England’s worst state schools are no longer concentrated in big cities, either. Of the ten best-performing local authorities in Britain, seven are now in London. In Tower Hamlets, a largely Bangladeshi borough in the East End, children entitled to free school meals because of poverty do as well in GCSEs, the exams taken at 16, as do all children in England as a whole. Small post-industrial cities like Hull and Portsmouth fare badly. But so do many rural spots. Between 2005 and 2012 many of the local authorities falling into the bottom 50 by GCSE results were rural areas like Dorset, Herefordshire, Somerset and Suffolk. Most of the areas that climbed out of that sad group were cities or parts of cities.

The number of girls under the age of 18 getting pregnant has been falling rapidly in most parts. But here, too, the trend is uneven. In Southwark, an inner-London borough, the conception rate for girls under 18 has fallen by 64%. In West Devon, by contrast, the rate of pregnancies to girls under the age of 18 has actually increased in recent years—as it has in several of its neighbouring local authorities. In 1998 its rate was three-fifths of the national average. Now it is slightly above it.


Credit: Economist.

England’s worst state schools are no longer concentrated in big cities, either. Of the ten best-performing local authorities in Britain, seven are now in London. In Tower Hamlets, a largely Bangladeshi borough in the East End, children entitled to free school meals because of poverty do as well in GCSEs, the exams taken at 16, as do all children in England as a whole. Small post-industrial cities like Hull and Portsmouth fare badly. But so do many rural spots. Between 2005 and 2012 many of the local authorities falling into the bottom 50 by GCSE results were rural areas like Dorset, Herefordshire, Somerset and Suffolk. Most of the areas that climbed out of that sad group were cities or parts of cities.

The number of girls under the age of 18 getting pregnant has been falling rapidly in most parts. But here, too, the trend is uneven. In Southwark, an inner-London borough, the conception rate for girls under 18 has fallen by 64%. In West Devon, by contrast, the rate of pregnancies to girls under the age of 18 has actually increased in recent years—as it has in several of its neighbouring local authorities. In 1998 its rate was three-fifths of the national average. Now it is slightly above it.


Credit: Economist.

@5 months ago
#The Economist #Charts 
The decline of spam
Read this and win million$!!!

Jan 26th 2013 |From the print edition


In 2004 at Davos, Bill Gates predicted the death of spam. His prophecy may finally be coming true. Since a peak in 2008, the share of e-mails that are junk has steadily declined. In the past year it has fallen from around 80% to 67% of the global total, according to Kaspersky Lab, a cyber-security firm. Spam filters are doing their job. Sophisticated technology is authenticating senders. Police are cracking down on spammers. And web users are ignoring the spam that gets through. Many spammers have switched to peddling fake handbags and baldness cures via online ads, which are often cheaper and more likely to be clicked on.

The decline of spam
Read this and win million$!!!

Jan 26th 2013 |From the print edition


In 2004 at Davos, Bill Gates predicted the death of spam. His prophecy may finally be coming true. Since a peak in 2008, the share of e-mails that are junk has steadily declined. In the past year it has fallen from around 80% to 67% of the global total, according to Kaspersky Lab, a cyber-security firm. Spam filters are doing their job. Sophisticated technology is authenticating senders. Police are cracking down on spammers. And web users are ignoring the spam that gets through. Many spammers have switched to peddling fake handbags and baldness cures via online ads, which are often cheaper and more likely to be clicked on.

@1 year ago with 1 note
#The Economist 
Drugs that cause most harm
Scoring drugs
Nov 2nd 2010, 12:30 by The Economist online

A new study suggests alcohol is more harmful than heroin or crack

MOST people would agree that some drugs are worse than others: heroin is probably considered to be more dangerous than marijuana, for instance. Because governments formulate criminal and social policies based upon classifications of harm, a new study published by the Lancet on November 1st makes interesting reading. Researchers led by Professor David Nutt, a former chief drugs adviser to the British government, asked drug-harm experts to rank 20 drugs (legal and illegal) on 16 measures of harm to the user and to wider society, such as damage to health, drug dependency, economic costs and crime. Alcohol is the most harmful drug in Britain, scoring 72 out of a possible 100, far more damaging than heroin (55) or crack cocaine (54). It is the most harmful to others by a wide margin, and is ranked fourth behind heroin, crack, and methamphetamine (crystal meth) for harm to the individual. The authors point out that the model’s weightings, though based on judgment, were analysed and found to be stable as large changes would be needed to change the overall rankings.

Drugs that cause most harm
Scoring drugs
Nov 2nd 2010, 12:30 by The Economist online

A new study suggests alcohol is more harmful than heroin or crack

MOST people would agree that some drugs are worse than others: heroin is probably considered to be more dangerous than marijuana, for instance. Because governments formulate criminal and social policies based upon classifications of harm, a new study published by the Lancet on November 1st makes interesting reading. Researchers led by Professor David Nutt, a former chief drugs adviser to the British government, asked drug-harm experts to rank 20 drugs (legal and illegal) on 16 measures of harm to the user and to wider society, such as damage to health, drug dependency, economic costs and crime. Alcohol is the most harmful drug in Britain, scoring 72 out of a possible 100, far more damaging than heroin (55) or crack cocaine (54). It is the most harmful to others by a wide margin, and is ranked fourth behind heroin, crack, and methamphetamine (crystal meth) for harm to the individual. The authors point out that the model’s weightings, though based on judgment, were analysed and found to be stable as large changes would be needed to change the overall rankings.

@1 year ago
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Thought for food
Mar 12th 2013, 14:35 by Economist.com

How much people in different countries spend on food

THE discovery by European food shoppers that some of them have been eating horse in place of beef is, some argue, a result of a trend in the rich world. Spending on food as a share of total income has declined markedly, but at the expense, some say, of quality. This is a nice kind of problem to have: people in poor countries are forced to devote a far higher share of income to buying food. As the chart shows, that correlation between poverty and spending on food is not watertight: Indians, for example, spend less of their household budget on food than Russians do. In general, though, as countries develop people spend proportionally less on food. South Koreans spent one-third of their income on food in 1975; now the figure is just 12%. That leaves more money for the more enjoyable things in life. Hungarians lead the way in these matters: they devote around 10% of their household spending to alcohol and tobacco.

Thought for food
Mar 12th 2013, 14:35 by Economist.com

How much people in different countries spend on food

THE discovery by European food shoppers that some of them have been eating horse in place of beef is, some argue, a result of a trend in the rich world. Spending on food as a share of total income has declined markedly, but at the expense, some say, of quality. This is a nice kind of problem to have: people in poor countries are forced to devote a far higher share of income to buying food. As the chart shows, that correlation between poverty and spending on food is not watertight: Indians, for example, spend less of their household budget on food than Russians do. In general, though, as countries develop people spend proportionally less on food. South Koreans spent one-third of their income on food in 1975; now the figure is just 12%. That leaves more money for the more enjoyable things in life. Hungarians lead the way in these matters: they devote around 10% of their household spending to alcohol and tobacco.

@1 year ago
#The Economist #Charts 
Capitalism makes you happy*
Mar 13th 2013, 17:52 by Economist.com

Suicide rates in Europe since 1990

THE World Health Organisation has produced some fresh data on the health, or otherwise, of Europeans. We have picked out suicide rates, which have declined in most of Europe since the early 1990s except for a slight uptick since 2007, which may or may not have something to do with the onset of the financial crisis. What’s more interesting, though, is the effect of the collapse of the Soviet Union on the suicide rate in the Commonwealth of Independent States (CIS)—the countries that were once members of the USSR (excluding the Baltic states). Those who disapprove of the way that market economies force people to compete with each other might point to the spike in suicide rates in the CIS after 1989 (something which may be down to different methods of data collection). Those who, like The Economist, take the opposite view will point to the marked decline in suicide as the CIS countries sloughed off one system and embraced another.

