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ISSUE 2-2019 / YEAR 22nd - PRICE 5,00 â&#x201A;¬ / $6,00

CHRISTINE LAGARDE

IS THE WORLD PREPARED FOR THE NEXT FINANCIAL CRISIS? TRENDS

THE WEB IS 30 YEARS OLD. WHAT BETTER TIME TO FIGHT FOR ITS FUTURE? EUROPE

HOW THE GERMAN ECONOMY IS FALLING BEHIND

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INDEX Founder

Konstantinos C. Trikoukis Chairman

Athanase Papandropoulos Publisher

Christos K. Trikoukis

8 EDITORIAL

10 OPINION

Brits, Boris and Brexit

Disgruntled Democracies

18 ECONOMIC OUTLOOK

20 COVER

Editor in Chief

N. Peter Kramer Editorial Consultant

Anthi Louka Trikouki Issue Contributors

Uwe Bott, Judy Dempsey, Michael Heise, Christine Lagarde, Antonis Zairis, Athanasios Krystallis, Alexandra Papaisidorou, Shada Islam, Beatriz Rios, Leonidas-Phoebus Koskos, Frank Bainimarama, Hilda Heine, Jaime Nack, CĂŠsar Chelala, Gabriel Hawawini, Simon Freakley, Rein van Gisteren, Martin Banks, Tim Berners-Lee, Ceri Parker, Einaras von Gravrock, Sharan Burrow

How the German Economy Is Falling Behind

Is the World Prepared for the Next Financial Crisis?

Correspondents

Brussels, London, New York, Paris, Berlin, Istanbul, Athens, Helsinki, Rome, Prague Communications Director Alexandra Papaisidorou Advertising

Marianna Panoutsopoulou Business Development John G. Tragkas Published by:

26 EU AFFAIRS

34 EU AFFAIRS

Looking to 2030 horizon: Europe and Greece

Youth should be a mainstream priority for the EU

40 SUSTAINABILITY

48 MANAGEMENT

A question of legacy: EU must step up and lead on climate

7 skills every leader needs in times of disruption

EMG STRATEGIC CONSULTING LTD. 19 Leyden Street, E1 7LE London, United Kingdom www.emgcommunications.co.uk

ISSUE 2-2019 / APRIL - JUNE. 2019, YEAR 21st Published bimonthly under the license of Christos K. Trikoukis. European Business Review trademark is a property of Christos K. Trikoukis. European Business Review is strictly copyrighted and all rights are reserved. Reproduction without official permission of the publisher is strictly forbidden. Every case is taken in compiling the contents of that magazine, but we assume no responsibility for the affects arising therefrom. The views expressed are not necessarily those of the publisher nor of the European Business Review magazine.

For previous editions archive and up-to-date information on major topics and events you may visit our website http://www.europeanbusinessreview.eu EUROPEAN BUSINESS REVIEW | 3

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EDITORIAL

by N. Peter Kramer, Editor-in-chief EBR

Brits, Boris and Brexit

‘B

russels’ politicians, eurocrats and the unconditionally pro-EU media (almost all) are telling us, time after time, how bad Brexit is for the British people. Much, much worse than for those left behind.

Statistically true. Many member states will not have a big problem. However, the situation is very different for instance for The Netherlands, Belgium, Denmark, France and industrial sectors like the German car industry. Brexit punches will be hard. Unemployment figures of hundreds of thousands are already being mentioned. The GDP in some memberstates will be hit substantially. To mask this effect, ‘Brussels’ talks only about the total effect on the EU. The Dutch Prime-Minister and his Belgian colleague seem not to worry about the disastrous Brexit effect for their countries, giving priority to their personal ambitions for an EU top job. The French President, very unpopular in his own country, is trying to take over Merkel’s position as the sacrosanct Leader of EU. And the mainstream media are their megaphones. But how is Britain? Let me quote the columnist Simon Kuper of the Financial Times, an absolute quality paper but to put it mildly, not pro-Brexit. ‘There has been lots of talk lately about how unhappy the UK is. The vote for Brexit is often described as a cry of pain from suffering people’, he wrote. But he was stunned by research done by the independent Resolution Foundation think-tank About 93 per cent of Britons now say they are ‘fairly’ or ‘very’ satisfied with their lives; a very marked upward turn since 2000. ‘Academic experts’, according to Kuper, ‘tell me they believe these findings’. He pointed to Nancy Hey, director of the What Works Centre for Wellbeing: ‘contrary to Britain’s doom-ridden national debate, for most people, things have been getting gently better’. Why are most Britons content? The worst thing for personal life satisfaction is unemployment. Seventy-six per cent of working-age Britons are in work. The highest rate on record. 2018 brought 354.00 new jobs. Improved physical health has boosted British happiness too, wrote Kuper. Other sources show also positive developments. The Office for National Statistics reports: there are nearly 100.00 more people from other EU countries working in the UK than last year; the buying power of working Britons increased in one year by 1,5%. The Daily Express highlighted that ‘London attracted more investment projects than Berlin and Paris’. Consultancy Deloitte discovered that, between 2015 and 2018. the UK booked more foreign investments than any other EU country. And the amount in that period that came from foreign investors was higher than for Germany and France together. Let’s finish this summary with super-investor Warren Buffet, himself not a fan of a Brexit, who said, that ‘my appetite for investing in the UK isn’t lessened by it’. The conclusion then might be that the UK economy is in good shape and the Brits are not unhappy. An important task for Boris Johnson (or Jeremy Hunt*) will be to maintain this and to convince those in power in ‘Brussels’ to renegotiate a deal and stop their deceptive information. *At the time of writing the new PM of the UK is still unknown.

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OTE Group: The Technology Powerhouse of Greece OTE Group, a member of Deutsche Telekom Group, is today the technology powerhouse of Greece and the enabler of the country’s digital transformation, offering a full range of services for households and businesses, from fixed and mobile telephony, broadband and wholesale telecommunication services, to pay-TV and ICT solutions. OTE's shares trade in the Athens Stock Exchange (OTE) and London Stock Exchange (HLTOY). GOING FORWARD: DIGITALIZATION As the Group’s CEO Mr. Tsamaz often says “change is primarily a mindset”. That’s the reason why the Group is in constant pursuit of change in order to become more efficient and address the evolving needs of the modern era. A new challenge lies ahead: its digital transformation.

o get to this point, the Group had to go through tough times and a radical structural overhaul, transforming from a state monopoly into a modern, competitive company. What’s more, all this was achieved against the backdrop of a severe financial and social crisis, and a volatile geopolitical environment.

A TURNAROUND STORY In 2010, OTE’s fixed-line segment was trapped in a vicious cycle of low competitiveness due to its eroding financial results, hostile regulatory environment, and fierce competition. Due to the Greek financial crisis and the inability to raise capital from the market, OTE’s inherited debt and solvency were at risk. In 2011, the newly appointed CEO of OTE Group Mr. Michael Tsamaz, set a concrete plan which aimed to fix the basics, progressively focus on growth, and ultimately lead the company into the digital era. The multi-layered turnaround strategy was based on six pillars: technological superiority, industry-leading customer experience, new revenue streams and enhanced leadership in core business, on the back of operational and cost optimization and a modern human resources strategy.

After the successful implementation of this turnaround strategy, OTE Group managed to streamline its financials, create new revenue streams and transform into a modern, customer centric, technology enterprise, with COSMOTE as the unified brand for its fixed, mobile, internet and TV products and services. OTE Group today leads the Greek market in fixed and mobile telecommunications, broadband, ICT and pay-TV, offering top services and constantly increasing value for customers and shareholders. It is by far the largest investor in telecommunications in Greece, having invested over €2bn over the past six years and committed to another €2bn by 2022, notably to establish fiber optics and mobile networks to enable its customers and the country to succeed in the digital era. Based on its know-how in the ICT field and its high level of activity in the field of IT integration, OTE Group is the partner of choice for businesses seeking integrated solutions in the fields of healthcare, tourism, information security, energy, data centers, cloud and Internet of Things (IoT) services. A pertinent example of OTE’s capability to successfully implement large scale and complex ICT projects is the €43m installation and operation of Coca-Cola HBC’s data center for 28 countries.

Michael Tsamaz, OTE Group Chairman & CEO

OTE Group has come a long way in the past few years, and is prepared for the upcoming challenge of helping customers and the markets where it operates to take full advantage of the new digital world. It now has a new vision: to become a digital transformation paradigm in Greece, as well as in Europe. For this, OTE’s management team has compiled a 360 degree digital transformation program which will lead it on its new journey, help it adopt a digital mindset, and allow it to exploit digital capabilities to the benefit of its customers, employees, partners and suppliers. OTE Group is leading change. It acts proactively, challenges all assumptions and continuously innovates. It operates in a responsible, ethical manner, ensuring sustainability and enabling digital transformation, which leads to growth for Greece’s economy and businesses. EUROPEAN BUSINESS REVIEW | 9

OPINION

Disgruntled Democracies Why the problem is far greater than nationalist resurgence. by Uwe Bott

dvanced countries in Europe and North America are facing an existentialist crisis of their democracies.

Once dominant large parties are disintegrating, and governance becomes more and more difficult as there are many smaller parties or – in case of the United States – a growing network of seemingly incompatible constituencies, which seem to paralyze the decision-making process. The question is: Why? The easy answer is that a rising number of people in advanced countries feel disenfranchised and as a default solution they feel drawn to nationalist ideologues, which has led to a resurgence of extremist and – in many cases anti-democratic – parties or has made existing parties more anti-democratic. While an increase in nationalist propaganda, isolationist tendencies and a decline in valuing our democratic principles cannot be denied, we would sell ourselves short if we accepted that as root of our problems.

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The disenchantment with the status quo of our existing democratic institutions affect vast majorities of people in advanced countries, most of whom would never consider it palatable to vote for those who preach hatred. And yet, they are without a doubt frustrated with the way things are. A STRONG TRACK RECORD There are several reasons for this unhappiness with the quality of our democratic governments. First, democracy in most European countries and in North America now has a strong track record. And democracy has been strongly associated by the people with consistent economic and social progress. Each generation in our democracies has done better than their parents, unless disrupted by war. This continuous generational progress has been accepted as an unmovable fact. Yet, for the first time, this progress is at risk for the current generation.

OPINION

that our societies face are more complex and more enormous than any we might have faced in human history. Finding workable solutions to these challenges, the job of our elected officials, may very well be beyond anybody’s capacity. Yet, that does not put into question the value of democracy, but rather shows our limitations as human beings. Let us start with climate change. You can take plastic bags and bottles away from people, you can introduce the most intricate recycling programs, you can even ask people to eat less meat. Maybe all of that is important, but in the end, it is going to help the planet only at the margin. Changing the composition of our energy sources critical to our lives, is the biggest challenge we face. The complexity of going green or zero-emission is a technological one and it is far from solved. Abandoning coal is easy, abandoning nuclear is easy, abandoning even natural gas is easy. But replace it how? Wind and solar energy cannot do it. And take wind turbines for example. They kill millions of birds and bees every year! It is far from certain that young people today will be better off than their parents. This is extremely unsettling, not just for them, but even for their predecessor generations. A POTENTIAL PARADIGM SHIFT Of course, there are many causes for this potential paradigm shift whereby the economies of Western democracies will no longer progress as they have for decades. One, often overlooked, factor is that one might argue that there is a natural developmental plateau - once an economy has reached a certain size that size becomes its constraint. In case of the United States, it is much harder to grow an economy with a GDP of $20 trillion at a sustainable growth rate of 3% than an economy that once stood at just $10 trillion of GDP. The lack of this progression and the risk that future generations may not do better than past generations is then squarely blamed on the established political parties. Clearly, so many people feel, they have not done their job in governing or we would not be in this predicament. Political mistakes notwithstanding, this is neither fair nor accurate. MORE COMPLEX CHALLENGES Second, and equally if not more important, the challenges

For us to have plants and eat only plant food, because we “should not” eat meat from methane emitting cows, requires bees - without bees, no plants. So, politicians like all humans, including scientists, are really stumped and overwhelmed. AGEING SOCIETIES Then, there is the ageing of many societies in advanced countries. Never before have we faced such a problem in human history. Populations were always growing and our social systems in most democracies were designed for future generations to take care of the elderly. With an upside-down population pyramid, that model is at risk. But how do we really deal with that? By creating massive poverty among the elderly? By raising retirement ages? As for the latter, let me just point at two major problems in that regard. First - age discrimination. In many sectors in many societies, there is blatant age discrimination. In most societies our democratic governments have also made this an illegal practice. And yet, those laws are – in practice – unenforceable. So, raising the retirement age does not work for those actively

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OPINION

discriminated against. It will impoverish them. The other problem with raising the retirement age in most societies is that life expectancy of the working classes has risen far less and sometimes not at all when compared to white collar workers over the last 20-30 years. So, raising working age for all means that the working classes will have even less time to enjoy their post-work lives. Is it fair? Governments in all advanced democratic countries are simply confounded by how to solve this puzzle in a manner that is just. That does not render them incompetent. Helpless, maybe, but not incompetent. THE CHALLENGE OF TECHNOLOGY Then, there is the challenge of technology. People in many countries demand digitalization of government. But elected officials have to consider the risks to our privacy and the potentially irreparable harm if our data were hacked into by the Russians or other bad actors. They have to worry that digitalization could bring down our entire system. The private sector does not know what to do about it. How can we expect this from government? A well-targeted breach of a digitized government can literally kill people. What we once needed nuclear weapons for, can be achieved from a computer terminal today. Should politicians just go full throttle ignoring these serious threats? What if the horrific happens, who gets blamed? I am sure those who were most vociferous about our lack of progress on digitalization will be the first to blame our governments for lack of controls (to be sure controls of the

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uncontrollable). So, many politicians are paralyzed by this and choose inaction over taking incalculable risks. BLAMING GOVERNMENTS IS TOO EASY In other words, it is easy to blame government for inaction, for incompetence, for bureaucracy, for lack of new ideas, for lack of solutions to complex problems. Too easy. Yes, maybe a country’s federal structure impedes quicker action, but are others doing better? Is France with highly concentrated central government power doing better? Is Russia with an autocrat doing better? Is China with a strong central government and – often enlightened policies – doing better? I am not even making reference to the failed state of the United States in this list of comparison. I venture to say that all democratic governments are simply humanly unable to address our most challenging problems. What I do believe is that freedom, self-determination and an open society are the key values that the people and our governments must protect. Given the enormity of our challenges, government first and foremost should serve as a protector of these values. Secondly, all we can hope for in terms of our enormous problems is that these governments are good administrators. The solutions to these problems may still be out of reach, but in fully open societies we may stand a better chance to find solutions over time. I think we all have to take a step back and ask ourselves, what would we do if we were omnipotent with no checks or balances and could implement policies at will? Would we know the answers to these complex questions? As for myself, the answer is a resounding “No”.

