The Importance of Tradition for British Universities

Great Britain has always been good at preserving its traditions. Taking tourists to see Big Ben in London in red buses, teaching English to international students in prison-like boarding schools, making roast dinner each Sunday and uniting people of all races and nationalities in pubs all across the country to watch Manchester United play Arsenal over a pint of beer-these constitute only a small part of centuries-old traditions which makes Britain truly Great.

Whether you are coming to the UK to live, work or study, the country offers you a ‘complete package’ in the form of the fusion of many cultures which promises to make your stay in Britain very unique. As for UK universities, they are world famous for the quality of their programs as well as their diverse student body which sets top institutions apart from their Ivy League competitors.

Did you know that Edinburgh University welcomes around 25,000 students, 20% of which are international? Such openness to foreign students does not only benefit international and British students who get to explore different cultures as a preparation to their global careers, but also serves as a huge benefit to the UK, which attracts many talented individuals who increasingly contribute to the development of a new, large export industry - higher education.

Recently, FT calculated that the tuition fees paid by the overseas students were the 2nd highest revenues collected in 2010 following financial services, a shocking figure! However, recent proposals by the UK Government to limit the number of working visas issued to non-EU citizens to 21,700 Tier 1 in 2011 (20% reduction) caused a new wave of discontent.

The argument behind such radical measures is based on a theory that a decrease in immigration of skilled workers (including graduates from UK universities) will help UK citizens to find jobs in depressed economy. However, many academic studies proved such theories wrong using empirical evidence to claim that immigration does not affect employment for local citizens (if interested, see papers by Christian Dustmann, Francesca Fabbri and Ian Preston). On the contrary to that, others consider visa plans as ‘hostage against British Universities’.

Reduction of student visas being issued is most likely to devastate pre-university pathway courses as well as have a serious impact on a reduction of number of students admitted to undergraduate programs costing the country billions of pounds in tuition fees and other income. Overseas students contribute to the local economy enormously in fees, rents and living expenses, so it is not surprising that Government’s actions are most likely to spike further public outburst.

Countries already began showing their discontent with the measures. Last week, India took up issue with the new UK student visa curbs. Major stake-holders in Britain have opposed the measures that are likely to result in thousands job losses and a cut in the annual contribution of 5 billion(!) pounds to the British economy from the international student market.

Recently, LSE surveyed all its overseas students (from outside the UK and the EU) to gather views on the recent UK Border Agency's consultation on changes to the student immigration system and found out that abandonment of post-study visa (PSV) will most likely result in less overseas applicants, as many students choose UK over US/Canada/Australia precisely because of the attractiveness of PSV. Moreover, research shows that due to the specifics of particular positions, there are actually very few jobs taken by post-study visa holders would have otherwise gone to unemployed Britons. This poses an important question - how will the UK universities survive recent changes brought forwards by the Government?

Due to newly imposed immigration rules, universities will not be able to attract more international students to compensate for their lost revenues as a result of dramatic increase in tuition fees for English students. So if English students will not be able to afford higher education while foreign students will not be allowed into the country or deported back home due to abolishment of post-study visa, how does Britain plan to increase its recovery and sustain the number of high skilled workers?

Those are vital factors contributing to Britain’s other long-standing traditions which are as well-known as fish and chips, namely - innovation, highly qualified labour force and global cultural reach.

Written by Daria Rusanova - 3rd year MA (Hons) Economics and Economic History

The School of Economics Staff Team 3 - 7 The School of Economics Student Team

It all started as expected. The student team passed the ball around, they were organised. The staff team didn't move, they were thinking about research. Sevi was late, he is Spanish. The game remained tight until after 30 minutes, the students suddenly scored 4 times in 3 minutes. Coincidentally, a large bet had been placed at Ladbrokes that the students would score 4 times between the 30th and 33rd minutes.

There are just a few incidents we should mention.

Adam Brown, the Braveheart, put his head in the path of a staff foot when scrambling the ball to safety. There was some confusion over whose foot it was but fortunately the referee got a clear view of the incident and said that it was definitely Santi's.

Unfortunately, the referee did not get a good view of how the Head of School, Simon Clark, came to be flat out on the ground so just to be sure, he gave each and every student a yellow card.

The referee gave the students a very soft free kick when Christopher Dias flung himself forward as if he had been hit in the back by a bulldozer. Replays show that it was a perfectly legitimate slight nudge.

Man of the Match: Christopher Dias the Drama Queen for his Oscar performance (and he also scored a few goals).

Inside Job

Last Sunday I’ve decided to take a break from working on my essays and catch a movie at a nearby cinema. To feel somewhat less guilty about it I picked Inside Job, a documentary about the causes and effects of the recent financial turmoil – that still counts as revising economics, right?

Here’s a little review I came up with.

The film starts with a short prologue describing the crisis in a nutshell on the example of Iceland. Next, we move to US where we’re greeted by a hypnotizing voice of Matt Demon who narrates throughout the rest of it.

The core of the movie comprises of a number of interviews with top players from the world of finance and extracts from politician’s TV appearances. It’s all divided into five chapters, focusing on different stage of economic downturn. Those go from the regulatory changes of 1980s and a resulting increase in the financial sector’s power, through the very tense weeks of autumn 2008, all the way to its immediate aftermath.

The director (Charles Ferguson) seems to be particularly concerned with close ties between Wall Street and not only the US government but also, quite interestingly, the entire discipline of economics. The latter is represented by lectures by Deans of top American universities like Harvard, Columbia Business School, Berkley or Brown University.

