Contemporary Issues in Economics ScribD

7/29/2019 Contemporary Issues in Economics ScribD

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Contemporary Issues in Economics

Final PortfolioDeadline: 13th December 2012

Word count limit: 1100 x 4 +/- 10% = 1210

1. Chinas Economy (1205)

2. Migration (1209)

3. Industrial Policy (1209)

4. Evidence-Based Policy (1202)


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ContentsTopic 2: Chinas Economy ....................................................................................................................... 3

Bibliography ............................................................................................................................................ 7

Appendix ................................................................................................................................................. 9

Figure 1 Soft-landing ........................................................................................................................ 9

Figure 2 World import/ export slows ............................................................................................... 9

Figure 3 China Exports ................................................................................................................... 10

Figure 4 US Debt clock ................................................................................................................... 10

Figure 5 Current Share of New Multinationals .............................................................................. 11

Figure 6 Sectorial Breakdown of New Chinese Multinationals ...................................................... 12

Topic 4: Migration ................................................................................................................................. 13

Bibliography .......................................................................................................................................... 17

Other Bibliography ................................................................................................................................ 19

Appendix ............................................................................................................................................... 20

Figure 1 Rise of Polish population in UK ........................................................................................ 20

Figure 2 Employment uncertainty ................................................................................................. 20

Figure 3 Unemployment claimant count, January 2008, January 2010, January 2012 ................. 21

Figure 4 Population age within UK ................................................................................................. 21

Figure 5 Net migration UK annual population change: 1991-2010 ............................................ 22

Figure 6 Returning Polish ............................................................................................................... 22

Figure 7 Inflow and Outflow of Indian and Polish immigrants in the UK ....................................... 23

Topic 5: Industrial Policy ....................................................................................................................... 24

Bibliography ...................................................................................................................................... 28

Topic 8: Evidence Based Policy ............................................................................................................. 30

Bibliography .......................................................................................................................................... 35

Appendix ............................................................................................................................................... 37

Figure 1 Qualitative and Quantitative Methodology ..................................................................... 37


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Topic 2: Chinas EconomyDiscuss the problems that China faces in rebalancing its economy in the

aftermath of the economic crisis? Assess the view that Chinas economy will

overtake that of the US?

The United States (US) has been the global super power since the end of World War II in

1945, thus the credibility of the recent forecast of Chinas apparent catalyst for a shift of this

centre of global capitalism is paramount to understanding the future of the world economy.

During the prospects of heightened international trade since 1950s, China experienced

annual Gross Domestic Product (GDP) growth averaging 10% for three decades, allowing

the country to become the worlds second largest economy (Riley, C. 2012). This prosperity

was fuelled by the economys role as a powerhouse exporterlargely due to its renowned

status as the sweatshop of the world(Zhang, L. 2012), leading the way for mass production.

Since the Global Financial Crisis of 2008, in Q3 2012, their annual GDP growth slowed to

7.4% (BBC News, 2012a). Despite, in comparison to the rest of the world, China

encountered a soft-landing (Lynch, R. 2012) (figure 1), brought about by a prior rise of

foreign direct investment (FDI), and continued export growth from the stagnating core

capitalist economies, experiencing the biggest recession since the 1930s.

Nevertheless, figure 2 illustrates how this crisis and other recent shocks including the

Eurozone crisis were detrimental to world trade, thus impacting Chinaas exports are their

major component supporting rapid growth. Chinas exports constitute 39.7% of its GDP, and

its largest markets are the European Union, the United States (US), Hong Kong, Japan and

South Korea (Trading Economics, 2012). Figure 3 demonstrates this impact, with rapid

growth prior to Q4 2008, leading to a sharp fall during the beginning of the economic crisis,

and then gaining slow but fluctuating growth thereafter.


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Chinas growth models over-dependency particularly on western exports, allowpolitical

economists including Ho-Fung (2009)to term the forecast highlighted in the introduction

myopic, questioning its sustainability. He highlights the dilemma of a reduction in export

demand leaving China, who owns US debt totalling 8% of US GDP (Knight, 2012), to decide

between ditching American assets triggering a dollar collapse, or buying more, preventing

an immediate crash but increasing their exposure to one in future. China remains the largest

creditor to the US due to their low-cost manufacturing, creating an existence of co-

dependency. This leverage is a sign of vulnerability, admitted by the US Republican party,

however as relieved by the Pentagon (2012), the effect of the threat is limited and identifies

the negative consequences to China as well as global trade (Capaccio, T. & Kruger, D.

2012a). Wilson, G (2012) acknowledges the US debt is largely shared amongst other

countries, defusing the security threat (figure 4).

The 8% debt ownership comparably amounts to 20% of the Chinese economy (Asia Society,

2012), and accounts to two-thirds of Chinas entire foreign exchange reserve, holding a

management risk for China in the event of any dollar depreciation (Casarini, N. 2012). In

recognition of this, seeking diversification, amid assisting the European crisis, China has

been strategising to reduce its US securities (Capaccio, T. & Kruger, D. 2012b), although

remains at $295bn compared to $83bn a decade ago (Business Today, 2012). This

approach is positive, tackling its peril tie with the debt-fuelled growth of the US, whose

Standard & Poors rating has recently been downgraded (Casarini, N. 2012).

