This Financial Times video report looks at the economic transformation of East London prompted in part by high levels of inward investment from the Far East. Consider the economic benefits of this investment but also the challenges of rejuvenating a part of London which for decades has lagged behind the rest of the capital in nearly every economic and social metric,read more...»
Here is an extract from a recent speech by Charlie Bean at the Bank of England - the full speech can be found here: www.bankofengland.co.uk/publications/Docume...
For the economic recovery to be both sustained and sustainable we really want to see three things happenread more...»
A revision presentation used at the workshop in Dubai on aspects of supply-side competitiveness in the UK economyread more...»
The introduction of a national minimum wage does not lead to job losses. That is the central finding of research by Peter Dolton and
Michael Stops, to be presented at the Royal Economic Society’s 2014 conference.
More on the implications of the UK’s massive current account deficit. Geoff has put together almost everything you need on the topic here, and he points out that the main implication is a net leakage from the circular flow of income, reducing AD and weakening multiplier effects.
A current account deficit is not necessarily a disaster; after all, imports are good too, sustaining our standard of living and is partly a reflection of the demand for intermediate goods our economy needs to stay efficient.
I’m going to pick up on the the statement that there is nothing wrong with a trade deficit. It simply means that a country must rely on foreign direct investment or borrowed money to make up the difference.read more...»
A significant 5 year rail infrastructure investment plan adds weight to the belief that capital spending will be a major driver of the next phase of the UK economic recovery. Network Rail is state owned, a not-for-profit business whose commercial returns are reinvested into the rail network.read more...»
In this new RSA Short, Kate Raworth makes a powerful argument to look beyond economic growth alone for a true measure of prosperity and progress. Read more about Kate Raworth's work and her idea of doughnut economics by clicking this link http://www.kateraworth.com and follow her on twitter @KateRaworthread more...»
I thought it worthwhile sharing my resources which I have been collecting for students (and teachers alike). I have been promoting them on Twitter (@Economics_KSF) through scoop.it but for those of you not on there, the link for the scoop.it boards are here:read more...»
Are skills shortages holding back the economic recovery? The Financial Times is running a video series looking at the problems businesses are having in recruiting people with technical skills. The apprenticeship programme is expanding but will it be enough to meet the growing gap between demand for and supply of engineers and other specialist jobs in industries surrounding precision engineering, nuclear power and many others?
According to an article in the Financial Times:
"Migrants are filling a fifth of jobs in industries such as oil and gas extraction, aerospace manufacturing and computer, electronic and optical engineering because of a lack of skilled British graduates."read more...»
Here is a revealing quote from a special study published in March 2014
"Simply put, too much of the city’s essential infrastructure remains stuck in the 20th Century—a problem for a city positioning itself to compete with other global cities in today’s 21st Century economy."
Which city do you think this report was referring to?read more...»
For years the government has tried to lift research and development spending as a share of national income - but seemingly to no avail. The latest data finds that the UK is spending less on R&D than any other EU country. What might this mean for the supply-side competitiveness of the economy?
The data finds thatread more...»
The Atlas of Economic Complexity is a new book (perfect for the coffee table) from Richard Hausmann and Cesar Hidalgo. It maps out the degree of complexity of individual economies around the world and provides a hugely visual and interesting insight into the importance of knowledge in shaping the future prosperity of countries in the global economy. I have put together a 10 question quiz on some of their key results - a useful activity I hope for students interested in the commodity composition of trade of developed and developing countries. Have a go!read more...»
Here is a revision presentation for an AS Macro topic - economic growthread more...»
Inequality might be falling between nations as a global middle class is emerging, but inequality is on the rise within nations. Quite why this is happening is a matter of debate, but the International Monetary Fund (IMF) has joined in the discussion asking if rising inequality is an obstacle to economic growth and development.read more...»
In Germany the government has reluctantly agreed to introduce a minimum wage of €8.50 (£6.98) per hour. Angela Merkel's conservative Christian Democratic Union party is opposed to the idea, but need to make concessions in coalition negotiations with centre-left parties such as the Social Democrats, who have campaigned for a national minimum wage.read more...»
