A new event for Tuesday 26th July has been added to the LSE listing today, which is a debate to be chaired by Paul Mason, economics editor of BBC 2’s Newsnight (and author of Meltdown: The End of the Age of Greed) and recorded by BBC Radio 4 for broadcast later on 3rd August. Billed as a debate between modern day followers of the sharply contrasting ideas of Keynes and Hayek, one of the speakers will be Robert Skidelsky, Emeritus Professor of Political Economy at the University of Warwick, with others to be confirmed. Entry is free, and no tickets are required as it will be first-come-first-served.
A new OECD report on the risks of external shocks to the global economy looks like being really useful for teachers preparing fresh materials for their courses. “The interconnectedness of the global economy makes it more vulnerable to major shocks…...these shocks include cyber attacks, pandemics, geomagnetic storms, social unrest and financial crises.” The report can be downloaded here.
China’s unit labour cost advantage in high-volume manufacturing is being eroded at a faster rate according to this feature piece from Time Magazine. “The average manufacturing wage in China is still only about $3.10 an hour, (compared with $22.30 in the U.S.), though in the eastern part of the country, it’s up to 50% more than that.” There are strong economic, social and political pressures for wages to rise and as they do this will have hugely significant demand and supply-side effects on their economy, for example accelerating the pressure for China to invest more in new technologies and product and process innovation to move higher up the value chain and become less dependent on supplying cheaper products to the rest of the world. My recent China Economics Revision Note focuses on some of these issues.
Emerging Africa: This new briefing document from the Center for Global Development looks at how 17 African economies are leading the way towards stronger and more durable development. A hat tip to John Wilson from New Zealand for flagging up the resource via his Twitter account. John can be found here: @mixedeconomies
Nigel Cassidy reports in this video from BBC news on fears that the world faces “a century of hunger” if the international community cannot agree on new rules regarding food prices. Food security is a hugely important global economic, political and social issue and one of the best resources for keeping up to speed on this is the Guardian’s dedicated page of articles. Here is the link. Check the links at the bottom of the blog for past articles on this topic.
As Nick Clegg makes his delayed visit to Brazil this week, with the aim of doubling UK exports to this fast-growing economy, the UK’s former Consul-General in Sao Paolo has written an interesting piece for the BBC’s website. As Martin Raven points out, British business has taken a long time to take Brazil seriously, and this high-level visit replaces one that was due to take place in February but cancelled at less than a week’s notice because of the debate in the House of Commons over the AV referendum - which can hardly have helped. As a result, he says, the UK has fallen behind other countries investment into the Brazilian economy and “there are now more international German companies in Sao Paulo alone than in any individual city in Germany.”read more...»
The tragedy of the commons and the grave consequences for the state of marine ecology are highlighted in this new report. Covered with passion in this blog. Climate change, pollution and over-fishing are two fundamental problems for the oceans. More details here from the International Programme on the State of the Ocean (IPSO) website.
The report identifies a number of important policy approaches to tackle the problems - The scientists say that the ‘precautionary principle’ must be used in terms of oceanic impacts, in other society shouldn’t don’t proceed with activities unless they are proven to be largely safe for marine ecosystems. And they argue for much stringer use of property rights by widening the size of international marines of the sea.
TED Talk: Jeremy Jackson: How we wrecked the ocean
This is a cross posting from the Business Studies blog because it strikes me as being SO useful for A2 students in particular as they look to include synoptic arguments and ideas into the evaluation this June. This new report by consultants Ernst & Young is a pinch of gold dust for such students, as it examines in a reasonably accessible way six broad, long-term developments which shape business around the globe.read more...»
Anthony Meacham has spotted this resource from BBC3. Last night on BBC3 there was a good programme on the economics of tourism in Kenya. Available on IPlayer using this link: Tourism and the Truth: Stacey Dooley Investigates Kenya See also this report from David Shukam (Oct 2010) Placing a value on Kenya’s largest forest This clip is also relevant from the BBC Learning Zone (Oct 2009)read more...»
A summery hat tip to Jon Andrews from St Paul’s School for heading to the LSE this week and providing us with some personal reflections on the Esther Duflo lecture there.
