Year 10, looks into the impact advancements in technology will have on future
technology only aggravate inequality, or provide healthier societies?
technology driven globe that we live in is one full of thrilling and stimulating
possibilities for our future. However, it is sure to pose countless challenges
whilst advancing in this adventure.
tourism, people reincarnation through AI, edible water blobs (the most exciting
of them all!) and self-driving cars are some of the many developments aiming to
be produced in the future. But with all these startling products being created
there are inevitably some challenges posed.
major concern is jobs. Our jobs. The thing we will be relying on for income and
a more comfortable lifestyle, the thing our whole education is aimed around, the
thing the economy relies on from the collection of taxes. Careers play a huge
role in everyone’s lives and the economy, but how on earth could this amazing
technology that is advancing us so much, have a negative impact on the economy and
I’m sure you have heard this many times before, and the biggest answer is simply: automation. Here are some figures to demonstrate how much will change – 9 out of 10 jobs will require digital skills, in 10 years’ time 50% of jobs will be changed by automation, and in 2025,
humans will account for only 58% of total task hours, meaning the machines’
share will rise to 42% from the current 29%.
These staggering figures could be perceived as a negative attribute to the technology
advancement, with it consuming all of our jobs and picking away at our futures.
However you have perceived those numbers, let me assure you that all of the
foreboding figures can easily be overridden with the fascinating possibilities
of what is to come.
Examples include the following:
industries will boom, not just the predicted boom of the IT industry; these include
healthcare, veterinary science, social assistance, engineering, geology and
The share of
women in the workforce is projected to reach 47.2% in 2024, and the number of
men in the workforce is expected to slightly decrease to 52.8% in 2024;
85& of the
jobs that will exist in 2030 haven’t even been invented yet.
the last opinion excites me the most with the possibilities that are to come
and will impact us. What jobs will be invented? How will they be
invented? Who will invent them?
no matter how many articles and reports you see in the future about this topic,
there are many positives that willoverride things reported as potential
negatives. Change might be coming, as we have seen with the development of the
internet over the last 40 years, but that does not mean that people will lose
the ability to train, learn and adapt to use these new technologies in their
day-to-day work. Creativity, critical thinking and complex problem solving –
all things that automation currently finds challenging – have been identified
as the top soft skills required by companies in 2020, and it is these areas
which we need to promote in our learning.
you take one thing out of this brief article, let it be that creativity and
your limitless imagination are the passport to the future.
Lily in Year 13 wrote this
article just before the start of Lockdown 2 in November 2020 in the UK. As we
now gradually come out of Lockdown 3 some 7 months later, how much of the
article rings true?
As of the 23rd March
2020 the UK was placed under lockdown and has been moving in and out of
lockdowns and restrictions ever since. This is likely to cause an economic
slowdown and possibly plunge the UK into recession over the coming years
because when people are in lockdown consumption and aggregate demand in the UK
is likely to fall. There will be impacts on workers and the UKs supply of goods
domestically and from abroad which is also likely to negatively impact the
economy. Overall, the UK and its economy is likely to suffer as a result of
demand in the UK will be hit by the virus as when people are quarantined they
will be unable to go out and spend, especially as recently all shops selling
non-essential goods along with bars and restaurants have been told to close
meaning this spending in these sectors won’t be possible anymore. This will be
added to by the low consumer confidence that is currently present as in
uncertain times people save their money as a safety net so they will be able to
support themselves in uncertain times.
will also change, meaning goods with an income elasticity of demand between 0
and 1 are likely to see little change in demand as these goods are classed as
necessities. Some might even see a rise in demand in the short term as people
panic buy (think back to scenes of toilet roll panic buying in April 2020).
