Equilibrium - Winter 2022

EQUILIBRIUM

EDITORS' LETTER

In the UK, we are fortunate enough to have many privileges: access to education, free healthcare, reliable institutions, among many others. But is this the case across the world? If not, then why not? Development economics aims to explain this. It helps us to establish the relationship between a country's social and political issues and its growth – both economic and social. The best way to measure global development has been a key issue for years. Some economists favour Gross Domestic Product (GDP) or GDP per capita while others prefer the Human Development Index (HDI), which considers standard of living, education and life expectancy rather than just a country's level of production per person.

This issue of Equilibrium focuses on many aspects of development and explores various issues within the exciting and dynamic field! These articles feature many different topics, so we hope there is at least one you enjoy. One of these articles delves into India's technological advances, a hugely important factor in its rapid growth and development. China, frequently the centre of discussions on development, has changed its approach to manufacturing which means some expect it is soon to overtake the USA as the world's largest and most influential economy. Other articles pick up on the vast importance of international trade in economic development and how a country's trading partners may make or break its economic success.

We also are delighted to have a festive article, by Dr StJohn, on the oligopolistic firms in the supermarket industry when it comes to Christmas food shopping and how much they decide to advertise and why, drawing on the idea of competitive oligopolistic market structure, game theory and the Nash Equilibrium.

Hopefully, everyone can find an article they enjoy, find interesting and can take away some new information from. We sincerely hope you all enjoy this issue!

Best wishes, the Equilibrium team

The

Samadi Beligaswatte

Rishi Shah

Ishan Visvanath

Dr StJohn

The Economics of digital music streaming

Aaryan

What exactly is Globalisation? is it imperative for development?

Rishi Shah

INTERNATIONAL TRADE: A PILLAR OF PEACE IN THE MODERN WORLD

Trade through the course of history has been used as an agency to facilitate political partnerships and foster trust, bringing together various entities motivated by the desire to do business and generate profit. To understand how trade impacts the world, we first must understand the act of trade itself. Trade is a voluntary exchange of goods and services between economic actors. It is a mutually beneficial transaction, where both parties involved gain

So how does international trade bring about peace?

The process of globalisation has brought about an increase in international trade and greater interdependence between countries Countries are reliant on one another for goods and services, forcing countries to collaborate with one another. Montesquieu hypothesised commerce is a force for good, which civilises different groups of people, and brings them together, as outlined by his theory of 'doux commerce' (gentle commerce) He argues that, for a trade to be successful, there has to be a modicum of honesty, tolerance over differences and, most of all, a willingness to work together.

The conclusion he draws is the economic actors are thus less likely to take (irrational) steps which may jeopardise that relationship, and any such step taken would be mutually detrimental to all parties. Proponents of the view, who believe in the commercial peace theory, argue an increase in trade means there are more stakeholders in the situation, incentivising more groups to lobby against conflict, with the cost of warfare outweighing the potential gains from warfare. As economies become more intertwined and trade increases, the gains from warfare continue to diminish, with war becoming more uneconomical and an unwise choice. Moreover, trade partners have a selfish stake in the well-being of the other, to ensure their own self-interests are preserved.

The graph overleaf demonstrates the relationship between the occurrence of conflicts, and openness to trade Evidently from the graph, we can see there is a clear negative correlation between trade and conflict. As international trade openness increases, the occurrence of conflict decreases.

So how can international trade be maximised?

The first question to answer is how each country maximises their own output, which can then then be traded internationally This matter has been contentious, and a multitude of theories have emerged to answer this question. Adam Smith, the widely heralded ‘father of capitalism’ proposed countries should focus on specialising in certain goods, using the availability of a particular natural resource to their advantage, and divide labour to ensure products were produced as efficiently and economically as possible, keeping prices low He then believed countries should exchange goods between one another which they specialised in. Whilst in principle this sounds like a good idea, it is oblivious to the fact the production of some goods will be more profitable than others causing inequality, and total interdependence makes the global economy extremely prone to externalities. Another theory was the national competition theory This theory stated that national competitiveness in a particular industry will depend upon the environment that industry is getting in the home country The main source of innovation and up-gradation for that industry is basically the environment in which they operate which helps countries in getting a national competitive advantage, relative to other countries, and the sheer amount of competition would force prices down, and ensure maximum quality of goods. The problem is if the market becomes too saturated, there will be a point where potential manufacturers do not choose to enter the market, eventually reducing competition.

