Texts English 2017-2018
De cursusdienst van de faculteit Toegepaste Economische
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Text 1: A very British business – The Economist Text 2: In Bejing’s bad books – The Economist
Text 3: In terror, conflating the threats inflates the fear Text 4: Robin Hood Coop, an activist hedge fund Text 5: In the rough – The Economist
Text 6: The problem with populism – The Guardian
Text 7: California drought spurs protest over ‘unconscionable’ bottled water business – The Guardian Text 8: Institute of directors weighs in on BP chief executive’s pay award – The Guardian
Text 9: Whose QE was it, anyway? – Carmen Reinhart Text 10: The new generation gap – Joseph E. Stiglitz
Text 1: A very British business – The Economist
Great success of Britain’s elite private schools, called “public schools” – certainly not open to just anyone. Eton, Winchester, Harrow, Fettes: service-industry super powers. They have increased their fees threefold since 1980, but still everyone wants to get in. More then 1/3 of the students is foreign, and they have campuses in Singapore etc..
Their secret of success: provide a first-class academic education and a ticket to the best universities, when importance for academic success is rising.
1944: Britain introduced universal, free secondary schooling, This caused an ‘egalitarian post-war-mood’: private schools seemed vestiges of an age of snobbery and privilege: on their way to extinction. The response of the private schools was: raising their standards, and in 1970 took the government the competition away by forcing most “grammar schools” to become “mixed-ability comprehensives”.
Another turnaround in private schools: 1) They have become science powerhouses 2) Proportion private-school girls going to university has risen from 9% to 92%.
Three management lessons from the revival: 1) “Tradition” and “innovation” don’t need to be mutually exclusive. They survive by constantly reinventing themselves. But Britain doesn’t have the monopoly in such institutional reinvention anymore: America’s Ivy League. But they retooled for corporate hospitality and global money.
2) Competition can work wonders, private schools were forced to prove that they delivered results. 3) Insiders can make the best revolutionaries. The heads of private schools: spent most of their lives inside them.
British private schools have 2 advantages in the market for secondary education: 1) They reach in the world’s de facto business language,
2) Many are within striking distance of London: Super rich will only pay for snobbery if it comes with academic result.
Risk, private schools will become victims of their own success, why? 1) They raised their fees to eye-watering levels.
2) They opened their doors to the children of the super wealthy global elite: how can they justify their charitable status & accompanying tax breaks.
3) Claim to offer a traditional British education when their classes are stuffed with kids from Asian/Russian,.. capitalists → their success will require even greater cleverness.
Text 2: In Bejing’s bad books – The economist
In China: 5 Hong Kong bestsellers are kidnapped, one of them because he was selling banned books on the mainland. He had now decided to tell the world his story to show that “Hong-Kongers will not bow down before brute force” → not everyone agrees: others see bowing down as a better option.
The booksellers’ travails feed into the climate of tetchy (=bad tempered) disgruntlement (=state of dissatisfaction). Hong Kong wants more open politics, there will be a new election but council’s powers are very limited and there are complex voting arrangements, but a platform is provided for a more democratic Hong Kong” free election for a chief executive.
This year’s campaign will also be joined by other fringe groups questioning “one country, two systems”: embodied the hope that China too might see democratic reform. 1980: some did call for self-determination, but politics couldn’t find a ‘echo’, (↔ Taiwan). Hong Kong Is a refugee-majority society that naturally sees the mother country as home, also never given a chance by Britain. Hong Kong ↔ China: gap in outlook and level of freedom is widening and the wealth gap narrows.
A new generation of activists is agitating not for freedom in China but freedom from China. China is never going to let Hong Kong secede.
Hong Kong’s young people want to improve the current political system. How the booksellers were treated strengthens anti-mainland sentiment and undermine confidence in the law in Hong Kong. Optimists: hope this was a security service blunder ↔ China wants to scare its critics (even more
disturbing).
Text 3: In terror, conflating the threats inflates the fear – Hugh White
Australia’s response to jihadist actions is out of proportion to the danger. 300 more troops are send to the Middle East: there’s an upsurge of jihadist terrorism in Australia. We realise we do have a problem, but is our response prudent?
Australia’s military air strikes in Iraq, RAAF’s role and training the Iraqi army makes it harder for IS to seize more large areas of territory, but it makes little strategic difference to the future of IS.
