Equilibirum - Issue 2

32
THE EURO Corruption and catastrophe at Kabul Bank The Vulnerable State of the Cuban Economy Social Enterprise: The Big Issue for our Big Society Minimum Wage: The case for structural reform LIVE O R LET DIE?

description

The University of York's Economic Society's magazine, featuring a leader on the Euro, an analysis of government debt, and a look at Cuba's vulnerable economy.

Transcript of Equilibirum - Issue 2

Page 1: Equilibirum - Issue 2

THE EURO

Corruption and catastrophe at Kabul Bank

The Vulnerable State of the Cuban EconomySocial Enterprise: The Big Issue for our Big Society

Minimum Wage: The case for structural reform

LIVE OR LET DIE?

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EQUILIBRIUM

Contents46810

15161822

The Vulnerable State of

the Cuban Economy 12

Global View:What’s going on in the world?

Leader:Will the Euro survive?

Social Enterprise:The Big Issue for our Big Society

Minimum Wage:The case for reform

Afghanistan:Catastrophe at Kabul Bank

Opinion:Government Debt

Development:How effective is economic growth as a measurement?

The Soapbox:

Broken Britain? 21

Public or Private?

UK Health Insurance 26

Zimbabwe:Can it be an economic success?

Patents:The struggle for power

Advertorial:Looking for an internship abroad? Try this...

Internships:Working in a Start-up

Janssen PharmaceuticalsLife as a marketing intern

25293031

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19

The Economics society committee aims to be a society that enhances the university experience of Economics students, both in a

social sense and in a careers focused way. This magazine is part of that and it is an important opportunity for students to get involved with the society and share their thoughts and knowledge.

It is also part of our aim to promote Economics students at York; we aim, alongside our friends at the Investment Fi-nance Society, to get the top banks, profes-VLRQDO�VHUYLFH�ÀUPV�DQG�JUDGXDWH�UHFUXLWHUV�up to York and make them aware of the strong talent base that is here.

Another aim of the current Econsoc committee is to introduce a new profes-sional network scheme within the whole society. This will entail graduates advising third years about application processes, as-sessment centres and the like for graduate roles, third years who were lucky enough to carry out summer internships advising second years seeking out an internship of WKHLU�RZQ�DQG�ÀQDOO\�VHFRQG�\HDUV�DGYLV-LQJ�ÀUVW�\HDUV�DERXW�VSULQJ�ZHHNV�DQG�KRZ�they can make themselves more employ-DEOH�LQ�WKHLU�ÀUVW�\HDU��

Students who are interested will be matched with the corresponding student in the year above them based on the industry they want to enter. The networking can be carried out over emails. The committee feel there is an incentive for both sides of the equation to build an active relation-ship and network. This process has already begun.

We hope you enjoy the magazine!

Thoughts and comments please email [email protected]

A Note From The ChairEditorial by Guy Wallace

With the recent Eurozone

crisis and the looming

possibility of a double

dip recession, continual

economic gloom and market uncertainty

has been unwelcomingly lingering in our

daily news. It is in this cheerful context

that we welcome you to the second edi-

tion of Equilibrium, the University of

York’s Economics Society magazine. For

those of you who are new to the univer-

sity, and others that haven’t come across

us before, we provide a termly publica-

tion packed with intellectually stimulat-

���ȱ��������ȱ ��Ĵ��ȱ��ȱ�ȱ ���ȱ����¢ȱ��ȱtopics.

Our lead article focuses on the future

of the Euro asking what is required.

The conclusions made would be imple-

mented with far more ease were there

��ȱ���������ȱ������ě�ǯȱ�����ȱ���ȱ����ȱ�ȱ������ȱ����ȱ�Ĝ��ȱ�����ę���ȱ������ȱ���ȱEurozone crisis, leaving to be replaced

by unelected technocrats. Firstly, we had

George Papandreou, the Greek ex-Prime

Minster, announcing a referendum on

���ȱ��������ȱ��ȱ�������ǰȱ��ȱ�ě���ȱ�ȱȁ����ȱme or sack me’ plebiscite from a man

with his political back against the wall:

ȁ����ȱ��Ȃȱ ��ȱ���ȱ��������ǯIn Italy the consequences of the

prospect of default on such enormous

debt has been and remains not just a

threat to the Eurozone but also to the

global economy. Silvio Berlusconi, the

bastion of political humour was unfor-

tunately for comics ousted with what

 ��ȱ�ě�������¢ȱ�ȱ������ȱ�����������ǯȱ�ȱwas replaced by Mario Monti; though a

renowned economist ironically he was

one of the architects of the Euro.

The outcome of the crisis has been

and remains of huge importance for Brit-

ain, who although not a member of the

EU is hugely exposed to it. The UK is de-

pendent on the EU for trade, around 40%

of exports, and some forecasters believe

the UK could lose up to 5-7% of GDP

in the event of a total collapse; which

would be disastrous for our economy.

This weekend David Cameron, stuck in

the ultimate impasse, has decided to veto

the proposed EU-wide treaty and tackle

the Eurozone crisis, saying it was not

in the UK's interests, particularly with

regard to its damaging restrictions and

�����ȱ��¡ȱ��ȱ���ȱ���¢ȱ��ȱ������ȱę�������ȱindustry. It can’t be described as a deep

surprise that he chose the far lesser evil

of aggravating his fellow EU leaders as

opposed to his voters. Not to mention

his party funders in the City.The ensuing

legal and political implications for the

UK will be complicated, as is evident in

light of Nick Clegg’s recent criticism of

the veto, indicating possible cracks in the

coalition.

This issue features articles ranging

from the big society, summer internships

and broken Britain to a variety of foreign

market analyses and this issue’s leader,

an evaluation of the Euro’s survival. The

ę���ȱ ���ȱ���������ȱ��������ǰȱ��������-tions and advice from former University

of York economics students.

A core aim of the magazine is to

provide an opportunity for students to

contribute articles and in doing so get-

ting their work published on campus.

Consequently, we would like to

thank everyone who wrote articles for

this issue and we look forward to future

submissions.

Please contact us at [email protected] if you would like to have your article in the

next publication.

Ben Turner Jack EastwoodGuy Wallace

Founderand designer:

Jim Norton

Printers

Yorkshire Web

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Global ViewWhat’s happening

in the world of economics?

Cameron Vetoes New Deal

David Cameron has rejected an

EU wide ‘accord’ which would

VHH�JUHDWHU�ÀVFDO�XQLW\�DPRQJ�the member states. Mr. Cameron

argued that the deal was not in

Britain’s interest “so I didn’t sign

up to it”. Although fears about the

UK becoming isolated have been

raised, members of the coali-

tion have rejected them, instead

arguing that Mr. Cameron’s aim

was to safe guard the single mar-

NHW�DQG�SURWHFW�%ULWDLQ·V�ÀQDQFLDO�services sector.

UK - Isolation for Cameron?

7KH�&DQDGLDQ�FRPSDQ\�(Q-

FDQD�KDV�EHHQ�DFFXVHG�E\�the Environmental Protection

$JHQF\��(3$��RI�KDUPLQJ�WKH�JURXQG�ZDWHU�VRXUFH�LQ�:\R-

ming. A technique known as

K\GUDXOLF�IUDFWXULQJ��XVHG�LQ�gas the production, is be-

lieved to be the cause raising

more questions over the con-

WURYHUVLDO�PHWKRG��7KH�ÀUP�believes that the results found

are inconclusive.

CANADA - EPA accuse Encana

Experts from the Wall Street

Journal believe US house prices

ZLOO�EHJLQ�WR�SLFN�XS�QH[W�\HDU�but do not believe that price rises

ZLOO�JURZ�IDVWHU�WKDQ�LQÁDWLRQ�IRU�at least another three. However

economists do not believe that

WKH�VWHDG\�LQFUHDVHV�ZLOO�DGG�WRR�PXFK�WR�*'3�JURZWK�ÀJXUHV�

86���(FRQRP\�:RHV

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EU ministers have made an ad-hoc alliance with some of the world poorest nations in an at-tempt to produce a roadmap for the future of climate change. The EU, the LDC and Aosis are hop-ing to initiate talks this January, however they are facing stiff op-position from some of the world’s biggest polluters who don’t want to begin talks till 2015. It’s decision time in Durban but as yet it is un-certain as to which way it will go.

EU - Alliance With Poorer Nation

With the Eurozone in an unprecedented crisis Sweden serves as a case study in sound economic management. They said no to Euro in 2003, opt-ing to keep the Krona and work outside the common currency. Pressure WR�PDLQWDLQ�FRPSHWLWLYHQHVV�GHPDQGHG�WLJKW�ÀVFDO�SROLF\��DQG�WRGD\�Sweden operates with a budget surplus of 0.1% of GDP. Growth in 2010 was 5.7% and ten-year bonds stand at 1.7%, half a point below German %RQGV��$V�WKH�UHVW�RI�WKH�FODVV�KDV�ÁRXQGHUHG��6ZHGHQ�KDV�H[FHOOHG�

SWEDEN - Top of the Class?

2IÀFLDO�ÀJXUHV�UHOHDVHG�WKLV�ZHHN�showed a sharp drop in Chinese LQÁDWLRQ�IRU�1RYHPEHU�WR������from 5.5% in October - politi-FDO�OHDGHUV�ÀQDOO\�IHHO�DV�LI�WKH\�have tamed this “vicious tiger”. However the drop has been accompanied by falls in growth indicators and analysts fear China may attempt to slow down the appreciation of the Yuan. Any further appreciation could nega-tively impact Chinese imports and in turn, growth prospects, but a move to quell this could anger trade partners, particularly the US.

CHINA - ‘Tiger’ quelled

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The future of the European Monetary Union has been called into question again �����ȱ���ȱę����ȱ��������ȱ��ȱ

�����ȱ����ȱ��ȱ�����ȱ��ȱ���ȱ���������ȱof 2010. The inherent contradiction of the European single currency is again taking the centre stage. The trio of “no bail out, no exit and no default” has been proved not to have been tenable.

���ȱę�������ȱ������ȱ���ȱ���ȱ�����-����ȱ������ȱ��ȱ����¢ȱ�������ȱ���ȱ��������ȱ�����ȱ���ȱ��� �ȱ����ȱ��ȱ�����ȱof crises the Euro is not the robust currency that it was applauded to be. ���ȱ�ě����ȱ��ȱ���ȱę�������ȱ������ȱ��ȱ���ȱ���������ȱ��ȱ�����ǰȱ��������ȱand Ireland are so severe because �����ȱ�������ȱ���ȱ����ȱ�ĝ����ȱ���-����ȱ��ȱ���ȱ����£���ȱ���ȱ������������ȱ ���ȱ��������ȱ������ȱ����ȱ�����¢ǯȱ���¢ȱ���ȱ��ě�����ȱ�����¢ȱ�������-�����ȱ��ȱ������ȱ���������ȱ������ǯȱ���ȱ

low-interest rate policy of the Europe-��ȱ�������ȱ����ǰȱ���ȱ�¡�����ǰȱ������ȱ����ę����ȱ���ȱ�����ȱ�������¢ȱ ��ȱnot suited to the borrow-and-spend ��������ȱ��ȱ�����ǯȱ� ����ǰȱ �ȱ����ȱ���ȱ�����ȱ���������ȱ����ȱ�������ȱcountries should never have been of-�����ȱ���������ȱȮȱ �ȱ����ȱ ���ȱ ���ȱthe realities of the situation and not ����ȱ����ȱ��ȱ����ȱ��������ǯȱ

�re-Euro, countries with lower ��ȱ ���ȱ����������ȱ��ȱ��������ȱ

rates in the region of 10-15%. When ���ȱ��������ȱ�������ȱ����ȱ����ȱ����ȱ�¡�������ȱ���ȱ������¢ȱ���������ȱwas essentially to ensure stability in ������Ȃ�ȱ�������ȱ������¢ǰȱ�����¢ȱȬȱ�����ȱ���������ȱ��ȱ���ȱȃ��������ȱ��-����ȱ��ȱ������Ȅǯȱ�����¢Ȃ�ȱ������¢ȱneeded low interest rates and the ECB obliged by consistently keeping ����ȱ �����ȱ���ȱ�����ȱ��ȱŘȬśƖǯȱ����ȱreduction in the cost of borrowing for capital-starved countries was akin to, �����ȱ������ȱ��ȱ��������ǰȱȃ���-���ȱ��ȱ��������ȱ�¡�����ȱ�����ȱ����ȱ��ȱ�ȱ�������ȱ��������Ȅǯȱ��ȱ�������ǰȱthe cost of borrowing dropped by as ����ȱ��ȱŜŖƖȱ�ȱ�����ȱ��ȱ�ȱ��������ȱřŖȬ¢���ȱ��������ǯȱ���������ǰȱ����-������ȱ���ȱ���������ȱ ���ȱ�������ȱencouraged to borrow outside of their �����ǯȱ

����ȱ�ȱ������ȱ�������ȱ�ȱ���¢ȱpicture as long as the waves of the ������¢ȱ ���ȱ����ȱ���ȱ��������ȱgrowth fuelled by borrowing contin-���ǯȱ� ����ǰȱ ���ȱ���ȱ�������ȱ��ȱ

���ȱę�������ȱ������ȱ������ǰȱ��������ȱgrowth buoyed by loan spending could not be sustained and countries such as Greece nose-dived into a deep recession.

��ȱ���ȱ�����ȱ��ȱ���ȱ�������ȱ�����ȱ��ȱ�ȱ����ȱ��ȱę����ȱ����������ȱ

that would transpire with a greater ������ȱ��ȱę����ȱ���ȱ���������ȱ����¢ǯȱ���ȱ�������ȱ��������ȱ���������ȱ��ȱthe Eurozone allows countries with ����ȱ������ȱ���������ȱ��ȱ����Ȭ����ȱ�ěȱ���ȱ����ȱ��ȱ����ȱę�����¢ȱ�����������ȱnations. There was no alternative but to create the initial bailout package in �����ȱŘŖŗŖǯȱ

Whilst the Eurozone has of-ę�����¢ȱ��������ȱ����ȱ����Ȭ��Ȭ��ȱ�����ȱ��ȱ������ȱ���������ȱ����ȱ���ȱ��������ȱ�¢ȱ����ȱ����ȱřƖǰȱ��ȱ��ȱ����ȱto enforce. Indeed, this inability to sanction countries operating outside ���ȱ������ȱ���������ȱ��ȱ����ȱ��ȱ���ȱ�������ȱ ���ȱ���ȱ����������ǯȱ������-���ȱ��ȱ��������ȱ������ȱ�������ȱ��ȱ���ȱ������ȱ���������ȱ��ȱ�������������ȱRelations, “This is a very deep crisis for the Euro and all of Europe be-cause what we have is a terrible debt ���ȱ��ę���ȱ�������ȱ����ȱ��������¢ȱ���ȱEuropean nations share and no collec-tive structures to deal with any of it”. �ȱ�������ȱę����ȱ�����ǰȱ���ȱ��������-ily a European federal or super-state, ��ȱ��������¢ȱ��ȱ������ȱ���ȱ���������ȱ��ȱ������ȱ��Ȭ���������ȱę����ȱ��������ȱ�����ȱ��ȱ���ȱ������ȱę�������ȱ������ǯȱ����� ���ǰȱ �ȱ����ȱ�¡����ȱ���ȱ��ȱ

Will The Euro Survive?

The usual sceptics will decry the devolution of yet more power to Brussels. Yet, this is the

only route to ensuring the long-term survival of the Euro.

““

Eurozone’s ����������ȱ��������

Need for ������ȱUnity

BYȱ�����ȱ��¢�����ȱ���ȱǭȱ���������ȱ�������ȱ

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three things: more bailouts paid for

by foreign governments for irrespon-

sible domestic spending, countries

withdrawing from the Eurozone or

the extinction of the Euro. It is clear

����ȱ�����ȱ��ȱ��Ĵ��ȱ���������ȱ��������ȱfor any of these options and one of

these are viable at the present time.

Bob Hancké of the London

������ȱ��ȱ���������ȱ�Ĵ�������ȱ���ȱsystemic incompetence of the Euro-

zone in dealing with crises and the

���������ȱ����������ȱ��ę���ȱ��ȱ�������ȱof a “political union to coordinate

budget and taxation practices and

create euro-zone institutions and

capacities to help member economies

adapt to changes and turmoil”.