The second factor to consider is obstacles standing in the way of maximising international trade currently. These largely are political and social aspects. The first hurdle is the government itself. Many businesses and corporations are put off doing business with countries with volatile and unpredictable governments, due to the lack of stability and security required for businesses to run well. Businesses also may view foreign legal systems and paperwork as unfriendly, especially MSME’s, who lack the resources to seek counsel. Undertaking dispute resolution procedures, attaining correct licensing and settling financial payments abroad, when combined with the usual financial risks within a domestic market, may make it illogical for companies to trade and invest abroad. Economists like Von Hayek believed an interventionist approach by the government hinders and hampers the ability of international trade to occur naturally, and thought the biggest problem in the market was the government. One radical approach is to roll back on government influence, and encourage them to adopt a laissez-faire standing, as many right-wing economists believe the government should do Right wing thinkers also believe that all governments should do away with protectionist policies, which are visible through tariffs, quotas and embargoes, and subsidies, which they argue give an unfair competitive advantage to certain businesses. Quotas can curtail the amount of a good imported, limiting the size of trade

Finally, there are also monetary barriers to consider These include government approval for securing foreign exchange, which is more frequent amongst less stable economies. This is when all foreign exchange transactions must be approved by the central bank. Thus, importers who want to buy foreign goods must apply for an exchange permit which is permission to exchange an amount of local currency for foreign currency, adding a layer of unwanted bureaucracy, and providing an opportunity for government overreach. Another monetary barrier is blocked currency, which is used as a political weapon in response to a difficult balance of payments situation. The blockage is accomplished by refusing to allow importers to exchange their national currency for the seller’s currency

As discussed, trade is a viable route to achieve and sustain peace, with the added benefit of reaping economic rewards for the parties involved. The question of how to maximise trade is a completely different one, and given competing economic and political ideologies, along with the lack of consensus has made it a difficult one to answer. What’s certain is globalisation and increased international trade provides new opportunities not previously available to us, invariably playing a large part in development, and help preserving peace around the world

Manav Mashru

THE ECONOMIC DEVELOPMENT OF THE NEXT GLOBAL SUPERPOWER

China is currently the world’s second largest economy. This article explores the timeline of major Chinese economic policy and the prime effects they have had in boosting economic growth by record levels.

Mao Era (1943-1976):

From post-World War II to 1976, Mao Zedong was the Communist leader of China. During his time in office millions of Chinese people died because of failed economic plans like the Great Leap Forward Why was this?

Up until 1978, 80% of China’s population lived rurally and the Chinese government operated a command economy. This meant that the government had complete control over the prices of goods and services produced by Chinese workers Furthermore, land owned by farmers were seized and controlled by the state known as the People’s Commune. The People’s Commune was detrimental to China from the 1950s to 1960s because many resources produced by workers were misallocated and basic necessities were seized by the government

This had created widespread famine by 1959 causing 15 to 55 million Chinese people to die in just several years. Another widespread famine was predicted to occur in the 1970s because of how deficient productivity and resources were. This was a huge problem coupled by the fact that in 1981, 88% of China’s population were in poverty.

The GDP in China at this time was only 150 billion dollars, 6% of America’s GDP When Mao passed away in 1976, Deng Xiaoping became the leader of China founding the new one-party state. His party was determined to succeed where Mao had failed, developing China’s economy into prosperity.

By studying the economic growth of Singapore under Lee Kuan Yew. Deng was equipped to release his party’s economic reforms which paved the way for China to become the second largest economy in the world.

Deng Era (1978-1987)

In 1978, the Chinese government led under Deng Xiaoping launched major economic reforms The first main reform was in agriculture. The largest sector by far in China’s economy was agriculture with only 20% of Chinese people living in urban areas. For thousands of years, agriculture was the life and blood of China’s economy, but Deng’s reforms would turn China’s economy on its head

Decollectivisation and Privatisation

The government halted the failed system of the People’s Commune allowing peasant farmers to have much more control over their land and yield as long as workers provided a small amount of yield to the government. This act of privatisation is known as the Household-Responsibility-System. Between 1975 and 1985, the agriculture sector had increased by 25%, a rousing success that led to the privatisation of many other sectors in the Chinese economy

Open Door Policy

Pioneered by America in the late 19th century. Deng adapted the policy to suit the Chinese economy in December 1978. The purpose was to allow for foreign business globally to set up branches in China allowing for strong investment In 1980, four Special Economic Zones (SEZs) were set up: Shenzhen, Zhuhai, Shantou, and Xiamen. These were the four prime zones for foreign companies to set up in China and all of them were located near the coast of the South China Sea allowing for easy accessibility. Further incentives included extremely cheap labour, efficient land use and a reduction in corporate and income tax.

