Essay on Existence of Anglo-American Model of Public Debt Management

There are various questions regarding the existence of Anglo-American model of public debt and corporate governance and capitalism. There are researchers that posit that such a model exists in the modern society and those that disagree with the same idea (Lockwood, 2015, p78). One of the reasons why other researchers disagree with the thought is because of the differences in the corporate governance between the United States and the United Kingdom that make it challenging for the two countries to have a similar model for public debt. The first difference between the U.S. and the U.K. is that the U.K. is composed of a system that is based more on the principles and voluntary codes where the citizens operate more on a comply or explain basis. On the other hand, the U.S. system is based more on rules and litigious (Sassen, 2015, p154). The other difference between the two countries is that U.K. focuses on ex-ante protection of outside shareholders the more and this differs with the American system which focuses on ex post protection of share traders.

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In the United Kingdom, it is expected that investors need to play a critical role in the corporate governance of the country as compared to the United States, despite their great involvement in the affairs of the country, they do not have much recognition when it comes to the voting process which makes their importance to be downplayed in the country (Streeck, 2014, p143). In the year, 2000, there was an expulsion of private equity which led to the leveraging of buy-out activity, the same led to various challenges in the economy and required the government to introduce solutions towards the same where there was the decrease in the efficiency. In this relation, it is expected that the working of the system could result to a new system in the economy and become harbinger of a new capitalism. There is also another suggestion that the changes in the systems could have led to tax advantages that the current economies enjoy by debt over equity where the same could have other effects such as special deterred capital gains tax treatment that the private equity enjoy. Others include that low real interest rates and the rising prices of equity (Lewis, 2015, p50). In this manner, the economic and social demographics of both the U.S. and the U.K. make it challenging to develop the system in the economy and take part in the development of Anglo-American model of public debt. In this regard, there is no existence of the model in the modern society.

Characteristics of the Model

There are various characteristics of the Anglo-American model of public debt management and examining the same helps in understanding the working mechanism of the model and its benefits in the modern society. There is a need for the population to acknowledge the importance of such characteristics and how they promote businesses in the modern society (Baker, Bloom, and Davis, 2015, p208). One characteristic of the model is that it has legal and regulatory framework which helps in outlining the rights and responsibilities of the two countries in the management of debt in their economies. There is a need for the population to acknowledge the importance of such characteristics in promoting business and ensuring that there is specialization d division of labor in the daily operations of the debt management. Additionally, the legal and regulatory framework helps in outlining the de facto realities of the corporate environment in both the United States and the United Kingdom. The same helps in outlining the mode at which each of the countries associate with one another (Norris, 2016, p261).

Another characteristic of the model is that there are key players in the corporate environment, and that control the working of the working of the economies. It is the key players that engage in the controlling of the debt of the country and highlight challenges that economies face in the process of managing debt in the economies. There is a need for the population to acknowledge the benefits of the key players in the model and acknowledge their role in controlling debts of both the U.S. and the U.K (de la Porte, and Heins, 2016, p15). Moreover, there is the challenge in that every country has its own share of ownership pattern which then enables every country to run their own and help in the improvement of the society. There is a need for the population to identify the role of the share ownership pattern in the modern society and engage in helping the population. Additionally, the other characteristic is the composition of board of directors; it is the directors that guide the application of the model and determine how the same is being used in the population (David, 2014, p312). The board has the power to make the right decision in controlling debt. Finally, there is a regulatory framework that help in the which aids in modulating debts of both countries and set guidelines for the improvement of the society.

Sustainability of the Model

With the current levels of globalization, every country is making own decisions that can enable them to have competitive advantages over other countries in the market. In this manner, there is bound to be a model that is all inclusive and which does not focus on the interests of two countries only (Lockwood, 2015, p67). There is also a need to acknowledge that the differences in the economic structures of the two countries negate the ability of the model to be all inclusive and beneficial to the population. Such requires that countries need to come up with harmonized systems and models that can be used to control debts in respective countries and improve the working of the economies. However, the current Anglo-American model of debt management is not suitable to the working of the modern society, and this establishes the need to formulate a better and more effective model (Wang, 2015, p222).

