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  • The Economist: Lessons Learned Five Years After Lehman's Collapse

    This week marks the fifth anniversary of the collapse of Lehman Brothers, and with it, much of the global economy. To be clear, the global economic crisis had begun at least a year prior to Lehman's collapse, but September 15 was the day that most citizens really understood we were in crisis, (it was also the day the crisis-deniers had to be quiet, at least temporarily), as Lehman filed for bankruptcy. So moving to the present, The Economist 's Zinny Minton-Beddoes and Greg Ip discuss lessons learned from the Lehman collapse:
  • Economist Live Chart: Economic Class Shifts in Latin America

    One of the bright lights in global economic news over the last five years has been the growing middle class in Latin America. The Economist illustrates the positive trend of much of Latin America's population from poor to middle class in this live chart:
  • The Case for Green Growth as Central to Economic Growth

    The Economist 's globalisation editor, John Parker , says that the cost of the environmental damage that comes with economic growth and rapid industrialization of China's cities comes to about 9% of China's GDP. That is why, as he discusses with Economist international editor Edward Lucas , that China, and other emerging markets, don't have the option of growing first then cleaning up later. Parker wants us to think of green growth as a recognition that "the environment is like a form of capital," and he argues that it must be a central part of economic growth programs in China and other emerging economies.
  • My Kingdom for an iPad, or the Curious Case of Scottish Independence

    It isn't the most pressing international issue, but the Scottish vote for independence--two years away at this point--does make for an interesting case study. The push for independence may sound like a lot of cultural and nationalistic pride, and indeed that may be the driving force for the leaders of the independence movement. But for most Scots it appears economics will rule the day, according to a recent Economist report: Opinion polls suggest that they will determine whether or not Scots go for independence. One poll found that just 21% of Scots would favour independence if it would leave them £500 ($795) a year worse off, and only 24% would vote to stay in the union even if they would be less well off sticking with Britain. Almost everyone else would vote for independence if it brought in roughly enough money to buy a new iPad, and against it if not. Opinions on the economics of independence are starkly divided. Nationalists argue that, mostly thanks to North Sea oil and gas, Scotland subsidises the union and would be better off alone. The more sneering sort of unionist argues the opposite, that Scotland is a parasitic subsidy junkie. Both are wrong, in the short term at least. Assuming it keeps the oil and gas extracted from under Scottish waters, an independent Scotland would currently gain roughly as much in taxes as it would lose in subsidies (see article ). The future, however, looks much dicier. This is a stormy economic world, and an independent Scotland would be a small, vulnerable barque. It would depend on oil for some 18% of its GDP, making it subject to shifts in global commodity prices. Though high oil and gas prices have pushed up tax revenues, if they drop production as well as receipts would plummet. The richest reserves have already been exploited, leaving inaccessible oil that becomes uneconomic when prices fall. North Sea production has been falling by about 6% a year for the past decade. Eventually the oil will run out entirely. A small country is more vulnerable to other shocks. In 2008 the British government had to bail out Royal Bank of Scotland (RBS) and HBOS, Scotland’s two biggest banks. At its peak, RBS’s balance sheet was 13 times Scottish GDP. Edinburgh has faltered as a financial centre since, and would be hard to revive. There is a limit to how large a financial sector an independent Scotland—a new, small economy—could support. Mr Salmond has already rebuffed suggestions that he should take a share of RBS’s £187 billion of toxic assets. So what might be the economic advantages of a small independent nation such as Scotland or the Basque region going it alone, or as part of the EU? Read It’ll cost you: Scottish independence would come at a high price here .
  • Peter Diamandis on 'Abundance'

    If you want to find an optimistic voice on the future of the global economy, look no further than Peter Diamandis . Diamandis, the founder and funder of the X-Prize , has a history of putting his money where his mouth is--and, for that matter, where his hopes are. He demonstrates a great deal of faith in our ability to improve the world through entrepreneurship and competition in his book, Abundance—the Future is Better Than You Think . Diamandis discussed the book with The Economist 's Matthew Bishop : For a longer interview with Diamandis, take a listen to his interview with Tom Ashbrook , On Point , here .
  • Switzerland and Japan Take Top 4 Spots on World's Most Expensive Cities List

    Zurich has supplanted Tokyo as the most expensive city in the world, according to the Economist Intelligence Unit . The struggles in the EU seem to have pushed already pricey Swiss cities Zurich and Geneva into the top three most expensive cities, as the Swiss Franc keeps getting more and more valuable. From the EIU's Worldwide Cost of Living 2012 report: Both Japan and Switzerland have seen strong currency movements over the last few years which have made them relatively more expensive. This has become especially true of Switzerland in the last year, where investors looking for a haven currency outside the beleaguered Eurozone have invested heavily in the Swiss Franc, prompting an unprecedented move by the Swiss government to peg the Swiss Franc to the Euro to keep the currency competitive. Although Switzerland has long featured in, or around, the world’s most expensive cities, the strong swing in currency headwinds is responsible for Zurich’s current elevated position. In local terms the opposite has been true, with relatively cheaper imports and a stable economy keeping local price inflation low. This mirrors a similar situation in Japan over recent years which resulted in Tokyo and Osaka traditionally holding the unenviable title of being the world’s most expensive cities. Local inflation in mature markets always has far less influence on the relative cost of living than the currency movements of the countries in question. This also explains the recent presence of Australian cities like Sydney and Melbourne in the ten most expensive locations as last year saw the Australian dollar pass parity with the US dollar from holding half that value a decade ago. New Yorkers with empty pockets may be surprised to learn that their city isn't near the top of the list. In fact, no American city cracks the top ten this year. Here are the ten most expensive cities: Read the EIU's release here .
  • Tyler Cowen on the Limits of Narrative

