Keynes Newsletter

December 13th 2016
DUBAI COLLEGE
Issue 28. Spetember 2021. Copyright of Prime Car Magazine | primemagazine.com
KEYNES
E C O N O M I C S N E W S L E T T E R

December 2016
T A B L E O F
Contents
03
04 Fintech: The Future of Banking?
Editorial
Trump: What happens
Brexit,
06 next?
Capitalism: What are
08
Darwinian
effects? its
10
12
14
The Downfall of the Taxi
Uber:
Industry
over Money: The Gambler's
Mind
and Conceit
Fallacy
Effects of Poverty and
The
on the Global
Inequality
16
Economy and Trade Market
19 In the UAE
to D.C. : Washington D.C.
DC
Summary
Trip
21
Economics Bookshelf

to the first issue of Keynes, a student-led newsletter
Welcome
with examining significant economic events, theories
tasked
advancements in a collaborated effort to discern the
and
landscape of our global economy.
ever-changing
the first term, our society met on a weekly basis to
Throughout
and debate prevalent issues facing our economy. With
discuss
access and insight into the political mayhem
instant
across the globe, our members were quick to
unravelling
the economic implications of a recent shift towards
decipher
ideals, as exhibited in the election of Donald J. Trump,
populist
UK's decision to leave the EU, and more recent turbulence
the
Europe after the emergence of several far-right
across
in Marine Le Pen (France), Albert Hoofer (Austria)
demagogues
Beppe Grillo (Italy), to name a few. Our visiting speaker, Mr.
and
Aka, reassured the society that initial market shock
Jahangir
Trump’s election was merely a consequence of a strong
after
to act in the vote’s aftermath – global markets
compulsion
as investors digested Trump’s victory, and we
recovered
proceeded to tackle more persistent issues
likewise
the long-term sustainability of our economy.
threatening
a total of six student-led sessions, our society addressed a
In
of important matters, ranging from the increasing role
number
financial technology among big-data firms to the challenges
of
micro-financing in Southeast Asia. The underlying notion
of
emerges, however, after a series of stimulating open
that
presentations and visiting speakers, is that the practice
forums,
economics can no longer be confined to the analysis of
of
much to the contrary, and with respect to a rise in
markets;
inequality, is the nature of social reasoning that has
global
to challenge traditional methods of applying classroom
begun
to real-world crises. Put frankly, the study of
economics
can not afford to exclude the experience of
economics
countries, nor can it neglect the importance of
developing
to credit, or the economic role of co-operation as well as
access
Andrew Haldane, chief economist of the Bank of
competition.
believes that the time has come to ‘rethink some of the
England
building blocks of economics’ - it is in this fashion that our
basic
sets forth to provide a solution.
newsletter
Malik Editor
Hasan
hasan7713@dubaicollege.org
December 2016 3
Editorial
"The study of economics can no longer
afford to exclude the experience of
developing countries, nor can it
neglect the importance of access to
credit, or the economic role of
co-operation as well as competition. "

The Future of
Fintech:
Banking?
is no secret that Fintech is taking the financial world by storm. Forbes is denoting it as “the future of your money”
It
Times Magazine proclaims it is an industry-shaker that banks are “right to be afraid of”. Simply put, Fintech (a
and
of Financial and Technology) is software that can be used to provide a range of financial services on
portmanteau
a microcosmic and macrocosmic level. Indeed, Fintech is revolutionising the way the banking and finance
both
will function in the very near future, and the ripples are growing exponentially as private investment into
industry
is almost doubling year-on-year. Currently, private firms are investing just over 19 billion US Dollars in a bid
Fintech
gain traction in this new battleground and assert themselves as the alpha, despite the infant nature of the Fintech
to
This age greatly contrasts with the longstanding paradigm of banking, a disparity that only instigates more
industry.
backbone of the Fintech revolution is hinged on the dichotomy of creation and disruption. Firstly, there is the
The
element as the “big banks” of Wall Street scramble to put together an action plan in order to adapt their
disruption
services to match the changing course of market interests. Failing as a result of becoming archaic in a changing
own
is a story we have all heard far too many times, manifested by the firms many thought were too powerful to
industry
the likes of ‘Borders’ and ‘Blockbuster’ prompt a cautionary tale for current giants who resist change. Fintech
fail;
are prided on their unbelievable efficiency – something only exemplified in comparison with banks. Fintech
firms
can even function without the need for physical offices, with all of their material existing in cloud. The
firms
of the low cost of area for servers and data hubs versus the high price that banks pay for their numerous
comparison
(many of which command a premium because of high profile locations) is mind-boggling. The antithetical
offices
of the banking industry (often considered that of high society bigwigs) and the disruptive and somewhat lax
ideals
of start-up culture have led to conflicts of interests arising in the past. However, it seems banks have no other
nature
today but to either modernise themselves or work with start-ups, else their fate may be condemned to failure.
choice
there are steps being taken by banks to adapt – the introduction of mobile banking by many major banks
But
to be one in the right direction, though it begs the question as to whether they are innovating at a rate that
appears
allow them to maintain their current stake in the economy, or whether they will soon be overtaken by financial
will
firms.
technology
4
December 2016
Arnav Mathur
"Consumers need to feel their
information is safe as, unlike a
bank, there is no large vault
that one can see to put their
minds at ease about the
security of their wealth. "
and more uncertainty about the fate of traditional methods of managing and storing money.

