International Economics: IB Economics

Interesting article reporting that Elon Musk is forecasting slower sales growth in 2024, presumably a function of low levels of growth - a nice application of YED.

However, I'm more intrigued by the suggestion that "Chinese rivals 'will pretty much demolish most other car companies in the world' unless trade barriers are put in place."

Obviously, it's a self-interested plea:but wouldn't it be perfectly acceptable for Western consumers to buy cheaper Chinese-manufactured electric cars? Or is Musk arguing that protectionism would be appropriate because of the state support these firms receive? Of course, Tesla have never received a single penny of state aid...

Coronavirus isn't the only thing hobbling the global economy - the continued trade wars between the US and China, and the US and the EU, rumble on - in this case, the EU is threatening retaliatory tariffs if the US imposes tariffs of its own, in response to EU support of Airbus.

Just when you thought it couldn't get much worse... 

News of another substantial bailout in the aviation sector, with Cathay Pacific the recipeint of a sizeable chunk of state aid from the Hong Kong government, $5bn.

It will be interesting to see how this pans out - will all flagship carriers survive? And to what extent will government's fall foul of the sunk cost fallacy?

Another day, another bailout: this time, the French government is seeking to help car manufacturers, and encourage them to become the leading manufacturer of clean vehicles in Europe. 

This comes in addition to a separate bailout package for Renault, and is seen by many as trying to reposition the sector, not least in the wake of Brexit.

And in an attempt to ward off the worst of the economic effects, Congress has passed another raft of measures designed to provide assistance for small firms. It seems that we're all Keynesians now - out of necessity.

The US has acted to offer a rescue package to the airline sector, with a $25bn package going to the countries 10 largest airlines. Of course, the sector is more important in the US than the UK, in terms of its linking effect as part of national infrastructure. However, many people will baulk at an environmentally-unfriendly sector getting such a sizeable lift at this time, and wonder about the distributional effects of saving large firms rather than small firms.

I suspect the airlines would posit that, given the positive externalities, they generate for the economy at large, such action is justified. They'd be less keen to highlight the negative externalities, I'd guess.

The EU has announced a 500 billion euro rescue package, in addition to the individual nations offering their own state aid, in the wake of the coronavirus crisis. 

It really is an unprecedented threat - and one which requires hitherto unimaginable solutions.  And there's been an awful lot of disagreement about the extent to which support should be provided, with the Germans looking to limit the amount of aid offered, and other nations, notably Italy, asking for more.

This little snippet looks at the issue of state aid in the aeronautics sector, with Boeing likely to lose some of its state assistance as the US and EU continue to squabble over acceptable levels of aid in the sector. 

While most South-East Asian economies are worried about an increase in the birth rate as a consequence of the coronavirus pandemic, the same isn't true for Singapore, which has worried about low birth rates for a while.

As a result, the government are offering a 'pandemic bonus' for parents who have babies, although the size and nature of the bonus is yet to be specified.

Very interesting little piece in the Guardian about the US coronavirus aid programme and the lack of accountability associated with it. In the UK, the National Audit Office would hold the government to account - is there an equivalent body in the US?

The German government have announced a fiscal stimulus package designed to act counter-cyclically as the economy enters recession.

The most eye-catching measure is the one-off payment to families with children, a direct cash transfer, but it's also supported by a temporary cut in VAT, a bigger subsidy for people buying electric cars, and help for businesses, notably in the hospitality sector too. 

It will be interesting to see whether the Chancellor's mini-budget is going to be as generous: governments are trying to balance the need for stimulating the economy with a dramatic fall in tax revenues, and a commensurate rise in government borrowing. 

Another bailout story - this time German airline Lufthansa is in receipt of 9 billions euros worth of state aid - seeing the government take a 20% stake in the company until the end of 2023.

Another indicator of the extent to which the aviation sector has been hammered by the coronavirus pandemic.

The extent to which the coronavirus outbreak has affected all economies is illustrated by this story which details how the original US rescue package has already run out, and the ongoing disagreements about whether or not more funds should be dispersed to other businesses in need, especially SMEs.

It raises interesting questions for all economies about what the appropriate level of state aid is at this time and the question of who should be receiving it. 

The Guardian details the extent to which EU member states have clashed over the response to the coronavirus pandemic, highlighting the extent to which the Dutch and the French disagreed over the extent of the rescue package.

The European Union has put together a package of measures to try and help the Eurozone economy through the coronavirus outbreak. It's designed to prop up investment and give governments greater freedom as regards budget deficits and state aid. All sobering stuff: I can't see how there's going to be anything like growth in the Eurozone this year at this rate.