Threats of the Model

Despite the aims of the model in the management of debt, there is a need to address threats associated with the same and one of the threats is that the model can lead to the increase in vulnerability of the financial position of the government through the increase in risk (Streeck, 2014, p147). Although the model helps by reducing costs and lowering of deficit in the short run, the model creates the loophole through which debt managers can expose their portfolio to various kinds of risks and catastrophic loses. Even in the situations when there are low probabilities, there is a low risk of capturing marginal cost savings in the economy. The second threat of the model is that it distorts private vs. government decisions, and also understate the true interest cost. Related effect of the same is that they lead to the collateralization of debt by the shares of the state-owned enterprises. Debt is also collateralized by specified sources of future tax revenue (Sassen, 2015, p149). Finally, the model leads to higher chances of tax exemption or tax reduction.

The third threat of the model is that it leads to misreporting of the contingent or guaranteed debt liabilities, and the same can lead to the understatement of actual levels of liabilities of the government. Associated negative effects from the same include the inferior coordination of the regarding borrowing, and the higher chances of debt forgiveness for the lower levels of governments and state-owned enterprises. The final threat is that the model can lead to improper oversight and the making of records that are debt contracting and payment and of debt holders. In this manner, the model leads to the reduction of the control that the government has in the control of the tax base and the supply of outstanding tax (Lewis, 2015, p50). This makes the government to have the challenge of putting controlling the debt in the economy which may lead to the use of poor strategies of controlling debt.

The importance of the clock in showing debts that countries have is of great importance in that it shows the debts that countries have with regards to the current date and time in whatever year is being viewed (de la Porte, and Heins, 2016, p15). It is in this manner that the debt increases when the clock is viewed in past or future years. The data used in the debt clock is mapped on the modern borders among them in Montenegro which is split from Serbia in the year 2006, Kosovo in the year 2008 and South Sudan Split from Sudan in the year 2011. In this case, the data from such new countries are included in their parent nations before such dates (David, 2014, p312). The examination of debts that countries have should be put of great importance as it is evident that they help in the examination of economic performance in various ways helps in the determination of how economic activities and debts affects the living conditions of the population.

Results are available for the countries that have the highest amount of debt in their economies. The revelation is from The World Economic Forum where there is a release of Global Competitiveness Survey. The survey takes a look at the financial and health risks of various countries around the world (Wang, 2015, p222). In this manner, it helps in checking the amount of wealth that countries have in their economies. The ranking which of the greatest importance and interests is the level of government debt, and it helps in the examination of the factors that affect the economic performance of the countries under examination. When looking at the gross government debt regarding the percentage of the gross domestic product, it is apparent that the same an indication of ways that countries can use to pay back their debts without having to increase the debts they have (Lockwood, 2015, p67). In this regard, there is a need for countries to decrease their debt-to-GDP ratio for the betterment of their economic performance.

Bibliography

Baker, S.R., Bloom, N. and Davis, S.J., 2015. Measuring economic policy uncertainty (No. w21633). National Bureau of Economic Research.

David, H., 2014. Skills, education, and the rise of earnings inequality among the" other 99 percent".

de la Porte, C. and Heins, E., 2016. A new era of European integration? Governance of labour market and social policy since the sovereign debt crisis. In The sovereign debt crisis, the EU and welfare state reform (pp. 15-41). Palgrave Macmillan UK.

Lewis, W.A., 2015. The evolution of the international economic order. Princeton University Press.

Lockwood, W.W., 2015. Economic development of Japan. Princeton University Press.

Norris, M., 2016. Conclusions. In Property, Family and the Irish Welfare State (pp. 261-272). Springer International Publishing.

Sassen, S., 2015. Losing control?: Sovereignty in the age of globalization. Columbia University Press.

Streeck, W., 2014. The politics of public debt: Neoliberalism, capitalist development and the restructuring of the state. German Economic Review, 15(1), pp.143-165.

Wang, X.S., 2015. The Chinese economy in crisis: state capacity and tax reform. Routledge.