OPINION

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OPINION

Europe Puts the Western Balkans on Hold by Judy Dempsey*

s several countries celebrated the fifteenth anniversary of the big bang enlargement on May 1, there was little cause for jubilation in the Western Balkans.

A summit of the region’s leaders, hosted in Berlin by Chancellor Angela Merkel on April 29, exposed divisions and indecision instead of unity and strategy. The lack of any sustained, long-term policy toward the Western Balkans will play into the hands of Russia and China, as if EU leaders are not already aware of that possibility. Indeed, it is more than worrying how European governments have consistently failed to take its own back yard— Albania, Bosnia and Herzegovina, North Macedonia, Montenegro, Serbia, and Kosovo—seriously. It’s as if the EU has learned little from the former Yugoslav war of the 1990s that exposed deep historical divisions among the big EU

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countries. The war finally ended in 1999. But it did not put closure to the centuries-old conflict between Serbia and Kosovo—a conflict that, to this day, divides the union. The EU has failed to adopt a united stance on recognising the independence of Kosovo in 2008, with several countries, including Spain, opposing that new status. Serbia, which waged a policy of ethnic cleansing against the ethnic Albanians in Kosovo during the 1990s ending only after NATO intervened, has consistently rejected Kosovo’s unilateral declaration of independence. Yet because Serbia wants to join the EU—as does Kosovo—Serbian President Aleksandar Vucic and his Kosovar counterpart, Hashim Thaci, proposed a land swap on ethnic lines last year in a bid to normalise relations. The calculation was that if such a swap could be agreed, Serbia could then recognize Kosovo’s independence, one of the major condi-

OPINION

to believe that these countries will join the union in the near future. The state institutions are very weak, corruption is rampant, and the economies are underdeveloped. But she knows that down the road the region’s place is in the EU. Macron, however, has little interest in mentioning the “e” word. Further enlargement, in his view, would further weaken the cohesion of the EU and fuel populist or far right movements. It is a view shared by some other countries, including The Netherlands. Yet what is even more disappointing about these divisions and lack of strategy is the EU’s attitude toward North Macedonia. Against all the odds, Greek Prime Minister Alexis Tsipras and North Macedonian Prime Minister Zoran Zaev managed to resolve a long and debilitating dispute over the future name of Macedonia. When the agreement was clinched between Athens and Skopje, it was an immense fillip for Zaev. Greece would no longer block Zaev’s ambitions to have his country join NATO and the EU.

tions for starting accession talks with the EU. Those bilateral talks not only broke down, but any idea of a land swap was vehemently opposed by Merkel and former diplomats and ministers who played a major role in ending the war in the former Yugoslavia. They believe it would set a very dangerous precedent. But the EU’s foreign policy chief, Federica Mogherini, and President Donald Trump’s national security advisor, John Bolton, supported the swap. In the meantime, relations between Belgrade and Pristina have turned sour. In November 2018, Kosovo imposed a 100 percent tariff on Serbian goods because Belgrade has been lobbying against Kosovo joining Interpol, precisely because it would amount to this organization giving Kosovo’s independence more international legitimacy. During the Berlin summit, Merkel, who has taken a close interest in the Western Balkans after she launched the “Berlin Process” in 2014, which was aimed at encouraging regional cooperation and closer integration, had hoped to kickstart a dialogue between Serbia and Kosovo. Another summit will be held in July 2019, this time hosted in Paris by President Emmanuel Macron. Macron’s attitude toward the Western Balkans is completely at odds with Merkel’s. Merkel is not naive enough

Yet, for all the courageous steps in ending this dispute, the EU has been ungracious, to say the least. During the Berlin summit, Zaev was hoping he would be given a date for starting EU accession talks. Macron did not agree. Nothing like a slap in the face for Skopje and Athens. The rest of the region still hopes that Merkel will change Macron’s mind. But for now, the EU’s policy toward the Western Balkans is divided and short-sighted. Thankfully, these countries can still count on NATO to extend security and stability. In July 2018, it invited North Macedonia to join after previously admitting Montenegro, a move Russia had tried to prevent. Without the alliance, the region would be in a very sorry state and even more vulnerable to Russian interference.

*Judy Dempsey A nonresident senior fellow at Carnegie Europe and editor in chief of Strategic Europe

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ECONOMIC OUTLOOK

How the German Economy Is Falling Behind by Michael Heise*

ith growth deteriorating, the day of reckoning for Germanyâ&#x20AC;&#x2122;s economic policymakers is approaching fast. The German economy is lagging in its growth performance. Even in the group of the euro countries, not exactly a strong growth league to begin with, Germany has fallen to the lower GDP growth ranks in 2018 and 2019, just ahead of Italy. The French economy, often falsely belittled by Germans, as well as the British economy, which has been battered by Brexit, are growing faster than Germany, albeit only slightly. For now, the weakness of growth in the German economy has not yet become a big issue in the public debate in Germany, mainly because of still rather strong employment data and low levels of unemployment. Many jobs are being created primarily in the service sector, which thrives on consumer spending. However, it is only a matter of time before the downturn in manufacturing that has been taking hold for about a full year now, will negatively affect the other sectors.

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US-CHINA TRADE WAR German goods producers have been hit by the slowdown and lately also by the contraction of world trade. The lack of trade dynamics has various causes, with the tariff and broader trade policy conflict between the United States and China ranking prominent among them. By itself, Germany can do little to heal the weakness of global trade. Therefore, it should do all it can to create more internal dynamism of the German economy through investment and innovation. Unfortunately, this area of economic activity has been neglected for years. As a result, Germany is losing attractiveness as an investment location and capital is being exported on a large scale. A series of factors come into play. In addition, Germanyâ&#x20AC;&#x2122;s famed labor productivity has hardly risen at all since 2017, while wages and non-wage labor costs are rising faster than in other European countries. In the manufacturing sector,

ECONOMIC OUTLOOK

the level of wages has long been very high by international standards. That is also true for the level of taxes.

to record levels and spending on public consumption increased by rather large bounds.

Following tax reform measures in other countries, Germany is once again among the industrialized countries with the highest level of corporate taxes and tax burden imposed on small and medium-sized incomes. On top of that, very high average energy prices also keep industrial companies from expanding in Germany. This triad of high wages, high taxes and high energy prices would not have to be a matter of concern, if companies operating in Germany could rely on first-class infrastructure as well as a highly qualified labor supply that would justify those high taxes and business costs. But these traditional strengths of the German economy have been eroding in recent decades.

While the long promised abolition of the temporary “solidarity” surcharge, passed at the time to finance the economic integration of the former East Germany into the Federal Republic, keeps getting pushed back. Simply put, additional public expenditures seem more attractive politically. The biggest spending decisions since the new federal government was formed in 2018 concern further pension increases, the expansion of family benefits and big structural support for regions affected by the end of coal-fired power generation.

HALF MEASURES WON’T WORK It will take some far-reaching political measures to improve the current situation in which the business sector finds itself. And yet, despite all the problems and concerns that are piling up and visible in the trade and investment data, German policy makers are reluctant to address the “old” and unpopular issues such as taxes or non-wage labor costs. Any meaningful form of tax reform that could achieve beneficial results is rejected out of hand by referring to scarce resources. This is even more surprising as tax revenues had been rising

Whatever one thinks of these choices, one fact is beyond debate: Such expenditures do not strengthen future growth potential, even though that is urgently needed to support the welfare state in the future. In conclusion, as much as Germany’s politicians want to avoid acknowledging it, policies for growth must urgently address the hard facts of deteriorating business conditions.

*Michael Heise Chief Economist of Allianz SE. He advises the board of Allianz SE on economic and strategic issues.

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COVER

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COVER

Is the World Prepared for the Next Financial Crisis? by Christine Lagarde*

he world in 2019 is still reckoning with the legacy of the global financial crisis, which is hardly surprising given its scale and lasting impact. Ten years on from the Lehman Brothers collapse, one question about the financial system keeps coming up: Are we safer than we were in 2008? The short answer is yes—but not safe enough. While there has been marked progress, more needs to be done, including keeping pace with potential new risks from a rapidly evolving financial landscape.

public debt is at levels last seen during the 1980s-debt crisis. And if recent trends continue, many low-income countries will face unsustainable debt burdens.

Nonbank finance, also known as shadow banking because it takes place beyond the perimeter of traditional bank regulation, is another source of risk. Regulators must develop and deploy new tools to address it, particularly in those emerging markets where it has expanded rapidly. At the same time, new challenges First, the progress. Banks have bigger and better capital have emerged, including the danger of cyberattacks buffers and more liquidity. Countries have taken steps on banks and stock exchanges. Financial innovation to address systemic risks posed by institutions seen as and technology hold out the promise of better, cheaptoo big to fail. Regulation and supervision have been er, and more accessible services but also pose risks for strengthened; many counconsumers, investors, and the tries have stepped up their economy’s overall financial “Too big to fail” remains a problem as focus on monitoring financial stability—risks that are not stability, and many now also banks grow larger and more complex. always easy to understand or conduct regular stress tests anticipate. More progress is needed to check banks’ health. A subon procedures for resolving, or stantial portion of trading in And for all the progress to winding down, failing banks, over-the-counter derivatives strengthen the financial secespecially those that are active across has shifted to safer central tor, the revamped architecborders. Regulators should encourage clearing systems. ture remains untested. If fibanks with weak business nancial conditions were to models and high levels of For its part, the International tighten sharply—for example, nonperforming loans to clean Monetary Fund (IMF) has imvia unexpectedly higher inup their balance sheets. proved its ability to analyze terest rates or a sharp drop and monitor sources of sysin asset prices—this could temic risk. It has partnered expose areas of vulnerability with national authorities to help them identify potenthat have built up during a decade of record-low intertial trouble spots, such as excessive consumer or corest rates. porate debt; develop tools to curb risks; and strengthen analysis of their financial systems. But what about arIn the last year, we have already seen some investors eas where progress has been inadequate or where new pull money out of emerging markets in response to risks have emerged? a stronger dollar, rising U.S. interest rates, and trade tensions. IMF calculations show that with an abrupt Let’s start with debt. Globally, nonfinancial debt baltightening, there is a chance—albeit a small one—that looned to a record $182 trillion in 2017—224 percent capital outflows from these economies (excluding Chiof global GDP, an increase of almost 60 percent over na) could reach $100 billion. That would broadly match 2007. In the United States, investor demand for debt outflows during the financial crisis. Looking at the ecoissued by highly leveraged companies has led to worrynomic context, there are several sources of risk that ingly loose underwriting standards, increasing the risk could shake investor sentiment. Global growth, while of default by weaker borrowers. In emerging markets, still strong, is leveling off. Support is waning for the

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COVER

open, rules-based international system that has fueled global prosperity, and trade tensions could escalate. Uncertainty about fiscal policy in Europe is reviving worries about the self-reinforcing nexus of government and bank debt that shook the Eurozone in the first years of this decade. Finally, central banks must navigate the end of an unprecedented monetary experiment. In the United States, the Federal Reserve may need to raise interest rates higher than currently anticipated if tax cuts combined with fiscal stimulus fuel faster-than-expected inflation. So how should policymakers respond? First, they must complete financial regulatory reforms and, just as important, resist pressure to roll them back. Bank capital should be raised even further in places where buffers remain low. “Too big to fail” remains a problem as banks grow larger and more complex. More progress is needed on procedures for resolving, or winding down, failing banks, especially those that are active across borders. Regulators should encourage banks with weak business models and high levels of nonperforming loans to clean up their balance sheets. Second, policymakers should rebuild their fiscal and monetary arsenals, which were weakened as they contended with the 2008 crisis and its aftermath. Doing so will require reducing budget deficits and gradually bringing interest rates back to normal levels as economic con-

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ditions permit. Governments should also work together to reduce excessive global imbalances in a way that supports sustainable growth. Flexible exchange rates can help absorb shocks. Steps to boost lagging productivity would counter demographic headwinds and raise growth, which in turn would support efforts to bolster fiscal and monetary room for maneuver. Finally, as we consider the lessons of the crisis and the path forward, we must also recognize and confront more profound, longer-term risks to financial—and social— stability. Climate change is one that threatens all of us, low-income countries in particular. Advanced economies must ensure that prosperity is more widely shared, by dealing with rising inequality and stagnant wage growth. All countries need to educate and train workers for automation and the fast-changing workplace of the future. Many of the measures that might make the world safer than it was before the last crisis depend on international cooperation-on matters of trade and finance but also on a number of global public-good problems, including the environment and refugees. The stakes are just as high as they were in 2008. *Christine Lagarde *The managing director and chairwoman of the International Monetary Fund ** from her speech at the World Government Summit, Dubai

