Fair trade debate
A hat tip to Harriet Thompson for this heads up - a debate at the Economist on “This house believes that making trade fairer is more important than making it freer.”
AS Economics Revision - The Balance of Payments
Here is a brief two page revision note on the balance of payments designed as a resource for AS macroeconomics students. Click below for the file (written in May 2010)
Balance of Payments revision note
Revision_on_Balance_of_Payments.docx
A2 Economics Revision - Protectionism
This new streamed revision presentation for A2 economics examines the topic of protectionism and the threats to the process of globalisation.
Revision Presentation on Protectionism
A2 Economics Revision - Changing Pattern of Global Trade & Investment
This new streamed revision presentation guides students through some key evaluation points on the changing patterns in global trade & investment. Ideal for A2 revision.
Revision Presentation on the Changing Pattern of Global Trade & Investment
AS / A2 Revision - Where Next for the UK Economy?
Students wanting to demonstrate up-to-date understanding of the UK economy should find this streamed revision presentation really useful. It was delivered by Geoff at our AS & A2 Economics workshops in London & Manchester. It provides a comprehensive coverage of recent developments in the UK economy and highlights some potential downsides and upsides as the economy attempts to sustain a recovery during 2010 and 2011. Has the era of macro economic stability been replaced by a new phase of macro economic uncertainty, slower growth and a recovery constrained by debt? Or are there grounds for being more optimistic about the near-term future for the British economy?
Revision Presentation on the UK Economy
Global Business - who sets our standards
Here is a brief recommendation to those studying globalisation to listen to this programme from the BBC World Service. Presented by Peter Day, it examines the way in which standards are set for the goods we import and consume:‘World trade in goods and services - from the butter on your bread to the existence of the mobile phone - is held together by an invisible web of standards set by all kinds of official and semi official organisations.’ Potentially useful in considering patterns of international trade, regulation, and comparative and competitive advantage.
Broadband and economic growth
Investment in broadband capacity and speed has a strong impact on economic growth according to new research.
read more...»Economists do it with models - explaining trade theory
A different take on the gains from trade from a female perspective! And links to two excellent revision You Tube videos on trade theory - all part of the growing web site of economist Jodie Beggs.
Brazil looks to diversify
BBC World Business news carries an interview with Luciano Coutinho, CEO of BNDES Bank in which he argues that Brazil is looking to diversify its economic base as a platform for stronger long term economic growth
“The Government is stepping up efforts to diversify the economy, creating global champions in a range of industries, from telecoms to farming. Brazil dominates global trade in several agricultural commodities, from coffee to sugar, or chicken and beef.”
Global Competitiveness Report 2009-2010 - Xavier Sala-I-Martin
Following on from Geoff’s entry on international competitiveness here ; this video clip sees macroeconomist Xavier Sala-i-Martin (Professor of Economics at Columbia University) discuss the current international competitiveness rankings from the World Economic Forum report 2009-10, and the recent relinquishing of the top spot by the USA. Do go to his website too… always a good source of random fun!
read more...»Metal prices on the rise again
What do the following businesses have in common?
Anglo American
Antofagasta
BHP Billiton
Eurasian Natural Resources
Fresnillo
Kazakhmys
Lonmin
Randgold
Rio Tinto
Vedanta
Xstrata
China Economy Chartroom 2010 - Classroom Posters
We’ve just updated our China Economy Chartroom classroom poster set. It provides charts using the latest public data on the key economic variables in China together with some profiles of China’s phenomenal consumer and industrial growth in recent years.
read more...»Chinese growth in words and pictures
Statistics about the speed of China’s development never cease to be amazing, no matter how many times you read them. Here is another one; in the dark days of 2009 the Chinese economy grew by yet another 8.7% (10.7% in the final quarter of the year) so that it is now set to overtake Japan, which probably shrank by 6% over the same period, to be the world’s second largest economy. And yet, according to Ma Jiantang, head of the National Bureau of Statistics, there are still 150 million people in China living on $1 a day and so poor according to the UN’s standard rating. This gives a remarkable contrast as the world’s second or third largest economy is also a developing nation with enormous conflicts and trade-offs in macroeconomic policy to resolve. Mr Ma also referred to the concerns about inflation in China - he said price rises were “mild and under control”, but over recent days the government has tried to limit the amount of loans made by the country’s banks in order to avoid a ‘domestic bubble’ of growth. This is the focus of the Times’ report, which highlights expectations that there may be a rise in interest rates in China in the next two months.
read more...»Revision Presentation - China’s Economy Surges into 2010
More significant developments in the Chinese economy over recent weeks, with significant implications for the global economy & businesses looking to exploit opportunities in China, or counter threats from import penetration. This new revision presentation guides students through some of the key data and developments:
Launch revision presentation on Chinas Economy Surges into 2010
Krugman on Chinese mercantilism
My dictionary suggests that mercantilism is governmental regulation of a nation’s economy for the purpose of augmenting state power at the expense of rival national powers. Answers.com says that the term historically refers to policies designed to accumulate bullion, establishing colonies and a merchant marine, and developing industry and mining to attain a favorable balance of trade. China’s trade and exchange rate policies have been a subject of heated controversy for many years and, as we head into a new year, Nobel prize winning economist Paul Krugman launches an attack on Chinese mercantilism which he argues has cost over a million jobs in the USA.