Capitalism makes you happy*
Mar 13th 2013, 17:52 by Economist.com

Suicide rates in Europe since 1990

THE World Health Organisation has produced some fresh data on the health, or otherwise, of Europeans. We have picked out suicide rates, which have declined in most of Europe since the early 1990s except for a slight uptick since 2007, which may or may not have something to do with the onset of the financial crisis. What’s more interesting, though, is the effect of the collapse of the Soviet Union on the suicide rate in the Commonwealth of Independent States (CIS)—the countries that were once members of the USSR (excluding the Baltic states). Those who disapprove of the way that market economies force people to compete with each other might point to the spike in suicide rates in the CIS after 1989 (something which may be down to different methods of data collection). Those who, like The Economist, take the opposite view will point to the marked decline in suicide as the CIS countries sloughed off one system and embraced another.

@1 year ago
#The Economist #Charts 
Stockmarkets

After more than five years of financial turmoil, some stockmarkets are back to, or close to, their pre-crisis levels. Stockmarkets rose until mid-to-late 2007, and even into 2008, before the severity of the financial crisis hit them; their troughs were in early 2009. Last week the Dow Jones Industrial Average surpassed its previous peak (though it is still around 7% off once inflation is taken into account). The S&P 500 and Germany’s DAX are expected to reach all-time highs soon. The FTSE 100 is near its 2007 peak, which was only 3% shy of its record high in December 1999. Not all stockmarkets have recovered to this degree. Greece’s Athex composite index is still more than 80% below its peak in October 2007.

Stockmarkets

After more than five years of financial turmoil, some stockmarkets are back to, or close to, their pre-crisis levels. Stockmarkets rose until mid-to-late 2007, and even into 2008, before the severity of the financial crisis hit them; their troughs were in early 2009. Last week the Dow Jones Industrial Average surpassed its previous peak (though it is still around 7% off once inflation is taken into account). The S&P 500 and Germany’s DAX are expected to reach all-time highs soon. The FTSE 100 is near its 2007 peak, which was only 3% shy of its record high in December 1999. Not all stockmarkets have recovered to this degree. Greece’s Athex composite index is still more than 80% below its peak in October 2007.

@1 year ago
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America’s Shale Gas: Spot Price vs Production.

America’s Shale Gas: Spot Price vs Production.

@1 year ago
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America’s Competitiveness: Infrastructure

A time for renewal

America’s infrastructure is in a dire state, stimulating a search for creative solutions


Floreat Florida
RAHM EMANUEL, THE mayor of Chicago, Illinois, lifts up a decayed wooden tube and waves it for emphasis. Many of the city’s water pipes are over 100 years old, he says. Some, it turned out when the Water Department got round to replacing them, are made of wood. No wonder the network sprang 3,800 leaks in 2011 alone. Yet at the pace of investment that prevailed until last year it would have taken the local water company until 2059 to refurbish all the mains, the mayor points out.

Everywhere Mr Emanuel looks, he sees the need for new or improved infrastructure: pockmarked roads; century-old stations on the “L”, Chicago’s elevated-train network; grand but draughty municipal buildings; a congested airport; clapped-out schools and community colleges. Over the next three years alone he plans to spend over $7 billion to start fixing all this. But finding the money has required some creativity.

Cities like Chicago, with meagre investment budgets, generally rely on grants from the state and federal governments, along with municipal bonds, to pay for such improvements. However, the federal government’s fiscal woes and the political impasse in Washington have been putting the squeeze on infrastructure funding. Take the highway fund, which Congress created to pay for its share (usually about a third) of improvements to roads and public transport around the country. It is supposed to be fed by receipts from the gas (petrol) tax of 18.4 cents per gallon, but this is not linked to inflation and has not been raised since 1993. Moreover, Americans are driving less, in more efficient cars, or in ones that run on something other than petrol, all of which leaves the transportation kitty increasingly bare. At the same time the cost of building roads has risen faster than prices in general, further sapping the fund’s value.

Fingers in the dyke

Politics has compounded the problem. The act under which Congress doles out money from the highway fund expired in 2009. Unable to agree on how much to spend, or how to top up the shrinking fund, lawmakers passed nine short extensions of the old act before finally approving a new, two-year bill last year. But this does nothing to strengthen the fraying funding mechanism. Instead, Congress has frozen spending at the current level and cobbled together a few one-off revenue-raisers to pay for it. The Congressional Budget Office now expects the highway fund to run dry in 2014, and the gap between receipts and the present level of spending to reach $109 billion over the next eight years.

Worse, the current level of investment, even if Congress finds a way to maintain it, is utterly inadequate. More than five years after the collapse of a bridge in Minnesota that claimed 13 lives and prompted pledges to speed up repairs, almost 70,000 other bridges, or roughly 11% of the total, are still rated as “structurally deficient” by the Federal Highway Administration. The American Society of Civil Engineers (ASCE) estimated in 2009 that Americans lost $78 billion a year to traffic delays, in the form of wasted time and petrol. A further $67 billion goes on repairing the damage to cars caused by the shoddy condition of many roads. Crashes, a good number of which are also attributable to this neglect, cost a further $230 billion. The ASCE reckoned that for the period from 2005 to 2020 the country was spending only 54% of what was needed to prevent further deterioration, and just 29% of what it would take to set America’s roads to rights.

Falling to bits

Nor are the problems confined to roads. The ASCE thought that America’s water and sewage systems, inland waterways and levees were equally dilapidated, and that its schools, dams, airports, public transport and hazardous-waste disposal were in only slightly better shape. It blamed “delayed maintenance and chronic underfunding” and argued that the country needed to double its spending on infrastructure over five years, from a projected $1.1 trillion to $2.2 trillion. And that was at a time when infrastructure spending was being boosted by a one-off contribution from Mr Obama’s stimulus.

Civil engineers, naturally, are keen on civil-engineering projects. But the Centre for American Progress, a think-tank, reached much the same conclusion in a report that looked only at the federal share of spending on essential projects. Congress, it concluded, was coughing up barely half of the $262 billion a year that was needed.

Such big sums are daunting in austere times, but the potential benefits outweigh the spending. In the short run, infrastructure investments provide a boost to a feeble recovery. The CBO estimated in 2011 that for every dollar the federal government spent on infrastructure through Mr Obama’s stimulus, the value of economic activity increased by between $1 and $2.50—one of the biggest multipliers of the main components of the programme. And a study by the University of Massachusetts-Amherst in 2009 found that every $1 billion spent on infrastructure creates 18,000 jobs, almost 30% more than if the same amount were used to cut personal income taxes.

Every $1 billion spent on infrastructure creates 18,000 jobs, almost 30% more than if the same amount were used to cut personal income taxes.

In the long run, investment in infrastructure boosts productivity by enabling people and goods to get to places faster, communicate more easily, spend less time and money on repairs and so on. One recent study found that the construction of a road typically led to an increase in economic activity between three and eight times bigger than the initial outlay within eight years after its completion. (The impact subsequently fades, presumably because congestion returns.) And since the government’s borrowing costs are currently low and the construction industry is still in the doldrums, investment in infrastructure is cheaper now than it will be when the economy is humming again.

Mr Emanuel is convinced of all this. Unfortunately for Chicagoans, the politicians in Springfield, the state capital, are even less help than those in Washington. The state and local authorities have accumulated debts of about $10,000 per resident, which puts them among the top quintile in the country. The pension plan for state workers has assets to cover only 39% of its projected liabilities. In 2009 the legislature approved a series of tax increases on things like sweets and alcohol, as well as an expansion of gambling, with the proceeds earmarked for infrastructure improvements. But so far these measures have fallen well short of producing the hoped-for $1 billion a year. All this has left Illinois with the worst credit rating of all 50 American states—and little money to spare for an overhaul of Chicago’s infrastructure.