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THE WORLD

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THE WORLD

Why Biden is leading the Democratic candidates pack and frightening Trump Former Vice-President Joe Biden is running for the democratic presidential nomination. by N. Peter Kramer

race with 23 candidates, six of them women, six minorities, with a gap between the youngest and the oldest of 40 years. Biden started at the front of the pack and has stayed right there after a month. Normally, this would hardly be surprising, considering how well-known and deeply rooted he is within his party. But we don’t live in normal times. Many insiders thought Joe Biden was too old, too old-school, too centrist, too willing to work with Republicans, too much baggage from past controversies, etcetera. It is very early of course, but what is the buoyancy of Biden telling us about the Democratic Party? A guess. Democrats may not have moved as far left as thought by many observers. May be a misreading of the 2018 midterm elections. The most important victories weren’t by candidates on the left, but by 21 House freshmen who won in districts President Trump carried in 2016. These were centrist candidates and represent where many Democratic and independent voters are: on the center-left. Don’t forget there is actually unease within the party over prominent candidates of the left. In a Wall Street Journal/ NBC News polling, 36% of Democratic primary voters say they have reservations about or are uncomfortable with Senator Bernie Sanders, and 33% say that about Senator Elisabeth Warren. In the meantime, just 27% have reservations about or are uncomfortable with Joe Biden. Staring with his announcement, Biden’s message has been that Trump’s values and behaviour, more than the policy debate, are the real issues for the 2020 campaign. This approach presumes that voters are most interested in a candidate who represents the opposite of Trump in terms of style and demeanour, and puts less importance on ideology and policy positions. Biden shows a contrast with the approaches of Sanders and, especially, Warren, who has begun to gain attraction

with a series of detailed liberal policy proposals, a wealth tax, a corporate tax, student-debt forgiveness. Joe Biden presents himself as a traditional Democrat with traditional middle-class sensibilities but also one who knows how to reach across the aisle to work with Republican and find consensus in Washington. ‘We need to have a candidate who is ready to rebuild trust’, is what you hear often. Biden’s position contrasts with most other Democratic candidates, who are appealing to the anti-Trump anger by using the word ‘fight’ and stressing their eagerness to battle with Republicans. Biden’s more reasonable positioning turns to be smart. Opinion polls, though impossibly far from November 2020, have Obama’s vice-president ahead in tree states that put Trump in the White House, Pennsylvania, Michigan and Wisconsin. But there is one big problem for Biden, his party. Conventional wisdom holds that Hillary Clinton’s candidacy was a personal failure. But that’s only part of it. It was also a cultural failure, as Daniel Henninger recently wrote in the Wall Street Journal. “Mrs Clinton’s ‘deplorables’ weren’t merely overlooked blue-collar families but in fact included millions of American of every class who saw themselves as alienated from a relentless progressive Democratic ethos of mandated political and cultural beliefs’. Joe Biden is accusing the President of violating ‘our core American values’ and tries to deflect attention from his own party’s core values. Henninger points to the rapid ascent of Alexandria Ocasio-Cortez, Democratic representative of New York City. She “represents something certain to rub millions the wrong way: an alliance of latte liberalism and radical left”, Henninger wrote in his same column. Anyhow, Trump is directing so much of his Twitter fire at Biden, that it seems to suggesting that he is the Democrat the president considers the biggest threat. And probably he is right.

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EU AFFAIRS

Looking to 2030 horizon: Europe and Greece by Antonis Zairis* and Athanasios Krystallis*

iewing at 2030, Europe-Greece differentiation stems from the difference between Europe's powerful agenda on the one hand and the irrational agenda (or the lack of it) of Greece on the other. A Europe with political, economic and technological skills, an equal partner for strong world-wide economies, with productive potential harmonized to the exploitation of resources and capabilities, to the upgrading of a highly trained human resource commensurate with the challenges of the future. A Europe based on bridging relations of respect and mutual interest, holding a leading position in a global free trade network on the basis of principles and deterrent rules to all forms of protectionism, a Europe that benefits from the globalization of international trade with multiplied output and added value for businesses, consumers and workers. In 2030, Europe being amiable to the world, with a strong voice on the world stage, will contribute to the comprehensive reform of the World Trade Organization and negotiate in the multilateral forums with arguments and direction on the re-

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form agenda at all social, political and economic levels of life. An active leader in the challenges that are presented, with an advantageous positioning to contribute to global agreements on big, hot issues: climate change, environmental protection and participation in the digital economy.Moreover, ensuring the integrity of the European Union's single market and the existence of a safety net with the United Kingdom should constitute a priority for a deep economic and political relationship in Europe 2030. However, the long-standing alliance with the US and Canada will probably cause barriers that may create turbulence in trade and factor mobility and investments. The threat to democracy, though, which stimulates public interest and mitigates adversity, should be priority on the 2030 agenda, while deeper partnerships with neighboring countries, depending on the uniqueness of each one of them, will be examples of political culture and rational political behavior. The relations with Russia will be developed within a logical frame of mutuality and respect for international rules, while Europeâ&#x20AC;&#x2122;s relationship with African countries will be delimited

EU AFFAIRS

in the context of beneficial economic relations and free trade between the two continents. The participation to and creation of regional and global supply chains and investments in a basic infrastructure will pave the way for the creation of an innovative environment and a balanced development process as well. Nowadays, it is a well-known fact that competitive conditions of equality and the expansion of areas of collaboration constitute conditions for sustainable growth and prosperity. The influxes of illegal immigration will also be controlled by an effective security system at the external borders of the European Union. Besides that, Europe in 2030 will also dominate the Cyberspace around the world through the necessary coordination about any threats in this area as well as receiving the proper measures for crime limitation. External threats and the security of state entities will be protected on the basis of agreed rules and a robust legislative framework that ensures functionality and efficiency within a Common Security and Defense Policy. All of these certainly are contrary to the unfavorable predictions for Europe of Br. Simms, a Cambridge Professor, who in a recent article in New Statesman argues that a new period is coming, similar to that of the early 16th century, an era of fragmentation and acute political confrontations within states, with a yet unknown end. As far as Greece is concerned, it is true that after almost a decade of introversion, contraction and stagnation, the economy remains hopeless and anemic. Under normal circumstances, the ten-year economic crisis should be followed by a growth period with GDP accelerating between 5% and 7%, albeit growth remains cling to 1.5% to 2%, while forecasts are around 2% -2.5% by 2025. Moreover, private consumption by the end of 2017 was considered to be the driving force for 2018, with a slightly positive sign of + 0.1%, and similar expectations by 2020, a fact that may have a positive effect for the next five (5) years on GDP growth and employment decline. On the other hand, household savings rate remained negative at -4% for 2018, with families’ small assets being exhausted fast and the accumulated private debt not to be among the lowest in the EU any longer, closing fast the national GDP level. High public debt and uncontrollable private debt growth also exacerbate the inability of households and the State to manage their debts, combined with governments’ ideologically myopic stubbornness to serve their economic development model and political agenda. The contribution of the “marketable” sectors of the economy, such as agriculture, manufacturing, commerce, tourism, logi-

stics, high-tech products, essentially remains theoretical or a wishful thinking, but serves communication objectives of the governments and provides a complementary but not essential theme to political speeches of party leaders and politicians of all kinds. Neither did the latter comprehend the significance of these marketable products nor the way they can help to boost the economy through added value creation and the ability to compete with similar products from abroad. Exports have contributed substantially to growth and will contribute further; however, they will do that not as an integral part of an organized strategy of Greek businesses extroversion, but rather as a “necessity” due to the collapse of the internal market. It is a conceivable truth that this approach has no depth and scope for development prospects. Exports are still lagging behind imports, resulting in the widening of the trade balance deficit. Under normal circumstances, part of the imports should be input to the domestic production process, which would lead to a beneficial development of consumption and would relieve the advocates of the view that consumption is a growth driver, as we would then talk about consumption of domestically-produced and not imported goods. In addition, the fragile and weak investment aim of private sector firms lowers the expectations of the investment-to-GDP ratio for the next ten (10) years. Overall, investments represent less than 15% of GDP, compared to 25% in the pre-crisis years. Depreciation is much larger, closing € 32bn compared to € 20bn of domestic investment, which means an investment deficit of of around € 12bn. Political leading forces face difficulty in convincing society for the new Productive Growth Model that will contribute to investments’ proliferation and create a sense of security and confidence in international investors and market forces. The country lacks an agenda for the next five (5) years and it is therefore extremely risky to form an agenda for 2030! And yet, we live in a country that suffers from timeless esotericism, is plagued by severe neo-liberalism and is constantly threatened by external enemies! However, defining the kind of neo-liberalism that finds its place in a country like Greece, where taxation and all kinds absorbs three-quarters (3/4) of the citizens' income and the increase in government wage spending in the last five (5) years is around 1%, remains a question that no one is concerned to provide a responsible answer to.

*Antonis Zairis is Deputy Vice-President of the Hellenic Retail Business Association and Assistant Professor , Neapolis University, Pafos, Cyprus. Athanasios

Krystallis is Associate Professor on

International Business, American College of Greece "Deree".

EUROPEAN BUSINESS REVIEW | 27

Jean-Claude Juncker named European Leader of the year by Alexandra Papaisidorou

he European Leadership Awards hosted it’s second edition as a part of the European Business Summit on 6 May 2019. The Business Leaders Dinner and Awards ceremony concluded the first day of the Summit held at the Egmont Palace in Brussels, Belgium.

The event was attended by European Commission President Jean-Claude Juncker and many other high-level decision makers, business leaders and key partners of EBS and Euronews. The European Leadership Awards was broadcast live by Euronews and translated into 10 languages.

This prestigious and reputable awards ceremony recognizes the outstanding achievement of the many men and women shaping Tomorrow’s Europe in the areas of business, politics, entrepreneurship and innovation.

The nominees and award winners are listed below:

The winner was selected by a jury of five experts across the areas of business, academia and media, including Business Europe President Pierre Gattaz, European Commission Director General and European Policy Strategy Centre Head Ann Mettler, Euronews editor-in-chief Gardenia Trezzini, Euractiv Executive Chairman Bart Becks and Former Director Corporate Citizenship IBM EMEA and CSR Europe Board Member Celia Moore.

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EUROPEAN ENTREPRENEUR OF THE YEAR: Awarded by Pierre Gattaz, President Business Europe • Winners: Vincent Zimmer and Markus Kessler, Juan David Mendieta, Founders of Kiron Open Higher Education • Fredrik Carling, CEO of Hövding • Oliver Dlouhý – Founder of Kiwi.com ‘The company has proven that technology and traditional entrepreneurship can be used to solve social problems but

EU AFFAIRS

also that innovation that comes from the social entrepreneurship can be used in the future as a way to find solutions for the education of tomorrow.’ - Juan David Mendieta, Kiron EUROPEAN INNOVATOR OF THE YEAR: Awarded by Dr. S. Jaishankar, President Global Corporate Affairs for Tata Sons • Winner: Yvan Bourgnon, founder and CEO of The Sea Cleaners • Friso Stoffer and Daniel Weststeijn, Storro • Richard White, AB in Bev’s Simmer and Strip Technology, the Vice-President for Procurement and Sustainability at AB InBev Europe EUROPEAN CORPORATE SOCIAL INITIATIVE OF THE YEAR: (FORMERLY EUROPEAN CEO OF THE YEAR) Awarded by Anne Mettler, Head of EPSC • Winner: Saori Dubourg, Member of the Board of Executive Directors BASF • Jean-Pierre Clamadieu, Chairman of ENGIE SA. and Chief

Executive Officer & Director at Solvay SA • Martin Villig, Co-founder of Bolt (formerly known as Taxify) EUROPEAN PERSONALITY OF THE YEAR: Awarded by Celia Moore, Board Member CSR Europe • Winner: Zuzana Čaputová – President-elect of Slovakia (due to take office June 15,2019) • Greta Thunberg – Swedish Political Activist working to stop global warming and climate change • Lilian Thuram – a French retired professional footballer, UNCIEF Ambassador and activist fighting against racism EUROPEAN LEADER OF THE YEAR: Awarded by Jean de Gheldere, Managing Partner of the EBS and Michael Peters, CEO of Euronews • Winner: Jean-Claude Juncker, President of the European Commission • Michel Barnier, Chief Negotiator for the European Union • Cecilia Malmström, EU Commissioner for Trade As Jean-Claude Juncker accepted the award he maintained that he was, “taking this award in the name of the commission, our performance is as a collective.” EUROPEAN LEADERSHIP AWARDS The European Leadership Awards is a prestigious and reputable awards ceremony recognizes outstanding achievements in business, politics, entrepreneurship and innovation. Begun in 2018 as a joint venture by Euronews and the European Business Summit, each year winners are chosen by a jury of experts from business, academia and media. Award categories include European Leader of the Year, European Personality of the Year, European Innovator of the Year, European Corporate Social Initiative of the Year, and the European Entrepreneur of the Year. EUROPEAN BUSINESS SUMMIT European Business Summit is a well-known organization which creates and supports networking and debating events in Brussels, including our biggest and most prestigious event - the annual European Business Summit. Our principal goal is to bring business and politics together and stimulate thinking on the most challenging European issues. Through its events and publications, EBS delivers an inspired and informed contribution to policy-making in Europe. EBS is supported by the FEB (Federation of Enterprises in Belgium) and BUSINESSEUROPE. The EBS is also proud to acknowledge the high patronage of His Majesty the King of the Belgians.

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EU AFFAIRS

Spain extradites Taiwanese nationals to China contrary to EU concerns about human rights situation. by N. Peter Kramer

t a time when people in Hong Kong are showing very strong opposition to an extradition bill that would allow Hong Kong citizens and even foreigners to be sentenced under China’s impenetrable judicial system, Spain extradites 94 Taiwan nationals to China. In April, the EU raised the issue of China’s inhuman treatment of detainees during its annual human rights dialogue with China. Spain’s decision to extradite 94 Taiwan nationals to China is clearly at odds with the EU’s view of the deteriorating human rights situation in China. Bitter is also that Spain’s extradition comes in the same period as the 30th anniversary of China’s Tiananmen Square massacre, a reminder of the devastation that paranoid authoritarianism can inflict on its people. The story begins in December 2016, when a huge telecom scam targeting Chinese citizens was unveiled by Spanish authorities and 269 suspects were arrested, among them 219 Taiwanese nationals. In May 2018, Spain extradited two of these to face trial: not in their homecountry Taiwan, but in China. The UN High Commissioner for Human Rights immediately issued a statement urging the Spanish government to halt the extradition process, with UN human rights experts pointing out Spain’s international commitment to avoid extraditions to any State where there is a well-founded like-

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lihood of torture and the risk of severe sanctions including capital punishment. Moreover, they said, some of the individuals to be extradited may have been victims of human trafficking: several victims stated they had been taken to Spain on the understanding that they would work as tour guides, before being forced to work making fraudulent calls. These claims, said the experts, did not appear to have been adequately investigated by the Spanish authorities, nor considered prior to the extradition decision. Despite this plea, on June 6, Spanish authorities extradited a further 94 Taiwan nationals to China. The Chinese media used the opportunity to publish that Spain, an EU member-state, clearly has confidence in the Chinese judicial system. But remarkable is that Spain does seem to have misgivings about the Chinese justice system, as suggested by Madrid’s statement of concern over two Canadian detainees in China, expressing hope that they would, “receive fair, transparent and impartial treatment in their respective legal processes.” Interestingly, recently we saw the New Zealand Court of Appeals quash the extradition of the Korean-born Kyung Yup Kim on humanitarian grounds, suggesting very real concerns over China’s judicial system and an alternative way of dealing with extradition requests.

