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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 FT video clip below provides a short interview with Dame Ellen MacArthur - the former ocean yachtswoman - and her idea of building a circular economy - this idea might be a fruitful area for student exploration when studying environmental economics. To quote from the web site:L
"The linear ‘take, make, dispose’ model relies on large quantities of easily accessible resources and energy, and as such is increasingly unfit for the reality in which it operates. Working towards efficiency—a reduction of resources and fossil energy consumed per unit of manufacturing output—will not alter the finite nature of their stocks but can only delay the inevitable. A change of the entire operating system seems necessary"read more...»
The recovery in the British economy is now firmly established. Output in the services sector, the largest part of the economy, is above the previous peak level prior to the crash in 2008. There is a widespread myth that the recovery is fuelled by debt-financed personal spending. Yet since the trough of the recession in 2009 the economy as a whole has grown faster than spending by consumers.read 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...»
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...»
Most of us are keen to see the economy grow – as measured by GDP – and in the short run, the most likely driver of growth will be aggregate demand (AD). But which component of AD do we want to grow the most?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.
Britain's exports of whisky have been growing strongly in recent years helped by a lower pound and fast-rising demand from whisky drinkers in emerging markets. Whisky exports set to rise to £4.5bn by 2017 even though sales to traditionally strong markets in the European Union have stalled because of persistent recession in countries such as Spain, Portugal and Italy. This Channel 4 news report looks at the experiences of two whisky producers - one a small-scale manufacturer and the other the giant Diageo to consider prospects for UK exports as a way of strengthening the recovery,read more...»
How sticky is unemployment? Will it take three years to fall?
The views expressed by the new Bank of England Governor, Mark Carney, on interest rates and unemployment remain a hot topic. Interest rates will not be raised until unemployment falls below 7 per cent, a process he thinks will take three years.read more...»
Collaboration and innovation are often fast-tracked by creating the right spaces for people and ideas to mingle.
This seven minute video from the Economist is deeply interesting - it looks at the Artisan's Asylum near Boston, Massachusetts in the USA which is host to a number of new hardware businesses. They are built around cheap work space, high-tech tools and crowd-sourced funding. The project has spawned some notable success stories many built around digital 3D printing - is there anything like an equivalent Maker Movement in the UK?read more...»
Britain is growing again—but in perplexing and unsustainable ways - here is a discussion between two journalists at the Economist looking at recent developments in the UK economy - they attempt to dig below the headline figures on GDP to consider whether the ingredients are in place for a sustained, balanced and strong recovery over the next few years. The prospects do not look too good at the moment.
Arising from a recent visit to Sheffield, Peter Marsh, formerly the Manufacturing editor of the Financial Times, wrote an article on how Britain's steel city might benefit from the new industrial revolution - here is the link to follow
Understand better some of the very long term changes in the structure of output and employment in England and Wales using this clear video resource published by the Office of National Statistics. The video also looks at some of the key technological changes that have driven big changes in output and jobs over the years.read more...»
Where have all the miners gone? To judge by the rhetoric of the BBC and other Leftist media outlets, whole swathes of Britain lie devastated, plagued by rickets, unemployment and endemic poverty – nearly thirty years after the pit closures under Lady Thatcher!
The reality is different. There is indeed a small number of local authority areas where employment has never really recovered from the closures in the 1980s. But, equally, there are former mining areas which have prospered.
This article gives the opportunity for some neat cause-and-effect analysis. The cause is data from the ONS which shows that manufacturing output fell by 1.5% in January, following a 0.9% rise in December. The effect? Sterling has fallen to another low against the dollar. However the chain of argument which links this to the fall in manufacturing data is missing, as if often the case in students' essays, and which tends to cost them valuable analysis marks in exams.
Aggregate Demand may be stimulated by an increase in exports. Ha-Joon Chang, Author of the best seller, 23 Things They Don’t Tell You About Capitalism considers reasons in a short article for The Guardian why this hasn't happened after Sterling had fallen against other major trading economies. " Compared with ...2007, the pound has been devalued about 30% against the dollar, 50% against the yen, and 20% against the struggling euro. Yet despite the huge incentive to export created by such devaluation, Britain is still running trade deficits because it has lost the productive capacity to respond."
It may help students consider plausible policies to reduce its trade deficit, a macroeconomic goal overlooked in arguments over fiscal and monetary policies to control inflation or output. Finally it may aid evaluation, how different are the most pressing short and long term macroeconomic challengers facing UK governments.
Link to most trade figures.
We will put together some visual resources here on the division of labour in action! Click below to access them.read more...»
An updated glossary of key terms for AS macroread more...»
