Archive for March, 2008

Operational risk

Conditions in Iraq present the most risk to business profitability; Switzerland is the safest bet

Risk Briefing rates operational risk in 150 markets on a scale of
0-100. The overall scores are an aggregate of underlying scores for ten
categories of risk: security; political stability; government
effectiveness; legal and regulatory; macroeconomic; oreign trade and
payments; financial; tax policy; labour market; and infrastructure. The
model is run when events require it, and at least once a quarter for
each country.

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Democracy index

Liberty and justice for some

Aug 22nd 2007
From Economist.com

Almost half of the world’s countries can be considered democracies, but only 28 qualify as “full democracies”

There is no consensus on how to measure democracy, definitions of
democracy are contested and there is an ongoing lively debate on the
subject. Although the terms “freedom” and
“democracy” are often used interchangeably, the two are not
synonymous. Democracy can be seen as a set of practices and principles
that institutionalise and thus ultimately protect freedom. Even if a
consensus on precise definitions has proved elusive, most observers
today would agree that, at a minimum, the fundamental features of a
democracy include government based on majority rule and the consent of
the governed, the existence of free and fair elections, the protection
of minorities and respect for basic human rights. Democracy presupposes
equality before the law, due process and political pluralism.

The Democracy index is based on the view that measures of democracy
that reflect the state of political freedoms and civil liberties are
not thick enough. They do not encompass sufficiently or at all some
features that determine how substantive democracy is or its quality.
Freedom is an essential component of democracy, but not sufficient. In
existing measures, the elements of political participation and
functioning of government are taken into account only in a marginal way.

The Economist Intelligence Unit’s Democracy index is based on
five categories: electoral process and pluralism; civil liberties; the
functioning of government; political participation; and political
culture. The condition of having free and fair competitive elections,
and satisfying related aspects of political freedom, is clearly the
basic requirement of all definitions.

This index provides a snapshot of the current state of democracy
worldwide for 165 independent states and two territories. This covers
almost the entire population of the world and the vast majority of the
world’s 192 independent states (27 micro-states are excluded).
Several things stand out. Although almost half of the world’s
countries can be considered to be democracies, the number of
“full democracies” is relatively low (only 28). Almost
twice as many (54) are rated as “flawed democracies”. Of
the remaining 85 states, 55 are authoritarian and 30 are considered to
be “hybrid regimes”. As could be expected, the developed
OECD countries (with the notable exception of Italy) dominate among
full democracies, although there are two Latin American, two central
European and one African country, which means that the level of
development is not a binding constraint. Only one Asian country, Japan,
makes the grade.

More than half of the world’s population lives in a democracy
of some sort, although only some 13% reside in full democracies.
Despite the advances in democracy in recent decades, almost 40% of the
world’s population still lives under authoritarian rule (with a
large share of these being, of course, in China).

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Which MBA?

Which MBA?

A blustery success

From Economist.com

The University of Chicago’s business school tops this year’s ranking

The University of Chicago’s Graduate School of Business has claimed
top spot in the Economist Intelligence Unit’s 2007 ranking of full-time
MBA programmes (full report and methodology).
It is the first time the school has led the annual ranking, which is
now in its sixth year. Chicago toppled the Spanish school IESE, which
had ranked in first place for the previous two years, and IESE dropped
to third position.

With three European schools breaking into the top ten this
year—Cambridge, Instituto Empresa and Henley—the top of the
ranking is now split equally between America and Europe. Hong Kong
University of Science and Technology, ranked 20th, is Asia’s highest
placed school

Much of Chicago’s success can be put down to the record of its careers
service (see table below). This is now one of the key competitive
battlegrounds between schools. Indeed, when the Economist Intelligence
Unit asked prospective MBA students why they were considering the
degree, opening new career opportunities was the most popular reason
given. Chicago’s careers office is rated as the world’s best by its
students. Within three months of graduation 97% of Chicago students are
in jobs, the vast majority of them facilitated by the careers office. Click Here!

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Plastic fantastic

Credit-card spending

Plastic fantastic

From Economist.com

CONSUMERS everywhere have been merrily spending with their credit
cards since the dotcom bust ended in 2003. Americans put most on
plastic: on average, each person splashed out $6,700 in 2005, according
to Ronald Mann at Foreign Policy magazine. But spending more
means repaying more. Personal bankruptcies rose in America by 20%
between 2000 and 2005. Britain, where debit-card spending is higher
than the credit card sort, also saw a big increase in bankruptcies.

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Personal taxes

Personal taxes

Give over

From Economist.com

PAYING TAXES is, for most people, both unavoidable and irksome. But
how much hard-earned pay is taken by governments varies considerably
across the world. Among the rich countries of the OECD, Germans shell
out the most, with a worker earning an average income giving 43% of
their gross pay to the state, with nearly half of that going towards
social security. Workers in Poland hand over nearly 25% of their wages
to social security; whereas Australians pay nothing at all directly.
Mexicans and South Koreans enjoy the lightest taxation by some way.