The city has not always been a model of fiscal rectitude. The previous administration papered over deficits with one-off measures, prompting a downgrade in its credit rating the year before Mr Emanuel took office. Although for the most part he has since cut costs enough to match the city’s means, the state’s failure to amend the pension system, in which Chicago participates, raises yet another threat to its finances.

With the city, state and federal governments all strapped for cash, Mr Emmanuel has had to turn to other sources of revenue. One obvious step is to increase the charges to users of the city’s infrastructure. At his urging, the city council raised water rates by 25% last year; by 2015 they will almost double. That has allowed the city to start replacing leaking water mains at two-and-a-half times the previous rate. Similarly, fares on the L are rising, which should help cover the costs of refurbishing decrepit stations. Mr Emanuel also wants to encourage more private investment in the city’s infrastructure, but its left-leaning voters are touchy about anything that smacks of privatisation. They noted that a consortium to which his predecessor sold a 75-year lease on the city’s parking meters immediately quadrupled the fees.

Mr Emanuel’s solution is called the Chicago Infrastructure Trust (CIT). This will help pair investors with projects that will generate a revenue stream to be hypothecated to cover the cost of the original investment, plus a return. First on its list are some $100m-worth of energy-saving measures in city buildings.

Lightbulb moment

At Newton Bateman Elementary School the principal asks a teacher how she likes the new lighting in her classroom. She seems not to have noticed any difference. That is the idea. Workmen have recently halved the number of lights above her head, installed more efficient bulbs and added automatic switches. Over the next ten months the city wants to overhaul the lighting in another 241 schools. It estimates that these retrofits will cost $14m and yield savings of $3m a year. In January it put out a request for “financial partners” to stump up the cash, to be repaid from the savings in the schools’ operating budgets.

From the mayor’s point of view this scheme has several advantages. It enables him to raise money from investors such as foreigners, charities and pension funds who are not interested in tax-exempt municipal bonds because they have little tax liability in the first place. It means that projects with clear benefits but low priority can go ahead sooner, helping to stimulate the local economy. All the assets involved remain not just the property of the city but under its management, so political attacks on “privatisation” can easily be rebutted. The mayor’s supporters in the unions are enthusiastic because the scheme will create new jobs. And although initially Mr Emanuel expects the CIT to get involved in only around $200m of the $7 billion-worth of infrastructure investments he is looking for, he clearly hopes to expand its role if the early projects prove successful.

Mr Emanuel is not the only local leader coming up with inventive ways to pay for infrastructure improvements despite the fiscal squeeze. The number of “public-private partnership” (PPP) projects under way around the country, although still low by European standards, has jumped in recent years. They include a tunnel under construction in Florida, a commuter rail scheme in Colorado and road improvements in Texas and Virginia. The Centre for American Progress, not normally a cheerleader for red-blooded capitalism, reckons it should be possible to mobilise at least $60 billion a year in private infrastructure investment. That would be a huge step up from the paltry total of $10 billion raised through such schemes between 1990 and 2006.

In Indiana a PPP is being used to boost public investment. In 2006 Mitch Daniels, a former governor, championed a 75-year lease of a busy toll road in the state in order to create an investment fund for future roadbuilding projects. The consortium that now runs the highway paid $3.8 billion for the privilege (just before the recession caused asset prices to plummet), as well as promising to invest $600m in upkeep over the first nine years of the lease. Indiana has used the proceeds to increase its roadbuilding budget by a third, to $1 billion a year.

Bob McDonnell, the governor of Virginia, is confronting the gradual decline in revenue raised by the state’s gas tax, which is levied on top of the federal one and suffers from the same problems. He recently persuaded the state legislature to abolish it altogether and instead raise the state’s sales tax from 5% to 5.3%. Along with some other increases, this should provide a steadier revenue stream.

Antonio Villaraigosa, the mayor of Los Angeles, helped secure a 30-year increase in the local sales tax in 2008 to fund transport projects. He then used the projected revenue as security for loans that will allow the city to build the original 30-year roster of projects in just ten years. The idea is to stimulate the local economy and take advantage of low construction costs, just as economists have been urging Congress to do.

Congress, however, is being unhelpful as usual, and not just by scrimping on its own capital budget. Last year, for the first time, it gave states free rein to charge tolls on new highways built with federal help, or on new lanes added to existing ones. But it still bars them from levying tolls on the unimproved portions of existing roads. It has also allowed a law to lapse that encouraged private investment in infrastructure by offering a tax break on bonds that finance it.

Meanwhile, the repeated brief extensions of the highway bill make it difficult to plan for the long term or to embark confidently on projects that might take many years to complete. Mr Obama has long called for a federal infrastructure bank which could invest more strategically and attract private capital relatively cheaply by subsidising or guaranteeing commercial loans. But Congress wants nothing to do with it.

There are plenty of ways for Congress to boost investment in infrastructure without massively inflating the public debt, but America’s governors and mayors are not holding their breath. As Mr Emanuel, a former congressman and White House chief of staff, says, “We can’t allow dysfunction, whether in Washington or Springfield, to delay our economic development.”


Mar 16th 2013 |From the print edition.

@1 year ago
#The Economist #The Economist Special Report #America's Competitiveness 
Between 2008 and 2013 the annual number of murders in Britain’s three biggest urban police forces—the London Metropolitan Police, Greater Manchester and the West Midlands—declined by 34%. In the rest of the country, murder fell by just 7%. Burglaries have plummeted in inner London but have increased in some suburbs. Towns such as Brentwood, just east of London, have been hit by a wave of thefts by people who flee via motorways, thinks Louise McKinlay, leader of the borough council.

Drug-running gangs are increasingly building bases outside London, reckons detective superintendent Kath Barnes, of Hampshire Police. She runs “Operation Fortress”, a unit set up in 2012 to tackle organised crime following a spate of violence in Southampton, a city on the south coast of England. More oddly, last month guns including an AK47 assault rifle and an Uzi sub-machine gun were allegedly found at the home of a parish councillor in a Suffolk village. 


Credit: Economist.

Between 2008 and 2013 the annual number of murders in Britain’s three biggest urban police forces—the London Metropolitan Police, Greater Manchester and the West Midlands—declined by 34%. In the rest of the country, murder fell by just 7%. Burglaries have plummeted in inner London but have increased in some suburbs. Towns such as Brentwood, just east of London, have been hit by a wave of thefts by people who flee via motorways, thinks Louise McKinlay, leader of the borough council.

Drug-running gangs are increasingly building bases outside London, reckons detective superintendent Kath Barnes, of Hampshire Police. She runs “Operation Fortress”, a unit set up in 2012 to tackle organised crime following a spate of violence in Southampton, a city on the south coast of England. More oddly, last month guns including an AK47 assault rifle and an Uzi sub-machine gun were allegedly found at the home of a parish councillor in a Suffolk village.


Credit: Economist.

@5 months ago
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The sun’s still not quite set
Jan 23rd 2013, 15:17 by Economist.com

The imperial residue of overseas territories

SINCE 1946, the United Nations has compiled a list of the world’s “Non-Self-Governing Territories”: overseas domains it considers, in effect, to be colonies. Since then 100-odd entries have come and gone. Leavers may gain full independence (such as Cameroon or Singapore) or merge more or less fully with their parent nation (Puerto Rico or French Guiana). Today the number of entries has dwindled to just 15, most of which are British, or 16 if you include ambiguous Western Sahara.

Only three of the remaining listings are the subject of conflicting claims by other nations. Two are British-ruled; the third is Western Sahara. The dispute between Britain and Argentina over sovereign rights to the Falkland Islands (Malvinas) turned into war in 1982. It flared up this month with the publication of tit-for-tat open letters in national newspapers. Britain’s Foreign Office has also recently complained to the Spanish government over incursions into Gibraltar’s territorial waters. Achieving self-determination through referenda for both territories was listed as a priority in the British Government’s mid-term review on January 7th. The Falkland Islanders are due to vote in March. 

