John Stuart Mill Essay

I) Utilitarianism: + Whenever we have a choice between alternative actions or social policies, we must choose the one that has the best overall consequences for everyone concerned. + According to utilitarianism, the moral worth of an action is determined only by its resulting outcome. 3 + Utilitarianism is the one that maximizes utility, which is understood in terms of happiness or pleasure, in the moral actions. + For Utilitarianism, the morally best (better) alternative is that which produces the greatest (or greater) net utility, where utility is defined in terms of happiness or pleasure. (Ethics, Mackinnon) 4 + Two main philosophers of Utilitarianism Jeremy Bentham (1748-1832) John Stuart Mill (1806-1873) 5 II) Introduction to the main idea of Utilitarianism: A) The Principle of Utility (J. Bentham) â€Å"By the Principle of Utility is meant that principle which approves or disapproves of every action whatsoever, according to the tendency which it appears to have to augment or diminish the happiness to the party whose interest is in question† (The Principles of Morals and Legislation, J.Bentham) + The principle is for the promotion of greater happiness. 6 â€Å"We ought to do that which produces the greatest amount of happiness for the greatest number of people. † (Ethics, Mackinnon) + It is the guidance or principle of ethics: We should promote the greatest happiness in choices or actions. 7 Example: Killing is morally wrong because it does not promote happiness. But killing would be morally right if it promotes happiness, like the case of Japanese story and the case of disabled person. http://www. youtube. com/watch? v=8BjJ3yms8VM 8. II) Introduction to the main idea of Utilitarianism: B) The Greatest Happiness Principle (J. S. Mill) â€Å"†¦The creed which accepts as the foundation of morals, Utility, or the Greatest Happiness Principle, holds that actions are right in proportion as they tend to promote happiness, wrong as they tend to produce the reverse of happiness. † (Utilitarianism, J. S. Mill) â€Å"By happiness is intended pleasure, and the absence of pain; by happiness, pain, and the privation of pleasure. † (Utilitarianism, J. S. Mill). 9 + â€Å"According to the Greatest Happiness Principle†¦ the ultimate end, with reference to and for the sake of which all other things are desirable (whether we are considering our own good or that of other people), is an existence exempt as far as possible from pain, and as rich as possible in enjoyments. † (Utilitarianism, J. S. Mill) + The Greatest Happiness Principle: Promote pleasure/ utility 10 III) Two kinds of pleasure (J. S. Mill): 1) Physical pleasure: satisfaction of physical need 2) Intellectual pleasure: satisfaction of intellectual / spiritual need Example: Aesthetic pleasure, like painting 11. The Painting of Vincent Van Gogh 12 The Painting of Claude Monet 13 + The beauty of music: http://www. youtube. com/watch? v=Xg4ekh8 MwfM&list=PLF9B40412F22FA26B http://www. youtube. com/watch? v=n4ba8A W_Zck 14 IV) Calculation of Utility / Happiness + Pleasure minus Pain = Net happiness 1) Act A produces 10 units of happiness and 2 units of unhappiness: net happiness = 8 units of happiness 2) Act B produces 8 units of happiness and 4 units of unhappiness: net happiness = 4 units Act A is morally better than Act B. 15 + The best choice of Utilitarianism is the promotion of the interests of the greater (or greatest) number. + The utilitarian does not consider the nature of the acts or the motive, but just the utility or happiness in sum. + Example: the case of Down’s syndrome. http://www. youtube. com/watch? v=NeaDwFx8fgs 16 V)The measurement of utility: a)Intensity: quality of pleasure, e. g. winning a basketball match vs ice-cream b)Duration: the time lasted c)Fruitfulness: Not only the immediate pleasure, but also long-term result, like friendship, d)Likelihood: the closeness of happening of the consequence (utility). 17 VI)The proof of Principle of Greatest Utility or Happiness â€Å" The only proof capable of being given that an object is visible, is that people actually see it. The only proof that a sound is audible, is that people hear it†¦In like manner, I apprehend, the sole evidence it is possible to produce that anything is desirable, is that people do actually desire it. † (Utilitarianism, J. S. Mill) 18 + David Hume’s Is/ Ought distinction – ‘Is’ does not imply ‘Ought’: – e. g. we have parents ? we should obey to parents. VII) Mill’s the Harm Principle: â€Å"That the only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others. His own good, either physical or moral, is not a sufficient warrant . . . Over himself, over his body and mind, the individual is sovereign. † (On Liberty, J. S. Mill) 19 + The harm principle above promotes freedom, which is as the means to happiness. + The ultimate or intrinsic Good: pleasure or happiness + Instrumental good is the good which promotes the intrinsic good: education, freedom 20 VIII) Assessing Utilitarianism 1) Utilitarian conception of impartiality – The utility or interest of the party involved is to be counted equally. (NO privileged class under Utilitarianism) 2) The promotion of animal welfare and animal right as the happiness of the animal is counted as well. (Peter Singer) 21 3) The Utility-oriented approach: A) Act-Utilitarianism: The consequence of this particular act is considered. In this case, killing the innocent may be justified for the sake of greater utility. The problem of right and justice. B) Rule-Utilitarianism: The consequence of the act is performed as a general practice (rule). 22 4) Conflict of pleasures Intellectual pleasure vs physical pleasure (satisfaction of hunger) How should we act/ choose? Life is not worth living when it is without utility or pleasure? 23 + Discussion: Is Utilitarianism a good way to guide our actions or choices, according to the common sense of morality and moral practices? 24.

Immigration causes Essay

Groups, societies, or cultures have values that are largely shared by their members. The values identify those objects, conditions or characteristics that members of the society consider important; that is, valuable. In the United States, for example, values might include material comfort, wealth, competition, individualism or religiosity. The values of a society can often be identified by noting which people receive honor or respect. In the US, for example, professional athletes are more highly honored than college professors, in part because the society values physical activity and competitiveness more than mental activity and education . Young people Old people are more annoying by far. They are so quick to degrade and stereotype younger people even though every group has had their criminals and bad apples. They are rude and think they can say or do anything to anyone without the other person having any recourse. I have been victimized numerous times by older people and all old people can do is keep degrading us. So I chose Young people because that has a no one can touch me attitude, demo and think they know everything . Science and technologies The distinction between science and technology is not always clear. Science is the reasoned investigation or study of phenomena, aimed at discovering enduring principles among elements of the phenomenal world by employing formal techniques such as the scientific method. Technologies are not usually exclusively products of science, because they have to satisfy requirements such as utility, usability and safety. Technology is often a consequence of science and engineering Ââ€" although technology as a human activity precedes the two fields. For example, science might study the flow of electrons in electrical conductors, by using already-existing tools and knowledge. This new-found knowledge may then be used by engineers to create new tools and machines, such as semiconductors, computers, and other forms of advanced technology. In this sense, scientists and engineers may both be considered technologists; the three fields are often considered as one for the purposes of research and reference . Human rights The concept of human rights has existed under several names in European thought for many centuries, at least since the time of King John of England. After the king violated a number of ancient laws and customs by which England had been governed, his subjects forced him to sign the Magna Cart, or Great Charter, which enumerates a number of what later came to be thought of as human rights. Right of women Nowadays we take it for granted that women have the same rights as men before the First World War few people believed this . As far as work was concerned there were jobs wish were regarded as women’s jobs and other which were regarded as men’s jobs. Women’s jobs were generally lower paid as men’s. Men did almost all the heavy jobs in industry or in transport . Women had jobs like dress-making, cleaning or worked as servants . Women’s main role was as being to raise children and look for their home. Women were not expected to take position of leaders chip . Women’s role in development Women’s participation in development has vital benefits. In the case of morocco, this participation takes place at there main levels: the social this political and the economic. First, we can’t ignore the active contribution of women in our society as nurses, teachers or mothers and wives. As nurses. women give help to patients in hospitals. as teachers ,they teach the young generation and the illiterate. as mothers and wives, they bring up kids tube good citizens. Second, there are many women who take leading position in the government with a desire to encourage democracy, and establish freedom and equal rights at the components of our society. Citizenship is membership in a society, community, city or town but now usually a country and carries with it to political participation; a person having such membership is a citizen. Citizenship status often implies some responsibilities and duties. It is largely coterminous with nationality although it is possible to have a nationality without being a citizen legally subject to a state and entitled to its protection without having rights of political participation in it); it is also possible to have political rights without being a national of a state. In most nations, a non-citizen is a non-national and called either a foreigner or an alien Citizenship , International organization International Organization is a leading peer-reviewed journal that covers the entire field of international affairs. Subject areas include: foreign policies, international relations, international and comparative political economy, security policies, environmental disputes and resolutions, European integration, alliance patterns and war, bargaining and conflict resolution, economic development and adjustment, and international capital movements. Published on behalf of the International Organization Foundation. Drop out of school Increasing stress in school, at work, and at home has caused many students to drop out of school to escape their problems. With this increasing amount of stress and work, some students have become very frustrated and depressed. Students then drop out of school and take the easy way out to eliminate some of that stress . Brain drain The migration of skilled individuals from developing countries has typically been considered to be costly for the sending country, due to lost investments in education, high fiscal costs and labor market distortions. Economic theory, however, raises the possibility of a beneficial brain drain primarily through improved incentives to acquire human capital. Our survey of empirical and theoretical work shows under what circumstances a developing country can benefit from skilled migration. It argues that the sect oral aspects of migration and screening of migrants in the receiving country are of major importance in determining the welfare implications of the brain drain. These issues, as well as the size of the sending country, duration of migration and the effect of Diaspora populations, should be addressed in future empirical work on skilled migration. Brain drain† is the phenomena whereby nations lose skilled labor because there are better paid jobs elsewhere. In recent years , this has affected poorer countries more so, as some rich countries tempt workers away, and workers look to escape bleak situations in their poor home countries. Sustainable development Sustainable development is a pattern of resource use that aims to meet human needs while preserving the natural environment so that these needs can be met not only in the present, but in the indefinite future. The term was used by the Brandt and Commission which coined what has become the most often-quoted definition of sustainable development as development that â€Å"meets the needs of the present without compromising the ability of future generations to meet their own needs.† The field of sustainable development can be conceptually broken into three constituent parts: environmental sustainability, economic sustainability and social . Humor I think that the best things to relief from stress is to watch some sitcoms or hear something funny like jokes Â…person should develop his sense of humor and he should be cool , Comic and optimistic, because some expert of mental .health have noted that we can’t imagine going through a day without laughter. Humor will make every part of your life better. It will help you trough difficult times and it will help you make the good times even letter, also i twill attract good people and good situations to you .

