The Drayton Tribune The official student magazine for the UCL Economist’s society I Issue 4 - 14/15
The Drayton Tribune
Dear Reader,It is my pleasure to welcome you to the final and fourth published
issue of The Drayton Tribune.
As always, this issue contains a wide variety of articles. In
particular, if you would like to find out more about economic
consulting, I would urge you to have a look at the Academic
Careers section. We have interviewed Helen Ralston, a senior
consultant at Oxera, covering topics such as what made her go into
economic consulting as well as her current day-to-day
responsibilities. Oxera offers internship opportunities to economics
undergraduate students in their second year. The deadline for
applications is this Saturday 28th February.
The other sections cover a range of current issues, including the rise
of the Islamic State (IS) in certain parts of the world and the
potential political consequences of the death of King Abdullah of
Saudi Arabia. We have also included an article analysing whether
the massive amounts of money spent on Oscar campaigns really is
an efficient allocation of resources. I hope that you will find
something of specific interest to you.
It has been a pleasure to serve as the Editor-in-Chief of The
Drayton Tribune over the past months, and I would like to take this
opportunity to thank everyone in the Editorial Team for their
contributions. This magazine would have been nothing without
your significant efforts. I would also like to thank The Economist’s
Society for taking the project onboard in May last year, and for
continuously providing the funds necessary for publishing the
magazines. Last, but not least, I would like to express my gratitude
to the Economics Department, who has been a persistent supporter
of this project over the past year.
The new Editor will be announced once The Economist’s Society’s
AGM on Tuesday 24th February has finished. Shortly after that, the
recruitment process for the Senior Editorial Team that will run the
paper next year will begin. This will be an excellent opportunity for
anyone that would like to become more involved within both The
Drayton Tribune and The Economist’s Society. More information
about this will be released shortly.
In the meantime, I would like to take this opportunity to wish you
the best of luck and with your exams in May.
All the best,
Nils LarssonEditor-in-Chief 14/15
Cover Page Image Source: http://www.icgmagazine.com/wordpress/wp-content/images/2013/03/Web-Exclusive_1.jpg
Across UK government buildings, the
union jack has flown at half-mast to mark
the death of King Abdullah of Saudi
Arabia. A respectful gesture was made to
the leader, who brutally sentenced a Saudi
blogger, merely attempting to exercise the
right to freedom of expression, to one
thousand lashes and ten years’
imprisonment. Was the UK parliament
delusional?
Westminster Abbey defended its case by
arguing that the two countries are allies in
fighting against Islamic terrorism and by
not flying the flag, it would have done
nothing to support the oppressed Christian
communities in the Middle East. Yet,
backlash prevails with explicit evidence,
illustrating King Abdullah’s complacency
to act upon the severe lack of human rights
in Saudi Arabia. Such policies include:
capital punishment, including public
executions by beheading, press censorship,
restricting religious freedom and
discrimination against women, most
predominantly known to the media. Saudi
Arabia received the lowest possible score
for civil and political freedoms in the 2014
Freedom House rankings. Although human
rights organisations have persistently
condemned Saudi’s policies, the US does
not publicly do so and criticise only
through annual reports.
Perhaps this is the case as King Abdullah
was actually a reformist. There are indeed,
massive improvements to be made but
Abdullah was able to push reform against
the highly religious conservatives within
the population. Since 2011, women are
now able to vote and run in future
municipal elections and Abdullah
convinced Arab leaders to make Israel a
peace offer in 2002.
Despite Abdullah’s attempts, the Saudi’s
are at risk of moving at a slow pace.
Compared with the West, they are
undoubtedly sluggish but this pace of
reform went as fast as it could in order to
avoid violent resistance from the
conservatives. The Wahhabism (an
orthodox religious movement of Sunni
Islam) puts them in danger of sustaining
sectarianism and jihadist ideology, which
they are paradoxically challenging by
forming a coalition with the West to
combat the Islamic State. In addition,
dropping oil prices is unsustainable for the
country; Deutsche Bank analysts have
estimated that the oil price needed for the
government to balance its budget in 2015
is $104, more than twice as what it is now.
However, reliance on financial reserves
may be able to last the dip in prices for
lengthy periods.
Politics
Saudi Arabia’s Stability
Image Source: http://i.imgur.com/1h9PYg8.jpg
Such issues are now of major concern to
Abdullah’s successor, King Salman. The
succession itself was not of actual concern,
as Abdullah’s death was expected early on
and the overall leadership was collective,
hence Salman’s rule, to an extent, will not
be a ‘rocky’ one. The main question is
whether Salman is capable of maintaining
stability. Salman himself is not very
conservative and it is highly predictable
that he will continue with Abdullah’s
legacy. Of course, the adamant issue here
will be the struggle to balance between
pushing for modernisation and the
opposition of the religious conservatives.
With jihadists on the rise, the anti-IS
coalition has proved unpopular to the
Saudis. However, Salman will persist with
strategies to deter young Saudis from
joining with the Islamic State, particularly
with its rising young population.
One of the key decisions that Salman made
soon after he was appointed King, was of
significance to future stability. His nephew
Mohammed bin Nayef was made the
Deputy Crown Prince, meaning he would
be second in line to the throne, after
Crown Prince Muqrin bin Abdulaziz. This
appointment is the first time in Saudi
history: a grandson of the kingdom’s first
ruler, rather than a son, would be in place
of succession. Usually, top appointments
would be made several months after deaths
of the monarchs; hence this was a shock to
the Saudis. Nevertheless, this will reduce
the prospect of a power struggle within the
monarchy in future generations to come.
Moreover, Prince Mohammed has
followed his father, former Crown Prince
Nayef’s example in keeping close relations
with the conservatives and even obtained a
political science degree in the US in 1981.
This could be of utmost importance to the
West, in terms of retaining a strong
relationship and possibly open the way to
more freedom within Saudi Arabia.
So far, King Salman has proved
competent at maintaining stability, most
probably due to the fact that he will
continue the same approach as his
predecessors; no revolutionary policies
have been put onto the table. Nonetheless,
reforms are taking place, just at the slow
step-by-step approach the officials in
Riyadh are suggesting is optimal. After the
initial 50 lashes given to blogger Badawi
earlier in January, the following sessions
have been delayed on ‘medical grounds’
and they may not even continue due to its
profound coverage over global news. The
judicial system will still take time to
reform but the perception of ‘softness’
may come at a cost of rallying resistance,
especially when the Islamic State are on
the rise.
Vanessa Ma
Source: http://www.timesofisrael.com/saudi-arabias-king-abdullah-dies-aged-90/
Source: http://www.foxnews.com/politics/2014/03/28/amnesty-international-says-human-rights-missing-in-action-on-obama-trip-to/
Politics
Who speaks for Islam?Perception of Islam in Western countries i
s rapidly changing. The recent attacks in
Pakis tan, Nigeria, Kenya, Syria, and
France caused international outcry,
reducing already low bargaining power of
MENA (Middle-East North-African)
migrants in the EU. Despite some Islamic
authorities having expressed regret about
instrumental use of religion symbolism
by terrorist organisations, the vast
majority of Muslim leaders have not
condemned the violence clearly enough.
Ayaan Hirsi Ali, in his Wall Street Journal
article, called Islamic scholars and
politicians to go beyond “uttering the
usual laments after another horrifying
attack, but making a constant, high-profile
effort to show the world that the preachers
of hate are illegitimate”. The question
arises: who is representing Islam in the
world of media, economics, and politics?
Who can take responsibility for the shape
of the future Umah – the global Muslim
community? The answer seems to be
rather complicated.
The collapse of the Soviet Union in 1991
marked the end of the bi-polar system of
international relations. An undeniable
leader, the United States, had an
opportunity to shape global politics for
more than a decade. The unsuccessful US
military intervention in Somalia (1993-
1995), the involvement of American
troops in Balkans, Kuwait, Iraq, and Haiti
(1990s) and the supporting of oppressive
regimes in MENA (e.g. Hosni Mubarak in
Egypt, Saddam Husain in Iraq) caused a
surge of anti-American movements within
Muslim-dominated countries. While
Americans managed to win militarily in
these conflicts, they have lost people’s
hearts, previously oriented towards a more
secular American consumptionism. In
1990s a clear trend of Islamic resurgence
was observed. What is more, the Soviet
Union’s financial and military support in
the third world was withdrawn, the
political system of USSR was discredited,
leaving unfilled vacuum. A few years
later, the US, previously perceived as a
victorious leader, became the enemy
number one in many Islamic countries.
The new generation of Muslims,
especially young recent-graduates, was
more devoted to Islamic values than their
grandparents, a trend unobservable in the
contemporary world with respect to any
other religion. Islam has become trendy.
Samuel Huntington pointed out in his
famous book “The Clash of Civilisations”
that in 1995, every Muslim-dominated
country, except Iran, was more Islamic
than 15 years before. As a result, new
institutions were created. Islamic schools
became increasingly more popular in
comparison to ordinary secular schools.
Muslim organisations were supporting
people on the street, caring about
homeless, promoting justice, and setting
up new charities. As Huntington pointed
out, it was not Hosni Mubarak’s police
which was “handing out food and
blankets” after the Cairo 1992 earthquake,
but members of the Muslim Brotherhood.
The gap created by the collapse of the
Soviet Union and failing American
dominance was filled by Islamic ideology
- locally, but not globally.
A case study of Somalia is very helpful in
understanding this paradox. After the
terribly unsuccessful UN military
operation in Somalia (1993-1995), the
country was left to local warlords
competing with each other. Terror and
injustice had no end. Stig Hansen, in the
book “Al-Shabaab in Somalia” (2014),
highlighted that every single political
system was tested in Mogadishu –
Marxism before 1977, pro-American
quasi-democracy, and military
dictatorship. Finally, in the early 2000s,
local warlords, unable to pay their militias,
were losing control, tacitly allowing their
people to exploit local civilians (if there
were any) e.g. by organising excessive
number checkpoints in Mogadishu.
Radical Islamists, veterans of the Afghan
war, today mainly associated with the Al-
Shabaab terrorist group, managed to bring
justice and egalitarianism that nobody else
could guarantee in the past. Involved in
Sharia Courts, Al-Shabaab members were
able to transcend borders of traditional
clan structures, using religion as an
instrument of unification among divided
families.
Not only through terror, but especially
thanks to ideology promoting equality
and social justice, radical Islamic
groups were able to create effective
institutions allowing restored order in
deprived areas of Sahel, Middle-East,
and the Horn of Africa.
Even defeated, after the Ethiopian
intervention in Somalia, Al-Shabaab
remains active and should not be
underestimated. The organisation’s
members are blamed for the recent violent
attacks in Kenya. Al-Shabaab puts
pressure on the Kenyan government to
withdraw its support for the Transitional
Federal Government (of Somalia), created
in opposition to Sharia Courts. Even more
attention is currently paid to another
terrorist group in Africa – Boko Haram -
operating in North-Eastern Nigeria, and
locally in Cameroon, and Chad (see more:
“Quo Vadis Africa? Challenges for 2015”
– The Drayton Tribune 2014/2015 Issue
2).
According to Hansen, the evidence that
Al-Shabaab fighters are supporting Boko
Haram is “overwhelming”. Once again, a
military intervention resulted only in
shifting the sphere of influence of regional
terrorist organisations. Boko Haram, now
controlling almost three Nigerian states
(Yobo, Borne, and Adamawa) did not
hesitate in engaging in pro-social and pro-
justice activities in the past (similarities to
Al-Shabaab), which were necessary for
the organisation to grow. It is true that
Boko Haram uses terror to force abducted
people (especially teenagers) to fight in
their ranks, but many of its fighters
voluntarily decide to join the
organisation.
Disappointed graduates who cannot find
employment, people tired of social
injustice, poverty, high income inequality,
corrupted local and federal governments,
might perceive creating an Islamic state (a
caliphate) as a “national revival”. Figure
one depicts push and pull factors
determining the popularity of the above-
mentioned terrorist groups as well as
institutions influencing described factors.
Politics
From the variety of interacting factors
three are almost entirely external: foreign
policy of the key players (US, UK,
France), developmental aid (IMF, World
Bank), and lack of leadership in the
Islamic world (for a more in-depth
analysis of internal factors such as local
economic policy, see “Quo Vadis Africa?
...”). The problem of global governance in
Islam is that both the political and spiritual
dimension are complex due to a multitude
of categories that should be included in the
analysis, such as economic and military
strength, ethnicity, population, natural
resources, and dominant schools of Islam
in different countries. The Six most
influential Islamic countries are Turkey,
Egypt, Iran, Saudi Arabia, Pakistan, and
Indonesia, which all score differently in
each category, making the puzzle of
leadership in Islam hard to resolve. Ranks
for seven categories (6-the strongest one,
1-the weakest one) are presented in table
one on the next page.
1. Military strengthIn order to compare military potentials of
the six countries, the “World military
strength” index for 2014 was used. It takes
into account quantity and quality of
conventional weapons, annual spending on
national defence, available manpower, and
key natural resources. The ranking is
published online and can be found at
www.globalfirepower.com/
The fact that Pakistan possesses nuclear
arsenal is not taken into account in the
index, but is reflected in the table. The
winner in this category is Turkey, a
NATO member, typically perceived as a
close US ally. Turkish leaders are
commonly disregarded by more
conservative Islamic governments for their
cooperation with the West. Moreover, in
the past decade Turkey was reluctant to
engage in international military
operations. This may reduce the
significance of Turkish undoubted military
leadership in the Islamic world.
[Figure 1]Pull and push factors model – voluntary participation in terrorist organisations. Source: Author’s own elaboration.
