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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...»
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...»
There has been renewed focus in recent weeks on the slowing growth rates in the BRIC countries - Brazil, Russia, India and China. It is inevitable that the pace and sources of growth will change as these countries develop and experience continued structural adjustments. How successful will they be in responding the the challenges and opportunities of the next stage of development? In this blog we link to some recent articles on the BRIC countries for students wanting to deepen their understanding of this important area of the A2 macro course.read more...»
A brief selection of video resources on the biggest protests in Brazil for over 20 years. The country is experiencing a sharp slowdown in growth but inflation remains a big difficulty for the Brazilian authoritiesread more...»
Hundreds of millions of people around the world are escaping poverty and becoming middle class. The explosion of new consumers in China, India and other economic powerhouses is changing the global balance of power. The BBC website has a new series on exploring the effects of this shift in global economic power and influence - click here for further research and watch the video below
In May 2013, the Brazilian government announced that it plans to cancel or restructure almost $900m in debt owed by African countries. The move is designed mainly to expand Brazil's economic ties with Africa and fast forward the growth of trade and investment between emerging countries and regions. In the aftermath of this move, Brazil’s future aid assistance is likely to target infrastructure, agriculture and social programmes. Among the 12 countries set to benefit are Tanzania, oil-producing Republic of Congo and copper-rich Zambia. The Southern Silk Road continues to develop as new models of aid and trade are forged between the emerging fast growing countries of the world.
Bringing innovations to the market is crucial for countries wanting to focus on green industries as a source of economic growth. This blog will provide a number of short news videos on innovation in environmental products.read more...»
There are several research organisations out there producing regularly updated forecasts on what is likely to happen to the relative shares of global GDP and income per capita over the long run. Typically the forecast stretches out to 2050 and necessarily involves plenty of uncertainty. But these over the horizon studies are quite interesting in their own right because they remind us of the changing drivers of growth in the world economy.
Here is one of these reports - World in 2050 The BRICs and beyond: prospects, challenges and opportunities - produced by economists at PriceWaterhouseCoopersread more...»
Andy Reeve explains that a 20 year trade dispute between the European Union and 11 Latin American countries has finally ended, with a historic trade agreement. The agreement was signed in front of Pascal Lamy, the Director General of the World Trade Organisation. The agreement was originally made in 2009, but has taken three years for all nations to ratify.read more...»
Land Grabs have become an important and controversial issue in development economics in recent years.read more...»
The middle income trap exists for some countries that make significant progress in reducing extreme poverty and experience structural change and growth but then find it difficult to make the climb from being a middle-income country to achieve high-income fully-developed status. GDP growth rates often slow down and a country can struggle to build and maintain international competitiveness. Research from the World Bank finds that only 13 of the 101 countries deemed to be middle-income countries in 1960 had achieved high-income levels in 2011. Different studies find different thresholds for where growth tapers off, ranging from $8,500 to $18,500 at 2010 prices, adjusted for purchasing power parity.
I am linking in this blog to some of the ideas and arguments contained in "The Quest for Prosperity" the new book on economic development from Professor Justin Lin - in particular the case he makes for the need for a new development economics - devel econ 3.0!read more...»
Brazil's growth rate is slowing down, their currency is depreciating (good for exports) but investment remains low and the country is not achieving the minimum growth needed for another step change in extreme poverty levels. There is good background here in this news article from the BBC for students who like to keep up to date with what is happening in the BRIC economies.
This article from the Telegraph adds context to the Brazilian slowdown story. The economy is suffering from structural competitiveness problems - accentuated in recent times by their very strong exchange rate. This article from Forbes also looks at the causes of the growth slowdown in Brazil. High labour costs, weak productivity growth and protectionist tendencies are cited as some of the factors behind a possible slow-growth trap. Will Brazil suffer from the middle-income trap in years ahead or can the government engineer another step change in their growth prospects?
Brazil held back by education trap (BBC, Sept 2012)
In many countries, resource nationalism has become more frequent in recent years, indeed it has been one of the key stories in 2012 as several countries have introduced new resource taxes, natural resource licence reviews and expropriation of assets from private sector companies. This Financial Times news video looks at the trends including resource nationalism within countries as provinces and regions look to exert great control on the revenues from oil, gas and mining projects.
See also: Economist: Foreigners beware - oil and mining in Indonesia
Resource insecurity: New report from Chatham House
Interactive resource: New political economy of natural resourcesread more...»