inverse principle is that of creation, whereby new, smaller firms no longer need to pander to the whims of
The
bigwigs due to the greater availability of financial data and services that are no longer limited to single
corporate
cities, or localities thanks to the marvel that is the Internet. Fintech firms have an infinite consumer grasp, and
towns,
usher in a new era of a sharing economy: the new banking industry that is accessible on the go, at
consequently
fingertips, 24 hours a day. Complementary industries are set to boom in the near future as the demand for
one’s
that can provide related skills surges to unprecedented amounts. Both front end and back end software
specialists
are highly sought after as the Fintech industry innovates to create faster and more efficient methods of
developers
storage and transfers, in addition to a more cohesive user experience. This lends itself to the more macrocosmic
data
on the need for more appropriate methods of storing this Big Data, an issue that is currently hassling some of
issue
largest and most prominent companies in the technology field, most notably Google and Amazon who are
the
great attention and urgency on building large-scale cloud platforms capable of managing such vast
placing
of consumer data and finding an effective way (i.e. compression algorithms) to store it. Of course with
quantities
sensitive information moving wirelessly, a need for greater security arises on such platforms as cybersecurity
more
and hackers play cat and mouse games of building and breaking more effective encryption algorithms
experts
Consumers need to feel their information is safe as, unlike a bank, there is no large vault that one can
respectively.
to put their minds at ease about the security of their wealth. Rather, the real burden falls on coders to constantly
see
more elaborate methods of ensuring that data is both transmitted and stored in the most secure manner
create
possible.
the leaps and bounds that the Fintech industry is making in terms of changing the way money moves, there
Despite
still a number of challenges that need to be addressed. Over and above the aforementioned Big Data and
are
we also face issues on the ethics of data control, assuming we evolve into a Fintech-centric society.
cybersecurity,
can be 2 equally horrifying scenarios that play out: one where it is ultimately impossible to control data on such
There
great scale that we end up with a sudden lack of regulation in the economy, resulting in illegal or restricted goods
a
rampant. The alternative is equally jarring, where data control measures escalate out of control, resulting in a
running
society where authorities can see and store all of the transactions we execute. With hard cash obsolete,
dystopian
would no longer be any privacy of transactions – a feature that governments may exploit for greater control over
there
population and insight into their lives. Furthermore, the effectiveness of Fintech will always be limited to the
their
of the algorithm the software is based upon. While it is not difficult designing software to manage the wealth
intricacy
the common man (a current account, a savings account and maybe some form of retirement fund), it becomes
of
challenging as we progress up the economic classes into the elites and the top five- to one-percenters. At
increasingly
stage, wealth becomes complex and multifaceted, manifesting itself as numerous financial instruments and
this
spread across an array of accounts, quite possibly culminating in some form of inheritance fund. Not only
estates
many such clients be unwilling to transition due to the bespoke service they receive today, but developing
would
to manage such a wide range of variables would be incredibly challenging. Many large banking
software
have their own private arm, and perhaps some will continue to run their private banking segment as a
corporations
intensive endeavour, although the results that this will yield can only be speculated.
labour
what does the future hold in store for you and I, the average consumer? Honestly, it is very hard to predict. There
So
no doubt that Fintech will definitely hold a sizeable stake in the society of tomorrow, though it is difficult to define
is
exact period of time in which this can be expected, given the complexities linked to the management of the data
an
the development of the applications themselves. However, we can rest assured that Fintech will become a major
and
in the realm of finance, and in doing so will likely eat into a chunk of the market that until today has been held
player
exclusively by banking institutions. Many such firms are already sending waves throughout the industry, and
almost
amount that banks are investing in technological research is clearly an insight into the opportunities and
the
that Fintech will unleash in a few years.
uncertainties
5
December 2016

