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rostra economica Charter Cities

creating new cities to combat poverty


personal gain vs. development aid

nummer 292 november 2012 reageren?


capital creation and property rights in slums

Development aid 2.0 constructing new paths towards growth

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COLOPHON Editor in chief Bart Hoffmann Copy Editors Jules Vos Moira Hooper Editors Maaike Boot Floris Dekter Corneel den Hartogh Klara Keutel Tim Martens Berre Simonse Ruben Slot Anela Turulja Dovile Venskutonyte Pierre Borst Photographer Nicole Koedooder Supervisory Board Wouter Smeets Hanne van Voorden Lennart Verhoef Albert Jolink Reactions, letters and ­applications can be sent to: Room E0.02 Roetersstraat 11 1018 WB Amsterdam 020 5254024 Columnists Roger Pruppers Joop Hartog Design def., Amsterdam (Yvonne Roos) Print run 5000 Address Changes Can only be made through studielink,

Importing rules and governance, the concept of Charter Cities


De (verloren) magie van microkrediet, zijn de verwachtingen uitgekomen?

How poverty might not be the problem but the solution in slums around the world

How global arms trade keeps development down

Advertisements Mazars PwC Advertisement Costs Contact Sefa and ask for Aniel Ganga 020 525 40 24 Printing DR&DV Media Services, Amsterdam Copyright Notice Any redistribution of part or all of the contents in any form is prohibited. You may not, except with express written permission by the editor in chief, distribute or commercially exploit the contents. Nor may you transmit it or store it in any other website or other form of electronic retrieval system.

en verder 9 column roger pruppers:

37 column dr joop hartog

15 feb student abroad

38 feb flash

20 sefa front 28 The Ya$uni project: paying Ecuador for not selling oil 33 FSR Page

text Bart Hoffmann editor-in-chief -------------------------image NASA

Bart Hoffmann is 22 years old and a mster student of ­Economics.

The WTO negotations: is Doha failing?

18 3034 Backpacking and saving the world: the rise of voluntourism

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Development revolutionized?


evelopment aid has always been a controversial topic, both in politics and economics. It is even argued by some that development aid has too much of a negative, hierarchical sound to it, and that instead you should speak of development assistance or development cooperation. That providing development aid is a contested topic was shown during the Dutch elections of September this year, where the political parties had very different views on how to deal with this issue. The VVD, the biggest party of the nation, argued in their election program that development aid is not a central task of a government, and that people should decide for themselves whether or not to give money to charity. And indeed, just a couple of weeks ago, the new Dutch government announced to cut the budget of development aid by one billion euros. In 2011, The Netherlands was amongst only 5 countries in the world to reach the goal of the United Nations to spend 0.7% of GDP on development aid. But with the above mentioned budget cut, this goal will no longer be reached. Whatever your opinion on this issue might be, it seems overall that it is mainly to the way aid is given than merely the existence of this aid that sparks criticism. In this Rostra, we take a deeper look at some of the new initiatives in the field of development economics, that might be able to take away some of the criticism. You can for example read about the concept of charter cities.

This idea, by the well-known economist Paul Romer, states that a new way towards development could be to designate a specific plot of land in an undeveloped area as a new city. Within the right kind of framework of rules and governance, ‘imported’ from abroad, this city could become a very attractive region for businesses and people to work and live in, and may spur development in the surrounding areas as well. Another new take on development comes all the way from Ecuador, a poor country with plenty of oil reserves. The fact is however that a lot of these reserves are found right in the middle of the Ecuadorian rainforest, so a trade-off has to made between economic gain or ecological preservation. Instead of making this hard decision, Ecuador is now looking at the international community to donate money into a special fund. This way, the rainforest remains untouched and Ecuador still receives the economic benefits of its oil reserves. A very new, and indeed bold way of looking at development and economic growth. Obviously, this Rostra will look at many more aspects of today that deal with development and development economics, all with a focus on revolutionary ideas or how to move forward in this interesting field of economics. From arms trade to microcredit, and the development of major slums to the extremely slow Doha Round of the World Trade Organization, you’ll find it all in this issue.

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En Mi Salsa is a Dutch foundation that enables 25 underprivileged Maya women in Guatemala to have a skilled and independent future. These women run corporation Ut’z Bat’z, selling a range of artisan products, thereby generating income for their families. En Mi Salsa not only sees donations to the corporation, but also provides intensive training in empowerment, craft techniques and management. This way the corporation can run itself and its fair trade shop in a few years.

-------------------------------------------------------------------------------------------------------------------------------rostraeconomica 5 -------------------------------------------------------------------------------------------------------------------------------Looking for a nice challenge? The board is looking for a secretary and the foundation can always use volunteers in marketing, sales and acquisitions.

photo Francien Wouters

-------------------------------------------------------------------------------------------------------------------------------6 rostraeconomica development aid 2.0 -------------------------------------------------------------------------------------------------------------------------------text Tim Martens -------------------------images NASA, Mark Ostow, City image designed by Inna Belenkey from the Noun Project

Tim Martens is 23 years old and a Master student in Economics.

-------------------------------------------------------------------------------------------------------------------------------rostraeconomica 7 -------------------------------------------------------------------------------------------------------------------------------The NASA picture of the world at night shows that there is a big difference between electricity supply in North Korea and South Korea. Both countries started with an identical set of rules, regulations and cultural conditions. After the seperation, however, both countries developed different rules that led to this development.

City Start-Ups as Development Aid The attempt to build a second Hong Kong The economist Paul Romer tries to revolutionize the way industrialzed countries help developing countries. His idea: new cities and proper rules promote growth. Romer is convinced Hong Kong can be repeated. Recent developments in Honduras could test this hypothesis.

Once Paul Romer received a lot of praise for his ideas and theories. Today he receives a lot of criticism for his idea of development aid. Romer’s basic idea is simple. Take a vacant piece of land big enough for a city of several million people, specify the rules that will apply there and let the people that like the concept move to these so called Charter Cities. The new city should attract companies by offering a combination of law, security and the cost structure of a developing country. Workers will come because they hope to find a job while big companies and investors want to earn high profits. The name Charter Cities comes from the Charter of the US-State Pennsylvania. In 1682, Pennsylvania introduced freedom of religion and trade, which attracted skilled European immigrants. This forced the neighbouring states to undertake similar agreements. For Romer, places like Hong Kong, which was a British colony until 1997, have shown that the right rules can

promote growth. Under the British government the city became one of the most important harbors in the world. During this time the colony developed a rule and market structure that supported growth. The existence of this city inspired the Chinese government to use the surrounding area as a playground for the free market. Close to the border a new special economic area called Shenzhen was build, which induced many firms to move from Hong Kong to the surrounding area. At the same time, many migrant workers moved to this area and the city became a growth engine for the whole country. When the Chinese government took control over Hong Kong, the city was already integrated in the country. But Hong Kong did not join the British empire voluntarily. As a result, critics see neo-colonial features in the concept. Romer challenges this criticism with his view that it is possible for workers to leave the town whenever they want. The people cannot elect the

government; their only option is to leave the city if they don�t agree with the decisions made there. The fact that you can only vote with your feet raises major doubts about the democratic structure of the concept. To create a city on paper is easier than to build a real Charter City. The ambition to create a new city is a breeding ground for social tension and riots. One barrier to the success of a Charter City is the fact that many governments don’t like sharing their political power and they are not keen on transforming areas into special economic zones. Moreover, there exists a danger of parallel-societies in the city. The people who move to these cities have learned a specific behaviour and some might simply not want to follow the new rules and structures. The effects for the surrounding region are controversial. On the one hand there is a possible danger of so called ‘Brain-Drain effects’. Skilled people might leave the surrounding region to work in the cities, which could have negative consequences for the region. On the other hand there is a possibility of ‘Brain-Gain effects’. The empirical work of James Rauch and Enrico Moretti deals

with the effects of an increase in educated workers on the wage of uneducated workers in the USA. The results are that a 1 point increase in the percantage of the local population that is college educated leads to a 1.4 percent increase in the real wages of non-college educated locals, and a 0.3 percent increase in the real wages of local college graduates. In the short run, the people outside the cities will suffer a decrease in wages, but Paul Romer argues that in the long run the people have more incentives to increase their qualification. The result should be an increase in investments in education in less-developed countries. Besides a reliable legal system, efficiency plays an important role. The economists Noel Maurer and Kris James Mitchener support the idea that developing countries should delegate specific administrative tasks. The example of Angola shows that this can increase efficiency significantly. Angola appointed a British nonprofit organisation to manage the tariff-administration, after which tariff revenues tripled. The fact that researchers discuss the concept of Charter Cities so intensely despite many unanswered questions

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Roger Pruppers

“New and improved, now with ENRICHED URANIUM!”

A ABOUT ROMER The Economist Romer helped to develop the ‘new growth theory’ in the 1990s. The new growth theory deals with the technological factors that influence growth besides the factors capital, labour and land. In 1997, the ‘Time’ magazine chose him as one of the 25 Most Influential Americans. Romer founded a software firm that developed the learning software Aplia in 2000. The firm was sold in 2007 and Romer uses the money to finance Charter-Cities.

is the result of the low efficiency of classic development aid. The Economist Dambisa Moyo claims that direct financial support of the Sub-Sahara region rather fosters than alleviates poverty, corrupts structures and creates dependencies. According to Moyo, it would be more effective to promote free trade with developing countries by eliminating export-subsidies that sabotage this kind of trade. At the moment we can only estimate the effectiveness of a Charter City. A project in Honduras will give observeable data over the next few years. The government of Honduras has signed an agreement allowing private investors to start the construction of

three independent cities over the course of six months. The congress president Juan Hernandez has said that the investment group plans to invest $15 million in building infrastructure for the first city near Puerto Castilla. He added that this first city is estimated to create 200,000 jobs in the future.