Inside Job isn’t exactly the most objective documentary I’ve seen. It seems quite determined to depict the employees of the financial sector as a bunch of greedy and self-egoistic hustlers whose sole goal is to make as much money as possible so they can spend it on more jets, mansions, drugs and prostitutes (there’s actually a bit on all four of those “expenses” in the film).
Nevertheless, I really liked that it wasn’t over-dramatic or shocking where it didn’t need to be – which unfortunately isn’t very common for films of that genre these days.

All in all, the film provides a good summary of the recent events and explains some terms from the glossary of crisis (like CDOs, credit default swaps, subprime mortgages etc.) in a fairly clear way. It’s also simply a good entertainment and gives you a chance to get to know a bit more about people like Alan Greenspan, Ben Bernake or Nouriel Roubinin.

So, if you want to see the film for yourself, it’s screened at Cameo at least twice a day, and now that it has won itself an Academy award for the best documentary, probably in all the other cinemas in the weeks to come.

Post written by Witold Gawlikowicz - 3rd year MA (Hons) Economics and Mathematics

Staff v Students Football 2011

Toppling dictators: The role of natural resources

2011 is not being a good year for Arab dictators. After 24 years of rule, Mr Zine El Abidine Ben Ali, Prime Minister and President of Tunisia was ousted from power. In Egypt, Mr Hosni Mubarak was forced to step down after having ruled the country for three decades. And now in Lybia, Mr Muammar Al-Qaddafi is using extreme violence to avoid being overthrown by masses of discontented citizens and factions of the army after holding an iron grip on the country for more than 40 years.

This has been a series of remarkable revolutions. Driven by the desire of people in these countries to end corruption, tyranny and to improve their economic conditions. These three rulers used their position to accumulate enormous amounts of wealth and to benefit their inner circle of relatives and friends by "privatising" national companies. For instance, Mubarak's family wealth was estimated to be between US $40 and $70 billion. Of course, one big question from an economist perspective is why these kleptocratic rulers, with their bad economic policies and corruption could stayed in power for so long. And, especially in the case of Qaddafi, why are they so difficult to overthrow.

The paper by Daron Acemoglu, Jim Robinson and Thierry Verdier entitled "Kleptocracy and Divide-and-Rule: A Model of Personal Rule" (Journal of the European Economic Association, 2004) addressed this problem. These authors developed a model aimed at answering this question and focused mostly on the cases of Mobutu Sese Seko in Congo (1965-1997) and Rafael Trujillo in the Dominican Republic (1930-1961), but it is possible to apply their ideas to these Arab autocrats. The main point of the paper is that a kleptocrat (from Greek, a ruler who steals) can stay in power if he is able to buy the support from the different groups that conform their country. These groups could oust the ruler if they were united but they fail to do so because the kleptocrat "bribes" pivotal groups and make them content, mostly by taxing and mistreating other social groups. That is the Divide and Rule strategy.

Critical to this strategy is the budget constraint of the ruler. The amount of income that it is at his disposal and that allows him to buy these groups. That is why Arab revolutions were sparked by the severely deteriorated economic conditions in these countries, poverty and unemployment. That is why these rulers and the rulers in other Arab countries such as Saudi Arabia or Morocco have used subsidies on food or massive housing programs to avoid revolts. Critical to this strategy is also foreign aid and natural resources. They can provide kleptocrats with more wealth they can then distribute across social groups to buy their support. This can help to explain the position of Qaddafi, who has been able to stay in power because of the revenues from the massive oil and natural gas reserves that Lybia enjoys, as well as the revenues derived from contracts with other nations on the supply of these resources

That is what is missing in Acemoglu, Robinson and Verdier's analysis. That in order to stay in power, autocratic rulers not only need to buy the support of pivotal groups within their countries but also of pivotal governments abroad.

The Peseta Returns

If you thought you were witnessing tough times in the UK, just take a look at Spain for a little perspective. I’m spending my third year abroad studying in Barcelona and never have I been more intensely aware of the economic woes of the people around me. Wages falling, retirement age rising, government bond yields still over 5%, stagnant GDP growth, and over 20% unemployment – it all adds up to some pretty pissed-off locals. So when I read in a local newspaper this week about a town which had given up on futile strikes and was taking its own proactive measures against the systemic Spanish hardships I was thoroughly impressed.
In the Atlantic province of Galicia the local businesses of a tiny pueblo named Mugardos have begun accepting the old Spanish currency of pesetas. The idea is that local businesses which are struggling because of feeble consumer demand will get a boost by giving everyone a chance to get rid of the pesetas they forgot to change into euros 9 years ago. The businesses can then make a communal trip to the Banco de España in Madrid where they can still exchange the pesetas for euros.
This is an incredibly brilliant idea for a number of reasons. It taps into a huge dormant source of wealth – the Banco de España estimates that Spaniards are still sitting on 1.7 billion euros worth of pesetas! What’s more, the market is effectively the entire nation and, indeed, businesses in Mugardos are reporting visitors from all over Spain.
It is particularly interesting for an economist because this situation showcases the peculiar properties of money – something physical which has had no real worth to the owner since the switchover to the euro has suddenly been re-imbued with purchasing power and once again has value. Nothing about the material notes or coins has changed in all this time, only their interpretation.
But my favourite aspect of this new idea is the symbolic move against the euro. With many Spaniards begrudging their new currency and blaming it for their recent troubles this is the perfect way to give it a kick in the proverbial balls.

Post written by Stephen Devlin - 3rd year MA (Hons) Economics