Economist 3/23/16

  1. Globally, one in three higher-education students is in the private sector, according to Daniel Levy, an academic at the State University of New York. In Europe the figure is only one in seven. But the share is set to rise. According to Parthenon-EY, a consultancy, between 2011 and 2013 the number of students enrolled in private higher education grew at a faster rate than those in the public sector.Companies are also turning to private universities, further boosting their growth. IUBH offers a “dual studies” hospitality degree, paid for by hotels, whereby students spend alternate weeks on campus and at work.International students are also swelling the ranks of private providers. There are 4.5m international higher-education students worldwide, a number that is expected to rise to 7m-8m by 2025.America’s State Department wants to double the number of American students abroad from 300,000 to 600,000 by 2020.
  2. One problem with American capitalism has been overlooked: a corrosive lack of competition. The naughty secret of American firms is that life at home is much easier: their returns on equity are 40% higher in the United States than they are abroad.High profits might be a sign of brilliant innovations or wise long-term investments, were it not for the fact that they are also suspiciously persistent. A very profitable American firm has an 80% chance of being that way ten years later. In the 1990s the odds were only about 50%.You might think that voters would be happy that their employers are thriving. But if they are not reinvested, or spent by shareholders, high profits can dampen demand. The excess cash generated domestically by American firms beyond their investment budgets is running at $800 billion a year, or 4% of GDP. The tax system encourages them to park foreign profits abroad. Abnormally high profits can worsen inequality if they are the result of persistently high prices or depressed wages.
  3. Unfortunately the signs are that incumbent firms are becoming more entrenched, not less. Microsoft is making double the profits it did when antitrust regulators targeted the software firm in 2000.Getting bigger is not the only way to squish competitors. As the mesh of regulation has got denser since the 2007-08 financial crisis, the task of navigating bureaucratic waters has become more central to firms’ success. Lobbying spending has risen by a third in the past decade, to $3 billion.Most of the remedies dangled by politicians to solve America’s economic woes would make things worse. Higher taxes would deter investment. Jumps in minimum wages would discourage hiring.The first step is to take aim at cosseted incumbents. Modernising the antitrust apparatus would help. Mergers that lead to high market share and too much pricing power still need to be policed.The second step is to make life easier for startups and small firms. Concerns about the expansion of red tape and of the regulatory state must be recognised as a problem.
  4. BRISTOLIANS think of themselves as different. Theirs was the only city to vote to adopt an elected mayor in a series of plebiscites held in 2012; nine others rejected the idea. The place has its own currency, the Bristol pound, which can be used in local shops and even to pay council tax. And it is unusually prosperous.It has by far the highest productivity of any big conurbation outside London.It also has the highest household income beyond the capital.Much of the city’s prosperity dates back to the slave trade, which accounted for half its income in the 18th century.Even after slavery went away, the bankers did not: today Bristol has one of the highest concentrations of finance jobs in the country.
  5. Bristolian companies are particularly inclined to let their staff work from home, suggest data from the Centre for Cities, a think-tank. This helps to explain an exodus from London of working-age folk, particularly those with families: in 2014 one-third more 30- to 50-year-olds moved from London to the Bristol area than vice versa.Bristol’s success is thus partly down to historical and geographical accident, but local officials have also taken some wise decisions. When the city received money to develop an “enterprise zone” offering financial relief to firms, the council located it in the city centre, next to the main train station.But in other ways government has hindered more than it has helped. The lack of joined-up thinking among the four local authorities explains why public transport is so ropy.As for housing, the average Bristol home costs nearly ten times earnings, pricier than in any comparably sized city. Lack of supply is partly to blame. Bristol’s “green belt” of protected land is six times the size of the city, so it is tricky to build new homes: in 2004-14 Bristol’s housing stock grew more slowly than that of inner London.

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