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621. How best to protect workers employed by gangmasters, five years after Morecambe Bay

Publication Date:
07-2009
Content Type:
Policy Brief
Institution:
Oxfam Publishing
Abstract:
In 2008, Oxfam commissioned the Wilberforce Institute for the Study of Slavery and Emancipation, based at Hull University, to conduct an independent evaluation of the Gangmasters Licensing Authority (GLA). The research team found that the GLA and its licensing regime were considered effective by many labour providers, unions, retailers and representatives of vulnerable workers, for its significant work in improving labour rights standards for workers and creating a more level playing field for employers. However, a significant number of unlicensed gangmasters continue to operate, and exploitation, though reduced, is still reported. Workers' fear of the consequences of blowing the whistle – loss of job, loss of accommodation, violence, and deportation – fundamentally thwarts intelligence-led enforcement. There are clear indications that some gangmasters have switched their operations to sectors beyond the remit of the GLA in which enforcement is scarce. Exploitation is endemic in the sectors of construction, hospitality, and care.
Topic:
Corruption, Crime, Labor Issues, and Financial Crisis

622. Credit Crunch Watch

Publication Date:
10-2009
Content Type:
Working Paper
Institution:
Oxford Economics
Abstract:
The financial stress indicator is a composite index of a number of indicators including risk spreads, mortgage spreads, equity volatility, commercial paper and commercial loans outstanding and the spread of LIBOR rates over T-bill rates (the “Ted” spread). The stress indicator fell again last week, driven by a further narrowing of corporate bond spreads and lower equity volatility. These shifts offset a rise in 30-year mortgage spreads. Stress levels are now at their lowest levels since February 2008, and while still well above their long-term average have also dropped below the levels seen in previous periods of distress such as in the early 1990s and in 2001- 2003.
Topic:
Economics, Markets, and Financial Crisis
Political Geography:
United States

623. Financial meltdown averted – but how deep and how widespread will the recession be?

Publication Date:
01-2009
Content Type:
Working Paper
Institution:
Oxford Economics
Abstract:
The credit crunch that began in July 2007 intensified dramatically in September 2008, with a series of bank failures prompting rescues and effective nationalisation of major financial institutions in the US, the UK and the Eurozone. Despite massive intervention, financial stress rose to new highs at the start of Q4 2008 as financial markets dried up, with treasury bond yields falling, interbank lending rates still high, emerging market spreads widening sharply and stock markets plunging further. Faced with financial sector meltdown, many governments have recapitalised banking sectors and guaranteed interbank loans and bank deposits to try to shore up confidence in the financial system. These moves have averted a meltdown, but the spotlight has moved onto the rapidly weakening real economy – both world growth and world trade are now expected to decline in 2009, making it the worst year since 1945.
Topic:
Economics, Markets, and Financial Crisis
Political Geography:
United States

624. Why are US home foreclosures so high?

Publication Date:
06-2009
Content Type:
Working Paper
Institution:
Oxford Economics
Abstract:
US mortgage foreclosures have risen to extraordinary heights in recent months, with the scale of the distress in the US mortgage market much greater than in the UK. Key factors behind this divergent performance include laxer underwriting standards in the US and the widespread existence of 'non-recourse' loans. The latter allow borrowers in negative equity to walk away from their mortgage debt and sap the incentive to remain current on 'underwater' loans. As a result, steep house price falls can generate a sharp rise in foreclosures even without high interest rates or unemployment. In the UK, by contrast, there are strong incentives for home owners to remain in their properties, even when in negative equity.As a result, the escalation from arrears to foreclosure in the UK is much more limited. This may head off very abrupt prices falls but could also mean a more drawn out process of adjustment in the housing market.
Topic:
Debt, Economics, Markets, and Financial Crisis
Political Geography:
United States

625. Slump in wealth to hinder global recovery prospects?

Publication Date:
05-2009
Content Type:
Working Paper
Institution:
Oxford Economics
Abstract:
Since the credit crunch began in Q3 2007, there has been a dramatic slump in the prices of many financial assets. Global equity prices have dropped some 40-50% from their peaks in the major economies and by as much as 70% in some emerging markets. Many classes of other private sector securities have also seen sharp falls in value. Corporate bond spreads have exploded as defaults have soared, as have mortgage-backed securities (MBS). Currently, many classes of MBSs are trading at less than 10% of their par value, and even AAA-rated tranches are trading at as little of 25% of par.
Topic:
Economics, Markets, and Financial Crisis
Political Geography:
United States

