CGS Economics Magazine

CGS ECONOMICS MAGAZINE

01/10/21 THE CURRENT ACCOUNT ISSUE

WOMEN – A WASTED RESOURCE September 2017 marked a monumental day for the women of Saudi Arabia. King Salman announced that women could obtain driving licenses from the 24th June 2018 without permission from a male guardian. By March 2019, it was reported that at least 70,000 women had been issued their licenses, and seven female driving schools were opened, quickly filling the missing market in the economy. Subsequently, the sales of cars rose by 145%, and due to joint demand, created a new market for insurance for women. Repair workshops are also expected to benefit. This would increase the incomes of people within the car industry, leading to a positive multiplier effect across Saudi Arabia, as these employees can afford to spend more in other industries.

Saudi Arabia’s main export is oil that initially facilitated the growth of the economy. However, commodities are a very volatile market. Hence, after the price of oil plummeted in 2014, the young crown prince announced ‘Saudi Vision 2030’ to initiate the reform of the Kingdom, reducing reliance on the dwindling oil revenues and instead investing heavily in renewables.

FEATURING: •

‘Women: A Wasted Resource’ by Simona Donker (Yr 13)

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‘The Evergrande Collapse’ by Sean Patten (Yr 13)

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‘Should Employees Have to Be Vaccinated?’ by Lucy Harding (Yr 13)

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‘Economic Impact of Online Learning’ by Bruno Allsop and Lois Miller (Yr 11 and Yr 12)

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‘Gas Prices Going Up in Flames’ by Millie Harrison (Yr 12)

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‘Supply Shortages’ by Kitty Butler (Yr 13)

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‘BP Oil Spill’ by Hannah Lochan-Jenkinson (Yr 13)

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’23 Things They Don’t Tell You About Capitalism’ by Ewan Sutherland (Yr 13)

The aim is to transform the economy to reduce the reliance on the oil market, whilst simultaneously increasing the proportion of Saudis in the labour force. Currently, out of the 12 million paid jobs, only 5 million are held

by Saudis, with the rest held by migrant workers. They are also trying to reduce inequality by basing employment opportunities on merit, not family connections. Part of this plan involves increasing women’s involvement in the economy, allowing movement on the PPF closer to the productive capacity. The curve denotes the maximum output an economy can produce if all resources are utilised efficiently, reducing market failure by reducing the misallocation and under utilisation of the labour force.

Previously, only the wealthy could afford a driver, increasing the inequality gap.

Otherwise, women would have to be driven by a male relative. This meant men would have to leave their work to take their wives to do daily tasks including dentist appointments. Whilst this is accepted as a cultural norm, it can be one of the causes for Saudi Arabia’s labour productivity –16.26 in 2016, which later rose to 10.93 in 2018 when women could drive themselves to job interviews and fewer interruptions for the working men.

Whilst driving is something we take for granted in the West, in the arid climate transport to work can be impossible - walking and cycling long distances simply aren't an option. Additionally, public transport is significantly underdeveloped, and taxis aren't culturally feasible unless two women travel together. Therefore, women being able to drive has revolutionised the economy.

Lifting restrictions on women has been essential in improving productivity, aiming to increase women’s participation in the workforce from 22% to 30% by 2030.

It has been estimated that lifting the ban could be worth as much as $90 billion in extra economic output by 2030. This is because the improved mobility has made it easier for lower income families to increase their total household income with it being easier for women to get work, creating a multiplier and increasing overall incomes and output. Already, retail and leisure have benefitted from the improvement in women's rights.

The opening of Saudi Arabia has encouraged businesses to expand and increase foreign direct investment there. In September 2018, Uber announced plans to allow female drivers to engage a feature in Saudi Arabia called “women preferred view” whereby they can choose to accept female customers. This reflects companies' abilities to integrate their culture to make their business successful and ensure employees are comfortable. Moreover, the distributor of Toyota and Lexus – Abdul Latif Jameel Motors – had deployed 100 women to advise and support buyers, whilst also providing over 500 cars to driving schools alongside workshops aimed at driving safely. This widens Toyota's market, generates good publicity and increases its revenues.

