Teachers and students of development economics may be aware of this fresh blog from the chief economist of the World Bank’s Africa Region.
There is plenty of coverage today of new data from Oxford Economics that shows how per capita incomes have declined during the third term of the Labour Government.
UK GDP per capita in 2009 prices (£ sterling)
2009 (estimate) £22,700
2010 (forecast) £22,775
2/ Japan pledges to end economic spiral (The Times) - The ten-year plan would see Japan shift some of the focus of its giant economy, with new emphasis placed on environmental technology, science, tourism and medical care.
3/ Economics emerges from the rubble in fragile state (Larry Elliot in the Guardian)
4/ Freakonomics meets More or Less (BBC Radio 4) - Tim Harford gets together with Steve Levitt for a special edition of the excellent Radio 4 programme
5/ Counting the cost of high speed trains (BBC Global Business) - how large are the economic and environmental benefits of investment in new high speed trains?
Many millions of people enjoy playing online games and for social game developers a hugely important source of revenue is from the sale of virtual goods. The trading of virtual goods within games is a global industry worth over $10 billion a year. Here is a good example of complementary demand in markets - regular gamers are happy to purchase seeds, tractors and coins using real money to help them get ahead in their favourite game. This BBC news feature argues that virtual goods are one of the hottest trends in technology and are fuelling huge growth in the social gaming sector.
There is a fascinating lecture at the RSA early next month - Fun Inc.: Why games are the 21st century’s most serious business - details are here. Tom Chatfield’s new book is available here from Amazon.
1/ BBC news: UK unemployment ‘will peak at 2.8m’ in 2010: Report on the latest forecast from the Chartered Institute of Personnel and Development
2/ Financial Times: UK suffers a decade of weak expansion: UK gross domestic product, on average, rose by 1.7 per cent annually in real terms throughout the so-called noughties, Britain’s weakest period of economic expansion of any since the 1940s
3/ Guardian: British homeowners continue to trim mortgage debt: Britons reduced their outstanding mortgage debt by £4.9bn during the third quarter of the year, figures from the Bank of England showed today
4/ Guardian: The global economy’s decade of debt-fuelled boom and bust: Larry Elliot argues that borrowing was both the shaky foundation of global growth and the cause of its collapse
I limit my recommended reading list to twenty books and issue it to my students twice a year making the odd change each time. My current list is shown below.read more...»
1/ Paul Krugman on The Big Zero (Comment piece in the New York Times)
“From an economic point of view, I’d suggest that we call the decade past the Big Zero. It was a decade in which nothing good happened, and none of the optimistic things we were supposed to believe turned out to be true.” More here
2/ How economics managed to make amends - Arvind Subramanian (FT comment page)
“The avoidance of the Greatest Depression that could so easily have happened in 2009 is an outcome the world owes to economics; at the least, it is the discipline’s atonement for allowing the crisis of 2008 to unfold” More here
3/ Tim Harford - The battle for the soul of microfinance (FT)
“Multinational banks at last see microfinance as a profit opportunity” More here
4/ Stephanie Flanders - Intriguing economic questions for 2010
“What are the most intriguing economic questions for 2010? Here are my top four.” More here
As part of his continuing series Making Sense of financial news, Paul Solman at PBS has a unique look at the legacy of economist John Maynard Keynes, who first introduced the concept of government intervention in the economy, and his countertenor Friedrich Hayek.
1/ Liam Halligan on the risks of a fresh surge in protectionism
We are at risk of a trade war - and the West has most to lose
2/ A Sunday Times profile of a Lovefilm, which with 1.2m members, has become the market leader in mail-order film rental
Lovefilm owners to sell out
5/Innovation continues at Apple
Apple poised to start new year with launch of tablet computer
A terrific google wave on some of the landmark events of 2009.read more...»
This revised and extended revision presentation on monetary policy is designed for AS students
2/ Signs of hope for the economy in 2010 - Observer journalists believe there are reasons to believe the worst of the crisis is over
3/ Independent: A decade of excellence? The heroes and zeros
4/ Wall Street Journal on “creative destruction” - To understand the challenges that faced businesses the past 10 years, consider the household names that didn’t make it through the decade: Anheuser-Busch, Compaq, Gillette, Enron, Lehman Brothers, Merrill Lynch, WorldCom. More here
Ask a student on the first day back which countries you associate with hyper-inflation - its a fair bet that most will offer Zimbabwe as an answer - and of course they would have been right up to a few months ago. But currency reforms have brought about a remarkable twist in the inflationary outlook. “Since January, inflation has slowed rapidly after the country shelved use of the local currency and adopted various currencies such as the dollar, South African rand, British pound and Botswana pula” ......indeed there are signs of mild deflation in consumer prices.