Trump:
Brexit,
happens next?
What
has been a surprising year in terms of global geo-political and economic tensions. This has primarily been
2016
by two key events – (1) the Brexit vote from the European Union (EU) on 23rd June, and (2) Donald Trump
caused
elected to become President of USA on 8th November. Geo-political opinions centered around these two
being
have varied significantly both domestically and internationally; their impacts are expected to be immense
events
forward, not least due to the uncertainties that they both bring. Given the range of different opinions and
going
sudden effects, the true question is, what happens next?
their
a result of the Brexit vote in June, Britain will have a 2 year “divorce period” from the EU after Article 50 of the
As
of Lisbon is invoked. While the true consequences and economic impact of Brexit are difficult to currently
Treaty
Brexit vote led to an
The
depreciation of
immediate
Pound Sterling (GBP)
the
e.g. USD and EUR.
against
a result, UK imports
As
more expensive,
became
the general cost
alongside
goods rising, causing
of
inflation. The
cost-push
pressures were
inflationary
by the Bank of
supported
cutting interest
England
by 0.25%. The likely
rates
for this was to
reason
firms and
incentivise
to borrow and
consumers
more. This base
consume
has remained the same
rate
July up till now,
from
that perhaps
suggesting
rates may not
interest
in the short run,
change
would encourage
which
economic activity in
more
6
December 2016
Rafael Azmat
gauge, it is clear is that it will be an epoch-making event for the UK and indeed the EU.
Britain’s economy.

trade deficit still remains in the UK, though the value of this deficit has steadily risen post-Brexit to GBP 12.60 billion.
A
this steady growth, in July (right after the Brexit vote), the value of the deficit had actually improved by GBP
Despite
billion. From these figures, we can observe that the fluctuations in the value of GBP against other major currencies
3.6
not had an impact on the UK trade deficit; should we continue to see the GBP depreciate continuously up to the
have
exit, however, then we could potentially see a more pronounced rise in exports in comparison to imports in the
official
which could reduce the trade deficit.
future,
key impact of Brexit could be on foreign manufacturing firms with factories in the UK being compelled to
Another
out to other EU countries in order to gain benefits from intra-EU trade and sales advantages. Global financial
move
could also move out as they lose their EU business “passport rights”. All in all, it is estimated that Brexit could
firms
the UK approx. GBP 100 billion.
cost
the only President-Elect to have no formal political experience,
Being
J. Trump has already come up with a series of new plans,
Donald
he believes would 'Make America Great Again'. Trump has
which
the idea of boosting US growth through expansionary fiscal
adopted
Trump intends to reduce business tax from 35% to 15%, and
policy.
the top direct tax to 33% from a current 39%, whilst increasing US
cut
spending. This policy would cause consumption to
government’s
alongside firms within the US to better invest in domestic goods.
rise,
rise in household consumption and investments by firms will result
A
inflationary pressures in the US economy. Due to the value of the
in
Dollar (USD) potentially appreciating, this would make US exports
US
expensive, but domestic US goods cheaper. On the other
more
imports would become cheaper and could result in imported
hand,
inflation.
with Trump being in favour of high US protectionism, if legislated, there could be a large impact on
Furthermore,
trade and growth. In the short-run, Trump may achieve the higher protectionism by potentially imposing higher
global
or introducing more quotas on foreign exporters into the US such as China, Japan, Korea. A rather severe result
tariffs
Trump increasing protectionism could be the development of trade wars, in which countries affected by the
of
protectionism may introduce similar trade barriers as a method of retaliation. However, the protectionist
increased
would mean that US firms are better insulated from international competition. Trump has even promised to
policy
the Trans-Pacific Partnership (TPP) - a pact aimed to deepen economic ties between 12 member nations (the
abandon
being one), slashing tariffs and fostering trade to boost growth, and indicating Trump’s strong desire for
USA
pendulum in the UK and the USA appears to have shifted in terms of how the two countries will each prioritise
The
economic interests regardless of any external international forces. In view of this, what we will most likely see
their
a post-Brexit UK and post-Trump US are stronger international trade negotiations to promote their economic
from
as well as expansionary economic policies under a low tax environment.
interests,
7
December 2016
'Trump intends to reduce business tax from 35%
to 15%, and cut the top direct tax to 33% from a
current 39%, whilst increasing US government’s
spending."
protectionism.