626. Assessing the slowdown in China

Publication Date:
04-2009
Content Type:
Working Paper
Institution:
Oxford Economics
Abstract:
Growth in China has slowed dramatically over the past year from a blistering pace of over 13% in 2007 to just 6.1% in 2009 Q1. A turning in the domestic investment cycle has been coupled with a dramatic slowdown in external demand. Despite an unprecedented fiscal package, in the near term we expect growth to dip below 6% but it should begin to recover strongly towards the end of this year as the fiscal stimulus comes on stream, rising to 10% by end-2010. Indeed, some green shoots of recovery are already emerging with a pickup in manufacturing new orders and strong growth in credit. Domestic demand may be recovering but the impact of the external crisis on China’s growth prospects is uncertain. Nevertheless, more fundamental downside risks remain if rising unemployment leads to social instability or if an increase in loss-making investments uncovers weakness in the banking sector. By looking at what has driven the recent slowdown and how this compares with previous downturns, we can shed light on China’s prospects going forward and the major risks.
Topic:
Economics and Financial Crisis
Political Geography:
China and Asia

627. How far away is a global recovery?

Publication Date:
03-2009
Content Type:
Working Paper
Institution:
Oxford Economics
Abstract:
Steep drops in output have been recorded across the industrialised world and much of the emerging market world in recent months. Such has been the scale of these declines that there is now little doubt that the global economy is set for its worst year since the end of WWII, with world GDP forecast to fall almost 1½% (and more than 2% at 2000US$). Significant uncertainties nevertheless remain about the economic outlook, in particular about how deep and protracted the recession will prove to be and how rapid an eventual recovery can be expected. A key factor generating uncertainty is that the current recession has been sparked by and accompanied by a major financial crisis. Recessions of this sort are often more severe than 'standard' recessions, featuring deeper and more sustained drops in asset prices, and a weaker impact from policy interventions due to malfunctioning banking systems. Equity and house prices have continued to drop in the early part of 2009, and there looks to be a significant risk that this weakness will drag on for some time – the average duration of stock price declines in previous financial crises is more than three years and for house prices around six years. The financial sector also remains in a highly dysfunctional state. Although the credit tightening process is showing some signs of coming to an end, stress levels remain extremely elevated and risk appetite is low with banks stuck in 'balance sheet repair mode'. This process is unlikely to be complete for some time. Retrenchment has also become a priority for the corporate and household sectors. In the face of a plunge in final demand, firms have slashed investment and begun destocking. Worryingly, the destocking process could continue f or several quarters as the ratio of inventory to sales remains high. US households were net re payers of debt in the final quarter of 2008, and it seems unlikely that the appetite to take on more debt will recover quickly there or elsewhere in the face of steep increases in unemployment and large falls in household wealth. Taylor rule analysis suggests that the 'appropriate' short-term interest rate for the major economies has now turned negative, supporting the big shift to quantitative easing now under way. Eventually, this and other stimuli in the pipeline should produce a strong recovery. But the outlook for 2010 has weakened significantly in recent weeks and the risks remain skewed toward a more deflationary outcome than that envisaged by our baseline forecast.
Topic:
Economics, Markets, Foreign Direct Investment, and Financial Crisis
Political Geography:
United States

