Hillary Diane Rodham Clinton is about to become the first female President of the United States of America. After a long political career, Clinton seems to have proven that she has got all it takes to lead the country. She is familiar with worldwide politics and cares about the American people: at the age of 16, Hillary volunteered to babysit for migrant workers who could not afford childcare. In 1968 she supported the anti-war movement on campus. Clinton graduated from Yale Law School and started working at the Children’s Defense Fund. In 1975 she married Bill Clinton and three years after that became first lady of Arkansas, and later on of the whole country. As first lady of the United States she tried to reform the current health care system of the country, and spoke about women rights at the UN Fourth World Conference on Women in Beijing. She later became senator of the state New York and already aspired the presidency when she competed for the Democratic candidature against Barack Obama. Obama asked Clinton as Secretary of the State after his triumph, so she gained a lot of experience on the political world stage, while visiting 112 different countries. Altogether, Hillary – with all of her experience and involvement in women rights, health care and social and economic inequality – appears to be Obama’s dignified successor. However, due to the fuss concerning e-mails, health problems, and Hillary’s much discussed opponent Trump, we are often distracted by the media and would almost forget what Clinton’s vision for the United States actually is. What are Clinton’s plans for the States when she becomes the first female president? Stronger together First of all, it is important to know what Hillary’s main vision is. Her guiding principle is something that has been visible throughout her whole life and is for instance reflected by the voluntary work during her youth. Clinton attaches much value to social cohesion and charity. She always stresses that no one can fix the American problems alone; and therefore the whole nation has to work together: one should help another, since we are stronger together. The problems she identifies in the country with respect to inequality, unemployment, disunity, and fear, are to be solved by a president who cares about the people, what she states to do. The biggest problem in the country regarding to Clinton is the fear arising from uncertainty about jobs, income, and safety. Due to the economic crisis, the unemployment rate of America in 2008 increased dramatically. Although the unemployment rate now is at pre-crisis level, the nation is still recovering from the shock. Because of this, a lot of Americans cannot make ends meet. Families rely on hard-working relatives who still have a job. Clinton notices that Americans have always been willing to work hard, and now are unable to do so. There are hardly any possibilities to work part-time, or to find jobs that match the capacities of all the job applicants. This results in inequality, since the middle and lower classes are not provided the same opportunities as the upper classes. For example, college is not as accessible for children from the lower classes as it is for children with a wealthy background, and because of such income related opportunities the inequality remains or will substantially grow. Apart from the growing concern of economic inequality, social inequality is still striking the country as well. Women are not given the same opportunities or wages as men; the ‘Black Lives Matter’ movement as a reaction on the Ferguson incidents shows that ‘black people’ are still being discriminated; the fear for immigrants stealing jobs and changing the American society divides the country into supporters and opponents of immigrants, especially towards undocumented Mexican workers; and the debate about gender neutral bathrooms in North Carolina is an example of incomprehension concerning the LGBT minority. The fact that Clinton is now running for president can be seen as a first step towards more mutual respect according to the first female presidential candidate herself. Clinton will therefore not ‘build a wall. Instead, she will build an economy where everyone who wants a good job can get one.’ A strong economy is the key to more equality in both economic and social respect. Hillary’s proposal But how is Hillary going to create more jobs and provide security to the people? First of all, she will set up a plan during her first 100 days of president for the biggest investment in infrastructure in decades: she will rebuild the infrastructure by repairing and expanding roads and bridges, and connecting every American to Internet. Besides of that, she wants to build world-class airports and lower transportation costs, to unlock ‘economic opportunity’. This will lead to more employment in the short run, and more mobility in the future. Furthermore, she will make it easier for small companies to start by lowering the requirements for credits. Clinton also states that innovations in the energy grid are necessary to create a sustainable economy. She acknowledges the climate change and therefore emphasizes that scientific research is of great importance. According to Hillary, the state should invest in this kind of science as well. To provide more security, Clinton will raise the minimum wages and make health care affordable for everyone. In cooperation with Bernie Sanders, college tuition fees will be made free for middle class and debt-free for all. In