-------------------------------------------It is necessary to deal with the reasons for poverty, not simply the effects The whole project was initially going to be supported by Paul Romer and a transparency commission. Romer resigned from the advisory committee because the Honduran government refused to provide the contracts that have been closed. This was a violation of the transparency guidelines. In a public letter the commission stated that they have no ongoing role in the project. The example shows that the concept is fragile. Furthermore, the lack of a democratic system is a heavy drawback. This point is ethically and economically disputable. There is no doubt about the importance of rules for the development and performance of a country but it is also very important to teach the people how to set up good rules. Without this ability it is likely that the whole project will fail. That fact that Romer ignores this point shows how unrealistic the concept is. It is crucial to develop new ways to give developing countries aid and it is necessary to deal with the reasons for poverty, not simply the effects. Ideas like Charter Cities help to illustrate the causes of poverty. Romer is right when he points out that the right rules are important for development. The question remains how to change these rules in an effective and ethical way.

couple of editions ago, I briefly addressed the phenomenon of brands using “weird claims” in marketing communication for food products. Let me explore the concept of positioning beyond the pure food context this time. It�s about establishing a Point of Difference (PoD) in the eyes of the consumer, a Unique Selling Point (USP), a Reason to Buy (RtB). (In case you hadn’t noticed, we marketers like to invent multiple terms for the same concept, preferably ones that can be abbreviated so they make no sense whatsoever to outsiders. Makes us feel like we�re practicing Science.) Often brands can establish fairly obvious PoDs: “our price is lower than our competitors’”, “our quality is better than our competitors’”, “our brand gets you more chicks than our competitors’”. When that becomes difficult however, we need more complex claims to impress the target market. Especially cosmetics brands have brilliant ways to do so. For instance, we all know that bamboo bends easily, but does not break, so it makes sense for Andrélon conditioner to claim that its bamboo extract makes your hair flexible and resilient. I have no clue whether bamboo’s inherent flexible qualities magically transfer to hair when you use bamboo extract (and if it does, I’m going to rub my belly with a brick right now to get a rock hard six-pack), but from a mental association perspective, it simply works. Bamboo automatically links with flexibility and resilience in

text Roger Pruppers -------------------------Roger Pruppers is an Assistant Professor of Marketing at the ­Amsterdam Business School (University of Amsterdam). His ­teaching activities focus on consumer behavior, marketing communication, and brand management.

our minds, which is a relevant association for a hair care brand, and we really shouldn’t think too much about it. After all, neither does the average consumer.

silver ions two years ago), it’s the consumers‘ response that fascinates me: the ease with which we seem to accept such peculiar claims without examining what they really mean.

It becomes more of a challenge to wrap your head around claims when they seem to work just because they sound cool, or because multiple brands use them, so “it must be important!” You’d be silly to buy skin crème without Q10 co-enzyme, BioFlorine, or Retinol Correxion (a fancy word for Vitamin A apparently). The mere communication of such trivial or meaningless attributes seems enough to make a difference in the eyes of consumers, even when they have no clue what the attribute represents or what it does. Mind you, I’m not implying companies using such claims are lying or behaving unethically. I’m quite certain these ingredients perform a specific function; I just wonder whether Trudy Consumer really comprehends that function, and whether that understanding is the reason she buys the product. Let me take you one step further: Nivea Silver Protect deodorant communicates the beneficial PRESENCE of silver ions, whereas the same brand’s Pure & Natural Action line communicates the ABSENCE of aluminum salts. So silver: GOOOOD, aluminum: BAAAAD! Once again, I’m not questioning the underlying veracity of the claim (although you can wonder what made them change the original silver molecules claim to

The Nivea example illustrates an even more interesting phenomenon: the communication of “non-attributes” for positioning purposes. Besides aluminum salts, the Pure & Natural line also focuses on the absence of parabens. Wikipedia tells me parabens are a class of chemicals often used as preservatives in cosmetics. We’re all striving for purity and authenticity these days, and we obviously don’t want any artificial preservatives in our cosmetics, so it makes sense to communicate that your brand does not put parabens in its products. The thing is: I really like the word parabens. Just say it in your head five times: Pa-Ra-Bens. Has a nice ring to it, doesn’t it? It’s obviously too late now, but I would have loved to run an experiment where we communicate that “our products are the only ones with the beneficial impact of real Parabens”! It would be interesting to figure out how far consumers’ willingness (or perhaps even their will) to buy into advertising claims can be stretched before it finally tears. I’m planning do some research with my colleague Jorge Labadie, who sees even bigger possibilities for stretching than I do. “Our brand new skin care line, now with Enriched Uranium: for that Pure Radiant Glow!” You think we could find a market for that?

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-------------------------------------------------------------------------------------------------------------------------------development aid 2.0 rostraeconomica 11 -------------------------------------------------------------------------------------------------------------------------------text Dovile -------------------------image iStockphoto, Ben King from the Noun Project

Dovile is a 3rd year student, pursuing a BSc. in Economics.

Doha: dead or deadlocked? It is understandable that global economic policies take time to take form. However, the current multilateral trade negotiations in Doha have been going on for more than ten years. This delay is not without cost and calls for some serious questions to be raised about the global decision making process.

The current negotiations. In November of 2001 the World Trade Organization launched the ninth round of multilateral trade negotiations after WWII. It was named the Doha round, after the capital of Qatar, where it was started. The process is also referred to as the Doha Development Agenda; since the special feature of this particular round is that its focused on development. In the first meeting statements have been made by ministers, such as “We seek to place developing countries’ needs and interests at the heart of the Work Programme adopted in this Declaration.�, giving hope that this will be the beginning of the end of suffering in so many parts of our planet. The scope of the agenda covers an abundance of regulations, categorized into about 20 areas of trade including agriculture, manufactured goods, intellectual property and services. However, the most substantial issues of trade discussed are subsidies and tariffs. Being highlighted are the agricultural subsidies developed countries give to the local agriculture sector and the import tariffs they charge to protect their domestic markets. All WTO negotiations focus on trade liberalization, which according to economic theory should benefit all parties in the large picture, however, seemingly, not all countries agree. Seemingly, because they claim to support free trade, but find it very difficult giving up their more protectionist policies.

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The Uruguay Round The framework of the Doha Round was largely influenced by questions raised in the previous WTO multilateral trade negotiations process, called the Uruguay Round, which lasted from 1986 to 1994. It was much more complex and broader in comparison to previous negotiations, but was concluded relatively successfully. In this process member countries have started discussing many areas of trade that were not paid attention to in previous rounds. The biggest innovations were made in the areas of trade of services and intellectual property rights. Also agricultural protectionism was tackled, resulting in the elimination of clothing and textile quotas. Even though important breakthroughs were achieved in the round, trade was not liberalized substantially. The Doha Round is often viewed as an extension of the Uruguay negotiations, aimed at finishing the work started in the 80’s.

Unfortunately, self-interest has overshadowed the hopes for a better world and the Doha round went into hibernation in 2008, Today the director-general of WTO Pascal Lamy is calling for deliverable action in almost every speech he gets to give, but the next big meeting is going to take place in Bali, December 2013. Due to this rather long break, many trade experts have declared the Doha negotiations de facto expired. But why is Doha failing when popular economic theory states that the benefits of free trade are abundant?

-------------------------------------------------------------------------------------------------------------------------------rostraeconomica 13 -------------------------------------------------------------------------------------------------------------------------------In 2010 developing and transition economies absorbed more than

50% of global FDI inflows.