Such territorial disputes usually centre on history and the inhabitants’ choice of national identity, but also geography: the territory’s proximity to the claimant’s national boundaries and its distance from the “occupying country’s” shores. As the graphic below demonstrates, the distances between administrative capitals and their listed territories are indeed vast. The Falkland Islands’ capital Stanley lies some 12,650 km from London. Luckily for Britain and other former imperial powers, proximity is not the defining factor in deciding rightful rule (and if it were, the entire UN list of territories—and previous versions—would be up for grabs).

The UN lists only inhabited territory. A host of other, unpopulated, territories would be open to scrutiny on grounds of proximity, or lack of it: swathes of Antarctica for example. Norway’s Bouvet Island in the South Atlantic is the most remote island on the planet, lying furthest from any other land mass. But at a meagre 12,700 km from Oslo it cannot compete with some inhabited British, French or American islands for the furthest distance from the motherland.

The sun’s still not quite set
Jan 23rd 2013, 15:17 by Economist.com

The imperial residue of overseas territories

SINCE 1946, the United Nations has compiled a list of the world’s “Non-Self-Governing Territories”: overseas domains it considers, in effect, to be colonies. Since then 100-odd entries have come and gone. Leavers may gain full independence (such as Cameroon or Singapore) or merge more or less fully with their parent nation (Puerto Rico or French Guiana). Today the number of entries has dwindled to just 15, most of which are British, or 16 if you include ambiguous Western Sahara.

Only three of the remaining listings are the subject of conflicting claims by other nations. Two are British-ruled; the third is Western Sahara. The dispute between Britain and Argentina over sovereign rights to the Falkland Islands (Malvinas) turned into war in 1982. It flared up this month with the publication of tit-for-tat open letters in national newspapers. Britain’s Foreign Office has also recently complained to the Spanish government over incursions into Gibraltar’s territorial waters. Achieving self-determination through referenda for both territories was listed as a priority in the British Government’s mid-term review on January 7th. The Falkland Islanders are due to vote in March.

Such territorial disputes usually centre on history and the inhabitants’ choice of national identity, but also geography: the territory’s proximity to the claimant’s national boundaries and its distance from the “occupying country’s” shores. As the graphic below demonstrates, the distances between administrative capitals and their listed territories are indeed vast. The Falkland Islands’ capital Stanley lies some 12,650 km from London. Luckily for Britain and other former imperial powers, proximity is not the defining factor in deciding rightful rule (and if it were, the entire UN list of territories—and previous versions—would be up for grabs).

The UN lists only inhabited territory. A host of other, unpopulated, territories would be open to scrutiny on grounds of proximity, or lack of it: swathes of Antarctica for example. Norway’s Bouvet Island in the South Atlantic is the most remote island on the planet, lying furthest from any other land mass. But at a meagre 12,700 km from Oslo it cannot compete with some inhabited British, French or American islands for the furthest distance from the motherland.

@1 year ago
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USA alternatives: Hitting a wall

Maize-ethanol manufacturers are reaping meagre rewards. This year may be only slightly better.

Ethanol manufacturing consumes two-fifths of the US maize harvest. This has made the industry unpopular with those who worry about food security and blame it for pushing up food prices by limiting supply. Recently, many makers of the fuel—which, at the federal government’s behest, is mixed with petrol (gasoline)—have been suffering adversity as well as unpopularity.

Among the major types of ethanol, in the US the variety made from maize reigns supreme. It is the source of the vast majority of US ethanol production, in part due to a law stipulating that 40% of the maize harvest must be used to make ethanol. Despite this, maize-ethanol producers are having a rough ride. To turn a decent profit, they need a wide spread between prices for maize and those for ethanol. But last year saw the worst drought in the US for over 50 years, sapping crop yields and driving up maize prices in the third quarter (see chart). As the price of maize exceeded that of ethanol, it wiped out many maize-ethanol makers’ profits. (Prices eventually fell in the latter part of the year, causing an overall year-on-year rise of 2%, according to the US Department of Agriculture (USDA).)

Regulatory uncertainty

Ethanol makers’ difficulties are now being compounded by mounting regulatory uncertainty. This in part relates to a dispute over the decision by the Environmental Protection Agency (EPA) in 2011 to raise the limit on the proportion of marketed petrol that can be derived from ethanol from 10% to 15% for cars made after 2001. Yet, despite the EPA’s move, the 10% “blend wall” remains highly relevant: the “E15” mix remains scarce, partly due to oil-industry opposition.

A related source of current controversy is the Renewable Fuels Standard (RFS). Under this mechanism the EPA sets annual quotas for the total volume of ethanol that refiners must blend into petrol. Last year, it mandated mixing in 13.2bn gallons of ethanol, or about 10% of the 133bn gallons of gasoline guzzled. But this year it proposes targeting 13.8bn gallons, which will be difficult to achieve for two principal reasons.

First, petrol consumption in the US has been falling in recent years, as Americans drive less and vehicles become more fuel efficient. Thus, demand for petrol—hence also for ethanol—may not live up to expectations. Second, oil prices have been falling in the US as oil output has risen. Petrol refiners have therefore favoured using more (relatively cheap) oil over ethanol, instead fulfilling their RFS obligations by buying Renewable Identification Number (RIN) credits (one RIN is equal to roughly a gallon of renewable fuel). Against this backdrop, only an uncharacteristic spike in petrol demand, combined with a sharp rise in oil prices, would make the EPA’s 2013 ethanol target attainable.

Criticism from food and oil groups hostile to ethanol may also need to be overcome. They argue that many cars are not made to use higher concentrations of the liquid, although more uptake of E15 may be necessary to meet this year’s target. Ethanol’s detractors want the EPA to keep down its 2013 target, which could be confirmed in April. A coalition of interests in February petitioned the US Supreme Court to overturn a lower court’s support of the EPA’s 2011 decision. Amid the maize-price pressures, doubt over future regulations and falling petrol prices, ethanol production has slowed. By mid-February, 25 of the 211 US ethanol plants reportedly sat idle.

Green shoots?

This year may see a modest upturn in the fortunes of those making maize ethanol by old-fashioned methods, whose margins have recovered greatly, according to data provided by the US Energy Information Administration (EIA). More sophisticated and profitable plants capable of recovering other products, like maize oil, have been better insulated against high crop prices, the government agency points out.

The Economist Intelligence Unit expects the coming crop year, due to begin when planting is carried out later in the spring, to bring a much larger yield than was seen in the preceding period. We forecast that maize prices will drop by just under 1% in 2013—from US$305/tonne in the first quarter of 2013 to US$290/tonne in the fourth quarter—as stocks will remain tight despite higher output. On top of this, Brazil’s efforts to use more of its (sugar-cane) ethanol at home, meaning it will export less to the US, also count in maize-ethanol makers’ favour.

Should maize-ethanol production fail to rebound, makers of other forms of ethanol could benefit, especially if the EPA’s E15 rule is allowed to stand. Cellulosic ethanol (made from wood chips, crop waste and so forth) is in theory one alternative source, although it has so far failed to live up to its billing. Like maize ethanol, the cellulosic type faces animosity from some members of Congress. Only 22,000 gallons of the fuel were produced last year, despite a supposedly binding EPA blending target of 8.65m gallons. Following a complaint from the American Petroleum Institute (API), a trade association, a Washington DC court found against the target, reasoning that US refiners were in “no position to ensure, or even contribute to, growth in the cellulosic biofuel industry”. Attempts by the EPA to enforce an even higher target in 2013, of 14m gallons, could prompt further legal challenges.

