Protests over mining

This story is perfectly timed for my Year 13 students as they start their final A2 module. I doubt that many of them spotted this on Tuesday night - they may have been doing some revision for their synoptic module (or I hope they were!).

According to this BBC report, 10,000 people encircled the Niyamgiri hills in Orissa to protest at the ruling of India's Supreme court to allow a UK based firm to begin mining bauxite in the hills. Local tribes view the hills as sacred and mining activities clearly threaten their culture and way of life. Vedanta argues the extraction of bauxite will earn valuable export revenue, generate jobs and increase the standard of living for local people and that such natural resource endowments provide the key to economic development in the area.

Campaigners on the other hand argue that "India's rush to development should not come at the expense of traditional and sustainable ways of life of tribal and marginalised people".

There are lots of issues in this story which we will explore over the coming months including:

• the meaning of development;
• the charactreristics of developing countries;
• the role of multinationals;
• sustainable development.

My challenge to Year 13 students
Best response to the two questions below by the end of this week
1. What is the difference between economic growth and development?
2. To what extent are global patterns of trade determined by countries' resource endowments?

Is there a future for the UK steel industry?

The Independent makes this its Big Question for the day after Corus announced it was laying off 3,500 workers, 2,000 of them in the UK.

The demand for steel is a textbook example of 'derived demand' - steel is demanded primarily by the car manufacturing and construction industries, so falling demand in these sectors has reduced the demand for steel. In turn this has created excess supply in the industry and over-capacity. The response is to cut jobs. Whether these jobs are lost permanently depends upon a number of factors. An eventual upturn in demand should ensure a revival of output (hence why Corus has mothballed production facilities rather than closed them). However, strong competition from China may mean that production of steel in the UK and the rest of Europe is simply too costly - despite the huge gains in labour productivity in the last twenty years.

The Independent's coverage of the big steel question is excellent and well worth reading

My challenge to Year 10 students

What is meant by labour productivity?

Click on the chart at the top right of this blog and tell me by how much productivity in the UK steel industry has increased since 1988.

Is your essay worth £1000?

The Royal Economics Society's essay competition for A Level economists offers £1000 for the best essay from an A Level student (£500 for the second best).

The 2009 essay title is certainly topical:

'Are economic recessions inevitable?'

Anyone interested in entering the competition should see SDW for further details as soon as possible.

Spotting the green shoots

With the recession only just officially confirmed, it is way too early to be talking about the 'green shoots of recovery'.

But what will these shoots look like and how do we spot them when they emerge?

This short BBC video interview with four economists helps to understand the signs. It is likely to be a long time before we spot them though.

Recession tracker

The word 'tracker' raises my blood pressure - a series of blunders by my mortage broker resulted in me moving from a 'tracker' mortage to a fixed rate mortage some 5 months ago. The dramatic decrease in interest rates since then is having little impact on the family finances!

That aside, the BBC's 'recession tracker' is a great resource for economics and business students. It gives the latest data and news on GDP, unemployment, interest rates, house prices and repossessions on a single page.

Check it out here.

Impact of exchange rates on business

My Year 11 GCSE students have had a quick introduction to exchange rates in today's lesson. Tomorrow we will be considering the importance of exchange rates to business. A great illustration of the problems created by changes in exchange rates is to be found in today's news, with British Airways experiencing rising costs due to the fall in the value of sterling on foreign exchange markets.

Click here to read the short BBC article about the impact of the exchange rate on BA's costs.

Other useful weblinks

Robert Peston on the impact of the weak pound on retailers such as Next

Latest on the falling pound

The New Capitalism

Robert Peston is undoubtedly the face of reporting when it comes to the events of the last three months. He has led with 'scoops' (some have said inside information) of troubles in the financial sector and definitely been one step ahead of the story.

His analysis of what went wrong and what the future of capitalism holds is well worth sixth form students of economics reading. You can read what he has to say here and you might want to follow his blog (if you aren't already) by clicking here.

Microsoft in the dock ... again

Year 11 students have just completed work on monopolies and the role of the competition authorities. The behaviour of Microsoft was raised more than once! 'Bundling' has been an issue that has vexed competition authorities in the EU and the US - giving away products free with Microsoft's operating system. The argument has been that Microsoft has restricted competition unfairly by given away products for free as part of Windows - taking advantage of its monopoly of operating systems.

