Economics | The Guardian

Kristalina Georgieva hopes MPs back deal she feels will spare UK significant economic damageThe head of the International Monetary Fund confessed she jumped for joy after hearing news of a Brexit breakthrough that she said would spare the UK significant economic damage.Kristalina Georgieva, the IMF’s new managing director, said there would still be some impact from leaving the EU with an agreement but said much of that had already been felt in the period since the 2016 referendum.Related: British businesses say new Brexit deal worse than May's deal Continue reading...

Industry groups and firms say PM’s deal will make exporting to their biggest market harderBritish companies have expressed concerns that Boris Johnson’s Brexit deal could leave industry worse off than under the previous agreement with the EU.Businesses, investors and economists have been almost unanimously in favour of the UK securing a withdrawal deal with the EU to avoid a no-deal Brexit, and markets appeared to welcome a diminished risk of a chaotic break on 31 October, after the UK and the EU unveiled a revised deal on Thursday.Related: New IMF boss 'jumped for joy' over Brexit breakthrough Continue reading...

Boris Johnson’s agreement estimated to cost 6.7% of expected GDP rise over 15 years

The CBI’s flawed analysis ignored all the benefits of the party’s flagship policyIt’s hard to unite nationalisation advocates and sceptics. But the Confederation of British Industry has managed to do just that, getting into hot water this week with an unsubstantiated claim that the Labour party’s plans to renationalise utilities would cost £196bn. These kinds of big numbers get media attention and help drive a narrative, particularly when they come from an establishment organisation such as the CBI. But by presenting an unbalanced view it has lost out on an opportunity for genuinely useful public debate.Related: Northern rail could be renationalised, says transport secretary Continue reading...

Department store sales slump further and online shoppers also rein in spending, says ONSRetail sales failed to bounce back last month from a drop in August as Brexit uncertainty deterred shoppers from splashing out on big ticket items.The volume of sales was flat and the value down by 0.2% in September with a further slump in department store sales offsetting a modest rise in clothing and supermarket food purchases, according to the Office for National Statistics.What’s the problem? Continue reading...

The work of Esther Duflo, Abhijit Banerjee and Michael Kremer on poverty deserved this accolade, but both the prize and the discipline need reformReaders of this paper on 6 June 2011 may have spotted an editorial titled “In praise of... Esther Duflo and Abhijit Banerjee”. It was indeed a paean to the two Massachusetts Institute of Technology economists and their work to lift people out of poverty. “They make a subtle case for one big argument,” we wrote. “Aid really can help poor people, provided the money follows the evidence.” Scroll forward almost a decade to this week, and the judging committee behind the “Prize in Economic Sciences in Memory of Alfred Nobel” announced that the pair would win this year’s award, alongside their colleague Michael Kremer. To the lucky trio sharing a prize of 9 million Swedish kronor (currently £716,000, although sterling’s value in these Brexit-addled times can go down as well as down), we extend our congratulations. To the judges, we say: what took you so long?A number of precedents are being broken or tested by this welcome decision. At 46, Prof Duflo is the youngest-ever winner of this prize. She is also only the second woman to win it. Handed out since 1969, it was never given to one of the major economists of the 20th century, Joan Robinson. Prof Banerjee is only the second Indian to win it, and one of very few winners to come from outside the west. Most of the world economy is not in the west, and many of the most interesting thinkers do not come from there, as is now reflected in the senior echelons of the World Bank, the International Monetary Fund and the Bank for International Settlements. Alas, the prize givers at the Sveriges Riksbank have yet to catch up. Instead, the prize has gone to some odd choices such Milton Friedman. In 1997, Myron Scholes and Robert Merton won the prize for their work on derivatives. The very next year, the hedge fund they ran according to their model lost $4bn in just six weeks and required a state-organised bailout. Continue reading...

Freeze imposed in 2015 was planned to last until end of 2019-20 financial yearThe government has refused to commit to ending its freeze on benefits despite a promise to turn the page on a decade of austerity.The work and pensions secretary, Thérèse Coffey, said she could not give a definitive answer about whether the freeze on most working-age benefits and tax credits would continue beyond its initial four-year term. Continue reading...

With corporations loading up on debt, any recession would have dire consequences

Rolling coverage of the latest economic and financial news, including the latest UK and eurozone inflation figures

Update on markets lists eight leading countries, including US, China and UK, as vulnerableLow interest rates are encouraging companies to take on a level of debt that risks becoming a $19tn (£15tn) timebomb in the event of another global recession, the International Monetary Fund has said.In its half-yearly update on the state of the world’s financial markets, the IMF said that almost 40% of the corporate debt in eight leading countries – the US, China, Japan, Germany, Britain, France, Italy and Spain – would be impossible to service if there was a downturn half as serious as that of a decade ago.Related: IMF haunted by fears that history might be about to repeat itself | Larry Elliott Continue reading...

