Economics Social Sciences

A Cashless Economy?

This short-read article was written by fifth former Johnny Kershaw.

Estimated read time: 4 minutes

Cash is king? Not so much these days. What are the potential benefits of a cashless society, and what might be the downsides?

For an economy to be successful, it is reliant on its ability to carry out commerce smoothly. It is for this reason a plethora of innovations and technologies have led to numerous ways to pay for things. In the face of this, cash is still preferred for its ease of use, representing 30% of all transactions1 in 2018.  

However, the decline of cash is happening all around us; in Australia there is soon to be a law banning any cash payment over $10,000. It is therefore worth examining the benefits and downsides of a cashless society and explaining why we are not quite ready for this revolution.  

Practically, benefits of a cashless society are simple: you cannot just lose your money like if you were to lose your wallet; a credit or debit card can be replaced whereas physical notes are lost forever. Banks also reward customers with things like airline points.2  

Day to day, crime rates would drop as there is no physical money to steal and any money laundering would be easily traced by its digital footprint. A study by American and German researchers found that crime in Missouri dropped by 9.8% as the state replaced cash welfare benefits with Electronic Benefit Transfer (EBT) cards. 3 

Sceptics of a cashless society would fairly argue that the transition to a world without cash would be incredibly difficult. However, China may have proved otherwise. The country has created a QR code payment system where apps like WeChat have been made a cultural norm. Just by the downloading of an app and the scanning of a code, cash has been removed from the equation. In the USA in 2019, credit card payments totalled 4.1 trillion dollars compared to China’s payment apps which totalled a jaw dropping 41 trillion dollars. This difference is far bigger than can be explained by population difference and shows how easy it can be to transition to a cashless society.  

For large providers such as visa, a cashless society is undoubtedly a desirable thing. This is primarily because of the merchant fee they receive per transaction. This fee allows them to receive a percentage of the payment as high as 2.9% every time anything is bought with a card. Another factor is the ultimate power they would hold over economies for, as private companies, they could deny service to anyone they wanted.  

However, one could easily argue that this is a downside of a cashless society and this power should not be given to the CEOs of massive corporations.  

Furthermore, credit cards can hurt finances in the long run. Depending on the provider, interest rates can be as high as 30% if not paid back within the set time. 

A life without cash could also “make it more difficult for clients to manage their day-to-day spending”.4 A 2018 paper published by the Bank of International Settlements found that there was “a strong correlation between a person’s credit score and their propensity to consume.”5   

Another concern for cashless societies is how susceptible people’s life savings would be to hacking and data breaches such as the infamous EQUIFAX affair where 400,000 UK accounts and 143 million US accounts were compromised.6 This presents a problem that, without a doubt, has a solution but one we have not yet completely discovered.  

It has also been argued that a cashless society will further exacerbate economic inequality. For example, if smartphone purchases become the standard way to transact, the 5% of people in the UK7 who don’t have one will be left behind by society and stuck in a cycle of poverty.8 

Examples of cashless society and an assessment of success:  

In Sweden, according to the European Payments Council, cash transactions accounted for just 1% of Sweden’s GDP in 2019. The response from the people has been largely happy, but those who struggle to keep up with technical development, such as the elderly, continue to rely on cash.9 This case study showed some success but failed to address the marginalised as afore mentioned could happen. 

To conclude, in the same way as gold ingots in the past, cash will disappear eventually, and this has its benefits. But, for the moment, “cash is king”10 and so long live the King!  

Economics FTRP Social Sciences

Nudges – Marketing or Mind Control?

This long-read article was written by lower-sixth former Tom Wright, and shortlisted for the 2020 Fifth Form Transitional Research Project. . The following provides a short abstract to his full essay, which can be found at the bottom.

Estimated read time of abstract: 2 minutes
Estimated read time of essay: 14 minutes

Nudges are apparent throughout all aspects of our daily lives, acting as a hidden force influencing a significant part of how we live and make decisions. Put simply, a nudge can be viewed as a small deliberate action made to intentionally influence an individual’s decision-making process. Take for example the layout of a supermarket, depending on where items are placed in the shop changes people’s perceptions of them. People will associate the most prominent products as being ‘better’ when in reality there is no rational or logical reasoning for this. Richard Thaler, one of the founders of nudge theory, suggests that nudges should be viewed as a sat-nav; you follow them as they guide you to your destination whilst not preventing you from choosing an alternate route. If nudges follow libertarian paternalistic principles which involves guiding individuals into a decision while not compromising their freedom to choose, is a nudge just an effective marketing technique or can we view it as a form of mind-control? 

To answer this question we must first understand what the key characteristics of a nudge are. A nudge must obey two principles; it must alter people’s behaviour and it must not compromise an individual’s freedom to choose. Secondly, we must analyse the extent to which the characteristics of a nudge align with the criteria of a marketing technique or that of mind-control. Marketing is defined as only ever being an offer to the customer and that this offer must be beneficial to them. Whereas mind-control can be defined by its unethical motives and manipulative nature. A nudge contains elements of both marketing and mind-control, so we must determine which classification the nudge more closely align to.  

The two main lines of argument which support the view that a nudge is a form of marketing are that a nudge is only an offer because the recipient ultimately makes the decision. If viewed as mind-control then this would imply that a pre-determined decision would be forced upon the recipient, meaning the action would no longer fit the definition of a nudge. Secondly, the most beneficial option to the recipient is still there, it is their responsibility to choose the option that they want most. Conversely, there are some attributes of a nudge that are shared with that of mind-control. These include its unethical motives, where weaknesses within the cognitive system are specifically exploited. However, it could be argued that it is impossible for companies not to nudge, making it less unethical. The second line of argument for a nudge being classed as mind-control is its manipulative nature, whereby the recipient is not informed of the fact that their choice is being subtly influenced by external factors. The high success rate nudges have in changing the decisions people make demonstrates the degree to which a nudge is manipulative.  