Capitalism
Darwinian
its Effects
and
Capitalism, otherwise known as a branch of Social Darwinism, is a term that applies the biological ideas of
Darwinian
Darwin to modern day economics. Social Darwinism is an umbrella term given to various phenomena that
Charles
in the second half of the 19th century; it tries to apply biological concepts of natural selection and survival of
emerged
fittest to human society.
the
terms of capitalism specifically, it meant that cutthroat competition between firms and greed-driven practices were
In
(as they supported survival of the fittest). In fact, Darwinian views were so popular amongst capitalists that many
fair
their Christian backgrounds to justify their Darwinist approach to economics. However, we can even
abandoned
Darwinian Capitalism to modern day businesses. Robert Blake and his co-authors wrote a book (Corporate
apply
in 1996 attempting to apply modern Darwinism to business. They concluded that business evolves in
Darwinism)
predictable ways, specifically in defined stages (very much like the stages of human evolution) - this "business
very
is natural and businesses either swallow the competition, or find themselves being swallowed by that
evolution"
However, these Darwinist approaches have disastrous impacts on the economy.
competition.
are usually the first to suffer. There is little to no regard for the workers wellbeing, pay is minimal, and working
Workers
are usually poor. In the 19th century, many workers suffered frequent injury under Darwinist firms (which
conditions
usually the larger firms), and many more were forced into unpaid overtime (due to fear of being fired). As a result,
were
managed to improve output and keep costs low (in the short run), as workers had no choice but to work for
firms
or to go to an equally terrible large firm. Working for a small firm was usually better: pay was higher, conditions
them
better and overall satisfaction was much higher than in big firms. However, Darwinian Capitalism justified
were
competition, which meant that large firms would bully small firms out of business or buy them out. Ironically,
ruthless
the long run many firms suffered because of their ruthless exploitation of workers. Staff satisfaction was low so firms
in
lower productivity (and thus produced less), and many workers started to go on strikes and formed trade unions.
had
time, many firms gave in; working conditions were improved, pay was higher, and many people began to re-enter
In
8
December 2016
Craig D'Souza
the workforce with higher productivity (due to their increased job satisfaction).

consumers were also affected by the trend of
Many
Capitalism. Since producers wanted to
Darwinian
the highest possible profits, and usually had a
make
or oligopoly in the market, prices were
monopoly
fixed at a much higher value then what was
usually
fair. Due to this, many in the working class
deemed
to survive; things were not improving as
struggled
rich could comfortably afford these higher priced
the
and services, bringing upon inflation and
goods
to a large increase in income inequality
leading
the rich and the poor. In addition, firms
amongst
usually use their high profits to expand into
would
land. Many local houses were destroyed and
civilian
were left homeless. These conditions were
people
easily fixed since low income families could not
not
education for their young; there was just a
afford
supply of unskilled labor being brought into
constant
market. In fact, education was such a privilege
the
the only way to increase economic growth was
that
improve and increase capital and to increase
to
of labor. Capital was constantly being bought
supply
there was large competition between
and
firms to design better machinery.
manufacturing
of labor was increased through child labor,
Supply
women into the workforce and (in the short
bringing
longer work hours/ overtime.
run)
Darwinian Capitalism was a misapplication of a scientific theory. Many believed that since natural
Overall,
was a normal occurrence, they could justify their greedy and ruthless behavior. However, this type of
selection
played a critically important role in the development and growth of capitalism. It helped with the
capitalism
of women into the workforce, trade unions becoming more prominent and even encouraged
introduction
in capital. Whilst it remains impossible to infer whether the world would have been better off
advancements
Darwinian Capitalism, it can be justified as having led to some improvements in the general economy,
without
9
December 2016
Charles Darwin
"Many in the working class struggled to survive; things were not improving as
the rich could comfortably afford these higher priced goods and services,
bringing upon inflation and leading to a large increase in income inequality
amongst the rich and the poor."
despite its failure to account for the notion of equity.