However, like every economic decision there are also multiple negatives. By 2027, Saudi Arabia’s roads are predicted to be 20% busier, increasing carbon emissions and increasing negative externalities on the environment. Private drivers have become structurally unemployed, with families no longer spending $450 million each month on their services, forcing 400,000 drivers to retrain. On the other hand, the drop in foreign chauffeurs will reduce the magnitude of money transferred out of the country by $1.3 billion, increasing the balance of payment surplus. This in itself can be seen as a negative to the wider economy as remittances, in which migrants send money back to their home country, will also have fallen, reducing their ability to help alleviate poverty and financially help their family. Economists have also begun to question the country’s balance of trade, with an increasing number of imports of cars rather than boosting local car productions.

Whilst a lot of restrictions on women remain including Guardianship Laws, Saudi Arabia has taken the first steps in allowing women to be utilised within the economy and integrated into society. The success of policies that share feminist objectives have been staggering in how they can boost the economy as well as achieving more gender equality.

Worldwide, women are often a wasted resource in the economy. From 1990 to 2019, the world’s female labour force participation rate has fallen from 51.2% to 47.3%. The current rise of the Taliban's power is restoring fears of the reversal of the recent improvement in female literacy rates – now 30%. Education is essential in the investment of the quality and size of a nation’s labour force, whilst also being a basic human right.

Thankfully, women are fighting back.

Malala Yousafzai has become a recognisable activist for female education, whose charity has invested $22 million across 8 countries: Afghanistan, Brazil, Ethiopia, India, Lebanon, Nigeria, Pakistan and Turkey.

The vitality of these organisations is evident with Turkey’s rise in percentage of females in the labour force, from 26% in 2005 to 33% in 2019. Hopefully, this growth will be exponential, and as more awareness is raised, women can be encouraged and supported in gaining access to work and education.

Another huge issue with modern economics is the lack of flexibility in working hours that often prevents both parents from working full time.

Scandinavian countries are renowned for flexible hours, equal parental leave and providing 525 hours of free childcare, explaining the maternal employment rate amounting to almost 80% in Sweden.

Whilst also preventing an ageing population, it would boost the human development index (HDI) and national welfare – key government objectives.

Economic theories involving gender equality typically explore the idea that economics ignores the lives and work of women. It often highlights the unfairness of unpaid domestic and care work carried out that isn't included in the measurement of GDP. Overall, improving women's rights can significantly benefit the global economy.

THE EVERGRANDE COLLAPSE: A POTENTIAL TRIGGER FOR AN ECONOMIC COLLAPSE Evergrande are widely diversified. They own a 50% stake in the Guangzhou football club, a growing industry in China, with the other 50% owned by Alibaba. Furthermore, they produce a line of bottled water, they have made investments into agrobusiness, solar panels, electric cars, and oddly, baby formula as well as amusement parks. Evergrande Health, a subsidiary of the Evergrande group, is the largest shareholder in Faraday Future.

This diversification, showing a spread of risk and investment into green stocks, all signal a healthy, modern business, however in the recent weeks the property developer has been faced with an 84% hit to their stock.

The 2nd largest Chinese property developer, Evergrande Real Estate Group, has threatened already cautious international markets. In America 40% of US dollars in existence were printed in the last 12 months. The use of quantitative easing, low interest rates and high performing stock market has left all investors feeling apprehensive, as if it is all too good to be true. As the Federal Reserve has released news in the last week about imminent tapering, the news of property developers going bankrupt due to bad debt, sounded all too familiar to those investors with any small amount of knowledge or experience of the last 2 decades. Property values have been rising at the fastest pace since 2005, accelerated by the lowest interest rates in memory and total shortage of properties.

