BRIEF CONTENTS

List of figures xii

List of tables xvi

List of abbreviations xx

Preface xxiii

About the contributors xxv

Guided tour xxviii

Acknowledgements xxx

1 Changes in the economic structure 1

Part I: Theory of the firm 29

2 Financial reports as a source of

corporate information 31

3 Firm objectives and firm behaviour 46

4 Entrepreneurship and small/

medium-sized enterprises (SMEs) 63

5 Mergers and acquisitions in the

growth of the firm 80

6 Oligopoly in theory and practice 107

7 The multinational corporation 124

8 Privatization and deregulation 147

9 Beyond markets: critical approaches

to microeconomics 164

Part II: Environmental, regional and social economics 185

10 The economics of the environment 187

11 Transport 210

12 Health economics 229

13 Distribution of income and wealth 253

14 Trade unions, wages and collective

bargaining 271

15 Corporate social and ethical

responsibility 299

Part III: Macroeconomics 319

16 Consumption and saving 321

17 Investment 338

18 Public expenditure 351

19 Taxation 368

20 Money and monetary policy 393

21 Financial institutions and markets 424

22 Inflation 459

23 Unemployment 478

Part IV: International economics 499

24 Globalization 501

25 Exchange rates and trade

performance 525

26 Free trade, regional trading blocs

and protectionism 548

27 The European Union 564

28 The BRIC economies: Brazil,

Russia, India and China 594

29 Growth and development 622

30 Managing the global economy:

post ‘credit crunch’ 646

A guide to sources 667

Index 677

CONTENTS

List of figures xii

List of tables xvi

List of abbreviations xx

Preface xxiii

About the contributors xxv

Guided tour xxviii

Acknowledgements xxx

1 Changes in the economic structure 1

Synopsis 1

Structure defined 2

Structural change in the UK 3

Causes of structural change 9

Consequences of structural change 21

Conclusion 24

Key points 25

Notes 25

References and further reading 26

2 Financial reports as a source

of corporate information 31

Synopsis 31

Financial reports and the assessment of

company performance 32

External sources of financial information 40 Conclusion 44

Key points 44

Notes 45

References and further reading 45

3 Firm objectives and firm

behaviour 46

Synopsis 46

Firm objectives 47

Firm behaviour 51

Conclusion 59

Key points 59

Notes 60

References and further reading 60

4 Entrepreneurship and small/

medium-sized enterprises (SMEs) 63

Synopsis 63

Entrepreneurship and business start-ups 64

Definition of the small firm 65

The importance of the small firm 67

The neglect of small firms 68

The renewed interest in small firms 70

Measures to help small firms 71

European Union policy for small firms 76

Conclusion 76

Key points 77

References and further reading 78

5 Mergers and acquisitions in the

growth of the firm 80

Synopsis 80

Definitions 81

Types of merger 81

Economic theory and merger activity 83

Mergers and the public interest 89

Merger booms 91

The control of mergers and acquisitions 92

Corporate restructuring 102

Conclusion 103

Key points 104

Notes 104

References and further reading 105

6 Oligopoly in theory and

practice 107

Synopsis 107

The definition and measurement of

oligopoly 108

Oligopoly in theory and practice 109

Conclusion 121

Key points 122

Notes 123

References and further reading 123

7 The multinational corporation 124

Synopsis 124

What is a multinational corporation? 125

How important are the multinationals? 126

Multinationals and the UK economy 128

Why do companies become multinational? 130 The impact of multinationals on the UK

economy 138

Conclusion 144

Key points 145

References and further reading 146

8 Privatization and deregulation 147

Synopsis 147

Nature and importance 148

Reasons for nationalization 148

Privatization 150

Regulation and deregulation 157

Conclusion 161

Key points 162

Notes 162

References and further reading 163

9 Beyond markets: critical

approaches to microeconomics 164

Synopsis 164

Classical and neoclassical perspectives

on markets 165

Markets, prices and economic efficiency 168

Role of the state in neoclassical economics 172

Institutionalist perspectives on markets 173

Key points 182

References and further reading 183

Part II: Environmental, regional and social economics

10 The economics of the

environment 187

Synopsis 187

The role of the environment 188

Sustainable economic welfare 189

Valuing the environment 190

Market-based and non-market-based

incentives 194

Global warming 201

Kyoto Protocol 204

Conclusion 207

Key points 208

References and further reading 209

11 Transport 210

Synopsis 210

The characteristics of transport 211

The demand for transport 213

Road transport congestion 215

Government transport policy 222

Airline operations and the growth of

low-cost carriers 225

Conclusion 227

Key points 227

References and further reading 228

12 Health economics 229

Synopsis 229

Health economics, health and health care 230 Health inequalities 235

The organization of the NHS in England 238 Welfare Economics - Pareto 245

Economic evaluation 247

Conclusion 250

Key points 250

Notes 251

References and further reading 251

13 Distribution of income and

wealth 253

Synopsis 253

Distribution and justice 254

Issues in distribution 254

Income distribution between people 254

Income distribution between factors

of production 257

The earnings distribution 259

The distribution of wealth 263

Poverty 264

Conclusion 268

Key points 268

References and further reading 269

14 Trade unions, wages and

collective bargaining 271

Synopsis 271

Types of trade union 272

Trade unions and change 274

The employers 278

The government 279

The structure of collective bargaining 284

Wage determination and collective

bargaining 286

The effects of collective bargaining 292

Conclusion 294

Key points 295

Notes 296

References and further reading 296

15 Corporate social and ethical

responsibility 299

Synopsis 299

Corporate Social Responsibility (CSR):