Emotional Intelligence – Summary

February 10, 2013 ASMT W4b (R) ASMT W4b  (R) Why Emotional Intelligence Is Not Essential for Leadership C6 p. 171 Mitch McCrimmon, the author of â€Å"Why Emotional Intelligence Is Not Essential for Leadership†, presents an argument contrary to that of Daniel Goleman’s claim that leaders must be emotionally intelligent to be effective. He even ventures as far as calling Goleman’s theory harmful. â€Å"The bottom line is that emotional intelligence is more important for management than leadership† (Rowe, 2013, p. 172). McCrimmon begins his argument referencing great leaders like Martin Luther King, Mahatma Gandi, and Nelson Mandela.Each of these men has influenced others with their passion to eradicate unfairness. They convinced those who can make decisions to favor their ideas. â€Å"They aimed their cry at their respective governments and the population at large . . . but none of them managed the people responsible for making the policy changes that th ey were promoting† (Rowe, 2013, p. 172). They were bottom-up leaders. McCrimmon makes this point in order to simplify and redefine leadership to â€Å"the successful promotion of new directions† (Rowe, 2013, p. 172).This simplified definition of leadership allows for the promotion of better ideas in an environment where the leadership role shifts from person to person as ideas are developed. As justification for his new definition, McCrimmon claims that the traditional concept of leadership is founded within the confines of the managerial framework, not in those who lead outside of managerial roles. Returning to the topic of the article, the author contends that â€Å"emotional intelligence is critical for management, though not so for leadership† (Rowe, 2013, p. 174).From the beginning, emotional intelligence should have been associated with management, but â€Å"a scapegoat was needed to blame for the failure of Western businesses to cope with Japanese competi tion, and management was fingered for this role† (Rowe, 2013, p. 174). With management now the â€Å"bad guy†, emotional intelligence became associated with the â€Å"good guy† – leadership. Emotional intelligence has its place among management and only a situational role in leadership. It is important for executives and managers because they have many responsibilities involving the welfare of others.Managers need high emotional intelligence to succeed. However, creative and innovative non-managers, those wanting to challenge the status quo, do not need emotional intelligence in order to convince others of their ideas and be effective leaders. â€Å"The power to lead is increasingly knowledge based and is less about personality and character. Conversely, emotional intelligence is essential for all managerial roles† (Rowe, 2013, p. 175). McCrimmon concludes his argument with call for organizations to cultivate bottom-up leadership, especially organiz ations dependent on constant innovation. If potential leaders are told to keep quiet until they become emotionally intelligent, they may well say good-bye before they gain the necessary maturity† (Rowe, 2013, p. 175). He implores those in management positions to relinquish their monopolies on leadership in order to grow and encourage bottom-up leadership. Empower others to be leaders. References Rowe, G. , & Guerrero, L. (2013). Cases in leadership. (3rd ed. ). Thousand Oaks, California: Sage Publishing.

Leadership Essay Example | Topics and Well Written Essays - 500 words - 3

Leadership - Essay Example As mentioned above, schools obviously function as an open system, taking input from the environment, putting it through a transformative process and producing the changed product back into the environment. The second major frameworks schools function in is rational. A rational system is a system which attempts to achieve a specific goal with maximum efficiency. Though schools have a wide variety of goals, they are often very specific: they want to educate students to the point that they meet required standards (whether the standards are set by a school board, an accredited body, or the school itself). They seek to give students a balanced life, by providing access to education (in the form of physical education classes) and food along with academic pursuits. So clearly schools meet the first part of the definition of a rational system: they have specific goals. Schools also try to meet these goals in as efficient methods as possible; they employ teachers with enough experience to cov er multiple subject areas (such as physical education and another subject), they try to economize by using textbooks which will not become outdated quickly or can be used for multiple classes. So clearly they meet the second definition of a rational system.

Report on the Religious Life of Planet Earth Essay - 8

Report on the Religious Life of Planet Earth - Essay Example My research report about the religious dimensions led me to know the essence of religion, which was evoking of specific response over various aspects of life, taken to be pure as designed by traditional practices of religious bodies (Fisher, 2011). My criteria to examine the religiosity of the people on earth was philosophical related to the causal purpose of the universe; peoples’ adherence to religious rituals and moral code of conduct, as propounded by the leading religions. Starting from Christianity, I examined the people believing in this religion on the parameter of cause behind the creation of the cosmos. Christians believed that there is one supreme power governing the affairs of the universe. Human beings are the final product of the creator to live on the planet with love and justice. They believe that the purpose of their existence is to love and serve God (Christianity Human Nature, 2012). My next stoppage to research and analyze the preaching of Islam revealed about the followers of Islam, the Muslims who adhere to five pillars of Islam, called the â€Å"pillars of faith†, which are critical religious rituals. These are observing disciplined routine of confessing to the faith, strictly adhering to the ritual of prayer, paying the alms tax, fasting during the month of Ramadan, and Pilgrimage to Mecca. True Muslims are only those who follow the routine first four rituals and accomplish once in their life time a visit to the holy city of Mecca, their fifth ritual. This is a religious pilgrimage held in the last month of the Islamic year. While playing the ritual of donning a white sheet, they show their allegiance to the almighty by projecting that they have covered their wealth, culture, and class, as belonging to various corners of the planet to attain a feeling of equality and unity (Denny, 1987). The religion of Hinduism was the third parameter to decide whether the believers in the Hindu philosophy of

My Government Expectations Essay Example | Topics and Well Written Essays - 1250 words

My Government Expectations - Essay Example Chinese communist government’s functions that I seek to introspect on what I expect from my government on a day-to-day basis as well as in posterity. Essentially, one of the most basic services is health care and insurance, in China there is a government health insurance system that is similar to America’s Medicare . As a citizen, I expect to access government funded health insurance, in China there are two systems the labor insurance schemes (LIS) and government employee insurance scheme1. Depending on where I am working, I can be assured of cover and access to public medical facilities at a highly subsidized cost. However, I must concede that it is not as straightforward on the ground as it is on paper. There is a huge disparity between the level of care provided in public and private hospitals. In some cases, I am well aware that people shun government hospitals because the care is more efficient in the private clinics. Nevertheless, that is to be expected and is oft en the case in many countries but at the very least, I can be assured that I will have access to effective even if not the best medical care should I need it. As far as education is concerned, every Chinese child is guaranteed nine years of compulsory education that is sponsored by the government. In the 80’s, due to the high population pressure, the government abolished the tax-funded higher education2, today for anyone to get these scholarships they have to compete for them on the basis of merit.

Tsunami Disasters Essay Example | Topics and Well Written Essays - 750 words

Tsunami Disasters - Essay Example In particular, the port of Chennai on the east coast of India sustained moderate damage. The local fishing fleet was affected, with a number of boats overturned or washed ashore within the harbor. Overall economic losses from the 2004 Indian Ocean Earthquake and Tsunami disaster are estimated at$10 billion, with 75% of the loss attributed to the damage inflicted by Indonesia, Thailand, Sri Lanka, and India. The Southwestern costal area of the island Hokkaido was affected by the earthquake. The most affected area was in east of island Okushiri and was 100 by 125 kms. Waves soared high. They were from 5 to 12 m high and inundated the area around the island. The highest wave run-up along the southwest coast and was about 30.5 m on a limited area. Most of the deaths were on Okushiri island. The number of missing was expected to be higher because it is a tourist area. Â  540 houses were destroyed by tsunami and fire caused by earth quake, 154 houses and other properties were heavily damaged and 1,826 were slightly damaged. 31 public buildings were damaged and some were severely destroyed. Highways were destroyed in at least 365 locations and Railway lines were completely damaged at 124 locations. Port facilities and all other infrastructure in direct path of tsunami were extensively damaged, including power, water, telecommunications, transportation, and sewage. Tsunami didn’t damag e the sewage treatment plant at Apnea. Naturally high sand dunes protected it The powerful Earthquake of Hokkaido occurred in south west, the Sea of Japan. The earthquake’s epicenter was at a depth of 34 km on the Sea floor and was very close to the Okushiri Island. The island was hit by tsunami in less than 4 minutes after the earthquake and that left no time for the people of the island to evacuate. Many homes were constructed along the sea side which explained the high toll of victims. Despite only

