Something that has really been dominating the news lately is just how far local authorities are willing to go in order to attract Amazon’s second headquarters to their cities. You might already have heard about New York City lighting up some of its biggest landmarks in ‘Amazon orange’, or about a town in Georgia offering to change its name to ‘Amazon’ in exchange for becoming the host of HQ2 — attracting an estimated 50,000 high-paying jobs in the process. However, beyond the creative acts that the mayors of these cities have managed to pull off, something that has not been getting so much attention — perhaps because many people have kept it classified — is the tax reductions (also known as incentives) that the respective states are offering to Amazon. These can easily be described as the most important part of the deal. So why are the officials of 238 cities so desperate to get Amazon’s attention? The answer is pretty simple: They all think of it as a source of economic development. A new company running in their area would create jobs and thus salaries, which translates to increased spending by means of consumption — in turn boosting investment even more in trying to meet this newly generated demand. Now, the logic behind these tax incentives is that by lowering both income, business, and property tax, local governments are making their states more attractive to businesses, claiming that they’ll be getting back the money that they would otherwise have earned through these taxes. However, the controversy about this issue concerns whether or not these incentives are as needed or effective as they seem to be. For starters, this practice has generated a situation where cities try to outbid each other in trying to get a certain firm under their belt, making their offers extremely high. For instance, the highest bid revealed to the public has been from New Jersey, which offered Amazon approximately 7 billion US dollars worth of tax breaks. This becomes a huge expense for the city, as well as something that harms government budgets, since every dollar spent on incentives is taken away from other accounts, such as education and health — which are investments that give governments and citizens secured benefits, unlike incentives. To illustrate: Studies have shown that the economic impact that some of these companies bring to the cities could actually be smaller than the amount of money that states are setting aside in order to host them. In some cases, they are also reducing some of their costs by granting these benefits to new businesses, which drives the prices of their products down. This indirectly harms firms that did not acquire such benefits, pushing down the demand for their products. In such cases, one of the expected benefits of the economic development incentives is lost, since there would hardly be any extra job creation; instead, what happens is that workers are reallocated to the new businesses, as older ones need to reduce output in order to cope with the decreased levels of demand. Moreover, these incentives have the purpose of encouraging firms to do something that they wouldn’t otherwise have done, but many people question whether or not these tax breaks are actually necessary for a business expansion. For instance, there are cases where incentives are not meant to make a business change location, but instead to make it boost expansion. Also, because companies tend to grow and expand depending on the needs of the market, not all investment or job creation can be attributed to incentives. This limits their effectiveness, since the state could have profited from that expansion. Let’s take the case of FedEx as an example. Back in 2016, they decided to move their business to Fargo, North Dakota, where legislators granted them 600,000 US dollars worth of tax incentives, even though FedEx representatives had openly stated that the incentive would not alter their decision to move to the city. In this case, the incentive becomes redundant, since you don’t need to encourage a person to do something that they were going to do anyway. Therefore, the city would also have benefited from more jobs, salaries, and tax collection without it. Nevertheless, it is true that in many cases, cities and states sustain great advantages from a business expansion, especially one as big as Amazon’s. It is also true that a city without an appealing infrastructure or workforce can draw the attention of investors using these tax cuts. However, it is not always convenient for them to set aside so much money for uncertain benefits, especially when some of these incentives have proven to be unnecessary (and sometimes even ineffective) to earn back the taxes that are given up in exchange for new businesses in town.

Around seven or eight years ago, I started getting into music very heavily. I was mesmerised by the wide variety of genres and artists I could explore, and so exploring new music and sharing the things I had come across with my friends became a major passion of mine very quickly. At the time, I had one of the iPod touch 3’s (having saved up for one for months), and my father was kind enough to give me the green light regarding purchasing music through Apple’s iTunes store. I was very surprised when I found out that most of the albums I purchased online were around one third of the price of an album I would buy from my local music and book store. I remember very vividly being surprised about how convenient it was to just tap on a few buttons and download an entire album for a very reasonable price, and them being organised into my music library on their own. It was an interesting topic back then too, since after digital purchases/media hit the scene, the whole world was talking about how everything was “going digital”, and what it could mean. I can recall thinking to myself: “How far can they push this?” As of today, the last time I bought an album from iTunes goes back to around the end of December 2014, the exact month that I got my Spotify subscription for the first time. By offering a convenient, instant, and saturated service, streaming services are currently taking the world by storm. Companies such as Spotify, Twitch.tv, and Netflix are pioneering a new wave of digital media, and they’re building their images as popular culture icons. They have gone as far as covering up close to 40% of viewing content around the world. At first, I was very stubborn about the streaming craze. By the time music and film streaming services like Spotify and Netflix started becoming popular, I was already too financially and practically invested in the idea of buying physical music or searching for Blu-ray discs for my favorite movies, and I was disinterested in the idea of buying subscriptions. I felt similar things towards live streaming services like Twitch, where you can livestream anything you want to — from video games to cooking. A lot of people I know were spending hours on their computers or phones watching people play video games, write songs, perform sketch comedy, and — for very specific instances — even watch others clean up their houses on camera. One thing that sparked an interest in me regarding streaming was the pricing of these services. Twitch, for example, is a completely free service that actually requires a lot of server maintenance because of the heavy requirements that simultaneous video streaming brings. Spotify’s pricing stands at a mere 9.99 euros, and offers a wide variety of discounts for users who would like to purchase the service together. Prior to doing my research for this article, I was confident that most of the streaming services that are reaching mainstream appeal were making favourable profits, as the monetisation agendas that they follow are actually quite impressive. I was especially really interested to see where Spotify currently stands, as they have been in altercations with popular artists regarding their services, and kept on adding countless artists to the database, ranging from very popular to heavily underground. Out of most streaming services, it can be said that Twitch is the crown jewel. With its broad audience and monetisation plan formed by microtransactions and advertisements, Twitch is valued at around 3.3 billion dollars, and it’s one of the fastest growing websites of 2017. Being backed by Amazon.com, Twitch is the star of the livestream media industry, and has the flexibility to grow into something even bigger in the future. With this, the largest music streaming service in the world — Spotify — also seems to be in a good state. Even though Spotify’s losses more than doubled in 2017, their revenue increased by 54% at the same time. Spotify’s revolutionary approach to music service was one of the main wake up calls for their industry rivals, including Apple, which opted for a streaming-based service in the summer of 2015 as well. With their major business level success and out-of-the-box approach to catering for their users, it seems that everything is just newly starting for the reign of streaming services worldwide. While there seems to be enough evidence all around us regarding their growing influence, I don’t think anybody should stop asking themselves the question regarding the future of media and technology: “How far can they push this?”

