News Recap: Economics by Daniel Koudijs
Signs of global economic stagnation accumulated over the past months. Following the stock market crash in China earlier this year, worries of falling growth in China and other emerging economies have caused turmoil across the world. A report published by the CPB, a Dutch economic institute, estimated that emerging market exports fell by 3.3% in the first half of 2015. As a consequence, commodity prices are in a slump, putting strain on economies like those of South Africa and the already troubled Brazil. Furthermore, lowered growth prospects have caused a capital flight from the emerging economies and a depreciation of their currencies against the dollar. The depreciation is devaluing profits earned in these markets and is affecting firms dependent on these profits.
The developed economies have not stayed immune to the turmoil. Aside from losses on the stock markets, companies like Glencore and BHP as well as exporters like Australia and Canada suffer from the low commodity prices. Global concerns were also hailed by the FED as the main reason to postpone what would be the first Federal Reserve Rate hike since 2006. Expectations remain that rates will rise by the end of the year, and the resulting capital flow towards the US is driving up the dollar’s trade weighted index to its highest level since 2003. Meanwhile, negotiations advanced on the TTIP treaty: a trade agreement between the US and EU primarily focused on regulatory and non-tariff barriers. In the long run, TTIP should stimulate growth in both economies by 0,4%, though its road to a final agreement and implementation will be bumpy. Demonstrations against the pact are spreading, including one in Amsterdam last week.
Oreos, Magic, Computers and Business by Artur Rymer
In the area of brands, one of the most entertaining novelties is the launch of the redesigned Pottermore platform. Pottermore is a website that offers many articles and trivia, related to the realm of witchcraft and wizardry. The new redesigned version offers more interactivity and shows that Harry Potter’s story is still very much alive and the brand is strong. It seems that, thanks to technological progress, magic is accessible to us all.
October witnessed the World’s biggest merger in digital industry. Dell Inc. and EMC Corporation signed an agreement that is valued at $67 billion. Together, they will hold an increased share in the markets vital for their operations, including personal computers, software and the IT market as a whole. We will see whether the move will help both companies to compete against other big corporations such as Microsoft, Apple or HP.
American snack-producer Mondelez, most famous for its Oreo cookies, will cut costs and increase investment, aiming at company’s expansion in the upcoming years. Among other plans, Mondelez will focus more on healthy products in response to the growing demand. Additionally, this month, Oreo cookies have entered the Russian market. Perhaps a bit of chocolate will make Russia’s policies somewhat sweeter…
Air France Reorganisation by Fransje Puts
The half-naked pictures of two top managers of Air France, Xavier Broseta and Pierre Plissionnier, that appeared in all media across the world were unfortunately not because of a drastic career switch. Although it sometimes looks like Western society has lost its willingness to protest, employees of Air France knew how to make an impact with their physical attacks on these managers. On October the 5th, a large demonstration took place in front of the Air France headquarters in Paris. The reason for this demonstration was the announcement of a large reorganisation within the airline company, which will result in massive redundancies. By 2020, 1900 of the ground crew jobs will disappear, 700 people of the cabin staff will be laid off, and 300 pilots will get fired. On top of this, multiple long-distance airplanes will be sold. By all these cuts, Air France-KLM intends to save around €2 billion in total.
Volkswagen Scandal by Olga Kowalska
On the 18th of September 2015 US Environmental Protection Agency has informed about the violation of Clean Air Act by the Volkswagen AG. It has been reported that the company intentionally installed software on their 2009-2015 diesel models, which manipulated the results of emissions testing for certain air pollutants. The vehicles were programmed to rejig its engine dynamics to burn fuel in a different mixture to lower its tested emissions under testing conditions. VW admitted to deception and issued a public apology. On 23rd of September Martin Winterkorn resigned of his position as VW group CEO. The stock prices have dropped by more than 50 %, but the price gradually increases since the biggest drop on 2nd October.
The company has voluntarily declared to recall the vehicles in Europe and replace the faulty software, but on 15th of October Germany’s federal motor transport authority ordered a mandatory recall of Volkswagen diesel cars. Moreover, it imposed strict regulatory oversight of actions. In Europe, approximately 8.5 mln cars will have to repaired. Probably, also cars sold outside of EU (around 2.5 mln) will have to be recalled too.
The VW has allocated around $7.3 billion for dealing with the scandal, but the estimated cost can be even higher. In the analysis made by Credit Suisse, in the worst case scenario, the company can lose around $87 billion.
Conflicts of Interests? A Marketing Stunt? Pure Grossness? An Environment Dominated by Shaking Regulatory Practices? Turing Pharmaceuticals Raises the Prices of a Prescription Drug by 4000%. by Vlad Cristian Marin
Back in September 2015, Turing Pharmaceuticals’ CEO, Martin Shkreli – a former hedge fund manager – decided to go hard on his new start-up’s business plan and raised the prices of a prescription drug from $13.5 to $750. Daraprim is a drug in the first line treatment regimen for toxoplasmosis – a disease that affects those with low and damaged immune systems, mostly as a result of cancer treatment or HIV infections – that has been on the market for decades now. As soon as Turing acquired the patents for producing the prescription drug, prices for the medication skyrocketed overnight and angered the population, the political parties, the patients’ representatives and unions and caused a big hysteria on social media and in all news.
In a letter jointly sent to Turing Pharma., Judith Alberg (HIV Medicine Association), together with the Infectious Diseases Society of America, called the price increase “unjustifiable for the medically vulnerable patient population” and “unsustainable for the health care system”.
The company eventually announced in the end that they would substantially lower the prices, following heavy critique and angry manifestos from a wide range of entities. When? How? Is it for real? We will find out soon.