I don't know Lab Report Example | Topics and Well Written Essays - 1500 words

I don't know - Lab Report Example ording to Daly (1996, p.78), many worksites are increasingly adopting the use of new technologies and innovative corporate practices to reduce consumption and achieve sustainability. This paper discuses my voluntary worksite experience at Red Cross with particular focus on the aspects of technology and international development as they relate to sustainability. My chosen worksite for volunteer field work experience was Red Cross, and I spent twenty hours working in the organization as a sales team research assistant. American Red Cross was established in 1880s as an independent and neutral humanitarian organization which was dedicated to helping people across the United States. Clara Barton and the other prominent founders of the organization were particularly inspired by the need to help people and save lives following the American Civil War (Moorehead, 1998, p.134). As an affiliation of the international Red Cross movement, the American Red Cross is a non profit organization whose primary humanitarian mission is to provide emergency assistance, disaster relief as well as protect the lives and dignity of victims of violence and wars. According to Gilbo (1987, p.36), American Red Cross currently boasts a nationwide network of nearly 650 chapters and 36 blood donation centers, which are dedicated to protecting and saving lives as well as helping communities to prevent, respond to and prepare for emergencies. Being one of the largest volunteer based humanitarian organizations in the world, Red Cross has adopted a number of technologies and international development strategies that ensure it achieves sustainability in its goals to improve humanitarian standards, saving lives and guaranteeing disaster preparedness. I performed a number of duties during my twenty hours of work at Red Cross as a volunteer sales research team member. My worksite setting not only provided me with an opportunity to work with different technologies but also enabled me to appreciate the

Difference between non-profit public sector administration and private Essay

Difference between non-profit public sector administration and private sector - Essay Example The terms of employment and leadership also determine the administrative structures in each. In the public sector, job security is high and despite poor performance, separation requires extensive documentation over a long period of time.The span of control is low, which also means more individuals to a particular task and we see that job security, stability, and sheer size of organizations tend to foster well-defined bureaucracies. Educational qualifications and political affiliations play a major role in the selection of those at the top, regardless of managerial capabilities. Forced to be competitive in order to survive, the private sector companies value efficiency over all else. They have little use for bureaucratic hierarchies.Corporate bureaucracies consist of performance-driven individuals, who function in situations of large spans of control.The number of people required to do a job is strictly monitored and adhered to, any excesses are trimmmed immediately based on optimum efficiency and job security is low. Managerial capabilities are usually the sole determining factors for high positions in a private sector organisation. Thus it is easier for an excellent performer to rise on the corporate ladder, whereas in the public sector, â€Å"seniority† is the determining factor. In other words, we might see an individual promoted purely on the basis of the fact that he or she has been in the organisation for a particular period of time, despite possible poor performance, while diregarding cases of good performance from more recent employees.

Article summary Essay Example | Topics and Well Written Essays - 500 words - 3

Article summary - Essay Example The author argues that Moliere satirizes both the protagonist and the society that he is a part of, seeking to bring in an element of moderation in reform (Rudin, 309). According to Rudin, the argument that Rousseau put forward indicated the ineptness of the critique of the protagonist in so much so that he appeared to be, at the end, at one with very society that he was critiquing. Apart from this, he appeared to be, right from the beginning, a caricature of an extreme form of idealism that was the subject of the comedy that the audience is supposed to laugh at. The Comedy of Manners is something that he becomes a part of through the laughter that he evokes (Rudin, 311). There are however, according to Rudin, devices, in the form of characters and otherwise, that Moliere employs so as to make the play a critique of both the society and the protagonist. Through these devices, the author is able to propose a middle path that would lead to a society that could then probably not be as dishonest and materialistic as the one that the plays talks of. The foils in the play, Philinte and Eliante are two devices that the playwright uses for the purpose of showing how it is possible to lead a life that is not entirely at odds with the society but also in accordance with certain rules of it. Eliante leads a life that is unacceptable to the protagonist, Alceste. However, he is in love with her and this love reveals an opportunity for his moving back to the society (Rudin, 312). Rudin points to the fact that for different eras, the way Alceste is perceived has been different and for the people of Moliere’s era, he was looked upon as a funny caricature while he was looked at as a hero who fought against the entire world of vice, by the Romantics (like Rousseau). He advocates a mixed response that may be possible for contemporary critics and viewers of the

Oil Drilling and Arctic National Wildlife Refuge Essay

Oil Drilling and Arctic National Wildlife Refuge - Essay Example al Plain of the Arctic National Wildlife Refuge: Updated Assessment, states that the coastal plain region harboring the 1.5 million-acre 1002 Area is "the largest unexplored, potential productive onshore basin in the United States." The oil industry has long argued in favor of the drilling for oil in the ANWR, but the idea was unpopular for decades among many members of the public and the U.S. government and no drilling was permitted. (Botkin and Keller, 2003) Analysis of Benefits and Costs As with all industrial developments especially in oil projects, issues actually revolve on just two opposing forces: environmental and social impacts. We are aware that ecological importance has become a major issue that must be included in our ventures due to the fact that we can not tolerate pollution anymore. However, most job generating and welfare increasing measures are only possible with the introduction of business that may have environmental repercussions. This dilemma is further highlighted by the ANWR issue. In this section, we take a look at the arguments in favor and not in favor of drilling in the ANWR. Arguments in Favor of Drilling a) The United States need s the oil and it will help us to be more independent on imported oil In the introduction, it was mentioned that oil prices rose dramatically in the United States due to problems in supply and legislation. However, this was actually just the fourth oil shock since 1973. The first one occurred when the Arab oil embargo of 1973-1974 occurred. Arab oil producing countries cut back productions and imposed an oil embargo on shipments forcing Americans to wait in lines to receive limited amounts of gasoline. Prices of oil more than doubled. The second occurred in 1978 with the overthrow of the Shah of Iran which... After having known both sides of a coin, we are now in a position to state our recommendation. In many industrial issues, a point where both sides supposedly found equal footing has been made. Suffice it to say, the developments pushed thru. In this study, however, we cannot find such point because in the developments where they were able to find one, immediate and long term environmental degradation became prominent. For sure, developments will bring about wealth and increased economic activity and we certainly do not want our country to be dictated by other countries. However, hard science and numerous experiences have proven that the development can negatively affect the wilderness as what had happened to Prudhoe Bay. Once development starts, there will be no stopping companies and those who benefits from it from finding a way to skip all those legal limitations. The development is actually a black hole problem where development results to further developments which results to fur ther expansion and so on and so forth. Congress voted not to drill in 2002. I agree with them. It is not that I do not want Alaskans to prosper. It is because there are technologies available already which are cleaner and greener. Alternative energy sources such as solar, geothermal and wind power are proving themselves to be business friendly and sufficient for customer demand.

