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Channel Title: Economic Issues
Channel Website: http://www.economist.com/topics/economics

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An ORSome wheeze: How becoming a Hong Kong pensioner can save you tax
Print section Print Rubric:  Rich and tax-shy? Try a Hong Kong pension Print Headline:  An ORSome wheeze Print Fly Title:  Tax evasion UK Only Article:  standard article Issue:  How to improve the health of the ocean Fly Title:  An ORSome wheeze Main image:  Not dodging but shuffling Not dodging but shuffling THE global war on tax evasion rumbles on. What began as an American onslaught, with the Foreign Account Tax Compliance Act (FATCA) of 2010, has been joined by more than 100 countries through an initiative called the Common Reporting Standard (CRS). Under this, governments will exchange tax information on their financial firms’ clients on a regular, “automatic” basis, without having to be asked for it, starting this year. Holdouts such as Panama, the Bahamas and Lebanon have, one by one, been frogmarched into line. But tax-dodgers and their advisers are ...
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Globalisation: An economist’s bleak view of the future of globalisation
Print section Print Headline:  Negative reaction Print Fly Title:  The future of globalisation UK Only Article:  standard article Issue:  How to improve the health of the ocean Fly Title:  Globalisation Main image:  America’s helping hands America’s helping hands Grave New World: The End of Globalisation, the Return of History. By Stephen King. Yale University Press; 290 pages; $30 and ÂŁ20. GLOBALISATION is not new. In the late 19th century capital moved freely across the world and goods crossed national borders (despite tariffs) with the help of cheap transport. People, too, migrated across the oceans on a proportionately far bigger scale than they do today. All that came to a dramatic end with the outbreak of the first world war. Trade did not recover its share of world GDP until the 1960s. But after the Berlin Wall fell in 1989, it became tempting to believe in a kind of “Whig theory of globalisation” with economies growing ...
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Print section Print Headline:  Africa UK Only Article:  standard article Issue:  How to improve the health of the ocean External financial flows into Africa came to a total of $178bn in 2016, according to the OECD, down from $183bn the year before. This was largely driven by a 60% fall in the value of inflows of portfolio investments. In 2015 these made up 9% of external inflows; in 2016 they accounted for only 4%. Global shocks mean investors have been buying fewer developing-country assets. Inflows of official development assistance and remittances also fell. But foreign direct investment in Africa increased by 10%. Countries in the Middle East and Asia are becoming a source of cash for greenfield projects. Total external inflows are expected to increase slightly this year, partly due to a projected rise in remittances. Article body images:  20170527_inc771.png Published:  20170527 Source:  The Economist Newspaper ...
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Bubble bath: The end of Canada’s housing boom?
Print section UK Only Article:  standard article Fly Title:  Bubble bath Location:  OTTAWA Main image:  20170520_amp501.jpg STEPHEN POLOZ, the governor of the Bank of Canada, has been warning Canadians about piling up debt to buy overpriced houses since he took office four years ago. At first he used bankerly language, pointing to the risk of a “disorderly unwinding of household-sector imbalances”. Lately, with household debt at record levels and house prices in Toronto and Vancouver continuing to rise, he has started to speak clearly. “It’s time to remind folks that prices of houses can go down as well as up,” he said on April 12th. Various levels of government have been trying to restrain house prices (which Mr Poloz has encouraged to rise by keeping interest rates low). The federal government has tightened conditions for the mortgage-insurance policies it sells to lenders, which cover more than half of mortgages by value. Last year the government of British Columbia, Vancouver’s province, slapped a tax of 15% on foreign buyers. Ontario, whose capital is ...
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Ministers as managers: Nationalisation’s high short-term price and higher long-term cost
Print section Print Rubric:  A high short-term price and higher long-term cost Print Headline:  Ministers as managers Print Fly Title:  Nationalising industries UK Only Article:  UK article only Issue:  Why Israel needs a Palestinian state Fly Title:  Ministers as managers Main image:  Privatised Pat and his black and white fat cat Privatised Pat and his black and white fat cat LABOUR’S manifesto is as long as it is ambitious. Over 123 pages of sometimes dense prose, the party promises to “upgrade” the economy and “transform our energy systems”. This would involve the nationalisation of the water system, the energy-supply network, Royal Mail and the railways. Britain’s infrastructure is indeed due for an upgrade. But Labour’s plans would be costly—both in the short and long term. The first challenge would be to move privately held firms back into public ownership. ...