H� ����ǰȱ�����ȱ��ȱ����ȱ��Ĵ��ȱ��-

petite for anything resembling a

political union, especially in light of

Eurosceptic parties gaining ground

in countries traditionally amenable

to the Euro. To take the Greek ex-

ample, it does seem that German,

French, Italian and Spanish politi-

cians have in fact brought in a degree

��ȱę����ȱ����¢ȱ�������ȱ���ȱ���������-cal backdoor to save their beloved

European enterprise.

����ȱ ��ȱ��������ȱ�������ȱ���ȱę�-cal conditionality that all emergency

loan relief to Greece was subjected to.

����ȱ��������ȱ���������ȱ�ȱę��ȱ���-

mitment from the Greek governance

to implement an austerity package to

reduce excessive public expenditure

along with raising taxes. This condi-

tionality is precisely the function that

ę����ȱ����¢ȱ ����ȱ������ǰȱ������ȱmade pervasive on a larger and more

institutionalised scale.

Mario Draghi and those at the

helm of the European common cur-

rency zone need the tools to ensure

Fundamentally, at the heart of

the current drama is a ����ȱ��ȱę����ȱ����������ȱ����ȱ ����ȱ���������ȱwith a greater degree of ę����ȱ���ȱ���������ȱunity.

“Jean-Claude Juncker, Head of the Eurogroup

����ȱ�������ȱ������ȱ��ȱę��������¢ȱsound footing to avoid irresponsibil-

ity of one member nation impacting

on another member. This would

��� ȱ����������ȱ���ȱ�ě���ȱ���ȱ�������ȱstability of the zone, not to mention

the volatility and uncertainty it would

�����ȱ��ȱ���ȱ�������ǯȱ����ĵȱ ������ȱof Standard and Poor’s has stated

aloud what many of Europe’s heavy-

weight politicians have shuddered to

��¢DZȱȃ���ȱ�����Ȭ��ȱ�ě����ȱ��¢ȱ��ȱ��ȱcatastrophic that every line of defense

would be built up to try to prevent

this situation”. A permanent defense

against future crises and tool for

managing the Euro’s macro-stability

 ����ȱ��ȱ���ȱ��������ȱ��ȱ����ȱ�ȱę����ȱauthority.

Sceptics, such Britain’s conserva-

tive backbenchers, have decried the

devolution of yet more power to

Brussels and the loss of further politi-

cal and economic sovereignty. Yet,

this is the only route to ensuring the

long-term survival of the Euro the Eu-

ropean Monetary Union, with or, as is

now the case, without Britain, and the

�������ȱ����ę��ȱ����ȱ�����ȱ����ȱ��ǯȱThe elimination of transaction costs,

exchange rate uncertainty, increased

trade and labour and capital mobility

are worth the value of greater strin-

gency and centralised control.

Is It

Possible?

EQ

Eurozone in-competence

due to absence of

“political union to coordinate budget/taxa-

tion, create institutions; and

help mem-bers adapt to changes and

turmoil Bob Hancké

Reader at LSE

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As we are all aware, our ������¢ȱ��ȱ��ȱ��Ĵ���ǯȱ��ȱfact last year’s elec-tion was won almost

entirely on the back of promises ��ȱę¡ȱ���ȱ������ȱ������¢ȱ���ȱthe “broken society” it was built ������ǯȱȱ��ȱ���ȱ����ȱ�����ȱ�������ȱ������ȱ���ȱ����ȱȃ���ȱ���ȱ������¢ǰȄȱ���ȱ�����ȱ���ȱ�����ȱ����������ȱ���ȱ����������ǰȱ�����-���ȱ��ȱ��ȱ�ȱ���������ȱ�������ǯȱȱ��ȱ�����ǰȱ��ȱ��ȱ�ȱ������ȱ����ȱ���ȱ����- �������ȱ������ȱ���ȱ��������ȱ���������ȱ��ȱ����¢ȱ������ȱ��ȱ������ȱ�¢ȱ����������ȱ��������-����ǰȱ���ȱ������ȱ�¢ȱ����������ȱ�����ȱ�����ȱ������ǯȱ��ȱ��ȱ�ȱ�����¢ȱ���ȱ����������ȱ������ǰȱ���ȱ ���ȱ�ȱ������ȱ��ę���ȱ��ȱ���ȱ��������ȱ����������ȱ��ȱ�¡����ȱ��ȱǡŗŝŞ��ȱǻŗǼǰȱ��ȱ��¢ȱ��-����ȱ��ȱ��ȱ�ȱ���¢ȱ����������ȱ���ǯȱ

��ȱ��¢ȱę���ȱ¢���ȱ���������ȱ ����ȱ����ȱ¢��ǰȱ���������ȱ�����¢ȱ���������ȱ���ȱ�������ȱ��ȱ���ȱ�������-ist structure, in large part because �����ȱ������ȱ�������ȱ��ȱ����������ǯȱ��¢ȱ��ȱ �ȱ������ȱ����ȱ ���ȱ���ȱ�����ȱ��ȱ�� ��ǵȱ�������ȱ �ȱ����ȱ����ȱ��ȱ����ǯȱ������¢ȱ����ȱ��ȱ���ȱ�ȱ���������ȱ�� ǰȱ��ȱ����������ȱ�������-�����ȱ ����ȱ���ȱ�¡���ǰȱ���ȱ�����ȱ

�������Ȃ�ȱ��������ȱǻ���ȱ���ȱ������¢Ǽȱ�������ȱ����������ȱ�������¢ǯ

����ȱŗřǯśȱ�������ȱ������ȱ��ȱ�������ȱǻŘǼȱ������ȱ���� ȱ���ȱ������¢ȱ����ǰȱ���ȱ�ȱ�������ȱŜŗǰŖŖŖȱ��ȱ��������¢ȱ����-����ȱ��ȱ���������¢ȱ������ȱǻřǼǰȱ���ȱ����������¢ȱ

��������ȱ��ȱ����ǯȱȱ��������ǰȱ��ȱ����ȱ����Ȃ�ȱ� �����ȱȃ��������Ȅȱ����¢ȱ��� ��ǰȱ��������ȱis far from inher-���ǯ

So it is clear ����ȱ�ȱ������������ȱ

����������ȱ��¢ȱ����ȱ��ȱ ���ȱ�ȱ����ȱ����ȱ���ȱ����ȱ ���ȱ��ȱ�������ǯȱ

It is also clear from the ������ȱ����������Ȃ�ȱ����-ings that a socialist system ���ȱ���ȱ� �ȱ������ǯȱ���ȱwhat if there were a happy ������ǰȱ�ȱ����������ȱ�����-ture with a social focus? �����ȱ������ȱ����������ǯ���ȱ��ȱ�����ȱ��ȱ���-

haps one of the most highly �������ȱ�����ȱ��ȱ������ȱ����������ǰȱ���ȱ�������¢ȱ�ȱ���ȱ���ȱ���������ȱ��ȱ

��������ȱ����ȱtime at their

����ȱ�Ĝ���ȱ��ȱ������ǯȱFor those who are unaware, ���ȱ���ȱIssue is a magazine set up in �����ȱ��ȱ���� ȱ��������ȱ��ȱ���������¢ȱ������ȱ�������ȱ��ȱ����ȱ�����ȱ� �ȱ����¢ȱ�������ȱ��ȱ�������ǯȱ���ȱ�����ȱ��������ȱ�����ȱ��ȱ����ȱ���ȱ�������ȱ��¢ȱthe magazine from the Big Issue for a �����ǰȱ���ȱ����ȱ����ȱ���ȱ����£���ȱ��ȱ���ȱ� �ȱ������ǯȱ���¢ȱ���ȱ���� ��ȱ��ȱ����ȱ���ȱ���ȱ���ę�ȱ���ȱ���ȱ������¢ȱ����ȱ���ȱ�ȱ������ȱ������ȱ��ȱ������-���ȱ����ȱ����ȱ�����ǯȱ��ȱ��ȱ���ǰȱ�� -����ǰȱ�ȱ������¢ǯȱ��ȱ��ȱ������������¢ȱ�ȱ����¢ȱ������ȱ������ȱ ���ȱ�ȱ���¢ȱsimilar management structure to many ���������ȱ�������������ǯȱ��ȱ���ȱ�����ȱ�¡��������ǰȱę�������ȱ���������ǰȱ�������ȱ��������ǰȱ�ȱ���������Dzȱ����¢�����ȱ¢��ȱ ����ȱ�¡����ȱ��ȱę��ȱ��ȱ�ȱ�������-���ȱ������¢ǯȱȱŗǯŜśƖȱ��ȱ���ȱ����������ȱ�����ȱǻ���������ȱ��ȱ���������ȱ���ěȱ���ȱ�����ȱ�����Ǽȱ���ȱ�������ȱ�¢ȱ�����-������ȱ��������ȱ����ȱ����ȱ���ȱ�����ȱ������������ǯȱ���ȱ��������ȱ���ę�ȱ��ȱ����ȱ����£���ȱ�������ȱ��ȱ������ȱŞś�ǰȱwhich is a typical mark up for publish-���ǯȱ���ȱ��ě������ȱ��ȱ����ȱ������ȱ¢���ȱ�¢�����ȱ��������ǰȱ���ȱ��ȱ���ȱ���ę��ȱ����ȱ

BY Ellie CanhamŘ��ȱ����ȱ���������ȱǭȱ�����

Can The Big Issue and social enterprise provide the solutions for our Big Society?

December 12-19 2011 No.881 £2.00

FOR OUR BIG SOCIETY

Interview with The Big Issue Financial Director, Stephen Canham

EXCLUSIVE!

Page 9: Equilibirum - Issue 2

EQUILIBRIUM

9

of money to get it going. Many social

enterprises, particularly when they

start up, rely on a blend of money they

generate and grants from other sources

to balance their books. The more

fundamental question is that if you

���ȱ�ȱę����ȱ��ȱ���ȱ ����ȱ������ȱ������ȱan enterprise creates, does this add

up to economic sense? A hypothetical

example is that if the stat spends £10k

a year on a homeless person how big a

grant would you give a social enter-

prise that prevents 30 people from be-

ing homeless? Many social enterprises

(and charities) are now thinking about

�� ȱ�����ȱ ���ȱę��ȱ����ȱ����ȱ����ȱ��ȱequation.

To me it is clear the one of the suc-

cesses of the Big Issue is that it pro-

vides a product that the public wish to

buy- a magazine chock full of celebrity

�����������ȱ���ȱ ���ȱ ��Ĵ��ȱ������ǰȱhence creating our “incentive” to buy

it. But at the same time The Big Issue

has its challenges as well. The nature

of homelessness means that many of

the vendors struggle with debilitating

drug or alcohol problems, and may

����ȱ��ě��ȱ����ȱ������ȱ�������ȱ��ȱ�����ȱproblems. The Foundation can put

them in touch with support services,

but as the mission statement makes

clear, even innovative social enterprise

cannot make these problems go away,

that is and must be an individual’s

choice. And here lie the limitations of

what even successful social enterprise

can achieve.

But the Big Issue is not alone,

according to UK Social Enterprise

Awards 2011 two other successful

organisations are Newington Credit

Union (N.I) and Blue Sky Develop-

ment and Regeneration.

Newington Credit Union was set

up to “enable people to help them-

selves in relieving debt and poverty.”

Its conditions are simple, only mem-

bers can save or borrow, loans will

be made for productive purposes at

fair rates of interest, the character or

a member is the most important basis

for a loan, and membership is open

irrespective of class, creed, colour, or

politics. It works much like a bank

�ě�����ȱ����ȱ���������ǰȱ����¢ȱmanagement advice, savings schemes,

and foreign currency, but unlike banks

it will never exploit its customers for

���ę�ȱ��ȱ���ȱ���������ȱ���ȱ��������ȱ��ȱthe members.

Blue Sky is a ground maintenance

������¢Dzȱ���ȱ���¢ȱ��ě������ȱ��ȱ����ȱ��ȱ�����¢ȱ�����¢�ȱ�¡Ȭ�ě������ǯȱȱ���ȱmission is to help break the cycle

��ȱ���ě������ȱ�¢ȱ���������ȱ����ȱemployment for those leaving prison,

and to “enable them to move success-

fully into long-term employment.”

The employees work in small teams of

4-6 with one supervisor who is also an

�¡Ȭ�ě�����ȱ��ȱ���ȱ�ȱ����ȱ�¡�����ǯȱ���ȱteams provide work in a high demand

sector and the value is clear as less

����ȱŗśƖȱ��ȱ�����¢���ȱ����ȱ���ě-

ended, compared to a national average

of 39% (4) .The added bonus is that it is

an easily transferable model to employ

�¡Ȭ�ě������ȱ��ȱ�ȱ������ȱ��ȱ�������ǯIt is clear therefore that social enter-

�����ȱ���ȱ����ȱ���ȱ��� ��ȱ��ȱ��ě�����ȱforms: a magazine to provide jobs for

the homeless, a credit union to help

people in poverty save for the future,

�ȱ�������ȱ�����������ȱę��ȱ ����ȱ��-�����������ȱ�¡Ȭ�ě������ǯȱ�������ȱ����ȱimportant is that these schemes can

be expanded and adapted to address

many aspects of our broken society

without as much reliance on govern-

ment funds. Of course they have their

limitations and there is no one golden

solution to these vast challenges, but

maybe with a bit of innovation and

social consciousness the next genera-

tion of entrepreneurs will create our

Big Society.

be channelled back into the business,

the “Big Issue Foundation,” or other

charitable causes.

“The Big Issue Foundation” is the

charitable side to the organisation,

��������ȱ��ȱę�������ȱ���ȱ�����ȱ�����ȱit is very separate to the company. It

helps the vendors to gain access to the

services to which they are entitled and

supports the charities which provide

these services. It does not, however,

directly provide any services and this

aspect is key. As it says on the front

cover the Big Issue is “a hand up not a

����ȱ���Ȅǰȱ���ȱ����ȱ��Ĵ�ȱ�¡�����ȱ��ȱall areas.

The average vendor will sell

around 50 copies a week, leaving him

with 25 pounds of income. This self

made salary provides the vendors not

only with an income but also with a

�����ȱ��ȱ�����������ǰȱ���ȱ���ȱ��ě��-ence the scheme can make to people’s

lives should not be underestimated.

On a practical level, last year alone

“The Big Issue” made a turnover of

ǡŜ�ȱ ���ȱ�ȱ���ę�ȱ��ȱŘƖȱ��ȱ�����ȱ��ȱclearly this business model is working.

�ȱ���ȱ��ȱ�����ȱ ���ȱ���ȱę�������ȱ�����-���ȱ�������ȱ������ȱ��ȱę��ȱ���ȱ �¢ǯ

Q: “Stephen you’ve worked in busi-

ness for many years, what would you

say is the biggest strength of the Big

Issue as a company?”

A: It’s a very well known brand which

is recognised through our vendors -

our readers get not just a magazine

but the feel good factor of helping a

homeless person to earn their living.

That gives a unique selling proposition

ǻ���Ǽǯ

Q:ȱȃ�����ȱ��ȱ���ȱ�������ȱ���Ě����ȱ�����ȱ ���ȱ��¢���ȱ��ȱ��������ȱ���ę��ǰȱbut stay true to your mission state-

ment?”

A: The real problem is just trying to

��������ȱ���ę��ǯȱ�����ȱ���ȱ��ȱ���¢ȱthings you can do to provide addi-

tional support to vendors that there

�����¢ȱ���Ȃ�ȱ��¢ȱ���Ě���ȱ��ȱ���ȱ���������ȱ��ȱ������ȱȃ���ę��Ȅȱ��ȱ���ȱ���ȱ��-sue’s mission is that they are always

reinvested. The big problem right now

is times are hard for all businesses

and we’re no exception. Fewer people

are buying paper magazines choosing

digital media and free papers instead -

we can’t swop into these routes as that

removes the opportunity for the ven-

dor to be at the heart of the process.

Q: “Do you think social enterprise is

self-sustaining and could it hold the

answers for our broken society?”

A: I personally think that the Big Issue

is unusual in being able to be truly self

sustaining. Even then if you go back

20 years it only started because the

Roddick family gave John Bird a lot

Sources

1) Taken from European Commission/Eco-

nomic Forecast autumn 2009, estimated 12.6%

RI�*'3�DV�EXGJHW�GHÀFLW��

3) http://bit.ly/s2ow34 - Taken from 2011 Eng-

land statistics.

2) http://bit.ly/cHRTTT - Based on threshold

data of household income of 60% or less of the

median British household income in 2008/09.