Albatross Anchor Operational Changes Essay Example for Free

Albatross Anchor Operational Changes Essay

Development of Credit Facilities in Sierra Leone

Development of Credit Facilities in Sierra Leone Chapter 1 This study is on the creation of credit facilities to Small and Medium Size Enterprises in Sierra Leone with special focus on the construction industries. 1.1 Background to the Economy of Sierra Leone Sierra Leone is a relatively small country, on the West Coast of Africa with an area of approximately 28,000square miles. The estimated population is 5.5 million inhabitants, 30% of whom resides in the western area of the country according to recent census in 2006. The state of the country’s economy, immediately after independence from the British Colony in 1961 up to the 1970’s, was quite satisfactory in terms of performance. The exchange rate between the Leone and other foreign currencies was relatively good. More so, the British Pound Sterling was exchanged at One pound ( £1) to One Leone (Le1). The inflation rate was extremely low. The country’s earnings from exports were very much attractive, with Diamond export accounting for well over 50% of the country’s foreign exchange earnings. This was closely followed by cash crop exports such as Cocoa, coffee, oil palm, piassava and chillies. The country’s external debt position at this time was not high, Between 1972 to 1975, the economy started experiencing down turn that was mainly due to external factors, such as the famous oil price shock in 1973. Naturally, the 1980 Organisation of Africa Unity (OAU) summit that was hosted by the government of Sierra Leone fuelled the debt crisis in Sierra Leone. Because of the foreign exchange scarcity in the country, the credit agreement between domestic importers and their business partners aboard collapsed. In 1988, the country was forced to devalue her currency. Between 1992 and 1994, Sierra Leone successfully implemented an adjustment program supported by the International Monetary Fund (IMF) under the Right Accumulation Program (RAP). The World Bank also supported the program through the Reconstruction of Import Credit (RIC) in 1992 and the Structural Adjustment Credit (SAC) in 1993. Following the successful implementation of the RAP, the IMF approved a three year arrangement support under Enhanced Structural Adjustment Facility (ESAF). The implementation of the first annual program was disrupted by the escalation of the rebel activities in 1995. With the return of democracy in 1996, the IMF supported the economic recovery program adopted by the new Government with a second annual program under the ESAF. Poverty intensified with real per capita declining to US$142 in 2000. Since then Sierra Leone has been classified as the poorest country in the world and ranks at the bottom of the United Nations Development Programme (UNDP) Human Development Index. The growth in the economy has been underpinned by broad recovery in Agriculture, mining, manufacturing, construction and the service sector. The economy of the Country continues to worsen in early 1992 when the civil unrest started which causes untold sufferings on humans and the entire country. Many people were forced out of their houses and eventually became displaced persons and refugees in their own country and neighbouring country like Guinea, The Gambia and Ghana. Almost all segments of the business economy collapsed including banking and lending institutions. It was then the problems of growth in economy worsen and every thing completely deteriorated and collapsed. The almost 11 years of civil unrest ended in March 2002. The end of the war actually opens the door for a new beginning, for new economic growth and prosperity in the face of peace and unity. The situation has recently worsened because of the credit crunch faced by many of the world famous banking institutions and Sierra Leone has not been any exceptions. The effect coupled with other factors has created more gaps for banking institutions to provide loans to small and medium enterprises. In a press release from Prlog Dec. 15, 2008 by Robin Trehan as quoted â€Å"SMEs represent over ninety-nine percent of the country’s employers. While it is essential that these businesses obtain the necessary funding to remain active, they are often the first to suffer when financial crisis hits. Banks already facing financial hardship often deem SMEs as too risky to finance. Credit terms are becoming increasingly harder and qualifying for financing is subject to much stricter guidelines. The re are things that SMEs can do, however, to increase their chances of finding financing†. 1.2 Statement of the Problem The term credit in this thesis refers to an amount or sum placed at a person’s disposal by a bank and usually to be repaid with interest within a given period of time. Small and Medium Size Enterprises (SME) is very important in terms of the dynamic role in the development of the private sector in Sierra Leone. The SME’s are regarded as an engine for any economic growth and development in any country. They provide opportunities for job creation and expansion in the physical reconstruction of the economy especially for a post war development country like Sierra Leone. Majority of the physical infrastructures ranging from housing, office buildings and business structures were all destroyed during the civil unrest. These structures need to be reconstructed for the economy to grow and become prosper. Today many construction companies or firms have emerged to assist in the rehabilitation and reconstruction. While there may be some of the construction companies who have existed of years, it is also true that majority of these construction companies are new ones who are just coming up to help and provide their expertise in the development of Sierra Leone. But yet still, it is a challenge for many of these companies to adequately involve in the process of rehabilitation and reconstruction simply because they cannot get the required finance in the form of overdraft or loans, or provide the necessary collateral for the banks as required, making them less competitive. In Sierra Leone the performance of SME’s over the years has been very poor which is due to the fact that the creation of credit from the banks which is an essential stimulant for private investment in the construction industries has been grossly under performing. This is one of the reasons for poor performance of the economy in terms of growth in most developing countries including Sierra Leone. Construction companies have not been able to access huge funds by way of loan over the years from the banking and other financial institutions, mainly due to lack of confidence in the private sector as a result of problems like moral hazards and the absence of collateral security and the lack of experience in construction engineering. 1.3 Justification of the Study The importance of the construction industries in the process of rehabilitation and reconstruction of the war towns in Sierra Leone cannot be over-emphasized. During the war there was so much destruction of infrastructures in the country, now that there is peace there is high need for reconstructions and the development of new roads and structures to aid national growth. International organisations like the International Monetary Fund (IMF), World Bank, African Development Bank (ADB) main focus is to assist Small Medium Size Enterprises (SME) in developing countries gain strong financial base. It had been felt that SMEs employ majority of the work force in the developing countries, therefore, they have realised that when SME become financially stable the economy of the nation will be better and that the citizens will be able to live a comfortable life. The role of commercial banks and other financial institutions in private sector development and the assessment of their overall performance in terms of economic growth and development has not received much of the attention by researchers. The central bank maintaining interest rate at high level has greatly contributed to discourage SMEs from borrowing from retail banks and other financial institution for investment purposes. This is one of the reasons why most SMEs are under developed. Besides commercial banks are requesting for very stiff conditions to access loan by the private sector. A study on the provision of credit to construction companies for investment towards economic growth has not been studied in greater detail by previous researchers. This among others, gave me the urge to probe into the activities of the commercial banks and other financial institutions in the creation of credit to construction companies in Sierra Leone, This study is to help government and other professionals as well as other stakeholders, to grasp fully the implications of credit refusal to small and medium size enterprises and how it will affect the development of the nation. The result of this study is hope to enable banking and other financial institutions, local and national government and other stakeholders to device concrete ways by which small and medium size enterprises can easily get access to credit to undertake construction programmes. 1.4 Objectives of the study The main aim of the study is to assess the implications of credit creations by the banks and other financial institutions to Small and Medium Size Enterprises with special focus on the Construction Industries for economic growth and development in Sierra Leone. The specific objectives are: To determine the extent to which banks have been contributing to the development of the construction industries in Sierra Leone. To examine some of the reasons responsible for the inability of the construction industries to solicit loans from the banks and other financial institutions for the purpose of investment. To establish reasons for the reluctance of the banking and other financial institutions to provide the much needed funds for private sector development. To examine the reasons for the reluctance of the banking sector to provide the much needed funds for SME in the construction industries for development, even though SME’s are regarded as the engine of economic growth. 1.5 Research Questions: Certain research questions will be drawn up for proper examination of this objective. These include: To what extent do commercial banks provide funds to Small and Medium Size Enterprises in the construction Industries? What are the main problems encountered by the construction companies in terms of securing loans and overdrafts from the commercial banks? What is responsible for the low investment of the private sector (SME’s) in Sierra Leone? What is the role of the central bank in facilitating credit creation for SME’s in the pursuit of development in Sierra Leone? What is the role of the Government ministry in the area of infrastructural developmental plans for Sierra Leone? The study will make use of secondary data received from the Bank of Sierra Leone, Commercial Banks and some of the registered construction companies in Sierra Leone. The study will try to reveal the reasons for the constraints Small and Medium size Enterprises are facing in securing credit facilities from the banks. Interviews will be conducted with senior officers of both the banking industries and construction sectors, together with government officers in the area of national development for the country. 1.6 Definition of Operational Terms: 1. Credit Creation: Credit creation is the multiple expansions of banks demand deposits. It is an open secret now that banks advance a major portion of their deposits to the borrowers and keep smaller parts of deposits to the customers on demand. 2. Venture Capital: Venture Capital is the name given to equity finance provided to support new, expanding and entrepreneurial businesses. Venture capitalists usually prefer to take a close interest in the business that is the subject of their investment. This could involve taking part in decision made by the business. Funds provided by venture capitalist are often referred to as private capital.(Mclaney E, 2003) 3. Gearing: Small businesses are in a fundamentally different position from that of the larger one on the issue of gearing. Financial risk to which capital gearing gives rise tends to emphasise operating risk, which will be present with or without gearing. Small businesses are more exposed to financial risk than public liability companies. (Mclaney, 2003) 4. Bank and Institutional Debt: Long term loans are available from banks and other financial institutions at both fixed and floating interest rates, provided the issuing bank is convinced that the purpose of the loan is a good one. The cost of bank loan is usually a floating rate of 3-6 percent above the base rate, depending on the perceived risk of the borrowing company. The issuing bank charges an arrangement fee on bank loans, which are usually secured by a fixed and floating charge, the nature of the charge depending on the availability of assets of good quality to act as security. A repayment schedule is often agreed between the bank and the borrowing company, structured to meet the specific needs of the borrower and in accordance with the lending policies of the bank. (Watson D Head A, 2007) 5. Security –the Bank’s Perspective: A bank has little to lose and much to gain by taking security for a loan. A bank’s solicitor should check that the borrower and any other party providing security have capacity to do so. (The company act 1989, prima facie, a company could pursue only the objects for which its memorandum stated it was incorporated) 6. Security – the Borrower’s Perspective: It is often difficult for a borrower to argue against a reasonable request for security. However, some borrowers will be contractually prohibited from providing security by a negative pledge in a document to which they are already a party. Specialised lending for financing a project will always be secured over the asset or project in question. (Adams D, 2006) 7. Cash Flow Statements for Small Companies: Financial Report Standard (FRS1) prescribes a format for cash flow statements. Except for very small companies, all companies are required to prepare a cash flow statement for each accounting period. There are two approaches available under the standard; the direct method which shows the operating cash receipts and payments summing to the net cash flow from operating activities, and the indirect method which identifies the net cash flow via reconciliation to operating profit. (Wood F, 2002). CHAPTER 2 Literature Review 2.0 Introduction The purpose of this chapter is to make a review of related literature on Small and Medium isze Enterprises and the Creation of Credit in the Construction Industry. With these literatures the researcher will have a better understanding of the study, as well as what has already been done on it in the form of previous research. 