Politics
2. Geopolitical factorsLocation, access to open waters, natural
resources are key factors in contemporary
geopolitical analysis. The winner in the
second category is Saudi Arabia, a country
with vast natural resources and a very long
coastline, giving direct access to the
Persian Gulf and Red Sea. What is more,
Saudi Arabia is located in the middle of
the Islamic World. The only drawback one
could point out is the high desertification
of the territory, potentially reducing
productive capacity of the Saudi economy.
The lowest score was assigned to
Indonesia, a country far away from the
core Arabic lands - yet with oil resources
and access to key South-Eastern straits -
and Pakistan (limited reserves of oil and
natural gas, also far away from the core).
3. Integrity with UmmahThe third category can be broken down
into two parts: political and cultural
integrity with the global Islam community.
The winner – Egypt. The Egyptian dialect
of Arabic is the one which is used as an
international standard. What is more, the
Egyptian entertainment industry is of
major importance in the entire Arabic
world. The country is regarded as
moderately secular, predestining Egypt to
be an equally good negotiation partner for
conservative Saudi Arabia and Iran, and
secular Turkey and Indonesia. Turkey,
where the Latin alphabet is used, and
which is politically isolated Iran had a
lower score in this section. In addition,
ethnicity should be taken into account. For
example, citizens of Iran are Persians, not
Arabs, which is a reason for many
animosities between Iran and its neighbors
(also with respect to policy against Israel).
Low score for Saudi Arabia in this
category is motivated by limited openness
of the society and anachronistic judicial
system based on strict rules derived from
Qur’an and tradition.
4. ReligionSpiritual leadership in Islam is an
important factor, though very hard to
analyse. Countries with dominant Shia
Islam are unlikely to be regarded as
leaders (e.g. Iran) by Sunni countries
which constitute an overwhelming
majority. Relatively secular countries such
as Turkey or Indonesia will not be
accepted by more conservative societies of
Pakistan or Saudi Arabia. Pakistan with its
famous madrassas is exerting a real impact
upon contemporary Islam. Egypt - the
only African country on our list - can be
regarded as a centre for Sunni Islam. Al-
Azhar University in Cairo is the most
important scholarly institution in the
Islamic world, which would legitimate
Egyptian leadership of Ummah in the
spiritual dimension. However, the winner
in this category is Saudi Arabia which is
visited by millions of people every year,
mainly pilgrims wanting to pray in sacred
towns of Mecca and Medina.
5 and 6.
Economic strength and well-beingEconomic power is the subject of the next
two categories. Firstly, countries’ relative
economic performance was assessed with
per capita measures of well-being (such as
the Human Development Index). The
winner was Saudi Arabia. Secondly,
economic power in absolute terms was
taken into account, measured by gross
domestic products in US dollars (not PPP
adjusted). See Figure 2. This time, the
winner is Indonesia, just slightly ahead of
Turkey and Saudi Arabia.
7. Internal stabilityFinally, a perfect leader must not have any
serious internal problems such as civil
wars, the persecution of minorities, or an
unstable political system. Unlike in other
categories, Egypt is performing poorly,
with significant political tensions after the
beginning of the Arab Spring in 2011.
Pakistan is struggling due to conflicts with
Afghan terrorist groups and India (over
Kashmir). Iran is perceived as an
international outsider, suffering from
sanctions imposed by the West (see Figure
2) which followed unsuccessful
negotiations of the national nuclear power
programme. Indonesia, Turkey and Saudi
Arabia are more politically stable. There is
hence no clear winner in this category.
Egypt Turkey Saudi Arabia Indonesia Pakistan Iran
Military strength 4
WMS: 13th
6
WMS: 8th
3
WMS: 25th
4
WMS: 19th
5
WMS: 15th
4
WMS: 22th
Geopolitical factors 4 4 5 2 2 3
Integrity with
Ummah
6 2 3 2 4 2
Religion 5 2 6 3 4 3
Well-being 3
HDI: 110th
5
HDI: 69th
6
HDI: 34th
3
HDI: 108th
2
HDI: 146th
4
HDI: 75th
Economic strength 3
GDP:42th
5
GDP:18th
5
GDP: 19th
6
GDP: 16th
3
GDP: 46th
4
GDP: 27th
Internal stability 2 5 5 4 2 2
TOTAL 27 29 33 24 22 22
WMS – “World Military Strength” (2014) / HDI - Human Development Index (UN, 2013)
Politics
ResultsThe final results are as follows: Saudi
Arabia (33), Turkey (29), Egypt (27),
Indonesia (24), Iran (22), and Pakistan
(22). Saudi Arabia is undoubtedly
among the wealthiest and more powerful
states in the world. However, low
population, lack of national identity, low
openness of the society, and a very strict
legal system may be major obstacles in
gaining leadership in the Islamic world.
From my point of view, Egypt is a
country that would have a chance of
being accepted as a leader by all the key
players for a multitude of reasons: it is
an African country, moderately secular,
Arabic, the second most important centre
for Sunni Islam, and have strong cultural
ties with other Islamic countries. In the
case of Egypt, political instability and
economic problems may be regarded as
temporary obstacles, while constraints
on Saudi leadership are rather permanent
(a radical change in the political system
would be required).
A unified Muslim world would be a new
superpower if well coordinated. The
recent brutal murder of Mouath al-
Kasaesbeh, a Jordan pilot who was
burned to death by Islamic State
warriors, unified the Muslim World
against the threat of terrorism. I believe
that military commitment of Islamic
countries against jihadists is one of a few
ways to ensure that differences between
violence are clear for everyone –
Muslims and non-Muslims. The question
arises whether it is just a temporary
response to a shock or a permanent
awakening.
Mateusz Stalinski
0
1E+11
2E+11
3E+11
4E+11
5E+11
6E+11
7E+11
8E+11
9E+11
1E+12
2004[YR2004]
2005[YR2005]
2006[YR2006]
2007[YR2007]
2008[YR2008]
2009[YR2009]
2010[YR2010]
2011[YR2011]
2012[YR2012]
2013[YR2013]
Iran, Islamic Rep. Pakistan Indonesia
Egypt, Arab Rep. Saudi Arabia Turkey
Source: World Development Indicators Database (World Bank)
Politics
Syriza’s victoryMonday, the 26th of January 2015. Alexis
Tsipras’ first official day as Prime Minister
of Greece after a convincing election
victory the night before: with 149 seats out
of 300 in the Greek Parliament, his party
Syriza came alarmingly close to an outright
majority. Mr. Tsipras saw this historic day
as the perfect time to make a provocative
and symbolic statement. He decided to visit
the war memorial in the suburban town
Kaisariani, where 200 Greeks were killed
by the Nazis in 1944. The leader of the far-
left populist party promised in his victory
speech that he would “end the vicious
circle of austerity” – first and foremost the
work of the German chancellor Angela
Merkel. Visiting the war memorial on his
very first day certainly made his resistance
to any kind of German occupation clear.
Demanding a big cut in Greece’s debt and
promising a public-spending spree may
have won Syriza many votes, but investors
have not shared their excitement. The stock
market has been in free fall; Greek banks
have had to deal with the biggest one-day
drop of all times on January 28th, and short-
term bond yields have risen to new highs.
Though the latest implementation of
quantitative easing by the European Central
Bank can arguably be seen as an admission
that the “Merkellian” austerity path in
Europe has been extreme, a Greek
abandonment of the structural reforms can
have huge consequences for Greece, as
well as for the Eurozone as a whole.
If Mr. Tsipras turns out to be successful in
obtaining an extensive bailout extension,
this would likely spur the growth of
Syriza’s “sister” parties in countries like
Spain and Portugal. It is a lot more fun to
abandon reforms than to stick to the strict
rules of austerity, and if this proves to be an
actual option in one troubled country, we
should only expect others to make the same
kind of commotion. Spain and Portugal are
both currently led by centre-right
governments, and representatives of these
were also very quick to express their
skepticism and warnings against letting a
party like Syriza in charge. Alexis Tsipras
is facing an enormous challenge, and even
though the Greek population has voted anti-
austerity all the way, their new Prime
Minister will have to deal with the fact that
Greece is still very dependent on the
official support from their bailouts. Though
the country’s economy has been improving
- an on-going recession ended last year,
growth of 0.7% made them one of the best
European achievers in 2014, and they have
seen substantial gains in competitiveness -
it all results from the structural reforms that
the Greeks have managed to comply since
2010. Thus, all of it could be easily lost if
Mr. Tsipras acts too provocatively and tries
to push his luck. He is still dealing with a
fragile country, and if he does not find a
way to obey the bailout rules, it could
potentially lead to an expulsion from the
Eurozone.
This means that although Alexis Tsipras
has declared that he wishes to stay in the
euro, a wrong move may leave him with no
choice. A move that becomes even more
likely when you take a closer look at his
disturbingly inexperienced government: a
questionable coalition with the rightwing
Independent Greeks. Only one politician on
his team has actual experience with the
governing of Greece, which does not
exactly make Greece’s official supporters
feel calmer about the country’s future.
The most crucial consequence of a so-
called Grexit would have to be the
inevitable and substantial depreciation of
the new currency. With their foreign debt
still in euros, it would make it
unsustainable, leading to a Greek default.
Furthermore, the usual upside of an intense
depreciation – gain in competitiveness –
could potentially be lost as well, were
Greece to be expelled from the European
Union and the Single Market all together.
Clearly, Greece would not be alone to
suffer the consequences of a Grexit: if one
country had actually left the Eurozone, it
would give investors good reasons to worry
about other countries, who might share
their fate. But it is highly unlikely that
Angela Merkel and the European Central
Bank will agree to the demands of Alexis
Tsipras – and even if that eventually means
that Greece will have to leave the
Eurozone, the EU is at least in a far better
position to handle this, than they were in
the recent euro crisis. A Grexit is a much
more realistic possibility this time around,
with consequences being a lot more fatal to
Greece than to the rest of the European
countries.
If Alexis Tsipras and his newly elected
government realise the fatal outcomes of
their current anti-austerity policy in time,
they will, not surprisingly, have to let their
voters down. The story of Syriza’s victory
will then just be yet another example of a
country in desperation, believing the words
of any politician who puts “public” and
“spending” in the same sentence, but who
will never be in a position to actually
follow through.
Maria Uttenthal
Politics
Je Suis CharlieThe international reactionWhen French President Francois Hollande
gave a sombre televised address to the
nation, hours after the shocking attack by
brothers Saïd Kouachi and Chérif Kouachi
on Charlie Hebdo, he vowed to protect the
message of freedom that the magazine's
journalists represented.
Internationally, political leaders supported
France’s stance on the freedom of press
and freedom of speech. In the United
Kingdom, David Cameron told the House
of Commons, "This House and this
country stand united with the French
people in our opposition to all forms of
terrorism and we stand squarely for free
speech and democracy. These people will
never be able to take us off those values."
German Chancellor Angela Merkel said
that: "[it was] not just an attack on the life
of French citizens and the internal security
of France. It also represents an attack on
freedom of opinion and of the press, (an
attack on) a core element of our free and
democratic culture.”
U.S. President Barack Obama called the
shootings horrific, adding “France is
America's oldest ally… Time and again,
the French people have stood up for the
universal values that generations of our
people have defended.”
But not all international reactions have
been entirely positive. Pope Francis spoke
with journalists while flying over the
Philippines, and stated that the Charlie
Hebdo attacks were an "aberration", and
that such horrific violence in God's name
could not be justified. He defended
freedom of expression, but then he said
there were limits, especially when people
mocked religion. "You cannot provoke.
You cannot insult the faith of others. You
cannot make fun of the faith of others.
There is a limit."
The domestic reactionThroughout France, people supported
Charlie Hebdo. After the attacks, the
phrase “Je suis Charlie”, French for "I am
Charlie", was adopted by supporters of
free speech and freedom of expression
who were reacting to the shootings. It
quickly spread to social media, becoming
one of the most popular hashtags in
Twitter’s history, being tweeted 6,500
times a minute at its height.
From the 10th to the 12th of January, over
three million took part in unity marches
across France. Up to 1.6m are estimated to
have taken to the streets of the French
capital. More than 40 world leaders joined
the start of the Paris march, linking arms
in an act of solidarity.
"We have to show solidarity with ‘Charlie’
but without forgetting all the ‘Charlies’
around the world,” said Christophe
Deloire, the Reporters Without Borders’
secretary general. The Reporters Without
Borders annually publish a Press Freedom
Index, and some of the countries
represented in the Paris march rank
particularly low. In Russia, Algeria,
Turkey and Gabon, there have been many
cases of journalists being falsely
imprisoned or prosecuted on trumped-up
charges. Christopher Deloirse stated that
“It would be intolerable if representatives
of states that silence journalists in their
countries take advantage of the day’s
emotion in order to improve their
international image.”
The French declaration of rights that
came with the 1789 French Revolution
established the right to say, write or
print what one wants, but abusing that
freedom has always been limited by
law. Exceptions to freedom of speech
were defined in 1881 as defamation,
slander and incitement to hate. There is
also explicit reference to crimes
against humanity, condoning crimes of
war or collaboration with the enemy.
A delicate balanceHowever, freedom of speech has never
been a clear-cut issue in France. Hours
after 3.7 million French citizens took
to the streets to proclaim “je suis
Charlie”, the French comedian
Dieudonne M’bala M’bala wrote “I
feel like Charlie Coulibaly”. “Charlie
Coulibaly” is a mash-up that refers to
magazine Charlie Hebdo and Amedy
Coulibaly, the shooter who killed a
policewoman and died in a stand-off in
a Kosher supermarket.
He said the posting was meant to be
humorous. But in the context of his
past convictions for anti-Semitism, the
authorities saw it as a voice of support
for the gunman, and he is set to appear
in court in February, where he faces up
to seven years in jail and a fine of
€100,000.