The Downfall of the
Uber:
Industrty
Taxi
is an innovative American
Uber
transportation network
online
headquartered in San
company
California. It
Francisco,
markets and operates
develops,
Uber mobile app, which
the
consumers with
allows
to submit a trip
smartphones
which the software
request,
then automatically
program
to the Uber driver nearest
sends
the consumer, alerting the
to
to the location of the
driver
It was founded in
customer.
and is now used by 30
2009
people globally every
million
company is worth an
month.The
$60 billion.
estimated
has recently generated a lot of animosity from the taxi industry because of its role in enabling market entry for
Uber
of private drivers.Taxi drivers are indeed disadvantaged by strict industry regulation and need for licenses. Unlike
lots
traditional taxi company, Uber does not operate its own cars. Instead it signs up private drivers willing to provide
a
to paying passengers and passes the ride requests directly to them and their vehicle. Effectively, Uber works as
rides
matching platform for passengers and drivers and makes money by taking a 10-20% cut from each ride. The drivers
a
as many hours as they desire but they must maintain a good passenger given rating to stay employed. Uber
work
welcomed by the urban population and widely acclaimed for low prices, short waiting times, and good service,
was
reflected by its rapid growth over the past few years. Uber threatens not only taxis’ profits, but also their
as
and assets in form of costly operating licenses. The ridesharing industry is in need of regulation that
investment
the playing field for it and the taxis, and protects its customers and employees.
levels
and Information
Technology
elimination of information asymmetries was cited as a major motivation for taxi industry regulation, Uber’s
The
on digital technology simply provides consumers with a better overview of quality and prices. The drivers
reliance
rated by consumers and are banned from the system if their rating falls below a certain threshold. Prices of the
are
are estimated beforehand and can be easily compared across several applications, introducing greater
rides
– something that taxi regulation attempted for years by requiring taxis to publish their price lists inside
transparency
outside of the cab. But with the technological world, how effective would this be in making consumer lives
and
easier?
10
December 2016
Mariam Shaikh

Struggle of Licensing
The
taxi industry is also hit hard by the need for a special licence, referred to as a “medallion” in the USA. Since
The
are issued rarely, entering the market often requires buying one from a current owner at a high price. In
medallions
growing urban populations and stagnating supply has led to skyrocketing prices for taxi medallions in some of
fact,
large cities. For example, the cost of a single-taxi medallion has varied between $700,000 and $1,000,000 in the
the
US cities like New York and Chicago. In fact, a taxi license was treated as an asset which could later be sold for
large
similar or higher price for profit. The value of such licenses into was severely reduced by Uber’s entry into the
a
market. Becoming a driver for Uber doesn't require buying a license, since joining Uber can be done for
transport
As most taxi cab drivers and companies have no financial protection against a sudden devaluation of their
free.
this situation can have detrimental effect on their welfare and generate a lot of workplace bitterness among
licenses,
regulation of the sharing economy even exist?
Does
is a part of the newfound pioneers sharing economy. Its a transportation company but doesn't own a single
Uber
Unlike taxis, Uber was subjected to few rules at the start of their operation, as regulations for companies of
vehicle.
sharing economy don't really exist yet Nevertheless, such regulation is needed to protect customers and
the
and ensure a level playing field for ridesharing companies and taxis alike. As time passes, such
employees,
should take the peculiarities of Uber’s business model into account and aim to stimulate competition
regulation
a whole, Uber’s business
As
is still fairly novel. The
model
industry is definitely
taxi
to suffer a dip in
going
in the coming years
demand
more and more people
as
the technological train in
join
of transportation.
terms
as the ongoing
However,
shows, these sharing
debate
innovations may
economies
disrupt existing
strongly
and their success
markets
depend on the
may
of regulators to
willingness
markets for
open
Meanwhile,
competition.
will have to face
regulators
challenges,
several
balancing the
including
of consumers and
interests
creating
incumbents,
rules for the
efficient
economy” and
“sharing
sure competition
making
exists.
11
December 2016
them.
between companies, rather than restrict it.
"Uber was welcomed by the urban population and widely
acclaimed for low prices, short waiting times, and good service,
as reflected by its rapid growth over the past few years."

