What next for Brazil, after it suspends president for mishandling economy?
The biggest corruption scandal in its history, a president on trial, and a vice-president who plans on turning the current government’s economic principles on its head: it’s been an eventful few months for Brazil, to say the least. Current president Dilma Rousseff, accused of tampering with government accounts to hide an extremely large budget deficit, has stepped aside to make way for vice-president Michel Temer, a man who sees private enterprise, a free market, and a strong financial sector as the way forward for Brazil’s economy. He’s got a serious challenge ahead: one in 10 people are unemployed, is at 10%, and the government deficit is higher than ever. And he can’t necessarily rely on Brazilians having his back: according to a poll last week, 62% of the population would have preferred new elections to an impeachment, and a LatAm expert said the Worker’s Party will make the current opposition look like "a bunch of teddy bears". Funnily enough, his last name ‘Temer’ means ‘to fear’ or ‘dread’ in Portuguese. We’d be ‘temer’-ing for the future too, if we were him…
How long will the troubles in Greece go on? Nobody knows
It’s been a topsy-turvy week in Greece, with financial reforms pushed through parliament, meetings to agree ‘debt relief’ and widespread protests on the streets of Athens. News from Greece hasn’t been as prominent recently as it was last year. But the country’s troubles haven’t gone away. What exactly is going on? Well, it’s still struggling under the burden of massive debts to its creditors - mainly Germany, France and Italy - after they bought the debt off the banks that originally leant Greece the money. The so-called austerity policies which were put in place to help the country save enough money to pay this debt back mean that cuts to public services, limits on cash withdrawals from banks, and high unemployment continue. This week two things happened. On Monday lots of important people in suits agreed to cut Greece a bit more slack on the terms of repaying its debt, giving it a longer time to pay it back and charging less interest. But the day before, the Greek government passed some tough budget reforms – smaller pensions, higher taxes – which will make things even harder for people, a lot of whom are still struggling to make ends meet. Strikes and protests this week don’t seem to have changed politicians’ minds: it looks like the economic turmoil Greece has been facing for six years now won’t go away anytime soon.
Will Kenya really close its refugee camps?
The Kenyan government has said it will close its refugee camps, potentially leaving some 600,000 people with nowhere to go. The government says the "environmental, social, and economic burdens" have become too much to handle, and that the international community has not done enough to support the camps. Initially a temporary measure to house people fleeing conflict in Somalia, some of the country’s biggest camps have become fully fledged cities with schools, restaurants, hair salons, and even computer game arcades. Amnesty International has called the plan a “reckless decision” and other human rights organizations have condemned the move. The situation is taking place in the context of an increase in the numbers of migrants and refugees across the world, with millions on the move, fleeing war, persecution and looking to secure better lives. Shutting the Kenyan camps down will be hugely expensive, and more importantly, will leave hundreds of thousands of people currently living on rations and a token pay of $50 a month with little choice but to return to Somalia, where the war that they fled from years ago is still raging on. It’s a painful example of the costs of war, and the difficulties of sustaining an economy on aid and charity, which leaves a gaping hole when it’s taken away.
“Dear world leaders, please sort out the whole tax haven thing. Love, lots of economists”
With more information from the Panama Papers published this week, a group of 300 economists have written to world leaders to say that tax havens “serve no useful economic purpose”. They argue that there’s no economic justification for tax havens to exist, saying that “territories allowing assets to be hidden in shell companies or which encourage profits to be booked by companies that do no business there, are distorting the working of the global economy.” The letter comes after increasing pressure upon governments to do something about the levels of tax avoidance and evasion revealed by the recent leaks from Panama. Many believe that allowing the rich to move their money abroad means there’s less tax revenue to go round in the countries where they reside. That’s less money for the schools, hospitals and welfare on which most people –especially the less well off – depend. Others disagree: they believe that ‘offshore tax centres’ allow companies to more effectively operate internationally, making sure they’re not taxed more than they should be. London hosted an Anti-Corruption Summit this week, where this topic was discussed by politicians and policy makers. But with the tax haven system so well established, finding the political will to change it might prove a real challenge.