2.2 Definition of Small and Medium Size Enterprises A business can be considered small on basis of predetermined criteria such as the number of employees, annual turnover or capital employed. In the late 1990s, it was estimated that small businesses with fewer than 50 employees accounted for 99 per cent of all UK business, almost 50 per cent of non government employment and 42 per cent of turnover. Small firms have become a focus for governmental policy at both national and intergovernmental level. Bolton in his report in 1971 identified three main characteristics of a small firm: were independently owned The business securities are not quoted in any established capital market that is they are not traded in the efficient market. were managed in a personalised way- The ownership of the business’s equity and hence its control lie in the hands of a small close knit-group; that is it is a family type business. possessed a limited share of the total market 2.3 Nature of Small and Medium Size Enterprises The Bolton report, the first official government inquiry into small firms attempted to establish standard definitions of small firms for particular sector of industry based on numerical indicators of size such as sales or number of employees. A firm with 250 employees in a labour intensive industry may still be a small firm. (Brown, 1987) Criteria for Small and Medium Size Enterprises Size Category Number of Employees Maximum Annual Turnover (euros) Maximum Balance balance sheet total Micro Firm 0 -9 2 million euros 2 million Small Firm 10 – 49 10 million euros 10 million Medium-sized Firm 50 – 249 50 million 43 million 2.4 Objectives of Small and Medium Size Enterprises In SME’s the managers and the shareholders are likely to be substantially the same person or at least closely connected with one another. Thus agency problems, and their potential associated costs, are likely to have little or possibly no impact on the typical small business. Because of the elimination of agency gap, most managers of SME’s are shareholder; they would make decisions following a pure wealth-maximising goal more determinedly than would be the case in the typical large enterprise. The motives of managers or owners of small businesses are diverse. These motives might be the desire to experience the satisfaction of building up a business, a desire to lead a particular way of life, or a desire to keep someone (perhaps family) tradition alive. Since it is possible for managers to know the personal objectives of shareholders of small business, decisions can probably be made with these in mind. Both large and small businesses that makes a series of decisions causing the wealth to diminish, will sooner or later fail. Wealth maximisation goal is very important to small business and cannot be ignored. 2.5 Organisation of Small and Medium Enterprises The research will consider Small and Medium Size Enterprises in the construction industries that are organised as private limited companies. According to Mclaney (2003) private companies need be of no minimum size; public companies must issue at least  £50,000 of nominal share capital, of which 25% must be paid up. There is no upper limit on the size of a private company. Private companies are entitled to restrict the transfer of their shares; that is it is possible for the company’s Articles of Association to contain a clause giving the directors the power to refuse to register a transfer, at their discretion. While private companies must publish annual accounts, the volume of details is rather less than that which the law requires of public companies. 2.6 Sources of Finance for Small and Medium Size Enterprises Several inquires have dealt with the financing of SMEs and each of these enquires discovered, to a greater extent, that small businesses find it more difficult and more expensive to raise external finance. A particular problem faced by small businesses in their quest for equity capital is the lack of an `exit route’. Generally investors require that there be some way of liquidating their investment before they are prepared to commit funds to it. A number of schemes have been introduced to help small businesses: 2.6.1. The loan Guarantee Scheme (LGS) as first introduced in 1981 to cover situations were potential borrowers were unable to provide sufficient collateral or where the bank deem the risk of lending unacceptable. 2.6.2. The Enterprise Investment Scheme (EIS) – This scheme replaced the Business Expansion Scheme (BES) and it is designed to help small unquoted companies to raise equity finance from business angels 2.6.3.The Venture Capital Trust (VCT) – The trust was introduced in 1995 to encourage individuals to invest in smaller, unlisted trading companies. Venture Capital is the name given to equity finance provided to support new, expanding and entrepreneurial businesses. Venture capitalists usually prefer to take a close interest in the business. This could involve taking part in decision made by the business. Funds provided by venture capitalist are often referred to as private capital.(Mclaney E, 2003) 2.6.4. The Enterprise Fund (EF) it was announced in the competitiveness white paper in 1998 and is designed to help the financing of small businesses with growth potential. 2.6.5. The National Business Angel Network (NBAN) it was launched in 1999 to connect ‘business angels’ with companies seeking equity capital 2.6.6. The late payment of Commercial Debts (Interest) act 1998 gives certain small businesses a statutory right to claim interest from large businesses and the public sector on late payment of commercial debts. 2.7 Gearing Small businesses are in a fundamentally different position from that of the larger one on the issue of gearing. Financial risk to which capital gearing gives rise tends to emphasise operating risk, which will be present with or without gearing. Small businesses are more exposed to financial risk than public liability companies.(Mclaney,2003) 2.8 Help and Advice to Small Businesses One of the major barriers faced by SMEs is the lack of information, help and advice on their operations. Recent initiative to improve this sphere includes: 2.8.1. The business link network – organised in 1993 as a ‘one stop shop’ for information and advice to SMEs. It brings together the services of major business development services in the single accessible location. 2.8.2. The Enterprise Zone – launched in 1997 as a definitive internet site for business information. It provides help on a whole range of business issues. 2.8.3. The Information Society Initiative/Interforum E-Commerce Award – launched in 1999 as part of government’s e-commerce strategy. It is essentially an award scheme to recognise and reward best practice in the use of electronic trading among smaller firms. 2.9 Bank and Institutional Debt Long term loans are available from banks and other financial institutions at both fixed and floating interest rates, provided the issuing bank is convinced that the purpose of the loan is a good one. The cost of bank loan is usually a floating rate of 3-6 percent above the base rate, depending on the perceived risk of the borrowing company. The issuing bank charges an arrangement fee on bank loans, which are usually secured by a fixed and floating charge, the nature of the charge depending on the availability of assets of good quality to act as security. A repayment schedule is often agreed between the bank and the borrowing company, structured to meet the specific needs of the borrower and in accordance with the lending policies of the bank. (Watson D Head A, 2007) 2.10 Security –the Bank’s Perspective A bank has little to lose and much to gain by taking security for a loan. A bank’s solicitor should check that the borrower and any other party providing security have capacity to do so. (The company act 1989, prima facie, a company could pursue only the objects for which its memorandum stated it was incorporated) 2.11 Security – the Borrower’s Perspective It is often difficult for a borrower to argue against a reasonable request for security. However, some borrowers will be contractually prohibited from providing security by a negative pledge in a document to which they are already a party. Specialised lending for financing a project will always be secured over the asset or project in question. (Adams D,2006) 2.12 Working Capital Problems of the Small Business Working capital is the difference between current assets over current liabilities. The amount invested by businesses in working capital is often high in proportion to the total assets employed. It is important that these amounts are managed properly. It is often claimed that many small businesses suffer from a lack of capital and, where this is the case, tight control over working capital investment becomes critical. There are evidence, however, that SB are not very good at managing their working capital, and this has been cited as the major cause of their high failure rate compared with that of large businesses. 2.13 Credit Management Small businesses don’t have the resources to manage their trade debtors (account receivables) effectively. Most small businesses don’t have a credit control department. Small business also lack proper debt collection procedures, such as prompt invoicing and sending out regular statements. These risks probably tend to increase where there is an excessive concern for growth. In an attempt to increase sales, small businesses may be too willing to extend credit to customers that are poor credit risk Lack of market power is another issue for small businesses. They find themselves in a weak position when negotiating credit terms with larger businesses. When big customer exceeds the terms of credit, the small supplier may feel inhibited from pressing the customer for payment in case future sales are lost. (A survey undertaken by the Credit Management Research Centre (CMRC) during April and June, 2003, indicates that small businesses are likely to have to wait an average of 60 days for their trade debtors to pay. 2.14 Cash Flow Statements for Small Companies Financial Report Standard (FRS1) prescribes a format for cash flow statements. Except for very small companies, all companies are required to prepare a cash flow statement for each accounting period. There are two approaches available under the standard; the direct method which shows the operating cash receipts and payments summing to the net cash flow from operating activities, and the indirect method which identifies the net cash flow via reconciliation to operating profit.(Wood F,2002) Credit Creation 2.15 Definition of Credit Creation The BNET business dictionary defines credit creation as the collective ability of lenders to make money available to borrowers. Credit creation is the multiple expansions of banks demand deposits. Banks advance a major portion of their deposits to the borrowers and keep smaller parts of deposits to customers on demand. The tendency on the part of commercial banks to expand their demand deposits as a multiple of their excess cash reserve is called creation of credit. 2.16 Functions of Financial Intermediation in Credit Creation Financial intermediation is the process of channelling funds between those who wish to lend or invest and those who wish to borrow or require investment funds. Financial intermediaries act as principal, creating new financial assets and liabilities. They do not act solely as agents, charging a commission for their services. (The Monetary and Financial System-CIB/BPP Publication 1993 Edition) Any institution standing between the ultimate provider of funds and the ultimate user of funds is engaged in financial intermediation. There are many types of institutions and other organisations that act as intermediaries in matching firms and individuals who need finance with those who wish to invest. These institutions also provide other services which are non-intermediary services like financial advisory services, fund management services and advice to undertakers and mergers provider by merchant banks. Some of the organisation that acts as financial intermediaries is as follows: 2.16.1 Clearing Banks – this bank participate in system which simplifies daily payment so that all the thousands of individual customer payments are reduced to a few transfers of credit between the banks. They offer various accounts to investors and provide large amount of short to medium-term loans to the business sector and the personal sector. The work of these institutions can best be understood through a consideration of the main items in their balance sheet. 2.16.2 Clearing Bank Liabilities – The money from the banks responsible comes chiefly from their customer’s sight and time deposits- mostly current and deposit accounts with which most people are familiar. An important additional item relates to certificates of deposit. These are issued generally for a medium amount of  £50,000 and a maximum of  £500,000 with an initial term to maturity of from three months to five years. Clearing Bank Assets Customers’ money is re-lent in a variety of ways. The main aim of the bank is to have a range of lending instruments of varying terms so that money can be recovered quickly and yet, at the same time, earn the maximum return. 2.16.3 Investment Banks / Merchant Banks The investment banks or Merchant banks have some functions that they undertake: 2.16.3.i Financial Advice to Business Firms Few manufacturing or commercial companies of any size can now afford to be without the advice of a merchant bank. Such advice is necessary in order to obtain investment capital, to invest surplus funds, to guard against takeover, or to take over others. Increasingly, the merchant banks have themselves become activity involved in the financial management of their business client and have had an influence over the direction these affairs have taken. 2.16.3.ii Providing Finance to Business Merchant banks also compete in the services of leasing, factoring, hire-purchase and general lending. They are also the gateway to the capital market for long-term funds because they are likely to have specified departments handling capital issues as ‘issuing houses’. 2.16.4 Foreign Trade A lot of merchant bank are active in the promotion of foreign trade by providing marine insurance, credits, and assistance in appointing foreign agents and arranging foreign payments. Merchant bank is essentially in the general business of creating wealth and of helping those who show that they are capable of successful business enterprise. It is expected that merchant banks will operate without the large branch network necessary for a clearing bank, they work closely with their clients and be more ready to take business risk and promote business enterprise than clearing bank. 2.16.5 Building Societies These take deposits from the household sector and lend to individuals buying their own homes. They have recently grown rapidly in the UK and now provide many of the services offered by clearing banks. Over the years many have converted to banks. 2.16.6 Finance Companies/Houses – Providing medium-term instalment credits to the business and personal sector. These are usually owned by business sector firms or by other financial itermediaries. 2.17 Services Provided by Financial Institutions Financial institutions are organisations that provide services in connection with one or more of the following:- Financial intermediation, linking ultimate providers of funds with ultimate users and creating new financial assets in the process. Exchanging financial assets on behalf of their customers, that is acting as brokers or agents for clients. Exchanging financial assets for their own accounts proprietary dealers, as they are termed. Helping to create financial assets for their customers, and then selling these assets to others in the market underwriting new share issues, for example Providing investment advice to others, example to people seeking a personal pension or to firms on mergers and takeovers. Fund management- managing the whole or part of a pension fund, for example some large non-financial companies have their own financial subsidiaries. In the United Kingdom Ford Motor Finance and Mark and Spencer Finance Se Development of Credit Facilities in Sierra Leone Development of Credit Facilities in Sierra Leone Chapter 1 This study is on the creation of credit facilities to Small and Medium Size Enterprises in Sierra Leone with special focus on the construction industries. 