Nonetheless, on the back of federal support, cellulosic-ethanol production is expected to grow almost 20-fold this year (albeit falling far short of the EPA’s aspirations) as a new generation of bigger refineries come online. Other ethanol-manufacturing processes, such as substituting other sources for maize—wheat, for instance—are now attracting interest. None of these competing methods has yet proven itself viable on a large scale, but maize-ethanol manufacturers have little cause for optimism. Weak petrol demand and regulatory confusion leave them praying for a wholly different blend of government policy.

@1 year ago
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Peripheral employment
Mar 12th 2013, 17:00 by Economist.com

LAST week Greece reported the first monthly fall in its unemployment rate since May 2008. Although the rate stands at 26.4% for December, more than double the euro-area average, other indicators from Greece hint at the possibility of a turnaround in the jobs market. In the same month seasonally adjusted employment jumped 40,000, suggesting that the improving unemployment rate is not just down to job-seekers giving up. In addition, the latest numbers on firms’ hiring intentions show fewer companies plan to fire staff and more expect to hire, according to ManpowerGroup, a recruitment consultancy. Parts of Greece’s economy have become more competitive, with earnings dropping almost 30% from peak. Ireland is in the same boat. There unemployment rates have edged down 0.4 percentage points from peak of 15.1%. Wages are adjusting and employers are more positive, too. In Spain and Italy, however, (ManpowerGroup do not cover Portugal) wages have increased steadily, keeping their economies uncompetitive. Employers in both economies remain more keen to fire and less willing to hire than they were a year ago. Many workers on the European periphery are still waiting for a turnaround.

Peripheral employment
Mar 12th 2013, 17:00 by Economist.com

LAST week Greece reported the first monthly fall in its unemployment rate since May 2008. Although the rate stands at 26.4% for December, more than double the euro-area average, other indicators from Greece hint at the possibility of a turnaround in the jobs market. In the same month seasonally adjusted employment jumped 40,000, suggesting that the improving unemployment rate is not just down to job-seekers giving up. In addition, the latest numbers on firms’ hiring intentions show fewer companies plan to fire staff and more expect to hire, according to ManpowerGroup, a recruitment consultancy. Parts of Greece’s economy have become more competitive, with earnings dropping almost 30% from peak. Ireland is in the same boat. There unemployment rates have edged down 0.4 percentage points from peak of 15.1%. Wages are adjusting and employers are more positive, too. In Spain and Italy, however, (ManpowerGroup do not cover Portugal) wages have increased steadily, keeping their economies uncompetitive. Employers in both economies remain more keen to fire and less willing to hire than they were a year ago. Many workers on the European periphery are still waiting for a turnaround.

@1 year ago
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African-American-Chinese
Mar 14th 2013, 16:26 by Economist.com

The UNDP’s favoured measure of progress throws up some intriguing comparisons

GROSS domestic product, Robert F. Kennedy said, “measures everything…except that which makes life worthwhile.” In an attempt to redress the fixation with economic output alone, in 1990 the United Nations Development Programme (UNDP) launched the Human Development Index (HDI). This index combines life expectancy at birth, the average and expected number of years in education and economic output. Only two countries, Zimbabwe and Lesotho, have seen their index scores fall since 1990, but elsewhere big strides have been made, particularly in China, Iran and India. As a result of these changes, the UNDP expects the world’s middle-class population—defined as households with incomes over $20,000 a year—to grow from 1.85 billion in 2009 to 3.25 billion in 2020. It predicts that by 2030, 80% of middle-class households will live in emerging and developing countries, accounting for 70% of global spending.

These figures mask some important difference within countries. The UNDP estimates that Latin Americans in America have an HDI of 0.75 (on a par with Kazakhstan). African-Americans have an HDI rating of 0.70, which is similar to China’s. African-Americans in Louisiana score just 0.47 (equivalent to Nigeria).

African-American-Chinese
Mar 14th 2013, 16:26 by Economist.com

The UNDP’s favoured measure of progress throws up some intriguing comparisons

GROSS domestic product, Robert F. Kennedy said, “measures everything…except that which makes life worthwhile.” In an attempt to redress the fixation with economic output alone, in 1990 the United Nations Development Programme (UNDP) launched the Human Development Index (HDI). This index combines life expectancy at birth, the average and expected number of years in education and economic output. Only two countries, Zimbabwe and Lesotho, have seen their index scores fall since 1990, but elsewhere big strides have been made, particularly in China, Iran and India. As a result of these changes, the UNDP expects the world’s middle-class population—defined as households with incomes over $20,000 a year—to grow from 1.85 billion in 2009 to 3.25 billion in 2020. It predicts that by 2030, 80% of middle-class households will live in emerging and developing countries, accounting for 70% of global spending.

These figures mask some important difference within countries. The UNDP estimates that Latin Americans in America have an HDI of 0.75 (on a par with Kazakhstan). African-Americans have an HDI rating of 0.70, which is similar to China’s. African-Americans in Louisiana score just 0.47 (equivalent to Nigeria).

@1 year ago
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America’s Petrol-tax Revenue (1977 to 2010).

America’s Petrol-tax Revenue (1977 to 2010).

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America’s R & D Spending vs Patents Granted.

America’s R & D Spending vs Patents Granted.

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England’s worst state schools are no longer concentrated in big cities, either. Of the ten best-performing local authorities in Britain, seven are now in London. In Tower Hamlets, a largely Bangladeshi borough in the East End, children entitled to free school meals because of poverty do as well in GCSEs, the exams taken at 16, as do all children in England as a whole. Small post-industrial cities like Hull and Portsmouth fare badly. But so do many rural spots. Between 2005 and 2012 many of the local authorities falling into the bottom 50 by GCSE results were rural areas like Dorset, Herefordshire, Somerset and Suffolk. Most of the areas that climbed out of that sad group were cities or parts of cities.

The number of girls under the age of 18 getting pregnant has been falling rapidly in most parts. But here, too, the trend is uneven. In Southwark, an inner-London borough, the conception rate for girls under 18 has fallen by 64%. In West Devon, by contrast, the rate of pregnancies to girls under the age of 18 has actually increased in recent years—as it has in several of its neighbouring local authorities. In 1998 its rate was three-fifths of the national average. Now it is slightly above it.


Credit: Economist.
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Between 2008 and 2013 the annual number of murders in Britain’s three biggest urban police forces—the London Metropolitan Police, Greater Manchester and the West Midlands—declined by 34%. In the rest of the country, murder fell by just 7%. Burglaries have plummeted in inner London but have increased in some suburbs. Towns such as Brentwood, just east of London, have been hit by a wave of thefts by people who flee via motorways, thinks Louise McKinlay, leader of the borough council.

Drug-running gangs are increasingly building bases outside London, reckons detective superintendent Kath Barnes, of Hampshire Police. She runs “Operation Fortress”, a unit set up in 2012 to tackle organised crime following a spate of violence in Southampton, a city on the south coast of England. More oddly, last month guns including an AK47 assault rifle and an Uzi sub-machine gun were allegedly found at the home of a parish councillor in a Suffolk village. 


Credit: Economist.
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The decline of spam
Read this and win million$!!!

Jan 26th 2013 |From the print edition


In 2004 at Davos, Bill Gates predicted the death of spam. His prophecy may finally be coming true. Since a peak in 2008, the share of e-mails that are junk has steadily declined. In the past year it has fallen from around 80% to 67% of the global total, according to Kaspersky Lab, a cyber-security firm. Spam filters are doing their job. Sophisticated technology is authenticating senders. Police are cracking down on spammers. And web users are ignoring the spam that gets through. Many spammers have switched to peddling fake handbags and baldness cures via online ads, which are often cheaper and more likely to be clicked on.
1 year ago
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The sun’s still not quite set
Jan 23rd 2013, 15:17 by Economist.com

The imperial residue of overseas territories

SINCE 1946, the United Nations has compiled a list of the world’s “Non-Self-Governing Territories”: overseas domains it considers, in effect, to be colonies. Since then 100-odd entries have come and gone. Leavers may gain full independence (such as Cameroon or Singapore) or merge more or less fully with their parent nation (Puerto Rico or French Guiana). Today the number of entries has dwindled to just 15, most of which are British, or 16 if you include ambiguous Western Sahara.

