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The causes: A very short history of the crisis

Slowing China - Barry Eichengreen Exit from comment view mode. Click to hide this space BERKELEY – With the world’s rich countries still hung over from the financial crisis, the global economy has come to depend on emerging markets to drive growth. Increasingly, machinery exporters, energy suppliers, and raw-materials producers alike look to China and other fast-growing developing countries as the key source of incremental demand. But Chinese officials warn that their economy is poised to slow. In late February, Premier Wen Jiabao announced that the target for annual GDP growth over the next five years is 7%. Should we take this 7% target seriously? Of course, it is difficult to be too critical of past Chinese policies. So are China’s leaders again underestimating their economy’s growth capacity? There is reason to think not – that this time Chinese officials are convinced that a slowdown is coming. Chinese officials are well aware that these changes are coming. There is no iron law of slowdowns, of course.

Eurozone in crisis in graphics: Deficit Continue reading the main story EU rules say that countries using the euro are not allowed to have an annual deficit of more than 3% of GDP, but several countries have failed to keep to that rule in recent years. Note that Germany, Italy and France were all among the first countries to break the Maastricht rule during the last decade, while Spain and the Republic of Ireland ran surpluses before the 2008 crisis. Since 2008, peripheral economies such as Spain, Greece and Portugal have run big deficits, because their economies have slumped, generating less tax revenues and requiring more unemployment benefit payments. Ireland experienced an exceptionally enormous deficit of 31% of its GDP in 2010, largely due to the cost of rescuing its banks. Italy, however, has faired surprisingly well. Send us your feedback

Call for greater aid transparency 14 November 2011Last updated at 23:59 By Mark Doyle BBC International Development Correspondent Aid donors and recipients would benefit from greater transparency in spending on development projects A UK-based lobby group is calling for more transparency in the spending of global development aid, estimated to be worth about $150bn (£93bn). Publish What You Fund says taxpayers in rich donor countries and recipients in poorer nations need more information to know if aid is being spent wisely. It has published a transparency index ranking the openness of donor nations and organisations. Major donors including the US, Japan and France score badly on the index. The international development industry is big business - roughly equal to the value of the loan package currently being proposed to bail out Greece. This official government aid, whether direct or through multinational organisations like the United Nations, is far larger than the amount distributed by charities such as Oxfam or Christian Aid.

“The Office” goes to India: How bad management keeps India poor “The Office”, a popular British television programme, has been shown in more than 50 countries. Its international appeal likely stems from its universal theme: managerial incompetence. This column looks at the case of India and shows how the poor management of its companies is holding the country back. Anyone who has seen the TV show “The Office” knows about the impact of bad management on office productivity. Economists have long puzzled over why there are such astounding differences in productivity across both firms and countries (Syverson 2011). One reason for this scepticism is the complexity of management, making it hard to measure and quantify. In this project we used field experiments to evaluate if these differences in management actually cause differences in performance. Our experiment in India involved 20 large textile firms. We collected detailed performance metrics on output, inventory and quality to understand the effects of improved management for firm performance.

A tale of two economies – Greece and Iceland Last Friday (March 9, 2012), the Greek government effectively defaulted on its public debt after the required minimum of 75 per cent of private creditors agreed to the so-called “haircut” or debt swap. I find it amusing how the Euro leaders have attempted to massage the default as a debt swap or some other euphemism. The facts are obvious – close to 100 per cent of those who are holding Greek government debt will lose at a minimum 53.5 per cent of the value of their assets. All the political elites in Europe (or most of them) seemed to be raising their Chardonnay glasses to toast a success. On Saturday (March 10, 2012) the Sydney Morning Herald reported in the article – Greek problem solved, Sarkozy says – while Germany warns – which predictably had the French leader making political statements in the face of his upcoming election and the Germans – being, well, Germans. Sarkozy was quoted as saying: Today the problem is solved … A page in the financial crisis is turning. Conclusion