To tackle this interdependency, China should ease availability of lending to SMEs,

encouraging private enterprises over state-owned enterprises, leading to personal wealth,

innovation, and boosted employment. In addition to the 2008 stimulus package estimating

$586bn from the Peoples Bank of China (PBOC), over the past two years Chinas minimum

wages have incrementally raised 22% nationwide, with Shenzhens hourly rate reduced from

twelve to four times less than in the US (Tsui, E. 2012). This is the government; keen to

boost domestic consumption and to narrow a widening poverty gap (Tsui, E. 2012), building


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on their comparably low gross domestic product (GDP) per capita, confronting increasing

political unrest, as expressed in the riots of Foxconns factory (Moore, 2012). However, only

20% of the stimulus was used in social spending, widening class polarisation, and the lack of

welfare maintains difficulty in translating high personal savings into consumption. Growth

has largely been due to the significantly higher investment to gross national product (GNP)

ratio, enabled by the savings of the low-paid workers, which are recycled by state-run banks

providing loans. In 2012, the PBOC launched a further $150bn infrastructure injection

(Evans-Pritchard, A. 2012), released by the newly liberalised bank loan policies. Yet, lagging

consumer spending and overzealous government investment may lead to serious

imbalances (Jacobs, A. 2012). In 2010, Chinas trade union complained that wages as a

proportion of national income has fallen for 22 years (Hardy & Budd, 2012).

The wage increase creates a hike in overall production costs, leaving the country to lose its

competitive edge and as the tempo of competitive accumulation worldwide increases, future

FDI is lead to its neighbouring countries including Vietnam, and Thailand. A BBC article

reports a 15% rise of FDI from China to Bangladesh, an attempt to keep low cost labour

supply (Anbarasan, E. 2012). Regardless, analysis (Accenture, 2012) suggeststhe wage

increase will have minimal impact on margins for export goods, as hourly wage rates remain

lower than in developed countries. China can offset this impact by improving their

productivity, efficiency and supply chain processes. China continues to hold a competitive

advantage over its neighbouring countries due to its political stability and developed

infrastructure. Multinational companies (MNC) may tend to locate more production facilities

in the interior and western regions where wages are lower; another positive for developing

Chinas uneven economy.

Contemporary economics see a trending rise of emerging multinational markets with a PcW

(2010) projection estimating China and India to account for 42% of the total over the next 15

years (figure 5) focusing operations in the business services and high value manufacturing


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sectors (figure 6). The analysis showed China produced the most new MNC between 2005

and 2009, due to trade openness and country size; signalling appreciation of the countrys

currency, and the trend is intensified by the competitive accumulation of the uncoordinated

nature of what Huang describes as one country, thirty two economies (Hardy & Budd,

2012). However, it isn't necessarily the largest economic power that always is going to be

the superpower (BBC, 2012b).

Importantly, CEO of leading automotive manufacturer Chang-An believes it is impossible for

wages to match their counterparts in Detroit, and as scrutinised by Anderson, Chinas growth

model is not a new one, as tremendous growth is coupled with tremendous imbalances; the

scale of which determines the difficulty of the adjustment period (Business Today, 2012). He

continues by investigating what he terms the new industrial revolution, where collabo rative

computer driven design, allied with 3D printing will revolutionise medium-scale

manufacturing, challenging companies such as Ikea.

To sustain its lead, China must develop its domestic strength through re-balancing

investment to consumption, transferring offshored R&D and design learning, to

accommodate and train its own people and further building on its citizens welfare and trade

relationships with neighbouring Asian economies. Externally, China is right to diversify its

treasury holdings, whilst moving away from the collapsing US-debt. Finally, industrial policy

could steer its manufacturing towards its demand for and comparative advantage of high-

value production particularly within IT and Communications.


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Bibliography

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01, December, 2012]

Business Today (2012) iPhone reflects Chinas relationship with US. BBC Radio 4. 10December, 2012. Available at:http://news.bbc.co.uk/today/hi/today/newsid_9776000/9776792.stm. [Accessed: 10December, 2012]

Anbarasan, E. (2012) Chinese factories turn to Bangladesh as labour costs rise. [Online]Available at:http://www.bbc.co.uk/news/business-19394405. [Accessed: 01 December,2012]

Asia Society (2012) Assessing the Impact of U.S. Debt to China. [Online] Available at:http://asiasociety.org/new-york/events/assessing-impact-us-debt-china-0. [Accessed: 01December, 2012]

BBC News (2012a) China's economy slows but data hints at rebound. Available at:http://www.bbc.co.uk/news/business-19975112. [Accessed 06 November, 2012].

BBC News (2012b) Asia 'to eclipse' US and Europe by 2030 - US report. 10 December.Available at:http://www.bbc.co.uk/news/world-us-canada-20671917. [Accessed: 11December, 2012]

Capaccio, T. & Kruger, D. (2012a) Chinas U.S. Debt Holdings Arent Threat, Pentagon

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[Accessed: 01 December, 2012]

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Wilson, G. (2012) US debt tops $16 trillion: So who do we owe most of that money to?Fox News. [Online] Available at:http://www.foxnews.com/politics/2012/09/04/who-do-owe-most-that-16-trillion-to-hint-it-isnt-china/. [Accessed: 01 December, 2012]

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Appendix

Figure 1 Soft-landing

Source: World Bank

World Bank (2012) GDP growth (annual %). [Online] Available at:

http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG/countries?display=graph.