Only three of the remaining listings are the subject of conflicting claims by other nations. Two are British-ruled; the third is Western Sahara. The dispute between Britain and Argentina over sovereign rights to the Falkland Islands (Malvinas) turned into war in 1982. It flared up this month with the publication of tit-for-tat open letters in national newspapers. Britain’s Foreign Office has also recently complained to the Spanish government over incursions into Gibraltar’s territorial waters. Achieving self-determination through referenda for both territories was listed as a priority in the British Government’s mid-term review on January 7th. The Falkland Islanders are due to vote in March. 

Such territorial disputes usually centre on history and the inhabitants’ choice of national identity, but also geography: the territory’s proximity to the claimant’s national boundaries and its distance from the “occupying country’s” shores. As the graphic below demonstrates, the distances between administrative capitals and their listed territories are indeed vast. The Falkland Islands’ capital Stanley lies some 12,650 km from London. Luckily for Britain and other former imperial powers, proximity is not the defining factor in deciding rightful rule (and if it were, the entire UN list of territories—and previous versions—would be up for grabs).

The UN lists only inhabited territory. A host of other, unpopulated, territories would be open to scrutiny on grounds of proximity, or lack of it: swathes of Antarctica for example. Norway’s Bouvet Island in the South Atlantic is the most remote island on the planet, lying furthest from any other land mass. But at a meagre 12,700 km from Oslo it cannot compete with some inhabited British, French or American islands for the furthest distance from the motherland.
1 year ago
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Drugs that cause most harm
Scoring drugs
Nov 2nd 2010, 12:30 by The Economist online

A new study suggests alcohol is more harmful than heroin or crack

MOST people would agree that some drugs are worse than others: heroin is probably considered to be more dangerous than marijuana, for instance. Because governments formulate criminal and social policies based upon classifications of harm, a new study published by the Lancet on November 1st makes interesting reading. Researchers led by Professor David Nutt, a former chief drugs adviser to the British government, asked drug-harm experts to rank 20 drugs (legal and illegal) on 16 measures of harm to the user and to wider society, such as damage to health, drug dependency, economic costs and crime. Alcohol is the most harmful drug in Britain, scoring 72 out of a possible 100, far more damaging than heroin (55) or crack cocaine (54). It is the most harmful to others by a wide margin, and is ranked fourth behind heroin, crack, and methamphetamine (crystal meth) for harm to the individual. The authors point out that the model’s weightings, though based on judgment, were analysed and found to be stable as large changes would be needed to change the overall rankings.
1 year ago
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USA alternatives: Hitting a wall

Maize-ethanol manufacturers are reaping meagre rewards. This year may be only slightly better.

Ethanol manufacturing consumes two-fifths of the US maize harvest. This has made the industry unpopular with those who worry about food security and blame it for pushing up food prices by limiting supply. Recently, many makers of the fuel—which, at the federal government’s behest, is mixed with petrol (gasoline)—have been suffering adversity as well as unpopularity.

Among the major types of ethanol, in the US the variety made from maize reigns supreme. It is the source of the vast majority of US ethanol production, in part due to a law stipulating that 40% of the maize harvest must be used to make ethanol. Despite this, maize-ethanol producers are having a rough ride. To turn a decent profit, they need a wide spread between prices for maize and those for ethanol. But last year saw the worst drought in the US for over 50 years, sapping crop yields and driving up maize prices in the third quarter (see chart). As the price of maize exceeded that of ethanol, it wiped out many maize-ethanol makers’ profits. (Prices eventually fell in the latter part of the year, causing an overall year-on-year rise of 2%, according to the US Department of Agriculture (USDA).)

Regulatory uncertainty

Ethanol makers’ difficulties are now being compounded by mounting regulatory uncertainty. This in part relates to a dispute over the decision by the Environmental Protection Agency (EPA) in 2011 to raise the limit on the proportion of marketed petrol that can be derived from ethanol from 10% to 15% for cars made after 2001. Yet, despite the EPA’s move, the 10% “blend wall” remains highly relevant: the “E15” mix remains scarce, partly due to oil-industry opposition.

A related source of current controversy is the Renewable Fuels Standard (RFS). Under this mechanism the EPA sets annual quotas for the total volume of ethanol that refiners must blend into petrol. Last year, it mandated mixing in 13.2bn gallons of ethanol, or about 10% of the 133bn gallons of gasoline guzzled. But this year it proposes targeting 13.8bn gallons, which will be difficult to achieve for two principal reasons.

First, petrol consumption in the US has been falling in recent years, as Americans drive less and vehicles become more fuel efficient. Thus, demand for petrol—hence also for ethanol—may not live up to expectations. Second, oil prices have been falling in the US as oil output has risen. Petrol refiners have therefore favoured using more (relatively cheap) oil over ethanol, instead fulfilling their RFS obligations by buying Renewable Identification Number (RIN) credits (one RIN is equal to roughly a gallon of renewable fuel). Against this backdrop, only an uncharacteristic spike in petrol demand, combined with a sharp rise in oil prices, would make the EPA’s 2013 ethanol target attainable.

Criticism from food and oil groups hostile to ethanol may also need to be overcome. They argue that many cars are not made to use higher concentrations of the liquid, although more uptake of E15 may be necessary to meet this year’s target. Ethanol’s detractors want the EPA to keep down its 2013 target, which could be confirmed in April. A coalition of interests in February petitioned the US Supreme Court to overturn a lower court’s support of the EPA’s 2011 decision. Amid the maize-price pressures, doubt over future regulations and falling petrol prices, ethanol production has slowed. By mid-February, 25 of the 211 US ethanol plants reportedly sat idle.

Green shoots?

This year may see a modest upturn in the fortunes of those making maize ethanol by old-fashioned methods, whose margins have recovered greatly, according to data provided by the US Energy Information Administration (EIA). More sophisticated and profitable plants capable of recovering other products, like maize oil, have been better insulated against high crop prices, the government agency points out.

The Economist Intelligence Unit expects the coming crop year, due to begin when planting is carried out later in the spring, to bring a much larger yield than was seen in the preceding period. We forecast that maize prices will drop by just under 1% in 2013—from US$305/tonne in the first quarter of 2013 to US$290/tonne in the fourth quarter—as stocks will remain tight despite higher output. On top of this, Brazil’s efforts to use more of its (sugar-cane) ethanol at home, meaning it will export less to the US, also count in maize-ethanol makers’ favour.

Should maize-ethanol production fail to rebound, makers of other forms of ethanol could benefit, especially if the EPA’s E15 rule is allowed to stand. Cellulosic ethanol (made from wood chips, crop waste and so forth) is in theory one alternative source, although it has so far failed to live up to its billing. Like maize ethanol, the cellulosic type faces animosity from some members of Congress. Only 22,000 gallons of the fuel were produced last year, despite a supposedly binding EPA blending target of 8.65m gallons. Following a complaint from the American Petroleum Institute (API), a trade association, a Washington DC court found against the target, reasoning that US refiners were in “no position to ensure, or even contribute to, growth in the cellulosic biofuel industry”. Attempts by the EPA to enforce an even higher target in 2013, of 14m gallons, could prompt further legal challenges.

Nonetheless, on the back of federal support, cellulosic-ethanol production is expected to grow almost 20-fold this year (albeit falling far short of the EPA’s aspirations) as a new generation of bigger refineries come online. Other ethanol-manufacturing processes, such as substituting other sources for maize—wheat, for instance—are now attracting interest. None of these competing methods has yet proven itself viable on a large scale, but maize-ethanol manufacturers have little cause for optimism. Weak petrol demand and regulatory confusion leave them praying for a wholly different blend of government policy.