EU AFFAIRS

EUROPEAN BUSINESS REVIEW | 31

EU AFFAIRS

It’s time for Africa There’s more to Africa than alarming headlines. And there’s more to EuropeAfrica relations than the EU’s obsessive focus on African migration by Shada Islam

here’s more to Africa than alarming headlines. And there’s more to Europe-Africa relations than the EU’s obsessive focus on African migration.

New members of the European Parliament and the women and men eyeing top jobs at the European Commission and the EU Council have an opportunity to reset Europe’s out-dated views on Africa. They must seize the moment. Urgent action to reshape policies which have weighed down EU-Africa relations for far too long must be a top priority in the EU’s new ‘strategic agenda’. That means more than a mere re-tweaking of current EU-Africa trade and aid programmes. It requires a real effort to walk the talk on making Africa a strategic partner.

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Above all, it demands revisiting the perception of Africa as a continent of mass exodus and migration. True, Africa has problems. At the moment, there is political turmoil in Sudan, an outbreak of Ebola in the Democratic Republic of Congo which has spread to neighbouring Uganda and warnings of rising food insecurity in the Lake Chad Basin, Central African Republic, Congo, Somalia, and South Sudan. These and other crises must be dealt with. But European policymakers must be wise enough – and bold enough - to look beyond the emergencies and headlines. Here’s a quick primer for those seeking to replace current European group think of Africa as a continent of violence

EU AFFAIRS

and despair by a more positive vision of a continent in transformation. - Stop kowtowing to the Far Right fanatics – including those now sitting in the European Parliament - about the dangers of African migration. Ditch references to the need to “protect, defend and safeguard” Europeans in the new EU ‘strategic agenda’. Instead focus on crafting an intelligent policy which focuses on managing migration, including from Africa. - Don’t look at Africa only as a land of current and future ‘migration crisis’. Africans represent about 14% (36.3mn) of the world’s migrant population (compared to 41% from Asia and 23.7% from Europe), according to a recent study by the Mo Ibrahim Foundation. And while about a quarter travel to Europe, many more move within Africa. Also, about a half of African migrants are women, belying the perception that African migrations are male-dominated. - Keep your eyes and ears open for trade and investment opportunities in Africa – and urge European businesses to do so as well. GDP growth for the continent is forecast to accelerate to 4% this year, up from an estimated 3.5% in 2018, making it the fastest-growing region in the world after Asia, according to the African Development Bank. And that’s despite Nigeria and South Africa, which make up almost half of the continent’s GDP, “pulling down Africa’s average growth,” according to the AfDB’s latest economic outlook report. - Pay attention to Africa’s ambitious plans for a continent-wide tariff-free area. Having come into force in May this year, the African Continental Free Trade Agreement (AfCTA) is expected to boost intra-African trade by 52% in a few years. Already, Foreign Direct Investment (FDI) flows into Africa are on the rise as investors rush to put their money in what could become the world’s largest free trade area. European business leaders are eager to become part of Africa’s new economic adventure. Policymakers should encourage them, not throw cold water on their plans. - Move beyond the traditional EU interaction with governments to a wider conversation with a variety of stakeholders including local and regional authorities, business leaders, civil society, female groups, young professionals and students. Broadening the EU-Africa conversation will ensure that both sides get a better understanding of each other. Europeans need to comprehend the different ways in which Africa is changing and transforming in order to fashion new policies which are based on Africa’s reality, not an untrue nightmare vision. - Work together to provide Africa’s young people with skills and education suited to the 21st century. Almost 60% of

Africa’s youth population is under the age of 25, making Africa the world’s youngest continent. The African Union’s ‘Youth Charter’ claims that youth is Africa’s biggest resource. But making full use of that resource means upping investments in traditional education but also zeroing in on skills needed to run digitalised economies, gearing up for the Fourth Industrial Revolution and tackling challenges posed by artificial intelligence. Entrepreneurship skills must be given priority. - Meet and listen to the many young (and old) Africans who are engaged in a range of low and high-tech schemes and start-ups which are changing Africa. The silent tech revolution underway in Africa is already reshaping the continent by generating new market opportunities, improving labour productivity and enhancing Africa’s comparative advantage in global production networks. Digital connectivity is also transforming access to health and education and shifting relations between citizens and the state. - Say no to competition and be prepared to work more closely with other countries and organisations working in Africa. Europeans have so far shied away from engaging in a constructive dialogue with China, Japan and others on connectivity and other projects in Africa. It’s now time to put egos aside so that there is less damaging competition and more constructive cooperation to help Africa meet its own development goals. - Work with Africans to promote gender equality and encourage women’s empowerment. Women hold close to one-third of parliamentary seats in eleven African countries, with Rwanda often spotlighted as the poster child for gender equality. South African President Cyril Ramaphosa has won acclaim for setting up a gender and politically balanced national government of 14 men and 14 women. But women are currently greatly underrepresented in peace and security efforts although research shows that involvement of women in peace processes makes them 64% less likely to fail and that peace negotiations that involve women are 35% more likely to last at least 15 years. It’s not going to be easy for EU policymakers to ditch the perception of Africa as a junior partner. But one-dimensional views of the continent do no justice to either Europe or Africa. Europe can only play a role in Africa’s fascinating transformation if it changes gear, stops playing tutor and starts behaving like a true partner. It really is time for Africa. *First published in friendsofeurope.org

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Youth should be a mainstream priority for the EU Europe’s future lies in young peoples’ hands. And if the EU wants to see economic growth, leaders should better put youth and education at the core of the bloc’s policymaking, JA Europe CEO Caroline Jenner says in this interview. by Beatriz Rios*

oung people and their employability, their job creation potential and entrepreneurship skills have to remain a top priority across all other priorities, Jenner said.

Education and young people “must be on the table” because “that’s where all the jobs come from,” JA Europe CEO said. Jenner praised the European Commission for support-

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ing start-ups and promoting entrepreneurial education, through programs such as Horizon 2020. However, she feels there is a need to merge all policies so that they can support each other. At EU ministerial meetings, “the competitiveness meeting is more important than the education meeting, or they don’t talk to each other about the synergies between them,” Jenner explained. “That tells the story.”

EU AFFAIRS

“We have to see education appear in digital, we have to see education appear in research. And I mean, in this case, entrepreneurial education, but it has to stay alive across all of those budget lines,” JA Europe CEO insisted. But synergies on education should go beyond policymaking and cultivate exchanges between schools and the business community, in order to prepare young people for the world of work. This an area where Europe has progressed notably in the past few years. “The school community is saying that they want to work with businesses,” the Jenner said. “We’re now into mainstreaming this kind of collaboration.” LEARNING BY DOING JA Europe has been working to prepare the young generation for the world of work for a hundred years. Entrepreneurial education is at the core of their work and they praise the EU’s contribution in this area. In a fast-changing world where the skills required by the job market cannot be foreseen, entrepreneurial education provides a timeless set of abilities, according to Caroline Jenner.

ENTREPRENEURIAL EDUCATION IN EUROPE EU heads of states and government met for a European Council summit last week. Although they did not find a compromise on who will lead the EU in the next five years, leaders did approve a strategic agenda that sets the priorities for the EU during the next five-year term. “We must step up investment in people’s skills and education, do more to foster entrepreneurship and innovation and increase research efforts, in particular by addressing the fragmentation of European research, development and innovation,” the strategic agenda stated. Caroline Jenner highlighted the difference between the EU’s newcomer countries where there is a very high penetration of entrepreneurial education, and older member states like Germany, France or Spain which struggle to introduce change. Nordic countries, for instance, understand investment in entrepreneurial education as an opportunity for the younger generation, she said.

“Young people and their employability, their job creation potential and entrepreneurship skills have to remain a top priority across all other priorities”

“You need people who are adaptable, who can think quickly, who can adjust to all of those advances in technology and digital, and who can create value out of that,” Jenner explained.

According to Jenner, education should be mainstreamed in all EU-funded programmes, – from Cohesion Policy to Horizon 2020 – when EU leaders agree on the bloc’s next long-term budget in the coming months. “If education could be across the board and kept alive, then that would be my wish,” she said.

“Yes, you need some specialisation, people will need to know a little bit more about this or that. But the skills that are really going to drive society and economy forward is our ability to navigate through the change and not be scared of it,” she pointed out. For JA Europe, entrepreneurial education goes beyond teaching students how to build a company. “It means being opportunistic, it means being less risk-averse. It means being a problem solver. It means being a collaborator, a team player. It means all of those things that are relevant no matter what career choice,” Jenner explained. “When you fill the school up with this kind of experience, you end up with teachers relating to kids differently in schools,” the CEO argued. “You learn faster and you learn a lot” through learning by doing, Jenner stressed.

*Beatriz Rios *CEO of JA Europe **First published at Euractiv.com

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EDUCATION

Fostering Tomorrow’s Agile SelfLearners Students in Greece and their parents tend to ask the same questions when they investigate options for higher education. Among the most frequent are those having to do with the courses they’ll be taking in the program by Leonidas Phoebus Koskos*

urprisingly, few ask how they will learn. I would argue, however, that this is an equally important question—and one particularly relevant in American higher education. Our graduates will enter a labor market that is rapidly changing under the disruptive force of technological innovation. The skills they need to thrive in this world are not so much the ones they have in their field but those that enable them to adapt to these changes. The focus on what you learn is understandable. It’s due in part to the traditional view of higher education as something that prepares you straight for a career in a specific sector in which you’ll work for years to come, if not the rest of your life. Certainly, education does involve mastering the essential body of knowledge and skills in the student’s field of interest. Students doing a Business degree, for example, will need to know how to put together a marketing plan, analyse financial statements and construct budgets.

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I believe, however, that there are several reasons why students should not base their decision about where to study too narrowly on what they’ll learn and forget about how they’ll learn. The most important skills companies are looking are the ones that cut across disciplines. Naturally, the specific field in which the degree is earned remains important on the job market. But most if not all the people competing for the jobs our graduates apply for also have a degree. What will make them stand out? A recent survey of roughly 1,000 business executives and hiring managers for the Association of American Colleges and Universities (AACU) provides an answer. The report, entitled “Fulfilling the American Dream: Liberal Education and the Future of Work”, found considerable gaps between the skills these executives were hoping to find and the ones their

EDUCATION

job applicants had. The high-priority skills they identified included competencies such as critical thinking, oral and written communications, ethical judgment, and the ability to work independently but also in teams. Research by the consulting firm PwC, involving almost 1,400 interviews with CEOs around the world, confirm this finding. In their summary presentation, entitled “The talent challenge: Harnessing the power of human skills in the machine age”, PwC reports that more than three quarters of the executives they interviewed were concerned about their firm’s ability to recruit people with certain key skills. The “skills battleground” they identified—the ones executives considered very important but the most difficult to find—were not sector-specific but skills such as problem-solving, creativity, adaptability and leadership. The career students imagine for themselves may not even exist in 10 years’ time. Consider some of the jobs in demand today. Drone operators, mobile app developers, social media managers, search engine optimization analysts. None of them even existed 10 years ago. At the same time, employment in work roles such as accountants, financial analysts, customer service representatives is stagnant or has already started to decline. Today’s world is one of unprecedented change, driven by massive advances in technology and communications. The World Economic Forum’s (WEF) “Future of Jobs Report 2018”, a survey of Chief Human Resource Officers in firms in 20 developed and emerging economies, representing 15 million workers in a broad spectrum of sectors, identified 4 developments that will drive business growth in the coming years: high-speed mobile internet, artificial intelligence, big data analytics and cloud computing. These technologies will certainly disrupt the labor market. The WEF estimates that 20% of current work roles are likely to become obsolete and be displaced by 2022. The good news is that technological changes will also create new work roles - an estimated 27% more during the same period. Demand is expected to grow for professionals in tech fields such big data and machine learning but also for digital marketing and strategy specialists, as well as people and culture specialists. As the WEF report makes clear, even in jobs that are not expected to decline, the skills needed to perform most of them will have changed significantly. It estimates that almost half of the required workforce skills will have shifted by 2022. The skills expected to be trending in 2022 range from critical thinking and problem-solving to ideation, innovation and creativity. The companies estimate that they’ll need to significantly reskill and upskill more than half their workforce, with about 20% needing six months of retraining or longer. How you learn is just as important as, or perhaps more important than, what you learn.

The skills in demand now and expected to be trending in 2022 cannot be acquired by attending lectures. They can only be gained through active learning that forces students to question their assumptions and move out of their comfort zone. With assignments that require them to apply theoretical knowledge to real-life problems and with research projects where they analyse material from a range of sources and synthesise their findings in a tightly argued report. With a system of teaching and learning that fosters students’ ability to work on independent projects, identify what they don’t know and develop strategies to learn what they need to know. In the AACU survey of CEOs and hiring managers, most respondents noted that they would be more likely to hire someone whose college experience included something more than just courses in the major. The most frequently mentioned advantage was an internship or apprenticeship with a company or organization. Roughly 60% said they would be much more likely to hire a graduate with this. But “multiple courses requiring significant writing assignments” was also important, as were collaborative research projects, a senior capstone or thesis project or service learning project with a community organization. As the WEF Report concludes, the challenge for society is to ensure that we have “a motivated and agile workforce, equipped with futureproof skills to take advantage of new opportunities through continuous retraining and upskilling.” These skills are precisely the ones cultivated by an approach to the “how” of learning that I consider a hallmark of American higher education, including that offered by Hellenic American University/Hellenic American College. And the reason why prospective students and their parents, when investigating options for higher education, should make sure they ask the “how” question as well as the “what”.