Shutterstock

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Excess baggage

Air travel | Excess baggage | Economist.com


Air travel
Excess baggage

Mar 20th 2008
From Economist.com

FEW things will ruin an Easter break more effectively than discovering your luggage hasn’t taken the same trip. Sadly, figures from the Association of European Airlines suggest that airlines are losing more luggage than before. Last year 16.6 bags were delayed for every 1,000 passengers across 25 European airlines, up from 15.7 in 2006. (This excludes no-frills carriers such as EasyJet, and some bigger carriers, which do not report their statistics.) Perhaps avoid TAP Air Portugal, which mislaid nearly 28 bags for every 1,000 passengers. British Airways is the most careless of the big operators, mainly because many of its trips involve connecting flights. The canny traveller could instead opt for Turkish Airlines or Air Malta.
AFP

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European air travel

European air travel | Heathslow | Economist.com

European air travel
Heathslow

Mar 27th 2008
From Economist.com

TRAVELLERS using Heathrow, the world’s busiest international airport, suffered an unpleasant surprise on Thursday March 27th as doors opened to the swanky new Terminal Five. The new $8.5 billion terminal, for the exclusive use of British Airways, was supposed to help to ease overcrowding at the notoriously congested airport. But as flights were cancelled, baggage lost and desks left unmanned, it was business as usual for long-suffering passengers. Last year over a third of European flights were delayed by more than 15 minutes at Heathrow, the worst record of all European airports.

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The Big Mac Index

The Big Mac Index | Sizzling | Economist.com

The Big Mac Index

Sizzling

From The Economist print edition

Food for thought about exchange-rate controversies

AMERICAN politicians bash China for its policy of keeping the yuan
weak. France blames a strong euro for its sluggish economy. The Swiss
are worried about a falling franc. New Zealanders fret that their
currency has risen too far.

All these anxieties rest on a belief that exchange rates are out of whack. Is this justified? The Economist’s Big Mac Index,
a light-hearted guide to how far currencies are from fair value,
provides some answers. It is based on the theory of purchasing-power
parity (PPP), which says that exchange rates
should equalise the price of a basket of goods in any two countries.
Our basket contains just a single representative purchase, but one that
is available in 120 countries: a Big Mac hamburger. The implied PPP, our hamburger standard, is the exchange rate that makes the dollar price of a burger the same in each country.

Most currencies are trading a long way from that yardstick. China’s
currency is the cheapest. A Big Mac in China costs 11 yuan, equivalent
to just $1.45 at today’s exchange rate, which means China’s currency is
undervalued by 58%. But before China’s critics start warming up for a
fight, they should bear in mind that PPP
points to where currencies ought to go in the long run. The price of a
burger depends heavily on local inputs such as rent and wages, which
are not easily arbitraged across borders and tend to be lower in poorer
countries. For this reason PPP is a better guide to currency misalignments between countries at a similar stage of development.

The most overvalued currencies are found on the rich fringes of the
European Union: in Iceland, Norway and Switzerland. Indeed, nearly all
rich-world currencies are expensive compared with the dollar. The
exception is the yen, undervalued by 33%. This anomaly seems to justify
fears that speculative carry trades, where funds from low-interest
countries such as Japan are used to buy high-yield currencies, have
pushed the yen too low. But broader measures of PPP
suggest the yen is close to fair value. A New Yorker visiting Tokyo
would find that although Big Macs were cheap, other goods and services
seemed pricey. A trip to Europe would certainly pinch the pocket of an
American tourist: the euro is 22% above its fair value.

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Business environment rankings

Business environment rankings | Outpacing America | Economist.com

Business environment rankings

Outpacing America

Oct 29th 2007

Financial risks and increased protectionism will damage America’s business environment over the next five years

The comparative attractiveness of America’s business environment is
set to decline over the next five years as a result of mounting
financial and macroeconomic risks, increased protectionism, security
concerns and strained international relations. The Economist
Intelligence Unit’s business environment rankings for 2008-12 show
America falling to ninth position, the lowest the country has placed
since the launch of the business environment rankings in 1997.Fundamental

features of America’s business environment will remain attractive (deregulated labour markets, the high quality of
infrastructure, leadership in technology) and the differences between
countries at the top of the business environments league are fairly
small—so the changes for America should not be exaggerated. Yet
there are also signs of deterioration in key areas. Other countries
will make improvements to their business environments, while the
overall quality of conditions in America will stagnate. As a result,
America will be overtaken in the rankings by Canada, Switzerland, Hong
Kong, the Netherlands and Australia.

The global investment environment remains generally attractive over
the next five years. There are difficulties, of course: rising
protectionism, security risks and macroeconomic imbalances are not only
confined to America, and they pose significant global threats. But
globalisation is not about to be derailed, and while average world GDP
growth in 2008-12 will slow from recent peaks, it will remain high by
historic standards. Progress in further international trade
liberalisation may be slow, but foreign trade and exchange regimes will
be freer than at any time since the early part of the 20th century. In
most countries the quality of infrastructure will continue to improve.
Reform of labour and product markets, even if frequently halting and
subject to strong opposition, will continue. As a result, the global
business environment will improve, despite the disappointing outlook
for America.

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Natural disasters

Natural disasters | Economist.com


Natural disasters

Mar 27th 2008
From The Economist print edition

More than 4,000 people died or went missing as a result of Cyclone Sidr, 2007’s biggest killer, which caused flooding in Bangladesh last November. Swiss Re, an insurance company, puts the (mostly uninsured) cost of destroyed homes, damaged crops and lost livestock at $2.3 billion. The insurer reckons the total economic cost of natural and man-made catastrophes was more than $70 billion; related claims on insurers totalled $28 billion. Kyrill, a winter storm that caused flooding in Western Europe, led to the largest insurance loss. The storm claimed 54 lives and cost insurers $6.1 billion. Floods in Britain during the summer claimed fewer lives than America’s storm season, but had a higher economic cost.

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