Category Archives: Economics

Why we’re wrong to blame immigrants for our sputtering economies

By Kevin Shih, Rensselaer Polytechnic Institute

Immigrants have become a major scapegoat in recent years for sputtering Western economies.

From the U.K.’s jarring “Brexit” from the European Union to Donald Trump’s infamous wall and more recent proposal to apply “extreme vetting” to those wishing to enter the U.S., many politicians have found success by casting immigrants as a threat to the physical, social and economic welfare of natives.

In short, Americans (and our European brethren) are unhappy, and many are convinced immigration brings harm. A recent poll found that almost two-thirds of Americans think immigration, including the legal kind, “jeopardizes the United States.”

While it has become a popular notion in the West that immigrants jeopardize the job prospects of natives, over 30 years of economic research (including my own) gives strong reason to believe otherwise.

And in fact, the opposite may be more likely: There’s evidence immigrants actually promote more economic growth.

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How work can lead to suicide in a globalised economy

By Sarah Waters, University of Leeds and Jenny Chan, University of Oxford

A Paris prosecutor recently called for the former CEO and six senior managers of telecoms provider, France Télécom, to face criminal charges for workplace harassment. The recommendation followed a lengthy inquiry into the suicides of a number of employees at the company between 2005 and 2009. The prosecutor accused management of deliberately “destabilising” employees and creating a “stressful professional climate” through a company-wide strategy of “harcèlement moral” – psychological bullying.

All deny any wrongdoing and it is now up to a judge to decide whether to follow the prosecutor’s advice or dismiss the case. If it goes ahead, it would be a landmark criminal trial, with implications far beyond just one company.

Workplace suicides are sharply on the rise internationally, with increasing numbers of employees choosing to take their own lives in the face of extreme pressures at work. Recent studies in the United States, Australia, Japan, South Korea, China, India and Taiwan all point to a steep rise in suicides in the context of a generalised deterioration in working conditions.

Rising suicides are part of the profound transformations in the workplace that have taken place over the past 30 years. These transformations are arguably rooted in the political and economic shift to globalisation that has radically altered the way we work.

In the post-war Fordist era of industry (pioneered by US car manufacturer Henry Ford), jobs generally provided stability and a clear career trajectory for many, allowing people to define their collective identity and their place in the world. Strong trade unions in major industrial sectors meant that employees could negotiate their working rights and conditions.

But today’s globalised workplace is characterised by job insecurity, intense work, forced redeployments, flexible contracts, worker surveillance, and limited social protection and representation. Zero-hour contracts are the new norm for many in the hospitality and healthcare industries, for example.

Now, it is not enough simply to work hard. In the words of Marxist theorist Franco Berardi, “the soul is put to work” and workers must devote their whole selves to the needs of the company.

For the economist Guy Standing, the precariat is the new social class of the 21st century, characterised by the lack of job security and even basic stability. Workers move in and out of jobs which give little meaning to their lives. This shift has had deleterious effects on many people’s experience of work, with rising cases of acute stress, anxiety, sleep disorders, burnout, hopelessness and, in some cases, suicide.

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The rising power of China will create new political fissures in the West

Gideon Rachman writes: Whether he wins or loses the US presidency next November, Donald Trump has already come up with one of the defining slogans of 2016 – “Make America great again”.

Trump’s vision of an America in precipitous decline is all-encompassing. At home, he points to falling living standards for many Americans and the disappearance of well-paid manufacturing jobs. Overseas, he claims the world is laughing at the US and laments that “we don’t win any more”.

Many in Europe are tempted to see Trump as an “only in America” aberration. Yet the fear of economic and geopolitical decline that Trump is capitalising upon is widely visible across the west. The coalition of frustrated working-class voters and nostalgic nationalists that the Republican has put together is uncomfortably reminiscent of the alliance that voted for Brexit in the UK. Trump’s “make America great again” mantra has an echo of the Brexit campaign’s winning slogan – “Take back control”. Nor is this is just an Anglo-American phenomenon. Across the EU, including in France, the Netherlands, Italy and Poland, protectionists and nationalists are gaining ground.

As Trump might put it: “Something’s going on.” That something is a historic shift in economic and geopolitical power that is bringing to an end a 500-year period in which western nations have dominated global affairs. This erosion of the west’s privileged position in world affairs is creating new economic, geopolitical and even psychological pressures in both the US and the EU.