[Accessed: 12 November, 2012]

Figure 2 World import/ export slows

Source: World Trade Organisation

WTO. (2012) Trade growth to slow in 2012 after strong deceleration in 2011. [Online]

Available at:http://www.wto.org/english/news_e/pres12_e/pr658_e.htm. [Accessed: 26

November, 2012]
http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG/countries?display=graphhttp://www.wto.org/english/news_e/pres12_e/pr658_e.htmhttp://www.wto.org/english/news_e/pres12_e/pr658_e.htmhttp://www.wto.org/english/news_e/pres12_e/pr658_e.htmhttp://www.wto.org/english/news_e/pres12_e/pr658_e.htmhttp://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG/countries?display=graph


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Figure 3 China Exports

Source: Trading Economics

Trading Economics (2012) China Exports. Available at:

http://www.tradingeconomics.com/china/exports. [Accessed: 26 November, 2012]

Figure 4 US Debt clock

Source: Dave Manual

Manual, D. (2012) U.S. National Debt Clock December 2012. [Online] Available at:

http://www.davemanuel.com/us-national-debt-clock.php. [Accessed: 01 December, 2012]
http://www.tradingeconomics.com/china/exportshttp://www.tradingeconomics.com/china/exportshttp://www.davemanuel.com/us-national-debt-clock.phphttp://www.davemanuel.com/us-national-debt-clock.phphttp://www.davemanuel.com/us-national-debt-clock.phphttp://www.tradingeconomics.com/china/exports


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Figure 5 Current Share of New Multinationals

Source: PwC (2010) Emerging Multinationals, The rise of new multinational companies

from emerging economies. [Online] Available at:

http://www.pwc.co.uk/en_UK/uk/assets/pdf/emerging-multinationals-27-april-10.pdf.

http://www.pwc.co.uk/en_UK/uk/assets/pdf/emerging-multinationals-27-april-10.pdfhttp://www.pwc.co.uk/en_UK/uk/assets/pdf/emerging-multinationals-27-april-10.pdfhttp://www.pwc.co.uk/en_UK/uk/assets/pdf/emerging-multinationals-27-april-10.pdf


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Figure 6 Sectorial Breakdown of New Chinese Multinationals

Source: PwC (2010) Emerging Multinationals, The rise of new multinational companies

from emerging economies. [Online] Available at:

http://www.pwc.co.uk/en_UK/uk/assets/pdf/emerging-multinationals-27-april-10.pdf.

http://www.pwc.co.uk/en_UK/uk/assets/pdf/emerging-multinationals-27-april-10.pdfhttp://www.pwc.co.uk/en_UK/uk/assets/pdf/emerging-multinationals-27-april-10.pdfhttp://www.pwc.co.uk/en_UK/uk/assets/pdf/emerging-multinationals-27-april-10.pdf


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Topic 4: MigrationTo what extent would you agree that the problems caused by migration to the

UK from the New Member States of Europe after 2004 outweigh the benefits?

How far can the cross border mobility of health workers be understood as a

movement from low to high wage economies? What are the main barriers to

mobility?

The accessions enlarging the European Union (EU) to include the former communist

countries of Central and Eastern Europe (CEE) has sparked polarised debate regarding its

widespread impacts and benefits, across multiple channels, between both sender and

receiver countries.

The transition took place over two intervals; in May 2004 the A8 entered; and in January

2007 the remaining A2 entered; resulting with 10 countries gaining entry, known as the New

Member States (NMS), to the now EU27. The scale of migration was much higher than

expected, as some analysis suggests flows were going to be much smaller (Dustmann et al.

2003a, Zaiceva, A. 2004). Projections lacked historical data, resulting with the analysis from

emigration data of other countries, and associating it with the Southern enlargement in early

1990s which had no significant migration movements. The average annual Long-Term

International Migration inflow of EU citizens to the UK for 2004-2010 was 170,000, compared

to 67,000 during 1997-2003 (Dr Vargas-Silva, C. 2012). From the A8s, the largest group

were from Poland representing 66% of total migration (ONS, 2011); with over half a million in

the United Kingdom (UK) (figure 1).

The UK, Ireland, and Sweden immediately fully opened their labour markets to the NMS.

Fearing large migration flows, the majority of old member states imposed transitional rules;

largely regarding their access to employment and welfare. However, by 2006 Finland and

Iceland opened their labour markets (Perdersen, P, J. et al. 2008) and by 2008 other


14/37

countries ended their restrictions to varying degrees (Hardy, J. 2012). Thus the introduction

of such transition periods represent coordination failure as those countries which planned to

immediately open their labour markets absorbed migration flows (Boeri, T. & Brcker, H.

2005).

Latest UK data (ONS, 2012) show a decreased migrant population, reaching its lowest inflow

since 2004, coupled with an increase in outflow, due to definite jobs abroad. This could be

observed as a response to the uncertainty of employment, due to the lagging indicator of

mass lay-offs, as firms try to cut back costs over the recession (figure 2). This also, to an

extent, deterred new entrants; as 2011 experienced 22% less emigrants for work-related

reasons (Rogers, S. 2012). Despite the depressed labour market, migration was still high;

the report stated a slightly lowered annual net migration at 215,000 compared to 252,000 in

2010. This was partially due to a 26% drop of migration for the purpose of studying in the

year up to September 2012, perhaps owing to the increase in tuition fees.

Despite this fall, figure 3 shows a claimant count increase focusing on the highly migrant

concentrated area of London. As admitted by the Daily Mail (2012), proportionately,

migrants are less likely to be claiming out-of-work benefits than people born in Britain.

Foreigners coming into the UK tend to be young and healthy (figure 4); the non-nationals

within the EU27 are a greater representation of adults aged between 20 and 47. In respect

of this, immigrants are less likely to make health claims. Overall, Britons are refusing to

agree for immigrants to receive taxpayer-funded support (Daily Mail, 2012). As reported in

the Independent (2009), most illegal immigrants work within the informal sectors of

construction, cleaning, catering, and hospitality services. They are also seen selling non-

taxable gifts such as flowers, and fruits, whilst still claiming benefits. The public appear to

generalise this activity upon the legal migrants, creating social conflicts.


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Lucchino, P. et al. (2012) highlights the link stressed by Ministers between immigration and

negative labour market impacts; Controlling immigration is critical or we will risk losing

another generation to dependency and hopelessness. This boldness supports restrictions

on immigration, and exacerbates the inaccurate interpretation of immigrants by the public; as

tabloid newspapers, such as The Suns (Schofield, K. 2012) Migrant a minute article,

repeatedly and indirectly emphasising the blame. The Guardian newspaper (Lowles, N.