definitions and themes 300

CSR: a growth phenomenon 302

Corporate responsibility 307

CSR perspectives and ethical frameworks 311 Corporate governance 313

Conclusion 316

Key points 317

References and further reading 318

Part III: Macroeconomics

16 Consumption and saving 321

Synopsis 321

Consumption 322

The Keynesian consumption function 322

Post-Keynesian theories of the

consumption function 327

The savings ratio 331

Conclusion 335

Key points 336

Notes 337

References and further reading 337

17 Investment 338

Synopsis 338

The nature of investment 339

Gross Domestic Fixed Capital

Formation (GDFCF) 339

The importance of investment 346

Conclusion 348

Key points 348

References and further reading 349

18 Public expenditure 351

Synopsis 351

Trends in UK public spending 352

Total Managed Expenditure (TME) 352

Planning, monitoring and control 356

The size of public expenditure 359

Explanations of the growth in public

expenditure 360

International comparisons 362

Should public expenditure be restricted? 364 Conclusion 365

Key points 366

References and further reading 367

19 Taxation 368

Synopsis 368

The taxes that are collected: some

taxation concepts 369

The pattern of UK taxation 371

Does the level of taxation matter? 377

Direct versus indirect taxes 383

Tax and social security reform 385

Conclusion 390

Key points 391

Notes 391

References and further reading 391

20 Money and monetary policy 393

Synopsis 393

The nature of money 394

Functions of money 394

The importance of money 398

Issues in counting the money stock 404

The money supply process 407

The rules versus discretion debate 408

Monetary policy targets 409

Central bank credibility 410

Techniques of monetary policy 412

UK monetary policy since the 1950s 414

The making of monetary policy in the UK 417 Recent developments in UK monetary

policy 417

Conclusion 421

Key points 421

Notes 422

References and further reading 422

21 Financial institutions

and markets 424

Synopsis 424

The role of the financial system 425

The role of financial intermediaries 426

UK financial intermediaries 428

The Bank of England 434

UK financial markets 438

The Bank of England and the sterling

wholesale money markets 443

The changing UK banking market 444

An overview of bank operations and

the UK banking collapse 454

Conclusion 456

Key points 456

References and further reading 457

22 Inflation 459

Synopsis 459

The definition and measurement of

inflation 460

Low inflation as a policy objective 463

The effects of inflation on economic

growth 465

Economic theory and inflation 465

UK inflationary experience: 1970-92 473

Inflation targets and central bank

independence 1992- 474

Conclusion 475

Key points 476

Note 476

References and further reading 477

23 Unemployment 478

Synopsis 478

Unemployment in the UK 479

International comparisons 483

Unemployment and economic theory 484

A framework for thinking about

unemployment 488

Unemployment in the OECD 491

Unemployment persistence and

hysteresis 492

What can be done to reduce

unemployment? 493

The great recession 494

Conclusion 496

Key points 496

Note 496

References and further reading 497

Part IV: International economics

24 Globalization 501

Synopsis 501

Characteristics of ‘globalization’ 502

Indicators of globalization 504

Globalization and corporate strategy 507

Dimensions of globalization 512

Anti-globalization movements 516

The US and globalization 517

Conclusion 521

Key points 521

Note 522

References and further reading 522

25 Exchange rates and trade performance 525

Synopsis 525

The foreign exchange market 526

Exchange rate definitions 527

Exchange rate determination 529

Currency ‘warfare’ 537

Economic policy and the exchange rate 540 The gold standard system 542

The IMF system 543

The floating exchange rate system 544

Key points 546

Notes 546

References and further reading 547

26 Free trade, regional trading

blocs and protectionism 548

Synopsis 548

Free trade 549

Trade and the world economy 551

Protectionism 554

Conclusion 560

Key points 561

Notes 562

References and further reading 562

27 The European Union 564

Synopsis 564

Historical background 565

Finance and the EU budget 568

Policy areas 573

Monetary union 584

Conclusion 590

Key points 591

Notes 591

References and further reading 592

Russia 614

Conclusion 618

Key points 619

References and further reading 620

29 Growth and development 622

Synopsis 622

Theories of economic growth 623

Productivity and growth 625

Sustainable development 626

GNP data, developed and developing

countries 630

Less developed countries (LDCs) 633

International Development Targets (IDTs) 636 Urbanization and developing economies 636 Aid, trade and development 639

Debt and development 641

Key points 643

Key terms 644

References and further reading 644

30 Managing the global

economy: post ‘credit crunch’ 646

Synopsis 646

The objectives of policy 647

The instruments of policy 648

Problems in managing the economy 650

The theory of economic policy 651

Global economic management: post

‘credit crunch’ 658

Sovereign wealth funds (SWFs) and

sovereign debt 662

Key points 664

Notes 665

References and further reading 665

A guide to sources 667

28 The BRIC economies: Brazil,

Russia, India and China 594

Synopsis 594

Rise of BRIC economies 595

China 597

India 604

Brazil 609

Statistical sources 668

The UK economy in a European context 670

The UK economy in a global context 670

Applied materials 672

Electronic media 673

Internet sources 674

Index 677

LIST OF FIGURES

Fig.

level of education, 2008 17

Fig.