However, goods with
an income elasticity over one are likely to see a decrease in demand as these
are classed as luxuries so people won’t be prioritising purchasing these items
when economics conditions are uncertain. This means that overall consumption
will decrease as people don’t have the opportunity to spend as much out
shopping or on luxuries and are also likely to be more cautious with their
spending by nature. This fall in consumption will also be exacerbated if
people’s incomes are negatively impacted, such as if they were previously
working in the gig economy, perhaps on zero hour contracts or with irregular,
These people would be
relying on their savings or help from the government for their money, meaning
their spending and consumption is likely to fall. To encourage more spending
the bank of England has dropped interest rates to a new record low 0.1% to
encourage people to go out and spend instead of save as they will be receiving
very little gain from letting their money sit in a bank account. Also, as if
demand falls whilst there is still a constant level of supply prices of goods
and services are likely fall. This can be seen through the drop in the price of
flights as airlines suffer a shortage in demand. For example a flight from
California to London would have previously cost $1000 can now be purchased for
as low as $246 dollars. However, this drop in prices is likely to have a
limited effect on demand because of the uncertainty currently which also means
low interest rates are likely to have a limited effect in changing people’s
behaviour. Recent travel bans will also limit the impact lower prices in the
airline industry since people are unable to take advantage of these lower
prices when they are unable to travel or will be deterred by quarantine times.
This means that overall aggregate demand and consumption in the UK is likely to
fall because there will be fewer opportunities for people to spend but mostly
because of consumer uncertainty. This will negatively impact the UK economy.
Aggregate supply in
the UK will also be impacted by the virus, impacting costs along with exports
if less is being produced domestically. A fall in domestic supply could result
in cost push inflation as if demand levels for some products remain steady
prices would have to rise to make up for the limited stock or production due to
covid-19 restraints on supply. This fall in supply could be caused if workers
have to self-isolate and cannot go to work, meaning a company cannot operate at
full capacity causing a shift inward on their PPF.
Companies might also
have trouble receiving stock from other countries if their production has been
impacted by the virus which could prevent production in domestic businesses.
This is likely to hit the manufacturing industry especially hard as these rely on
parts from abroad, such as the car company Jaguar which is now running out of
parts it would usually ship from China,
and people coming to work as it is very difficult to work from home if you
worked in a factory. This effect on supply could be decreased depending as the
UK has a flexible labour market, meaning people can easily move from job to job
meaning businesses won’t be hit as hard by the shock as resources (people) can
be reallocated more easily compared to France where the labour market is very
This effect on supply
also depends how flexible the product markets are as if a company could switch
supplier there would be minimal effect especially if this new supplier was
located domestically instead of abroad. There might also be a time lag if
producers had stockpiled meaning it would take longer to run out of stock
however is still likely to happen in the long term. In the long run this
outbreak could cause LRAS curve to shift inwards if there is less investment as
companies will be working harder to keep afloat rather than investing or
spending on R&D meaning less will be invested into the countries long term
This can be seen
though the fall in the share prices of the FTSE 100 as on 9th March
2020 the average prices of shares fell 8%,
the worst day since the 2008 financial crisis with £144bn wiped off its
combined value. These top 100 companies were likely to be some of the largest
investment spenders. Although, as the UKs economy is mainly based on financial
services, many can work from home meaning domestic supply issues may not affect
the economy as much as countries that rely heavily on manufacturing such as
China and Germany shown as Chinese economy shrank by 6.8% in the first quarter
of 2020, the first contraction since 1976. The government could also reduce the
effect on domestic supply by subsidising companies so they are able to invest
in the technologies they need and keep production lines running, or as interest
rates are low companies could take out a loan to invest. Meaning there are
options for companies to try and uphold supply and investment. However, there
is still the underlying issue of people not being able to go to work because of
self-isolation. This will have a huge impact on supply in the UK and therefore
the economy as if products aren’t being made they cannot be consumed and if
they aren’t being consumed profits will fall leaving companies to have less
money to invest, impacting supply in the short term along with productivity in
the long term.
Overall, the impact
of the virus is going to be wide-ranging across the world and in the UK,
impacting both supply and demand. Impacts of the fall in supply in the short
term will be slightly counteracted by the fall in aggregate demand as if both
curves shift inwards there will be a new equilibrium point of production and
cost push inflation is likely to be limited. However, the nation’s productivity
and output will decrease which means the UKs GDP is likely to fall
significantly, plunging the UK into a recession. The British government are
spending more to combat some of the impacts however this is unlikely to cover
the full economic impact and will see a rise in the government budget deficit
as a result. This also makes it likely that we will see the government to
following a policy of austerity over the coming years, meaning people in the UK
and the UKs economy are likely to be hit hard by this crisis. However, as the
virus is a global pandemic, it is likely that its impact will also be mirrored
across the rest of the world.
