Developed countries value both consumers and producers equally in terms of their importance and welfare.

Philosophers have been debating whether to let the economy engage in self-correction procedures, via so-called invisible hands, or craft and implement policies that aim at eradicating periodic malfunctions that plague economic cycles.
As reported by Arabnews.com, since the Great Depression and its aftermath, that debate had been settled toward the adaptation of economic policies in the case of market failures, and it became a modus operandi for boosting efficiency and reducing waste. Scholars, in their published books and research papers, illustrated which policy to be used and to what extent. The classic textbook example is interest rate effects on employment and inflation, policymakers manipulate the return rate to influence aggregate demands, and consequently to acquire targeted employment and price levels.
The real question, however, is: Why do some countries adopt suboptimal, and in most cases failed, policies? Such policies exacerbate the situation and make the problem even harder to cure in the future.
For instance, unemployment percentage will be small at the outset so unless corrective measures are taken the number of jobless will skyrocket and the problem will spin beyond control. The worst case scenario, however, is when no policy at all is being implemented which allows the problem to gain momentum and wreak havoc the economy. When late panacea arrives, either it is going to be too late or the “bitter medicine is a lot worse than the problem itself.“
That may explain the persistence of simple economic challenges in less developed countries (LDCs) because untreated problems tend to gain immunity and resist any future policy prescription. One of the reasons for failed or no policies is the fact that policymakers lack the knowledge of the true economic indicators. In most cases, they relay on foreign “experts“ who possess inchoate understanding of quite intricate circumstances of the national economy.
At the same time, highly-educated indigenous people are alienated because they, in spite of their deep knowledge, do not meet the “expectations“ of the policymakers. This turns the national economy into an experimental field for foreigners with mediocre education, and in some cases no qualification at all.
Second, policymakers may have vested interest in the outcome of the implemented procedure because they succumb to immense pressures from affluent and prominent members of the society, who are very protective of their interest at the expense of the rest. In rare cases, however, general public begs the government to abandon policies in spite of its success because people tend to be myopic and trade quite a substantial long-term gain for a short-run smaller one.
That may explain the slow reform process in most developing countries in spite of its importance because risk-averse policymakers don’t want to take any chance that may endanger their posts.
Third, LDCs usually have nascent political and economic structures which result in fledgling, or absence of autonomous, institutions. Fully-functioning and independent institutions is sine qua non for success because they ensure implementation of the right economic policies.
The absence of a specialized commission will be quite costly because other unspecialized government administrations will fill in the role and will compromise efficiency and effectiveness.
In the United States, after the collapse of the financial market in the 1920s, the US Congress held several hearing sessions in order to figure out what went wrong.
As a result, Security and Exchange Act (SEA) has been promulgated and the Security and Exchange Commission (SEC) has been formed in 1934 with the sole purpose of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation.
The statute and its subsequent amendments along with the autonomous agency have been able to bring back confidence to the stock market. While in the case of Saudi Arabia, the stock market collapsed (that is, meltdown) and investors lost their life-long savings and the country is yet to figure out what went awry. A typical case of policy failure.
Developed countries value both consumers and producers equally in terms of their importance and welfare. In order to grant equal opportunity and fairness, the US for instance established the Free Trade Commission (FTC) to fight price-fixing, collusion, as well as dumping practices by different retailers.
The Saudi market is still rife with monopolistic practices by retailers who engage in predatory-pricing schemes to foreclose the market, and consumers are complaining of higher prices and the inferior quality of commodities available in the local market. Their complaint is yet to be heard.

Earlier this year, Swiss ingredient maker DSM Nutritional Products launched a “premium“ Vitamin C. The marketing gambit: It comes from tidy Scotland instead of sprawling China, which provides 80 percent of the world’s supply. But it was a tough sell.
“We were struggling to get the price we thought was justified by the quality,“ communications chief Alex Filz told Businessweek.com.
No more. Not after contaminated products from China ended up on supermarket shelves. Suddenly, “Not Made in China“ has become a major selling point. DSM’s Quali-C brand is flying out of its Scottish factory at more than double the price for bulk Vitamin C. “It’s a tremendous business opportunity for us,“ says Filz.
In the midst of the imported food crisis, companies are finding clever ways to cash in. Some, like DSM, are playing the “not from China“ card. Upscale New York grocery Fairway reassures consumers that none of its seafood is Chinese. Others see a growing business in making this global supply chain safer.
One big player: IBM, which is pushing systems to trace the food supply from source to market. “Whenever there’s a crisis, there will always be a silver lining for someone who can help alleviate whatever pain is out there,“ says crisis consultant Gene Grabowski, senior vice-president of Levick Strategic Communications.
With today’s global food supply, however, eliminating every particle from China is impossible for most major food companies. Even a simple product like a cereal bar contains ingredients from India, the Philippines--and China, which now supplies the bulk of the world’s vitamins, apple juice, and other goods.
Instead, the latest woes have many food giants scrambling to ratchet up efforts to ensure the safety of imported ingredients. That’s providing a big boost to a host of companies aiming to help with the task. While Kellogg’s has long had systems in place to monitor its global food chain, for example, it has arranged additional third-party audits of its suppliers. Many companies are also broadening the list of things they’re analyzing.
This increased scrutiny is good news to Gene Rider, North American consumer goods vice-president of Intertek Group PLC. Operating in 110 countries, with headquarters in London, the company offers a complete quality system for clients ranging from Kraft (KFT) Food Inc. and Unilever to Nike (NKE) and Microsoft Corp. (MSFT) Intertek will evaluate and train suppliers, test products, and provide other services. Since the latest bans and recalls, inquiries have more than doubled, says Rider.
IBM also sees a big opportunity in this market. One of the key steps to putting safe food on the dinner table is tracing the entire path of ingredients and products from fields and factories to grocery store shelves. Such a system sounds like a no-brainer, but in practice it’s difficult, requiring sophisticated markers and software.
Not only does such a system help boost safety and quality, it enables a company to offer up premium products. It’s possible to document, for instance, that beef was grown without hormones, or that yogurt contains the advertised bacteria--and thus be able to charge a higher price. Already, retailers overseas have found big profits by giving consumers just that kind of information.
For now, big US chains are just beginning to move in that direction, with certified organic foods and produce labeled with the country of origin. But a high level of interest is fueling the business.
In recent years, food producers have been under relentless pressure to buy ingredients at the lowest price. That, inevitably, led them to China. Now, says DSM’s Filz, they increasingly are “moving away from decisions made just on price to something like a stamp or seal.“
No surprise then that DSM is creating such a seal, which would guarantee the quality, reliability, and traceability of its products. That’s good for safety--and for DSM’s business.