4) http://tgr.ph/u2ZnRe - Telegraph article by

Tom Whitehead.

If you would like to know more about social enterprise visit: www.socialenter-prise.org.uk

Blue Sky is a ground maintenance company that solely �����¢�ȱ�¡Ȭ�ě������ȱand it has been suc-cessful - less than 15% ����ȱ���ě�����ȱ���-pared to the national average of 39%

EQ

Page 10: Equilibirum - Issue 2

10

EQUILIBRIUM

We all know the theory of minimum wages. With-out interference from any government or institu-

tions, we reach the equilibrium wage ����ȱ��������¢ǯȱ��ȱ�ȱę��ȱ���ȱ�������ȱǡŚȱ��ȱ����ę�ȱ����ȱ�ȱ���ȱ��ȱ ���ȱ�ě��ȱ�ȱ ���ȱ��ȱ��¢�����ȱ���� ȱǡřǯşşȱ���ȱ��ȱ��Ĵ��ȱ�ěǯȱ��ȱ�ȱ �����ȱ�������ȱ�ȱ ���ȱ��ȱǡřǯśŖȱ��ȱ�����ȱ����ȱ���ȱ���¢ȱ����ȱ����ȱ���ȱ����ȱ���ȱ��������ȱ����ę��ǰȱ���ȱ�����ȱ���ȱ���ȱ����ȱ��������ȱ����ę�ȱ���ȱ��ȱ���ȱ��������ȱ����ȱ��ȱ�����ȱ����ǯȱ����¢���ȱ ���ǯ

����ȱ�ȱ����ȱ������ȱ�����ȱ���ȱ����ȱmarket mechanism with people, I have ����ȱ������ȱ�������ȱ ����ȱ����ȱ��ȱȁ�¡�������Ȃȱ�����ȱ���� �ȱ������ǯȱ����ȱpeople seem to fail to realise is that employment is an agreement, if you are ������ȱ����ȱ�ȱ���ȱ¢��ȱ���ȱ�¡�������ǰȱ���ȱ��ȱ¢��ȱ�����ȱ��ȱ����ȱ�ȱ���ȱ¢��ȱ���ȱ���ȱ�¡�������ǯȱ��ȱ����ǰȱ¢��ȱ�������¢ȱ����ę�ǯȱPeople take actions such as accepting �ȱ���ȱ��ȱ��ȱ���������ȱ�����ȱ������¢ǯȱ��ȱ¢��ȱ������ȱ�ȱ���ǰȱ¢��ȱ���ȱ����������ȱ¢���ȱutility.

����ȱ���ȱ����������ȱ�������ȱ��ȱimpose a minimum wage above the ������ȱ��������ȱ ���ǰȱ��¢ȱ��ȱǡśǰȱ��ȱ���ȱ����ȱ����ȱ�������ȱ����ę�ȱ��ȱ���ȱę��ȱ

��ȱǡŚǯşşȱ��ȱ���� ȱ ���ȱ��ȱ��������ȱ��ȱ��¢���ȱǡśȱ���ȱǡŚȱ��ȱ����ę�ȱ�����ȱ��ȱ�����ǯȱ���ȱ�����¢ȱ��ȱ����ȱ ���ȱ���������ȱ����Dzȱ���ȱ������ȱ���ȱ����ȱ ���ȱ��ȱ���ȱ���¢ȱ�����ȱ ���ȱ���¢ȱ��������ǰȱ���ȱ���ȱ��ȱ��ȱincrease in the wage probably increase. The consequence is a lack of equality ��� ���ȱ�����¢ȱ���ȱ������ǰȱ�����ȱ��ȱexcess supply – unemployment.

��ȱ���ȱ����ȱ������ȱ��ȱ�������ȱ ���ȱ���ȱ�������ȱ ���ȱ��������ǵȱ���ȱgeneral consensus seems to be that the answer is no.

����ȱ���ȱ����������ȱ��ȱ���ȱ� ǰȱ������ȱ����ȱ�����¢����ȱ�� �ȱ���������ȱ�����¢���ȱ����ȱ��������ȱ������ȱ��ȱ���¢ȱ ����ȱ����ȱ�����ȱ��ǯȱ�������ȱ���-gestions are the high sunk costs that re-quire labour meaning that in the short ���ǰȱ������ȱ���ȱ������ȱ���ȱ���ȱ����ǯȱHowever, there are numerous other ef-�����ȱ ����ȱ��� ȱ���ȱ����ȱ������ȱ����ȱ

Minimum wage is nice if you can get it and keep your hours, however for those unemployed it is no fun at all. It may score political brownie points, but government, consumers, emloyers, and workers are all hit with the huge costs it imposes. ““

MMINIMU

WAGE

The poor do not

dare talk about it;

reform is needed

culturally and

structurally.

Comparison: Minimum wage across Europe (€)

BY Olly Neville�����ȱ����ȱ���������ȱ�������������

Page 11: Equilibirum - Issue 2

EQUILIBRIUM

11

Industries relying on minimum wage work-ers saw their prices rise by 1.8% more than RPI every year.

““

minimum wage causes.Firstly, while pay per hour may

have gone up, total pay stayed con-stant or fell. Employers who couldn’t reduce job numbers instead reduced hours worked. Those who are meant ��ȱ����ę�ȱ����ȱ�������ȱ ���ȱę��ȱ���ȱ�����ȱ��ȱ ���ȱ���¢ȱ��ȱ�����ȱ�������Dzȱ���¢ȱ���ȱ��ȱ��ȱ��Ĵ��ȱ��������ȱthan before.

Secondly, short run changes take time to adjust, in the long run there ��ȱ��ȱ�ě���ǰȱ ����ȱ������ȱ�� �ȱ��¢ȱmean employee numbers may not have been reduced, over the long run, less jobs are created and less new employees are taken on board.

A third reason was non compli-ance, is that the number of workers in the non compliance sector has been growing since the introduction of the minimum wage. Employers under-stated the hours worked by employ-ees. In a paper quoted in the research I was shown ‘Ram et al. clearly be-lieve that full compliance would force many small businesses in the clothing and catering sector to close’

�������¢ȱ �ȱ����ȱ�ě����ǯȱ�¡��-ples given include not hiring tempo-rary workers to cover for employees on mandatory training systems ȁ������ȱ���ȱ�¡������ȱ����������ȱ���ȱto work a bit harder or service to the customer worsened.’ But the big-����ȱ�ě���ȱ ��ȱ�ȱ�������ȱ����ȱ��ȱ���ȱcompliance. The government uses ��¡ȱ�������ȱ��ȱ�����������ȱ ���ǰȱ���ȱlower the family pay the higher the ��¡ȱ������ǯȱ���������ȱ����ȱ�����¢-ers would ‘understates the pay of the worker, but understates the hours by even more to demonstrate compli-ance with the NMW. This permits the worker to get a larger amount of ��¡ȱ������ȱ���ȱ���ȱ�����¢��ȱ��ȱ��¢ȱ�ȱcorrespondingly lower hourly wage. The employer, for consistency, under-states his own turnover which lowers ���ȱ���ȱ���ȱ������ȱ��¡ȱ������Ȃȱ

Finally we have prices. A study done by Wadsworth in 2007 show that industries relying on minimum wage workers saw their prices rise by 1.8% more than RPI every year, as the paper says ‘It is clear that the price of consumer services provided by NMW workers has risen, since the NMW,

relative to the RPI.’So what results do we have?

While minimum wage may not have initially seen job losses it has almost certainly caused a reduction in the number of small businesses starting up, and a fall in jobs being created. �����¢����ȱ�ě����ȱ���ȱ����ȱ��ȱ���ȱmedium to long run as the economy adjusts but seeing as we are in a ę�������ȱ������ȱ��ȱ ����ȱ��ȱ������ȱ��ȱ�������ȱ�����¢����ȱę�����ȱ����ȱ���ȱ�������ǯȱ� ����ȱ���ȱę�����ȱ�����ȱthe crisis will be interesting and not just the unemployment rate, but the hourly work level, as employers have ���ȱ�����ȱ�������ȱ ������ȱ��ȱ��Ĵ��ȱ�ěǯ

Furthermore we have non compli-����ǰȱ����������ȱ��¡ȱ��������ȱ�������ȱand government welfare payments increasing, hardly something to be mooted as a success.

The question that remains is who wins and loses from National Mini-mum Wage? As we can see if your hours have been cut and you retain �����¢����ǰȱ¢��ȱ ���ȱ��ȱ���¢ȱ��Ĵ��ȱ��Ĵ��ȱ�ěǰȱ��ȱ��ȱ�����ȱ ��ȱ����ȱ���ȱtheir wages raised, not all will feel the ����ę��ǯȱ���������ȱ���ȱ���ȱ������ȱ EQ

Full compliance [with minimum

wage] would force small businesses in

the clothing and catering sector

to close Professor M. Ram

purse as we see lose out, consumers who face higher prices lose out, but worst of all, those who really lose out are the unemployed and the unskilled. With falling job creation those who NMW is meant to help are hit hardest. People with physi-cal or mental disabilities or those who have low skills face increased job competition due to a shortening ��ȱ ���ȱ������ȱ���ȱę��ȱ����������ȱlosing out. There are a plethora of ����ȱ����ȱ ����ȱ����ę�ȱ���������ȱat amounts below the minimum wage, but cannot be accessed as the amount that would have to be paid  ����ȱ��ȱ�����ȱ���ȱ����ę��

Minimum wage is nice if you get it and can keep your hours, but for the many others out of a job it is not so fun at all and at the end of the day, everyone loses. It may sound like a nice idea and may score political brownie points with the left wing metropolitan elite who will never have to take a minimum wage job, or be kept out of employ-ment due to the minimum wage, but government, consumers, employers and workers are all hit and all face the huge costs of minimum wage.

UK Minimum wage Percentage Changes 1999-2010 (Source: Wikipedia)

6WDWXWRU\�PLQ�ZDJH�ZDV�ÀUVW�proposed as a way to control the prolif-

eration of sweatshops in manafacturing industries. The owners were thought to have unfair bargain-ing power over their workers.

First enacted in New Zealand in 1984. There is now legislation or binding collec-

tive bargaining regarding minimum wage in more than 90% of all countries.

Min wage was promulgated in the US in 1938. It was intentionally set at a high

national level to render the low-technology and low-wage factories in the South obsolete.

Since its introduction in the UK in1999, the adult rate of the national min wage has

increased by 68.9% - from £3.60 to its current level of £6.08.

Ipso Facto

- Professor J. Wadsworth, Report to Low Pay Commision (2007)

Page 12: Equilibirum - Issue 2

12

EQUILIBRIUM

Before critically addressing the modern economic state of Cuba it is important to understand its provenance

for individual character traits maybe overlooked if its history is not ac-counted for. Cuba, a previously colo-nial state, had been granted its formal independence from the Spanish in 1902. Whilst the state struggled with �������ȱ���Ě����ȱ����� ���ȱ�������ǰȱ�¢ȱthe 1950’s under the rule of Batista, Cuba boasted a high middle class (around half the population) with “living standards...among the high-est in Latin America (and indeed the  ����ǼȄȱǻ�� ��ǰȱŘŖŖŜǼǯȱ�ȱ�����ȱ��Ě�¡ȱof immigration collared with high wage levels helped keep the economy in relative terms “healthy”. Although allowing unions and wage rights the state had limited operations within the market.

This stance abruptly altered as the communist revolution in the late 1950’s successfully took control of governance of the society. Within the ę���ȱ¢���ǰȱ����� ���ȱ���ȱ����ȱ�������-ment to prime minister, Fidel Castro’s

��������������ȱ�¡����������ȱ�������ȱproperty and nationalised public ���������ǯȱ��ȱ�ě���ǰȱ�����ȱ���ȱ�����ȱBanks World Development Report, the state was moving from minimal-ist/intermediate to highly activist. A �����ȱ�Ĵ�������ȱ��ȱ����ȱ���ȱ������-tion by becoming more active may not necessarily be harmful. Social justice above economic performance is arguably favourable. Protection of farmers through barriers of trade or creating new jobs by increas-ing the work force at state owned ��������������ȱ��¢ȱ����ę�ȱ���ȱ�����ǯȱInstead, it is the miss-management of resources, poor policies and constrict-ing institutions that cause damage to the political economy. Unfortunately the governmental practices seem to ����ȱ��������ȱ��ȱ�¡����¢ȱ����ǯȱ����ȱ��ȱareas such as food supply, follow-ing communism, the Cuban state has ��ě����ǯȱ�¢���ȱ�����DZȱȃ���������ȱ��ȱstaple food products have character-ized the last twenty years and, al-though famine conditions have never materialized, the country has had to ������ȱ�������ě�ȱ��ȱ����ȱ��ȱ�������ȱ

before...Cuba commercially imported nearly 85 percent of its food needs” ǻ�¢���ǰȱŘŖŖŝǼǯ

The state took on a high number of roles but with limited strength and �¡�������ǰȱ���ȱ�������ȱ��ȱ����ȱ ���ȱmet mainly by failure. As a result ȃ�����ȱ��ȱ��Ĵ��ȱ�����ȱ����ȱ����Ȃ�ȱ��ȱ���������ȱ����ȱŗşŜŖȱ��ȱŘŖŖřǯȄȱǻ����������ǰȱŘŖŖŝǼȱ����ȱ��¢ǰȱ��ȱ����ǰȱbe accounted to the so called “special period” following the collapse of the Soviet Union. The Cuban state heavily relied on soviet support both socially and economically. Therefore, with the collapse of the Eastern Bloc Empire, Cuba lost its major source of trade and the wealth of the currency it was tied to. This period saw intense hardship. Many staple products pre-viously available to Cuban civilians disappeared; Deere notes vulner-ability in “wheat, beans, and animal feed” and a “mandated 50 percent cut in state energy consumption across all industries and services.” (Deere, 1991) With 99% of all oil imports coming from the USSR, once this �����¢ȱ����ȱ��������ȱ���ȱ�ě����ȱ����ȱ�¢ȱ

The Cuban economy needs to be classified as ‘vulnerable’, argues James Kay.Why? Because this vulnerability left unchecked and unal-tered, as Fidel dies, could lead to dangerous instability with serious

possible consequences.

The Vulnerable State of The

Cuban Economy

Raul Che Fidel

Area:

109,884 sq kmPopulation:

11,241,894GDP:

US$9,900

HDI:

0.776

Page 13: Equilibirum - Issue 2

EQUILIBRIUM

13the state were dramatic. Worse still a large level of state revenue came from the re-export of unused soviet oil (second largest export).

Although starvation was avoided, food consumption was cut back to ���ȱę���ȱ��ȱ���ȱ��������ȱ������ȱ������-ing in the “United Nations World Food Program (WFP) [having] to feed more than 700,000 families” (Gayoso, 2007). The economic dependence the state placed on another nation shows serious political misjudgement. Whilst Cuba was able to formulate deals with China and many of the Latin American states including large oil contracts with Venezuela it was forced to accept US donations. Perhaps this period could be argued to be unforeseeable and a series of unfortunate events that hamper the Cuban state; however, the UN food donations remained in place for over a decade and there are economic reports of no positive growth in 2009 [1]. Even faced with famine, the state refused aid from countries it per-ceived enemies of the political ideal leading to unnecessary economic hardship.

The analysis of Cuba as economi-cally vulnerable and politically poor whilst accurate overlooks posi-tives and successes that have been achieved. The Brookings Institute Index of State Weakness in the Developing World (Brooks Index) ranked Cuba 62nd. Economically and politically it scored 3.60 and 2.94 out ��ȱŗŖȱ�����������¢ǰȱ���ȱ��Ĵ��ȱ����-tile. However, for Social Welfare it scored 9.88 [2]. For a state with such a marked history of shortcomings this is an impressive achievement. The Cuban Constitution of 1992 illustrates the importance of education: “no child be left without schooling, food and clothing...that no young person be left without the opportunity to study...that no one be left without access to stud-ies, culture and sports” (Cuban Constitution Article 9, 1992). Re-mote farming villages have state run education for the youth who would be un-����ȱ��ȱ�Ĵ���ȱschooling due to their remote loca-tion. Cuba ����ę��ȱ����ȱhaving one of the highest

doctors to person ratio in the world and a life expectancy rate greater than that of the US: “no sick person be left without medical care” (Cuban Constitution Article 9, 1992). The state employees complete impartiality in terms of race citing “Discrimination because of race, skin colour, sex, national origin, religious beliefs and any other form of discrimination harmful to human dignity is forbid-den and will be punished by law.” (Cuban Constitution Article 42, 1992) Impartiality, at least in terms of race, is therefore a characteristic of the Cuban state.