The UK Government introduced the
furlough scheme to support workers and businesses who were unable to run as
normal owing to the impact of the virus. Up to April 2021 this has cost over
with 4.7 million jobs impacted. Government spending is at the highest figure
ever seen outside of periods of war.
With increasing numbers of the
population having now been vaccinated against the virus, and the recently
announced reopening of restaurants from 17 May 2021, there is a feeling that
we are gradually moving out of the crisis and that normality is becoming
However, the vast spending seen
since the crisis started in January 2020 will almost certainly mean that a
return to a pre-pandemic life will be a challenge and that further austerity
will be required to settle the books. The need to ‘level up’ the country, as
announced by the Prime Minister on 11 May 2021, will be central to life
as we know it for many years to come. Whether this can be achieved will be
subject to criticism and debate for the significant future.
This article focusses on how
we incorporate current affairs into our teaching of A Level Economics. It is
written by Richard Finch – Head of Economics at Wimbledon High School.
One great aspect of teaching
Economics at A Level is that we can relate the topics on the specification to
real world events. We run weekly news article review sessions with all our
classes to build their understanding of contemporary issues in Economics and strengthen
their ability to apply fundamental concepts and theories to these real-world
events. For many pupils, beyond improving their chance of achieving a top grade
and boosting their ability to critically analyse articles, this process builds
their confidence to engage in debate and can be very empowering.
However, it often it is a
challenge to stimulate that initial interest in current affairs, particularly
stories related to the Economy. However,
in recent years we have made significant progress on this issue.
At the start of the course, each week,
we ask our Year 12 students to find two articles, one related to microeconomics
(individual industries and business) and one to macroeconomics (the entire
economy). These articles can be from any publication and on any subject that
The pupils post a brief summary of the article on our OneNote system along with their general reflections. We keep the brief very flexible at this stage and the emphasis is very much on exploring what interests them. We as teachers then review the articles and post some leading questions for each. This encourages the pupils to reflect on what they’ve read and think about where their research might lead them.
The pupils have time to prepare
their response to these questions prior to the lesson. During the lesson the
teacher will project the summary on the screen and the pupil then presents to
the class. The teacher chooses three pupils from the class who have demonstrated
clear analysis or whose topic area was addressed by many students in the class.
We have found that celebrating work in this way creates an element of friendly
competition and encourages others to engage.
Interestingly, although we do not
limit the topics at this stage, the pupils tend to gravitate towards similar
articles and as they source their information from different publications these
presentations often lead to enthusiastic class debate. This also serves as a
great way to break the ice with a new Year 12 class.
Through our questioning we
encourage pupils to pursue additional articles on the same topic. Over weeks the
pupils start to develop expertise in certain topic areas and having that deeper
understanding builds their confidence. As they become more familiar with the
jargon used in Economics they start to source articles from more challenging publications.
As the course progresses we start
to encourage the pupils to apply the fundamental concepts and theories we cover
in class to these real-world examples. We want our pupils to use this
“Economics Toolkit” to deepen their analysis and understanding.
For example, here a pupil has applied their knowledge of Income Elasticity of Demand (the responsiveness of demand to a change in income) to the demand for Fortnum & Mason products to assess the extent to which these products can be described as luxury items and the implications of a change in national income on this particular organisation and the wider economy.
The term “luxury good” is used
commonly in society but Economics pupils develop an understanding of what this
term actually means and how it can be calibrated. This gives them a clearer
understanding of the likely implications of a national rise in income on this
market. They begin to make links at this stage between different concepts and
ask broader questions, beyond the focus of that article. We continue to
encourage them to explore and connect topic areas through our questioning and
through class debate.