On July 19, the World Bank Board of Executive Directors endorsed the Progress Report on the World Bank Group’s Country Partnership Strategy for the Republic of Tajikistan covering the period 2006-2009.
The Board also approved a $10 million Second Programmatic Development Policy Grant, which will help improve the environment for private sector development as well as the overall functioning of the public sector in the country.
The Country Partnership Strategy (CPS) maps out the collaboration between the World Bank Group and the Republic of Tajikistan over a four year period. The progress report comes at roughly midterm of the implementation period and presents results achieved in all three CPS areas--improving business opportunities in rural and urban areas; enhancing and preserving the quality of human capital; and exploiting the country’s hydropower potential.
The Second Programmatic Development Policy Grant (PDPG2) continues to support the Government’s reform program as outlined in its Poverty Reduction Strategy (PRSP). More specifically, the grant will help the authorities improve the environment for private sector development in the cotton, energy and aviation sectors, and provide service delivery improvements in the health and education sectors.
PDPG2 is the second in a series of three grants through which the World Bank is assisting the Government with improving governance, transparency and good economic management in the public and private sectors. A third PDPG grant is currently under preparation, and all three grants are closely aligned with investments and technical assistance programs of the World Bank and other development partners in related areas.
The grants are provided by the World Bank Group’s International Development Association (IDA), and are an important addition to Tajikistan’s efforts to sustain strong growth, improve governance, and reduce poverty.
The proposed reforms in health and education are expected to result in improved access and quality of services to the poor in the short term, while reforms in public administration should yield benefits through improved public sector management in the medium term.
Meanwhile, sustaining long term economic growth in Tajikistan will require accelerating export growth and diversification of the domestic economy by stimulating investment, improving productivity and strengthening competitiveness.
Tajikistan is a small economy in Central Asia with 6.7 million inhabitants and a per capita income of $360. Over the past two years, the country has made progress in achieving macroeconomic stability, implementing important policy reforms, and combating poverty.
The economy, which has been growing nine percent on average in 2001Ð2005, depends heavily on cotton and aluminum exports, the major part of which is destined for countries from the Commonwealth of Independent States and Europe.
Remittances are another significant contributor of economic growth, conservatively estimated at 35 percent of GDP in 2006. While poverty has been declining steadily over the past few years, it remains a serious concern.

If Rupert Murdoch changed his mind and bought Dow Jones & Co. in a stock swap, the purchase would hardly dent News Corp’s treasury.
As reported by Bloomberg.com, the $5 billion that Murdoch has offered for the publisher of the Wall Street Journal is equivalent to 204 million of his company’s Class A shares, which include voting rights, or 220 million non-voting Class B shares.
News Corp has more than enough of its own shares to cover the cost, assuming he abandons a proposal to pay all or part of the purchase price in cash. The New York-based media company held 313.7 million Class A shares and 1.78 billion Class B shares as of March 31, according to a regulatory filing.
Murdoch, who controls News Corp, isn’t the only chief executive officer with that kind of flexibility. Fifty-seven percent of companies in the Standard & Poor’s 500 Index cut the number of shares outstanding last year by buying back stock for their treasuries, according to an S&P study released this week.
Treasury shares are the largest and most overlooked asset for S&P 500 companies along with cash, said Howard Silverblatt, a New York-based senior index analyst at S&P who conducted the study. “What companies choose to do with this enormous asset is perhaps the most important decision facing them,“ he said in a statement.
The index’s members paid $1 trillion for stock in their treasuries and had $589 billion in gains on these holdings as of the end of 2006, the study found. Exxon Mobil Corp, the world’s largest oil company, accounted for one-fifth of the increase.
The profits have piled up because companies tend to keep shares they buy back, rather than canceling them. The stock is omitted from calculations of earnings per share either way, so repurchases can make companies appear more profitable. Twenty percent of companies in the S&P 500 increased last year’s per-share profit at least 4 percentage points this way, S&P said.
At least two companies in the index--International Game Technology, the world’s biggest producer of slot machines, and Sunoco Inc., the largest oil refiner in the US Northeast--have more than half of their stock in the treasury.