628. Eurozone Unity Under Threat?

Publication Date:
03-2009
Content Type:
Working Paper
Institution:
Oxford Economics
Abstract:
Ten years after the introduction of the euro, the onset of deep recession in the Eurozone has triggered concern that the single currency might impose intolerable strains upon some members. With some countries hit hard by the impact of the credit crunch, there are mounting concerns about a possible debt default by one or more member states, which in turn might threaten the euro and even the existence of the Eurozone. With the Eurozone economy forecast to contract by 3.1% this year, unemployment is starting to climb steeply and fiscal deficits are soaring. This has raised concerns about deteriorating public finances in a number of countries, leading to sharply wider spreads on government bonds and credit rating downgrades for Greece, Spain and Portugal, with Ireland maybe facing a similar fate soon. And repercussions from the growing economic crisis in Central and Eastern Europe are adding to the problem, with Austria particularly exposed. Rising bond spreads were always intended to be the mechanism that would restrain public spending by more profligate Eurozone countries. But the question now is whether the weaker economies can withstand the strains that a lengthy period of recession will impose and, at the same time, adopt credible medium-term spending plans to ward off the worst of the downturn and retain market confidence. With fiscal deficits already rising as a result of bank bailouts, fiscal packages and recession will push budget deficits far above the 3% of GDP target – Ireland, facing a deficit of 12% of GDP, and Spain will be worst hit. And with rising deficits and higher bond spreads pushing up the cost of debt, countries face a sharp rise in their level of indebtedness, with Greece and Italy seeing debt/GDP ratios around 100%. This deterioration could lead to a further downward spiral if the recession is prolonged and will be a test of countries' euro commitment, which has remained strong thus far despite rising social tensions in some countries. At this stage, the problems remain manageable and the risk of default or of countries leaving the euro is still very low. Bond spreads are still much lower than during much of the 1990s, when countries were striving to qualify for euro membership, and the currency risks attached to leaving the euro would be substantial. Moreover, EU countries that have been exposed to considerable currency strain over the past year are anxious to join the Eurozone as soon as possible, to take advantage of the benefits of a stable currency. While some smaller countries may experience financial difficulties, it seems inevitable that the larger Eurozone members would step in to stabilise the situation – failure to do so would risk contagion spreading to other countries, which in turn would cause even deeper problems for the euro. More policy action also seems likely to counter this threat – although the German government will probably remain reluctant to countenance the scale of expansionary fiscal policy really needed at this time. Current policies inevitably mean a long hard slog back towards fiscal rectitude in the years ahead, with monetary policy also tightening and growth slower than previously expected. Fiscal federalism may also have to be on the agenda. All this will undoubtedly lead to ongoing strains within the Eurozone. And any measures by governments that appear to be protectionist – such as the support for the French car industry – will only fuel these tensions.
Topic:
Economics, International Trade and Finance, Regional Cooperation, Treaties and Agreements, and Financial Crisis
Political Geography:
Europe and Germany

629. The Economic Outlook for London

Publication Date:
10-2009
Content Type:
Working Paper
Institution:
Oxford Economics
Abstract:
The present recession, which had its origins in the global financial crisis that began to unfold in mid-2007, has hit London's economy hard. And in the face of ongoing financial sector constraints, a debt overhang and rising unemployment, a strong bounce in the immediate future – of the kind seen in the wake of the early1990s recession – cannot be realistically expected. Nevertheless, Oxford Economics' forecasts show the recovery in the capital gaining traction by 2011, with growth into the medium term matching the robust performance of the decade prior to the recession. We expect growth over the period 2011-2019 to outstrip that of the rest of the UK and of most comparable cities across the western world.
Topic:
Economics and Financial Crisis
Political Geography:
United Kingdom, Europe, and London

630. Brazil and the Transatlantic Community in the Wake of the Global Crisis

Author:
Thomas J Trebat
Publication Date:
06-2009
Content Type:
Working Paper
Institution:
Institute for Latin American and Iberian Studies at Columbia University
Abstract:
As the great global crisis eases its grasp, it is a time to reconsider relations between Brazil and the North, especially the United States and the European Union. While the world economy is still reeling, it is very possible that a new and more productive period in Brazil's relations with the US and Europe is possible. This positive outcome derives from numerous factors, most especially Brazil's “peaceful rise” to a more prominent global role and the arrival of the Obama administration whose promise of a new beginning in U.S. foreign policy has been greeted with such evident enthusiasm in Latin America.
Topic:
International Relations, Foreign Policy, Development, Economics, International Political Economy, and Financial Crisis
Political Geography:
United States, Europe, Brazil, and Latin America