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Labour’s manifesto (re)launch: Nationalisation’s high short-term price and higher long-term cost
Main image:  IN ITS manifesto published this morning the Labour Party is proposing sweeping changes to Britain’s infrastructure. Backed by a ÂŁ250bn ($320bn) “national transformation fund”, the manifesto promises to “transform our energy systems [and upgrade] our economy”. This involves the nationalisation of the water system, the energy-supply network, Royal Mail and the railways. Britain’s infrastructure is indeed due an upgrade. But Labour’s plans would be extremely costly—both in the short and long term.The first challenge would be to move privately held firms back into public ownership. The government might need to fork out around ÂŁ65bn for the water industry, ÂŁ60bn for National Grid (which runs electricity- and gas-transmission networks) and ÂŁ6bn or so for Royal Mail. In reality, were Labour to win the election on June 8th the share price of those firms would probably fall as investors took fright. That would make everything cheaper. Nonetheless it is quite possible that half of the ÂŁ250bn fund would be spent before Labour had been able to meet its other pledges, such as building a “Crossrail” train line for the north of England. Nationalising the railways, by contrast, might not be especially costly. Network Rail, which manages the track, is already in public hands. The train companies have ...
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The Trump trilemma: The contradiction at the heart of Trumponomics
Print section Print Rubric:  Donald Trump promises expensive tax cuts, an investment boom and a smaller trade deficit. He can’t have all three Print Headline:  You can’t always get what you want Print Fly Title:  The Trump trilemma UK Only Article:  standard article Issue:  The policy designed to make America great again Fly Title:  The Trump trilemma Location:  WASHINGTON, DC Main image:  20170513_fbp501.jpg THE currents of trade, President Donald Trump accepts, will ebb and flow: “Sometimes they can be up and sometimes we can be up,” he said in an interview with The Economist on May 4th. A long-term trade deficit, though—such as that between America and Mexico, which ran to $56bn in 2016—is bad. Bad because it shows that a poor trade deal has been made (see article); bad because money is being ...
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If Macron fails, Germany fails: Angela Merkel should seize this chance to remake Europe
Main image:  GERMAN celebrations of Emmanuel Macron’s victory had barely begun last night when the first arguments about it broke out. The French president-elect’s longstanding calls for a “new deal” between his country and Germany were the impetus. In return for French structural reforms and fiscal restraint Mr Macron wants Berlin to support the closer integration of the euro zone, including joint investment projects, Eurobonds (common debt) and a finance minister, budget and parliament for the 19-state currency area. All of which drives a trench through the Berlin political landscape.On the one side are most in the centre-right CDU/CSU, the liberal FDP and especially in the finance ministry under Wolfgang Schäuble, the CDU finance minister. This camp opposes all of Mr Macron’s most ambitious proposals. It is backed by the majority of public opinion and the Bild Zeitung, Germany’s most-read newspaper. And it tends to the belief that the country already pays disproportionately into the European project, that its current success was built on tough reforms in the last decade and that struggling Latin economies like France need to go through the same painful but necessary process. This outlook has deep cultural roots in Germany’s aversion to loose money; the word for “debt” in German is the same as the word ...
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When the music stopped: How the 2007-08 crisis unfolded
Print section Print Headline:  When the music stopped Print Fly Title:  A brief history of the crisis UK Only Article:  standard article Issue:  A decade after the financial crisis, how are the world’s banks doing? Fly Title:  When the music stopped Main image:  20170506_SRD002_0.jpg EXACTLY TEN YEARS ago, on May 6th 2007, ABN AMRO rejected a $24.5bn bid by three European rivals for LaSalle, a Chicago bank which the Dutch lender had owned since 1979. The previous month Britain’s Royal Bank of Scotland (RBS), Spain’s Santander and Belgium’s Fortis had offered €72.2bn (then $98bn), almost all in cash, for the whole of ABN AMRO. By October that year RBS and its partners had won their prize, minus LaSalle, in what is still banking’s biggest takeover. When ABN AMRO was carved up, RBS briefly enjoyed the glory of being the world’s largest bank by assets. A giddy party was in full swing. “As long as the music is playing,” Chuck Prince, ...
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Subprime, anyone?: Worries mount about car finance in America and Britain
Print section Print Rubric:  Worries mount that it is too easy to borrow to buy a car Print Headline:  Subprime, anyone? Print Fly Title:  Car finance in America and Britain UK Only Article:  standard article Issue:  The data economy demands a new approach to antitrust Fly Title:  Subprime, anyone? Location:  LONDON AND NEW YORK THOUSANDS of second-hand cars, ranging from dented clunkers to Bentleys, glisten under the evening floodlights at Major World, a car dealership in Queens, a borough of New York. “Business has been good,” says a crisply-dressed salesman, scurrying between prospective customers. Almost everyone who wants to buy a car at Major World can get approved for a loan, he explains, regardless of their credit score, or lack of one: when banks turn buyers down, the dealership offers them its own in-house financing. In both America and Britain new-car sales ...