After three weeks ago the World Economic Forum published 2017’s Global Gender Gap Report, the ongoing debate about gender inequality erupted again. Apparently, the wage gap between men and women hasn’t even slightly closed and therefore action is still needed. Females earn less than males, even if they have the same qualifications, or sometimes even when they have similar jobs. Moreover, females are less well-represented in executive positions or government institutions and are less likely to receive a promotion than men. These are facts, and this is nothing that we didn’t know yet. However, besides the importance and relevance of this topic, I find it a rather difficult topic to address. This is mostly because sometimes feminism seems to be perceived as man-hating, and many people have the feeling that feminism is no longer needed nor desired. I must say that I have never experienced any of the disadvantages of being a woman in our society yet, but I can imagine that this is going to change once I start looking for a full-time job, or when I do not get promoted because I might be having children in a few years’ time. What is it that makes gender equality so difficult to discuss and why are we not yet where we want to be? Why does the gap close so slowly? First of all, the problem of gender inequality originates from centuries ago. It was only around the 1900s that women started to fight for equality and this has been an ongoing movement ever since. From the situation in which women were only allowed to take care of their families, the situation has improved a lot as women are given more opportunities than ever before, such as the right to vote, study, and work (I am aware of the fact that this is does not hold for all countries in the world). Considering the fact that the fight for equality has started relatively recently, huge progress has thus been made. That we are not yet where we want to be is partly the result of the fact that the status quo on which our modern society was built, is also the situation in which males are dominating in the managerial workforce. Although there are particular sectors such as nursery and pre-graduate education in which women are the dominating gender, it is mostly men running the big companies, banks, and governments. The process of such a big change is a rather slow one, and this partly explains why there is still a lot progress to be made. However, it is not only due to the slow pace of change that this equalizing process is taking so long: Women have their own role in it as well. Several studies show that women are worse negotiators than their male colleagues. If males successfully negotiate their starting salaries and afterwards are more proactive in asking for a pay raise, the gender wage gap naturally increases over time. Some people therefore advocate against individual salary negotiations, as these negotiations have been proven to widen the gender gap. However, on the other hand one could also state that women should do their best to increase their negotiating skills. These two contradicting arguments are the exact representation of what makes the gender equality discussion so difficult: Is it the responsibility of society as a whole (and thus the government) or the responsibility of females themselves to make sure that both sexes are treated equally? There is not a single answer to this question, and probably that is why there lately has been so little progress. As there are solutions at hand for solving the problem of inequality, every measure has its pros and cons. Let me give you a few examples: 1. Setting a quota for the number of women hired/in managerial positions This measure is one of the most often proposed ‘solutions’ to the problem. The reasoning is pretty straight-forward: as hiring managers have the tendency to select applicants that remind them of themselves, the selection process ends up in a vicious circle. If a male-manager selects a male-applicant, this male-applicant will in turn select a team of other males as well and so on. This continues until the selection process is influenced by an external force, for example a quota. Of course there are always exceptions to this rule of selecting similar people, but it is suggested that this selecting behaviour leads to less diversity in management positions. If the best way to get women in managerial positions is to make it compulsory, it will take a few years before institutions become familiar with both men and women in managerial positions, after which it will slowly turn into the status quo. What people could argue against this measure, is that these quotas would be a form of positive discrimination. The fear is that females would not be selected because of their qualifications, but because of their gender, and that appears to be a paradox. In order not to discriminate women, should we discriminate them in a positive way? What if there are only male candidates that appear to be fit for the particular job? Should you then still hire the second-best option, just because the best candidate is male? If a female is not suited for the job, she should of course not be appointed. However, quotas are not meant to favour women, but to give them equal opportunities, as in practice many women despite their qualifications do not get into top positions. 2. Provision or subsidizing of paternity leave and childcare by the government The reason that women are being discriminated in the first place is of course the fact that they can give birth. Maternity leave is inevitable, paternity leave is not necessary in the sense that fathers do not physically have to recover after a child is born. Or at least, it has been the case for a long time that fathers did not go on an extended leave for which the employer had to pay. This difference in leave of absence causes women to be less attractive to employers. As women can obviously not continue working if their child has just been born, a solution would thus be to let either the government pay for the maternity leave, or to provide the father with the same amount of absence (which is also good for the relationship between father and child). The same holds for childcare: It is rather old fashioned to have the mother staying home for the kids, but this still is the most common situation to occur. What if childcare were to be provided by the government or companies itself? In for example Scandinavia childcare is pretty accessible and that resulted in more women returning to work after having children. However, is it the responsibility of the government to take of the children of their employees? Children are the joint responsibility of their parents and they should figure out who is going to work full-time or whether both of them will be working part-time jobs. Although this measure works in Scandinavia, the question is whether this kind of policy will work in other countries as well. Socialism or Liberalism? The entire discussion of gender inequality tends to become a bit more fundamental, as the solutions that are proposed all have to do with regulation. Apparently, the gender wage gap is still significant, which is due to the lacking female negotiation skills, but also just discrimination and males preferring males in certain positions. The biggest problem is that we as a society have to figure out what is more important: Our beliefs concerning socialism (gender inequality is a problem the government should take care of) and liberalism (women have to work harder in order to deserve the same treatment as men and it is their responsibility to come to an agreement with their partner on who is taking care of the kids), or see these measurements as an intervention in an inefficient labour market? It is up to you to decide, but I know for sure that I will work hard and try to negotiate the best I can in order to get that job and get that promotion. Even though I am a woman, or maybe just because of that. #career #GenderInequality #Sexism

The World Bank, one of the biggest Bretton Woods institutions, is the premier institute in global development finance. With 189 countries, it aims to be a ¨knowledge bank¨. Set up after World War II, its aim was to finance development in Europe, and combat the consequences of the large scale destruction in that period. Over the years, it has shifted its focus to global trade and goods. Neo-liberal policies implemented by the World Bank have brought about vast changes to the global economy. Conditional lending to recipient has been heavily studied and its effects have been well-documented. However, with markets being freer than ever, and an increasing number of sectors being privatized, concerns have been voiced regarding the lack of sustainability and regional expertise on behalf of the World Bank. Regional banks have come up across different continents in the past few decades. There are primarily two reasons for this: Expertise in socio-economic affairs of the region of operation; Combating the influence of global neo-liberal policies propagated by Western-dominated institutions (such as the World Bank and IMF). There are many regional development banks which focus on their own issues, and it does not necessarily mean that they are small in scales and operations. A few prominent examples of this are the Inter American Development Bank, which focuses on development aid and projects in North and South America. These banks do not necessarily group by geographical proximity. Demographics and social indicators of development are very important in multilateral co-operation as well. BRICS, which comprises of Brazil, Russia, India, China and South Africa are a very powerful bloc of developing countries. Almost half of the global working population resides in these five countries. The New Development Bank, also termed as NDB, is the joint effort of the aforementioned countries. Its focus areas are on international lending for primarily sustainable projects. These projects include hydro-thermal energy, water and sanitation, sustainable practices in existing industrial mechanisms and so on. Asia currently is experiencing an unprecedented economic growth spurt. Japan and Korea have been important contributors to the global trade framework for decades now. China and India are predicted to be some of the most vital players in trade and investment, with the combined population of these two countries falling a little short of fifty percent of the global population. It is without a doubt that with these developments, geo-political structures will change, with Asian economies taking the center field. Given this shift of Western policy making to Eastern economic importance, the Asian Development Bank, which is currently the largest regional development bank in the world, will be a fore-runner in economic decision making and policy implementation. The Asian Development Bank was founded in 1966, and it prioritized rural development. Beginning with 31 members since its initiation, it now has 67 members. Of these 67 members, 48 are from the Asian/Pacific countries, and 19 are from outside (for example: Europe, North America etc.). Since then, it has diversified into different sectors. Education and health were prioritized after rural development. With the 1970’s oil crisis, the Asian Development Bank focused on investment in energy production. It played a major role in subverting the Asian Economic Crisis in the 90’s, and joined forces with the World Bank and the International Monetary Fund (IMF). With the undoubted importance of the Asian Development Bank, and the overarching influence of the World Bank, the question remains whether there can be some sort of co-operation or will there be tensions in terms of ideological economic policies. Both the Asian Development Bank and the World Bank are similar at operational levels. However, the differences are pertinent when it comes to the conditionality of lending policies. The World Bank imposes strict liberalist policies such as market penetration, privatization of public sector services etc. The ADB on the other hand, focuses on fiscal stability and price mechanisms, with a focus on maintaining constant capital and services flows in the region. Given this apparent division of labor and divisive economic policies, it remains to be seen if there is some sort of concurrence. If there is, it will be an example for there emerging regional banks. It will have the way for future regional development banks to create synergies with other Banks to further mutual goals. In the end, the goal is to create a better world for fellow human beings. Be it by cooperation with different banks, or various institutions, geo-political factors need to be considered, otherwise the consequences would not be optimal.

