The Drayton Tribune The official student magazine for the UCL Economist’s society I Issue 4 - 14/15

The Drayton Tribune

Dear Reader,It is my pleasure to welcome you to the final and fourth published

issue of The Drayton Tribune.

As always, this issue contains a wide variety of articles. In

particular, if you would like to find out more about economic

consulting, I would urge you to have a look at the Academic

Careers section. We have interviewed Helen Ralston, a senior

consultant at Oxera, covering topics such as what made her go into

economic consulting as well as her current day-to-day

responsibilities. Oxera offers internship opportunities to economics

undergraduate students in their second year. The deadline for

applications is this Saturday 28th February.

The other sections cover a range of current issues, including the rise

of the Islamic State (IS) in certain parts of the world and the

potential political consequences of the death of King Abdullah of

Saudi Arabia. We have also included an article analysing whether

the massive amounts of money spent on Oscar campaigns really is

an efficient allocation of resources. I hope that you will find

something of specific interest to you.

It has been a pleasure to serve as the Editor-in-Chief of The

Drayton Tribune over the past months, and I would like to take this

opportunity to thank everyone in the Editorial Team for their

contributions. This magazine would have been nothing without

your significant efforts. I would also like to thank The Economist’s

Society for taking the project onboard in May last year, and for

continuously providing the funds necessary for publishing the

magazines. Last, but not least, I would like to express my gratitude

to the Economics Department, who has been a persistent supporter

of this project over the past year.

The new Editor will be announced once The Economist’s Society’s

AGM on Tuesday 24th February has finished. Shortly after that, the

recruitment process for the Senior Editorial Team that will run the

paper next year will begin. This will be an excellent opportunity for

anyone that would like to become more involved within both The

Drayton Tribune and The Economist’s Society. More information

about this will be released shortly.

In the meantime, I would like to take this opportunity to wish you

the best of luck and with your exams in May.

All the best,

Nils LarssonEditor-in-Chief 14/15

Cover Page Image Source: http://www.icgmagazine.com/wordpress/wp-content/images/2013/03/Web-Exclusive_1.jpg

Across UK government buildings, the

union jack has flown at half-mast to mark

the death of King Abdullah of Saudi

Arabia. A respectful gesture was made to

the leader, who brutally sentenced a Saudi

blogger, merely attempting to exercise the

right to freedom of expression, to one

thousand lashes and ten years’

imprisonment. Was the UK parliament

delusional?

Westminster Abbey defended its case by

arguing that the two countries are allies in

fighting against Islamic terrorism and by

not flying the flag, it would have done

nothing to support the oppressed Christian

communities in the Middle East. Yet,

backlash prevails with explicit evidence,

illustrating King Abdullah’s complacency

to act upon the severe lack of human rights

in Saudi Arabia. Such policies include:

capital punishment, including public

executions by beheading, press censorship,

restricting religious freedom and

discrimination against women, most

predominantly known to the media. Saudi

Arabia received the lowest possible score

for civil and political freedoms in the 2014

Freedom House rankings. Although human

rights organisations have persistently

condemned Saudi’s policies, the US does

not publicly do so and criticise only

through annual reports.

Perhaps this is the case as King Abdullah

was actually a reformist. There are indeed,

massive improvements to be made but

Abdullah was able to push reform against

the highly religious conservatives within

the population. Since 2011, women are

now able to vote and run in future

municipal elections and Abdullah

convinced Arab leaders to make Israel a

peace offer in 2002.

Despite Abdullah’s attempts, the Saudi’s

are at risk of moving at a slow pace.

Compared with the West, they are

undoubtedly sluggish but this pace of

reform went as fast as it could in order to

avoid violent resistance from the

conservatives. The Wahhabism (an

orthodox religious movement of Sunni

Islam) puts them in danger of sustaining

sectarianism and jihadist ideology, which

they are paradoxically challenging by

forming a coalition with the West to

combat the Islamic State. In addition,

dropping oil prices is unsustainable for the

country; Deutsche Bank analysts have

estimated that the oil price needed for the

government to balance its budget in 2015

is $104, more than twice as what it is now.

However, reliance on financial reserves

may be able to last the dip in prices for

lengthy periods.

Politics

Saudi Arabia’s Stability

Image Source: http://i.imgur.com/1h9PYg8.jpg

Such issues are now of major concern to

Abdullah’s successor, King Salman. The

succession itself was not of actual concern,

as Abdullah’s death was expected early on

and the overall leadership was collective,

hence Salman’s rule, to an extent, will not

be a ‘rocky’ one. The main question is

whether Salman is capable of maintaining

stability. Salman himself is not very

conservative and it is highly predictable

that he will continue with Abdullah’s

legacy. Of course, the adamant issue here

will be the struggle to balance between

pushing for modernisation and the

opposition of the religious conservatives.

With jihadists on the rise, the anti-IS

coalition has proved unpopular to the

Saudis. However, Salman will persist with

strategies to deter young Saudis from

joining with the Islamic State, particularly

with its rising young population.

One of the key decisions that Salman made

soon after he was appointed King, was of

significance to future stability. His nephew

Mohammed bin Nayef was made the

Deputy Crown Prince, meaning he would

be second in line to the throne, after

Crown Prince Muqrin bin Abdulaziz. This

appointment is the first time in Saudi

history: a grandson of the kingdom’s first

ruler, rather than a son, would be in place

of succession. Usually, top appointments

would be made several months after deaths

of the monarchs; hence this was a shock to

the Saudis. Nevertheless, this will reduce

the prospect of a power struggle within the

monarchy in future generations to come.

Moreover, Prince Mohammed has

followed his father, former Crown Prince

Nayef’s example in keeping close relations

with the conservatives and even obtained a

political science degree in the US in 1981.

This could be of utmost importance to the

West, in terms of retaining a strong

relationship and possibly open the way to

more freedom within Saudi Arabia.

So far, King Salman has proved

competent at maintaining stability, most

probably due to the fact that he will

continue the same approach as his

predecessors; no revolutionary policies

have been put onto the table. Nonetheless,

reforms are taking place, just at the slow

step-by-step approach the officials in

Riyadh are suggesting is optimal. After the

initial 50 lashes given to blogger Badawi

earlier in January, the following sessions

have been delayed on ‘medical grounds’

and they may not even continue due to its

profound coverage over global news. The

judicial system will still take time to

reform but the perception of ‘softness’

may come at a cost of rallying resistance,

especially when the Islamic State are on

the rise.

Vanessa Ma

Source: http://www.timesofisrael.com/saudi-arabias-king-abdullah-dies-aged-90/

Source: http://www.foxnews.com/politics/2014/03/28/amnesty-international-says-human-rights-missing-in-action-on-obama-trip-to/

Politics

Who speaks for Islam?Perception of Islam in Western countries i

s rapidly changing. The recent attacks in

Pakis tan, Nigeria, Kenya, Syria, and

France caused international outcry,

reducing already low bargaining power of

MENA (Middle-East North-African)

migrants in the EU. Despite some Islamic

authorities having expressed regret about

instrumental use of religion symbolism

by terrorist organisations, the vast

majority of Muslim leaders have not

condemned the violence clearly enough.

Ayaan Hirsi Ali, in his Wall Street Journal

article, called Islamic scholars and

politicians to go beyond “uttering the

usual laments after another horrifying

attack, but making a constant, high-profile

effort to show the world that the preachers

of hate are illegitimate”. The question

arises: who is representing Islam in the

world of media, economics, and politics?

Who can take responsibility for the shape

of the future Umah – the global Muslim

community? The answer seems to be

rather complicated.

The collapse of the Soviet Union in 1991

marked the end of the bi-polar system of

international relations. An undeniable

leader, the United States, had an

opportunity to shape global politics for

more than a decade. The unsuccessful US

military intervention in Somalia (1993-

1995), the involvement of American

troops in Balkans, Kuwait, Iraq, and Haiti

(1990s) and the supporting of oppressive

regimes in MENA (e.g. Hosni Mubarak in

Egypt, Saddam Husain in Iraq) caused a

surge of anti-American movements within

Muslim-dominated countries. While

Americans managed to win militarily in

these conflicts, they have lost people’s

hearts, previously oriented towards a more

secular American consumptionism. In

1990s a clear trend of Islamic resurgence

was observed. What is more, the Soviet

Union’s financial and military support in

the third world was withdrawn, the

political system of USSR was discredited,

leaving unfilled vacuum. A few years

later, the US, previously perceived as a

victorious leader, became the enemy

number one in many Islamic countries.

The new generation of Muslims,

especially young recent-graduates, was

more devoted to Islamic values than their

grandparents, a trend unobservable in the

contemporary world with respect to any

other religion. Islam has become trendy.

Samuel Huntington pointed out in his

famous book “The Clash of Civilisations”

that in 1995, every Muslim-dominated

country, except Iran, was more Islamic

than 15 years before. As a result, new

institutions were created. Islamic schools

became increasingly more popular in

comparison to ordinary secular schools.

Muslim organisations were supporting

people on the street, caring about

homeless, promoting justice, and setting

up new charities. As Huntington pointed

out, it was not Hosni Mubarak’s police

which was “handing out food and

blankets” after the Cairo 1992 earthquake,

but members of the Muslim Brotherhood.

The gap created by the collapse of the

Soviet Union and failing American

dominance was filled by Islamic ideology

- locally, but not globally.

A case study of Somalia is very helpful in

understanding this paradox. After the

terribly unsuccessful UN military

operation in Somalia (1993-1995), the

country was left to local warlords

competing with each other. Terror and

injustice had no end. Stig Hansen, in the

book “Al-Shabaab in Somalia” (2014),

highlighted that every single political

system was tested in Mogadishu –

Marxism before 1977, pro-American

quasi-democracy, and military

dictatorship. Finally, in the early 2000s,

local warlords, unable to pay their militias,

were losing control, tacitly allowing their

people to exploit local civilians (if there

were any) e.g. by organising excessive

number checkpoints in Mogadishu.

Radical Islamists, veterans of the Afghan

war, today mainly associated with the Al-

Shabaab terrorist group, managed to bring

justice and egalitarianism that nobody else

could guarantee in the past. Involved in

Sharia Courts, Al-Shabaab members were

able to transcend borders of traditional

clan structures, using religion as an

instrument of unification among divided

families.

Not only through terror, but especially

thanks to ideology promoting equality

and social justice, radical Islamic

groups were able to create effective

institutions allowing restored order in

deprived areas of Sahel, Middle-East,

and the Horn of Africa.

Even defeated, after the Ethiopian

intervention in Somalia, Al-Shabaab

remains active and should not be

underestimated. The organisation’s

members are blamed for the recent violent

attacks in Kenya. Al-Shabaab puts

pressure on the Kenyan government to

withdraw its support for the Transitional

Federal Government (of Somalia), created

in opposition to Sharia Courts. Even more

attention is currently paid to another

terrorist group in Africa – Boko Haram -

operating in North-Eastern Nigeria, and

locally in Cameroon, and Chad (see more:

“Quo Vadis Africa? Challenges for 2015”

– The Drayton Tribune 2014/2015 Issue

2).

According to Hansen, the evidence that

Al-Shabaab fighters are supporting Boko

Haram is “overwhelming”. Once again, a

military intervention resulted only in

shifting the sphere of influence of regional

terrorist organisations. Boko Haram, now

controlling almost three Nigerian states

(Yobo, Borne, and Adamawa) did not

hesitate in engaging in pro-social and pro-

justice activities in the past (similarities to

Al-Shabaab), which were necessary for

the organisation to grow. It is true that

Boko Haram uses terror to force abducted

people (especially teenagers) to fight in

their ranks, but many of its fighters

voluntarily decide to join the

organisation.

Disappointed graduates who cannot find

employment, people tired of social

injustice, poverty, high income inequality,

corrupted local and federal governments,

might perceive creating an Islamic state (a

caliphate) as a “national revival”. Figure

one depicts push and pull factors

determining the popularity of the above-

mentioned terrorist groups as well as

institutions influencing described factors.

Politics

From the variety of interacting factors

three are almost entirely external: foreign

policy of the key players (US, UK,

France), developmental aid (IMF, World

Bank), and lack of leadership in the

Islamic world (for a more in-depth

analysis of internal factors such as local

economic policy, see “Quo Vadis Africa?

...”). The problem of global governance in

Islam is that both the political and spiritual

dimension are complex due to a multitude

of categories that should be included in the

analysis, such as economic and military

strength, ethnicity, population, natural

resources, and dominant schools of Islam

in different countries. The Six most

influential Islamic countries are Turkey,

Egypt, Iran, Saudi Arabia, Pakistan, and

Indonesia, which all score differently in

each category, making the puzzle of

leadership in Islam hard to resolve. Ranks

for seven categories (6-the strongest one,

1-the weakest one) are presented in table

one on the next page.

1. Military strengthIn order to compare military potentials of

the six countries, the “World military

strength” index for 2014 was used. It takes

into account quantity and quality of

conventional weapons, annual spending on

national defence, available manpower, and

key natural resources. The ranking is

published online and can be found at

www.globalfirepower.com/

The fact that Pakistan possesses nuclear

arsenal is not taken into account in the

index, but is reflected in the table. The

winner in this category is Turkey, a

NATO member, typically perceived as a

close US ally. Turkish leaders are

commonly disregarded by more

conservative Islamic governments for their

cooperation with the West. Moreover, in

the past decade Turkey was reluctant to

engage in international military

operations. This may reduce the

significance of Turkish undoubted military

leadership in the Islamic world.

[Figure 1]Pull and push factors model – voluntary participation in terrorist organisations. Source: Author’s own elaboration.