1 year ago
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Thought for food
Mar 12th 2013, 14:35 by Economist.com

How much people in different countries spend on food

THE discovery by European food shoppers that some of them have been eating horse in place of beef is, some argue, a result of a trend in the rich world. Spending on food as a share of total income has declined markedly, but at the expense, some say, of quality. This is a nice kind of problem to have: people in poor countries are forced to devote a far higher share of income to buying food. As the chart shows, that correlation between poverty and spending on food is not watertight: Indians, for example, spend less of their household budget on food than Russians do. In general, though, as countries develop people spend proportionally less on food. South Koreans spent one-third of their income on food in 1975; now the figure is just 12%. That leaves more money for the more enjoyable things in life. Hungarians lead the way in these matters: they devote around 10% of their household spending to alcohol and tobacco.
1 year ago
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Peripheral employment
Mar 12th 2013, 17:00 by Economist.com

LAST week Greece reported the first monthly fall in its unemployment rate since May 2008. Although the rate stands at 26.4% for December, more than double the euro-area average, other indicators from Greece hint at the possibility of a turnaround in the jobs market. In the same month seasonally adjusted employment jumped 40,000, suggesting that the improving unemployment rate is not just down to job-seekers giving up. In addition, the latest numbers on firms’ hiring intentions show fewer companies plan to fire staff and more expect to hire, according to ManpowerGroup, a recruitment consultancy. Parts of Greece’s economy have become more competitive, with earnings dropping almost 30% from peak. Ireland is in the same boat. There unemployment rates have edged down 0.4 percentage points from peak of 15.1%. Wages are adjusting and employers are more positive, too. In Spain and Italy, however, (ManpowerGroup do not cover Portugal) wages have increased steadily, keeping their economies uncompetitive. Employers in both economies remain more keen to fire and less willing to hire than they were a year ago. Many workers on the European periphery are still waiting for a turnaround.
1 year ago
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Capitalism makes you happy*
Mar 13th 2013, 17:52 by Economist.com

Suicide rates in Europe since 1990

THE World Health Organisation has produced some fresh data on the health, or otherwise, of Europeans. We have picked out suicide rates, which have declined in most of Europe since the early 1990s except for a slight uptick since 2007, which may or may not have something to do with the onset of the financial crisis. What’s more interesting, though, is the effect of the collapse of the Soviet Union on the suicide rate in the Commonwealth of Independent States (CIS)—the countries that were once members of the USSR (excluding the Baltic states). Those who disapprove of the way that market economies force people to compete with each other might point to the spike in suicide rates in the CIS after 1989 (something which may be down to different methods of data collection). Those who, like The Economist, take the opposite view will point to the marked decline in suicide as the CIS countries sloughed off one system and embraced another.
1 year ago
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African-American-Chinese
Mar 14th 2013, 16:26 by Economist.com

The UNDP’s favoured measure of progress throws up some intriguing comparisons

GROSS domestic product, Robert F. Kennedy said, “measures everything…except that which makes life worthwhile.” In an attempt to redress the fixation with economic output alone, in 1990 the United Nations Development Programme (UNDP) launched the Human Development Index (HDI). This index combines life expectancy at birth, the average and expected number of years in education and economic output. Only two countries, Zimbabwe and Lesotho, have seen their index scores fall since 1990, but elsewhere big strides have been made, particularly in China, Iran and India. As a result of these changes, the UNDP expects the world’s middle-class population—defined as households with incomes over $20,000 a year—to grow from 1.85 billion in 2009 to 3.25 billion in 2020. It predicts that by 2030, 80% of middle-class households will live in emerging and developing countries, accounting for 70% of global spending.

These figures mask some important difference within countries. The UNDP estimates that Latin Americans in America have an HDI of 0.75 (on a par with Kazakhstan). African-Americans have an HDI rating of 0.70, which is similar to China’s. African-Americans in Louisiana score just 0.47 (equivalent to Nigeria).
1 year ago
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Stockmarkets

After more than five years of financial turmoil, some stockmarkets are back to, or close to, their pre-crisis levels. Stockmarkets rose until mid-to-late 2007, and even into 2008, before the severity of the financial crisis hit them; their troughs were in early 2009. Last week the Dow Jones Industrial Average surpassed its previous peak (though it is still around 7% off once inflation is taken into account). The S&P 500 and Germany’s DAX are expected to reach all-time highs soon. The FTSE 100 is near its 2007 peak, which was only 3% shy of its record high in December 1999. Not all stockmarkets have recovered to this degree. Greece’s Athex composite index is still more than 80% below its peak in October 2007.
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America’s Petrol-tax Revenue (1977 to 2010).
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America’s Shale Gas: Spot Price vs Production.
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America’s R & D Spending vs Patents Granted.
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America’s Competitiveness: Infrastructure

A time for renewal

America’s infrastructure is in a dire state, stimulating a search for creative solutions


Floreat Florida
RAHM EMANUEL, THE mayor of Chicago, Illinois, lifts up a decayed wooden tube and waves it for emphasis. Many of the city’s water pipes are over 100 years old, he says. Some, it turned out when the Water Department got round to replacing them, are made of wood. No wonder the network sprang 3,800 leaks in 2011 alone. Yet at the pace of investment that prevailed until last year it would have taken the local water company until 2059 to refurbish all the mains, the mayor points out.

Everywhere Mr Emanuel looks, he sees the need for new or improved infrastructure: pockmarked roads; century-old stations on the “L”, Chicago’s elevated-train network; grand but draughty municipal buildings; a congested airport; clapped-out schools and community colleges. Over the next three years alone he plans to spend over $7 billion to start fixing all this. But finding the money has required some creativity.

Cities like Chicago, with meagre investment budgets, generally rely on grants from the state and federal governments, along with municipal bonds, to pay for such improvements. However, the federal government’s fiscal woes and the political impasse in Washington have been putting the squeeze on infrastructure funding. Take the highway fund, which Congress created to pay for its share (usually about a third) of improvements to roads and public transport around the country. It is supposed to be fed by receipts from the gas (petrol) tax of 18.4 cents per gallon, but this is not linked to inflation and has not been raised since 1993. Moreover, Americans are driving less, in more efficient cars, or in ones that run on something other than petrol, all of which leaves the transportation kitty increasingly bare. At the same time the cost of building roads has risen faster than prices in general, further sapping the fund’s value.

Fingers in the dyke

Politics has compounded the problem. The act under which Congress doles out money from the highway fund expired in 2009. Unable to agree on how much to spend, or how to top up the shrinking fund, lawmakers passed nine short extensions of the old act before finally approving a new, two-year bill last year. But this does nothing to strengthen the fraying funding mechanism. Instead, Congress has frozen spending at the current level and cobbled together a few one-off revenue-raisers to pay for it. The Congressional Budget Office now expects the highway fund to run dry in 2014, and the gap between receipts and the present level of spending to reach $109 billion over the next eight years.

Worse, the current level of investment, even if Congress finds a way to maintain it, is utterly inadequate. More than five years after the collapse of a bridge in Minnesota that claimed 13 lives and prompted pledges to speed up repairs, almost 70,000 other bridges, or roughly 11% of the total, are still rated as “structurally deficient” by the Federal Highway Administration. The American Society of Civil Engineers (ASCE) estimated in 2009 that Americans lost $78 billion a year to traffic delays, in the form of wasted time and petrol. A further $67 billion goes on repairing the damage to cars caused by the shoddy condition of many roads. Crashes, a good number of which are also attributable to this neglect, cost a further $230 billion. The ASCE reckoned that for the period from 2005 to 2020 the country was spending only 54% of what was needed to prevent further deterioration, and just 29% of what it would take to set America’s roads to rights.