The long history of bias, discrimination and underestimation of women in the field of economics is why Duflo’s prize is a such a great step forwardThis week, MIT’s Esther Duflo became the second female economist to win a Nobel prize. She and her husband, Abhijit Banerjee, also of MIT, and Michael Kremer of Harvard University, shared the award “for their experimental approach to alleviating global poverty”.In Poor Economics: A Radical Rethinking of the Way To Fight Global Poverty, Duflo and Banerjee studied the poor not as “cartoon characters” but as human beings “in all their complexity and richness”. In 2003, they founded the Abdul Latif Jameel Poverty Action Lab at MIT to study poverty.Related: Economics Nobel prize won by academics for tackling povertyJill Priluck’s reporting and analysis has appeared in the New Yorker, Slate, Reuters and elsewhere Continue reading...

The International Monetary Fund tips growth will be 1.7% in 2019 but is expected to recover to 2.3% in 2020The International Monetary Fund has downgraded Australia’s economic growth forecasts by 0.4% to 1.7% in 2019 amid rising geopolitical turmoil, the US-China trade war and stalling economic growth globally.The world economic outlook forecasts, released on Wednesday, show growth is expected to recover to 2.3% in 2020, providing some support to the Reserve Bank’s view when it cut interest rates earlier in October that Australia’s economy has reached a “gentle turning point”.Related: Josh Frydenberg steers clear of the ‘S’ word while asking states to boost economyRelated: The prime minister's office accidentally sent out its talking points. We fact checked them Continue reading...

BEIS committee blasts management failures for the collapse of the world’s oldest travel company, and urges bonuses to be clawed back

Mark Carney says capital markets are financing projects likely to fuel a catastrophic rise in global heatingThe governor of the Bank of England has warned that the global financial system is backing carbon-producing projects that will raise the temperature of the planet by over 4C – more than double the pledge to limit increases to well below 2C contained in the Paris Agreement.In a stark warning over global heating, Mark Carney said the multitrillion-dollar international capital markets – where companies raise funds by selling shares and bonds to investors – are financing activities that would lift global temperatures to more than 4C above pre-industrial levels.Related: Revealed: the 20 firms behind a third of all carbon emissions Continue reading...

World growth forecast cut as central banks battle impact of protectionism

The Fund’s latest forecast accepts that financing public debt is easier when borrowing is cheap

Brexit uncertainty ‘finally taking toll’ as pay rises slow and unemployment increasesThe number of people in work fell by the largest margin in four years in August as the uncertainty created by the Brexit talks weakened Britain’s previously robust labour market.The employment figures dropped by 56,000 in the three months to the end of August from the previous quarter after a shake-out of high street retail jobs and redundancies across much of the manufacturing sector.The International Labour Organisation (ILO) jobless rate is a measure of unemployment adopted in a number of countries to reflect the state of the labour market. It is expressed in percentage terms, as a proportion of working-age people who are out of work but want a job and are actively looking for one. Continue reading...

His bold new plan is even more radical than the Labour party’s. It would transform how companies operate and for whomOligarchy rules the United States: the republic has been ransacked, its commonwealth privatised, and rentierism runs amok. The richest 10% of Americans capture an estimated 97% of all capital income – including capital gains, corporate dividends and interest payments. Since the financial crisis of 2008, almost half of all new income generated in the US has gone to the top 1%. The three wealthiest people in the US now own more wealth than the bottom 160 million Americans. And the richest family in America – the Walton family, which inherited about half of Walmart’s stock – owns more wealth than the bottom 42% of the American people.Related: The pundit class continues to misunderstand Bernie Sanders – and it shows | Nathan RobinsonRelated: Trump's mounting troubles in Iowa could spell doom for Republicans | Art Cullen Continue reading...

Dr Kevin Bannon on the root of the Caribbean country’s problems and why the US demeans the politician who became Haiti’s first democratically elected presidentHaiti’s political and economic problems are of course rooted in its exploitative treatment by the US going back decades and more (How US aid failed Haiti, The long read, 11 October). However, since 1990, in both elections and in huge popular demonstrations, Haitians have expressed their desire to be led by Jean-Bertrand Aristide – a sensible, conscientious humanitarian, and democratic reformer and a supporter of the liberation theology movement. He has been overthrown as leader and exiled twice by pro-US local elites because the US fears his influence might initiate a regional domino effect; this explains why Aristide continues to be demeaned by conservative sources in the US. Jacob Kushner’s article attributes Haiti’s woes more prominently to the philanthropy of Bill and Hilary Clinton than even the country’s disastrous 2010 earthquake. More remarkably, the article is without a single mention of Jean-Bertrand Aristide.

