Economist 6/8/15

  1. AMID mounting protests by rebellious teachers the Mexican government has taken a risky gamble. On May 29th, just days before mid-term elections scheduled for June 7th, it “indefinitely suspended” the most important part of its landmark education reform. The education ministry issued a curt, 33-word statement saying it was suspending examinations of teachers. The exams were due to take place for the first time in July as part of the education reform approved by Congress in 2013. Officials later elaborated that the announcement was an attempt to placate teachers from the CNTE, their most radical union who have threatened to boycott the elections—to choose 500 congressmen, nine governors and hundreds of mayors.But the CNTE saw straight through the ploy. Instead of quieting down, it has stepped up its protests.
  2. On June 19th Title IV of the JOBS (Jumpstart Our Business Startups) Act of 2012 goes into effect. It will change how small companies raise money. Those seeking $20m-50m will be able to offer their shares to the public while skipping some of the most costly regulatory requirements that normally involves.In the past, firms that did not meet those requirements could only raise money from investors with a net worth in excess of $1m or $200,000 in annual income. Ten thousand people who did pass that test have signed on to SeedInvest’s system. With the lifting of the rules on income, any adult American can now invest in small share offerings.SeedInvest is among a handful of new electronic platforms that are designed to facilitate the process. In its brief existence, it has already channelled $25m to 40 firms. Qualifying companies must meet certain standards, such as having a functional prototype of any planned product (not just an idea), customers, and reasonable investment terms. Only 1% of applicants pass the test.
  3. WHEN Affirmed won the Triple Crown of American thoroughbred racing in 1978, the achievement merited little more than a shrug. It was the third time in five years that the same horse had won the Kentucky Derby, Preakness Stakes and Belmont Stakes, and the eleventh in the sport’s history. . It would be 37 long years for racing fans until this June 6th, when American Pharoah— whose owners are clearly better at horse-training than they are at spelling—at last equalled the feat.There are good reasons why the Triple Crown has proven so elusive. Raw speed is of course essential to secure it, but adaptability, endurance and a quick recovery time are almost as important. The three races, all for three-year-olds, occur within a five-week stretch in May and June in three different states.But the Belmont, held in Long Island just east of New York City, favours precisely the opposite type of horse. At a mile and a half, it is the longest track in the United States and a veritable equine marathon.
  4. Iceland was the first country to be hit by the financial crisis—and it was hit hard. Small wonder: it had a massive exposure to the volatile world of global finance. By 2008, the combined assets of its three biggest banks—Glitnir, Kaupthing and Landsbanki—were 14 times larger than Iceland’s entire GDP.These three banks had lent excessively and recklessly. But only about one-fifth of their loans were in Icelandic kronur, since interest rates on these were punitively high. Ordinary citizens instead borrowed from their banks in cheaper currencies such as Swiss francs to buy their homes and cars. That proved to be a big problem when the banks failed: when the kronur slumped, foreign-currency debts became much harder to service.These days, though, Iceland’s economy is looking much stronger. It grew by 2% last year, and should expand even faster this year.
  5. Illinois is one of the most mismanaged and corrupt of America’s states. Illinois is burdened with the country’s lowest credit rating and one of the highest numbers of federal public-corruption convictions. It banned the “revolving door” by which state employees pass on to lobbying firms, tightened restrictions on gifts to state employees and expanded the required disclosure of their economic interests.Illinois remains the country’s third-most-corrupt state after New York and California, and Chicago is still the corruption capital of America, according to a report by Messrs Simpson and Gradel and others that was published on May 28th. With 45 public-corruption convictions in 2013, almost one a week, and 1,642 convictions between 1976 and 2013, the federal judicial district for northern Illinois reported more public-corruption convictions than any of the country’s 92 other judicial districts.He estimates the monetary loss from corruption to be at least $500m a year for Illinois. The opportunity for corruption was far greater in Illinois than in Idaho or Iowa in the late 19th century, as Chicago was a big railway hub and the state was deeply involved in industry. This created a rotten political culture and a sense of entitlement, says Kent Redfield at the University of Illinois in Springfield, and it continues to this day.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s