For the past year or so I’ve been drinking more and more coffee, yet it’s not because I’m crunching books for exams, but because I started enjoying the taste a lot more. Right now I’m using a moka pot, and the only ‘waste’ product you get at the end is the grounds themselves that you can actually turn into plant fertiliser. As I started to try different blends and beans, I was also looking at alternative ways to make coffee. One method that’s getting really trendy right now, partially thanks to Mr Clooney, is Nespresso. The way it works is similar to an espresso machine, which forces water through a tamped-down filter full of ground coffee at high pressure (often roughly 8-12 times the atmospheric pressure). The difference from a regular espresso machine is that the pressure is lower, and instead of using ground coffee directly, you use single-serving coffee pods. Those small pods give you exactly one shot of espresso each. I was very surprised to find out about this, not because it makes inefficient use of coffee grounds, but because the leftover aluminum and plastic mix pods are most often not recycled at all. This was sort of a wake-up call for me, as I started noticing many more cases of outright ridiculous packaging practices. One that’s struck me was two dates, individually wrapped in paper, wrapped in clear cellophane and a carton base. For a mere couple of dates, that’s three individual components that must be recycled! I don’t know who that product targeted, but finding it in Marqt, an eco-friendly supermarket, made it even more ironic. After doing some research, I found that the two central issues about the recycling of packaging material are: First, these materials are getting more and more complicated due to mixing several forms of base materials (paper, cotton, numerous distinct forms of plastics, metals, glass). This makes it very difficult to recycle them as the separation processes get more complex and costly. It also leads to people trashing them instead of taking the effort to recycle them properly—compare a plastic and tin foil mix packaging for aspirin, versus a plain beer bottle; which one is easier to recycle from the recycling plant’s and consumer’s perspective? Bottle wins on both terms. A nine-bin system introduced by the authority of Newcastle-under-Lyme, with many others following them at 6-7, has faced significant criticism because it makes it confusing for people to recycle by complicating the system further than what’s necessary. Even though the authority has commented by saying that the system is not mandatory and that it increased recycling rates from 27% to 50%, it increases the complexity for potential recyclers and puts in a ‘barrier of entry’ against them. The takeaway from this is not that recycling systems should not get more complex because it confuses people, but that in the future these systems may have to get more complex… Second, recycling doesn’t get you the raw materials back completely. Even coffee pods made out of 100% aluminum are still wasting a considerable amount of dye at the Nespresso scale of production. The issue is even more complex with plastics, which yield low-quality plastics when different types polymers are mixed. On top of that, the dyeing agents used in plastics are practically inseparable from the end result. Fortunately, materials like paper and glass have it easier. For paper, even though the ink on it is lost, the processes involved result in pulp that is very similar to what is used in the first place. One ton of newspaper saves about one ton of wood, whereas one ton of white printing paper saves about two. Most importantly, the energy used in order to recycle paper that has already been used is significantly less than creating paper from wood, meaning that the savings are not solely on the raw material basis. Glass, although it has high recyclability, does not benefit from such high levels of energy savings. Tying into the first point, as we start finding better methods of recycling individual materials we will need consumers to be a lot more informed about their role in the chain. As long as we are not improving the methods of separation, which are becoming more difficult to research and execute, the consumers are mainly responsible for separating their waste into the appropriate bins. This may end up making it harder for consumers when the separation is more nuanced, but a change of culture is critically needed on this matter. If we want to increase the efficiency of pre-existing recycling processes, separation seems to be key. Ultimately, I also think that Piotr Barczak, waste policy officer at the European Environmental Bureau, poses the best approach very well: “The point with coffee pods isn’t about recycling – it’s about cutting down on the amount of stuff that we need to throw away or recycle. … Recycling should be the last resort when tackling waste, not the immediate solution.” No matter how conscious and efficient we are about recycling our waste packaging materials, taking the extra step by going for alternatives that are less wasteful and preferring companies who are taking this matter seriously is always a good idea for environmental sustainability.

Carles Puigdemont recently declared Catalonia an independent state with its own parliament. In its declaration of independence, Catalonia asked other countries and international organisations to acknowledge Catalonia as an independent state. Unfortunately for Catalonia, no country stood up to protect them. This is because it is a delicate matter within the EU. Most countries say it is a problem the Spanish government should deal with. This was easy to say — until Puigdemont fled to Brussels. The reason why Puidgemont fled to Brussels is simple. After Puigdemont declared Catalonia an independent state, the Spanish government immediately responded with harsh measures. The Spanish senate voted in favour of limiting the autonomy of Catalonia. The first measure was closing all embassies of Catalonia in other countries, deposing the Catalan parliament, and deposing the commander of the Catalan police. After this, the Spanish government decided that new elections should take place in December. But what happened to the former parliament of Catalonia? On Thursday the 2nd of November, an European warrant was issued from the Spanish law towards this former parliament. This warrant urges the former parliament to be brought to court for causing a rebellion, sedition, and misuse of government funds — these things all relating to the declaration of independence of Catalonia. Most members of the former parliament showed up in court, facing a maximum sentence of 30 years in prison. The cases of these ex-ministers — among them is the former vice-president of Catalonia, Oriol Junqueras — are now under investigation. They are all imprisoned during the investigation. Surprisingly, Puigdemont and four other former ministers of the Catalan parliament did not show up in court on the day of the trial. Puigdemont and the four ministers had fled to Brussels in order work in safety and freedom. Furthermore, they think that they will not get a fair trial in Spain. Spain wants the five politicians to be imprisoned during the case. They fear that possible evidence might be destroyed, or that the politicians could flee. Belgium received this European warrant on Friday the 3rd of November, and the five ministers turned themselves in. We can only speculate as to what Brussels will do. Will it act in favour of the politicians or in favour of Spain? There are three things the investigating judge can do. The first, even though very unlikely, is to reject the European warrant. When the European warrant is instead approved by the investigating judge, he can do two things. He can imprison the five former ministers for as long as the investigation is ongoing, or he can release them under certain conditions. The investigating judge will work together with the Belgian court of justice in order to decide what to do. Surprisingly, social media plays an important role in this. In order to measure and investigate the possibility that these ministers might flee the Belgian court of justice, an investigating judge will look into the tweets, the Facebook pages, and other social media accounts of these politicians for signs that they might want to flee. Therefore, Puigdemont has been very careful in using social media, hoping he will get away with a bail or specified conditions. Whether or not the Spanish government will be given custody of the politicians is decided by the Belgian Raadkamer, an institution of the Belgian court that decides whether or not a case should go to trial. They need to come up with an answer within 15 days. Timing is very important in this specific case, since new elections will be held on the 21st of December. Before these five politicians fled, it was only considered a matter Spain itself should deal with, but now Brussels is involved. Therefore it will not be much longer before other European countries get involved. They might even have to take sides. We will see what the effects will be. Another important effect of the independency of Catalonia is the effect on business. Before the declaration of independence of Catalonia, many headquarters of Spanish and international companies were based in Catalonia, but at this point, many companies are leaving. The reason for this is that the tumult and chaos are expected to have a negative effect on business. This can already be noticed on the stock market. After the referendum, the value of the stocks of businesses located in Catalonia dropped massively. Another reason why banks are leaving the Catalan region is that even if Catalonia does become independent, it will not be a member of the European Union, so it will not be under the control of the European Central Bank. Most banks want the support and security of the European Central Bank, so they decide to leave Catalonia. The Spanish government supports companies and banks that want to transfer their headquarters from Catalonia to another Spanish region, since it would be hard for Catalonia to be financially independent when many companies and banks leave the region. Furthermore, for as long as these companies remain on Spanish territory, they contribute to Spanish wealth, so Spain benefits a lot from helping companies transfer. They did this by passing a decree that makes it easier to transfer headquarters among Spanish regions. Spain did this specifically to help CaixaBank, which wants to make a transfer to Mallorca. Due to this decree, almost 2,000 companies left the region. Among them are other huge Spanish banks and companies, such as Banco Sabadell, biotechnology company Oryzon, and telecom company Eurona. All in all, a lot has happened after the declaration of independence of Catalonia. Members of the former parliament fled to Brussels, hoping to escape an imprisonment of 30 years. By doing this, they made it a more international problem than it already was. Furthermore, the impact on the economy is massive, with many companies and banks leaving Catalonia due to the unstable political situation, since they all want to be under the protection of the European Central Bank. We will see whether or not Catalonia stays strong and holds on to its declaration of independence despite all these disastrous effects.