The pupils start to develop real
expertise at this stage and we find ourselves referring to our “in-house retail
expert” for example during class discussion. Being the authority on an issue is
incredibly empowering for the pupils and builds their engagement and enthusiasm
for the subject. The ultimate aim of this initiative is to encourage our pupils
to use their voices and speak with authority on this traditionally male dominated
Amy (Year 13) looks at the issues surrounding gentrification of an area and the impact this has on the value and cultural capital of an area.
Gentrification has often been seen as a contested and negatively connoted process; it is routinely blamed to be destroying the ‘souls’ and ‘hearts’ of many cities across the globe, with higher housing costs to increasingly globalised high streets acting as forces driving those less privileged out of historically culturally rich community areas. It can be seen as an oppressive mechanism which, in potentially adding fiscal value to an area, does so at the expense of cultural diversity.
Gentrification is a term first created more than 50 years ago by the German-born British sociologist Ruth Glass to describe changes she observed in north London – but it is a phenomenon that has been at the heart of how cities evolve for centuries. Cambridge dictionary defines the term as ‘the process by which a place, especially part of a city, changes from being a poor area to a richer one, where people from a higher social class live.’ It is an important factor in the change and transformation of urban areas. However, whether it really eradicates poverty is subject to lively debate.
In London especially, gentrification characterises economic and demographic changes as the predominantly middle-class citizens settle in areas often occupied by high percentages of ethnic minority residents, who are often priced out of the new ‘improved’ areas. Not only does it have significant negative impact on smaller community areas, it also sends ripples throughout the rest of the country and down the class hierarchy.
Much resistance has been seen from those who see the process as an antagonised way of removing character and community from an area. In particular, estate agents and property developers are subject to this disapproval, with many campaigners vocal against their activities, given they seek to make money from attracting new, richer residents. Especially extreme campaigns such as the 200 anti-gentrification and housing campaigners that disrupted the beginning of the annual Property Awards in 2016 reveal the strong opinions many people have towards the process of gentrification.
When examining this change in London, it is important to inspect the history and background of the city itself. Gentrification is not a new process to the city, beginning in the 1960s when bits of the run-down, old post-war city attracted adventurous young architects who started doing up often cheaper, damaged, Georgian squares. The process is deeply ironic, as these forces of change accused of ruining London are products of its revitalisation.
Decades ago London was still recovering from detrimental damage done during World War 2. The population of inner London was still attempting to recover to its pre-war importance. At this point, it wasn’t the wealthy being the cause of change in the area but skilled manual workers seeking cheap and convenient land, headed for ‘the New Towns’ in the 1950s.
By the start of the 2000s however, London’s dynamic had completely changed. London had become an influential source of economic growth, catalysed by its ability to generate money from its ‘turbo-charged’ Square Mile. Increased profit immensely amplified the attractivity of London, in turn increasing the demand of space in the city. It is regularly said that ‘demand for space is the seed of gentrification’, and a failure to meet that demand is what stimulates the growth of it. London is a prime example of this. Hugely inflated property prices are a certain cost of gentrification, and this can be seen all throughout London. The average house price in Hackney, and area renowned for its influence of gentrification, has increased by 489% in the last two decades, up from £91,000 in 1998 to £536,000 in 2018. This directly drives out many ethnic minorities and those living on low income or relying on government benefits to afford housing costs.
The standard picture of gentrification is that new arrivals benefit greatly from gentrification at the expense of lower-income residents. This picture is often true in many cases. New arrivals to a community often get stylish housing and all of the expensive accessories of life in a trendy urban neighbourhood (boutiques, bookstores, coffee shops, clubs and more) that they can afford. While long-time residents may benefit initially from cleaner, safer streets and better schools, they are eventually priced out of renting or buying. As the new arrivals impose their culture on the neighbourhood, lower-income residents become economically and socially marginalized. This can lead to resentment and community conflict that feeds racial and class tensions. Ultimately as lower-class members of the community move out this can induce loss of social and racial diversity. Rowland Atkinson, a member of the ERSC centre for research describes it as ‘a destructive and divisive process that has been aided by capital disinvestment to the detriment of poorer groups in cities.’
