Income inequality and growth
William Bernstein writes in a guest spot for the Freakonomics blog and considers how extreme income and wealth inequality can hinder growth and development in the long run. Quite apart from the increased burden of spending on defensive expenditure such as home security, prison guards and home and contents insurance - when the gap between the haves and the have-nots reaches staggering levels there is a real fear that respect for property rights is fundamentally undermined.
“The paradox of economic growth is that the same mechanisms that create great wealth –secure property rights and rule of law guaranteed by an independent judiciary — also give rise to great inequalities in its distribution. Private property provides a powerful incentive to produce wealth for oneself while simultaneously denying that same wealth to others. Wealth does trickle down to the rest of the population, but often not fast enough to avoid political strife and worse.”
The remainder of his post is here
•Economic Growth - •Poverty and Inequality -
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Cutting capacity to weather the slump
Two excellent examples in recent days of businesses moving quickly to combat a slump in demand and sales. Both Land Rover and Toyota have decided to scale back on production at their manufacturing plants in the UK. Toyota has a huge plant at Burnaston in Derbyshire second only to Nissan in Sunderland for the annual output of vehicles. The Times reports that Toyota plans to reduce the number of daily shifts on the plant’s Auris production line from two to one this year. Over at Land Rover, some of the assembly workers will have longer weekends after a decision to make Land Rover and Discovery vehicles on four days a week, from Monday to Thursday.
These decisions are pro-active in the sense that businesses cannot afford to build up too high a stock of unsold cars - and with the credit crunch continuing to bite, demand for cars from consumers and from the fleet sector is weakening rapidly. The lower pound ought to make UK manufactured cars more competitive in western European markets - but with the Euro Area teetering on the brink of recession, the negative income effect on demand for new vehicles is offsetting the competitive boost from a lower currency.
•AS Micro - •Business Economics -
Tags: recession, euro, manufacturing, capacity, nissan, land rover, toyota
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Digital Course Companions now available for the new AS specifications
tutor2u’s new digital Course Companions are now available for the new AQA, Edexcel and OCR AS Economics specifications…
read more...»Property woes deepen
This isn’t a gentle correction of house prices towards a sustainable long run position - the fall in UK property values is now steeper than at any time since the Nationwide Building Society first published their house price survey. Prices were 10.5% lower in August than they were a year ago. Prices fell by 1.9% compared with July and the average home now costs £164,654, which is more than £19,000 cheaper than the average price one year ago. Things are pretty bad in Spain too as this BBC news video from Hugh Pym illustrates. This week Taylor Wimpey announced a loss of £1.54bn in the six months to 30 June, saying it faced “very challenging” conditions.
Ordinarily the slump in prices ought to improve affordability and bring more first time buyers into the market - but with expectations for prices so pessimistic and mortgages remaining very difficult to get hold of, that glint of silver lining is unlikely to come to the rescue to the property sector for the time being.
PowerPoint version of the chart
Housing_Market_0808.ppt
•UK Economy -
Tags: prices, property, correction, nationwide
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The most disgusting thing since sliced bread
I almost spat out my breakfast this morning when I read this piece of news: Rat meat in demand as inflation bites. Apparently with the price of beef at £2.50 per kilo, the poor in Cambodia can no longer afford it and have to resort to rodent meat, despite that being four times what it cost a year ago. We’ve all learnt about bread and potatoes in our lessons about Giffen goods but this is a rather peculiar example which might not quite make it to the textbooks just yet.
More here from the Guardian: Cambodians eat rats to beat global food crisis and from the BBC: India’s poor urged to ‘eat rats’
•Market Equilibrium and Price - •Fun and Quirky! -
Tags: price, food, cambodia, agflation, rats
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Behavioural change behind the wheel
I am about to hit the motorway this morning to return home for a new school year - so the front page of the Independent made for interesting reading. Trafficmaster has released figures which seem to indicate that congestion on Britain’s major roads is easing for the first time in over a decade. It offers firm evidence that motorists are responding to the effects of higher fuel prices when making their travel decisions.
read more...» •Credit Crunch - •Transport Economics -
Tags: demand, transport, efficiency, congestion, fuel prices, eco driving
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Shaking foundations
The Guardian has a nifty interactive graphic on the troubles facing the UK building industry during the property slump. Housing is one of the classic examples of an industry where cyclical changes in demand feed through very quickly into the number of jobs on offer in construction - a sizeable number of workers do not have permanent contracts, and this applies right the way through the industry from builders to the building supply sectors. The BBC considers whether London 2012 will provide a sufficiently big boost to demand and jobs to partly offset the current downturn.
•AS Micro - •GCSE Economics - •Housing Market -
Tags: housing, downturn, property, construction, jobs
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China’s currency manipulation to soften the slowdown
Perhaps fearful of a steep slowdown in exports to a weakening global economy, the Chinese monetary authorities appear to be engaging in another bout of active manipulation of the Yuan in the foreign exchanges.
•Emerging Economies - •China Economy - •Exchange Rates - •Global Economy - •International Trade - •US Economy -
Tags: dollar, exports, china, competitiveness, subsidy, yuan, floating
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Moonpig at the Entrepreneurship Society
Nick Jenkins is one of the true survivors from the first dot.com boom and bust and his personalised online greetings card company Moonpig has gone from strength to strength in recent years. Moonpig is estimated to have nearly 90 per cent of the online card market and the story of how Moonpig was created, built and expanded is terrifically entertaining.
read more...»Ageing but not ailing
Sarah Harper, Professor of Gerontology at Oxford and director of the Oxford Institute of Ageing offers this optimistic view of the economic and social spill-overs from our ageing population. Apparently - currently, every hour we live adds five minutes to our life expectancy.
Don’t panic, we have nothing to fear from an ageing society
The article seems to be in response to figures released last week that the number of people aged over 60 in the UK now outnumbers children for the first time.
•Labour Economics -
Tags: population, age structure, ageing, demography
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