A STUDY ON EMPLOYEE MOTIVATION

CHAPTER: 1

INTRODUCTION

Introduction towards Project Report on Motivation

The efficiency of a person depends on two factors, firstly, the level of ability to do
a certain work, secondly, the willingness to do the work. So for as the first factor is
concerned it can be acquired by education and training, but the second factor can
be created by motivation. A person may have several needs and desires. It is only
strongly felt needs which becomes motives. Thus motives are a product of needs
and desires motives are many and keep on changing with time motives are
invisible and directed towards certain goals.

Motivation means that process which creates on inspiration in a person to

motivation is derived from the word motive which means the latest power in a
person which impels him to do a work.

Motivation is the process of steering a persons inner drives and actions towards
certain goals and committing his energies to achieve these goals. It involve a chain
reaction starting with felt needs, resulting in motives which give rise to tension
which census action towards goals. It is the process of stimulating people to strive
willingly towards the achievement of organizational goals motivation may be
defined as the work a manager performs an order to Induce Subordinates to act
on the desired manner by satisfying their needs and desires. Thus motivations is
concerned with how behaviour gets started, is energized, sustained and directed.

WHAT IS MOTIVATION?
The word motivation has been derived from motive which means any
idea, need or emotion that prompts a man in to action. Whatever may be the
behavior of man, there is some stimulus behind it .Stimulus is dependent upon

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the motive of the person concerned. Motive can be known by studying his needs
and desires.

There is no universal theory that can explain the factors influencing motives which
control mans behavior at any particular point of time. In general, the different
motives operate at different times among different people and influence their
behaviors. The process of motivation studies the motives of individuals which
cause different type of behavior.

Motivation is the core of management.Motivation is an effective instrument in the

hands of the management in inspiring the work force .It is the major task of every
manager to motivate his subordinate or to create the will to work among the
subordinates .It should also be remembered that the worker may be immensely
capable of doing some work, nothing can be achieved if he is not willing to work
.creation of a will to work is motivation in simple but true sense of term.

Motivation is an important function which very manager performs for actuating

the people to work for accomplishment of objectives of the organization .Issuance
of well conceived instructions and orders does not mean that they will be
followed .A manager has to make appropriate use of motivation to enthuse the
employees to follow them. Effective motivation succeeds not only in having an
order accepted but also in gaining a determination to see that it is executed
efficiently and effectively.

In order to motivate workers to work for the organizational goals, the managers
must determine the motives or needs of the workers and provide an environment
in which appropriate incentives are available for their satisfaction .If the
management is successful in doing so; it will also be successful in increasing the
willingness of the workers to work. This will increase efficiency and effectiveness
of the organization .There will be better utilization of resources and workers
abilities and capacities.

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Definition of Motivation.

According to Edwin B Flippo, Motivation is the process of attempting to influence

others to do their work through the possibility of gain or reward.

According to Michael J. Jacius ; Motivation is the act of stimulating some one or

oneself to get a desired course of action or to push the right button to get a
desired reaction.

According to Dalton E. Mcfarland, "The concept of motivation is mainly

psychological. It related to those forces are many and keep on changing with time
motives are invisible and directed towards certain goals.

Importance of motivation
Motivation is one of the most important factors determining organizational
efficiency. All organizational facilities will go to waste in absence of motivated
people to utilize these facilities effectively. Every superior in the organization must
motivate its subordinates for the right types of behavior. The performance of
human beings in the organization is dependent on the ability in the motivation.
Rensis Likert called motivation as" the cost of the management". Motivation is an
effective instrument in the hands of management in inspiring the workforce.
Motivation increases the willingness of the workers to work, thus increasing
efficiency and effectiveness of the organization.

Best utilization of resources: - Motivation ensures best and efficient utilization

of all types of resources. Utilization of resources is possible to their fullest extent if
the man is induced to contribute their efforts towards attaining organizational
goals. Thus, people should be motivated to carry out the plans, policies and
programmes laid down by the organization.

