How Russian Economy Changed Over A Year

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By Daniil Chen

Today, the Russian Federation has tense relations with both the European Union and the United States. This is mainly the result of series of political events; however, the most crucial one was the annexation of Crimea Island. It is important to keep in mind that this is a sensitive issue and that there are many factors involved. It has been a year since the US and EU imposed economic sanctions on Russia. How have the sanctions impacted development of the Russian economy?

Russia’s economy was negatively affected by the sanctions.Looking at the GDP annual growth rate of the country, in 2014 it was only 0.7%, compare to 2013 (right before the sanctions) when it was 2%. The forecast for current year is even worse: 0.6%. Inflation has intensified the situation.For example, Russia’s inflation rate in February of 2015 was 16.7%, which is even higher than the highest rate –15.1%– during the financial crisis in 2008. A 45% drop in oil prices also contributed to some of the slowdown. This year –2015– Russia’s food inflation rate was 26.1%. The unemployment rate continues to soar up reaching 5.8%, therefore about 4.3 million of people don’t have a job. Due to many different factors, the Russian economy has been experiencing a slowdown which has the potential to impact development.

According to Levada-Center, a Russian non-governmental research organization, 79% of the population feels the burden of Western sanctions. 34% of all the people faced serious problems, created by economic constraints. 12% did not have any changes in their lives at all. As you can see from these statistics, majority of Russian population has financial difficulties because of the sanctions.

To sum up, the economic situation in Russia is quite difficult right now. People have lost jobs, food prices are increasing and the country is experiencing different economic problems. Nevertheless, citizens are still keep a stiff upper lip and try to deal with challenging situation in the country.

Works Cited

Birnbaum, Michael. “A Year into a Conflict with Russia, Are Sanctions Working?”Washington Post. The Washington Post, 27       Mar. 2015. Web. 01 Apr. 2015.

“Centrobank RF: Tempi Rosta VVP Blizky K Nuliu.” RIA Novosti. N.p., 11 Dec. 2014.Web. 01 Apr. 2015.

Plushenko, Anton. “Posledstviya Zapadnih Sancciy.” MKRU. N.p., 3 Feb. 2015. Web. 07 Apr. 2015.

“Russia – Economic Indicators – Actual Data – Historical Charts.” IECONOMICS. N.p., n.d. Web. 07 Apr. 2015.

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The Future of E-commerce

By Tianqi Wang

Alibaba, China’s largest e-commerce firm, floated shares in New York Stock Exchange last year. After publishing the offers, Alibaba had the highest IPO even higher than Facebook. Based on the price of the IPO of Alibaba, some people think this can be marked as the growth of E-commerce.

As the Internet and computers are used widely and become the indispensible necessities in human life, Electronic commerce is also increasing. Based on the increasing sum of business transactions these years, E-commerce is being seen as a future business mode. But does e-commerce have the huge potential capacities as we think? Will this kind of business mode replace the traditional mode in the future? Will it become global in the future?

I think that’s may become possible in the future. E-commerce has the wider platform than the traditional off-line commerce. Off-line commerce needs a huge space to display and sell goods while E-commerce does not. E-commerce is more convenient than off-line commerce. People could buy anything they want online without going out.

But still, the advantages of E-commerce are a double-edged sword. Although there are many conveniences of E-commerce, it still has many limitations. The largest bottleneck problem is logistics. All of the sales depends on the fluency of logistics. The sale process is electronic but the transportation is not. The packages need manpower to transport. Given one simple example, holidays such as Christm as are the peak of shopping, On peak holidays, the transportation could be disrupted due to traffic and laborer’s vacations. So at that time, when you want to buy goods, E-commerce might not deliver the goods on time.

Credibility is also an important issue for E-commerce. People cannot see the real goods instead of pictures and words. Thus, the credibility of the sellers is important. Whether they could trust the sellers or not only depends on the evaluations from other people. But still, this system is not the complete system because customers may not recognize which evaluation is real and which is false. Sometimes customers might buy the wrong goods or goods that are not as same as the descriptions.