This was the turning point for China allowing for massive economic development and urbanisation. The scheme was so successful that for 12 years, Shenzhen had an annual growth of 9.8% meaning that the economy doubled every eight years or so. These incentives meant that companies would choose to set up new branches in China opposed to other nations creating rapid industrialisation and increased profits.

The following graph shows the primary consequences to urbanisation following on from the implementation of SEZs There were ever increasing incentives for workers to urbanise.

Overall, China had transitioned from a command market into becoming a mixed market Prices of goods were determined by the behaviour of the market and bottom-up approaches triumphed in making China from the 32nd exporter in 1980 to becoming 13th in 1989 doubling its global trade to becoming the largest exporter in the world now (twice the volume exported than America).

Technology and Sustainability (2000-2022)

China now focuses on transforming their economic development model. This has primarily slowed down growth compared to the late 20th century.

From previous strategies of providing exceptionally cheap labour and high productivity, the nation now focuses on greener technology and innovating new, cutting-edge products Since 2009, the average wage of a Chinese worker has gone from 26600 yuan to 72000 yuan in 2018 (11000 dollars). Despite the increases of wages, the country aims to bring most of its population out of the working class. In order to do so, China has been focussing on developing the finest technology and capital that act as a substitute for workers leading to a decrease in labour demanded by firms Over the last decade or two, China has been focussing on innovation. But how has this been put into practice?

China had created Economic and Special Technology Zones (ESTZs) primarily focussed on encouraging foreign tech industries to produce and invest in China allowing for more exports for China’s economy. China is renowned for creating many important components of American products like the iPhone In fact, most phones are produced in China making the country the dominating smartphone market In an age of technology, China is without a doubt the driving force of high tech.

Being at the forefront of education and technology, China is dedicated to producing and revolutionising greener technology especially when compared to the US Air pollution is a serious health problem in China and the transition from diesel and petrol cars to electric cars is accelerating.

Chinese electric car brand BYD sought to release a premium brand called Yangwang by 2023 We very well could see BYD taking the car market by storm similar to Tesla.

The economic development of China has been unprecedented and simply ground-breaking It is highly likely that China will become the global superpower in the late 21st and 22nd century The development from a socialist regime post WW2 to becoming a free market 1978 onwards has seen investment skyrocket creating surges in quantity of labour demanded and consumption which is why China has seen exceptional growth in GDP (national output). Whether we like it or not, China will become the leading country in the globe producing highly educated citizens and a site of innovation for Western firms

Samadi Beligaswatte

Recently, the frequency, severity and unpredictability of severe weather events have been increasing because of climate change. Given the increased frequency and magnitude, the costs of extreme weather could double this decade, providing the world with additional costs that they would rather not have Though at the same time, climate change could provide an economic opportunity and initiate the greatest transformation in our economy since the industrial revolution.

Since the 1880s, the combined land and ocean temperature has increased at an average rate of 0.07 °C per decade. And, since the 1980s, this rate has doubled causing the eruption in global temperatures and the frequent melting of polar ice caps contributing to a rise in sea level. Following these higher temperatures, a warmer sea fuels storms, increasing the potential for tropical cyclones to develop As warming also leads to more evaporation, heavy rainfalls and snowfalls become more frequent, making floods and cyclones more severe.

In its Fifth Assessment Report published in 2014, the Intergovernmental Panel on Climate Change (IPCC) reported that risks associated with extreme events will continue to increase as the global mean temperature rises.

Hence, it’s not just the two phenomena: rising sea levels and warming average temperatures that are the most important for assessing the economic costs of climate change. But what’s wreaking havoc on our economies is associated with the increasing frequency and intensity of extreme weather events, for instance, the floods in Germany, India, and China in July 2021 Or the severe wildfires in Southern Europe during August Collectively, a storm is rising on world economies, and will not stop till it has rained over each one.