changes in UK cost competitiveness in manufacturing 20

Fig. 2.1 Tesco plc Group Balance Sheet 34

Fig. 2.2 Tesco plc Group Income Statement 37

Fig. 2.3 Group cash flow statement 39

Fig. 2.4 Tesco plc Statement of changes

in equity 39

Fig. 2.5 Notes to the financial statements:

accounting policies 41

Fig. 2.6 Tesco plc Auditors’ report 42

Fig. 2.7 (Extract from) FTSE actuaries

share indices 43

Fig. 2.8 FT Share Information Service 43

Fig. 3.1 Variation of output with firm

objective 47

Fig. 3.2 Trade-off between average profit

and balanced growth 49

Fig. 3.3 Development of aspiration levels

through goal achievement 50

Fig. 3.4 Variation of price with firm objective 51

Fig. 3.5 Price under perfect competition

and monopoly 58

Fig. 3.6 Market structure, firm objective

and price 58

Fig. 4.1 Early-stage entrepreneurial activity

rates and per capita GDP, 2009 66

Fig. 4.2 High-growth expectation early-stage

entrepreneurship (HEA), 2004/09 67

Fig. 5.1 Valuation ratio and probability of

takeover 85

Fig. 5.2 Mergers, economic efficiency and economic welfare. Welfare gain (ghkj) and welfare loss (cflk) from merger 90

Fig. 5.3 UK mergers 1973-2009 92

Fig. 5.4 Hypothetical markets in the construction of market concentration indices 100

Fig. 5.5 The Herfindahl-Hirschman index

as an instrument of merger policy 101

Fig. 6.1 Kinked demand curve and price

stability 112

Fig. 6.2 Joint profit maximization in

duopoly 117

Fig. 6.3 Limit-pricing as a barrier to entry 118

Fig. 7.1 Evolution of a market-oriented

multinational 132

Fig. 7.2 Growth of the global economy,

1992-2020 132

Fig. 7.3 Product life cycle 133

Fig. 7.4 Stages/phases in the product life

cycle and the switch from domestic to overseas production 133

Fig. 7.5 Demand and marginal revenue

depending on company and market 134

Fig. 7.6 Honda: EU motorcycle networks

and supply links 137

Fig.

and overseas 140

Fig. 7.8 Investment financed from overseas

versus investment financed locally 141

Fig. 8.1 Welfare loss with a quota

scheme 0Q₂ raising price (P₂) above the market clearing level P₁ 158

Fig. 8.2 Deadweight loss as a result of monopoly power raising equilibrium price (P_c to P_m) and lowering equilibrium output (Q_c to Q_m) 160

Fig. 8.3 Price regulation of monopoly: P₁ as the price ceiling set by the regulator 161

Fig. 9.1 Edgeworth-Bowley consumption box 169

Fig. 9.2 Role of product prices in attaining contract curve (Pareto-efficient solutions) 170

Fig. 9.3 Imperfect information as to prices and market failure 172

Fig. 9.4 Demand and supply of healthcare 178

Fig. 9.5 Problems with average cost pricing 181

Fig. 10.1 Economy/environment linkages 188

Fig. 10.2 Finding an optimum level of pollution 191

Fig. 10.3 The relationship between the

number of visits to a site and the price of the visit 192

Fig. 10.4 Imposing a lump-sum environmental

tax t on output 194

Fig. 10.5 Determining the market price for

permits 195

Fig. 10.6 Marginal abatement cost (MAC)

and the trading in emissions allowances 197

Fig. 10.7 Negotiation under property rights 199

Fig. 10.8 Bargaining and game theory 199

Fig. 10.9 Setting the appropriate standard

and imposing the appropriate penalty 200

Fig. 10.10 Using abatement and damage

cost curves in finding a socially optimum level of pollution 202

Fig. 10.11 Regional reciprocal pollution and the need for negotiation 203

Fig. 10.12 Finding the ‘efficient’ or ‘least-cost’ solution for reducing CO₂ emissions in a two-sector model 205

Fig. 11.1 Speed-flow curve 216

Fig. 11.2 Motor vehicles licensed, 1951-2008 217

Fig. 11.3 Equilibrium traffic flow 217

Fig. 11.4 Equilibrium traffic flow: supply-side policies 222

Fig.

Fig. 12.2 Public spending on health as a percentage of GDP 1987/88-2009/10 231

Fig. 12.3 UK population mid-2009 232

Fig. 12.4 Life expectancy at birth,

England, 1900-2001 233

Fig. 12.5 The rectangularization of life curve, England and Wales, 1831-2031 233

Fig. 12.6 Total health expenditure per capita, public and private 2007 235

Fig. 12.7 Life expectancy in OECD countries 236

Fig. 12.8 The relationship between spending on health and life expectancy 236

Fig. 12.9 Life expectancy by social class, males 237

Fig. 12.10 Coronary heart disease mortality in males, England and Wales, by social class over three decades 238

Fig. 12.11 Primary care and secondary care 240

Fig. 12.12 Diminishing marginal utility 246

Fig. 12.13 Average daily number of available beds by sector in NHS hospitals, England, 1987/88-2008/09 247

Fig. 12.14 How to calculate a QALY 249

Fig. 13.1 Lorenz curve and Gini coefficient 255

Fig. 13.2 Real hourly male earnings by percentile (Index 1966 = 100) 261

Fig. 14.1 Wage determination in a competitive market 286

Fig. 14.2 Wage determination with monopsony in the labour market 288

Fig. 14.3 Minimum wage (W*) set above the competitive market wage (W_c) 289

Fig. 14.4 Minimum wage (W*) raising both wages and employment with monopsony in the labour market 289