Recognising serious cultural rifts
between children in heavily immigrant
communities and others, officials in
France have announced new measures
to reinforce secular values at French
schools. Ms. Vallaud-Belkacem,
French education minister, said that,
starting in September, a new program
of “moral and civic training” for
students would include lessons on how
to fight “any form of discrimination.”
This comes after many French teachers
have expressed their concern over their
student’s reactions to the killings.
Some students, particularly in heavily
immigrant communities, protested or
refused to be silent during the minute
of silence.Source: Charlie Hebdo
Politics
Source: http://static.businessinsider.com/image/54b2a1e869bedd6d4136bd2b/image.jpg
http://en.wikipedia.org/wiki/File:Charlie_in_Prague_Sophie_Knittel-4.jpg
France is one of Europe’s most diverse countries,
with approximately 20% of its population
consisting of foreign-born immigrants and their
direct descendants, which brings with it a
delicate balance. Freedom of speech is an
important feature of modern democracies, but
ensuring that everybody, regardless of
nationality, race or religion, is not unjustly
prejudiced is of equal importance. The Charlie
Hebdo attacks, and the resulting aftermath, show
that this balance needs to be maintained carefully.
Martin Wickens
Politics
Source: http://commons.wikimedia.org/wiki/File:Je_suis_Charlie.svg
Economics
Double Trouble for Iraq:
ISIL & OilWar-torn Iraq The Republic of Iraq was once a symbol
of power, stability and economic growth.
After the success of the Iranian revolution,
Iraq emerged as the world’s second-
largest oil exporter. From 1970 to 1980,
the Iraqi economy grew by a healthy
percentage of 11.7, thanks to the increase
in oil exports. Oil production was
approximately 3.5 million barrels per day
and oil revenues were 27 billion in 1980
due to record oil prices. Just before the
Iraq war, the economy had an estimated
35 billion in foreign exchange reserves
But today, Iraq paints a whole new picture
of itself. It is a country that has seen many
wars and experienced terror to the core.
2003 marked the beginning of the Iraq
War - the U.S. led invasion of Iraq, which
overthrew the government of Saddam
Hussein. The eight year long war
destroyed a large amount of Iraqi
infrastructure and weakened the political
stability of the country. After the Iraq War,
peace became a scarce word for Iraqis.
The Iraqi insurgency followed right after
the withdrawal of the U.S. troops in 2011,
as Sunni militant groups intensified
attacks on the country’s Shia population.
Today, the insurgency is far worse, with
the Islamic State in the Iraq and the
Levant (ISIL) taking over Mosul and
major areas in northern Iraq, threatening
peace and fuelling a deadly conflict.
ISIL is a Sunni extremist group that
promotes violence in the name of religion
and they have self-proclaimed themselves
as the Islamic State, under the leadership
of a worldwide caliphate, Abu Bakr al-
Baghdadi. Their rule on almost one-third
of Iraq has undoubtedly brought more
damage than benefit to the civilians and
Iraq’s economy. Numerous resources in
these areas have been channelled towards
funding ISIL’s war equipments instead of
improving the living standards of the
people.
The ISIL occupation of areas in Iraq has
had massive negative implications on the
country’s already weak financial system.
According to an economics expert, Ali al-
Sayhood al-Sudani, Iraq’s banking sector
is the “biggest loser” in the midst of this
ISIL crisis. Before the insurgency, the
Iraqi banking sector was already limited,
carrying out only basic functions of
trading currency from the Central Bank of
Iraq. Baghdad’s public policies mostly
focused on the development of public
sector banks, which resulted in them
being loaded with cash while private Iraqi
banks struggled to stay afloat. Now, with
Iraqi infrastructure and farms destroyed
on a large scale and 20 million Iraqis
displaced, debtors have become unable to
bear the burden of agricultural and real-
estate loans. As more and more loans are
written off as bad debts, several Iraqi
banks are heading fast towards
bankruptcy.
Mr Haider al-Abadi, Iraq’s Prime MinisterSource:
https://corpcommap.files.wordpress.com/2014/09/iraq_interview2.jpg
Moreover, Iraqi officials never passed a
budget for the fiscal year of 2014 due to
the stress over the ISIL insurgency and the
long-lasting disputes between the Sunnis
and the Kurds over oil management and
revenue sharing. The absence of a budget
is detrimental to any country, especially
one already plagued by war – Iraqi
investment projects have been blocked,
limiting development and forcing the
government to seek more foreign
investment to finance the country. But, the
current security conditions in Iraq are
pulling investors back as they fear for the
uncertainty involved with the returns on
their investment.
Economic growth figures since 2007
indicate that Iraq’s economic growth is
very sensitive to domestic security
conditions. The ensuing conflict with ISIL
has caused a significant decrease in the
economic growth outlook for Iraq. In
October 2014, the International Monetary
Fund (IMF) revised the predicted growth
rate of Iraq from 6.7 percent to a mere 1.5
percent this year.
Oil woes
If suffering the wrath of the terror group
of ISIL was not bad enough, Iraq’s
economy has also been severely affected
by the slump in the price of crude oil. Iraq
is currently the second largest OPEC
producer of crude oil and is expected to
contribute towards 60% of the cartel’s
total production until 2019 as shown in
Figure 1. balance its budget, which is a far
cry
One thing is clear: Iraq has an enormous
potential of being a leader in oil
production and supposedly earning
soaring revenues. But, falling oil prices
are increasingly clouding such a
possibility. At a recent press conference,
the Iraqi Prime Minister, Mr. Haider al-
Abadi expressed that Iraq’s economy and
budget has an 85 percent reliance on oil,
which has spelled disaster for the Middle-
East economy. Iraq is very vulnerable to
changes in oil prices and government
revenues have been reduced dramatically
as oil prices has fallen to just below $50
per barrel in 2014. As reported by the IMF
and Deutsche Bank, Iraq needs an oil price
of $101 per barrel to from the situation
now. Lower government revenues have
translated into lower public spending to
improve the living standards while
security expenditure continues to increase
in light of the ISIL conflict.
Iraq exported 91.141 million barrels of oil
in December 2014 (record high levels of
export in decades). However, the low oil
price added up to a revenue of $5.247
billion, much lower than the earlier
months of 2014. In November last year,
Iraq’s oil ministry reported more than 27
percent losses in revenue due to lower oil
prices.
The Islamic State jihadist group is said to
have worsened conditions by capturing oil
wells in northern Iraq and selling the oil
produced in the black market to fund their
reign of terror.
Time to get the act together
With the Islamic State spreading its wings
in Iraq and oil prices showing no
significant signs of recovery, Iraq’s
government needs to act fast to save the
economy from drowning in a fiscal and
financial crisis. The government has to be
prudent in reassessing its fiscal policies.
Iraq cannot afford another year without a
budget and its government is clearly aware
of this.
In December 2014, the Iraqi cabinet
reached a consensus on the 2015 budget
and submitted it to the parliament for
review. Iraq’s 2015 budget highlights a
large cut in government spending to
improve public finances - ministerial
salaries have been slashed by 50% and the
budget has been revised to account for the
lower oil prices. Under the leadership of
Mr Haider al-Abadi, the government has
also pledged to fight fraud and corruption
and extend support towards private sectors
of the economy, especially the private
banks.
Source:The Organisation for Economic Co-operation and Development (OECD) and the International Energy Agency (IEA), Oil Market ReportSource (right): Energy Intelligence Group, Bloomberg Finance L.P., Fidelity Investments, 2014.
Economics
With unemployment currently standing at
11%, the Iraqi government has also
expressed its aim of generating jobs by
expanding large and small businesses and
attracting foreign direct investment via
joint ventures with international firms. For
instance, Shell has recently signed a
contract with Iraq to build one of its
largest company in the republic.
There is also a dire need for Iraq to
diversify its economy and reduce its
dependence on oil exports. It is high time
Iraq regained its status as one of the most
diversified economies of OPEC. Mr al-
Abadi’s government seems to be on the
right track, increasing investment in
agriculture and the petrochemical industry.
On the whole, Iraq’s government seems to
have many promising plans of reviving the
ailing economy. However, they must
accelerate and maintain these fiscal
reforms should they wish to see a
significant improvement.
As for the fight against ISIL, Iraq has
received support from the West and Iran in
terms of defence and ammunition. The
battle against ISIL is no longer a
domesticated or regional issue, it has
become an international problem. A U.S.
sponsored international coalition was
formed in December last year to defeat
ISIL. The coalition, including a wide
range of countries, has committed to work
together under a multifaceted and long-
term strategy to destroy the Islamic State.
Hence, Iraq has to maintain its
international relations with neighbouring
countries and the West to reclaim the
governance of Iraq as a whole.
Looking ahead – Clouds of
uncertaintyAlthough steps are being taken to address
the issues faced by Iraq, it is uncertain
when the ISIL chapter will close and when
oil prices will heal, especially with Saudi
Arabia refusing to cut back supply. Iraq
was once the Cradle of Civilization in
Ancient Mesopotamia. Today, it has
become the centre of crisis with no clear
indication of the direction its economy is
heading. Whether or not Iraq revives itself
to become a strong economic nation
depends a lot on its government’s
diligence and commitment towards the
planned strategies of improving fiscal
policies. If conducted successfully, these
fiscal reforms may well open up a new
and positive horizon for Iraq,
economically, politically and socially.
Nareen Sidhu
ISIL militants march for a propaganda image of the groupSource: Abara Presss
Economics
The Deadweight Loss of the Oscars
Just as this issue of the Drayton Tribune is
released, the 87th Academy Awards will
have finished. On 22nd February, weeks
of speculation will have come to an end
but so will months of spending on
campaigning. One estimate suggests $100
million is spent altogether every year. The
average cost of winning a seat in the
House of Representatives in 2012 was
$1,689,580. By comparison, Sony planned
on spending $4.2 million on Captain
Philips for just the ‘Phase 1’ Oscar
campaign aimed at securing nominations.
Conservative estimates of campaign
spending per film hover around $5 million
but they can potentially be much higher.
2013 nominees Lincoln and Argo were
estimated to have spent at least $10
million alone on Oscar-targeted ‘For Your
Consideration’ adverts and other
marketing by one industry expert. Is this
vast amount of spending an efficient
allocation of resources?
One question at the heart of this topic is
whether big campaign spending helps win
awards. The short answer is that it helps
but does not guarantee anything. Harvey
Weinstein, considered by many to be the
most notorious and aggressive of
campaigners, commented in 2013, “I have
always said the most important thing is to
get people to see the films and everything
else is mostly fluff.” With this ethos at the
heart of campaigning, advertising and
marketing dominate the campaign budgets.
This is separate to the general advertising
aimed at everyday moviegoers; instead,
Oscar advertising focuses on Academy
members, featuring on Hollywood
billboards and industry websites and
publications. Stephen Follows, a writer
and producer based in Ealing Studios,
detailed in a blog post that four recent
‘Best Picture’ nominees (including two
from 2014) spent 53% of their total
campaign expenditure on advertising. On
average, this amounts to nearly $3.7
million. Similarly, another notable cost is
sending out DVD screeners to the
Academy members, which can potentially
be as high as $1 million.
Many would be inclined to think that this
is a wasteful endeavor, however, some
examples would suggest it is not. The
total cost of sending DVD screeners for
Crash, the 2005 ‘Best Picture’ winner,
was $250,000 but the move is regarded to
have helped get the Academy’s attention
and at least secure a nomination. At a
more expensive end of the spectrum,
Harvey Weinstein reportedly spent $15
million on promoting Shakespeare In Love
in 1998. In the end, the romantic-comedy-
drama pulled off one of the biggest upsets
in Oscar history as it beat Steven
Spielberg’s epic Saving Private Ryan to
‘Best Picture’. The data on campaign
spending, however, is highly limited and
as a result, it is difficult to determine
whether increased spending converts into
a hig her likelihood of winning.
Do Oscars translate into financial
wins?The Oscars clearly hold prestige but the
studios engaging in such expensive
campaigns must hope for a financial return.
There are varying degrees of conclusions
on whether the Oscars hold a quantifiable
benefit. A brief look at Figure 1 and 2 tells
us that the Oscars can arguably make a
difference. 12 Years A Slave, the 2014
‘Best Picture’ winner, made massive gains.
In the week following the announcement
of Oscar nominations, its weekly gross
increased nearly 4 fold, amounting to
roughly $2.4 million. The next week, it
rose to $2.88 million and in the two weeks
after its win, it made just over £4.5 million.
But not all ‘Best Picture’ winners
experience such a large change. Looking
at the ‘Best Picture’ winners from 2005 to
2014, 12 Years A Slave stands out in
experiencing such a big financial boost
relative to its previous trend.
In general, there are two observations that
seem convincing. The first is that both
nominations and wins tend to correlate
with increases in box office revenue. This
might suggest that such accolades do
attract people to the cinema, who perhaps
would not otherwise consider going. The
boost lasts for about two weeks, after
which weekly box office revenues appear
to return to their normal downward trend.
In many cases, however, the weekly gross
does continue to be higher than the
average in the weeks just preceding the
announcement of nominations.
Source: http://contently.com/strategist/wp-content/uploads/2014/03/oscars-1.jpg
Economics
Examples of ‘For Your Consideration’ adverts targeted at Academy members
Source: http://www.awardsdaily.com/FYC/gallery/
The second observation is that in the short
sample of data presented here, nominations
seem more valuable than wins. 12 Years A
Slave, Gravity (the biggest winner of 2014)
and Dallas Buyers Club (starring ‘Best
Actor’ winner Matthew McConaughey)
experienced far bigger increases in their
weekly gross figures post-nominations
compared to post-ceremony. The same trend
is more starkly visible in 2013 [see Figures 4
and 5] where only two films, Life of Pi and
Beasts of the Southern Wild, experienced a
gain. The former was the biggest winner of
the night with four awards, including ‘Best
Director’.