Here is a fascinating piece from the New York Times on how some restaurants are restructuring their menus in a bid to beat the recession and drive higher revenues and profit margins from their businesses. Decoy choices and eliminating the currency sign are among the experimental strategies.
“Pounded by the recession, they are hoping that some magic combination of prices, adjectives, fonts, type sizes, ink colors and placement on the page can coax diners into spending a little more money.
A huge number of well-known economists and a remarkable number of ideas make an appearance in John Cassidy’s new book How Markets Fail – the logic of economic calamities. From Akerlof and Arrow to Von Neumann and Walras, John Cassidy’s ambitious and lucid work takes us on a swift journey through over two hundred years of economic thought and policy-making through to the moment when the global financial system stared over the abyss in the early autumn of 2008.read more...»
The original misery index compiled by economist Arthur Okun added together a country’s unemployment and inflation rates to derive a simple measure of ‘economic misery’. The idea was popular at times of stagflation - a combination of stagnant growth, rising unemployment and accelerating consumer prices. Various reincarnations of the Misery Index have been developed over the years - Harvard’s Robert Barro, for instance, made one that includes interest rates and GDP
Now we have new one created by Pierre Cailleteau, an economist and sovereign risk analyst at Moody’s. The index adds together a country’s budget deficit, as a percentage of gross domestic product, and its unemployment rate. It captures the current conundrum for many countries: their economies need stimulus, but their budgets may not be able to afford it. It reflects the realisation of a new age of fiscal austerity as governments across the world battle to control their ballooning fiscal deficits and accumulating national debt. Floyd Norris writes about this new version of the index in this piece in the New York Times.
Spain is at the top of the Misery Index, Latvia places second and Lithuania third, followed by Ireland, Greece and the UK. The US places eighth after Iceland. This makes the Uk the lousiest economy among the Group of 7! Of the 16 economies studied by Moody’s, the Czech Republic, Italy and Germany were forecast to be the least miserable.
Fans of behavioural economics will love this festive selection of cognitive biases in popular songs unearthed by Chris Dillow in his excellent blog.
The ONS has produced a short piece looking at what has happened to unemployment in the UK over the last three economic recessions.
Their data shows that the unemployment rate has (thus far) remained lower than it was in the first six quarters of the 1980s and 1990s recessions. The unemployment rate was 0.1 percentage points higher at the start of the 1980s recession than at the start of this recession. Several explanations have been put forward for this including a shift towards part-time working, greater use of short-time working to avoid compulsory redundancies, a fall in working hours and businesses encouraging some of their employees the chance to take unpaid breaks from work such as sabbaticals during the downturn. Wage freezes and (in some cases) pay cuts may have had some effect on total employment.read more...»
The UK household savings ratio continues to move higher. But it is unlikely this heralds a return to consistent savings behaviour by consumers. Instead it reflects - in the short term at least - a decision to cut spending and repay existing debts rather than a deliberate decision to accumulate financial wealth by locking money away in occupational pensions and other long-term savings instruments. Ian King has a good piece on this in the Times today. The nominal rates of return on most savings accounts have collapsed because of the steep cut in policy interest rates and millions have lost confidence in the financial services industry.
“A study published yesterday by AT Kearney, the management consultancy, revealed that 90 per cent of UK households have less than £50,000 in financial assets — including their defined contribution pensions — and average financial wealth of just £7,000.”
New data on the UK shows that household expenditure growth rose 0.1 per cent, although remains 3.3 per cent lower than the third quarter of 2008. The savings ratio — the gap between household income and spending, which is often used to repay debts or add to savings — soared to 8.6 per cent between July and September, the highest level since 1998.
Another superb interactive resource from the FT provides a tabbed guide to key market data from the Noughties. Highly recommended.
A good investigation here into the rapid growth of the counterfeit cigarette market in the UK…read more...»
Here is a really interesting example of external growth through horizontal integration with a highly successful UK drink and leisure business seeing expansion opportunities in Central and Eastern Europe. Costa is paying £36million for Coffee Heaven a business that has 90 coffee shops in Central and Eastern Europe, comprising 62 shops in Poland, 14 in the Czech Republic and 14 across Bulgaria, Hungary and Latvia.