In California, sight-unseen transactions have become the most common purchase, meaning the acquirers are blindly entering a deal on a property in a rush to beat further inflation.

Evergrande has stopped paying their employees, left hundreds of large apartment blocks unfinished across China, the most in the Guangdong province,

and racked up a total of $304 billion dollars in liabilities. In the real estate business, it is more than custom for property developers to borrow large sums of money from banks. However, the corporation owes money to 128 banks and 121 nonbanking financial companies, according to recovered documents from last year.

Furthermore, China’s Ministry of Housing and Urban-Rural Development has told the major banks that Evergrande will not be able to make loan interest payments due on September 20. This information had a ring of truth to it; in the past week Evergrande has missed some of its key bond payments.

Last Thursday the 23rd, Evergrande had 2 big payments coming up which included $83.5 million dollars in interest on an 8.25%, five-year dollar denominated bond, meaning a bond issued within the U.S. by the Evergrande Real Estate Group. The second, a $36 million coupon on an onshore bond the same day, which is effectively a life insurance. The corporation reportedly did meet the $36 million bond payment, however, there was no statement released about the dollar denominated bond, meaning it was unclear how the company expected to meet its obligations to its overseas bondholders. Furthermore, it was confirmed the following morning that at least some of its investors had not been paid, according to the Financial Times. This renewed fears of Evergrande’s collapse. Evergrande have a grace period of 30-days to make its payment before it defaults.

Therefore, if Evergrande did have that $83.5 million, they would likely not have paid it. It would be safer for them to hold onto that money, because they have more upcoming bond payments in March 2020, March 2024, April 2022, April 2023, April 2024 for $84 million, $45 million, $69 million, $43 million, $37 million respectively. This begs the question: are they able to make that payment or will they default?

Last year, the Chinese government introduced new, tough laws effectively pushing Evergrande to lose a lot of its debt before being allowed to build more debt. These new policies have guided Evergrande into the trouble they are in. Furthermore, questions raised by Wall Street as to whether or not the government would bail Evergrande out were shut down in no uncertain terms as the Chinese government expects the property developer to deal with it themselves and if they don’t, they will face the consequences.

The property to income ratio in the main special economic zones such as Shenzhen and Beijing is at 46.6 and 45.8. These zones are home to most of Evergrande’s property. This housing bubble dwarfs that of any other, for example in London property to income ratio is at 13.5 and in New York, 9.3. The bubble cannot continue to rise, which speculators and investors have noticed. Stock markets have seen a huge downturn, iron ore being the most significant with an average of 57% drop. The S&P 500 has fallen 3% in the last 3 weeks.

One path of action from here is a bailout from the government. Government assistance would lead to lenders receiving cents on the dollar for those with a dollar bond, and shareholders will likely be wiped out. However, it would mean the company might be able to continue operating, avoiding job losses and sparing home buyers’ deposits.

The alternative option is total bankruptcy. In the event of a collapse, in order to settle debts, Evergrande would have to have a ‘fire sale’, meaning they would have to sell their current assets (property) at very low prices. As a result, this will bring prices down across the entire property market in China, making everybody’s assets a lot less and apply external pressures on other property developers. Secondly, suppliers will miss out on payments, as they will get paid after the government. So, if China’s second largest property developer can’t pay contractors, financial strain will be applied to those businesses and pose a threat to the industry on a national scale.

Lastly, the reactions of banks are of paramount importance in keeping sustainability. Banks may not lend to other property developers, who will be subject to increasing scrutiny, therefore those developers are proved to be unstable, and banks will refuse customers of those developers who are trying to get a loan to buy from that company. This will then severely restrict cash flow to the other developers, potentially worsening the crisis.

Many have likened the events of the last week to that of Lehman Brothers during the global financial crisis. Prior to 2007, a slow build up was met with a rapid drop-off and if Evergrande were to default, that is the most likely cause of action.