Crises in Syria, North Korea, Iran… Yet those are just the most visible flashpoints in a world driven by conflict – look beyond them and there are plenty more troubling spots that could escalate globally. Every day, people are fighting to the death for the ideals they believe in. Some are fighting for independence and freedom. Others are dying for their right to be heard, to be treated as human beings. Some even say they are ultimately fighting in the name of peace. But many of the wars and conflicts happening these days have been dismissed, forgotten, ignored and under-reported while the world stays busy looking the other way. Sadly enough, world peace is even further away from reality than you have ever imagined. In this article, I will try not to give any opinion­. Being from a  country where the armed conflict is currently taking place, I know for myself that you get extremely sensitive when someone expresses a point of view with regards to your homeland. The University of Amsterdam, in itself, is a diverse community, and I am confident that there are people among our readers who are from the states that I am going to talk about. Therefore, I will try to stay as objective as possible and will only give an overview of a few conflicts that, in my view, are not being talked enough about. If it touches you or at least raises an interest for further investigation on the matters – then my work is done. It is important to increase awareness of the problems that the biggest media channels are not reporting. I would like to first overlook a conflict which is happening since the Soviet Union collapsed and is being extremely under-reported in the media. Nagorno-Karabakh conflict With the attention of EU leaders firmly fixed on Syria’s civil war, the refugee crisis and the menace posed by Islamist terrorism, most of us seem to forget or do not even know about the conflict between Karabakh and Azerbaijan over Karabakh territory. Karabakh is an internationally unrecognized Armenian-dominated enclave inside Azerbaijan. Although Nagorno-Karabakh is not a very large territory – it is home to about 150,000 people. It has long been a flashpoint for great power rivalry, ethnic and religious tensions. The Nagorno-Karabakh unrest is one of the several so-called frozen conflicts, mostly on Europe’s borders, that has the potential to erupt at any time. Because they are so difficult to resolve, the big powers tend to leave them on ice until circumstances force them to act. Why is it important to know? Firstly, there is virtually no room for compromise between the two sides: Azerbaijan refuses to settle for anything less than full control of the entire area, while Armenia supports Karabakh’s attempts to become an independent state. Moreover, a military showdown between Azerbaijan and Armenia over the disputed Nagorno-Karabakh region is highly likely to heighten in the following years, a Council on Foreign Relations (CFR) report says. Svante Cornell, who is a Swedish scholar specializing on politics and security issues in Eurasia commented: “Of all Caucasian conflicts, the Karabakh conflict has the greatest strategic and region-wide importance. This conflict is the only one in the territory of the former Soviet Union, in which two independent states are directly involved.” Both Armenia and Azerbaijan professionalized and rearmed their force significantly in the past year. Just like in many conflicts these days, hundreds of people have died in the exchange of fire across the border that always has a possibility of escalation. Conflict in Ukraine Around three years ago, Ukraine was all over the news. No matter which news channel you watch or read – there was always a report on the situation in the east of the country. These days, Ukraine is hardly ever mentioned in any media. Does this mean that Ukraine is at peace these days? Unfortunately, it does not. It only means that interest for the conflict itself has diminished among the Western European public. However, the confrontation is still not over. The ceasefire in Donbass Region has been continuously violated. Since the armed conflict in Eastern Ukraine has evolved in 2014, 9758 people have died, according to the UN report. Just think about this number once again. Almost 10,000 people died in the east of Europe, in a country which borders with Poland, Hungary, Romania, Slovakia, within the last 3 years. This is a terrifying number and more people are dying every day. Hundreds, thousands of young people are joining armed forces in order to fight for the independence of my homeland. The report of the United Nations Monitoring Mission on Human Rights in Ukraine describes the situation in settlements that are locked in “no-face territory” between checkpoints, where several hundred people are isolated and have no access to basic services: there is no urgent medical care; the nearest grocery store is 7 km away; children have to walk 3km in order to get to school. Families are being separated, sons and husbands are leaving homes to fight and people are surviving but not living in the area of an armed conflict – that is a current situation in Ukraine, and, sadly, there seems to be no conflict resolution in the near future. Israeli – Palestinian conflict Another conflict that hasn’t been widely covered in the news in the past years is a conflict between Israel and Palestine. While many believe the conflict is over religious issues, the heart of the conflict is at two groups of people claiming the same land called Gaza. The Israelis believe that they are entitled to this territory now known as Israel, while the Palestinians believe that they are entitled to the land they call Palestine. For religious Jewish Israelis and religious Muslim Palestinians, however, the belief is deeper. Both sides believe that God (called Jehovah by the Jews and Allah by the Muslims) gave them the land and, therefore, giving it away to another people would be considered as a sin. Providing a short background, after the 1948 Arab-Israeli war, the Holy land was divided into three parts: the State of Izrael, The West Bank of the Jordan River, which contained thousands of Palestinians and the Gaza Strip, which was controlled by Egypt. The conflict was then calmed by the Camp David Accords in 1979, which bound Israel and Egypt in a peace treaty. But then, in 1967, after another war, Israel occupied these Palestinian areas and Israeli troops stayed there for years. Israel finally left Gaza in 2005 but soon after, a Palestinian organization called Hamas won elections and took control there. Much of the world calls Hamas a terrorist organization. It refuses to recognize Israel as a country and wants Palestinians to be able to return to their old home – and will use violence to achieve its aims. Since then, Israel has held Gaza under a blockade, which means it controls its borders and limits who can get in and out. I happened to visit Israel last winter and I was fascinated by how the territory between the two states is actually divided. Basically, the bordering territories of two countries are being distinguished by the colour of the barrels on the roofs of the houses. The white-colored barrels define Israeli territory, while the black stand for Palestinian. There is a popular view that the conflict between Israel and Palestine is inevitable. Too complicated for a practical solution to be ever found, many political experts expect that it could continue for years and years. However, this view seems way too pessimistic. Hopefully, there can be a two-state solution, so everyone can be recognized. Just like any other war, it eventually will come to an end, but we just don’t know when. Majority of both populations wants peace, extremists don’t. Let’s hope the majority wins. So what is the bottom line? It is hard to tell. It is difficult to find a universal “pill” for all of the conflicts in the world. However, maybe the citizens of the affected countries should stop waiting for the governments and institutions to solve the problem. After all, war brings money, and actually, instead of being the ones to try to find solutions, governments of different states actually create more problems. We, as a public, need to stop buying into the perpetually told lies and propaganda. Because the first thing that is being affected by war is the truth. People all around the world need to become properly informed, especially in these days, when any type of information could be found online. Those of us who are honest and actually care about the victims of the violence—on both sides of any of the conflicts happening nowadays, need to have a responsibility to educate ourselves and take an active role in sharing knowledge with others. “Sharing is caring”, they say. Sharing knowledge – is caring about nations, caring about the world.