Premier Foods is the UK's largest food manufacturer but in November 2012 they have announced the closure of two large bakeries that have - for many years - produced Hovis bread for supermarkets. The closure of the factories follows the loss of its £75m-a-year contract with Co-operative supermarkets. Hundreds of jobs are set to be lost in the spring of 2013 with damaging consequences for the local economy. What types of unemployment can you associate with these factory closures? What measures might be appropriate in addressing the extra unemployment problem that will result?
BBC news: Hovis shuts bakeries - click here
Hovis bakery worker devastated - click here
Peter Marsh's talk at our Global economy conference in London on Monday challenged us to think in fresh terms about what manufacturing is and the opportunities for British businesses to make successful headway in premium and precision manufactured products in a fast-changing global environment. Here are the slides from his presentation. The FT special reprot - Making the Future is well worth tapping into - here is the link. We have also linked to some of his recent video pieces for the Financial Timesread more...»
Michael Heseltine’s report on economic growth came out last week. It contains 89 recommendations. A mere 57 varieties, to recall the famous Heinz slogan, might have connected it more with popular culture.
The headline news from the Financial Times could not be starker. Ford Motors has announced the closure of its last two remaining assembly plants in the UK with the probably loss of thousands of jobs. The Ford Transit plant in Southampton will close in early 2013 and a tooling factory will close in Dagenham, east London. Workers in these two factories are paying a heavy price for the sustained fall in new vehicle orders and production since the credit crunch came in 2007. Since then there has been a more than 20 per cent decline in total demand for vehicles. New passenger car registrations in Europe are expected to be just over 9 million in 2012 compared to 13 million in 2011 and 15 million in 2007. Demand for commercial vehicles has also suffered as businesses have cut back on their capital investment.
Ford is not alone in making difficult decisions to restructure their European business as a way of stemming losses and maintaining competitiveness in a hugely difficult market. Many other leading car manufacturers are taking steps to lower their production costs and survive this turbulent period:read more...»
My students have been researching and writing about the rapid growth of wages in the Chinese economy. Here are some of their perspectives with each author appearing at the top of the relevant section.
Lewis turning points are the defining feature of Arthur Lewis’ Dual-Sector Model, devised in 1954.
Peter Marsh the Financial Times industrial editor has written a new book about the future of manufacturing. He has been travelling around the world looking at some examples of cutting edge new technologies in manufacturing that will likely reshape the industrial landscape in the years to come. In this video example we visit a company Phoenix, Arizona at the forefront of made to order manufacturing. After 17 years of development by Dr. James St. Ville, Armor Designs, can, within a few hours, create custom composites for body and vehicle armour.read more...»
In this Financial Times analysis video the world class British business JCB is showcased - they see the world as their market and focus only on their core competencies - what are the key ingredients in building and sustaining their competitiveness in global markets? JCB is the UK’s biggest privately owned manufacturer.read more...»
A potentially important moment for the contestability of the tablet market. Technology giant Microsoft has unveiled its touchpad tablet computer. The “Surface” will face tough competition from Apple’s iPad and many other devices including those made by Samsung. These video resources provide some background. The Surface tablet computer will not be available until the Autumn on 2012.read more...»
This 101 East programme from Al Jazeerah shown in June 2012 looks at attempts within China to fast track investment and progress in product innovation as part of the drive to sustain growth and make the leap from middle to higher income living standards. The programme is 25 minutes long. China faces allegations of unfair trade practices and intellectual piracy by some of its major trading partners in the US and Europeread more...»
If workers are needed for the output they are required to produce, then it follows that they could be paid up to the extra value of revenue that their output generates for the firm, and that wage differentials will reflect differences in labour productivity - in other words, I am talking about the marginal revenue product of labour. The University and College Union (UCU) have commissioned a report from the Institute of Public Policy Research (IPPR) called ‘Further Higher? Tertiary education and growth in the UK’s new economy’, looking for some evidence of the differences in the productivity of workers who have A levels and those with degrees - you can see the results in the table above.read more...»
How long can China keep its comparative advantage of cheap production for manufacturing goods? We are aware of rising inflation in China which is eroding their advantage, and here is an article about a UK firm which manufactures cushions, some from a factory in Kirkby on Merseyside and some from his factory in the Zhejiang province in China. The story comes from a programme ‘The Town taking on China’ to be shown on BBC2 at 8pm tonight - and subsequently on i-player.read more...»
This is well worth watching! It is an 8 minute discussion from the Economist which examines what is being called “The Third Industrial Revolution” - based around the digitisation of manufacturing processes. Concepts such as 3d printing and advanced robotics are discussed, as are concepts such as competitiveness, productivity and product personalisation. One possible consequence of these changes might be that high quality manufacturing may begin to move back from lower-wage economies such as China and back to economies like the USA.read more...»