2011) takes up an objective role; concluding a middle ground; occupying cultural

integrationists; and identity ambivalents; totalling 52% of the population. Recently,

demonstrations held banners saying No to being European slaves, yes to being British ,

representative of the preference for well qualified and educated immigrant workers or

students (BBC, 2012). In response to public demand, David Cameron blamed language

barriers causing disjointed integration (Guardian, 2011), and the Telegraph (Beckford, M.

2012) reported the Governments plan to cut net migration to the tens of thousands by

2015 (figure 5). This is known as social exclusion (Eurostat 2011) and it has led to a multi-

culturally diverse UK, creating social divisions and conflict due to religious, ethnic or cultural

otherness (GSDRC 2012). Policy whether direct or indirect against migrant and immigrant

populations becomes cyclical, with structural exclusion driving low educational attainment,

low employment, and vulnerability to crime and consequent community tensions, posing a

threat to stability (Kothari, U. 2012).

In defence, migrant workers voice that English people are not prepared to take hard work in

local factories (BBC, 2012). Furthermore, a study (LSC, 2006) found employers had

positively balanced views towards migrant workers, perceiving them to have a stronger and

more positive work attitude and ethic than UK-born workers. Also, the Polish are mobile and

active agents for utility of social and economic determinants (figure 6). Research (Anacka,

M. et al. 2012) show Poland experiencing cyclical flows of returning migrants (figure 7),

constituting an inflow of economically active people possessing Western-influenced, high-

quality human capital; important for a country undergoing post-communist transition.


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The concern of the reserve labour force is coherent; 55% of the record population rise of is

due to high immigration, placing England as the most crowded country in Europe (Doughty,

S. 2012). This has placed spatial pressure upon schools and housing, including social

housing. As health in the country improves, 33 times more people are reaching 90 years of

age than a century ago. The statistics suggest an ageing population, placing pressure upon

health workers, and a rising demand for them, particularly in coastal regions where people

aged over 65 are highly concentrated.

Due to austerity measures across the EU chiefly impacting the public sector, Packer, C. et

al. highlights the trend of health workers to emigrate from poorer countries with severe

shortages of health human resources (HHR) and higher burdens of disease, to richer

countries in search of a better life for their families. Their countries of origin tend to have

increasingly deteriorating economic, social and environmental conditions attributable to

liberalisation . Differential working conditions has led to an increase in the sectors mobility,

partially due to privatisation. Such factors serve as human capital flight, particularly in the

health sector. This is a problem for sender countries as they are unable to replace or attract

new workers. The UK and Germany are the most cited destinations, and there has been a

marked switch from non-EU to EU entrants. Evidence shows they move between countries

to take advantage of better conditions (Hardy, J. et al. 2012). As there is no uniform

acceptance of professional qualifications across the EU states, a common barrier is the lack

of recognition of their qualifications.

This essay concludes a positive outlook upon the EU Enlargement, as managed net

migration, and supervised productivity can lead to better distributed economic welfare,

featuring health workers jumping between countries taking advantage of better conditions,

provided the impact upon sender countries are monitored.


17/37

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http://www.globalhealthequity.ca/electronic%20library/Globalization%20and%20the%20Cross-Border%20Flow%20of%20Health%20Workers.pdfhttp://www.globalhealthequity.ca/electronic%20library/Globalization%20and%20the%20Cross-Border%20Flow%20of%20Health%20Workers.pdfhttp://www.globalhealthequity.ca/electronic%20library/Globalization%20and%20the%20Cross-Border%20Flow%20of%20Health%20Workers.pdfhttps://pure.au.dk/portal/files/3859/wp_08-29https://pure.au.dk/portal/files/3859/wp_08-29http://www.thesun.co.uk/sol/homepage/news/3425461/Four-million-migrants-allowed-to-settle-in-Britain-under-Labour.htmlhttp://www.thesun.co.uk/sol/homepage/news/3425461/Four-million-migrants-allowed-to-settle-in-Britain-under-Labour.htmlhttp://www.thesun.co.uk/sol/homepage/news/3425461/Four-million-migrants-allowed-to-settle-in-Britain-under-Labour.htmlhttp://www.guardian.co.uk/politics/2011/apr/14/david-cameron-immigrants-learn-englishhttp://www.guardian.co.uk/politics/2011/apr/14/david-cameron-immigrants-learn-englishhttp://www.guardian.co.uk/politics/2011/apr/14/david-cameron-immigrants-learn-englishhttp://www.guardian.co.uk/politics/2011/apr/14/david-cameron-immigrants-learn-englishhttp://ssrn.com/abstract=546044http://ssrn.com/abstract=546044http://ssrn.com/abstract=546044http://legacy.london.gov.uk/mayor/economic_unit/docs/irregular-migrants-report.pdfhttp://legacy.london.gov.uk/mayor/economic_unit/docs/irregular-migrants-report.pdfhttp://www.aeaweb.org/aer/top20/60.1.126-142.pdfhttp://www.aeaweb.org/aer/top20/60.1.126-142.pdfhttp://www.guardian.co.uk/news/datablog/2010/jun/26/non-eu-immigration-uk-statisticshttp://www.guardian.co.uk/news/datablog/2010/jun/26/non-eu-immigration-uk-statisticshttp://www.guardian.co.uk/news/datablog/2010/jun/26/non-eu-immigration-uk-statisticshttp://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-SF-12-040/EN/KS-SF-12-040-EN.PDFhttp://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-SF-12-040/EN/KS-SF-12-040-EN.PDFhttp://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-SF-12-040/EN/KS-SF-12-040-EN.PDFhttp://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-SF-12-040/EN/KS-SF-12-040-EN.PDFhttp://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-SF-12-040/EN/KS-SF-12-040-EN.PDFhttp://www.guardian.co.uk/news/datablog/2010/jun/26/non-eu-immigration-uk-statisticshttp://www.guardian.co.uk/news/datablog/2010/jun/26/non-eu-immigration-uk-statisticshttp://www.aeaweb.org/aer/top20/60.1.126-142.pdfhttp://legacy.london.gov.uk/mayor/economic_unit/docs/irregular-migrants-report.pdfhttp://ssrn.com/abstract=546044http://www.guardian.co.uk/politics/2011/apr/14/david-cameron-immigrants-learn-englishhttp://www.guardian.co.uk/politics/2011/apr/14/david-cameron-immigrants-learn-englishhttp://www.thesun.co.uk/sol/homepage/news/3425461/Four-million-migrants-allowed-to-settle-in-Britain-under-Labour.htmlhttp://www.thesun.co.uk/sol/homepage/news/3425461/Four-million-migrants-allowed-to-settle-in-Britain-under-Labour.htmlhttps://pure.au.dk/portal/files/3859/wp_08-29http://www.globalhealthequity.ca/electronic%20library/Globalization%20and%20the%20Cross-Border%20Flow%20of%20Health%20Workers.pdfhttp://www.globalhealthequity.ca/electronic%20library/Globalization%20and%20the%20Cross-Border%20Flow%20of%20Health%20Workers.pdf