Fig. 14.5 Numbers of jobs paid below different hourly rates of pay for people aged 22 and over, UK, 1999-2002 290

Fig. 14.6 Annual increase in hourly earnings of employees aged 22 and over by percentile, UK, 1992-2009 291

Fig. 15.1 Stakeholders in a large organization 302

Fig. 15.2 Demand increases and becomes

less elastic with successful CSR campaign 303

Fig. 15.3 Corporate involvement in society:

a strategic approach 304

Fig. 15.4 Putting ethical/environmental

strategies into practice using

the value chain 305

Fig. 15.5 Augmented product and

strategic CSR 306

Fig.

Fig. 15.7 Codes of conduct and ethical

frameworks 312

Fig. 16.1 The consumption function 324

Fig. 16.2 The UK consumption-income

relationship, 1970-2009 324

Fig. 16.3 Error analysis of simple consumption function (actual consumption minus forecast

consumption) 325

Fig. 16.4 UK annual percentage change in

disposable income and

consumption 326

Fig. 16.5 Long- and short-run consumption

functions 328

Fig. 16.6 UK households’ savings ratio (%) 332

Fig. 16.7 Percentage points change in

household savings ratio between average for 1992-97 and average for 2003-08 334

Fig. 17.1 The investment demand schedule 341

Fig. 17.2 Investment as a share of GDP 347

Fig. 18.1 Total Managed Expenditure (TME) as a percentage of GDP since 1970 352

Fig. 18.2 Forecasts for spending and revenues 354

Fig. 18.3 UK public debt since the

17th century 354

Fig. 18.4 The Public Expenditure Survey (PES) within the Department of

Work and Pensions 358

Fig. 18.5 General government expenditure as a percentage of GDP, 1890-2010 (projected) 361

Fig. 19.1 Government revenue in 2009/10 and the tax base (as % of total tax revenue of £359.2bn) 371

Fig. 19.2 Direct and indirect taxes as a percentage of gross household income (2008/09) 372

Fig. 19.3 The ratio of central government taxes on income to taxes on expenditure, 1949-2010 373

Fig. 19.4 Comparison of income tax between 1987/88 and 2010/11 376

Fig. 19.5 Top marginal rates of personal income tax, 2009 376

Fig. 19.6 The ‘Laffer’ curve 379

Fig. 19.7 Hours, wages and net family

income: couple (one earner) with two children aged 4 and 6 381

Fig. 19.8 Council Tax: property values

and tax in each band 388

Fig. 20.1 (a) In a non-money economy

producing four goods, six exchange ratios are required. (b) In a money economy producing four goods where one of the goods is money, only three exchange ratios are required 395

Fig.

Fig. 20.3 Clearing and settlement of cash

and E-money 398

Fig. 20.4 When velocity of circulation is

constant, a change in the money supply leads to a proportional

change in nominal GDP 400

Fig. 20.5 Velocity of the money

aggregate M4 402

Fig. 20.6 The effects of reductions in

aggregate demand and supply 411

Fig. 20.7 Quantitative easing 420

Fig. 21.1 The financial system 425

Fig. 21.2 The regulatory structure in

the UK 439

Fig. 21.3 Open Market Operations of

the Bank of England 444

Fig. 21.4 Average gilt repos outstanding at

banks and other institutions, 2000-09 445

Fig. 21.5 (a) Number of branches and ATMS

and (b) staff at the ‘big four/five’ retail banks between 1981 and 2009 452

Fig. 21.6 Cost/income ratios for UK MBBGs, 2000-09 (cost/income measured by operating expenses as a proportion of gross income) 453

Fig. 21.7 Net interest income and non-interest income as a proportion of average balance sheet total for UK MBBGs, 1980-2009 453

Fig. 21.8 The securitization process 455

Fig. 22.1 Inflation is measured as the annual

increase in the retail price index from 1946 to 1974, and in the retail price index excluding mortgage interest payments since 1974 and in the CPI index since 2003 461

Fig. 22.2 CPI compared with RPI (all items)

- annual percentage change 462

Fig. 22.3 Aggregate demand and supply 466

Fig. 22.4 A one-off increase in demand 466

Fig. 22.5 Continuous demand inflation 467

Fig. 22.6 Cost-push/supply-side inflation 468

Fig. 22.7 The Phillips curve 469

Fig. 22.8 The relationship between unemployment and inflation rates

in the UK, 1966-2010 470

Fig. 22.9 The labour market 471

Fig. 22.10 The expectations-augmented

Phillips curve 472

Fig. 22.11 UK price levels and real GDP,

1970-2010 473

Fig. 23.1 UK unemployment rate, 1881-2010

(excluding school-leavers) 479

Fig. 23.2 Unemployment and the Claimant

Count 480

Fig. 23.3 Unemployment rates for

16-24 years of age by ethnicity 483 Fig. 23.4 Technical change and the level of

employment 486

Fig. 23.5 ‘Voluntary’ or equilibrium

unemployment and the real

wage 487

Fig. 23.6 Demand-deficient unemployment 488 Fig. 23.7 Unemployment rate, structural