Costa has more than 1,000 stores in the UK and more than 400 internationally and its stores account for around 25 per cent of Whitbread’s total revenues. All its international stores are operated under franchise. Costa is a wholly-owned unit of Whitbread, the U.K.‘s largest hotel and restaurant company operating brands in the budget hotel, restaurant and coffee shop sectors, whose brands include Premier Inn, Beefeater and Brewers Fayre. Premier Inn is the key part of this business - its fortunes essentially drive the company’s share price.
2010-11 should see a number of CEEC countries emerge from a turbulent and difficult macroeconomic period. And as per capita incomes rise, the potential for growth of market demand in high street coffee stores in many of the EU’s new member states ought to be high. That said Coffeeheaven has made net losses in each of the last seven years - Costa will be hoping that its greater financial resources and economies of scale will help to bring the business back into profitability. Whitbread has an annual capital spending in excess of £300million, so the £36million paid for Coffee Heaven looks small in comparison.
Open economies, which are highly trade dependent and export only a small range of products to few markets, are affected most by the trade transmission mechanism. This helps to understand the wider economic and social effects of the 2009 global downturn.
The recession has affected developing countries in many different ways including the following:
Embroiled in what looks likely to be a protracted takeover bid from Kraft, Cadbury’s has suffered a blow with the news that its share of the UK confectionery market has dipped below 30 per cent for the first time in a while. The Times reports that Cadbury’s chunk of the chocolate market by value slipped 1.7 per cent to 29.8 per cent last month, the first time that it has fallen below 30 per cent all year. Market share of Mars, its biggest rival, slipped 0.6 per cent in the period. There are signs that aggressive pricing of basic chocolate bars by discount retailers such as Aldi and Lidl is having an effect; so too is the growth of sales for own-brand bars offered by Tesco, Sainsbury’s and the ongoing battle for customers between Waitrose and Marks and Spencer. Some customers have complained about a 75% rise in the price of a 230g bar of Dairy Milk in the last 12 months. High world cocoa prices have explained some of the price hike but Cadbury’s tactic of launching a new 100g bar priced at £1 had led some to claim that their are deliberately trying to anchor their prices at a higher level to raise profit margins as a defence against the takeover bid. The decline in market share suggests that chocoholics are more price sensitive than Cadburys might have forecast.
This new revision presentation looks at the issues facing the struggling economy in Greece
This describes an outflow of money from one country to another as investors lose faith and confidence in their external investments. Typically it happens when a nation’s currency is under strong downward pressure either because of speculative selling or because of fundamental factors such as a recession, poor trade performance or a steep fall in asset prices or interest rates. Another root cause is weakening faith in the creditworthiness of a national government especially when they are running up large budget deficits that might be unsustainable. Foreign investors may choose to withdraw their money if they expect a hike in taxes on their investments.read more...»
This new chart from Barclays Capital shows the steady but sustained decline in the global market share for the internet explorer browser.
For years Microsoft has been in dispute with the European Union competition authorities over alleged abuse of its dominant position in the browser market. From now onwards, it will now offer European users a choice of web browser options like Apple’s Safari, Google’s Chrome, and Opera, in addition to its Internet Explorer (IE). Mozilla’s Firefox now has a quarter of the browser marke and Chrome has made a good start in this increasingly contestable market. Google is positioning Chrome as both a browser and an operating system - a real challenge to the Microsoft model.
This hints that the transmission mechanism of monetary policy might have broken down. When ultra-low interest rates appear to be ineffective in restoring confidence and spending, this is known as the liquidity trap. For the exam you need to explain how a reduction in policy interest rates can stimulate household and business sector demand and also (through the exchange rate) providing a stimulus to export s. But we do not live in normal times! There are grounds for thinking that – in the short term at least – the impact of monetary policy may have been reduced. Here are some reasons:read more...»
Martin Dougiamas, lead director and founder of Moodle has shared a superb presentation on where Moodle is heading with the release of 2.0 (and looking further forward to 2.1). You can find it here on slide share. I will be using some of the holidays to explore applications that can fit within Moodle or which can sit outside the VLE and encourage me to try some of the activities and approaches above point 5 above!
The UK first introduced inflation targets in 1992 following sterling’s suspension from the exchange rate mechanism. The government wanted an inflation target to be the ultimate objective of monetary policy having opted to move to a floating exchange rate system.read more...»