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Monthly Archives: March 2017

Brexit vote: Single market benefit ‘largely imaginary’ – BBC News

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The trade benefits of belonging to the European Union have been “largely imaginary”, according to the social policy think-tank Civitas.

Its analysis argues that exports from non-EU countries to the single market have grown faster than the UK’s, since its creation in 1993.

That lends weight to the argument that no EU deal is better than a bad deal, the author said.

Theresa May will start talks on the UK’s departure from the EU on 29 March.

The prime minister will officially notify the EU of the UK’s intention to leave by triggering “Article 50” and writing to European Council president Donald Tusk.

Economies that trade with the 11 founding members of the single market, using World Trade Organization (WTO) terms, have increased their exports to the EU five times faster than the UK has, over the past 20 years, the study says.

Michael Burrage, the report’s author, said that before joining the single market in 1993, the UK’s exports to the EU grew at a faster rate than major economies such as the US, Canada, Australia, Switzerland, Norway, South Africa and Brazil.

But since joining, export growth from those countries to the EU has now overtaken that of the UK’s – a development he said was counterintuitive.

What is the single market?

This usually refers to the European Union’s single market and is perhaps the most ambitious type of trade co-operation.

That’s because as well as eliminating tariffs, quotas or taxes on trade, it also includes the free movement of goods, services, capital and people.

A single market strives to remove so-called “non-tariff barriers” – different rules on packaging, safety and standards. Many others are abolished and the same rules and regulations apply across the area.

There are EU-wide regulations covering a whole host of industries and products on everything from food standards and the use of chemicals to working hours and health and safety.

For goods, the single market was largely completed in 1992, but the market for services remains a work in progress a quarter of a century later.

“The evidence shows that the disadvantages of non-membership of the EU and single market have been vastly exaggerated and that the supposed benefits of membership, whether for exports of goods and services, for productivity, for worldwide trade, or for employment, are largely imaginary,” the study said.

“The government appears to have decided to leave the single market on the basis that we should return full control of UK laws to the UK, but trade data also offers strong support for the decision and provides comfort for those worried about relying on WTO rules if no deal emerges,” it added.

Mr Burrage said that UK exports have grown faster to 111 countries with which it trades under WTO rules than to the 14 other early members of the single market.

Other economists disagree. Jonathan Portes, economics professor at Kings College London, said there was plenty of evidence to suggest that the single market had been good for the UK.

“A lot of industries are dependent on the EU not just for zero tariffs, but also for regulation,” he said, pointing in particular to the car and pharmaceuticals sectors.

After leaving, the two alternatives are either setting up the country’s own regulatory structure, which takes time and is complicated, or using the EU’s, in which case we end up using the same rules as previously but have no say in how they are made, he said.

“It won’t be the end of the world, but it won’t be pain-free either, ” said Mr Portes.

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What makes gambling wrong but insurance right? – BBC News

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Image caption Shipowners and traders meet in shipping agency Lloyd’s of London’s coffeehouse in 1863

Almost a decade ago, I tried to place a bet with a leading UK betting shop that I would die within a year. They should have taken the bet – I am still alive.

But they will not gamble on life and death. A life insurance company, by contrast, does little else.

Legally and culturally, there is a clear distinction between gambling and insurance. Economically the difference is less visible.

Both gambler and insurer agree that money will change hands depending on what transpires in some unknowable future.

Find out more

50 Things That Made the Modern Economy highlights the inventions, ideas and innovations which have helped create the economic world we live in.

It is broadcast on the BBC World Service. You can find more information about the programme’s sources and listen online or subscribe to the programme podcast.

Gambling tools such as dice date back millennia – perhaps five thousand years in Egypt. Insurance may be equally old.

The Code of Hammurabi – a law code from Babylon, in what is now Iraq – is nearly 4,000 years old. It includes numerous clauses devoted to the topic of “bottomry”, a kind of maritime insurance bundled together with a business loan.

A merchant would borrow money to fund a ship’s voyage, but if the ship sank, the loan did not have to be repaid.

Image copyright Alamy
Image caption Many of the provisions of the Code of Hammurabi – as seen on this stone stele – deal with matters of contract and trade

Around the same time, Chinese merchants were spreading their risks by swapping goods between ships. If any single ship went down, it would contain a mix of goods from many different merchants.

But all that physical shuffling around is a fuss. Much more efficient to structure insurance as a financial contract instead, something the Romans did a few millennia later.

Later still, Italian city states like Genoa and Venice developed ever more sophisticated ways to insure the ships of the Mediterranean.

