Economic Security

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21 Aug, 2024

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Economic security is defined as individuals' capability to meet their basic daily and essential needs regularly throughout their lives. It acts as an indicator of public happiness, economic growth, high standards of living, and progressive society.

If there is no economic security, public discontent, riots, revolts, and economic instability begin. That may lead to political chaos, hinder growth, and cause society to suffer badly. On the other hand, it empowers people with money and gives them power and economic security. It helps in fulfilling the basic needs of every citizen of a country.

Economic Security Definition

Economic security denotes the capability of people to meet their daily basic needs sustainably.
Therefore, it serves as a gauge for public contentment, economic expansion, citizen confidence in their government, good standards of living, and a forward-thinking culture.
Its importance is many, including the prevention of poverty, rebellion, political instability, hunger deaths, a decrease in civil liberties, and economic instability.
Moreover, its threats include pandemics like coronavirus, debts, inflation, and climate change, which can be improved by focusing on improving labor, benefit, protection, and equity policies.

Economic Security Explained

Economic security refers to the state of an individual's or a community's financial well-being and stability. It varies per an individual's living conditions, physical needs, social surroundings, and cultural upbringing. The culture of place plays a vital role in determining what counts as essential needs to be counted into economic security. Hence, it encompasses the ability to meet basic needs, withstand economic shocks, and pursue opportunities for advancement.

Components

According to Internation Committee of the Red Cross's (ICRC) Economic Security (EcoSec) Unit, there are five main components of economic security, namely:

Food intake: It contains the type of food eaten by people and whether the amount of nutrition intake fulfills the requirements of healthy growth.
Production of Food: It deals with the means of food production to meet food requirements, like meat and grains, through production and procurement.
Income: It seeks to identify the levels of income that enable people to fulfill their most basic essential daily needs.
Living situations: It comprises the housing facility, cooking provisions, and basic healthy hygiene in their daily lives.
Capability: It contains government means, civil society, or international humanitarian societies that help fulfill people's economic security.

If all these are fulfilled for the people living in a locality, then they are said to have economic security. Otherwise, it means the government has failed to provide these to its people, which may lead to chaos, instability, rebellion, and backwardness of the people and society. Additionally, the economic security project aims to address economic challenges and inequality by supporting research and initiatives related to providing individuals and families with a guaranteed income.

Thus, in the business context, some corporations may have committees or teams responsible for ensuring economic security. Hence, these economic security committees involve financial planning, risk management, and strategies to maintain the company's financial stability and growth.

Examples

Let us look at some examples to understand the topic.

Example #1

Let’s consider a scenario where a country implements robust social safety net programs, including unemployment benefits, healthcare coverage, and educational support. In this environment, individuals facing job losses or health crises can access financial assistance and necessary resources to navigate these challenges.

Moreover, the existence of affordable housing options and retirement plans contributes to long-term economic stability, allowing individuals to plan for the future with confidence. In such a society, there is a strong emphasis on education and skills development, ensuring that the workforce remains adaptable to changing economic landscapes. Therefore, this multifaceted approach to economic security not only mitigates immediate financial risks but also fosters a sense of social cohesion, providing a foundation for a resilient and thriving community.

Example #2

The president of Nippon Steel Corp. stated on December 2023 that the business is specifically the $14.1 billion acquisition of the United States Steel Corp. would spur growth, and it is crucial for Japan's economic security.

At an online press conference, Nippon Steel President Eiji Hashimoto stated, "The United States has without a doubt taken the worldwide lead in securing its economic security," and he added, "We can expect further growth" in the U.S. market as more manufacturers participate in the reshoring of manufacturing.

According to Hashimoto, Nippon Steel must establish new networks and capitalize on demand from one of the most developed markets in order to compete against formidable rivals like China Baowu Group.

Importance

Let us discuss some importance of economic security:

In its absence, people tend to become poor and hungry
The economy suffers if people have no security
Political instability may occur due to acute hunger and poverty
Labor may not get appropriate wages leading to widespread chaos
It supports society's growth, tolerance, personal goodness, and happiness.
Economic security contributes to human dignity by allowing individuals to live with a sense of autonomy and self-worth.
These acts as a buffer during times of economic downturns, crises, or personal emergencies.
Individuals and families with this security are better positioned to engage in long-term financial planning.

Threats

These threats can arise from various sources and may have wide-ranging effects on economic systems.

Debt burdens have increased on people globally due to the pandemic.
Supply chain issues have hindered the supply of food to European and less developed nations.
Events such as banking crises or stock market crashes can disrupt financial markets, erode investor confidence, and lead to economic instability.
Trade tensions and protectionist measures between countries can disrupt international trade, impacting businesses, supply chains, and economic growth.
Natural disasters, such as earthquakes, hurricanes, or pandemics, can cause significant economic damage, thus disrupting supply chains, destroying infrastructure, and causing business closures.
Growing income inequality can lead to social unrest and economic instability, as a significant wealth gap. Therefore, this may result in reduced consumer spending and hinder long-term economic growth.

How To Improve?

Improving economic security involves a combination of individual actions, government policies, and societal initiatives.

Education and Skill Development: Investing in education and skill development can increase employability and adaptability to changes in the job market. Furthermore, it encourage lifelong learning and training to stay current with evolving industry demands.
Promoting financial literacy: The governemnt should provide education on financial management, budgeting, and investment to empower individuals to make informed financial decisions. Moreover, the government should promote the importance of savings and emergency funds.
Ensuring employment stability: The government should advocate for policies that support job creation and employment stability. It should encourage businesses to invest in their workforce, providing training and opportunities for career advancement.
Promote equal opportunities: There should be advocation for policies that ensure equal opportunities for all, regardless of gender, race, ethnicity, or socioeconomic background.
Financial inclusion: We must promote financial inclusion to ensure that all individuals have access to banking, credit, and insurance services. Thus, it can support initiatives that provide financial services to underserved populations.
Global cooperation: International cooperation should be encouraged to address global economic challenges, trade issues, and financial stability.

Frequently Asked Questions (FAQs)

1. What is the department of economic security?

The Department of Economic Security (DES) was started by Arizona state for its residents and served as a nodal safety net agency. DES has been established to enhance people's safety and promote Arizonans' well-being. Moreover, it has three main goals, as discussed below:
- To strengthen families and individuals
- Aims to increase self-sufficiency
- To develop the capabilities of its communities
These objectives have been realized for over two million residents being covered through forty different social and economic programs until now.

2. How to ensure economic security?

Any government can ensure economic security if it strengthens the policies that:
- Addresses the inequality and economic disparity among its people
- It protects people's income through the promotion of debts, decreasing debts, more accessible access to credits, and regulation of important financial factors.
- Enabling direct money transfer to all households using social insurance systems or tax expenditures
- Proactive labor market regulations like higher minimum wage, better overtime payments, and robust unemployment insurance for jobless workers.

3. How does economic security differ from financial security?

It is a broader concept that encompasses financial security. While financial security focuses on the individual's ability to meet immediate financial obligations, economic security includes broader aspects like employment stability and access to essential services.