It is difficult to assess the economic impact of weather-related disasters due to the lack of data availability and the issues with measurements due to their unpredictable and volatile nature. Therefore, to quantify the economic loss from significant weather events like cyclones and floods, it is important to focus on direct economic loss, for example, damage to infrastructure and production losses when there is a disruption to economic activity. Hence, disregarding indirect damage from water stress, migration and famine.

The destructive power of known weather events has increased since the 1980s, and the severity of economic loss can depend on the level of economic wealth There is an increasing trend with natural disaster damage, and countries which are heavily impacted by high seasonal rates of precipitation are those that have a greater percentage of GDP E G China and India Hence, GDP is used as a proxy as income and wealth are typically correlated with one another. The change In GDP between the 1980’s start of the 2000s depicts different average losses, with a higher average loss in the second decade of the 2000s. This signifies that climate change is harming the economy as much as it harms the environment.

The damage resulting from extreme weather events can occur during or after the hazard. The economic damage, in turn, can cause indirect economic loss – a reduction in the flow of economic activity after the event The losses can include a micro-level reduction in activity for example a decline in a firm’s revenue owing to business interruption or individuals’ loss of income. Or a mesoeconomic impact. This could be the interruption to transport networks or blockages in the flow of inputs through supply chains. And there are macroeconomic impacts including price and exchange rate changes, an increase in government debt and negative effects on stock markets and declines in GDP.

Assessing the damages caused by Hurricane

Harvey, based on estimations taken by the Centre for Research on the Epidemiology of Disasters in Belgium concluded a $95 billion total cost, second largest in US history. There was damage to infrastructure as well as commercial property along the gulf Small and medium-sized enterprises (SMEs) were inevitably damaged because of indirect losses.

There was a serious loss in productivity from weather events like Hurricane Harvey including many workers being unable to report to their jobs – creating significant declines in revenue for the duration of the inclement weather. For example, consumer activity is also rare during extreme weather events, leading to massive losses in sales and revenue. As a high-income country, the recovery period that followed took place two years after the hurricane occurred, which is in contrast to lower-income countries, where the recovery process spans over a long period, as the government are unable to support and assist due to a lack of capital.

Most recently, the weather is becoming the most uncertain determinant of demand. As winter is starting to make itself felt, as Germany's first snows arrive, natural gas is also taking a hit. Historically, the demand for gas has always been correlated to the temperature: the colder it gets, the more gas is needed. But climate change is making things more complicated. Temperatures are even colder and fluctuate differently than expected Moreover, home-heating systems have been left unused for longer than usual. And blankets are being sold more as people are willing to wrap up . Now, the gas crisis is not only just an environmental problem but a political one It is becoming more evident that renewable energy is more of a factor in heating up the homes of thousands of people. Indeed, hydropower has been an issue for Europe as a hot summer led to reservoirs being dried up. But our world’s investment into cleaner energy other than improvements and new solutions in ways to store electricity or whether batteries, hydrogen or other techniques, could in the future smooth out such variability.

The current climate issue we face is first an economic one Economists typically underestimate the cost of climate change and are therefore likely to underestimate its urgency and the urgency required for costeffecting mitigation policies. Climate change impacts different people And a low-income uninsured family has a higher risk compared to a family with a higher income Well, this is the case in the US. But, can be applied everywhere else, and is typically more prevalent in low-income countries

Politicians and leaders of major countries are now realising that new strategies are needed, and billions of dollars need to be spent to find carbon scrubbing and ocean seeding to remove carbon dioxide from the atmosphere, or solar radiation to reduce warming The unpredictability of our weather patterns has come from the global fossil fuel industry treating the atmosphere as a free sewer for emissions from their products. Therefore, now our global goals are to improve the environment and there is a demand for a return to a safe climate

Climate change also opens up a wide array of jobs and services to new industries which can pave the way to higher rates of future employability generating an increase in GDP for many nations, especially those that are low or middle-income, underdeveloped or developing nations. But the challenges that face our economy with climate change and the natural disasters that follow will cause more damage faster than a rate that will rebuild our economy.