Here is a revision presentation for an AS Macro topic - aggregate supplyread more...»
Economics coverage of Africa can be a bit bleak (though perhaps it shouldn't be, with incomes rising rapidly in parts of Africa). There are often bad news stories, particularly in terms of human development indicators. News of economic progress often centres on the exploitation of primary commodities, with all the risks and issues that presents.
If you hope Africa will experience development, you’re likely to want to see sustained and robust economic growth. That, in turn, will require industrialization.read more...»
In the 1990s and early 2000s, Germany was seen by many as the new ‘Sick Man of Europe’. Between 1991 and 2005, GDP growth averaged only 1.2 per cent a year, compared to 3.3 per cent in the UK. Since then, the German economy has revived dramatically. The recovery in the German cluster of economies from the financial crisis has been as strong as in the United States, with the previous peak level of output being regained in 2011. Germany itself experienced virtually no increase in unemployment in 2008 and 2009, its exports are at record levels, and even the crisis in the Euro area has not prevented expansion in both output and employment.read more...»
According to a report published by the Parliamentary Public Accounts Committee, the Government are currently underestimating how many students will actually pay back their university loans over the coming decades. Currently, the Government estimates that between 35 and 40% of loans to Higher Education students are never paid back - the Committee believes that the rate on non-repayment is much higher and reflects a weakness in the loan collection method. The primary reason for non-repayment is that student details get lost over a period of time particularly if the graduate moves and works abroad or was an EU citizen who has returned to their own country. The method of using the income tax registration process as a way of locating former students has been criticized for not being an effective method of collecting information. It is estimated that the shortfall could be as much as £80 million by 2042.read more...»
We are often (quite rightly), talking about Britain’s disappointing export performance. There are lots of good reasons to promote exports – an injection into the circular flow of income and the X in C+I+G+(X-M).
But don’t fall for the trap of thinking that exports=good and imports=bad. In the final analysis, one of the main reasons for exports is to pay for imports. Imports play a crucial role in making our economy more efficient.read more...»
Notes from a talk given by Liu Xiaoming, Chinese ambassador to the UK at the Marshall Society economics conference in Cambridge in January 2014.read more...»
Successful innovation is a driving dynamic of competitive businesses and countries. Bloomberg Rankings recently examined 215 countries and sovereign regions to determine their innovation quotient. They have narrowed this down to thirty countries and the results are available through this Bloomberg slideshow. Which nation comes first?read more...»
Here are ten questions for students wanting to check their understanding on supply-side economic policies .... and improve their bobble shoot tekkers at the same time! Courtesy of our sister site Zondleread more...»
The GINI coefficient for Switzerland is already low, at 29.6 (compared to the UK's 34, US's 45 and an EU average 30.4). Current data indicates the relative strength of the economy - real GDP growth at 1.9% in quarter 3 of 2013 (compared with a year earlier), 3.2% unemployment, real incomes rising, a current account surplus, high levels of both inward and outward FDI and a small government budget surplus. But things can always be improved, and the Swiss approach to 'direct democracy', which allows citizens to call for a referendum on anything they want, if they can gather 100,000 signatures calling for a vote, is currently resulting in a series of proposals to promote equality and social welfare.read more...»
If you didn't quite grasp the importance of agglomeration economies in driving and sustaining growth and wealth creation in cities, then this wonderful piece from Bridget Rosewall will do it I am sure! It highlights the importance of vision and a willingness to take risks in bond-funded infrastructure projects in London (and elsewhere). Bridget Rosewall's new short book is available direct from the publishers - click here for details
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...»
I don’t know the answer to the question I've just posed, but I think the recent news about RBS raises some interesting issues about the perceived zombie problem in the UK economy.read more...»