In an unsuccessful and maybe exaggerated attempt to defend themselves, Turing Pharma – eventually dedicated to fighting toxoplasmosis (among others) – cast the load of this outrageous price on their efforts to find alternative medication through research and development (R&D) and on their plans to educate people about the disease. Fair enough? Hard to believe.
Political Power Shifts, the Long-awaited Agreement and a Solution to Be Found by Magdalena Wiśniewska
On September 15th, taking over the Liberal Party leadership from Tony Abbott, Malcolm Turnbull became Australia’s 29th prime minister. On the 20th, Alexis Tsipras and his Syriza party won elections in Greece with 35% of the vote and just four fewer seats than previous time. On the 27th, pro-independence parties in Catalonia reached an absolute majority in regional elections. The “Together for Yes” group of secessionists and Popular Unity Candidacy party obtained together 72 seats in the 135-member parliament. Exceeding the 68 needed, they will try to set Catalonia independent from Spain by 2017.
On the 2nd of October Prime Minister of Nepal, Sushil Koirala, announced his resignation as a provision of Nepal‘s new democratic Constitution. On the 13th, after 20 months of negotiations, Iran’s parliament has approved a deal on its nuclear programme with the so-called P5+1 (the US, UK, France, China and Russia plus Germany). The immigration crisis in Europe continues, without any agreement reached on the solution within the European Union. The Chancellor of Germany, Angela Merkel, is losing support. Her liberal attitude towards the situation caused the Christian Democrats party to reach 38% level of support, the lowest since the elections of 2013.
The Golan Heights of Israel – a Game Changer by Ioana Nicolau
Huge amounts of oil have recently been discovered in Israel, amounts that could make the country self-sufficient for the upcoming years. The large reserves of oil consisting of billions of barrels were found in the Golan Heights, an area that was taken away from Syria in the Six-Day War from 1967. The intriguing fact is that, although the Israeli government considers the area a part of the country, the United Nations recognizes Syria as having sovereignty over the place. The discovery represents a land mine for even greater tensions between Israel and the Arab countries, maybe a potential for a massive conflict that would tear away any hope for peace still left for those nations.
Commentators Divided over Russian Military Action in Syria by Antoine Steen
Russia has launched air strikes in Syria against militants opposed to the government of Bashar al-Assad.
Russian President Vladimir Putin says that the military action is being taken against the Islamic State only, but the US and UK governments have charged that the air strikes have been targeted at moderate anti-Assad groups.
Commentators are divided over the motivations behind the air campaign, especially given its huge cost. Stratfor has estimated that the campaign will cost at least $500m just to set up, with an additional spend of $2m per day.
Some analysts argue that Putin is intervening in Syria in order to tackle jihadism. Others say it could be that Putin is seeking to bolster his popularity domestically, which might be threatened by the current recession, however his approval rating currently stands at over 80%. Syria is one of Russia’s few allies in the region, so it could simply be a matter of geopolitics.
Guessing the reasons behind the military action is made all the more difficult given the opaque nature of Russian politics. It could be an eternity before a consensus emerges.
MH17 Plane Crash Report by Michel Mijlof
Flight MH17, departing from Schiphol Amsterdam with destination Kuala Lumpur, was travelling above the conflict region in Ukraine on the 17th of July 2014, when it disappeared from the radar.
Malaysia Airlines Flight MH17 crashed after being hit by a Russian-made BUK missile system over eastern Ukraine, which was concluded by the Dutch Safety after a 15-month investigation. The final report about the disaster confirmed that a BUK missile exploded just above and near the cockpit causing the plane to crash. A total of 283 passengers, including 80 children and 15 crewmembers did not survive the crash. The remaining question as to who is to blame for the crash was not answered by the final report.
The Circle of Death by Raffaele Di Carlo
Meanwhile, the death toll in Africa rises. In addition to the ethnic cleansings and conflicts that ravaged the continent during the past century, new political turbulences promise to wreak renewed havoc upon the already tormented population: as the Islamic State rises in the East, its “ideological offspring”, namely Boko Haram in Nigeria and Al-Shabaab in Somalia, keeps making the headlines with terror attacks, the former causing at least 30 victims in bombings only during the month of October.
The political scenario doesn’t seem too bright either. The presidential elections of March 2015 in Nigeria saw Muhammadu Buhari – already military ruler of the country from 1983 to 1985 – rise to power democratically. While the leader’s grit and military support might seem what the country needs to deal with Boko Haram and finally reach some stability, only time will tell what effects it will have on the freedom of its people. In the meantime, in Burkina Faso, the African Union and the Economic Community of West African States (ECOWAS) managed to turn down a military coup d’état in September, installing the current president Michel Kafando. Anarchy still rules Libya, were the tribal wars seem far from their end and keep expanding the ranks of the fallen.
Migration in Europe by Yoeri Min
Over the last few months, hundreds of thousands of people have fled the Middle East and Africa, seeking safety in various parts of Europe, risking their lives along the way. Experts say it is the biggest migration crisis Europe has ever encountered. To illustrate, at least 350.000 migrants crossed the borders of Europe in January till August 2015, compared to 280.000 in whole 2014.
Measures have to be taken in order to effectively and efficiently provide a safe haven for all migrants. That being said, migration has an impact on economic growth within Europe. However, research on the matter is inconclusive, contradictory, and often does not cover all relevant aspects. Moreover, few empirical studies have been conducted that examine the overall impact of net migration on economic growth, largely because of a shortage of comparative data on international migration by skills levels. The economic impact of the current migration crisis is therefore hard to predict; maybe time will tell.
If you want to find out more about the Refugee Crisis, read Rostra’s article (Not So) United in Diversity by Raffaele Di Carlo and Artur Rymer