A better life in sight With deft, precise touches, Mastura Khatun goes about her work. On the operating table below her is a three-year-old girl, one eye staring upwards, a small brown disc visible through turquoise surgical sheets. Working through a microscope, Khatun starts to remove Erina Hossain’s cataract, making precise cuts as she moves around the girl’s clouded lens, before finally winkling it out. Then Khatun, senior consultant at the Islamia Eye Hospital in Dhaka, introduces an artificial lens, which she nudges into place. Half an hour later, Erina is on a trolley, being wheeled back to the children’s ward with its wall paintings of Bengali jungle scenes – prancing tigers and fish – and regimented rows of wrought-iron beds, overseen by a starched matron. For the Hossains, who live in one tenement room on the edge of Dhaka, this is a bewildering encounter with the world of modern medicine. The longer-term benefits to children make a sight-saving operation ‘the most cost-effective thing in the world’

Print - What Makes a Nation Rich? One Economist's Big Answer We are the rich, the haves, the developed. And most of the rest — in Africa, South Asia, and South America, the Somalias and Bolivias and Bangladeshes of the world — are the nots. It's always been this way, a globe divided by wealth and poverty, health and sickness, food and famine, though the extent of inequality across nations today is unprecedented: The average citizen of the United States is ten times as prosperous as the average Guatemalan, more than twenty times as prosperous as the average North Korean, and more than forty times as prosperous as those living in Mali, Ethiopia, Congo, or Sierra Leone. The question social scientists have unsuccessfully wrestled with for centuries is, Why? You can chart the search for a theory of inequality to the French political philosopher Montesquieu, who in the mid-eighteenth century came up with a very simple explanation: People in hot places are inherently lazy. It's the same with the theories put forth today. The U.

Germany: A False Model at Reports from the Economic Front As growing numbers of countries face renewed austerity pressures, there is a tendency to explain the trend by searching for specific policy failures in each country rather than considering broader structural dynamics. Key to the credibility of those who argue for a focus on national decisions is the existence of countries that people believe are performing well. Thus, the argument goes, if only policy makers followed best practices their people wouldn’t find themselves in such a bad place. Here is a typical framing of the German experience: At a time when unemployment rates in France, Italy, the UK, and the US are stuck around 8%-9%, many are turning to the apparent miracle in the German labor market in search of lessons. In other words, Germany seems to be doing things right. This development was far from accidental. The New York Times described the German employment miracle as follows: As the chart below shows, German wages have been stagnating for over a decade.

Und morgen endlich wieder Schule - Festung Europa Paula weiß, dass es Kinder gibt, die nach der Schule mit dem Auto abgeholt werden. Die Sechsjährige weiß auch, dass diese Kinder mit dem Auto zu einem richtigen Wohnhaus fahren, mit einer richtigen Heizung, wo die Eltern ein eigenes Schlafzimmer haben und die Kinder hin und wieder ein Stück Schokolade. Wo der Vater ein Gesicht hat und einen Körper zum Umarmen, und nicht nur eine Stimme am Telefon, die nur selten glücklich klingt. Paula weiß das alles von ihren Klassenkolleginnen, denn das sind solche Kinder. Jeden Tag um 14 Uhr sagt Paula "Bye bye" zu ihnen, steigt in den roten Kleinbus, und verlässt die Stadt. Alles vollgestopft Paula ist eines von 50 Kindern im Familienzentrum des Flüchtlingslagers Hal Far in Malta. Spaß in der Klasse Es ist Donnerstag, neun Uhr morgens, die Lehrerin wirft den Beamer an. Maltesisch, eine komplizierte semitische Sprache, beherrscht Paula bereits fließend. Weg - und wieder da "Immer auf Achse" Traum von Italien "Keine Probleme" Die Hausübung zählt

IS-LMentary A number of readers, both at this blog and other places, have been asking for an explanation of what IS-LM is all about. Fair enough – this blogosphere conversation has been an exchange among insiders, and probably a bit baffling to normal human beings (which is why I have been labeling my posts “wonkish”). [Update: IS-LM stands for investment-savings, liquidity-money -- which will make a lot of sense if you keep reading] So, the first thing you need to know is that there are multiple correct ways of explaining IS-LM. My favorite of these approaches is to think of IS-LM as a way to reconcile two seemingly incompatible views about what determines interest rates. How can both views be true? Start with the loanable funds side. That means that loanable funds doesn’t determine the interest rate per se; it determines a set of possible combinations of the interest rate and GDP, with lower rates corresponding to higher GDP. And that’s IS-LM: What use is this framework?