Teaching in the capital has its benefits; a notable one of these being the accessibility of a fantastic array of public lectures. The LSE public lecture programme provides an excellent opportunity to hear speakers on various topics from various backgrounds, some very relevant to the A level course. Last night the LSE hosted Abhijit Banerjee and Esther Duflo who came to discuss their book ‘Poor Economics’. Professor Banerjee is currently the Ford Foundation International Professor of Economics at MIT and Professor Duflo, also from MIT, is Abdul Latif Jameel Professor of Poverty Alleviation and Development Economics. Both are highly influential, Duflo having been included within Fortune magazine’s ‘forty under forty’.read more...»
Tim Harford’s piece in the New York Times today is a stunning visualisation of what economists term revealed competitive advantage - if you have a few moments please do read through it - superb for understanding the inter-connections between trade performance and structural changes in output, jobs and investment.
“Economies change in structure over time, moving from simpler goods to scarcer, more valuable ones. Countries rarely make radical structural changes. Instead, they generate capabilities gradually, and new industries usually develop from existing ones. Unfortunately, some industries — oil extraction, say, or fishing — do not naturally lead to anything new without a huge leap.”
“The only way”, says William Hague, “to increase our national prosperity and secure our growth for our economy, is through trade, and our Embassies play a vital role in supporting British business.” Therefore the Foreign Office announced today that they are opening five new Embassies and many Consulates, from China and India to El Salvador and South Sudan. This two minute clip from the Foreign Secretary’s speech to the House of Commons today could make a good lesson starter for a revision session on trade, the capital account, comparative advantage, government intervention for competitive advantage, and so on.
There is much focus on Chinese foreign direct investment in Africa and Latin America - China is also making huge investments in Australia as my friend Mark Johnston writes about in this blog. Here Euro News looks at investment in the European Union by Chinese owned businesses. New motorways in Poland ahead of the 2012 European Football Championships, co-financed by the EU, are being built by Chinese companies. The Chinese are also buying up public debt, in Greece, Spain and Portugal.
This Euro News video report (8 mins) looks at the background to the rise in global food prices and the economic impact. I have linked below to related blog posts on the issue of the economics of food price inflation (also known as agflation)
I am using economic developments in China as an anchor for my AS macro and A2 macro revision this week and next. We are also looking at developments in Germany and Spain as well to give revision a stronger European Focus. Last week I posted an eight page revision document on the Chine Effect - available here - and below I have brought together a set of recent video clips on the economics of China that have been used in the classroom as a prompt for discussion. I will add to them going forward as a reference point for teaching next term.read more...»
There has been much coverage in the last few days of the latest data on China’s population trends and in particular strong evidence about the ageing of her population. The demographic dividend of the fast population growth during the Mao era is well and truly over.
The annual growth of the Chinese population is falling away - the average annual growth was 0.57% over the last decade, down from 1.07% in 1990-2000. And when the age structure of the population is analysed, we find that the number of people over the age of 60 rose by about 48m, reaching 13.3 per cent of the population. China’s total population is now 1.339bn – up 5.84 per cent from the last decade. The number of old people in China has grown by more than the population of Spain over the last ten years and there is growing pressure for a reversal of the controversial one-child policy.read more...»
This is a new eight-page revision briefing note for students taking AS and A2 macroeconomics courses on developments in the Chinese economy and their impact on the UK and the wider global economy. Fans on our Facebook page voted for it and we will be adding some more revision briefings in the next week based on the votes and preferences on the page! What is happening in China and in China’s changing economic relationships around the world is and will continue to have a profound impact on the UK and European Economy - this revision briefing looks at some of these connections. Download it here in pdf formatread more...»
The Australian Government released unemployment figures showing the rate of unemployment falling ot 4.9%. This figure is lower than previously expected and is now now influencing the value of the exchange rate in Australia. The article makes reference to the possible implications on the interest rate in the economy over the coming months to counteract.
Task: The article in the Australian Times could be used as a revision lesson for AS or Year 1 IB Economists to review the links between different macroeconomic variables.read more...»