Whilst there are arguments which would suggest that a nudge is a form of mind-control, on balance I believe a nudge can be viewed as a marketing technique. To continue Thaler’s analogy, the nudge is the sat-nav guiding us to a decision but we are ultimately the ones in the driving seat. 

To view Tom’s full article, follow this link below.

Arts & Humanities Economics Geography Lower School Social Sciences

Have receiving countries benefited from the Belt and Road Initiative?

This long-read article was written by second former Gavin Sivakumaran.

Estimated read time: 8 minutes

The Belt and Road Initiative (BRI) is a $1,300,000,000 plan which was initiated by Xi Jinping, the President of China in 2013. Various nations in Africa, Asia and Europe are interconnected with China through land and oceanic networks like highways, seaports and railroads. More than 65 have signed up to the Initiative, to strengthen globalisation across the world, develop economies and infrastructure in countries that are struggling, and open world trade. In this essay, I will judge whether the receiving countries have benefited from China’s Belt and Road Initiative economically and socially. I will look at the projects that have happened in the country, how successful they were and how much debt the country has to China. I will also conclude whether countries have benefited from the Belt and Road Initiative. 

In 2010, China had partially moved out of the manufacturing sector, so it experienced a growth decline. So, the Government thought that investing in other countries could create a lot of money because if the country grows very quickly and pays back loans and interest to China, China could earn a lot of money. However, many critics of the BRI state that China is using the BRI to increase leverage over LICs countries and making them depend on China for their development, leading to China becoming the next global superpower. 

Sri Lanka is one of the countries that is part of the Belt and Road Initiative (BRI). Hambantota Port, a maritime port, was built by China Harbour Engineering Company and with Chinese loans. It was built because more than 23,000 ships pass Hambantota (a district in Sri Lanka), so it would be a good location to load, dock and refuel ships, and would hopefully generate a lot of money. As the port incurred heavy losses, making debt repayment difficult, in 2016 the newly-elected government, led by Ranil Wickremesinghe, decided to privatise an 80% stake of the port and give it to China Merchants Port Holdings Co. for $1.1 billion on a 99-year lease, to raise foreign exchange. The port was built by Chinese people and the shipping workers who work there are mainly Chinese people. The Mattala Rajapaksa International Airport is another example of an infrastructure project that is part of the Belt and Road Initiative. Although Sri Lanka was able to pay for the airport, it had a low number of flights, so it has been dubbed as ‘The World’s Emptiest Airport.’ In addition to this, China has built many factories, highways and power plants in Sri Lanka. Sri Lanka has not been able to pay back for all of these. As of 2020, there is still an ongoing project called Colombo International Financial Centre better known as Port City Colombo, which will be an environmentally sustainable SEZ (Special Economic Zone), costing $15 billion and is what the Sri Lankan Government believes will generate enough money to pay off all Sri Lanka’s debt and attract top international investors. Most of the construction workers that are working on this project are Chinese but China promises that the SEZ (Special Economic Zone) will create 80,000 new jobs when completed for Sri Lankans. In Sri Lanka, the economic gains from the BRI are less obvious since most of the projects have been given back to China or have not received their full potential; they can be described as a ‘white elephant,’ which means a non-valuable object which its owner cannot easily dispose of. Additionally, social gains are also not obvious because most of the people building the infrastructure in Sri Lanka are Chinese and they also dominate the number of people who work in these projects after construction (shipping workers etc.). Therefore, the BRI has not been beneficial in Sri Lanka. 

Maldives is also one of the countries that is part of the Belt and Road Initiative (BRI). Under the Presidency of Abdullah Yameen, Maldives undertook many China-funded projects. This includes the expansion of their only airport, the construction of several resorts and the construction of the China Maldives Friendship Bridge, which is a bridge that interconnects the island of the capital of Maldives, Malé with the island in which Velana International Airport (Maldives’s only airport) is located. This bridge brought economic and social benefits to the Maldives. Before the bridge was constructed, travellers would have to travel by boat to reach the capital. This bridge allowed taxi drivers in Malé to pick up fares from Velana International Airport. Also, the building of several resorts has created jobs for the locals in the Maldives. In 2018, Maldives owed $600m directly to China (which they have borrowed for housing, the expansion of the airport and the construction of bridges) and was liable for another $935m of guaranteed loans (which they have borrowed for power infrastructure, building resorts and road infrastructure). Altogether, debt to China amounted to one-third of their GDP in 2019. This shows that the Maldives has not benefited economically. Socially, jobs have been created from resorts built by China and taxi drivers have been able to earn more because they can now pick up fares from Velana Airport. Consequently, the BRI has been quite beneficial to the Maldives. 

Pakistan is another country that is part of the Belt and Road Initiative (BRI). In 2013, CPEC (China Pakistan Economic Corridor) was introduced by Chinese Premier Li Keqiang and Pakistani President Asif Ali Zardari to further enhance connectivity between the two countries. China and Pakistan are such good friends that during Xi Jinping’s visit to Pakistan, he stated ‘This will be my first trip to Pakistan, but I feel as if I am going to visit the home of my brother.’ CPEC projects that have already built and that are still being built include several hydropower projects, a railway linking the cities of Karachi and Peshawar, a freight railway linking Kunming and Karachi, Gwadar Port, Gwadar Port City (which includes a coal plant and hospital) and Gwadar International Airport. Most of the people who are building these projects are Chinese workers. $17 billion was owed to China by Pakistan by 2020 (6.25% of GDP that year). In Gwadar, China’s promises of better infrastructure and job creation have not materialised. Most of the people who work in Gwadar Port are Chinese and most Pakistanis living in Gwadar fear that once the Gwadar Port project is finished, they won’t be able to work there, because they think that Chinese workers will be brought to work there. The China-Pakistan Economic Corridor has raised the expatriate population, which has grown from 20,000 in 2013 to 60,000 in 2018. Also, the Pakistanis in Gwadar cannot continue fishing (the main economic activity in Gwadar) because land reclamation cuts their access to the sea. In 2020, China built a joint naval and air force base in Pakistan. Economic benefits are not apparent because Pakistan has huge sums of debt to China. Furthermore, social gains are less obvious because the people of Gwadar cannot continue their jobs of fishing due to land reclamation for Gwadar Port and they fear that the jobs created by CPEC will be taken by the Chinese expatriate population entering the country. Therefore, the BRI has not benefited Pakistan. 