Abhijit Banerjee, Esther Duflo, Michael Kremer ‘dramatically improved’ practical solutionsAcademics who pioneered on-the-ground experiments to discover the most effective ways to tackle poverty in the developing world have been awarded this year’s Nobel prize for economics.Abhijit Banerjee and Esther Duflo, of the Massachusetts Institute of Technology, secured the 9m Swedish krona (£720,000) prize with the Harvard professor Michael Kremer on Monday.Related: Nobel Prize in Economics won by Banerjee, Duflo and Kremer for fighting poverty - live updates Continue reading...

Esther Duflo becomes second woman to win the Sveriges Riksbank Prize in Economic Sciences, with Abhijit Banerjee and Michael Kremer also recognised for their research alleviating poverty

Party says calculation of renationalisation costs is ‘incoherent scaremongering’Labour’s plans for a sweeping renationalisation of utilities would cost Britain almost £200bn, the Confederation of British Industry has said.Branding the plans as “eye-watering”, the nation’s foremost business lobby group, which represents some companies that would be put into state ownership under a Labour government, said the project would add to the UK’s debt levels and could come with costs to pensioners and savers. Continue reading...

Financial Stability Board says countries should be prepared for global economic downturnGlobal authorities gathering in Washington this week must stand ready to address emerging risks including a global economic downturn and Brexit, the leading body for global financial stability has warned.The Financial Stability Board – which was formed after the 2008 banking crisis that brought the financial system to its knees – said that while much has been achieved in the past decade, its job was “far from complete”. It also warned of new dangers, including higher levels of corporate debt, weaker lending standards, and cyber-attacks. Continue reading...

Ariel Rubinstein, who says economics lacks common sense, heads list of likely winners

According to our study, the deal now being discussed would reduce per capita GDP by 6.4%, as opposed to 4.9%Back to the (original) backstop? By conceding that any customs border will have to be in the Irish Sea, Boris Johnson appears to have revived the possibility of a Brexit deal. But the focus on the politics of the Irish border risks missing the implications of his proposals for the economy of the UK as a whole. And, as we reveal in our report for The UK in a Changing Europe, these are significantly worse than was the case for Theresa May’s Brexit plan.Indeed, Johnson’s motivations for ditching May’s withdrawal agreement have little if anything to do with Northern Ireland. Rather, it is because the new prime minister sees the ultimate relationship the UK should have with the EU very differently to his predecessor. Gone is the notion that a shared customs territory and close regulatory alignment on goods should form a “bridge” to the long-term relationship. As Johnson put it himself in his letter to Jean-Claude Juncker: “The backstop acted as a bridge to a proposed future relationship with the EU in which the UK could be closely integrated with the EU customs arrangements and would align with EU law in many areas. That proposed future relationship is not the goal of the current UK government. The government intends that the future relationship should be based on a free trade agreement in which the UK takes control of its own regulatory affairs and trade policy.”Relative to the status quo and May’s proposals, the economic impact of these proposals would be significant and negativeRelated: 'Two borders for four years': what is Boris Johnson's Brexit offer? Continue reading...

Bank of England governor warns of financial collapse linked to climate emergency

The state of the global economy is particularly worrying because the usual explanations do not applyGrowth is the default setting for modern economies. Humans innovate and improve, find better ways of doing things. Only when shocks occur is this process of steady advance interrupted.One of the long-established adages in financial markets is that business cycles never die of old age, and there is plenty of historical evidence to support that view. Continue reading...

Economists and manufacturers warn recovery will be long delayed despite any deal prime minister may be working onBritain’s economy will take years to recover from the uncertainty that has seen companies abandon investment plans and move headquarters abroad, economists warned this weekend.Dashing hopes that a deal with the EU would mean a new start for business, economists said weak global growth and employers shifting from the UK could see recovery delayed until well into the next decade. Continue reading...

In the fog of Brexit uncertainty, UK GDP growth has been undermined by lack of business investmentOne of the confusing trends since the Brexit referendum vote can be found in the official measure of national income or GDP. A glance at the data since 2016 reveals a series of ups and downs from quarter to quarter, and very little in the way of a trend.The low points conform to the argument that Brexit was a disaster for the economy, while the mini-recoveries play to the Brexiters’ charge that “project fear” amounted to no more than a childish scare tactic. This year has proved to be little different. Stockpiling by businesses before the first Brexit deadline in March boosted the first-quarter GDP number before a slump in the second quarter.When a country can count on about 1 million more people every four years, it is almost impossible for GDP not to rise Continue reading...

