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Friday 28 February 2014

Unit 4: IMF & World Bank on development & Inequality

Two articles that highlight the influence the IMF & World Bank can have on development.


World Bank postpones $90m Uganda loan over anti-gay law

A newly-diagnosed HIV positive woman lies in the treatment ward of the Mildmay Uganda clinic on 27 FebruaryThe World Bank was set to approve a new project in Uganda to strengthen its health services

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The World Bank has postponed a $90m (£54m) loan to Uganda over its tough new anti-gay law that has drawn criticism from around the world.
World Bank officials said they wanted to guarantee the projects the loan was destined to support were not going to be adversely affected by the new law.
The loan was intended to boost Uganda's health services.
The new law, enacted on Monday strengthens already strict legislation relating to homosexuals in the country.
It allows life imprisonment as the penalty for acts of "aggravated homosexuality" and also criminalises the "promotion" of homosexuality".
Elimination of discrimination
The law has been sharply criticised by the West, with donors such as Denmark and Norway saying they would redirect aid away from the government to aid agencies.
US Secretary of State John Kerry has called the law "atrocious". Both he and South African Nobel peace laureate Desmond Tutu compared it to anti-Semitic laws in Nazi Germany or apartheid South Africa.
A spokesman for the World Bank said: "We have postponed the project for further review to ensure that the development objectives would not be adversely affected by the enactment of this new law."
Anti-gay supporters celebrate after Uganda's President Yoweri Museveni signed a law imposing harsh penalties for homosexuality in Kampala February 24, 2014.Anti-gay supporters in Uganda rejoiced when the law was passed on Monday
The loan was supposed to be approved on Thursday to supplement a 2010 loan that focused on maternal health, newborn care and family planning.
The World Bank's action is the largest financial penalty incurred on the Ugandan authorities since the law went into force on Monday.
In an editorial for the Washington Post, World Bank President Jim Yong Kim warned that legislation restricting sexual rights "can hurt a country's competitiveness by discouraging multinational companies from investing or locating their activities in those nations".
He said the World Bank would discuss how such discrimination "would affect our projects and our gay and lesbian staff members".
In his view, he adds, fighting "to eliminate all institutionalized discrimination is an urgent task".
Ugandan President Yoweri Museveni signed the anti-gay bill earlier this week, despite international criticism.
Ugandan authorities have defended the decision, saying President Museveni wanted "to demonstrate Uganda's independence in the face of Western pressure and provocation".
Uganda is a very conservative society, where many people oppose homosexuality.

IMF & failure of supply side policies

I welcome this report from the IMF who seem to be suggesting that pure supply side policies that create inequality (simple unit 2 evaluation point) actually hinder economic growth. 

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.

To general surprise, the Guardian reports IMF research which suggests that countries with high levels of inequality suffered lower growth than nations that distributed incomes more evenly. Backing analysis by the Keynesian economist and Nobel prizewinner Joseph Stiglitz, it warned that inequality can also make growth more volatile and create the unstable conditions for a sudden slowdown in GDP growth.

Even more controversially, the IMF said the supply side defence of inequality – that it gives the rich incentives to invest and the poor incentives to work has a very limited impact. 

Obviously, some groups are pleased to hear this news, with Oxfam welcoming the report saying it shows "extreme inequality is damaging not only because it is morally unacceptable, but it's bad economics … redistribution efforts - essential to fight inequality - are good for growth is a welcome finding. Low tax and low public spending are clearly not the route to prosperity."


I expect there will be a backlash to the report, and the debate won’t end (you can read more here), especially in the US where studies show most of the country's income growth since the crash has gone to the richest 1%. Last year the UK's coalition government cut tax on incomes over £150,000 from 50p to 45p after a debate over the negative effects on growth of high taxes on wealthy individuals.

Wednesday 19 February 2014

Well done Mariah Fresi - 100,000 view on Dubai Economics!

A gift (small) will follow! :-)


Unit 1: Market & Information Failure

Excellent presentation on a key Unit 1 issue. Why do we smoke too much, why is binge drinking a real issue in UK. Lots of theory and practical examples in this presentation:

Unit 4: Growth in Nigeria - Excellent video clip

This is a short clip that explains the many issues facing a developing country - even one that is oil rich.

Click here to access the article - it includes the video clip - a must watch

Issues such as:

  • Corruption
  • Poor infrastructure - this includes transport and power (electricity shortages)
  • No policy to help manufacturing
  • Reliance on oil (Primary product dependency)
  • Inefficient production methods
  • Poor education - low labour productivity


All of the above needs to be improved if Nigeria really is going to develop. However, it looks like the rich get richer and are therefore happy to drive their Porsche's around Lagos, whilst the rest of the country suffers!

Aadil / Michael - lets have a debate! :-)




Unit 4: Dutch disease in Australia - and issues with primary product dependency

Thank you to Aadil for spotting this piece about another manufacturing plant closing in Australia.

When you guys see questions about primary product dependency, this is another factor (besides the ones listed below) that can cause problems for both developed and developing countries.

Primary Product Dependency Issues:

Dutch disease - relying on one primary product appreciates currency and makes manufacturing uncompetitive

Worsening terms of trade - the real price of primary goods falls with respect to manufactured good. (Singer–Prebisch theory)

Inelastic demand - Causes price fluctuations

Low value added product - makes it difficult to generate income to re-invest

Can you think of any  more?