Kazakhstan is another country that is part of the Belt and Road Initiative (BRI). With the help of China, Kazakhstan has built a multimillion-dollar land port, special economic zone and town with the help of China. All of this was built near the most landlocked, remote place on Earth called the Eurasian Point of Inaccessibility. Kazakhstan and China chose this area to lure manufacturers to the area that might want to take advantage of an overland shipping route to Europe, establishing Kazakhstan as a logistics and manufacturing hub. The infrastructure projects that China has built in Kazakhstan are on the border between the two countries, next to the Xinjiang Province in China. The land port (Khorgos Land Port) is the largest land port in the world. Once the port was built it didn’t attract many clients. Recently, there has been a steady increase, due to heavy subsidies given by the Chinese Government to companies that use the route. Additionally, less cargo has come back from Europe due to the trade imbalance. Looking at how ambitious the Kazakhstan and Chinese Governments were about the project, their predictions have been very higher than reality. Khorgos Land Port had 160,000 TEU of cargo going through the port in 2019. To put that into perspective, Shanghai, the world’s busiest port, had 43.3 million TEU of cargo going through the port in 2019. That is roughly 270 times Khorgos’s amount. Economic gains in Kazakhstan are quite clear because there has been an increase in clients using the Khorgos port. Consequently, the BRI has been quite beneficial to Kazakhstan. 

UK is one of the countries that is part of the Belt and Road Initiative (BRI). The Yiwu-London freight train was launched in January 2017. As of 2018, the network had expanded to cover 48 Chinese cities and 42 European destinations, delivering goods between China and Europe. This railway line has not only boosted China – UK trade but has also increased China-Europe. Figures show that nearly 3000 trains between January and April 2020, carrying roughly 262,000 TEU. Economic gains in the UK are very clear due to the increase in trade from the BRI. Therefore, the BRI has benefited the UK. 

Djibouti is another country that is part of the Belt and Road Initiative (BRI). Data shows that in 2020, Djibouti’s debt to China accounted for more than 70% of its GDP. China has constructed two airports in Djibouti, extended Doraleh Port and built a naval base. There have been concerns that China will turn many of the ports constructed across the Indian Ocean into naval bases, to increase its military presence across the world and control the Indian Ocean shipping route. Economic gains in Djibouti are less obvious since debt to China accounts for more than 70% of their GDP. And although Djibouti’s Government agreed to build a naval base for China, this may begin a “String of Pearls” and will affect other countries across the Indian Ocean. Consequently, the BRI has not benefited Djibouti. 

In conclusion, receiving countries have not benefited from the BRI. Many countries have had to sell back projects to China or are in large debt to them. China is using what is referred to as debt-trap diplomacy (where a powerful lending country brings a borrowing country into a debt-trap and increases its leverage over it) to try and become the global superpower. Furthermore, China believes that by creating a network of dependencies across Asia, Africa, Europe and Latin America, China will be able to have more influence around the globe (This is known as Infrastructure Imperialism or Infrastructure Diplomacy). The String of Pearls theory, which predicts that China is trying to establish a string of naval bases in the Indian Ocean that will allow it to station ships and guard shipping routes that move through the region (the Indian Ocean is the home to one of the largest shipping routes in the world that interconnect Africa and the Middle East with South East Asia), is likely to become true. 

Economics Independent Learning Assignment Social Sciences STEM

Analysing the Gacha Mechanism: The Truth behind the Rates

This essay was written by upper-sixth former Muhammed Hussain, and a finalist for the 2020 Independent Learning Assignment. The following provides a short abstract to the full essay, which can be found at the bottom.

Estimated read time of abstract: 4 minutes
Estimated read time of essay: 60 minutes

The following Preface is an extract from my ILA that serves as an overview of both what my ILA entails and of the process in writing it: 


It was nearing the deadline for submitting the title for my ILA and I had still not given the project much thought. Forcing myself to choose a topic on the final day of the extended deadline, I was deliberating going down one of two routes; the easy yet laborious, or the difficult but enjoyable. After taming down my ambitions I went with the former and submitted that in thinking the route would be less bumpy.  

Fast forward a couple of days and I am at my desk looking at my blank screen titled, “How Immigration affects the Local Economy.” Finally I come to the realization that this is going to be a reading fest, examining 30 odd articles and picking out what is relevant for me, only to come up with a conclusion that mirrors someone else’s with data that has been sourced from someone else. What would be my input? Besides, the title itself was bland and monotonous, exactly not what I wanted my ILA to encompass.  

So, I had to start from scratch with Mr Bradford (our ILA director) thinking I was some labour economist. This time I decided I would go down the other route titled: “Are in-app purchases a scam?” Being a frequent app gamer and statistics enthusiast, I thought this was the perfect idea until I became aware of its potential downfall: the countless different app genres and in-game purchase functions. For example, in one game “gems” might be spent trying to summon a character from a pool, in another “stones” may merely speed up time. Trying to make comparisons of the value of in-game currency between two distinct games (whose currency served different functions) would be very difficult, let alone quantifying the value of speeding up game time itself.   