-------------------------------------------If all WTO members raised their tariffs to WTO allowed levels, world income would fall by €258 billion Perhaps it’s structural deficiencies. One deep issue Doha has, is the way it is set up. WTO has 157 members most of which are sovereign countries. However there are some separate agents, which are not states like the European Union and Hong Kong. Not only do all 157 different parties, with different experiences and interest have to agree, but also they have to agree on everything at the same time. The Doha round is based on the principle of “single undertaking”, which in essence means that nothing is agreed until everything is agreed. In such large negotiations absolute unanimity on absolutely everything in absolute terms is quite the problem. In fact during a meeting held in Geneva in July of 2008 Doha came near conclusion. However one dispute between the US and India over the trade of agricultural products, ended 10 days of successful negotiations once again without a positive result. Considering the scope of the agenda, it would be far easier to make gradual progress, if countries would be able to agree on smaller pacts and proceed to implementation one policy at a time. This approach was proposed by Australia in 2011, but the “single undertaking” principle still stands today. Another deficiency is WTOs complex and expensive legal system. Around 400 legal claims have been made in the past 15 years, however not one of them came from an African nation, which is a big problem, considering these are the countries the round aims to help. WTO has pledged time and time again to simplify

and reduce the costs of all the legalities, but has failed to deliver any substantial results. Nobody wants to step up. A third, yet crucial problem with the negotiation process is the lack of leadership. Even though the developing world makes up about two thirds of WTO members, the negotiations are dominated by the big players: USA, EU and BRICS. Participation and compromise from the developed world is crucial to achieving a conclusion, however nobody wants to take the lead. In a Bloomberg interview last January, Peter Sutherland, the first director general of WTO, put the blame for the failure of Doha on the US and its lack of leadership. He claimed that the WTO as an organization has fulfilled its role well, but that in particular the USA stopped taking the Doha round seriously. Mr. Sutherland also said that the reason, why all previous multilateral trade negotiations were successfully concluded, is the leadership and active participation of the developed world, especially the US. Perhaps the lack of initiative is explained by the loss of hope of ever reaching a conclusion after long years of debate. Also the depressing economic reality at home, caused by the recent crisis, may require the leaders of countries to focus on domestic issues. However, there are other barriers to free trade emerging at the moment. Just how free do we like our free trade? The last G-20 passionately reaffirmed its commitment to liberalizing global trade, however in reality members have been heading in the opposite direction. After the 2008 collapse of the financial sector and the economic crises it caused, protectionist policies became a growing trend in the same countries that claim to stand against them. For example the fair trade foundation estimated that between the launch of the Doha development agenda and 2010, 47 billion dollars have been given to cotton farmers in the US, Europe, China and India,

with 51% received by American producers. This protects the lucky farmers by giving them an unfair advantage. In fact the best producers of cotton and simultaneously some of the poorest countries in the world are Benin, Burkina Faso, Chad and Mali also refered to as the Cotton-4. 15 million of these countries’ farmers have had to face the ramifications of reduced competitiveness. Furthermore, a devastating 5 million families have been forced out of the cotton trade and into poverty. Unfortunately, this is just the tip of the iceberg. Since a global trade agreement is so hard to reach, more bilateral and interregional agreements are emerging. This means that two or several countries make trade easier between them, but make it much harder for excluded countries to compete. There are many examples of trade agreements around the globe, but the one closest to home is the European Union, which gives excessive subsidies to its farmers. This drives down the prices of agricultural commodities, which induces overproduction in the receiving companies and makes the developing world’s competitive agricultural advantages nearly obsolete. Not only is protectionism a major obstacle on the road to prosperity for the poorest of nations, it is also a disadvantage for the richest. Subsidies and import tariffs allow inefficient companies with high production costs to survive and taxpayers have to pay for it. It was estimated that in 2012 the US subsidies cost 422 euros per member of the population, which sums up to a total of 138 billion. Pascal Lamy blames geopolitics for these inefficiencies. In an interview with The Economist he explained that politicians hesitate lowering tariffs and subsidies, because they need to please their home publics, which do not understand free trade as well as they should. Mr. Lamy illustrated this, by giving an example of people ignoring the fact that the price of a tee shirt is 30% less due to trade liberalization and at the same time blaming WTO for the jobs lost to other countries due to off shoring. Even though the fear of

-------------------------------------------------------------------------------------------------------------------------------14 rostraeconomica development aid 2.0 -------------------------------------------------------------------------------------------------------------------------------Africa’s share of world exports fell from 4.5% in 1980 to


job loss in developed countries is understandable, it is also harming their and others economies. Not willing to take their own medicine. Even though the developed world is reluctant to reduce the level of protectionism in their economic policies, they simultaneously press developing countries to do the opposite. In fact, tariffs and subsidies have been cut in many African and Asian countries, which has created a great misbalance. Rich countries have not met trade liberalization in the developing with the same tariff and subsidy reductions.This has made farmers and manufacturers in poorer parts of the globe even more exposed to the negative consequences large subsidies for western farmers cause. The round has aimed at inducing growth by making it easier for underdeveloped countries to export their products. However the reality is that it became harder for them to protect domestic markets and producers from imports coming from developed states. Furthermore, industries, both agricultural and manufacturing, in the developing world are in many cases still in their infancy. Due to this reason, it would make sense for them to be protected against the wellestablished western ones. However the unfairness and one-sidedness of what has happened in the Doha round so far has arguably made developing countries worse off. What are we doing about this? In the beginning, the Doha round had been supposed to be the Seattle round, launched in 1999. A mass of activist protests, which lasted for several days on the streets of Seattle forced WTO ministers to delay the negotiations and move to Qatar. The protesters were not against free trade, but saw the injustices in the decision making process. That was 13 years ago, today trade protests are basically non-existent. Instead, we buy fair trade chocolate, donate money to UNICEF and order more lattés at Starbucks when they decide to give a small

in 2007.

percentage of the price to a development cause. Unfortunately, these kind yet tiny actions of charity create an illusion that we have done our part in helping our fellow human beings. What developing countries really need is a strong civil society like in developed nations, which would push for real political change that would make the global economy not only more efficient, but also more fair. Perhaps Pascal Lamy was right stating that it is the lack of knowledge and understanding that is killing the Doha Development Agenda.

-------------------------------------------2009 saw global trade take such a big hit, that it was called the Great Trade Colapse So should we burry Doha for good? Despite all the problems multilateral trade negotiations have, there may be hope left. The developed world is facing a crisis of mass proportion and the most effective and sustainable way to spur economic growth is efficient production and trade. Recently economists have been stressing that better trade around the world is crucial to ending the economic mess we are all in today and sparking the recovery. Perhaps this will encourage ­ world-leading economies to take development seriously, provide leadership and promote the benefits of global free trade in their home countries. The Doha round and its focus on development were inspired by the surge of solidarity after the devastating 9/11 attacks. Hopefully the current crisis will remind us that we are all in this together and bring us back on track towards building a more inclusive and fair global economy and society. Otherwise, the Doha round will only go round and round and round…

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Two students Who GET AHEAD BY GoING abroad Nike: I’m really happy to have lived in Milan and actually dreaded the moment that I needed to go home How is the academic climate? Bocconi is a really good university. They have a lot of amazing guest speakers, I had a guest lecture from Christian Wulff and Mario Monti opened the Academic Semester. Probably partially because it is a private university, all students are ridiculously ambitious and motivated. Moreover, the lectures are very interesting, because many professors worked at high-end companies (McKinsey, Armani) before starting teaching at Bocconi. How is Bocconi socially? I’m really happy to have lived in Milan and actually dreaded the moment that I needed to go home. Bocconi organizes many things for exchange students (mainly parties and trips). To be honest, I didn’t participate in those, because I’d prefer to experience the ‘real’ Milan and Italy instead of the touristy and ‘shallow’ version that is seen when most of your social life revolves around the ESN (Erasmus Student Network) activities. Milan itself is a city that might seem a bit harsh at first, but when you get to know your way around and get

into the network of students and young workers, it is an amazing and vibrant city to live in. Should students go on an exchange? I would recommend it to anybody, since it is an amazing experience. You learn a lot about yourself and you have time to travel around. Was it difficult to arrange the exchange? Going abroad obviously requires quite some preparation, but overall I think it is quite straight forward and easy. For more information on studying abroad visit

---------------------------Madalina: It taught me to be creative and take initiative and I proved my abilities to a potential employer Madalina Tafta from Romania completed the Finance programme at the FEB. She did a nine month internship at ABN AMRO in Amsterdam. How? I got the contact information from the Internship Office and sent my CV directly to the manager I would

Nike Festen Exchange at Bocconi University in Milan.

Madalina Tafta Internship at ABN AMRO.

be working with at ABN AMRO rather than to ABN’s HR department. This saved a lot of time. After an interview with the project manager at the bank I was able to start right away. What? I was assigned to a project that dealt with the demerger of ABN AMRO and the Royal Bank of Scotland. I assisted various departments such as Finance, IT and Legal by providing them with the necessary information for the transition. I monitored charges to the bank for the demerger process. I would prepare a case and negotiate with the opposite party to determine how much ABN AMRO should pay for certain services. These negotiations were what I enjoyed most about the internship. can win. Afterwards I was offered another job at ABN AMRO dealing with the merger of Fortis Bank. Why? The internship was a valuable experience on many levels. It taught me to be creative and take initiative and I proved my abilities to a potential employer. It was the next step in my professional learning process: applying academic knowledge in the workplace. I received good feedback from my manager and I’m now a business analyst for Dutch private clients of ABN AMRO’s Finance department. Find the full interview on


Mazars is ontstaan uit een fusie tussen Mazars en Paardekooper&Hoffman

Naam: Rory van ’t Schip Leeftijd: 26 jaar Opleiding: Masteropleiding Accounting & Control en Postgraduate opleiding Accountancy aan de VU (deeltijd). Afgerond in 2012. Aantal jaar werkzaam binnen de accountancy: 6 jaar Aantal jaren werkzaam bij Mazars: 2 jaar Huidige functie: Junior Manager Audit & Assurance bij Mazars Accountants- en belastingadvieskantoor.