631. Is the G-20 Summit a Step Toward a New Global Economic Order?

Author:
Johannes F. Linn and Colin I. Bradford
Publication Date:
09-2009
Content Type:
Policy Brief
Institution:
The Brookings Institution
Abstract:
In November 2008, President George W. Bush convened the first G-20 summit in Washington to address the worst global financial economic crisis since the Great Depression. This summit provided a long-overdue opportunity for a dramatic and lasting change in global governance. This was followed by the election of Barack Obama, who had campaigned on a distinctly different foreign policy platform compared with his Republican rival, Senator John McCain. These two events were no mere coincidence.
Topic:
International Organization, International Trade and Finance, and Financial Crisis
Political Geography:
Washington

632. Global Outlook 2010: What lies ahead for the global economy

Publication Date:
11-2009
Content Type:
Working Paper
Abstract:
Leo Abruzzese, Editorial Director for North America, discusses the latest EIU forecast for the world. Forward-looking economic indicators have continued to improve in many countries in recent months, suggesting that the worst of the contraction in global GDP is over. The improvement has triggered hopes of an imminent and sustained global economic recovery. But does this signal the start of a genuine strong recovery, or is it a false dawn, to be followed by months—or even years—of anemic growth? What is the outlook for the US, Canada, and Asia, as well as the major emerging markets, over the next couple of years? And what are the downside risks to this outlook?
Topic:
Economics, International Trade and Finance, Markets, and Financial Crisis
Political Geography:
United States, Canada, Asia, and North America

633. Mortgage Loan Modifications: Program Incentives and Restructuring Design

Author:
Dan Magder
Publication Date:
11-2009
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Mortgage defaults and home foreclosures remain a growing problem that undermines the nascent US economic recovery. Delinquencies continue to skyrocket, up 300 percent since the beginning of the crisis, and the contagion has spread to prime loans where delinquencies have risen to over 11 percent of outstanding loans. The resulting foreclosures have broad consequences: Individuals lose their homes, banks take losses on the loans, neighbors suffer as area prices go down, and localities lose on property taxes. The economics of modifying loans to avoid defaults appear strong: Lenders lose an average of $145,000 during a foreclosure compared with less than $24,000 on a modified loan. Yet the track record of modification programs has been surprisingly poor. Potential lawsuits over modifying loans in securitization trusts may be a less important obstacle than many claim. More significant are misaligned incentives that put mortgage servicers in opposition to both investors and borrowers, conflicts between investors holding different tranches of mortgage-backed securities (MBS), operational impediments, and problems in loan modification design that contribute to redefaults. Policymakers should improve reporting metrics to highlight servicers' conflicts of interest, shift the emphasis of loan modifications from short-term fixes to making the new loans more sustainable, and use government resources to drive operational/capacity improvements in the industry.
Topic:
Economics, Markets, and Financial Crisis

634. The Impact of the Financial Crisis on Emerging Asia

Author:
Morris Goldstein and Daniel Xie
Publication Date:
11-2009
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper analyzes how the global financial crisis has affected emerging Asia and identifies key characteristics that have made these economies more or less vulnerable to a transmission of crises from the advanced economies. After reviewing how economic outcomes in emerging Asia have evolved since the crisis began in the summer of 2007, we review several studies of the effect of financial stress and/or growth slowdown in advanced economies on emerging Asia. We then discuss how emerging Asia is “different” in ways that matter for the contagion of crises, with the emphasis on currency and maturity mismatches, the nature of the region's foreign trade links (product composition, the geographic pattern of trade, and the degree of net export-led growth), financial market integration with the advanced economies, and the scope for implementing countercyclical monetary and fiscal stimulus.
Topic:
Economics and Financial Crisis
Political Geography:
Asia