Will to Contribute: - there is a difference between "Capacity to work" and

"willingness to work". One can be physically and mentally fit to work but he may
not be willing to work. Motivation results in feeling of involvement to present his
better performance. Thus, motivation bridges the gap between capacity to work
and willingness to work.

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Reduction in Labor Problems: - all the members try to concentrate their

efforts to achieve the objectives of the organization and carry out plans in
accordance with the policies and programmes laid down by the organization if the
management introduced motivational plans. It reduces labor problems like labor
turnover, absenteeism, indiscipline, grievances, etc. because their real wages
increase by the motivational plans.

Sizeable increase in production and productivity: - when motivated

properly, people try to put efforts produce more, thus increasing their efficiency
and as a result of this general production and productivity of the organization
increases. They (motivated employees) use the methods, system and technology
effectively in the best interest of the organization.

Basis of Cooperation: - In a zeal to produce more the member's work 'an s a

team to pull the weight effectively, to get their loyalty to the group and the
organization, to carry out properly the activities allocated and generally to play an
efficient part in achieving the purpose which the organization has undertaken'.
Thus, motivation is a basis of cooperation to get, the best result out of the efforts
of the human beings on the job.

Improvement upon skill and knowledge:- all the members will try to be
efficient as possible and will try it improve upon the skill and knowledge to the
progress of the organization which, in turn will provide the promised and more,
ultimately enabling them to satisfy their needs - personal and social both.

Acceptance of organizational change: - change is the law of nature. Due to

several changes in the society, changes in technology, value system, etc.
organization has to incorporate these changes to cope with the requirement of
the time. If people are effectively motivated, they gladly accept, introduce and
implement these changes without reserving any resistance to change and
negative attitude, thus keeping the organization on the right track of progress.

Better Image: - a firm that provides opportunities for the advancement of its people has a better
image in the minds of the public as a good employer. This, image helps in attracting qualified personnel
and thus simplifies the staffing function. This will also improve employee satisfaction and reduce
industrial stifle.In a nutshell, to achieve the organizational and individual goals in an economical and

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efficient manner, motivatiis an important tool in the hands of management to direct the behavior of
subordinates in the desired and appropriate direction and thus minimize the wastage of human and
other resources.

Motivation is one of the most crucial factors that determine the efficiency and
effectiveness of an organization with its help a desire is born in the minds of the
employees to achieve successfully the objective of the enterprise. All
organizational facilities will remain useless people are motivated to utilize these
facilities in a productive manner. Motivation is an integral part of management
process. An enterprise may have the best of material, machines and other means
of production but all these resources are meaningless so long as they are not
utilized by properly motivated people. There was a time when the human
resource of production was treated like other non-human resources and was not
given any special importance. But this old concept has lost all importance in this
competitive age classifying the importance of motivation Renis Likert has called it.
"The core of Management". The importance of motivation becomes clear from
following facts :

1-High Level of Performance.

2-Low Employee Turnover and Absenteeism.

3-Easy Acceptance of organizational changes.

4-Good human relations.

5-Good image of organization.

6-Increase in Morale.

7-Proper use of Human Resource Possible.

8-Helpful in Achieving Goals.

9-Builds Good relations among employees.

10-Easier Selection.

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11-Facilities Change.

Motivation involves getting the members of the group to pull weight effectively, to
give their loyalty to the group, to carry out properly the purpose of the
organization. The following results may be expected if the employees are properly
motivated.

The workforce will be better satisfied if the management provides them with
opportunities to fulfill their physiological and psychological needs. The workers
will cooperate voluntarily with the management and will contribute their
maximum towards the goals of the enterprise.

Workers will tend to be as efficient as possible by improving upon their skills and
knowledge so that they are able to contribute to the progress of the organization.
This will also result in increased productivity.

The rates of labors turnover and absenteeism among the workers will be low.

There will be good human relations in the organization as friction among the
workers themselves and between the workers and the management will
decrease.The number of complaints and grievances will come down. Accident will
also be low.There will be increase in the quantity and quality of products. Wastage
and scrap will be less. Better quality of products will also increase the public image
of the business.