However, should gentrification really be held accountable for the unacceptable level of poverty in London? Assertions that it is ‘pushing out’ the deprived of the city often look less persuasive when examining the figures of social housing which still exist in classic ‘gentrified’ areas of north London. In Camden, 35% of all housing is for social rent, in Islington it’s 42% and in Hackney, 44%. Although poverty rates have fallen in those boroughs, the absolute numbers of poor people (people living on the reliance of government benefits) remain high.
Although there are many deservingly negative outlooks on the consequences of gentrification, assumptions should not always be made to antagonise the process. For example, middle class pressure often leads to improvement in community features such as modernised and beautified public buildings and spaces. As the property tax base increases, so does funding to local public schools. Jobs arrive with the increased construction activity and new retail and service businesses, and crime rates habitually decline.
Edward Clarke of the UK urban policy research company Centre for Cities writes that the debate should not be reduced to ‘a simple battle between plucky communities and greedy gentrifies’, emphasising that this ‘fails to recognise that the roles and functions of urban neighbourhoods have always changed over time and within a city’ or to acknowledge that gentrifying ‘new work businesses can create new jobs and improve wages in many fields.
Clarke concludes in general that the real roots of the problems that come with thriving urban economies are ultimately down to “poor city management”. He argues that to improve this it requires better skills training for local people, more planning and tax-raising powers to be devolved to local politicians and more land, including a small portion of green belt, being made available for building.
Ultimately gentrification, as a form of change and transformation in urban areas, is an issue that has been going on for decades. Although it potentially brings improvement to the appearance and functionality of urban environments, the problems created by this process must be addressed; failing to do so will result in places like London becoming so unaffordable they will begin to deteriorate – not only in potential economic value, but also in cultural capital. The process often exacerbates inequality on a local scale and drives out the cultural diversity that can so often be found at the heart of London’s communities.
Glass, R. (1964). London: Aspects of Change. London: MacGibbon & Kee
Hill, D. (2016). Let’s get our gentrification story straight. London: Guardian
Dr Atkinson, R. (2002). Does Gentrification help or harm urban neighbourhoods? An assessment of the evidence-base in the context of the new urban agenda. CNR Paper 5
Clarke, E. (2016). In defence of gentrification. London: Centre for Cities
Alex in Year 13 writes a short introduction to foreign aid, highlighting some of the successes and problems that can appear from the charitable act of giving.
Instilled in us from a young age is the principal that we should help those who are in extreme need. And what could be simpler? From charity mufti days and bake sales, this theory underpins social behaviour in our modern day. It is indeed this principal that drives support for foreign aid.
In the words of Roger Riddell, ‘The belief that aid is a ‘good thing’ is sustained by the assumption that the resources or skills that aid provides do make a difference to those being assisted’. However, the impact of such aid on recipient countries is not always as positive as it may initially appear.
As the effects of climate change enhance the frequency and severity of natural disasters, we often see foreign aid expenditure in an emergency form. Altruism of this kind is uncontested as in the short-term these humanitarian responses are overwhelmingly positive. However, it is with sustained aid that potential problems arise.
Overtime, foreign aid has expanded from small beginnings to become a large and complex global enterprise. Development cooperation (as foreign aid is also called) is now established as an integral part of international relations, with many donor countries contributing at a UN target rate of 0.7% of their gross national income. For the UK, this sum stood at £14.6 billion in 2018. As can be seen from the charts below, few countries meet this target.
However, if we compare this data above with looking at this giving as a percentage of GDP, a rather different picture emerges:
For many people, this huge economic contribution to foreign aid and development is a triumph in the world of humanitarianism and society as a whole. An ethical theory linked closely with the topic of foreign aid is utilitarianism. To put it simply, this is the notion that ‘moral life should be guided by the objective of trying to achieve the maximum happiness for the greatest number of people.’
As stated by Paul Streeten, ‘a dollar redistributed from a rich man to a poor man detracts less utility than it adds, and therefore increasing the sum total of utility’. This argument is comprehensive and easy to wrap your head around, which explains why foreign aid is so often short sightedly seen as a win-win situation.
Unfortunately, this is not always the case. There has been evidence of several key factors that can inhibit the aggregate impact of foreign aid.