over Money: The
Mind
Fallacy and Conceit
Gambler's
question I have come to ask myself, is if we as economists are to function under the belief that Casinos are
The
that deal with chance on a day to day basis, then why is it that, no matter the game, and no matter the bet,
organisations
always end up the victors? It was in search for answers that I came across 2 concepts that catalysed my ability to
Casinos
the manipulative game that these casinos are supposedly playing, only to realise that in essence, the only entity
unravel
fact of the matter is, that it is our psychological beings that are the cause of our losses - the way our mind perceives
The
is wired to analyse the data presented to us. To put it simply, as amateur gamblers, before entering the casino our
and
to take risks is low, yet our ability to control ourselves in pressure situations is lower still. We often walk into a
inclination
with the confidence that as soon as our budget for the night is drained, we shall leave, or alternatively once we
casino
doubled our money, we shall call it quits and walk away with a handsome profit. It is my sincere regret to inform
have
that whilst this is a theoretically sound game plan, it very rarely materialises.
you,
12
December 2016
Yash Bansali
we can blame for our losses as we leave that colosseum of deception, is ourselves.

an attempt to further understand why we must look at two separate paradoxes: ‘The Gamblers Conceit’ and then
In
Gamblers Fallacy’. The Gamblers Fallacy, also referred to as the ‘Monte Carlo Fallacy’ is a fallacy that assumes
‘The
negative outcome patterns will be self-correcting. What this means is that if a gambler were to bet on the
all
of a coin toss being heads, and the coin is tossed ten times, only to land on tails each time, the 11th time,
outcome
gambler will still stay in the game and bet on heads (as oppose to walking away as we previously discussed
the
be the pragmatic response). This is because their brain is wired to function on the flawed understanding
should
if they have lost so many times, then surely the probability of them winning the next round will increase by a
that
margin as a result of their previous losses. This is wrong. The probability of that coin landing on heads was
certain
½ the first time the toss took place and will remain ½ even after 100 tosses - the previous outcome has nothing to
with the probabilities of outcomes in the next round. Each toss is in reality independent, but in our
do
mind, is shown to be linked to previous outcomes. It is because of this ‘Monte Carlo Fallacy’ that
subconscious
Gamblers Conceit’ shows us a similar effect. Once
The
if we contextualise it with our coin toss example,
again
idea is that if the gambler bets on heads once
the
and ten out of ten times the coin lands on head,
again,
the gambler is more inclined to play on and bet
then
heads again. By doing so they totally disregard the
on
that they will leave the casino when they are ‘up’.
rule
their mind shows them patterns, they feel they
Instead,
on a winning streak and thus they play on. Each
are
reduces their aversion to risky bets, until finally,
victory
go ‘all in’… the coin is tossed… and it lands on
they
All that money that the casino could have lost
tails…
the gambler left just a few turns earlier, was taken
had
in one go, and the gambler has no one to blame
back
it other than themselves. Their mind created an
for
where they were on a winning streak, as such
illusion,
probability of the gambler winning the next round
the
wrongly advocated to be far greater than ½,
was
more and more irrational bets, until the
forcing
loses it all.
gambler
in all, it seems that the moment we enter that
All
our own mind is pitted against us, showing us
casino,
false promises of victory, to then only bring us to
the
knees, burdened by the weight of an ever-growing
our
to these ‘lucky businesses’. Whilst I am no expert
debt
the matter, it seems to me that the key is to
on
that each bet must be made objectively
recognise
it being linked to past outcomes - this way you
without
the merit of the gamble before putting up a
analyse
and focus more on probability than in the
stake,
13
December 2016
"The fact of the matter is, that it is our
psychological beings that are the cause
of our losses - the way our mind
perceives and is wired to analyse the
data presented to us. To put it simply, as
amateur gamblers, before entering the
casino our inclination to take risks is
low, yet our ability to control ourselves
in pressure situations is lower still. "
even when gamblers are losing heavily, they are still persistent to stay in the game.
illusions of luck or chance.