Nowadays, E-commerce is still in B2C (business-to-customer) mode. But in the future, E-commerce will be in C2B (customer-to-business) mode. This process will change the sales mode fundamentally . People are more and more connected and there are more and more voices from customers. Customers are replacing sellers and becoming the new sellers.

Also, if E-commerce wants to progress, it needs a platform for the supply chain to share different basic information. If E-commerce changes the supply chain coordination, every part of value chain could be shown on the Internet. The E-commerce should not be isolated from sales to delivery, from customers to sellers. The information could include new arrivals of goods and the credibility of each sellers could be found on this platform.

That’s what I think about the future of E-commerce. Although E-commerce would included a greater percentage of off-line commerce, E-commerce still cannot replace all off line commerce.

Microfinance and its Impacts on Development and Women

By Deanna Salerno

Is the emphasis placed on credit repayment so intense that other aspects of development are left behind?

The empowerment of women has been increasingly correlated with Microfinance. Some research suggests that women’s participation in microcredit programs helps to increase women’s empowerment, while others argue that economic productivity doesn’t automatically empower women.

Microfinance began formally in the 1970’s when Muhammad Yunus, an economics professor in southeastern Bangladesh, wanted to apply his theories to improving the lives of the poor. Following the success of initial experiments, Yunus founded Grameen Bank. Today, Grameen bank declares millions of members and carries a goal that Yunus strived for since the beginning; more than half of the borrowers are women.

Opinions on the impact of microfinance have been split between those who see it as a “magic bullet” for women’s empowerment and those who are unconvinced of its ability as a cure-all panacea for development.

Access to financial services can make important contributions to the economic productivity and social well-being of poor women and their households, however is it just an entry point?

Many studies show that while for some women microfinance may be empowering, for many others, it is marginalizing in both economic and sociopolitical terms, and in some cases, it increases domestic violence. Studies also show that technical advice on agriculture, education, and health is not given as equal importance as that of credit.

Despite the effective role of microfinance in organizations for providing financial services to poor women, it cannot substitute for broader policies. Similarly, the lack of sustainability of microenterprises and the dependency on NGOs for credit further counter the ‘development’ impact of microfinance.

To better stabilize and further the development impact of microfinance, NGOs should provide microcredit along with other beneficial services that are equally emphasized with that of credit.

Minimum Wage and Poverty

By Asad Sajjad

Minimum wage is the lowest hourly, daily or monthly compensation a worker can receive from employers in exchange for labor and service. Much of the world has no minimum wage set for workers. This means that the marketplace is left to decide how much a worker should be paid for their work. While most will agree that a minimum wage should be set by the government, the amount and how often it should be raised is something that is constantly debated. As the cost of living has gone up all around the US, the issue of minimum wage has become a very hot topic. I will be talking about the history of minimum wage, why it’s necessary and I will present the effects of minimum wage in regards to poverty.

In the United States minimum wage is set by the federal and state governments. In June of 1938, President Franklin D. Roosevelt signed the landmark Fair Labor Standards Act (FLSA). The FLSA set federal minimum wage at twenty-five cents per hour (about four dollars and seven cents 2012 dollars).sdasdsaasdas

This act was heavily debated and capitalist argued that wages payable should be left to the free market. The US congress argued for this legislation under its constitutional grant of authority to regulate interstate commerce.  While this act only applied to industries that made up about one fifth of the workforce, this was an iconic piece of legislation as at the time federally mandated minimum wage was unheard of. A few states had made non-compulsory minimum wage but did nothing to enforce it. This act also set standards for minimum work age, maximum work hours allowed per week, and gave some bargaining rights to the workers. While this act was a great start to establishing minimum wages, it didn’t nearly cover the entirety of the American labor force in terms of establishing minimum wage, and workers standards. It was also noted that this act generally only applied to industries that were composed of mainly male workers.

