Describe how the socialist school of thought would respond to the following scen
ID: 1127005 • Letter: D
Question
Describe how the socialist school of thought would respond to the following scenario:
The economy has experienced a sudden collapse of asset prices, with the stock, real estate, and commodity market experiencing declines of over 50 percent relative to last year. Data show a loss of nearly 1 million jobs since last month, which brings to year-to-date loss of jobs to nearly 5 million. And, bank lending has slowed sharply, and initial data on investment suggests a sharp decline in new projects. The central bank reports that that bank balance sheets have deteriorated significantly, and it is contemplating emergency monetary actions. The country's Prime Minister claims to be "on top of the situation," but polls suggest her popularity is falling fast as confidence in the government's economic leadership diminishes. This appears to be the start of a serious recession, with the rate of decline in production rivaling the rapid declines in 2008 and 2009.
Describe clearly, or use diagrams, or other specified models to describe how they would handle the situation.
Explanation / Answer
A socialist state means a welfare state, in the above described situation first of all the government will undertake the authority of the heavy, core industries and MSME, banks will be nationalised and other financial institutions, monetary control etc will be taken total control by the government, the government will establish various communes or labour unions based on the type of industries and therby a polity and governance is established. The salaries will be fixed by the govt. and the minimum purchase pricing of the products will also be decided, those industries which are facing huge losses, will be supported by the government also the government banks that are weakend due to there NPA's and stressed assets will be recapitalised. The government will try to apply a progressive bench of taxation and thereby try to fulfill its expenditure, there is no separate powers given to the central bank, the central bank will be working in syncronization wit the centre. With governments recapitalisation of banks confidence amoung the public will be boosted, more money will be pumped in the market through expansionary monitory policies to fight the recession. Also government authority over the industries will lead to boost in the production sector therby resulting in rise of the GDP of the country. With the economic stability the popularity of the leaders and the PM will rise exponentially.