A few years back we talked of the China Effect - where the rapid transformation of the Chinese economy and the huge growth of high volume low labour-cost manufacturing was acting as a supply-side cause of lower prices in the world economy. A decade or more of this may be coming to an end as the Chinese economy risks experiencing several more years of higher inflation and slower economic growth.
This article from the Telegraph “China inflation threat underestimated” reports on research from economists at Legal & General Investment Management that pinpoints of some of the inflationary impulses in the Chinese economy - notably the surge in credit, higher food and other commodity prices and the rapid rise in wage costs in urban areas as cities find the pool of cheap labour from the countryside is not running behind demand and creating labour shortages. This piece from the Economist provides a super chart on what has happened to Chinese wage costs in recent times. China’s tricky wage dynamics Despite recent increases - wages in Chinese manufacturing in 2008 were still only about 4 per cent of those in the USA.
If the Chinese authorities are truly serious about controlling inflation we can expect further tightening of monetary policy in the coming months driving the Yuan higher and curbing the rate of growth of real GDP. China has a new growth target of 8% per annum. Might this prove to be an over-estimate if the over-heating economy enters a clear slowdown phase?
BBC News: China grew at a robust 9.7%, as inflation hits highs
Al Jazeera: China’s inflation continues to rise
John Cassidy is always worth reading. His recent book ““How Markets Fail: The Logic of Economic Calamities” is one of the very best around for understanding important contributions to the development of economic thought and policy during the last fifty years. (I reviewed it here) In this article from the New Yorker, John Cassidy reports from the annual conference of the Institute for New Economic Thinking held at the Bretton Woods Hotel in New Hampshire, USA. It is a review of some of the keynote presentations and discussions and is recommended reading for A2 economics students wanting more background on some of the key policy dilemmas existing at present.
The Telegraph has this guide to the history and expansion of the International Monetary Fund (IMF)
The IMF’s own page explaining their roles can be found here
The IMF has a video channel on You Tube - a mix of interviews with notable economists and short features on individual countries such as the UK and Poland (both featured in recent months). Keeping in mind the traditional IMF policy prescriptions for economic reforms in countries where it is asked to provide bail-outs, the video resources may well be useful for colleagues wanting to embed some current video content in their teaching of global economics. Here is the link to their You Tube channel.
Poland is the largest of the central and eastern european countries (CEECs) to have entered the European Union Single Market in the recent enlargement process. And her macroeconomic record during and after the global financial crisis stands comparison as one of the best of the twenty seven EU member nations. Recession has been avoided and the economy is set to continue a long run of economic growth that is (slowly) bringing about a rise in relative living standards and a sustained fall in unemployment. The Guardian newspaper has been running a series on New Europe and this set of articles focuses on some of the challenges and opportunities facing Poland as Europe seeks to drag itself into a durable recovery phase.
Guardian - New Europe - Focus on Poland
An excellent resource for Unit 2 and Unit 4 macroeconomics. Vishnu Padmanabhan from Timetric has this excellent look at the impact of the recession on real GDP growth in OECD countries. Which countries did best and worst in the recession? It turns out that Australia, Poland, Israel and South Korea were the countries least affected by the crisis and all avoided a full-blown recession - experiencing instead a soft landing. Here is Vishnu’s article. Our own growing selection of Timetric charts can be found by scrolling down to the bottom of this blog entry.
The OECD has just produced their annual review of Going for Growth - a largely supply-side look at policies designed to promote long-term growth in productive potential in the world economy. Details can be found here.
One of the most keenly awaited macro statistics in the USA is the monthly data on employment and unemployment. For some time there have been fears that the huge fiscal and monetary policy stimulus programs seem to have been having little effect on the jobless rate.
As we can see from the charts below there are tentative signs that a more durable economic recovery is setting across the Atlantic. The unemployment rate has fallen to a two year low, employment in private sector businesses is expanding and the steep fall in manufacturing employment seems to have come to an end (for now). Getting unemployment down is crucial for Obama with the next Presidential electoral campaign in view. And it is also important for the wider health of the world’s biggest economy.
One of the really striking things about the recent recession and weak recovery has been the dramatic increase in the mean duration of unemployment in the USA compared to previous bouts of cyclical unemployment. My third chart in this blog looks compelling and suggests that it has been really hard for those who have lost their jobs in the wake of the global financial crisis and the subsequent recession to find fresh work. Long-term unemployment is a structural problem in the labour market and it becomes harder to resolve as the length of time spent out of paid work grows month by month.
