Economics Society Magazine Issue 1

CGS ECONOMICS MAGAZINE 26/04/21 THE CURRENT ACCOUNT ISSUE 1

WHAT IS ECONOMICS?

FEATURING:

Economics is often confused with business studies however it is a social science interested in the impacts of the production, distribution and consumption of goods and services. This can be on a smaller scale (micro-economics) focusing on firms, consumer and producers, but also on a larger scale (macro-economics) looking at the economy as a whole involving the governments intervention on the economy’s employment, inflation and economic growth whilst being sustainable in the long term.

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Studying economics in school develops your ability to evaluate policies and anticipate all possible consequences of an action based upon theories and application from real life. Analysing data and graphs is introduced at GCSE and further developed at A-Level: a key skill for understanding current affairs.

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What is economics by Simona (Yr 12)

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Fast fashion by Kitty (Yr 12)

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Football: The Pandemic Story by Ewan (Yr 12)

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The undercover economist

by Bruno (Yr 10) Vaccinations by Hannah (Yr 12)

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The Suez Canal by Zuhah (Yr 12)

For example, you may assess recent examples of economic activities. This includes the High Speed 2 Train (HS2) aiming to increase travel across the UK at the expense of £106 billion of taxpayer’s money. With better access to London, where the higher paid jobs usually are, it allows an opportunity for inequality between the North and South to reduce. Whilst building HS2 creates jobs in construction, one must evaluate whether it is worth the environmental damage when the pandemic has shown our capability to work productively from home.

Evidently economics can and continuously does hugely impact every-day life, with the ability to increase (and sometimes decrease) the standard of living and tackles problems including distributing resources fairly. Jobs involving economics include: consultancy, government advisory, finance and banking, data analysis and working in the public sector.

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IMPACTS OF FAST FASHION: We live in an era of fast fashion where consumers want stylish clothes quickly and cheaply, it has become a normal part of modern consumer behaviour to see something and want it immediately. Society has the desire to buy new things everyday which is part of the main problem of the fashion industry. This explains why fast fashion companies have new products every week in their store; to attract customers, keep up with consumer demand and trends and compete with other producers to earn the highest profits. Fast fashion brands such as Boohoo, Misguided and In the Style use social media to see what influencers and celebrities are wearing and manufacture an almost identical item in as little as a few days ready to be sold. Not only is it having a devastating effect on our environment but also our society. Fast fashion brands often produce low quality clothing, they take zero responsibility for the environmental costs of production, they do not make clothes ethically or sustainably and arguably worst of all they exploit workers and treat them unfairly.

Boohoo’s low competitive prices seem too good to miss by consumers, so profits soared to £68.1m by August 2020, their highest ever. However, the founding Dean of the Dubai Institute of Design and Innovation, Sass Brown, said “the hidden price tag is the cost people in the supply chain and the environment itself pays” and there are many problems that customers do not always see when they are buying an item of clothing at such a low price.

These poor working conditions are not only abroad but are also closer to home in cities such as Manchester and Leicester where Misguided and Boohoo have their factories. It was disclosed last summer that some garment workers in Leicester are paid an average of £3 an hour, way under the national minimum wage of £8.91 for those over 23.

These workers are underpaid to keep brand prices at a minimum and make their garments the cheapest in the industry.

The effect that fast fashion brands or consumers do not consider, is that these workers are forced to live on a very low salary. This sees employees struggling to afford basic necessities such as food and rent and has a damaging effect on society’s standard of living.

However, people are beginning to stand up for the rights of workers. China is facing a considerable amount of criticism for its treatment of Ughyurs (a group of mainly Muslims living in Xinjiang, a region in north-west china) who are forced under poor working conditions to pick cotton. Countries such as the US and the UK have made allegations against China and the US Secretary of State Anthony Blinken said that China is committing “genocide and crimes against humanity”. It is not only countries that are protecting workers human-rights, but some western brands have also conveyed negative feelings to the labour conditions in Xinjiang. However, this has caused backlash for many western brands such as H&M because Chinese authorities have boycotted them. On the 26th March China had removed H&M from any Chinese apps and removed their stores from e-commerce maps. China did this because they either want brands to support their economy by buying Xinjiang cotton or to not be on the Chinese market at all. Considering that China accounts for 5% of H&M sales globally, the actions China have taken will be very impactful on their business.