With the help of Mr Xuan (my ILA supervisor), I managed to narrow down my appetite to a more specific genre, gacha: the controversial Japanese lootbox1 extraordinaire now common in western app stores and perhaps the biggest “socially approved” scam out there. Having played these games before and having previously meddled with statistics in the context of these games, I realized there was a much bigger section of this topic to be explored using more elements of statistics, I at the time did not know of.   

I wanted my ILA to be truly independent, in other words, I wanted most of the research to be my own, using my own unique methods and coming up with my own conclusions about these games. That’s why choosing such a niche topic that had not been previously explored, bar the odd superficial statistical analysis by players in the games’ communities, was perfect for my goal.  

However, there were two large problems that I immediately faced as I tried to change subject from in-app purchases as a whole to the specific genre of gacha. Firstly, gacha was too specific and foreign a genre that many people did not understand the complicated terminology associated with it. Being an avid gacha gamer myself did not help either, as it was difficult to gauge what a stranger to the game would not at first understand. In fact, after submitting my first draft for approval, those who had played such games prior to reading my draft had good things to say about it, as opposed to those who hadn’t who struggled to get past the first couple pages. To fix this, I decided to restructure my ILA so it was more easy to follow, add a definitions page for any foreign vocabulary, buff up the introductory explanation of gacha, and finally add footnotes to parts that may not be fully accessible to a lay reader. This came with a downside in that my essays’ word count ballooned to make up for the more detailed explanations. 

The second problem was perhaps the bigger of the two. Having already written a large amount for my old topic of in-app purchases it was painful to cut out the now irrelevant sections. Changing topics immediately made the vast proportion of my then ILA redundant. My over attachment to what I had previously written made it difficult to cut stuff out on the basis of forcefully made reasons explaining their relevance. This resulted in an ILA which lacked a coherent structure and clearly looked as if someone had changed ideas halfway through writing it. In the end I managed to overcome this issue with the help of Mr Xuan (…again), by planning my new essay and ruthlessly extracting only the relevant parts from my old ILA,  editing them slightly before inputting them into my new one.   

The end product was an ILA dipped in statistical analysis, coated with behavioral analysis with a sprinkle of scorn on top. I understand some of this analysis does not apply to the whole gacha genre, indeed there are some games which are not so much of a scam but more a delight to play. This essay was mainly aimed at targeting the so-called gacha mechanism in popular gacha games that have, in some cases, been criticized as “scam-like” or close to “gambling” by many game critics.  

To view Mo’s full article, follow this link below.

Economics FTRP History STEM

How Gambling in the 17th Century has shaped insurance markets in the 21st century

This essay was written by lower-sixth former Moog Clyde, and shortlisted for the 2020 Fifth Form Transitional Research Project. The following provides a short abstract to the full essay, which can be found at the bottom.

Estimated read time of abstract: 1 minute
Estimated read time of essay: 11 minutes

In 1654, the Chevalier de Mere, a French nobleman, posed the notorious ‘Problem of the Points’ to Blaise Pascal, an esteemed mathematician. The Problem of the Points concerned a game of chance containing two players with equal chances of winning any given round, and posed the question of how to split the stakes if one gambler has to leave the game prematurely. Despite several attempts, finding a definitive solution stumped even the greatest minds of the previous two hundred years, most notably Luca Pacioli (the ‘Father of Accounting’ ) in 1494 and Niccolò Tartaglia (solver of cubic equations and the first to apply maths to the paths of cannonballs, otherwise known as ballistics) in 1556. Even the great Galileo failed to discover a reasonable solution to the problem. Pascal was determined to find a logical and fair solution, and thus reached out to Pierre de Fermat, a brilliant mathematician himself. In their resulting correspondence, the pair developed the first explicit reasoning about what today is known as ‘expected value’ and laid the groundwork of probability, earning them both joint title of ‘the Fathers of Probability.’

Although it is easy to underplay the significance of this breakthrough as merely a clever, tidy solution, to appease opposing gamblers, in reality, it was truly revolutionary. It is difficult to understate how vast and significant the cognitive shift across Europe that occurred following this solution was. The notion that you can hang numbers into the future was alien to mathematicians merely years before this solution was proposed. Soon, others began to see the possibilities that this concept generated.

Within three years Christiaan Huygens adapted Fermat’s theory into a coherent pamphlet entitled ‘De Ratiociniis in ludo aleae,’ which was used as the standard text on probability for the next 50 years. Huygens attributed his developments to “some of the best mathematicians of France” (i.e. Pascal and Fermat). This text spread like wildfire among the academic community as it was evident that the new science of probability had the potential to transform the world. In the next few years, Huygens’ text was ripped out of the context of gambling and thrust into several aspects of life, including law and maths. In particular it was applied to a very different, brand new data set: mortality tables. Almost immediately, by using specific intricate data, insurance shifted from a form of blind gambling, based on hunches and guessing, to a remarkably accurate science.

It now is clear that this rapid chain reaction of discovery underpins all notions of mathematical ‘expected value’ and insurance came not from savvy merchants but from avid gamblers, eager to improve their craft.

To view Moog’s full article, follow this link below.

Arts & Humanities Economics Geography Social Sciences

Should the world open all borders to immigration?

This article was written by upper-sixth former Anish Goel.

Estimated read time: 6 minutes

Since World War Two, countries have reduced trade barriers and have tended to move towards free trade. Should the world follow a similar path with respect to immigration and open all borders?

