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Rescooped by Ben Graves from Pre-U Macroeconomics
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Britain's economic recovery: three key challenges to long-term growth

Britain's economic recovery: three key challenges to long-term growth | Economics | Scoop.it
Jonathan Portes: The UK economy needs to be less reliant on the financial sector and more oriented towards investment and exports

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Tom Rees's comment, September 16, 2013 4:11 PM
The author starts by commenting that short-term economic prospects in the UK are much more hopeful now than they were a couple of months ago; this includes the fact that the government ‘Help-to-buy’ schemes are succeeding. However the government must be extremely wary of these low-deposit mortgages and especially of their decision to back these mortgages with a government guarantee. If not kept under control this scheme will inevitably lead to a bubble. The scheme is so generous, especially with the additional deposit loan, that it could create a huge demand for new properties. This demand will clearly become too much for a limited increase in supply, and so house prices will start to rise. Keynesian animal spirits will come into play, and before long the bubble will reach its peak. It is not only people looking to buy their first property that this rise in prices will attract; with rent prices at a record high, investors will look to buy up-market properties to receive a healthy income from rent while the value of their property increases. However as these loans are backed by the government, if the bubble pops as drastically as it did in 2008, it will be the government that take the majority of the blow as opposed to the banks.
As to the author’s ideas for a medium term growth strategy, I agree that something must be done about youth unemployment. Youth unemployment is now at 21%; the young are often the most keen to be earning their own money and this clearly shows that those who don’t go on to higher education struggle to find work. However the author states that “We need to improve schools”, and believe this is not an issue. The UK education system is very academically orientated, with few alternatives to higher education specialising in a particular profession. I agree with Tom that the German system is much better, and in fact there is a similar system in many more European countries, e.g. Austria and Switzerland. While for certain jobs it is useful to have the A-level qualifications that higher education provides, to be skilled in a certain profession by the age of 18 would be highly attractive to employers and save them both time and money in training graduates. This contributes to growth on two frontiers: reducing unemployment, and increasing the efficiency of businesses.
Pippa Fernandes's comment, September 16, 2013 6:37 PM
With reference to his point of education, Germany have a system that works very well. Being streamed into 3 groups early on and studying subjects based on your level of intelligence works very well for them. We could do with more vocational programmes in schools. The perception that these institutes are for the less clever needs to be targeted in order for the younger generations to accept it. There i no point training everybody to become doctors, we will always need plumbers as well. There needs to be s balance between skilled and unskilled workers coming out of the education system otherwise it is very inefficient and there could be lots of unemployment.
Andrew Watson's comment, September 18, 2013 7:30 AM
I agree with Tom Daniel's point about the benefit of the German "streamed" School System allowing for more practical work after school such as apprenticeships, but any attempt to replicate such a system here in the UK would cause an uproar due to lack of "social mobility" as outlined by Prof. Susan Hallam. She said streaming could lower parents', teachers' and children's own expectations, which could then become "self-fulfilling prophesies". Although the upper-half of the stream would benefit dramatically from their enhanced learning, the lower-portion would suffer and spiral into unemployment and cause a strain on the welfare and benefits scheme currently in place in this country. Admittedly, if an equilibrium could be struck, the streaming system would produce a balance of a skilled and a lesser qualified workforce.
I also see some sense in Alex's point (if it is a little draconian) that scrapping the welfare state, although being massively unpopular could motivate some people to go out and find jobs. The privatization of the NHS or the individual sale of its hospitals would not only provide a lump sum which could help reduce the budget deficit, helping with long-term sustainable growth, but also potentially more jobs in a more competitive market. I admit there would be drawbacks with popularity and civil discontent but along with the reduction of unemployment benefits I believe this country could see long-term change for the better.
The main problem with the author's third point is that no matter how effective and seemingly brilliant the long-term plan is, it will not survive countless changes in government as people care for immediate results, not struggling through a grueling life for next generation to live easily. Different governments have different ideas and come under different opposition and unseen crises so it is unreasonable to think that any one plan could last long enough to see its efforts come to fruition. Although, as in Malayandi's comment, I do not believe we should become an autocratic state, it is the only way a long term plan could possibly work.
(Sorry this is late, I've been bed-ridden for the past three days)
Rescooped by Ben Graves from Competition Issues
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Competition Commission blocks Eurotunnel's ferry service from Dover - Telegraph

Competition Commission blocks Eurotunnel's ferry service from Dover - Telegraph | Economics | Scoop.it
Eurotunnel has had its bid to operate three ferry services from Dover blocked by the UK Competition Commission, which fears it would mean higher prices for passengers and freight haulers.

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Marist Economics's curator insight, June 13, 2013 2:56 PM

I think the CC have got this one about right; what would be the motives be for the Eurotunnel business to operate three ferry services out of Dover, other than to reduce competition in the cross channel transport market and to asserts its dominant control via higher prices,and thus super-normal profits in the LR?

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mainly macro: New Keynesian models and the labour market

mainly macro: New Keynesian models and the labour market | Economics | Scoop.it
You cannot understand macro today without going back to the New Classical revolution of the 1970s/80s. I often say that the war between traditional macro (Keynesian or Monetarist) and New Classical macro was won and ...
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Rescooped by Ben Graves from Competition Issues
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BP and Shell raided over allegations of petrol price-fixing

BP and Shell raided over allegations of petrol price-fixing | Economics | Scoop.it
The European Commission today raided the offices of BP and Shell on suspicion that they are playing a central role in what could be the next price fixing scandal – colluding to inflate oil prices and, in turn, the cost of petrol.

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Rescooped by Ben Graves from Competition Issues
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Ryanair must cut Aer Lingus stake, says Competition Commission

Ryanair must cut Aer Lingus stake, says Competition Commission | Economics | Scoop.it
UK watchdog says arrangement could substantially reduce competition on routes between Britain and Ireland

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