Therefore, for now, climate change is controlling our weather patterns and dictating our storms, hurricanes, floods and droughts the correlation between that and our economy is a strongly positive one, and now it continues to control our current economic decisions and major economic funding for which we hope will be the for the short term

Rishi Shah

THE INDIAN ECONOMIC MIRACLE

On the 15 August 1947, as India gained freedom from British Colonial Rule, the country surmounted over 200 years of struggles; setting out the dawn of a new era of deliverance from the clutches of British Colonialism. On that fateful day, one could not predict, with complete and utter candour, India’s remarkably robust and resilient growth story In this essay, I will explore how the technology services revolution has ushered in a social revolution, uplifting the lives and livelihoods of hundreds of millions of citizens, fast tracking the economy to overtake the UK and by 2050 become the second largest economy in the world.

For one, in the last 10 to 15 years, the country has emerged as a technological hub for the software companies of the world Bengaluru, honing the nickname of ‘Silicon Valley 2.0’ hosts some of the world’s biggest firms' largest world bases, including Infosys, Wipro, Mindtree, and Capgemini, just to name a few. In addition, Hyderabad is home to the Microsoft development centre, also being the largest bioinformatics hub of India- This term refers to the process of both the collection and analysis of complex biological data such as genetic codes.

In 2019, NASSCOM, the premier body of India’s tech industry, reported the sector aggregating revenues of over 180 billion US Dollars, with export revenue standing at 99 billion dollars and domestic revenue at approximately 48 billion USD. This is the result of the country becoming the largest global sourcing destination for the IT industry-Online retailing, Cloud Computing, and E - Commerce all contributing to its rapid growth rate. However, one of the largest positive outcomes of the flourishing technology industry of India is its ripple effect on the lives of the local populace.

According to Achin Steiner, the administrator of the United Nations Development program, India has lifted over 271 million people out of poverty, during a 10 year range between 2006 to 2016 Using a figure from worldvision.org, we can estimate that this was some 26.7% of the entire global population of those under the poverty threshold at the time; putting into perspective the sheer scale of the operation Subsequently, a growing middle-class has fuelled impressive consumer growth, helping underprivileged Indians, who were deprived of an education to make their mark in life through entrepreneurial endeavours, targeting the new wave of wealthy migrants to the country.

For instance, as tech parks are built throughout rural areas of Bengaluru, those living in poor villages, lacking adequate sanitation, can sell their plots and homes for a substantial figure, to help either private companies or the government acquire space to construct their offices. These citizens who have been beaten and bruised by both the state and their living conditions are able to move to various parts of the country and live a more comfortable life, now as part of the lower-middle class. As a result, IT employs over 14 million people, 10 million being direct employees and 4 million being indirect. Using India’s average employment rate figure between the years of 2002 and 2020, this equates to approximately 3.2%- a seemingly nominal figure. However, considering that a mere 34% of employed Indians live in urban areas and many of those are uneducated and live under poverty, we can deduce that 16% (just above a 1:6 ratio) of all Indians in cities and suburbs work in IT and software. In comparison, the same percentage in the UK is 0.2% and 2.9% in the USA.

In conclusion, the 21st century is earmarked as driven by technology, and India is the centre of attraction, considered a global knowledge powerhouse. The IT industry in particular is considered a backbone, in order for the Indian economy to prosper exponentially, generating millions of jobs every single year, as result of over 50% of the population being under the age of 26. Growth in the sector will help push the Indian economy at a projected rate of 6-7%, bringing them to the world's third largest economy by 2030, and second by 2050 Now with the emergence of new and exciting technology such as Artificial Intelligence and Machine Learning, as well as predictions of the tech related jobs doubling in the next decade in the country, the future of IT in India is bright

Ishan Visvanath

CHRISTMAS ADVERTS AND GAME THEORY

One of the surest signs that Christmas is approaching is that from November each year our screens are awash with expensive adverts by the major retailers Marks and Spencer, Tesco, Asda and of course John Lewis. Why do these retailers advertise so much? It’s slightly odd, since, really, few people need to be reminded to buy food for Christmas, and the costs of these adverts are very high according to Forbes, the John Lewis advert this year cost $8m. It is quite likely that the various retailers would be better off not advertising at all, and just enjoy the pure benefit of the increased Christmas spending This, of course, is just what does not happen. And

game theory helps to explain why

Why do firms advertise at all? In most cases it’s not to increase total demand for the given product they make; it is, rather, to increase their share of the total market Food adverts at Christmas will, probably, make each of us buy a bit more food. But the reason Asda or Sainsburys advertise is so that we buy our Christmas food from them and not some rival. The problem is, they are essentially locked in a Prisoner’s Dilemma.

