Starter Activity - Economic Cycle in Pictures
This is an exercise that I have used in the past with AS level students and I decided this year to introduce it very early on in the course, indeed just a few lessons in when we sketched out the economic cycle and were discussing the economics of a recession. The exercise is a simple one - to think about the different stages of the business cycle and then discuss where in the cycle various examples might fit. There are no unique right or wrong answers, indeed in our discussion today students were sufficiently confident to justify their choices.
read more...»Policies for long-term unemployed in Denmark
Here is an intersting clip from the New York Times website that looks at the Danish model for dealing with the unemployed.
In Denmark unemployment is at 4.2% which is well below the EU average of 9.7%. When you become unemployed you are guaranteed 70% of your income for 2 years – was 4 years before the financial crisis.
They also spend big money on education and training. How do they fund this? Income tax rates range from 42.9% – 63% and not surprisingly it is the most taxed country in the world. Click here to go to the video on the NYT site
Cost cutting: Pre-Budget Report scrapped
George Osborne will scrap the pre-Budget report this year in a break with Gordon Brown’s era and a signal of a return to more normal economic policy making. The chancellor’s decision to ditch what had become a second annual Budget will save resources at the Treasury; in its place a slimmed-down autumn statement, with new forecasts, towards the end of the year.
Macroeconomic Developments in the UK Economy - September 2010
Here is an updated version of the keynote tutor2u teacher presentation on key developments in the UK Economy…
read more...»Stephanie Flanders and Robert Peston on the government spending review
As part of the BBC’s coverage of the government spending review, Stephanie Flanders asks how has the UK economy ended up in its current state - and what impact are the cuts likely to have? This is an excellent piece to use when introducing students to the broader macroeconomic issues at the start of their course.
In a second video piece Business Editor Robert Peston considers what impact are government cuts likely to have on the business world?
Autumn leaves are falling for the global economy
The arrival of the Fall is often a time to take stock of where the global economy is heading and there have been several perceptive and fascinating blogs on this in recent days.
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Housing market and negative equity
Home owners who bought at the tail-end of the property boom face another four years of negative equity before they recover what they paid, new figures reveal today.
David Orr, chief executive of the National Housing Federation, said:
“Even though price rises look sluggish for the next few years, affordability is not improving for many low-to-middle income households as banks continue to restrict their mortgage lending and house prices remain historically expensive in relation to salaries. There’s a very real risk that an entire generation will be locked out of the housing market for the foreseeable future and people will increasingly look to buy or rent an affordable home instead.”
read more...»Raising money from taxation - a BBC guide
This new video from Declan Curry on the BBC explains in straightforward terms how the UK government raises taxation from various sources and how it attempts to finance the gap between government spending and taxation. A good resource for AS level students.
read more...»The Happy Planet Index
Statistician Nic Marks from the Centre for Economic Well-Being/ New Economics Foudnation asks why we measure a nation’s success by its productivity instead of by the happiness and well-being of its people.
read more...»UK migration data for 2009
The latest official figures for net migration in the UK have been published and are reported here on the BBC website. The scale of the number of overseas students coming into the UK on student visas took me by surprise - The number of visas issued to students also went up by 35% to 362,015 - a factor behind the increasingly competitive and difficult task of winning places at many UK universities - the admissions process is now a truly global process.
The Financial Times reports that “The number of students accepted via the Ucas system from China, the largest single source of students from outside the UK, for this year is 7,752, up from 6,845”
I might use this article as a way of encouraging students to pick out organisations / bodies with a vested interest in the migration debate - there are two or three good ones included in the BBC news article and others can be located by using some of the external news links provided.
Revisiting the economics of John Maynard Keynes
I came across this PBS documentary piece on Keynes whilst researching for the new school year. The feature was broadcast in December 2009 but is still highly relevant today and includes an interview with Professor Robert Skidelsky.
AS Macro: Extreme weather hits Russian economic growth
This BBC news article explains how extreme weather conditions in Russia this summer is hitting GDP growth.
read more...»Fears rise for a double dip over the pond
There are some very worrying signs for the United States today with the news that new home sales (for completed properties and those under construction) have dropped to to their lowest level for nearly 50 years. Dr Doom, Noruiel Roubini has tweeted that the risk of a double dip recession in advanced economies (comprising the USA, Japan, the Eurozone and the UK) has now risen to 40%.
The fall in new home sales is taken as a litmus test of weakening confidence and signs that the fiscal and monetary policy stimulus policies have started to run out of steam. Unemployment claims in the USA are up to 500K per month and a fresh descent into recession in the labouy-intensive US construction industry will give deeper deflationary pressure on the world’s largest economy. Since the start of the global financial crisis, US construction businesses have shed more than two million jobs.
In a related feature, Nouriel Roubini takes tea with the Economist and discusses some of the main systemic risks for the global economy.