One factor worth stressing is that the
announcement of Oscar nominations tends to
be within few days of the Golden Globes,
the Critics Choice Awards and the Screen
Actors Guild Awards. Oscar contenders
feature prominently in these preceding
shows and so undoubtedly benefit from the
exposure. This complicates distinguishing
the causal link between Oscar nominations
and increased revenue.
A study conducted in 2001 by economists at
Colby College, argued that winning was far
more valuable than a nomination.
Comparing 131 nominated films against a
control of 131 non-nominated films, the
study found that a ‘Best Actor/Actress’
nomination’ increased expected average
revenues by 42.52% on average in the six
weeks following the nomination whereas
winning resulted in a 170.18% increase in
the four weeks after the ceremony; the
corresponding figures for ‘Best Picture’ was
98.85% and 245.23% respectively. This
study did, however, use box office data from
1978 to 1987 that may not be representative
of current trends.
Another more recent assessment of the value
of the Oscars by data analyst Edmund
Helmer suggests that the biggest benefits are
reaped in the weeks leading up to the
ceremony. This is reflected in the total
weekly gross figures before and after the
Oscars [shown in Figure 6]. Helmer has also
found that Golden Globes success is
financially more valuable than an Oscar win;
Golden Globes boost box office earnings by
$14.2 million per film on average whereas
Oscars only results in a $3 million increase.
Pursuing the Oscars does not appear to be a
venture without any reward. Figure 6
indicates that Academy Award winners
gross more revenue after the ceremony than
unsuccessful nominees. However, it would
seem that particularly for films with less
obvious mainstream appeal, perhaps with an
unknown cast and dealing with more serious
or obscure subject matter, recognition from
the Academy is especially beneficial. Beasts
of the Southern Wild was made on a modest
budget of $1.8 million. The film had stopped
being screened in US cinemas by mid-
November but returned after nominations
were announced and added nearly $1.55
million to its total domestic gross. Slumdog
Millionaire in 2008, with a cast and story
unfamiliar to American audiences, garnered
$96 million after its nominations. Films with
big credentials, either directorial or acting,
are more likely to have found box office
success regardless of the Oscars. The same is
unlikely to be true for smaller films.
Harvey WeinsteinSource:
http://www.digitalspy.co.uk/movies/news/a519503/harvey-
weinstein-oscars-2014-race-the-most-competitive-ive-
seen.html#~p38SVYDUEekHgJ
Economics
-100
0
100
200
300
400
500
1 week after nomination
announcement
2nd week after nominations
announcement
3rd week after nomination
announcement
% c
hange in w
eekly
US g
ross
revenue
12 Years A Slave (winner)
Gravity
American Hustle
Captain Philips
Dallas Buyers Club
Her
Nebraska
The Wolf of Wall Street
Philomena
-80
-60
-40
-20
0
20
40
60
80
100
120
Week of Oscars ceremony 1 week after Oscars
ceremony
2nd week after Oscars
ceremony
% c
hange in w
eekly
US g
ross
revenue
12 Years A Slave (winner)
Gravity
American Hustle
Captain Philips (no longer screening)
Dallas Buyers Club
Her
Nebraska
The Wolf of Wall Street
Philomena
Source: http://www.boxofficemojo.com/
Source: http://www.boxofficemojo.com/
Economics
-80
-60
-40
-20
0
20
40
60
80
100
120
Week of Oscars ceremony 1 week after Oscars
ceremony
2nd week after Oscars
ceremony
% c
hange in w
eekly
US g
ross
revenue
12 Years A Slave
Argo
The Artist
The King's Speech
The Hurt Locker
Slumdog Millionaire
No Country For Old Man
The Departed
Crash
Million Dollar Baby
-500
0
500
1000
1500
2000
2500
1 week after nomination
announcement
2nd week after nominations
announcement
3rd week after nomination
announcement
% c
hange in w
eekly
US g
ross
revenue
Argo (winner)
Silver Linings Playbook
Amour
Django Unchained
Zero Dark Thirty
Lincoln
Life of Pi
Les Misérables
Beasts of the Southern Wild
Source: http://www.boxofficemojo.com/
Source: http://www.boxofficemojo.com/
Economics
-70
-60
-50
-40
-30
-20
-10
0
10
20
Week of Oscars ceremony 1 week after Oscars
ceremony
2nd week after Oscars
ceremony
% c
hange in w
eekly
US g
ross
revenue
Argo (winner)
Silver Linings Playbook
Amour
Django Unchained
Zero Dark Thirty
Lincoln
Life of Pi
Les Misérables
Beasts of the Southern Wild
Source: http://www.boxofficemojo.com/
Source: http://boxofficequant.com/the-value-of-an-oscar/
Economics
Two researchers at University of
California Los Angeles (UCLA), Gabriel
Rossman and Oliver Schilke, published an
article on the rewards to prize-seeking in
2014. Studying data from 1985 to 2010,
they found a “bimodal reward structure”
for the Oscars whereby “winning a prize is
valuable but pursuing it is costly”.
Rossman and Schilke were looking at the
returns to films with “Oscar appeal” -
films aimed to cater to the Academy
voters. In producing films with Oscar
appeal there is a trade-off with the tastes
of the mass audience. In consequence, the
films with Oscar appeal that fail to get
nominations tend to lose money whereas
those that are successful experience
substantial rewards. In light of this
understanding, campaigning acquires a
new importance because there is the risk
that failure to secure a nomination can
lead to a financial loss.
So, is there a Deadweight Loss?Campaigning for the Oscars may be
viewed akin to rent-seeking attempts by
lobbyists. Individuals or groups lobby the
government to try to get privileges for
themselves, which usually create
inefficiencies. For instance, consider the
imposition of tariffs on agricultural goods
to appease domestic farmers. Rent-seeking
in this case inflicts a deadweight loss on
society since consumers pay higher prices
and demand a lower quantity. Gordon
Tullock introduced the insight that the cost
of lobbying must be subtracted from
whatever private gain is attained by
successful lobbyists. Moreover, the cost of
lobbying represents a social loss to society
since those resources could have been
directed in a more productive manner that
benefitted society.
It seems unlikely that the awarding of
Oscars in itself imposes a deadweight loss
in the manner akin to a tariff imposition; it
does not introduce a significant
inefficiency in the market. University of
Chicago economist Matthew Gentzkow,
Clark Medal winner of 2014, has been
writing about media communication and
creation of brand loyalty. The Oscars are
an example of certification and super
branding.
Rossman and Schilke’s research might be
used to argue that if the Oscars act as a
signal, enticing the mass audience to
watch films they otherwise would not,
then it might do so at the detriment of
other equally formidable, alike films. They
provide the example of two similar films,
which were cited as potential contenders
for the 2006 Oscars: Brokeback Mountain
and The Three Burials of Melquiades
Estrada. The two had drastically diverging
fates as the former received eight
nominations and racked up $83 million at
the US box office and the former got no
nominations and made a mere $9 million.
The Oscars may support an uneven ground
for competition but Rossman and Schilke
also suggest that the Oscars promote
heterogeneity in films. They present a
reward to deviating from the mass-appeal
norms and encourage studios to back more
original and creative, albeit risky,
filmmaking. For the consumer, there is
more choice. In that respect, there might
even be a positive social contribution.
So where, if at all, does the Oscars inflict a
deadweight loss? A deadweight loss arises
if the total cost of the campaigns exceeds
the total benefits. Let us assume that
altogether $100 million is indeed spent
every year on campaigning. A student
research report at the New York
University Stern School of Business found
the median rate of return from studio films
was 27%. Since the studios dominate the
award season, the opportunity cost for the
$100 million is $27 million, making the
total cost of the campaigns $127 million.
Based on analysis by Edmund Helmer, the
total estimated gain of winning at the
Oscars, counting most categories, is
roughly $90.9 million. Here, we lack data
on the total estimated gains from
nominations but given that nominations
seem to be more valuable, it is not a
stretch to imagine they may generate an
extra $36.1 million. These calculations are
a crude estimate but perhaps, if the costs
are matched by the benefits, there is not a
deadweight loss.
In all of the analysis, a major underlying
problem is that it is almost impossible to
know how films would have performed
had they not received the nominations and
wins. Game theory, in particular The
Prisoners’ Dilemma, suggests that if all
the major studios now spend heavily in
campaigns, then they neutralise each
others efforts; they end up at the same
level playing field as they would be with
much lower expenditure. In that sense, the
studios are overspending. This is a
deadweight loss because if the studios had
spent less, they would be better off and
funds could be freed up for filmmakers -
all parties gain.
Many people will also feel it is not just
about efficiency but also equity. In the
recessions following the financial crisis,
arts funding in many countries have taken
big cuts. It is possible to distribute the
$100 million in a manner that might
benefit a far wider section of society rather
than a small and already rich Hollywood
elite. One might argue that the campaign
spending makes a contribution to the LA
economy. A report found that the 2013
Academy Awards created “at least $67
million in immediate, identifiable benefits
to Los Angeles County”. But $26 million
was spent by the Academy and another
major chunk, $30 million, is accounted for
as multiplier effects. PR consultants,
hotels, limousine and car rentals, and
spending on wardrobe will all receive a
boost due to spending by the studios in the
Oscar season but these form a smaller
contribution to the LA economy. For
example, wardrobe and limousine rentals
amounted to only 6% of the total
economic benefit.
It seems hard to believe that there is not a
degree of wasteful spending in current
campaigns. The lack of concrete data on
the budgets make it difficult to discern.
Given that there are gains to be made from
seeking the Oscars, it seems unlikely that
there will be a reversal in the campaign
trends. Perhaps predictably, money will
maintain its indomitable presence in
Hollywood.
Shreyosi Saha
Economics
Social enterprises:
a driver for growthDivine Chocolate, TOMS Shoes, and a
Jamie Oliver restaurant. What do these
things have in common? They are all social
enterprises.
A new type of businessA social enterprise is a business that does
not prioritise profit, but uses business
methods to tackle problems in society.
They serve people and communities, and
their primary goal is to improve lives or
increase environmental sustainability.
However, they also need to make a profit to
survive, which differentiates them from
charities.
In the past several years, there has been a
growing interest in social enterprise, with
an increasing number of entrepreneurs are
choosing this industry over public or other
private sector jobs. In fact, 35% of the
owners and founders are formerly from the
private sector. This says a lot about
people’s motivations and a desire for
change in how business operate.
The government is also starting to look
beyond the traditional public and private
sectors to drive growth. In 2013, social
enterprises outperformed the private sector;
compared to 29% of small and medium
enterprises (SMEs), 38% of social
enterprises surveyed reported an increase in
turnover. There are over 70,000 social
enterprises in the UK, and data shows that
the number of these businesses has grown
form 5,300 in five-year period. They
contribute at least £24 billion to the
economy and employ a million people.
One of the reasons that social enterprises
are thriving may be the past economic
downturn. Social entrepreneurs see
opportunities in the gaps left by market and
government failures, and they create new
ways to rebuild the economy with
sustainability at its core. It’s a win-win
situation because these businesses create
growth that combines business with social
opportunity.
ImpactSocial enterprises are changing not only
how we do business, but also who does
business. They are much more diverse than
traditional firms. For example, 38% have
female chief executives, compared to 19%
of SMEs and 3% of FTSE 100 companies.
They are also twice as likely as mainstream
SMEs to be led by somebody from an
ethnic minority.
Many businesses nowadays wish to set up
away from dense urban areas, which
compounds the problems for communities
in deprived inner cities where a
disproportionate number of unemployed
live. Conversely, many social enterprises
deliberately choose to locate in a
challenging area, and are three times more
likely than their private sector equivalents
to be based where there is high
unemployment. 38% operate in deprived
communities in England and more than half
employ disadvantaged workers who
struggle to find a mainstream job.
Moreover, relative to private firms of a
similar size, social enterprises employ more
people. They often have a core mission to
tackle unemployment, and are usually the
best at understanding the complex needs of
people struggling to find work. Social
enterprises have a strong track record for
not only employing the disadvantaged, but
also helping them gain the skills they need
to find a stable job.
Social enterprise has the potential to make
big changes, because when the markets
shift, big corporates shift along with them.
Several big businesses are measuring their
social impact, working closely with social
enterprises in their supply chains or setting
up social investment funds. In fact, the
Social Value Act has been taken up by
more businesses than has been by public
sector commissions in the UK. Corporates
and social enterprises are not mutually
exclusive; if these enterprises can
demonstrate that their innovative model
works, others may follow. For example, the
Royal Bank of Scotland has an Inspiring
Enterprise programme, where the
Community Banking Team provides
dedicated support for the social enterprise
sector. Additionally, PwC has created The
Fire Station, a social enterprise hub that
partners with large organisations such as
the UK Government Homes and
Communities Agency and the Beyond
Food Foundation.
Source: http://www.cirqueducabaret.com/wordpress/wp-content/uploads/2012/02/Hearts-group_Large.jpg
Economics
Student actionThis interest in socially aware business
has spread to universities as well, with
organisations such as Enactus aiming to
enable progress and empower people
through entrepreneurial action.
A great example of the impact that
students can have through social
entrepreneurship is the ‘Beevelop’
programme of Nottingham University. It
was first set up by Enactus students in
2006, helping ten families in a small
Ghanaian village establish their own
beekeeping business. The families were
given extensive business training and
started with ten beehives each, which was
used to increase their annual incomes by
80%. Seeing the success of the
programme, the Enactus team expanded
the scope of the project to help families
throughout Ghana. They provided more
than 65 beekeeping cooperatives with
training and found solutions to business
problems the beekeepers had been having,
such as low productivity or poor access to
markets. The Enactus team also taught the
beekeepers to convert the leftover
beeswax to make scented candles instead
of throwing it away, creating a new
income stream at a minimal cost. In a
year, the student led team was able to
reach out to thousands of beekeepers and
empower their communities, transforming
the lives of many.
