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Saudi Arabia’s position as one of the largest players in the global oil market, producing more than a tenth of the world’s output and owning a quarter of the world’s proven reserves, has negative effects on other market participants. Writing in the Economic Journal, Anton Nakov and Galo Nuño document two features that have made the Kingdom different from other oil producers:read more...»
This is a great learning aid, especially if you've not come across it before. If you're trying to understand exchange rates, you often end up wondering which countries have overvalued exchange rates (that should, ideally, depreciate in value) or those that are undervalued (where appreciation would probably help).
The idea is so simple - find a product that's available in most countries, produced to a standardised design, and that serves as a reasonable 'basket of goods' capturing a range of price data for the economy you're looking at. By this measure, the countries with expensive Big Macs have overvalued exchange rates and cheap Big Macs means an undervalued exchange rate.read more...»
On the 1st January 2014, Latvia became the 18th country to enter the single currency Euro area, joining Estonia who adopted the Euro four years ago. How will it affect the economy? Are the forecast benefits greater than the costs and risks? Here are some resources on the issue:read more...»
This report which the Public Accounts Committee published on Friday, entitled Supporting UK exporters overseas, gives a useful piece of background reading, as it marries up AS and A2 level theory, and micro and macro topics. It looks at the combined efforts of the Foreign and Commonwealth Office and UK Trade and Industry to help UK firms, particularly small and medium sized businesses, boost their exports and so contribute to UK GDP recovery. The summary of the report on the PAC website could be used by students to consider a couple of questions:
How many examples of government failure can you identify?
Given that the UK does not currently use monetary policy to influence the exchange rate, what mix of government policies might be used in order to meet the target of doubling exports by 2020?
On Project Syndicate, economist Ricardo Hausmann argues that urging cities, regions, and countries to specialise can be wrong and even dangerous.
An interesting point, as almost everyone studying economics assumes that the basic idea is so intuitive and obvious that it is hard to deny it. See what you think.read more...»
Here is a new series on BBC radio 4 that will excite students and teachers who enjoy tracking the changing centre of gravity in the world economy. Jim O’Neill, former chief economist and head of asset management at Goldman Sachs, presents the flagship four-part series in Radio 4’s focus on the MINT countries – Mexico, Indonesia, Nigeria and Turkey – tipped as the next to assume their places at the high table of economic success. Details of the programme can be found here.
In November 2013, Anthony Beaumont from Eton College organised a panel event on lessons to be learnt from the Global Financial Crisis. The highly successful event was attended by over 500 students from nearly forty schools and colleges. The panel included Anne Pettifor, Ha-Joon Change, Paul Ormerod and Crispin Odey. Tutor2u was pleased to sponsor the event by producing a colour booklet containing some relevant articles to the discussion. If you would like to have a look at it, please check it out using the streamed presentation below.read more...»
Which of these brands are British?
- Newcastle Brown
- Aston Martin
- Rolls Royce
- Branston's pickle
- Land Rover
- HP sauce
- PG Tips
- John Smiths bitter
- Sarson’s vinegar
- Rowntree Mackintosh
The phrase ‘industrial policy’ seems to take us decades back in time. In 1964, a powerful catchphrase of the new Labour Prime Minister, Harold Wilson, was the need for Britain to embrace the ‘white heat of the technological revolution’. Sadly, by the 1970s this vision had deteriorated into a list of institutions, stuffed with dull businessmen and trade unionists, meeting to decide how to prop up yet another failed sector of the UK economy.
But the concept is now back in vogue. Perhaps surprisingly, given the historical experience, the coalition chose to preserve Labour’s Technology Strategy Board (TSB) quango. The TSB has a budget of £400 million to “accelerate UK economic growth by stimulating and supporting business-led innovation”. A key way in which it plans to do this is through the purchasing decisions of the public sector.read more...»
The euro should either be dismantled in an orderly way or the leading members should do what is necessary to make it growth- and employment-friendly as fast as possible. That is the central message of Nobel laureate Professor Sir Christopher Pissarides, when he delivers his inaugural lecture as the first Regius Professor of Economics at the London School of Economics.
Professor Pissarides was once a passionate believer in the benefits of European monetary union. He now thinks that either the euro should be dismantled or the direction of economic policy dramatically reversed so as to promote growth and jobs and avoid creating a lost generation of educated young people.
‘We will get nowhere plodding along with the current line of ad hoc decision-making and inconsistent debt-relief policies’, he will say. ‘The policies pursued now to steady the euro are costing Europe jobs and they are creating a lost generation of educated young people. This is not what the founding fathers promised.’
The co-recipient of the 2010 Nobel Memorial Prize in Economic Sciences will outline what needs to be done to bring Europe back to life:read more...»