Theories of Motivation.
Understanding what motivated employees and how they were motivated was the
focus of many researchers following the publication of the Hawthorne study
results (Terpstra, 1979). Six major approaches that have led to our understanding
of motivation are Mcclellands Achievement Need Theory, Behavior Modification
theory; Abraham H Mallows need hierarchy or Deficient theory of motivation. J.S.
Adams Equity Theory, Vrooms Expectation Theory, Two factor Theory.

McClellands Achievement Need Theory.

According to McClellands there are three types of needs-

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Need for Achievement

This need is the strongest and lasting motivating factor. Particularly in case of
persons who satisfy the other needs. They are constantly pre occupied with a
desire for improvement and lack for situation in which successful outcomes are
directly correlated with their efforts. They set more difficult but achievable goals
for themselves because success with easily achievable goals hardly provides a
sense of achievement.

Need for Power

It is the desire to control the behavior of the other people and to manipulate the
surroundings. Power motivations positive applications results in domestic
leadership style, while it negative application tends autocratic style.

Need for affiliation

It is the related to social needs and creates friendship. This results in formation of
informal groups or social circle.

Behavioral Modification Theory;

According to this theory people behavior is the outcome of favorable and
unfavorable past circumstances. This theory is based on learning theory. Skinner
conducted his researches among rats and school children. He found that stimulus
for desirable behavior could be strengthened by rewarding it at the earliest. In the
industrial situation, this relevance of this theory may be found in the installation
of financial and non financial incentives.

More immediate is the reward and stimulation or it motivates it. Withdrawal of

reward incase of low standard work may also produce the desired result.
However, researches show that it is generally more effective to reward desired
behavior than to punish undesired behavior.

Abraham H Maslow Need Hierarchy or Deficient theory of Motivation .

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The intellectual basis for most of motivation thinking has been provided by
behavioral scientists, A.H Maslow and Frederick Heizberg, whose published works
are the Bible of Motivation. Although Maslow himself did not apply his theory to
industrial situation, it has wide impact for beyond academic circles. Douglous Mac
Gregor has used Maslows theory to interpret specific problems in personnel
administration and industrial relations.

The crux of Maslows theory is that human needs are arranged in hierarchy
composed of five categories. The lowest level needs are physiological and the
highest levels are the self actualization needs. Maslow starts with the formation
that man is a wanting animal with a hierarchy of needs of which some are lower
ins scale and some are in a higher scale or system of values. As the lower needs
are satisfied, higher needs emerge. Higher needs cannot be satisfied unless lower
needs are fulfilled. A satisfied need is not a motivator. This resembles the standard
economic theory of diminishing returns. The hierarchy of needs at work in the
individual is today a routine tool of personnel trade and when these needs are
active, they act as powerful conditioners of behavior- as Motivators.

Hierarchy of needs; the main needs of men are five. They are physiological needs,
safety needs, social needs, ego needs and self actualization needs, as shown in
order of their importance.

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Physiological or Body Needs: - The individual move up the ladder responding

first to the physiological needs for nourishment, clothing and shelter. These
physical needs must be equated with pay rate, pay practices and to an extent with
physical condition of the job.

Safety: - The next in order of needs is safety needs, the need to be free from
danger, either from other people or from environment. The individual want to
assured, once his bodily needs are satisfied, that they are secure and will continue
to be satisfied for foreseeable feature. The safety needs may take the form of job
security, security against disease, misfortune, old age etc as also against industrial
injury. Such needs are generally met by safety laws, measure of social security,
protective labor laws and collective agreements.

Social needs: - Going up the scale of needs the individual feels the desire to
work in a cohesive group and develop a sense of belonging and identification with

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a group. He feels the need to love and be loved and the need to belong and be
identified with a group. In a large organization it is not easy to build up social
relations. However close relationship can be built up with at least some fellow
workers. Every employee wants too feel that he is wanted or accepted and that he
is not an alien facing a hostile group.