Politics

2. Geopolitical factorsLocation, access to open waters, natural

resources are key factors in contemporary

geopolitical analysis. The winner in the

second category is Saudi Arabia, a country

with vast natural resources and a very long

coastline, giving direct access to the

Persian Gulf and Red Sea. What is more,

Saudi Arabia is located in the middle of

the Islamic World. The only drawback one

could point out is the high desertification

of the territory, potentially reducing

productive capacity of the Saudi economy.

The lowest score was assigned to

Indonesia, a country far away from the

core Arabic lands - yet with oil resources

and access to key South-Eastern straits -

and Pakistan (limited reserves of oil and

natural gas, also far away from the core).

3. Integrity with UmmahThe third category can be broken down

into two parts: political and cultural

integrity with the global Islam community.

The winner – Egypt. The Egyptian dialect

of Arabic is the one which is used as an

international standard. What is more, the

Egyptian entertainment industry is of

major importance in the entire Arabic

world. The country is regarded as

moderately secular, predestining Egypt to

be an equally good negotiation partner for

conservative Saudi Arabia and Iran, and

secular Turkey and Indonesia. Turkey,

where the Latin alphabet is used, and

which is politically isolated Iran had a

lower score in this section. In addition,

ethnicity should be taken into account. For

example, citizens of Iran are Persians, not

Arabs, which is a reason for many

animosities between Iran and its neighbors

(also with respect to policy against Israel).

Low score for Saudi Arabia in this

category is motivated by limited openness

of the society and anachronistic judicial

system based on strict rules derived from

Qur’an and tradition.

4. ReligionSpiritual leadership in Islam is an

important factor, though very hard to

analyse. Countries with dominant Shia

Islam are unlikely to be regarded as

leaders (e.g. Iran) by Sunni countries

which constitute an overwhelming

majority. Relatively secular countries such

as Turkey or Indonesia will not be

accepted by more conservative societies of

Pakistan or Saudi Arabia. Pakistan with its

famous madrassas is exerting a real impact

upon contemporary Islam. Egypt - the

only African country on our list - can be

regarded as a centre for Sunni Islam. Al-

Azhar University in Cairo is the most

important scholarly institution in the

Islamic world, which would legitimate

Egyptian leadership of Ummah in the

spiritual dimension. However, the winner

in this category is Saudi Arabia which is

visited by millions of people every year,

mainly pilgrims wanting to pray in sacred

towns of Mecca and Medina.

5 and 6.

Economic strength and well-beingEconomic power is the subject of the next

two categories. Firstly, countries’ relative

economic performance was assessed with

per capita measures of well-being (such as

the Human Development Index). The

winner was Saudi Arabia. Secondly,

economic power in absolute terms was

taken into account, measured by gross

domestic products in US dollars (not PPP

adjusted). See Figure 2. This time, the

winner is Indonesia, just slightly ahead of

Turkey and Saudi Arabia.

7. Internal stabilityFinally, a perfect leader must not have any

serious internal problems such as civil

wars, the persecution of minorities, or an

unstable political system. Unlike in other

categories, Egypt is performing poorly,

with significant political tensions after the

beginning of the Arab Spring in 2011.

Pakistan is struggling due to conflicts with

Afghan terrorist groups and India (over

Kashmir). Iran is perceived as an

international outsider, suffering from

sanctions imposed by the West (see Figure

2) which followed unsuccessful

negotiations of the national nuclear power

programme. Indonesia, Turkey and Saudi

Arabia are more politically stable. There is

hence no clear winner in this category.

Egypt Turkey Saudi Arabia Indonesia Pakistan Iran

Military strength 4

WMS: 13th

6

WMS: 8th

3

WMS: 25th

4

WMS: 19th

5

WMS: 15th

4

WMS: 22th

Geopolitical factors 4 4 5 2 2 3

Integrity with

Ummah

6 2 3 2 4 2

Religion 5 2 6 3 4 3

Well-being 3

HDI: 110th

5

HDI: 69th

6

HDI: 34th

3

HDI: 108th

2

HDI: 146th

4

HDI: 75th

Economic strength 3

GDP:42th

5

GDP:18th

5

GDP: 19th

6

GDP: 16th

3

GDP: 46th

4

GDP: 27th

Internal stability 2 5 5 4 2 2

TOTAL 27 29 33 24 22 22

WMS – “World Military Strength” (2014) / HDI - Human Development Index (UN, 2013)

Politics

ResultsThe final results are as follows: Saudi

Arabia (33), Turkey (29), Egypt (27),

Indonesia (24), Iran (22), and Pakistan

(22). Saudi Arabia is undoubtedly

among the wealthiest and more powerful

states in the world. However, low

population, lack of national identity, low

openness of the society, and a very strict

legal system may be major obstacles in

gaining leadership in the Islamic world.

From my point of view, Egypt is a

country that would have a chance of

being accepted as a leader by all the key

players for a multitude of reasons: it is

an African country, moderately secular,

Arabic, the second most important centre

for Sunni Islam, and have strong cultural

ties with other Islamic countries. In the

case of Egypt, political instability and

economic problems may be regarded as

temporary obstacles, while constraints

on Saudi leadership are rather permanent

(a radical change in the political system

would be required).

A unified Muslim world would be a new

superpower if well coordinated. The

recent brutal murder of Mouath al-

Kasaesbeh, a Jordan pilot who was

burned to death by Islamic State

warriors, unified the Muslim World

against the threat of terrorism. I believe

that military commitment of Islamic

countries against jihadists is one of a few

ways to ensure that differences between

violence are clear for everyone –

Muslims and non-Muslims. The question

arises whether it is just a temporary

response to a shock or a permanent

awakening.

Mateusz Stalinski

0

1E+11

2E+11

3E+11

4E+11

5E+11

6E+11

7E+11

8E+11

9E+11

1E+12

2004[YR2004]

2005[YR2005]

2006[YR2006]

2007[YR2007]

2008[YR2008]

2009[YR2009]

2010[YR2010]

2011[YR2011]

2012[YR2012]

2013[YR2013]

Iran, Islamic Rep. Pakistan Indonesia

Egypt, Arab Rep. Saudi Arabia Turkey

Source: World Development Indicators Database (World Bank)

Politics

Syriza’s victoryMonday, the 26th of January 2015. Alexis

Tsipras’ first official day as Prime Minister

of Greece after a convincing election

victory the night before: with 149 seats out

of 300 in the Greek Parliament, his party

Syriza came alarmingly close to an outright

majority. Mr. Tsipras saw this historic day

as the perfect time to make a provocative

and symbolic statement. He decided to visit

the war memorial in the suburban town

Kaisariani, where 200 Greeks were killed

by the Nazis in 1944. The leader of the far-

left populist party promised in his victory

speech that he would “end the vicious

circle of austerity” – first and foremost the

work of the German chancellor Angela

Merkel. Visiting the war memorial on his

very first day certainly made his resistance

to any kind of German occupation clear.

Demanding a big cut in Greece’s debt and

promising a public-spending spree may

have won Syriza many votes, but investors

have not shared their excitement. The stock

market has been in free fall; Greek banks

have had to deal with the biggest one-day

drop of all times on January 28th, and short-

term bond yields have risen to new highs.

Though the latest implementation of

quantitative easing by the European Central

Bank can arguably be seen as an admission

that the “Merkellian” austerity path in

Europe has been extreme, a Greek

abandonment of the structural reforms can

have huge consequences for Greece, as

well as for the Eurozone as a whole.

If Mr. Tsipras turns out to be successful in

obtaining an extensive bailout extension,

this would likely spur the growth of

Syriza’s “sister” parties in countries like

Spain and Portugal. It is a lot more fun to

abandon reforms than to stick to the strict

rules of austerity, and if this proves to be an

actual option in one troubled country, we

should only expect others to make the same

kind of commotion. Spain and Portugal are

both currently led by centre-right

governments, and representatives of these

were also very quick to express their

skepticism and warnings against letting a

party like Syriza in charge. Alexis Tsipras

is facing an enormous challenge, and even

though the Greek population has voted anti-

austerity all the way, their new Prime

Minister will have to deal with the fact that

Greece is still very dependent on the

official support from their bailouts. Though

the country’s economy has been improving

- an on-going recession ended last year,

growth of 0.7% made them one of the best

European achievers in 2014, and they have

seen substantial gains in competitiveness -

it all results from the structural reforms that

the Greeks have managed to comply since

2010. Thus, all of it could be easily lost if

Mr. Tsipras acts too provocatively and tries

to push his luck. He is still dealing with a

fragile country, and if he does not find a

way to obey the bailout rules, it could

potentially lead to an expulsion from the

Eurozone.

This means that although Alexis Tsipras

has declared that he wishes to stay in the

euro, a wrong move may leave him with no

choice. A move that becomes even more

likely when you take a closer look at his

disturbingly inexperienced government: a

questionable coalition with the rightwing

Independent Greeks. Only one politician on

his team has actual experience with the

governing of Greece, which does not

exactly make Greece’s official supporters

feel calmer about the country’s future.

The most crucial consequence of a so-

called Grexit would have to be the

inevitable and substantial depreciation of

the new currency. With their foreign debt

still in euros, it would make it

unsustainable, leading to a Greek default.

Furthermore, the usual upside of an intense

depreciation – gain in competitiveness –

could potentially be lost as well, were

Greece to be expelled from the European

Union and the Single Market all together.

Clearly, Greece would not be alone to

suffer the consequences of a Grexit: if one

country had actually left the Eurozone, it

would give investors good reasons to worry

about other countries, who might share

their fate. But it is highly unlikely that

Angela Merkel and the European Central

Bank will agree to the demands of Alexis

Tsipras – and even if that eventually means

that Greece will have to leave the

Eurozone, the EU is at least in a far better

position to handle this, than they were in

the recent euro crisis. A Grexit is a much

more realistic possibility this time around,

with consequences being a lot more fatal to

Greece than to the rest of the European

countries.

If Alexis Tsipras and his newly elected

government realise the fatal outcomes of

their current anti-austerity policy in time,

they will, not surprisingly, have to let their

voters down. The story of Syriza’s victory

will then just be yet another example of a

country in desperation, believing the words

of any politician who puts “public” and

“spending” in the same sentence, but who

will never be in a position to actually

follow through.

Maria Uttenthal

Politics

Je Suis CharlieThe international reactionWhen French President Francois Hollande

gave a sombre televised address to the

nation, hours after the shocking attack by

brothers Saïd Kouachi and Chérif Kouachi

on Charlie Hebdo, he vowed to protect the

message of freedom that the magazine's

journalists represented.

Internationally, political leaders supported

France’s stance on the freedom of press

and freedom of speech. In the United

Kingdom, David Cameron told the House

of Commons, "This House and this

country stand united with the French

people in our opposition to all forms of

terrorism and we stand squarely for free

speech and democracy. These people will

never be able to take us off those values."

German Chancellor Angela Merkel said

that: "[it was] not just an attack on the life

of French citizens and the internal security

of France. It also represents an attack on

freedom of opinion and of the press, (an

attack on) a core element of our free and

democratic culture.”

U.S. President Barack Obama called the

shootings horrific, adding “France is

America's oldest ally… Time and again,

the French people have stood up for the

universal values that generations of our

people have defended.”

But not all international reactions have

been entirely positive. Pope Francis spoke

with journalists while flying over the

Philippines, and stated that the Charlie

Hebdo attacks were an "aberration", and

that such horrific violence in God's name

could not be justified. He defended

freedom of expression, but then he said

there were limits, especially when people

mocked religion. "You cannot provoke.

You cannot insult the faith of others. You

cannot make fun of the faith of others.

There is a limit."

The domestic reactionThroughout France, people supported

Charlie Hebdo. After the attacks, the

phrase “Je suis Charlie”, French for "I am

Charlie", was adopted by supporters of

free speech and freedom of expression

who were reacting to the shootings. It

quickly spread to social media, becoming

one of the most popular hashtags in

Twitter’s history, being tweeted 6,500

times a minute at its height.

From the 10th to the 12th of January, over

three million took part in unity marches

across France. Up to 1.6m are estimated to

have taken to the streets of the French

capital. More than 40 world leaders joined

the start of the Paris march, linking arms

in an act of solidarity.

"We have to show solidarity with ‘Charlie’

but without forgetting all the ‘Charlies’

around the world,” said Christophe

Deloire, the Reporters Without Borders’

secretary general. The Reporters Without

Borders annually publish a Press Freedom

Index, and some of the countries

represented in the Paris march rank

particularly low. In Russia, Algeria,

Turkey and Gabon, there have been many

cases of journalists being falsely

imprisoned or prosecuted on trumped-up

charges. Christopher Deloirse stated that

“It would be intolerable if representatives

of states that silence journalists in their

countries take advantage of the day’s

emotion in order to improve their

international image.”

The French declaration of rights that

came with the 1789 French Revolution

established the right to say, write or

print what one wants, but abusing that

freedom has always been limited by

law. Exceptions to freedom of speech

were defined in 1881 as defamation,

slander and incitement to hate. There is

also explicit reference to crimes

against humanity, condoning crimes of

war or collaboration with the enemy.

A delicate balanceHowever, freedom of speech has never

been a clear-cut issue in France. Hours

after 3.7 million French citizens took

to the streets to proclaim “je suis

Charlie”, the French comedian

Dieudonne M’bala M’bala wrote “I

feel like Charlie Coulibaly”. “Charlie

Coulibaly” is a mash-up that refers to

magazine Charlie Hebdo and Amedy

Coulibaly, the shooter who killed a

policewoman and died in a stand-off in

a Kosher supermarket.

He said the posting was meant to be

humorous. But in the context of his

past convictions for anti-Semitism, the

authorities saw it as a voice of support

for the gunman, and he is set to appear

in court in February, where he faces up

to seven years in jail and a fine of

€100,000.