Two cartoons to illustrate two key issues: Britain doesn't export enough (especially goods) and so has a large current account deficit.
That's not to say that the UK doesn't have significant exports markets - but where?read more...»
The Third Plenum has finished in China and with it has come some potentially significant reforms designed to rebalance the Chinese economy and shape future growth and development. The BBC's Linda Yueh has been prominent in reporting on this crucial stage of Chinese development and we have linked below to some of her recent output broadcast on the BBC.read more...»
This is an updated revision presentation covering aspects of inequality and economic growth/development - it is designed for Year 13 A2 macro studentsread more...»
The biggest issue facing capitalism in modern times is the moral critique. This is partly due to a misunderstanding of capitalism, which has allowed it to become synonymous with “fat cat” bankers, “wide boys” and the fast and loose nature of our booming financial centres and cities. These are good in their own right, providing many jobs directly and indirectly and through their role as the life-giving force in the economy with small business support, which was albeit more prominent before the crash.
It isn’t supposed to be like this. The 'upside' of the recession and financial crisis was a steep depreciation in the value of sterling. That should have made our exports cheaper and imports dearer, thereby helping the UK to close its huge current account deficit. But as the graph above shows, it just hasn’t happened.read more...»
This BBC news report is superb background for students who want a mini case study of the potential of mobile technology in improving farm yields and incomes for farmers in developing countries. A 29-year-old developer from Ghana has created a mobile app that he hopes will transform the livelihoods of farmers and help address food shortagesread more...»
This revision presentation highlights the key opportunities and threats faced by firms outside China looking to do business in and with China. It also provides examples of businesses that have succeeded in China and those that have struggled!
A fully editable and printable version of this presentation is included in our AQA BUSS4 2014 Toolkit on China which is being published on 8 November 2013.read more...»
It is a normal rule of thumb that the volume of world trade tends to grow at double the rate of growth of world GDP. Between 1990 and 2008 global real GDP expanded at an average annual rate of growth of 3.2% while world trade volume grew at an average of growth of 6%. However, in the last two years world trade volume has risen by 4.8 per cent while real GDP has risen by only 4.0 percent. If the normal 2:1 ratio had applied, trade growth would have been about 3.2 per cent higher. The slowdown in the growth of world trade can be partly explained by the economic difficulties in the euro zone in 2012 and more latterly in the BRIC economies. In addition there has been a growth in protectionism since the start of the economic crisis in 2008.read more...»
UK immigrants who arrived since 2000 are less likely to receive benefits and less likely to live in social housing than UK natives. What’s more, over the decade from 2001 to 2011, they made a considerable positive net contribution to the UK’s fiscal system, and thus helped to relieve the fiscal burden on UK-born workers.
The positive contribution is particularly evident for UK immigrants from the European Economic Area (EEA – the European Union plus three small neighbours): they contributed about 34% more in taxes than they received in benefits over the period 2001-11.
These are the central findings of a comprehensive analysis of the fiscal consequences of immigration to the UK, published today by the Centre for Research and Analysis of Migration (CReAM) at University College London.read more...»
The Confederation of British Industry has today launched a report called Our Global Future: The Business Vision for a Reformed EU - The report calls for further EU reform not least the completion of the single market in particular in services and the new internet economy. They argue for more free trade deals with other countries and regions.
The report produces estimates – based on past academic studies – that EU membership adds £62bn-£78bn a year to UK gross domestic product, equal to the combined economies of northeast England and Northern Ireland. That works out at £3,000 per household and £1,225 per individual. The fact sheets from the report can be found hereread more...»
Suyash Raj Bhandari considers some of the ways in which the rapid expansion and adoption of mobile technology in Africa can act as a spur to growth and development on the continent. We link also to some useful background video resources on this issue.read more...»
In a recent assignment, A2 students were asked to write a 500 word profile on each of two development economists of their choice and to capture their key ideas and connect to one or more current issues in development. I will be adding some of their responses to the economics blog. Here Ben Evans focuses on the work of Amartya Senread more...»
Suyash Raj Bhandari profiles the Founder of the Grameen Bank, Mohammad Yunusread more...»
In a recent assignment, A2 students were asked to write a 500 word profile on each of two development economists of their choice and to capture their key ideas and connect to one or more current issues in development. I will be adding some of their responses to the economics blog. Here Ben Evans focuses on the work of Daron Acemogluread more...»
In the second part of his conversation with Professor Richard Hausmann, John Authers from the FT asks which countries are well set for growth in the years ahead. Hausmann argues that there are three factors that explain growth - firstly how well natural resources are used, second how many productive capabilities a country currently has. And thirdly, how easy can a nation can acquire new productive capabilities. He claims that Mexico is better placed than Brazil on account of improved diversification into more sophisticated products. Hausmann forecasts that China will grow at a rate of around 5% between now and 2020, well below the growth target set by the Chinese government.read more...»