this way, opportunities are more equally divided and all Americans can have dreams within reach. This will lead to more security, which in turn will lead to more opportunities and equality. The question rises whether this plan is financially possible. The liberal United States of America are no fond of an intervening government. The resistance to Obamacare is a good representation of the classical liberal statements valued by most Americans. However, Clinton plans on raising taxes for the wealthy, in order to let them pay their fair share to the country. She also wants companies to share their profits with shareholders instead of paying disproportional high executive bonuses. Furthermore, the growing economy itself will yield more money to finance the investments. The Democratic proposal for investments is a good example of the Keynesian model: by raising government expenditures, the growth in the economy as a whole will have a greater return than the amount of original investments due to the multiplier-effect. Another – not yet mentioned – concern of the American nation is the war against terrorism. Hillary reassures the people that together with all the allies of America, terrorism can be defeated. She will extend the military force wherever needed, and asks Americans not to fear. Because – as she quoted Franklin Delano Roosevelt during her presidential nomination acceptance speech – ‘the only thing we have to fear is fear itself’. A president for all Americans All in all, Hillary Clinton wants to become the first female president and promises to be ‘president for Democrats, Republicans, independents, for the struggling, the striving, the successful, for all those who vote for me and for those who don’t.’ By creating a stronger community in which all people have equal opportunities, she believes that there is nothing that can bring the United States of America down. The most important pillar has to be a growing economy which will lead to equal opportunities for everyone and therefore solve inequality as a logical consequence. As she wants to convince the people that she is the perfect candidate over Donald Trump, she relies on her experience and has the tendency to sum it up. During the presidential debates, she kept calm, although not much content was discussed. Merely 11 days before the elections, the FBI re-opened the investigation into Hillary’s emails, and some people believe that Hillary has serious health problems and is therefore not able to rule. However, supported by Barack and Michelle Obama, the Democratic Party, her husband and former president Bill Clinton, her daughter Chelsea, hundreds of famous people and celebrities, and a significant part of American society, Hillary Clinton’s proposal seems to be the best one offered to the Americans. Although she is often accused being cold, I believe she has good intentions and a warm heart, and for now is the only person suitable for the job. The world awaits for America’s decision the 8th of November…

There is practically nobody, whose opinion I would trust uncritically. I believe that simply accepting a point of view acquired from any media source is not a sound state of reality for a conscious individual. Because of that, in the issues that matter, I highly appreciate articles, which give me an opportunity to clearly separate facts from author’s opinions and media’s propaganda. The plan for this piece was therefore to write an objective, down to Earth summary of what Donald Trump seeks to represent with himself, with no prejudice and no tendentious research. However, I have to admit I failed miserably in fulfilling it. I sat down with my laptop and a strong decision to remain preserving and watch all three U.S. Presidential Debates, which I did. They end conclusion was that I end up knowing everything about both candidates sins and peccadilloes, but almost nothing about their policies. I proceeded to read the policy statements of Donald Trump publish on his website. I ended up lost in the tones accusations toward Obama’s Administration and Hillary Clinton. I knew that it is really hard to construct a valid picture of a person based on the knowledge given you by the media. It turns out however that if that person happens to be a candidate for U.S. President, it gets almost impossible. The attempt to admit objectiveness of judgement to any source is an illusion, even more than usually, and a simple trust in truthfulness would be a pure naivety. Therefore, there are only three ways left to acquire any valuable knowledge, on which you can base your judgement if somebody is worthy of our vote: judging from the appearance, from the official policy statements and from the actions. The knowledge based on those sources is however not purely objective and subject to value judgement when processed into writing. Let me therefore evaluate on those and present you with what I conclude out of it. Judging from appearance. The appearance is usually correctly considered misleading. There is no sense in judging a person by the way she dresses up or by her body language. A politician’s work, especially the leader’s, is however strictly connected with those aspects – they has to move the crowds and earn respect. After watching the Presidential Debates I came up with the single, simple conclusion about the message that Donald Trump sends with his physics and behaviour: complete lack of class. In other words – vulgarity. It is a different thing when you don’t agree with your opponent’s views or