Most economists tend to agree with both the policies of free trade and free movement of people.[1] To a free market economist, restricting immigration prevents the free market from allocating labour most efficiently. Free movement of people, in theory, should increase world GDP, with The Economist estimating that it could make the world $78 trillion richer.[2] However, there are other important factors including the effect on the natives and the large cultural and social effects. The definition of ‘open borders’ also may vary, although it could, it does not necessarily mean we become a nationless world with no borders between country. Countries could maintain their borders and vet everyone who enters their country but would allow everyone in, except in extremely extenuating circumstances e.g. a security risk.

Open border immigration has the potential to lower the wages of native workers. Immigration increases the supply of available labourers so (ceteris paribus) one might expect wages to fall for native workers as they now have more competition in the labour market. This problem is exacerbated by the fact that migrants often take low-skilled work, e.g. in the UK in 2013 of the 13 million low-skilled jobs, 2.1 million were occupied by migrants.[3] Low-skilled workers earn lower wages and so if their wages are lowered even more by immigration, it could lead to some not being able to afford the necessities e.g. food, utilities, rent etc and so would be an undesirable policy for governments to follow as a government’s job is to protect its own people first.

In reality however, immigrants don’t necessarily reduce native wages, especially in the long run.

Immigrants are also consumers and so will need to buy more products to sustain themselves. Therefore, increasing the demand for goods and services which increases the derived demand for labour to provide these products. This may then help to offset the reduction in native wages. The Mariel Boatlift case study illustrates the reality that the influx of immigrants may have little effect on native wages. In 1980 there was a sudden influx of Cuban immigrants into Miami, the size of the labour force increased by 7%. There seemed to be virtually no effect on the wages of natives, nor on the unemployment rate even for African American minority groups.[4] Immigrant’s don’t necessarily

compete for the same jobs as natives, often companies rearrange their structure and delay their automation due to the available supply of immigrant workers. This allows native workers to move onto more complex roles with more technical ability and communication required. In the short term a certain minority of low-skilled workers may see wage reduction however overall, in the long term, wages will likely go up.[5]

Open borders may make it possible for workers to commute from one country to another which could lead to native wages decreasing, especially in regions near the border. Commuting immigrants may spend their wages in their native country rather than the country in which they are working. So, the derived demand for labour will not increase. With the increased supply of labour from the commuting immigrants we could see a reduction in wages for natives. The native country may not feel the benefits of immigration if the ‘demand channel’ is shut down and the wages of the immigrants are repatriated.[6] A similar effect could be seen if the immigrants send a significant amount of their earnings back home. So, for an open border policy to fully benefit the natives, some regulation would need to be enforced which restricts the ability of individuals to reside in one country and work in another.

Another potential problem associated with open border immigration is the existence of state welfare. As Friedman suggested, in a welfare state, “the supply of immigrants would be infinite”7. Taking the UK for example, the NHS is already under immense pressure and all immigrants can make full use of the service. Hitherto Britain’s departure from the EU, EU citizens were able to claim jobseekers allowance.[7] Open borders could lead to a high number of immigrants immigrating to use these services and therefore reducing its quality for all. However, this problem is not as big as one would expect. Firstly, in the OECD European countries, it was found immigrants contribute more in social and tax contributions than they receive in individual benefits.[8] Secondly, even if immigrants did take more than they give, if borders were opened, governments could write legislation limiting immigrants’ ability to gain free access to public services until they have worked in the country for some time.

The immigrants themselves have much to gain; that’s why they move. When they move to a new country, they move somewhere they can be more productive by making use of their new countries’ capital, efficient firms, stability, and strong legal system.[9] They are therefore compensated more with a higher wage. Unskilled Nigerians can increase their earnings by 1000% by moving to the USA.11 Thus, opening borders has the potential to decrease global poverty and inequality more than foreign aid ever could; it would improve the immigrant’s standard of living.

By increasing their productivity, immigrants can also provide more value to their new country and the world. Michael Clemens claims that the complete opening of borders could double global GDP.

Shutting borders traps human talent in low productivity countries.[10] Countries who receive immigrants increase the number of their factors of production and so increasing their potential output. Immigrants increase the proportion of the country, which is of working-age population, they bring new skills to a country and contribute to human capital development of receiving countries.[11] Immigrants will provide more than the sum of their labour as they are enterprising and often start  businesses and organise the factors of production. Through creating jobs and increasing GDP, migrants grow a nation’s economy. 

Immigration has the potential to promote more gender equality amongst natives. Immigrants often enter jobs such as childcare, cleaning and catering[12] and so the increased supply of these types of workers decreases their cost.15 In the UK 19% of cleaning jobs are taken up by immigrants.[13] Domestic jobs like cleaning and childcare are often taken up by women as unpaid labour. By decreasing the cost of such services, they become more affordable for families and so they may free women up to join the workforce. The price of childcare may be reduced enough to make it worthwhile for a woman to get a job, and then pay for someone to help with childcare.  This would allow women to have more fulfilling careers and when they join the workforce, they can take up more productive jobs and provide more benefit to society in terms of tangible economic value.