Calls ask us to "buy local," supporting domestic industry and cutting back on "food miles." The reasons advanced include saving fuel used in transportation, and not "exploiting cheap labour" in developing countries. Self-sufficiency is, however, an expensive delusion.
This morning few of us draw our own well water to wash in. Nor did we grow our own cotton and weave it into shirts. We did not grow even our own wheat and combine it with “oaty goodness” to produce Cheerios. This is because we stick to what we can do, which is none of these things.
The concept of gains from trade is of fundamental importance to economists. But don't be fooled into thinking that gains from trade are limited to international trade. The same theory that explains trade is just as relevant when talking about trade between individuals, cities and regions.read more...»
Here is an updated streamed presentation on overseas aid and economic development (updated October 2013)read more...»
Here is an updated revision presentation covering aspects of the growth of microfinance and the role that it can play in driving development. We have also linked to some suggestions for background reading on the microfinance issue.read more...»
Growth elasticity of poverty is a measure of elasticity (responsiveness) that calculates how much poverty falls for each percentage point in economic growth. According to a recent estimate from World Bank development economists Luc Christiaensen, Punam Chuhan-Pole and Aly Sanoh, that elasticity was about 2.0 in the developing world as a whole (excluding China) during the 2000s, but only 0.7 in Africa. In other words, the rapid growth achieved in many African countries over the last decade or more has not had as much impact on inequality as in other regions.read more...»
The nature of A2 economics specifications is that they lag interesting and important developments in the subject much of which are directly relevant to what students are taught in the classroom. The role of complexity in understanding how and why countries grow is one such example and I have blogged before about the work of Cesar Hidalgo and Richard Hausmann through the Observatory of Economic Complexity - see "Teaching Trade in a Different Way"
It is a joy to find the Financial Times covering some of their ideas in a brace of short videos as part of the John Authers Daily Note. You can always find these clips on the FT's You Tube Channel and I strongly recommend this for ambitious and enthusiastic students.read more...»
A huge reminder about the shifts in economic power arrived with the news about the development of Hinkley C nuclear power station.read more...»
Are you a student taking an A2 economics course in development economics? Each day fresh research and news articles appear that are directly relevant to your work and keeping up to speed can be difficult! Our Scoop.It board provides an avenue to follow with a daily selection of useful articles to extend and enrich your understanding and awareness. Click here or follow the live stream below. The RSS feed for this board can be found hereread more...»
It was a pleasure to visit the LSE earlier on this week to hear a lecture from the distinguished economist Professor Angus Deaton from Princeton University in the United States. His new book "The great escape from inequality" is on my must-read list for the half term holiday and brings into focus over 250 years of changes in health and income inequalities across the world economy.
I will blog about his book a little later on but for now this Financial Times interview provides an introduction to some of the main themes of his book. Incidentally, Professor Deaton has strong views on the efficacy of foreign aid and this chapter of his book has provoked some strong responses from the pro-aid lobby active on twitter. Click below for the full video of his lecture at the LSE.read more...»
On the World Bank twitter account, President Jim Kim is quoted as saying that "Properly managed, new minerals wealth could transform Africa’s development." Back in June 2013, a new report from the African Progress Panel looked at this important issue and set out an agenda for maximising Africa’s natural resource wealth and using it to improve well-being.
My own students have been researching the economics of natural resources and whether they can be a blessing and/or a curse to countries seeking sustained growth and development. I just wanted to share one or two of these essays with you because I was delighted with the depth of the independent research on show and the quality of evaluation in their arguments.read more...»
Almost one in five people worldwide paid bribes to education services last year, according to Transparency International’s 2013 Global Corruption Barometer. In the world’s poorest countries the number rises to one in three.
These shocking figures feature in their report into global education, and an excellent item on the BBC website highlights some of the key findings, with analysis of how they impact on potential for development. For example, in parts of sub-Saharan Africa and Asia the corruption might take the form of requiring parents to pay a fee for a school place that should be free. In Eastern Europe, it might be paying to gain an advantage in university admissions.
"Leakages" in the funding of schools in Kenya had the equivalent value of losing more than 11 million text books, says the report. A study of 180 schools in Tanzania showed that more than a third of intended funds had failed to reach the school. The list of examples goes on, and the BBC item gives some analysis of the effect, raising the cost of education and lowering the quality of human capital.
Students learning about growth and development issues can often state that 'corruption' constrains development, but struggle to give clear evidence of exactly how it does so. Studying this report would really help them to give that evidence, and also to understand some of the difficulties faced by students in other countries.
