Influences on Governments: The Beginning of Corruption

Influences on Governments: The Beginning of Corruption

DOI: 10.4018/978-1-5225-7558-0.ch003

Abstract

Even knowing that country leaders have a tremendous responsibility, financial laws undeniably dictate the action that governments take. This chapter brings up some of the global laws that can directly affect the way a government rules. The margin of action the governments have is also subject to debate in this chapter. Furthermore, corruption is another factor that would make a government easily influenced by private interests. These influences, and the possible reaction from the governments to these factors, are studied in this chapter.
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Big Picture

In order to try to determine what a government can or cannot do, it might be helpful to try to draw the rules that dictate citizen lifestyles today beyond politics.

Below there is an explanation in general terms of how the monetary system operates. Many details have been skipped, as the intention is not to show deep concepts of the financial markets. The explanation is based on articles and books of different economists such as Raggat, Pavon, and Danaher.

  • 1.

    There are natural resources, or prime materials that the planet produces. These can be represented by a variable R. R includes oil, gas, food, water, wood, and corn. In general, the Earth can regenerate these resources, and R can increase or decrease depending on its consuming rate among other factors. R, according to this model, is defined as the total amount of total amount of resources.

  • 2.

    Every resource has a monetary value supplied by the markets that is based on the demand/supply equation as [1] explains. Thus, it is possible to define M as the total monetary value of natural resources in the planet. i.e. =m

  • 3.

    Therefore, it is possible to establish a bidirectional link between resources and monetary value. Let us define a bijective application f between and M. f assigns a monetary value to a natural resource, such that f()= and therefore f(R)=m.

When one of the natural resources, let us say for example rice, decreases because the demands is higher than supply, its monetary value increases (Pavon, 2011). The factors that can make a natural resource decrease can mainly be overuse and natural disasters. These factors can make the resource regeneration growth not enough so the supply can considerably be reduced.

  • 1.

    Financial institutions such as Federal reserve or the European central bank can generate lines of credit (Monetary value).

  • 2.

    Based on the market laws, the money suppliers can create credit lines. In other words, they can generate a finite amount of money in a specific period of time t. This amount plus the one in circulation makes a total amount of money available at t. Let us define this amount as M(t). M(t) is the total amount of money in circulation in a particular time t. From now on, let us address M(t) to M, meaning that M always refers to the amount of money available in a specific period of time t (Raggat, 2007; Danaher, 2001).

  • 3.

    The first equation to take into account is the relation between the total amount of natural resources R and the total amount of money that is being distributed M (Pavon, 2011). The money flow existing in the world has a direct dependency on the amount of natural resources. As R increases or decreases, that can influence the supply and demand laws which influences the money flow and generation (Raggat, 2007; Zhu, 2012).

  • 4.

    As a limited asset, the evolution of changes in M is controlled by the money suppliers such as the IMF, Fed, and ECB.

  • 5.

    With the limitation, how is M distributed? One possible classification is done in terms of countries. The GDP works as an indicator of the money that a country controls, which can be seen as a piece of M (Raggat, 2007; Danaher, 2001).

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