(sustainable) and cyclical

components, 2010 489

Fig. 23.8 Finding the natural rate of

unemployment (NRU) 489

Fig. 23.9 The determination of the NAIRU 490

Fig. 23.10 Change in unemployment and

GDP from peak to trough:

selected OECD countries 495

Fig. 24.1 New strategic directions in

a global economy 510

Fig. 24.2 Modular strategies 511

Fig. 24.3 US dollar’s share of world total,

%, in 2010 518

Fig. 25.1 The foreign exchange market 530

Fig. 25.2 Marshall-Lerner elasticity

conditions 531

Fig. 25.3 ‘J’ curve effect 532

Fig. 25.4 Balance of payments, foreign

exchange reserves and currency implications 538

Fig. 25.5 ‘Big Mac’ Index 540

Fig. 25.6 Impact on prices of a 10%

depreciation 541

Fig. 26.1 Free trade versus no trade 549

Fig. 26.2 The effect of a tariff 555

Fig. 26.3 The effect of a quota 556

Fig. 26.4 The effect of a general subsidy 557

Fig. 27.1 EU agricultural pricing 574

Fig. 27.2 The EU guarantee system 575

Fig. 28.1 Hofstede scores on five cultural

dimensions 603

Fig. 28.2 BRICs and global economic

prospects 619

Fig. 29.1 Classical growth theory 623

Fig. 29.2 Neoclassical growth theory 624

Fig. 29.3 Sustainable and non-sustainable

growth paths 628

Fig. 29.4 How technological change can

influence economic growth 630

Fig. 29.5 GNP per head in $US, 2008 631

Fig. 29.6 Stabilization versus structural

adjustment 643

Fig. 30.1 Two-instrument/two-objective case 651

Fig. 30.2 Two-instrument/three-objective

case 652

Fig. 30.3 (a) The Keynesian approach;

(b) the supply-side approach 656

Fig. 30.4 Composition of a Structured

Investment Vehicle (SIV) 659

Fig. 30.5 Scenarios for economic recovery 660

Fig. 30.6 US household net worth as % of

disposable personal income 661

LIST OF TABLES

Table 1.1 Index numbers of output at

constant prices (1990 = 100) 4

Table 1.2 Percentage shares of GDP at

factor cost 6

Table 1.3 Industrial market economies,

distribution of GDP: percentages 7

Table 1.4 Employees in employment, UK 8

Table 1.5 Industrial market economies,

distribution of the labour force:

percentages 9

Table 1.6 Changes in industrial employment (%) 9

Table 1.7 Growth of real GDP per hour

worked (% per year) 12

Table 1.8 International comparisons of

productivity: GDP per hour and

per worker (UK = 100) 12

Table 1.9 Major sectoral contributions to

average annual labour productivity: market economies 1995-2004

(% growth rates) 13

Table 1.10 Contributions of sectors to average

labour productivity growth in market services (1980-2004) (%) 14

Table 1.11 United Kingdom productivity and

manufacturing output (1990 = 100) 14

Table 1.12 Labour productivity in

manufacturing (output per hour),

1980-2008 (2002=100) 15

Table 1.13 Relative unit labour costs (RULCs)

1995-2009 (2005 = 100) 21

Table 3.1 Sample of 728 firms 52

Table 3.2 The ten highest-ranked US

corporations by sales revenue growth, profit growth and CEO remuneration 2010 54

Table 3.3 Patterns of corporate growth 56

Table 4.1 EU definitions of micro, small

and medium-sized firms 67

Table 4.2 Numbers of business, employment

and turnover share by size band

(2009) 68

Table 4.3 Shares of enterprises, employment

and turnover: UK and EU (2008/09) 69 Table 4.4 Comparison between main stock

exchange listing and AIM 73

Table 4.5 Biggest obstacles to business

success, 2006/07 and 2007/08 75

Table 5.1 Estimated costs to consumers

of the mergers against which

the CC took action between

March 2005 and March 2006 91

Table 6.1 Company shares of the UK

market by sector/product 2009/10 108

Table 6.2 Top 15 advertising companies

in the UK, 2009 109

Table 6.3 Firm A’s payoff matrix 114

Table 6.4 Payoff matrix (daily profits) 115

Table 6.5 Payoff matrix (profit per period) 116

Table 7.1 World’s top 10 non-financial

multinationals ranked by foreign

assets, 2008 125

Table 7.2 World’s top 10 non-financial

multinationals ranked by transnationality index, 2008 126

Table 7.3 Multinational activity in a

global context 127

Table 7.4 Inflows of foreign direct

investment ($bn) 128

Table 7.5 The UK’s top 25 companies by

revenue 129

Table 7.6 Home and host to multinationals 129 Table 7.7 Outflows from five main home economies for multinationals

($bn) 130

Table 7.8 Hourly compensation costs in

manufacturing 2008 ($ per hour) 131 Table 7.9 Types of international production:

some determining factors 136

Table 7.10 The ten largest foreign takeovers of UK companies between 2000 and 2010 ($bn) 139

Table 7.11 Multinational tax avoidance 144

Table 8.1 Major privatizations: a sectoral breakdown 151

Table 9.1 Purchasers and providers of

health care 179

Table 11.1 Passenger transport by mode, 1997-2007 212

Table 11.2 Passenger transport by national vehicles on national territory, 1997 and 2007 212

Table 11.3 Domestic freight transport by mode (in billion tonne kilometres and percentages), 1998-2008 213