when you bring up the wrongs that she did. It’s competition, it’s politics, it’s a fierce world, we all get it. But it is something completely different, when you are purely a boor. Not answering the question you are asked, talking 100% of the time you have about the weaknesses of your opponent instead of explaining your plan, offending people, both your opponent and those uninvolved in the situation directly – women, Latinos, other minorities, interrupting the other candidate when she is talking; those are things, which show how unmannerly you are, and how low you can go. Inability to guard your point of view with worldly arguments shows, how surreal they are. Judging from official policy statements. When you type into google ‘ Trump Donald’ this incredibly funny and redundant website obtains better positioning than the actual website of Trump’s campaign: TrumpDonald. Reading through their policies and plans should be the very most popular manner of choosing your candidate – by what they are going to do and how they are planning to accomplish it. But I am a realist – considering how badly written, long and boring those statements are, I doubt that a reasonable amount of voters spend their time to analyse them in the way they ought to. What’s more – those statements are mingled with perfectly round phrases as ‘Uphold our freedoms, constitutional values and principles that our country was founded on.’ or ‘Transform America’s crumbling infrastructure into a golden opportunity for accelerated economic growth and more rapid productivity gains with a deficit-neutral plan targeting substantial new infrastructure investments.’, which don’t make it any more accessible and don’t really bring anything into the discussion. Here you have what I took out of it, after slowly crawling through Trump’s policy statements on 15 different topics. Trumps want to increase military spending, lower the business taxes from 30% to 15%, support school choice and lowering of university tuitions, allow deduction of childcare from the taxes and many, many more. An impartial agency, called Committee for a Responsible Federal Budget, judges that his reforms would cost U.S. the public debt to rise by 52 percentage points during his presidency. You can find out more about the Trump-effect on economy reading Michel’s article on that topic. Trumps advocates a veterans reform, however his website talks much more about reducing the alleged fraud in the veterans fund structures, than about actual change in the policies. He supports exportation of illegal immigrants, blocking the inflow from the ‘dangerous’ countries, which happen to be exactly the ones in need, and building a wall that would separate the U.S. from Mexico. Trump harshly argues against Obama Care act and promotes idea of the free market for the health care. Since recently, he switches from being pro-choice towards being pro-life and supports the anti- abortion policy strengthening. He supports the guns availability and is against any additional regulation in this matter. The external policy suggested by Trumps involves renegotiation or withdrawal of most international agreements (NAFTA deals, TTIP) and labelling China as currency manipulator. Judging from actions. Last but not least, judging a person by its action – this is exactly what the modern world advocates to do when forming ones opinions. The biggest asset that Trumps claims to possess is his Business knowledge. The phrase of the ‘small loan of million dollars’ that his father gave him for starting the business loses most of its ridicule when contrasted with the size of the empire he created. And how much you would oppose his views, this is a thing you cannot refuse him – his company is his great success. However, the situations by which you can shape your view on his opinion about the world are speaking much less in his favour. Trump did not release his tax returns for unknown reasons and used not to pay federal income tax. He commonly talks about women in a degrading manner, allowing to his own daughter to be calleda good piece of ass. A recording from a few years back disclosed Trump saying that you can touch and kiss women without their consent. Even though he argues it was a locker-room talk dated a few years back, I do not believe that a man aged 60 or 70 has a different view in those matter. He mocked handicapped journalist, made sexual jokes about former Miss Universe, disrespected family of killed U.S. Muslim soldier and accused President Obama of not being U.S.A. born. He uses phrases as ‘bad hombres’ meaning Latinos and ‘a nasty women’ directed towards Secretary Clinton. Recently Trump refused to admit that he will accept her as the President if she wins the race against him. We have Halloween today – the day of scary things and cult of fear, witches and zombies, death and life after it. But do you know what is really scary? The most terrifying thing is a thought, that in addition to the facts, at least part of the information about Trump that the media feeds us with is true. The most dreadful nightmare is a reality in which a man like him becomes a President of the United States of America, the leader of the whole Western world. Judging from the facts themselves, Donald Trump is the last person I would like to see as the President of United States. And the most scary costume I saw at the Saturday night Halloween party was a guy in a white trash bag, with a caption at his back saying ‘White Trash’ and ones at his front ‘Vote for Trump’.