A common misconception about minimum wage is that “most workers earning the minimum wage are young workers, part-time workers, or workers from non-poor families”. This argument is flawed and invalid especially in recent times as the global economy is still recovering from recession. Jobs that were previously done by “younger workers from non-poor families” are now being done by older adults who may have lost their career related jobs due to the global economic recession.

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Developing a minimum wage is great for a variety of reasons. The most common argument for government regulated and controlled minimum wage is economic benefit. Basic macro-economic principals state that RGDP is driven by variables like consumer spending and consumer spending is based on people’s real income.  The only way for the government to increase people’s income is to increase people’s real wages and essentially let the business cycle flow. Economists have proven that countries with set minimum wages generally do much better financially than those who don’t regulate minimum wage.

In most cases minimum wage helps to fight poverty. According to economist James Galbraith, “raising the minimum wage would raise the incomes of over 28 million Americans”). He based this theory on the idea that once minimum wage is raised, employers who pay slightly above minimum wage now have to increase their wages to meet and maintain competitiveness in the market. For example, a company paying its employees nine dollars an hour would have to increase their wages if the government decided to set minimum wage at nine dollars per hour. If this company were to keep their current wage, workers would start looking for new higher-pay jobs that pay a wage “adjusted” for minimum wage. Overall, an increase in the minimum wage would be beneficial for not just those who actually work for minimum wage. An increase in minimum wage would increase the income of millions thus stimulating the economy while increasing people’s quality of life.

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            Minimum wage doesn’t always pan out in every economic situation. I will briefly present a few cases in which minimum wage has done little to nothing to help the poor. In Mexico, “workers in the poorest households had the largest wage gains following an increase in the minimum wage but the wage gains were not large enough to push most of these households above the poverty line” (IZA World of Labor). In Brazil, “higher minimum wages did not raise the incomes of households in the bottom decile of the household income distribution” (IZA World of Labor). In both cases the wage inequality was so big that raising the minimum wage had very little difference on controlling poverty.

The idea of establishing a minimum wage has been spreading all around the world. Most developed economies have established minimum wages for their workers and have developed basic labor standards that employers much follow. These so-called government “regulations” benefits workers in many ways as the workers get to earn wages that are much higher and lead to a better quality of life. The workers also benefit from the enforced labor standards such as minimum work age, and maximum hours per week. Creating a minimum wage and adjusting it regularly to match cost of living is a great way for any country to reduce its poverty level. As this issue continues to develop, Unlike Mexico and Brazil, poverty levels and wage inequality aren’t nearly as large so even the slightest increase would push low wage workers out of poverty.  I hope that those who argue against minimum wage and believe the various misconceptions try to understand the benefits of minimum wage.

Works Cited

Does Increasing the Minimum Wage Reduce Poverty in Developing Countries? IZA World of Labor, 1 May 2014. Web. 3 Apr. 2015.

Kurtz, Annalyn L. “Minimum Wage since 1938.” CNNMoney. Cable News Network, 5 July 2013. Web. 6 Apr. 2015.

“Minimum Wage Mythbusters.” – U.S. Department of Labor. DOL, 2 July 2014. Web. 5 Apr. 2015.

Galbraith, James. ” Raise Minimum Wage in the US.” Arizona Central. Gannett Companies, 13 Apr. 2015. Web. 13 Apr. 2015.

Tradeoffs for success stories

By Nathania Vena

Newspapers and magazines often cover a person’s success story.  It discusses the struggles and process they went through before they obtain the position they are right now. Their stories inspire the readers to be hardworking in hoping that one day, they would be able to be success too. In reality, wealth and income distributions are not always fair. Sometimes, the poor are still unable to earn enough money although they devote all their efforts. It is very easy for the rich to prosper more; yet, the poor hardly make their way to the better life.