“We know that China is pursuing a mercantilist policy: keeping the renminbi weak through a combination of capital controls and intervention, leading to trade surpluses and capital exports in a country that might well be a natural capital importer. We also know, or should know, that this amounts to a beggar-thy-neighbor policy — or, more accurately, a beggar-everyone but yourself policy — when the world’s major economies are in a liquidity trap.”
Lots in this short paragraph for students:
1/ How can capital controls and intervention affect the value of the Chinese exchange rate?
2/ Using your understanding of the balance of payments, explain how trade surpluses can lead to capital exports. Identify some of the longer-term effects of these capital exports.
3/ Why does mercantilism represent a beggar-thy-neighbour policy? With what consequences for the world economy?
4/ What policies are available for governments wanting to reduce trade imbalances?
2010 marks launch of new free trade zone
The 1st of January 2010 marks an important day in global trade economics. China, and 10 South-East Asian countries formally join together from today to scrap import tariffs.
Impact of global recession on developing countries
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:
Over-investment in China
John Gapper’s blog in the Financial Times today focuses on the risks that come from excessive capital investment in the Chinese economy. Bloated by an ultra-low cost of capital, many heavy industries have boosted their capacity to enormous levels and then relied on double digit annual growth in exports to absorb this capacity and maintain output and jobs. But this excess investment has made China vulnerable to the world financial crisis (not least the slump in world trade) and it has been a key factor behind global trade imbalances and the rise of protectionism. Capital investment of up to 40% of GDP is a reflection of a deeply skewed development model and one that is unsustainable.
“The result is huge over-capacity in heavy industries that soak up excess capital, which was hidden until last year by strong export demand for steel and the other affected products. But it also makes Chinese industry vulnerable to shocks such as the financial crisis.The Chinese government itself accepts - at least in theory - the need to switch away from a pure reliance on exports to fuel growth, to boost domestic consumption and to make growth more balanced.”
More here - China’s over-investment is its Achilles’ heel
An FT editorial today develops the discussion and highlights the waste of scarce resources that occurs when investment is made in capacity that will probably never be used:
“At the end of 2008, China’s steel capacity was 660m tons against demand of 470m tons. This difference is much the same as the European Union’s total output. Yet, notes the report, “there are currently 58m tonnes of new capacity under construction in China”. To the extent that gross domestic product is driven by such absurd spending is a measure of waste, not of economic welfare.”
The rest of the editorial can be found here
George Magnus also writes on China in his piece in the Times
A short guide to protectionism
Available here from the Telegraph
1 Smoot-Hawley
2 Common Agricultural Policy
3 Shoe wars, bra wars
4 Chinese tyres
5 India vs China
E-Book on the Collapse in World Trade
World trade experienced a sudden, severe and synchronised collapse in late 2008 – the sharpest in recorded history and deepest since WWII. VoxEU today posts a new Ebook – written for the world’s trade ministers gathering for the WTO’s Trade Ministerial in Geneva – that presents the economics profession’s received wisdom on the collapse. A seasonal hat tip to Diane Coyle for flagging this new resource up via her excellent blog. Here is Diane’s recent review of Super Freakonomics - a book that kept me going on a long flight to Hong Kong but which will forever gather dust on my bookshelves.
Will they… won’t they… will they?
Ahead of President Obama’s visit to Asia, earlier this week, the Chinese central bank issued a report signalling its intention to perhaps consider allowing a more flexible exchange rate regime come into force.
read more...»Development Economics - Sharp Practices in International Trade
A new interactive resource from OXFAM provides a thought-provoking introduction into some of the issues facing developing economies.
read more...»Global food prices and the terms of trade
Agflation refers to a sustained increase in the general price of foodstuffs and in recent years we have become accustomed to seeing the prices of many basic staple products rising. The era of cheap food looks to be over for now on the back of significant demand-side factors, not least rising population levels, higher per capita incomes and speculative demand for foods as prices have become more volatile. Supply-side factors are also important in explaining strong inflation in food prices. Both sides of the market are discussed by Ambrose Evans-Pritchard in his column in the Telegraph today “Food will never be so cheap again” - plenty of applied microeconomics here in addition to the huge number of macroeconomic issues that the trend rise in food prices has caused. One of the big changes in a switch in the terms of trade away from food importers towards food exporters. But do higher food prices necessarily cause agricultural supply to expand?