����ȱ��¡����ȱ��ȱ��ě�����ȱ���-nomic achievements and pitfalls arguably culminates in classifying the Cuban economy as a “vulnerable”. ������������¢ȱ���ȱ��ȱ��ę���ȱ�������ȱ��ě�����ȱ�������Dzȱ���ǰȱ�������¢ȱ���ȱmost important, is “security”. Whilst ���ȱ������ȱ����¡ȱ�������ę��ȱ�����ȱSecurity at 8.28, it must be asked how this statistic is accumulated. By mea-suring “the occurrence and intensity ��ȱ�������ȱ���Ě���ǰȱ�������ȱ���£���ȱ��ȱpolitical power, perceptions of secu-rity, state sponsored political violence and gross human rights abuses” (Rice and Patrick, 2008) the Index com-������ȱ����ȱę����ǯȱ����ȱ�����ȱ����ȱ�ȱfair assessment, personal security is highly important; one must feel safe in their given territory. And, with the view to active armed rebellion ���ȱ���������ȱ��Ĵ���ǰȱ����ȱ���ȱ��ȱ����ȱto be true. However, Cuba’s actions against those it perceives a threat to ���ȱ����������ȱ���ȱ����ȱ����ȱ��������ȱthe security of its citizens from the state itself.

According to the NGO “Commit-tee to Protect Journalists”, Cuba was the third largest prison for journalists in the world [3]. Further to this, the survey does not take into account all factors that could be seen to encom-

pass “security”. Does it take into account the Cuban reliance on very generous import and export poli-����ǵȱ����ȱ��ȱ��������ȱ���ȱ����������ȱof rebellion following the death of �����ȱ������ǵȱ����ȱ��ȱ��������ȱ���ȱjob security of citizens dependent on crumbling infrastructure such as sugar mills that continue to produce less per annum than previous years: “After the 2002 government decision to restructure the sugar industry, the numbers of sugar mills decreased drastically...more than 200,000 workers have been released by the industry.” (Gayoso, 2007) This would not seem to entail security to those working for the state.

The Cuban economic state can be termed vulnerable with regards to illicit trade and internationally judged illegal activities. When faced with a serious lack of income, a terrible cur-����ȱ�������ȱ��ę���ȱ���ȱ��ȱ������¢ȱ�������¢ȱ���ȱ�¢ȱ���ȱ�����ǰȱ�ȱȃ�����ȱę¡Ȅȱ�����ȱ������ȱ����ȱ����ȱ������ȱrevenue into the system. Re-creating institutions can be costly, lengthy and for a proud nation provide an embar-rassment, an admission of failure of a certain ideal. Illegal operations rep-resent a relatively easy way to gain large sources of money. Although the

“To avoid more trauma or inconsist-

ency, any change to the currency must

be done with an approach

integral to one that is born in

mind”

Cuba’s ac-tions against

those it percieves a threat can call into question the security of its citizens from the state itself

Raul Castro,CUBAN PRESIDENT

Page 14: Equilibirum - Issue 2

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14communist government removed the gambling enterprise when they came to power, the elites are no strangers to illicit activities, “By the 1980s, Castro ���ȱ��Ĵ��ȱ��������ȱ��ȱ���ȱ����ȱtrade.” (Nilsen, 2007) This contin-ued and potentially increased illegal activity weakens Cuba internally, but crucially, politically in the interna-tional forum.

The United States’ policy on international drug trade and per-ceived illegal actions has become increasingly hard-line following the şȦŗŗȱ�Ĵ����ǯȱ���ȱ��ȱ���ȱ����ȱ���ȱby no ways on favourable terms: “the tension in U.S.-Cuban relations remains deeply entrenched” (Erikson and Wander, 2008). As a state that has ��ě����ȱ����ȱ�����ȱ��������ȱ���ȱthe hardship brought by the end of trade partners, it must be aware of the potentially devastating nature of being isolated from the international community let alone the threat of foreign invasion. Nilsen goes as far to add “Cuba’s future depends on controlling illegal operations and all types of corruption.” Perhaps this may seem too dramatic, however, this further concurs with the idea of the Vulnerable Economy.

Vulnerability can be found in the currency of the Cuban economy. Despite continued and renewed pro-test following the recent succession of Raul Castro to power, Cuba still operates a dual currency. As shown by Orro all levels of the Cuban society wants freedom from this restricting practice: “Whether ordinary citizens, ����������ǰȱ��ȱ�����ȱ�Ĝ�����ǰȱ���¢ȱ���ȱagree that the current dual monetary system should be eliminated.” (Orro, 2008). In short, state workers are paid in one currency (authentic Cuban Peso – ACP) but, in order to buy cer-tain staple products must convert this to Cuban Convertible Peso (CUC). Before state intervention the use of the American dollar was common in such deals; however, following arguably an act of pride the Cuban state placed

����ě�ȱ��ȱ����������ȱ���ȱ�¡��������ȱ�������ȱ�ě�������¢ȱ�������ȱ�����ȱ�����ǯȱRaul Castro, aware of the popular ������ȱ��ȱ���ȱ�¢����ǰȱ����ȱ�����ę�ȱmention in his initial address as the new Prime Minister: “To avoid...more ���������ȱ�ě����ȱ���ȱ���������������ǰȱany change referred to the currency must be done with an approach inte-gral to one that is born in mind” (Cas-tro, 2008). These constricting institu-tions slowing the recovery and action of an already weak economy show the vulnerability of the overarching political mind of those in power.

In conclusion, following the collapse of colonial rule two major events can account for the condi-tion the Cuban economy is found in present day: the communist revolu-tion of 1958-1960 and the special period following the collapse of the Soviet Union from 1989-1993. Due ��ȱ���ȱ�����ę�����ȱ��ȱ�����ȱ������ǰȱshortcomings and failures cannot be �Ĵ�������ȱ��ȱ���ȱ��������ȱȃ�������-cal hangover” that other struggling �¡Ȭ��������ȱ������ȱ����ȱ��ȱ��ě��ȱ����ǯȱȱCastro’s government has refused aid, advice and implemented policies that have directly resulted in unemploy-ment and economic hardship. Certain

communist ideals have equally led to a notably impressive education and healthcare sector; however, economic and political freedoms overshadow these positives. Coupled with a dam-aging duel currency, isolation from the international community and a worrying level of security in certain areas, the Cuban economy can argu-ably be classed as a vulnerable.

In order to emerge from this strife the state must adjust in some crucial ways. Altering entrenched institu-tions, removing pride from decision making and increasing bureaucratic strength to allow more voices to the debate can only aid state suc-cess. Cuba is not failing or falling apart as many other African and Middle-Eastern states appear to be, this is apparent from its rankings in NGO surveys (it is not in the top 50 ���ȱ������ȱ���ȱ������ȱ�����ȱ����¡ȱ��ȱ���ȱ����¡ȱ��ȱ�����ȱ��������ȱ��ȱ���ȱDeveloping World). However, the economic vulnerability, especially in an overarching socio-political regard, as it goes through arguably its third most important transition, the death of Fidel, could result in tension and ultimately instability if key areas are left unchanged.

Betancourt, Roger. (2007). Human Rights and Economic Growth: Why the Real China Model May Be Desirable In A Post-Fidel Transition.

Cuba in Transition. Vol. 17. pp. 305 – 314

Canadian Medical Association. (2008). Health consequences of Cuba’s Special Period. [On-

line] Available at http://www.ncbi.nlm.nih.

gov/pmc/articles/PMC2474886/

Cuban Government. (1992). Constitution of the Republic of Cuba. [On-line] Available at

http://www.cubanet.org/ref/dis/const_92_e.

htm

Deere, Carmen. (1991). Cuba’s struggle for VHOI�VXIÀFLHQF\���DIWHUPDWK�RI�WKH�FROODSVH�RI�Cuba’s special economic relations with East-ern Europe. Monthly Review. Vol. 43. [On-line]

Available at http://www.monthlyreview.org/

Erikson, D and Wander, P. (2008). Raul Castro and Cuba’s Global Diplomacy. Cuba in Transi-

tion. Vol. 18. pp. 390 – 401.

Gayoso, Antonio. (2007). Food vs. Fuel: A False Dilemma for Cuba—A Survey of the Issue.

Cuba in Transition. Vol. 17. pp. 212-217.

Lewis, Paul. (2006). Authoritarian regimes in Latin America. Oxford, UK: Rowman and Lit-

WOHÀHOG�Nilsen, Silvia. (2007). Cuba and Illegal Opera-tions: Yesterday, Today, and Tomorrow. Cuba

in Transition. Vol. 17. pp 376 – 383.

Pujol, Joaquin. (2009). The Cuban Economy in a World of Uncertainty. Cuba in Transition. Vol.

19. pp. 1- 13.

Bibliography and Footnotes

EQ

Faced with a serious lack of income, a terri-���ȱ�������ȱ�������ȱ��ę���ȱ���ȱ��ȱ������¢ȱ������-�¢ȱ���ȱ�¢ȱ���ȱ�����ǰȱ�ȱȃ�����ȱę¡Ȅȱ�����ȱ������ȱ����ȱ����ȱ������ȱ�������ȱ����ȱ���ȱ�¢����

““

[1]Pujol, Joaquin. (2009).

The Cuban Economy in

a World of Uncertainty.

Cuba in Transition, gives

full details of this.

[2] The next highest Social

Welfare is Poland scoring

9.95 and positioned at 135.

[3] Statistic taken from

the Committee to Protect

Journalists website avail-

able Online at: http://cpj.

org/reports/2009/12/free-

lance-journalists-in-prison-

cpj-2009-census.php

Page 15: Equilibirum - Issue 2

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15

ing under house arrest of both Ferozi and Farnood.

Since then events have been ����������£��ȱ�¢ȱ��Ĵ��ȱ������ȱ���ȱ����� ȱ��������ǯȱ� ���ȱ������ȱ�Ĝ�����ȱ��ȱ���ȱ���ȱ����ȱĚ��ȱ���ȱ������¢ȱ��ȱfear of persecution or retribution as scapegoats. It has also become clear that the initial amount estimated by the auditor as lost, $579million, was ���ȱ�� ȱ���ȱ�������ȱ���ȱ����ȱę����ȱ��ȱmore like $1billion. It has been seen that the Bank gave out 207 undocu-mented ‘loans’, which the Bank’s ���������ȱ�������ȱ��ȱȁ���ę�����Ȃȱ���ȱwhich on closer review were shown to have lost the bank money over the past 3 years.

So far of the original amount allegedly stolen ($1billion) less than 10% has been recovered. Although the two disgraced employees, Far-nood and Ferozi, have been enlisted to recover the ‘loaned’ funds so far only $68.5million in cash assets has been returned.

The corruption within the bank has been an ‘irritant’ between Karzai and his international patrons as the withdrawal of foreign forces draws nearer. It also jeopardizes $1.8bil-lion of foreign aid that has been earmarked for Afghanistan. Despite this, the Afghani government still has not prosecuted Ferozi or Farnood. Indeed it is expected that their help in recovering assets will ensure they are treated with greater leniency. �����¢ȱ�Ĵ����¢ȱ������ȱ���¢����-lah Nazari says he is determined to bring the culprits to court, but time will tell.

Recently there have been more positive steps for the Kabul Bank.

The Afghan Lower House passed a bill to provide $825million over the next eight years to reimburse the government for its bailout of the Banks. This in turn has shored ��ȱ���ȱ������ȱ�����������ȱę�������ȱsystem enough and paved the way for an International Monetary Fund loan to continue to improve it. The IMF released a statement saying “the authorities have made important progress in managing the Kabul Bank crisis that came to the fore in the fall of 2010”. It is hoped that this latest boost of capital will precipi-tate higher growth and stimulate Afghanistan’s mining sector.

So what are we left with? In a year billions of dollars have been lost in aid and government funds, in a ������¢ȱ ����ȱ���ȱ��ȱ��ȱ���¢ȱǞŗŘȱbillion. Hamidullah Farooqi, a US educated economist, said that Af-ghanistan received a ‘massive wake up call’ from this: this remains to be seen. What we can see is that positive steps are now at last being taken in the form of cash injection from both the government and the IMF. This provides an opportunity for Afghani-stan to learn from its mistakes. But in one of the world’s poorest countries, undergoing a debilitating war, will these opportunities be taken? Will the men who did almost as much damage to the country as the Taliban be held accountable? These ques-tions cannot be answered now, but over time it will become apparent whether the Kabul Bank, is ready to take up its role in helping to rebuild Afghanistan and whether Afghani-stan is ready to move forward and go it alone.

Much mystery has sur-rounded the shady Kabul Bank of Afghani-stan, and recent dealings

����ȱ����ȱ��Ĵ��ȱ��ȱ�������ȱ����ȱ�����ǯȱEstablished in 2004 it is Afghanistan’s leading commercial bank and was seen as holding a central role in the rebuilding of the war torn Afghani-stan. However, in 2010 it became starkly obvious that the Kabul Bank was not operating, as it should have been. A near run on the bank has led to its being taken over by the Afghanistan Central Bank and to a long, painful episode which has only recently started to be resolved. The � �ȱ��¢ȱ���¢���ȱ��ȱ����ȱę����ȱ ���ȱ���ȱbank’s Chairman (and big time poker player) Sherkhan Farnood and its CEO Khalilullah Ferozi.

The Kabul Bank is Afghanistan’s most important bank and has been ���ȱ�������ȱ��ȱ���������¢ȱ�Ĵ����ȱ����ȱhave claimed several lives. It has branches throughout the country with 28 branches alone in Kabul. It is also the principal agent for Western Union inside the country, handling the lion’s share of their transactions. However, what is particularly sig-��ę����ȱ�����ȱ���ȱ ����ȱ����ȱ��ȱ����ȱit is used by the government to pay around 300,000 government workers, predominantly within the police and security forces and hence some of the most important people in Afghani-����Ȃ�ȱę���ȱ�������ȱ���ȱ�������ȱ���ȱ���ȱthe country’s future stability.

���ȱ����������ȱ����ǰȱ����¢ȱ����ȱyear, claimed that the Bank stood for the old corrupt habits of the country, espousing cronyism and questionable practices, not to mention links to the ���������ȱ����ȱ ��£��Ȃ�ȱ�����¢ǰȱ��ȱ����ȱ�����ę����¢ȱ���ȱ�������ȱ���-mood Karzai. In early September CEO Ferozi announced that the $300million that the bank was esti-mated to have lost was wildly over-������ȱ���ȱ�������ȱ����Ĵ��ȱ����ȱ��ȱ�ȱrun occurred, then the Bank would not be in a position to deal with it.

�����ȱ������ȱ��ȱ���������ȱ������¢ȱwithdrew their savings and sales of safes jumped as people began to keep their money at home. Eventu-ally the government waded in and promised to guarantee deposits. They announced an audit and placed the Bank under the governance of the Afghanistan Central Bank (ACB) with the resignation and subsequent plac-

Catastrophe At Kabul Bank

EQ

BY Jack Eastwood�����ȱ����ȱ���ȱ�������������

PYRAMID

...lost his job at the Afghanistan’s central bank...

FEROZIChief Excecutive of

Kabul Bank

FARNOODFormer Chairman

of Kabul Bank

...after the bank belatedly

realised he had been running it

with...

...as a giant...

PYRAMID SCHEME

In a Nutshell

Page 16: Equilibirum - Issue 2

“”

16

EQUILIBRIUM

likely raise GDP by less than the increase in government spend-ing. Defense-spending multipli-ers exceeding one likely apply only at very high unemployment rates, and nondefense multipliers are probably smaller. However, there is empirical support for the proposition that tax rate reduc-tions will increase real GDP.’To put it simply, more govern-

ment activity such as spending, results in government debt and less economic improvement than the debt incurred (unlike private investment where debt is only taken on when ���ȱę��ȱ ����ȱ���ȱ���ȱ����¢ȱ��ȱ ���ȱmake from their investment). How-����ǰȱ����ȱ����������ȱ��Ě�����ǰȱ�ǯ�ǯȱtax cuts, do lead to growth, as more people are encouraged to participate

in the economy, earn more, start up businesses and employ more indi-viduals etc.