1.1 Background to the Economy of Sierra Leone Sierra Leone is a relatively small country, on the West Coast of Africa with an area of approximately 28,000square miles. The estimated population is 5.5 million inhabitants, 30% of whom resides in the western area of the country according to recent census in 2006. The state of the country’s economy, immediately after independence from the British Colony in 1961 up to the 1970’s, was quite satisfactory in terms of performance. The exchange rate between the Leone and other foreign currencies was relatively good. More so, the British Pound Sterling was exchanged at One pound ( £1) to One Leone (Le1). The inflation rate was extremely low. The country’s earnings from exports were very much attractive, with Diamond export accounting for well over 50% of the country’s foreign exchange earnings. This was closely followed by cash crop exports such as Cocoa, coffee, oil palm, piassava and chillies. The country’s external debt position at this time was not high, Between 1972 to 1975, the economy started experiencing down turn that was mainly due to external factors, such as the famous oil price shock in 1973. Naturally, the 1980 Organisation of Africa Unity (OAU) summit that was hosted by the government of Sierra Leone fuelled the debt crisis in Sierra Leone. Because of the foreign exchange scarcity in the country, the credit agreement between domestic importers and their business partners aboard collapsed. In 1988, the country was forced to devalue her currency. Between 1992 and 1994, Sierra Leone successfully implemented an adjustment program supported by the International Monetary Fund (IMF) under the Right Accumulation Program (RAP). The World Bank also supported the program through the Reconstruction of Import Credit (RIC) in 1992 and the Structural Adjustment Credit (SAC) in 1993. Following the successful implementation of the RAP, the IMF approved a three year arrangement support under Enhanced Structural Adjustment Facility (ESAF). The implementation of the first annual program was disrupted by the escalation of the rebel activities in 1995. With the return of democracy in 1996, the IMF supported the economic recovery program adopted by the new Government with a second annual program under the ESAF. Poverty intensified with real per capita declining to US$142 in 2000. Since then Sierra Leone has been classified as the poorest country in the world and ranks at the bottom of the United Nations Development Programme (UNDP) Human Development Index. The growth in the economy has been underpinned by broad recovery in Agriculture, mining, manufacturing, construction and the service sector. The economy of the Country continues to worsen in early 1992 when the civil unrest started which causes untold sufferings on humans and the entire country. Many people were forced out of their houses and eventually became displaced persons and refugees in their own country and neighbouring country like Guinea, The Gambia and Ghana. Almost all segments of the business economy collapsed including banking and lending institutions. It was then the problems of growth in economy worsen and every thing completely deteriorated and collapsed. The almost 11 years of civil unrest ended in March 2002. The end of the war actually opens the door for a new beginning, for new economic growth and prosperity in the face of peace and unity. The situation has recently worsened because of the credit crunch faced by many of the world famous banking institutions and Sierra Leone has not been any exceptions. The effect coupled with other factors has created more gaps for banking institutions to provide loans to small and medium enterprises. In a press release from Prlog Dec. 15, 2008 by Robin Trehan as quoted â€Å"SMEs represent over ninety-nine percent of the country’s employers. While it is essential that these businesses obtain the necessary funding to remain active, they are often the first to suffer when financial crisis hits. Banks already facing financial hardship often deem SMEs as too risky to finance. Credit terms are becoming increasingly harder and qualifying for financing is subject to much stricter guidelines. The re are things that SMEs can do, however, to increase their chances of finding financing†. 1.2 Statement of the Problem The term credit in this thesis refers to an amount or sum placed at a person’s disposal by a bank and usually to be repaid with interest within a given period of time. Small and Medium Size Enterprises (SME) is very important in terms of the dynamic role in the development of the private sector in Sierra Leone. The SME’s are regarded as an engine for any economic growth and development in any country. They provide opportunities for job creation and expansion in the physical reconstruction of the economy especially for a post war development country like Sierra Leone. Majority of the physical infrastructures ranging from housing, office buildings and business structures were all destroyed during the civil unrest. These structures need to be reconstructed for the economy to grow and become prosper. Today many construction companies or firms have emerged to assist in the rehabilitation and reconstruction. While there may be some of the construction companies who have existed of years, it is also true that majority of these construction companies are new ones who are just coming up to help and provide their expertise in the development of Sierra Leone. But yet still, it is a challenge for many of these companies to adequately involve in the process of rehabilitation and reconstruction simply because they cannot get the required finance in the form of overdraft or loans, or provide the necessary collateral for the banks as required, making them less competitive. In Sierra Leone the performance of SME’s over the years has been very poor which is due to the fact that the creation of credit from the banks which is an essential stimulant for private investment in the construction industries has been grossly under performing. This is one of the reasons for poor performance of the economy in terms of growth in most developing countries including Sierra Leone. Construction companies have not been able to access huge funds by way of loan over the years from the banking and other financial institutions, mainly due to lack of confidence in the private sector as a result of problems like moral hazards and the absence of collateral security and the lack of experience in construction engineering. 1.3 Justification of the Study The importance of the construction industries in the process of rehabilitation and reconstruction of the war towns in Sierra Leone cannot be over-emphasized. During the war there was so much destruction of infrastructures in the country, now that there is peace there is high need for reconstructions and the development of new roads and structures to aid national growth. International organisations like the International Monetary Fund (IMF), World Bank, African Development Bank (ADB) main focus is to assist Small Medium Size Enterprises (SME) in developing countries gain strong financial base. It had been felt that SMEs employ majority of the work force in the developing countries, therefore, they have realised that when SME become financially stable the economy of the nation will be better and that the citizens will be able to live a comfortable life. The role of commercial banks and other financial institutions in private sector development and the assessment of their overall performance in terms of economic growth and development has not received much of the attention by researchers. The central bank maintaining interest rate at high level has greatly contributed to discourage SMEs from borrowing from retail banks and other financial institution for investment purposes. This is one of the reasons why most SMEs are under developed. Besides commercial banks are requesting for very stiff conditions to access loan by the private sector. A study on the provision of credit to construction companies for investment towards economic growth has not been studied in greater detail by previous researchers. This among others, gave me the urge to probe into the activities of the commercial banks and other financial institutions in the creation of credit to construction companies in Sierra Leone, This study is to help government and other professionals as well as other stakeholders, to grasp fully the implications of credit refusal to small and medium size enterprises and how it will affect the development of the nation. The result of this study is hope to enable banking and other financial institutions, local and national government and other stakeholders to device concrete ways by which small and medium size enterprises can easily get access to credit to undertake construction programmes. 1.4 Objectives of the study The main aim of the study is to assess the implications of credit creations by the banks and other financial institutions to Small and Medium Size Enterprises with special focus on the Construction Industries for economic growth and development in Sierra Leone. The specific objectives are: To determine the extent to which banks have been contributing to the development of the construction industries in Sierra Leone. To examine some of the reasons responsible for the inability of the construction industries to solicit loans from the banks and other financial institutions for the purpose of investment. To establish reasons for the reluctance of the banking and other financial institutions to provide the much needed funds for private sector development. To examine the reasons for the reluctance of the banking sector to provide the much needed funds for SME in the construction industries for development, even though SME’s are regarded as the engine of economic growth. 1.5 Research Questions: Certain research questions will be drawn up for proper examination of this objective. These include: To what extent do commercial banks provide funds to Small and Medium Size Enterprises in the construction Industries? What are the main problems encountered by the construction companies in terms of securing loans and overdrafts from the commercial banks? What is responsible for the low investment of the private sector (SME’s) in Sierra Leone? What is the role of the central bank in facilitating credit creation for SME’s in the pursuit of development in Sierra Leone? What is the role of the Government ministry in the area of infrastructural developmental plans for Sierra Leone? The study will make use of secondary data received from the Bank of Sierra Leone, Commercial Banks and some of the registered construction companies in Sierra Leone. The study will try to reveal the reasons for the constraints Small and Medium size Enterprises are facing in securing credit facilities from the banks. Interviews will be conducted with senior officers of both the banking industries and construction sectors, together with government officers in the area of national development for the country. 1.6 Definition of Operational Terms: 1. Credit Creation: Credit creation is the multiple expansions of banks demand deposits. It is an open secret now that banks advance a major portion of their deposits to the borrowers and keep smaller parts of deposits to the customers on demand. 2. Venture Capital: Venture Capital is the name given to equity finance provided to support new, expanding and entrepreneurial businesses. Venture capitalists usually prefer to take a close interest in the business that is the subject of their investment. This could involve taking part in decision made by the business. Funds provided by venture capitalist are often referred to as private capital.(Mclaney E, 2003) 3. Gearing: Small businesses are in a fundamentally different position from that of the larger one on the issue of gearing. Financial risk to which capital gearing gives rise tends to emphasise operating risk, which will be present with or without gearing. Small businesses are more exposed to financial risk than public liability companies. (Mclaney, 2003) 4. Bank and Institutional Debt: Long term loans are available from banks and other financial institutions at both fixed and floating interest rates, provided the issuing bank is convinced that the purpose of the loan is a good one. The cost of bank loan is usually a floating rate of 3-6 percent above the base rate, depending on the perceived risk of the borrowing company. The issuing bank charges an arrangement fee on bank loans, which are usually secured by a fixed and floating charge, the nature of the charge depending on the availability of assets of good quality to act as security. A repayment schedule is often agreed between the bank and the borrowing company, structured to meet the specific needs of the borrower and in accordance with the lending policies of the bank. (Watson D Head A, 2007) 5. Security –the Bank’s Perspective: A bank has little to lose and much to gain by taking security for a loan. A bank’s solicitor should check that the borrower and any other party providing security have capacity to do so. (The company act 1989, prima facie, a company could pursue only the objects for which its memorandum stated it was incorporated) 6. Security – the Borrower’s Perspective: It is often difficult for a borrower to argue against a reasonable request for security. However, some borrowers will be contractually prohibited from providing security by a negative pledge in a document to which they are already a party. Specialised lending for financing a project will always be secured over the asset or project in question. (Adams D, 2006) 7. Cash Flow Statements for Small Companies: Financial Report Standard (FRS1) prescribes a format for cash flow statements. Except for very small companies, all companies are required to prepare a cash flow statement for each accounting period. There are two approaches available under the standard; the direct method which shows the operating cash receipts and payments summing to the net cash flow from operating activities, and the indirect method which identifies the net cash flow via reconciliation to operating profit. (Wood F, 2002). CHAPTER 2 Literature Review 2.0 Introduction The purpose of this chapter is to make a review of related literature on Small and Medium isze Enterprises and the Creation of Credit in the Construction Industry. With these literatures the researcher will have a better understanding of the study, as well as what has already been done on it in the form of previous research. 