The first problem arising with aid is its potential for misuse. Additional resources in the hands of potentially corrupt governments are significant impediments to optimum utilization of funds. This is because the fungibility of aid could enable the financing of non-developmental projects against the interest of the population. Hence, aid itself has, in some cases, the perverse ability to create negative effects on recipient economies.
Secondly, there are limits associated with aid and a country’s absorptive capacity. As the volume of aid increases, it is subject to diminishing marginal utility. In basic terms, the effect is as if I gave you one chocolate bar that you enjoyed consuming. And perhaps a couple more wouldn’t do you any harm… but once I’ve given you 100 chocolate bars, each individual bar’s worth has decreased along the way. In this way it can be seen than after a certain point (called the absorptive capacity threshold), providing more aid becomes completely ineffective.
Finally, fluctuations in aid inflows are external shocks to vulnerable economies, which plan expenditures based on promised aid commitments. When a highly dependent country’s aid is not given in full, this can damage future growth prospects significantly.
From all this, we can gather that the future of aid-giving and its associated policies may need modifying to ensure aid is given and used in the most efficient and appropriate ways possible, enabling it to help those who are most in need.
Lily in Year 13 looks at the importance of sovereign wealth funds, telling us more about this area of Economics.
Simply, a sovereign wealth fund is a state-owned investment fund meaning countries can invest in shares and assets internationally in the hope that these investments will then increase in value. These profits can then be extracted by a government when shares are sold and ideally then used to benefit the country’s economy and citizens.
The term sovereign wealth fund was initially created in 2005 by the economist Andrew Rozanov who stated that the funds in question “are neither traditional public-pension funds nor reserve assets…but a different type of entity altogether”. A new and exciting form of investment was emerging, now commonly called the sovereign wealth fund.
Sovereign wealth funds are important because of the economic benefits they can bring to a country. The largest fund in the world at the moment is the Government Pension fund of Norway which “owns on average 1.3% of all equities listed worldwide”, which means that Norway owns 1.3% of global stocks and shares, now worth over $1 trillion in assets. This shows the scale of these funds and the influence they can have on the world economy.
One key benefit of sovereign wealth funds is the diversification of countries incomes. This is because sovereign wealth funds almost always invest in foreign assets which is particularly helpful if a country relies on a single commodity for their income as they are more at risk if that particular industry experiences a downturn. This is why many oil reliant countries have sovereign wealth funds as oil markets are often volatile. This factor has become particularly important in 2020 through the corona virus epidemic, one specific example being in the oil industry since “US oil prices went negative for the first time in history” in April 2020, resulting in companies paying people to take oil off their hands because the demand for oil had fallen so rapidly.
This shows the oil industry is particularly vulnerable to large fluctuations in price and if a country relies on oil for their income they could be at risk of an economic downturn (recession). Sovereign wealth funds have been shown to limit this risk as some funds around the Gulf (largely oil reliant countries) are already “channelling some of their billions back to counter the recession triggered by the coronavirus pandemic.”, showing how important these funds have already been for the recovery and survival of oil reliant economies throughout the Covid-19 outbreak.
However, there are debates surrounding the benefits of sovereign wealth funds as there will always be an element of risk in making investments since they can never be one hundred percent safe as assets always have the possibility of decreasing in value. This includes the idea of black swan events – the idea that some events are unpredictable and therefore markets cannot prepare for the shocks they cause. This is one way of stating we can’t predict the future and therefore will never be able to completely rely on an investment bringing positive returns. Which poses the question ‘is it a good idea to be risking millions of public money on the stock market?’
Sovereign wealth funds can be very beneficial but there are always opportunities for investments to turn sour. This means that it is important for a country to analyse the rewards that can be generated before creating a sovereign wealth fund. These countries are still not immune to black swan events which can disrupt the global economy however, if profits from these funds are used well they can actually mitigate these risks and add huge value to their economies, such as through diversification. A well-managed and cleverly invested fund will always benefit the country at hand if it is used wisely. These benefits mean that sovereign wealth funds are likely to become more and more common, making them important as they a likely to become a huge factor of the global economy.