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Although lack of resources is a problem today, another thing to look at is the distribution of resources among our societies today. The rich becomes richer and the poor buys things from the rich, who intend to maximize their profit. Income is the wages and other earnings such as interest and profits. According to the Center on Budget and Policy Priorities, the top 3% of the world population earn 31% of total income while the bottom 90% only earns 53% of total income. Even worse, the top 3% owns 54% wealth, which means total assets they have such as houses and cars subtracted by the debt. The bottom 90% often makes just enough to live, or some of them even do not make sufficient money for their living. The statistics showed that the bottom 90% only has 25% of the total wealth.

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It is proven that successful cities such as New York City has a higher inequality gap. Often times, specialized jobs in cities require professional skills that most poor people couldn’t acquire due to lack of education. These specialized jobs pay very high wages, leaving the poor people with jobs that don’t require education, paying only minimum wage. Although a person may work long hours, the income they receive would still not compare to people working specialized jobs.

The statistics showed that resources are actually available. Yet, some people have too much and the rest are just lacking. As 54% of wealth is shared only among 3%, the rest wouldn’t have enough resources to help them sustain. This doesn’t help promote development, as 90% of the people that have the minimum portion couldn’t afford their basic necessities. It’s sad when I realize that a person somewhere did not have their stomach filled with anything for the last couple of days while another person could throw away their lunch simply because they did not like it. These are wasted resources; the thrown lunch would mean a lot for those who are not able to afford one. Inequality hinders development because resources are allocated in an inefficient manner. This means that the poorer ones are not actually living the decent life as some of portion is going to the richer that don’t necessarily need more resources.

Work Cited

Stone, Chad, Danilo Trisi, Arloc Sherman, and DeBot Brandon. “A Guide to Statistics on Historical Trends in Income Inequality” 20 February 2015. 27 March ​

The Asian Infrastructure Investment Bank (AIIB)

By Aodi Jiang

The Asian Infrastructure Investment Bank (AIIB) has been a hot topic in the past couple of months. As an international student from China, I want to take this opportunity to briefly introduce this topic to the class.

The Asian Infrastructure Investment Bank is an international financial institution proposed by the government of China. On October 24th, representatives from 21 Asian nations signed an agreement to establish the AIIB, which is aimed to lend money to build roads, mobile phone towers and other forms of infrastructure in poorer parts of Asia. As of April 2, 2015, almost all Asian countries and most major countries outside Asia had joined the AIIB, except the US, Japan (which dominated the Asian Development Bank) and Canada. Countries known as major US allies such as Britain, Germany, France, Italy, Australia and South Korea, also joined AIIB as founding members despite US pressure. North Korea’s application was rejected.

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Many questions why China is proposing and taking lead in the creation of a new bank in Asia when there is already the Asian Development Bank (ADB). China’s answer is that Asia has a massive infrastructure funding gap which currently no existing institutions could fill. It is true since a 2010 report from the ADB estimated that Asia alone would need to spend some US$8 trillion on infrastructure in the next decade and the reality is that neither the World Bank nor the ADB have the political power or the funds to meet the challenge. China also said that ADB and World Bank mainly focuses on areas of environmental protection and gender equality, but the AIIB will concentrate its firepower on infrastructure.

On April 11, when asked if the establishment of the Asian Infrastructure Investment Bank would be a competition or even a ‘threat’ to the World Bank, Jim Kim the current president of the World Bank replied: “As we sit back and look at the new development plan—17 goals, 169 targets— [and the goals of] the United Nations, that’s a multitrillion-dollar agenda. You know, all the multilateral development banks together are less than $200 billion. [So] how are we going to get there? We’ve been saying again and again and again that it’s going to take a new kind of collaboration. There’s not anywhere near enough financing for infrastructure in Asia. And China, they’ve defined Asia very broadly—from Japan to the Middle East is really Asia now. We look forward to working very closely with them. We just want them to use international standards. The enemy is poverty, not another institution”.

As the leader of the establishment of the AIIB, China has offered to put up US$50 billion of its own money. China will also be playing a key role in contributing through its financial muscle and political power. Furthermore, China has roughly US$3.9 trillion in foreign reserves, more than any other country, and decades of infrastructure construction experience. Personally, I think it is a great move from China, as one of the world’s largest economy powers to take responsibility at economics development in Asia. What do you think?