Investment banker, one of the most prestigious jobs in the field of finance. If you are working towards a degree in finance, you have probably heard a lot about investment banking, and maybe even saw a few top-tier students doing an internship at one of the local investment banks. Thereby, a lot of rumors go round about the working hours and social sacrifices you have to make to land a job in investment banking. Why are people making these sacrifices and how do you land a job in investment banking? First of all, investment banking is all about excellence. Top-tier students “may” have a chance to be hired as an investment banker. Exceptional academic results and/or outstanding sport performance is a must. But why should you want to be an investment banker? Investment banking is the top-tier industry within finance. This means, besides getting paid a lot of money, that you will work for the biggest and most important clients all over the world. It is an international experience. Thereby, when you climb up the ladder, you will have to make meaningful decisions which have a huge impact on the worldwide economy. For example: the economic crisis in Greece. If you think that the Greek government has decided all by themselves how to save the Greek economy and how to issue its debt, you are wrong. Huge investment banking teams have assisted and advised the Greek government in all those decisions. In this case, the investment banker has a huge stake in the success or failure of a rescue plan of a whole country. Now you may have an idea on why you want (or not want) a job in investment banking. If you have decided you want to work in investment banking, you have to form a strategy that maps out your way in. This article might help you a little bit. There are five steps to breaking in into investment banking: Understand the industry; Strategy; Craft your story; Networking; Interviews Understanding the industry is one of the most important steps and is linked to almost all of the others. If you have an interview and you get asked a question about whether you want to be in Mergers & Acquisitions or Debt Advisory, you have to know the difference in extreme detail to explain your choice. Also, to make a proper choice yourself, you have to understand that banks are extremely rigid with recruiting. An investment bank is a conservative, traditional organization that sticks to what has worked for the past twenty to thirty years. Therefore, they know exactly what they are looking for in candidates. You should take this into account when submitting your application. Next, realize that there are two entry-level positions in investment banking: Analysts and Associates. An analyst is recruited straight out of undergraduate or Master’s programs. They are at the bottom of the food chain and do all the work. In most organizations, you will be an analyst for around two or three years after which you will be promoted to associate or you move out to, most of the times, private equity boutiques, hedge funds, or venture capital firms. Associates are either recruited out of MBA programs or are promoted directly from the analyst pool. They manage analysts, work more directly with clients and senior bankers (Vice Presidents and Managing Directors), and put out fires. They are expected to stay for the long-term, and therefore, moving to private equity, hedge funds, or venture capital is significantly more difficult. Secondly, you have to set up a strategy on how to break in. First of all, you have to determine which of the two entry positions you are aiming for, and contemplate on how you can get in. For this part, I will focus on undergraduates or Master’s program candidates: you have to aim for the Analyst position. One of the main strategies on how to do this, is to get an investment banking internship and land a full-time offer out of that one. Cold-call or network like crazy until you get to know the right person. Meet up with them to explain your story and ask about investment banking. Here are two advantages that this will bring: you will get to know more of the industry and what the work will be like, and you will get to know another banker who you can contact for a job interview. Then, practice full-time job interviews. You can do this with current bankers, or a lot of study associations are offering interview trainings like Sefa does. Craft your story to convince bankers that you will excel in investment banking and that you are much better for the job than anyone else. You do that by structuring your story around four key points: The beginning; Your finance spark; Your growing interest; The future & why you are here today The beginning might be an introduction about yourself. For example, your international experience like exchanges or that you really like traveling. After the beginning you have to explain your finance spark. Describe the moment you realized that you want to pursue a career in investment banking and why that was the case. For example: you met a few bankers in London and talked with them about the job, or you did a case in university which you loved to do. Then, explain your growing interest. For example: you bought some books about investment banking, joined a student investment club, met up with investment bankers to get to know more about the industry, or did an M&A internship. To finish the interview, talk about your future, goals, and why you are here today. What do you want to do? What kind of deals? Why you like cross-border deals or why you want to stay local. Explain your long-term goals. Last thing which is very important: explain why you love this specific bank. You can get an idea of the culture by visiting the bank’s recruiting events, take a look at their career website or talk to employees. Networking is one of the most important things in investment banking. Not only is it important to land a job, but also when you climb up the ladder during your investment banking career, you have to network a lot to win clients over or even with other employees to build up relationships within the bank itself. Go back to step two (strategy) to see what your strategy was and go back to step three to remember your story. With these two concepts, go out and network your ass off. I can describe how you should network and what the tips and tricks are myself, but I think Brian DeChesare did a great job describing the network concepts in investment banking. You can find his article about how to network in investment banking here. And last but not least, ace your interviews. Now you have networked like crazy, you have a killer resume, and you have a couple of interviews coming up with prestigious banks. Prepare for your interviews very, very well. I think interviews in investment banking are one of the hardest of all industries. As described earlier in this article, investment banks are very conservative organizations which will aim to do what they did best for the last twenty to thirty years. They have a lot of experience with interviewing candidates and know exactly what they are looking for in a candidate. So, preparations are essential to ace your interview. For exemplary interview questions, you can search the internet and prepare some answers for the questions you find. Think about step three, how to craft your story in a proper way, when answering the interview questions. Show the recruiter that you are the most passionate person out there, and that you will never give up on your dreams or on a project. Give them the impression that no sleep is better than sleep with an unfinished project, and make them feel that you are unstoppable when you get handed over a project to finish. Do not be arrogant in your interview. There is a difference between arrogance and confidence. Be confident, but do not think that you know everything about banking already. I can tell you: you do not, so do not act on this. I hope this helped you to form an idea on how to get into investment banking. Be confident and try your ultimate best. It is not easy, but when you eventually break in, you will be highly rewarded intellectually and financially. Good luck! #career #Investments #InvestmentBanking #Howto #Finance #Banking