I am linking here to a recent (October 2012) lecture and discussion at Gresham College in London. The three eminent speakers look at the limits to world economic growth from an environmental and economic perspective. Will inflation caused by rising primary product prices be likely to be the key constraint on economic growth? Douglas McWilliams, Thras Moraitis and Mike McWilliams consider whether this constraint will bite at a sufficiently slow rate for the impact of the extra growth in emerging economies to mean that the West will have to grow more slowly.read more...»
Here are some regularly updated revision resources on the economics of the BRIC countries - Brazil, Russia, India and Chinaread more...»
The balance of economic power is expected to shift dramatically over the coming half century, with fast-growing emerging market economies accounting for an ever-increasing share of global output, according to new OECD research. Here are some links to their report and to media coverage.
I am launching into a short course in international trade, balance of payments and links to economic development issues. The standard fare is inescapable and there will be plenty of opportunity to cover theories of comparative and competitive advantage, evaluate the costs and benefits of protectionism and look at key trends in the balance of payments, terms of trade and capital accounts for developed and developing countries.
This time, in an attempt to freshen things up I am starting by looking at the work of Cesar Hidalgo and Richard Hausman at the MIT Media Lab and the Observatory of Economic Complexity. I first came across their work whilst reading Tim Harford's last book Adapt. They are mapping vast amounts of trade data from across the world to explore the extent to which export complexity, dynamic advantage and per capita incomes are connected. The data visualisations are tremendously interesting and I will be asking my Year 13 students to explore their site and choose some data of their own that sheds light on revealed comparative advantage in the world economy.read more...»
Dutch Disease was first coined in 1977 by The Economist in reference to the decline in the manufacturing sector in the Netherlands after the discovery of a large natural gas field in 1959. It is a phenomenon that arises when exploitation in the exporting of natural resources leads to an appreciation in the value of the currency of a country thus making its exports less competitive internationally. An increase in the revenues from natural resources pushes the value of a nation’s currency higher compared to other countries. This directly impacts the trade balance of that country as exports seem comparatively more expensive and thus less competitive. Out of all the sectors this has the greatest impact on the manufacturing sector.
Infrastructure includes physical capital such as transport networks, energy, power and water supplies and telecommunications networks. Poor infrastructure hampers growth because it causes higher supply costs and delays for businesses. It reduces the mobility of labour and affects the ability of exporters to get their products to international markets.read more...»
Many lower-income developing nations still relying on specializing in and exporting low value added primary commodities. The prices of these goods can be volatile on world markets. When prices fall, an economy will see a sharp reduction in export incomes, an adverse movement in their terms of trade, risks of a higher trade deficit and a danger that a nation will not be able to finance investment in education, healthcare and core infrastructure.
Billions of dollars are being pumped in to meet targets for the 2016 Olympics - this news report looks at the many construction projects that are in place as the next Olympic cycle starts. Will this - together with the 2014 soccer world cup - be a significant kick start for a Brazilian economy whose growth rate has stumbled of late?read more...»
Have a guess at the price tag (measured in US dollars) of a large margarita pizza in the comfortable middle-class environment of San Paulo in Brazil? Would you expect it to be less or more expensive than say a home delivered pizza to your house from leading UK business Dominos?
The Brazilian government has invested heavily in anti-poverty programmes over the last ten to fifteen years and has lauded as an example of a country where a well designed combination of policies can have a significant effect. The percentage of the Brazilian population in extreme poverty has fallen from 23% in 1993 to 8.3% in 2009, and Brazil has achieved its own Millennium Development Goal to cut back extreme poverty in 2015 to ¼ of the level experienced in 1990 – this target was achieved in 2007.
Much remains to be done for despite sustained economic growth, Brazil remains a highly unequal country and sixteen million people continue to experience extreme poverty living below the $1.25 per day UN benchmark. That said Brazil has seen their Gini coefficient fall by 9% between 2011 and 2009.read more...»
The BBC have just released an excellent video guide titled ‘How solid are the BRICS?’ Read on for the link…read more...»
A short BBC news video here on rapid growth and development in the Brazilian city of Manaus, on the banks of the Amazon river. A new bridge across the world’s biggest river and a healthy manufacturing sector are providing many new jobs. But what of the ecological challenges and threats that this creates?read more...»
Just a few years ago, Conab, Brazil’s official crop bureau was busy buying up surplus supplies of Brazilian coffee to support the weak global price of high quality arabica coffee. Over the years Conab has accumulated large stockpiles of coffee in their warehouses. Some estimates put the 2002-2003 stockpile purchases at just under 4 million kg together with 1.9m kg bought in 2007-08. The 2009-10 buffer stock purchases are much higher - exceeding 91 million kg. That is a lot of coffee to hold in reserve!
