If you are studying politics, or history or sociology, and are wondering whether the subject content of your degree has any bearing on a career in business, our answer is 'yes'.
Business and economics are as much about power and leadership as any military war or purely political event. However, my wider point is that the economic world still sits within the context of the political framework, and so a knowledge of and interest in politics is a fundamental pre-requisite to understand economics and financial markets.
Here's why: -
10 Ways that Politics Drive Economics
1. The Government sets the overall mood and tone of the nation.
Aside from any measures of policy, the perceived competence, the direction and the tone of Government sets the mood of the entire nation. Margaret Thatcher may never have been universally popular during her 11 year term as Prime Minister, but she was generally acknowledged as competent and so business had confidence in her. So too when Tony Blair was elected in 1997, a feel good factor ensued under a banner of "Cool Britannia" set to the soundtrack of Britpop and ensured the strong economic legacy that the Conservatives left would endure.
2. The Government is the economic leader of the nation.
Politicians throughout the world have recently had to intervene in the free flow of the capitalist markets to bail out failing banks with injections of capital, guarantee savers' deposits, encourage their Central Banks to lower interest rates and inject liquidity into the money markets. When the markets fail, the Government has to act, or society suffers.
3. Business needs stable laws and the state protection of private property rights to flourish.
The Legislature, with the Judiciary, are the chief defenders of private property rights, seen by Alan Greenspan, the former chairman of the Federal Reserve in the US as the single most important determinant for the success of free market economics and prosperity. Equally if Government processes are corrupt, no person or business will have the confidence to invest their time or capital, and the so the growth of the economy will always be stunted. Moreover, the Government sets social policy, which is equally required by business to provide a stable societal back-drop to its commercial activities.
4. The Government is the guardian of our international security.
Without this, all economic activity is threatened and so national security is seen as the first responsibility of government. The period of greatest economic prosperity in the whole of human history has been since the end of the Cold War and the fall of the Berlin Wall in 1990. Without the threat of political and military fighting, the Eastern Bloc, as well as the huge markets of India and China have been free to trade with the West. The effect of this has been a huge expansion of economic activity coupled with an equally crucial brake on global wage inflation, thanks to the east's supply of cheap labour, keeping manufacturing costs low.
5. The Government is a huge customer and employer.
The politics of health, education, welfare, and defence have huge economic consequences. The largest employer in the UK is the National Health Service with just under a million employees. Money spent on these monoliths of the public sector amount to a significant percentage of the national gross domestic product, while investment in infrastructure projects like the M6 toll road, Crossrail and the Olympics fuel economic demand.
6. The Government sets fiscal policy.
It makes the all important decisions about the levels of public expenditure, taxation and borrowing, all of which have massive economic consequences for current and future generations. According to Milton Friedman, the leading monetarist thinker, wasteful public expenditure squeezes more efficient private expenditure, and so Governments should keep taxation to a minimum, leaving private citizens to spend their own money and create economic demand. However, the current troubled times are calling for a return to Keynesian tax-and-spend policies and already Alastair Darling has announced he will bring forward expenditure on capital projects budgeted for the future.
7. The Government sets an inflation target which determines monetary policy.
Even if it is the responsibility of the independent Central Bank, not the Treasury, to set interest rates, it is to hit the target for inflation that the MPC decides on the correct level of interest rates. Moreover, the Government, via the Treasury appoints the members of the Monetary Policy Committee which sets the level of rates. Interest rates are crucial because they determine the 'price' of economic risk taking because of their impact on the cost of financing and the time value of money, felt through the valuations of all assets. Interest rates are also a significant determinant of exchange rates which affect the prices of our imports and exports and our balance of trade.
8. The Government sets and oversees the regulatory framework.
We have seen recently how lax regulation can cause free markets to overheat out of control. Achieving the right level of regulation - loose enough to allow free markets to prosper but tight enough to prevent abuses and excessive risk taking - are crucial in keeping the economy on an even keel. Greenspan has come out this week to say he held mis-placed faith in the self-regulation of lenders to protect shareholders' equity, while Gordon Brown should accept responsibility for creating the tri-partite structure of the Treasury, the Bank of England and the FSA which utterly failed to prevent the catastrophe in the UK.
9. The Government sets our foreign trade policy and membership of international trade agreements.
It is often the government that takes the lead when it comes to negotiating bid trade agreements with foreign countries. This is especially true when it comes to agreeing lucrative defence and aerospace deals.
10. The Government, plus the European Parliament pass laws that govern business.
Over the last 20 years a ludicrous amount of red tape and administrative constraint has been imposed on business. Mandatory paternity leave, absurd health and safety laws and interference from local authorities and quangos has restricted the freedom of business. These measures hit small businesses hardest because they lack the internal resources to respond.