Trade wars are likely to dominate discussions in Washington despite new leader’s passion on inequality and climate crisisThe world’s finance ministers and central bankers will be in Washington this week for the annual meetings of the International Monetary Fund and World Bank amid growing concerns that the global economy is heading towards stagnation.Predictions of a sharp downturn fill policymakers with anxiety, knowing that job losses and lower tax revenues can only lead to social unrest. Last week the IMF’s new leader, Kristalina Georgieva, asked nations involved in tit-for-tat trade wars if they dare ignore warnings of the most serious threat to the global economy since the financial crisis.Related: Nations must unite to halt global economic slowdown, says new IMF headRelated: IMF accused of 'reckless lending' to debt-troubled states Continue reading...

Sterling hits a three-month high against the dollar and UK company shares rocket

Sharpest rise in sterling’s value since EU referendum follows Boris Johnson-Leo Varadkar meetingThe pound had its biggest two-day rally against the dollar since the Brexit vote as hopes rose that a deal could be struck before the deadline later this month.Sterling climbed to the highest level in three months against the US currency, briefly hitting $1.27, amid mounting optimism in the City, after the EU’s chief negotiator, Michel Barnier, said talks could progress to the next phase. Continue reading...

Vice-president was pressed on Trump-Zelenskiy transcript after urging residents to ‘turn up the heat’ on Democrats to pass USMCAMike Pence visited Iowa this week to pitch the Trump administration’s USMCA trade deal and ask Iowans to “turn up the heat” on their Democratic representatives in Congress to pass the legislation designed to replace Nafta.Speaking to a crowd of more than 500 supporters at Manning Farms in Waukee, a suburb of the capital, Des Moines, the vice-president had come to Iowa to push the deal, which was agreed in November 2018 between the US, Mexico and Canada but has yet to be passed by Congress.Related: Trump-Ukraine impeachment scandal: timeline of key events Continue reading...

Growth is weak but strong summer for services and a TV-film industry boom lifts quarterly figuresBritain is on track to avoid a recession despite mounting Brexit uncertainty after official figures showed an unexpectedly strong jump in economic growth over the summer.The Office for National Statistics said gross domestic product had risen by 0.3% in the three months to the end of August, beating the forecasts of City economists, helped by the strength of the services sector and a boom in TV and film production across the country.Gross domestic product (GDP) measures the total value of activity in the economy over a given period of time. Continue reading...

The latest UK GDP report shows that the economy will probably avoid sliding into recession this autumn

Readers respond to the launch of the NHS Every Mind Matters campaign and share their thoughts on other mental health issuesCongratulations to Suzanne Moore for highlighting those who are forgotten in campaigns such as Every Mind Matters (Telling people to jog will not solve this mental health crisis, 8 October). When Jeremy Hunt spoke of the biggest expansion of mental health services in Europe, he referred to expanded provision for people with mild to moderate problems. Those with serious mental heath problems have found that there is no therapy for them, specialist services like assertive outreach have disappeared, and their community mental health teams are too busy managing crises to support them.I work with people who regularly self-harm and feel suicidal. Because the NHS has a tendency to keep them out of services and ignore NICE guidelines aimed at helping them, they find themselves the subjects of reports such as “No Longer A Diagnosis of Exclusion” and “The Patients Psychiatrists Dislike”. As they are turned away while seeking help and reading “If you feel that life is not worth living, you’re harming yourself or have thought about self-harm, it’s important to tell someone” on the Every Mind Matters website they will rightly feel gaslighted. We are building awareness of difficulties for which there is no help. We are encouraging people to talk while leaving them alone. Despite this, the insult of being manipulative and deceitful is thrown at the people wanting help, not those who promise the earth but whose words are dust. It’s clear that some minds don’t matter as much as others.

Rolling coverage of the latest economic and financial news, as hopes of a trade war breakthrough this week grip markets

Multinationals would be forced to pay more tax in countries where they make biggest salesLarge internet companies would be forced to pay more tax in countries where they sell products and services under proposals for a global shake-up of taxation rules that currently allow companies to shift profits to low-tax locations.The Organisation for Economic Co-operation and Development wants to upgrade the international tax system for the 21st century and make multinationals such as Facebook, Amazon and Google pay more corporate tax in the countries in which they generate their biggest sales. Continue reading...