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Doing good and doing well: A growing share of aid is spent by private firms, not charities
Print section Print Rubric:  A growing share of aid is spent not by charities, but by private firms Print Headline:  Doing good, doing well Print Fly Title:  Aid and the private sector UK Only Article:  standard article Issue:  The data economy demands a new approach to antitrust Fly Title:  Doing good and doing well Main image:  20170506_IRP001_0.jpg “THE gold rush is on!” That is how a cable from the American ambassador to Haiti described the descent of foreign firms upon Port-au-Prince in early 2010. An earthquake had flattened the city and killed hundreds of thousands. But a deluge of aid presented an opportunity. The message, released by WikiLeaks, noted that AshBritt, a Florida-based disaster-recovery firm, was trying to sell a scheme to restore government buildings, and that other firms were also pitching proposals in a “veritable free-for-all”. During the ...
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Buttonwood: Investors are both bullish and skittish about share prices
Print section Print Rubric:  Investors are simultaneously bullish and skittish about valuations Print Headline:  Cape Fear Print Fly Title:  Buttonwood UK Only Article:  standard article Issue:  The data economy demands a new approach to antitrust Fly Title:  Buttonwood TEN years ago this month investors were pretty confident. True, there were signs that problems in the American housing market would mean trouble for mortgage lenders. But most people agreed with Ben Bernanke, the Federal Reserve chairman, that “the impact on the broader economy…seems likely to be contained.” The IMF had just reported that “overall risks to the outlook seem less threatening than six months ago.” That was reflected in market valuations. In May 2007 the cyclically-adjusted price-earnings ratio (CAPE), a measure that averages profits over ten years, was 27.6 for American equities (see chart). That ratio turned out to be the peak for the cycle. As the ...
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Speeding up: Euro-area GDP growth outpaces America’s
Print section Print Rubric:  GDP in the euro zone rose at a faster rate than America’s in the first quarter Print Headline:  Speeding up Print Fly Title:  The euro-area economy UK Only Article:  standard article Issue:  The data economy demands a new approach to antitrust Fly Title:  Speeding up Main image:  20170506_FNP501.jpg THE appeal of GDP is that it offers, or seems to, a summary statistic of how well an economy is doing. On that basis, the euro-area economy is in fine fettle; indeed, it is improving at a faster rate than America’s. Figures released on May 3rd show that GDP in the currency zone rose by 0.5% in the first quarter of 2017, an annualised rate of around 2%. That is quite a bit faster than the annualised 0.7% rate reported for America’s GDP. These figures probably overstate the gap between the two economies. In recent years, first-quarter ...
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The Economist explains: Why the war on poverty is about to get harder
Main image:  IN THE past few decades something amazing has happened. The share and the number of extremely poor people in the world (on the current definition, people who consume less than $1.90 a day at purchasing-power parity) has plunged. This is hugely welcome. People who live on less than $1.90 a day are very poor indeed—poor, in fact, even by the standards of the world’s poorest countries. So it is regrettable that the steep decline in poverty is unlikely to continue. Extreme poverty will probably not fall as quickly in the next few years as it has done for the past few decades. Why?The World Bank, which tracks poverty, estimates that 1.9bn people were extremely poor in 1981. In that year, the poor accounted for 42% of the world’s population. In 2013, by contrast, only 767m people were poor. Because the world’s population has grown so much in the interim, the share of poor people in the population has fallen even faster, to just below 11%. The single biggest reason for this delightful trend is China. In 1981, almost unbelievably, 88% of Chinese (and 96% of rural Chinese) seem to have lived below the poverty line. In 2013 only 2% of Chinese were extremely poor. That cannot continue. China will soon eradicate extreme poverty, if it has not done so already. So will countries like Indonesia and ...
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The battle of three centuries: The history of central banks
Print section Print Rubric:  Today’s criticisms of central banks echo debates from times past Print Headline:  Battle of three centuries Print Fly Title:  The history of central banks UK Only Article:  standard article Issue:  How to have a better death Fly Title:  The battle of three centuries Main image:  20170429_BBD001_0.jpg TWENTY years ago next month, the British government gave the Bank of England the freedom to set interest rates. That decision was part of a trend that made central bankers the most powerful financial actors on the planet, not only setting rates but also buying trillions of dollars’ worth of assets, targeting exchange rates and managing the economic cycle. Although central banks have great independence now, the tide could turn again. Central bankers across the world have been criticised for overstepping their brief, having opined about ...
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The last, toughest mile: China’s new approach to beating poverty
Print section Print Rubric:  China is trying a new approach to poverty Print Headline:  Stumbling along the last mile Print Fly Title:  Poverty UK Only Article:  standard article Issue:  How to have a better death Fly Title:  The last, toughest mile Location:  MINNING Main image:  20170429_CNP001_1.jpg MOST of Tian Shuang’s relatives are herding goats in the barren hills of Ningxia province, one of the poorest parts of western China. But last year Mr Tian came down to Minning, a small town in the valley, when the local government, as part of an anti-poverty programme, gave him a job growing mushrooms and ornamental plants in a commercial nursery garden. His name, address and income (20,000 yuan a year, or $2,900—six times the minimum wage) are written on a board by its greenhouse door. Mr Tian’s ...