Tuesday 18 February 2014

Unit 2 & 4: Macro economics - Useful Video clips to aid understanding

Below are several links to vital concepts that you need to understand:

You should watch them outside the classroom, and then in the classroom we would follow up with class exercises to check their understanding. The plan is that they will also prove useful for revision.

The clips are deliberately short and rapid-fire – around 10 mins long for each mini topic –remember, you can pause, take notes, rewind, re-watch them as many times as you wish. Then if you have any further queries, you can ask your teacher to clarify any points you didn’t understand. This will make the lesson time much more productive.

The tutorials are short and quick:


The tutorials include:

Fiscal policy intro – this covers the basics of what fiscal policy is, how it affects the economy, expansionary fiscal policy, progressive taxes etc.

Automatic stabilisers – watch this if you are unsure why we call government spending and tax revenue an automatic stabiliser

Crowding out and in – watch this if you are unsure what crowding out / in is – why it happens etc

Laffer Curve explained – watch this if you wish to understand the explanation behind why the shape of the Laffer Curve is the way it is

Exchange rate and AD – watch this to learn how an exchange rate affects AD

Expansionary monetary policy – watch this to understand an overview of the transmission mechanism of monetary policy

Evaluation fiscal policy – watch this for some key evaluation points on fiscal policy that limits its effectiveness

Fiscal drag – watch this short clip that explains the phenomenon of fiscal drag

Quantitative Easing – watch this for a very quick explanation of what QE is

Evaluation monetary policy – watch this clip to understand the key evaluation points on interest rates that limit its effectiveness

Evaluation exchange rates – watch this clip to understand the key evaluation points on depreciating a currency to promote real GDP


Note: There are similar tutorials available on elasticity here

Unit 4: Excellent video on the Eurozone and all the issues involved - A must watch!

Gains from international trade, the history of European economic integration, fiscal and monetary policy, the launch of the €uro and the 2008 financial crisis are all clearly animated and explained in this superb video. 

In just over 12 minutes it explains the problems of the €urozone and the threats and challenges it still faces. Definitely one to watch for the closing stages of an A2 macro course.

Hat tip to Isaac Duffy who spotted this Bloomberg video.



Sunday 16 February 2014

Unit 3: Monopolistic competition presentation



A clip helping explain short to long run equilibrium....

Unit 4: The economics of a minimum wage rise

A really useful presentation on the minimum wage. It focuses on some of the arguments surrounding the possible introduction of a £7 per hour national minimum wage in the UK. 

It also gives you an idea about how to evaluate. Try and argue against the point made on slide 19 - a useful exercise in evaluation.

Tuesday 11 February 2014

Unit 3: Perfect Competition Vs Monopoly

A quick but informative guide on how to structure an essay evaluating perfect competition and monopoly. For more videos, click here



Perfect competition revision quiz - click here

Unit 4: 'Dutch Disease' hits Australia!

What a timely article regarding Toyota's decision to pull out of Australia. Coming after last year’s announcements that Ford will cease production in October 2016 and Holden in 2017, the decision also means the end of a car components industry that employs more than 30,000. Click here to access the full article which highlights the strong Aussie Dollar as the main reason for leaving.


Monday 10 February 2014

All Units: Economics Presentations

Follow this link to access all the presentations from tutor2u.

Unit 4 Macro: Is Norway suffering from Dutch Disease? + Past questions





Norway has for many years recorded an enviable macroeconomic performance. It regularly tops the international rankings for the Human Development Index (HDI) and it has one of the highest figures for GNI per capita (PPP) among developed nations. 

It records huge current account surpluses in excess of 10% of GDP each year and strong growth and surging revenues from oil and gas production have given the Norwegian government a fiscal position that many other countries would die for!  Unemployment is the lowest of any European country.

That said there are some signs that the economy is suffering from an over-dependence on oil and gas - it is at risk of the Dutch Disease? 

The Dutch Disease is the idea that economic growth from exploiting and exporting natural resources can crowd out investment in other sectors, in part due to a strengthening exchange rate which causes a sharp rise in relative unit labour costs. High wages are also seen as a factor behind a trend decline in the average hours worked and a rise in the drop-out rate from high school education.

Manufacturing wages in Norway have climbed by more than 150 per cent since 1997 against just 50 per cent in the US and Germany They are now 60-70 per cent higher than the weighted average of Norway’s trading partners, meaning “that for every hour worked here we need to be 60 per cent more productive”. (FT, 7 Feb 2014)


This Financial Times video report looks at some of the issues facing Norway.



Past questions 

*(a) To what extent is primary product dependency a constraint on economic growth
and development in developing countries? (20)

*(b) Evaluate four ways in which economic growth and development might be
promoted in developing countries. (30)

*(a) Assess the significance of three factors which might limit economic development in developing countries. (20)

*(b) Discuss debt cancellation and trade liberalisation as alternative means of promoting economic development in developing countries. (30)

Case study question - June 2013, Question 5.


Sunday 9 February 2014

Unit 4: Why India may struggle to become fully developed!

Thank you Carl for this article on why 'poor governance and inadequate infrastructure' are holding up growth and development in India.


Tuesday 4 February 2014

Unit 3: Excellent video which explains game theory

Here is a really well produced and clear visual explanation of the Hotelling model of spatial location. As two competitive cousins vie for ice-cream-selling domination on one small beach, discover how game theory and the Nash Equilibrium inform these retail hot-spots. A good short video to use when teaching or learning about game theory.



Click here for more on Game theory (It is quite complex, but may help you understand the basics)