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Appendix

Figure 1 Rise of Polish population in UK

Source: ONS

ONS (2011) Polish People in the UK Half a million Polish Residents. 25 August. [Online]

Available at:http://www.ons.gov.uk/ons/rel/migration1/migration-statistics-quarterly-

report/august-2011/polish-people-in-the-uk.html. [Accessed: 07 December, 2012]

Figure 2 Employment uncertainty

Unemployment figures are based on a survey carried out by the Office for National Statistics.

They show the average number of people unemployed over a three-month period

Source: BBC News.

BBC News.(2012) Economy tracker: Unemployment. 14 November. [Online] Available at:

http://www.bbc.co.uk/news/10604117. [Accessed: 07 December, 2012]
http://www.ons.gov.uk/ons/rel/migration1/migration-statistics-quarterly-report/august-2011/polish-people-in-the-uk.htmlhttp://www.ons.gov.uk/ons/rel/migration1/migration-statistics-quarterly-report/august-2011/polish-people-in-the-uk.htmlhttp://www.ons.gov.uk/ons/rel/migration1/migration-statistics-quarterly-report/august-2011/polish-people-in-the-uk.htmlhttp://www.ons.gov.uk/ons/rel/migration1/migration-statistics-quarterly-report/august-2011/polish-people-in-the-uk.htmlhttp://www.bbc.co.uk/news/10604117http://www.bbc.co.uk/news/10604117http://www.bbc.co.uk/news/10604117http://www.ons.gov.uk/ons/rel/migration1/migration-statistics-quarterly-report/august-2011/polish-people-in-the-uk.htmlhttp://www.ons.gov.uk/ons/rel/migration1/migration-statistics-quarterly-report/august-2011/polish-people-in-the-uk.html


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Figure 3 Unemployment claimant count, January 2008, January 2010, January

2012

The ONS also publishes the claimant count whichshows the number of people receiving Jobseeker'sAllowance (JSA) in a particular month. That figure

comes from information supplied by the Departmentfor Work and Pensions

Source: BBC News.

BB News. (2012) Economy tracker: Unemployment.

14 November. [Online] Available at:

http://www.bbc.co.uk/news/10604117. [Accessed: 07December, 2012]

Figure 4 Population age within UK

Source: Eurostat

Eurostat (2011). Migration and migrant population statistics. European Commission. [Online]

Available at:http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Migration_and_migrant_pop

ulation_statistics. [Accessed: 07 December, 2012]
http://www.bbc.co.uk/news/10604117http://www.bbc.co.uk/news/10604117http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Migration_and_migrant_population_statisticshttp://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Migration_and_migrant_population_statisticshttp://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Migration_and_migrant_population_statisticshttp://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Migration_and_migrant_population_statisticshttp://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Migration_and_migrant_population_statisticshttp://www.bbc.co.uk/news/10604117


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Figure 5 Net migration UK annual population change: 1991-2010

Figure 6 Returning Polish

Source: Authors elaboration based on the LFS.

Anacka, M. and Fihel, A., (2012) Selectivity of the recent return migration to Poland. Centre

of Migration Research. University of Warsaw. [Online] Available at:http://epc2012.princeton.edu/papers/120722. [Accessed: 08 December, 2012]
http://epc2012.princeton.edu/papers/120722http://epc2012.princeton.edu/papers/120722http://epc2012.princeton.edu/papers/120722


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Figure 7 Inflow and Outflow of Indian and Polish immigrants in the UK

Source: International Passenger Survey.

Rogers, S. (2012) Immigration to the UK: the key facts Migration is at record levels - and

new asylum figures show a rise in applications from Libya and Syria. So, what are the facts?

The Guardian. [Online] Available at:

http://www.guardian.co.uk/news/datablog/2010/jun/26/non-eu-immigration-uk-statistics.

http://www.guardian.co.uk/news/datablog/2010/jun/26/non-eu-immigration-uk-statisticshttp://www.guardian.co.uk/news/datablog/2010/jun/26/non-eu-immigration-uk-statisticshttp://www.guardian.co.uk/news/datablog/2010/jun/26/non-eu-immigration-uk-statistics


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Topic 5: Industrial PolicyEvaluate the arguments for and against a national industrial policy. Does the

potential for supporting new industries and new employment outweigh the risk

of deadweight or the displacement of private investment?