The Stimulus Debate - Krugman versus Ferguson
If you are looking for an introduction to some of the key themes in the debate about how best macro policy should respond to the global financial crisis and the recession then this set of videos from Global Public Square could be pitch perfect. There are interviews with the Keynesian-leaning Paul Krugman and Niall Ferguson who buils the case for running small fiscal deficits.
Links to the videos are below
read more...»Germany speeds ahead
After a terrible 2009 in which real GDP dropped by 4.9%, the German economy has posted the biggest increase in her quarterly GDP since West was unified with the East. German gross domestic product expanded by 2.2 per cent rate in the second quarter compared with the previous three months. German industry is riding on the back of a rebound in demand in the global economy (her manufacturing businesses are closely tied to swings in the world economic cycle) allied to the competitive boost of the recent depreciation of the euro against the US dollar.
Steve Evans reports on the surging German economy
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81 million young workers unemployed in 2009
The global financial and economic crisis has spurred a record increase in youth unemployment according to a new report from the International Labour Organisation.
This deeply important structural issue for the UK and many other labour markets is not confined to developed nations. In developing / emerging economies where 90 per cent of young people live, youth are more vulnerable to underemployment and absolute poverty. The ILO reports that 152 million young people, or about 28 percent of all the young workers in the world, worked in 2009 but remained in extreme poverty in households surviving on less than US$1.25 per person per day in 2008.
More here from the Guardian and here is a link to the ILO report on the problems of youth unemployment in the global economy. And a report on long-term youth unemployment in the UK from the Telegraph.
King on the economy
The Guardian offers a good summary of the main issues arising from Mervyn King’s recent Inflation Report. There is a great little animation in the middle of this article to show how each month the Bank’s projected growth figures have always proven to be a little too optimistic and how they have deteriorated over the past couple of years.
read more...»Choppy times ahead
“Looking ahead, the UK economy is facing a major rebalancing away from private and public consumption and towards net exports. Achieving that rebalancing, while confronting these headwinds, is likely to mean a choppy recovery.” (Mervyn King on prospects for the UK economy over the next couple of years).
Details here of the Bank of England’s latest inflation forecasts.
But as Chris Giles pointed out in an article in the Financial Times earlier on this week:
“Despite having hundreds of economists working in the Bank, and the most sophisticated suite of economic models in the UK, the monetary policy committee’s forecasts since 1997 have achieved no better outcome than if the committee had simply predicted the average level for inflation and growth over the 13-year period”
Hat tip to Michael Owen for spotting this excellent FT analysis. FT audit casts doubt on Bank’s forecasts
Reasons to fear a jobless recovery
Will the UK labour market be able to generate enough new jobs to sustain the recovery? There are plenty of doubts surfacing at the moment and we might be finding ourselves on the cusp or yet another surge in structural unemployment. Here are some reasons why - despite our much vaunted flexible labour market - a jobless recovery is on the cards.
read more...»Fiscal Austerity - Businesses in the Firing Line
The Guardian has this timely article offering plenty of examples of firms whose revenues & profits will be affected by public sector cuts in the months (and years) ahead. What the article does not really consider are the opportunities for businesses during this time of fiscal austerity. Firms who can supply goods and services to public sector organisations more efficiently - open source software businesses spring to mind - can tap into the need for great value for money in delivering public services. And the wider context is the threat to individuals and corporates from a higher tax burden and higher long term interest rates unless the fiscal deficit is brought under control. Once in a generation a nation needs to take a cold hard look at state spending and this time has arrived.
Consumer sentiment weakens as double dip looms
Swings in consumer confidence have often provided reliable evidence of short term turning points in economic activity. And there are growing fears of a double-dip recession for the UK with a raft of household surveys suggesting a weakening of sentiment about prospects for the economy.
read more...»Little sign yet of a Yuan appreciation
Back in June the Chinese authorities announced that they were prepared to allow a managed withdrawal of the pegged currency against the US dollar. There has been longstanding pressure from US law-makers that an undervaleud Yuan has given China an artificial competitive advantage in international markets. And that the huge rise in her current account surplus is indicative of an exchange rate that is some distance from a long-run equilibrium level.
read more...»Where next for the UK economy?
The Independent newspaper yesterday carried a pessimistic interview with the Chief Economist of the Bank of England (Spencer Dale) in which he commented on the risk of a “triple whammy” for the British economy - namely a dubious combination of anemic growth, rising inflation and much higher unemployment. The interview is available here. According to the piece “The economy, said Mr Dale, would not return to normal “for an awfully long time”.
Tough times ahead for sure but perhaps there are also grounds for optimism not least for manufacturing industries able to export their products to economies that are emerging from the downturn. And the latest (albeit provisional) data for UK GDP shows an economy much stronger than many people expected. The UK economy grew by 1.1% in the three months from April through to June - close to double the growth rate that was expected by the markets.