The FutureSocial enterprises have the potential to
impact how markets and businesses work,
but we must take care to ensure that it is
not treated as a passing fad. Lulu Toledo,
a UCL masters student in social
entrepreneurship, says that there is a
danger that social enterprises will follow
the same route as international
development – highly popular and
optimistic for several years, but fizzling
out when difficulties arise. Social
enterprise might be all about striving for
sustainability, but like any other business,
finance and funding are the biggest
impediments to growth. Donors are still
needed to improve training and boost
market exposure. Incubation programmes
and technical assistance can go a long way
in helping them attract private
investment.
There is also a genuine need for
collaboration across sectors – the
government, private sector, entrepreneurs,
philanthropists and NGOs can all make
the case for social enterprise.
Governments and international
organisations, although late to the party,
still have a huge role to play since they are
the largest buyers of social investment.
Nevertheless, the outlook looks very
positive for social enterprises, especially
since change occurs from the bottom up.
An increasing number of people are
realising that they can make a real impact,
which is perhaps the most promising idea
of all.
Kiuree Kim
Source: http://sites.psu.edu/jillleap/wp-content/uploads/sites/13714/2
014/07/toms-logo.jpg
Source: http://uclu.org/sites/uclu.org/files/styles/large/public/fifteen.png?itok=qTXfTLvZ
Economics
The Eurasian Economic UnionA future leader or yet another
victim of the free trade?
Brief overview and background Widely seen as an attempt to restore the
Soviet Union, the Eurasian Economic
Union (EEU) formally came into force on
1 January 2015, marking the beginning of
the year. The EEU is an economic and
political bloc that includes Russia,
Belarus, Kazakhstan and Armenia - a
powerful trio with an estimated population
of 173 million, combined GDP of 2.7
trillion dollars and 15 percent of the world
oil reserves that is to become either a
future economic dragon or a victim of the
free trade. The three founding countries
(Russia, Belarus and Kazakhstan) have
been part of the Eurasian customs union
since it was formed in 2010. As such, the
EEU can be seen as a further step in the
integration of the former Soviet empire
into a common political union arguably
seen as the final stage in any economic
integration. Indeed, the EEU implies the
free movement of goods, capital and
labour among its members, therefore
transforming the former customs union
into a common market. Furthermore, the
EEU aims at creating a common
pharmaceutical market by 2016, a
common electricity market by 2019 and,
more importantly, a new common
currency by 2025. However will such
high expectations ever be justified?
Undoubtedly, more attention needs to be
paid to this historic event that will matter
on the world stage.
The EEU’s structureSimilar to the EU, the EEU has a formal
structure with financial, political and
economic departments. It consists of the
Eurasian Economic Commission, a
Moscow-based executive body that is in
charge of the trade relations with third-
world countries and the World Trade
Organisation; the Court of the EEU, a
judiciary body, based in Minsk, and the
Eurasian Development bank based in
Almaty. The decision-making process of
the EEU is outlined in Figure 1.
Source: http://112.ua/mir/nachal-deystvovat-evraziyskiy-ekonomicheskiy-soyuz-obedinyayuschiy-rossiyu-belorussiyu-i-kazahstan-168937.html
[Figure 1]Source: http://en.wikipedia.org/wiki/Eurasian_Economic_Union
Economics
However, there is a crucial difference
between the formation of the EU and the
EEU: the conditions for membership; it is
widely known that countries wanting to
join the EU must meet certain
requirements, such as a well-functioning
economy, well-established democracy and
the rule of law. In contrast, the EEU does
not have such requirements, leading to
countries with an absence of the price
stability, contrasting a well-functioning
economy, joining the union. For example,
Belarus has seen an inflation rate of more
than 20 percent over the past years,
despite the target of 12 percent. Likewise,
Kazakhstan’s attempt to retain the
competitiveness of its domestic companies
through the 19 percent devaluation of its
currency in February 2014 led to pressures
on its then already high inflation rate. The
economic situation in Armenia does not
look promising either; the country’s
economy has been weakened by the
ongoing conflict with Azerbaijan over
Nagorno-Karabakh that is far from being
fully resolved. The resulting blockade
along the Azerbaijan and Turkish borders
has led to the isolation of Armenia’s
economy and contributed to its
dependence on Russia. Similarly, it should
not be forgotten that Armenia does not
share the borders with any of the members
of the EEU and this may cause problems.
Indeed, the potential gains of a free trade
agreement are likely to be higher the
closer in distance the trading partners are.
The purpose of the EEU
Generally, a trading bloc is viewed in
terms of the potential economic gains. For
now it would appear that the EEU is an
exception. What is the purpose behind the
Putin’s idea introduced in 2011? It can
potentially be seen as an attempt to rebuild
the Soviet Union, and hence be viewed as
a political bloc rather than a trading
association. More broadly, the EEU can be
seen as an attempt to boost the Russian
influence in the region and to retain
Russian global influence that has been
severely threatened following the Russian-
Ukrainian conflict. Therefore, the purpose
of a trading bloc may justify the different
conditions for membership between the
EU and EEU - different aims require
different approaches. It comes as no
surprise that Russia is ready to give up
economic stability by forming a bloc with
relatively weak and unstable economies in
order to gain political success and prevent
its neighbors from joining the EU – a wise
strategic choice during its political
isolation. Indeed, political gains from
trade may reduce the likelihood of
international hostility towards Russia.
Therefore, the EEU may be viewed as an
example of the ‘political’ free trade
agreement primarily signed for political,
rather than economic reasons. Countries
that have experienced an interest in
joining the EEU, such as Kirgizstan and
Tajikistan, are the members of the former
USSR. In such instance, this economic
union has a great chance of becoming a
political union; it just needs the right
direction. However, the EEU has a greater
chance of achieving the desirable outcome
if the benefits of the EEU agreement are
shared equally among the members.
Gainers and losers
Furthermore, it is worth asking whether
the benefits of the EEU membership
would be equally spread among the
members. At first sight, the benefits to
Belarus, Kazakhstan and Armenia are
clear - from gas and oil subsidies to
financial aid. However, some may
question the ability of the Russian
economy to provide such financial
benefits to its neighboring countries in the
light of the sharp fall in crude oil prices.
Indeed, this is a dramatic shock to the
Russian economy, which is highly
dependent on the oil revenues and,
therefore, is on the edge of recession.
Furthermore, Belarus is the only country
in the former USSR that trades more with
Russia than with the EU or China,
according to historical calculations; as
such, the Belarusian economy has a higher
dependence on Russia relative to the other
countries. However, this is not true for
Kazakhstan and Armenia who have
stronger commercial links with the EU
market. It is believed that since the
formation of the Eurasian customs union
in 2010 the only country that has benefited
has been Belarus. Indeed, Kazakhstan has
its own strong economy rich in oil
reserves. How does one know that the
EEU could not generate the same outcome
again with Belarus being a single winner
from yet another Eurasian trade agreement?
There is not enough evidence to suggest
that the same cannot happen this time.
Indeed, ‘the importance of being
unimportant’ phenomenon used in
international economics states that the
relative size of a country may play a role
in determining the gains from trade. When
big countries, such as Russia and
Kazakhstan, trade with relatively small
countries, such as Belarus and Armenia,
the latter are likely to enjoy most of the
gains. However, this would also mean that
Russian economic problems, such as the
falling rouble and oil prices, will quickly
spread across the other member states. The
EEU agreement would exacerbate the
impact of the anticipated recession in
Russia. Indeed, Belarus has already
experienced it with its rising inflation,
falling exports to the Russian market and
depreciation of the domestic currency. The
Belarusian currency has lost half of its
value since the start of 2014 following the
depreciation of the Russian rouble, since
the Belarusian economy is very dependent
on its neighbour. This resulted in the 30
percent duty on buying foreign currency
(known as the Tobin tax) introduced on 19
December 2014 and a rise in the interest
rate to 50 percent. Similarly, the
government forced exporters to convert
half of their revenue into the Belarusian
currency in attempts to protect domestic
currency. Nevertheless, this did not help
prevent an increase in the price of imports
and inflation. Unsurprisingly, this has
spread the hyperinflation panic following
the past experience of high inflationary
pressures with price levels reaching 192
percent in 1992 and another shocking 110
percent in 2010. The historically high
inflation can be witnessed on the
Belarusian national currency – with 4
pounds being equivalent to 100,000
Belarusian roubles now, compared to 100
Belarusian roubles a few years ago. This
has caused a collapse of the domestic
producers who rely on imported factors of
production leading to a distortion in the
functioning of the economy. It is already
evident that a few businesses have left the
market in Belarus, thereby reducing the
product range and resulting in the failure
of the market mechanism as consumers’
wants are hardly satisfied in the troubled
economy.
Free Trade Theories
According to the Similarity of Preferences
Theory, the main purpose of free trade is
to meet the tastes of consumers who prefer
products with different characteristics.
Economics
Therefore, the source of a comparative
advantage is on the demand side of a
given country, not the supply side as the
majority of the classic trade theories
predict. Consequently, countries with
similar lifestyles would aim at trading
with each other as they tend to consume
similar types of goods. This is exactly
what we see in case of the EEU – its
members have similar cultures and ways
of living and are hence able to meet the
tastes of consumers, which are alike
among their nations, through the free
trade. However, as seen earlier, an
increased dependence on the Russian
economy as a consequence of the EEU
agreement may prevent the Similarity of
Preferences Theory to hold; for example,
the consumers’ choice in Belarus has
declined over the recent weeks. This
suggests that free trade agreements may
not achieve the desirable outcome at least
in the short term.
What other reasons are there for the
possible failures of free trade agreements?
The answer is simple – incomplete
specialisation, which occurs if, after the
trade liberalisation has taken place, a
country continues to produce some of the
goods it imports. One would especially
expect the incomplete specialisation to
take place between economies of very
different sizes such as Russia and Belarus.
This is a feature of the Heckscher-Ohlin
model under which free trade takes place
between the goods that use the abundant
factors of production. In contrast to the
classical trade theory, the Heckscher-
Ohlin model states that each country will
still continue to produce goods that are
provided by both domestic and importing
countries, as well as the goods produced
only domestically. This would result in the
factor-price equalisation, which states that
identical prices of the factors of
production in the countries engaged in a
free trade agreement lead to equalised
prices of the domestic and imported goods
in the long run.
Indeed, this happens as a result of the
similar technologies and equally
productive workers, which earn the same
wage, being used in the production of
similar goods. This holds, to be exact,
only under the assumptions of the
Heckscher-Ohlin model (no barriers to
trade and access to identical technologies).
However, one can argue that neither of the
assumptions is perfectly satisfied in the
real world meaning that we should not
expect this theory to hold.
Free Trade as an engine of
economic growthThere is no surprise that yet another free
trade agreement came into force given an
ever increasing globalisation and growing
dependence of the world economies on its
neighbors in recent decades. Free trade is
often seen as an engine of economic
growth. Indeed, existing empirical studies
have showed the positive correlation
between an individual country’s growth
rate and the degree of trade openness.
Firstly, trade between the EEU countries is
likely to be pro-competitive; greater
pressure of competition will make firms
more efficient and innovative leading to
an expansion in the productive potential
and potentially Pareto optimal allocation
according to the famous Schumpeterian
creative destruction. Secondly, free trade
is directly related to better standards of
living through lower unemployment rates
(with higher trade volumes) and, as such,
higher spending by consumers that has an
impact on the short-run economic growth.
Thirdly, countries that engage in the free
trade may share technological and
knowledge advances with each other that
would allow greater efficiency in the
longer run. In case of the common market
with free movement of labour, this would
be an easy aim to achieve. Finally, the
economic growth increases simply
because the volume of trade rises with the
trade liberalisation. This may bring the so-
called linkage effects that arise from the
benefits exploited by the industries when a
particular sector of an economy expands.
For instance, consider an expansion of the
Belarusian production of tractors (one of
the main sources of exports) due to
liberalising trade with the EEU members;
this could encourage the development of
the infrastructure and telecommunications.
Consequently, this improved infrastructure
would lower the costs of transportation for
other industries in Belarus, further
contributing to the economic growth.
However, economists have so far not been
able to reach a consensus over the relation
between growth rates and trade openness.
The endogenous growth theory provides
quite an opposite argument – the long-run
economic growth is created and sustained
from within the country, rather than from
trade. For instance, this can come from an
improvement in the human capital of a
given country that is a result of an internal
process, such as public policies. Arguably,
a common market on its own is not likely
to succeed –it needs to be accompanied
with government reforms, such as
deregulation of businesses, investments
into human and physical capital and
improved rule of law aimed at overcoming
weaknesses of political legitimacy.
Otherwise, free trade may not be
associated with the desirable long-run
economic growth in the EEU. Indeed, the
famous Bhagwati-Ramaswami analysis
argued that free trade had a chance to
become a sustainable policy if used in
conjunction with a proper domestic policy
addressed to solve the domestic market
distortions that may threaten the success
of the free trade. Consider, for instance, an
inadequate environmental policy that leads
to the trade liberalisation being an
unsustainable policy. However, the market
failure that arises is a result of the
government failure, not free trade in the
first place.
4 pounds nowSource: www.world-banknotes.ru
4 pounds a few years agoSource: www.belarusguide.com/images/money/100BR_f.jpg
Economics
This is in line with Paul Krugman’s
argument that successful government
policy can be a source of a sustainable
comparative advantage in itself that can
prevent the failure of the free trade. Indeed,
Paul Krugman argues that ‘If governments
maximized the welfare of their citizens,
prospective moves toward regional free
trade would almost surely do more good
than harm to the members of the free trade
areas’.