���ȱ���¢ȱ����ȱ���ȱ��Ĵ���ȱ��¡ȱdoesn’t lead to a fall in government revenue. Indeed empirical evidence from the US have shown that as tax rates fall, as a percentage of GDP revenues remain constant, and in absolute terms revenues have risen.

Taking this in the context of ��������ȱ���ȱ������ȱ��ę���ǰȱ��ȱ���ȱUK is currently trying to do, lower-ing taxes increases revenues thus helping pull the country out of debt. All of those who want to see higher government spending are condemn-ing the country to languish with low economic growth and devastating levels of debt.

Indeed in his book Macroeconom-ics in a European Perspective, Olivier

Debt is not all bad, many businesses take loans to ę�����ȱ����������ȱ���ȱfuture growth, individu-

als borrow so as to purchase things now that would otherwise require years of saving to fund. These debts ���ȱę��ȱ���ȱ�����ȱ�������DZȱę����¢ȱ���¢ȱare relatively short term, second certainly in the case of business loans, the borrowing is often done to buy capital and so increase future in-come, and thirdly, and perhaps most importantly, they are the choice of ���ȱę��ȱ��ȱ����������ǰȱ���¢ȱ������ȱ��ȱtake on the debt themselves and they cannot pass it on to their children.

��ȱ ���Ȃ�ȱ���ȱ��ě������ȱ ���ȱgovernment debt? Well, in the UK debt is certainly not short term nor �ȱ���ȱ�ěȱ����ȱ����ȱ����ȱ�¢ȱ¢����ȱof savings as responsible house-holds do. The debt is structural, the government spends more than it earns year after year. Secondly, government borrowing does not produce economic growth. When the government borrows billions to spend on council executives bumper pay packets, diversity co-ordinated gold plated pensions or to pay French farmer’s not to cultivate their land via the EU, they are not creating wealth. Only the private sector producing goods and services that people demand are the wealth creators.

Indeed, research has shown ����ȱ���ȱę����ȱ����������ȱ��ȱ����ȱ����ȱ1 (National Institute of Econom-ics and Social Research Discussion paper no 271 p 18) so government spending is expensive and wasteful. Further research by Robert J Barro (a professor of economics at Har-vard and a senior fellow at Stanford University’s Hoover Institution) and Charles J Redlick has shown that government spending increases GDP by less than the spending itself. They ��������ȱ����DZȱȱ

‘The available empirical evidence does not support the idea that spending multipliers typically exceed one, and thus spending stimulus programs will

Opinion:

The case for scaling down government spending...

Government Debt

ȱ ȱȱȱ��ȱ�����ȱ���ȱ������ȱ��ę���DZȱ���ȱ��¡��ȱ��ȱ�����ȱ��������ȱ��� ��ȱ���ȱ��¡ȱ��������Dzȱ������ȱ����������ȱ��������ȱ��ȱ���� ȱ�������ȱ��������ȱ���ȱ����������ȱ��ȱĚ������Dzȱ���ȱ��ȱ� �¢ȱ ���ȱ�¡�������ȱ����������ȱ����ȱ���-�����ȱ��� ��

““

BY Olly NevilleThird Year Economics

Page 17: Equilibirum - Issue 2

EQUILIBRIUM

17

EQ

Blanchard notes that a credible com-

�������ȱ��ȱ������ȱ�ȱ������ȱ��ę���ȱcan instantly raise economic growth,

despite the fall in government

spending.

Taking a simple IS LM model

we can see that when government

spending falls the IS curve shifts left

meaning that in the medium run

output returns to the natural level

and the LM curve will shift right

since prices are below the expected

price level. Therefore in the medium

run GDP will return to the natural

level, but as it is made up of less

government spending, there must

��ȱ�¢ȱ��ę������ȱ����ȱ����������ȱand consumer spending. Higher

investment spending means more

capital and thus more capital per

worker. Taking a Solow Growth

model we can see that this

means higher economic output

and thus a credible commitment

��ȱ������ȱ�ȱ������ȱ��ę���ȱ ���ȱsee future incomes rise so

current

output

increases as a result of these expecta-

tions.

Government spending doesn’t

only lead to high debt, it also crowds

consumer spending and investment

spending out of the market. When a

government wishes to borrow, it sells

government bonds (in the UK they

are called gilts). Lets look at a very

simple situation where there are only

1 year bonds which promise to pay

£100 a year from today. The interest

rate depends on the price of those

bonds today. If the bond sells at £50

today, the interest rate is 100%, as

you pay £50 today and get £100 in a

years time when the bond matures. If

the bond is worth £90 today the inter-

est rate is 11.1% and so on.

When the government bor-

rows, it sells bonds. This low-

ers the price of bonds due

to an increase in supply,

which means the interest

rate rises. This higher in-

terest rate means investors

do not wish to borrow

to invest as it is too ex-

pensive and consumers

would rather save than

spend. It is either this or

their disposable income falls as their

mortgage payments increase. In both

cases GDP is lowered.

Government spending crucially is

also not a choice, but is forced upon

people. While a family may choose to

take on a loan or a mortgage, people

do not choose to have government

spending above government rev-

enue. Government debt, again unlike

personal debt, can be passed down

onto those who didn’t take it out. So

future governments and generations

are liable for the reckless overspend-

ing of today’s politicians. Even if

you wish to ignore the economic

arguments showing that govern-

ment spending does not improve the

economy and is purely damaging, it

is hard to ignore the fact that children

who have not yet been born will have

to pay back the debt of today.

���ȱ �¢ȱ��ȱ�����ȱ�ȱ������ȱ��ę���ȱis therefore clear. We should cut

taxes to raise economic growth and

tax revenues, reduce government

spending allowing private spending

���ȱ����������ȱ��ȱĚ������ȱ���ȱę����¢ȱdo away with expensive regulation

that prevents business growth and

hinders small businesses starting up.

Federal Revenues Have More Than Tripled Since 1965

Overall tax revenues have risen despite a recent decline due to the recession. Con-

gress cut income taxes and the death tax in 2001 and capital gains taxes and divi-

dends in 2003, yet revenues continued to surge even after the tax cuts were passed.

The available

empirical evidence

does not support the

idea that spending

multipliers typically

exceed one, and thus

spending stimulus

programs will likely

raise GDP by less than

the increase in govern-

ment spending “

- Robert J Barro

Prof of Economics at Harvard

UK 5 Year Bonds Hauser’s Law

Page 18: Equilibirum - Issue 2

18

EQUILIBRIUM

How effective is

economic growth as a

means of measuring

development?

Economic growth is not a ��Ĝ������¢ȱ�ě������ȱ�����ȱ��ȱ���������ȱ�����������ȱ�������ȱ�����������ȱ���ȱ�ȱ

�����Ȭ�����������ȱ�������ǯȱ��Ȭ���������ȱ��ȱ�ȱ��������ȱ������������ȱ��� ���ȱ������ǰȱ��������ǰȱ��������ȱ���ȱ���������ȱ����������ǯȱ�����¢�ȱ���ȱ�������ȱ����ȱ�����������ȱ��ȱȁ���ȱ�¡�������ȱ��ȱ���ȱ������������ȱ��ȱ�������ȱ��ȱ����ȱ���ȱ����ȱ��ȱ�����ȱ���¢ȱ�����ȱ���ȱ����ȱ������ȱ��ȱ�����Ȃȱǻ���ǰȱŗşşşǼǯȱ

��ȱ��������ǰȱ�������ȱ��ȱ����ȱ���ȱ������¢ȱ���ȱ���ȱ���������ȱ�����ȱ��ȱ�����������ǯȱ���������ǰȱ���ȱ��ę��Ȭ����ȱ��ȱ�����������ȱ��ȱ������������¢ȱ������ȱ��ȱ���ȱ�����������ǯȱ����ȱ��Ȭ������ȱ�������ȱ���ȱ������ȱ���ȱ�����ȱ��������ȱ������������ȱ��ȱ���ȱ��ȬĚ���ȱ���ȱ�������ȱ��ę������ȱ��ȱ�������Ȭ����ǯȱ�����������ǰȱ�����ȱ����������ȱ���ȱ���ȱ��������ǯȱ��ȱ��ȱ��ȱ�������ȱ������������ȱ���������¢ǰȱ��ȱ�������ȱ��ȱ�� ���ȱ����ȱ���ȱ����ȱ���ȱ���������ȱ��¢ȱ�����������ȱ��������ǯȱ

� ����ǰȱ���Ȃ�ȱ������������ȱ���ȱ��������ȱ��������ȱ��ȱ������ȱ��ȱ���Ȭ������¢ǰȱ������ȱ��ȱ���ȱ������¢ȱ��ĜȬ����ȱ����ȱ��ȱ���������ȱ��Ě������ȱ������ȱ�������ǯȱ����������ȱ���ȱ������������ȱ���ȱ���������ȱ�������ȱ���¢ȱ�������ȱ��������ȱ�����������ȱ��ȱ�����¢ȱ������ȱ����ȱ���ȱ�������������ȱ�������¢ȱ����ǰȱ���ȱ�����ȱ����ȱ���ȱ������ȱ�������ǯȱ�����������¢ǰȱ���ȱ����ȱ�������Ȭ����ȱ����¡ȱ��ȱ���ȱ����ȱ�ě������ȱ�����������ȱ��ȱ�����������ǯ

���ȱ��ę��������ȱ��ȱ�����ȱ������Ȭ��ȱ��� ��ȱ��ȱ��ȱ�ě������ȱ�������Ȭ����ȱ��ȱ�����������ȱ���ȱ�¡�������ǯȱ

��������ȱ��� ��ȱ��ȱ��ȱ���������ȱ������ȱ��ȱ����������ȱ�ȱ������¢ǯȱ��������Ȭ����ǰȱ����������ȱ��ȱ���ȱ����������ȱ��ȱ���ȱ��������ȱ������ȱ��ȱ�����������ǰȱ��ȱ����ȱ���ȱ��ȱ����ȱ��ȱ�ȱ���¡¢ȱ���ȱ���ȱ ����ȱ�����ȱ��ȱ�����������ȱǻ������ǰȱŗşŞŚǼǯȱ

���ȱ���ȱ��ȱ �����ȱ��������ȱ��ȱ������ȱ�����������ȱ��ȱ�����ȱ��ȱ���ȱ����������ȱ����ȱ���������ȱ �����ȱ�������ȱ��ȱ�ȱ��Ĵ��ȱ������¢ȱ��ȱ����ȱǻ���Ȭ���ǰȱŘŖŖśǼǯȱ����ȱ����������ȱ��ȱĚ� ��ǯȱ���ȱ�¡�����ǰȱ�����ȱ���ȱ�¡���������ȱ����ȱ��������ȱ��� ��Dzȱ��ȱ�������ȱ�¢ȱŞǯŜȱ�������ȱ����ȱ���ȱ����ȱ����ȱ¢����ǯȱ� ����ǰȱ�ȱ������ȱ������������ȱ�¢ȱ���ȱ������ȱ����������ȱ�����ȱ����ȱŝŝȱ�������ȱ��ȱ���ȱ������ȱ����������ȱ����ȱ��ȱ����ȱ����ȱ����ȱ�ȱ������ȱ�ȱ��¢ȱ���ȱ������ȱŘŜȱ�������ȱ��ȱ���ȱ����������ȱ����ȱ���� ȱ���ȱ������¢ȱ����ȱǻ�������ǰȱ

ŘŖŖŝǼǯȱ���ȱ������ǰȱ�¢ȱ��������ȱ���Ȭ�������ȱ���ȱ�����������ȱ��ȱ���ȱ����Ȭ�������ȱ������ǰȱ���ȱ�����������ȱ�����Ȃ�ȱ����ȱ��ȱ������ȱ�������¢ȱ�����������ǯȱ��������ȱ��� ��ȱ����������ȱ��ȱ���ȱ��Ě���ȱ�����ȱ������ȱ������������ǯȱ�����Ȭ����ǰȱ��������ȱ��� ��ȱ��ȱ��ȱ����ĜȬ�����ȱ�����������ȱ��ȱ�����������ǯȱȱȱ

�����¢�ȱ���ȱ��ȱ�����������ȱ��ȱ�������ǰȱ��������ȱ���ȱ���ȱ��ȱ��������ȱ��� ��ȱ��ȱ�ȱ�����������ȱ��ȱ�����������ǯȱ���ȱ��������ȱ��������ȱ������ȱ �����ȱ��ȱ������¢ȱ��ȱ������ȱ����ȱ���ȱ����������ȱ ����ǯȱ���ȱ����ȱ������ȱ����������ȱ��ȱ�����ȱ����ȱ������Ȭ��ȱ��� ��ȱ����ȱ���ȱ��Ě���ȱ�������Ȭ����ȱ������ǯȱ�����ȱ�������Ȭ���������ȱ����ȱ���ȱ����ȱ����ȱ������ȱ����ȱ��ȱ���ȱ �����ȱ��������ȱ��ȱ�����ȱ��ȱ�����ǰȱ���¢ȱ����ȱ���ȱ����ȱ������ȱ��ȱ��������ȱ��������ȱ����ȱǻ���ǰȱŗşşşǼǯȱ�������Ȭ

Very High

Medium

High

Low

Data

Unavailable

Human Development Index 2011

The 2011 HDI report combines three dimensions:

- A long and healthy life: Life expectancy at birth

- Education index: Mean years of schooling and Ex-

pected years of schooling

- A decent standard of living: GNI per capita (PPP US$)

BYȱ�����ȱ�����������ȱ����ȱ�����¢ȱǭȱ��������

Page 19: Equilibirum - Issue 2

EQUILIBRIUM

19

economic production to measuring

people’s well-being” (BBC, 2009).

Moreover, the World Bank in its

annual World Development Indicators

report acknowledges “the need to do

more to enrich the quality of develop-

ment statistics” (World Development

Indicators, 2010). Economic growth

measurements are not an accurate

assessment of economic develop-

ment and well-being. Therefore, it is a

severely limited measurement.

In addition, economic develop-

ment measures are almost entirely

quantitative. This focus on quan-

titative measurement has resulted

in a neglect of qualitative research.

Qualitative research does not have

extensive scope in regard to economic

growth. However, it can be used to a

greater extent to assess social, political

and cultural development. The quan-

titative approach adds the possibility

of further analysis into opinions and

experiences of the groups involved in

development (Willis, 2005). McIl-

waine (2002 cited by Willis 2005) used

quotations in his study on poverty

to portray how both the meaning of

development and its indicators are

experienced and understood; “for me,

being poor is having to wear trousers

that are too big for me.” Therefore,

economic growth does not adequately

measure qualitative perception of

development.

International agencies like the

International Monetary Fund and the

World Bank as policy-makers need to

measure development. Initially, the

World Bank and the IMF established

the orthodoxy of using economic

growth as a measurement of develop-

ment. This consensus has distracted

agencies from the real objective of

development; increasing living stan-

�����ǯȱ��������ȱ�ě����ȱ��ȱ���������ȱland reform in both Kenya and Tan-

zania in the late 1970s were complete

failures (Deron and Collier, 2006).

However, Streeten’s Basic Needs

theory and Sen’s Capabilities Ap-

proach (1999) have caused interna-

tional agencies to view development

as a holistic multi-dimensional

process. For example, the World Bank

����ȱ����ȱşŖŖȱ��ě�����ȱ������ǰȱ������-

ic and environmental indicators to

measure development (World Devel-

opment Indicators, 2010). The World

Bank acknowledges that sustainable

economic development is dependent

on meeting the social, economic and

environmental needs of the future

(World Bank, 2010).

The International Monetary Fund

Amartya Sen condemns the use of economic growth as a measure of devel-opment. While African-Americans earn far more than people in India or China, they have far less chance of reaching ad-vanced ages.

more, Sen uses research by McCord

and Freeman (1990) to emphasise

����ȱȁ�����������ȱ���ȱ����ȱ�ȱ��Ĵ��ȱchance of living to ages beyond forty

years than African-American men

from Harlem’ (Sen, 1999). Conse-

quently, economic growth indicators

���ȱ���ȱ��ȱ�ě������ȱ�����������ȱ��ȱ���ȱ����ȱ��ę������ȱ��ȱ�����������ǯ

Economic measurements like

Gross National Product per capita,

which is used by the World Bank to

categories development levels, do

not provide regional variations or

underlying inequalities. In 2001, The

United States of America had a GNP

per capita of $34,870 but had a Gini

Index of 40.8. Furthermore, in 1973

the top 20 percent of earners had 44

percent of total income. In 2000, the

���ȱŘŖȱ�������ȱ��ȱ�������ȱ���ȱę��¢ȱpercent of the total income. Therefore,

despite the rise in economic growth

��Ě�����ȱ�¢ȱ��ȱ���ȱ������ǰȱ�������ȱof the United States have not develop

evenly (Willis, 2007).