To sum up, Evergrande must find cash, without taking on any new debt, because of the limit of 15% annual growth in debt set by the Chinese government. They must come up with $83.5 million in the next 27 days. Essentially, Evergrande may have to sell some of the many properties they currently possess. They currently have $55 million in inventory, $198 billion dollars in properties under development and $22 billion in completed properties held for sale. The majority of Evergrande’s balance sheet is weighed down by properties under development. Furthermore, they are facing a cash crunch, which means they are unable to pay workers and suppliers to go forward with those projects and push those projects to a high enough standard to be sold. It has been noted by Bloomberg that Evergrande’s vendors have suspended work on some projects due to unpaid bills.

To further worsen the pain, many of Evergrande’s properties held for sale are being held as collateral for the Group’s debts. Moreover, these properties held for sale are disputed to be valueless, essentially cost ineffective investments, therefore the value of their properties held is far less than stated. The accounts at Evergrande decide on the net realisable value, making it likely their inventories value is what it has cost the firm to build. This means that the value of the inventory depends on the state of the business, which is currently bad news for Evergrande.

Recently, the Group’s aggressive discounts have failed to boost property sales in August, underscoring how the debt-laden developers’ efforts to find the cash are seeping profitability, as the company’s average selling price slid 11.5% in August from the month before.

SHOULD EMPLOYEES HAVE TO BE VACCINATED?

On the 2nd of October 2020, the UK government became the first government to approve a COVID vaccine. After seven months of clinical trials (vaccines often take 10 to 15 years to be approved), the first Pfizer jab was administered on the 8th of October.

Now, 89% of over 16s have had at least the first dose, and 82% have had both.

As of November 11th 2021, it will be mandatory for employees working in care homes to be fully vaccinated, and consultations have taken place regarding the introduction of legislation requiring all frontline NHS and care workers to have received both doses.

Other firms (for example Pimlico and Goldman Sachs) have adopted a “no jab, no job” policy where all new employees will have to provide proof of vaccination. This will provide many benefits, both to the economy, individual firms and advanced protection against COVID for employees. However, they also have the potential to create political and ethical problems.

Changes to the self-isolation rules mean that people who are fully vaccinated do not need to isolate if they have come into contact with someone who has tested positive for COVID-19. Consequently, if all employees are vaccinated, one positive COVID case in a workplace will mean all staff members do have to self-isolate. This will maintain productivity across firms, maximizing efficiency and therefore output levels. After a contraction of 9.9% in UK GDP in 2020, caused by national lockdowns, increasing output levels will help the economy grow sustainably.

It also enhances the safety of employees, as there is a move for workers return to offices.

The vaccinated are at reduced risk of hospitalization from COVID, so the labour force will remain healthier. Previously, NHS frontline have been required or it has been recommended that they have the hepatitis B and flu jab, so arguably, requiring the COVID jab is no different to these examples – it is a condition of the job.

The key opposition results from religious and philosophical beliefs, as well as discrimination against people with disabilities which prevent them from having the vaccine. This political move blurs the line between individual freedoms and the right to protect others. There are possible side effects caused by the vaccine – there have been a few cases of blood clots and allergic reactions -- but the more common ones involve fatigue, nausea and headaches. Some religious groups prohibit or strongly discourage receiving vaccinations. Should the government accommodate their beliefs or is it fair that workers are subject to dismissal due to their own personal beliefs?

There have been alternative methods suggested which are less invasive on workers. Regular lateral flow testing does not have the risk of any side-effects.

However, the results are not always reliable, so it still potentially puts others at risk. Additionally, it is difficult to enforce and can be hard to ensure employees are doing them regularly.