Table 11.4 Detailed household expenditure by gross income decile group, 2008 214

Table 11.5 Households with regular use of cars, 1998-2007 215

Table 11.6 Cross-elasticity of demand between parking price and purpose of journey using public transport 221

Table 11.7 Terminal passenger traffic (arrivals and departures) at selected UK airports, 1994-2008 226

Table 11.8 UK forecasts of air traffic demand, terminal passenger traffic 2005-20 226

Table 12.1 NHS workforce (headcounts) in England (thousands) 241

Table 12.2 Annual salary (gross), 2009, all employee jobs (£) 242

Table 12.3 Hypothetical inputs and outputs in the coal industry 243

Table 12.4 The calculation of a volume index 245

Table 13.1 Percentage shares of income after tax in the UK (before housing costs) 256

Table 13.2 Income distribution: the Gini coefficient (after tax and transfers): mid-1980s to mid-2000s 257

Table 13.3 Factor shares as a percentage of gross value added at factor cost 258

Table 13.4 Relative earnings by occupational groups, 2009 259

Table 13.5 Relative earnings by sex, 2009 260

Table 13.6 Ownership of marketable wealth 264

Table 13.7 The growth of poverty (defined as earning less than 60% of average income), 1979-2009 265

Table 13.8 Child poverty by type of family and income, 1998-2009 266

Table 13.9 The European child wellbeing

and poverty index 267

Table 14.1 Unions and union membership,

1979 and 2010 272

Table 14.2 The top 10 largest TUC unions, 2009/10 273

Table 14.3 Trade union membership and density in the UK, 1979-2010

(000s and %) 275

Table 14.4 National minimum wage rates per hour, April 1999 to September 2011 289

Table 14.5 Strikes: international comparisons, 1997-2006 (working days not worked per 1,000 employees) 294

Table 15.1 Organizational definitions of CSR 301

Table 15.2 Codes of conduct: advantages and disadvantages 313

Table 15.3 Structure of CEO remuneration packages around the world 314

Table 15.4 Top five earners in the FTSE 100 2009/10 314

Table 15.5 CEO compensation in the

FTSE 100 315

Table 16.1 UK household income, consumption and savings ratio, 1970-2009 (£m at 2006 prices) 323

Table 16.2 National and sectoral savings and investment 335

Table 17.1 Gross Domestic Fixed Capital Formation by sector and by type of asset 340

Table 17.2 Average annual rates of growth of output and the growth and share of investment, 1985-2008 346

Table 17.3 Incremental capital/output ratios 347

Table 18.1 Historical series of government

expenditure (% of GDP) 353

Table 18.2 Public sector expenditure on

services by function, 1999-2009 355

Table 18.3 Government spending as a

proportion of National Income 360

Table 18.4 Total outlays of government as a percentage of GDP at market prices: some international comparisons 363

Table 18.5 Composition of fiscal tightening to 2014-15: Labour and Coalition government estimates 363

Table 19.1 How public spending is paid for:

income of general government 369

Table 19.2 Public sector borrowing

requirement, 1996-2010 370

Table 19.3 The regressiveness of indirect

taxes (2008/09) 372

Table 19.4 The UK tax burden 374

Table 19.5 Comparative tax burdens and

economic growth 375

Table 19.6 UK income tax schedules,

1987/88 and 2010/11 375

Table 19.7 Impacts of various ‘flat tax’

options 380

Table 19.8 The poverty trap: married couple

with two children under 11 381

Table 19.9 Number and percentage of jobs

paid below the national minimum wage in the UK 382

Table 19.10 The unemployment trap:

unemployed married couple with two children under 11 383

Table 19.11 Council Tax: bands and property values, 2009/10 (England) 387

Table 20.1 Components of M4 (£m) as at August 2010 406

Table 20.2 Typical monthly round of the

MPC 417

Table 21.1 Bank and building society shares of gross lending for mortgages and consumer credit, 2001-09 (£m) 431

Table 21.2 UK private sector deposits with banks and building societies, 1985-2009(£m) 432

Table 21.3 Building society conversions, total assets and market capitalization 432

Table 21.4 Total investments of investment and unit trusts, 2008 (market value, £m) 434

Table 21.5 Average yearly size of the UK sterling money markets, 2000-09 (£bn) 445

Table 21.6 The demand for TESSAs, PEPs and ISAs in the UK, 1991-2010 (£m) 448

Table 22.1 CPI divisions and weights, 2000 and 2010 460

Table 22.2 HICP: EU comparisons of inflation (year to August 2010) 463

Table 22.3 UK inflation dynamics,

1950-2007 475

Table 23.1 UK unemployment rates (%) by age, May-July 2010 482

Table 23.2 Percentage of UK unemployed who have been out of work for over a year, May-July 2010 482

Table 23.3 Comparative unemployment rates (%) (standardized) 483

Table 23.4 Estimates of the UK NAIRU 491

Table 24.1 Characteristics of globalization 504

Table 24.2 Increasing liberalization of

markets on a global scale 505

Table 24.3 Transnationality Index for the world’s largest 100 MNEs in their home economies, 1990 and 2008 505

Table 24.4 2020 KOF Index of Globalization: top 20 overall, and by each dimension 508

Table 24.5 Globalization: two schools of thought 512

Table 25.1 Sterling exchange rates,

1997-2010 528

Table 25.2 Balance on oil trading account

(£m) 534

Table 25.3 Fixed versus floating exchange rates: pros and cons 545

Table 26.1 Growth in world GDP and merchandise trade, 1870-2009 (average annual % change) 551