I've recently looked at the issue of a smaller slice of GDP going to wages, and here are a couple of links and updates on the minimum wage discussion. For those of you who follow this topic, you’ll also perhaps be familiar with the idea of a living wage, which is based around the argument that minimum wages are too low anyway.read more...»
This topic is of profound importance. It gets the heart of a fundamental economic issue: the distribution of income. When national income rises, does that extra income go into the pockets of workers or capitalists?
The answer is clear cut: labour is getting a smaller slice of the pie. How and why might that be happening, and what might be done? Here are links and summary of a couple of articles, plus a great Economist video clip.read 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 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...»
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...»
This is an updated revision presentation covering some of the factors that determine short run aggregate supply (SRAS) in an economy. Click here to take a quick revision quiz on short run aggregate supply.read more...»
The entrepreneur is considered crucial in economics: so crucial that they are even described as a factor of production, listed alongside land, labour and capital. Supply side economic approaches often recommend policies that will encourage and support entrepreneurs, as a way of stimulating the economy.read more...»
There’s been plenty of recent coverage of the fact that Britain needs more investment for a sustained, balanced recovery. Why aren't firms investing more? Many firms are flushed with cash. Interest rates are at a record low. As The Economist notes, profits have been booming in America, reaching the highest proportion of GDP since the second world war. Given such buoyant conditions, you might imagine that businesses are investing like crazy to take advantage of all those great opportunities. Not a bit of it. The ratio of business investment to GDP has picked up since the depths of the financial crisis, but is still close to the lows of previous cycles. Instead, businesses are handing cash back to shareholders, a tactic once reserved for executives who had run out of ideas. In 2011 the value of British share buy-backs was equal to 3.1% of GDP.
Enter a new theory shedding light on this puzzle – why might investment be so low?read 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...»
The Ethiopian government is ploughing up to 15% of her GDP into large-scale infrastructure development projects - will this kick start a renewed period of fast growth and development? The Grand Ethiopian Renaissance Dam will be the largest hydroelectric power plant in Africa when completed, delivering 6,000MW. The cost and the potential impact of diverting the Blue Nile have created controversy in the region. This FT video looks at some of the issues. This BBC news resource is also useful: The dam that divides Ethiopiansread more...»
Many of you starting out on Economics programmes will quickly hit on this topic. Is it wise to take a 'free market' or Laisser Faire approach to organising the economy? Or should the government be controlling key parts of the economy? This theme is likely to run through the course, as you go on to consider the ways in which government intervention in the economy can make things better - or worse.
Here's the ideal topic to get you thinking. Are industries best managed when they are in the hands of the government (which is often described as nationalised)? Or is it better for them to be run as regular private businesses - that is privatised?read more...»
The Focus Circle is quickly becoming one of our most popular teaching & learning activities and here is a version that comes ready-made for a lesson macroeconomic policy.
In the Focus Circle, students are shown up to 4 topic areas (categories) inside. Around the Focus Circle are up to 18 words/ phrases which belong to one or more of the different categories. Students select 1 of the topic areas and decide which of the key words/ phrases belong inside the Focus Circle (words that are specifically related to that topic area).
So, is currency intervention a supply-side policy? Is "forward guidance" part of fiscal or monetary policy? Can your students define the words or phrases they select? Can they provide an example to back-up their selection.
The possibilities for an engaging and effective lesson are endless...read more...»
Why is economic growth such a rare and elusive butterfly in the UK garden? What institutions and policies are needed to sustain UK economic growth in the dynamic global economy of the twenty-first century?read more...»
Would Apple Inc have succeeded without a helping hand from the US government? Where are the European Googles? A new book focuses on the key roles that the state can fulfill as an agent of innovation and economic growth. Without the US government for example, there would be no iPhone, says economist Mariana Mazzucato in her new book 'The Entrepreneurial State'. The author of the book is featured here in an FT interview. Some of the examples discussed in the book are covered in this article from the Economist. Mazzucato argues that "“All the technologies which make the iPhone ‘smart’ are also state-funded ... the internet, wireless networks, the global positioning system, microelectronics, touchscreen displays and the latest voice-activated SIRI personal assistant.”read more...»