It’s hard to shake the idea that Western countries can intervene effectively in civil wars by training local forces to do the fighting we don’t want to do ourselves → it never works. What makes a good soldier can’t be imposed from the outside, they will be wasting their time. IS has little chance of expanding further → Western intervention to which Australia is contributing will make no material difference to this.
How important is the military defeat of IS to reducing the jihadist threat in Australia? It’s easier and more cost-effective to keep track of a few hundred individuals. Defeating IS won’t kill the ideas that those people have, it’s an isolated phenomenon, it makes better sense to look closer at home and keep the problem in proportion.
We are wrong to encourage the attackers in their delusions. The problem with our response: to foster the terrorists own belief in the wider significance of terrorist acts. We should be saying that acts of terrorism are just meaningless and pointless crimes.
Text 4: Robin Hood Coop, an activist hedge fund – David Bollier
Finland: the Robin Hood asset Management Coop: an investment cooperative to: - democratize finance
- Expand financial inclusion - Generate new economic space
→ to arbitrage the routes of wealth and distribute the loot they believe a more equitable world is a better one.
They started in June 2012 and already generated over 100.000 euros for it’s members. Anyone can join the coop for a 30 euro membership fee, which entitles members to invest a minimum of 30 euros. Most members choose a 50-50 split (there are 8 different options).
Enterprise is driven by “dynamic-data-mining algorithm” called “parasite”: it tracks actual transactions in US stock markets and mimics the best market actors. They appear to be out-performing many leading hedge funds and reaping impressive returns and provides a modest but welcome source of income for some common projects.
Doubts Virtanen: is it really changing the system? As an financial enterprise RH has a rather unusual interest in art, politics and finance. It’s not the usual bedtime reading of financiers. RHC is a cultural experiment in creating new forms and subjectivities by using the financial apparatus in paradoxical and monstrous ways. But he thinks RHC sounds like a fake, a hoax, a scam to make advantage of the naïve cultural people.
Why should we trust the official documentation about financial value when it is itself so abstract/arbitrary and theological?
The truth is: the meaning of value is elusive and socially contingent.
Text 5: In the rough – The Economist
Lesedi La Rona: the biggest diamond to be discovered. But the bidding was desultory
(=onsamenhangend). They hoped to dispel the rumours that all diamonds are bad, that they’re “blood diamonds” because of the war in Siera Leone.
Kimberly Process: 75 countries linked to the diamond supply chain, to ban the export of diamonds to fund conflict, this is still considered a badge of honour within the industry.
Financial stresses are also mounting and especially on sightholders, family run middlemen (ship rough diamonds to Antwerp etc..), they have been caught out by the pressures to improve transparency.
Banks don’t want to invest anymore because of “risk-tolerance”. The dragged prices of diamonds have veen compounded by a glut of diamonds caused by a slump in consumer demand in China, also makes it harder to win millennial consumers. From China to California, they are perfecting gem-quality stones.
In California based Diamond Foundry, they have been producting lab-grown rough diamonds, they attack traditional miners at their weakest point: ethical sourcing and they will know where the stones come from. Also Leonardi DiCaprio: selling these diamonds as “morally pure”. But sales are still minuscule, but industry veterans believe values will plummet. But it still troubles the industry: 1) Tars all miners are the same
2) Feeds the insecurity about millennials (Slogan: “real is rare”)
→ any industry that thinks anything can last forever is ripe for toppling.
Text 6: The problem with populism – The Guardian
There’s a new impulse to the debate on populism in Europe: recent electoral success of leftwing populist parties in Spain and Greece.
Populism: is linked to radical right, = an ideology that considers society to be ultimately separated into 2 groups: “the pure people” and “the corrupt elite”.
Couple years ago: consensus that populism was bad, = “paranoid style of politics”. Lately: populism actually constitutes the essence of democratic politics = in their view it’s good for democracy → think liberalism is the real problem.
Main good thing about populism = it brings the fore issues forward, political elites now avoid discussing about those, for example: immigration. In many cases: political elites have worked hand in glove with cultural and economic elites, leaving no space for democratic opposition.
Populism behaves like the drunken guest at a dinner party, it is a monist and moralist ideology, denies the interest within the people and rejects political opponents → leads to a polarised political culture. It gets ugly when it gets the power, in most cases: they’re successfully opposed by other parts of the political structure. But in cases like Hungary and Venezuela not: they introduced new constitutions that undermine the liberal democracy.