Hoe ben ik bij Mazars terechtgekomen? In 2007 heb ik de opleiding Accountancy aan de Hogeschool Inholland in Diemen afgerond en ben ik gaan werken bij een klein accountants­ kantoor in Amsterdam-Zuidoost. Daarnaast ben ik de masteropleiding Accounting & Control en postgraduate opleiding Accountancy aan de VU gaan volgen. In 2010 heb ik de overstap van een klein kantoor naar een middelgroot kantoor ge­ maakt en ben ik dankzij de positieve verhalen van collega’s en studiegenoten, bij Mazars terecht gekomen. Ik werk nu ruim 2 jaar met veel plezier bij Mazars en ben momenteel werkzaam als Junior Manager op de Audit & Assurance praktijk in ­Amsterdam. Wat het werken bij Mazars leuk maakt is de informele en persoonlijke sfeer en de ‘Rules don’t Rule’-mentaliteit. Bij Mazars draait het om creativiteit, regels zijn er niet om je achter te verschuilen maar om er op een crea­ tieve manier mee te spelen. Daarnaast zorgt de omvang van Mazars ervoor dat er genoeg ruimte is voor doorgroeimogelijkheden. Ik ben blij met mijn keuze voor Mazars. Hoe ziet een gemiddelde werkdag er voor jou uit? Hoe mijn werkdag eruit ziet is afhankelijk van de periode. Zo ben ik in de zomermaanden voor­ namelijk bezig met het voorbereiden van de con­ troles voor het nieuwe jaar. In deze periode ben ik veel op kantoor en ga ik af en toe bij klanten langs om de controle voor het komende jaar te bespreken. Tijdens zo’n gesprek probeer ik er­ achter te komen welke gebeurtenissen er bij de klant gaan plaatsvinden en hoe wij de klant daar­

bij kunnen ondersteunen. Daarnaast wordt ook de risicoanalyse gemaakt en bekijken we met het gehele team hoe de controle dit jaar wordt aangepakt. Na de zomer richt ik mij voornamelijk op de ­interim controles bij klanten. Tijdens de interim controle ben ik voornamelijk bezig om processen te analyseren, ter voorbereiding op de daad­ werkelijke controle. Tijdens deze periode houd ik me bezig met het aansturen en reviewen van het team, besprekingen met de klant en het schrij­ ven van rapportages over onze bevindingen. Het leuke aan deze periode is dat je meestal elke week bij een andere klant op bezoek bent. In mijn functie komt het zelfs voor dat je in één week, bij meerdere klanten langs gaat. In het voorjaar ben ik voornamelijk bezig met de controle van de jaarrekening. Dit houdt in: het aansturen van het team, de controle van de moeilijkere posten, besprekingen met de klant en het schrijven van rapportages. Zoals je merkt zijn er veel diverse werkzaamheden te doen en dat maakt het werk ook zo aantrekkelijk. Geen dag maar ook geen klant is hetzelfde. Heb je nog tips voor studenten die ­accountant willen worden? Denk je dat accountancy iets voor jou is? Kom dan eens een dag met ons mee lopen of kom naar een van onze inhousedagen. Op deze manier maak je op een leuke manier kennis met ­accountancy en met Mazars. Neem voor meer informatie contact op met Glenn Holster, tel. 088 277 23 54 of stuur een e-mail naar ­

⎥⎦W.we∼ kΨn bijm Εza rs.⇔ ←

Ga verder met Mazars.

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Tourism for a better world? D

oing social projects in developing countries during the holidays is becoming increasingly popular – but does it really make a difference? Recently, several people in my surroundings decided to go abroad for the summer to help out in developing countries. One of them, for example, went to Ghana to teach about HIV prevention in a rural village, another took part in a turtle preservation program in Costa Rica, and a third taught English to refugee children in Thailand. When questioned about their motives for taking on a volunteer job in a developing country, the most common answer was: to travel, to have fun and to do small-scale development aid. Now it could be that the people around me are special, yet it seems to me that participating in volunteer tourism, as the phenomenon is called, is getting more and more popular among students. A quick

search on the internet showed me that this is true. AIESEC, a wellknown student-run internship organization, reports a steady increase in students going on exchange with them, some of whom go on what they term a volunteer exchange. In fact, according to numbers from the Association of Tourism and Leisure Education, there are now 1.6 million volunteer tourists per year, 70 percent of which are between 20 and 25 years old and 90 percent of whom go to Asia, Africa or South-America. Clearly, this is a growing market that seems to offer a win-win situation for everyone, with a novel experience for the volunteers and aid in kind for the developing countries. However, the economist in me cannot help but wonder whether this is really the case. It seems reasonable to assume that volunteer tourists largely reach their goals of traveling and personal development, yet I am a bit more skeptical as to

text Ruben Slot -------------------------illustration Keely Huis in 't veld

Ruben Slot is a 21-year-old Bachelor student in Economics and Physics.

whether students can actually make a difference by working in a developing country. After all, universities are not exactly known for the wide array of down-to-earth practical skills they teach their students, and most of us have little experience with development aid. The literature on the subject is rather specific, mostly focusing on one particular project, such as participating in a social work project in South Africa or in an infrastructure program in rural China. However, a certain picture does emerge after reading several papers and talking to some people who were volunteer tourists themselves: a lot of well-meant initiatives fail due to a few persistent problems. A prominent issue is a general lack of preparation on the side of the volunteers. To live and work in a developing country is a challenge in itself that requires careful planning and a good idea of what to expect. For one thing, life in the developing world is typically less organized than we are used to. Job descriptions may not match the actual work that needs to be done and the definition of a personal working space might not be the same as here: One volunteer recounts that instead of receiving a cubicle with a computer,

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---------------------------A team of German economics students set up business plans for clothing shops in Ghana without realizing Ghanaians usually sell their clothing from portable baskets rather than shops she was told that her working space was on the roof of the building and that she could bring her own pillows there to sit on. As another example, a team of German economics students attempted to execute a business plan they had set up for a clothing shop in Ghana. It was only when they arrived that they discovered that there were no clothing shops there and that the women sold the garments from baskets they walked around with. Such differences between expectations and reality can be quite demotivating to students and the cultural misunderstandings can drive a wedge between them and the local population. Related to this problem of preparation is the dearth of useful

skills that students have. Most students are enthusiastic to help out, but there is typically not a lot of work they can do. They often also do not speak the local language, which prevents them from effectively doing useful things like teaching English. What most communities require are people with specific skills, such as architects, doctors or individuals with experience in setting up a tourist business – not unqualified young people without work experience. In general, development workers should do work that the local community is unable to do – there is no point in bringing in western people to do work that locals can do themselves, as this would only takes away jobs from them. Thus the students’ lack of skills could cause them to become a burden rather than an asset to the community they work in. All these problems are exacerbated by what the literature and my panel of volunteer tourists see as the biggest problem: the short time

period available to most students. The two to three months during summer are generally not enough to fully acclimatize to a country, understand its culture and its needs and gain the skills necessary to work there. Volunteer tourists that stay longer have a greater chance of getting out of the holiday mood and into the working rhythm, to learn the language and to make a difference. So it seems that there is little to be gained for developing countries through volunteer tourism. What remains are the lasting impressions that living in a developing country leave you, the experiences gained by working in a different culture and the feeling that you have explored a part of the world. Whether these things still make volunteer tourism a worthwhile experience is a question that I cannot answer, but most volunteer tourists seem to believe it does – as long as they realize it is a lot more tourism than development aid.

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Message from sebastiaan

4 Active Members

sefa front

Dear Rostra reader, We can look back on a successful start of this academic year. As you may have noticed, the Career Month is in full swing. We started of with the Sefa Conference. Several interesting speakers spoke about this year’s theme: “Power, Corruption and Compliance”. There were also two interesting panel discussions guided by Room for Discussion, our weekly discussion platform in the E-hall. The Sefa Career Month continued with several career events, all aimed at letting students of the specific study fields of the FEB get into contact with their future employer. The Accountancy Tour is held throughout the month, with visits to the Big Four firms as well to several smaller accounting firms. Further, the 36-hours challenge in finance

Masters of Finance just took place with visits to renowned firms like ABN Amro and Kempen & Co. The Consultancy Event and Amsterdam Marketing Challenge both take place at the end of November. The Consultancy Event will consists of solving challenging cases for strategy consultancy firms such as the Boston Consulting Group and Booz & Company, while the Amsterdam Marketing Challenge gives students the chance to get into contact with, among others, Heineken and Unilever. However, not only the Sefa Career Month kept us busy. Our board, which was officially installed last June, has worked all summer long for the demanding months of September and October. During the summer, our famous Faculty Camp gave our new freshman students the possibility to get to know each

Become active and move into another dimension Our active members organize our events; people that are working on the organization of these events in teams, aiming to learn the skills you won’t acquire through studying alone. Gaining these skills and

other before starting their studies. Other introduction activities were organized as well, such as a drink during the Intreeweek and the traditional Kick-Off Event. Further, the new “Zo Goed Als Nieuw” (Z.G.A.N.) is also filled with 22 first-year students, who are going to organize most of our social activities. By doing this, they already gain an extra dimension to their studies in freshman year. This will definitely help them out in their future careers. Throughout their study life, they will gain the experience Sefa offers to our active members. With kind regards, On behalf of the 91th Sefa board, Sebastiaan Klein Chairman Sefa board 2012-2013

experience is proven to be of great importance in your future career. It is a way to change and develop who you are. Sefa is the perfect place to do so; we are an organization with over 4000 members, of which 200 active in organizing one of our 65 events. If you are interested in organizing one of our events, please send an e-mail to You can find more information on

and their experiences In January Sefa will start the second big recruitment period of the year. Several committees should be filled with new ambitious students. The following committees will be open: Amsterdamse Carrière Dagen, Sefa Career Month, Voluntary Committee, List Sefa, International Student Career Event, International Development Project and several social committees. Four active members would like to share their experiences gained by participating in a Sefa committee:

I am the promoter of the Sefa Career Month. My task is to find out a good way to promote the events of the Career Month. In the beginning you have to be really creative to compose a theme and invent several ways of promotion in this theme. You can be really creative, but your ideas also have to be realistic and convenient. Sometimes that is a difficult combination. When you find out the best plan, there is a new exciting part. You will get in contact with a designer to translate your plans into real promotion material. There will be a lot of adjustments, but finally you and your committee will have a great campaign. Denise Oomen Bachelor Fiscal Economics

As the chairman of the Consultancy Event, I am among others responsible for the overview, planning and weekly meetings of the committee. It is really challenging to manage different opinions so the optimal decisions for the event are made. I check if everybody has done their work and arrange teambuilding activities. When necessary, I jump in to help out the other committee members. Being the chairman of this committee, one of the things I enjoy the most is to see the whole come together. The committee members develop themselves both within their function and as a team. Therefore I would recommend everybody interested in doing something besides their study to do a committee. Sefa has several committees; possibly there is one of interest to you! Wesley Kuiper Bachelor Economics and Business I am the treasurer of the Amsterdam Marketing Challenge. One of my most important tasks is to compose the budgets for the committee. This is a real challenge, since you have to cope with large amounts of money and the expenses change often. Therefore you have to be precise and plan well. Next to this, I was

responsible for the documentation of the contracts of the participating companies. This requires a very structured approach and a disciplined attitude. One of the side tasks I liked most was finding a location, which isn't as simple as it seems. All together I think it will be a great event! Charity Miller Bachelor Economics and Business By being active in the Amsterdamse Carrière Dagen committee, I have developed skills which I use every day during my current job. Skills that you won't acquire through studying alone; working in teams, communication, negotiation and more. Good grades are not enough; you have to prove that you have developed serveral other skills in order to distinguish yourself. This was the main reason for me to become active. After organizing the Amsterdamse Carrière Dagen and being a board member, I'm now working as a Management Trainee at KLM. To be interesting for high-level companies like KLM, active membership is important. Sofie Jansen Past: Amsterdamse Carrière Dagen 2007, Sefa board 2007-2008 Current: Management Traineeship at KLM

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Activities 1

1. Recruiters Event. 2. Active Members weekend. 3. Room for Discussion. 4 & 5. Sefa Faculty Camp.

-------------------------------------------------------------------------------------------------------------------------------rostraeconomica 23 -------------------------------------------------------------------------------------------------------------------------------Active Members weekend Twice a year, Sefa organizes a marvelous weekend for his active members. The committee, combined with one coordinator of the board, brought us this year to Frysl창n. The weekend was unforgettable. Two nights and days we enjoyed ourselves in the Dutch polders. Friday we started with a great theme party, followed by an amusing boat trip on Saturday, before we took over the local bar in Heeg.





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text Corneel den Hartogh -------------------------photo Rodrigo Gelmi (

Corneel den Hartogh is 22 years old and studying Philosophy of Social Sciences. He wrote his bachelor thesis in South Africa on township entrepreneurship.

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How the poor can rise out

of poverty

by themselves Due to a diverse range of processes, cities in developing countries have experienced an extreme growth in population. This has led to informal settlements on the outskirts of these cities. It is estimated that nowadays one billion people live in these slums.

The names of these settlements differ per country; in Brazil they are called favelas, in South Africa townships and in Chile campamentos. They all have one thing in common: The inhabitants have no legal property. In the words of Hernando de Soto, director of the Institute for Liberty and Democracy (ILD), these people’s actions should be called ‘extra-legal’. So the question is: how can the situation of people living outside the law and in poverty be improved? Washington Consensus and Criticism The ‘Washington Consensus’ refers to the policy prescriptions for developing countries of institutions like the International Monetary Fund (IMF) and free-trade advocates in the 80’s and 90’s of the last century. Developing countries that were not able to pay their debt anymore were forced to open up to market forces and investment following standard models in economic science. Labour laws had to become more flexible to allow for more entrepreneurship and business. However,

Some buildings in a Brazilian favela.

contrary to western belief, increasing capitalism did not alleviate poverty. The standard models did not seem to work in the developing world. Criticism from the left rose along with an increase in informal settlements. In his book ‘Planet of Slums’, Mike Davis argues that there are structural problems that need to be solved. Without proper education, infrastructure and social rights, capitalism only helps the rich. The idea that the poor could be seen as entrepreneurs is also rejected; they are just ‘actively unemployed’. They are survivalist entrepreneurs and, in the eyes of Davis, the informal sector is made up of ‘poor exploiting the very poor’.

-------------------------------------------One billion people have no legal property The other path De Soto disagreed with both views. While he recognized the failure of the ‘Washington Consensus’ he acknowledged the successes of capitalism in the developed world. In addition, De Soto dismissed Davis’ idea that the situation of the poor was hopeless. When he went into the slums of Lima (Peru) he saw pro-active and creative entrepreneurs, not desperate survivalists. It made him wonder why capitalism and free markets had

failed to bring prosperity to areas outside the west, so he took a closer look at the factor of production, capital. He decided to start with explorative research on three fundamental questions: What exactly is capital? How is it raised? And how can it help to alleviate poverty? What is capital? De Soto defines capital as the legal representation of assets: ‘It invites you to go beyond viewing the house as a mere shelter – and thus a dead capital – and to see it as live capital. (…) It represents the non-visible qualities that have potential for producing value.’ When this capital is made formal in a large transparent legal system, everyone in this system can determine the potential value of an asset. When there is no legal framework, there is no protection against fraud. Therefore, the probability of fraud and thereby the overall risk of business is much higher. The result is that businessmen in the informal sector deal mostly with businessman they already know. Before dealing with other businessmen a lot of time is needed to build the trust that is necessary without a legal system. Establishing Capital To assess the difficulties in establishing property rights (and thus capital) in these informal settlements, De Soto and his colleagues tried to register a business in Peru. They had to go through endless bureaucracy at

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Hernando de Soto has written ‘The Other Path’ and ‘Mystery of Capital’ and his work is widely recognized in academic and political circles.

government agencies which took them years. The same holds for the registration of real estate. Those who want to build proper houses in these informal settlements are in this way demotived. Since they do not officially own the land they build on, they live in constant fear of removal. This also has as a consequence that they are unable to get a mortgage or official registration. The result is that building proper housing, has for the poor zero return on investment. Hence, for those living in the worst circumstances, improving living conditions is economically penalized!

-------------------------------------------The slums of Lima are full of entrepreneurs In places in which the direct costs of formality (i.e. acquiring the official documents, paying the taxes on property) are too high, the indirect costs of informality come into play. According to De Soto: ‘the poor cannot sell shares, secure formal credit, limit liability or obtain insurance’. Therefore, people in the informal sector have to trust each other completely when doing business since there is no law to protect them. As a result, the poor in developing countries have developed ‘social contracts’. These contracts are unwritten and can be compared with ‘gentlemen agreements’ to ensure some, although still

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limited, stability in business. These social contracts, which had no place in the models of western economists, were neglected by policy-makers from institutions like the IMF. Poverty Alleviation In order to find out why capitalism thrived in the west, De Soto investigated the history of developed economies. He found that two centuries ago in England the migration of great numbers of rural inhabitants into the cities also resulted in social unrest and extra-legal lives. The state supported guilds that protected their own markets and did not allow new entrants. However, due to the lower cost of production of informal businesses, the guilds ended up outsourcing their work to the informal settlements. As the integration of the formal and informal sector developed, guilds were forced to open up. Another example comes from the United States (US) which already had an extensive English legal system in place that was not, however, suited for the local particularities. For instance, in England all the land was already in use, while in the US most land was vacant. The settlers that built farms on this land were able to demand the property rights since they added value to it. Over time, more people agreed and democratic representatives started to propose land reforms. It took a long time before the system embraced the ‘social contracts’, but it was necessary to restore social stability. In the words of De

Soto: ‘Governments are powerless to enforce legal codes when most people operate outside the law.’ Conclusion De Soto’s advice is clear: When the poor have access to capital, they too can reap their share of the benefits of capitalism. Government officials should embrace the social contracts and integrate them into the existing laws. This would result in a legal system that has a low cost of formality. When this is done successfully, the next step is to register all the businesses in the informal settlements. Once the poor have a place in the legal system, they have capital, and once they have capital, they can build on it more easily. And when they increase their own capital, the poor can rise out of poverty by themselves. This culminates in the De Soto’s mantra: ‘The poor are the solution, not the problem.’ For economists outside development studies there is a lesson to be learnt as well. Models cannot be applied universally. It remains important to investigate the local situation and incorporate particularities. Also, it is not helpful to label the poor as victims. Instead, we should develop specific economic frameworks wherein the poor have the possibility to improve their position. The methods of De Soto could in this way be relevant for an analysis of the situation of South Europeans countries as well.

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text Floris Dekter -------------------------photo Flickr

Floris Dekter is 25 years old and currently pursuing a MSc in International Management.