Ego or Esteem Needs: - These needs are reflected in our desire for status and
recognition, respect and prestige in the work group or work place such as is
conferred by the recognition of ones merit by promotion, by participation in
management and by fulfillment of workers urge for self expression. Some of the
needs relate to ones esteem

e.g.; need for achievement, self confidence, knowledge, competence etc. On the
job, this means praise for a job but more important it means a feeling by
employee that at all times he has the respect of his supervisor as a person and as
a contributor to the organizational goals.

Self realization or Actualization needs: - This upper level need is one which
when satisfied provide insights to support future research regarding strategic
guidance for organization that are both providing and using reward/recognition
programs makes the employee give up the dependence on others or on the
environment. He becomes growth oriented, self oriented, directed, detached and
creative. This need reflects a state defined in terms of the extent to which an
individual attains his personnel goal. This is the need which totally lies within
oneself and there is no demand from any external situation or person.

J.S Adams Equity Theory

Employee compares her/his job inputs outcome ratio with that of reference. If the
employee perceives inequity, she/he will act to correct the inequity: lower
productivity, reduced quality, increased absenteeism, voluntary resignation.

Vrooms Expectation Theory

Vrooms theory is based on the belief that employee effort will lead to
performance and performance will lead to rewards (Vroom, 1964). Reward may
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be either positive or negative. The more positive the reward the more likely the
employee will be highly motivated. Conversely, the more negative the reward the
less likely the employee will be motivated.

Two Factor Theory

Douglas McGregor introduced the theory with the help of two views; X
assumptions are conservative in style Assumptions are modern in style.

X Theory
Individuals inherently dislike work.

People must be coerced or controlled to do work to achieve the objectives.

People prefer to be directed

Y Theory
People view work as being as natural as play and rest

People will exercise self direction and control towards achieving objectives they
are committed to

People learn to accept and seek responsibility.

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CHAPTER: 2
TYPES OF MOTIVATION

Intrinsic motivation occurs when people are internally motivated to do something

because it either brings them pleasure, they think it is important, or they feel that
what they are learning is morally significant.

Extrinsic motivation comes into play when a student is compelled to do something

or act a certain way because of factors external to him or her (like money or good
grades)

Incentives
An incentive is something which stimulates a person towards some goal. It
activates human needs and creates the desire to work. Thus, an incentive is a
means of motivation. In organizations, increase in incentive leads to better
performance and vice versa.

Need for Incentives

Man is a wanting animal. He continues to want something or other. He is never
fully satisfied. If one need is satisfied, the other need need arises. In order to
motivate the employees, the management should try to satisfy their needs. For
this purpose, both financial and non financial incentives may be used by the
management to motivate the workers. Financial incentives or motivators are
those which are associated with money. They include wages and salaries, fringe
benefits, bonus, retirement benefits etc. Non financial motivators are those which
are not associated with monetary rewards. They include intangible incentives like
ego-satisfaction, self-actualization and responsibility.

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INCENTIVES

Financial Incentives Non-financial Incetives

Wages and Salaries. - Competition

Bonus - Group recognition

Medical reimbursement - Job security

Insurance - Praise

Housing facility -Knowledge Res

Wages and Salaries.

Often paid every week, sometimes in cash or sometimes into a bank account. It is
a common way of remuneration for manual workers those who work in factories
and warehouse. It can be calculated in two ways:

Piece Rate: this is where the workers are paid depending on the quantity of
products made. The more they make the more they get paid. This system of wages
is followed where the output can be counted.

Time Rate: This payment by the hour. The longer you work the more you get paid.
This system of wages is followed where the output cannot be measured.

Bonus
Bonuses motivate employees to raise their performance to meet business goals.
You might want your employees to lower production costs, for example, or
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eliminate waste in the materials they use. You might give cash or non-cash
bonuses as incentives. Employees earn rewards for special achievements,
improving productivity and raising profits. Bonuses can serve as an important tool
for small businesses, which have smaller staffs and a smaller reservoir of talent
than larger firms, helping ensure employee loyalty and reducing turnover.