Will eroding long-held workers’ rights in France help ease unemployment?
On Tuesday the French government forced through an overhaul of the country’s rigid labor laws, sparking protests across the country. The move is designed to help cut unemployment, but opponents say it puts workers’ rights in danger. France has traditionally had very strict laws that protect around things like pay, breaks, hours and overtime. Some feel this has made it difficult for businesses to be as flexible with their recruitment practices as they need to be. According to the new laws, companies would now be able to negotiate things like working hours, bonuses and paid holiday, as well as more easily lay off people when times get tough. It’s an age-old battle – businesses want more control in their relationship with employees because it helps them maximize their profits, while workers want the best conditions possible. In France business leaders and politicians argue that the changes will help them build a better economy and combat high unemployment (especially among the young), but it’s difficult to see unions, students and labor activists accepting that anytime soon.
Is China a ‘market economy’ or not?
You’d think a country could decide for itself what kind of economy it had, but apparently not: the EU and the US decided this week not to grant China ‘market economy’ status. This term designates when a country is recognised as one that's based on a ‘free market’ - an economy where the price of goods and services is set by competition between businesses. ‘Market economies’ get to trade with other market economies on equal footing – non-market economies are blocked by ‘anti-dumping’ regulations which are designed to protect market economies from the ‘unfair’ pricing of goods that are produced with government support. The European Commission alleges that China fails on 52 of the conditions it would take to be a market economy; the US is even harsher, saying it falls flat on 98 (who knew there even were that many?!). China’s not pleased, saying that this is just a political move to block cheap Chinese goods from international markets. And it’s not like Europe and the US have completely ‘free markets’ anyway. Europe’s Common Agricultural Policy protects its farmers from cheap produce abroad, and the US has been nicknamed the ‘United States of Subsidies’ for the amount of corporations it supports. Seems all isn't necessarily fair in economic love and war.
In other news...
Say hello to the octogenarian mortgage. The UK based building society Nationwide has raised the age limit for mortgage borrowing to 85. The move is a response to the fact the UK population is getting older, with many people working well into their 70s. It also reflects the fact that affording a mortgage is becoming increasingly difficult, given that the average price of a house in the UK is now £298,030.
Economics equations or terrorist code? A domestic flight in the US was delayed because a woman thought the math equations a fellow passenger was writing were a sign he was a terrorist. In fact he was an economics professor preparing a speech he was set to give at a university in Canada. After explaining to staff and showing them his calculations, he was finally allowed to return to his seat, before the flight went ahead.
Nigeria fuel price spirals upwards. The Nigerian government announced on Wednesday that the price of fuel was to increase by 66% to try and stop people from wanting so much of it. The country has faced huge queues at gas stations as people wait to fill up their cars. But the big question remains: why is Africa’s largest economy and largest oil producer short of fuel?
£80 million to go down. Newcastle United have become the most expensive football team ever to be demoted from the English Premier League. Given that the league was won by Leicester City, whose entire team cost £30 million less than the extra players Newcastle bought during the season, it seems that there’s more to footballing success than just money.
How to predict a nation’s economic future… just ask an ox or two
On Monday Thailand held its annual plowing ceremony, predicting growth in foreign trade and abundant rice crops - welcome news for a country that’s struggling with drought and a slow economy. The ancient rite marks the start of the rice growing season and dates back hundreds of years. Two sacred oxen lead a plough on ceremonial ground, while rice seed is sown by court officials. After the ploughing, the oxen are offered plates of food, including rice, corn, green beans, sesame, grass, water and rice whisky. Depending on what they eat, the officials make a prediction on whether the coming growing season will be bountiful or not. The deputy permanent secretary of the Ministry of Agriculture, read the forecast after the ceremony: "This year there will be enough water, rice will be abundant and cereals and fruit bountiful," adding, “Foreign trade will grow and the economy will prosper."