Here is a superb news report from Channel 4 news about the shortage of skilled workers in the North East of England (an area of high unemployment). Nissan this week announced a big new investment in car making at their ultra-high productivity plant in Washington, Tyne and Wear. But many of the manufacturers along Nissan’s supply chain are finding it tough to get enough skilled people coming througth to make realistic bid for the orders that will come from Nissa. Some businesses are having to turn down contracts because they dont have the extra workforce to cope with the higher volumes of businesses.
Skills shortages are restricting the growth of many small and medium sized businesses especially in manufacturing. Little wonder that Nissan is working very closely with Gateshead College to run an apprenticeship scheme - an example of external economies of scale in action.read more...»
Productivity is a measure of the efficiency with which a country combines capital and labour to produce more with the same level of factor inputs. We commonly focus on labour productivity measured by output per person employed or output per person hour.
A better measure of underlying productivity growth is total factor productivity which takes into account changes in the amount of capital available for each worker to use and also changes in the size of the labour force.
To give a simple numerical example, if the size of the capital stock grows by 3% and the employed workforce expands by 2% and output (GDP) increases by 8%, then total factor productivity has increased by 3%.
China has achieved impressive gains in productivity in recent years. Some of this is undoubtedly the huge spending on capital investment which has grown to nearly 50% of China’s GDP. The labour force has also grown although this is scheduled to level off and then decline in the years ahead.
What has driven improvements in Chinese total factor productivity?read more...»
There have been lots of stories in recent days about the future for UK industry / manufacturing - here is a selection of audio and video links:read more...»
This new five minute video report from the Financial Times is excellent on the competitive pressures facing many manufacturing businesses located in southern China. Wages are rising quickly and some manufacturing businesses have already moved either to lower-cost locations within the Chinese economy or to other countries such as Bangladesh and Indonesia.
But there are alternative approaches and this video emphasises the decision that some manufacturers have made to stay put but instead to move up the value chain and produce higher-end, higher-priced products for advanced western markets. Businesses are reluctant to move factories and sacrifice the human capital that has been accumulated over in some cases over thirty years.read more...»
Additive manufacturing or 3D printing is an emerging technology that takes product design data which provides a geometric representation of a product such as a pen and that data is then sent over to a machine that allows products to be manufactured ‘on the spot’ typically using additive materials in liquid or powder format.
This TED talk from Lisa Harouni (co-founder of Digital Forming) looks at examples of intricately designed products made using this new and increasingly affordable manufacturing technology. 3D machines can build structures, build replacement parts and parts within parts - the detailed resolution possible is incredible.read more...»
Before you read this blog please have a look at another blog written by our good friend Mark Johnston from New Zealand. Students of China and the US economy will find it fascinating!
There are good grounds for no longer calling China an emerging economy - it has arrived! The multiple significance of the rapidly-growing Chinese economy is plain for all to see but for Britain, only a small percentage of our exports of goods and services go there and this must change if Britain is to fully engage with and benefit from the rising might of the Chinese consumer. This article from the Daily Mirror provides a non-technical but clear explanation of the growing purchasing power of newly wealth Chinese, thousands of whom are flocking to western shopping malls to buy premium brands. Chinese foreign exchange reserves are also being used to buy up real assets - last week we heard that a Chinese sovereign wealth fund is set to buy nearly 9% of Thames Water.read more...»
Last night’s edition of Newsnight should be required viewing for all AS and A level economists - and it is a huge shame that it is only available on i-player for another 7 days. Introduced on the shock news that even Tesco is vulnerable to the downturn, it included reports from Andrew Verity looking at whether the British economy will ever wean itself off shopping and the City, and an excellent (and all-female!) discussion including Deborah Meaden and the FT’s Gillian Tett. Try challenging your students to watch and listen to this while noting down every aspect of the syllabus which is mentioned or referred to - that will keep them busy!
There was also a debate between Employment Minister Chris Grayling and disability campaigner Sue Marsh about the government’s welfare reforms, defeated in the House of Lords the night before, and finally Tokyo correspondent Roland Buerk looking at Japanese economic stagnation of the late 1980s and 90s, to consider whether it was a “lost decade” and what could be learnt from it.
Vicky Pryce FRSA has a new article on the economic significance of manufacturing industry for UK economic renewal. It is available here from the January 2012 edition of the RSA Journal. In a related article Sir Christopher Frayling FRSA discusses the rise of the Maker Movement.
Back in November 2011 Channel 4 news ran a special on the future for UK manufacturing here is a link to a related video
Are you into your cycling? The huge expansion of interest in cycling in the UK from road racing through to BMX and mountain-biking has gone hand in hand with the fantastic success of British cyclists on the international stage. 2012 promises to be another strong year for the industry despite difficult economic conditions.read more...»