Consider two rival retailers, Tesco and Sainsbury’s. Their payoffs from advertising are as follows (in millions of pounds) In each box the payoff to the Row player is given first (Tesco) and the payoff to the second player (Sainsbury’s) is given second.

The Nash Equilibrium for this game is for both firms to advertise, even though they would both be better off if neither advertised (so the outcome is similar to a Prisoner’s Dilemma, when both prisoners would be better off being silent but both confess) Starting with Tesco, if Sainsbury’s advertises, Tesco will need to advertise too, since if it does not its share of the Christmas market will be squeezed and its profits will be only £20m, whereas if it advertises its profits will be £30m So we put a tick next to Tesco £30m payoff in the top left hand box But if Sainsbury’s does NOT advertise, Tesco will benefit even more by advertising as it can gain market share from the silent Sainsbury’s, so hence we put a tick next to the payoff to Tesco of £70m in the top right hand box Obviously, ‘Advertise’ is Tesco’s Dominant Strategy it will run a Christmas advert whatever Sainsbury’s does

The same reasoning applies for Sainsbury’s. So, if Tesco advertise, Sainsbury’s will do better to advertise too, since their payoff then will be £30m, compared to only £20m if they don’t advertise. So place a tick next to £30m for Sainsbury’s payoff in the top left hand box. And if Tesco do NOT advertise, Sainsbury’s will do even better and earn £70m if they advertise and thereby take market share off Tesco. So we place a tick next to £70m for Sainsbury’s in the bottom left hand box

As can be seen, the only box with two ticks is the top left-hand box where both retailers run Christmas adverts and earn £30m in profits each This is the Nash Equilibrium which means that, in the light of what the other retailer does, neither retailer regrets its decision to run a Christmas advert campaign. By contrast, suppose Tesco had decided not to run a campaign and now it finds Sainsbury’s has well then Tesco would regret that decision and would (if it could) reverse it, since by not advertising it makes only £20m profit to Sainsbury’s £70m AdvertiseAdvertise is the only outcome that neither retailer would change even if it could.

The irony is, of course, that both firms would be better off if they abandoned Christmas adverts altogether, for then each would earn £50m in profits compared to £30m The problem is neither firm will occupy that position for, as we have seen, it is always in the individual retailer’s interest to advertise irrespective of what the other retailer does. Any shop seeking not to advertise and make the bottom right-hand box possible will be badly hit by the other firm that does advertise So no one takes that chance and both firms advertise and as a result our screens are saturated with Christmas adverts by oligopolistic retailers. Whether this is an optimal outcome for consumers is another question though these adverts do seem to kick off the season of festive cheer!

Dr StJohn

THE ECONOMICS OF DIGITAL MUSIC STREAMING

Digital Music Streaming has seen an astronomical rise since lockdown hit the world in 2020. The number of people using music streaming services like Spotify and Apple Music rose dramatically during the Covid -19 Lockdown due to the absence of live music events. These services provided a way for music fans to listen to their favourite artists within the comfort of their own home and on the go, therefore their usage increased dramatically However, within this industry, there has been much scrutiny over the way the revenues received by these streaming services are split up between the different parties involved, specifically the artists themselves. This article will explore this aspect of the economics behind music streaming services, as well as others

The music streaming industry has been competitive for years with many apps fighting for the spot of being the ‘Number 1’ music streaming app However, over the past few years, this has undoubtedly been occupied by Spotify, which boasts a massive 236 million free monthly users and 182 million premium users This is huge in comparison to other apps like Apple Music which has 78 million users and Amazon Music with 68 million users