The future of the EEU
Does the EEU have a future? This is a
tough question to consider. Given that the
structure of the union has been based on
the structure of the EU, one may find it
helpful to consider what has happened to
the EU. Yet, with deflationary pressures,
unbalanced economies and austerity
measures in a few countries in the EU, the
future of the EEU looks less promising
even if it adopts a common currency by
2025. However, it would be too simplistic
to believe that the future of the EEU will
be similar to what happens to the EU now.
Furthermore, the EEU includes only four
countries, whilst the EU – 28 member
states. What if the growing imbalances
between the southern periphery and
countries, such as Germany, have been
caused by the ‘diseconomies of scale’, in
other words too many members joining
the EU, resulting in diminishing marginal
returns of each additional member?
This may be because it is arguably more
difficult to monitor 28 different countries
that are different from each other than the
inner six founding countries of the EU. It
is important to identify the point when
allowing additional members to join will
lead to the diminishing returns and falling
benefits of the free trade cooperation.
However, one may question whether any
country would ever like to join the EEU
with a clear winner and dominance of
Russia – Tajikistan has so far been the
only potential member with the exception
of Kirgizstan that has already signed an
agreement to join by May 2015.
Ultimately, the EEU is a unique
association not just in terms of the
political purpose, which seems to be a
driving force behind it, but also, more
crucially, in terms of the significant
structural changes that are needed to
overcome its weak institutional framework.
There should be no doubt that this
economic union will be followed by a
political union in the longer run, sooner
than any other existing association can
expect this to happen, due to its ambitious
goals that are justified by a common
language, the same mentality, shared
culture and the sense of unity it creates for
the former USSR countries.
Anastasia Yermakova
Source: http://expert.ru/data/public/480764/480772/912-evr.jpg From left to right: Alexander Lukashenko, Vladimir Putin and Nursultan Nazarbayev
Emblem of the Eurasian Economic UnionSource: http://www.tsouz.ru/SiteCollectionImages/LogoEVRAZES.jpg
Flag of the Eurasian Economic UnionSource: http://yeurasia.org/wp-content/uploads/2013/07.jpg
Economics
Which Country has bled the most?News regarding the fall in oil prices has
for months been plastered over the media.
So much so that talking about what is
happening in the financial world without
mentioning ‘oil’ poses some difficulty.
The effects of low oil prices are not only
impacting the plans and budget sheets of
oil companies, but it is also leaving its
mark on the finances of various countries.
This report will focus on what influences
the price drop has had on an array of
countries.
Beginning with the OPEC countries, we
see exactly how contrasting the situations
are. For example, it would be perfectly
acceptable to assume that low oil prices
would automatically result in these
countries suffering from dire conditions.
However, a country such as Saudi Arabia
can indeed survive a period of cheaper oil
and this is because of its impressive
savings when prices were around the $100
mark. And whilst not ideal, in the short
run, Saudi Arabia may be able to sustain a
budget deficit. This is perhaps why the
country and its leaders are not feeling the
need to cut production in order to achieve
a stable price. Unfortunately, this does not
reflect the situation in Venezuela. The
debt-ridden country, unlike Saudi Arabia,
does not have the luxury of being able to
survive in such an environment.
Calculations by Deutsche Bank reveal that
in order for Venezuela to balance its
budget, a price of $120 per barrel is what
is required [1].
More so, Venezuela’s role in providing oil
to the Caribbean may mean that those
involved in the programme will be forced
to share the troubles of Venezuela.
PetroCaribe, set up by former Venezuelan
President, Hugo Chávez, is an energy
programme, which helped countries in the
Caribbean purchase Venezuelan Oil by
providing them with low interest loans. It
is estimated that the cost of this scheme to
the Venezuelan Government is in excess
of $2 billion a year. As a result of the
fallen oil prices, this scheme may now be
unsustainable for Venezuela, meaning that
it could soon be terminated, leading to the
spreading of woes across the Caribbean.
The contract of the agreement states that
Venezuela holds the right to cancel its
arrangement by giving notice of only 30
days, and these terms are not something
that will ease the worries of the countries
on the other side of the deal [2]. These
problems have presented an opportunity
for the United States to benefit at
Venezuela’s expense. The U.S. hopes to
take the baton away from Venezuela and
begin exporting oil to the Caribbean. Peter
Schechter was quoted saying, “We don’t
want our closest neighbours in the
Caribbean to suddenly be surprised by a
situation in which Venezuela is suddenly
unable to provide oil”, and so it does come
across that the U.S. is acting in the best
interests of the Caribbean, even if it does
mean making the PetroCaribe scheme
redundant.
Shifting focus to Iran, we find some rather
contradicting messages. For example, the
Deputy Foreign Minister of Iran, Hossein
Amir Abdollahian, said in regards to Saudi
Arabia’s attitude to not influence oil prices
that “If Saudi does not help prevent the
decrease in oil price…this is a serious
mistake that will have a negative result on
all countries in the region” [3]. A report by
the International Monetary Fund found
that for Iran to balance their budget, an oil
price of $136 is required [4]. A staggering
amount considering where the price lies at
the moment and with OPEC choosing not
to actively influence prices by cutting
output. So far, the picture does not seem
pretty. However, Iranian Oil Minister
Bijan Zanganeh stated that, “Even if the
oil price goes down to $25 a barrel, the oil
industry will not be threatened” [5].
http://theenergycollective.com/sites/theenergycollective.com/files/imagepicker/488516/falling%20oil%20prices.jpg
Economics
The two largest importers of oil are the
United States and China, and with low oil
prices both these countries are likely to
benefit, as their imports are now cheaper. In
regards to China, it is said that the country
would save over $2 billion annually for
every dollar drop in the price of oil. The
fact that the United States is also a producer
of oil may mean that their benefits are
outweighed by China’s. Coming back to
China, it seems as though they are making
the best of the current situation. Research
by Citibank found that China are planning
to open new storage facilities across the
country, which will allow them to
significantly boost their holdings of oil,
suggesting that China is keeping oil in its
reserves for a rainy day. And the conclusion
by the analysts at Citibank certainly
supports this idea “With the combination of
dramatically lower prices and the opening
of new coastal storage tanks, [we are] likely
to see strong stockpiling” [6].
Russia is no doubt going through a
tumultuous period with sanctions being
imposed from the left, right and centre, and
their situation is made even direr due to the
low oil prices. Russia is expected to lose
around $2 billion for every dollar drop in
the price of oil - as mentioned earlier, this is
roughly the same amount China saves for a
$ drop. The oil price situation is also
influencing their policy decisions, and just
recently they decided to cut their interest
rate from 17 per cent to 15 per cent (just
months after increasing it to 17 per cent
from 10.5 per cent) [7].
Whilst Russia doesn’t need a price of $136
to balance the books like Iran, they do
require a price of $100 per barrel, which,
without action, seems like a while away.
The International Monetary Fund has said
that they expect Russia to be in a recession
during 2015 and expected a 3% contraction
in growth this year. All these factors
combined seemed to have contributed to
Russia’s credit rating being slashed to
‘Junk’ by Standard and Poor (S&P), the
ratings agency [8], which means that the
price of borrowing for Russia has just shot
up.
It is quite clear that Oil has a significant
influence on individuals, companies, and
countries. And whilst the positive and
negative effects are split across the globe,
perhaps the only constant is that as the
lower oil prices are factored into everyday
goods, consumers across the world will be
better off. However, this article does not
report on the inevitable negative
consequences that lower oil prices are
having on oil companies, and that is why
the ‘perhaps’ appears in the previous
sentence. This development in oil prices
means lower revenues and profits for the
companies involved in the business, which
may threaten the financing of various oil
projects [9].
In the long run, if these projects do not
receive the green light, the supply of oil
may fall and that is when consumers may
begin to feel the pain.
Zaim Beekawa
References
[1] - (2014). Cheaper oil: Winners and Losers. Available: http://www.economist.com/news/international/21627642-america-and-its-friends-benefit-falling-oil-prices-its-most-strident-critics. Last accessed 7th Feb 2015.
[2] - Cunningham, N. (2015). U.S. Pushes Energy Exports to Undermine Venezuela.Available: http://oilprice.com/Energy/Crude-Oil/U.S.-Pushes-Energy-Exports-to-Undermine-Venezuela.html. Last accessed 7th Feb 2015.
[3] - MOGHTADER, M. (2015). Iran says Saudi Arabia should move to curb oil price fall. Available: http://www.reuters.com/article/2015/01/01/us-iran-saudi-idUSKBN0KA1OP20150101. Last accessed 7th Feb 2015.
[4] - Bowler, T. (2015). Falling oil prices: Who are the winners and losers?. Available: http://www.bbc.co.uk/news/business-29643612. Last accessed 7th Feb 2015.
[5] - MOGHTADER, M. (2015). Iran sees no OPEC shift toward a cut, says oil industry could withstand $25 crude. Available: http://www.reuters.com/article/2015/01/19/us-iran-oil-idUSKBN0KS1A120150119. Last accessed 7th Feb 2015.
[6] - Lily, K. (2015). China is stockpiling vast quantities of cheap oil. Available: http://qz.com/323827/china-is-stockpiling-vast-quantities-of-cheap-oil/. Last accessed 7th Feb 2015.
[7] - Allen, K. (2015). Russia sends roubletumbling after cutting main interest rate.Available: http://www.theguardian.com/world/2015/jan/30/russia-rouble-interest-rate-falling-oil-prices-central-bank. Last accessed 7th Feb 2015.
[8] - (2015). Russia's credit rating is cut to junk by S&P. Available: http://www.bbc.co.uk/news/business-30995473. Last accessed 7th Feb 2015
[9] - Adams, C. (2014). Oil price fall threatens $1tn of projects. Available: http://www.ft.com/cms/s/0/b3d67518-845f-11e4-bae9-00144feabdc0.html#axzz3R6DDFsVw. Last accessed 7th Feb 2015.
Image Source: http://www.arb.ca.gov/cc/oil-gas/images/oil%20pump%20sunset.jpg
Economics
Malaysia, misplaced your brains?
Insights into Research
Sometimes, talent is nothing more than a
factor of production. Capital has long been
the main topic which firms are concerned
about. Everything is about shifting from
labour to becoming capital-intensive. The
race to cut costs and hike up profits has
led firms to pursue innovation relentlessly.
But recently, everyone is humming to a
different tune in this entire buzz about
innovation – human capital. Harder to get
hold of than cold hard cash, talent is the
new obsession of the workforce.
Since human capital is often the seed for
innovation and the driving force behind
tertiary sectors, countries have begun
accumulating a large pool of high-skilled
workers, relying on them to accelerate the
development of their economies and thus
stay competitive. Unfortunately, for many
developing countries, where the need for
innovation is at its most dire, human
capital flight is very much a problem.
Termed the “brain drain” population, the
World Bank defined these high-skill
workers as those who have tertiary
education, are aged 25 years or above, and
who are currently not residing in their
country of birth. When wages and living
standards are less attractive than those in
developed countries, developing countries
such as Malaysia and Kenya are finding it
an uphill battle simply retaining their local
talent.What more about attracting overseas
talent?
The Case of MalaysiaMalaysia, for instance, has more than
300,000 high-skilled workers living
abroad, as of 2013. With such a significant
number of skilled workers leaving its
shores, it is no wonder that policy makers
and economists are worried. Adding insult
to injury is Malaysia’s migration
demographic. Unlike certain countries
such as the United States or Singapore,
where brain drain is alleviated by an
inflow of high-skilled workers, Malaysia’s
inflow of migrants is typically composed
of low skilled workers. Some economists
put down Malaysia’s declining growth rate
partly to this brain drain. At the current
rate, it seems like Malaysia’s aspirations
to become a high-income nation by 2020
have to be put on hold, unless it can
remedy its intensifying brain drain.
But how should the damage of the brain
drain be quantified? ‘Brain drain’
literature typically explains the push and
pull factors of high-skill emigration, but
very few have expanded on the monetary
costs of it. Seeking to put a number to the
brain drain in Malaysia, a think tank in
Penang recently released a piece of
research on the economic costs and
benefits of Malaysia’s human capital
flight.
The research concerns itself with 3 main
aspects: i) net income gain to the
emigrants, ii) net remittances to the
country, and iii) net fiscal costs to the
country. The study was based on 16 top
host countries for Malaysian high-skilled
emigrants, shown in the table 1.
Net Income GainTo make results comparable across
countries, the study controlled for
occupation, and accounted for cost of
living and income tax. It is assumed that
emigrants will be working in the same
occupation they are currently working in
overseas. Cost of living is accounted for
by using purchasing power parity
exchange rates. Finally, income tax is
deducted from gross income so that
income gains are not overestimated.
Consistent with previous studies,
overwhelmingly positive income gains
were reported in the study - unsurprising,
given that the World Bank reported that
54% of high-skilled Malaysian emigrants
had moved abroad for ‘higher salaries and
benefits’. The study found that the average
annual net income gain per emigrant in
2013 was USDPPP 24,500. More
significantly, this figure was 3.2 times the
average annual net income in Malaysia.
Emigrants who may expect high net
income gains would be those who are
working as ‘legislators, managers and
senior officials’ – income gain per migrant
was USDPPP 35,900 per annum.
Interestingly, Malaysian emigrants were
found to have experienced positive income
gains in all 16 host countries, irrespective
of occupation.
Net RemittancesApart from benefitting the emigrants
themselves, brain drain tends to benefit
their families through remittances as well.
Remittance inflows to Malaysia in 2012
were USDPPP 1.27 billion. Malaysian
emigrants in Singapore were found to
remit the most at USDPPP 2,289 per
annum. However, remittance outflows
from Malaysia during the same year were
USDPPP 7.25 billion, almost 6 times the
inflows. The gigantic outflow size was
mainly attributed to Malaysia’s large
population of low-skilled immigrants,
almost 95% of the immigrant population.
Weighing up both inflows and outflows, it
is obvious that Malaysia is a remittance
sending country, with a net outflow of
USDPPP 6 billion during 2012.