Recognising serious cultural rifts

between children in heavily immigrant

communities and others, officials in

France have announced new measures

to reinforce secular values at French

schools. Ms. Vallaud-Belkacem,

French education minister, said that,

starting in September, a new program

of “moral and civic training” for

students would include lessons on how

to fight “any form of discrimination.”

This comes after many French teachers

have expressed their concern over their

student’s reactions to the killings.

Some students, particularly in heavily

immigrant communities, protested or

refused to be silent during the minute

of silence.Source: Charlie Hebdo

Politics

Source: http://static.businessinsider.com/image/54b2a1e869bedd6d4136bd2b/image.jpg

http://en.wikipedia.org/wiki/File:Charlie_in_Prague_Sophie_Knittel-4.jpg

France is one of Europe’s most diverse countries,

with approximately 20% of its population

consisting of foreign-born immigrants and their

direct descendants, which brings with it a

delicate balance. Freedom of speech is an

important feature of modern democracies, but

ensuring that everybody, regardless of

nationality, race or religion, is not unjustly

prejudiced is of equal importance. The Charlie

Hebdo attacks, and the resulting aftermath, show

that this balance needs to be maintained carefully.

Martin Wickens

Politics

Source: http://commons.wikimedia.org/wiki/File:Je_suis_Charlie.svg

Economics

Double Trouble for Iraq:

ISIL & OilWar-torn Iraq The Republic of Iraq was once a symbol

of power, stability and economic growth.

After the success of the Iranian revolution,

Iraq emerged as the world’s second-

largest oil exporter. From 1970 to 1980,

the Iraqi economy grew by a healthy

percentage of 11.7, thanks to the increase

in oil exports. Oil production was

approximately 3.5 million barrels per day

and oil revenues were 27 billion in 1980

due to record oil prices. Just before the

Iraq war, the economy had an estimated

35 billion in foreign exchange reserves

But today, Iraq paints a whole new picture

of itself. It is a country that has seen many

wars and experienced terror to the core.

2003 marked the beginning of the Iraq

War - the U.S. led invasion of Iraq, which

overthrew the government of Saddam

Hussein. The eight year long war

destroyed a large amount of Iraqi

infrastructure and weakened the political

stability of the country. After the Iraq War,

peace became a scarce word for Iraqis.

The Iraqi insurgency followed right after

the withdrawal of the U.S. troops in 2011,

as Sunni militant groups intensified

attacks on the country’s Shia population.

Today, the insurgency is far worse, with

the Islamic State in the Iraq and the

Levant (ISIL) taking over Mosul and

major areas in northern Iraq, threatening

peace and fuelling a deadly conflict.

ISIL is a Sunni extremist group that

promotes violence in the name of religion

and they have self-proclaimed themselves

as the Islamic State, under the leadership

of a worldwide caliphate, Abu Bakr al-

Baghdadi. Their rule on almost one-third

of Iraq has undoubtedly brought more

damage than benefit to the civilians and

Iraq’s economy. Numerous resources in

these areas have been channelled towards

funding ISIL’s war equipments instead of

improving the living standards of the

people.

The ISIL occupation of areas in Iraq has

had massive negative implications on the

country’s already weak financial system.

According to an economics expert, Ali al-

Sayhood al-Sudani, Iraq’s banking sector

is the “biggest loser” in the midst of this

ISIL crisis. Before the insurgency, the

Iraqi banking sector was already limited,

carrying out only basic functions of

trading currency from the Central Bank of

Iraq. Baghdad’s public policies mostly

focused on the development of public

sector banks, which resulted in them

being loaded with cash while private Iraqi

banks struggled to stay afloat. Now, with

Iraqi infrastructure and farms destroyed

on a large scale and 20 million Iraqis

displaced, debtors have become unable to

bear the burden of agricultural and real-

estate loans. As more and more loans are

written off as bad debts, several Iraqi

banks are heading fast towards

bankruptcy.

Mr Haider al-Abadi, Iraq’s Prime MinisterSource:

https://corpcommap.files.wordpress.com/2014/09/iraq_interview2.jpg

Moreover, Iraqi officials never passed a

budget for the fiscal year of 2014 due to

the stress over the ISIL insurgency and the

long-lasting disputes between the Sunnis

and the Kurds over oil management and

revenue sharing. The absence of a budget

is detrimental to any country, especially

one already plagued by war – Iraqi

investment projects have been blocked,

limiting development and forcing the

government to seek more foreign

investment to finance the country. But, the

current security conditions in Iraq are

pulling investors back as they fear for the

uncertainty involved with the returns on

their investment.

Economic growth figures since 2007

indicate that Iraq’s economic growth is

very sensitive to domestic security

conditions. The ensuing conflict with ISIL

has caused a significant decrease in the

economic growth outlook for Iraq. In

October 2014, the International Monetary

Fund (IMF) revised the predicted growth

rate of Iraq from 6.7 percent to a mere 1.5

percent this year.

Oil woes

If suffering the wrath of the terror group

of ISIL was not bad enough, Iraq’s

economy has also been severely affected

by the slump in the price of crude oil. Iraq

is currently the second largest OPEC

producer of crude oil and is expected to

contribute towards 60% of the cartel’s

total production until 2019 as shown in

Figure 1. balance its budget, which is a far

cry

One thing is clear: Iraq has an enormous

potential of being a leader in oil

production and supposedly earning

soaring revenues. But, falling oil prices

are increasingly clouding such a

possibility. At a recent press conference,

the Iraqi Prime Minister, Mr. Haider al-

Abadi expressed that Iraq’s economy and

budget has an 85 percent reliance on oil,

which has spelled disaster for the Middle-

East economy. Iraq is very vulnerable to

changes in oil prices and government

revenues have been reduced dramatically

as oil prices has fallen to just below $50

per barrel in 2014. As reported by the IMF

and Deutsche Bank, Iraq needs an oil price

of $101 per barrel to from the situation

now. Lower government revenues have

translated into lower public spending to

improve the living standards while

security expenditure continues to increase

in light of the ISIL conflict.

Iraq exported 91.141 million barrels of oil

in December 2014 (record high levels of

export in decades). However, the low oil

price added up to a revenue of $5.247

billion, much lower than the earlier

months of 2014. In November last year,

Iraq’s oil ministry reported more than 27

percent losses in revenue due to lower oil

prices.

The Islamic State jihadist group is said to

have worsened conditions by capturing oil

wells in northern Iraq and selling the oil

produced in the black market to fund their

reign of terror.

Time to get the act together

With the Islamic State spreading its wings

in Iraq and oil prices showing no

significant signs of recovery, Iraq’s

government needs to act fast to save the

economy from drowning in a fiscal and

financial crisis. The government has to be

prudent in reassessing its fiscal policies.

Iraq cannot afford another year without a

budget and its government is clearly aware

of this.

In December 2014, the Iraqi cabinet

reached a consensus on the 2015 budget

and submitted it to the parliament for

review. Iraq’s 2015 budget highlights a

large cut in government spending to

improve public finances - ministerial

salaries have been slashed by 50% and the

budget has been revised to account for the

lower oil prices. Under the leadership of

Mr Haider al-Abadi, the government has

also pledged to fight fraud and corruption

and extend support towards private sectors

of the economy, especially the private

banks.

Source:The Organisation for Economic Co-operation and Development (OECD) and the International Energy Agency (IEA), Oil Market ReportSource (right): Energy Intelligence Group, Bloomberg Finance L.P., Fidelity Investments, 2014.

Economics

With unemployment currently standing at

11%, the Iraqi government has also

expressed its aim of generating jobs by

expanding large and small businesses and

attracting foreign direct investment via

joint ventures with international firms. For

instance, Shell has recently signed a

contract with Iraq to build one of its

largest company in the republic.

There is also a dire need for Iraq to

diversify its economy and reduce its

dependence on oil exports. It is high time

Iraq regained its status as one of the most

diversified economies of OPEC. Mr al-

Abadi’s government seems to be on the

right track, increasing investment in

agriculture and the petrochemical industry.

On the whole, Iraq’s government seems to

have many promising plans of reviving the

ailing economy. However, they must

accelerate and maintain these fiscal

reforms should they wish to see a

significant improvement.

As for the fight against ISIL, Iraq has

received support from the West and Iran in

terms of defence and ammunition. The

battle against ISIL is no longer a

domesticated or regional issue, it has

become an international problem. A U.S.

sponsored international coalition was

formed in December last year to defeat

ISIL. The coalition, including a wide

range of countries, has committed to work

together under a multifaceted and long-

term strategy to destroy the Islamic State.

Hence, Iraq has to maintain its

international relations with neighbouring

countries and the West to reclaim the

governance of Iraq as a whole.

Looking ahead – Clouds of

uncertaintyAlthough steps are being taken to address

the issues faced by Iraq, it is uncertain

when the ISIL chapter will close and when

oil prices will heal, especially with Saudi

Arabia refusing to cut back supply. Iraq

was once the Cradle of Civilization in

Ancient Mesopotamia. Today, it has

become the centre of crisis with no clear

indication of the direction its economy is

heading. Whether or not Iraq revives itself

to become a strong economic nation

depends a lot on its government’s

diligence and commitment towards the

planned strategies of improving fiscal

policies. If conducted successfully, these

fiscal reforms may well open up a new

and positive horizon for Iraq,

economically, politically and socially.

Nareen Sidhu

ISIL militants march for a propaganda image of the groupSource: Abara Presss

Economics

The Deadweight Loss of the Oscars

Just as this issue of the Drayton Tribune is

released, the 87th Academy Awards will

have finished. On 22nd February, weeks

of speculation will have come to an end

but so will months of spending on

campaigning. One estimate suggests $100

million is spent altogether every year. The

average cost of winning a seat in the

House of Representatives in 2012 was

$1,689,580. By comparison, Sony planned

on spending $4.2 million on Captain

Philips for just the ‘Phase 1’ Oscar

campaign aimed at securing nominations.

Conservative estimates of campaign

spending per film hover around $5 million

but they can potentially be much higher.

2013 nominees Lincoln and Argo were

estimated to have spent at least $10

million alone on Oscar-targeted ‘For Your

Consideration’ adverts and other

marketing by one industry expert. Is this

vast amount of spending an efficient

allocation of resources?

One question at the heart of this topic is

whether big campaign spending helps win

awards. The short answer is that it helps

but does not guarantee anything. Harvey

Weinstein, considered by many to be the

most notorious and aggressive of

campaigners, commented in 2013, “I have

always said the most important thing is to

get people to see the films and everything

else is mostly fluff.” With this ethos at the

heart of campaigning, advertising and

marketing dominate the campaign budgets.

This is separate to the general advertising

aimed at everyday moviegoers; instead,

Oscar advertising focuses on Academy

members, featuring on Hollywood

billboards and industry websites and

publications. Stephen Follows, a writer

and producer based in Ealing Studios,

detailed in a blog post that four recent

‘Best Picture’ nominees (including two

from 2014) spent 53% of their total

campaign expenditure on advertising. On

average, this amounts to nearly $3.7

million. Similarly, another notable cost is

sending out DVD screeners to the

Academy members, which can potentially

be as high as $1 million.

Many would be inclined to think that this

is a wasteful endeavor, however, some

examples would suggest it is not. The

total cost of sending DVD screeners for

Crash, the 2005 ‘Best Picture’ winner,

was $250,000 but the move is regarded to

have helped get the Academy’s attention

and at least secure a nomination. At a

more expensive end of the spectrum,

Harvey Weinstein reportedly spent $15

million on promoting Shakespeare In Love

in 1998. In the end, the romantic-comedy-

drama pulled off one of the biggest upsets

in Oscar history as it beat Steven

Spielberg’s epic Saving Private Ryan to

‘Best Picture’. The data on campaign

spending, however, is highly limited and

as a result, it is difficult to determine

whether increased spending converts into

a hig her likelihood of winning.

Do Oscars translate into financial

wins?The Oscars clearly hold prestige but the

studios engaging in such expensive

campaigns must hope for a financial return.

There are varying degrees of conclusions

on whether the Oscars hold a quantifiable

benefit. A brief look at Figure 1 and 2 tells

us that the Oscars can arguably make a

difference. 12 Years A Slave, the 2014

‘Best Picture’ winner, made massive gains.

In the week following the announcement

of Oscar nominations, its weekly gross

increased nearly 4 fold, amounting to

roughly $2.4 million. The next week, it

rose to $2.88 million and in the two weeks

after its win, it made just over £4.5 million.

But not all ‘Best Picture’ winners

experience such a large change. Looking

at the ‘Best Picture’ winners from 2005 to

2014, 12 Years A Slave stands out in

experiencing such a big financial boost

relative to its previous trend.

In general, there are two observations that

seem convincing. The first is that both

nominations and wins tend to correlate

with increases in box office revenue. This

might suggest that such accolades do

attract people to the cinema, who perhaps

would not otherwise consider going. The

boost lasts for about two weeks, after

which weekly box office revenues appear

to return to their normal downward trend.

In many cases, however, the weekly gross

does continue to be higher than the

average in the weeks just preceding the

announcement of nominations.

Source: http://contently.com/strategist/wp-content/uploads/2014/03/oscars-1.jpg

Economics

Examples of ‘For Your Consideration’ adverts targeted at Academy members

Source: http://www.awardsdaily.com/FYC/gallery/

The second observation is that in the short

sample of data presented here, nominations

seem more valuable than wins. 12 Years A

Slave, Gravity (the biggest winner of 2014)

and Dallas Buyers Club (starring ‘Best

Actor’ winner Matthew McConaughey)

experienced far bigger increases in their

weekly gross figures post-nominations

compared to post-ceremony. The same trend

is more starkly visible in 2013 [see Figures 4

and 5] where only two films, Life of Pi and

Beasts of the Southern Wild, experienced a

gain. The former was the biggest winner of

the night with four awards, including ‘Best

Director’.