Spotify also has a 31% market share in the global music streaming market compared to its nearest competitor, Apple Music, with 15%, which further shows Spotify’s dominance in this market. However, with this, comes a danger that Spotify can hold a monopoly in the music streaming industry. This occurs when a single seller or producer holds a dominant position in an industry or sector, and controls the supply chain, which means there is a lack of competition. This can lead to price changes and barriers for new competitors to enter the market This is not entirely applicable to this industry as there are still competitors within the market and Spotify is not the sole producer of digital music, but it still holds a monopoly over the other streaming services in the sense that it is so dominant in comparison to the others. As well as this it controls the different ways to listen to music, as streaming on the go has become the preferred way compared to CDs or Vinyl This is seen as an advantage for consumers as it has improved the consumer experience due to more songs and artists available. However, inevitably someone loses out when a company like Spotify monopolises and, in this instance, it is the artists

To understand how the artists are the losers amongst all this, it is important to first understand how revenues are split up within this industry. Usually, the streaming services don’t pay the artists but instead they pay the rights holders, who are the record labels, publishers, and distributors of the music. So, for example, Spotify takes a 30% cut of the subscription fees, and the remaining 70% is divided up among the rights holders These rights holders then pay the artists based on their contract These payments are known as royalties, which in simple terms, is a recurring payment in exchange for permission to use something, which in this case, is the artist’s music. The normal royalty rate is between 15% and 25%, which, when compared to the 70% that record labels receive, is quite a small amount Furthermore, streaming decreases the equitable remuneration that artists receive. Equitable remuneration is a basic performer right where performers must be paid shares in revenues of a song, regardless of royalty rates This includes performers such as back-up singers, who may not be featured on the song. Therefore, artists are receiving a very small share of revenue, considering how vital they are to the creation of the songs

The difference in revenue is further widened when we see that two of the biggest record labels, Universal Music Group and Sony Music Independent, have shares in Spotify. This further shows how these major record labels are in fact profiting massively from artists’ work using streaming services, creating an imbalanced business model, which is very

damaging for artists’ revenues, showing how they are losing out from the music streaming industry when it could be argued that they should be the ones profiting.

Due to this unsustainable model, the British government’s Digital, Culture, Media, and Sport Committee launched an inquiry into the economics of music streaming in 2021, after seeing that ‘music streaming in the UK brings in more than £1 billion in revenue ’ but ‘artists can be paid as little as 13% of the income generated.’ Fiona Bevan, a singer, and songwriter, said how ‘everybody who is further down the chain, like songwriters, are not getting any income’ and that ‘music has been utterly devalued’ which shows the state that the music streaming industry is in. The committee suggested a few solutions to the government to try and solve this fundamental problem, which included improving legislation to enforce the right to equitable remuneration and restoring revenue equality for artists in general. Hence, there are solutions to this widespread problem of artists losing out in the music streaming industry

Overall, from the evidence shown, the music streaming industry is slowly becoming a monopoly dominated by big record labels and apps like Universal Music Group and Spotify, who have sizable shares in the market. Hence, disparities in revenues have been created between the rights holders, which are the record labels, and the artists, like the songwriters and singer, which are causing artists to be unfairly treated and not get the income and revenue they deserve. Therefore, the only solution to all this is to balance out the venues shared and create a more competitive arket within the music streaming industry.

Aaryan Beri

WHAT EXACTLY IS GLOBALISATION? IS IT IMPERATIVE FOR DEVELOPMENT?

Globalisation, put simply, is the connection of different parts of the world An economics definition instead would be globalisation is a process in which businesses, organizations and countries begin operating on an international scale. It is a transition into a state of increasing interconnectedness and interdependence due to a rapid increase in cross-border movement of goods, services, technology, and capital. Generally, globalization can be seen as an economic process, but it can also be affected by politics and culture. Even though there is a trend that can be seen where the standard of living tends to increase in developing countries during globalisation, but some analysts also warn that globalization can negatively impact emerging economies and individual workers. Is it only the newly industrialised countries such as the BRICS and MINTS which benefit from globalisation and the developing countries in the “bottom billion” which suffer from it

Since the start of human civilisation, people have traded goods with their neighbours. And with cultural advancements, people were able to travel farther afield to trade their own goods for other desirable produce elsewhere.

For thousands of years, Europeans traded glass with the Chinese for spices and silk, where both continents traded goods from far away. Sooner, globalization occurred or a much larger scale where there was a rich transfer of goods like plants, food, animals, ideas and cultures forming the Columbian exchange A process which followed, known as the Triangular Trade network saw ships carrying manufactured goods from Europe to Africa which enslaved Africans to Americas. This revealed the social manacles impinged on people and the damage demonstrated by globalization, showing its true double nature; it can hurt people as much as it connects people.