Moreover, the boycott has widened into other brands such as Nike, Adidas and Burberry although China still denies the allegations over the abuse of workers.

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SUSTAINABLE SHOPPING ALTERNATIVES: -

Second hand including Depop or vinted

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Upcycling old clothes

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Avoiding overconsumption

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Handmade items from small businesses

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Renting clothes for oneoff occasions eg Hurr Collective

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Sustainable brands tend to be more expensive – but worth saving for

Furthermore, brands are becoming increasingly more aware of the detrimental effect they are having on the environment and recognising that change needs to happen. For example, H&M has just launched a new conscious points scheme where you gain points for buying clothes from their new recycled range, recycling your own clothes, and bringing your own shopping bag.

They have also made a promise to be more transparent about where their clothes come from. However, the nature of fast fashion means that brands can never truly be sustainable because of how quickly they turnover new trends. There were also complaints about H&M’s new range with people arguing “it promotes overconsumption” and does not stop people from shopping but forces them into spending more money. Therefore, fast fashion is still a very long way from being sustainable.

FOOTBALL: A Pandemic Story

In a sport that is inextricably linked to money, the rich want to get richer and in turn the poor get poorer. This idea has been highlighted by the pandemic and compounded by the announcement of the proposed European Super League. However, football has a business model that is reliant on fans and if we continue to see empty stadiums the consequences of the pandemic on the industry will only worsen.

A report issued in the summer of last year by the European Club Association (ECA) forecasted that there would be a €4 billion loss in revenue across Europe’s 20 top-flight leagues over the 2019-20 and the 2020-21 seasons. This paints a pretty grim picture for football, a money-making machine, even before you take into account the fact the report was under the impression that attendance would be 50% on average. This prediction definitely hasn’t happened, with fans last being allowed in stadiums in the UK back in November last year and only in socially distanced groups of 2,000-4,000. The matchday revenue from these games is vital for teams up and down the football pyramid. However, the impact is felt harder the further you go down the pyramid: Manchester United, a Premier League side, have 52,000 season ticket holders but League 2 side Plymouth Argyle have 2,300 season ticket holders, 20% of their matchday tickets. The smaller clubs rely further on the support from the local community, who now cannot be there at all and in periods of poor economic performance, like the pandemic, may not even be able to afford to go to games. An additional illustrator of this lost opportunity for matchday revenue is the absence of fans at huge David vs Goliath FA Cup games like Marine against Tottenham Hotspur in this year's 3rd round. A game that saw two teams 160 places apart in the football pyramid compete, it should have been a great money-making scheme for the non-league side in ticket money, TV rights or even merchandise but it was not to be. Marine were unable to have the evening they had dreamed of and missed out on that opportunity. In fact, this example also illustrates how smaller clubs rely on the generosity of fans to survive as thousands of football fans bought ‘virtual tickets’ for the game despite being able to get it for free on BBC One. The world of football is dependent on fans as they are consumers, consumers that the clubs need to profit from.

Football is a business, a business that supports a range of individuals from players who are on as much as £300,000 a week to bar staff at a pub on Fulham Broadway near Stamford Bridge. This pandemic highlights the precarious knife edge that so many are on when it comes to being financially supported by football. For example, ‘Gunnersaurus’, the Arsenal mascot, was let go by the club as part of an attempt to save money. Other professions reliant on the industry include matchday stewards, training ground canteen chefs, club doctors, groundsmen and so much more.

Moreover, this illuminates the fact businesses and individuals follow money; none more so than the broadcasters who pay millions for TV rights to clubs and leagues at the top. Leagues did offer rebates on the contracts signed such as the Bundesliga who returned €200 million to broadcasters. This, in combination with other factors, does present another issue that could see revenues of clubs fall. This fall in revenue could mean wages of players might fall and more importantly the fans are hurt admission prices may have to rise thus reducing accessibility of the sport.