It could be argued that the influx of new culture has a positive effect on a country. Take the UK for example, whose curry houses in 2016, employed 100,000 people and had annual sales of £4.2 billion.[14] This income and these jobs are a direct result of immigration from South Asia and the culture which followed. The cultural benefits of immigration are not limited to culinary choices. Immigrants are often hard-working, risk-takers and entrepreneurial. Out of the USA’s top 500 companies, 43% were founded or co-founded by immigrants or their children[15]; immigrants bring a more innovating culture to a country and can make use of their ‘cross-cultural experiences’ to create better products.[16]

There is also the notion that immigrants bring a culture of crime with them; however, the data does not necessarily support this, e.g. in the USA foreign-born residents are only a fifth as likely to be incarcerated.[17] Some may also argue that open borders allow terrorists to enter the country, however, there is that risk with our current immigration system. Having open borders does not forfeit a countries right to vet those entering their borders. Additionally, due to the economic

growth that results from immigration, there is evidence to suggest that terrorist activity is reduced by immigration.[18]

The biggest loser of immigration is probably the nation from which immigrants leave. If the risktaking and resilient citizens leave a country, that country is bound to suffer. A smaller population will cause decreases in GDP, and due to the nature of those leaving, it may see fewer businesses set up. In Haiti 85% of their educated youth leave and thus the average education of the Haitian population decreases.[19] However, this problem can be limited. Firstly, open borders would allow individuals to make use of richer countries’ universities, if they study there, they may return to their country more educated and therefore more productive. Secondly, immigrants often send money back to their family, this extra money is therefore pumped back into the local economy. Thirdly, many immigrants return to their home country having gained valuable work experience abroad and perhaps a broader cultural outlook, e.g. 45% of Mexicans who immigrated to the US eventually return.23

Overall, I strongly believe borders should be opened far more than they already are, the potential economic value of immigrants living in low productivity countries is too great for countries to not take advantage of. Given current immigration levels, the sudden opening of borders could see too many people entering and countries could face overpopulation problems e.g. housing shortages. However, in the long run, I believe borders should eventually be opened up. Despite the fears of cultural clash and native culture getting ‘washed away’ and overwhelmed, many of these thoughts lay in racist and colonial attitudes[20]; natives often vastly overestimate the presence of immigrants in their own country.[21] Not only would immigration be beneficial economically, but in my opinion, it isn’t ethically right to restrict an individual’s standard of living based on the location of their birth, something of which they have no control over. In order to progress to an economically efficient world, where individuals’ talents are used to their potential, we must move towards opening our borders.


Abhijit V. Banerjee, Esther Duflo. 2019. Good Economics for Hard Times. London: Allen Lane.

Bowman, Sam. 2013. Adam Smith Institute. 03 07. Accessed 08 22, 2020.

Brandom, Russel. 2018. The Verge. 05 09. Accessed 07 06, 2018.

Caplan, Bryan. 2019. Foreign Policy. 1 11. Accessed 08 23, 2020.

Collier, Paul. 2013. The New York Times. 29 11. Accessed 08 25, 2020.

Course, Crash. 2016. Youtube. 18 05. Accessed 08 18, 2020.

2020. European Cleaning Journal. 21 02. Accessed 08 22, 2020.

2020. Kellog Insight. 02 03. Accessed 08 19, 2020.

Matthews-King, Alex. 2018. The Independant. 24 12. Accessed 08 25, 2020.

2014. Migrants in low-skilled work. Government Report, London: Migration Advisory Committee.

2014. “Migration Policy Debates.” OECD. 05. Accessed 08 25, 2020.


Moore, Malcom. 2016. “The great British curry crisis.” Financial Times, 08 01.

Peron, James. 2018. The Radical Centre. 22 04. Accessed 08 23, 2020.

Peter Vandor, Nikolaus Franke. 2016. Harvard Business Review. 27 10. Accessed 08 23, 2020.

entrepreneurial#:~:text=In%20the%20U.S.%2C%20immigrants%20are,as%20native%2Dborn %20U.S.%20citizens.&text=It%20appears%20plausible%20that%20entrepreneurial,highly%2 0motivated%20and%20capable%20individuals.

The Economist. 2017. “The $78 trillion free lunch.” 13 07. Accessed 08 25, 2020.

2017. United Nations Development. 19 10. Accessed 08 19, 2020.

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Uta Schönberg, Christian Dustmann ,Jan Stuhler. 2016. “Labor Supply Shocks, Native Wages, and the Adjustment of Local Employment.” 08. Accessed 08 23, 2020. 04907305403203309207411211103602304409102406609102810310102300503900802412 7067119093112120105004081081085105088127006024110093109114122017086027&EXT


Vincenzo Bove, Tobias Bohmelt,. 2015. “Does Immigration Induce Terrorism.” 29 10. Accessed 08 23, 2020.

Wearing, David. 2017. The Guardian. 09 05. Accessed 08 25, 2020.

[1] Kellog Insight, When Do Open Borders Make Economic Sense?,, (Accessed 18 Aug. 2020)

[2] The Economist, A world of free movement would be $78 trillion richer, ,(Accessed 19 Aug. 2020)

[3] Migration Advisory Committee, Summary Report,(July 2014) , Migrants in low-skilled, work

MAC_Migrants_in_lowskilled_work_Summary_2014.pdf , (Accessed 19 Aug. 2020)

[4] David Card, The Impact of The Mariel Boatlift on The Miami Labour Market, NBER Working Paper Series, No.3069, 1989

[5] Crash Course, The Economics of Immigration: Crash Course Econ #33, Youtube Video, May 2016,, (Accessed 25 Aug. 2020)

[6] Abhijit V. Banerjee, Esther Duflo, Good Economics for Hard Times, (London: Allen Lane, 2019) 7 Sam Bowman, Adam Smith Institute,, (Accessed 22 Aug. 2020)

[7] FullFact, , (Accessed 22 Aug. 2020)

[8] OECD, Is migration good for the economy?,, (Accessed 25 Aug. 2020)

[9] The Economist, A world of free movement would be $78 trillion richer 11 Lbid.

[10] Bryan Caplan, Foreign Policy, Open Borders Are a Trillion-Dollar Idea,, (Accessed 23 Aug.


[11] OECD, Is migration good for the economy?,, (Accessed 25 Aug. 2020)

[12] Banerjee, Duflo, Good Economics for hard times 15 Lbid.