Populism is an illiberal democratic response to undemocratic liberalism → not much difference between left and rightwing populism: it’s whom they exclude, which is determined by their ideology (nationalism or socialism).
Text 7: California drought spurs protest over ‘unconscionable’ bottled water business – The Guardian
Californians facing the prospect of endless drought, mandated cuts un water use and the browning of their summer lawns are mounting a revolt against the bottled water industries, following
revelations that Nestle and other bug companies are taking advantage of poor government oversight to deplete mountain streams and watersheds at vast profit.
They set up an petition: urging a immediate end to Nestle’s water bottling operations on permits that expired as long as 27 years ago. Revelations have agencies scrambling to justify a regulatory framework that is poorly policed and let the big companies never declare how much water they’re taking,
Nestle: says their water use is efficient and had minimal impact on the environment. They point out that bottled water accounts is just a tiny fraction of California’s overall use and they have mad investments to further reduce the amount of water used for (non)bottling.
Water-bottling: had a symbolic weight → water belongs to all. Sayings: bottled water is healthier than tap, but is it “pure drink or pure hype”? Grown of the industry hasn’t stopped yet.
Nestle made deals that hasn’t been permitted since the ‘90’s. Legislation to force regular disclosure of volumes bottled and sold is vetoed by former governor Arnold Schwarzenegger, otherwise it was easier to check how much water Nestle is really using. Another regulatory headache, according to the activist group Food and Water watch, is the near-absence of legislation governing groundwater – an absence largely explained by the lobbying power of agribusiness in a state that boasts the single most productive concentration of farm land on the planet.
Scow (California director of Food and water watch): In a drought, bottling public water for private profit qualifies as wasteful and unreasonable.
Text 8: Institute of Directors weighs in on BP chief executive’s pay award – The Guardian
Shareholders told decision to award Bob Dudley 14m despite company’s worst-ever losses sends the wrong message: Institute of Directors: rare invention on executive’s pay urging BP (=oil company) shareholders think twice. The director general: it’s sending the wrong message given the annual loss and the decision to axe 7000 jobs.
There will be a stormy annual meeting: the oil company is facing criticism over a range of issues: including new drilling plans in waters of Australia.
The company argued that Dudley had done a good job in difficult circumstances: BP’s safety and operating performance was excellent and management responded early and decisively to the steep fall in oil prices. BP wasn’t a badly run company and it’s current woes are common to other firms in the sector. But corporate governance was clear that pay should be tightly linked to performance. They also face fire from investors whether or not the promise to be transparent over threats is being kept.
In addition: threat that the shareholder meeting will be a target for Brexit campaigners to leave the EU.
ShareAction (responsible investment group): BP wants to drill in the Great Australian Bight, but then you have the issue of high remuneration (=loon) = a high risk-project off Southern Australia.
Chief executive: Shareholders expect to see value for money and long-term strategic thinking in exchange for high pay packets - not the pursue of high risk projects like the controversial Great Australian proposal.
More critics: Over the southern drilling plans, it shouldn’t be happening at a time when the world was trying to move to a low carbon economy → case against this project is an ethical and financial one.
In a third stand of attack, campaigners at Warwick University said BP was continuing to resist opening its corporate archive based on the student campus.
Text 9: Whose QE was it? – Carmen Reinhart
Nederlands:
United States Federal Reserve (= hetzelfde als de Europese Centrale Bank), was vroeger grootste bezitter van verhandelbare securities/treasuries (=papiertjes met een bepaalde waarde waarop je interest kunt krijgen, vergelijkbaar met aandelen). Veel buitenlandse banken kopen deze op waardoor het aandeel van de USFR sterk daalt tov de anderen.
Door geld te creëren tijdens 2003-2013 worden rentes verlaagd gehouden die erg hoog lagen tijdens de crisis. De centrale bank koopt ‘effecten’ van de gewone banken.
Verschillende redenen zorgen voor een einde aan de min of meer stabiele periode + buitenlande banken verkopen treasuries → dewaardering van de dollar (slecht voor US economie).
Fed stopt met het publiceren van data omtrent verkoop (om geen kettingreactie te veroorzaken). US treasury (overheidstak Financiën) doet dit nog wel.