Non-monetary incentives- Besides the monetary incentives, there are certain

non-financial incentives which can satisfy the ego and self- actualization needs of
employees. The incentives which cannot be measured in terms of money are
under the category of Non- monetary incentives. Whenever a manager has to
satisfy the psychological needs of the subordinates, he makes use of non-financial
incentives. Non- financial incentives can be of the following types:-

Security of service- Job security is an incentive which provides great motivation

to employees. If his job is secured, he will put maximum efforts to achieve the
objectives of the enterprise. This also helps since he is very far off from mental
tension and he can give his best to the enterprise.

Praise or recognition- The praise or recognition is another non- financial

incentive which satisfies the ego needs of the employees. Sometimes praise
becomes more effective than any other incentive. The employees will respond
more to praise and try to give the best of their abilities to a concern.

Suggestion scheme- The organization should look forward to taking suggestions

and inviting suggestion schemes from the subordinates. This inculcates a spirit of
participation in the employees. This can be done by publishing various articles
written by employees to improve the work environment which can be published
in various magazines of the company. This also is helpful to motivate the
employees to feel important and they can also be in search for innovative
methods which can be applied for better work methods. This ultimately helps in
growing a concern and adapting new methods of operations.

Job enrichment- Job enrichment is another non- monetary incentive in which

the job of a worker can be enriched. This can be done by increasing his
responsibilities, giving him an important designation, increasing the content and

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nature of the work. This way efficient worker can get challenging jobs in which
they can prove their worth. This also helps in the greatest motivation of the
efficient employees.

Promotion opportunities- Promotion is an effective tool to increase the spirit

to work in a concern. If the employees are provided opportunities for the
advancement and growth, they feel satisfied and contented and they become
more committed to the organization.

Motivation is the key to performance improvement

There is an old saying you can take a horse to the water but you cannot force it to
drink; it will drink only if it's thirsty - so with people. They will do what they want
to do or otherwise motivated to do. Whether it is to excel on the workshop floor
or in the 'ivory tower' they must be motivated or driven to it, either by themselves
or through external stimulus.

Are they born with the self-motivation or drive? Yes and no. If no, they can be
motivated, for motivation is a skill which can and must be learnt. This is essential
for any business to survive and succeed.Performance is considered to be a
function of ability and motivation, thus:

Job performance = f(ability)(motivation)

Ability in turn depends on education, experience and training and its
improvement is a slow and long process. On the other hand motivation can be
improved quickly. There are many options and an uninitiated manager may not
even know where to start. As a guideline, there are broadly seven strategies for
motivation.

There are broadly seven strategies for motivation.

Positive reinforcement / high expectations

Effective discipline and punishment

Treating people fairly

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Satisfying employees needs

Setting work related goals

Restructuring jobs

Base rewards on job performance

Essentially, there is a gap between an individuals actual state and some desired
state and the manager tries to reduce this gap. Motivation is, in effect, a means to
reduce and manipulate this gap.

CHAPTER: 3
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Techniques of Motivation

Financial Incetives-
Incentive is an act or promise for greater action. It is also called as a stimulus to greater
action. Incentives are something which are given in addition to wagers. It means
additional remuneration or benefit to an employee in recognition of achievement or
better work. Incentives provide a spur or zeal in the employees for better performance.
It is a natural thing that nobody acts without a purpose behind. Therefore, a hope for a
reward is a powerful incentive to motivate employees. Besides monetary incentive,
there are some other stimuli which can drive a person to better. This will include job
satisfaction, job security, job promotion, and pride for accomplishment. Therefore,
incentives really can sometimes work to accomplish the goals of a concern. The need of
incentives can be many:

To increase productivity,

To drive or arouse a stimulus work,

To enhance commitment in work performance,

To psychologically satisfy a person which leads to job satisfaction,

To shape the behavior or outlook of subordinate towards work,

To inculcate zeal and enthusiasm towards work,

To get the maximum of their capabilities so that they are exploited and utilized
maximally.