In addition, the measurements

of economic growth are not com-

pletely accurate. Economic growth

is measured using national accounts

which are often upwardly biased

and tend to project more favourable

statistics. Also, expensive and large

items, which are not consumed by

the poor, are recorded in national

accounts of GNP and GDP (Dea-

ton, 2005). Furthermore, GDP and

��ȱ����ȱ��ȱ�ě�������¢ȱ�������ȱ���ȱ�����ę����ȱ�������������ȱ��ȱ���ȱ������ȱ������ǯȱ������ĵȱ��ȱ��ȱ���������ȱ����ȱ���ȱ��ę��������ȱ��ȱȁ�����������Ȃȱ��ȱ���ȱtrue value of government output and

a wide-range of errors in calculating

GDP result in economic growth not

�������ȱ��ȱ��ȱ�ě������ȱ�������ȱ��ȱsocietal well-being. The Commission

on the Measurement of Economic

Progress and Social Progress suggests

that indicators like GDP and GNP

caused the current economic crisis by

creating a false image of the economic

�������ȱǻ������ĵȱ��ȱ��ǰȱŘŖŖşǼǯȱ���ȱ���-

mission emphasised that; “the time

is ripe for our measurement system

to shift emphasis from measuring

Qualitative re-search might not have extensive scope measur-ing economic growth, but it can be used to measure social capital and political develop-ment

Page 20: Equilibirum - Issue 2

EQUILIBRIUM

20

EQ

The UN

Human Development

Report emphasises

that there is no

automatic link

between income

growth and human

development

has likewise stressed the importance

of social factors in development

(IMF, 2001). Therefore, economic

development is not measured purely

on the basis of economic growth

Consequently, the Human Devel-

������ȱ����¡ȱ��ȱ�ȱ�����ę�����¢ȱ����ȱ�ě������ȱ�����������ȱ��ȱ�������-

ment. The United Nations Human

�����������ȱ������ȱ��ę���ȱdevelopment as a process of enlarg-

ing peoples’ choices and is therefore

closely aligned with Amartya Sen’s

��ę������ǯȱThe report emphasises that there

is no automatic link between income

growth and human development.

Instead, it highlights three critical

�������ȱ�ě������ȱ�����������Dzȱ���ȱability to lead a long and healthy

life, acquire knowledge and access to

resources required for a decent stan-

dard of living. The Human Devel-

opment Index uses life expectancy,

literacy rates and GDP or Purchas-

ing Power Parity indicators. These

indicators deliver a wider scrutiny

of multi-dimensional development

(UNDP, 1990).

In 2009, Afghanistan had a GDP

growth rate of 22.5 percent, the

highest in the world (CIA factbook

and IMF, 2009). However, Afghani-

stan’s HDI stood at 0.349, 155th

in the World (United Nations

Development Programme, 2010).

Afghanistan has a life expectancy

rate of just 44.6 years old and the

on-going war suggests that Af-

ghanistan is far from the highest

developing nation in the world.

In 2010, Liechtenstein had the

highest income index of 0.955 but

ranked 73rd for education (UNDP,

2010).

Liechtenstein is a good example

of economic indicators

like GDP per capita

masking the real

levels of de-

velopment.

Consequently,

it is evident

that economic

growth is not

��ȱ�ě������ȱmeasurement of

development.

This shows eco-

nomic growth is not a suf-

ę������¢ȱ�ě������ȱ�����������ȱ��ȱdevelopment. The examples prove

the limited capacity of economic

growth as a measurement of human

development. Economic growth

����ȱ���ȱ�������¢ȱ��Ě�����ȱ��������-ties and low income is not

���ȱ���¢ȱ������ȱ��Ě�-

encing capability

deprivation. Eco-

nomic growth

as an indicator

is too narrow

to portray

an accurate

cross-sectional

measurement

of societies’

development.

Moreover,

economic growth

measurements are not

entirely accurate. Further-

more, the international develop-

ment consensus proves economic

growth by itself does not accurately

��Ě���ȱ�����������ǯȱ���������ǰȱ��ȱ�����������ȱ���������ȱ����ȱ��Ě���ȱthe multi-dimensional nature of

development.

The Human Devel-

opment Index gives

a broader and

more appropri-

ate measure-

ment of

develop-

ment due

to its wider

range of

indicators

and more

encompassing

measurement

of human devel-

opment factors.

Esteva, Gustavo (1992) Development in Wolf-

gang Sachs (ed) The Development Dictionary.

A Guide to Knowledge as Power (London, Zed Books)

Gasper, Des (2000) Development as Freedom:

Taking Economics Beyond Commodities – The

Cautious Boldness of Amartya Sen, Journal of International Development

UNDP (1990) Human Development Report

1990: Concept and Measurement of Human

Development, (Oxford, Oxford University Press)

Granham D (1972), Development Indicators

and Development Models. In Bastor, N (1972), Measuring Development, London, Frank Cass & Co

Bibliography

References

Bastor, N (1972), Measuring Develop-

ment, London, Frank Cass & Co.

BBC (2009), An obsession with

Wealth. Available at http://www.bbc.co.uk/blogs/thereporters/mark-easton/2009/09/an_obsession_with_wealth.html.

&,$���������:RUOG�)DFWERRN��3URÀOH��Afghanistan, Economy. Available at https://www.cia.gov/library/publi-cations/the-world-factbook/geos/af.html.

Deaton, A (2005), the Review of Economics and Statistics, Measuring Poverty in a growing world. Available at http://www.mitpressjournals.org/doi/pdf/10.1162/0034653053327612.

Dercon, S and Collier P (2006), Review Article: The

Complimentarities of Poverty Reduction,

Equity and Growth: A Perspective on the World Devel-opment Report 2006, Economic Development and Cultural Change.

IMF (2001), Social Dimensions of the

IMF policy dialogue. $YDLODEOH�DW��KWWS���

www.imf.org/external/np/exr/facts/social.htm.

Reuters (2007), Nearly 80pct of India lives on half a dollar a day. York, University of York. Available at: http://www.reuters.com/article/lat-estCrisis/idUSDEL218894.

Sen, A (1999), Development As Free-dom, University of Oxford Press.

Stiglitz et al (2009), Commission on the Measurement of Economic Performance and Social Progress, Survey of existing ways of measuring socio-economic progress. Available DW�KWWS���ZZZ�VWLJOLW]VHQÀWRXVVL�IU�documents/Survey_of_Existing_Ap-proaches_to_Measuring_Socio Economic_Progress.pdf.

UNDP (1990) Human Development Report 1990: Concept and Meas-urement of Human Development, (Oxford, Oxford University Press), &KDSWHU���²�'HÀQLQJ�DQG�0HDVXULQJ�Human Development.

Willis, K (2005), Theories and Prac-tises of Development, Abingdon, Routledge.

World Bank (2010), World Develop-ment Indicators. Available at http://data.worldbank.org/data-catalog/world-development-indicators/wdi-2010.

World Bank (2010), What is sustain-able development? Available at http://www.worldbank.org/depweb/english/sd.html. .

World Bank

United Nations

International Monetary Fund

Page 21: Equilibirum - Issue 2

EQUILIBRIUM

Two years ago a fresh faced, charismatic politician burst on to the wider picture with talk of mending a ‘Broken

Britain.’ Although many found this bike riding, Old Etonian a bit of a laughing stock, he gained the ���ę�����ȱ��ȱ�ȱ������ȱ���ȱ�������ȱhis ticket into 10 Downing Street. It seems two years on we may have ę����¢ȱ��������ȱ ���ȱ����ȱ���ȱ ��ȱ��ȱabout.

If we were unsure before, Broken Britain certainly reached up and slapped us in the face last August. The events witnessed around the UK portrayed just about every aspect of broken Britain and then some, with David Cameron describing some areas as “not just broken but frankly sick.” What started as a peaceful �������ȱ��ȱ��Ĵ�����ȱ��ȱ������ȱŚ��ȱquickly turned into anarchy. Over �ȱ�� ȱ��¢�ȱ��ȱ ����ȱ�Ĵ����ȱ������ȱa contagion, the capital city of an advanced nation reverted to a Hobbe-sian dystopia of chaos and brutality.

By 11th August a bruised and ��Ĵ����ȱ������ȱ ��ȱ��¢���ȱ��ȱ�����ȱitself together. While heroic ‘broom ������Ȃȱ����ȱ�ȱ��Ĵ����ȱ������ȱ�ȱ�� ȱlease of hope a new war was waging over what had caused these scenes of pure madness, who should we blame and what should we do?

There were those that saw poverty and inequality as the root of these problems and regarded the rioters as victims to be saved rather than criminals to be punished. Individu-als on this side of the debate such as Harriet Harman, Labour’s deputy leader, talked of the riots as the voice of an angry generation, crying out in resentment against the cuts, ‘the rich’ and ‘the system.’ Their prescription seems to be to spend more. Well Mrs �����ǰȱ��ȱ¢��ȱ�������¢ȱ�����ȱ�ȱŗŚȱyear old chav from Hackney went looting for a Sony PSP and a pair of Nike Air Max Classics because he was frustrated with the bossy bureaucratic state and had reservations about go-ing to university after recent tuition fee rises then please, do yourself and your political party a favour and ����ȱ�ěȱ�ȱ������Ƿȱ�ȱ�����ȱ �ȱ�����ȱalways spend more on education Mrs Harman? It’s not as if this delinquent in question grew up in the 13 years during which the labour government doubled spending on education.

���ȱ����ȱ��ȱ���ȱ��Ĵ��ȱ��ȱ������¢ȱis hardly a new phenomenon, yet

London has never before witnessed images of unopposed directionless anger on a scale such as this. It’s clear for all to see that cash alone is not the solution to the problem. Could it be that the riots were just an expres-sion of the increasing social problems ingrained throughout every level of our society?

For too long now we have lived in a consumer society, mollycoddled by a spineless state too timid to say no. Perhaps this mentality, to live without constraints, beyond ones �����ǰȱ���ȱę������ȱ�� �ȱ�������ȱ���ȱsocio-economic layers. David Cameron talks of “a death of responsibility” and calls for a “clearer code of values and standards.” The problem now is that people consider it abuse if you discipline a child. Human rights fairies moan about ‘police brutality’ if they try and assert some sort of authority. Adolescents moan that it’s not fair if they don’t receive EMA payments to go to school. I even read the other day that prisoners feel hard done by to only have one Sky Sports channel and ���ȱ���ȱ����Ƿ

The question is, when are we go-ing to wake up and realise we have to learn to accept no for an answer? If you’re a parent then you’re sup-posed to discipline your children. If you’ve done something illegal then

you should fear the police. If you’re in education then be grateful, it’s a privi-lege and if you’re in jail then please, be �����ȱ���ȱ�����ȱ¢���ȱ����Ƿ

David Cameron seems to have his head in the right place. The summer of discontent happened because people are not used to hearing the answer “no.” It laid bare problems deep and inherent in our society, a society des-perately in need of the states strong, authoritative hand. Perhaps after ������ȱ������ȱ�ȱę��ȱ�������������ȱ����ȱwill be what the country wants too.

Broken Britain?BY Andrew WallaceThird Year Economics

THE SOAP OXB

We live in a con-sumer society, mollycud-dled by a spineless state, too timid to say no. Per-haps this mentality has ę������ȱ�� �ȱ���ȱ�����Ȭeconomic layers

EQ

21

Page 22: Equilibirum - Issue 2

22

EQUILIBRIUM

In February 2009 Zimbabwe’s power sharing government was sworn into power. The years before had been fraught with

multiple political problems, such as rigged elections, violence and intimidation, coupled with economic problems, including frequent bouts of �¢�����Ě�����ǯȱȱ���ȱ�����ȱ���ȱ��������ȱof the power sharing government, has any progress been made?

���ȱę���ȱ���������ȱ��ȱ���ȱ�� ȱ���-ernment was the ending of the hyper-��Ě�����ǯȱ�����ȱę���ȱ���ȱ ��ȱ��ȱ�����ȱthe rigid price controls, like those enforced in 2007. These price controls meant shopkeepers were physically being forced to lower prices, with the threat of violence if the demands were not met. This inevitably led to store shelves being emptied by masses of people, who were taking advantage of the exceptionally cheap ������ǰȱ������ȱ�ȱ������ȱ��ȱ�¢�����Ě�-tion. Due to this shopkeepers lost money and were not able to replace the goods for sale. By ceasing these �����ȱ��������ǰȱ �����ȱ�ěȱ� ����ȱzeros from the currency, and by al-lowing trade in other currencies, the �������ȱ��Ě�����ȱ�����ȱ�������¢ǯȱ

����ę��ȱ ���ȱ����ȱ �����ȱ������ǰȱwith foreign direct investment be-���ȱ�Ĵ������ȱ���ȱ��ȱ���ȱ����������ȱ������ȱ��ȱę�������ȱ�������¢ǯȱ�����¢-ment also increased, albeit to a very low level of 15%, whilst industrial capacity also expanded. One of the newest and fastest growing develop-ments in the country is the mobile telecommunications industry, which saw rapid growth in the years 2008

to 2010. This is set to contin-ue, as revenues are pre-

dicted to skyrocket to US$1.34 bn by 2016.

The swift increase is being caused by the rapid growing

demand for mobile communication. The ę¡��ȱ���������ȱ�����ȱwithin the country ���ȱ�������ȱ��ȱ����ȱinfrastructure and

maintenance, fuelling

the rapid switch to mobile devices. However this increasing demand for mobile telecommunications is �������ȱ��ȱ�ȱ����ȱ�����������ȱ����-lem. The power supply within the country is notoriously temperamen-���ǰȱ���ȱ��ȱ�ȱ�����ȱ�������ȱ���ȱ���¢ȱ��ȱthe development of this market, but also to the overall level of economic growth within the country.

����ȱ��ȱ�ȱ��¢ȱ��Ĝ����¢ȱ �����ȱ���ȱinfrastructure of the country. The main sources of electricity genera-tion come from the Kariba Hydro-electric Dam, and 3 coal powered stations. These are all owned by the Zimbabwe Electricity Supply Authority (ZESA), which is a state monopoly whose role is to generate, transmit and distribute electricity. However due to years of mainte-nance neglect and rising debts with-in ZESA, these sources of electricity ����������ȱ����ȱ������ȱ���ě������ǰȱand the country can occasionally be plunged into blackouts. The only

BY James DrinkellSecond Year Economics & Econometrics

Can Zimbabwe Be An

Economic Success?ȱȱȱȱ��Ě�����ȱ���ȱ����ȱ�����¢ȱ���ȱ��ȱ��� ��ȱ

��ȱ���������ǰȱ���ȱ��������ȱ���������ȱ���Ě����ȱ���ȱ��������������ȱ��������ȱ���ȱ���������ȱ���ȱ���������ȱ��������ȱ��������ǯȱ

““

Robert Mugabe,PRESIDENT

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EQUILIBRIUM

23

History:

Zimbabwe has had numerous

economic problems. Participation in

a 1998-2002 war in the Democratic

Republic of the Congo exhausted 100s

of millions from the economy.

The government’s land reform initia-

tive, persistently marred with turmoil

DQG�LQVXUUHFWLRQ��KDV�UXLQHG�WKH�SURÀW-able farms, which were once the chief

source of exports and employed nearly

500,000: this made Zimbabwe a net

food importer.

Up until early 2009, the Reserve

Bank of Zimbabwe regularly printed

PRQH\�WR�IXQG�EXGJHW�GHÀFLWV��FDXVLQJ�K\SHULQÁDWLRQ��<HW��WKH�SRZHU�VKDULQJ�government formed in early 2009 has

led to some economic enhancements,

LQFOXGLQJ�D�VWRS�WR�K\SHULQÁDWLRQ�E\�eliminating the Zimbabwe dollar and

removing price controls.