Effects of Poverty and
The
on the Global
Inequality
and Trade Market
Satadru Sanyal
Economy
is defined as the state of one who lacks a socially acceptable amount of money or material possessions
Poverty
known as the poverty line). Inequality is an unfair situation in which some people have more rights or better
(usually
than others. This article will deal with the effects of poverty and inequality on the global economy and
opportunities
market.
trade
in an economy is
Poverty
by a large variety of
controlled
such as vulnerability to
factors,
disasters, national debt
natural
government laws, fiscal
level,
monetary policy, and
policy,
growth rate.
economic
inequality is also
Monetary
by several other
controlled
such as the proportion
factors,
skilled to unskilled labour,
of
of education available,
quality
prices of goods in an
the
the initial level of
economy,
a child is born into,
inequality
type of taxation, the level
the
the micro scale, poverty and inequality may have several effects, but this is not the concern of this specific
On
Here, we will focus on the macro concept of these factors to the global economy, and international trade. In
article.
economy with a high degree of poverty, a vast proportion of the population is likely to be uneducated or
an
In this case, the average productivity of the economy is likely to be low. There may also be a large
unskilled.
rate (which might be the reason for the high degree of poverty). This means they are not able to
unemployment
as much as they are capable of, and so have a deficit of goods in the economy. As such, exports will be low
produce
imports will be high. This is unsustainable, and countries that are already poor will need to take foreign aid
and
to sustain their economies, which will lead to further worsening of the state of the public (as any revenue
loans
14
December 2016
of poverty itself, etc.
"Poverty, if left by itself, will just lead to cycles of more extreme poverty, with a
larger income disparity between the rich and the poor. "
generated by the government will go towards paying back these loans and not for the benefit of its people)

it can be seen that if poverty is high, and productivity of an industry is low in most countries, there will be a
Hence
shortage of goods, pushing the prices up immensely. In a bid to increase production, many countries
worldwide
decrease the quality of production to try to increase supply, leading to a global supply of poor quality goods.
may
scenario is one that economies work hard to avoid.
This
an economy with a considerable amount of poverty, the demand for goods is often quite low as people are
In
to afford them. Firms in this type of economy will not be able to survive as not enough people will consume
unable
products to allow them to reach break even point or to make a profit. This will lead to firms moving away to
their
economies and reducing the investment in the economy, further increasing poverty, and making things
better
inequality (when the inhabitants of one country are considerably richer on average than the
International
of another), means that the richer country (with a higher national GDP per Capita) will be able to afford
inhabitants
goods and services and so will import more goods, and so have a positive effect on the poorer economy by
more
production and economic growth. This is currently the case with many less economically developed
encouraging
(LEDCs), which would otherwise not have developed past their current ‘third world’ status. However, only
countries
richer population of an otherwise impoverished state may enjoy this benefit. That is, only the rich factory owners
the
if left by itself, will just lead to cycles of more extreme poverty, with a larger income disparity between the
Poverty,
and the poor. This, as indicated throughout this article, usually has adverse effects on not only the poor but also
rich
the economies of the world. Thus, poverty is a major issue that needs to be addressed as soon as possible not
on
from a humanitarian perspective but also for the want of human progression.
only
15
December 2016
worse.
and entrepreneurs may receive the greater flow of money and produce more.

and we even found time to
breath)
an NBA (basketball) and NHL
watch
16
December 2016
Dubai College Trip to
Washington, D.C. 2016
DC to D.C!
the 25th November, 17 students
On
2 members of staff departed DC
and
the other DC, Washington - a first
for
trip destination for this school.
time
15 hour flight covering 11,349
The
may put some off but not
kilometres
intrepid fellows keen on
these
the Trumped up post-
experiencing
atmosphere in the nation's
election
The kilometre bashing didn't
capital.
there over the next seven days
stop
the group walked the length and
as
of DC taking in Congress
breadth
the Capitol building, the World
and
the Organisation of American
Bank,
Bureau of Engraving and
States,
Georgetown University
Printing,
in situ DC alumnus Alesha
(where
gave our students the
Gulamhusein
of her campus experience),
benefit
Pentagon, the National Archives,
the
piece de resistance The White
the
(!), several Smithsonian
House
the Newseum, the
museums,
museum, Mount Vernon,
Holocaust
Cemetery (pause for
Arlington
(ice hockey) match!

17
December 2016
"Perhaps the most impactful and inspiring part
of our trip from my perspective would have to be
the tour through congress with an actual
congressman- even if he was a Republican!
Sitting in the chairs of Congressman and hearing
about the process of election and debate was a
very educational and inspiring experience to
have, and the very building itself feels like a place
of power and intellectual debate. In fact, just
stepping into the room makes you realise how
important this place is to American democracy
and to top it all off we got to see some fantastic
and exclusive views from inside the building. For
such a young nation, there is indeed so much
history engraved into every wall and window. A
fantastic experience that indeed I think none of
us will ever forget."
- James
"Perhaps the most extraordinary and
fascinating experience, in my opinion, was
visiting the World Bank, where a series of
employees working in different facets of the
Bank talked to us about their roles and
explained not only the function of the Bank but
also demonstrated its importance on an
international scale. We spent time analysing
debt sustainability, attempting to understand
the loan formula the Bank follows, as well as
looking at the reasons the World Bank chooses
to invest in certain projects that other banks
may not. I personally found their mission truly
inspiring, and their fundamental beliefs on
society and our global community to be
particularly prevalent in a word that does
increasingly seem to be looking inwards- it was
definitely worth the early wake-up and long
walk!
- Sophie