2.2 Definition of Small and Medium Size Enterprises A business can be considered small on basis of predetermined criteria such as the number of employees, annual turnover or capital employed. In the late 1990s, it was estimated that small businesses with fewer than 50 employees accounted for 99 per cent of all UK business, almost 50 per cent of non government employment and 42 per cent of turnover. Small firms have become a focus for governmental policy at both national and intergovernmental level. Bolton in his report in 1971 identified three main characteristics of a small firm: were independently owned The business securities are not quoted in any established capital market that is they are not traded in the efficient market. were managed in a personalised way- The ownership of the business’s equity and hence its control lie in the hands of a small close knit-group; that is it is a family type business. possessed a limited share of the total market 2.3 Nature of Small and Medium Size Enterprises The Bolton report, the first official government inquiry into small firms attempted to establish standard definitions of small firms for particular sector of industry based on numerical indicators of size such as sales or number of employees. A firm with 250 employees in a labour intensive industry may still be a small firm. (Brown, 1987) Criteria for Small and Medium Size Enterprises Size Category Number of Employees Maximum Annual Turnover (euros) Maximum Balance balance sheet total Micro Firm 0 -9 2 million euros 2 million Small Firm 10 – 49 10 million euros 10 million Medium-sized Firm 50 – 249 50 million 43 million 2.4 Objectives of Small and Medium Size Enterprises In SME’s the managers and the shareholders are likely to be substantially the same person or at least closely connected with one another. Thus agency problems, and their potential associated costs, are likely to have little or possibly no impact on the typical small business. Because of the elimination of agency gap, most managers of SME’s are shareholder; they would make decisions following a pure wealth-maximising goal more determinedly than would be the case in the typical large enterprise. The motives of managers or owners of small businesses are diverse. These motives might be the desire to experience the satisfaction of building up a business, a desire to lead a particular way of life, or a desire to keep someone (perhaps family) tradition alive. Since it is possible for managers to know the personal objectives of shareholders of small business, decisions can probably be made with these in mind. Both large and small businesses that makes a series of decisions causing the wealth to diminish, will sooner or later fail. Wealth maximisation goal is very important to small business and cannot be ignored. 2.5 Organisation of Small and Medium Enterprises The research will consider Small and Medium Size Enterprises in the construction industries that are organised as private limited companies. According to Mclaney (2003) private companies need be of no minimum size; public companies must issue at least  £50,000 of nominal share capital, of which 25% must be paid up. There is no upper limit on the size of a private company. Private companies are entitled to restrict the transfer of their shares; that is it is possible for the company’s Articles of Association to contain a clause giving the directors the power to refuse to register a transfer, at their discretion. While private companies must publish annual accounts, the volume of details is rather less than that which the law requires of public companies. 2.6 Sources of Finance for Small and Medium Size Enterprises Several inquires have dealt with the financing of SMEs and each of these enquires discovered, to a greater extent, that small businesses find it more difficult and more expensive to raise external finance. A particular problem faced by small businesses in their quest for equity capital is the lack of an `exit route’. Generally investors require that there be some way of liquidating their investment before they are prepared to commit funds to it. A number of schemes have been introduced to help small businesses: 2.6.1. The loan Guarantee Scheme (LGS) as first introduced in 1981 to cover situations were potential borrowers were unable to provide sufficient collateral or where the bank deem the risk of lending unacceptable. 2.6.2. The Enterprise Investment Scheme (EIS) – This scheme replaced the Business Expansion Scheme (BES) and it is designed to help small unquoted companies to raise equity finance from business angels 2.6.3.The Venture Capital Trust (VCT) – The trust was introduced in 1995 to encourage individuals to invest in smaller, unlisted trading companies. Venture Capital is the name given to equity finance provided to support new, expanding and entrepreneurial businesses. Venture capitalists usually prefer to take a close interest in the business. This could involve taking part in decision made by the business. Funds provided by venture capitalist are often referred to as private capital.(Mclaney E, 2003) 2.6.4. The Enterprise Fund (EF) it was announced in the competitiveness white paper in 1998 and is designed to help the financing of small businesses with growth potential. 2.6.5. The National Business Angel Network (NBAN) it was launched in 1999 to connect ‘business angels’ with companies seeking equity capital 2.6.6. The late payment of Commercial Debts (Interest) act 1998 gives certain small businesses a statutory right to claim interest from large businesses and the public sector on late payment of commercial debts. 2.7 Gearing Small businesses are in a fundamentally different position from that of the larger one on the issue of gearing. Financial risk to which capital gearing gives rise tends to emphasise operating risk, which will be present with or without gearing. Small businesses are more exposed to financial risk than public liability companies.(Mclaney,2003) 2.8 Help and Advice to Small Businesses One of the major barriers faced by SMEs is the lack of information, help and advice on their operations. Recent initiative to improve this sphere includes: 2.8.1. The business link network – organised in 1993 as a ‘one stop shop’ for information and advice to SMEs. It brings together the services of major business development services in the single accessible location. 2.8.2. The Enterprise Zone – launched in 1997 as a definitive internet site for business information. It provides help on a whole range of business issues. 2.8.3. The Information Society Initiative/Interforum E-Commerce Award – launched in 1999 as part of government’s e-commerce strategy. It is essentially an award scheme to recognise and reward best practice in the use of electronic trading among smaller firms. 2.9 Bank and Institutional Debt Long term loans are available from banks and other financial institutions at both fixed and floating interest rates, provided the issuing bank is convinced that the purpose of the loan is a good one. The cost of bank loan is usually a floating rate of 3-6 percent above the base rate, depending on the perceived risk of the borrowing company. The issuing bank charges an arrangement fee on bank loans, which are usually secured by a fixed and floating charge, the nature of the charge depending on the availability of assets of good quality to act as security. A repayment schedule is often agreed between the bank and the borrowing company, structured to meet the specific needs of the borrower and in accordance with the lending policies of the bank. (Watson D Head A, 2007) 2.10 Security –the Bank’s Perspective A bank has little to lose and much to gain by taking security for a loan. A bank’s solicitor should check that the borrower and any other party providing security have capacity to do so. (The company act 1989, prima facie, a company could pursue only the objects for which its memorandum stated it was incorporated) 2.11 Security – the Borrower’s Perspective It is often difficult for a borrower to argue against a reasonable request for security. However, some borrowers will be contractually prohibited from providing security by a negative pledge in a document to which they are already a party. Specialised lending for financing a project will always be secured over the asset or project in question. (Adams D,2006) 2.12 Working Capital Problems of the Small Business Working capital is the difference between current assets over current liabilities. The amount invested by businesses in working capital is often high in proportion to the total assets employed. It is important that these amounts are managed properly. It is often claimed that many small businesses suffer from a lack of capital and, where this is the case, tight control over working capital investment becomes critical. There are evidence, however, that SB are not very good at managing their working capital, and this has been cited as the major cause of their high failure rate compared with that of large businesses. 2.13 Credit Management Small businesses don’t have the resources to manage their trade debtors (account receivables) effectively. Most small businesses don’t have a credit control department. Small business also lack proper debt collection procedures, such as prompt invoicing and sending out regular statements. These risks probably tend to increase where there is an excessive concern for growth. In an attempt to increase sales, small businesses may be too willing to extend credit to customers that are poor credit risk Lack of market power is another issue for small businesses. They find themselves in a weak position when negotiating credit terms with larger businesses. When big customer exceeds the terms of credit, the small supplier may feel inhibited from pressing the customer for payment in case future sales are lost. (A survey undertaken by the Credit Management Research Centre (CMRC) during April and June, 2003, indicates that small businesses are likely to have to wait an average of 60 days for their trade debtors to pay. 2.14 Cash Flow Statements for Small Companies Financial Report Standard (FRS1) prescribes a format for cash flow statements. Except for very small companies, all companies are required to prepare a cash flow statement for each accounting period. There are two approaches available under the standard; the direct method which shows the operating cash receipts and payments summing to the net cash flow from operating activities, and the indirect method which identifies the net cash flow via reconciliation to operating profit.(Wood F,2002) Credit Creation 2.15 Definition of Credit Creation The BNET business dictionary defines credit creation as the collective ability of lenders to make money available to borrowers. Credit creation is the multiple expansions of banks demand deposits. Banks advance a major portion of their deposits to the borrowers and keep smaller parts of deposits to customers on demand. The tendency on the part of commercial banks to expand their demand deposits as a multiple of their excess cash reserve is called creation of credit. 2.16 Functions of Financial Intermediation in Credit Creation Financial intermediation is the process of channelling funds between those who wish to lend or invest and those who wish to borrow or require investment funds. Financial intermediaries act as principal, creating new financial assets and liabilities. They do not act solely as agents, charging a commission for their services. (The Monetary and Financial System-CIB/BPP Publication 1993 Edition) Any institution standing between the ultimate provider of funds and the ultimate user of funds is engaged in financial intermediation. There are many types of institutions and other organisations that act as intermediaries in matching firms and individuals who need finance with those who wish to invest. These institutions also provide other services which are non-intermediary services like financial advisory services, fund management services and advice to undertakers and mergers provider by merchant banks. Some of the organisation that acts as financial intermediaries is as follows: 2.16.1 Clearing Banks – this bank participate in system which simplifies daily payment so that all the thousands of individual customer payments are reduced to a few transfers of credit between the banks. They offer various accounts to investors and provide large amount of short to medium-term loans to the business sector and the personal sector. The work of these institutions can best be understood through a consideration of the main items in their balance sheet. 2.16.2 Clearing Bank Liabilities – The money from the banks responsible comes chiefly from their customer’s sight and time deposits- mostly current and deposit accounts with which most people are familiar. An important additional item relates to certificates of deposit. These are issued generally for a medium amount of  £50,000 and a maximum of  £500,000 with an initial term to maturity of from three months to five years. Clearing Bank Assets Customers’ money is re-lent in a variety of ways. The main aim of the bank is to have a range of lending instruments of varying terms so that money can be recovered quickly and yet, at the same time, earn the maximum return. 2.16.3 Investment Banks / Merchant Banks The investment banks or Merchant banks have some functions that they undertake: 2.16.3.i Financial Advice to Business Firms Few manufacturing or commercial companies of any size can now afford to be without the advice of a merchant bank. Such advice is necessary in order to obtain investment capital, to invest surplus funds, to guard against takeover, or to take over others. Increasingly, the merchant banks have themselves become activity involved in the financial management of their business client and have had an influence over the direction these affairs have taken. 2.16.3.ii Providing Finance to Business Merchant banks also compete in the services of leasing, factoring, hire-purchase and general lending. They are also the gateway to the capital market for long-term funds because they are likely to have specified departments handling capital issues as ‘issuing houses’. 2.16.4 Foreign Trade A lot of merchant bank are active in the promotion of foreign trade by providing marine insurance, credits, and assistance in appointing foreign agents and arranging foreign payments. Merchant bank is essentially in the general business of creating wealth and of helping those who show that they are capable of successful business enterprise. It is expected that merchant banks will operate without the large branch network necessary for a clearing bank, they work closely with their clients and be more ready to take business risk and promote business enterprise than clearing bank. 2.16.5 Building Societies These take deposits from the household sector and lend to individuals buying their own homes. They have recently grown rapidly in the UK and now provide many of the services offered by clearing banks. Over the years many have converted to banks. 2.16.6 Finance Companies/Houses – Providing medium-term instalment credits to the business and personal sector. These are usually owned by business sector firms or by other financial itermediaries. 2.17 Services Provided by Financial Institutions Financial institutions are organisations that provide services in connection with one or more of the following:- Financial intermediation, linking ultimate providers of funds with ultimate users and creating new financial assets in the process. Exchanging financial assets on behalf of their customers, that is acting as brokers or agents for clients. Exchanging financial assets for their own accounts proprietary dealers, as they are termed. Helping to create financial assets for their customers, and then selling these assets to others in the market underwriting new share issues, for example Providing investment advice to others, example to people seeking a personal pension or to firms on mergers and takeovers. Fund management- managing the whole or part of a pension fund, for example some large non-financial companies have their own financial subsidiaries. In the United Kingdom Ford Motor Finance and Mark and Spencer Finance Se