Eight years have passed so it is time that President Barack Obama leaves the White house in order to make place in the Oval Office for either Donald Trump or Hillary Clinton. The presidential elections in the United States of America are always a big happening. There is a lot of media attention and the whole world is watching the debates and the campaigns of the candidates. After all, being the president of the United States is a job unlike any other. As a president, you will receive a lot of economic, political and military power of one of the biggest and most influential countries in the world. First of all, the background about the elections will be explained shortly. Second, the economic consequences of both presidential candidates will be described and last, a conclusion will be given. The State-structure of the United States is kind of complex but with some explanation, it should be understandable. First of all, you have governors. Governors are the most important leaders of each state and each state has one governor. And remember, the US contains 50 states. The work of governor can be compared with the work of the President but on a lower level. The governor is chosen directly from by the electorate of a state. Next to the President, the Congress is the most important part of the government. It is the legislative authority. The Congress consists of two other parts, namely the Senate and the House of Representatives. The Senate consists of 100 persons, two from every state. The senators are re-elected every six years and many presidential candidates were senators or governors in the past. The House of Representatives consists of 435 members, who are re-elected every two years. Each state will choose a number of Representatives for the House of Representatives based on its population. Further, States are divided into districts and each district will deliver one representative. Also, the United States has two main political parties, namely the Republicans and the Democrats. Donald Trump belongs to the Republicans, whereas Hillary Clinton belongs to the Democrats. Are you still following? Because there is more. Lastly, there are electors who are part of the Electoral College. The size of the Electoral College is a summation of the amount of members of the Senate and the House of Representatives (so Congress) plus three members for Washington D.C. Thus the total amount of electors in the Electoral College will be 538. A strange thing about this is that way how electoral votes work. If a state votes 51% in favor of a candidate, all the electoral votes from that state go to that candidate. So, in a sense, 49% are not represented in the college. This can result in a bizarre situation where a candidate receives the majority of the votes nationwide but loses the elections. Enough about the state structure of the United States, but we will need it to explain the economic consequences when Donald Trump or Hillary Clinton will become President of the United States of America. There are also more elections at the same time, next to the presidential one. Examples are the elections for the members of the Senate, some governors and some other local government institutions. We will start with the economic consequences of Donald Trump becoming the President. As many of you know, Donald Trump is going to maintain a strict foreign policy, not only for the immigrants but also when it comes to the international trade. For instance, he is going to be more strict about the trade agreements with countries such as Mexico and China. This will lead to lower exports for the United States. He is also willing to reduce the amount of immigrants, for instance by building a wall on the Mexican border. This could reduce the labor force, which would reduce the production factor of the United States. On the other side, a lower workforce would enlarge the salaries of the existing workers, which can lead to higher expenses and therefore stimulate the economy. However, many argue that stricter immigration policy on the borders would not reduce the amount of immigrants but even increase it as many of them came to the United States legally by plane and stayed there after their visas expired. Additionally, many immigrants who would otherwise return to Mexico would now not do that, as they could not return to the United States with stricter border checks. Another plan of Trump is to lower the corporate income tax form 35% to 15%. As a result, the United States will be more attractive for international businesses and will lead to more work employment. Donald Trump will also increase public expenditure to invest in the army. His policies about the economy are quite the same as many former Republican candidates. According to some research by an impartial agency called Committee for a Responsible Federal Budget, the public debt will rise by 52 percentage points during his presidency. Last, the expectations are that the US dollar will depreciate when Trump becomes President. Hillary