The final problem with dismissal on the grounds of no vaccine is whether who has been vaccinated is public knowledge. The General Data Protection Regulation (GDPR) is a data protection law that enables workers to access their information and limits the lawful uses of personal data. Companies cannot gain access to their employees’ health data without permission or alignment with Article 9, so at the moment, who is vaccinated is not public information, meaning it can be argued that firms should not be able to use personal information as a reason for dismissal.

There are arguments both in favour of and against legislation requiring workers be vaccinated. There are benefits to the safety of workers and the productivity levels of firms if the laws are put in place, but the main issue lies with is it right for the government to infringe upon people’s personal beliefs?

ECONOMIC IMPACT OF ONLINE LEARNING In the past 18 months the UK, along with the rest of the world, has faced major disruption since the dawn of COVID-19. One huge change was that the world had to quickly adapt to online learning, a huge learning curve for the education sector. Students in the UK are now in their third year of disrupted learning with isolations and lockdowns forcing students to revert to learning from home which is a far less efficient way to learn with many distractions all around them.

Initially, students were told that online learning would only be a temporary solution, but during the two lockdowns and cases continuing to surge, learning remotely very quickly became the new norm, with no clear timings of when it may end.

However, with the sudden switch to zoomlearning and remote assignments, new challenges emerged at the same rapid pace.

Even before the pandemic, there was clear education inequality between lower and higher socio-economic groups. For example, in 2018 children from disadvantaged backgrounds were twice as likely to leave school without any qualifications in maths and English. This growing gap between state and independent schools has only widened by home learning, as many children from lower income backgrounds didn’t have access to a laptop or working device to attend the new online lessons. According to the Sutton Trust Charity, almost two-thirds of private schools had competent online platforms to allow remote learning to take place, in contrast to only one quarter of the most under-funded state schools.

In addition, children from higher income families were also much more likely to have the necessary equipment needed for online learning, like a device, WiFi and a suitable desk/working space to complete their studies. In January of 2021, it was found that 40% of social mobility foundation students didn’t have access to a reliable broadband, which made online learning almost impossible for these students.

It was reported that many children were having to work from a single phone, shared between multiple siblings, to try and keep up with the online workload. 9% of children in the UK (equating to over 1,000,000 children) had no access to a laptop, computer or tablet, and therefore no access to any online learning or interaction with teachers.

One potential solution to this could have been a government subsidy scheme. For example, all families on universal credit could have received a government-funded laptop to ensure children were given an opportunity to attend school and complete the work.

However, even children that were able to access the online classrooms were still not guaranteed to keep up with the schoolwork. Many large families didn’t have the space for a good working environment due to sharing rooms with siblings. Many kids reported that they struggled to concentrate or stay focused whilst working at home, causing them to slip behind and miss vital portions of their education.

A study carried out by Harvard researchers showed that the usage of an online maths learning platform correlated directly with the median household incomes of the surrounded area. Those in the lower-earning neighbourhoods clocked up less time, and subsequently achieved average lower test scores. It was also reported that children from disadvantaged households had less encouragement and motivation from parents to learn, as they were having to focus on finding work to support their family. This can also be explained by parents that are key workers being absent and unable keep an eye on their children.

Additionally, many students have had exams cancelled and postponed leaving the public with concerns of the accuracy of GCSE and A-Level grades due to the algorithm initially used to generate the grades, and the fairness of using mock grades to help determine students’ final grades. The pandemic has had many economic effects that will disrupt the UK economy for many years to come.

The effects of this inequality could be large, the consequences arising maybe in a couple of years. As those children from private or privileged schools are statistically more likely to get higher GCSE and A-level grades, as well as support for further education like universities, they have been set up to have access to the highest paying jobs and career opportunities. However, in comparison to the most disadvantaged students, who drop out of school with little or no qualifications, their job opportunities would be greatly limited.

This could perpetuate the unemployment cycle – they don’t have the money for education, so can’t gain the skills needed for high-paying jobs, so will be stuck in occupations that have lower salaries, and therefore will struggle to provide the higher education for their children, further repeating the difficult and dangerous cycle.