    We crave stories. We need stories. They help us navigate a world that is too complicated to understand. Tyler Cowen says they are like candy, and we crave them as such. And this, Cowen argues can be a problem. When we think in terms of simple narrative, we "strip away detail." And when we do this with complicated problems, we avoid exploring the very details that matter most. Cowen gave the following talk a couple of years ago, but TED is highlighting it once again. And we understand why. With another presidential election year under way, the airwaves are full of competing narratives about how we got here, conspiracy theories, and simplified good-versus-evil storylines. Here is the talk:
  • A Call for Better Long Term Planning by US Policymakers

    Speaking at The Economist 's Buttonwood Gathering , Tom Kaplan says that if a Martian were to visit the US in 1973, and then jump ahead to today, that Martian would be appalled by our policymakers' inability to prepare for long term problems. While we don't understand why Kaplan, chairman of the Electrum Group , uses a Martian as the observer, his point is a good one to consider. Kaplan argues that the US needs to be less reactive in its economic and energy policies, and plan ahead much, much better. Access more video from the Buttonwood Gathering here .
  • IBM at 100: Staying Power Based on Ability to Change

    IBM is marking the 100th anniversary of its incorporation. And far from being a relic, IBM seems to have caught its stride once again in the last decades. Take a look at the company's market capitalisation compared to its young competitors in the tech sector (from The Economist ): It is a remarkable feat for any company, but especially so for a high tech company. IBM operates in a field where the basic foundation of business products changes rapidly. But, as The Economist details, the company has survived by doing what so many companies across a variety of fields fail to do. Its business was based on punch cards, but it did not allow itself to become a dinosaur when punch cards started to fade in favor of the early calculating machines. As leadership of the company passed from Thomas Watson, Sr., to Thomas Watson, Jr., IBM became the global leader in computing. From The Economist: Under the younger Watson, IBM became by far the world’s biggest computer-maker. He did the trick by betting the company on the System/360, IBM’s first family of mainframe computers, which took years and $5 billion (in 1960s dollars)—more than the Manhattan Project that led to the atomic bomb—to develop. Launched in 1964, the System/360 became the first dominant computing platform, mainly because all the family’s machines, big or small, were “compatible”, meaning they could run the same software. By 1969 IBM’s market share had grown to 70%. It thus became the first IT company to be called an “evil empire” and aroused the ire of America’s antitrust authorities. The Reagan administration eventually dropped the case in 1982, asserting that it had been “without merit”. The second platform shift—from costly mainframes to “distributed” computing systems, including PCs—was a much closer shave. Even while the antitrust case was dragging on, technological progress had begun to undermine IBM’s near-monopoly and, more importantly, its business model of renting its expensive machines to customers. Since this was highly profitable, IBM was very slow to deliver cheaper and distributed computing systems, made possible by new processors. When these systems took off in the early 1990s, IBM’s business collapsed. Mainframe revenues dropped from $13 billion in 1990 to $7 billion in 1993 and losses of $16 billion piled up. “Only a handful of people understand how precariously close IBM came to running out of cash,” wrote Lou Gerstner, who was brought in to turn the company around, in “Who Says Elephants Can’t Dance?”, his book about the revival. He fired 35,000 employees to cut costs. The lesson of the story appears to be that companies that develop a strong sense of what the company is rather than being simply a vehicle for a certain product or certain type of product stands a better chance at long term success. Read IBM: 1100100 and counting here .
  • Economist Saez Nets MacArthur 'Genius Award'

    University of California-Berkeley economist Emmanuel Saez received a 2010 MacArthur Foundation Fellowship today. Saez was selected for his work on the relationship between tax policy and wealth and income inequality. Here is a short video in which Saez briefly explains his area of interest:
  • Women to Top 50% of American Workforce

    Sometime early this year, the Economist asserts, "women will cross the 50% threshold and become the majority of the American workforce." The Economist notes that this is one of the most significant economic stories of our times and a cause for celebration, but there is still a long way to go: Women’s economic empowerment is arguably the biggest social change of our times. Just a generation ago, women were largely confined to repetitive, menial jobs. They were routinely subjected to casual sexism and were expected to abandon their careers when they married and had children. Today they are running some of the organisations that once treated them as second-class citizens. Millions of women have been given more control over their own lives. And millions of brains have been put to more productive use. Societies that try to resist this trend—most notably the Arab countries, but also Japan and some southern European countries—will pay a heavy price in the form of wasted talent and frustrated citizens. This revolution has been achieved with only a modicum of friction (see article ). Men have, by and large, welcomed women’s invasion of the workplace. Yet even the most positive changes can be incomplete or unsatisfactory. This particular advance comes with two stings. The first is that women are still under-represented at the top of companies. Only 2% of the bosses of America’s largest companies and 5% of their peers in Britain are women. They are also paid significantly less than men on average. The second is that juggling work and child-rearing is difficult. Middle-class couples routinely complain that they have too little time for their children. But the biggest losers are poor children—particularly in places like America and Britain that have combined high levels of female participation in the labour force with a reluctance to spend public money on child care. Read the full article, Women and Work: We Did It! here .