635. American Multinationals and American Economic Interests: New Dimensions to an Old Debate

Author:
Theodore H. Moran
Publication Date:
07-2009
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The 2008 election rekindled debate about whether US multinationals shift technology across borders and relocate production in ways that might harm workers and communities at home. President Obama now pledges to end tax breaks for corporations that ship jobs overseas. The preoccupation about the behavior of American multinationals takes three forms: (1) that US-based multinational corporations may follow a strategy that leads them to abandon the home economy, leaving the workers and communities to cope on their own with few appealing alternatives after the multinationals have left; (2) worse, that US-based multinational corporations may not just abandon home sites but drain off capital, substitute production abroad for exports, and “hollow out” the domestic economy in a zero-sum process that damages those left behind; and (3) worst, that US-based multinational corporations may deploy a rent-gathering apparatus that switches from sharing supranormal profits and externalities with US workers and communities to extracting rents from the United States. Each of these concerns contains a hypothetical outcome that can be compared with contemporary evidence from the United States and other home countries.
Topic:
Economics, International Political Economy, International Trade and Finance, Markets, and Financial Crisis
Political Geography:
United States and America

636. The Global Economic Crisis after One Year: Is a New Paradigm for Recovery in Developing Countries Emerging?

Author:
Wim Naudé
Publication Date:
08-2009
Content Type:
Policy Brief
Institution:
United Nations University
Abstract:
T HE ECONOMIC DOWNTURN AND RECESSION, WHICH spread across the globe following the US sub-prime mortgage crisis in September 2008, has become the dominant news topic of the past year. One year into the crisis it has become clear that the paradigm for international development has changed irrevocably. With leadership, moral authority and the capacity of the West diminishing, developing countries' recovery and future growth will critically depend on their own initiatives and solutions.
Topic:
Economics, Globalization, International Trade and Finance, and Financial Crisis
Political Geography:
United States

637. Policy Responses to the Global Economic Crisis in Africa

Author:
Wim Naudé and Augustin Kwasi Fosu
Publication Date:
08-2009
Content Type:
Policy Brief
Institution:
United Nations University
Abstract:
THE GLOBAL ECONOMIC CRISIS OF 2008 HAS INDUCED two negative external shocks in African countries. The first is a financial shock with the availability of credit declining and the cost of international credit increasing (a financial crisis); and the second is a shock relating to the demand for and price of exports, as most of Africa's important markets went into recession and commodity prices tumbled (an economic crisis).
Topic:
Globalization, Poverty, and Financial Crisis
Political Geography:
Africa

638. Bridging the Divide: The reform of global food security governance

Author:
Chris Leather
Publication Date:
11-2009
Content Type:
Policy Brief
Institution:
Oxfam Publishing
Abstract:
Another World Food Summit is being held in Rome to discuss world food security, in the midst of a chronic global food crisis in which one billion (one in six) people go to bed hungry every day of their shortened lives. During the two-and-a-half days of the Summit, more than 60,000 people, 70 per cent of them children, will die of hunger-related causes.
Topic:
Security, Agriculture, Food, and Financial Crisis
Political Geography:
Rome

639. Is the world addicted to bubbles? EIU's Quarterly Global Outlook webinar series

Author:
Robert Ward
Publication Date:
12-2009
Content Type:
Working Paper
Abstract:
Global: Recoverology Bounce-back theory: "V". The sharper the contraction, the stronger the recovery Financial-impairment theory: "U", "L" Recoveries following financial crises are much slower than normal recoveries Borrowed-time theory: "W" Stimulus boosts economy at the cost of weakness later Armageddon theory: "Q" Too grim to talk about.
Topic:
Economics, Markets, and Financial Crisis
Political Geography:
Asia

640. Improving Resolution Options for Systemically Relevant Financial Institutions

Publication Date:
10-2009
Content Type:
Working Paper
Institution:
Council on Foreign Relations
Abstract:
There are critical holes in the existing regulatory framework for handling large complex financial institutions that become impaired. First, regulators may not have the legal authority to do what is necessary to resolve a distressed institution's problems, including selling some divisions, closing or liquidating others, renegotiating or abrogating some contracts, and finding parties to manage what is left. Second, even if regulators have the necessary authority over part of the institution, they may not have authority over the whole firm. Holding companies, for example, often have subsidiaries that are incorporated in multiple countries and therefore governed by different legal codes. Third, regulators are unlikely to be aware of all the interconnections within the institution, and between the institution's various subsidiaries and other firms. This uncertainty makes it difficult for regulators to know the best way to restructure a financial institution or, indeed, whether restructuring is even feasible without enormous disruption.
Topic:
Economics, Markets, and Financial Crisis