Job enlargement:

Job enlargement (sometimes also referred to as horizontal loading) involves

the addition of extra, similar, tasks to a job.In job enlargement, the job itself
remains essentially unchanged. However, by widening the range of tasks that
need to be performed, hopefully the employee will experience less repetition
and monotony that are common on production lines which rely upon the
division of labour.With job enlargement, the employee rarely needs to acquire new skills
to carry out the additional task, and the motivational benefits of job enrichment are not

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usually experienced.One important negative aspect is that job enlargement is sometimes

viewed by employees as a requirement to carry out more work for the same amount of pay.

Job enrichment-

Job enrichment is connected to the concept of job enlargement.Job enrichment is the

process of "improving work processes and environments so they are more satisfying for
employees".Many jobs are monotonous and unrewarding - particularly in the primary and
secondary production industries. Workers can feel dissatisfied in their position due to a
lack of a challenge, repetitive procedures, or an over-controlled authority structure.Job
enrichment tries to eliminate these problems, and bring better performance to the
workplace.

Job rotation:

it refers to shifting an employee from one job to another. Such job rotation
doesnt mean hanging of their job but only the employees are rotated. By this it
helps to develop the competency in several job which helps in development of
employees.

Why is Job Rotation Important?

Job rotation is seen as a possible solution to two significant challenges faced by
business:

(1) Skills shortages and skills gaps, and

(2) Employee motivation

Skills shortages occur when there is a lack of skilled individuals in the workforce.

Skills gaps occur when there is a lack of skills in a companys existing workforce
which may still be found in the labour force as a whole.

According to the Treasury and DfES, both skills shortages and gaps are major
problems acting as major barriers to economic growth and the reduction in long-
term unemployment in the UK.

Participation :

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Participation refers to involvement of employee in planning and decision making

.it helps the employees feel that they are an asset of the organization which helps
in developing ideas to solve the problems.

Delegation of authority:
Delegation of authority is concerned with the granting of authority to the
subordinates which helps in developing a feeling of dedication to work in an
organization because it provides the employees high morale to perform any task

Quality of work life:

It is the relationship between employees and the total working environment of
organization. It integrates employee needs and well being with improves
productivity, higher job satisfaction and great employee involvement. it ensures
higher level of satisfaction.

Management by objectives:
It is used as a motivation and technique for self control of performance. By this
technique superior and subordinates set goals and each individual subordinates
responsibilities clearly defined which help to explore the sill and use in the
organization effectively

.Behavior modification:

The work in desired behavior in order to modify behavior he last technique of

motivation is behavior modification. It develops positive motivation to the workers
to do.

CHAPTER: 4
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CHAPTER: 4

SOLUTIONS TO GLOBAL FINANCIAL CRISIS

Corrective Measures
In response to the global financial crisis, governments and central
banks took different measures to rectify the problems and put the
financial markets and the economies back in the right path (Ramadhan
2008a). The most important of these measures are:

Financial rescue plans: Since the credit crisis started in the United
states, The American government arranged in Sept 2008, for an 800
Billion US$ rescue plan to save the financial market. The aim was to
save the most important investment banks and insurance companies
from bankruptcies to prevent further financial deterioration. Many
central banks around the world presented similar rescue plans with
different scoop.

Central banks monetary policies: central banks around the world have
resorted to all monetary policies to contain the financial crisis. The most
critical of these policies was to lower the interest rate drastically. The
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objective is to minimize the cost of borrowing for private businesses

and consumers in order to stimulate commercial activities. Moreover,
finance officials from the G20 nations appear to have achieved a
preliminary consensus on a 24-point program intended to identify the
growth of market bubbles and to insure that the world's banks operate
more cautiously (Dixon 2009).

Public stimulus packages: Governments around the world launched

huge stimulus packages to pull their economies out of recession. As the
financial crisis pushed the economies into deep recession, consumer
spending has declined sharply due to fears and lack of confidence. As a
result, industrial output declined and unemployment has been rising
sharply around the world (expected job losses to be around 50 million
jobs). Therefore, the stimulus packages aim to increase public spending
on infrastructure projects. Public spending should create more jobs and
stabilize consumers spending pattern. However, recovery from the
current recession could be very sluggish. Production idle capacity and
unemployment are on the rise. This makes it difficult for companies to
hire workers which will keep demand at low levels and in turn increase
idle capacity (Uchitelle, 2009).