Does Punishment Deter Crime?

Does Punishment Deter Crime? Does punishment really deter crime? One could say no since the rate of crime is stable instead of declining. The interaction between crime and punishment is certainly a complex one. In simple terms, one might anticipate that, if crime rates increase, there should be a corresponding increase on prison populationà ¢Ã¢â€š ¬Ã‚ ¦On the other hand, if punishment levels increase, crime control theory suggests that deterrence and incapacitation should show themselves in a corresponding reduction in crime rates (Blumstein, 1998). Over the past few decades, crime rates have fluctuated, but have been fairly stable numbers. We have not seen the decline in crime that one would expect to with the growth in prison or jail inmates. What type of punishment deters crime most effectively? Retribution is the oldest form of punishment. Retribution is an act of moral vengeance by which society makes the offender suffer as much as the suffering caused by the crime (Macionis, 2006). With retribution, we assume that society is morally balanced. When a crime is committed, it upsets that balance. Retribution is thought to restore the balance by granting a punishment that fits the crime; for example, and eye for an eye. Another thought is that if the punishment is severe enough, it would discourage anyone from committing the crime. This justification is known as deterrence. Deterrence is the attempt to discourage criminality through the use of punishment (Macionis, 2006). Deterrence came about during the eighteenth century and was a renewed form of punishment from retribution. Retribution had become harsh punishment, such as mutilation and death. People began to believe that criminals could be punished effectively and accordingly through lesser punishment. Along the lines of thinking that a person can be punished effectively through lesser punishment came the act of rehabilitation. Rehabilitation; however, didnt come around until the 19th century. Rehabilitation is a program for reforming the offender to prevent later offenses (Macionis, 2006). Society came to believe that criminal deviance was learned and could be a result of ones upbringing, financial status, or even the lack of positive role models. The thought was that if one had learned these bad traits earlier in life, they could also be taught good traits if given the opportunity. In other words, they could be reformed or rehabilitated. Rehabilitation takes work on the part of the offender; however, it does not include suffering such as that involved with retribution and deterrence. Rehabilitation is also customized to the fit the needs of the deviant. The final justification for punishment is societal protection. Societal protection means rendering an offender incapable of further offenses temporarily through imprisonment or permanently by execution (Macionis, 2006). Like deterrence, the primary focus of societal protection is protecting society. The intent is to render a punishment that leaves the deviant incapable of committing the crime again. Currently, there are 2 million people imprisoned in the United States. This population has tripled since 1990 and continues to rise. America imprisons more of its population than any other country (Macionis, 2006). Everyone agrees that punishment deters crime, but which form of punishment is the most effective? Unfortunately, deterring crime through punishment is difficult to measure. It is difficult to say what form of punishment might work best for every crime and every criminal. Generally speaking, one would think that the death penalty would be an excellent deterrent to crime; however, that is not exactly the case. It is questionable whether the death penalty actually deters others from committing the crime. Additionally, there have been individuals put to death who were later found innocent of committing the accused crime. Because the threat of punishment as a deterrent for crime has long been debated, many have attempted to measure the effectiveness. In most models, the optimal amount of deterrence does not mean eliminating the crime all together. Instead, the optimal amount of deterrence comes from balancing the costs, the benefit to society, and the deterrence to the deviant. Every justification is controversial and debatable. Personally, I am not a proponent of the death penalty; however, I think the evidence may show that it is an effective deterrent to crime. My issues with capital punishment are moral. I do not feel that it is morally right to take the life of another human being, even if they have taken the life of another. I am also concerned about the fact that an innocent person may be put mistakenly put to death. Although I have moral issues with the death penalty, this does not mean that it is not an effective deterrent to crime. Nothing says do not do it like the fear of death for doing it. In other words, I do not think there is a better way of getting the attention of a criminal than by letting them know that they will be put to death if they commit certain criminal acts. According to an article in USA Today, In New York, the death penalty has turned the tables on fear and put it back where it belongs-in the hearts of criminals. Within just one year, the death penalty helped produce a dramatic drop in violent crime. Just as important, it has restored New Yorkers confidence in the justice system because they know their government genuinely is committed to their safety. (Pataki, 1997) So although I may not be a proponent of the death penalty, I think the evidence speaks for itself. Capital punishment is a form of deterrence and it does seem to be a deterrent to crime. The benefits to society outweigh that that of retribution, rehabilitation, and societal protection. I personally support rehabilitation, but I believe that it is very expensive and does not always work. When looking for the optimal justification for punishment, I lean more towards deterrence when looking for that balance between cost, benefit to society and deterring the deviant. Deterrence seems to be the best overall solution for preventing crime. Ultimately, our desire to alleviate crime is only as tough as the laws we enforce to punish deviants. By enforcing the death penalty as the law of the land, we demonstrate our determination and strengthened the idea that our children and future generations can grow up in a country that is free of violence (Pataki, 1997).