I have updated my keynote presentation on recent macroeconomic developments for the UK economy. This seventy-five slide presentation covers many of the main macro indicators and focuses on some of the risks and opportunities for Britain into the next crucial stage of the cycle.
read more...»A Lewis Turning Point? Wages in China
The Telegraph reports that FoxConn is raising wages for workers at its factories by 70% with effect from the 1st of October. Following the latest rise the basic salary for production-line workers at Foxconn’s will have risen from 900 renminbi (£91.30) per month two weeks ago to 2,000 renminbi (£203). The article picks out some of the short and medium term factors driving average wages higher in the Chinese economy including the effects of demographic change in addition to labour shortages in many Chinese manufacturing heartlands.
It raises plenty of interesting economics aspects:
1/ Whether the wage hike will raise productivity still further - many economists believe that there is a positive relationship between pay rates and output per worker - the idea of efficiency wages
2/ How Chinese manufacturing businesses will absorb the increase in unit labour costs
3/ The extent to which consumers in the developed world will now pay more for their digital gadgets
4/ The impact on domestic living standards and consumption in China and on demand for household goods and services
In several ways the Chinese authorities will support the lifting of average wages - China now aims to boost private sector capital investment and consumption to cut dependence on the fiscal and monetary stimulus that countered the effects of the global financial crisis
Foxconn is not the only foreign-owned company in China to decide to raise wage rates. Honda, Japan’s second-largest automaker has recently reached an agreement with most of the 1,900 employees at a Chinese parts factory to raise pay by 24 percent after workers walked out on strike.
More here from the BBC news web site: Foxconn gives workers second pay rise
See also: Apple boss defends conditions at iPhone factory
And more here from Bloomberg Economy
“China, once an abundant provider of low-cost workers, is heading for the so-called Lewis turning point, when surplus labor evaporates, pushing up wages, consumption and inflation, said Huang Yiping, former chief Asia economist at Citigroup Inc. The result may prompt manufacturers to switch to cheaper countries such as India and Vietnam. “
How are taxes raised and spent?
This neat set of graphics from the BBC makes an ideal introductory resource when teaching government taxation and spending.
EU Economics: Estonia is17th member of the Euro Zone
Here is an update for revision on Euro issues. Estonia has been accepted into the Euro Zone and will join the single currency in January 2010.
Details here. Estonia is the first of the Baltic States to enter into monetary union. In macroeconomic terms it is a minnow - with economic output of 14 billion euros ($17 billion), Estonia would rank as the euro’s second-smallest economy, ahead of Malta.
China’s housing market - fantastic interactive resource
The Wall Street Journal has excelled itself with this superb resource providing background on the Chinese housing market (bubble?)
Innovation to get the British economy growing again
Larry Elliott in this latest piece for the Guardian turns his attention to the importance of innovation as a catalyst for competitiveness, growth and new jobs. The basis for the article is the speech given last week by the new Business Secretary Vince Cable who is charged with finding the right incentives to encourage domestic and externally-owned businesses to invest and commit to sufficient research and development to speed up the process of innovation in the UK. As a nation our spending on R&D is painfully low and has been for years despite the best efforts of successive governments. Many emerging market countries are streets ahead in terms of R&D spending as a share of their national income. Successful innovation brings benefits on the demand and supply-side of the economy. And most of it will flow from the private sector - so how best to achieve this?
The Elliott article links to a new report from NESTA - available here which focuses on the need to re-balance the British economy to provide a stronger platform for sustainable growth and new jobs. Re-balancing the economy has become a buzz phrase in recent months.
“Economic ‘balance’ has come to refer to many things, including the balance between imports and exports, the balance between the public and private sectors, the balance between public spending and tax receipts, and the balance between the South East and the rest of the country. This report focuses on one particular aspect: the balance between different sectors in the economy.
There are some super charts showing the changing contribution of manufacturing and other sectors to output and trade. This will be a good resource for teachers wanting to update their notes on manufacturing and competitiveness.
Unit 2 Macro: How can supply-side policies help in a recession?
Recessions are often the result of negative demand-side shocks that hit real incomes of consumers and demand and profits for businesses. The consequences show through in higher unemployment, a fall in capital investment and an increasing rate of business failures. Most macroeconomic policies in a recession centre on boosting demand and confidence in a bid to generate a rebound in output, jobs and incomes within the circular flow.
What role can supply-side policies play during an economic downturn?
read more...»AS Macro: Macroeconomic Performance
Macroeconomic performance refers to an assessment of how well a country is doing in reaching key objectives of government policy. The main aim of policy is usually an improvement in the real standard of living for their population. The term ‘real’ means that we have taken into account the effects of rising prices so that we get a better picture of how many goods and services we can afford to buy and consume.
Macroeconomic policy is not solely concerned with living standards. The bigger picture would take into account some of the following:
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