Net Fiscal ImpactThe findings of fiscal impact was split into
two layers in the research. Firstly, the
fiscal impact of high-skilled emigration
from Malaysia. And secondly, the fiscal
impact of immigration to Malaysia.
According to the study, the annual income
tax and consumption tax revenue lost from
one high-skilled emigrant was USDPPP 923
in sum. Thus after multiplying with the
total working high-skilled emigrant
population, lost tax revenue per annum
was USDPPP 208 million. The remittances
sent home generated consumption tax
revenues as well. An estimation from the
study placed the total at USDPPP 19.4
million per annum.
Calculating government expenditure was
slightly more complicated. Using full
government expenditure, the study found
that public spending saved comes to
USDPPP 3,824 per migrant each year.
However, using the lower boundary
(which comprises of health expenditure
only) gave an annual saving of USDPPP
313 per emigrant. Multiplying these
figures for individual emigrants by the
total high-skilled emigrant population,
public expenditure savings came to a
range between USDPPP 96.5 million and
USDPPP 1.18 billion.
Summing everything up, the annual fiscal
impact of high-skilled emigration ranged
between an annual benefit of USDPPP 1
billion and an annual cost of USDPPP 84.6
million.
After accounting for immigration
however, net fiscal impact altered
tremendously, ranging from a cost of
USDPPP 4.39 billion to a gain of USDPPP
1.09 billion per annum. Given that the
average was negative, it seems more likely
that brain drains pose costs to
governments.
What’s next?Although some effort has been made to
curb the high rates of brain drain, the
Malaysian government has come under
fire for not doing enough - more
specifically, for not taking the steps that
need to be taken, such as implementing a
meritocratic system. Unless the issue is
taken more seriously, it is likely that high-
skilled emigration will become a
permanent fixture in the Malaysian
economy. And at a time where the country
is looking to make the leap and join the
ranks of developed economies, it is worth
asking whether it really can afford to
continue to sweep its brain drain problem
under the carpet.
The full paper may be found at
http://penanginstitute.org/v3/files/BrainDr
ain_20140713.pdf
Lim, Krishnan, Yap (2014). The
Economic Costs and Gains of Brain Drain:
the case of Malaysia and its policy
relevance.
Joey Yap
The top host country for high-skilled Malaysian emigrants in 2013 was Singapore, hosting 47.2% out of 300,000 emigrants. The remaining high-skilled workers tended to cluster in traditional education destinations such as Australia, United States, United Kingdom, Canada and New Zealand.
Source: Lim et al. (2014), World Bank (2011)
Insight into Research
University LifeThe Economist’s Society’s Board
“As I was making preparations for the upcoming society elections, it occurred to me that it has nearly been a year since all of us were elected onto this great team.
Working with such amazing people has been (and will continue to be) the highlight of my time at UCL, and that made me extremely glad to have been given
the opportunity to serve as General Secretary of the society. The position has allowed me to better appreciate the time and effort which all of our directors
dedicate to each and every event. So as the end of our term in the society draws to a close, I would like to thank everyone on this team and, of course, all our fellow
Economists as well as the department - without whom the society would have not been able to achieve our success. With that, I wish the incoming juniors all the best
in their future endeavors and may we always stay close as a society even as we graduate from UCL.”
”Teamwork is like playing in an ensemble of a piano quartet. Each instrument takes a leading and supporting role along with the development of the music. Top notch players understand well when to stand out and to stay pianississimo as the composer requires.
Fortunately we have a dedicated and harmonious ensemble in The Economists’ Society from the very start and throughout to date. I wish our audiences will enjoy the most from the sonorous finale of the 2014-15 team yet to deliver."
“It has a very eventful year at the Economist’s Society, and the AGM last March seems like a distant memory. I have thoroughly enjoyed my time working as Treasurer, and I am proud to have been part of a committee that has introduced many new and innovative initiatives. It has been a real pleasure to work with both close friends and new faces within the committee, and I wish the first years that will be taking over from the current board all the best for the future!”
”Planning and coordinating Social Events at The Economist’s Society has been a fun and useful experience. Organising events requires more time and effort
than you think; however this has by far been outweighed by a certain satisfaction when events are successfully carried out and the work behind
them appreciated. While building on events from past years, it has been exciting to expand and diversify the variety of events, this year to include a
highlight in Social Events and the society’s first ever trip abroad: The EU Journey to the heart of Europe with visits at three of the world’s most
important institutions. Along with events such as the Freshers’ Programme, the Classic Christmas and The David Ricardo Ball, I hope that this initiative
will be pursued and further developed in coming years.”
“The academic year 2014/2015 has really been a year of advancement for the society. Looking back on what the society has accomplished, I can be
proud to have been a part of this team. With regards to Intra-Collegiate activities, we have made significant improvements in integrating Affiliate
Students into the department and UCL through our outreach events such as the Affiliate Students Social. The academic year also saw a return of the
Beyond the Lecture Series, for which we've received awesome feedback from both the students and the lecturers. I would like to thank all the
students, lecturers and administrative staff for making our events a success - the society would be nothing without you- and take this chance to wish
the new committee all the best in their future efforts to propel the society to even greater heights!”
”It has been my pleasure to be the Marketing and I.T. Director this year and to work with such dedicated and talented committee members. Well done to Liu Jia and Max. Thanks for all of your hard work and outstanding contributions to the Economist’s Society. I wish you all the best!”
University Life
”Leading the Academic Events Team this year has been pretty fun. It’s been a real honour to meet numerous Noble Prize winners, have dinner with Lars Peter Hansen at the Savoy and chat to leading economists such as Olivier Blanchard. Moreover, I feel this year has helped to develop strong relationships with the Economics division of the EFS as well as the LSE Economics Society through hosting joint events, and I’d really like to see this continued in the coming years.”
”As a sponsorship director of the Economist's Society, I truly had an experience best described as challenging, exciting and ultimately rewarding.
The exposure I received was invaluable, from pitching the society to organising events, from teamwork with the committee to individual tasks,
from each meeting down to each email helped me develop myself as an individual. With a degree spanning just 3 years, I can definitely say I've
made the most of it! As a part of the core committee, I've not only built a network with the brightest economists at UCL, I've made friends for life!”
“Looking back on the past two years of being in the Economist’s Society, I’ve enjoyed myself thoroughly. Having the opportunity to speak to esteemed Economists, Nobel Prize Winners, and working with the committee members of other schools has been an extremely edifying experience. I’m also glad the work myself and my fellow committee members set out to do, has in part come to fruition. Over the past year, the Economist’s Society has grown from strength to strength, we have formed partnerships with think-tanks such as the IEA as well as other schools such as Cambridge University. These partnerships have in turn allowed us to better leverage on our resources and cater to a larger student audience to organize events such as the LSE-UCL Economics Conference and the London Economic Policy Challenge. I hope the future committee will continue to build on this work, and that UCL students will cherish these platforms we have worked hard to establish. If more students would seize these opportunities to interact with Econ students from other schools and further explore and cultivate their love for Economics, I think UCL Economics will be an even more robust and dynamic than it already is.”
University Life
Academic Careers
Interview with Michelle TanThis article narrates the story of Michelle
Tan, a student whose diligence and
commitment are truly appreciated and well
respected.
Michelle came to UCL on a scholarship
scheme offered by the Singaporean
government. Students on similar publicly
funded programmes are usually bound by
contracts to work for the government after
graduation. In Michelle’s case, she will
start her career with International
Enterprise (IE) Singapore, a statutory
board under the Ministry of Trade and
Industry, Singapore. Focusing on boosting
Singapore’s external economy, the
government agency “spearheads the
overseas growth of Singapore-based
companies and promote international trade.”
Michelle will be engaged in trade and
business related affairs, helping companies
based in Singapore to explore the foreign
markets around the world.
Before coming to university, Michelle
studied in Hwa Chong Institution in
Singapore, known to be one of the best
schools nationwide. When asked about
how her pre-university experience has
affected her, Michelle referred to the
education system in Singapore as “very
structured and rigorous”. The A level
course intensity grants its students with a
rather strong mathematical foundation. She
added that being the student counsellor at
Hwa Chong also enriched her leadership
experience.
Michelle has been praised by Dr
Pemberton to be one of the students
“who’s done very well in all aspects”. She
speculated that such evaluation was made
on a reflection of many things besides
grades. “Academically, I am a decent
performer. Also, from how hard I worked
as president of The Economist’s Society, I
guess he [Dr Pemberton] inferred certain
qualities of myself from my achievement
as a president, rather than just the
academic records, since I’m not the best
academic performer.” In particular, she
emphasised the importance of being
proactive. “In university you realise that
you don’t get a lot of contacts with
professors. If you are in doubt, for instance,
when you encounter difficulties regarding
the courses, or you want to find out more
about your professors (what they do and
their research), just be proactive – take the
initiative and go to office hours.”
The most interesting part of the interview
came as Michelle talked about her roles in
The Economist’s Society: during the first
year she was the secretary, second year the
president, and now she is the Chairperson.
She recalled her entire ‘presidential year’
as extremely hectic: “I certainly had no
time to be involved with any other society.
I literally had no time to breathe! I
remembered last year was just society,
exams, bang!”
Devoting three years of her life at UCL to
be involved in The Economist’s Society,
Michelle endeavoured to do her best for it.
The Economist’s Society’s committee 13/14. Michelle’s year of presidency.
It is commonly acknowledged that the
president has a somewhat vague
definition in terms of responsibilities. As
Michelle pointed out, “you can do
everything and you can do nothing. It’s
quite ambiguous. It’s about how much
you want to put into the role.” Pushing
the society well beyond the status quo,
Michelle led a team to establish a special
events department, which are now
categorised as the intra-college events
and external relations departments. “I
had ideas - I wanted to do this and that -
so I needed a strong team to help me.
Then I had the first years to assist the
team.” She named four of our current
second-year students without hesitation.
“We had so many ideas, we did the LSE-
UCL conference, the Beyond the Lecture
series, the Ph.D. social, the London
economic policy challenge (…) we
turned the visions into reality.” Seeking
for opportunities outside the department,
the team extended their outreach and
networks.
Subsequently, Michelle listed what a
normal day was like for her back in the
2013/14 academic year, as exemplified in
Table 1.
When it comes to certain qualities of
being a leader, Michelle values the
ability to understand. “I always like to
meet my committee members, one to one,
just to check with them. It’s a team effort.
Sometimes you get caught up and tend to
forget about friendship. What I did as the
president made me very busy, but I also
needed time to catch up with friends,
rather than to talk about work all the
time.”
During her final year at UCL, she
stepped back and took the chairman
position in the society. By trusting for
her successor, Michelle has again found
the right balance as the chairperson. “I
would go to meetings when there’s
something wrong or there are some
concerns, otherwise I will just let him
[Fangzhou] manage everything.” She is
currently in the UCL Wine society and
enjoys life in a different way. (Michelle
happily shared some of her knowledge
about wines in the interview.) “Imagine
your senior’s telling you ‘maybe we
should do this or maybe we should do
that’, I didn’t want to be like that. The
committee has a lot of free space to do
whatever it wants within the constraints.”
Besides being proactive, there are three
other better-knows Michelle have for
students. The first is time management.
“Write a schedule when you start the day,
you want to make sure you finish it.”
Understanding trade-offs allows one to
plan rationally. “You only have 24 hours
a day. You need to know the priority at
this point of time. Maybe this meeting
with Queen Mary is really important and
this coursework is not due till next
Monday so go to the meeting today. It’s
about trade-offs and knowing what’s
important and what is more urgent.”
Secondly, one should set his/her goals.
“This is what I learned as the president. I
wanted to do these few things when I
started my term - I had this direction and
I would hit towards it.” Don’t let it drag
on.
Thirdly, in terms of working for the
government, one needs to be able to listen.
“Because when you are in a position of
setting policies, you have to be able to listen
to other people you are working with. In
government services, there’s a lot of decision
making.” This relates closely to her
experience as a leader.
“Try to listen to what other people have to
say, and form one consensus thereafter.
Eventually, the decision is what I make
together with the team. ” She illustrated the
decision-making process when organising the
Beyond the Lectures series. “I sought the
opinions of everyone in the team and found
out the timetable of the target audience. We
figured out when their free time was, or if
they had exams coming soon. We also tried
to collaborate with the other events we had so
there wouldn’t be four events in a week.”
As the interview proceeded, Michelle shared
her viewpoint for the future as “too early to
say,” because of changes in one’s priorities
and goals. Nevertheless, she is keen to work
for the government as a means of making a
difference for Singaporeans and their
businesses. “Six years later (when the
scholarship bond ends), I hope I will still be
in the government and in a position where I
can help Singaporeans even more, not just
inward looking but also outward looking.”
Geographically, Michelle is quite mobile: “I
might get posted overseas, from one overseas
centre to another.” She also pointed out the
potential shift of priorities to family. In a
sense, considering possible changes and
uncertainties in the future is pivotal whether
or not one has a clear plan.
How useful does Michelle think of her
economic background? Her answer is “the
quantitative reasoning and analytical skills I
obtained at UCL are certainly useful”. She
also mentioned some tools like Stata that
analyses data so as to make better policy
decisions.
In the end, Michelle kindly gave her advice
to economists of different years. “One thing I
want to tell myself back in the first year is to
have fun. I had too little fun. Do everything
you can, try it. Travel, meet people, have fun.
Second year is the year where most of us
have responsibilities. Manage your time well
and be proactive. We’ve got to do whatever
you can to achieve your goals in the end.
Know your goals. Because it’s the year when
a lot of things start to count. Not just your
academic grades, but also your internships.
Set your goals and walk towards the end.”
[Table 1]
Academic Careers
Ask five economists and you'll get
five different answers - six if one
went to Harvard.