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Verify, then trust: Why America has a trust problem
Main image:  TRUST IN politicians in America is at an all-time low. Recent polling suggests that the president is less trusted than ABC or MSNBC—a poor performance, given that in 2016 only 21% of Americans suggested that they had confidence in television news. But the legislative branch may be the least trusted wing of government: only 9% of Americans reported confidence in Congress in 2016. Technology and globalisation are commonly cited culprits for this parlous of affairs. But there is a simpler explanation for much of the slide: a reasonable perception that politicians are not working in the best interests of voters.The government’s trust problem certainly predates Donald Trump: trust has been falling for decades. Apart from a short-lived spike in support after the terror attacks on New York in September, 2001, the last time a majority of Americans suggested that the government in Washington, DC could be trusted to do what is right was in 1972, according to the Pew Research Centre. By 2015, less than one in five Americans held that view. And the trust problem spreads beyond government: survey evidence suggests that answers to the question “do you think most people can be trusted?” are also at a historical low in America, with only about a third of people answering in the affirmative. That ...
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The Franco-German relationship: What France’s election means for Germany
Main image:  Emmanuel Macron outside the chancellery in Berlin IN MAY 2012 a freshly elected François Hollande took off for Germany on his first foreign visit as president, determined to forge a close alliance with Angela Merkel. His plane was hit by lightning and had to turn back to Paris. Maybe it was an omen. Mr Hollande never achieved the reboot he had sought; a function of crises in both countries, poor chemistry between the two leaders and the growing gap between struggling France and the booming economy across the Rhine.Paris sees Berlin as patronising and uncollegiate. Berlin sees Paris as dysfunctional and unreliable. The two have been through shocks—the refugee crisis in Germany and the terror attacks in France—that prompted “no strong bond of cooperation between the two countries, despite the potential to set an example to the rest of the EU”, write Josef Janning and Manuel Lafont Rapnouil of the European Council on Foreign Relations.Yet the two are irredeemably interdependent. Berlin needs Paris to help keep the euro zone together, deal with the root causes of the refugee crisis in the Middle East and Africa (Mrs Merkel is increasingly taking an interest in the latter) and make Europe more self-sufficient in defence. There is even talk of Germany “buying into” France’s nuclear deterrent if ...
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Taking stock: To understand Britain today, look to the 17th century
Main image:  DAMN her eyes! I took over as Bagehot only the other day, on April Fools’ Day, having not focused on British politics since 1993. I was gently easing myself into my new job—getting my parliamentary pass, having lunch with MPs who happened to have been at Oxford with me, planning a trip out to the mysterious North. And now I have an election to cover!Theresa May’s decision to call a general election has been thoroughly chewed over by now. This was obviously a good call. Labour is as weak as it has ever been; Mrs May will be able to stamp her own authority on her party; shifting the next general election from 2020 to 2022 means that she won’t be negotiating with the EU against the sound of a ticking clock. I also sense that this could be a highly significant election. Mrs May is hardly an electrifying politician—she’s a competent grind with an unpleasant willingness to play to the Daily Mail. But she’s operating in electrifying times—and she has an interesting sense that something has gone wrong with globalisation and that we need to reach back into our national traditions, our sense of ourselves as a community, to fix it.This is the first election to be called in the post-globalisation era. British politics since the 1980s has been dominated by liberal globalisation: dismantling the ...
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Daily chart: Competitiveness at school may not yield the best exam results
Main image:  EVERY three years the OECD, a club of mostly rich countries, tests hundreds of thousands of high-school pupils across the world on maths, reading and science. Its Programme for International Student Assessment (PISA) has become the leading benchmark for international educational comparisons, and has prompted policymakers to learn lessons from the best-performing school systems. The latest PISA study, conducted in 2015, assessed more than half a million students in 72 countries. For the first time, it also asked respondents in 53 countries broader questions about their social and emotional well-being, addressing their relationships with peers, parents and teachers. The findings, published on April 19th, suggest that students’ family circumstances and psychological well-being matter just as much as schooling does for their eventual performance.One strong conclusion from the study is the importance of students’ desire to succeed, regardless of their natural aptitude. In general, the 25% of pupils describing themselves as the most motivated attain average test scores that correspond to an extra year’s worth of schooling relative to those of the bottom 25%. However, not all forms of motivation are equal.The OECD distinguishes between external motivation, produced by pressure from others, and ...
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