The football in England is financially dominated by the ‘Big Six’ (Manchester United, Manchester City, Chelsea, Arsenal, Tottenham and Liverpool) who are, supposedly, the best 6 clubs in the best league. To put this dominance into view, in the 2018-19 season Manchester United had an annual overall income of £602 million but Crewe Alexandra, who at the time were a League 2 side, had an annual overall income of £3.2 million. If this doesn’t demonstrate the contrast in prosperity of two clubs at either end of the football pyramid nothing will. The ‘Big Six’ dominate in so many ways, they earn millions in TV rights revenue every year, sponsorships and merchandise sales. This

has generated a cycle of greed, this growing greed has culminated in the form of the

and merchandise sales. This has generated a cycle of greed; this growing greed has culminated in the form of the proposed European Super League (ESL). The proposal would mean Europe’s top clubs would abandon domestic leagues and play in a relegation-less ‘super’ league. It has financial ramifications for the smaller clubs but would bring the clubs and the investors involved significant profits. The clubs involved would be gifted between £25 billion to be shared between them, just for participating and would leave the domestic competitions to pick up the pieces of their dramatic exit. The proposal smacks of an Americanisation of a sport that has its roots in the working class, a sport built by the poor for the poor and stolen by the rich. The league would supposedly not involve relegation, undermining the ethos of competitive competition, illustrating how they have prioritised money making over competitive edge and it would deny new clubs joining on sporting merit. It is not just in appearances that the ESL is Americanised, the biggest financial backers are American bank JP Morgan who were investing £2.7 billion and, according to the Financial Times, would charge 2-3% on the debt.

This is detrimental for football as it’ll also worsen, and already inflated player transfer market and wages will spiral out of control as money is so readily available.

“If it actually happens, I will never work on this European Super League” Gary Lineker The proposal is now facing some rightly deserved backlash and the ESL may never come into existence. Whether it does or does not, it still demonstrates how greed fuels the decisions made by those at the top of football. It is not the managers or players but those who sit in board meetings or on private planes exchanging large finances with the impact on the clubs an afterthought as they themselves have no emotional connection to the teams. For example, the American Glazer family own Manchester United: a team born out of the workers team of the Newton Heath railway depot 1878. The super-rich Glazers could not care less what Manchester United means to fans and run the club to maximise profits. But this is more than a private business whose main economic aims would be to maximise profits, it is deeper than that. Years of history have pre-dated the Glazers and years of history will follow the Glazers and they will be a minor footnote and will hopefully remain in the shadow of the actual football that is played. Unfortunately, enough is not done to ensure the protection of clubs from unempathetic foreign owners and if this continues, football will continue to be run solely in attempt to make more profit.

Football is awash with money and always will be, but the pandemic has highlighted where most of that money is, it is in the hands of those who are already at the top. A slightly more optimistic view would be that the pandemic has shown to clubs that the fans are the most important part in the football puzzle and are the key to profit and financial success. One must hope that these clubs understand this and that more is done to protect football from the tyranny of the most financially prosperous teams to make football, as we know it, more financially sustainable.

The Undercover Economist

By Tim Harford Summary: The Undercover Economist is a non-fiction book which gives the reader an interesting insight into the minds and lives of an economist. Exploring how they think differently to most people today. Every passage in the book is tied to economics and in most cases how it has such an important and heavy impact on our day to day lives and the minute decisions we make like buying a cappuccino but also on larger decisions like buying a house or how much smog there is in the air. The book also covers global dilemmas and questions like why poor countries are so poor as Harford explains the segregation of wealth between countries and global economies.

Predominantly the book is about how an economist would deal with everyday life problems including why Starbucks may offer syrup or cream in your coffee and why it is not solely down to giving the consumer extra choice. It enables Starbucks to attract those consumers who are extremely conscious about price, whilst also extracting as much money as possible from those consumers that care less about the price of a product and more about the quality of the drink. Therefore, this really enables companies like Starbucks to extract as much money as possible from consumers due to the financial range on their products appealing to everyone despite their income level.

My Opinion on the book The book showed me how broad economics really is and how it is not all about stocks and shares, markets, and inflation rates but it’s actually about how economists think and how they try to find ways to make consumers better off. As a student new to economics, I feel the initial assumption of the subject is its full of greedy middle-aged people trying to make as much money as possible however this book helps you understand that this assumption is entirely not the case. I also really enjoyed the book as enables me to keep up with current political affairs; I would highly recommend the book to new economics students who are keen to get an insight into the mind of an economist.