Remittances are the sending of money to people in another country. Despite a recent dip because of the global recession, total remittance flows have grown in the world economy over the longer-term as the scale of migration between countries has grown. For many lower-income nations, remittance income is now a sizeable contribution to their Gross National Income (GNI) The World Bank estimates that there are over 250 million people living overseas who send some of their earned income back - remittances to all countries topped $305bn in 2008. The biggest single recipients of remittances are India, Mexico and China but measured as a share of national income is probably a better way of considering their relative importance. The World Bank calculated that in 2007, remittances as a share of GDP was particularly high in these countries:
Our Timetric charts provide some data background to the importance of remittances
For a currency that used to have the tag of the “Pacific Peso”, these are heady days for the Australian dollar. The external value of the dollar has reached a 29-year high as the Aussie dollar continues to appreciate on the global currency markets. Our Timetric charts follow the Australian dollar against the US dollar and also sterling.
This is a good mini case study on the factors that determine the value of a currency when it is allowed to float freely in foreign exchange markets
1/ The Australian economy is growing relatively strongly - increasing the expected returns from foreign investment in the economy
2/ Policy interest rates are relatively high (4.75%) - attracting inflows of hot money - short term banking flows that seek the best risk-adjusted rate of return
3/ Trade - the Australian economy has enjoyed a resurgence in the value of exports, notably from selling minerals and liquid natural gas to fast-growing developing countries in Asia
4/ Changing sentiment in the market - foreign exchange market speculators seem to be buying the Australian dollar as a safe haven investment instead of Japanese Yen
In simple terms the expected yield to investors prepared to buy Australian dollars is pretty high - for example compared to that on offer in Japan. This is causing a strong market demand for the Australian dollarread more...»
One aspect of globalisation is that manufacturers source their supplies from around the world. This will depend on the comparative advantage those countries have developed in producing various types of components. Japan produces about 30% of the global output of ‘flash memory’ used in electronic cameras and smartphones, and about 15% of the DRAM memory used in PCs. If something happens to disrupt that supply chain, as is clearly the case after the horrific events in Japan, there will be global effects.read more...»
I will keep this blog updated with a selection of video clips relevant to the study of the EU - please check below for some links and embedded videosread more...»
A wonderful chart showing the long run path of GDP per capita for the USA, Africa, Western Europe and Asia at constant 1990 prices. The sweep of this data makes for a terrific discussion in the classroom. So too does the second chart which tracks UK population and per capita GDP (measured in US dollars at constant 1990 prices)read more...»
There is a noticeable trend in the monthly trade balance! UK exports to China have grown over the years but the trade imbalance has widened enormously! According to former Business Secretary, Lord Mandelson UK exports to Brazil, Russia, India and China - the so-called ‘Bric countries’ - are lagging behind the rest of the world. The share of exports to the four BRIC nations remains persistently below our 3.7% share of world trade. Some economists point to an “export gap” worth £19.8bn with China, £3.2bn with India, and £1.8bn with both Russia and Brazil.
This is a terrific visualisation of what has happened to US house prices since the late nineteenth century - we ride the rollercoaster based on data from the Case Shiller index.
And if you want the latest Case Shiller data on US house prices - based on the 20 city survey, then click on the Timetric charts below .... hold onto your hats, the Florida property price data in particular looks pretty scaryread more...»
The terrible news coming out of Japan reminds one of the fragility of human life in the face of overwhelming natural forces. The thoughts of everyone at Tutor2u are with the people of the region affected by the earthquake and subsequent tsunami.
The narrow economic impact of the natural disaster will take many months to calibrate - Japan is one of the richest countries in the world and ought to have the resources to cope with the immediate aftermath. But her macro-economy has been weak for many years - the country has been struggling to shrug off a lost decade of slow growth and - more recently - one of the deepest recessions in her post war history.
Does the third largest but most indebted government in the world have any fiscal freedom to react? What will happen in the short term to industrial production, energy and food supplies and her export sectors?