*Leonidas Phoebus Koskos *Esq., President Hellenic American University/ Hellenic American College ** First published in Business Partners, the magazine of the AmericanHellenic Chamber of Commerce

EUROPEAN BUSINESS REVIEW | 37

September 2008: the global banking system collapsed – Today: the patient is in remission but not cured A book-review: ‘Crashed: How a Decade of Financial Crises Changed the World’ by Adam Tooze by N. Peter Kramer

character in one of Ernest Hemmingway’s short stories said, when asked how he went bankrupt, ‘two ways. Gradually and then suddenly’. That is what happened in 2007/2008. There was already an extended build up with cracks in the system emerging during 2007. Then there was the sudden shock, when Lehman Brothers collapsed in September 2008 and the global banking system teetered on the edge. There are already many sometimes impressive analyses of the turmoil, such as Andrew Ross Sorkin’s ‘Too

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Big to Fail’ and Michael Lewis’s ‘The Big Short’, which was made into an Oscar-winning film. ‘Inside Job’, a documentary, was a scathing attack on the culpability of the finance industry for the crisis. And not to forget the three-part play about the history of Lehmann. Adam Tooze, a historian, is aiming to be less entertaining than authoritative: he takes on the financial and economic history of the last decade in a monumental tome of nearly 700 pages; it as much reportage as historical analysis. Four big themes emerge. The first was

BOOK REVIEW

the immediate post-crisis response in which the banks were rescued and both the monetary and fiscal taps were loosened. The second was the euro-zone crisis, which hit Greece he hardest. The third was he shift in the developed world after 2010 to a more austere fiscal policy. The fourth was the rise of populist politics. Tooze sides with most economists in taking he view that the immediate post-crisis response was necessary. But unfortunate in hat executives in the banking industry paid too low a price for their folly; that Europe was slow and narrow-minded in dealing with peripheral countries like Greece and Ireland; and that the switch to austerity was a mistake. Taken together, the backlash against bankers, frustration with EU governments and the impact of austerity led to the rise of populism, the election of Trump and the Brexit vote. A big part of the problem, as the author points out, was a failure of political leadership. European politicians initially dismissed the crisis as an American problem, generated by Wall Street, even though Europe’s banks also had balance sheets stuffed with dodgy loans. Meanwhile in America, the Bush administration got its crisis measures through Congress with support from Democrats. But it changed from the moment Barack Obama took office, another view on the measures entered.

‘Crashed: How a Decade of Financial Crises Changed the World’. By Adam Tooze. Published by Viking (Penguin Random House Llc); 720 pages.

According to Tooze, perhaps the most dangerous failure, though, lies in the unwillingness to deal with problems which lie at the heart of the system and persist today. The finance sector, which caused the crisis, looks remarkably unaltered. Banks may now hold more capital and their bonuses are now tied to longer performance, but these bonuses are still very high; the average payout on Wall Street in 2017 was $184.220, just shy of the 2006 record from before the crisis. Scandals over banks’ bad behaviour, in areas such as price-fixing, money laundering and mis-selling continue to come to light. As a dark conclusion, the author used a deadly metaphor: ‘Central banks brought a global economic heart attack to an end by performing emergency surgery. But the patient has gone back to his old habits of smoking, heavy drinking and gorging on fatty foods. He may be looking healthy now. But the next attack could be even more severe and the medical techniques that worked a decade ago may not be successful a second time’. EUROPEAN BUSINESS REVIEW | 39

SUSTAINABILITY

A question of legacy: EU must step up and lead on climate Every day our people, the people of island states, are confronted with the harsh realities of climate change. We are reaching a critical juncture in the fight against this change and the European Union should help us by raising its own climate ambition, write Frank Bainimarama and Hilda Heine. by Frank Bainimarama and Hilda Heine*

t is not an exaggeration when seasoned politicians, scientists and academics say this is the biggest threat to our planet and existence. Yet the collective speed at which we confront these challenges head-on is of concern.

Key opportunities cannot be missed, and this week, the European Union has the opportunity to do its part by committing to a net zero emissions target of 2050 and raising their mitigation target by 2020 to be in line with that goal.

We are at a critical juncture in this fight, at a point where we know we can still act globally to change the course of human-made climate change or fail to act and face the reverberations of climate, environmental and biodiversity crises for generations to come.

Millions of young people have been demanding a response to the climate-change crisis that matches the scale of the emergency.

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As small island states, we have been doing our part, and

SUSTAINABILITY

for this momentum not to be lost we need major economies to come in behind us and do the same. Since the Paris Agreement was achieved in 2015, geopolitics has shifted, elections have changed those in the driving seat, but most importantly we know more now than we did then. In October last year, the IPCC Special Report on 1.5 Degrees was released, spelling out the sobering science that we have far less time available than we thought to turn the tide. The dramatic, far-reaching, and possibly irreversible consequences of surpassing 1.5 degrees of warming are less than 12 years away. There are many European leaders who understand this and who also recognise that EU action would have a snowball effect on other major economies. Momentum on this front is growing globally. The United Kingdom, France, Japan and New Zealand have proposed legislation for carbon neutrality by 2050. Germany and Chile are discussing it. Costa Rica, Denmark and Portugal have set policy positions. Finland is targeting 2035, Iceland 2040, and Norway and Sweden have enshrined their targets – 2030 and 2045 respectively – in law. However, the fact remains that the Marshall Islands and Fiji are the only two countries to have officially submitted long-term plans to the UN for achieving net-zero emissions by 2050. Setting a date is the critical first step in developing the strategy of how to get to net-zero. It gives all the relevant stakeholders, government departments, businesses and citizens the signal they need to start achieving that goal.

billion to adapt our economy to the impacts of climate change over the next ten years, which has informed our National Adaptation Plan. This is nearly equivalent to our entire GDP for a year and if major economies do not start to mitigate emissions fast it will end up costing us, as well as them, a lot more in the long run. Vulnerable countries have laid the groundwork, and we need to hand the baton on to the EU; we cannot continue to carry the burden on our own. Climate leadership comes down to strengthened climate targets plus long-term plans for carbon neutrality by 2050. Those able to announce these things at the UNSG’s Climate Summit in September will be at the forefront of climate leadership. Momentum is growing, but we’re still dangerously off track. The commitments the world has made so far under the Paris Agreement to reduce the emissions are woefully inadequate. We are almost out of time. If we do not increase these commitments by 2020, the potential impacts will be devastating, and they threaten the lives, homes and livelihoods of people everywhere, not just in countries like ours. The EU can take a massive step in the right direction by committing to a strengthened target by 2020 and carbon neutrality by 2050. Doing so will begin building the critical mass we need to chart a different course – to a secure, sustainable and prosperous future. Don’t let us down.

If two developing countries can develop robust emissions-reduction targets that truly drive us toward the goals we agreed to in Paris, then other nations can, too. In the Marshall Islands, we are particularly looking into the effect climate change will have on Atoll Nations like our own. We face the threat of losing the ability to viably live on our islands due to sea-level rise. And unlike other vulnerable nations, we will have nowhere else to go, no higher ground. We don’t have the luxury of waiting to see whether others will step up or not. We are developing our National Adaptation Plan, or as it is becoming colloquially know, our National Survival Plan.

*Frank Bainimarama and Hilda Heine * Frank Bainimarama is the prime minister of Fiji. Hilda Heine is the president of the Republic of the Marshall Islands.

In Fiji, we conducted a climate vulnerability assessment with the World Bank that told us it will take USD$4.5

** First published at Euractiv.com

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SUSTAINABILITY

5 ways you can personally fight the climate crisis As we watch the youth take to the streets over climate change, and read daily news reports on sea-level rise, glacier melt rates and the alarming amount of carbon in the atmosphere, many are left with a desire to act. by Jaime Nack*

et, the gravity of the climate crisis can seem overwhelming – especially for those who do not work in the environmental arena. Without a clear roadmap of simple steps to take, inertia sets in. After working on climate action projects for nearly two decades with diverse communities around the globe, I’ve seen this inertia first-hand. The universal question seems to be: “The climate crisis is here, but what can I do?”. There are many ways to take action. Whether you are a CEO, a student or a professional athlete, your voice matters. We all have a unique reach and can create a ripple effect across our spheres of influence. We all have our personal sphere (social and familial relationships), our community sphere (home city and local organisations), our workplace sphere (job environment or campus environment for students), our industry sphere (professional associations) and our global sphere (social media reach and global affiliations).

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I’ve outlined five steps that one can take to activate these networks and play a role in battling the greatest challenge of our time. 1) Start the discussion Research shows that the average individual makes about 35,000 decisions every day. Imagine if you placed a climate action lens over even a small percentage of these choices? What to eat? Where to shop? What to buy? Where to work? What candidate to vote for? Your choices matter. And the people you interact with on a daily basis (in real life and in your online presence) are watching your actions. When you consider the climate crisis in your decision-making, others notice. Discussion begins, and the effect of your decision is multiplied. The reason that brands recruit influencers to wear their clothes, drive their cars and visit their hotels is because they know that people are more

SUSTAINABILITY

likely to follow the preferences of those they relate to or aspire to emulate. We all have peer groups – those who travel within the same circles. With each climate-friendly decision you make, you start a discussion among these groups about why you chose to drive an electric vehicle, why you implemented a carbon-neutrality commitment at your company, or why you decided to buy stocks in a clean tech company. 2) Tap into your relationship capital Is there a climate issue that is particularly significant to you? Someone within your network may have the influence or power to effect change. Just as your network watches your everyday decisions, they listen when you voice a concern – and you may be surprised by what happens next. We often are not even aware of the value of the web of relationships that we keep. The concept of “six degrees of separation” can also be applied to “six degrees of impact”. If you recognise an environmental challenge but are not in a position of power to enact the necessary change, you may be connected to a decision-maker who is. Speak up and inspire action in others – you do not need to be the leader of a nation or a celebrity to influence the masses. 3) Get to know your local, regional, national and global policy landscape The policy landscape can vary greatly from one region to the next. The more you learn about existing policies (those that help and those that damage the environment), the more you will realise how regulations and legislation can play a critical role in supporting the adoption of clean technology. As more of the global populace moves into cities, the policies that guide the creation of these communities must give back more than is taken in terms of energy, waste, water, soil health and other key impact areas. 4) Amplify the voices of others With the Paris Agreement, the world witnessed a coming together and a unification of leaders from nations of all sizes. This type of public commitment encouraged non-state actors to step up their ambitions and make similar pledges. For this reason, many would argue that Paris was a tipping point. It signaled that countries were taking responsibility for their emissions, and that others could – and should – do the same. But, the story did not end in Paris. When Greta Thunberg caught the attention of the cameras at Davos with her cry for adults to “wake up and act like the house is burning”, people took to the streets. Greta’s movement allowed new voices to come into the picture, and she created agency among those in power positions. It is important to look for the “Greta’s” within your community, and to amplify their voices. Look also, if it applies, to your community’s indigenous people – those who have amassed so much knowledge

from living closely with the land, and who are now on the frontlines of experiencing its rapid degradation. With an amplified platform, their expertise can create truly transformative solutions. 5) Recognise the journey Yes, we need to move quickly. But even more important is that we move together … in the same direction. No matter how far along each of us are on our journeys, we must lift one another up as we pursue a unified goal. Some may have been in the environmental movement for decades while others may have been inspired by a film they saw last week. Yet every step counts. We must support the positive efforts of others – whether big or small – as we cannot afford for people to feel hesitant to act because they do not have the same level of knowledge about climate science as others. So, what are you waiting for? To fight the climate crisis, we need as many people as possible working in unison towards one common goal: a healthy planet.

*Jaime Nack President, Three Squares Inc.

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MANAGEMENT

Health Consequences of Overwork Death by overwork affects not only the families of the deceased, but also the industries they worked in and the national economy. by César Chelala*

orking for long periods under extreme stressful work conditions can lead to sudden death. “Burn out” is now described as an occupational phenomenon, resulting from chronic workplace stress that has not been successfully managed. This is a phenomenon that in its most extreme manifestation is described by the Japanese as karõshi, literally translated as “death from overwork,” or occupational sudden death, mainly from a heart attack and stroke due to stress. Karõshi has been more widely studied in Japan, where

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the first case of this phenomenon was reported in 1969. In 1987, as people’s concerns about karõshi increased, the Japanese Ministry of Labor began to publish statistics on the problem. According to government estimates, 200 people die from overwork annually because of the long hours spent at the workplace. Death by overwork lawsuits have been on the rise in Japan, prompted by the deceased’s relatives demanding compensation payments. In Japan, if karõshi is considered a cause of death, surviving family members may receive compensation from the government and up to

MANAGEMENT

$1 million from the responsible company in damages. EXTENSION OF THE PHENOMENON This phenomenon is not limited to Japan. Other Asian nations such as China, South Korea and Bangladesh have reported similar incidents. In China, where the phenomenon is called guolaosi, it was estimated in 2010 that 600,000 people had died this way. Increasingly, workers in more than 126,000 Chinese factories are organizing and demanding better work conditions. In South Korea, where the work ethic is Confucian-inspired, and work usually involves six-day workweeks with long hours, the phenomenon is called gwarosa. In the United States, workers in some areas such as banking and finance work extremely long hours, despite its obvious negative consequence. A 2018 survey by The Physicians Foundation states that 80% of physicians across all specialties report being at full capacity or overextended and 78% report experiencing feelings of burnout. CAUSES AND CONSEQUENCES The causes and consequences of karoshi have been studied in particular by Japan’s National Defense Council for Victims of Karoshi, established in 1988. Japan has much longer working hours than any other developed country. The country’s grueling work schedule has been suggested as one of the main causes of karoshi. It is not, however, the only cause. A growing body of evidence indicates that workers in high-demand situations who have little control of their work and low social support are at increased risk of developing and dying of cardiovascular disease, including myocardial infarction and stroke. Stressful work conditions are a critical component of this phenomenon. In this regard, it has been found that workers exposed to long overtime periods show markedly elevated levels of stress hormones. The consequences of long working hours and stressful situations at work are not limited to men. Several studies have shown strong links between women with stressful jobs and cardiovascular disease. In the Women’s Health Study (WHS) - a landmark study involving 17,000 female health professionals - a group of Harvard researchers found that women whose work

is highly stressful have a 40% increased risk of heart disease compared with their less stressed colleagues. The results of the WHS were confirmed both in Denmark and in China. A large 15-year study conducted in Denmark found that the greater the work pressure, the higher the risk for heart disease among women under the age of 52. In Beijing, a study among white-collar workers found that job strain was associated in women with increased thickness of the carotid artery wall. MOVING FORWARD Death by overwork affects not only the families themselves who may lose the main breadwinner in the family but also the industries as a result of lawsuits and lost productivity. That, in turn, affects the national economy. It is therefore urgent to devise ways to curb this problem. It is important for workers to get regular exercise, which will reduce anxiety and depression and improve sleep. Whenever possible, they should practice relaxation techniques and, if they feel overwhelmed by their personal situation, seek help from a mental health professional. At the industrial level, organizations should provide the workers with the best conditions for their work, a policy that may look expensive but that will be of better economic value in the long run. Business executives should realize that it is counterproductive for them to place excessive demands on their workers. At the government level, legislation should be passed to increase job security and skill training as well as employee’s participation in issues that directly affect them such as transfers and promotions. Workers who have better control of their jobs will increase productivity and suffer less from the stressful component of their jobs. In the long run, prevention is the more humane and cheapest alternative to a very serious social and public health problem.