Recommendations and Measures

Based on the above analysis, this section will present a few
recommendation and solutions that might help in correcting the
mistakes that allowed for the financial crisis (Ramadhan 2008b). The
following are some of these measures:

Reform of the WTO and global trade: The WTO should play more
active role in balancing global trade. Countries such as China should not

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be allowed to dominate the world trade by adopting unfair activities.

Many countries suffered because of decline in their exports'. Moreover,
China has enjoyed high economic growth (over10% annually) over the
last decades relative to the world. This has accelerated the rise in the oil
and food prices leading to disasters in the developing world and great
imbalance between poor and rich countries. The unwarranted
economic growth in China has led to abundance of surpluses that were
channeled back to the USA and played a role in the credit crisis
(Economists 2009).

G8 and G20 summits: These summits are usually conducted to serve

the interest of the main industrial countries. The assumption is what
good for the developed world is good for the world. This view should
change and the perspectives and concerns of many developing
countries should be considered and incorporated into common policies
that serve the whole world. No country should dominate the agenda of
the meeting anymore. This was requested from American president
prior to the attendance of the G20 meeting to be held in England in
April 2009.

Government fiscal policies: Government fiscal spending and stimulus

packages are very important during recession periods. However public
spending should focus on infrastructure and construction activities that
can lead to economic growth. Excessive spending on bailouts,
unemployment benefits, and subsidy programs, in order to increase
spending will not have a long term impact. Short term objectives and
spending will only worsen future growth.

Market regulation and supervision: Governments and Central Banks

around the world must be active in supervising and monitoring the

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activities of financial firms locally and international. Efforts in the short

run must be directed to clean the balance sheet of financial firms from
toxic assets. Credit lines should be provided for companies with good
practices. A better process of monitoring the tax reports of financial
companies is needed. It must be noted that, for many governments, the
current financial system is very complicated to understand and control.
Hence the expertise of financial specialists and central banks

must be considered to formulate new policies and regulations.

New global financial system: International Monetary Fund (IMF)

should play a major role in regulating and auditing the global financial
system. The IMF should both have more resources and play a broader
role in the world economy than the past. New measures and
regulations must be adopted to insure that the financial market
mechanism will not permit for future collapses. Investment companies
should be punished for conducting unfair practices in some countries
(Tax Evasion) and financial practices must be consistent globally. China
has proposed the creation of new global currency to replace the US$.
This proposal should be considered because the dependency of the
world on US$ is a major cause of the crisis (Economist, 4/8/2009).

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CHAPTER: 5

CONCLUSION

The global recession 2008 is the outcome of the financial crisis that has
originated in the United States mortgages market and extended to the
rest of the world. The financial crisis has forced the insolvency of many
banks and financial institutions in the U.S. and the world. Governments
adopted different policies such as; financial saving plans, spending
stimulus packages, and aggressive monetary policies to contain the
crisis. However, the negative spread affect of the crisis has extended to
other sectors and industries (e.g. Motor Industry). The financial credit
crisis has moved the US and the global economy into deep recession.
Bankruptcies and foreclosure of banks and firms has caused huge
layoffs. Increased unemployment coupled with decline of wealth and
income of consumers around the world has lowered demand for
consumer and industrial products. As production output declines, this
will cause factories to lay off more labor. The spiral effect will take a

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period of time until new equilibrium is reached. To summarize, lack of

supervision of regulatory agencies over the financial market, expansion
of financial derivatives beyond acceptable norms, imbalance in the
world trade, and greed of Wall Street has led to this exceptional global
financial and economic crisis.

BIBLIOGRAPHY

The Following Are A List Of Reference Books Which Have Been

Referred For This Project :

THE FINANCIAL CRISES 2007-2008

FALSE PROFIT:RECOVERING FROM THE BUBBLE ECONOMY

WEBLIOGRAPHY

The Following Are A List Of The Websites Used For

The Purpose Of This Project :

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SOURCES:

www.google.com
www.yahoo.com
www.wikipedia.com

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