Financial crisis impacts on progress of employees Essay - 1

Financial crisis impacts on progress of employees - Essay Example Financial crisis can be used to refer to economic; an economic crisis refers to a situation where the economy is unstable and thus the instability results to an economic recession or a depression. An economic recession results from economic shocks thus leading to real changes in the economy, in the case of financial crisis it may not necessarily result into an economic crisis. There has been many financial crisis with many of them resulting to economic recession to name but a few, the Mexican financial crisis which occurred in the mid 1990, the Asian financial crisis in the late 1990’s and the popular know global financial crisis in the late 2000’s that saw giant economies like the United experience negative economical growth (Akhigbe 1985). The Mexican financial crisis occurred in the mid 90’s and to be exact in late 1994 and 1995, scholars have argued that the devaluation of peso was mishandled thus resulting to the crisis. Mexico economy was growing at an aver age of 3.1% between the year 1989 and 1994, inflation rates were decline and 1993 there were a single digit after two decade of soar prices. This had made Mexico attractive to foreign investor thus making the capital inflows and foreign direct investment to spur the economy (Tuano, 2002). The economic growth achieved was halted by the decision to devalue Peso in December 1994 was not attractive to the foreign investors, thus there no more capital inflows and this was the commencement of what was later came to be known as the great Mexican Peso crisis. In addition to devaluation weak regulators systems as contributed to the crisis, after the foreign investor pulled out the Mexican government did not measures in place that could avoid depletion of foreign reserves or reverse the imported created demand thus resulting into a crisis (Muller, 2011). The Mexican crisis left employees vulnerable to high prices due to imported created inflation, these de-motivated employees as used much of their to cover bills and purchase basic commodities. Although manufactures could not request employees for a wage cut as suggested by many classical economist due wage rigidity, the employers resulted to layoffs so as reduce the monthly bills or closing. In some cases employers had closed down manufacturing plant as demand for their products was low, thus this led to many workers dream being shut down. The Mexican crisis was closely followed by the Asian financial crisis which can be contrasted to the earlier currency crisis to the crisis that had the most severe to Asian countries to name but a few Thailand and Philippines. The Asian financial crisis resulted to the main reasons as outlined below, shortage in foreign reserves, wrong replenishment measures by the International Monetary Fund and in adequate financial institutions. Similar to the Mexico the Asian counties before the crisis the countries experienced high capital inflows but unlike in Mexican cases foreign investors wit hdrew from Asia at some extent due to panic and contagion (Age?nor, 2006). Asian crisis also affected on employees, for example, in Philippines one of immediate reaction by companies operating in the region was to cut down cost of production thus resulting to down sizing of the workforce or even at worst level closing down. According to the