Another well-known cost of the COVID-19 pandemic has been the increasing effects on the mental health of our population, especially on young people, who have had to cut out any social interaction with friends and teachers for over 6 months. This can leave young people isolated and alone, meaning the government is forced to increase its spending on mental health treatment and therapy in the form of education, training and wages whilst having to build infrastructure for mental health clinics and groups.

The government spending on mental health in 2019/20 was 14.0% of the local health spend, however once the coronavirus hit in 2020/21, 14.8% of the local health spend was on mental health.

Online learning has also impacted many parents. Toddlers and young children have had to have full time care from parents, as now 7 in 10 families have both parents in employment and working from home in the pandemic, this means that potentially both of their working careers will have been interfered with, decreasing the output of many workers and leading to a lower productivity for many firms and small businesses. This can also have long term effects on the quality of their labour in the future.

To help solve this rising issue of the ever-increasing education gap, the government, in conjunction with technology businesses, needs to step up to support schools, especially those in the lowest socio-economic areas to help recover and transition from home to in-school learning. There needs to be support and additional funding for schools to help implement plans to make up the lost time, as well as support for students who found the lockdowns draining and a strain on their mental health. It has emphasised the importance of the education sector to our economy and will encourage the government to invest more into education and mental health treatments.

GAS PRICES GOING UP IN FLAMES

In recent months wholesale gas prices have soared in the UK resulting in a crisis that threatens a wide range of industries, small energy firms and households.

This crisis has been blamed on a number of factors including an especially cold and long winter in 2020-21 that left gas stocks depleted and demand for gas is now increasing because the economy is opening back up from its pandemic lows. There has also been a fall in exports from Russia, and demand is high in Asia, which is putting pressure on international markets. In the UK, several gas platforms in the North Sea have closed to perform maintenance that was paused during the pandemic and wind power, which supplied a quarter of UK electricity generation in 2020, has also been unusually low this year with some of lowest wind speeds since the 1960s being recorded. In a further stroke of bad luck, cables that supplied 2,000 megawatts of power to the UK from France were damaged in a fire on September 15th which catalysed the crisis.

Together these factors have resulted in the price of fuel increasing by an estimated 250 percent this year, resulting in seven energy companies going bust including Avro Energy and Green. Several others are teetering on the brink of survival. This has affected 1.5 million customers in the UK. This is because many companies have made pledges to sell gas to consumers for less than it is currently costing them to buy it and Ofgem's price cap which is meant to protect customers on some tariffs by limiting how much firms can charge per unit of gas but providers have complained that this means they are unable to pass on their rising costs to customers. Experts have already warned that many smaller energy companies will soon go bust, with financial pressures threatening to reshape the British market.

While market conditions have certainly created new challenges for Britain’s energy supply, not everything can be put down to bad luck. In reality, Britain’s energy crisis has been decades in the making. Over time, Britain has become increasingly reliant on gas to power the country and when North Sea gas production began to fall sharply in the mid-2000s, Britain became increasing reliant on gas imports. Given this reliance on imported gas, one might assume that Britain would have invested heavily in storage capacity to provide a buffer against market shocks.

However today less than 1% of Europe’s stored gas capacity is held by the UK. The lack of storage capacity left Britain’s gas supply at the mercy of volatile global markets, with few tools available to soften the impact of any future supply shock. This is the main reason that Britain has been one of the hardest hit countries from surging gas prices. With higher gas prices set to be sustained into the winter, the government faces a dilemma: should it try and protect energy companies by letting prices rise, or should it protect consumers from rising gas prices, and accept the fact that this may kill off many of the recent entrants into the market?

The scope to pass rising costs onto households is already limited: millions of families are facing a 12% rise in their energy bills from October when a higher price cap comes into force. With the universal credit uplift expiring at the end of the month, reducing household incomes and increasing inequality, alongside an estimated 3.2 million households already in fuel poverty in England alone, any further rise in energy prices could mean that millions of households are unable to heat their homes, putting increased pressures on charities and the healthcare system.