The International Business Times is producing a series of short videos on life, work and enterprise inside Tech City - a fast-growing hub of digital start ups and established tech businesses centred around Old Street / Digital Roundabout. The clips reveal the energy of the start-up economy in this part of London and the importance of network effects, collaboration and attracting human capital in accelerating routes to market for lean start-ups. This series of short videos is worth a look if you are interested in this potentially significant catalyst for growth in the UK economy and to learn more about the factors that influence the emergence and success/failure of start ups.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...»
As of today, any employee wishing to take their employer to an unfair dismissal, unequal pay or sexual discrimination tribunal will have to pay a fee. This fee will not be automatically refunded on a successful tribunal outcome meaning that employees who are making choices about such an action have to be aware of the potential financial cost of such an action.
The government argue that this removes some of the burden of tribunal costs away from tax payers and should also reduce the number of frivolous claims made (and thus reduce a further burden on businesses). As such, you could claim that the tribunal fee represents a supply-side policy by the government - an attempt to improve the efficiency of the operation of businesses by reducing some of the red-tape that can stop a business working effectively (particularly small businesses).
Trade Unions are unhappy about the fee introduction. They argue that it reduces the opportunity for poorer workers (or unemployed people who have lost a job) to seek justice for what may have been unfair treatment. An evaluative argument here, therefore, might suggest that the tribunal fee acts as a barrier to fair pay, particularly in cases of discrimination.
Follow this link for some details as illustrated by the New Statesman.
Access to affordable comprehensive child care and schooling is widely regarded as being crucial to improving the incentives for mothers to actively search for and take paid work. Effective early years education also has a long run positive effect on employment prospects and is important as part of the overall supply-side capacity of the economy.read more...»
In its annual assessment of the U.K. economy, the IMF called on the UK to invest in skills and infrastructure and increase banking sector competition in order to foster growth and achieve a sustainable recovery.
The report can be found here and contains plenty of relevant background information on the current situation facing the UK - here is a selection of quotes from their summary
The UK Coalition government has introduced a controversial welfare cap - imposing a maximum on the total social security spending per year for each family. The welfare cap limits households to £26,000 a year. Couples and single parents receive no more than £500 a week in benefits, while the limit for single people is £350, although there are some exemptions.
The cap is designed to ensure that benefits payments do not exceed the income of the average working household and is designed both to cut total welfare spending and as part of a strategy of improving incentives for people to actively look for and take paid work.
Critics argue that a welfare gap does little or nothing to address deeper underlying problems such as the soaring cost of renting property and the lack of affordable child care.
Social spending varies greatly across different countries. The Economist live chart below looks at some of these differences.read more...»
This short video from the OECD looks at the importance of knowledge capital as a key driver of innovation and growth for businesses and economies across the world. Innovation -- building on human knowledge - is booming, changing the way business invests and grows. As coal drove the last industrial revolution, software, databases, research and development, designs, new business models and the skills people bring to an organisation are driving revolutionary changes today.read more...»
For students' exam answers to be lifted from the ordinary to the higher levels, they really need to add some convincing evidence for their statements of theory. Here is a nice, simple report from the BBC of the latest figures from the ONS which shows what happened to household incomes in 2011-12, which would really fit the bill nicely.
Average household income has fallen by £1,200 since 2007-8 in real terms;
Before tax and benefits, the average income of the top fifth of households was £78,000 and of the bottom fifth was £5,400 - a ratio between them of about 14:1
After tax and benefits these had changed to £57,300 and £15,800 - a ratio of four to one
Between 2007-8 and 2011-12, the average income of the top fifth has fallen by 6.8% and the bottom fifth has risen by 6.9%, so the gap between the two has narrowed (- note that the latest changes in benefits are not included as they took place after the end of the 2011-12 year).
All groups paid more in indirect tax in 2011-12 than in the previous two years, due to rises in VAT in 2010 and 2011.