Overall, I really enjoyed reading the book and it has developed and increased my interest into the subject further. I would recommend this book to those considering A-level economics or those wanting to push themselves at GCSE, as it can be challenging at times, but is equally interesting, thought-provoking, and rewarding.

COVID VACCINATION PROGRAMME: During the past year, the world has had to face many unexpected challenges including the task of online learning, working from home, staying in contact with friends and family via social media and most currently the vaccination programme. As we know, this rollout is essential to reopen shops and reintroduce the idea of spending money in the economy which is needed for future economic growth. Most importantly, a vaccination can save the most vulnerable people in society from falling seriously ill if they become infected with COVID-19.

These factors have made the Coronavirus vaccine the most sought after good in the world. However, clear disparities have been highlighted between developed and developing nations as their ability to access the necessary stock to vaccines varies depending on the wealth of the country.

Failure to vaccinate developing nations could cost the global economy $9.7 trillion over the coming years. This has prompted an organisation named Gavi to set up a programme called Covax to help lower income nations, which would otherwise be unable to afford these vaccines.

The 54 wealthiest countries are home to 18% of the worlds adult population but have collectively ordered 40% of all available vaccines. This is because developed countries are prioritised on the list of who gets access to the limited supply of vaccines as they can afford to make agreements with drug firms promising them high prices in return for all the doses they can secure. As production of these vaccines was initially slow at the beginning, supply was inelastic, so developing countries weren’t able to receive as many

doses as they need due to all of the available stock going to developed nations. However developed countries recognise this as an issue

doses as they need due to all the available stock going to developed nations. However developed countries recognize this as an issue and have agreed to donate money or left-over stock to countries included in the Cova scheme. G7, a group of economically advanced countries have agreed to donate $4.3bn to the Covax organisation, this, along with many other donations, has made it possible for Covax to ship out over 33 million COVID-19 vaccinations to 74 developing countries including Indonesia, Botswana, and Jamaica as of the 1st of April 2021. Along with this scheme, countries have agreed to donate vaccinations to specific nations. An example of this is the “Quad” a group of four countries (United States, India, Japan, Australia) that have promised to produce and distribute 1 billion doses to Asia-Pacific nations by the end of 2022.

However, this has created issues for countries that are classed as middle income, as they are not seen as countries in need of aid, they receive no donations or support from Covax but they do not have the funding to purchase all the vaccine doses they need independently. South Africa is a country that has been hit hard by the pandemic.

Vaccines are needed there urgently, however the government has been criticised for acting slowly. As a middle-income nation and the richest country in Africa, they were initially not included in the Covax programme and had only secured 1 million doses by February as this was all. However, after it became clear that they could not achieve the goal of vaccinating their whole population alone, they sort help by the Covax scheme through an African Union programme. With this help, they have been promised 12 million doses which they should receive from April to June.

Although the EU is seen as one of the richest nations in the world collectively bound by their political and economic interdependence, they have struggled to allocate resources efficiently and have acted slowly in the race to secure vaccines. Due to their initial hesitancy when it came to health risks of administering certain vaccines, they had a late start compared to many other countries and have only administered 14% of the adults’ populations first shot compared to Britain giving 58% of the adult population their first shot. As tourism in the EU creates jobs for 5.1% of the total labour force with some individual countries such as Croatia relying heavily on tourism with it making up 19.6% of total GDP, the vaccine rollout is essential to return to normality and for economic recovery and growth. Due to travel restrictions, the tourism industry has suffered, and unemployment levels have risen 1% in Croatia. As GDP per capita is an indicator over for wellbeing of a country, a fall in this indicates decreased standard of living and consumer spending and an increase in unemployment. Croatia has recently fallen into a recession (two consecutive periods of negative economic growth) a fast vaccine rollout is needed to create the return of safe travel and tourism to their country. As the EU extended negotiations with vaccine companies to decrease the price that they would buy the stock at, extended lockdowns and travel restrictions for this group of countries will cost them more than they saved during these negotiations. This paired with the risk of new mutant strains threatening their vaccine rollout progress has put them in a vulnerable position.

