winds (Andrews & Jelley, 2007).


Wind Power History

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Wind StationThe use of wind dates back to thousand years ago where windmills and wind turbines were first used. It is believed that the use of wind power originated from Persia, china, Tibet, India and Afghanistan. In Persia, the windmills which were driven by vertical wind turbines were used for pumping water and grinding of grain crops.  However there is uncertainty as china is also believed to have developed the similar wind mills at an earlier stage before Persia (Andrews & Jelley, 2007).  The wind mills in Afghanistan were also the same but were complimented by use of cloth sails or reed matting to harness more wind and they were used to grind corn and sugarcane and also to pump water.  There is also evidence that Egyptians used wind power to sail their ships across river Nile before wind power technology was introduced in Persia. Wind power use then spread to other regions in Europe where the Dutch developed the horizontal axis windmills which they used for grinding grains and draining lakes and marshes in the Rhine River.  The use of wind power then intensified in Europe and countries like Denmark and United states started to use wind power to pump water (Andersen, 2007).

Professor James Blyth from Scotland built the first windmill for energy production in 1887 and this was followed by another one in the United States in 1888 by Charles Brush from Cleveland, Ohio who built a large turbine for electricity generation. The Brush windmill was operational for over twenty years but had the shortcomings of low speed and the firmness of the rotor and hence did not allow maximum electricity generation. In 1891 Poul La Cour from Denmark developed a more improved windmill which in addition to decreased firmness of the rotor, it was able to electrolyze the water and store the oxygen and hydrogen that was formed during the process. By 20th century, the use of wind power intensified across Europe, and Russia was able to built the first utility wind turbine using the 100 kW Balaclava generator which operated for nearly two years along the Caspian Sea. Electricity generation by use of wind power increased and many countries namely United States, Denmark, France, Germany and Great Britain increased research with the view of improving the existing wind turbines. The use of wind power however decreased in early 1930s with the introduction of fossil fuels which were now being used on wider scale. The situation changed when the oil shortage of the 1970s created more opportunity for alternative energy sources and again wind energy use was rejuvenated (Dodge, 2006).


The importance of “green” energy

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green energy   The quest for green energy technology and environmentally benign energy sources has intensified globally in the recent time. Most of the world countries are now prospecting on alternative energy sources that can substitute the conventional fossil fuel energy.  The use of fossil fuel in the production of energy as resulted in both environmental and economic effects in the world. The rise in the global pollution trend and the increased incidences of global warming as a result of fossil fuel combustion, not withstanding the high cost of this fuel source since it is found in the boundaries of few countries are just but a few effects. Wind energy is arguably one of the alternative energy sources that can help meet the energy demands of most population of the world and also aid in the mitigation of climate change effects. This research paper therefore seeks to explore the history, cost, merits and demerits, and the future of wind power.


Another view on Unemployment

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Unemployment is termed as joblessness and is the situation created when people vigorously try to find jobs but have no luck for a period of more than four weeks (Fogiel and Rycroft 334). Fogiel and Rycroft also go on to say that unemployment could either be frictional, structural or cyclical (334). Frictional unemployment occurs when a person decides to switch jobs. Structural unemployment occurs when a company decides to replace their manpower with technological innovations, rendering people jobless. Cyclical unemployment on, the other hand, is the unemployment caused by the fall in the economy’s output and growth. (334). When one understands unemployment fully, it becomes clear that unemployment is not only a problem by itself, but it also the maladies that unemployment prompts. One cannot go about solving problems which they do not understand. Getting a heed of the problem is thus the first step to problem solving. This is a logical step that makes use of the critical statement ‘think before you act’.

Another view on Unemployment

Every problem, though, has a solution. There are a number of ways to go about solving the problem of unemployment this way, eradicating those that come as a result of unemployment. Unemployment has been and still is a highly crucial part of the society and, is thus best to find ways of solving it. It is well known that anything that is not part of the solution is then a component of the problem. The solution to unemployment is eradicating all possible impediments and barriers to employment.

High Cost of Workers’ Maintenance

The most widespread basis of unemployment is the high cost of employees’ maintenance is on the rise and most employers tend to find this as a challenge. The solution to this would be for employees to enhance their knowledge and skills by taking up training to keep themselves up to date with the latest skill set. By keeping themselves up to date with their training, they are able to acquire skills relevant and necessary in the changing marketplace. This way, people have the best job qualifications for jobs on hand.

Intrusion by External Bodies

The intrusion by bodies outside the labor market is also a leading cause of unemployment in this day and age. The minimum wage laws, workers unions and taxes, are imposing on the labor market in a bid to better the workers working conditions, end up achieving the opposite. Most employees involved with these groups, demand for wages that are unachievable from their employees. Eventually, they end up pricing themselves out of their occupations. It is hard to determine just how far the workers’ wages should be increased or reduced to eradicate the problem of unemployment.

The Corporate Income Tax

The government could also have a hand in eliminating this vice of unemployment by reducing or entirely eliminating the Corporate Income Tax. Money lending institutions like banks find it necessary to retain most of their capital; this is so as to be able to counteract the loss that may come with the act of giving loans. Once the companies are freed from having to paying the corporate tax, they get to retain more money and are thus able to take their chances in hiring more manpower. The government as a countermeasure should monitor businesses to make sure they do not just sit on the cash reserves created from the elimination of the corporate tax.

The Contribution to Social Security and Social Security and Medicare

In recent years, the employer and employee contribute to the social security and Medicare. This is not a good thing for the employment state. The situation would be different if the two were eliminated, as the employee salary would rise adequately to cover the Medicare and also to atone for the loss of the benefit. This will eventually lead to companies being more efficient in producing quality services and subsequently extensive profits. The profits gained by the company would then directly have an effect on the cost of hiring more manpower as it would be reduced considerably.

Deduction of Time Saving Services

In some instances, people prefer remaining unemployed to being employed. This is because the cost of unemployment compared to being employed is somewhat lower especially to people with working spouses or is receiving the unemployment benefits. The service one has to hire in case of a job are, on the other hand, not required if they stay off work and instead put their own labor into these services. If one is unemployed, he or she becomes responsible for working on the gardens, doing the laundry, taking care of the kids and, cleaning the house . This is as opposed to taking the children to a daycare, taking the clothes to a dry cleaner and hiring a gardener. This will render the people offering these services out of work. The solution would be to reduce these services that limit people to taking up jobs. This way, people are able to go to work and profit the companies with their output. This action will also directly impact the level of unemployment by actively reducing it.

From the entire problem solving options mentioned, the level of unemployment is expected to reduce and eventually become a thing of the past.

Works Cited

Fogiel, Max& Rycroft, Robert S. The Economics Problem solver. New Jersey: Research & Education Association, 1980. Print. (Book)