Thirst for news

Then, in 1687, a coffee house opened on Tower Street, near the London docks. Run by Edward Lloyd, it was comfortable and spacious, and business boomed. Patrons enjoyed the fireside tea and coffee, and – of course – the gossip.

There was much to gossip about: London’s great plague, the great fire, the Dutch navy sailing up the Thames, and a revolution which had overthrown the king.

But above all, the inhabitants of this coffee house loved to gossip about ships: what was sailing from where, with what cargo – and whether it would arrive safely or not. And where there was gossip, there was an opportunity for a wager.

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Image caption Lloyd’s patrons were happy to speculate on the likely death of Admiral John Byng, who was shot in 1757

The patrons bet, for example, on whether Admiral John Byng would be shot for his incompetence in a naval battle with the French. He was.

The gentlemen of Lloyd’s would have had no qualms about taking my bet on my own life.

Edward Lloyd realised his customers were as thirsty for information to fuel their bets as they were for coffee, and began to assemble a network of informants and a newsletter full of information about foreign ports, tides, and the comings and goings of ships.

His newsletter became known as Lloyd’s List.

Image copyright Getty Images
Image caption Lloyd’s List was published daily until 2013, when it became online-only

Lloyd’s coffee house hosted ship auctions, and gatherings of sea captains who would share stories.

If someone wished to insure a ship, that could be done too: a contract would be drawn up, and the insurer would sign his name underneath – hence the term “underwriter”. It became hard to say quite where coffee-house gambling ended and formal insurance began.

Eight decades after Lloyd had established his coffee house, a group of underwriters who hung out there formed the Society of Lloyd’s.

Today, Lloyd’s of London is one of the most famous names in insurance.

Image copyright Getty Images
Image caption Lloyd’s is not an insurer: it is a marketplace in which multiple financial backers, grouped in syndicates, come together to pool risk

But not all modern insurers have their roots in gambling. Another form of insurance developed not in the ports, but the mountains.

Alpine farmers organised mutual aid societies in the early 16th century, agreeing to look after each other if a cow – or child – fell ill. While the underwriters of Lloyd’s viewed risk as something to be analysed and traded, the mutual assurance societies of the Alps saw it as something to be shared.

And when the farmers descended from the alps to Zurich and Munich, they established some of the world’s great insurance companies.

Deep pools of risk

Risk-sharing mutual aid societies are now among the largest and best-funded organisations on the planet – we call them “governments”.

Governments initially got into the insurance business as a way of making money, typically to fight a war in the turmoil of Europe in the 1600s and 1700s.

Instead of selling ordinary bonds, which paid in regular instalments until they expired, governments sold annuities, which paid in regular instalments until the recipient expired. Easy to supply, and much in demand.

Annuities are a form of insurance: they protect an individual against the risk of living so long that all their money runs out.

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Providing insurance is no longer a mere money-spinner for governments. It is regarded as a core priority to help citizens manage some of life’s biggest risks – unemployment, illness, disability and ageing.

Faced with these deep pools of risk, private insurers often merely paddle.

At least, citizens in richer economies expect insurance from their governments. In poorer countries, governments are not much help against life-altering risks, such as crop failure or illness. And private insurers tend not to take much interest, either. The stakes are too low, and the costs too high.

Blurred lines

That is a shame, because there is growing evidence that insurance doesn’t just provide peace of mind, but is a vital element of a healthy economy.

A recent study in Lesotho showed that farmers were being held back from specialising and expanding by the risk of drought – a risk against which they couldn’t insure themselves.

Image copyright Getty Images
Image caption The Red Cross has called Lesotho’s current water shortages “the worst drought in a lifetime”

When researchers created an insurance company and started selling crop insurance, the farmers bought the the insurance and expanded their businesses.

Today, the biggest insurance market of all blurs the line between insuring and gambling: the market in financial derivatives.

Derivatives are financial contracts that let two parties bet on something else – perhaps exchange rate fluctuations, or whether a debt will be repaid. They can be a form of insurance.

An exporter hedges against a rise in the exchange rate. A wheat farming company covers itself by betting that the price of wheat will fall.

The ability to buy derivatives lets companies specialise in a particular market. Otherwise, they would have to diversify – like the Chinese merchants four millennia ago, who didn’t want all their goods in one ship. The more an economy specialises, the more it tends to produce.

But unlike regular insurance, for derivatives you don’t need to find someone with a risk they need to protect themselves against. You just need to find someone willing to take a gamble on any uncertain event anywhere in the world.

It is a simple matter to double the stakes – or multiply them by a hundred. As the profits multiply, all that is needed is the appetite to take risks.

Before the international banking crisis broke in 2007, the total face value of outstanding derivatives contracts was many times larger than the world economy itself.