Tales of success from Dadaab, world's biggest refugee camp 3 November 2011Last updated at 08:25 By Wairimu Gitani BBC World Service Dadaab refugee camp in north-eastern Kenya was set up in 1991 as a temporary solution to conflict in the Horn of Africa. Twenty years later its numbers are still growing and for many of the camp's younger residents it is the only home they have known. The camp was built to house 90,000 refugees but its population is now broaching half a million people and with drought and famine ravaging East Africa, more arrive each day. Despite the desperation some residents are battling the odds, determined to make a success of life as a refugee. Ardo Ahmed and her niece prepare for her wedding Today at her parent's hut in Dadaab, Ardo Ahmed is caught up in flurry of activity. But now at 24, she can put those memories aside and concentrate on a happier thought - her forthcoming wedding day. Like many young women around the world, Ms Ahmed went through several relationships before meeting her fiance.

Economic history ignored leads to the inevitable When the Queen asked economists why so few of them had foreseen the global financial crisis, our professor Geoff Harcourt and some other academics petitioned her to say, among other things, that one reason was their profession's loss of interest in economic history. That sad truth was demonstrated convincingly by two American professors, Carmen Reinhart and Kenneth Rogoff, in a book which has since become a modern classic, This Time Is Different: Eight Centuries of Financial Folly. It's just out in paperback, published by Princeton University Press. In their landmark study of hundreds of financial crises in 66 countries over 800 years, Reinhart and Rogoff find oft-repeated patterns that ought to alert economists when trouble is on the way. But, as we're witnessing at present, even when economists and financial market players have been hit over the head by reality, their ignorance of history stops them understanding what happens next. Advertisement refinanced.

Migrant workers flock to Qatar 8 December 2011Last updated at 00:30 By Stephanie Hancock BBC News, Doha, Qatar Qatar has been built by ever-rising numbers of foreign workers If any country encapsulates the life of the foreign worker, then Qatar is surely it. Just a few decades ago the tiny Gulf state was the region's most sleepy outpost, known for pearl trading, and not much else. Now it boasts a modern capital city, enormous industry thanks to its vast gas reserves, and is gearing up to host the World Cup in 2022. This phenomenal development has only been possible because of one key resource: migrant workers. Qatar is a country that has been built by foreigners - a veritable army of workers have been brought in to build its bridges, run its companies and clean its streets. In the past decade, Qatar's population has tripled. Watch: Italian recruitment consultant Elisa Grimaldi, Romanian valet parker Dan Pascut and Nepalese supervisor Dhan Baruwal share their work stories. Lure of money Continue reading the main story No bills

The Miracle of the Market With some help from the Student Entrepreneur Society at the University of Michigan-Flint (especially Jennifer Moore), and an old 1950 Sears catalog purchased from Ebay, we were able to compare the costs of 16 typical household items in 1950 to the costs of those same items today, measured in the cost of our time to purchase those household items. Using the average hourly manufacturing wage of $1.30 in 1950 and $18.01 today, the hours of work to purchase those 16 household items in both 1950 and 2009 are displayed above (click to enlarge). In all cases, we tried to match the size and quality of the items as closely as possible in both years. Bottom Line: In 1950, it would have taken almost 8 months of full-time work at the average manufacturing wage to earn the $1,650 needed to purchase the 16 items above at the retail prices in 1950 (or 31.7 weeks, 158.4 days, or 1,267 hours). To what do we owe this significant 80% reduction in the time cost of household goods over time?