As individuals, we acknowledge the importance of economic forecasting and how it affects the decision-making process of all relevant entities. From individuals to businesses to governments, you could see that all are paying really close attention whenever any economic forecast is released. Despite its significance, more often than not, economic forecasts are not successful in yielding indicative results of the future economy, as has been consistently proven in the last decades. Although various augments in model technicality have been made in order to improve the accuracy of forecasts, the predictive power of these models continues to be in question. In fact, econometric models have not yet yielded more accurate results in the past 40 years. If forecasts fail to deliver, should we continue to trust them, or are they even relevant to our daily lives? How do economists construct a forecast model? If we are about to attempt to answer this question, let’s take a look at how scientists and economists build up such a model. Usually, we would want to explore the relevant causal factors that affect the outcome that we want to investigate. These potential variables can be found in literature, or even in your own imagination. In econometrics, the process is formally known as creating a “base specification”, which includes all of the most basic necessary factors of the model. Then, an “alternative specification” will be made, in which you would add other possible explanatory factors into your model and then use statistical methods to evaluate whether they are relevant. After making appropriate adjustments, we check whether these combined factors fit well to what we intend to explain. Now, these steps seem relatively easy on paper, but it is much more difficult to create a model in real life. So, suppose that you want to determine the market price of milk based on an economic model. After a thorough investigation, your “base specification” might include seasonality factors, the number of cows in the country, or the price of cheese, a (partial) substitute for milk. However, the equilibrium price of milk might be based on other factors that constitute the “alternative specification”, such as the futures market, or even the exchange rate! Why is it so difficult to construct a good model? The economy is a highly complicated system with various kinds of interactions between factors, which is why it is so difficult to construct a concrete econometric model. For example, the price of cheese is also dependent on the number of cows and vice versa, so these factors interplay with each other. Because of such similar interconnections, a subtle change in an economic phenomenon might result in substantial changes in other variables, which directly affects the accuracy of the model. Thankfully, the application of probabilities in models records these random changes, but one weakness is that these models cannot anticipate sudden large shocks. Econometric models are undoubtedly helpful to professionals attempting to make predictions about the economy, but they still have some flaws. For example, we often use statistical tests in econometrics in order to evaluate the validity of the models. However, statistical inference is only a means to test the degree of correlation between the outcome and the input variables, and it does not need to conclude such causal relationship between them. After all, the judgment of whether to include a variable still depends on the knowledge and expertise of the economists. Another explanation is that the market is largely driven by biases and because of that, confidence plays a big role in its formation and development. In most classical models, we presuppose that humans are rational decision-makers and that they are not likely to be influenced by external motives. Recent models do take into account the deviation from rationality to some extent, but the effects of behavioral patterns are not easily quantified. Take Bitcoin as an example. The increasing attention to digital currency has only been around for a couple of years, and only in 2017 has Bitcoin grown by 600 percent (at the time of writing this article). When some businesses and institutions started to accept Bitcoin as a means of transactions along with fiat currencies, investors also started to believe in the actuality of the cryptocurrency. When such consistent confidence is accumulated, demand is quickly fueled into investing the currency and its buying price keeps surging. Economic models usually do not take into account exogenous variables. Usually, they suppose that some exogenous adjustments should be made when the model is run. These exogenous factors can include, for example, fiscal or monetary policy changes. These decisions on economic policies are determined based on the judgment of an independent board that is not involved in the market mechanism (although their decisions are the reaction to the happenings of the economy), so it is improbable to incorporate these changes into the model appropriately. For example, forecasts generally are forward-looking in terms of years. During that period, if the president decides to expand public expenditures or the central banker adjusts the interest rate, while the model does not take into account these changes, then it is unlikely that the model remains correct. In addition, the economy is continuously evolving as well with even more complex economic and financial products. The economy is so complicated that any model would be impossible to capture the entirety of an economy at a certain time. However complex the constructed model seems to be, it can be only partly representative of reality. Should economists be able to see if a crisis is coming? When there is a crisis, many economic forecasts tend to misjudge the development of the economy. For example, when the Fed was asked in 2007 to estimate how the US economy would perform during 2008-09, its estimates showed that there was no anticipation of a breakdown. There were some indications that the economy would moderately slow down due to the initial impact of the bankruptcy of financial firms, but the forecast showed that it would be merely temporary. Contrary to the general belief, the US economy began to shrink. Even with their further downward adjustments in 2008, the Fed governors did not believe that the economy was heading into a deep recession. As we have seen in reality though, the US economy collapsed: domestic banks bailed out and the stock market plunged. The US suffered a 2.8 percent contraction in growth in 2009 and is still enduring the consequences of the crisis. In this scenario, the failure of economic models could be attributed to the fact that many economists erroneously undervalued the importance and interconnections between financial institutions, both public and private. Similar results can be found when we investigate the extent of the Eurozone crisis, as OECD was too optimistic regarding how European countries would be capable of reacting properly to the crisis. Similar to the Fed, they had to make constant downward adjustments on the performance of European economies. How should we react to one forecast? Well, although we could see how unreliable economic forecasts may be, it is better to have forecasts rather than nothing at all. However, there are some ways in which we can utilize the available forecasts to our advantage. One approach is to compile all of the available forecasts at hand and then take the average values from the obtained figures. The approach is sensible if you do not have any other information, and statistically speaking, the more forecasts you have, the lesser the extent of the error. However, when there is additional information that one believes to be true, one should be more critical of what forecasts to choose based on the included inputs. The accuracy of economic models, for some reason, is rarely evaluated in a timely manner. In the United States, however, forecasts made by the Congressional Budget Office and their associates are occasionally evaluated by comparing its projections to the actual performance of the domestic economy. Their annual assessments can give some indication to what forecasts can be trusted if you are interested in the US economy. Similar evaluations are performed by the European Central Bank for European countries as well, but they are much less common.

