Economics in Action

The real challenge of development is the bottom billion the people living in 50 or so countries, mainly in Africa, that are falling behind and often falling apart. But increased aid and freer trade will make only a marginal difference to these people’s lives until they enjoy greater security and that means military interventions by the rich countries to end civil wars, prevent conflicts from restarting and provide peacekeeping forces in support of long-term economic solutions.

These were the central messages of Professor Paul Collier when he delivered the 2006 Royal Economic Society Annual Public Lecture ‘ War and Peace in Africa’ at the Wigmore Hall in London on Friday 1 December.

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Researchers at the Universities of Warwick and Kent are calling on the Child Support Agency (CSA) to replace deadbeat Dads. Where fathers fail to pay a CSA assessment, the CSA itself should simply pay mothers the amount due.

Such an arrangement would create a sharp financial incentive for the CSA itself to be more active in pinning down recalcitrant fathers. The agency would have to have new powers (and be prepared to use existing powers) to effect compliance and seek new effective powers such as mandatory withholding via the tax system.

Drawing on evidence published this month in their research report in the Economic Journal, Professor Ian Walker and Dr Yu Zhu say:

Child support (CS) is a really good idea that needs to be made to work. Policy so far has been about trying to make Dads better at paying if they leave. But policy should also be about making Dads into better Dads if they stay.

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The BBC is reporting that applications to Economics degrees are up 12.8%, against a general rise in university applications of 6.4%. It also has mixed news on the graduate employment front. The number vacancies requiring degrees is increasing strongly but the salaries aren’t increasing at the same rate.

Despite misgivings about the growth of giant retailers, as reviewed in a previous post, the Competition Commission’s new enquiry is unlikely to shake up UK supermarkets any more radically than its earlier probes in 2000 and 2003. Even though it has detected some anti-competitive practices – such as big chains pressuring suppliers to sign exclusive deals, and buying land to stop rivals building stores on it,  the Commission can allow these if consumers are judged to benefit. The ‘Big Four’ can claim they do, through persistently low prices and now from the environmental and nutritional improvements they promise to wring from already lean supply chains.

So why do we still feel uncomfortable stepping through Tesco’s (or Sainsbury’s, Asda’s and Morrisons) ever more prevalent sliding doors, when they can claim to be cutting our bills without crucifying our consciences?

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Sex and drugs could soon be the only item you can’t buy at Tesco, in its UK home market or the increasing number of other countries (China is the latest) to which the supermarket chain now extends.

Tesco accounted for half of the new retail space opened in the UK in 2006 and has tripled its store numbers in the past six years, raising its grocery market share to 31%. (Asda and Sainsbury’s vie for second place with around 16%). Almost 60% of the land bank held by UK supermarket chains for future development also belongs to Tesco, which could raise its market share to 40% if all those sites were turned into new stores.

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Volatile Bangladesh pins hopes on an economist Associated Press proclaimed this month, headlining the story of how the country’s former central bank head Fakhruddin Ahmed was called in to lead its interim government and rescue scheduled elections.

In fact, Bangladesh turned not once, but twice, to an economist to resolve its political deadlock. Dr Ahmed, who worked at the World Bank after his economics PhD from Princeton, took the job after it was turned down by Professor Muhammad Yunus, awarded this year’s Nobel Peace Prize for pioneering micro-credit at the Grameen Bank.

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