The driving force of this change is the extraordinary economic development of Asia over the past 50 years. In 2014, the IMF reported that, measured in purchasing power, China is now the world’s largest economy. The US had held this title since 1871, when it displaced the UK; now China is number one. The rise of China is just part of a broader shift of economic power towards Asia. The IMF reports that three of the world’s four largest economies are now in Asia. China is first, the US is second, India third and Japan fourth. [Continue reading…]

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The countries leading the world in happiness and sustainability are not the economically wealthiest

Anna Bruce-Lockhart writes: Is life on this planet getting better? When it comes to the progress of nations, how do you measure what matters most? There’s wealth, there’s health, there’s basic human freedoms. These criteria, and others, make regular appearances in a variety of international rankings, from the Better Life Index to the Sustainable Economic Development Assessment and the World Happiness Report.

But a new study takes a different approach. The Happy Planet Index, which has just published its 2016 edition, measures health and happiness not in isolation but against a crucial new gold standard for success: sustainability.

The formula goes something like this: take the well-being and longevity of a population, measure how equally both are distributed, then set the result against each country’s ecological footprint.

In this calculation, the most successful countries are those where people live long and happy lives at little cost to the environment.

So which countries are they?

They’re not the wealthy Western countries you’d expect to see, or even the progressive Nordic ones that normally bag the lifestyle laurels. Instead, a list of the top 10 (the index ranks 140 countries overall) shows that when it comes to people’s ability to live good lives within sustainable limits, Latin American and Asia Pacific countries are ahead of the crowd. [Continue reading…]

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The Middle East needs help with its long game: education and jobs for the young

By Zahir Irani, Brunel University London

The future for many young people across the Middle East and North Africa looks bleak. The World Bank records that 54% of the working age population in the Middle East and North Africa is unemployed with little prospect of any positive immediate change. An average of 28.7% of 15 to 24-year-olds in the Middle East and 30.6% of those in North Africa are unemployed according to the International Labour Organisation.

Much of the world’s response to this chronic problem has been to intervene financially: in the form of aid or debt restructuring. But through supporting economic recovery by giving generations of young people new skills and new opportunities to improve themselves, the world can help Middle Eastern societies in a more sustainable and thoughtful way.

Reliance on public sector jobs

One of the biggest challenges the World Bank identifies in this broad region is that unemployment rates are the highest among the educated, with university graduates making up 30% of the region’s unemployed. They are slowly losing optimism and hope for a better life and future.

This is largely attributed to a reliance on the public sector to provide jobs that come with steady albeit low salaries but high degrees of job security. In many North African countries or those Middle Eastern ones with high populations, other than wait in line for a public sector job, there are few other alternatives. At one end of the spectrum there’s the misery of violence and refugee camps in Jordan, Syria, Iraq and Lebanon, and the other – even if you’ve excelled – a flat and static job market for the best and brightest. No wonder so many highly-skilled people are fleeing to Europe in search of stability and new opportunities.

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Visualizing the world’s shipping routes

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Click on the image above to view a data visualization of the world’s shipping routes created by Kiln studio and the UCL Energy Institute. Click the play button to follow a guided tour around the map. (Note: this data visualization web page uses a lot of memory — you might experience problems if you’re using an old computer and/or have a slow internet connection.)

What can I see?
You can see movements of the global merchant fleet over the course of 2012, overlaid on a bathymetric map. You can also see a few statistics such as a counter for emitted CO2 (in thousand tonnes) and maximum freight carried by represented vessels (varying units).

What can I do?
You can pan and zoom in the usual ways, and skip back and forward in time using the timeline at the bottom of the screen. The controls at the top right let you show and hide different map layers: port names, the background map, routes (a plot of all recorded vessel positions), and the animated ships view. There are also controls for filtering and colouring by vessel type.