 

 

Citations

“Asian Infrastructure Investment Bank.” Wikipedia. Wikimedia Foundation, n.d. Web. 14 Apr. 2015.

“World Bank President Jim Kim on Asian Infrastructure Investment, Africa Rising, and His Bromance with Jack Ma.” Quartz. N.p., n.d. Web. 14 Apr. 2015.

Gender Equality and Economic Development

By Maria Sapozhnikova

Living in the Western world in the Twenty-First century it sometimes shocking to realize how much more has to be done for gender equality. Although, in most of the developed world today women are struggling with equal pay and inappropriate behavior towards them, most of us are able to find jobs and drive a car with no issues. There are countries in the Middle East and Asia, where a woman cannot drive a car, cannot find a job and cannot get an education. And without these basic necessities no country can become truly developed economically or otherwise. Although lots of research states that women «as primary caretakers of families, communities and natural resources, women have accumulated specific knowledge and skills about local conditions and ecological resources. Furthermore, research has shown that women are more inclined than men to choose sustainability as a lifestyle, engage in environmentally appropriate behavior and make sustainable consumption choices». However, gender discrimination creates a restriction for women’s contribution to economic development.

For example, Saudi Arabia is a top 20 economy in the world, however; the treatment of women in the country is infamous, according to The Washington Post: «Women can’t get driving licenses, meaning that, legally, they cannot drive. Women are also expected to keep their heads covered with scarves and wear loose fitting garments such as an abaya when in public. And adult women need to have a “male guardian’s” permission to do things like work or travel, a severe restriction on their freedom». A country that treats women like this is one of the major US allies. Which raises two questions: Will the United States ever get rid of its the relatively tolerable gender discriminations since they are seemingly okay with Saudi Arabia’s? And how can the women’s workforce continue emerging around the world and contributing to development? Of course, it is important to understand and respect the different cultures of different countries. For some people, this might be a sensitive issue and I think it will be wise to remind people of the importance of understanding and respecting different cultures even if we disagree with some things. But I believe, it is time for women in the developed world, in which they have more rights and ability to stand up for women around the world.

Sources: http://www.thestar.com/news/world/2008/03/08/ten_worst_countries_for_women.html http://www.washingtonpost.com/blogs/worldviews/wp/2015/02/09/the-facts-and-a-few-myths-about-saudi-arabia-and-human-rights/ http://www.undp.org/content/dam/undp/library/gender/Gender%20and%20Environment/

Inequality Struggles

By Diego Ramos

All growing economies and expanding countries will experiences improvements in infrastructure and luxury goods within their society. New cars, new technology, new buildings, new streets, are examples of how countries can adapt and change due to their growing economies. While the minority takes advantage of this in the short term and get rich, the majority of the population fails to do so. This creates inequality throughout the society, maybe even a greater one than they faced in the past. Fortunately I have never been in a situation where this has impacted me greatly, but often I do sit back and try to imagine what it would be like on the other side.

Growing up in many different countries like I did, I was able to experience many different cultures, countries, and differences that they all have. The most impacting places where inequality was seen drastically were in Venezuela and Brazil. In those two countries, it was impressive how you could see how the minority would live in luxury houses, have luxury cars, attend the most expensive schools, clubs, and so one. While the majority, on the other hand would live a completely different reality. My concern would be a question of ethics, and how countries, or individuals should deal with inequalities in their population? It must be really difficult for a person that is struggling to put food on the table and provide a secure shelter for their family to be observing meters away people living the opposite reality. In Brazil, there is a very famous picture of a building that demonstrates this situation of inequality; it shows a luxury building and right besides it, the biggest favela of Sao Paulo. Doesn’t this just create envy or a problematic reaction from those less fortunate? It’s like showing them a toy they will never be able to have.