On Friday, November 3rd, Professor Rodrik is in Room for Discussion to discuss Trade and Globalization, a topic he has discussed at length in The Globalization Paradox (2011). What I appreciate about Rodrik is that he is highly self-critical and openly admits that he, too, was overoptimistic in the run-up to the financial crisis. As he puts it: ‘Along with the rest of the economics profession I too was ready to believe that prudential regulations and central bank policies had erected sufficiently strong barriers against financial panics and meltdowns in the advanced economies, and that the remaining problem was to bring similar arrangements to developing countries. My subplots may have been somewhat different, but I was following the same grand narrative’ (2011: xii). According to Rodrik, however, the dismal failure of this grand narrative is not necessarily a sign of economics failing as a science. It merely shows we were placing too much faith in the wrong models at the wrong time. The problem thus lies in model selection, rather than being caused by flaws in these models themselves. He explains his position further in his later book Economics Rules (2015). In it, he argues that we need to distinguish between critical and non-critical assumptions. In his view ‘an assumption is critical if its modification in an arguably more realistic direction would produce a substantive difference in the conclusion produced by the model’ (2015: 27). These critical assumptions have to correspond to reality, while the non-critical ones need not (and may well appear absurd to the uninitiated). The critical assumptions also guide our selection of models. So when confronted with some empirical problem, like – say – disappointing growth figures in a particular country, we examine the many possible impediments to growth (such as lack of trade, training, infrastructure, property rights enforcement and what not) and the models that map out the consequences of these assumptions and check whether the growth barrier assumed in a specific model corresponds to that country’s reality. To verify that this is the right model to use, one can further check whether the model’s many (direct and incidental) implications are also borne out in reality. If so, we can use the model to see what it predicts will happen if that growth barrier is removed. If the results conform to the goal that the politicians in that country have set, we can safely advise them to go on and start working on removing the barrier in question. Models thus are best viewed as diagnostic tools, and as such they can be properly or improperly used, but cannot themselves be right or wrong. Now this sounds like a prudent way of applying models to reality, but the problem is that many assumptions that are critical in Rodrik’s sense cannot actually be modified ‘in an arguably more realistic direction’ at all, because doing so, would invalidate a whole class of models. If households are not identical for instance, models invoking individual rationality cannot generate (predict) a unique market outcome at all, and would thus be useless as diagnostic tools. (If you follow my columns (1 and 2), you may be getting a bit weary with me talking about the SMD conditions by now, but its implications are so pervasive and so often downplayed, that I feel they can never be overexposed.) Similarly, People like Minsky (1992) and Keen (e.g. 2017) have shown that when the idea of loanable funds is replaced by the much more realistic idea that investment and concomitant money creation is a function of prospective profits, the dynamics of the system change completely. Yet growth diagnostics (a field that Rodrik proudly hails as being a prime example of the correct use of models) almost always hinges crucially on this doubtful idea of loanable funds. So, although Rodrik doesn’t say it, some critical assumptions remain in force, not because they are reasonable non-disruptive simplifications of the underlying problematic, but because neoclassical ideology forbids contemplating alternatives. As to the latter, Rodrik is crystal clear that the model library that economists are to select their diagnostic tools from, has to be neoclassical, as he writes in yet another book on globalization: ‘At the core of neoclassical economics lies the following methodological predisposition: social phenomena can best be understood by considering them to be an aggregation of purposeful behavior by individuals—in their roles as consumer, producer, investor, politician, and so on—interacting with each other and acting under the constraints that their environment imposes. This I find to be not just a powerful discipline for organizing our thoughts on economic affairs, but the only sensible way of thinking about them’ (2007: 3). From a modeling perspective, however, this is neither the most powerful, nor the only way to think about social phenomena. Models can only function as diagnostic tools if the entities and transmission mechanisms critical to getting the diagnosis right are stable while diagnosing and correspond to real world stability and it just so happens, that individual predispositions and actions are much more volatile than aggregate ones. In fact, it was the resilience of suicide rates among specific social groups (Durkheim 1979 [1897]), that spawned the emancipation of sociology as a scientific field. Apparently, social phenomena are stabilized more by social pressures in certain groups than by stable, predictable individual inclinations. Durkheim showed, for instance, that soldiers have higher suicide rates than civilians. So if civilians become soldiers, the overall suicide rate rises. Similarly, consumption of certain positional goods (goods that showcase your status) probably depends more on the relative size of high status groups, than on individual inclinations (cf. Bourdieu 2010 [1984], Ilmonen 2011, Miles 1998). But this implies that in many cases ‘purposeful behavior by individuals’ is a far less powerful discipline for organizing our thoughts on economic affairs than are ‘social pressures emanating from social groups’. All in all then, Rodrik’s defense of economics fails, because his predisposition towards neoclassical economics precludes him from modifying many critical assumptions in a more realistic direction. It was a good try, but it will take an even more open minded economist to take the discipline into a truly fruitful direction and remove the barriers that currently prevent economists from producing models that have something to do with reality. But this will only happen if all models, no matter whether they originated in Marxist, institutional, post-Keynesian, Austrian or other thinking, are accepted as being on a par with neoclassical models. If that happens, Rodrik’s methodological ideas just might work.

On September 19th, 2017, one of the biggest toy and juvenile-products retailers — Toys”R”Us — filed for bankruptcy in the U.S. and Canada in order to reorganis e its debt structure. Toys”R”Us became predominant in its niche field of toy retail in the past decades. Currently, it has more than 1,000 branches all over the world. However, its successful history failed to ke ep it from a decline in revenue and an increase in risk of debt default. At one time, Toys”R”Us was the place to go for toys. That changed when competing big box stores expanded their own toy sections, and not long after that, consumers were looking for dolls and games online — along with everything else. Add to that the fact that Amazon, Wal-Mart,  and Target are all cheaper than Toys”R”Us, and the company finally succumbed to the competitive pressure, thus filing for bankruptcy. However, long ago, the CEO of Toys”R”Us started the layout in the online-retail segment. It entered a ten-year contract with Amazon.com to be the exclusive supplier of toys on the website. Unfortunately, Amazon blamed Toys”R”Us for failing to carry a sufficiently large range of goods, including the most popular lines. Therefore, Amazon eventually reneged on the terms of the contract by allowing third-party retailers to use its marketplace to sell toys. In 2006, Toys”R”Us won a lawsuit against Amazon, and in 2009, they were awarded $51m — just over half of the $93m damage fee claimed in their filing. How ever, at that time it was already too late for Toys”R”Us to become dominant in the emerging online market, since it had missed the best time to enter it. Apart from all the aforementioned, Toys”R”Us faces other problems as well. Firstly, it has a heavy burden of debt. It has had $5bn to $6bn of debt on its balance sheet during all these years, and the annual interest payments for that are building up to $400m or more. That is a lot tied up in those payments. As a result, a very small amount of money was left for the management to reinvest in the business and grow it bigger. Furthermore, the inventory of Toys”R”Us has been painfully slow to adapt to changing trends. All these factors contributed to its bankruptcy. Only outranked by a 2002 Kmart and a 1990 Federated Department Stores filings, Toys”R”Us now lays claim to being the third largest retailer that has filed for Chapter 11 bankruptcy, according to bankruptcydata.com. Apparently, the announcement is calling a lot of attention. People are wondering: is it actually ‘game over’ for them? According to The Economist, many analysts agree, Chapter 11 bankruptcy is a sensible way to deal with the chain’s $5bn of long-term debt. The bankruptcy offers the company the opportunity to reschedule its business and reorganise its enormous debt. So Toys”R”Us is not dead; its future is just very uncertain. Surprisingly, while the company’s North American business line is going downhill, it seems to be doing quite well in Asia. The Asian subsidiary — Toys”R”Us Asia — was set up in 1986, and the parent company holds about 85 percent stake in it. The rest is owned by the Fung Group — a holding company owned privately by the Hong Kong businessmen brothers Victor and William Fung. Toys”R”Us controls 20 percent of the Asia Pacific market for traditional toys, such as dolls and action figures. At the same time, the second largest competitor has a share of just 1.4 percent. Thanks to the rising income levels and more trading up on higher-end toys, the company is expected to see faster growth in the toy market there compared to Western Europe and North America. Growth in the Asia Pacific helped offset weaker sales in the U.S. and Europe in the quarter ended April 29, Toys”R”Us said in June. Given the promising future in the Asia Pacific area, the company continues to expand its business. It combined its Japanese business line with a joint venture running stores in greater China and Southeast Asia. They also opened more stores in India last year. Thus, it is not surprising that Toys”R”Us is said to be in discussions with investment banks to study the feasibility of listing the Asian business line on the Hong Kong Stock Exchange. A successful initial public offering (IP O) could value the subsidiary at about $2bn. Whether the IPO will happen or not is still unknown. Firstly, although the bankruptcy in September included only North American subsidies of the company (and not the Asian business line), it could still complicate matters for an IPO. Investors are more likely to be concerned about putting money into a company whose parent company is already under bankruptcy. Secondly, even if the IPO is a success,  it is not guaranteed to bring the company back to life. The market share of Toys”R”Us is indeed quite big in the Asian market, but that is also because there is not a lot of competition in that area. With the further development of those areas, more companies might join the market, thus bringing about more competition. As consumers run wallets-first towards online shopping, it is highly likely that Toys”R”Us will end up in the gut ter if it does not radically change its business strategy. In China, for example, the sale of Toys”R”Us in its official online store on TaoBao (the biggest online retail platform in China) is still quite low compared to the average amount per customer spent on the website. Hence, there is still a lot it can improve on. Traditional retail sales appear to have had their worst patch in the past few years, so let’s hope that Toy”R”Us can return with successful transition.