Earthquakes have a special power to create hugely damaging economic consequences. Japan suffered losses of 10 trillion Japanese yen in the 1995 Kobe quake, 2.5 percent of the country’s GDP the previous year. Over time a rebuilding process will help to stabilise economic activity but there is an opportunity cost of having to devote scarce resources to rebuilding. The Japanese economy has endured a period of relative stagnation in part because many Japanese companies have out-sourced their manufacturing production to China and other countries where unit labour costs are lowest.
I have produced a series of charts below tracking some of the recent key changes in macroeconomic indicators for Japan and linked to some news coverage and audio-visual resources on how the earthquake may affect the Japanese economy
Hamish McRae: The cost of catastrophe and unrest is huge in both human and economic terms
BBC News (Feb 2011): Japan is no longer the world’s second largest economy
BBC News (Nov 2010): Japan grapples with deflation and demographics
BBC news: (Nov 2010): G20: Currency War and Japan
Guardian: Japan’s economy heads into freefall after earthquake and tsunami
Telegraph: Japan shuts down as economic fears grow
There is much talk in macro-economic policy circles of “re-balancing the economy” as a prelude to sustaining economic growth in the future. One aspect of this is addressing the long-term increase in importance of household spending as a share of national income (GDP). As our Timetric chart shows, the proportion of GDP accounted for by consumer spending on goods and services has edged higher over the years from 58% in 1980 to nearly two thirds of GDP in the credit-fuelled spending boom of the last few years.read more...»
Dambisa Moyo’s talk at the RSA available here focuses on some of the long term structural problems facing Western Economies in general and the USA in particular. She argues that there are three crucial ingredients in economic growth - better capital, the quantity and quality of the workforce plus improvements in productivity
Our good friends at Timetric are producing some superb stuff with economic data and here is another example. Policy interest rates are at historically low levels but the cost of borrowing for businesses and unsecured loans for personal customers continues to edge higher and is a vast multiple of the policy rate. This blog from Timetric offers timely background on the rising cost of credit. And it provides a connection to information failures in the consumer credit market.
Two videos show the stark contrast between rail networks between China and India! Good for understanding a little more about the importance of rail network investment (high speed and conventional) as a platform for economic growth and development.
Here is a link to an article written by John Gapper in the Financial Times about the long term decline of the US container shipping industry. The finger of blame is pointed at the protectionist ruling that “all domestic cargo must be carried in US ships made in US shipyards, crewed by US citizens .....Of the world’s 7,200 container ships in 2007, only 89 were US-registered compared with 1,250 European ships and 860 in Greater China ......An alliance of shipping companies, trade unions and US shipyards has blocked liberalisation.”
This is also a really good article on the economies of scale in container shipping.
Inflation is rising in China, and many of the reasons are the same as those given by Mervyn King for the rise in the UK - food prices are up 10.3% and the producer price index has risen to 6.6%, giving an annual inflation rate of 4.9% in January.
This is in spite of three interest rate rises in the last four months, and has brought about a further rise from 5.81% to 6.06% by the Central Bank.
The growth of the property owning middle class is recognised as having a role here - the National Bureau of Statistics also announced changes in how it calculates consumer price inflation.
In spite of the fact that there is still a huge proportion of the population who live on a very low income, and poor families spend up to half their incomes on food, housing has now been given a much larger share of the new consumer price index (CPI) basket, and food prices have been given less weight, it said.read more...»
This is a 16 minute video produced by Media Storm on behalf of Yale Environment 360 which is an online magazine offering opinion, analysis, reporting and debate on global environmental issues - may be of interest to colleagues teaching water scarcity in Africa / the economics and geography of adaptation to climate change. From the Yale 360 site this video on The Warriors of Qiugang - A Chinese Village Fights Back is particularly powerful.
The US trade gap with China hit a record $273.1 billion in 2010 raising fresh fears of a deteriorating trade relationship between the world’s two biggest economies. But a quick look behind the figures suggests that the US economy is enjoying a surge in exports a major stimulus to their recovery hopes.
The raw data is that US goods exported to China totaled $91.9 billion in 2010 while imports from China rose 24 percent to $364.9 billion. In fact that represents a rise in the value of US-China exports in 2010 of more than 31%.