The Ya$uni project

-------------------------------------------------------------------------------------------------------------------------------rostraeconomica 29 -------------------------------------------------------------------------------------------------------------------------------Preliminary seismic studies show massive depots of crude oil accounting for


of Ecuador’s oil reserves lying under Yasuni National Park.

The population is divided over whether or not Correa will actually drill in Yasuní, but as they wait, some people have decided to add to the myriad of graffiti art in Cuenca and let their voices be heard.

an innovative development strategy The Ecuadorian government has put forward an ambitious conservation plan to leave untapped more than 900 million barrels of crude oil – 20% of its national reserves – in exchange for international donations in order to preserve one the most biodiverse spots on Earth.

Ecuador, a poor country ridden by high levels of inequality, is blessed with two major natural resources: significant amounts of oil – which are its main export product – and rainforest. As a member of the OPEC cartel, it exports 285,000 barrels of crude oil a day, which account for approximately one-third of all Ecuadorian tax revenues. Ecuador’s ecological wealth is manifested in some of the most diverse and valuable rainforest of the Amazon, with the Yasuni National Park being the most important remaining jungle area for it is considered one of the most biodiverse places on Earth. What’s the problem? Because the two resources overlap geographically, a common trade-off

between ecological issues and economic wealth arises. Preliminary seismic studies show depots of crude oil accounting for 20 percent of Ecuador’s oil reserves lying under Yasuni National Park. Preserving the unique Yasuni rainforest would therefore result in a significant loss of resources and wealth - it is estimated that the oil could easily earn Ecuador over 10 billion dollars - needed for Ecuador’s economic and social development. Giving in to these economic pressures could however result in irrevocable damage to the rainforest. The destructive patterns seen in other areas are striking and include the building of pipelines, wells and roads. Furthermore, potential oil spills and accidents form an additional risk as the pollution of vast stretches of the

Ecuadorian Amazon by oil giant Texaco has shown. The company currently faces a 27 billion dollar lawsuit over the damages inflicted in the 1970s and ‘80s. Overall, the development dilemma that Ecuador is facing seems to be part of a more global phenomenon as it is experienced by many developing countries. What’s the solution? In Ecuador, there seems to be a way to overcome this development dilemma. Ecuadorian president Rafael Correa presented a plan by which Ecuador will refrain from extracting the oil contained in Yasuni in exchange for international donations by public and private actors – worth 3.6 billion dollars – which would go into a capital fund administered by the United Nations Development Programme (UNDP). The so called Yasuni-ITT initiative would conserve Yasuni’s unique biodiversity, prevent the emission of carbon dioxide, while at the same time enabling Ecuador to capitalize on its resources. How should we perceive such a plan? Some accuse Ecuador of environmental extortion or

environmental blackmail. Other concerns focus on the long-term political instability of the country and the disputable reputation of its leaders. Who is to say, for instance, that Ecuador will fulfil its commitment after receiving the 3.6 billion dollars? The various cases of expropriation of oil fields and the defaulting of bonds are to be kept in mind when trying to answer that question. I would, however, argue that one cannot ignore the essential justice of the plan and a more positive attitude towards it seems more appropriate. Two perspectives are particularly interesting. First of all, the Yasuni ITT project provides Ecuador with an economic alternative to the model of development based on the export of raw materials, whose risks were exposed by the economic crisis of 2008. Capitalizing on rainforest has an enormous advantage as opposed to extracting oil. This is due to the fact that it does not infringe on the long-term capitalizing potential of its other major resource, for the oil remains in the ground. Moreover, the initiative offers a potential alternative to the ineffectual efforts of the United

Nations (UN) to deal with environmental issues concerning emissions of carbon dioxide and greenhouse gases. It is in this second argument that the essential justice of the plan becomes really clear as I will explain in the next section. Why should the international community concur? The Yasuni initiative reassesses current global ethics on coresponsibility when thinking about the administration of global goods. This is an important dimension of the essential justice of the plan because we all have an inherent stake at preserving ecological wealth. The United Nations Environment Programme (UNEP) estimates that 40% of the global economy is based on biological products and processes, biodiversity loss is therefore increasingly becoming a global concern for businesses. So, if all benefit from this global resource, the financial burden of protecting it, can’t lie solely with the developing nations where it is to be found. Here lies however an essential problem, for the trade-off between environmental issues and economic gains does not exist for the international community. Since

the international community can consume the assets generated by the rainforest for free, there is no incentive to contribute to an initiative which contradicts their economic need for oil. An additional problem is that assets like clean air are intangible and therefore hard to capture in economic terms. Whether international actors experience the moral obligation in the same way as presented by Correa remains to be seen. But although the chance of success seems slimmer every day – merely 3.6 million dollars has been committed so far –, the environmental and economic issues raised by the Yasuni project remain. South America is becoming an increasingly important oil producer, often neglecting its other main natural resources. The Yasuni initiative has consequently moved to the frontline of a global battle between ecological wealth and fossil fuels. Perceiving the initiative as an economic strategy for developing countries to ensure capitalizing on resources in order to prosper while at the same time preserving a global good, could help win the battle in favour of all.

-------------------------------------------------------------------------------------------------------------------------------30 rostraeconomica development aid 2.0 -------------------------------------------------------------------------------------------------------------------------------tekst Maaike Boot -------------------------beeld iStockphoto

Maaike Boot is 21 jaar oud en derdejaars studente algemene economie

De (verloren) magie van microkrediet M

icrokrediet. Het woord zegt het eigenlijk al, een microkrediet is een kleine lening. Een zoekopdracht naar microkrediet via Google levert ruim 300.000 resultaten op. Mijn vermoeden dat de term microkrediet niet zo simpel is als dat het klinkt, wordt bevestigd. Ik lees dat Muhammad Yunus in 2006 de Nobelprijs voor de Vrede won met zijn werk over ­microkrediet en zie dat tientallen organisaties de dienstverlening aanbieden. Een kleine speurtocht op het internet vertelt mij dat microkrediet dé dienstverlening is voor arme ondernemers in ontwikkelingslanden die ook zonder onderpand in aanmerking kunnen komen voor een lening. Het klinkt als een magisch sprookje en mijn nieuwsgierigheid is gewekt. Een kritische duik in de wereld van het microkrediet. Een wereld zonder armoede We worden groot gebracht met economische theorieën die ons zouden moeten helpen om de wereld te begrijpen, maar wat heb je aan deze, op papier zo mooie, ­theorieën als het overgrote deel van de wereld in ar­ moede leeft? Dat moet ook Muhammed Yunus hebben gedacht toen hij in 1999 de Graheem Bank oprichtte in Bangladesh. De eerste bank die arme mensen zonder

o­ nderpand toegang gaf tot de kapitaalmarkt, zonder al te veel gedoe en zonder ingewikkelde formulieren. Zijn doel was het creëren van een wereld zonder armoede, ­zodat echte armoede later alleen nog maar in een ­museum te zien zou zijn. Een simpele oplossing voor een wereldwijd probleem. Een mooi alternatief voor ­lief­dadigheid, dat volgens Yunus niet de oplossing is voor armoede. Liefdadigheid maakt mensen lui, het neemt initiatieven weg. Microkrediet daarentegen, zou ervoor kunnen zorgen dat de ondernemer in ieder mens wordt wakker geschud. Thomas Dichter, ontwikkelingsconsultant, beschrijft het ‘magische’ idee als volgt: “Je geeft arme mensen een beetje geld, dat investeren ze, ze verdienen geld en betalen de lening terug. Mooier kan toch niet? Een bijna kosteloze investering en pats: ­ de armoede is weg.” Het succes van microkrediet In de eerste jaren na de oprichting van de Graheem “platteland” Bank blijkt het verlenen van microkredieten een groot succes. De microkredietinstellingen beperken zich niet langer tot de grenzen van Bangladesh. Ook grote beroemdheden als Bill Clinton, U2 zanger Bono en prinses Maxima lijken er geen moeite mee te hebben

om hun naam te binden aan deze nieuwe financiële dienstverlening. Voor mij blijven er echter toch wat vragen onbeantwoord. Ik lees dat de microkrediet-instellingen in de begin jaren van hun bestaan een aanzienlijk hoog aflossingspercentage van ruim 95% hebben, een percentage dat bijna onhaalbaar lijkt zonder onderpand. Het geheim blijkt hem te zitten in het feit dat groepjes binnen de samenleving garant staan voor een lening, ­zodat sociale druk er voor zorgt dat de leningen worden afgelost. Mensen zijn bang om niet af te lossen en op tijd aflossen is daarmee de norm voor het verlenen van ­microkrediet. Deze techniek is tot dan toe uniek en zelfs de grootste financiële instelling van de Verenigde Staten, de Citibank, is onder de indruk: aflossingspercentages van 95% zijn zelfs voor hen, met onderpand, lastig ­haalbaar. Miljoenen mensen over de hele wereld lijken baat te hebben bij de kleine leningen die worden verstrekt. ­Succesverhalen over arme mensen die van het geld dat ze lenen telefoonwinkeltjes openen, huizen ­bouwen of koeien kopen: het lijken stuk voor stuk geen uitzonderingen. In 2006 wint Yunus dan ook de ­Nobelprijs voor de Vrede, omdat zijn werk over Microkrediet economisch en sociale verandering van onderaf stimuleert.