One factor worth stressing is that the

announcement of Oscar nominations tends to

be within few days of the Golden Globes,

the Critics Choice Awards and the Screen

Actors Guild Awards. Oscar contenders

feature prominently in these preceding

shows and so undoubtedly benefit from the

exposure. This complicates distinguishing

the causal link between Oscar nominations

and increased revenue.

A study conducted in 2001 by economists at

Colby College, argued that winning was far

more valuable than a nomination.

Comparing 131 nominated films against a

control of 131 non-nominated films, the

study found that a ‘Best Actor/Actress’

nomination’ increased expected average

revenues by 42.52% on average in the six

weeks following the nomination whereas

winning resulted in a 170.18% increase in

the four weeks after the ceremony; the

corresponding figures for ‘Best Picture’ was

98.85% and 245.23% respectively. This

study did, however, use box office data from

1978 to 1987 that may not be representative

of current trends.

Another more recent assessment of the value

of the Oscars by data analyst Edmund

Helmer suggests that the biggest benefits are

reaped in the weeks leading up to the

ceremony. This is reflected in the total

weekly gross figures before and after the

Oscars [shown in Figure 6]. Helmer has also

found that Golden Globes success is

financially more valuable than an Oscar win;

Golden Globes boost box office earnings by

$14.2 million per film on average whereas

Oscars only results in a $3 million increase.

Pursuing the Oscars does not appear to be a

venture without any reward. Figure 6

indicates that Academy Award winners

gross more revenue after the ceremony than

unsuccessful nominees. However, it would

seem that particularly for films with less

obvious mainstream appeal, perhaps with an

unknown cast and dealing with more serious

or obscure subject matter, recognition from

the Academy is especially beneficial. Beasts

of the Southern Wild was made on a modest

budget of $1.8 million. The film had stopped

being screened in US cinemas by mid-

November but returned after nominations

were announced and added nearly $1.55

million to its total domestic gross. Slumdog

Millionaire in 2008, with a cast and story

unfamiliar to American audiences, garnered

$96 million after its nominations. Films with

big credentials, either directorial or acting,

are more likely to have found box office

success regardless of the Oscars. The same is

unlikely to be true for smaller films.

Harvey WeinsteinSource:

http://www.digitalspy.co.uk/movies/news/a519503/harvey-

weinstein-oscars-2014-race-the-most-competitive-ive-

seen.html#~p38SVYDUEekHgJ

Economics

-100

0

100

200

300

400

500

1 week after nomination

announcement

2nd week after nominations

announcement

3rd week after nomination

announcement

% c

hange in w

eekly

US g

ross

revenue

12 Years A Slave (winner)

Gravity

American Hustle

Captain Philips

Dallas Buyers Club

Her

Nebraska

The Wolf of Wall Street

Philomena

-80

-60

-40

-20

0

20

40

60

80

100

120

Week of Oscars ceremony 1 week after Oscars

ceremony

2nd week after Oscars

ceremony

% c

hange in w

eekly

US g

ross

revenue

12 Years A Slave (winner)

Gravity

American Hustle

Captain Philips (no longer screening)

Dallas Buyers Club

Her

Nebraska

The Wolf of Wall Street

Philomena

Source: http://www.boxofficemojo.com/

Source: http://www.boxofficemojo.com/

Economics

-80

-60

-40

-20

0

20

40

60

80

100

120

Week of Oscars ceremony 1 week after Oscars

ceremony

2nd week after Oscars

ceremony

% c

hange in w

eekly

US g

ross

revenue

12 Years A Slave

Argo

The Artist

The King's Speech

The Hurt Locker

Slumdog Millionaire

No Country For Old Man

The Departed

Crash

Million Dollar Baby

-500

0

500

1000

1500

2000

2500

1 week after nomination

announcement

2nd week after nominations

announcement

3rd week after nomination

announcement

% c

hange in w

eekly

US g

ross

revenue

Argo (winner)

Silver Linings Playbook

Amour

Django Unchained

Zero Dark Thirty

Lincoln

Life of Pi

Les Misérables

Beasts of the Southern Wild

Source: http://www.boxofficemojo.com/

Source: http://www.boxofficemojo.com/

Economics

-70

-60

-50

-40

-30

-20

-10

0

10

20

Week of Oscars ceremony 1 week after Oscars

ceremony

2nd week after Oscars

ceremony

% c

hange in w

eekly

US g

ross

revenue

Argo (winner)

Silver Linings Playbook

Amour

Django Unchained

Zero Dark Thirty

Lincoln

Life of Pi

Les Misérables

Beasts of the Southern Wild

Source: http://www.boxofficemojo.com/

Source: http://boxofficequant.com/the-value-of-an-oscar/

Economics

Two researchers at University of

California Los Angeles (UCLA), Gabriel

Rossman and Oliver Schilke, published an

article on the rewards to prize-seeking in

2014. Studying data from 1985 to 2010,

they found a “bimodal reward structure”

for the Oscars whereby “winning a prize is

valuable but pursuing it is costly”.

Rossman and Schilke were looking at the

returns to films with “Oscar appeal” -

films aimed to cater to the Academy

voters. In producing films with Oscar

appeal there is a trade-off with the tastes

of the mass audience. In consequence, the

films with Oscar appeal that fail to get

nominations tend to lose money whereas

those that are successful experience

substantial rewards. In light of this

understanding, campaigning acquires a

new importance because there is the risk

that failure to secure a nomination can

lead to a financial loss.

So, is there a Deadweight Loss?Campaigning for the Oscars may be

viewed akin to rent-seeking attempts by

lobbyists. Individuals or groups lobby the

government to try to get privileges for

themselves, which usually create

inefficiencies. For instance, consider the

imposition of tariffs on agricultural goods

to appease domestic farmers. Rent-seeking

in this case inflicts a deadweight loss on

society since consumers pay higher prices

and demand a lower quantity. Gordon

Tullock introduced the insight that the cost

of lobbying must be subtracted from

whatever private gain is attained by

successful lobbyists. Moreover, the cost of

lobbying represents a social loss to society

since those resources could have been

directed in a more productive manner that

benefitted society.

It seems unlikely that the awarding of

Oscars in itself imposes a deadweight loss

in the manner akin to a tariff imposition; it

does not introduce a significant

inefficiency in the market. University of

Chicago economist Matthew Gentzkow,

Clark Medal winner of 2014, has been

writing about media communication and

creation of brand loyalty. The Oscars are

an example of certification and super

branding.

Rossman and Schilke’s research might be

used to argue that if the Oscars act as a

signal, enticing the mass audience to

watch films they otherwise would not,

then it might do so at the detriment of

other equally formidable, alike films. They

provide the example of two similar films,

which were cited as potential contenders

for the 2006 Oscars: Brokeback Mountain

and The Three Burials of Melquiades

Estrada. The two had drastically diverging

fates as the former received eight

nominations and racked up $83 million at

the US box office and the former got no

nominations and made a mere $9 million.

The Oscars may support an uneven ground

for competition but Rossman and Schilke

also suggest that the Oscars promote

heterogeneity in films. They present a

reward to deviating from the mass-appeal

norms and encourage studios to back more

original and creative, albeit risky,

filmmaking. For the consumer, there is

more choice. In that respect, there might

even be a positive social contribution.

So where, if at all, does the Oscars inflict a

deadweight loss? A deadweight loss arises

if the total cost of the campaigns exceeds

the total benefits. Let us assume that

altogether $100 million is indeed spent

every year on campaigning. A student

research report at the New York

University Stern School of Business found

the median rate of return from studio films

was 27%. Since the studios dominate the

award season, the opportunity cost for the

$100 million is $27 million, making the

total cost of the campaigns $127 million.

Based on analysis by Edmund Helmer, the

total estimated gain of winning at the

Oscars, counting most categories, is

roughly $90.9 million. Here, we lack data

on the total estimated gains from

nominations but given that nominations

seem to be more valuable, it is not a

stretch to imagine they may generate an

extra $36.1 million. These calculations are

a crude estimate but perhaps, if the costs

are matched by the benefits, there is not a

deadweight loss.

In all of the analysis, a major underlying

problem is that it is almost impossible to

know how films would have performed

had they not received the nominations and

wins. Game theory, in particular The

Prisoners’ Dilemma, suggests that if all

the major studios now spend heavily in

campaigns, then they neutralise each

others efforts; they end up at the same

level playing field as they would be with

much lower expenditure. In that sense, the

studios are overspending. This is a

deadweight loss because if the studios had

spent less, they would be better off and

funds could be freed up for filmmakers -

all parties gain.

Many people will also feel it is not just

about efficiency but also equity. In the

recessions following the financial crisis,

arts funding in many countries have taken

big cuts. It is possible to distribute the

$100 million in a manner that might

benefit a far wider section of society rather

than a small and already rich Hollywood

elite. One might argue that the campaign

spending makes a contribution to the LA

economy. A report found that the 2013

Academy Awards created “at least $67

million in immediate, identifiable benefits

to Los Angeles County”. But $26 million

was spent by the Academy and another

major chunk, $30 million, is accounted for

as multiplier effects. PR consultants,

hotels, limousine and car rentals, and

spending on wardrobe will all receive a

boost due to spending by the studios in the

Oscar season but these form a smaller

contribution to the LA economy. For

example, wardrobe and limousine rentals

amounted to only 6% of the total

economic benefit.

It seems hard to believe that there is not a

degree of wasteful spending in current

campaigns. The lack of concrete data on

the budgets make it difficult to discern.

Given that there are gains to be made from

seeking the Oscars, it seems unlikely that

there will be a reversal in the campaign

trends. Perhaps predictably, money will

maintain its indomitable presence in

Hollywood.

Shreyosi Saha

Economics

Social enterprises:

a driver for growthDivine Chocolate, TOMS Shoes, and a

Jamie Oliver restaurant. What do these

things have in common? They are all social

enterprises.

A new type of businessA social enterprise is a business that does

not prioritise profit, but uses business

methods to tackle problems in society.

They serve people and communities, and

their primary goal is to improve lives or

increase environmental sustainability.

However, they also need to make a profit to

survive, which differentiates them from

charities.

In the past several years, there has been a

growing interest in social enterprise, with

an increasing number of entrepreneurs are

choosing this industry over public or other

private sector jobs. In fact, 35% of the

owners and founders are formerly from the

private sector. This says a lot about

people’s motivations and a desire for

change in how business operate.

The government is also starting to look

beyond the traditional public and private

sectors to drive growth. In 2013, social

enterprises outperformed the private sector;

compared to 29% of small and medium

enterprises (SMEs), 38% of social

enterprises surveyed reported an increase in

turnover. There are over 70,000 social

enterprises in the UK, and data shows that

the number of these businesses has grown

form 5,300 in five-year period. They

contribute at least £24 billion to the

economy and employ a million people.

One of the reasons that social enterprises

are thriving may be the past economic

downturn. Social entrepreneurs see

opportunities in the gaps left by market and

government failures, and they create new

ways to rebuild the economy with

sustainability at its core. It’s a win-win

situation because these businesses create

growth that combines business with social

opportunity.

ImpactSocial enterprises are changing not only

how we do business, but also who does

business. They are much more diverse than

traditional firms. For example, 38% have

female chief executives, compared to 19%

of SMEs and 3% of FTSE 100 companies.

They are also twice as likely as mainstream

SMEs to be led by somebody from an

ethnic minority.

Many businesses nowadays wish to set up

away from dense urban areas, which

compounds the problems for communities

in deprived inner cities where a

disproportionate number of unemployed

live. Conversely, many social enterprises

deliberately choose to locate in a

challenging area, and are three times more

likely than their private sector equivalents

to be based where there is high

unemployment. 38% operate in deprived

communities in England and more than half

employ disadvantaged workers who

struggle to find a mainstream job.

Moreover, relative to private firms of a

similar size, social enterprises employ more

people. They often have a core mission to

tackle unemployment, and are usually the

best at understanding the complex needs of

people struggling to find work. Social

enterprises have a strong track record for

not only employing the disadvantaged, but

also helping them gain the skills they need

to find a stable job.

Social enterprise has the potential to make

big changes, because when the markets

shift, big corporates shift along with them.

Several big businesses are measuring their

social impact, working closely with social

enterprises in their supply chains or setting

up social investment funds. In fact, the

Social Value Act has been taken up by

more businesses than has been by public

sector commissions in the UK. Corporates

and social enterprises are not mutually

exclusive; if these enterprises can

demonstrate that their innovative model

works, others may follow. For example, the

Royal Bank of Scotland has an Inspiring

Enterprise programme, where the

Community Banking Team provides

dedicated support for the social enterprise

sector. Additionally, PwC has created The

Fire Station, a social enterprise hub that

partners with large organisations such as

the UK Government Homes and

Communities Agency and the Beyond

Food Foundation.

Source: http://www.cirqueducabaret.com/wordpress/wp-content/uploads/2012/02/Hearts-group_Large.jpg

Economics

Student actionThis interest in socially aware business

has spread to universities as well, with

organisations such as Enactus aiming to

enable progress and empower people

through entrepreneurial action.

A great example of the impact that

students can have through social

entrepreneurship is the ‘Beevelop’

programme of Nottingham University. It

was first set up by Enactus students in

2006, helping ten families in a small

Ghanaian village establish their own

beekeeping business. The families were

given extensive business training and

started with ten beehives each, which was

used to increase their annual incomes by

80%. Seeing the success of the

programme, the Enactus team expanded

the scope of the project to help families

throughout Ghana. They provided more

than 65 beekeeping cooperatives with

training and found solutions to business

problems the beekeepers had been having,

such as low productivity or poor access to

markets. The Enactus team also taught the

beekeepers to convert the leftover

beeswax to make scented candles instead

of throwing it away, creating a new

income stream at a minimal cost. In a

year, the student led team was able to

reach out to thousands of beekeepers and

empower their communities, transforming

the lives of many.