In theory a buffer stock scheme should be profitable when stocks are purchased at a low price and then off-loaded onto the market when prices are higher. Indeed Conab was planning just such a sale earlier this year before favorable weather and the speculators intervened. Better than expected coffee harvests in Brazil have prompted a steep fall in coffee prices and the buffer stock has postponed an intervention into the market.
The coffee price drop is a far cry from last year. Arabica coffee prices hit a 34-year high in March 2011 amid fears of a shortage. Since then, much has changed. From a peak of $3.089 per pound nearly a year ago, prices are down roughly 40 per cent to $1.851 per pound.
Inventories of high-quality beans remain low, but the threat of a shortage has vanished as Brazil is expected to see a bumper harvest this year. This is in contrast to a number of other coffee-growing countries - but Brazil remains a dominant force in the market.read more...»
Leaders of Brazil, Russia, India, China and South Africa are meeting for the 4th time to discuss a deepening of economic ties within the fast-growing bloc of countries. The acronym BRIC was first coined by Jim O’Neill from Goldman Sachs in 2001. Recently he suggested another group of countries that deserved to be included in a broader grouping of high-growth and increasingly influential economies in the world economic system.
These countries make up forty per-cent of the world’s population and over a fifth of global GDP. Crucially they, and another cluster of rapid-growth countries will be the main drivers of world growth in the years ahead even though they are not immune to the financial volatility and commodity price inflation inflicting external shocks on advanced nations.
One of the key items on the summit’s agenda is a proposal to establish a “BRICS Bank” that would fund development projects and infrastructure in developing nations. The summit is also on opportunity to discuss ways of building intra-BRICS trade, which expanded by 28 percent last year to $230 billion. There are divisions within the BRIC grouping - for example Brazil’s criticisms of China’s exchange rate policies but the summit is a reminder that the balance of power and influence in the world economy is changing forever.
Here is a selection of news articles and videos covering the BRICS summit for 2012read more...»
Justin Rowlatt from the BBC has been investigating some of the remarkable progress being made in controlling deforestation in Brazil. The battle focuses on an area known as the “arc of destruction” and the video reports here show the impact of a government making a clear commitment to tackling the issue and backing it up with force and with incentives.read more...»
Here is a short collection of short video resources on measuring human development with specific reference to the annual human development report and to progress in improving welfare in countries such as Kenya and Brazilread more...»
The Guardian has reported new research from the CEBR that Brazil is set to overtake the UK to become the sixth biggest economy in the world. The U.S., China, Japan, Germany and France occupy the top five places.
Typically the Sun newspaper gets their economics muddled with this piece of sloppy writing
“BRITAIN will fall to seventh in the league table of the world’s richest countries next year when it is leap-frogged by buoyant Brazil.”
Brazil richer than the UK? The Sun is confusing the size of GDP with the level of real GDP per capita (adjusted to a purchasing power standard). And as our Timetric chart shows below there remains an enormous gap in average living standards between the UK and Brazil.read more...»
The Human Development Report 2011 reported that deforestation is a severe problem. In the last two decades, Latin American and Sub-Saharan Africa have experienced severe forest losses, especially when compared to the rest of the world.
For economists the economic and social costs of rapid deforestation represent a telling example of the tragedy of the commons where the pursuit of individual self-interest can risk a permanent destruction of natural resources that undermines the sustainability of communities and societies for current and future generations. The United Nations calculates that deforestation and degradation is responsible for nearly 20 per cent of global greenhouse gas emissions.
Will the REDD programme make a difference?
REDD stands for Reducing Emissions from Deforestation and Forest Degradation in Developing Countries and is designed to provide financial incentives funded by advanced nations for developing countries to preserve their forests and instead invest in low-carbon paths to sustainable development.
The UN estimates financial flows of up to $30bn could come from REDD and related initiatives - the scheme effectively allows rich countries to offset their carbon emissions from domestic industries and consumers by funding clean low-carbon development projects in developing countries. But it is highly controversial and opposed by many organisations such as Friends of the Earth and the World Rainforest Movement.
In this blog we have put together some web resources on the issue of deforestation - focusing on causation, consequences and also on some of the policy approaches that might work to bring about behavioural change.
Jim O’Neill the Chairman of Goldman Sachs Asset Management has a new book published early next week and it looks like being a tremendous resource for teachers and students wanting to deepen their understanding of crucial changes in the global economy. The Telegraph has been publishing extracts from the book - to have a view please click on the links below:read more...»
Brazilians who wanted to get on in life used to leave the country to seek their fortune in the richer developed nations. But now that trend is reversing in a big way - the workers are moving back home, and being followed by a reverse wave of movement of people and capital away from the shrinking economies of the US and Europe to the booming, resource rich economy of Brazil.