Ms Suzy Pett, Assistant Head (Teaching and Learning) at WHS, looks back at the end of the first year of the new PPE course studied by Year 10 pupils at WHS.
We are at the end of the inaugural year of our PPE course. We wanted students to look outwards and question the ideologies – political, economic, philosophical – that are influential in shaping our world. One of our school’s key objectives is for each student to “stride out’ and be prepared to “shape the society in which she lives and works’. Our PPE course has certainly helped our Year 10s become savvy and robust thinkers on important global, national and personal issues.
The course ended with students writing their own articles on a topic of their choice. The array of interests was kaleidoscopic! Articles ranged from Kantianism vs Utilitarianism; to immigration; to beauty; to Plato; to student loans; to voting…to Trump…and everything in the middle (including, of course, the impact of Coronavirus). There is no doubt that students have developed mature, thoughtful and increasingly bold voices on these matters. Their articles were hugely impressive.
Lauren, Year 13, discusses whether the Great Depression influenced the response to the 2008 Financial Crisis.
During the Great Depression, wages were cut for workers which led to a reduction in demand. This stemmed in the bankruptcy of thousands, as the stock market went into free fall after the Wall Street Crash. Between 1929 and 1932 more than 100,000 businesses went bankrupt, and around 11,000 banks stopped trading. When these banks shut down, savers lost all of their money so they could no longer buy consumer goods. This reduction in demand resulted in the redundancy of many workers, ultimately creating a further decline in the level of aggregate demand. Thus, the economy entered a downward spiral.
President Hoover interpreted the Depression as hypothetical notion, a normal business turndown, rather than a solidified and evidenced occurrence. Consequently, when an attempt to take action was made it was a little too late. Following the Great Depression, regulations were altered, and economic policies restructured all across the world. The economic system was redesigned to avoid a repeat of this disaster and the levels of government spending were increased.
After the Great Depression, it was often assumed that there would not be another economic downturn of such major proportions as it was believed that the lessons that had been learned then could be applied to any future crisis, protecting the future from such economic turmoil. However, perhaps the lessons learned were not enough to ultimately fend off the Financial Crisis of 2008 in which there had been a rise of non-bank institutions which were not regulated to the same extent as commercial banks, concerning loans.
Several measures were put into place in order to alleviate the effects of the crisis. In the USA, loans from the Federal Reserve were enforced, and the US even tried a Keynesian fiscal stimulus in early 2008 to ‘jump-start’ the economy, but this wasn’t successful enough because the stimulus was too small, at only about 1% of GDP.
A matter of interest to many economists is how the crisis was dealt with in the UK under the Labour government, because they continued to spend significantly in the immediate aftermath of the Financial Crisis. This helped to ease the initial impact because it reduced the economic downturn, but the rate at which the national debt was shooting up was dangerous.
The coalition government slashed public spending after 2010, damaging public services and holding back economic recovery after the crisis. Although it would have been wrong to ignore the huge government deficit inherited from Labour, it could be suggested that Osborne should not have cut spending on infrastructure and capital to such a degree, allowing the UK to invest to boost productivity.
In conclusion, had the enormous intervention by governments not happened, the impact of the Financial Crisis would have been significantly greater. This means that it can be argued that the Great Depression did, to some extent, influence the response to the 2008 Financial Crisis as it persuaded governments to intervene quickly and at great expense in order to avoid a repeat of events in the 1930s. However, it can be argued that these policies were not as successful as envisaged due to the complexity of new financial instruments.
Sofia, Year 13, discusses whether the increasing power of China issomething that should be concerning the global community.
China is increasingly becoming a hot topic amongst economists as we see the developing influence it is having on the western world. We are seeing a new form of colonialism – neo-colonialism – whereby China has (by being the second largest economy in the world) significant power over countries. One would expect this to be only over lower income countries; however, China is even beginning to power the West’s markets and economies and even has the power to have political control.