What the are types of ships shown?
The merchant fleet is divided into five categories, each of which has a filter and a CO2 and freight counter for the hour shown on the clock. The ship types and units are as follows:

  • Container (e.g. manufactured goods): number of container slots equivalent to 20 feet (i.e. a 40-foot container takes two slots)
  • Dry bulk (e.g. coal, aggregates): combined weight of cargo, fuel, water, provisions, passengers and crew a vessel can carry, measured in thousand tonnes
  • Tanker (e.g. oil, chemicals): same as dry bulk
  • Gas bulk (e.g. liquified natural gas): capacity for gases, measured in cubic metres
  • Vehicles (e.g. cars): same as dry bulk

Why do ships sometimes appear to move across land?
In some cases this is because there are ships navigating via canals or rivers that aren’t visible on the map. Generally, though, this effect is an artefact of animating a ship between two recorded positions with missing data between, especially when the positions are separated by a narrow strip of land. We may develop the map to remove this effect in the future.

Why are there fewer ships visible in the first part of the year?
Unfortunately the data we are using for the map is incomplete for the first few months of the year: roughly January to April.

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IMF says Brexit has ‘thrown a spanner in the works’ of global recovery

The Guardian reports: The International Monetary Fund has slashed its forecast for UK growth next year after warning that the decision to leave the EU has damaged the British economy’s short-term prospects and “thrown a spanner in the works” of the global recovery.

The IMF, which voiced strong misgivings about a vote for Brexit in the runup to the EU referendum, said it expected the UK economy to grow by 1.3% in 2017, 0.9 points lower than a previous estimate made in its April world economic outlook (WEO).

The fund said it had cut its forecasts for the global economy due to the likely knock-on effect of the vote on other countries, particularly in Europe. [Continue reading…]

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Why are voters ignoring experts?

Jean Pisani-Ferry writes: By the time British citizens went to the polls on June 23 to decide on their country’s continued membership in the European Union, there had been no shortage of advice in favor of remaining. Foreign leaders and moral authorities had voiced unambiguous concern about the consequences of an exit, and economists had overwhelmingly warned that leaving the EU would entail significant economic costs.

Yet the warnings were ignored. A pre-referendum YouGov opinion poll tells why: “Leave” voters had no trust whatsoever in the advice-givers. They did not want their judgment to rely on politicians, academics, journalists, international organizations, or think tanks. As one of the Leave campaign’s leaders, justice secretary Michael Gove, who is now seeking to succeed David Cameron as Prime Minister, bluntly put it: “people in this country have had enough of experts.”

It is tempting to dismiss this attitude as a triumph of passion over rationality. Yet the pattern seen in the UK is oddly familiar: in the United States, Republican voters disregarded the pundits and nominated Donald Trump as their party’s presidential candidate; in France, Marine Le Pen, the leader of the far-right National Front, elicits little sympathy among experts, but has strong popular support. Everywhere, a significant number of citizens have become hostile to the cognoscenti.

Why this angry attitude toward the bearers of knowledge and expertise? The first explanation is that many voters attach little value to the opinions of those who failed to warn them about the risk of a financial crisis in 2008. Queen Elizabeth II spoke for many when, on a visit to the London School of Economics in the autumn of 2008, she asked why no one saw it coming. Furthermore, the suspicion that economists have been captured by the financial industry, expressed in the 2010 movie Inside Job, has not been dispelled. Ordinary people feel angry about what they regard as a betrayal by the intellectuals.

Most economists, let alone specialists in other disciplines, regard such accusations as unfair, because only a few of them devoted themselves to scrutinizing financial developments; yet their credibility has been seriously dented. Because no one pled guilty for the suffering that followed the crisis, the guilt has become collective. [Continue reading…]

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While economists have begun to realise the failure of market orthodoxy, politicians remain in its thrall

Tony Karon writes: The policymaking elites of the industrialised West are panicking – and with good reason. The seismic shock of Britons voting to leave the European Union has sharpened awareness of the possibility that in November Donald Trump could ride a wave of xenophobia all the way to the White House. Voters in the advanced capitalist democracies appear more willing than ever to register a potentially catastrophic protest against a post-Cold War global economic order that has deified markets just as the fallen communist ideology deified the state.

A quarter century of market-driven globalisation and neo­liberal orthodoxy has systematically deregulated finance, and led to tax cuts and trade deals that favour wealthy elites and leave most of the others to fend for themselves. Its response to economic crises is to adjust interest rates, bailing out capital markets (and the fortunes of the elites) while forcing endless austerity on the most economically vulnerable. The prevailing economic consensus among western governments has steadily increased inequality and diminished hopes, but such are the rules of capitalist democracies that the economically marginalised still get to vote.