Vraagtekens Er is echter geen lening die niet gepaard gaat met een schuld, een besef dat binnen de samenleving in de afgelopen jaren een steeds groter draagvlak heeft gekregen en waar ook de voorstanders van microkrediet hun ogen niet meer voor kunnen sluiten. Angst om niet terug te kunnen betalen, te investeren in de toekomst of te worden buitengesloten van de groep zijn enkele voorbeelden van de negatieve gevolgen van het hebben van een schuld. Mensen in ontwikkelingslanden houden net zo min van schulden als mensen in de Westerse wereld en steeds meer mensen vragen zich af of we met het verlenen van microkrediet niet onze ideeën over leven op ­basis van schuld op het armere deel van de bevolking ­afschuiven. De eerste echte vraagtekens over het succes microkrediet lijken zich te vormen, groter te worden en zijn steeds nadrukkelijker aanwezig in het debat over de magische werking van Microkrediet. Kritiek Leningen die worden gebruikt voor persoonlijke consumptie, wrijving binnen samenlevingen en woeker­ rentes, het is slechts een greep uit de vele kritieken. Het klinkt mooi, een arme naaister die dankzij het

-------------------------------------------------------------------------------------------------------------------------------32 rostraeconomica development aid 2.0 -------------------------------------------------------------------------------------------------------------------------------Woekerrentes lopen soms op tot ver boven de


-------------------------------------------------------------------------------------------------------------------------------FSR page rostraeconomica 33 -------------------------------------------------------------------------------------------------------------------------------The Faculty Student Council found that a lot of students often do not know their rights. Therefore we made a short summary of facts, which we think might be the most interesting for you:

Did you know… ­ icrokrediet wat mooie stoffen kan kopen, kleding kan m maken en weer kan verkopen of wat te denken van de vrouw die dankzij de lening van de Graheem Bank een kapsalon kan openen en inmiddels al een hele keten op haar naam heeft staan; het zijn de succesverhalen die steeds vaker onder de voet worden gelopen door de negatieve verhalen over microkrediet. Stijgende zelfmoordcijfers In 2011 brak in India een crisis uit waarbij iedereen ­stopte met het terugbetalen van de leningen. Dit werd grotendeels veroorzaakt door de overheid, die tegen het verlenen van microkredieten was omdat ze haar eigen leenprogramma’s wilde promoten. De overheid gaf de burgers een vrijbrief om niet langer af te betalen door bekend te maken dat de zelfmoordcijfers flink waren gestegen sinds de microkredieten werden verleend. Om ervoor te zorgen dat de leningen toch werden terugbetaald werd men met zware dreigementen onder druk gezet. Het Microkrediet ondervond hierdoor niet alleen maar een verlies van zijn goede imago, er was nog een tweede gevolg: woekerrentes die soms opliepen tot ver boven de 100%. Hoge rente Doordat er geen onderpand garant stond voor de lening konden er niet al te grote bedragen worden uitgeleend, want dan zou men ermee vandoor gaan. Dit betekende ook dat de lening, net zoals iedere andere grote lening, goed gevolgd moest worden en dit leidde ertoe dat een kleine lening per uitgeleende dollar heel veel meer geld kostte. Om deze kosten te kunnen blijven betalen moet er meer rente worden gevraagd, met als logisch gevolg dat het voor mensen het aantrekkelijker werd om de benen te nemen en zo worden de geldschieters op hun beurt weer gedwongen om nog hogere rentes te vragen. Daar komt ook nog eens bovenop dat er in Westerse landen streng toezicht is op het hebben van een lening, zoals in Nederland door Bureau Krediet Registratie (BKR) gebeurt. In derdewereldlanden ontbreekt deze toezicht echter. Dit betekent dat schulden kunnen worden op­ gestapeld zonder dat iemand daar zicht op heeft. Een

combinatie van deze woekerrentes en oplopende schulden heeft er bij vele mensen toe geleid dat ze liever afstand nemen van hun leven dan de rest van hun leven met de schuld rond te blijven lopen. Meer dan alleen maar een beetje geld Yunus verklaarde bij het oprichten van de Graheem Bank dat mensen uit ontwikkelingslanden net zo goed ondernemers zouden kunnen zijn als mensen uit rijkere landen, sterker nog, in ieder mens zou een ondernemer verstopt zitten die met een beetje financiële stimulans boven zou komen drijven. Op basis van dat idee begon hij met het verlenen van microkredieten. Maar wat als zijn visie helemaal niet op de werkelijkheid gebaseerd is? Heeft iedereen daadwerkelijk een stukje ondernemerschap in zich en zo ja, is een beetje geld alleen dan wel genoeg om dit naar boven te halen? Esther Duflo, ­ontwikkelingseconoom, onderzoekt de effecten van ­armoedebestrijding. In één van haar onderzoeken naar Microkrediet is gebleken dat beginnende bedrijfjes in de beginfase veel baat hebben bij extra kapitaal, maar omdat de leningen vrij klein blijven, zwakt dit effect snel af. “De eerste honderd dollar helpen heel veel, de volgende 100 dollar helpen minder. De organisaties die mensen microkrediet verlenen zijn er niet op ingericht om mensen een grotere lening te geven die ze nodig hebben voor de volgende stap. Zo blijven de meeste bedrijfjes klein.” Het lijkt er dus op dat nieuwe ondernemers in de eerste fasen van het oprichten van hun bedrijf erg gebaat zijn bij het eerste kapitaal, maar dat er voor de volgende stappen in het proces meer nodig is dan microkrediet. Het blijft dus de grote vraag of mensen door micro­ krediet daadwerkelijk uit hun armoede worden bevrijd. We kunnen echter wel concluderen dat Muhammed ­Yunus een goede stap in de juiste richting heeft gedaan. Om de echte kans van slagen van Microkrediet te vergroten moeten we echter nog meer stappen zetten en wellicht dat we dan ooit nog eens kunnen spreken van dé oplossing voor het wereldwijde probleem dat voor­ lopig nog niet de wereld uit zal zijn.

According to the ‘Teaching and Examination Regulations (OER) 2012/2013’ every student is entitled to a representative sample exam with answers (OER, pagina 9, hoofdstuk 5, artikel 5.1.8). This exam must be representative with respect to length, type of questions and content.

That all students should be admitted to a course that is obligatory for their study direction.

That all first year’s students of the programme ‘Economie en Bedrijfskunde’ should get Taped Lectures or Slide casts (or other digital alternatives) that allow re-viewing the main material.


That SIS complaints have to be answered within two working days;

That the prices of the food in the Agora are high because it is organic, consistent with the UvAcontract.

At the Central Student Council, 14 students work full-time to represent your rights at the UvA.

Our year plan with more information about our goals for this year can be found on our website.

Contact details Open office hours E2.09: Tel.: 020 - 525 4384 Tuesday: 11:30 – 12:30 Wednesday: 11:30 – 12:30 Thursday: 11:30 – 12:30 For questions, complaints and feedback you can reach us by sending an email to: For regular updates and information join our Facebook-group:

-------------------------------------------------------------------------------------------------------------------------------development aid 2.0 rostraeconomica 35 -------------------------------------------------------------------------------------------------------------------------------text Klara Keutel -------------------------illustration Yvonne Roos

Klara Keutel (18), Economics & Business, 2nd year.

(Anti-)Devel pment Economics How uncontrolled arms trade can be a restraint on international development

It was a historic moment, when during the first Arms Trade Conference in July, all member states of the United Nations started the one-month negotiations on an Arms Trade Treaty. NGOs, like Amnesty International, had been promoting such a contract for more than 30 years already. But until 2006, when official attempts on the part of UN began, a realization was virtually unthinkable. The central idea behind arms trade regulations is the restriction of weapon transfers to parties or regions where misuse is very likely. And this restriction in turn could help economic development.

Arms trade and international development There are currently about 30 armed conflicts in the world, but besides the Mideast conflict and local battles in Russia none of them takes place in an industrialized country. As a result of these conflicts, every minute a person dies and what’s worse, 80% of these victims are civilians. The weapons, however, originate by a great majority from industrialized countries. The US, Russia, Germany, France, Great Britain (GB) and China are responsible for 75% of the international arms export.   After a first evaluation of the progress so far with the achievement of the Millennium Development Goals (MDG) in 2008, it could be seen that especially on the African continent the implementation of the MDG is far behind the set targets. Since 1990, $300bn of development aid have been invested in African countries. According to estimates presented in a report by Oxfam, IANSA and Saferworld (2007) that is approximately the same amount that got lost in terms of GDP in the affected regions due to armed conflicts.  Considering the fact that the involved countries are importing between 95% and 99% of their weapons from outside Africa it can be assumed that a better

-------------------------------------------------------------------------------------------------------------------------------36 rostraeconomica development aid 2.0 -------------------------------------------------------------------------------------------------------------------------------ATT Past July, the countries of the United Nations came together to negotiate on a universal and consequently binding arms trade treaty (ATT). The preparations started already in 2006 with a general need assessment and opinion survey; in 2007 a group of governmental experts was announced and published a first report in 2008. From 2009 on, a working group of the UN was engaged in drafting a possible contract that manages to an acceptable extent the balancing act between the right of every country to independent export, import, production and trade relations as well as the right of self-defense on the one hand and the pursuit of peace, poverty reduction, security and safety as well as appropriate development in education, health and living standards on the other hand.