18
December 2016
"For me the highlight of the Washington trip would have to be the NBA game between the
Washington Wizards and the San Antonio Spurs. Being inclined to like sports anyways, I was
delighted to hear about the opportunity to watch an NBA game live and it surpassed even my
highest expectations. It was sport like no other on the planet, as the atmosphere was throbbing
with loud music and excitement from every corner of the Arena. It was also basketball as I hadn't
seen it before, with incredible displays of skill and ability from the players, not to mention
constant hard work. In the end I was disappointed to see the Wizards lose, but I was extremely
happy for an opportunity to witness such an exciting event."
- Adam

19
December 2016
The Dubai Water
Canal
In the UAE
Ankita John
of the most awaited events of the year, the opening of the Dubai Water Canal, occurred on
One
9th of November 2016. His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Vice
the
Prime Minister of the UAE and Ruler of Dubai, inaugurated the Canal. Building the canal
President,
been an extensive process with a huge investment of Dh2.7 billion for a vast 3.2 Km stretch
has
across the city of Dubai. This opening has elevated everyone’s spirits about the future of
cutting
and its potential economic benefits.
Dubai
need for such a big investment came from His Highness Sheikh Mohamed Bin Rashid’s desire
The
“ensure the sustained development of the U.A.E’s economic capabilities”. In order to implement
to
it was necessary for Dubai to think outside the box, to innovate, to develop something no one
this,
dream of, in order to grow Dubai’s stature on the world map. The whole concept of opening
could
water canal in the centre of the city is a thought that most people believed would have been
a
However, conquering the impossible is a mere act for the city of Dubai. In less than a
impossible.
year, the canal has come up, not only changing the landscape of Dubai but also its geography.

20
December 2016
Water Canal has several positive
The
effects on the economy, one
domino
the appreciation in the value of its
being
land. Secondly, hotels that
surrounding
the canal will have the benefit of
face
prices for this unique attraction
increasing
theirs; this then increases the value of all
of
existing hotels and acts as an
these
for further development of more
incentive
within that area. The water canal
hotels
be lined with many different
will
on either side, this and the
restaurants
of the canal itself will attract a lot
novelty
tourists and local residents. This will
of
ensure enough revenue for the
also
to make this a commercially
government
viable project in the long run.
addition to the touristic benefits
In
above, the Dubai Water Canal
mentioned
also expected to ferry around more than
is
million passengers by the year 2020 and
a
number is expected to jump to four
this
riders by 2030. This will also
million
that Dubai will stand out as a city
ensure
has road, rail and water transport all
that
the heart of the city. The Water
within
also acts as a unique selling point
Canal
the city of Dubai and gives it a further
for
edge over all the other
competitive
in order to make it a go-to
countries,
destination for travellers all around
tourist
globe. It is predicted that this new
the
will generate roughly around 30
attraction
Dubai Creek
visitors per anum and thereby
million
Dubai’s leadership as a tourist
ensure
destination in the region for years to come.

Pillsbury also depicts a “Chinaled
renewal).
World” in 2049, one where Chinese
21
December 2016
'The Hundred Year
Marathon'
Economics Bookshelf
Malaika Nanda
Hundred Year Marathon” by
“The
Pillsbury carefully unveils
Michael
100-year plan to replace
China’s
as the next global superpower.
America
author, Micheal Pillsbury, is a fluent
The
speaker who has worked in a
Mandarin
national security position in the US
high
and his findings explore
government
China have deceived the United
how
into handing over American
States
and intelligence, presenting
technology
as a declining nation.
themselves
nationalists, or “hawks”, believe
Chinese
China can only succeed in this
that
through deception, artfulness
marathon
gradual control. Readers learn to
and
the ambiguity of the Chinese
decode
in translations and explore
language
on the Warring States periods
literature
the book, and it soon
throughout
clear that the Chinese believe
becomes
are on “fuxing zhi lu” (the road to
they
will dominate and there will be
values
in pollution and “cancer villages”.
surge
the most alarming part is,
However,
we have no idea the marathon
because
is even underway: America is losing.