Broadband and economic development
Access to and the speed and reliability of broadband infrastructure is one of the key institutional factors that impact on economic development. The lack of an affordable and cost-effective broadband network can be a huge barrier to economic growth especially in an age where companies in many rich countries are looking to outsource their back office and call centre services to countries where operating costs are lowest. The 2009 UNCTAD Information Economy Report provides a wealth of background information on the global digital divide.
According to the latest report, businesses and consumers are 200 times more likely to have access to broadband in developed countries than in the poorest Least Developed Countries (LDCs). And the monthly cost of broadband access varies to an incredible degree - from over $1,300 a month in Burkina Faso, the Central African Republic to less than $13 in Egypt.
read more...»Sugar prices and production and investment incentives
World sugar prices are close to a 30 year high with values on the Chicago mercantile exchange hovering just under $30c per pound. For countries whose sugar exports account for a large proportion of their export earnings, the steep increase in world prices has brought about an improvement in their terms of trade and - because demand for many foodstuffs is price inelastic, a favourable change in their balance of trade. A good example of this is the African country of Mozambique, a nation almost destroyed by a long running civil war that eventually ended in the early 1990s but which has also been hit in recent years by severes drought hit many central and southern parts of the country, including previously flood-stricken areas. And where half of the population must survive on less than $1 a day.
read more...»Taxing hot money - is Brazil getting it wrong?
Carl Mortished’s excellent world business briefing in the Times today covers developments in the Brazilian economy. Huge inflows of foreign direct investment have helped to drive their currency higher and the Brazilian Finance Ministry has responded with a 2 per cent capital tax on foreign ‘hot money’ inflows into stocks and bonds. The article suggests that Brazil might be better off in the long run by cutting import tariffs on capital goods thus reducing the price of imports of hi-tech machinery that will give her economy a major supply-side boost. In contrast to China, Brazil exports a relatively low percentage of her national output and it is largely self sufficient. The country has enjoyed a significant improvement in her terms of trade with strong world prices for many of her key exported commodites such as iron ore, coffee and orange juice. The boom in commodity exports has helped to increase the real purchasing power of millions of Brazil’s poorest people but a huge amount remains to be done and income and wealth inequalities are vast.
“Brazil is not China; it does not trade that much. Where China’s motor is manufacturing exports, Brazil is largely a self-sufficient economy, more like the United States, with a vast hinterland of eager, albeit poor, consumers.”
UK broadband in the slow lane
The relatively slow speed of the average broadband connections for most UK businesses and households will act as a contsraint on future competitiveness and growth. This report from BBC news finds that a study of the global state of broadband has put the UK 25th out of 66 countries in terms of the quality and reach of its networks. Rory Cellan Jones follows up the report with his own observations
“Britain has done well in the first broadband wave, using a pretty efficient copper network and DSL technology to get homes across most of the country connected. But other countries are moving forward more rapidly to build next generation networks using cable and fibre-optics.”
Investment in broadband can have significant demand and supply-side effects - the real consequences of under-investment will become more painful and obvious as time goes on - but who should pay for the extra capital spending needed? Will the new broadband tax make any noticeable difference?
Paul Mason on the future for the dollar
Paul Mason’s excellent short video report appeared on Newsnight last Friday and it considers whether the US dollar (currently weak in global currency markets) will continue to ebb away as the reserve currency of choice for international transactions? The Yen and the Euro are making strides and there is pressure from the Chinese for a new currency to emerge perhaps as a development of the special drawing rights organised by the IMF. The BBC video links to a follow up discussion featuring Irwin Steltzer and Linda Yueh from Oxford University. A good discussion-starter for A2 macroeconomists.
Watch Are dollar’s days as world currency numbered?
Human and social capital and pathways to prosperity
Tom Aedy picks an article by Michael Milken in the FT and focuses on the importance of human capital in a competitive global economy - Milken calls this the world’s most valuable asset.
read more...»Fair Trade given new push by government grant
Harriet Lamb the inspirational head of the Fair Trade Foundation is featured in this BBC news video that reports on a £12m grant to the organisation to help promote an expansion of the range of products that fall under the Fair Trade orbit. Welcome news indeed - Harriet spoke at our Economics Conference in June 2008 and listening to her and watching films like Black Gold convinced me never to buy another bag of non Fair Trade tea or coffee ever again if I could help it.