-- Edgar Fiedler
Economists follow different schools of
thoughts. Attending economic courses in
different universities can help expose the
students to a variety of viewpoints and is
potentially beneficial during later stages of
their careers. Furthermore, a research
carried out by the Institute of International
Education (IIE) showed that spending
some time studying abroad is
advantageous to students’ future careers.
Their study revealed that interpersonal
skills are the most important criteria when
the employers are making recruitment
decisions and these skills are likely to be
the most prevalent in individuals who
have spent time studying abroad. The
UCL economics department currently
offers such an opportunity - students can
be exchanged to an overseas university for
a year as part of their degree programme.
The 4-year course, L101 economics with a
year abroad, aims to help the students
develop transferable skills such as
adaptability, flexibility and sensitivity to
cultural differences, all of which are key
to a successful career in a truly
international discipline. The programme is
an amazing opportunity for students to
experience a different campus life in one
of the world-leading universities in Europe
or the US.
The four-year degree is similar to the
conventional three-year degree where
students are required to take core
economics modules and electives that
interest them each year. The key
difference is that the students in the year
abroad programme spend their third year
studying economics at an overseas
university. Currently, UCL has exchange
agreements with some of the most
renowned universities in North America
and Europe. The list has recently been
expanded to include ten universities,
including Columbia University, Università
Commerciale di Bocconi, University of
Chicago, and University of Pennsylvania
amongst others. The department is also
continually exploring additional exchange
opportunities with the very best economics
departments worldwide.
Students must be enrolled in the L101
programme if they wish to take part in the
exchange program. The number of
vacancies for this programme is very
limited; about 20 students are admitted
onto the course each year. In addition,
academic criteria have to be met at the end
of the second academic year in order for
the student to continue with the
programme. Students who do not have
satisfactory results may be transferred to
the L100 programme and continue their
studies at UCL. Unfortunately, according
to the department, the transfer from L100
to L101 will generally not be permitted.
However, during the year, transfers may
be made available if the quotas given by
the universities overseas are no fully met.
This year, the transfer was made possible
on the 27th January and will end on the
4th February. Interested students can
choose from the few universities where
spaces are not fully filled. Students
interested in joining the programme are
encouraged to speak with the officer in-
charge to make a special case at the start
of the second academic year. There will
also be a year abroad fair hosted by UCL
for students taking part or interested to
take part in exchange programmes. It is
usually held in October where overseas
universities and returning students help to
answer questions regarding the year
abroad programme.
Application procedureThe general procedure is that students in
the year abroad programme will list all the
available schools according to their
preferences in mid-November of their
second academic year. They are then
required to submit a personal statement to
their favourite school. The UCL
economics department will decide on the
final allocation, taking into account their
academic performances and the personal
statement. The result is usually released
before Christmas. Students who are
unsatisfied with the universities allocation
can choose to opt out of the programme
and be transferred into the conventional
L100 program.
Economics with a year abroad (L101)
https://www.flickr.com/photos/cjsmithphotography/6973099511/in/photolist-bCbXxD-bHwU5p-4Z6RBu-9LSjBQ-9ab8Lq-hVXjYb-bdgn7B-bDmURT-bdg7rc-66SXdp-nxh1NR-AsGd-bP9CbX-owcT3z-bxkjbH-6ch2aS-of14NP-oeZqsN-8eH6U2-owcSLH-jLdg7-7ksvc7-jQpff8-jjdUye-owtZuz-jgxdSU-9KEgqk-2N4AtE-9qbWNT-dAQYYV-dwVVkw-bjyamj-7zrtCE-m3t2iR-cNUVUq-i5zy5E-cNUTkq-ovZKxn-asuopc-owaBag-owrNun-qC82oj-bmmpNd-oev8wj-ovZNv6-owaBDc-ouvBS3-owaCwV-oeXVj8-owrQF6
Academic Careers
Experience at
Georgetown UniversityZohair Hassan, who spent a year at
Georgetown University in Washington DC
in 2012, shared his views on the year
abroad programme. “Studying abroad in
the US is a completely different
experience from the UK.” Academically
speaking, the US universities have many
more assessments and examinations in
comparison to studying economics at UCL.
The midterm exams and the amount of
research papers can definitely be a
challenge to the students. The students are
also required to take a general curriculum
during the year there. “Having to take
courses on writing and humanities is not
something an economics degree in the UK
requires and is something I hadn’t done in
a while!”
The kind of non-academic experiences
that one gets from an overseas university
can also be quite different from the UCL
experience. “There are also informal
events, where celebrities come to campus,
such as when Bradley Cooper or Patrick
Ewing were walking around campus or the
Miami Heat were practicing at
Georgetown!” These are special
phenomenon that are unique to each
individual institution and makes the year
enjoyable and unforgettable for the
students taking part in the exchange
programme. “I feel I definitely made the
right decision coming to Georgetown
University, in Washington, D.C. It has
been an amazing experience thus far and
studying economics at a different location
from UCL has been an eye-opener.”
Post-graduate studiesOn top of all the things mentioned above,
being an exchange student at the
University for one year also helps if one is
considering to take on a post-graduate
degree in that institution. This is especially
beneficial if the student is considering
applying for a P.h.D programme to the US
directly after completing the
undergraduate degree at UCL. For the US
universities, it is generally more difficult
to assess applicants with non-US based
education background. They thus require
the students to demonstrate their abilities
through different types of activities that
they are involved with. Studying at that
university for a year can help the school to
know and assess the student, thus making
it easier to secure a position in the post-
graduate programme. However, this
definitely depends on personal
performances during the year and the
outcome can differ significantly across
individuals.
Not only do students receive all kinds of
benefits, they also do so at a competitive
rate. Students do not pay any school fee to
the host institutions, which can be a
considerably large amount, especially in
the case of US universities. Instead, they
pay a reduced fee which is less than 50%
of the usual amount to UCL.
Although the year abroad programme is
relatively new in the economics
department, it is definitely a fantastic
opportunity that helps to enhance the
value of the degree by giving access to
courses and lecturers that wouldn’t have
been available at UCL. Finally, to quote
Hillary Clinton, "To remain the leader in
this ever-changing world, we have to push
ourselves not just to think globally, but to
get out there and study globally as well."
George Town University Sourece: http://upload.wikimedia.org/wikipedia/commons/c/c7/Healy_Hall_
at_Georgetown_University.jpg
Academic Careers
Oxera Interview with Drayton TribuneOxera Consulting LLP offers economics
expertise within the areas of Energy,
Financial Services, Telecoms and Media,
Health and Pharmaceuticals, Transport
and Water. With offices in Oxford, Berlin,
Brussels and London, the firm has over
the years built up a strong international
reputation that has allowed it to work with
key decision-makers such as
policymakers, regulators and courts.
Oxera currently offers employment and
summer internship opportunities for
university students. With the deadline of
28th February quickly approaching, we
have interviewed Helen Ralston, a Senior
Consultant specialising in competition
economics, regulation and behavioural
economics, with extensive experience of
advising clients in the financial services
sector. During the second year of her BS
Economics degree at Cambridge, Helen
managed to secure an internship at Oxera,
and later turned this into a full-time
position after graduation. Two years later,
in 2009, she decided to pursue an MSc in
Economics at UCL. During our interview,
she shared some of her experience of
applying to and working for Oxera, as
well as offering some general advice to
prospective applicants.
How did you find your time at
Cambridge?
At the time it was quite a big shock. You
had to do five modules in your first year
and I hadn’t written an essay since my
GCSEs, so it was a bit challenging at first.
I remember my first supervisor asking
whether I had actually read any of the
books on the reading list. The answer to
that question was pretty obvious to both of
us! So it was a steep learning curve at
Cambridge but I really enjoyed it.
And after Cambridge you went straight
to Oxera?
Yes, I did an internship in my second year
and I really enjoyed working there so it
was an easy choice. Oxera has an Oxford
office, and coming from Cambridge (and
originally a village outside Reading)
meant I wasn’t really up for living in
London straightaway. I liked the idea that
I didn’t have to jump to the big smoke and
find a place in London. I’m now based in
Oxera’s London office.
Before you applied to Oxera, did you
consider any careers other than
Economic Consulting?
I wanted to stay in economics – that was
definitely what I wanted to do. I looked at
the GES (Government Economics
Service), other consultancies and what
was then the Financial Services Authority
(now the FCA, Financial Conduct
Authority). I wasn’t really worried about
jobs when I was studying – I had a lot
going on. I just thought I should do an
internship and happened to really enjoy it
so I was lucky. I think students might have
a harder time now though.
Were there any significant parts of your
degree or university life that helped you
in the application process to Oxera?
Yes, there was a very good careers service
at Cambridge and I’m sure there is one at
UCL. When I started studying I had never
written a cover letter before and the
woman at the careers service explained
that I had to make sure it was about the
firm I was applying to, and not just
economics. Just talking to someone about
the options and what different careers
would mean on a day-to-day basis (nature
of work, weekly hours, salaries, pressure)
was really helpful. Prior to this I had no
information at all, so was a bit lost.
Academic Careers
Moving on, could you elaborate a bit
about how you ended up at UCL?
It is not essential to have a masters to be
an economics consultant but it’s definitely
useful. Most of my more experienced
colleagues at Oxera have a masters or a
PhD. And after graduating from university
I was still in contact with my Director of
Studies from Cambridge who once asked
me whether I was still learning new things
and then whether I would consider
pursuing a masters. I was fortunate in that
Oxera was willing to hold the job open for
me, so that helped. At that point I had
been living in London for a while and
didn’t really want to move away. UCL had
a really good micro [economics] course
which was important to me as these are
the core skills you need for economics
consultancy and I have a particular interest
in game theory.
After graduating from UCL, you went
back to Oxera. Did you start working in
Financial Services straight away?
When I originally started at Oxera I was in
the Financial Services and Regulation
teams. The way Oxera is orientated is that
we have sector teams – such as Financial
Services – but also key skill teams such as
Competition and Regulation. Belonging to
both a sector and a skill team provides a
lot of variety, and when you’re starting as
a green graduate like me, that’s perfect –
no one really wants to specialise too
quickly. As my career has progressed I’ve
focused on projects in Financial Services
but still cover a range of topics. For
example, I am now involved in market
manipulation investigations as well as
competition, regulation and policy work. It
helps to have a ‘home’ team – mine is
Financial Services.
Could you elaborate a bit on your work
on a day-to-day basis?
I have been working at Oxera nearly eight
years now, and have progressed quite
quickly – I have been a Senior Consultant
for three years. Therefore, I have,
jokingly, far too many client meetings. I
really enjoy them but it can be a juggle to
keep the diary free for actual work. So I
probably spend two-and-a-half hours a day
in contact with clients, and the remaining
six hours doing ‘real’ work. Oxera is very
collaborative; each project has a team
ranging from three or four to around 12
consultants, and a core part of our work –
particularly at the early stages of analysis
– involves brainstorming to identify and
define analytical approaches to answering
the client’s questions. Of course, Excel
and Stata modelling, plus report writing
and preparing presentations, are important
aspects too!
Could you give an example of a case
study you are or have been involved in?
I’m currently involved in the CMA
(Competition and Markets Authority)
investigation into banking. We’re looking
at personal current accounts, the
equivalent of personal current accounts for
SME (business current accounts) and
loans to SME. The CMA’s concern is
whether the market is working
competitively and whether people know
what types of deals are available when
they make their choices. I can’t say too
much more on this but as you can imagine,
economics, including behavioural
economics, is playing a central role in the
analysis.
What would you say sets Oxera apart
from other companies?
I think the size is very important. I would
say we’re not too big and not too small,
and we have been growing a lot in recent
years with new offices in London,
Brussels and Berlin. [Editor’s note: Oxera
currently has around 100 employees]
Oxera also has a very strong reputation,
especially in competition economics and
litigation and especially in Europe. So that
distinguishes us for our clients and helps
attract the most interesting pieces of work.
In general, what would you say are the
most important skills required to
succeed in the application process to
Oxera?
For the application process, I would say
logical and critical thinking is very
important. Basic IO (Industrial
Organisation) knowledge is also needed.
For example, it would be surprising if an
applicant didn’t know what ‘price
discrimination’ meant. And that would
make it difficult because defining price
discrimination is intended to be quite an
easy question to start with, to relax
interviewees before we can move on to the
more applied, analytical questions.
In the interview process, I would advise
applicants to take their time. Make sure
you understand the question asked.
Sometimes you see interviewees who
panic and don’t really listen to the
question. They then try to answer the
question with something completely
unrelated. In the written test, less is more.
There is a short essay task which is not the
most challenging question. If it seems too
obvious, then just put the obvious down.
The idea is to see whether people actually
understand and can apply economics.
And once you enter the internship, do
you get to choose which division you
will get to work in?
We always ask if people have preferences
but most of the time they don’t. Generally,
if they do, they always say competition
and I think that’s because they feel it fits
in most closely with IO, when in fact IO is
central to all our skill teams and projects.
The interns definitely move around the
projects a lot more than the permanent
staff. We often ask them to do quite
discrete tasks. For example, sometimes
when we need to do a quick review of the
literature on a specific topic we ask interns
to do that and feed their findings back to
us.
So it varies quite a lot?
Yes it does. It’s up to the intern to make
their experience as rewarding as they can.
If people say they’re really interested in a
certain area we will definitely take that
into account and try and find project work
that fits in with these interests. We want
them to enjoy working at Oxera as well.
What would you say is the key thing to
succeed as an intern at Oxera?
I would say that when you’re working at
Oxera, see it as a team experience. We are
collaborative. If you’ve got too much or
too little on then shout, because neither is
fun. And, of course, try to get involved
with lots of different projects.
We have quite a lot of cross-team
meetings to share ideas so people can
learn and find new things they’re
interested in.
Academic Careers
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