According to the Financial Times, the government’s preferred policy is to let the small companies fail, and to persuade larger companies to take on the customers of their former rivals with the help of state backed loans. In the past few days alone, Enstroga, Igloo Energy and Symbio Energy have joined the increasing list of energy firms that are going bust.

It is clear that Britain’s energy system needs reforming. For the free market wing of the government, the answer is to promote real competition by levelling the playing field for new entrants in the market. However, the Left would argue that creating a publicly owned energy retailer that would serve the public interest rather than focussing on private profit, is the way forward.

The gas crisis has exposed the longstanding vulnerabilities in Britain’s energy system which will likely have disastrous impacts for many families this winter.

SUPPLY SHORTAGES CO2 is currently a scarce resource which is thus causing food shortages. For example, CO2 is used to package meat and keep fruit and veg fresh, and it is also used in the manufacturing of fizzy drinks and carbonated water.

There is also a shortage of lorry drivers which is impacting some of the UK’s biggest firms such as Tesco, McDonald’s and Arla. There is estimated to be a shortfall of around 100,000 drivers and the effect is that goods are missing from shelves and there are multiple supply chain issues. The ONS said a quarter of British people had reported gaps on supermarket shelves over the past two weeks, with one in six reporting difficulty in finding “essential” items.

Suggestions are that food prices could rise by at least 5%.

Furthermore, the shortage of drivers is causing a lack of petrol.

BP and Tesco have closed some of their petrol stations as it cannot be transported quick enough to the stations. It has caused petrol prices to reach an eight year high.

The scarcity of CO2 is due to the soaring natural gas prices leading to the closure of fertiliser plants.

The UK government has set up a deal with a UK fertiliser plant to provide financial support to restart the plant. George Eustice, the Environment Secretary, has said this could be at a cost of “possibly tens of millions” of pounds. At the current price of gas it will be a severe situation for most European producers.

Brexit has made it hard for UK firms to hire drivers from Europe and more difficult for the drivers themselves to operate here. In addition, there is a backlog of new drivers waiting to take their tests ready for recruitment, with thousands reported to be stuck in the system. The effect has been that the government is unable to supply some of the basic necessities of life. However, because of the pandemic the government has been able to disguise the effects of Brexit because statistics on the economy for the past 18 months have been very disrupted regardless of Brexit or not. Furthermore Grant Shapps, the transport secretary, said that he, “[does] not support using foreign labour to tackle a longstanding issue in the haulage industry.”

However, there are already indicators to show that Boris Johnson may be willing to exempt EU drivers from post-Brexit rules and go against their original ideology of not using foreign labour. Moreover, the government’s lack of planning for Brexit meant the necessary infrastructure involving border control posts in key ferry ports, such as Dover, is yet to be built which has further deepened the problems with trade.

A-LEVEL CASE STUDY: BP OIL SPILL On the 20th of April 2010 the biggest marine oil spill in history occurred. The Deepwater Horizon oil rig leased by the gas and oil company BP was situated in the Mississippi Canyon and on the night of the disaster natural gas burst through the concrete core. It was later released that a similar event had occurred just two years prior in another BP owned rig in the Caspian Sea in September. When investigated, it was found that both cores were too weak to withstand the pressure of the natural gas. As the natural gas ignited on the night of the disaster, 11 workers were killed and 17 were injured before it capsized and sank. 210,000,000 gallons of crude oil were released which threatened many marine animals and birds.

Scientists concluded that the Deepwater Horizon oil spill killed thousands of marine animals and sea turtles as well as contaminating their habitats. The negative externalities continue to grow following this event as a study done by the National Geographic in 2020 suggested that only 20% of pregnancies among dolphins in the heavily oiled waters of Barataria Bay are successful compared with 83% in non-contaminated waters.