Table 26.2 Shares of intra-regional trade in total trade, 1928-2009 (% of each region’s total trade in goods occurring between nations located in that region) 552

Table 26.3 Regional Trading Arrangements (RTAs): intra-regional export shares (%) 553

Table 26.4 Anti-dumping cases initiated 559

Table 27.1 The 27 in 2010: some comparative statistics 567

Table 27.2 Sources of revenue for the EU

budget (ˆm and %) 568

Table 27.3 Budgetary expenditure of the European communities (ˆm) 569

Table 27.4 Shares of GNP and EU budgetary balances, 2009 571

Table 27.5 UK net contributions to the EU budget, 1996-2010 572

Table 27.6 CAP spending as a proportion

of the EU budget, 1984-2010 576

Table 27.7 Population covered by EU

regional aid, 2007-13 578

Table 27.8 UK current account transactions

with the EU, 1996-2009 580

Table 27.9 Comparisons of manufacturing

output (1970 = 100) 584

Table 27.10 Performance of the member

states in relation to the

convergence criteria, 2009 588

Table 28.1 Data profiles of the BRIC

economies 596

Table 28.2 China: data profile 597

Table 28.3 China’s population (millions),

1994 and 2009 602

Table 28.4 India: data profile 605

Table 28.5 Brazil: data profile 610

Table 28.6 Russia: data profile 615

Table 29.1 Selected country indicators and

rankings (out of 182 countries) 632

Table 29.2 The UN Millennium Development

Goals (MDGs) 637

Table 30.1 Percentage of GDP 661

ACAS Advisory, Conciliation and Arbitration Service

AEEU Amalgamated Engineering and Electrical

Union

AEU Amalgamated Engineering Union

AFTA ASEAN Free Trade Area

AHC after housing cost

AIM Alternative Investment Market

ALP active labour market policy

AME Annual Managed Expenditure

a.p.c. average propensity to consume

APS Approved Profit Sharing

ASEAN Association of South East Asian Nations

ASHE Annual Survey of Hours and Earnings

ASI Adam Smith Institute

ASLEF Associated Society of Locomotive

Engineers and Firemen

ATM Automatic Telling Machine

BA Business Angels

BALPA British Airline Pilots Association

BBAA British Business Angels Association

BCB Brazilian Central Bank

BMA British Medical Association

CAC Central Arbitration Committee

CAP Common Agricultural Policy

CAT Competition Appeal Tribunal

CBA cost-benefit analysis

CBI Confederation of British Industry

CBR Central Bank of Russia

CC Competition Commission

CCC Competition and Credit Control

CCL Climate Change Levy

CCP counter cyclical payments

CCT Common Customs Tariff

CDO Collateralized Debt Obligation

CEFTA Central European Free Trade Agreement

CEEP European Centre of Enterprises with

Public Participation

CEP Center for Economic Performance

CEPG Cambridge Economic Policy Group

CEPT Common External Preference Tariff

CET Common External Tariff

CFC chlorofluorocarbons

CFI Court of First Instance

CGT Capital Gains Tax

CHD coronary heart disease

COHSE Confederation of Health Service

Employees

COMRSA Common Market for Eastern and Southern Africa

CPAG Child Poverty Action Group

CPI Consumer Price Index

CPIY CPI excluding indirect taxes

CPI-CT CPI at constant taxation

CSR corporate social responsibility

CT Control Total

CTC Child Tax Credit

CUFTA Canadian-US Free Trade Agreement DEL Departmental Expenditure Limit

DGFT Director-General of Fair Trading

DHA District Health Authority

EAGGF European Agricultural Guarantee and

Guidance Fund

EC European Community

ECB European Central Bank

ECOFIN European Council of Economic and Financial Ministers

ECSC European Coal and Steel Community

ECU European Currency Unit

EEA European Economic Area

EEC European Economic Community

EER effective exchange rate

EES European Employment Strategy

EETPU Electrical, Electronic,

Telecommunications and Plumbing Union

EFG Enterprise Finance Guarantee

EFTA European Free Trade Association

EGT endogenous growth theory

EIB Enterprise Investment Bank

EIF European Investment Firm

EMCF European Monetary Co-operation Fund

EMS European Monetary System

EMU European Monetary Union

EPS earnings per share

ERA Employee Relations Act

ERDF European Regional Development Fund

ERM Exchange Rate Mechanism

ESCB European System of Central Banks

ESF European Social Fund

ETF European Technology Facility

ETI Ethical Trading Initiative

ETS Emissions Trading Scheme

ETUC European Trade Union Confederation

EU European Union

EWC European Works Council

FDI foreign direct investment

FFB Finance for Business

FIFG Financial Instrument for Fisheries

Guidance

FMI financial Management Initiative

FR financial resources

FSA Financial Services Authority

FSB Federation of Small Businesses

FSMA Financial Services Markets Act

FTAA Free Trade Area of the Americas

FTC Federal Trade Commission

GATT General Agreement on Tariffs and Trade

GBI Grant for Business Investment

GDP Gross Domestic Product

GFCF Gross Fixed Capital Formation

GFE gross final expenditure

GGE general government expenditure

GNI Gross National Income

GPFH General Practitioner Fund Holder

GPS global positioning satellites

GRD Grant for Research and Development

GSP Growth and Stability Pact

HCAI healthcare associated infections

HDI Human Development Index

HICP Harmonized Index of Consumer Prices

HPM hedonic price method

HRA Human rights Act