This article has a number of interesting examples and raises issues such as the extent to which Brazil is likely to over-expand, and so risk a fast upturn followed by equally fast decline through the economic cycle, and the role that their high interest rates will play in avoiding that.
It makes an interesting read, and might just encourage a few to learn Portuguese and take the plunge - with the fabulous climate and geography, abundant resources, and the World Cup coming to Brazil in 2014 followed by the Olympics in 2016, why would you not?
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...»
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...»
There is better news on progress being made by the Brazilian government in reducing the annual toll of deforestation in the Amazon. Better surveillance, tougher penalties and more effective incentives all have a role to play.
This is a super piece on the economic and social benefits from successful policies to bring about price stability in a Brazilian economy that has suffered from hyperinflation during the late 1980s and early 1990s. Very good on the consequences of high and volatile inflation on real incomes, the incentive to save and the asymmetric impact of rampant inflation on different social groups.
A superb new report from the BBC’s Matt Frei in Sao Paulo which looks at the gaps between rich and poor in booming Brazil. “Untangling the cycle of poverty is complex and daunting” but Brazil’s rising economic prosperity offers the opportunity for many millions of her poorest people to aspire to join the middle classes.
This BBC News Asia report provides a terrific example of how the Brazilian aviation industry is enjoying fast growth on the back of greater competition and rising per capita incomes. (Air travel has a high income elasticity of demand). Domestic demand for short haul and long haul flights is rising quickly and the emergence of Brazil as the world’s third largest manufacturer of commercial airlines is testimony to the increasing diversity of the Brazilian economy away from dependence on exporting commodities.
This new streamed revision presentation guides students through some key evaluation points on the changing patterns in global trade & investment. Ideal for A2 revision.
The BRIC grouping is shorthand for four countries – Brazil, Russia, India and China – and the BRIC acronym has become popular to describe the growing power and influence of emerging markets in the global economy. The BRICs already have a bigger share of world trade than the USA and China is on the verge of surpassing Japan as the second largest economy in the world.read more...»
Although many millions of people in the lowest income countries have suffered greatly from the world recession, for many emerging countries growth has continued apace and the world economy is more resilient than the consensus view believes. This was one of the arguments explored by Jim O’Neill, Head of Global Economics, Commodities and Strategy Research for Goldman Sachs, in his talk to the 40th Anniversary meeting of the Eton College Keynes Society last night. The creator of the BRIC acronym was also quite bullish about prospects for the UK economy, with Britain able to take advantage of a competitive exchange rate and a strong rebound in global economic activity driven forward by fast growth in emerging market countries.read more...»
The PIGS - Portugal, Italy, Greece and Spain - are in economic turmoil and likely to experience weak growth in the near term. A contrast to the BRICs - Brazil, Russia, India and China - three of whom are already seeing a ramping up of their growth rates as the world economic cycle turns. But which group is more important for the UK export sector? Chris Giles from the Financial Times has the answer here and his blog provides a useful evaluation point for AS and A2 macroeconomics students.
BBC World Business news carries an interview with Luciano Coutinho, CEO of BNDES Bank in which he argues that Brazil is looking to diversify its economic base as a platform for stronger long term economic growth
“The Government is stepping up efforts to diversify the economy, creating global champions in a range of industries, from telecoms to farming. Brazil dominates global trade in several agricultural commodities, from coffee to sugar, or chicken and beef.”
The following video clips from the FT focus on the so-called BRIC economies (coined by the Chief Economist at Goldman Sachs in 2001).
There are excellent to provide discussion points on why grouping the BRIC (Brazil, Russia, India, China) economies together is flawed, with the 4 countries being actually very different and the acronym BRIC no longer being appropriate, in its description of their experiences or their futures. They also discuss whether economic power has shifted from the US to the East.
A warm woolly hat tip to Himesh Patel from the Heathland School, Hounslow for spotting this superb resource that will be available for a while on the BBC iPlayer. Himesh points out that Jimmy’s Global Harvest: Brazil on BBC1 last night was an excellent epsiode that explained how Brazil produces biofuels using its crop harvest. The show goes through the full production phase from harvest to final product. If you teach anyone sitting the AS Micro paper next week, it is extremely useful for the evaluation of biofuels as an alternative to traditional fossil fuel energy. In addition it is pitched at the correct level enabling access for all students. The link is here Pay particular attention from 22.12 mins (where the biofuel begins). Definately something to recommend students to watch.
A fascinating, short interview on Bloomberg today (4 Jan 2010) with Jim O’Neill (Cheif Economist at Goldman Sachs) talking about the economic prospects of the BRICS in the next decade.read more...»