I am not saying that this is an excuse for all the crimes and robberies that occur in these areas or even the whole country, but it might be an aspect to consider. It provokes those less fortunate, as all they can see all day, even from their houses are things that they can’t have. Spreading out the inequalities in the country by areas maybe might help create incentives for the different communities to grow independent of their social status. Working together they can achieve much more, and what easier way to do it than with people facing your same conditions. Same thing applies to all social classes, they can all work together and improve their economy and also decrease the inequality they currently face.

Gap between the rich and the poor

By Andrew Ojemann

The gap between the rich and the poor is a growing problem in our current economy.  Not only is the actual gap growing, but surveys show that public perception of the gap is growing as well.

Why is this a problem?  As the average American finds it harder to make ends meet on a daily basis, they see the rich becoming increasingly frivolous.  In fact studies show that an increasing number of Americans see the rich as greedy.  This discord can already be seen in protest movements like the ones on Wall Street.  As more of the country struggles however it’s not only those on the left who are increasingly dissatisfied.  Those on the right are beginning to talk about the issue as well.  Once sentiment becomes strong enough the rich will be facing bipartisan discontent from the poor.  As the gap only show signs of widening this discontent can only grow further in the future.  There starts to become a risk of social, economic, political, and even military uprising if this problem is not eventually dealt with.

So what can be done to avert this growing problem.  For starters companies need to change they look at employees and stockholders.  As it stands now companies sink all their efforts into making short term returns for the stock holders.  This includes numerous decisions that actually hurt the company in the long term, however the current mentality is to get rich now and worry about the fallout later.  We need to foster a business culture where making strong long term choices is rewarded, this will strengthen our businesses and also plays into my next point.  One way to go about this is to focus on training and retaining a more highly skilled work force.  Provide employees with advanced training opportunities, invest in creating a smarter, more efficient work force as it will save costs over time.  Then invest the money to retain that work force by raising salaries.  I think we should enable companies to take this rout by allowing retraining companies and investors to look at the work force as an investment into the future, rather than a cost for today.

http://www.wsj.com/articles/fed-gap-between-rich-poor-americans-widened-during-recovery-1409853628

http://www.pewresearch.org/fact-tank/2013/12/05/americans-see-growing-gap-between-rich-and-poor/

Something Isn’t Working

By Hussein Elsadek

Ever since the time scholars began studying and thriving for economic development, the world has been trying to figure out what must be done to achieve constant, stable “economic growth”. Many economic methods and strategies have been laid out but, unfortunately, there has not been notable global progress. Even though some countries have been considerably and relatively successful, we still fail on the global stage. Why could this be?

Throughout adolescence, I constantly thought of the possible factors that make life on earth a massive struggle for most people around the world. I reach the same conclusion every time. Capitalism. We are born into a system that does nothing but support corruption and inequality in the name of economic freedom and prosperity. How can anyone possibly think of globally eliminating poverty when most countries live under a system that promotes “survival of the fittest” ideologies? Under capitalism, as we have witnessed over the decades, there will always be a weak and neglected class and they will always be the majority. Capitalistic development only favors a certain concentration of people. Any person who thinks for themselves knows who they are. Even though there could be obvious signs of economic improvement, it doesn’t necessarily mean that the overall standard of living is rising. “Economic growth” and “development” don’t mean that less people are struggling to meet their basic needs. If we are finding it difficult to make severely struggling people our priority, then the whole system under which we live is flawed.

Another reason I think we have struggled to “develop” is the deep levels of corruption that plague most countries around the world. Capitalism revolves around financial gains whether it is on a personal or institutional level. This makes huge space for corruption. As long as people in control are willing to be corrupt in favor of money, which is usually the case, then there couldn’t possibly be any type of economic growth. If we are not able to control aspects such as corruption then we must find a system that does allow any space for such facets that stagnate real growth. Global capitalism will only make it harder for actual economic growth, considerable higher standards of living, and almost impossible for lowering poverty. I hope one day the world realizes that capitalism is not the only logical and realistic solution.

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