*César Chelala Chelala is a global health consultant and contributing editor for The Globalist. [New York, United States]

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MANAGEMENT

Why Managers – Now More Than Ever – Need to Understand Corporate Finance Sound business strategy isn’t about shareholders vs. stakeholders, but about holistic vs. narrow value creation. by Gabriel Hawawini*

ith the recent re-intensification of the shareholder vs. stakeholder debate, the concept of value creation has become more ambiguous. On whose behalf should organisations generate value? For owners, employees, upstream and downstream partners, or local communities immediately affected by organisational activities? Both shareholders and stakeholders have solid claims. Financial managers are understandably fixated on share price as an index of market value. A stubbornly slumping share price means the loss of real wealth for the firm’s owners, and less ability to attract capital to fund the firm’s activities. Without some form of equity capital, a company cannot survive.

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At the same time, the increasingly urgent global war for talent raises the stakes for companies that pursue narrow financial objectives at the expense of employees. Further, customers and civil society groups have a louder voice than in the past, thanks to social media and other online tools enabling the far-flung masses to mobilise quickly and effectively. Still, pleasing external stakeholders is no guarantee of success. Consider the Saturn Corporation, a subsidiary of General Motors founded in 1985 with the aim of creating “a different kind of car” that could keep up with nimble overseas competitors. Throughout the 1990s, Saturn was consistently top-rated in customer satisfaction. Employ-

MANAGEMENT

ees were so happy with their working conditions that they rejected the standard labour contract from their international union. To top it off, Saturns were flying off the lot; in 1995, there were just 400 unsold from the previous year. But all that approbation could not make up for the US$6 billion GM spent to develop, manufacture and market the Saturn. The brand never really had a chance, due to poor financial management from day one. It is ironic, therefore, that so much ink has been spilled on a putative shareholder/stakeholder divide at the moment when this divide has never been more tenuous. Indeed, evidence shows that firms that please customers and employees also generate value for their owners. Across all industries, the companies atop Fortune’s Most Admired Companies ranking for 2019 – criteria include innovativeness, quality of management, social responsibility and ability to attract talent – significantly outperformed S&P 500 averages over the preceding ten years. The least-admired companies on Fortune’s list produced negative returns for their owners during the same ten-year period. What does all this mean? Sound financial management looks beyond short-term share price increases and cost control. It entails a holistic approach encompassing all relevant stakeholders. And given today’s enormous business challenges – environmental issues, equality and diversity concerns, and growing dissatisfaction with capitalism are just a few – I would argue that business executives need to understand corporate finance now more than ever. BASICS OF CORPORATE FINANCE Giving managers a basic grounding in corporate finance is the purpose of the textbook I co-wrote with the late Claude Viallet, Finance for Executives: Managing for Value Creation, now in its sixth edition. As we describe in the book, making optimal financial decisions for your firm can be a complicated art, but the basic principle is as simple as it gets. Ultimately, it concerns just two numbers: the cost of capital (i.e. what it costs to finance your firm’s investments) and the return on those investments. The extent to which the latter number exceeds the former is the key to value creation in the form of a higher firm value. If, however, return on investment is consistently lower than the cost of capital (as happened with Saturn), value is destroyed and the firm value falls. The concept is completely straightforward, yet you would be surprised at how many clever, experienced managers take it as a revelation when it’s explained to them. Where the complexity comes in, of course, is that cost of capital is not always easy to calculate. It consists of the average of two components: the cost of debt capital (borrowed money) and the cost of equity capital (money invested by owners in the firm). The former is not usually

difficult to estimate. If your firm has taken on debt, the interest rate of the loan(s) basically equates your firm’s cost of debt. Determining the cost of equity is the challenging part. It is the return – either dividends or higher share price – that shareholders demand in exchange for the investments they have put into the company. It is a risk-based calculation because the more risk investors are exposed to, the greater the return on investment they will expect. As such, any shift in business conditions (within or outside the firm) that raises or lowers risk will also affect the cost of equity, which requires that this cost be continually revisited. Managers who are familiar with the various models of corporate finance will be better able not only to engage with the CFO to determine the cost of capital, but also to collaborate with him or her to create a system that keeps track of its fluctuations going forward. For the CFO, the main challenge becomes structuring the firm’s finances in order to minimise the cost of capital. From a value creation perspective, this can be as impactful as the usual managerial preoccupation of minimising the cost of operations – e.g. supply chain, labour costs and so on. When managers know their way around corporate finance principles, they are plugged into the primary source of value creation, rather than its secondary, often-distorted reports such as quarterly sales figures and short-term earnings. They can then make smart decisions with confidence as to the likely outcomes for all stakeholders as well as for the firm’s financial prospects. This ability gives managers the strategic flexibility they need to respond effectively to our ever-less-predictable world. *Gabriel Hawawini is a Professor of Finance at INSEAD and the former Dean of INSEAD from 2000 to 2006. Professor Hawawini spearheaded the school’s expansion from Europe into Asia with the opening of the INSEAD Asia Campus in Singapore in 2000. He is the author of The Internationalization of Higher Education and Business Schools: A Critical Review.

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MANAGEMENT

7 skills every leader needs in times of disruption In our current times of great change, people are questioning what it means to be a leader and rethinking what we expect from those chosen to lead. by Simon Freakley*

here are certain qualities that leaders should always embody, such as integrity, persistence and objectivity. But my involvement in the transformation of hundreds of companies has shown me that different strengths are required at different times. The following characteristics are critical for leading through disruption. 1. COMMUNICATION This is the most critical attribute on the list. A leader

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must think of themselves as akin to a Chief Communications Officer. They must not only set the strategic vision - where the team is going and how it will get there - but also develop and articulate clear messaging so the vision is easily and widely understood. 2. URGENCY In times of great disruption, not making decisions quickly can be just as destructive as making the wrong

MANAGEMENT

ones. Leaders must drive execution. This means some decisions will be made without the optimal level of input and information. The key is to make decisions that are “nearly right, but now”, then pivot if necessary when new information becomes available. 3. COLLABORATION Success rests on the ability to engage the entire leadership team and other key stakeholders around a common vision and shared goals. This becomes critically important at various points throughout planning and execution. These groups will not only help to solve problems and navigate roadblocks, but they will also become evangelizers of your strategic vision, helping to communicate it broadly and inspire greater followership among stakeholders. Focus on your team, championing others and calling out their achievements, while inspiring, motivating and leading by example. “Never on your own” is one phrase that always has stood out to me. In times of change, it should be your mantra. 4. CREDIBILITY AND AUTHENTICITY Credibility is an important leadership attribute for any situation, but when leading through change it becomes even more critical. Many building blocks shape it. From a pragmatic standpoint, planning and sequencing various components of a plan and setting achievable milestones can certainly play a role. But so do so-called “soft skills”, such as acting with consistency and reliability, being a moral compass, having integrity and remaining calm.

have the grit to recognize what is realistic and achievable at a tactical level, as well as the timelines needed to execute effectively. This knowledge, plus the ability to be both analytical and pragmatic, helps leaders to simplify complexity, which is an important component to a strategic approach. 7. EMPATHY No one is immune to the fact that change is difficult. Even the most enlightened among us have moments of struggle. When leading through disruption, you must never lose sight of this fact. You need to consider what your stakeholders are thinking and feeling at all times. Especially when the disruption is severe or new, there is a good chance these feelings will include fear, anger, resentment, and, once again, a dose of pessimism. You need to consider, from a place of genuine curiosity and understanding, just where these feelings are coming from so you can open a dialogue, address any issues and bring people along on your journey. It has often been said there is no leadership without followership. The best leaders rely on their emotional intelligence to help motivate and inspire those around them.

5. FEARLESSNESS In times of disruption, you must be brave enough to make tough decisions. But you must also be bold and confident enough to remain optimistic, even as you navigate difficult times. It takes a great deal of energy to counter pessimism, plenty of which you will encounter in times of change. The key is to be brave and steadfast in spite of it. Adopting a state of mind centred on personal growth can help, as well as the ability to see change and challenges as opportunities rather than setbacks. 6. STRATEGIC MINDSET Good leaders through disruptive times have an ability to see the big picture and understand the steps needed to achieve the desired outcome. But great leaders also

*Simon Freakley Chief Executive Officer, AlixPartners

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BANKING

NewB or not to be? Belgium is waiting for its first ethical and sustainable cooperative bank to start. Will Belgium also get an ethical and sustainable cooperative bank? After more than five years of preparations, the decision is expected from the European Central Bank at the end of 2019 by Rein van Gisteren*

elgium is waiting for its first ethical and sustainable cooperative bank to start. Will Belgium also get an ethical and sustainable cooperative bank? After more than five years of preparations, the decision is expected from the European Central Bank at the end of 2019. More than 50,000 Belgians are in the starting blocks to make "socially responsible banking" possible in their country: they are the proud owners of the NewB cooperative. “They have not forgotten the banking crisis of ten years ago. More than 50,000 citizens are ready for it, along with 154 civil society organizations plus the French insurance group Monseau, who invested 10 million euros; they want to introduce a new standard in the Belgian banking world as a "new bee", a newcomer. NewB wants to become an internet bank, without an expensive branch network, but with an excellent online service. A bank that manages your wages and savings, but does not invest in the financial economy, but rather in the green economy”, says CEO Tom Olinger. “The interest in ethical banking in Europe is growing. Citizens are looking for an appealing alternative to cumbersome systemic banks that are guided by a pure profit objective. Money is not the most important thing at NewB, but it is the collective values behind its sound management. For example, our cooperative profiles itself with a striking wage tension: a top banker earns a maximum of five times more than the lowest paid bank employee. And at NewB every cooperative member has one vote, whether you own 20 or 3 million euros in shares”, he explains. NewB compared itself in its application to the National Bank of Belgium for a banking license with the Banca Polulare Etica (Italy), BAS (Switzerland), Credit Cooperatif (France), Ekobanken (Sweden), GLS (Germany), Merkurbank (Norway) and Triodos (The Netherlands). The most important similarity of these smaller banks is their people-planet-prosperity approach, a terminology

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we know from the United Nations Sustainable Development Goals. Compared to the already existing banks from the benchmark, the Belgian NewB with its 50,000 cooperatives can start with a relatively large number of members. Triodos-Bank is active in Belgium, but is no cooperative and does not provide current accounts to private individuals. And that is precisely the market that NewB wants to capture from the major banks that caused the banking crisis. NewB wants to start with a simple bank account, a savings account and a regular debit card. She only wants to work for the real economy and not to sell derivative (toxic) financial products. Investing in the transition to a sustainable economy is paramount. Because the establishment of a bank requires so much stamina, NewB is already selling insurances. “The income from this will be of importance once the bank is launched”, Olinger says. 7,000 cooperatives also have a Goodpay payment card. For each payment, NewB donates 5 cents to good cause. The NewB cooperatives held their annual shareholders’ meeting in June. The bank has to raise additional capital before the ECB approval can be given. If this is completely successful, the new bank is expected to start in 2020. Because NewB wants to be a sustainable and ethical bank, the bank’s financial products must meet 13 values, set by members in terms of safety, transparency, proximity and participation, innovation and professionalism, and requirements in terms of simplicity, austerity, honesty, integration, diversity, inclusion and sustainability. An independent Social Committee critically monitors the translation of these values into everyday norms and the behaviour of this banking cooperative. *Rein van Gisteren A communications consultant in Hoeilaart (Belgium)

BANKING

Georgia is a country on the up Georgia’s growing economic and political proximity to the European Union means its dynamic private sector is of interest with increasing attention being paid to its key economic players by Martin Banks

he World Bank forecasts 5% growth in 2019, 2020 and 2021 and the economy is becoming increasingly diverse and competitive. Its strategic location on the Belt and Road project means that attention on this small, culturally rich, nation is likely to grow in coming years. Georgia’s growing economic and political proximity to the European Union means its dynamic private sector is of interest with increasing attention being paid to its key economic players. In this context, TBC Bank is an important actor worth a closer look. TBC is listed on the Premium Segment of London Stock Exchange and is part FTSE 250 index; a major achievement for a bank operating in a region with residual political instability. Commenting on the choice of London, CEO Vakhtang Butskhrikidze describes London as “the deepest and most liquid stock market in Europe” and that it “benefits from being the best center of regional expertise”. The London listing also gives Georgia an anchor in Western Europe, consistent with its Euro-Atlantic aspirations. Butskhrikidze is conscious of this: “As Georgian citizens we are delighted to be closer to our country’s friends in Europe and North America”. As he acknowledges, the relationship with the EU is particularly important as it “supports the country’s long-term stability and prosperity”. Although much of this work towards closer integration is driven politically from above, it is essential that it is supported by the private sector and civil society; TBC is a key part of this. In addition to supporting and underpinning Georgia’s integration with the European Union, TBC has plans for regional expansion with an “ambition to expand well beyond the borders of our country of origin”. In recent months the Bank has expanded to Uzbekistan following the purchase of payment service Payme, and to Azerbaijan following a merger with Nikoil Bank. Further expansion is planned in the coming months and years and TBC is well-placed to enlarge across the region, further supporting regional integration. A notable feature of TBC is the extent to which it has become integrated within Georgian society and culture. Its

team are committed to their role as a wider force for good in Georgian society. Although most large businesses undertake some kind of Corporate Social Responsibility (CSR), TBC goes further than most. Alongside sponsorship partnerships including with the popular Georgian Rugby team, TBC supports a breathtakingly wide range of cultural initiatives including the Tbilisi Open Air Festival and supports its own art gallery. Aside from its traditional banking services, TBC has moved forward with its digital banking offer. It has recently launched Space – its digital-only bank – and has developed an online shopping app, Vendoo. This is in line with a wider trend towards rapid adoption of e-commerce throughout the country; something that will increase its accessibility to Western investment. Although many in the West might be concerned about regional stability and the impact of any sudden change in the security situation, TBC appears to be well-placed to be deal with any disruption. Despite seeing the situation with Russia as “stable”, TBC builds potential adverse developments into its contingency plans and in the words of Butskhrikidze “has no direct material exposure to Russia”. This reflects a growing trend throughout the Georgia economy that has seen it tilt towards the EU and the West whilst developing a pivotal role in broader Eurasian integration. Like most nations that were previously members of the Soviet Union, Georgia has encountered difficulties since it achieved independence. However it has a thriving and rapidly modernising private sector, making it a welcome target for inward investment. This trend is likely to increase over the next few years as China advances its Belt and Road Agenda. Georgia is in a perfect position to act as a transit point sitting between Europe and Asia and is likely to see investment from both sides in the near future. The role of TBC – as Georgia’s leading bank and a cornerstone of Georgia society – appears therefore be key in the country’s emergence as a regional economic power in the coming years.

