B200 TMA02-1 Essay Example | Topics and Well Written Essays - 1500 words

B200 TMA02-1 - Essay Example decades as the cartelization of the oil markets is often viewed as a failure of market forces since prices and output are heavily influenced by the cartel leaving aside the market forces to determine the correct demand and supply of oil in the international market. OPEC- Organization of Petroleum Exporting Countries- is the name which is given to the cartel of oil producing countries in Middle East in a bid to control the oil production as well as regulation the oil prices. This formation of cartels is therefore, often viewed as one of the reasons for failure of market forces at work because by not letting a market to determine the demand and supply, such actions create disequilibrium into markets. Therefore, markets are more prone to external shocks causing them not to function in their most appropriate way. Neoliberalism is the basic fundamental philosophy which advocates the lesser role of governments or other external agencies in regulating the market and emphasize giving a chance to the market forces to work for the greater good of the society. Due to this philosophical drive, most of the developed countries in the world including US and UK shifted their policy framework in a way which advocated the use of market forces as the lone regulator of the market without much intervention from the State. There were reasons behind this shift into the policy response from the developed world because of the increasing external shocks experienced by the developed countries, especially from oil embargo by oil producing countries from Gulf Region. Behind the neoliberalism also lies the fact that market forces are considered as the best regulators of the price mechanism within an economy by correctly and efficiently pricing the demand and supply and secondly, this mechanism brings in more efficiency into the system. However, any distortion in this mechanism can lead to the inefficient employment of resources hence the economy may not work at the full employment