“The real story of this election is that after several decades, American democracy is finally responding to the rise of inequality and the economic stagnation experienced by most of the population,” observed Francis Fukuyama recently. Fukuyama is the political scientist best known for declaring in 1989 that the collapse of the Soviet bloc heralded “the end of history”, with free-market capitalism now the undisputed ideological wisdom for the rest of time.

But the neoliberal order he proclaimed as eternal looks increasingly vulnerable, thanks to the very logic of the market economics he championed. “The gap between the fortunes of elites and those of the rest of the public has been growing for two generations, but only now is it coming to dominate national politics,” Fukuyama wrote in Foreign Affairs last month. “Now that the elites have been shocked out of their smug complacency, the time has come for them to devise more workable solutions to the problems they can no longer deny or ignore.” [Continue reading…]

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Venezuelans ransack stores as hunger grips the nation

The New York Times reports: With delivery trucks under constant attack, the nation’s food is now transported under armed guard. Soldiers stand watch over bakeries. The police fire rubber bullets at desperate mobs storming grocery stores, pharmacies and butcher shops. A 4-year-old girl was shot to death as street gangs fought over food.

Venezuela is convulsing from hunger.

Hundreds of people here in the city of Cumaná, home to one of the region’s independence heroes, marched on a supermarket in recent days, screaming for food. They forced open a large metal gate and poured inside. They snatched water, flour, cornmeal, salt, sugar, potatoes, anything they could find, leaving behind only broken freezers and overturned shelves.

And they showed that even in a country with the largest oil reserves in the world, it is possible for people to riot because there is not enough food.

In the last two weeks alone, more than 50 food riots, protests and mass looting have erupted around the country. Scores of businesses have been stripped bare or destroyed. At least five people have been killed. [Continue reading…]

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As the end of the oil era approaches, Saudi Arabia is lining up a US$2 trillion sovereign wealth fund

By Shabbir Dastgir, University of Huddersfield

The falling price of oil is beginning to have a real impact on the energy-fuelled economies of the Gulf. In 2014, after almost a decade of record highs, the price of a barrel of Brent crude began to collapse from a peak of US$140 to less than US$30.

Saudi Arabia is lining up a US$2 trillion sovereign wealth fund to see it through the twilight years of the oil era. But not all the countries of the Gulf Co-operation Council, or GCC, have this kind of cash. Indeed, even for Saudi Arabia, the new era of low oil prices spells increasing budget deficits, reductions in state subsidies and a slowdown of the energy and construction sectors, which the region’s economies have been built on.

Both private and state-owned firms are starting to restructure to reduce costs and increase efficiency now that the boom is over. They are merging divisions or outsourcing certain functions, introducing performance-related earnings, offering redundancies or smaller pay increases to staff. Qatar ought to be able to continue awarding annual salary increases given the continued investment in areas such as construction thanks to the 2022 football World Cup. But others, such as Saudi Arabia – most exposed to oil price fluctuations and subject to wide-ranging public sector cuts – will likely see redundancies at a time when the rate of inflation is high and subsidies are declining.

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How the Paris Agreement is driving climate action

Climate Nexus reports: This past December, representatives from 195 nations gathered in Paris to negotiate an historic agreement to combat climate change and accelerate the transition to a sustainable, low-carbon future. After two weeks of negotiations, the nations unanimously agreed to adopt the international climate pact. On April 22, 2016, nations will again gather, this time at the United Nations headquarters in New York, to formally sign the Paris Agreement.

The world has already seen a significant shift towards stronger climate action, in the ensuing months since the adoption of the Agreement.

The adoption of the Paris negotiations delivered a signal to governments, businesses and the global public: All parties, from national governments to small businesses, must do their part to minimize the risks and impacts of climate change.

This signal has mobilized actions by public and private sector institutions to move away from fossil fuels, which drive climate change, and towards an economy powered by renewable energy. [Continue reading…]

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Maintenance matters more than innovation in most people’s lives

Lee Vinsel & Andrew Russell write: Innovation is a dominant ideology of our era, embraced in America by Silicon Valley, Wall Street, and the Washington DC political elite. As the pursuit of innovation has inspired technologists and capitalists, it has also provoked critics who suspect that the peddlers of innovation radically overvalue innovation. What happens after innovation, they argue, is more important. Maintenance and repair, the building of infrastructures, the mundane labour that goes into sustaining functioning and efficient infrastructures, simply has more impact on people’s daily lives than the vast majority of technological innovations.