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EXTRAIT DE CULTURE

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EXTRAIT DE CULTURE

The canvas of our life: that is, we are Mythology Andreas Kontellis was born in Athens. He studied painting at the Athens School of Fine Arts and he holds a Master of Arts at the Middlesex University of London. His origins come from the Greek island of Lemnos and this is intensely depicted in each of his work of art. The deep blue sea air blows us inspiration and talent in his paintings along with the allure of the openness and transparency of the nature. by Alexandra Papaisidorou*

ndreas Kontellis leaves his mark as a contemporary European painter but by being saturated by the study of the old European masters. His influences by Ancient Greek Art, Modern Greek Art and his life experiences - mainly from his years on Lemnos - are obviously depicted and concerted his style dedicated to Expressionism, abstract painting and even a more realistic phase. His finishing touch is on the figures fading away in the dusky atmosphere, the vitality and the energy to the way of light and expression. This is what makes Andreas Kontellis an artist with aura. The exhibition of his paintings titled “Mythology” opened on May 9, at the Consulate General of Greece in New York, as part of the events organised to promote contemporary Greek culture in the United States. EBR was there and had an exclusive interview with the artist. WHAT WERE YOUR FIRST THOUGHTS AND EMOTIONS THAT GAVE BIRTH IN THE ART EXHIBITION 'MYTHOLOGY'?

The collection entitled “Mythology” connects two different themes of my work. There is great experience on landscape painting as expressed through 3 personal exhibits. At the same time, the presentation of the human figure, the naked figure, has had a defining role in my career. Nature and the form of the naked body came together at some point and produced the current exhibit as a continuation of my previous work which I presented at Gallery Skoufa in Athens in 2016. I first sensed this while I was working on the landscape of Lemnos with my model and it struck me that her spon-

taneous posture conjured the ancient myth of Ariadne of Naxos. At that point, mythology became connected to my work. Subsequently, I developed this connection between living human beings and narrations and the ancient myths in a non-biased manner. In every project, there is conscious creation which of course retreats at the moment of artistic creation and allows the latter to emerge. YOU ARE A UNIQUE EXPRESSIONIST OF FEELINGS, HOW DOES IT AFFECT YOU? IS IT THE MAIN "COLOUR" ON THE PALETTE OF YOUR CREATION? OR DO YOU OFTEN MIX IT WITH MORE TERRENE CONCEPT? Being an expressionist painter, meaning that my work is guided by the expression of feelings and emotions, is not a matter of personal and conscious choice; the choice is to create, allowing for the expression of emotion. What ensues is the collaboration of perception, style, and aesthetics. The emotion is often oppressing. Without the spark there is no creation but when it happens it brings about the conclusion and the connection with the subject. The psychological make up of the artist varies; we are not of a single dimension but rather of of multiple dimensions. However, the necessity to express leads us to seek ways to express ourselves individually. THE NOTION AND CONCEPT OF 'MYTHOLOGY' ALONG WITH ITS FULL OF MEANINGS INTERPRETATIONS GIVES ME THE SENSE OF THIS GREEK CULTURE MESSAGING AS

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AN AMBASSADOR TO A GENERAL PUBLIC AUDIENCE, IS IT ONE OF YOUR SERVING GOAL? The complexity and abundant meanings of Mythology cannot be covered sufficiently but they permeate the intellectual underpinning of this exhibit. What I suggest through this body of work is that the universe of Greek Mythology connects and expresses our personal stories, our everyday life. We all rely and lean on the same elements of our common human progression: we love, we grow old, these events are weaved again and again in the common and shared canvas of life: that is, we are Mythology. I feel that this is a message that can touch the broader audience and act as an ambassador to the way of life that the corner of the world called Greece demands: a perpetual innocence and a hedonism under the sun; however the cause and the empowerment for this work was purely experiential. Within the complexity of the age of technology, man struggles with the same, timeless, emotions and desires. YOU REFERRED TO THE SUBJECT OF 'MYTHOLOGY' AS IT STILL EXISTS AND DOMINATES IN CONTEMPORARY LIFE, COULD YOU PLEASE SPECIFY? The mythological dimension is felt and expressed in the way we live our lives where every excess and ecstatic experience yields s the privilege of mythical reference. Beauty, youth, which for some people are one and the same, liveliness and vigor are gifts that we all have cherished. The circle of life, a continuous alternation of time and energy are a quintessential process; the world is invulnerable. Within the complexity of the Age of Technology, man struggles with the same, timeless, emotions and desires. HOW HAS YOUR LOVE FOR ART BEEN ORIGINATED? I was fortunate to have support and encouragement from an early age which allowed me to observe and listen; it was during my childhood on the Island of Lemnos during the 70s. Later on I benefited greatly from the guidance of my teachers as I was preparing for my studies at the School of Fine Arts in Athens. At about the age of 15 I realized that there was no turning back as I found meaning in nothing else but Painting. DO YOU BELIEVE THAT EU HAS CONTRIBUTED TO A CULTURAL INTEGRATION? Cultural unification is a universal objective and the

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contributions of Europe to its achievement are immense. For me the important element is communication a dialogue that leads to the broadening of perception, tolerance, acceptance of different forms of expression, language and points of view. I do not think that it is necessary to submerge local cultures into one. Local cultures can still flourish with external influences while still maintaining the depth of their identity. IS THERE A EUROPEAN CULTURE, IN YOUR OPINION? I am Greek; therefore, I am European; this is self evident. Greek art has developed in line with European Art. It was Europe that maintained the ancient Greek heritage which even today is the guardian of ideals. During my work on this theme, I have come to understand how European painting treated the ancient Greek themes embodied in Mythology. By offering my own view and expression on this, larger, theme, I am automatically connecting with European painting. It is my belief that, as Greek contemporary art progresses and gains momentum, this dialog will become more and more exciting and create dynamic possibilities.

*Alexandra Papaisidorou Editor at large & PhD candidate of European & International Relations

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The web is 30 years old. What better time to fight for its future? The web has become a public square, a library, a doctor’s office, a shop, a school, a design studio, an office, a cinema, a bank - and so much more. by Tim Berners-Lee*

f course, with every new feature, every new website, the divide between those who are online and those who are not increases, making it even more imperative to make the web available for everyone. And while the web has created opportunity, given marginalised groups a voice, and made our daily lives easier, it has also created opportunities for scammers, given a voice to those who spread hatred, and made all kinds of crime easier to commit. Against the backdrop of news stories about how the web is misused, it’s understandable that many people feel afraid and unsure whether the web really is a force for good. But given how much the web has changed in the

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past 30 years, it would be defeatist and unimaginative to assume that the web as we know it can’t be changed for the better in the next 30. If we give up on building a better web now, then the web will not have failed us. We will have failed the web. To tackle any problem, we must clearly outline and understand it. I broadly see three sources of dysfunction affecting today’s web: 1. Deliberate, malicious intent, such as state-sponsored hacking and attacks, criminal behaviour, and online harassment.

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2. System design that creates perverse incentives where user value is sacrificed, such as ad-based revenue models that commercially reward clickbait and the viral spread of misinformation. 3. Unintended negative consequences of benevolent design, such as the outraged and polarised tone and quality of online discourse. While the first category is impossible to eradicate completely, we can create both laws and code to minimise this behaviour, just as we have always done offline. The second category requires us to redesign systems in a way that changes incentives. And the final category calls for research to understand existing systems and model possible new ones or tweak those we already have. You can’t just blame one government, one social network or the human spirit. Simplistic narratives risk exhausting our energy as we chase the symptoms of these problems instead of focusing on their root causes. To get this right, we will need to come together as a global web community. At pivotal moments, generations before us have stepped up to work together for a better future. With the Universal Declaration of Human Rights, diverse groups of people have been able to agree on essential principles. With the Law of the Sea and the Outer Space Treaty, we have preserved new frontiers for the common good. Now too, as the web reshapes our world, we have a responsibility to make sure it is recognised as a human right and built for the public good. This is why the Web Foundation is working with governments, companies and citizens to build a new Contract for the Web. This contract was launched in Lisbon at Web Summit, bringing together a group of people who agree we need to establish clear norms, laws and standards that underpin the web.

Those who support it endorse its starting principles, and together we are working out the specific commitments in each area. No one group should do this alone, and all input will be appreciated. Governments, companies and citizens are all contributing, and we aim to have a result later this year. Governments must translate laws and regulations for the digital age. They must ensure markets remain competitive, innovative and open. And they have a responsibility to protect people’s rights and freedoms online. We need open web champions within government — civil servants and elected officials who will take action when private sector interests threaten the public good and who will stand up to protect the open web. Companies must do more to ensure their pursuit of short-term profit is not at the expense of human rights, democracy, scientific fact or public safety. Platforms and products must be designed with privacy, diversity and security in mind. This year, we’ve seen a number of tech employees stand up and demand better business practices. We need to encourage that spirit. And most importantly of all, citizens must hold companies and governments accountable for the commitments they make, and demand that they respect the web as a global community with citizens at its heart. If we don’t elect politicians who defend a free and open web, if we don’t do our part to foster constructive healthy conversations online, if we continue to click consent without demanding our data rights be respected, we walk away from our responsibility to ensure these issues are a priority for our governments. The fight for the web is one of the most important causes of our time. Today, half of the world is online. It is more urgent than ever to ensure the other half are not left behind offline, and that everyone contributes to a web that drives equality, opportunity and creativity. The Contract for the Web must not be a list of quick fixes but a process that signals a shift in how we understand our relationship with our online community. It must be clear enough to act as a guiding star for the way forward but flexible enough to adapt to the rapid pace of change in technology. It’s our journey from digital adolescence to a more mature, responsible and inclusive future. The web is for everyone and collectively we hold the power to change it. It won’t be easy. But if we dream a little and work a lot, we can get the web we want. * Tim Berners-Lee Director, W3C (World Wide Web Consortium)

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An economist explains how to value the internet It is one the most commonly used measures of economic activity: gross domestic product (GDP), defined as the total market value of all final goods and services produced within a country in a given period. But GDP misses out on huge chunks of value in the digital economy. When digital goods, whether Google Maps or Wikipedia, are available free of charge, they make no impact on GDP despite the value to their users. by Ceri Parker*

t is one the most commonly used measures of economic activity: gross domestic product (GDP), defined as the total market value of all final goods and services produced within a country in a given period. But GDP misses out on huge chunks of value in the digital economy. When digital goods, whether Google Maps or Wikipedia, are available free of charge, they make no impact on GDP despite the value to their users. This has major consequences. Without a valid tool to mea-

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sure the value of the digital economy, policymakers are left scratching their heads over how to manage it. That led a group of economists at MIT to develop a new tool to measure the benefits of the digital economy. At the World Economic Forumâ&#x20AC;&#x2122;s Annual Meeting in January 2019, we spoke to Erik Brynjolfson, Director of the MIT Initiative on the Digital Economy and Professor at MIT Sloan School about this new measure.