7KH�HFRQRP\�LV�VHHLQJ�LWV�ÀUVW�JURZWK�in 10 years, but will rely on additional

political change for better economic

improvement.

means to combat this is to use small scale generators across the country, although this can hardly be seen as a long term solution. In 2001 the most common type of energy used within Zimbabwe was fuel wood, compos-ing 49% of energy consumption. This is most commonly used for cooking, lighting and heating by over 80% of the population. The corresponding ę����ȱ���ȱ����������¢ȱ ��ȱŗŘƖǯȱ���ȱheavy use of wood as fuel deeply harms the natural environment in terms of the levels deforestation, this problem still persists today. Zimbabwe’s forest cover in 1990 was roughly 57%, whereas in 2010 it had fallen to roughly 38%. If this problem continues, the environmental damage could be catastrophic, with some even predicting total depletion within 35 years.

One of the most recurring problems within the country is the political situation. This has been a major issue throughout the past, with Robert Mugabe’s party, Zimbabwe African National Union – Patriotic Front (ZANU-PF), rigging the 2002 election, and using other means of fraud and intimidation to win the 2005 election. The 2008 election was fraught with violence and intimida-tion, which led to the opposition leader Morgan Tsvangirai withdraw-ing from the ballot. However in mid September 2008 a power sharing deal was struck between Mugabe and ����������ǰȱ�������ȱ���ȱę���ȱ������-tion not being until February 2009. The political landscape however, is far from perfect. Mugabe and the rul-ing party elite own roughly 5 million ��������ȱ��ȱ���ȱ����ȱ���ę�����ȱ����ȱwithin the country, which does not ��Ě���ȱ��¢ȱ��������ȱ������ǰȱ�����¢ȱa corrupt land grabbing scheme. Mugabe is also keen to nationalise

A Troubled History

Nationalising

IRUHLJQ�ÀUPV�would lead to

resources be-

ing plundered

E\�D�´6PDOO�and parasitic

elite”

Morgan Tsvangirai,PRIME MINISTER

�������ȱę���ǰȱ ���ȱ�ȱ�����¢ȱ��ȱsigned into law in 2008 stating that ���ȱ�������Ȭ� ���ȱę���ȱ ����ȱ����ȱthan $500,000 should have 51% state ownership within 5 years. This has led to a recent direct dispute with the Prime Minister, Morgan Tsvan-girai, who stated that this would lead to resources being plundered by a “small and parasitic elite”. This type of policy will only discourage potential investors, if they feel that economic and political stability will not be ensured.

��ȱ��ȱ��������ȱ���������ȱ���Ě����ǰȱas well as infrastructure problems regarding power, transport and communications that hamper the potential economic advances. How-����ǰȱ���ȱ���ȱ��ȱ���ȱ�¢�����Ě�����ȱ���ȱ����ȱ����������ȱ��ȱ������ȱę�����ȱ��� ȱ�ȱ�����¢ȱ��Ě�����ȱ����ȱ��ȱŘǯŝƖȱin March 2011. GDP growth has also been promising, increasing by 5.7% in 2009, and 5.9% in 2010. However, even with these small promising economic signs, there still remain vast economic and political struggles inside the Republic of Zimbabwe. EQ

The ram-����ȱ��Ě�����ȱ�����ȱabruptly by ceasing �����ȱ��������ȱ���ȱ �����ȱ� ����ȱ£����ȱ�ěȱ���ȱ�������¢ȱ

Location:

Southern Africa

Population:

12,462,8979

Total Land Area:

390,757 sq km

3HU�&DSLWD�,QFRPH��US $340

&OLPDWH��Tropical; Moderated by altitude

Agricultural Products:

Corn, cotton, tobacco, wheat, coffee,

sugarcane, peanuts and livestock

Page 24: Equilibirum - Issue 2

24

EQUILIBRIUM

6DP�$VIDKDQL likes ‘fair marking of assessments’

Like Comment Share

the National Student Survey

7LP�(OOLV likes ‘getting enoughadvice and support for my studies’

Like Comment Share

'RQ·W�MXVW�VKDUH�\RXU�WKRXJKWV�ZLWK�\RXU�IULHQGV������If you’re in your final year, take the National Student Survey and get your voice heard where it matters!�

�ZZZ�WKHVWXGHQWVXUYH\�FRP�ZZZ�WKHVWXGHQWVXUYH\�FRP

www.yusu.org TALKTO US!

Page 25: Equilibirum - Issue 2

EQUILIBRIUM

25

The advent of the smart-phone has allowed the rapid spread of high speed mobile internet, it is now

possible to make phone calls, send texts, receive emails and browse the web all from the same device. Windows Phone 7 (Microsoft Corp.), iOS (Apple, Inc.), BlackBerry OS (Research In Motion Limited) and Android (Google, Inc.) are the four most common operating systems smartphone users come into contact with daily. The incumbents of the smartphone industry are struggling for power, much of this power strug-gle is fought through the number of patents each corporation owns and the legal protection they derive from these patents. The greater the num-ber of relevant patents, the broader the plane of protection a company has against lawsuits raised over infringement.

Microsoft Corp recently raised a lawsuit against Motorola Mobil-ity Holdings, Inc. claiming that the Android operating systems used on some of their models infringed upon seven Microsoft patents. Microsoft raised this issue with the Inter-national Trade Commission who have the power to stop imports of products which infringe upon U.S. Patent rights. If the software giant Microsoft wins the case imports of ���ȱ�ě�����ȱ��������ȱ������ȱ ����ȱbe banned from entering the United States. David Howard, Microsoft’s corporate vice president and deputy general counsel for litigation, said in an e-mail to Bloomberg “We have a responsibility to our employees, cus-

tomers, partners and shareholders to safeguard our intellectual property.”

Microsoft are trying to protect their innovators, but if successful they will be creating a huge barrier

BY Lisa RichardsonEconomics Graduate

to entry which may ease the com-petitive pressure felt by Microsoft, from smartphones using the Android operating system. In the three month period ending July, Android retained 48.1% of the U.S. smartphone market with Microsoft’s Windows Phone 7 capturing only 5.7% of subscrib-ers. Microsoft is trying to increase its market share using clever lawsuits aimed at disabling devices running the android operating system. This action by Microsoft will certainly have interested the U.S. competition authorities.

���ȱ�ě����������ȱ��ȱ���ȱ�������ȱsystem has long been debated. On the one hand, we need to protect innova-tors and reward them to encourage continuous advancement. On the other, patents create a barrier to entry advantageous to rich corporations. Larger companies have the funds to throw expensive lawsuits in the faces of other incumbents and new entrants. The iconic corporations Apple, Google and Microsoft, who are famous for their technological innovation and advancement, could now stagnate as funds are drained by mutually ��������ȱ������������ȱ��Ĵ���ǯȱ��-crosoft also has a case against Barnes & Noble and their Nook reader, although it is not only Microsoft who have been in the press recently for this kind of lawsuit. Apple has sued both Motorola and HTC Corp. for patent infringement. Motorola has raised counter-charges against both Apple and Microsoft.

The use of patent infringe-ment lawsuits to gain dominance in the smartphone market has led to speculation that the recent purchase of Motorola Mobility by Google for $12.5 billion was made to improve its defen-sive position, Google acquired over 24,500 granted and pending patents previously owned by Motorola. Mo-torola holds a strong position, it was Dr Martin Cooper of Motorola who ��ȱŗşŝřȱ������������ȱ���ȱę���ȱ����ȱheld mobile and in 1983 the DynaTAC 8000x was released by Motorola for commercial use. As the creator of the ę���ȱ����ȱ����ȱ������ȱ��������ȱ���ȱbuilt up an impressive plethora of pat-ents dating from their creation of this ę���ȱ����ȱ����ȱ������ǯȱ���ȱ�������ȱnow is that research and development ��ȱ��ȱ����ȱ��ȱ�����ȱ���Ě��ǯȱ�����ǰȱ ����ȱcould have been used to innovate, are now pumped into lawsuits and

spent acquiring yet more patents. Of course acquiring patents was not the only advantage of Google’s purchase. �����ȱ��ȱ������ȱ����ȱ�ě��ȱ��ȱ��-erating system, now creating both

the hardware and software they can compete directly with Apple.

Protection through patents works if you have many patents relevant to the area of innovation, Motorola have patents aging back to the very early mobile phone. Even before Google ac-quired Motorola Mobility, the numer-ous patents of Motorola allowed it to stand up against the lawsuit brought against it by Microsoft rather than backing down and paying Microsoft licensing fees. Google can now use the �� ȱ�������ȱ��ȱ���ȱ��������ȱ��ȱ��Ĵ��ȱprotect itself if accusations of infringe-ment are made in the future.

���ȱ��ȱ���ȱ����ȱ������ȱ��ȱ���Ĝ-ciencies within the market for smart-phones originates from the current patenting system. Instead of dynamic and innovative companies competing to be the technological front runner we instead have lethargic corporations whose innovative power is reduced by their patent count and associated lawsuits. This problem however will not just disappear; there is currently no other system that ensures protec-tion of an idea and monetary reward for innovators whilst not imposing the drawbacks of creating a barrier to entry and expensive lawsuits. These additional expenses will reduce corpo-rations’ available resources, reduc-ing innovation. Therefore monopoly ���ę��ȱ ���ȱ��ȱ������ȱ��ȱ�����ȱ��������ȱthrough technological boundaries, as Apple, Google and Microsoft are famous for, but rather squandered in

Microsoft Patent Infringement

We have lethargic coporations whose

innovative power is reduced by their pat-ent count and as-sociated lawsuits

EQ

The recent lawsuit Microsoft has raised against Motorola over patent infringement has served to illustrate the current struggle for power within the smartphone market.

Motorola patent numbers: http://bit.ly/vR1xuX

Market share statistics: http://bit.ly/nFDNM5

Microsoft quote: http://bloom.bg/nND6mk

Links

We have lethargic coporations whose

innovative power is reduced by their pat-ent count and as-sociated lawsuits

Page 26: Equilibirum - Issue 2

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EQUILIBRIUM

The demand for health insurance is driven by the risk of illness

and the risk of delayed or incomplete recovery which create losses from both medical cost and the loss of productive time during treatment (Arrow, 1963). The supply of health insurance, however, is ���Ȭ�������ǰȱ��ȱ���ȱę��ȱ�����-�����ȱ���ȱ���ȱ�Ĝ�����ȱ�����¢ȱ��ȱinsurance are not met[1].

The probability of illness is not independent when faced with a contagious disease. The probability is not less than one

���ȱ������ȱ��ě�����ȱ����ȱ�������ȱ��ȱcongenital diseases. Developments in genetic testing, which can improve knowledge of future health problems, create more uninsurable conditions (Barr, 2001).

While the probability of illness is estimable, the probability of the cost of treatment (over a long period of time)

is often not as medical technology advances quickly. Private health

insurance faces the problem of adverse selection and moral hazard.

The former problem arises because insurance companies do not have perfect information about insurees, thus giving poten-tial insurees an incentive to hide

�����������ȱ��ȱ���ȱ�ȱ��Ĵ��ȱ�������ǯȱThis creates unstable equilibriums within the insurance market as com-panies respond with either a pooling equilibrium, which drives healthy in-surees away, or a separate equilibrium, which creates sub-optimal coverage for healthy insurees[2].

���ȱ��Ĵ��ȱ�������ȱ������ȱ�������ȱboth the probability of illness and treatment cost are endogenous to the insurees.

Third party payment problems also occur when doctors, knowing that insurees do not face a constraint on medical treatments, overprescribe for �����ȱ� �ȱę�������ȱ����ę��ǯȱ����ȱ�����ȱto overconsumption of health care, as private costs are zero while social costs

Public or Private?Leslie Tay discusses health insurance in the UK

Health insurance offers protection against the risk of ill health, diseases and

accidents. We discuss why health insurance may be sub-optimal in the private

market. We then proceed to evaluate if the National Health Service (NHS)

does a better job in insuring her people against ill health. We conclude with

the principles that should guide future health care reforms.

Sub-optimality of private health insurance

Page 27: Equilibirum - Issue 2

EQUILIBRIUM

27

[1] Due to constraints, we have not explained ���ȱ��������������ȱ��ȱ���ȱę��ȱ����������ȱ���ȱ���ȱ�Ĝ�����ȱ�����¢ȱ��ȱ���������ǯȱ����ȱ���ȱ��ȱ����ȱ��ȱ��ȱ����ȱǻŘŖŖŚǼǯ

ǽŘǾȱ�ȱ�������ȱ�����������ȱ��ȱ���ȱ��ȱ ����ȱ���ȱ�¢���ȱ��ȱ������ȱ��������ȱ����ȱ���������ȱ����ȱ������ȱ��ȱ��ȱ���ȱ�����¢ȱ������ȱ��ȱ���ȱ��������-���ǯȱ�ȱ����������ȱ�����������ȱ��ȱ���ȱ��ȱ ����ȱ��ě�����ȱ�¢���ȱ��ȱ������ȱ��¢ȱ��ě�����ȱ�����ȱof insurance products designed to reveal their ����ȱ�¢���ǯȱǻ�����ǰȱŘŖŖŝǼ

ǽřǾȱ�������ȱ���������ȱ��ȱ������ȱ�����ȱ��ȱ�������ȱ���ȱ�¡������ȱ������ǯȱ����ȱ���ȱ����������¢ȱ��ȱ������ȱ��ȱ�����ȱ��ȱ���ǰȱ���ȱ�����ȱ��ȱ���������ȱ ����ȱ��ȱ������ȱ����ȱ�¡������ȱ������ȱ���ȱ��ȱ�������ǯȱ���ȱ���������ȱ������ȱ����ȱ�����ǰȱ��ȱ�����ȱ��ȱ��ȱ����ȱ��ȱ�������ȱ�����ȱ����ȱ��ȱ��������ǯȱ���ȱ��ȱ���ȱ�����ȱ����ȱ�����ȱ��ȱ��ȱ��ȱ������ȱ�¢ȱ��¡��ǰȱ ����ȱ���ȱ��������-���ȱ��ȱ�����ǯ

ǽŚǾȱ���ȱ���ȱ�������ǰȱ��ȱ����ǰȱę��ȱ����ȱ���ȱ��-������ȱ��ȱ���ȱ����Ȭ����ȱ ������ȱ����ȱ��ȱ������ȱ���������ȱ��ȱ����������ȱ ���ȱ�ȱ������ȱ����ȱ��ȱ��ȱ�������ȱ���������ǯ

ǽśǾȱ�������ȱ������ȱ�Ĵ�����ȱ�����¢

ENDNOTES

EQ

are positive (Barr, 2004).

There are two basic problems with

private health insurance- incom-

plete coverage and overconsumption.

���ȱ��ȱ���ȱ��ȱ����������ȱ����ȱ�ě��-tive than private insurance if it solves

these two problems and does not create

����������ȱ�ě����ȱǻ����������Ǽȱ�������ȱfrom public health service. The NHS is

����������¢ȱ�ȱ���������ȱ����ę�ǯȱ����¢-

one is entitled to free medical services

regardless of contributions. NHS,

funded by taxation, is a form of insur-

ance even though it is not governed by

���������ȱ����������ȱ��ȱ��ȱ�ě���ȱ������-tions against the risk of ill health.

Coverage is complete under the

NHS since taxation is compulsory for

every working adult, thus pooling the

risks of both the healthy and unhealthy,

young and elderly, solving the problem

of adverse selection. The NHS is also

��Ĵ��ȱ����ȱ��ȱ�����ȱ���������ȱ����ȱ���ȱnot idiosyncratic, chronic and congeni-

���ǯȱ������ȱ�ȱ���ę�Ȭ������ȱ���������ȱcompany, where the supply of insur-

ance requires the actuarial premium to

cover at least the markup and expected

losses[3], the government is more

interested in improving health and

social utility is taken into account. The

����������ȱ����ȱ���ȱ�ȱ ����ȱę�������ȱscope for covering these diseases. Last-

ly, under the NHS, doctors are given

salaries and are not paid fee-for-service.

This removes third party payment

problems since doctors no longer have

���ȱę�������ȱ����������ȱ��ȱ�������������ȱor encourage costly treatments.

The NHS is not free from moral

hazards since the private marginal

cost of health care remains at zero.

Fortunately, unnecessary treatments

are often non-urgent with long waiting

time. Long waiting time, a private cost,

���ȱ��ȱ����������ȱ�ě���ȱ��ȱ��������ȱmoral hazards. Non-urgent treatments

per month are limited by the ration-

ing of resources, which are usually

given lower priority. To that extent, the

introduction of waiting list targets since

the late 1990s have created a perverse

incentive for hospitals to give prior-

ity to non-urgent treatments, which

may be unnecessary, thus exacerbating

moral hazards.