Alongside the higher rates of reproductive failure, the study showed increased rates of lung disease, heart issues, impaired stress response, and higher levels of death in bottlenose dolphins. Some oil sank to the sea floor gluing together falling particles in the water such as bacteria and phytoplankton to form marine snow which damages deep sea corals and potentially damaging other ecosystems unseen from the surface.

When oil spills in water it usually floats on the surface and spreads out forming a thin slick a few millimetres thick. Workers usually surround the slick by floating booms to keep it from spreading to nearby harbours, beaches and biologically important areas such as marshes. They then use tools to skim the surface to remove the oil congealed on the top. Following this, sorbents can be used to absorb the oil like a sponge. If all of this fails, as oil is flammable the last option is the burn it away in a controlled fire, roughly 5-6% of the oil from the BP spill was removed from the sea this way.

As BP were found guilty of cost cutting and excessive risk-taking that led to the oil spill, they were forced to pay more than $60 billion US dollars in criminal and civil penalties, natural resource damages, economic claims and cleanup costs. In 2012, BP plead guilty to 14 criminal counts including manslaughter which lead to a hefty $4.5 billion dollar criminal penalty. Following the oil spill, the stock price for British Petroleum fell from $60 to $29 around -51%. However, BP have been able to recover its reputation and increase the company’s credit rating by adapting to a new lower oil price by cutting costs. The covid-19 crisis has strengthened BP’s resolve to transition to more renewable energy projects including wind technology and a renewable hydrogen project.

23 THINGS THEY DON’T TELL YOU ABOUT CAPITALISM

Chang, with balance, charm and wit, dispels some of the biggest economic myths that many of us accept as facts and highlights the major flaws in the world's most popular economic model, capitalism. Chang presents a balanced argument; recognising the failures of command economies and concedes that capitalism is ‘the worst economic model except all the others’ but he stays strong in his belief that capitalism has major issues. Written in 2010, often referring back to the 2008 Financial Crash, a perfect illustration of capitalist failure, Chang paints a picture where economic reform is the only way to see positive change and a better future on the road to recovery.

In the final section of the book he does this by outlining 8 key principles to take account of on the inevitably bumpy journey back to economic prosperity. To give insight into just one of these points, he suggests that the world economic system needs to unfairly favour developing nations. Developed nations have had a habit of exploiting less developed countries by being forced into adopting free market policies by the World Bank and the most developed states so they can borrow money from these same economies. This comes at the expense of the ordinary people living in the developing states due to a more ruthless implementation. Chang then suggests an abolition or reform of institutions like the World Trade Organisation and better terms for borrowing nations. This is just one idea presented in the book on how the world economy could be reformed. Whether you agree or disagree with this idea it is undeniable that Chang provides unique and engaging ideas on the world’s biggest economic issues.

Throughout the book Chang provides accessible examples for occasionally complex economic theorems in an engaging format, this undoubtedly adds value to the book.

Just one example is Thing 4 ‘The washing machine has changed the world more than the internet has’, explaining the idea that we too often regard recent technological advancements as the most revolutionary. Or Thing 15 ‘People in poor countries are more entrepreneurial than people in rich countries’ which explains the fact that many people in extremely poor countries have to be entrepreneurial just to survive. In some of the poorest countries the ratio of people working as one-person entrepreneurs is strong: 66.9% in Ghana or 88.7% in Benin thus dispelling the myth of Western entrepreneurial superiority.

These examples aid the book and Chang in making his points in an engaging and digestible way.

This book has the ability to enlighten readers on the economic model that most developed nations subscribe to with an unparalleled accuracy of how it actually operates.

Whilst Chang is plainly a critic of capitalism he isn’t so in a way that suffocates the book with laborious criticisms but rather in a factual manner. Therefore, I would suggest it be our duty as economic agents to read this book and more deeply understand the role we all play in the capitalist machine.