For this month’s article, I am going to take you into a much-neglected part of the world, where the summits are high and the forests boundless. Where one encounters happy people and no traffic lights. As American author Karan Bajaj puts it, “it is almost like you’ve stepped into a Shangri-La or a vortex of time 200 years ago. Those kinds of experiences are very much of the countryside of Bhutan, where people are truly happy in the sense of not creating and wanting more.” Farmers, Gangtey The Kingdom of Bhutan, a small Asian nation landlocked on the roof of the world between two of the giants of the modern world, India and China, is exceptional in every way. The country truly is not rich: The United Nations classifies it as a Least Developed Country (LDC) and for most of the population, economic activity in Bhutan consists in subsistence farming and animal husbandry. The economy is largely dependent on agriculture, forestry, and exports of hydropower to India, its main trading partner. Despite a budding industrial sector, the government is still relying tremendously on economic aid from the large neighbor. And still, Bhutan is developing in such a way that its per capita GDP (PPP) exceeds that of most nations of southern and south-eastern Asia. One new sector bringing about economic growth in Bhutan is tourism of a special kind: environmentally conscious, upmarket travel. And there is good reason for that to happen. Since foreign visits were legalized in 1974, the country has successfully marketed itself as a destination of unique, preserved cultural traditions and an untouched natural environment with an astounding degree of biodiversity. In net terms, in fact, Bhutan is the only country in the world with a negative balance of greenhouse gas emissions. The immense forests covering more than 70% of the country more than match the carbon dioxide emitted. The forests and the wildlife are strictly protected by government regulation and so are many cultural traditions. Thus, travel to the country only works by means of officially approved tour operators and mandates a minimum daily fee of 200$ to 250$ for lodging and supplies, rendering independent and individual tourism impossible. All of this is part of Bhutan’s governing national philosophy, which is the strive to increase the collective happiness of the people. The concept of Gross National Happiness (GNH), a term unmistakably devised in response to economic wealth measures such as GDP or GNI, is enshrined in the recent Bhutanese constitution of 2008 and has been serving as a guideline for all government action since the 1970s. It is based on four pillars, which are sustainable development, environmental protection, cultural preservation, and good governance. Among other gradual implementations of GNH measures, happiness surveys are conducted by the government to measure welfare and progress in the country. The results of this longstanding policy have been remarkable. Bhutan has experienced a development of democratization initiated by the king, resulting in the implementation of a constitution that turned the nation from an absolute monarchy into a parliamentary monarchy with free elections and functioning institutions. Evidence thereof, for instance, is the fact that the National Assembly even possesses the right to initiate an impeachment process to have the king involuntarily abdicate. Other features of this happiness-based policy include a high degree of economic freedom, peace, low corruption, and the enshrinement of human rights in the constitution, which are deemed essential for the attainment of GNH. Traffic Policeman in Thimphu A rather peculiar consequence of the government’s cultural preservation efforts is the slow adoption of foreign habits and technology. For example, traffic lights were implemented for a mere day in Thimphu, the capital, only to be removed in an instant due to the feeling of inappropriateness and difficulties concerning habituation. Smoking is prohibited and a ban on television was only lifted in 1999. The country is also showing convincing efforts regarding environmental conservation. More than 40% of the territory remains under national protection, and environmental standards can be found in the constitution, too. Electric cars already constitute a substantial share of all vehicles, powered by the country’s green energy generation. Nonetheless, Bhutan has not been free of human rights concerns. Ethnically and linguistically diverse, the country has been accused of human rights abuses against the Lhotshampa people in the 1990s, of whom many still reside as refugees in Nepal. In addition to that, the presence of religious freedom is frequently questioned as the dominant role of Buddhism seems to undermine the rights of religious minorities. Likewise, women’s and LGBT rights continue to fall short of standards in the Western world. This, among others, raises the question of whether the adoption of GNH as the principal measure of national progress seems appropriate, especially when contrasting it with conventional measures of the fiscal type. One conspicuous problem of the Bhutanese approach is the task of quantifying happiness. The goal of increasing the happiness of the people seems reasonable, since happiness can be considered a favorable goal of government policy. The discipline of economics, especially in its classical approach, has thus far laid its emphasis on the generation of material wealth assuming that to be the obvious source of contentment, while overlooking other potential foundations of happiness and hence putting aside the question of what really does make us happy apart from monetary affluence. And, although utilitarianism does play a role in the microfoundations of economic theory, it has been largely neglected for the account of national wellbeing. The difficulties, however, already start with both defining and subsequently measuring happiness, which ultimately makes it a philosophical question rather than an economic one. The emerging discipline of happiness economics tries to get hold of it. Yet, even if happiness could be measured properly, long-known economic questions regarding the distribution of “wealth” and Pareto efficiency can not be done away with. There have been various attempts at gauging happiness across different countries, and the results regarding Bhutan in particular have been very ambiguous, which is mainly due to differences in methodology. The Satisfaction with Life Index ranks Bhutan among the happiest in the world, supporting GNH as a goal setting, whereas the World Happiness Report implies that overall happiness in Bhutan lies far behind those of the world’s developed nations. Thus, it is perhaps not appropriate to assess GNH by some arbitrary measure of happiness, but rather to evaluate the effect of its policies on less abstract factors that can be measured more easily, such as human development and environmental scores. In this regard, Bhutan is arguably doing well. Although the country will most likely not be able to depart from its LDC status very soon, progress in the country in terms of sustainable growth and political stability is steady and may be evaluated very positively in comparison to its neighbors in the region. It remains unclear if this is because of the government’s GNH policies or rather due to historical, geographical, and demographic circumstances that happen to be conducive to the country’s development, considering the small size of Bhutan’s population, its location in the Himalayas and its history free of colonial rule, which distinguishes it from India, for example. But perhaps GNH provides an ideology favorable to the development of the country as it fosters the implementation of good institutions and sustainability. Regardless of the size of this effect, the Bhutanese approach proves useful for evaluating government policy and can therefore, perhaps, teach us a thing or two for our own pursuit of happiness.