Here are links to two superb short reports on prospects for UK manufacturing as the British economy struggles to escape from recession and sluggish growth forecasts in 2011 and 2012. Both are from Channel 4 News that produced a special on the health of the manufacturing sector - excellent for evaluation and for some applied examples to build into essays. The links appear belowread more...»
How well is British business coping in the aftermath of recession and during a sluggish recovery? Are there signs of improvement or are there warning signs that the UK business sector is fragile and vulnerable as we head into 2012? Four AS macro students - James Richardson, Ludo Higgin, Joe Landman and Nick Russell collaborated on this excellent piece and searched for some revealing clues about the resilience of British businesses at this crucial stage of the economic cycle.read more...»
What changes are produced by great economic upheavals? The financial and economic crisis prompts a rethinking of the assumptions about how businesses succeed and how economies operate. In a recent edition of the Global Business programme on BBC radio 4, Peter Day met Richard Florida, a renowned economic geographer who has written a new book The Great Reset. Here are some of the notes I jotted down from the programme:read more...»
To promote the expansion of renewable energy sources, many governments have introduced subsidies for consumers who install solar panels.
In April 2010, the Labour government introduced generous feed-in tariffs to encourage households to install solar photovoltaic systems. Anyone spending £13,000 up front to fit a system to their home was paid 41.3p per kilowatt hour (kWh) generated – enough to earn them a typical annual income of £900 a year in payments, on top of a £140-a-year saving in reduced electricity bills. The big six energy companies are required by law to pay householders who generate their own energy.
It looks like the days of generous subsidies for solar panels are coming to an end and there is a rush on to install them before the feed-in-tariff system is changed.read more...»
At last night’s Senior Economics Society at Oundle we had a riveting talk by Hywel Rees-Jones, Managing Director of CDC, which covered so many areas of the issues of development economics. The talk was entitled “Can the invisible hand solve poverty in Africa?” Whilst conceding that some of the statements were broad generalisations across a variegated continent, Hywel discussed some of the key issues facing Africa.read more...»
This feature article from the BBC web site is essentially about the vital importance of high-knowledge industries in sustaining competitiveness and growth in a globalising world. Europe lags behind many emerging countries in terms of the resources devoted to science and technology, research and development and creative industries in particular.
But the article makes reference to the expansion of science cities - knowledge clusters that bring together higher education expertise and entrepreneurial zeal - their number continues to grow from California and Boston in the USA, Cambridge in the UK, Education City in Qatar, Science City in Zurich and Digital Media City in Seoul. All good examples to use of the commercial leverage from external economies of scale in high-tech industries.
How does the world price of raw cotton affect the cost of buying new clothing on the high street and in the supermarkets? The answer is that the price of natural fibres is a key raw material into manufacturing garments and home furnishings. If prices rise, this increases the costs of production causing an inward shift of supply for clothing and furnishings at a given market price.
The world price of cotton has been rising steeply in recent times. As our chart below shows, raw cotton prices are well down from their peak in the spring of 2011, but the index is still more than twice the level of two years ago.read more...»
The occasion of the 2011 British Grand Prix at Silverstone in Northamptonshire is an opportunity to showcase the extraordinary growth and success of the motorsport industry in the UK. It is a classic example of the benefits that can flow from external economies of scale, and also of the way in which genuine competitive advantage in the global economy can be built and nurtured.read more...»
The first episode of a 3-part series, Made in Britain, was shown on BBC 2 last night, and was a really useful hour for economics (or business) students. It examined how and why Britain has lost thousands of manufacturing jobs over the last two or three decades in the low-value part of the sector, with some film of outsourcing shot in China as well as plenty of archive material from this country, but argued that the move to high-end, low scale manufacturing has become Britain’s area of comparative advantage in industrial manufacturing. This included Evan being taken for a test drive in the new McLaren sports car, which was clearly an amazing experience - watch the clip to see his reaction! And this surely emphasises the Economic Importance of Manufacturing to the UK economy - see below! Sadly this episode is not to be broadcast again, but is available on i-player for another 22 days and is thoroughly worth watching. I will certainly be setting the recording machine for the next two programmes, on Mondays at 9.00 on BBC2 - episode 2 is to focus on how innovation can help keep Britain ahead in the global economy.read more...»
I think Alan Sugar is a clown, he is about as comfortable with true entrepreneurship as Ryan Giggs is at a family wedding. His somewhat crass remarks about having never come across an engineer who has succeeded in business has prompted a wave of responses from the business community. Here is a selection of articles: And I have included an article by Luke Johnson which takes the Apprentice to bits and castigates it as a show that demonstrates that the BBC is not serious about real business.read more...»