Due to the economic turmoil, the economic structure of the United Kingdom (UK) has been

scrutinised, calling for a review for the return of industrial policy. However, British attitudes

may hinder the process commonly advantageously encompassed within other leading

countries tactic.

Industrial policy is described as a governments strategic process to enhance selected

industries and firms, by intervening in resource allocation (Ito. et al. 1991) such as subsidies,

to either grow winners or save losers (Economist, 2010). The European Commission

(EUC) has adopted industrial policy as a flagship initiative to be integrated into the Europe

2020 strategy (EUC, 2012).

However, the British policy establishment has rejected industrial policy for the last three

decades on three grounds; Britain has entered the era of post-industrial knowledge economy

where industry is not important anymore; secondly, if required, industry should only be

promoted through the efficient mechanism of the market to decide what should succeed and

fail; and finally, it goes against the countrys cultural grain (Chang, H. 2012). In contrast,

there are three main arguments for industrial policy, the presence of; knowledge spill overs

and dynamic economies; coordination failures; and informational externalities (Pack, H. &

Saggi, K. 2001). Each argument will be discussed in chronological order.

Firstly, as the government expands a selected industry, knowledge spill overs and dynamic

economies are achieved from for example the effect of improved manufacturing processes


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of lateral products, as research and development (R&D) progresses. Another perspective of

this argument is the infant industry theory, whereby young industries require nurturing, and

will eventually grow to be strong and independent (Mercatus, 2012). This combined

approach was successfully adopted by Japan during their devastating post-war period;

ordering resources to its critical industries and restricted international trade (Okuno-Fujiwara,

M. 1991). Industries eventually revived and their continued varying level of protectionism

formed the foundation of Japans renowned nexus of private corporations. It is suggested

that this strategy is particularly strong for latecomers (Ohno, K. 2001), as can be portrayed

upon the UK.

The UK economy is dominated by the tertiary sector, leading in financial and technological

services and scientific research. However, its lack of domestic industrial diversity and over-

dependence upon the capitalist credit system and tourist demand is evident in the crisis of

2008. This is exacerbated by the uneven distribution of; economic wealth towards Southern

UK; the labour force where 80.4% is within services constituting 77.1% of the nations Gross

Domestic Product (GDP); and thus a general lack of interest among the younger generation

aspiring towards primary and secondary sectors (Economy Watch, 2010). However, the

production of automotive and aerospace equipment successfully contributes to UK

industries, by worldwide leading firms such as BAE Systems and Rolls-Royce. As its

comparative advantage, the UK could enhance its agricultural sector by knowledge spill

overs of its engineering competencies by supporting relevant innovative infancies, and the

engineering students which are in stark anticipated growing demand (Gibney, E. 2012).

Secondly, advocates of industrial policy argue that it corrects coordination failure, evident in

economic downturns. Howitt, P (2005), writes that depression is a state of coordination

failure; in which market forces have failed to coordinate the millions of transactors that

interact. This link undermines Smiths invisible hand (Smith, A. 1982), rejecting the second

argument against industrial policy. A statement from the Adam Smith Institutes blog (2012)

subjects his theory to genuinely open competition and no coercion, however for example,


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Reuters (Miles, T. 2012) reports a rise of stealth protectionism since the 2008 crisis, where

discriminative policies favoured domestic firms. This is an example of monopoly privileges

that stealth around even those with authority, and as cited by Schlefer (2012), even Smith

identifies these situations as where natural liberty does not work.

Smiths theory assumes everyone will make rational acts for self-interest, balanced with

universal sympathetic ethics, within a market with perfect conditions; a view today

considered rare. Supported by Schlefer (2012), his blog reiterates; they aggregate corn,

iPods, and haircuts into one uniform quantity of stuff that they call commodities and label

Y. And they lump all diverse individuals into one representative agent. Howitt, P. (2005)

raises concern for the focus of price-adjusting which is eventually destabilising, and calls for

an understanding of non-price variables such as rationale-expectations, self-fulfilling

prophecies, asymmetric-information, conflicting-agencies, as the economy steers towards a

decentralised free-market structure. He cites J. B. Say, who identifies the visible agents of

coordination as shops who by seeking profit they serve their individual markets and

combined guide the whole system to a coordinated state. Therefore, it appears due to what

some interpret as animal spirits, the market requires actual coordination in the actual

economy to account for these diversities.

Thirdly, informational externalities is defined as the process of individuals such as producers

or entrepreneurs, who wait for other individuals to take the first attempt at a new industry or

entrepreneurial idea, as they will bear the largest risk of potential failure. Those free-riders

waiting for the risk-taker, are advantaged by information discovered. Therefore, industrial

policy or other incentives such as subsidies can encourage and award risk-takers which

benefit the economy. However, this could create deadweight loss or displacement of

investment, as the finance could have been spent on something risk-free. Although

Singapore is a clear example of successful investment benefits outweighing risky-investment

losses; as they subsidise failed entrepreneurs since they speculate them to occur.


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Historically, countries including Singapore, who have a nexus between politics and business,

have the most effective industrial policies. The family chaebol in South Korea (Dong-A

University, 2010), and the keiretsu in Japan, are formed intricate structures of companies,

dominating their markets. This, combined with their common use of own subsidiaries, allows

better coordination of investment and thus market forces. However, as some accuse

industrial policy for rent-seeking, it appears proudly present with the structural vehicles of

chaebols and keiretsu (Cutts, R. 1992, Yoon, S. 2012). However, Britain does not hold a like

structure; the government, banks and firms work relatively independently of each other, and

firms tend to subcontract, thus conflicts may arise.