Workers in Peru say they are suffering because of competition from cheaper imports. Chinese imports are stifling what was one of the largest clothing manufacturers in South America and a free trade agreement could make matters worse. A short video clip on this issue/read more...»
Here is an updated revision presentation on aspects of the natural resource trap or natural resource curse issue facing low (and also high) income countriesread more...»
A revision presentation on aspects of the links between investment and economic growth. Plus some slides on the causes of the so-called Middle Income Trapread more...»
Here are some video resources on Shanghai's new tree trade zone. The Financial Times reports that "The Chinese government has declared that it wants to use the zone – a small 28 sq km sliver of Shanghai – as a test bed for policies from interest rate liberalisation to capital account opening - There are no residents in the zone – only offices, factories and hotels" There is much debate about whether the creation of a new free trade zone will bring about greater digital freedom in China - allowing for example, freer access to social networks such as Facebook and Twitterread more...»
More than half of U.S.-based manufacturing executives at companies with sales greater than $1 billion are planning to bring back production to the U.S. from China or are actively considering it, according to a new survey by The Boston Consulting Group.
The share of executives who are planning to "onshore" or “reshore” or are considering it rose to 54 percent, compared with 37 percent of executives who responded to a similar BCG survey in February 2012.read more...»
Here at Tutor2u we are really looking forward to the launch of a new programme on BBC - Talking Business with Linda Yueh. Linda has spoken at several of our Tutor2u events in recent years and her ability to communicate important and often complex ideas to a wider public has been clearly evident in her presentations. This is a programme well worth tuning into and sharing with your students. Click here for details. See also: China's Transformation - The Long View (Linda Yueh at the Tutor2u Conference)
Today in class we were discussing the forces of globalisation, and some of the discussion took us down the following route:
Globalisation is defined in many different ways – there is no textbook definition - but economic globalisation is usually characterised by some of the following features:
- An increasing interdependence between economies and an erosion of national boundaries
- Increased cross-border activity from MNCs
- Increased cross-border flow of trade in goods and services, movement of people, flows of financial assets, hot money, and FDI flows
- The growth of labour migration and outsourcing and global supply chains
The OECD’s definition is: “The geographic dispersion of industrial and service activities, for example research and development, sourcing of inputs, production and distribution, and the cross-border networking of companies, for example through joint ventures and the sharing of assets”
One index that attempts to quantify and measure globalisation is called the KOF index.
-The KOF Index of Globalization measures the three main dimensions of globalization:
Economic, Social and Political.
We are exceptionally grateful to Bob Hindle for making available the notes and presentation from a superb talk given by Roopa Purushothaman from Everstone Capital at the Oberoi International School, 3rd September 2013. This is a fantastic resource for students and teachers who are focusing on India as part of their work on growth, development and macro polices to manage the economy. Check below for full details.read more...»
Since the appalling fire a few months back at the Rana Plaza complex that cost the lives of more than 1100 people, there has been intense interest and scrutiny of working and living conditions of thousands employed in Bangladeshi clothing factories.
On Monday night the BBC programme Panorama broadcast an investigation into this and the findings were compelling and deeply disturbing.
In "Dying for a Bargain" Panorama discovered there have been at least 50 fires in Bangladeshi clothing factories in the last 10 months. Clothing factory workers filmed by
#BBCPanorama were released at 2:30 am, 19 hours after they started. They were due back at 7am. You can see a clip of this here. Events uncovered at the Ha Meem Sportswear factory will no doubt have left executives at Lidl scrambling to find out the truth about what is happening at one of their major clothing suppliers.
In the whole of the 20th century, only a few countries managed to transform themselves and join the club of rich economies. Japan is the most prominent example. The key question for the first half of the 21st century is whether or not China will manage to do the same. It is a difficult and elusive feat, and the number of failures, of countries who nearly made it but then fell back, is as great as the successes.read more...»
China’s track record on using its currency as a tool for manipulating its international competitiveness has been well documented, especially during the period of 1995-2005, where it was pegged at 8.28 RMB to the USD.
However, adopting such strict policies on the exchange rate, leads to the Impossible Trinity / Trilemma - that is, that it is not possible for a country to have all three of the following at the same time:
- A fixed exchange rate
- Free movement of capital
- An independent monetary policy
Economics student Anthony Beaumont writes on the policies that might sustain an improvement in the Croatian economy as it settles into being the 28th member nation of the EU single marketread more...»
Economist Anthony Beaumont considers how the deeper economic integration within the ASEAN single market can act as a stimulant to economic growth and development for member nationsread more...»
This revision presentation explains and illustrates the concept of protectionism. The presentation explains the factors that motivate protectionism and the methods employed, including tariffs, import duties, dumping, currency manipulation and the favouring of domestic firms and industries.read more...»