And the true scale of the trade imbalance with China is likely to be much smaller than the conventionally published data suggests.
The deepening economic ties between China and the continent of Africa is a hot topic in the globalisation debate and one that has been covered in a two part series on the BBC by Justin Rowlatt. Details here. Episode 1 / Episode 2 More programme information can be found here.
Diane Coyle has a revealing blog post on the subtleties of this relationship in this blog post where she reviews the new book The Dragon’s Gift.
For visual learners this photo archive from the BBC is superb!
Here are some more recent news stories on this topic:
Poverty and Development: Africa-China relations mutually beneficial (Tutor2u Politics Blog)
Global food prices have risen on average by more than 135% over the last 5 years. While the price of food has been highly volatile, with a spike during 2008, there is clearly a trend pattern of a long term rise. This can be attributed to various root causes, both demand and supply side in nature.read more...»
The financialisation of the British economy continues apace. This article in the Guardian reports that US pay day loan businesses (regulated loan sharks to you and me) are planning a rapid and sizeable entry into the UK consumer credit market. In part this might be because in the UK there is little or no effective regulation on what they can charge.
Cash-strapped families often denied credit by high street banks are vulnerable to the heavy marketing of these businesses - students will know of one of them Wonga the shirt sponsor for Blackpool FC. The typical pay day loan is around £75 to £750, which is deposited in their bank account in as little as 15 minutes, to be repaid in around two to four weeks but with interest rates that can easily reach 30% a month or higher.
The pay day loan market might be a good case study for students wanting to understand more about the demand for credit and discussions about whether there should be a maximum price or cap on the interest rates that can be charged.
The NPR Friday podcast features Michael Lewis - author of The Big Short. For those who have enjoyed the book this will be a treat!
I would have to travel a long way to hear a better and more incisive talk than Mo’s talk at Fulham on Monday about the economics of currency wars. His students are lucky indeed to have such a gifted and authoritative communicator in their classroom! It was fascinating and focused on so many global economic forces that A2 macroeconomists need to have a handle on as their exams loom. Here are some brief notes taken during Mo’s talk and (at the end) a link to a pdf download of Mo’s presentation - full of fantastic supporting charts!read more...»
David Smith from the Sunday Times was on fine form in his talk to the Global Economy Student Enrichment event at Fulham yesterday. I have some brief notes below on some of his key themes and the pdf version of his presentation can be downloaded from the link at the bottom of the blogread more...»
Two programmes on BBC2 in the next two weeks investigate the spread of Chinese influence around the planet and asks what the world will be like if (when, surely?) China overtakes America as the world’s economic superpower. The first is on Tuesday 8th at 9pm, in which Justin Rowlatt covers a journey across Southern Africa to chart the extraordinary phenomenon of Chinese migration to Africa, and the huge influence of China on the development of the continent. This looks well worth watching, for all students who are embarking on topics of globalisation and development economics.
The BBC website for the programmes says that “While many in the West view Africa as a land of poverty, to the Chinese it is seen as an almost limitless business opportunity. From Angola to Tanzania, Justin meets the fearless Chinese entrepreneurs who have travelled thousands of miles to set up businesses.” Radio 4’s “From Our Own Correspondent” today featured a fascinating report by him about Chinese farmers who have emigrated to Angola to become chicken farmers there, and met with great success but some resentment from the local farmers, who are not managing to respond to this new competition in their market. There are also two short video extracts from the programmes:
Chinese sell ‘tender’ chickens in Zambia
Zambian chicken farmers lose trade to chinese
With EU carbon emissions market has closed since the middle of January after hackers stole €30m of permits the economics of a EU wide carbon tax has been given fresh prominence in recent weeks. Charles Hart evaluates the arguments for and against a tax on emissions in this super applied micro essay. After the essay there are some links to recent blog posts and other resources on carbon trading and carbon taxation.read more...»
Is Jim O’Neill at it again? A decade or more ago he coined the acronym BRIC for four emerging economies set to reshape the boundaries of power and influence in the global economy. Now he is making frequent reference to another cluster of four countries that together spell MIST. Can students name them?read more...»