It is evident that many African countries increasingly depend on China as a trading partner as trade was worth $10.5 billion in 2000, $40 billion in 2005 and $166 billion in 2011. China is currently Africa’s largest trading partner, having surpassed the US in 2009. However, dependency on China extends more deeply than trade. China has been seen to be providing many African countries with loans in the form of top-down development projects. Examples such as this can be seen in a $3.2 billion railway in Kenya, trekking 300 miles from Nairobi to Mombasa, which is faster than the equivalent distance of a train journey from Philadelphia to Boston. China has also built a $526 million dam in Guinea and a $475 million light rail system in Ethiopia, which is the first of its kind in sub-Saharan Africa. These infrastructure projects are effectively seen to be loans however these loans are extremely risky, with low or no interest, where often most of the money is not completely paid back. This shows that China is not investing in these projects for economic benefit, but to have leverage over a country. This allows China to have political leverage, especially in votes at UN conferences such as those involving the China/Taiwan governance issues or China’s allies such as North Korea.
In the most recent vote involving condemnation of North Korea, only 12 out of the 54 countries in Africa voted against China’s ally. It has also been found that if a country recognises Taiwan (which is under Chinese governance) as a country in its own right they receive 2.7 fewer Chinese infrastructure loans a year. Furthermore, if an African country voted overwhelmingly along with China in a UN General Assembly they receive 1.8 more infrastructure projects a year. This shows that increasingly in these vulnerable countries China is controlling their economies as well as their political views.
However, this is not only the case in low-income countries such as those in Africa, we have been seeing in recent years China is using a similar technique to have more influence over Europe. China is the EU’s largest provider of imports accounting for 20.3% in 2015. China has also invested a lot into Europe, arguably for profit however, some projects could also be for political influence even though European economies are significantly larger than those in Africa. Greece and Hungary worked together to prevent Europe condemning of a tribunal’s finding against China and its plan in the South China Sea. China has also recently invested half a billion euros into the Greek port of Piraeus and the Belgrade – Budapest railroad. China has also been seen to drive a wedge between the UK and the USA by decreasing trade between the two and siding with Europe on matters concerning Climate change. China has also been seen to exploit links with certain countries to make foreign policy hard in areas such as human rights.
It is clear China is having an increasing influence in countries everywhere, which is increasingly leading to the loss of democracy on the international stage. Countries should be weary of this increasing influence and so should decrease dependency on the super-power.
Phoebe, Year 13, explores the use of Bitcoin as a currency and its potential to replace Sterling by discussing the limitations of the new currency.
Bitcoin is a cryptocurrency, which is a digital currency that uses cryptography for security, and a worldwide payment system. It is the first decentralized digital currency, meaning the system works without a central bank or single administrator. It is based on a special field of maths called cryptography which is the study of how to secure communications, this being one of the main issues with not having transactions being overseen by a central administrator. Bitcoins are created through the process of mining; where miners use special software to solve mathematical problems and are issued in exchange with bitcoins. So, to what extent does this new unregulated technology have the ability to replace sterling?
Despite the fact that Bitcoin supports the attractive libertarian utopia of a society free from government intervention, where welfare is cheaper and wealth more distributed, in reality Bitcoin currently does not pose a threat to the sterling. One of the major reasons that I will be focusing on is the unsustainable scale of computer computational power that is required in order for miners to verify transactions within the block chain system due to the increasing marginal costs for them. Miners are being imposed with a direct cost as they are forced to require more bandwidth to enable them to solve the increasingly difficult puzzles in the same time frame.
Distributed systems such as Bitcoin’s involve a negative externality that causes over investment in computer hardware as the expected marginal revenue from the individual miners is increasing with the amount of computing power that they individually have. Not only does this increase their own marginal cost but it increases the competition within the system and thus the cost is also increasing across the entire network. “Cetirus paribus” economic theory would suggest that in equilibrium all miners are inefficiently investing in hardware while receiving the same revenue that they would have had they not invested in the extra computing power. This behaviour is irrational as it is increasing the computing power across the entire network making it harder for them to succeed individually.
If the cost of verification for the miners is constantly increasing, then eventually the incentive to secure the network will disappear and lead to the collapse of the system.
Therefore, due to this increasing cost of mining, Bitcoin, in its current state, does not have the potential to replace sterling.