Adaptive industrial policy has proven successful for the Four Asian Tigers (Hill, J. 2012); the

approach of the East aims to absorb domestic consumption with domestic production, and

simultaneously seeking Western knowledge. Chang-Un, leading automotive manufacturer in

China, exhibits this view with its joint venture with Americas Ford Motor Company. Design is

made in Detroit, R&D of engines in Birmingham, the style of design in Italy, and the

manufacturing in China; pulling the best from around the world and then putting them all

together (Business Today, 2012). Chang-Un recognises this as a process of learning

benefited from gaining insights to advanced management, technology and design from the

worlds best.

As highlighted above in Chinas case, it would be inaccurate to underpin the success of Asia

to model industrial policy for differing countries like Britain, as the nature of both retailing and

production networks has changed (Pack, H. & Saggi, K. 2006). Hence industrial policy

should be thought of as a discovery processone where firms and the government learn

about underlying costs and opportunities and engage in strategic coordination (Rodrik, D.

2004). Overall, there is a clear need for industrial policy with regards to recessions, and also

as a learning process to adapt Britain to the changing economic climate.


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http://www.reuters.com/article/2012/10/22/us-trade-protectionism-idUSBRE89L1JQ20121022http://www.reuters.com/article/2012/10/22/us-trade-protectionism-idUSBRE89L1JQ20121022http://www.reuters.com/article/2012/10/22/us-trade-protectionism-idUSBRE89L1JQ20121022http://www.reuters.com/article/2012/10/22/us-trade-protectionism-idUSBRE89L1JQ20121022http://www.grips.ac.jp/vietnam/KOarchives/doc/EP03_VNinfant.pdfhttp://www.grips.ac.jp/vietnam/KOarchives/doc/EP03_VNinfant.pdfhttp://www.nber.org/chapters/c8667http://www.nber.org/chapters/c8667http://www.ycsg.yale.edu/focus/gta/case_for_industrial.pdfhttp://www.ycsg.yale.edu/focus/gta/case_for_industrial.pdfhttp://blogs.hbr.org/cs/2012/04/there_is_no_invisible_hand.htmlhttp://blogs.hbr.org/cs/2012/04/there_is_no_invisible_hand.htmlhttp://www.amazon.co.uk/The-Wealth-Nations-Books-I-III/dp/0140432086/ref=sr_1_1?ie=UTF8&qid=1355093086&sr=8-1http://www.amazon.co.uk/The-Wealth-Nations-Books-I-III/dp/0140432086/ref=sr_1_1?ie=UTF8&qid=1355093086&sr=8-1http://www.amazon.co.uk/The-Wealth-Nations-Books-I-III/dp/0140432086/ref=sr_1_1?ie=UTF8&qid=1355093086&sr=8-1http://www.amazon.co.uk/The-Wealth-Nations-Books-I-III/dp/0140432086/ref=sr_1_1?ie=UTF8&qid=1355093086&sr=8-1http://www.amazon.co.uk/Inquiry-Nature-Causes-Nations-ebook/dp/B00847CE6O/ref=sr_1_4?ie=UTF8&qid=1355093048&sr=8-4http://www.amazon.co.uk/Inquiry-Nature-Causes-Nations-ebook/dp/B00847CE6O/ref=sr_1_4?ie=UTF8&qid=1355093048&sr=8-4http://www.amazon.co.uk/Inquiry-Nature-Causes-Nations-ebook/dp/B00847CE6O/ref=sr_1_4?ie=UTF8&qid=1355093048&sr=8-4http://www.hks.harvard.edu/fs/drodrik/Research%20papers/UNIDOSep.pdfhttp://www.hks.harvard.edu/fs/drodrik/Research%20papers/UNIDOSep.pdfhttp://www.hks.harvard.edu/fs/drodrik/Research%20papers/UNIDOSep.pdfhttp://www.amazon.co.uk/Inquiry-Nature-Causes-Nations-ebook/dp/B00847CE6O/ref=sr_1_4?ie=UTF8&qid=1355093048&sr=8-4http://www.amazon.co.uk/Inquiry-Nature-Causes-Nations-ebook/dp/B00847CE6O/ref=sr_1_4?ie=UTF8&qid=1355093048&sr=8-4http://www.amazon.co.uk/The-Wealth-Nations-Books-I-III/dp/0140432086/ref=sr_1_1?ie=UTF8&qid=1355093086&sr=8-1http://www.amazon.co.uk/The-Wealth-Nations-Books-I-III/dp/0140432086/ref=sr_1_1?ie=UTF8&qid=1355093086&sr=8-1http://blogs.hbr.org/cs/2012/04/there_is_no_invisible_hand.htmlhttp://www.ycsg.yale.edu/focus/gta/case_for_industrial.pdfhttp://www.nber.org/chapters/c8667http://www.grips.ac.jp/vietnam/KOarchives/doc/EP03_VNinfant.pdfhttp://www.reuters.com/article/2012/10/22/us-trade-protectionism-idUSBRE89L1JQ20121022http://www.reuters.com/article/2012/10/22/us-trade-protectionism-idUSBRE89L1JQ20121022


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Topic 8: Evidence Based Policy

Evaluate the role of evidence-based research in formulating good public

policy.

Evidence-based policy (EBP), piloted since the turn of the 20th century, steered by Welfare

policy in Britain. Research evidence has continued to shape policy ever since although it

has seldom been the dominant influence, outweighed by ideology, political ambition and

expediency (Bulmer, 1987, cited in Walker, R. 2009). A striking change government in the

last decade was the significant number of organisations seeking explicitly to advise or

influence government actions (Davies, H, et al. 2009), by use of EBP from a range of policy

communities, whether government departments, research organisations or think-tanks

(Sutcliffe, S. et al. 2005); raising a need for credibility and standards.