The FutureSocial enterprises have the potential to

impact how markets and businesses work,

but we must take care to ensure that it is

not treated as a passing fad. Lulu Toledo,

a UCL masters student in social

entrepreneurship, says that there is a

danger that social enterprises will follow

the same route as international

development – highly popular and

optimistic for several years, but fizzling

out when difficulties arise. Social

enterprise might be all about striving for

sustainability, but like any other business,

finance and funding are the biggest

impediments to growth. Donors are still

needed to improve training and boost

market exposure. Incubation programmes

and technical assistance can go a long way

in helping them attract private

investment.

There is also a genuine need for

collaboration across sectors – the

government, private sector, entrepreneurs,

philanthropists and NGOs can all make

the case for social enterprise.

Governments and international

organisations, although late to the party,

still have a huge role to play since they are

the largest buyers of social investment.

Nevertheless, the outlook looks very

positive for social enterprises, especially

since change occurs from the bottom up.

An increasing number of people are

realising that they can make a real impact,

which is perhaps the most promising idea

of all.

Kiuree Kim

Source: http://sites.psu.edu/jillleap/wp-content/uploads/sites/13714/2

014/07/toms-logo.jpg

Source: http://uclu.org/sites/uclu.org/files/styles/large/public/fifteen.png?itok=qTXfTLvZ

Economics

The Eurasian Economic UnionA future leader or yet another

victim of the free trade?

Brief overview and background Widely seen as an attempt to restore the

Soviet Union, the Eurasian Economic

Union (EEU) formally came into force on

1 January 2015, marking the beginning of

the year. The EEU is an economic and

political bloc that includes Russia,

Belarus, Kazakhstan and Armenia - a

powerful trio with an estimated population

of 173 million, combined GDP of 2.7

trillion dollars and 15 percent of the world

oil reserves that is to become either a

future economic dragon or a victim of the

free trade. The three founding countries

(Russia, Belarus and Kazakhstan) have

been part of the Eurasian customs union

since it was formed in 2010. As such, the

EEU can be seen as a further step in the

integration of the former Soviet empire

into a common political union arguably

seen as the final stage in any economic

integration. Indeed, the EEU implies the

free movement of goods, capital and

labour among its members, therefore

transforming the former customs union

into a common market. Furthermore, the

EEU aims at creating a common

pharmaceutical market by 2016, a

common electricity market by 2019 and,

more importantly, a new common

currency by 2025. However will such

high expectations ever be justified?

Undoubtedly, more attention needs to be

paid to this historic event that will matter

on the world stage.

The EEU’s structureSimilar to the EU, the EEU has a formal

structure with financial, political and

economic departments. It consists of the

Eurasian Economic Commission, a

Moscow-based executive body that is in

charge of the trade relations with third-

world countries and the World Trade

Organisation; the Court of the EEU, a

judiciary body, based in Minsk, and the

Eurasian Development bank based in

Almaty. The decision-making process of

the EEU is outlined in Figure 1.

Source: http://112.ua/mir/nachal-deystvovat-evraziyskiy-ekonomicheskiy-soyuz-obedinyayuschiy-rossiyu-belorussiyu-i-kazahstan-168937.html

[Figure 1]Source: http://en.wikipedia.org/wiki/Eurasian_Economic_Union

Economics

However, there is a crucial difference

between the formation of the EU and the

EEU: the conditions for membership; it is

widely known that countries wanting to

join the EU must meet certain

requirements, such as a well-functioning

economy, well-established democracy and

the rule of law. In contrast, the EEU does

not have such requirements, leading to

countries with an absence of the price

stability, contrasting a well-functioning

economy, joining the union. For example,

Belarus has seen an inflation rate of more

than 20 percent over the past years,

despite the target of 12 percent. Likewise,

Kazakhstan’s attempt to retain the

competitiveness of its domestic companies

through the 19 percent devaluation of its

currency in February 2014 led to pressures

on its then already high inflation rate. The

economic situation in Armenia does not

look promising either; the country’s

economy has been weakened by the

ongoing conflict with Azerbaijan over

Nagorno-Karabakh that is far from being

fully resolved. The resulting blockade

along the Azerbaijan and Turkish borders

has led to the isolation of Armenia’s

economy and contributed to its

dependence on Russia. Similarly, it should

not be forgotten that Armenia does not

share the borders with any of the members

of the EEU and this may cause problems.

Indeed, the potential gains of a free trade

agreement are likely to be higher the

closer in distance the trading partners are.

The purpose of the EEU

Generally, a trading bloc is viewed in

terms of the potential economic gains. For

now it would appear that the EEU is an

exception. What is the purpose behind the

Putin’s idea introduced in 2011? It can

potentially be seen as an attempt to rebuild

the Soviet Union, and hence be viewed as

a political bloc rather than a trading

association. More broadly, the EEU can be

seen as an attempt to boost the Russian

influence in the region and to retain

Russian global influence that has been

severely threatened following the Russian-

Ukrainian conflict. Therefore, the purpose

of a trading bloc may justify the different

conditions for membership between the

EU and EEU - different aims require

different approaches. It comes as no

surprise that Russia is ready to give up

economic stability by forming a bloc with

relatively weak and unstable economies in

order to gain political success and prevent

its neighbors from joining the EU – a wise

strategic choice during its political

isolation. Indeed, political gains from

trade may reduce the likelihood of

international hostility towards Russia.

Therefore, the EEU may be viewed as an

example of the ‘political’ free trade

agreement primarily signed for political,

rather than economic reasons. Countries

that have experienced an interest in

joining the EEU, such as Kirgizstan and

Tajikistan, are the members of the former

USSR. In such instance, this economic

union has a great chance of becoming a

political union; it just needs the right

direction. However, the EEU has a greater

chance of achieving the desirable outcome

if the benefits of the EEU agreement are

shared equally among the members.

Gainers and losers

Furthermore, it is worth asking whether

the benefits of the EEU membership

would be equally spread among the

members. At first sight, the benefits to

Belarus, Kazakhstan and Armenia are

clear - from gas and oil subsidies to

financial aid. However, some may

question the ability of the Russian

economy to provide such financial

benefits to its neighboring countries in the

light of the sharp fall in crude oil prices.

Indeed, this is a dramatic shock to the

Russian economy, which is highly

dependent on the oil revenues and,

therefore, is on the edge of recession.

Furthermore, Belarus is the only country

in the former USSR that trades more with

Russia than with the EU or China,

according to historical calculations; as

such, the Belarusian economy has a higher

dependence on Russia relative to the other

countries. However, this is not true for

Kazakhstan and Armenia who have

stronger commercial links with the EU

market. It is believed that since the

formation of the Eurasian customs union

in 2010 the only country that has benefited

has been Belarus. Indeed, Kazakhstan has

its own strong economy rich in oil

reserves. How does one know that the

EEU could not generate the same outcome

again with Belarus being a single winner

from yet another Eurasian trade agreement?

There is not enough evidence to suggest

that the same cannot happen this time.

Indeed, ‘the importance of being

unimportant’ phenomenon used in

international economics states that the

relative size of a country may play a role

in determining the gains from trade. When

big countries, such as Russia and

Kazakhstan, trade with relatively small

countries, such as Belarus and Armenia,

the latter are likely to enjoy most of the

gains. However, this would also mean that

Russian economic problems, such as the

falling rouble and oil prices, will quickly

spread across the other member states. The

EEU agreement would exacerbate the

impact of the anticipated recession in

Russia. Indeed, Belarus has already

experienced it with its rising inflation,

falling exports to the Russian market and

depreciation of the domestic currency. The

Belarusian currency has lost half of its

value since the start of 2014 following the

depreciation of the Russian rouble, since

the Belarusian economy is very dependent

on its neighbour. This resulted in the 30

percent duty on buying foreign currency

(known as the Tobin tax) introduced on 19

December 2014 and a rise in the interest

rate to 50 percent. Similarly, the

government forced exporters to convert

half of their revenue into the Belarusian

currency in attempts to protect domestic

currency. Nevertheless, this did not help

prevent an increase in the price of imports

and inflation. Unsurprisingly, this has

spread the hyperinflation panic following

the past experience of high inflationary

pressures with price levels reaching 192

percent in 1992 and another shocking 110

percent in 2010. The historically high

inflation can be witnessed on the

Belarusian national currency – with 4

pounds being equivalent to 100,000

Belarusian roubles now, compared to 100

Belarusian roubles a few years ago. This

has caused a collapse of the domestic

producers who rely on imported factors of

production leading to a distortion in the

functioning of the economy. It is already

evident that a few businesses have left the

market in Belarus, thereby reducing the

product range and resulting in the failure

of the market mechanism as consumers’

wants are hardly satisfied in the troubled

economy.

Free Trade Theories

According to the Similarity of Preferences

Theory, the main purpose of free trade is

to meet the tastes of consumers who prefer

products with different characteristics.

Economics

Therefore, the source of a comparative

advantage is on the demand side of a

given country, not the supply side as the

majority of the classic trade theories

predict. Consequently, countries with

similar lifestyles would aim at trading

with each other as they tend to consume

similar types of goods. This is exactly

what we see in case of the EEU – its

members have similar cultures and ways

of living and are hence able to meet the

tastes of consumers, which are alike

among their nations, through the free

trade. However, as seen earlier, an

increased dependence on the Russian

economy as a consequence of the EEU

agreement may prevent the Similarity of

Preferences Theory to hold; for example,

the consumers’ choice in Belarus has

declined over the recent weeks. This

suggests that free trade agreements may

not achieve the desirable outcome at least

in the short term.

What other reasons are there for the

possible failures of free trade agreements?

The answer is simple – incomplete

specialisation, which occurs if, after the

trade liberalisation has taken place, a

country continues to produce some of the

goods it imports. One would especially

expect the incomplete specialisation to

take place between economies of very

different sizes such as Russia and Belarus.

This is a feature of the Heckscher-Ohlin

model under which free trade takes place

between the goods that use the abundant

factors of production. In contrast to the

classical trade theory, the Heckscher-

Ohlin model states that each country will

still continue to produce goods that are

provided by both domestic and importing

countries, as well as the goods produced

only domestically. This would result in the

factor-price equalisation, which states that

identical prices of the factors of

production in the countries engaged in a

free trade agreement lead to equalised

prices of the domestic and imported goods

in the long run.

Indeed, this happens as a result of the

similar technologies and equally

productive workers, which earn the same

wage, being used in the production of

similar goods. This holds, to be exact,

only under the assumptions of the

Heckscher-Ohlin model (no barriers to

trade and access to identical technologies).

However, one can argue that neither of the

assumptions is perfectly satisfied in the

real world meaning that we should not

expect this theory to hold.

Free Trade as an engine of

economic growthThere is no surprise that yet another free

trade agreement came into force given an

ever increasing globalisation and growing

dependence of the world economies on its

neighbors in recent decades. Free trade is

often seen as an engine of economic

growth. Indeed, existing empirical studies

have showed the positive correlation

between an individual country’s growth

rate and the degree of trade openness.

Firstly, trade between the EEU countries is

likely to be pro-competitive; greater

pressure of competition will make firms

more efficient and innovative leading to

an expansion in the productive potential

and potentially Pareto optimal allocation

according to the famous Schumpeterian

creative destruction. Secondly, free trade

is directly related to better standards of

living through lower unemployment rates

(with higher trade volumes) and, as such,

higher spending by consumers that has an

impact on the short-run economic growth.

Thirdly, countries that engage in the free

trade may share technological and

knowledge advances with each other that

would allow greater efficiency in the

longer run. In case of the common market

with free movement of labour, this would

be an easy aim to achieve. Finally, the

economic growth increases simply

because the volume of trade rises with the

trade liberalisation. This may bring the so-

called linkage effects that arise from the

benefits exploited by the industries when a

particular sector of an economy expands.

For instance, consider an expansion of the

Belarusian production of tractors (one of

the main sources of exports) due to

liberalising trade with the EEU members;

this could encourage the development of

the infrastructure and telecommunications.

Consequently, this improved infrastructure

would lower the costs of transportation for

other industries in Belarus, further

contributing to the economic growth.

However, economists have so far not been

able to reach a consensus over the relation

between growth rates and trade openness.

The endogenous growth theory provides

quite an opposite argument – the long-run

economic growth is created and sustained

from within the country, rather than from

trade. For instance, this can come from an

improvement in the human capital of a

given country that is a result of an internal

process, such as public policies. Arguably,

a common market on its own is not likely

to succeed –it needs to be accompanied

with government reforms, such as

deregulation of businesses, investments

into human and physical capital and

improved rule of law aimed at overcoming

weaknesses of political legitimacy.

Otherwise, free trade may not be

associated with the desirable long-run

economic growth in the EEU. Indeed, the

famous Bhagwati-Ramaswami analysis

argued that free trade had a chance to

become a sustainable policy if used in

conjunction with a proper domestic policy

addressed to solve the domestic market

distortions that may threaten the success

of the free trade. Consider, for instance, an

inadequate environmental policy that leads

to the trade liberalisation being an

unsustainable policy. However, the market

failure that arises is a result of the

government failure, not free trade in the

first place.

4 pounds nowSource: www.world-banknotes.ru

4 pounds a few years agoSource: www.belarusguide.com/images/money/100BR_f.jpg

Economics

This is in line with Paul Krugman’s

argument that successful government

policy can be a source of a sustainable

comparative advantage in itself that can

prevent the failure of the free trade. Indeed,

Paul Krugman argues that ‘If governments

maximized the welfare of their citizens,

prospective moves toward regional free

trade would almost surely do more good

than harm to the members of the free trade

areas’.