IATA International Air Transport Association

ICT Information and Communications

Technology

IDBR Inter-Departmental Business Register

IDT International Development Target

ILO International Labour Office

IMF International Monetary Fund

IRB Internal Ratings Based Approach

IRC Industrial Reorganization Corporation

ISA Individual Savings Plan

ISEW Index of Sustainable Economic Welfare

ISTC Iron and Steel Trades Confederation JSA Jobseekers Allowance

LCH Life-Cycle Hypothesis

LDC less developed country

LFA Least Favoured Area

LFS Labour Force Survey

LIBOR London Inter-Bank Offer Rate

LRAS long-run aggregate supply

LSC Learning and Skills Council

LSE London Stock Exchange

M&As Mergers and acquisitions

MAC marginal abatement cost

MAD Market Abuse Directive

MBBGs Major British Banking Groups

MBO management by objectives

MBO management buyout

MDG Millennium Development Goal

MEC marginal external cost

MEC marginal efficiency of capital

MEI marginal efficiency of investment

MFA Multi-Fiber Agreement

MFI Monetary Financial Institutions

MFN most-favoured nation

MFV Managing for Value

MGQ maximum Guaranteed Quantity

MID Modularity in Design

MIP Modularity in Production

MIU Modularity in Use

MMC Monopolies and Mergers Commission

MNC multinational company

MNE multinational enterprises

MNPB marginal net private benefit

m.p.c. marginal propensity to consume

MPC marginal pollution costs

MPC marginal private cost

MPC Monetary Policy Committee

MSC marginal social cost

MSF Manufacturing, Science and Finance

Union

MTF multifactor productivity

MTFS medium-term financial strategy

MTO medium term objectives

NAFTA North American Free Trade Area

NAIRU non-accelerating inflation rate of

unemployment

NALGO National and Local Government

Officers Association

NDYP New Deal for Young People

NEB National Enterprise Board

NEDO National Economic Development

Office

NERA National Economic Research

Associates

NGO non-governmental organization

NHS National Health Service

NICE National Institute for Health and

Clinical Excellence

NME non-market economy

NMW National Minimum Wage

NPS non-product specific

NRU natural rate of unemployment

NUM National Union of Mineworkers

NUPE National Union of Public Employees

OFT Office of Fair Trading

OMO Open Market Operation

ONS Office for National Statistics

OPEC oil-producing and exporting countries

PCT primary care trust

PDI power distance

PEP Personal Equity Plan

PES Payments for Ecosystem Services

PES Public Expenditure Survey

PET positron emissions tomography

PFI private finance initiatives

PIH Permanent Income Hypothesis

PIRC Pension and Research Investment

Consultants

PPI Producer Price Index

PPP purchasing power parity

PRP performance-related pay

PS product specific

PSBR public sector borrowing requirement

PSNCR Public Sector Net Cash Requirement

QE quantitative easing

QUALYs quality adjusted life years

RCN Royal College of Nursing

RCT randomized controlled trial

RDP Rural Development Policy

RER real exchange rate

RHA Regional Health Authority

RMT Rail and Maritime Transport Union

RNULC relative normalized unit labour costs

ROA return on assets

ROCE return on capital investment

RPI Retail Price Index

RPIX RPI minus mortgage interest rates

RPIY RPI minus direct taxes and mortgage

interest rates

RSA Revised Standardized Approach

RTA regional trading arrangements

RULC relative unit labour costs

SAL Structural Adjustment Lending

SBU Strategic Business Unit

SD sustainable development

SEA Single European Act

SEM small/medium-sized enterprises

SEM Single European Market

SERPS State Earnings Related Pension Scheme

SEZ Special Economic Zone

SFI Selective Finance for Investment

SFP single farm payment

SHA strategic health authority

SIV Structured Investment Vehicle

SLB Small Loans for Businesses

SME small/medium-sized enterprise

SOE State Owned Enterprises

SPPI Service Producers Providers Index

SRAS short-run aggregate supply

SRI socially responsible investment

SS strong sustainability

SSA Standard Spending Assessment

SWF sovereign wealth fund

T&G Transport and General Workers Union

TCM travel cost method

TEC Training and Enterprise Council

TEEB The Economics of Ecosystems and

Biodiversity

TESSA Tax Exempt Special Savings Accounts TEV total economic value

TFE total final expenditure

TFEU Treaty on the Functioning of the

European Union

TFP total factor productivity

TI Transparency International

TME Total Managed Expenditure

TNI Transnationality Index

TOR Traditional Own Resources

TPI Tax and Price Index

TRIPS Agreement on Trade Related Aspects of

Intellectual Property

TUC Trades Union Congress

TVEI Technical and Vocational Educational

Initiative

UBR Uniform Business Rate

UKTI UK Trade and Investment

UNCED UN Conference on Environment and Development

UNFCCC UN Framework Convention on Climate

Change

USM Unlisted Securities Market

VFM Value for Money

VSTF Very Short Term Financing

WCED World Commission on Environment and

Development

WFD Work Force Development

WFTC Working Family Tax Credit

WS weak sustainability

WSSD World Summit on Sustainable

Development

WTA willingness to accept

WTC Working Tax Credit

WTP willingness to pay