regulation of the weapon transfer to these countries could create an environment where development investments were more effective. Cost estimation of armed conflicts There are three cost blocks. First, armed conflicts ask for direct spending on arms and the security system, health care and treatment of refugees and displaced people and on reparations of destroyed infrastructure. These kinds of costs are not directly resulting in a loss of GDP (as they are regular expenditures); however they have high opportunity costs and are therefore also called “unproductive expenditures”. If money, both on governmental and household level, is spent on gunshot treatment, arms purchases and infrastructure repairing, it cannot be spent on education, improvement of major disease treatments (e.g. AIDS and Malaria) and other social services. A treatment of a shattered jaw, for instance, costs around $6000. The same amount would also ensure primary education for 100 children for one year, total immunization of 250 children or finance 1.5 years of studies for a medical student (this case was reported in Kenya). According to conservative estimates, the economy of the affected African countries shrinks

The following points were identified as the main aspects an ATT should cover: • Transparency and accountability about weapon transactions. • No weapon deliveries or production licenses to countries or state (or non-state) parties if it is to be expected that these weapons will be used in a way that is not in line with the Human Rights Law, the Human Law, the International Criminal Law as well as national and local laws of the recipient and origin party. • No weapon deliveries to countries where it is expected to lead to circumstances that constrain sustainable development. • No weapon deliveries to countries that are under an embargo of the Security Council. Every country would be supposed to implement a governmental group that is assessing every transfer situation to its legitimacy. The UN or other countries could be consulted for help any time. Due to objections of, among others, the United States (US), Russia and China, no final contract could have been implemented, yet. However, all members are still committed to the goal of an effective ATT and it is planned to resume the negotiations during the next General Assembly.

with 15% annually, which equates to 150% of the average annual expenditures on health care and education. More severe than the direct costs are the indirect losses due to reduced economic activity because of general insecurity, reduced workforce and capital flight. Moreover, according to different studies, the presence of violent and armed conflicts reduces the touristic attractiveness of a country significantly. As for many African countries tourism is a major source of income (for Kenya it is the main source), this is a marked economic burden. In Uganda, for example,

-------------------------------------------------------------------------------------------------------------------------------rostraeconomica 37 -------------------------------------------------------------------------------------------------------------------------------Global weapon trade facts: • volume of global weapon exports is estimated to be $221bn in the past year (but probably higher, as it is assumed that around 30% of all weapon transactions are unauthorized and therefore not or only insufficiently documented) • On average, there is one weapon every ten people • The most used light weapon is the AK-47 (around 70-100 million worldwide) • 22% increase in sales volume of heavy conventional weapons (from period 2000-2004 to 2005-2009) • No or inconsistent data on worldwide employment level in the weapon industry: After the cold war the total amount of employees in the weapon industry decreased from 17.2 million to 9.2 million in 1996. In Germany the amount of workers decreased from 1990 to now from 290,000 to 80,000; in Great Britain 0.2% of the total work force are employed in arms trade-related jobs. In total, it is assumed, however, that there currently is a rather increasing trend.

There are many problems with the documentation of the international weapon trade: • Barely any financial data to the transactions (e.g. no prices) • No details to contract contents (maintenance, reparation guaranties, (installment) services, follow-up contracts, etc.) • Imports are hard to identify in the military expenditures (or are not documented at all), that is especially a problem in development countries • SIPRI (Stockholm International Peace Research Institute) has the biggest and probably most detailed database on weapon trade, however, cannot provide financial data but only details on volume

the reduction in tourism accounts for 14% of the loss in income. South Africa lost around 22 million visitors in 5 years. Another effect is the destruction of agricultural area and consequently reduced crop yields and livestock breeding. That amounts to 20% of the armed conflict costs in Uganda. Since almost all weapons are purchased from outside of Africa, foreign currency is needed to finance the transactions. However, most of the African countries do not have sufficient funds so the transactions often result in higher debts. The third area of consequences are hard to transform into concrete numbers but nevertheless detrimental

are intangible costs resulting from human suffering and psychological trauma, reduced job opportunities and restricted access to education and public services. Necessity for a better weapon control Arms trade and possession is generally very justified – to ensure state security, defend the country in threatening situations and stabilize the government. It needs to be ensured, however, that the transferred weapons are used for that purpose. There are some conventions, best practice guidelines and positions on arms exports. But they are not binding and therefore not enforceable. A particular problem is also the increasing popularity of production licensing that makes it even harder to control where the weapons are exported to. Moreover, second-hand weapons are almost entirely uncontrollable.  This situation causes problems especially in developing countries where the government is often not able to keep the control over the weapons. Originally state-owned arms often find their way in the hands of rebel and guerilla groups, to private households, and other nonstate parties, resulting in an overall violent environment that deters sustainable development. The ATT could be an important step.

-------------------------------------------------------------------------------------------------------------------------------38 rostraeconomica column --------------------------------------------------------------------------------------------------------------------------------

Dr Joop Hartog

Student happiness, Beijing style


eijing, September 3rd. Above the campus of Peking University the sky is intense blue, a comfortable breeze is blowing, the temperature is just gorgeous. The suffocating atmosphere that can so oppressively hang over the city has been swept away. Offering a cheerful beginning of the new academic year and providing a hospitable reception to the new cohort of students. As if the world has been brushed and polished to shine just for them. With a mixture of timidity, nervous excitement and joy they hang together. During the weekend, many of them were still accompanied by their proud parents. After a competition that essentially started around the cradle, mom and dad were all too keen to deliver their trophy to one of the top universities of China.

A mood of merry expectation pervades the campus. No need to sense any fear for failure, the dropout rate is incredibly low, just a few percent. But the battle to get in has been intense. There is a national exam for admission to universities and the exam grade determines at which university a student may apply. The university then decides who among those with at least the minimum required score shall be admitted. Universities are clearly ranked by academic quality and prestige, higher ranking universities

have more resources and better qualified academic staff. By admitting students on basis of their exam score, the student population has been sorted by quality.

--------------------------Careers simply ­follow from who you know, not what you know The incredibly low drop-out rate is not simply due to incredible effort by students. I was given two explanations. First, the social pressure to succeed is very high. After having been pushed through the race for so long, students will try to avoid failure in the final stage. In a society where respect for parents is so much greater than in our setting, this argument certainly makes sense. The other argument I was given is the high cost of dropping out. The university admission exam is valid only for one round. After dropping out, a student cannot simply enrol in an other program, or at an other university. The student will have to go through the entire procedure again: harsh competition through admission exam and selection by universities, with an unpredictable outcome. This shows clear incentives for students to succeed and avoid

-------------------------------------------------------------------------------------------------------------------------------FEB flash rostraeconomica 39 --------------------------------------------------------------------------------------------------------------------------------

feb flash

photo Jeroen Oerlemans

text Dr Joop Hartog -------------------------Emeritus Professor ­ of Economics ­Amsterdam School of Economics University of Amsterdam Fellow of Tinbergen Institute, IZA, AIAS, CESifo, CrEAM Member KNAW ­Royal Dutch ­Academy of Sciences.

wasting all the effort of the past. Yet, the common perception is not that it is the students’ effort that keeps the drop-out rate so much lower than what we are are used to. Perhaps there is a common understanding among staff and students that admitted students should not fail. In some academic literature, an interesting case is made that in Asia-Pacific countries (like China and Japan), students work hard in secondary school, but not at the university, whereas in the US they would work hard at the university but not in high school. The explanation would be that in the US, careers are made on personal merit, and obtaining valuable human capital is a key requisite for success, while in the Asia-Pacific region, networks are vital. Hence, students have to work hard to catapult themselves into the right network, through admission to the universities that control entry to the network. Careers simply follow from who you know, not what you know. Interesting arguments, interesting hypotheses for further investigation. It’s way too early to call the case closed. But certainly an intriguing perspective on these cheerfull bands of students that roamed the campus in search of a good location for their group portrait. Tied together for life?

Grant for CeNDEF Cars Hommes and Domenico Massaro, researchers at the Center for Nonlinear Dynamics in Economics and Finance (CeNDEF), have acquired an EU FP7 grant for a collaborative project: Macro Risk Assessment and Stabilization Policies with New Early Warning Signals (RASTANEWS).

Arnoud Boot appointed chair of DNB Bank Council Prof. Arnoud Boot has been appointed chair of the Bank Council of De Nederlandsche Bank (Netherlands central bank, DNB). The Bank Council acts as a sounding board for the bank’s Supervisory Board and Governing Board. The president of DNB reports to the Bank Council on general economic and financial developments and discusses policy adopted by the DNB. The Bank Council can then provide its recommendations to the Governing Board. Two members of the Supervisory Board hold seats in the Bank Council, including one who is a government-appointed member of the Supervisory Board. Social policy partners, the financial sector, and independent experts are also represented in the Bank Council.

The project focuses on research about the future of macroeconomic and monetary integration in Europe. The contribution of CeNDEF is aimed at the application of the theory of complex systems for modeling financial and macroeconomic (in) stability and doing laboratory experiments to investigate the (in)stability of financial-economic systems. Twelve European universities are working together on this project. Of the more than 100 grant applications RASTANEWS received the highest rating. The grant is € 2.4M in total, of which approximately € 200K for the University of Amsterdam.

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