Globalization does generate many benefits, especially in the environmental sector. There has been an increase in ecological awareness as globally the world has become more consciousness of problems faced within countries. This can be seen in the recent ‘debt for nature swaps This new settlement initiates a reduction in a country’s debt to another country in order for the debtor country to ensure the conservation of the natural rainforests. This happened in 2018 between the United States of America and Brazil

Globalisation has also led to an improvement in the quality of life in many nations as it can trigger rapid economic growth. For example, many businesses in the United States outsource their call centres or IT (Information Technology) services to companies in India because of cheaper land and labour As part of the North American Free Trade Agreement (NAFTA), U.S. automobile companies relocated their operations to Mexico, where labour costs are lower. This was similar with the UK and China; there was a shift in manufacturing from the East to the West because of the same reasons as well as looser environmental regulations. In the UK in 1900 the secondary sector took up 20% of employment, however by 2006 this fell by 2%. This shows the shift in importance of the secondary sector, to the tertiary and quaternary sectors which focus on the development of the service industry and technology industry This in turn creating the knock-on effect of allowing other countries to profit and develop, and boosting the rate of economic growth by outsourcing manufacturing. Globalisation has positively impacted the world as their increase in their concentration towards the quaternary/hightech sector has led to innovations that have improved standards of living world-wide. Advancements in the quaternary sector through R&D (research and development) like the rapid mass-production of the COVID-19 vaccine, saved millions of lives and saved the economy too from a heavy 10-year long-term hit which could have occurred if there hadn’t been enough focus towards the quaternary sector.

Globalisation has also led to millions of new jobs in LDCs and NICs because of multinational companies. Since 1980, global foreign direct investment has been increasing, peaking over $3 trillion in 2007. And, in the whole of sub-Saharan Africa, the average real growth in GDP of all countries has increased from less than 1% in 1992 to over 5% in 1996.

From an economic standpoint, capital inflows supported by TNCs have created higher output and jobs, which increase national consumption. The inward investment from multinationals creates much needed foreign currency for developing countries, raising expectation of what’s possible Politically, globalisation also creates the foundation for a more rounded global partnership where international problems are dealt with in an organized way. For example, the UK committed a £427 million package of direct support, and the USAID spent a total of $2.4 billion to assist West Africa in treating and controlling the Ebola outbreak in 2017. This upheld healthcare as well as helping Liberia and Sierra Leone in their loss of education and food security.

Globalisation does create many benefits But any change does have winners and losers. Free trade can harm developing countries as they struggle to compete with developed countries, as free trade helps developed countries more. The 'infant industry' argument says, that "developing countries are justified to put tariffs on their imports of they are seeking to develop new industries and diversify their economy." which gives them a comparative advantage There is also the huge impact of subsidising the agricultural industry high tariff protection policies initiated by the US. Hence, globalisation could be argued rather as an attack on free trade Developing countries do not benefit from being taken advantage of plus the additional costs from developed countries because of their useful primary products.

Another cost of globalisation is the environmental costs involved. Globalisation has led to an increase in trade and the consumption of goods. They can boost economies readily but quickly lead to rise in pollution through the emissions because of transporting goods. Carbon dioxide emissions from transport alone are expected to increase by 16% by 2050.

This puts stress on the environment as well as human health Air pollution is cause over 6.5 million deaths each year, and this number is increasing rapidly There is also an increase in the use of non-renewable resources which is another leading factor towards higher rates of air pollution. There is a failure to set satisfactory environment standards which is causing firms to outsource production to where environmental standards are less strict And their quality of life is improving due to an increase in the average national income. Many of these countries, in the long term, are facing an environmental breakdown which, long-term, will impact people's health and livelihoods

It's clear that globalisation appears to benefit MDCs and NICs which have strong and growing economies, as they have the ability and opportunity to outsource much of their manufacturing and laborious jobs to LICs and LDCs to increase their annual profits and boost their economy quickly. Globalisation's costs are mostly borne by developing countries, contributinb to a greater wealth divide and a dip into absolute poverty. Primary product exploitation has been a problem for a while now, and if there aren't any solutions soon, we might find ourselves looking at an even more dire situation.

Rishi Shah

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