Falling to bits

Nor are the problems confined to roads. The ASCE thought that America’s water and sewage systems, inland waterways and levees were equally dilapidated, and that its schools, dams, airports, public transport and hazardous-waste disposal were in only slightly better shape. It blamed “delayed maintenance and chronic underfunding” and argued that the country needed to double its spending on infrastructure over five years, from a projected $1.1 trillion to $2.2 trillion. And that was at a time when infrastructure spending was being boosted by a one-off contribution from Mr Obama’s stimulus.

Civil engineers, naturally, are keen on civil-engineering projects. But the Centre for American Progress, a think-tank, reached much the same conclusion in a report that looked only at the federal share of spending on essential projects. Congress, it concluded, was coughing up barely half of the $262 billion a year that was needed.

Such big sums are daunting in austere times, but the potential benefits outweigh the spending. In the short run, infrastructure investments provide a boost to a feeble recovery. The CBO estimated in 2011 that for every dollar the federal government spent on infrastructure through Mr Obama’s stimulus, the value of economic activity increased by between $1 and $2.50—one of the biggest multipliers of the main components of the programme. And a study by the University of Massachusetts-Amherst in 2009 found that every $1 billion spent on infrastructure creates 18,000 jobs, almost 30% more than if the same amount were used to cut personal income taxes.

Every $1 billion spent on infrastructure creates 18,000 jobs, almost 30% more than if the same amount were used to cut personal income taxes.

In the long run, investment in infrastructure boosts productivity by enabling people and goods to get to places faster, communicate more easily, spend less time and money on repairs and so on. One recent study found that the construction of a road typically led to an increase in economic activity between three and eight times bigger than the initial outlay within eight years after its completion. (The impact subsequently fades, presumably because congestion returns.) And since the government’s borrowing costs are currently low and the construction industry is still in the doldrums, investment in infrastructure is cheaper now than it will be when the economy is humming again.

Mr Emanuel is convinced of all this. Unfortunately for Chicagoans, the politicians in Springfield, the state capital, are even less help than those in Washington. The state and local authorities have accumulated debts of about $10,000 per resident, which puts them among the top quintile in the country. The pension plan for state workers has assets to cover only 39% of its projected liabilities. In 2009 the legislature approved a series of tax increases on things like sweets and alcohol, as well as an expansion of gambling, with the proceeds earmarked for infrastructure improvements. But so far these measures have fallen well short of producing the hoped-for $1 billion a year. All this has left Illinois with the worst credit rating of all 50 American states—and little money to spare for an overhaul of Chicago’s infrastructure.

The city has not always been a model of fiscal rectitude. The previous administration papered over deficits with one-off measures, prompting a downgrade in its credit rating the year before Mr Emanuel took office. Although for the most part he has since cut costs enough to match the city’s means, the state’s failure to amend the pension system, in which Chicago participates, raises yet another threat to its finances.

With the city, state and federal governments all strapped for cash, Mr Emmanuel has had to turn to other sources of revenue. One obvious step is to increase the charges to users of the city’s infrastructure. At his urging, the city council raised water rates by 25% last year; by 2015 they will almost double. That has allowed the city to start replacing leaking water mains at two-and-a-half times the previous rate. Similarly, fares on the L are rising, which should help cover the costs of refurbishing decrepit stations. Mr Emanuel also wants to encourage more private investment in the city’s infrastructure, but its left-leaning voters are touchy about anything that smacks of privatisation. They noted that a consortium to which his predecessor sold a 75-year lease on the city’s parking meters immediately quadrupled the fees.

Mr Emanuel’s solution is called the Chicago Infrastructure Trust (CIT). This will help pair investors with projects that will generate a revenue stream to be hypothecated to cover the cost of the original investment, plus a return. First on its list are some $100m-worth of energy-saving measures in city buildings.

Lightbulb moment

At Newton Bateman Elementary School the principal asks a teacher how she likes the new lighting in her classroom. She seems not to have noticed any difference. That is the idea. Workmen have recently halved the number of lights above her head, installed more efficient bulbs and added automatic switches. Over the next ten months the city wants to overhaul the lighting in another 241 schools. It estimates that these retrofits will cost $14m and yield savings of $3m a year. In January it put out a request for “financial partners” to stump up the cash, to be repaid from the savings in the schools’ operating budgets.

From the mayor’s point of view this scheme has several advantages. It enables him to raise money from investors such as foreigners, charities and pension funds who are not interested in tax-exempt municipal bonds because they have little tax liability in the first place. It means that projects with clear benefits but low priority can go ahead sooner, helping to stimulate the local economy. All the assets involved remain not just the property of the city but under its management, so political attacks on “privatisation” can easily be rebutted. The mayor’s supporters in the unions are enthusiastic because the scheme will create new jobs. And although initially Mr Emanuel expects the CIT to get involved in only around $200m of the $7 billion-worth of infrastructure investments he is looking for, he clearly hopes to expand its role if the early projects prove successful.

Mr Emanuel is not the only local leader coming up with inventive ways to pay for infrastructure improvements despite the fiscal squeeze. The number of “public-private partnership” (PPP) projects under way around the country, although still low by European standards, has jumped in recent years. They include a tunnel under construction in Florida, a commuter rail scheme in Colorado and road improvements in Texas and Virginia. The Centre for American Progress, not normally a cheerleader for red-blooded capitalism, reckons it should be possible to mobilise at least $60 billion a year in private infrastructure investment. That would be a huge step up from the paltry total of $10 billion raised through such schemes between 1990 and 2006.

In Indiana a PPP is being used to boost public investment. In 2006 Mitch Daniels, a former governor, championed a 75-year lease of a busy toll road in the state in order to create an investment fund for future roadbuilding projects. The consortium that now runs the highway paid $3.8 billion for the privilege (just before the recession caused asset prices to plummet), as well as promising to invest $600m in upkeep over the first nine years of the lease. Indiana has used the proceeds to increase its roadbuilding budget by a third, to $1 billion a year.

Bob McDonnell, the governor of Virginia, is confronting the gradual decline in revenue raised by the state’s gas tax, which is levied on top of the federal one and suffers from the same problems. He recently persuaded the state legislature to abolish it altogether and instead raise the state’s sales tax from 5% to 5.3%. Along with some other increases, this should provide a steadier revenue stream.

Antonio Villaraigosa, the mayor of Los Angeles, helped secure a 30-year increase in the local sales tax in 2008 to fund transport projects. He then used the projected revenue as security for loans that will allow the city to build the original 30-year roster of projects in just ten years. The idea is to stimulate the local economy and take advantage of low construction costs, just as economists have been urging Congress to do.

Congress, however, is being unhelpful as usual, and not just by scrimping on its own capital budget. Last year, for the first time, it gave states free rein to charge tolls on new highways built with federal help, or on new lanes added to existing ones. But it still bars them from levying tolls on the unimproved portions of existing roads. It has also allowed a law to lapse that encouraged private investment in infrastructure by offering a tax break on bonds that finance it.

Meanwhile, the repeated brief extensions of the highway bill make it difficult to plan for the long term or to embark confidently on projects that might take many years to complete. Mr Obama has long called for a federal infrastructure bank which could invest more strategically and attract private capital relatively cheaply by subsidising or guaranteeing commercial loans. But Congress wants nothing to do with it.

There are plenty of ways for Congress to boost investment in infrastructure without massively inflating the public debt, but America’s governors and mayors are not holding their breath. As Mr Emanuel, a former congressman and White House chief of staff, says, “We can’t allow dysfunction, whether in Washington or Springfield, to delay our economic development.”


Mar 16th 2013 |From the print edition.

1 year ago
#The Economist #The Economist Special Report #America's Competitiveness