Although this virus has seen loses in investment and profit for pharmaceutical companies, vaccine companies such as Pfizer and Moderna are profiting off this pandemic while AstroZeneca and Johnson & Johnson have pledged to provide vaccines while taking no profit. As AstroZeneca provides vaccines for roughly $5 compared to Pfizer charging around $15, despite allegations of potential risks of having the AstroZeneca vaccine, it is the more demanded good.

Negotiations between these companies and countries have created disparities in the price that the vaccines are sold at. Due to their extended negotiations, the EU has secured AstroZeneca vaccines for $2.15 per dose while South Africa is paying $5.25, more than double the EU’s price. This is because they have a smaller population and have less bargaining power when it comes to negotiations. As the EU subsidised the development of the Pfizer vaccine, they buy it at $14.70 while the US are charged $19.50 for it.

First person in the UK to be vaccinated: 90 year old Maragret Keenan

Anti-vaccine portests in America

The quicker a country can recover from this pandemic solely comes down to the vaccination programmes. The return of tourism is said to rebound all EU economies this summer providing restrictions are lifted, the high rates of economic growth that may follow in the coming years will cause a rise in general inflation levels, however this isn’t expected to be above 3% so it won’t cause consumer uncertainty and discourage spending in the economy. If no other issues arise within the next year such as new variants, the world is said to return back to normal by 2023, however many precautions that are seen as normal now such as social distancing and masks may become a part of everyday life for some people from now on.

The Suez Canal What is the Suez Canal and why was its blockage so significant?

The Suez Canal is an artificial sea-level waterway in Egypt which connects the Mediterranean Sea to the Red Sea, dividing Asia and Africa. It is 193.3km long and has been a complete waterway since 1869.

On 23 March 2021, a 400m-long container ship called Ever Given, became wedged in between the Canal. This blocked the canal completely and took six days to fully dislodge.

Experts feared the ship would take years to revert on its route and the blocking of this vital trade route came with dire consequences.

The Suez Canal is said to be one of the world’s busiest waterways. The Ever Given is a ship the length of four football pitches which became lodged in between the canal due to strong winds which changed its route, and by getting stuck it meant that dozens of vessels were stuck and unable to move, alongside the Ever Green. Rescue aid was in urgent demand which added additional pressure. The blockage only lasted 6 days but cause social, environmental, and economic impacts which could not be imagined. Let us look at how a simple ship blocking one waterway alone sent oil prices climbing on international markets alongside assessing many more of the other consequences this blockage had…

The impacts of the blockage: On average, nearly 50 vessels pass through the canal, although at times this can be higher. These figures mean that this waterway accounts for 12% of total global trade. This route being blocked for 6 days meant that so much was lost in the meantime.

The canal is very important since it is used as an avenue for oil and liquified natural gas. Due to the initial panic, many people began to fear that it would take a lot longer for the route to be cleared. This meant that prices of the commodities which were along the Suez channel rose significantly due to a certain ‘fear’ of what could come. This also meant that people began to panic buy certain items e.g., in Britain there were talks of toilet paper shortages since toilet paper containers were stuck behind the Ever Green.

The blockage also caused serious problems for shippers, delaying consignments of goods and fuel. Another impact was the economic cost of rescue; fourteen tugboats were required to pull the ship out of the canal in order to get it back on its course The country which suffered significantly was Egypt since the Canal contributes towards 2% of Egypt’s entire GDP. Trade slowed down significantly to and from Egypt which caused a lot of stress for both the government and their people working in the trading industry. The

stranded ship is also estimated to have held up $9.6 billion of trade along its way. You can only imagine how huge the impact was, on both producers, governments, consumers and other parties. One blockage, and thousands of lives affected. There were also many people who had their own personal items being shipped across to other countries which was now hindered. Many people feared they would never receive their treasured and personal items which was very upsetting and caused emotional distress.

Mrs Carr was one of the many unfortunate consumers, with her belongings from Dubai delayed due to the obstruction!

Countless businesses were also affected, and the damage is difficult to evaluate since people on both larger and smaller scales were sadly affected. There were also concerns that if the blockage at the Suez Canal continued, some firms will have to pay to order more goods and have them sent over by air, which costs at least three times more. The total economic damage is estimated to be at $90 billion.