The world economy

Oct 6th 2012 | from the print edition

The danger is most imminent, and obvious, in America, thanks to the so-called “fiscal cliff”. Under current law, America is set for a fiscal squeeze worth roughly 5% of GDP as the Bush tax cuts and a host of more recent temporary tax reductions expire at the end of this year, and deep cuts to defence and other types of federal spending kick in. If politicians do nothing, that fiscal squeeze would eventually send the weak economy back into recession.

That prospect is so horrible that most people assume the politicians will act, either just before the end of this year or early next. But no one knows what exactly they will do, or when. Nothing will happen until after the election on November 6th. And Congress is barely in session between then and the end of the year. The atmosphere of economic uncertainty is paralysing American business. Investors are more relaxed, but their nonchalance may prove misplaced. Any plausible solution requires compromise between Republicans and Democrats in Washington.

Neither tribe seems in the mood for it. Ironically, the Fed’s boldness may have left lawmakers less worried about acting responsibly themselves.

Something similar is happening in Europe. Spain is dithering about applying for a rescue package. Germany and other creditor countries are going back on their promises to use joint rescue funds to recapitalise banks. The Germans are obstructing the move towards common bank supervision. If this backtracking continues, the peripheries’ bond yields could prove short-lived, and the euro zone’s recession will deepen.

In China economic reform has stalled. To be fair, China’s politicians were wise to eschew a 2008-style credit binge to arrest this year’s slowdown. They have little appetite for another investment splurge. But they have failed to do enough to accelerate the shift from an export-led economy to one that relies on domestic consumption. They should be breaking up domestic monopolies and radically reforming the tax code.

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Data from The Economist’s latest ranking of mba programmes show Europe’s charms waning. A poor economy and Britain’s ill-advised visa policy are to blame

Oct 6th 2012 | from the print edition

NOT so long ago business students flocked to Europe. Compared with their American counterparts, European schools were cheaper and their student bodies more diverse, both attractive features—and the salaries of European MBA graduates were often higher, too. Some of these attractions remain undimmed. But they are no longer enough to bring in the punters. Data from The Economist’s latest ranking of full-time MBA programmes suggest the appeal of an Old World business education has gone into a rapid decline.

The intakes of many of Europe’s flagship full-time MBA programmes have plummeted (see chart). Enrolment on Aston Business School’s MBA, for example, more than halved in the past academic year, falling from 129 students to 59. By far the biggest drop was among Asian students. HEC School of Management in Paris enrolled 181 full-time MBAs in the past academic year compared with 233 the previous one. It is a similar story across Europe. Some smaller schools have been desperately scrabbling around to find the 30 students that some MBA rankings see as the minimum for a course in good standing.

One obvious reason why students might stay away is the dire economy. MBAs can look like a good way to sit out a short downturn. In a longer one they lose their charm. With no job-producing European recovery in sight, going there for an MBA seems not so much cleverly counter-cyclical as stubbornly contrarian.

Europe’s slide also reflects a problem specific to its most important MBA market. The average class size of the British MBA programmes ranked by The Economist has decreased by 11% over the past year. Schools blame Britain’s newly toughened visa requirements for non-EU students. Graduates used to have an automatic right to stay and work for two years. Now, they must find a sponsoring company and land a job which pays at least £20,000 ($32,000) a year. The number of visas available to students wanting to start their own business is piddling.

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