The future of the EEU

Does the EEU have a future? This is a

tough question to consider. Given that the

structure of the union has been based on

the structure of the EU, one may find it

helpful to consider what has happened to

the EU. Yet, with deflationary pressures,

unbalanced economies and austerity

measures in a few countries in the EU, the

future of the EEU looks less promising

even if it adopts a common currency by

2025. However, it would be too simplistic

to believe that the future of the EEU will

be similar to what happens to the EU now.

Furthermore, the EEU includes only four

countries, whilst the EU – 28 member

states. What if the growing imbalances

between the southern periphery and

countries, such as Germany, have been

caused by the ‘diseconomies of scale’, in

other words too many members joining

the EU, resulting in diminishing marginal

returns of each additional member?

This may be because it is arguably more

difficult to monitor 28 different countries

that are different from each other than the

inner six founding countries of the EU. It

is important to identify the point when

allowing additional members to join will

lead to the diminishing returns and falling

benefits of the free trade cooperation.

However, one may question whether any

country would ever like to join the EEU

with a clear winner and dominance of

Russia – Tajikistan has so far been the

only potential member with the exception

of Kirgizstan that has already signed an

agreement to join by May 2015.

Ultimately, the EEU is a unique

association not just in terms of the

political purpose, which seems to be a

driving force behind it, but also, more

crucially, in terms of the significant

structural changes that are needed to

overcome its weak institutional framework.

There should be no doubt that this

economic union will be followed by a

political union in the longer run, sooner

than any other existing association can

expect this to happen, due to its ambitious

goals that are justified by a common

language, the same mentality, shared

culture and the sense of unity it creates for

the former USSR countries.

Anastasia Yermakova

Source: http://expert.ru/data/public/480764/480772/912-evr.jpg From left to right: Alexander Lukashenko, Vladimir Putin and Nursultan Nazarbayev

Emblem of the Eurasian Economic UnionSource: http://www.tsouz.ru/SiteCollectionImages/LogoEVRAZES.jpg

Flag of the Eurasian Economic UnionSource: http://yeurasia.org/wp-content/uploads/2013/07.jpg

Economics

Which Country has bled the most?News regarding the fall in oil prices has

for months been plastered over the media.

So much so that talking about what is

happening in the financial world without

mentioning ‘oil’ poses some difficulty.

The effects of low oil prices are not only

impacting the plans and budget sheets of

oil companies, but it is also leaving its

mark on the finances of various countries.

This report will focus on what influences

the price drop has had on an array of

countries.

Beginning with the OPEC countries, we

see exactly how contrasting the situations

are. For example, it would be perfectly

acceptable to assume that low oil prices

would automatically result in these

countries suffering from dire conditions.

However, a country such as Saudi Arabia

can indeed survive a period of cheaper oil

and this is because of its impressive

savings when prices were around the $100

mark. And whilst not ideal, in the short

run, Saudi Arabia may be able to sustain a

budget deficit. This is perhaps why the

country and its leaders are not feeling the

need to cut production in order to achieve

a stable price. Unfortunately, this does not

reflect the situation in Venezuela. The

debt-ridden country, unlike Saudi Arabia,

does not have the luxury of being able to

survive in such an environment.

Calculations by Deutsche Bank reveal that

in order for Venezuela to balance its

budget, a price of $120 per barrel is what

is required [1].

More so, Venezuela’s role in providing oil

to the Caribbean may mean that those

involved in the programme will be forced

to share the troubles of Venezuela.

PetroCaribe, set up by former Venezuelan

President, Hugo Chávez, is an energy

programme, which helped countries in the

Caribbean purchase Venezuelan Oil by

providing them with low interest loans. It

is estimated that the cost of this scheme to

the Venezuelan Government is in excess

of $2 billion a year. As a result of the

fallen oil prices, this scheme may now be

unsustainable for Venezuela, meaning that

it could soon be terminated, leading to the

spreading of woes across the Caribbean.

The contract of the agreement states that

Venezuela holds the right to cancel its

arrangement by giving notice of only 30

days, and these terms are not something

that will ease the worries of the countries

on the other side of the deal [2]. These

problems have presented an opportunity

for the United States to benefit at

Venezuela’s expense. The U.S. hopes to

take the baton away from Venezuela and

begin exporting oil to the Caribbean. Peter

Schechter was quoted saying, “We don’t

want our closest neighbours in the

Caribbean to suddenly be surprised by a

situation in which Venezuela is suddenly

unable to provide oil”, and so it does come

across that the U.S. is acting in the best

interests of the Caribbean, even if it does

mean making the PetroCaribe scheme

redundant.

Shifting focus to Iran, we find some rather

contradicting messages. For example, the

Deputy Foreign Minister of Iran, Hossein

Amir Abdollahian, said in regards to Saudi

Arabia’s attitude to not influence oil prices

that “If Saudi does not help prevent the

decrease in oil price…this is a serious

mistake that will have a negative result on

all countries in the region” [3]. A report by

the International Monetary Fund found

that for Iran to balance their budget, an oil

price of $136 is required [4]. A staggering

amount considering where the price lies at

the moment and with OPEC choosing not

to actively influence prices by cutting

output. So far, the picture does not seem

pretty. However, Iranian Oil Minister

Bijan Zanganeh stated that, “Even if the

oil price goes down to $25 a barrel, the oil

industry will not be threatened” [5].

http://theenergycollective.com/sites/theenergycollective.com/files/imagepicker/488516/falling%20oil%20prices.jpg

Economics

The two largest importers of oil are the

United States and China, and with low oil

prices both these countries are likely to

benefit, as their imports are now cheaper. In

regards to China, it is said that the country

would save over $2 billion annually for

every dollar drop in the price of oil. The

fact that the United States is also a producer

of oil may mean that their benefits are

outweighed by China’s. Coming back to

China, it seems as though they are making

the best of the current situation. Research

by Citibank found that China are planning

to open new storage facilities across the

country, which will allow them to

significantly boost their holdings of oil,

suggesting that China is keeping oil in its

reserves for a rainy day. And the conclusion

by the analysts at Citibank certainly

supports this idea “With the combination of

dramatically lower prices and the opening

of new coastal storage tanks, [we are] likely

to see strong stockpiling” [6].

Russia is no doubt going through a

tumultuous period with sanctions being

imposed from the left, right and centre, and

their situation is made even direr due to the

low oil prices. Russia is expected to lose

around $2 billion for every dollar drop in

the price of oil - as mentioned earlier, this is

roughly the same amount China saves for a

$ drop. The oil price situation is also

influencing their policy decisions, and just

recently they decided to cut their interest

rate from 17 per cent to 15 per cent (just

months after increasing it to 17 per cent

from 10.5 per cent) [7].

Whilst Russia doesn’t need a price of $136

to balance the books like Iran, they do

require a price of $100 per barrel, which,

without action, seems like a while away.

The International Monetary Fund has said

that they expect Russia to be in a recession

during 2015 and expected a 3% contraction

in growth this year. All these factors

combined seemed to have contributed to

Russia’s credit rating being slashed to

‘Junk’ by Standard and Poor (S&P), the

ratings agency [8], which means that the

price of borrowing for Russia has just shot

up.

It is quite clear that Oil has a significant

influence on individuals, companies, and

countries. And whilst the positive and

negative effects are split across the globe,

perhaps the only constant is that as the

lower oil prices are factored into everyday

goods, consumers across the world will be

better off. However, this article does not

report on the inevitable negative

consequences that lower oil prices are

having on oil companies, and that is why

the ‘perhaps’ appears in the previous

sentence. This development in oil prices

means lower revenues and profits for the

companies involved in the business, which

may threaten the financing of various oil

projects [9].

In the long run, if these projects do not

receive the green light, the supply of oil

may fall and that is when consumers may

begin to feel the pain.

Zaim Beekawa

References

[1] - (2014). Cheaper oil: Winners and Losers. Available: http://www.economist.com/news/international/21627642-america-and-its-friends-benefit-falling-oil-prices-its-most-strident-critics. Last accessed 7th Feb 2015.

[2] - Cunningham, N. (2015). U.S. Pushes Energy Exports to Undermine Venezuela.Available: http://oilprice.com/Energy/Crude-Oil/U.S.-Pushes-Energy-Exports-to-Undermine-Venezuela.html. Last accessed 7th Feb 2015.

[3] - MOGHTADER, M. (2015). Iran says Saudi Arabia should move to curb oil price fall. Available: http://www.reuters.com/article/2015/01/01/us-iran-saudi-idUSKBN0KA1OP20150101. Last accessed 7th Feb 2015.

[4] - Bowler, T. (2015). Falling oil prices: Who are the winners and losers?. Available: http://www.bbc.co.uk/news/business-29643612. Last accessed 7th Feb 2015.

[5] - MOGHTADER, M. (2015). Iran sees no OPEC shift toward a cut, says oil industry could withstand $25 crude. Available: http://www.reuters.com/article/2015/01/19/us-iran-oil-idUSKBN0KS1A120150119. Last accessed 7th Feb 2015.

[6] - Lily, K. (2015). China is stockpiling vast quantities of cheap oil. Available: http://qz.com/323827/china-is-stockpiling-vast-quantities-of-cheap-oil/. Last accessed 7th Feb 2015.

[7] - Allen, K. (2015). Russia sends roubletumbling after cutting main interest rate.Available: http://www.theguardian.com/world/2015/jan/30/russia-rouble-interest-rate-falling-oil-prices-central-bank. Last accessed 7th Feb 2015.

[8] - (2015). Russia's credit rating is cut to junk by S&P. Available: http://www.bbc.co.uk/news/business-30995473. Last accessed 7th Feb 2015

[9] - Adams, C. (2014). Oil price fall threatens $1tn of projects. Available: http://www.ft.com/cms/s/0/b3d67518-845f-11e4-bae9-00144feabdc0.html#axzz3R6DDFsVw. Last accessed 7th Feb 2015.

Image Source: http://www.arb.ca.gov/cc/oil-gas/images/oil%20pump%20sunset.jpg

Economics

Malaysia, misplaced your brains?

Insights into Research

Sometimes, talent is nothing more than a

factor of production. Capital has long been

the main topic which firms are concerned

about. Everything is about shifting from

labour to becoming capital-intensive. The

race to cut costs and hike up profits has

led firms to pursue innovation relentlessly.

But recently, everyone is humming to a

different tune in this entire buzz about

innovation – human capital. Harder to get

hold of than cold hard cash, talent is the

new obsession of the workforce.

Since human capital is often the seed for

innovation and the driving force behind

tertiary sectors, countries have begun

accumulating a large pool of high-skilled

workers, relying on them to accelerate the

development of their economies and thus

stay competitive. Unfortunately, for many

developing countries, where the need for

innovation is at its most dire, human

capital flight is very much a problem.

Termed the “brain drain” population, the

World Bank defined these high-skill

workers as those who have tertiary

education, are aged 25 years or above, and

who are currently not residing in their

country of birth. When wages and living

standards are less attractive than those in

developed countries, developing countries

such as Malaysia and Kenya are finding it

an uphill battle simply retaining their local

talent.What more about attracting overseas

talent?

The Case of MalaysiaMalaysia, for instance, has more than

300,000 high-skilled workers living

abroad, as of 2013. With such a significant

number of skilled workers leaving its

shores, it is no wonder that policy makers

and economists are worried. Adding insult

to injury is Malaysia’s migration

demographic. Unlike certain countries

such as the United States or Singapore,

where brain drain is alleviated by an

inflow of high-skilled workers, Malaysia’s

inflow of migrants is typically composed

of low skilled workers. Some economists

put down Malaysia’s declining growth rate

partly to this brain drain. At the current

rate, it seems like Malaysia’s aspirations

to become a high-income nation by 2020

have to be put on hold, unless it can

remedy its intensifying brain drain.

But how should the damage of the brain

drain be quantified? ‘Brain drain’

literature typically explains the push and

pull factors of high-skill emigration, but

very few have expanded on the monetary

costs of it. Seeking to put a number to the

brain drain in Malaysia, a think tank in

Penang recently released a piece of

research on the economic costs and

benefits of Malaysia’s human capital

flight.

The research concerns itself with 3 main

aspects: i) net income gain to the

emigrants, ii) net remittances to the

country, and iii) net fiscal costs to the

country. The study was based on 16 top

host countries for Malaysian high-skilled

emigrants, shown in the table 1.

Net Income GainTo make results comparable across

countries, the study controlled for

occupation, and accounted for cost of

living and income tax. It is assumed that

emigrants will be working in the same

occupation they are currently working in

overseas. Cost of living is accounted for

by using purchasing power parity

exchange rates. Finally, income tax is

deducted from gross income so that

income gains are not overestimated.

Consistent with previous studies,

overwhelmingly positive income gains

were reported in the study - unsurprising,

given that the World Bank reported that

54% of high-skilled Malaysian emigrants

had moved abroad for ‘higher salaries and

benefits’. The study found that the average

annual net income gain per emigrant in

2013 was USDPPP 24,500. More

significantly, this figure was 3.2 times the

average annual net income in Malaysia.

Emigrants who may expect high net

income gains would be those who are

working as ‘legislators, managers and

senior officials’ – income gain per migrant

was USDPPP 35,900 per annum.

Interestingly, Malaysian emigrants were

found to have experienced positive income

gains in all 16 host countries, irrespective

of occupation.

Net RemittancesApart from benefitting the emigrants

themselves, brain drain tends to benefit

their families through remittances as well.

Remittance inflows to Malaysia in 2012

were USDPPP 1.27 billion. Malaysian

emigrants in Singapore were found to

remit the most at USDPPP 2,289 per

annum. However, remittance outflows

from Malaysia during the same year were

USDPPP 7.25 billion, almost 6 times the

inflows. The gigantic outflow size was

mainly attributed to Malaysia’s large

population of low-skilled immigrants,

almost 95% of the immigrant population.

Weighing up both inflows and outflows, it

is obvious that Malaysia is a remittance

sending country, with a net outflow of

USDPPP 6 billion during 2012.