[13] ECJ, British Cleaning Council worried by UK government immigration proposals, (Accessed 22 Aug. 2020)

[14] Malcom Moore, Financial Times, The great British curry crisis, , (Accessed 20 Aug. 2020)

[15] Banerjee, Duflo, Good Economics for hard times

[16] Peter Vandor, Nicholaus Franke. Harvard Business Review, , (Accessed 23 Aug. 2020)

[17] The Economist, A world of free movement would be $78 trillion richer

[18] Vincenzo Bove, Tobias Bohmelt, Does Immigration Induce Terrorism?, October 2015,, (Accessed 23 Aug. 2020)

[19] Paul Collier, The New York Times, Migration Hurts the Homeland, ( Accessed 25 Aug. 2020) 23 Alex Matthews King, The Independent, Proportion of migrants who return to country of birth significantly higher than first thought, study suggests, (Accessed Aug. 2020)

[20] David Wearing, The Guardian, Immigration will remain a toxic issue until Britain faces up to its colonial past, May 2017,, (Accessed 25 Aug. 2020)

[21] Banerjee, Duflo, Good Economics for hard times

Arts & Humanities Economics Geography Social Sciences

An analysis of the global north south divide

Runner up for the Cambridge Society for Economic Pluralism essay competition, written by upper sixth-former Jack Donnelly.

Estimated read time: 11 minutes

The Global North is rich largely due to exploitation and underdevelopment of the Global South, which still goes on to this day, and therefore owes reparations to rectify this rift. Discuss.

Murmurs of discontent spread throughout the former colonies. In July 2020 this went beyond mere whispers as the Democratic Republic of the Congo demanded compensation for the pain inflicted by decades spent under colonial rule. Just a month later, Burundi laid the same demands at the feet of Belgium and Germany – to the tune of $43 billion. There’s no doubt that a massive proportion of Sub-Saharan Africa’s – and indeed the Global South’s – modern troubles come courtesy of their exploitation under the Global North; the question emerges, do the modern nations owe reparations for crimes committed centuries ago?

The Global North is an oft-cited idea which, in reality, lacks clear boundaries or uniting principles. For one, the conceptual Global North ignores the geographical parameters implied by the name – it is not simply a conglomerate of nations existing above the Equator or, indeed, some agreed latitude. Therefore, before discussing the Global North-South divide we must establish what the Global North actually describes. The Brandt Report of 1980 gave economists and politicians an idea of the immense gulf in development between the two hemispheres; more importantly, it gave us the ‘Brandt Line’ which depicts the divide based on GDP per capita as a factor. Notably, it straddles the Earth at 30o N but drops to include New Zealand and Australia as part of the Global North. Brandt himself was optimistic for the new century and that coordination between the hemispheres could ‘build a world in which sharing, justice, freedom and peace might prevail’. 

In another sense, the geopolitical North-South divide was highlighted in Alfred Sauvy’s Trois Mondes, une planète where he coined the terms First, Second, and Third World. The phrases were originally instituted for the USA and the USSR and their respective allies, along with the unaligned Third World – a term now synonymous with poverty and underdevelopment, rather than a particular political alignment. Today we like to characterise the divide through a number of developmental factors: income inequality, wealth, democracy indices, along with political and economic freedom.

Regardless of how you categorise the divide – it is most certainly there. Examining its extent, the North earns four-fifths of the world’s income while constituting less than a quarter of its population; additionally, at least up until the early 2000s, over 90% of global manufacturing took place in the North. Interpreting the level to which exploitation has brought about the current situation could allow a conclusion to be reached on whether reparations are truly owed. 

The most obvious example of historical Northern exploitation of the South is colonialism – it’s simply inescapable. Initially, it came commercially, through companies such as the British and Dutch East India Companies[1] which grew to dominate the economies of their respective subjugated nations. At its height, the East India Company accounted for over 50% of global

trade and acted with the sovereignty and jurisdiction of a self-governing nation. The global mechanism of colonialism was analogous to that of a catapult. The colonial powers of Western Europe played a major role in the deindustrialisation of non-Western societies; British intervention in the Indian subcontinent reduced its share of global GDP from almost a quarter to just a couple of measly percentage points as shown in Figure 2. The metaphor completes itself in the way colonialism catapulted Western powers to global superiority through the exploitation of their colonial subjects.  

Nothing is a more egregious act of exploitation than the Atlantic Slave Trade existing between the sixteenth and nineteenth centuries. Briefly ignoring the horrific brutality and the dehumanising nature of the slave trade, we can identify it as the catalyst for so many demographical and economic issues facing Africa today. Some 12 million Africans were captured and shipped out – primarily to America – by the Europeans, destroying their social fabric and depleting the workforce immensely. The poorest parts of modern Africa share a direct correlation with the areas where the most slaves were taken. The scars of colonialism are visible to this day; African nations were created from thin air, ignoring cultural or geographical divides and instead opting for arbitrary borders which have incited enormous amounts of conflict – both national and international – since. 

Even beyond exploitation in its most explicit forms, the colonial powers of Western Europe capitalised on their supremacy by taking further advantage of unfair trade. Through ‘gunboat diplomacy’[2], they forced many countries which had escaped colonisation to sign unequal treaties, leaving the nations bereft of tariff autonomy. To understand the impact of this, we must examine the strength of protectionist policies in young economies. Alexander Hamilton argued in his 1791 Report on the Subject of Manufactures that the US needed to defend

‘industries in their infancy’ from cheaper imports in the more competitive and developed international market. By stripping young economies of ‘infant industry protection’, the powers of the Global North deprived many Latin American and Asian countries of a fair chance at development. Many of these treaties lasted for decades – even well into the twentieth century in some cases. The affected Southern countries experienced negative per capita income growth during the late Industrial Revolution period; an inability to nurture and promote their youthful industries contributed immensely. 