The fates of nations on opposing sides of the Iron Curtain illustrate good reasons that led to the rise of innovation as a buzzword and organising concept. Over the course of the 20th century, open societies that celebrated diversity, novelty, and progress performed better than closed societies that defended uniformity and order.

In the late 1960s in the face of the Vietnam War, environmental degradation, the Kennedy and King assassinations, and other social and technological disappointments, it grew more difficult for many to have faith in moral and social progress. To take the place of progress, ‘innovation’, a smaller, and morally neutral, concept arose. Innovation provided a way to celebrate the accomplishments of a high-tech age without expecting too much from them in the way of moral and social improvement.

Before the dreams of the New Left had been dashed by massacres at My Lai and Altamont, economists had already turned to technology to explain the economic growth and high standards of living in capitalist democracies. Beginning in the late 1950s, the prominent economists Robert Solow and Kenneth Arrow found that traditional explanations – changes in education and capital, for example – could not account for significant portions of growth. They hypothesised that technological change was the hidden X factor. Their finding fit hand-in-glove with all of the technical marvels that had come out of the Second World War, the Cold War, the post-Sputnik craze for science and technology, and the post-war vision of a material abundance. [Continue reading…]

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Climate change will blow a $2.5tn hole in global financial assets, study warns

The Guardian reports: Climate change could cut the value of the world’s financial assets by $2.5tn (£1.7tn), according to the first estimate from economic modelling.

In the worst case scenarios, often used by regulators to check the financial health of companies and economies, the losses could soar to $24tn, or 17% of the world’s entire assets, and wreck the global economy.

However, the research also showed the financial sense in taking action to keep climate change under the 2C danger limit agreed by the world’s nations. In this scenario, the value of financial assets would fall by $315bn less, even when the costs of cutting emissions are included.

“Our work suggests to long-term investors that we would be better off in a low-carbon world,” said Prof Simon Dietz, at the London School of Economics, the lead author of the study. “Pension funds should be getting on top of this issue, and many of them are.” But he said awareness in the financial sector was low.

Mark Campanale, at the thinktank Carbon Tracker Initiative, said the actual financial losses from unchecked global warming could be higher than estimated by the financial model behind the new study: “It could be a lot worse. The loss of financial capital can be a lot higher and faster than the GDP losses [used to model the costs of climate change in the study]. Just look at value of coal giant Peabody Energy: it was worth billions just a few years ago and now it is worth nothing.” [Continue reading…]

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How the precarious economy got built on top of disposable workers

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Louis Hyman writes: In 1967, the celebrated economist and intellectual John Kenneth Galbraith argued in his best-selling book The New Industrial State that “we have an economic system which, whatever its formal ideological billing, is in substantial part a planned economy.” Though postwar American politicians juxtaposed US free markets to the centrally planned economies of the Soviet bloc, Galbraith recognized that the two were more similar than one might have thought. The private planning of corporations, whose budgets were sometimes bigger than those of governments, defined postwar American capitalism, not markets. Markets meant uncertainty, and postwar corporate planners eschewed risk above all else.

After the chaos of depression and war, corporate planners had worked in conjunction with federal policymakers to make a world that promoted stability. None of the top 100 postwar corporations had failed to earn a profit. This profitability was not an accident. Nor was it the result of seizing every lucrative prospect. Rather, it had come from minimizing risk in favor of long-term certainty.

This postwar economy had allowed employees and employers alike to plan for the future, assuring them steady wages and steady profits. Big business had to be big to contain all the functions it would not entrust to the market. Through their own five-year plans, Galbraith argued, corporations “minimize[d] or [got] rid of market influences.” This American planned economy — which had appeared to be the natural future of capitalism in 1967 — began to fall apart only two years later, in 1969, nearly twenty years before the fall of the Soviet Union.

The collapse of this postwar economy came from the overreach of its new corporate form—the conglomerate—whose rise was legitimated by the belief in managerial planning. But its essential moral underpinnings — stability for investment and, especially, stability for work — took more of an effort to dislodge. Yet in the 1970s and 1980s, this effort succeeded as corporations began to embrace risk and markets, undoing the stability of the postwar period. By the 1980s, the risk-taking entrepreneur had displaced the safe company man as the ideal employee. [Continue reading…]

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