Net Fiscal ImpactThe findings of fiscal impact was split into

two layers in the research. Firstly, the

fiscal impact of high-skilled emigration

from Malaysia. And secondly, the fiscal

impact of immigration to Malaysia.

According to the study, the annual income

tax and consumption tax revenue lost from

one high-skilled emigrant was USDPPP 923

in sum. Thus after multiplying with the

total working high-skilled emigrant

population, lost tax revenue per annum

was USDPPP 208 million. The remittances

sent home generated consumption tax

revenues as well. An estimation from the

study placed the total at USDPPP 19.4

million per annum.

Calculating government expenditure was

slightly more complicated. Using full

government expenditure, the study found

that public spending saved comes to

USDPPP 3,824 per migrant each year.

However, using the lower boundary

(which comprises of health expenditure

only) gave an annual saving of USDPPP

313 per emigrant. Multiplying these

figures for individual emigrants by the

total high-skilled emigrant population,

public expenditure savings came to a

range between USDPPP 96.5 million and

USDPPP 1.18 billion.

Summing everything up, the annual fiscal

impact of high-skilled emigration ranged

between an annual benefit of USDPPP 1

billion and an annual cost of USDPPP 84.6

million.

After accounting for immigration

however, net fiscal impact altered

tremendously, ranging from a cost of

USDPPP 4.39 billion to a gain of USDPPP

1.09 billion per annum. Given that the

average was negative, it seems more likely

that brain drains pose costs to

governments.

What’s next?Although some effort has been made to

curb the high rates of brain drain, the

Malaysian government has come under

fire for not doing enough - more

specifically, for not taking the steps that

need to be taken, such as implementing a

meritocratic system. Unless the issue is

taken more seriously, it is likely that high-

skilled emigration will become a

permanent fixture in the Malaysian

economy. And at a time where the country

is looking to make the leap and join the

ranks of developed economies, it is worth

asking whether it really can afford to

continue to sweep its brain drain problem

under the carpet.

The full paper may be found at

http://penanginstitute.org/v3/files/BrainDr

ain_20140713.pdf

Lim, Krishnan, Yap (2014). The

Economic Costs and Gains of Brain Drain:

the case of Malaysia and its policy

relevance.

Joey Yap

The top host country for high-skilled Malaysian emigrants in 2013 was Singapore, hosting 47.2% out of 300,000 emigrants. The remaining high-skilled workers tended to cluster in traditional education destinations such as Australia, United States, United Kingdom, Canada and New Zealand.

Source: Lim et al. (2014), World Bank (2011)

Insight into Research

University LifeThe Economist’s Society’s Board

“As I was making preparations for the upcoming society elections, it occurred to me that it has nearly been a year since all of us were elected onto this great team.

Working with such amazing people has been (and will continue to be) the highlight of my time at UCL, and that made me extremely glad to have been given

the opportunity to serve as General Secretary of the society. The position has allowed me to better appreciate the time and effort which all of our directors

dedicate to each and every event. So as the end of our term in the society draws to a close, I would like to thank everyone on this team and, of course, all our fellow

Economists as well as the department - without whom the society would have not been able to achieve our success. With that, I wish the incoming juniors all the best

in their future endeavors and may we always stay close as a society even as we graduate from UCL.”

”Teamwork is like playing in an ensemble of a piano quartet. Each instrument takes a leading and supporting role along with the development of the music. Top notch players understand well when to stand out and to stay pianississimo as the composer requires.

Fortunately we have a dedicated and harmonious ensemble in The Economists’ Society from the very start and throughout to date. I wish our audiences will enjoy the most from the sonorous finale of the 2014-15 team yet to deliver."

“It has a very eventful year at the Economist’s Society, and the AGM last March seems like a distant memory. I have thoroughly enjoyed my time working as Treasurer, and I am proud to have been part of a committee that has introduced many new and innovative initiatives. It has been a real pleasure to work with both close friends and new faces within the committee, and I wish the first years that will be taking over from the current board all the best for the future!”

”Planning and coordinating Social Events at The Economist’s Society has been a fun and useful experience. Organising events requires more time and effort

than you think; however this has by far been outweighed by a certain satisfaction when events are successfully carried out and the work behind

them appreciated. While building on events from past years, it has been exciting to expand and diversify the variety of events, this year to include a

highlight in Social Events and the society’s first ever trip abroad: The EU Journey to the heart of Europe with visits at three of the world’s most

important institutions. Along with events such as the Freshers’ Programme, the Classic Christmas and The David Ricardo Ball, I hope that this initiative

will be pursued and further developed in coming years.”

“The academic year 2014/2015 has really been a year of advancement for the society. Looking back on what the society has accomplished, I can be

proud to have been a part of this team. With regards to Intra-Collegiate activities, we have made significant improvements in integrating Affiliate

Students into the department and UCL through our outreach events such as the Affiliate Students Social. The academic year also saw a return of the

Beyond the Lecture Series, for which we've received awesome feedback from both the students and the lecturers. I would like to thank all the

students, lecturers and administrative staff for making our events a success - the society would be nothing without you- and take this chance to wish

the new committee all the best in their future efforts to propel the society to even greater heights!”

”It has been my pleasure to be the Marketing and I.T. Director this year and to work with such dedicated and talented committee members. Well done to Liu Jia and Max. Thanks for all of your hard work and outstanding contributions to the Economist’s Society. I wish you all the best!”

University Life

”Leading the Academic Events Team this year has been pretty fun. It’s been a real honour to meet numerous Noble Prize winners, have dinner with Lars Peter Hansen at the Savoy and chat to leading economists such as Olivier Blanchard. Moreover, I feel this year has helped to develop strong relationships with the Economics division of the EFS as well as the LSE Economics Society through hosting joint events, and I’d really like to see this continued in the coming years.”

”As a sponsorship director of the Economist's Society, I truly had an experience best described as challenging, exciting and ultimately rewarding.

The exposure I received was invaluable, from pitching the society to organising events, from teamwork with the committee to individual tasks,

from each meeting down to each email helped me develop myself as an individual. With a degree spanning just 3 years, I can definitely say I've

made the most of it! As a part of the core committee, I've not only built a network with the brightest economists at UCL, I've made friends for life!”

“Looking back on the past two years of being in the Economist’s Society, I’ve enjoyed myself thoroughly. Having the opportunity to speak to esteemed Economists, Nobel Prize Winners, and working with the committee members of other schools has been an extremely edifying experience. I’m also glad the work myself and my fellow committee members set out to do, has in part come to fruition. Over the past year, the Economist’s Society has grown from strength to strength, we have formed partnerships with think-tanks such as the IEA as well as other schools such as Cambridge University. These partnerships have in turn allowed us to better leverage on our resources and cater to a larger student audience to organize events such as the LSE-UCL Economics Conference and the London Economic Policy Challenge. I hope the future committee will continue to build on this work, and that UCL students will cherish these platforms we have worked hard to establish. If more students would seize these opportunities to interact with Econ students from other schools and further explore and cultivate their love for Economics, I think UCL Economics will be an even more robust and dynamic than it already is.”

University Life

Academic Careers

Interview with Michelle TanThis article narrates the story of Michelle

Tan, a student whose diligence and

commitment are truly appreciated and well

respected.

Michelle came to UCL on a scholarship

scheme offered by the Singaporean

government. Students on similar publicly

funded programmes are usually bound by

contracts to work for the government after

graduation. In Michelle’s case, she will

start her career with International

Enterprise (IE) Singapore, a statutory

board under the Ministry of Trade and

Industry, Singapore. Focusing on boosting

Singapore’s external economy, the

government agency “spearheads the

overseas growth of Singapore-based

companies and promote international trade.”

Michelle will be engaged in trade and

business related affairs, helping companies

based in Singapore to explore the foreign

markets around the world.

Before coming to university, Michelle

studied in Hwa Chong Institution in

Singapore, known to be one of the best

schools nationwide. When asked about

how her pre-university experience has

affected her, Michelle referred to the

education system in Singapore as “very

structured and rigorous”. The A level

course intensity grants its students with a

rather strong mathematical foundation. She

added that being the student counsellor at

Hwa Chong also enriched her leadership

experience.

Michelle has been praised by Dr

Pemberton to be one of the students

“who’s done very well in all aspects”. She

speculated that such evaluation was made

on a reflection of many things besides

grades. “Academically, I am a decent

performer. Also, from how hard I worked

as president of The Economist’s Society, I

guess he [Dr Pemberton] inferred certain

qualities of myself from my achievement

as a president, rather than just the

academic records, since I’m not the best

academic performer.” In particular, she

emphasised the importance of being

proactive. “In university you realise that

you don’t get a lot of contacts with

professors. If you are in doubt, for instance,

when you encounter difficulties regarding

the courses, or you want to find out more

about your professors (what they do and

their research), just be proactive – take the

initiative and go to office hours.”

The most interesting part of the interview

came as Michelle talked about her roles in

The Economist’s Society: during the first

year she was the secretary, second year the

president, and now she is the Chairperson.

She recalled her entire ‘presidential year’

as extremely hectic: “I certainly had no

time to be involved with any other society.

I literally had no time to breathe! I

remembered last year was just society,

exams, bang!”

Devoting three years of her life at UCL to

be involved in The Economist’s Society,

Michelle endeavoured to do her best for it.

The Economist’s Society’s committee 13/14. Michelle’s year of presidency.

It is commonly acknowledged that the

president has a somewhat vague

definition in terms of responsibilities. As

Michelle pointed out, “you can do

everything and you can do nothing. It’s

quite ambiguous. It’s about how much

you want to put into the role.” Pushing

the society well beyond the status quo,

Michelle led a team to establish a special

events department, which are now

categorised as the intra-college events

and external relations departments. “I

had ideas - I wanted to do this and that -

so I needed a strong team to help me.

Then I had the first years to assist the

team.” She named four of our current

second-year students without hesitation.

“We had so many ideas, we did the LSE-

UCL conference, the Beyond the Lecture

series, the Ph.D. social, the London

economic policy challenge (…) we

turned the visions into reality.” Seeking

for opportunities outside the department,

the team extended their outreach and

networks.

Subsequently, Michelle listed what a

normal day was like for her back in the

2013/14 academic year, as exemplified in

Table 1.

When it comes to certain qualities of

being a leader, Michelle values the

ability to understand. “I always like to

meet my committee members, one to one,

just to check with them. It’s a team effort.

Sometimes you get caught up and tend to

forget about friendship. What I did as the

president made me very busy, but I also

needed time to catch up with friends,

rather than to talk about work all the

time.”

During her final year at UCL, she

stepped back and took the chairman

position in the society. By trusting for

her successor, Michelle has again found

the right balance as the chairperson. “I

would go to meetings when there’s

something wrong or there are some

concerns, otherwise I will just let him

[Fangzhou] manage everything.” She is

currently in the UCL Wine society and

enjoys life in a different way. (Michelle

happily shared some of her knowledge

about wines in the interview.) “Imagine

your senior’s telling you ‘maybe we

should do this or maybe we should do

that’, I didn’t want to be like that. The

committee has a lot of free space to do

whatever it wants within the constraints.”

Besides being proactive, there are three

other better-knows Michelle have for

students. The first is time management.

“Write a schedule when you start the day,

you want to make sure you finish it.”

Understanding trade-offs allows one to

plan rationally. “You only have 24 hours

a day. You need to know the priority at

this point of time. Maybe this meeting

with Queen Mary is really important and

this coursework is not due till next

Monday so go to the meeting today. It’s

about trade-offs and knowing what’s

important and what is more urgent.”

Secondly, one should set his/her goals.

“This is what I learned as the president. I

wanted to do these few things when I

started my term - I had this direction and

I would hit towards it.” Don’t let it drag

on.

Thirdly, in terms of working for the

government, one needs to be able to listen.

“Because when you are in a position of

setting policies, you have to be able to listen

to other people you are working with. In

government services, there’s a lot of decision

making.” This relates closely to her

experience as a leader.

“Try to listen to what other people have to

say, and form one consensus thereafter.

Eventually, the decision is what I make

together with the team. ” She illustrated the

decision-making process when organising the

Beyond the Lectures series. “I sought the

opinions of everyone in the team and found

out the timetable of the target audience. We

figured out when their free time was, or if

they had exams coming soon. We also tried

to collaborate with the other events we had so

there wouldn’t be four events in a week.”

As the interview proceeded, Michelle shared

her viewpoint for the future as “too early to

say,” because of changes in one’s priorities

and goals. Nevertheless, she is keen to work

for the government as a means of making a

difference for Singaporeans and their

businesses. “Six years later (when the

scholarship bond ends), I hope I will still be

in the government and in a position where I

can help Singaporeans even more, not just

inward looking but also outward looking.”

Geographically, Michelle is quite mobile: “I

might get posted overseas, from one overseas

centre to another.” She also pointed out the

potential shift of priorities to family. In a

sense, considering possible changes and

uncertainties in the future is pivotal whether

or not one has a clear plan.

How useful does Michelle think of her

economic background? Her answer is “the

quantitative reasoning and analytical skills I

obtained at UCL are certainly useful”. She

also mentioned some tools like Stata that

analyses data so as to make better policy

decisions.

In the end, Michelle kindly gave her advice

to economists of different years. “One thing I

want to tell myself back in the first year is to

have fun. I had too little fun. Do everything

you can, try it. Travel, meet people, have fun.

Second year is the year where most of us

have responsibilities. Manage your time well

and be proactive. We’ve got to do whatever

you can to achieve your goals in the end.

Know your goals. Because it’s the year when

a lot of things start to count. Not just your

academic grades, but also your internships.

Set your goals and walk towards the end.”

[Table 1]

Academic Careers

Ask five economists and you'll get

five different answers - six if one

went to Harvard.