Think about what you are using to read this blog. My bet is that most of you, like me, are using Explorer. Why are you using it? Because it's free and it came with your PC. Now think about other firms producing brower products. How do you compete against a free product? How do you break into this market?

The EU competition commission has reached a prelimary conclusion to these
questions:

Microsoft's tying of Internet Explorer to the Windows operating system harms competition between web browsers, undermines product innovation and ultimately reduces consumer choice

Leam more about this breaking story by clicking here.

Third runway for Heathrow

Year 13 economists have a field day on transport economics this week. This Friday they are lucky enough to have Alex Hynes, the Commercial Director for London Midland come in to give a presentation on the rail industry. Very timely given the January module examination!

Tonight the BBC breaks the news that the Government has given the go-ahead for a thrid runway at Heathrow airport. Lots of relevant issues here for students to mull over as a way of revising some of the key bits of the specification - environment, sustainability, externalities, cost-benefit analysis to name but a few.

Well worth reading more on this.

Useful weblink

Heathrow runway 'gets go-ahead'

Busy time for administrators

A quick blog entry for Year 10 students.

Now I know that none of you ever nod off in lessons, you all regularly read the quality press and you all believe in Father Christmas - even if he didn't bring YOU an iPhone. So, I'm guessing that you will have all heard about firms going into 'administration'.

My groups are nearing the end of Unit 1, Enquiry 4 of the GCSE course in which we have been considering how business success might be measured. Enquiry 5 considers reasons for business failure and what happens when firms fail.

You might find this link useful in explaining what administrators actually do. It would make good reading in advance of us considering business failure.

Fed accused of 'drink driving'

Former Vice President and Chief Economist of the World Bank (and Nobel Prize winner for economics) accuses the US Federal Reserve of behaving like a drunk driver over its conduct of monetary policy.

In an interesting article in the Guardian, Joseph Stiglitz shifts attention from the symptons of the global economic downturn to the causes. Stiglitz argues that the current economic crisis is part of the "unwinding of 'global imbalances'". He calls for long term solutions to these imbalances and offers three solutions:

First, we need to reverse the worrying trends of growing inequality.
Second, the world needs enormous investments if it is to respond to the challenges of global warming.
Third, a global reserve system is needed. It makes little sense for the world's poorest countries to lend money to the richest at low interest rates.

Read more by clicking here.

Who and what next?

'Cheers' to Charles Barry (U6) for his blog entry (see below). Anyone else want to join us?

1,200 job losses announced by M&S. Another 1,200 jobs lost at Nissan, Sunderland, the UK's most productive car plant. My Year 10 group may be quizzing me tomorrow, after today's discussion of the importance of productivity - guess which car manufacturing plant we were looking at?

Britain's oldest name in the clothing industry, Viyella, goes into administration (or at least part of the business does). The Sofa Workshop is on the brink of administration. Who is next? The impact of the recession deepens by the week - by the day would not be an exaggeration.

And UK interest rates come down to their lowest level since the Bank of England was founded in 1694. As Charles has explained there is a limit to how far interest rates can fall. With 0.5 percentage points knocked off the base rate today, the UK is now reaching this limit. What next? Will we see 'quantitative easing' and deliberate 'printing' of money to prevent the UK entering a period of deflation? Maybe. When the very politicians that gave the Bank of England its operational independence just over 10 years ago start talking about having a say in monetary policy you know that you are living in historic times. I first started to study economics at the height of 'monetarism' - a theory (actually more than that, as it provided the bedrock to a whole new political philosophy - Thatcherism) which urged governments to restrict the growth of the money supply. For an independent central bank to be contemplating deliberate expansion of the money supply is an even bigger shock than the return to fashion of Keynesian demand management.

What intrigues me about this is the battle for control over monetary policy which I suspect will grow over the coming months. Alistair Darling is effectively saying that responsibility for monetary policy decisions will now revert back to politicians. As an economist this scares me, but it doesn't surprise me. Monetary policy decisions made for political reasons are apt to destablise rather than stabilise the economy. And there is now talk of a further boost to government spending too. Economists don't always agree about appropriate policy responses, but at least the debate can be rational and objective. I know who I would want with their hands on the tiller.

Useful weblinks

Darling wants say on 'quantitative easing'

Economy may need a second cash boost

Bank cuts interest rate to 1.5%