Bank of England governor gives firms two years to agree rules for reporting climate risksThe governor of the Bank of England has warned major corporations that they have two years to agree rules for reporting climate risks before global regulators devise their own and make them compulsory.Mark Carney said companies should use their next two annual financial reports to road test how they document the impact of the climate emergency on their businesses. Continue reading...

PageGroup and Robert Walters also point to uncertainty created by Hong Kong protestsTwo of Britain’s biggest recruitment companies have warned that uncertainty created by Brexit, protests in Hong Kong and the US-China trade dispute will hit their profits this year.PageGroup, the UK’s second-largest recruiter, said rising fears about Brexit had made companies less willing to hire workers and potential candidates wary about moving jobs. It said uncertainty had affected the market for jobs at all levels. Continue reading...

In her first speech, Kristalina Georgieva says looming crisis requires coordinated responseThe new head of the International Monetary Fund has told squabbling nations to forget their differences and prepare a united response to the most serious threat to the global economy since the financial crisis a decade ago.In her first speech since becoming the IMF’s managing director, Kristalina Georgieva said the world was in a synchronised slowdown and needed a synchronised response.Related: No-deal Brexit would 'push national debt to levels last seen in 60s' Continue reading...

Boris Johnson claims issue is a priority but Labour says figures are a ‘damning indictment’The productivity of British workers fell at the fastest pace for five years in the second quarter of 2019, amid mounting concerns over the impact of Brexit uncertainty on the economy.The Office for National Statistics said labour productivity – a measure of economic output per hour of work – slumped by 0.5% in the three months to June compared with the same period a year ago, the worst performance since mid-2014. Continue reading...

IFS says public borrowing will more than double next year whatever the Brexit resultEmergency tax cuts and higher public spending to offset the impact of a no-deal Brexit would send government debt to its highest level in more than half a century, according to Britain’s leading experts on the public finances.The Institute for Fiscal Studies (IFS) said the scale of the government response required to firefight a flatlining economy in the event of a disorderly departure from the EU would come with a hefty price tag for the public purse.The government is now adrift without any effective fiscal anchor Continue reading...

Rolling coverage of the latest economic and financial news, as UK retailers suffer their worst September since at least 1995

Multinationals’ failure to pay is hitting governments’ ability to fight the climate crisis and inequalityGlobalisation has gotten a bad rap in recent years, and often for good reason. But some critics, not least Donald Trump, place the blame in the wrong place, conjuring up a false image in which Europe, China, and developing countries have snookered America’s trade negotiators into bad deals, leading to Americans’ current woes. It’s an absurd claim: after all, it was America – or, rather, corporate America – that wrote the rules of globalisation in the first place.That said, one particularly toxic aspect of globalisation has not received the attention it deserves: corporate tax avoidance. Multinationals can all too easily relocate their headquarters and production to whatever jurisdiction levies the lowest taxes. And in some cases, they need not even move their business activities, because they can merely alter how they “book” their income on paper.Related: Will London's post-Brexit future be as gloomy as predicted? Continue reading...

Jubilee Debt Campaign says the Fund broke its own rules by not ensuring sustainable debt burdenDebt campaigners have accused the International Monetary Fund of encouraging reckless lending by extending $93bn (£75bn) of loans to 18 financially troubled countries without a debt restructuring programme first.In advance of the IMF’s annual meeting in Washington next week, the Jubilee Debt Campaign (JDC) said the the Fund was breaking its own rules by providing financial support without ensuring that the debt burden was sustainable. Continue reading...

Tax Justice Network says poor countries could lose out under proposals to limit avoidanceProposed reforms of international tax rules by the Organisation for Economic Co-operation and Development will only claw back 5% of profits, and could end up worsening global inequality, analysis by tax campaigners has found.A study by the Tax Justice Network found that the OECD proposals, designed to limit the scope of multinationals to avoid tax, could end up shrinking the tax paid in poorer countries. Continue reading...

The reshaping of the railways left deep scars, with towns and villages isolated, and London all-importantThere are expert government reports that quickly gather dust. There are reports that seem as if they will make a difference but are quietly forgotten about. There are reports that actually matter. And then there’s Beeching.Even now, 56 years after its release, you don’t need to be a transport buff to know about the Beeching report. Following its publication in March 1963, hundreds of stations and thousands of miles of track were axed. The rail network was slimmed down on the grounds that many lines were underused and uneconomic.Related: Rail services lost under 1960s Beeching cuts may reopenRelated: Left in a siding: the rail link that could make Heathrow greenerRelated: Brewing in the Borders: businesses thriving on Scotland's new railway line Continue reading...