-- Edgar Fiedler

Economists follow different schools of

thoughts. Attending economic courses in

different universities can help expose the

students to a variety of viewpoints and is

potentially beneficial during later stages of

their careers. Furthermore, a research

carried out by the Institute of International

Education (IIE) showed that spending

some time studying abroad is

advantageous to students’ future careers.

Their study revealed that interpersonal

skills are the most important criteria when

the employers are making recruitment

decisions and these skills are likely to be

the most prevalent in individuals who

have spent time studying abroad. The

UCL economics department currently

offers such an opportunity - students can

be exchanged to an overseas university for

a year as part of their degree programme.

The 4-year course, L101 economics with a

year abroad, aims to help the students

develop transferable skills such as

adaptability, flexibility and sensitivity to

cultural differences, all of which are key

to a successful career in a truly

international discipline. The programme is

an amazing opportunity for students to

experience a different campus life in one

of the world-leading universities in Europe

or the US.

The four-year degree is similar to the

conventional three-year degree where

students are required to take core

economics modules and electives that

interest them each year. The key

difference is that the students in the year

abroad programme spend their third year

studying economics at an overseas

university. Currently, UCL has exchange

agreements with some of the most

renowned universities in North America

and Europe. The list has recently been

expanded to include ten universities,

including Columbia University, Università

Commerciale di Bocconi, University of

Chicago, and University of Pennsylvania

amongst others. The department is also

continually exploring additional exchange

opportunities with the very best economics

departments worldwide.

Students must be enrolled in the L101

programme if they wish to take part in the

exchange program. The number of

vacancies for this programme is very

limited; about 20 students are admitted

onto the course each year. In addition,

academic criteria have to be met at the end

of the second academic year in order for

the student to continue with the

programme. Students who do not have

satisfactory results may be transferred to

the L100 programme and continue their

studies at UCL. Unfortunately, according

to the department, the transfer from L100

to L101 will generally not be permitted.

However, during the year, transfers may

be made available if the quotas given by

the universities overseas are no fully met.

This year, the transfer was made possible

on the 27th January and will end on the

4th February. Interested students can

choose from the few universities where

spaces are not fully filled. Students

interested in joining the programme are

encouraged to speak with the officer in-

charge to make a special case at the start

of the second academic year. There will

also be a year abroad fair hosted by UCL

for students taking part or interested to

take part in exchange programmes. It is

usually held in October where overseas

universities and returning students help to

answer questions regarding the year

abroad programme.

Application procedureThe general procedure is that students in

the year abroad programme will list all the

available schools according to their

preferences in mid-November of their

second academic year. They are then

required to submit a personal statement to

their favourite school. The UCL

economics department will decide on the

final allocation, taking into account their

academic performances and the personal

statement. The result is usually released

before Christmas. Students who are

unsatisfied with the universities allocation

can choose to opt out of the programme

and be transferred into the conventional

L100 program.

Economics with a year abroad (L101)

https://www.flickr.com/photos/cjsmithphotography/6973099511/in/photolist-bCbXxD-bHwU5p-4Z6RBu-9LSjBQ-9ab8Lq-hVXjYb-bdgn7B-bDmURT-bdg7rc-66SXdp-nxh1NR-AsGd-bP9CbX-owcT3z-bxkjbH-6ch2aS-of14NP-oeZqsN-8eH6U2-owcSLH-jLdg7-7ksvc7-jQpff8-jjdUye-owtZuz-jgxdSU-9KEgqk-2N4AtE-9qbWNT-dAQYYV-dwVVkw-bjyamj-7zrtCE-m3t2iR-cNUVUq-i5zy5E-cNUTkq-ovZKxn-asuopc-owaBag-owrNun-qC82oj-bmmpNd-oev8wj-ovZNv6-owaBDc-ouvBS3-owaCwV-oeXVj8-owrQF6

Academic Careers

Experience at

Georgetown UniversityZohair Hassan, who spent a year at

Georgetown University in Washington DC

in 2012, shared his views on the year

abroad programme. “Studying abroad in

the US is a completely different

experience from the UK.” Academically

speaking, the US universities have many

more assessments and examinations in

comparison to studying economics at UCL.

The midterm exams and the amount of

research papers can definitely be a

challenge to the students. The students are

also required to take a general curriculum

during the year there. “Having to take

courses on writing and humanities is not

something an economics degree in the UK

requires and is something I hadn’t done in

a while!”

The kind of non-academic experiences

that one gets from an overseas university

can also be quite different from the UCL

experience. “There are also informal

events, where celebrities come to campus,

such as when Bradley Cooper or Patrick

Ewing were walking around campus or the

Miami Heat were practicing at

Georgetown!” These are special

phenomenon that are unique to each

individual institution and makes the year

enjoyable and unforgettable for the

students taking part in the exchange

programme. “I feel I definitely made the

right decision coming to Georgetown

University, in Washington, D.C. It has

been an amazing experience thus far and

studying economics at a different location

from UCL has been an eye-opener.”

Post-graduate studiesOn top of all the things mentioned above,

being an exchange student at the

University for one year also helps if one is

considering to take on a post-graduate

degree in that institution. This is especially

beneficial if the student is considering

applying for a P.h.D programme to the US

directly after completing the

undergraduate degree at UCL. For the US

universities, it is generally more difficult

to assess applicants with non-US based

education background. They thus require

the students to demonstrate their abilities

through different types of activities that

they are involved with. Studying at that

university for a year can help the school to

know and assess the student, thus making

it easier to secure a position in the post-

graduate programme. However, this

definitely depends on personal

performances during the year and the

outcome can differ significantly across

individuals.

Not only do students receive all kinds of

benefits, they also do so at a competitive

rate. Students do not pay any school fee to

the host institutions, which can be a

considerably large amount, especially in

the case of US universities. Instead, they

pay a reduced fee which is less than 50%

of the usual amount to UCL.

Although the year abroad programme is

relatively new in the economics

department, it is definitely a fantastic

opportunity that helps to enhance the

value of the degree by giving access to

courses and lecturers that wouldn’t have

been available at UCL. Finally, to quote

Hillary Clinton, "To remain the leader in

this ever-changing world, we have to push

ourselves not just to think globally, but to

get out there and study globally as well."

George Town University Sourece: http://upload.wikimedia.org/wikipedia/commons/c/c7/Healy_Hall_

at_Georgetown_University.jpg

Academic Careers

Oxera Interview with Drayton TribuneOxera Consulting LLP offers economics

expertise within the areas of Energy,

Financial Services, Telecoms and Media,

Health and Pharmaceuticals, Transport

and Water. With offices in Oxford, Berlin,

Brussels and London, the firm has over

the years built up a strong international

reputation that has allowed it to work with

key decision-makers such as

policymakers, regulators and courts.

Oxera currently offers employment and

summer internship opportunities for

university students. With the deadline of

28th February quickly approaching, we

have interviewed Helen Ralston, a Senior

Consultant specialising in competition

economics, regulation and behavioural

economics, with extensive experience of

advising clients in the financial services

sector. During the second year of her BS

Economics degree at Cambridge, Helen

managed to secure an internship at Oxera,

and later turned this into a full-time

position after graduation. Two years later,

in 2009, she decided to pursue an MSc in

Economics at UCL. During our interview,

she shared some of her experience of

applying to and working for Oxera, as

well as offering some general advice to

prospective applicants.

How did you find your time at

Cambridge?

At the time it was quite a big shock. You

had to do five modules in your first year

and I hadn’t written an essay since my

GCSEs, so it was a bit challenging at first.

I remember my first supervisor asking

whether I had actually read any of the

books on the reading list. The answer to

that question was pretty obvious to both of

us! So it was a steep learning curve at

Cambridge but I really enjoyed it.

And after Cambridge you went straight

to Oxera?

Yes, I did an internship in my second year

and I really enjoyed working there so it

was an easy choice. Oxera has an Oxford

office, and coming from Cambridge (and

originally a village outside Reading)

meant I wasn’t really up for living in

London straightaway. I liked the idea that

I didn’t have to jump to the big smoke and

find a place in London. I’m now based in

Oxera’s London office.

Before you applied to Oxera, did you

consider any careers other than

Economic Consulting?

I wanted to stay in economics – that was

definitely what I wanted to do. I looked at

the GES (Government Economics

Service), other consultancies and what

was then the Financial Services Authority

(now the FCA, Financial Conduct

Authority). I wasn’t really worried about

jobs when I was studying – I had a lot

going on. I just thought I should do an

internship and happened to really enjoy it

so I was lucky. I think students might have

a harder time now though.

Were there any significant parts of your

degree or university life that helped you

in the application process to Oxera?

Yes, there was a very good careers service

at Cambridge and I’m sure there is one at

UCL. When I started studying I had never

written a cover letter before and the

woman at the careers service explained

that I had to make sure it was about the

firm I was applying to, and not just

economics. Just talking to someone about

the options and what different careers

would mean on a day-to-day basis (nature

of work, weekly hours, salaries, pressure)

was really helpful. Prior to this I had no

information at all, so was a bit lost.

Academic Careers

Moving on, could you elaborate a bit

about how you ended up at UCL?

It is not essential to have a masters to be

an economics consultant but it’s definitely

useful. Most of my more experienced

colleagues at Oxera have a masters or a

PhD. And after graduating from university

I was still in contact with my Director of

Studies from Cambridge who once asked

me whether I was still learning new things

and then whether I would consider

pursuing a masters. I was fortunate in that

Oxera was willing to hold the job open for

me, so that helped. At that point I had

been living in London for a while and

didn’t really want to move away. UCL had

a really good micro [economics] course

which was important to me as these are

the core skills you need for economics

consultancy and I have a particular interest

in game theory.

After graduating from UCL, you went

back to Oxera. Did you start working in

Financial Services straight away?

When I originally started at Oxera I was in

the Financial Services and Regulation

teams. The way Oxera is orientated is that

we have sector teams – such as Financial

Services – but also key skill teams such as

Competition and Regulation. Belonging to

both a sector and a skill team provides a

lot of variety, and when you’re starting as

a green graduate like me, that’s perfect –

no one really wants to specialise too

quickly. As my career has progressed I’ve

focused on projects in Financial Services

but still cover a range of topics. For

example, I am now involved in market

manipulation investigations as well as

competition, regulation and policy work. It

helps to have a ‘home’ team – mine is

Financial Services.

Could you elaborate a bit on your work

on a day-to-day basis?

I have been working at Oxera nearly eight

years now, and have progressed quite

quickly – I have been a Senior Consultant

for three years. Therefore, I have,

jokingly, far too many client meetings. I

really enjoy them but it can be a juggle to

keep the diary free for actual work. So I

probably spend two-and-a-half hours a day

in contact with clients, and the remaining

six hours doing ‘real’ work. Oxera is very

collaborative; each project has a team

ranging from three or four to around 12

consultants, and a core part of our work –

particularly at the early stages of analysis

– involves brainstorming to identify and

define analytical approaches to answering

the client’s questions. Of course, Excel

and Stata modelling, plus report writing

and preparing presentations, are important

aspects too!

Could you give an example of a case

study you are or have been involved in?

I’m currently involved in the CMA

(Competition and Markets Authority)

investigation into banking. We’re looking

at personal current accounts, the

equivalent of personal current accounts for

SME (business current accounts) and

loans to SME. The CMA’s concern is

whether the market is working

competitively and whether people know

what types of deals are available when

they make their choices. I can’t say too

much more on this but as you can imagine,

economics, including behavioural

economics, is playing a central role in the

analysis.

What would you say sets Oxera apart

from other companies?

I think the size is very important. I would

say we’re not too big and not too small,

and we have been growing a lot in recent

years with new offices in London,

Brussels and Berlin. [Editor’s note: Oxera

currently has around 100 employees]

Oxera also has a very strong reputation,

especially in competition economics and

litigation and especially in Europe. So that

distinguishes us for our clients and helps

attract the most interesting pieces of work.

In general, what would you say are the

most important skills required to

succeed in the application process to

Oxera?

For the application process, I would say

logical and critical thinking is very

important. Basic IO (Industrial

Organisation) knowledge is also needed.

For example, it would be surprising if an

applicant didn’t know what ‘price

discrimination’ meant. And that would

make it difficult because defining price

discrimination is intended to be quite an

easy question to start with, to relax

interviewees before we can move on to the

more applied, analytical questions.

In the interview process, I would advise

applicants to take their time. Make sure

you understand the question asked.

Sometimes you see interviewees who

panic and don’t really listen to the

question. They then try to answer the

question with something completely

unrelated. In the written test, less is more.

There is a short essay task which is not the

most challenging question. If it seems too

obvious, then just put the obvious down.

The idea is to see whether people actually

understand and can apply economics.

And once you enter the internship, do

you get to choose which division you

will get to work in?

We always ask if people have preferences

but most of the time they don’t. Generally,

if they do, they always say competition

and I think that’s because they feel it fits

in most closely with IO, when in fact IO is

central to all our skill teams and projects.

The interns definitely move around the

projects a lot more than the permanent

staff. We often ask them to do quite

discrete tasks. For example, sometimes

when we need to do a quick review of the

literature on a specific topic we ask interns

to do that and feed their findings back to

us.

So it varies quite a lot?

Yes it does. It’s up to the intern to make

their experience as rewarding as they can.

If people say they’re really interested in a

certain area we will definitely take that

into account and try and find project work

that fits in with these interests. We want

them to enjoy working at Oxera as well.

What would you say is the key thing to

succeed as an intern at Oxera?

I would say that when you’re working at

Oxera, see it as a team experience. We are

collaborative. If you’ve got too much or

too little on then shout, because neither is

fun. And, of course, try to get involved

with lots of different projects.

We have quite a lot of cross-team

meetings to share ideas so people can

learn and find new things they’re

interested in.

Academic Careers

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