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HOW DOES GDP COUNT UP THE VALUE OF DIGITAL GOODS AT THE MOMENT? GDP is one of the great inventions of the 20th Century but it also has some weaknesses. In particular, anything with zero price has precisely zero weight in GDP: whether that’s Wikipedia, or the apps on your phone, or the air that we breathe. This was a design choice but it’s becoming a problem in the digital age. DIGITAL GOODS MAY HAVE ZERO PRICE BUT COMPANIES ARE GETTING AN AWFUL LOT OF VALUE OUT OF THEM. HOW DO YOU EXPLAIN THAT PARADOX? Even though digital goods have zero price, we as consumers can get a lot of value from them. I benefit greatly from access to Wikipedia, or Google, or the apps on my phone. Likewise, companies can make a lot of money from them. Some of them are volunteer organisations like Wikipedia, but others make billions or even hundreds of billions of dollars of valuation from selling advertising, or selling things directly on the internet. So clearly there’s a lot of value being created, even if the goods themselves don’t always show up in GDP. IS THAT A PROBLEM? The reason this is a problem is that these digital goods and these free goods are becoming a bigger and bigger share of the value we get in the economy. To some extent, we’ve always been missing parts of this, but with the advent of smartphones and the internet, this has become a bigger share of how we spend our time and where we get our value. Take one example: if you replace Encyclopedia Britannica with Wikipedia, GDP actually goes down because you don’t have to pay for anything anymore, but our value goes up. So, if we’re using GDP as a measure of our well-being, then we’re going to be misjudging where the value is being cre-

ated and we need some new metrics to capture it better. HOW DO YOU DEFINE A DIGITAL GOOD? IF I ORDER SOMETHING OVER THE INTERNET, IS IT NECESSARILY A DIGITAL GOOD? The internet is affecting all kinds of goods. It’s affecting the goods that we’ve always bought like food; you can buy that over the internet. But there’s also new classes of goods, that are purely made out of bits, not atoms. These digital goods have three characteristics that are very different from previous goods. They’re virtually free, perfect and instant. What that means is the cost of making an additional copy of a digital good is basically zero; each copy is an identical, perfect replica of the original; and they can be distributed anywhere in the world instantaneously, or at the speed of light. Those three characteristics – free, perfect and instant – were never used to describe earlier goods like apples, or cars, or haircuts, but they’re ubiquitous for digital goods. And they present lots of value creation opportunities, but also some new measurement challenges. So, for example, photography used to be made with an expensive chemical process. It cost about 50 cents each. Now there are about 100 times as many photos being taken but they can be distributed for zero cost, so they’re disappearing from GDP. Similarly, music was on vinyl records or CDs, now can be distributed as bits. Overall, if you look at the information share of the economy, which includes music, data, software, news, all those different kinds of information goods: in 1983 it amounted to 4.6% of GDP in the United States; now, with this explosion of digital goods, it’s still… 4.6%! Basically, our official GDP measures have completely missed the information explosion. So, if we want to measure it, we need a new metric and that’s what we’re developing with my team at MIT. HOW DO WE GO ABOUT VALUING THESE THINGS? We call the new metric GDP-B and the B stands for benefits. So, while traditional GDP measures the production cost of things, GDP-B measures the benefits we get. The way we do that is we ask people how much we would have to pay them to give up a particular good. We’ve surveyed hundreds of thousands of people now and compared what their valuations are for goods like Twitter and Facebook, but also breakfast cereal, jet travel and many others. In the case of Facebook, we offered people various different prices: some people $1, some people $10, some people

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$50, some people $100. Some people require even more to give up Facebook for one month. What we found was that the median person needed to be paid $48 to give up Facebook for one month. That suggests that there’s an enormous amount of value from this free good. I’m not surprised at how big that number is because the average Facebook user spends almost one hour per day using it. Some of us use it very little, others use it a great deal. But if you add up all the different valuations, it adds up to tens of billions of dollars of value that some people are getting collectively from Facebook that is completely missed in our conventional measures of GDP. WHAT ARE THE IMPLICATIONS OF FINDING OUT THAT VALUE? The implications for this are profound because the old saying is: you can’t manage what you don’t measure. We haven’t been measuring big chunks of the economy and understanding where people are getting real value. We still need conventional measures of GDP for measuring the dollars that are flowing through the economy. If the Federal Reserve wants to know what’s happening to wages and interest rates they really have to look at GDP. So, we’ve got to keep traditional GDP. But if we also want to understand where the value is coming, conventional GDP isn’t going to be as helpful as it once was. That’s why we need this new metric of GDP-B, to see where the value is being created, especially in the digital economy. IS THERE A FLIP SIDE TO THE RESEARCH? YOU’RE LOOKING AT THE VALUE PEOPLE GET FROM THE INTERNET, WHAT ABOUT THE DARK SIDE OF THE INTERNET? One of the things that we’ve discovered when we do this research is that when people put a value on something, you really think a bit harder about what that really means. People say they will pay $48 for Facebook but is that because they’re addicted? Maybe they’re unhappier in the long run despite being very attached to their Facebook accounts. There are some reports that people in the long run end up being less happy when they use social media. It really starts suggesting that there might be a divide between what people are willing to pay and their true happiness. To be fair, this was true of many goods in the past too. Whether it’s cigarettes, or automobiles, or luxury handbags, the valuation that people are willing to pay isn’t always what you might think is, or at least should be, their true valuation. In research going forward, we’re trying to get more deeply

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at those distinctions. The initial research is just looking at what people are actually willing to pay. But ultimately I think it’s important, if you want to understand society’s well-being, to consider their deeper valuations and the effects on their peers and on society as a whole. It’s a very interesting research agenda going forward. DO YOU THINK GDP WILL BECOME OBSOLETE AT SOME POINT IN THE FUTURE? Definitely not. GDP is still very useful. It measures something conceptually different from GDP-B. Traditional GDP measures the production of the economy. But Simon Kuznets, who is one of the inventors of GDP back in the 1930s, essentially said, ‘Please do not use my measure as a measure of wellbeing’. It’s for production not wellbeing and those are two different concepts. We now need a new measure that focuses on wellbeing, especially in the 21st Century digital economy. I liken it to a car’s dashboard. I’ve got one gauge for the speed that I’m going; there’s another fuel gauge; there’s the temperature; the air conditioning; maybe the oil pressure. It would be silly to try to roll those up into one aggregate number and say, what is my average “car-ness”? Instead, you need separate metrics for different concepts. So, we still need traditional GDP to measure production, but now we have GDP-B to measure the benefits we’re getting from production: a different concept. WHAT’S NEXT ON THE RESEARCH AGENDA? Now that we’ve done the research for American consumers, we’re hoping to ramp it up to other countries and see what the difference in valuations is in France, or South Africa, or Korea, or Brazil, or other countries. And we would welcome partners who would like to work with us to come up with this new, expanded measure of the benefits we’re getting not just from digital goods but from all goods. *Ceri Parker Commissioning Editor, Agenda, World Economic Forum

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Here are the 5 biggest cybercrime trends of 2019 by Einaras von Gravrock*

ybercriminals are using more advanced and scalable tools to breach user privacy, and they are getting results. Two billion data records were compromised in 2017, and more than 4.5 billion records were breached in the first half of 2018 alone.

attacks, due to the number of new phishing kits available on the dark web. These kits enable people with only basic technical knowledge to run their own phishing attacks. With more tools available, phishing will become an even more dangerous attack method.

1 - The most pressing cybersecurity issue in 2019, as well as rising trends into 2020 is advanced phishing kits. Four new malware samples are created every second. Phishing remains one of the most successful attack vectors due to its speed, as most phishing sites stay online for just four to five hours. Users only report 17% of phishing attacks, and it is seen as a low-risk type of activity. As a result, today only 65% of all URLs are considered trustworthy. This puts a strain on both the consumer and any enterprise with an online presence.

2 - Remote attacks are growing in number, as well as becoming more sophisticated. One of the main types of remote access attack in 2018 was cryptojacking, which targeted cryptocurrency owners. Another popular type of attack threatened perimeter devices. According to our threat intelligence database, remote access attacks are among the most common attack vectors in a connected home. Hackers target computers, smartphones, internet protocol (IP) cameras and network attached storage (NAS) devices, since these tools usually need to have ports open and forwarded to external networks or the internet.

We predict that 2020 will be known for advanced phishing

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see IoT devices as a vulnerability, because a significant portion of them do not have a user interface. This could lead to issues understanding what kind of data the device collects or manages. However, IoT devices are not only collecting valuable user data. They could become an entry point for an attacker or tool to launch a distributed denial-of-service (DDoS) attack. IoT devices are not secure by design, because putting a focus on security would significantly increase manufacturing and maintenance expenses. According to CUJO AI threat intelligence data, 46% of all attack types that these devices experience are remote access attempts and 39% are used for detecting behavioural patterns. With the exponential growth of connected devices at home, these threats are likely to increase. 5 - Most of the biggest industries already use machine learning (ML) and artificial intelligence (AI) to automate their processes and improve overall performance. Cybersecurity and cybercrime are no exception. AI is often considered to be a dual-use technology - while more cybersecurity companies are implementing AI-driven algorithms to prevent threats, hackers are also taking the opportunity to become more effective. Most AI qualities serve malicious purposes. AI systems are cheap, scalable, automated, anonymous and they provide physical and psychological distance for the attacker, diminishing the immediate morality around cybercrime : - Artificial intelligence for cybersecurity evasion. Cybercriminals are using various evasion methods to avoid detection, and AI helps to optimize different elements of this process.

3 - Attacks via smartphones, one of the most common attack vectors to smartphones, are related to unsafe browsing (phishing, spear phishing, malware). More than 60% of fraud online is accomplished through mobile platforms, according to RSA, and 80% of mobile fraud is achieved through mobile apps instead of mobile web browsers. As most people use their phones to manage financial operations or handle sensitive data outside the security of their home network, this becomes a prominent threat. The fact that users typically hold all their information on their phone, and that smartphones are now used for two-factor authentication - one of the most widely used cybersecurity tools - increases the security risk if the device is lost or stolen. 4 - The consumer Internet of Things (IoT) industry is expected to grow to more than seven billion devices by the end of 2020, according to Gartner. Many consumers do not

- Artificial intelligence in phishing. AI could help to create content that can pass through typical cybersecurity filters, such as email messages that are indistinguishable from those written by humans. - Artificial intelligence in social engineering. While social engineering is one of the most popular hacking techniques, it takes a lot of time to implement properly. AI could help in not only collecting information, but also by writing emails or calling potential victims. With new advances in AI-driven technology, utilizing AI in cyber-attacks will become an even more popular and dangerous trend.

*Einaras von Gravrock Chief Executive Officer and Founder, CUJO AI

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It’s people, not technology, that will decide the future of work by Sharan Burrow*

s a trade union leader, I am often asked about the impending catastrophic impact of technology on jobs. Are the more extreme estimates of job loss credible or is the reality more nuanced? Are we heading towards a data dystopia or on the road to a digital promised land? In truth, nothing is written in stone. Technology itself will not determine the way forward. It’s all about the choices that governments, businesses, workers and their unions and societies as a whole make. The accelerating march of digitalisation, robotics and a plethora of technological innovations will affect production, services and life in general - in ways that are hard to predict but which will surely be profound. The challenge is to make the right decisions, putting people at the centre and technology at the service of people. There is a historic opportunity this year to launch a human-centered agenda

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for Globalisation 4.0 and the future of work: the Centenary of the International Labour Organisation. At the ILO Conference in June, we expect to adopt an ILO Centenary Declaration, a milestone for the ILO itself, and something that will set out the high-level principles on how the world should shape Globalisation 4.0. Trade unions are caalling for the Centenary Declaration to define the parameters of a new social contract between governments, businesses and workers, recognising that the future of production is not something that will be determined by technology, rather that it will be shaped by political, social and economic choices. The context for these choices is indeed troubling. There are 300 million “working poor” – people who are in work but don’t earn enough to lift them out of poverty. Official unemployment globally is

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Around half the world’s working population is trapped in informal work, and many of those in formal work can only find precarious or temporary jobs. Global supply chains are contaminated by slavery, informality and jobs that frequently keep workers in poverty and expose them to disease or death. In addition, more than 40% of the world’s households do not have internet access, locking them out of the digital future. Then there are the impacts of climate change already devastating whole communities and depriving millions of people of their livelihoods, underlining the urgent need for ambitious action to keep the global temperature rise under 1.5%.

That Treaty was the first iteration of the social contract, but the lofty intent was soon undermined, leading to the Great Depression just 10 years later followed by the catastrophe of another global conflict. Towards the end of that war, leaders had another go at the social contract. The ILO’s 1944 Declaration of Philadelphia, set out four principles for the world of work: “labour is not a commodity; freedom of expression and of association are essential to sustained progress; poverty anywhere constitutes a danger to prosperity everywhere; and, the war against want requires to be carried on with unrelenting vigour within each nation, and by continuous and concerted international effort in which the representatives of workers and employers, enjoying equal status with those of governments, join with them in free discussion and democratic decision with a view to the promotion of the common welfare.”

The discussion about the future needs to be based on these realities. And we should also take a look at how we got to where we are today. When the visionary leaders of 1919 created the ILO through the Treaty of Versailles, they had a very clear objective in mind: that the guarantee of social and economic justice would help prevent the conditions which could drive another conflict as destructive as World War I.

These principles hold as true today as they did then, and provide the basis for managing change albeit in a world confronting the existential challenge of climate change and the exponential expansion of technology. These two factors were fundamental considerations in the work of the ILO Global Commission on the Future of Work which released its report, “Work for a brighter future”, on 22 January. That report eloquently combined the new challenges

around 190 million people, with large numbers of younger people entering the labour market only to find there is no job for them.

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of today with the tried and tested formula of ILO standards and the equal engagement of government, employers and workers and their unions. It provides the basis for a new, revitalised social contract. One of the salient recommendations of that Commission is the establishment of a Universal Labour Guarantee, ensuring fundamental rights to all workers, regardless of the type of employment or contract they have. It would guarantee their rights to union membership and collective bargaining, protect against discrimination, slavery, child labour and dangerous working conditions as well as a fair measure of control over their working hours. The Commission report also calls for a universal entitlement to life-long learning to help workers equip themselves for the future, and for the basic safety net of social protection to be extended to all instead of the minority who have it today. Concrete measures to realise gender equality, 100 years after the Versailles Treaty promised equal pay for women, are accompanied by calls to invest in care, infrastructure and in the green economy. Digitalisation and the use by employers of â&#x20AC;&#x153;platformâ&#x20AC;? businesses to escape regulation also come under the microscope, with the Commission recommending international regulation of these new forms of business. While the prescriptions of the ILO Commission will go a long way to delivering a framework of justice for a digitally dependent future of work, they need to be complemented and reinforced by action in other policy areas. Governments need to fulfil their responsibility to regulate, including by requiring due diligence and lifting of standards in corporate supply chains, by stopping corporate tax avoidance and evasion and by ensuring that competition law breaks up monopolies and allows freelance or own-account workers to collectively set floor prices and conditions.

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The World Economic Forum too has a critical role to play, with its convening power, engagement with business and important work on the future of production and many other areas. Trade unions will be taking these prescriptions into the ILO Conference in June, and into all other relevant fora within countries and across borders. This includes global trade, where the fictive and destructive separation of trade policy from social and environmental standards needs to be done away with. Without this, the existential crisis of the multilateral trading system will only deepen. It also encompasses the Bretton Woods institutions - the World Bank and the International Monetary Fund - which still cling to discredited economic theories. Coherence between the international institutions is needed, with ILO at the heart of global policy making. The world faces a stark choice. Will the global economy continue on the current unsustainable path, with yet greater inequality and a creeping return to feudalism in a modern cloak, or can the world collectively get its act together and shape a positive future? We can harness technology to create new jobs and we can ensure a just transition to new employment for those whose jobs are at risk. We can defeat climate change. The magic ingredient is political will, the courage to make choices that may be uncomfortable for some of the bigger corporations and vested interests. With economic insecurity fuelling distrust in government and institutions, threatening democracy itself, it is the course of collective commitment and effort that must be followed. It is to that end that the international trade union movement will work

*Sharan Burrow

General Secretary, International Trade Union Confederation (ITUC)

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