Economics was first termed the dismal science in 1888 (Harcourt, T. 2012), and as

described by Hill, J. (2012) have long envied the scientific rigour of the natural sciences.

Alfred Marshall (1890) defines it a study of mankind in the ordinary business of life; hence

its centrality of the relationship between humans and materials represents this difficulty.

Sutcliffe, S. et al. (2005) promotes EBP as a discourse or set of methods which informs the

policy process advocating a more rational, rigorous and systematic approach, and

therefore assists precision. This conscious retreat from political ideology began in 1997

when Labour government was elected with what matters is what works (Davies, H, et al.

2009), or as David Blunkett boldly linked Social science research evidence is central to

development and evaluation of policy (Young et al. 2002).

Walker, R. (2009) tells the landmarks of social policy research; the influential study by

Rowntree investigating the poverty of the people of York in 1899. Analysis provided stimuli to

the introduction of 1908 retirement pensions and 1911 unemployment benefits (Bruce, M.


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1968, cited in Walker, R. 2009). This represents societal benefits of emerged evidence-

based research forming policy; however, Rowntrees (1941) subsequent study determining a

measure of National Assistance benefit levels was disregarded by political imperatives,

questioning the influence of EBP despite sound empirical data.

Davies, H. et al. (2009) identifies that at the start of the 20th century, the public held a

general assumption that doctors, police officers, teachers and other professionals were

experts, whose judgement was trusted and unchallenged, though by the end of the century

this culture had been severely diluted as an increasingly educated, informed and questioning

public sought reassurance that its taxes were being well spent.

A key cause of this change is the realisation of the evermore apparent trend of selective

reporting influencing public opinion; exemplifying government power; as policy-makers are

influenced by research contesting against politically driven questions. Studies are

commissioned by government departments to support government positions, and often the

same researchers and research organisations appear in different guises, such as think-tanks

who are becoming increasingly influential (Walker, R. 2009), causing publication biases.

Oakley, A. (1999) notes the tendency within Cochrane reviews to prioritise the views of

professionals such as doctors, rather than patients, like mothers.

Fitz-Gibbon, C. (2009) looks at international comparisons for education policies, and finds

references to these results are often along the lines of we are falling behind our international

competitors, contesting whether negative comments are chosen by politicians with an eye

on voter approval ratings.

In the 1980s recession, authorities commonly used Invalidity Benefits as a repository for the

unemployed to stop growing headline figures. The UK relied on disability benefits, where


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from 1979-1997 people on sickness and disability benefits grew from 700,000 to 2.5million

(Meager, N. 2011).

Positively, in 2011 David Cameron confirmed acceptance to advisors from the Committee on

Climate Change (CCC), perhaps as arguments his principle economic departments offered

against the CCC was risible (Spencer, M. 2011). Although politicians review policy

outcomes, they do not tend to gather feedback from the public regarding policies. Friends of

the Earth examined 77 green policies and found little or no progress in more than three-

quarters of them rising public alarm. This exhibits how evidence can enforce and enlighten

public pressure for the right policies.

EBP, formed by past data, thus based on a static view, means on-going evaluations of

effectiveness of each EBP are required, particularly throughout research technique

advancements. This flaw in the EBP model was apparent when Townsend shattered

Rowntrees apparent eradication of poverty as his study of pensioners in 1957 found

incomes below the minimum, and others not receiving their entitlement. This stimulated an

official enquiry revealing it was because they viewed the entitlement as a charity (MoP,

1966, cited in Walker, R. 2009), and in 1966 Supplementary Benefits replaced the policy.

This consequential impact hints at the influence of qualitative research. As shown in figure 1,

research commissioned in the 1990s was eclectic in terms of methodology (Walker, R.

2009), signifying growing confidence in qualitative research for what lie beyond the scope of

survey-based methodology (Walker, 1985, Lessof and Squires, 1997, cited in Walker, R.

2009).

There are practical limitations to qualitative research, such as the Hawthorne effect; which

show how variables can be unwittingly confounded in an experiment because of some

aspect of the experiment itself (Parsons, M. 1974); proven in a companys internal


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experiment to improve worker efficiency. Also, the Ashenfelters Dip, is the empirical

regularity that the mean earnings of participants in employment and training programs

generally decline during the period just prior to participation (Smith, J. 1996); found in the

US Job Training Partnership Act. Thus people adjust their behaviour or circumstances to

facilitate performance or eligibility, therefore the research essentially fabricated, questioning

plausibility of the value infused EBP.

There are limitations of the practicality of EBP research for economics other sciences do not

appear to bestow. Young, K. et al (2002) identifies publishing is considerably more

fragmented; besides peer reviewed journals it also includes practitioner journal literature,

books, grey literature from a range of public, private and voluntary sector bodies and official

publications, continuing with the spectre that developing new media and the rapid growth of

internet-based sources blur the distinction between credible researches. He points out

access to social science literature is traditionally given low priority, and the proliferation of

databases, including small-scale specialist services and expensive commercial services

mean their quality is highly variable. A technical limitation is how fluid the terminology is,

causing a potential for merging concepts. Economics is still in the process of establishing

standards other scientific disciplines ensure.

David Gough et al. (2012) identify how people rely on researchers to keep abreast and

review growing literature, and making it available in a digestible form. As information is

gathered from multiple channels, and then synthesized it differs between individuals. Such

heterogeneous variables need to be applied to policy decision making as if overlooked can

over-generalise, or even become ecology fallacy.

Therefore, there requires a standardised systematic review of credible evidence; however

within the social sciences, theoretical controversy is generally welcomed as an indication of


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intellectual health. Gough, D. et al (2012) highlights; systematic reviewing is still a young and

rapidly developing field of study.

There is clear need for transparent EBP to accommodate the evidence-informed society

developing. Research as a

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