1 China factory slowdown deepens fears over economy
(Katie Allen in The Guardian) A further slowdown in China’s vast manufacturing
sector has intensified worries about the year ahead for the world’s second
largest economy.
The latest in a string of downbeat reports from
showed that activity at China’s factories cooled in December for the fifth
month running, as overseas demand for Chinese goods continued to fall. Against
the backdrop of a faltering global economy, turmoil in the country’s stock
markets and overcapacity in factories, Chinese economic growth has slowed
markedly.
The country’s central bank expects growth in 2015 to
be the slowest for a quarter of a century. After growing 7.3% in 2014, the
economy is thought to have expanded by 6.9% in 2015 and the central bank has
forecast that it may slow further in 2016 to 6.8%.
Friday’s figures showed that the manufacturing
sector limped to the end of 2015. The official purchasing managers’ index (PMI)
of manufacturing activity edged up to 49.7 in December from 49.6 in November.
There was upbeat news from the housing market, with
signs that prices were boosted in December by six interest rate cuts in the
year up to November, and by government moves to ease restrictions on
homebuying.
Despite the more positive news from the services
sector and housing market, economists have focused on the manufacturing sector.
They worry that a weak series of PMI survey readings, from the national
statistics offices and polls carried out by the private sector, point to GDP
growth that is slower than official estimates suggest.
2 How crony capitalism shackles growth (Noah Smith
in Gulf News) Economic inequality has skyrocketed in the US during the past few
decades. Defenders of the status quo argue that rising inequality is a
necessary by-product of economic growth: If we don’t allow people the chance to
become extremely rich, they will stop working, investing, saving and starting
businesses. A receding tide will then cause all boats to sink.
Critics have responded with the claim that
inequality doesn’t help growth but instead hurts it. This view was given
ammunition by a number of recent studies, which have found a negative
relationship between how much income inequality a country has and how fast it
grows.
They show that higher inequality has been associated
with lower growth. But as with all correlations, we should be very careful
about interpreting this as causation. It might be that countries whose growth
slows for any reason tend to experience an increase in inequality, as
politically powerful groups stop focusing on expanding the pie and start trying
to appropriate more of the pie for themselves.
When poor people have more money, they can afford to
invest more in human capital (education and skills) and nutrition. Because
these investments have diminishing marginal returns — the first year of
schooling matters a lot more than the 20th — every dollar invested by the poor
raises national productivity by more than if it gets invested by the rich. In
other words, the more resources shoring up a nation’s weak links, the better
off that nation will be.
That’s a plausible hypothesis. But there might also
be other factors contributing to the correlation between inequality and growth.
It could be that there is something out there that causes both high inequality
and low growth at the same time.
The obvious candidate for this dark force is crony
capitalism. When a country succumbs to cronyism, friends of the rulers are able
to appropriate large amounts of wealth for themselves — for example, by being
awarded government-protected monopolies over certain markets, as in Russia
after the fall of communism.
That will obviously lead to inequality of income and
wealth. It will also make the economy inefficient, since money is flowing to
unproductive cronies. Cronyism may also reduce growth by allowing the wealthy
to exert greater influence on political policy, creating inefficient subsidies
for themselves and unfair penalties for their rivals.
3 The real reason for remaining jobless (Ronald
Alsop on BBC) As the job market gradually improves, businesses say they aren’t
finding enough savvy graduates who can start contributing from day one on the
job.
CareerBuilder, the online job search site, surveyed
employers in the UK and India this year and found that they believe recent
graduates are most lacking in problem-solving skills (60% India, 40% UK),
creative thinking (56% India, 39% UK), and interpersonal skills (50% India, 49%
UK).
Some studies show a big gap between employer and
student perceptions. In a survey by the Association of American Colleges and
Universities, students and employers clearly didn’t see eye to eye on how well
prepared the students were in oral communication (62% of students versus 28% of
employers); working with numbers and statistics (55% versus 28%); teamwork (64%
versus 37%); applying knowledge and skills to the real world (59% versus 23%);
and analysing and solving complex problems (59% versus 24%).
Is the problem that employers have unrealistic
expectations or that universities and students are failing to develop critical
skills? A little of both, most workplace
experts say.
Some organisations are trying to help young people discern
skills they may not realise they can offer employers. YouthNet, a UK charity,
has just launched an online tool called Define Me that’s designed to help young
people identify job-related skills they have acquired in everyday life
experiences such as playing sports, traveling and volunteering, and then find
the right words to describe them to potential employers.
Some universities are spurring students to focus
very early in their studies on workplace preparation. At Bentley University in
Waltham, Massachusetts in the US, freshmen take an introductory career development
class and a skills assessment to get a better sense of their aptitudes, as well
as weaknesses. Employees of such companies as Fidelity and TJ Maxx visit the
class and provide feedback on resumes, elevator pitches and interview skills
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