Na 2008: redelijk lage volatiliteit (=stabiele markt) tijdens de lente van 2013. Maar door sterk gedaalde olieprijzen, basisbehoeften artikelen komen in een overrijpe business cyclus & een
aankondiging van de Fe dim hun aankopen te verminderen komt de decennialange bloeiperiode tot een einde.
Vele economieën hun aandelenmarkten zijn naar beneden gevallen, valuta’s gekelderd, enz.. Tegelijkertijd begonnen vele centrale banken de treasuries te verkopen. Eind 2015 hebben
buitenlandse centrale banken nog 1,5 keer zoveel treasuries als de Fed, veel minder als in het begin. Besluit: Het doel van de QE (grotere stabiliteit) is niet bereikt owv de omgekeerde actie van de
buitenlandse centrale banken (het veelvuldig verkopen ipv aankopen van treasuries). Het is niet zo dat de interesse in treasuries gedaald is, dit is historisch gezien altijd een veilige belegging. Het is de verschuiving in het publiek dat de markt onstabiel heeft gemaakt. Treasuries wisselen sneller van hand owv de ‘private investors’ (=beleggers) die gevoeliger zijn voor prijsschommelingen tov de centrale banken die voordien de markt veruit domineerden.
English:
Between 1913 (when the Fed was founded) and the latter part of the 1980’s, it would be fair to say that the Fed was the only game in town when it came to purchases of US Treasury securities by central banks. During that era, the Fed owned anywhere between 12% and 30% of US marketable Treasury securities outstanding, with the post- World War ll peak coming as the Fed tried to prop up the sagging US Economy following the first spike in oil prices in 1973.
Years before the global financial crisis foreign central banks’ ownership began to catch up with and then overtake the Fed’s share. This began years before the first round of quantitave easing or QE1. The charge of foreign central banks = QE0, was the most sustained and interrupted surge in central banks’ purchases of Treasuries on record. QE1 during the crisis owed it’s success in bringing interest rates down. Fed’s next 2 policies QE2 and QE3 appeared to have modest effects in financial markets. After the turmoil of 2008: spring bloom of stability. This faded soon because of falling oil prices,
primary commodity prices and an overripe business cycle, the Fed’s “tapering” brought the decade long “boom” to an end.
With this grim turn of events, numerous emerging markets central banks reversed course and began selling US Treasuries. Around the time official sales commenced, Fed stopped reporting US
Treasuries held by foreign official institutes. As of the end of 2015, the share of Treasuries held by fcb is more than 1,5 times what the Fed holds. But this figure is significantly down from its peak and, with capital outflows from China snd elsewhere showing little signs of abating, is now trending lower.
In times of financial turbulence, US Treasuries have historically been a safe heaven for private flight capital. But the change in ownership taking place now does carry implications for financial
instability, because they are more sensitive to changes in rates of return.
Text 10: The new generation gap – Joseph E. Staglitz
Something interesting has emerged in voting patterns on both sides of the Atlantic: Young people are voting in ways that markedly different from their elders. A great divide appears to have opened up, based not so much on income, education or gender as on the voter’s generation. The lives of both old and young are different and so are their prospects. Words like socialism do not convey the meaning they once did. Today’s experiments bear no resemblance to those of the past. The failure of those of the past say nothing about the new ones.
Older-upper-middle class Americans and Europeans have had a good life, that generation expected to have job security, to marry young, to buy a house and finally retire with reasonable security. Overall, they expected to be better off than their parents. While today older’s generation encountered bumps along the way, for the most part, their expectations were met. Today, the expectations of young people, wherever they are in the income distribution are the opposite. They face job insecurity, many college graduates search months before they find a job and they still count themselves lucky. Young university graduates are burdened with debt, so they do not ask wat job
they would like: they simply ask what job will enable them to pay their college loans. Likewise, buying a home is an distant dream → young people aren’t much thinking about retirement, they view the world through the lens of intergenerational fairness.
The sense of social injustice is enhanced as they see the bankers who brought on the financial crisis, walk away with mega bonuses, with almost no one held accountable for their wrongdoing. Everyone else, including the young got unprecedented insecurity.
These three realities: social injustice, massive inequities and a loss of trust in elites, define our political moment. That’s why center-left parties in Europe are losing.
The young will not find a smooth path into the job market unless the economy is performing much better. We won’t be able to fix the problem if we don’t recognize it, Our young do. The perceive the absence of intergenerational justice, and they are right to be angry.