The real economy became the sideshow, the side bets became the main event.

That story did not end well.

Tim Harford writes the Financial Times’s Undercover Economist column. 50 Things That Made the Modern Economy is broadcast on the BBC World Service. You can find more information about the programme’s sources and listen online or subscribe to the programme podcast.

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Japanese authorities decry ongoing robot failures at Fukushima

Six years ago, a massive earthquake, consequent tsunami and nuclear crisis struck Japan. International organizations rushed to help the countrys devastated residents, and to figure out how to clean up Fukushima Daiichi, the wrecked nuclear power plant. Robots offered a ray of hope amid unfathomable loss. At least they did, until recently.

As the Asahi Shimbun reported yesterday, members of Japans Nuclear Regulation Authority are now urging plant operators Tokyo Electric Power Company to find new technology and methods to aid in the cleanup. Robots keep getting fried on their missions, literally from radiation damage, or stranded on-site wastingprecious money and time.

The implication is that, perhaps, the clean up will move faster if Tepcos energy and the governments money is redirected to chemistry, biology, and so-called safe containment, building some sort of structure around Fukushima Daiichi like the sarcophagus around Chernobyl. Or perhaps humans need to trust AI to move robots through some of their tasks. All of the robots deployed in the cleanup effort have been remote-operated by humans, so far. The governmentwatchdogs critical comments followed the latest robo-fail revealed by Tepco.

The PMORPH survey robot is being used to clean up Fukushima.

On March 23 the company said it had attempted to send a survey robot into a containment vessel to find fuel debris, information it needs to decommission the plant. But the PMORPH survey robot, developed by Hitachi-GE Nuclear Energy and the International Research Institute for Nuclear Decommissioning (IRID), couldnt get its cameras to the predetermined location. As a result, it only sent back a partial report.

Just one month earlier, Tepco aborted a mission using a Toshiba scorpion robot that was built to scramble over rubble, capture images and data inside the plants facilities. The robot could tolerate up to 1,000 sieverts of radiation. And yet, it had troublewithin the hostile environs of the number 2 reactor where it was dispatched.

These followed a string of earlier robot losses at the plant going back to the Quince 1, the first robot to enter the facility after the disaster. Developed by the Chiba Institute of Technology, the International Rescue System Institute, and Tohoku University in Japan, Quince went into the power plants reactor 2 building where it measured radiation levels, collected dust samples and video footage. It ran several missions but eventually disconnected from its communications cable and got stranded within the building.

This scorpion robot was builttoinvestigate inside containment vessels at the Fukushima Daiichi Nuclear Power Plant.

It’s not like anyone thought it would be easy to make robots capable of finding and retrieving molten nuclear fuel, or decommissioning and decontaminating a nuclear power plant. Japanese researchers have been trying to create robots with these capabilities since the 80s, as Timothy Hornyak wrote in the journal Science last year. Robots remain incredibly tantalizing technology.

With cameras, dosimeters, and other tools on board, robots can ostensibly go where conditions would prove fatal to humans. If they were strong and agile enough, they might be able to bring core samples up for scientists to test, or find and plug leaks, clear paths and scour away radioactive materials. The ultimate task would be for robots to identify and retrieve some 600 tons of molten nuclear fuel and debris from Fukushima.

Despite the nuclear watchdogs most recent admonition, many robots, even the fried ones, have been helpful in what little progress has been made in cleaning up the site.

iRobots PackBot 510 E.T.

Early on, iRobots ground-based PackBot and Warrior robots, and Honeywells T-Hawk drones helped TEPCO get a handle on radioactivity and conditions around its facilities, including around damaged reactors within weeks of the disaster. Swimming and crawling robots, also developedbyHitachi and GE Nuclear energy, were used in a 2014 mission to capture images and readings fromwithin a damaged reactor.

Still, with every failed or aborted mission, every $1 million spent, it gets harder to tell people devastated by a crisis that robots are their greatest hope. Japan’s 3/11 crisis killed tens of thousands, left thousands missing and displaced a quarter of a million people. As radiation first gushed from the Fukushima-Daiichi nuclear plant, millions of residents were left mourning without electricity or water through cold and wet, end-of-winter weather.

More than half of those who fled or were evacuated from the area have no plans to come back, even still, according to Japanese government surveys. Scientific studies have concluded that certain areas are safe for residents’ return. But there’s not much in the way of schools, stores or other critical community support around Fukushima, and fears linger. The Japanese government estimates the cleanup effort will cost $189 billion and will take decades.

Let’s hope the next step change in technology, whether in robotics or another promising area, will hasten the Fukushima recovery, and prevent nuclear disasters from ever happening again.

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