Q2: What will be the effect of the outcome of the US election on your job prospects and your career?
Although America is still the most important country on earth, does it matter who becomes its President to the rest of us in other countries? If you are a graduate looking for a job in 2009 will the outcome of the US election have any bearing on you?
If Barack Obama wins the election and becomes the 44th President of the United States will he have any effect on your life?
Here is a chain of 10 POSSIBLE events that link an Obama election win to better prospects for graduate recruitment.
Tenuous? It could happen...
1. Barack Obama is elected as 44th President of the United States.
Meanwhile, the Democrats enjoy majorities in the both the lower and upper chambers of Congress - the Senate and the House of Representatives. Obama and his party have the mandate to make sweeping changes to all aspects of US government policy at home and abroad and set about a bold programme of legislation and reform
2. The mood of the world improves.
Can words make a difference? You bet they can. The good looks and smooth words of Obama, and not least his multi-racial origin, represents a zeitgeist of change and the opportunity to reset the clock on a host of the outgoing Republican / Bush administration disasters - from Iraq, relations with Iran, the swelling of the US fiscal and trade deficits, non-existent engagement with policies to stem climate change etc. Obama can make a fresh start in all these areas
3. Security fears abate.
Racial wounds are healed across America. Obama's mollifying language gives renewed impetus to the Middle East Process. Meanwhile in Iran hardline President Ahmadinejad is forced to retire due to ill-health and is and is replaced by more progressive elements less hostile to rapprochement with the West. Talks ensue between the US and Iran and a new peace accord in signed. Iran agrees to the bound by the terms of Nuclear Non-Proliferation Treaty and will not manufacturer its own fissile material or produce a nuclear bomb. Iran recognises Israel's right to exist and signs a peace accord. Civilian life continues to improve in Iraq so troops are transferred to Afghanistan where the Taliban is finally defeated in granting a safe haven to Al Qaida. Finally, Obama pours massive aid into Pakistan, stabilising it in the nick of time
4. Israel creates an independent Palestine.
The Middle East Peace Process concludes with the creation of an independent state of Palestine, removing the cause of Anti-Israeli hatred in the region. Terrorism recedes as a consequence
5. The US addresses its fiscal deficit.
Obama announces measures to reduce the US budget deficit with a return to sound money principles. A large package of tax cuts is unveiled at the same time as cuts in government expenditure put the budget back on a firmer footing.
6. Inflation falls / China devalues its currency.
The oil price returns to a stable level of $75 / barrel. Food prices also fall also. China bows to international pressure to reduce the value of the Renminbi which means its exports and the imports of the West are cheaper. As a result, inflation falls to an all-time low. This creates the conditions for cuts in global interest rates and in the US, Fed Chairman Ben Bernanke cuts the Fed Funds rate to just 1%
7. The Bank of England cuts its base rate to 2.5%.
LIBOR, being the rate at which the banks lend to each other, follows suit. Rates for two year and five swaps follow them down too. Lending between banks and between banks and private citizens returns to normal. Consumer demand and business activity pick up. The value of shares and houses begin to rise again. Because of low interest rates, the value of Sterling falls against the dollar and the euro, making our exports competitive and reducing demand for imports. This gives a boost to our balance of trade and to our manufacturing industry
8. The Conservatives replace Labour as the government.
Gordon Brown calls a snap election in the spring on 2009 in an attempt to capitalise on his work rescuing the British banking system. However, the electorate is not fooled and recognises it was Brown that got us into this mess in the first place. The Conservatives are returned with a majority of over 100, led by David Cameron. Cameron enjoys a similar reception to Obama. He immediately signals his intention to reverse years of Labour profligacy by announcing a twin programme of dramatic cuts in public expenditure and taxation. This return to sound monetarist principles restores confidence in public finances and allows individuals to make spending decisions, rather than civil servants.
Cameron also announces a complete scale back of all the red tape that has choked business for the last 10 years. Cameron announces that the UK will not be bound by some of the crazy red tape emanating from Brussels
9. Business confidence returns to the UK.
Houses are affordable to first-time buyers again thanks to falls of over 35% during the past two years and the lowest ever mortgage rates. A feel good factor returns to UK business and to the multi-nationals based in the UK. As Cameron cuts rates of corporation tax and reduces business red tape, more international businesses than ever before choose to base themselves in the UK, boosting employment.
10. Pick-up in graduate recruitment.
City employers such as investment banks and management consultancies see increased demand from businesses for their services