While the level of ‘exploitation’ today does not even hold a candle to its heights in colonial times, forms of neo-colonialism exist between powerful modern countries and the ‘Third World’. China is exercising its financial might – through FDI[3] – across the entire continent of Africa, moulding it into essentially a ‘China’s China’; in this case, however, the development is not necessarily one-sided. The truth is that China is richly compensating African nations as they surge forwards with rapid urbanisation in the ‘fourth industrial revolution’[4]. Daan Roggeveen, the founder of an Architecture firm and an author of books on Chinese and African

Urbanisation, said ‘right now you could say that any big project in African cities that is higher than three floors or roads that are longer than three kilometres are most likely being built and engineered by the Chinese. It is ubiquitous’. Africa is sitting on a massive stockpile of natural resources and China has been quick to take advantage of the power vacuum in the wake of departing colonial powers. China itself is still considered a part of the Global South, but in essence its actions in Africa are reminiscent of historical Northern intervention. Indeed, there have been cries of exploitation and Chinese imperialism, with the former governor of Nigeria’s central bank criticising their removal of natural resources without any provision of economic enrichment in the form of skills and jobs. Regardless, Africa benefits in some sense from the massive amounts of FDI – something one could consider a form of economic reparation. 

Conversely, a significant portion of the North’s success can be attributed to their intrinsic development. Throughout history, a correlation can be identified between the quality of institutions, the strength of government and more advanced economic development. These are elements of a country which can be built up naturally over time; alternatively, they can be instigated by colonisers or conquering foreign powers. School enrolment and greater provision of public goods, for example, contribute a powerful multiplier effect to development. It could be argued that the Global South has not arrived in its disadvantaged position as a result of exploitation, but instead due to unfortunate geography, climate and numerous other factors. 

The Global South has, beyond this, suffered from factors exogenous to the influence of the North. Geography is key to this argument – Africa and South America have been disadvantaged greatly due to their narrow orientation; Eurasia benefits from wide, vast plains of arable land perfect for cultivation and the domestication livestock. A lack of genetic immunity in the ‘New World’ led to the decimation of native populations throughout the continent; immunity that

European settlers had from centuries of close integration with livestock – something native Americans never had. Ultimately, the resulting underdevelopment cannot be pinned on European settlers; they could never have foreseen the devastation they would reap on the relatively immunocompromised natives. The blame here falls upon the poor geographical starting points of Southern societies.

Furthermore, Modernisation Theory attempts to explain the underdevelopment of the Global South as a result of their own policies and socio-economic structures rather than Northern intervention. Feudalism, tribalism and relatively primitive economic structures have led their societies to a point where they lack regulation, democracy and have failed to modernise and develop themselves. The theory considers Third World society largely responsible for its own poverty. The archetypal societal approach tends to grant too much power to individuals; corruption in a country’s elite leadership can obviously be enormously detrimental to development – but it is all too prevalent. 

The Global South now has its own mechanisms in place which, certainly in part, negate the need to have reparations paid by the North. One of the most notable institutions representing the spirit of the developing Global South is the BRICS[5], a multilateral group of major emerging Southern economies. Between them, they constitute 41% of the global population and approximately 23% of world GDP. The BRICS have two key components to their financial architecture which are dedicated to the development of the Global South, the New Development Bank (NDB) and the Contingent Reserve Arrangement (CRA). The bank, in particular, aims to lend up to $34 billion annually with a focus on massive infrastructure development. When outlining the plan for the organisations, the BRICS found themselves keen to distance Southern investment from the North’s sphere of influence; since they are willing to offer competitive rates to their Southern associates, perhaps they are best left to collaborate without the need for Northern intervention or reparations.

Moreover, we are obligated to question the feasibility of reparations being paid by the North. Multilateral payments of any kind are notoriously difficult to agree upon, as could be witnessed with the days of debate over collective debt[6] assumption in the EU in response to the Coronavirus Pandemic. Now consider the complexity of any agreement that would require payment by the collective ‘North’ to the collective ‘South’ on the basis of centuries of

exploitation and mistreatment. Even if it were decided that the current Global North needed to be held responsible for the actions of past generations, the practicality of it dispensing payments or other forms of compensation is contentious at best. Perhaps the more effective method of extending the olive branch would be through bilateral – rather than multilateral – action and intervention; individual Northern powers could be responsible for making reparations with the countries specifically impacted by their ventures. 

Ultimately, the statement is true: ‘The Global North is rich largely due to exploitation and underdevelopment of the Global South’ – to a certain extent. While the North has benefited significantly at the detriment of Southern countries, it is unfair to say that their wealth comes largely from exploitation. A significant portion of Northern success came from the strength of their innate development – strong institutions and a focus on societal growth and evolution have built them into successful nations. Regarding reparations, it is apparent that payment from a United North to a United South would be impossibly complicated to arrange; instead, individual acts of bilateral aids between wealthy Northern nations and poorer Southern nations targeting rapid economic and social development could be a far more constructive option.  


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[1] The British East India Company operated in the Indian subcontinent while the Dutch East India Company was in the Dutch East Indies, modern-day Indonesia. 

[2] Pursuit of foreign policy objectives with the aid of conspicuous displays of naval power 

[3] Foreign Direct Investment – Investment in the form of a controlling ownership in a business in one country by an entity based in another country. 

[4] ‘The Fourth Industrial Revolution’ is the ongoing automation of traditional manufacturing and industrial practices, using modern smart technology.

[5] Brazil, Russia, India, China, South Africa (BRICS)

[6] The EU agreed in July 2020 to an $869bn recovery package with debt shared between each member state. Despite close links between the EU states it took several days of debate to reach an agreement.