The NHS can also be seen as an

over-provision of health insurance,

since the NHS covers a wide range of

health-care services including cheap

treatments and checkups. Gruber (2007)

������ȱ����ȱ�����ȱ��ȱ��Ĵ��ȱ�����������ȱ���������ȱ����ę�ȱ��ȱ��������ȱ�����ȱ�� ȱcost and predictable health treatments

since the utility derived from insuring

them is small. These treatments are also

usually self-insurable, thus the NHS

���ȱ��ȱ�ě���ȱ��ȱ��������ȱ���ȱ����������ȱto save and increasing the burden of the

state.

The NHS has solved non-coverage

problems but has failed in reducing

moral hazards. The UK, however, has

been able to match other industrialized

nations in terms of health measures like

infant mortality and life expectancy

despite being a low-spending nation

on health care (Barr, 1989). We shall

conclude with 3 principles that should

guide future UK health reforms:

i) Role of private insurance: We

should not be quick in rejecting private

health insurance. The take-ups for

private insurance have been increasing

especially for costly necessary non-

urgent treatments[4] (Hall and Preston).

Moral hazard problems within private

insurance have also decreased with

����ę��ȱ��ȱ���ȱ��

��� �����ȱ��ȱ���ȱ��

�����ȱ��������

[1] Gruber, Jonathan, 2007, “Public Finance and Public Policy”, 2nd Edition, Chapter 12, 15

[2] �arr, Nichola�, 200�, “Econo�ic� o� the �el�are State”, �th Edi-�arr, Nichola�, 200�, “Econo�ic� o� the �el�are State”, �th Edi-tion, Chapter 8, 11

[3] Hall, John and Pre�ton, Ian, 1998, “Public and Private Choice in UK In�urance”, In�titute o� Fi�cal Studie�, �orking Paper 98/19

[4] Arrow, Kenneth, 1963, “Uncertainty and the �el�are Econo�ic� o� Medical Care”, The A�erican Econo�ic Review, Dece�ber 1963, No. 5, pg 1�1-1�9

[5] %DUU��1LFKRODV��������´6RFLDO�,QVXUDQFH�DV�DQ�(IÀFLHQF\�'HYLFHµ��Journal o� Public Policy, Vol. 9, No. 1, pg 59-82

REFERENCES

the introduction of co-insurance and

deductibles.

ii) Coinsurance: Co-payment for

health services can help reduce the

moral hazard problems and “over-

insurance” related to free medical

treatment under the NHS. As Gruber

argues, “The optimal health insurance

policy is one in which individuals bear

a large share of medical costs within

����ȱ�ě�������ȱ�����ǰȱ���ȱ���ȱ���¢ȱfully insured when costs become unaf-

fordable”.

iii) Spillovers: The increase in

�Ĝ�����¢ȱ���ȱ����Ȭ�������ȱ��ȱ�����-ing the country against poor health

have been matched by a decrease in

�Ȭ�Ĝ�����¢ȱ����ȱ���ȱ������ȱ���������ȱof health care. Bosanquent (1987) found

that 87% of respondents to a survey [5]

chose “long waiting time” as an area

that NHS needs improvement. Man-

agement problems and the quality of

public health care have to be addressed

�¢ȱ����������ȱ�����������ȱ���ȱ��Ĵ��ȱmonitoring. The introduction of quasi-

markets since 1990s and public bodies

like National Institute for Clinical

Excellence (NICE) are steps in the right

direction. EQ

Page 28: Equilibirum - Issue 2

EQUILIBRIUM

28

Page 29: Equilibirum - Issue 2

29

EQUILIBRIUM

Over 3 months of the Summer I ran my own busi-

ness in America, selling educational books with

an internship programme that has consistently

produced successful alumni who have gone on to be

prosperous business owners, CEOs and even Presidential

candidates. I worked a demanding schedule. Overcame

problems. Experienced the joys of achievement and the

frustrations of falling short of goals. This year, I’m going

back again, and I’m looking to bring YOU with me.

When I told my friends that I was setting off for the

whole somewhere, to someplace in America that

they’d never heard of, to sell books, they were

understandably suitably perplexed as to

why the usually level headed Harry had

decided to do something so unusual.

In short, the 3 reasons why over 3,000

students from the USA and Europe last

year and over 100,000 students in the

past have sold books are life experi-

ence, work experience (i.e. some-

thing impressive to put on your CV)

and money.

So what did I gain from my adven-

ture and experiences and why am I

going back this year to bring a team

with me?

The main thing I gained from the whole venture is life

H[SHULHQFH��$OWKRXJK�,�DOVR�PDGH�VLJQLÀFDQW�JDLQV�LQ�WKH�other 2 areas (money and work experience), life experi-

ence was the main I set out to gain, and I was rewarded

in abundance. Firstly, I had an awesome time out there.

The families and co-workers you meet stick with you

forever. To work with other likeminded people who are

driven but friendly, ambitious but have an awesome at-

WLWXGH��LV�GHÀQLWHO\��LQ�P\�PLQG��ZK\�VR�PDQ\�SHRSOH�KDYH�gone on from the internship to achieve great things. Sec-

ondly, and the Holy Grail I was looking for, was the skills

and habits that I learnt that are required to be successful.

Persistence, acting without hesitation, expectancy, com-

mitting to goals and simply making friends with everyone

you meet, to name but a few, are precisely the common

factors to living a successful life. In fact, surprisingly, the

last one, making friends with everyone, is the easiest way

to instantly boost your success in day-to-day life.

In terms of money, this was really not the reason why I

went to America but it went really well. Not only do I have

money that I can use to pay off my loans, invest or spend

in Ziggy’s, but I’m travelling to Bratislava in November,

attending various leadership weekends around England

and Scotland, and going to The Gambia in February with

some of the people who I worked with this summer. Not a

bad lifestyle for a 19 year old student.

Lastly work experience. Something every student

looks for is something that is going to separate them from

Tommy 2:1 with a 6 week placement with a bank.

To be able to put on your CV that you’ve run

your own business in your summer holidays,

including generating business, stock tak-

ing, ordering and keeping an inventory

of stock, being self-motivated, solving

problems whilst interacting with every

type of member of the public is some-

thing that’s pretty handy to put on your

CV. Not bad for a summer job. In fact,

companies like PWC actually use crite-

ria such as running you r own business in

their selection principles.

So to summarise what I gained from

this; I had an awesome time, I earned

some money, I got to travel to the USA, I’m going to

Bratislava and The Gambia, I found the centre-piece to

my CV and I discovered successful skills and habits that

will equip me for greatness! Can you see why I decided

before I even got on the plane home that I was coming

back next year?

Advertorial

Need an internship?

Last Summer, second year PPE student Harry Pampiglione undertook an

unusual internship in the States. He is now planning to return next year and is

looking to put a team together... Up for it?

Want to travel?

Interested?

I’m looking for likeminded people, who are fo-

cussed on success, to come back with me this

VXPPHU��,I�\RX�ZDQW�WR�ÀQG�RXW�PRUH�DERXW�LW�RU�have any question, feel free to email me at hp577

or drop me a message on Facebook or even stop

me in Derwent and I’d be more than happy to

show you my photo album and souvenirs and tell

Get involved!

Page 30: Equilibirum - Issue 2

30

EQUILIBRIUM

So I spent the summer work-ing at a Tech Start-up FIRM in London, and there is really no faster, more reliable way to

�����ȱ�����ȱ���ȱ�������ȱ���ȱ��Ĵ���Ȭup of a company. I really want to get across how great my experience was to make other students more aware ��ȱ�ȱ�������¢ȱ����ę����ȱ�������ȱ����ȱI found both exciting and interesting. �Ȃ��ȱ����ȱ¢��ȱ�ȱ��Ĵ��ȱ�����ȱ�¢ȱ�¡����-ence, and then I’ll tell you a couple of �������ȱ�������ȱ��ȱ�� ȱ��ȱę��ȱ�����ȱ(sometimes elusive) jobs. I will then discuss the application process and your rights as a student applying for this type of internship.

I was working with a year-old company that had approximately 6 ������ȱ�����ȱ���ȱ�Ĝ����ȱ����������ȱlaunch. It turned out that this timing was absolutely perfect – the product was more or less designed, the busi-����ȱ����ȱ ��ȱ ��Ĵ��ǰȱ���ȱ��ȱ ��ȱ���ȱ�����ȱ��Ĵ���ȱ���ȱ��������������ȱstarted and coping with the compli-cations that arose. I was the fourth person in a four person team, and it was incredibly intense, emotional, as well as truly informative. I got ��ȱ���ȱ���ȱ����ȱ������ȱ���ȱ�� ȱ���ěȱfrom the inside, hearing the inter-views, the analysis and comparison of candidates, the follow-ups. I got to learn about investment, competitor analysis, about monetization, about marketing.

In short, being part of a start-up

Why You Should Consider Internships With ‘Start-ups’

For Next Summer

of this size meant that the company was virtually transparent. Every deci-sion made by a team member directly �ě�����ȱ���ȱ��������ȱ��ȱ����¢ȱ�����ȱteam-member, and adjustments of the course of the company happened immediately. This process went from analysis to board meeting to decision without any spaces in between.

The truth is – if you have any ambi-tion to set up a company in the future or to work in business in a role related

to their structure (i.e. investment, consultancy, managementgoing into a start-up as an intern would be incred-ibly enlightening. The best part is that they tend to be hungry for help. I have no experience as an analyst, but they were willing to painstakingly coach me through tasks and were happy to sell me their idea and hear my naive ę���Ȭ�����������ǯȱ��ȱ�������¢ȱ���ȱ��ȱknow each other and become friends, and was working on the most impor-

Being part of a start-up meant the company was virtually transparent - every decision made �¢ȱ�ȱ����ȱ������ȱ�������¢ȱ�ě�����ȱ����¢ȱ�����ȱ���ȱadjustments happened immediately

““

Internship Experiences:

BY Dominic FalcaoSecond Year PPE Undergrad

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EQUILIBRIUM

31tant thing to the people taking part, which they had staked their lives on. It should really be no surprise that they conveyed their enthusiasm with such comprehensive diligence. More-over, since leaving they have made ����¢ȱ�ě���ȱ��ȱ���¢ȱ��ȱ�����ǯȱ������ȱworking for a multi-national indus-trial player, or gargantuan bank, I was genuinely a part of the company ������ȱ����ȱ�ȱ����������ȱ�Ĝ��ȱ�����ǯȱ

It may sound like I was simply lucky to have landed such a great job, and I really can’t guarantee that all start-ups will work so closely with their interns. But I will bet that most interns working in start-ups will share a lot in common, for example: proximity to the leadership, the chance to observe of the overall workings of the company, a variety of tasks and the excitement of being part of something novel and innovative.

OK, so hopefully you’re at least partially convinced by this point. But where would you even start look-ing for a summer internship as an intern? I was lucky enough to hear about the opening through a mutual acquaintance – but have since learnt �����ȱ�ȱ������¢ȱ��ȱ �¢�ȱ��ȱę��ȱ���ȱabout these kind of internship op-portunities. A great place to start is www.workinstartups.com (scan the

This summer I spent 3 months work-ing as a marketing intern at Janssen, a pharmaceuticals company which

is part of the Johnson and Johnson group. Janssen has a history in providing

�����ȱ���ȱ��ȱ���ȱ����£��������ȱ��ě��-ers, as well as developing a new treatment for prostate cancer, which was recently approved in the last month. I was lucky enough to be working on the marketing ���ȱ�����ȱę���ȱ��������ȱ�ȱ����ȱ ����ȱ ���ȱbring the chance of a cure to many people ��ě�����ȱ����ȱ�����¢��ȱŗȱ��������ȱ�ȱwho previously only had a 50% chance of clearing themselves of the disease.

�ȱ������ȱ���ȱ��ȱ�ȱ����ȱ��ȱ�������ȱ��ȱthe busiest possible point, with the launch of the drug just over 2 months away. There was a lot of pressure on the market-ing team because in the US the same drug had an 80% market share and so had set a very high standard for the UK team to match.

My day to day tasks could vary greatly; there were some typical ‘intern’ ����ȱ����ȱ��ȱ��Ĵ���ȱ���������ȱ���ȱ��¢ȱ�����������ȱ���������ȱ������ȱ�ěȱ���ȱorganising meetings and booking meet-

ing rooms. However, it wasn’t a summer �����ȱ��������¢���ȱ���ȱ��Ĵ���ȱ��ě���ȱfor people, there was a lot of opportunity to get involved. One of my roles was to create new websites to promote aware-����ȱ��ȱ��ȱ�ȱ���ȱ��ȱ�������ȱ�������-tion to health care professionals about the new treatment, and so I was able to get actively involved in the meetings for these. Another important aspect of my role involved interacting with a number of agencies who were involved in what we were doing; all the printing, website design, event organisation etc. was done by outside agencies that we contracted out to do it for us.

One of the most enjoyable parts of the job was organising internal events so that everyone within Janssen knew about what was happening with the new drug. This was important as it built a sense of excitement about the launch and so that everyone within the company felt a part of it however directly or indirectly they ��¢ȱ����ȱ������ȱ��ȱ��Ĵ���ȱ���ȱ����ȱ��ȱlaunch.

���ȱ������ȱ�����ȱ ��ȱ�¢ȱę���ȱ���ȱprobably biggest job, trying to organise ��ȱ�����ȱ����ȱ ����ȱ�Ĵ����ȱ�ȱ�����ȱ��� �ȱwhilst still being informative about the new treatment and how it would help.

����ȱ��ȱę����¢ȱ����ȱ �ȱ�������ȱ��ȱ��-tract several hundred people from other �Ĝ���ȱ��ȱ����ȱ ����ȱ�ȱ�� ȱ�����ȱ������ȱabout the treatment and to hear from a patient about their experiences on it and how it had changed their life.

I also had the opportunity to get out ��ȱ���ȱ�Ĝ��ǯȱ����¢ȱ�� ȱ ����ȱ�����ȱ ���ȱtraining events for the account managers who would be selling the drug and so as part of the marketing team I would get to �Ĵ���ǰȱ����ȱ�����ȱ�ȱ���ȱ��ȱ��ȱ�ȱ���ȱ��ȱ����-elling around staying in hotels in Man-chester and Birmingham, and ate out in ����ȱ�����������ǰȱ ����ȱ��ȱ�ȱ��ę����ȱ����ȱof a job like this and nice before coming back to uni and a student budget!

Working at Janssen was hard work but also an extremely enjoyable experi-ence. It was a good company to work for, everyone was friendly and Johnson and Johnson do look after their employees- �����Ȃ�ȱ�ȱ����ȱ�¢�ǰȱ���������ȱ��ȱ���ȱ�����ȱ��ȱ���ȱ�Ĝ��ȱ���ȱ��ȱ���ȱ����ǰȱ��ȱ ���ȱ��ȱemployee discounts on Johnson and John-son products. I will certainly be keeping in touch with the people I worked with and I already have one eye on the 2-year graduate programme (which they have started in the last few years) after I have graduated next summer.

QR code to go straight there). You can ����ȱę��ȱ����ȱ�����ȱ����������ȱ�¢ȱposting your interest into the message boards of the various social network-ing sites used by start-ups. One that I came across was called “dream-stake” – www.dreamstake.net – but ¢��ȱ ���ȱę��ȱ�ȱ������¢ȱ��ȱ�������ȱ

on www.meetup.com as well, simply by searching for groups in the industry area that you are interested in. Of course, you can �� �¢�ȱę��ȱ����ȱ�����������ȱ��ȱdedicated internship sites such as www.enternships.com, www.studentjobs.com and so on. It will require some improvisa-tion, and may involve phoning companies directly – the chances are that many will want interns but are not running an active program.

Will they pay you? The law is fairly clear-cut – you should get minimum wage unless all you are doing is shadowing. As soon as you start completing actual tasks for a company and are required to put your own time into the work, they need to pay you. But, and of course there is a ‘but’, expect fairly punish-ing hours, and probably some unpaid overtime.

Also, chances are you will need to seriously consider being avail-able for relocation. I had to move to London from Devonshire to complete my internship. Was it worth the hassle and missing a summer at the beach? ��ę�����¢ǯȱ��ȱ���ȱ���¢ȱ�����ǰȱ����ȱ���ȱidea some consideration.

BY Jordan RankinThird Year Economics Undergrad

JANSSEN PHARMACEUTICALS

EQ

Scan the QR code to start looking for start-up internship opportunities

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Page 32: Equilibirum - Issue 2

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