Clinton has other plans when she becomes the President of the United States. Barack Obama also belongs to the Democratic Party so Hillary Clinton will continue the plans that are already on the table at this moment. Clinton will increase public expenditure to invest in healthcare, social security and infrastructure. To obtain the funds for these investments, she is going to raise the income tax for the wealthy. She is also willing to raise the minimum wages in the United States of America. The economic outcomes of Clinton becoming President are more specific. Businesses who are focused on the health care and infrastructure will suffer more when Clinton becomes President. According to some research by an impartial body called Committee for a Responsible Federal Budget, the public debt will rise with 12 percentage points with her as the Presdient. Also the expectations about the US Dollar are better when Hillary Clinton will become president. Furthermore, the party division between the Congress and the President is also very important for the economic outcomes. The House of Representatives and the majority in the Senate at this moment are already Republican-controlled. There is a change that the Senate will be become Democratic when Hillary Clinton wins the presidential elections because the differences are not very big. On the other hand, in the House of Representatives, the differences are quite big in favor of the Republicans so it is not very likely that it will become Democratic. There are three most likely outcomes: A Democratic President, a Republic majority in the House of Representatives and a Democratic majority in the Senate: This scenario is most likely to happen. Policy changes will be hard in this scenario but changes in the investments in defense and infrastructure are likely to happen because both parties, Republicans and Democrats, agree on this. However, these changes will not a have huge impact on the economy. It should be growing at a slow rate and inflation will rise to approximately 2%. The public debt will also rise but not very much. A Democratic President, a Republic majority in the House of Representatives and a Republican majority in the Senate: This scenario is less likely to happen. Policy changes will be very hard in this scenario. Policy changes about migration, income tax and health care are not very likely to happen because the two parties will disagree. It could lead to political uncertainty. The economic growth will be lower but it is not possible to predict it. A Republican President, a Republic majority in the House of Representatives and a Republican majority in the Senate: This scenario is not likely to happen. Many candidates who become presidents are more balanced in the beginning so Trump’s plan could be executed in a less extreme way, despite some of his proposals being rather radical. The economy of the United States could be more isolated and their international trade will decrease. It could also lead to social tension in the United States. The economic growth will be low and public debt will increase while inflation will not increase. As a conclusion, we could say that the presidential elections will lead to a lot of uncertainty. For example, the financial markets in the US but also financial markets in other countries in Europe and Asia will be very volatile in the upcoming weeks. One of the causes can be that Trump is hinting about the fact that he will not accept the elections’ result. The best scenario will be that Clinton becomes president, especially with the combination of the Republican influence in the Congress. Research also confirms that this is the best combination for the economy of the United States and also for the financial markets and the US Dollar. It now seems that Hillary Clinton will win the elections and continue the plans that Obama started but there always can be a surprise. For example, we saw earlier this year that electorates are very unpredictable when the British people voted to leave the European Union, contrary to the expectations.

With Election Day fast-approaching, tension in the United States is quickly rising to an absolute climax. Indeed, after a year-long buildup to what could be the most consequential presidential elections in a very long time to come, November 8th is just around the corner. Needless to say, these elections concern so much more than just the United States alone, and it’s for this reason that we’ve decided to write a short series of articles on them, starting with one on the predictive power of polls. Do they ever get it wrong at all? As Election Day draws ever nearer, this question is becoming more and more pressing, so let’s find out what the data suggests. A brief history of polling Believe it or not, but political forecasting goes back as far as 1824, when the first known example of an opinion poll — a local straw poll by a newspaper from Pennsylvania — was conducted showing Andrew Jackson leading John Quincy Adams by 335 to 169 in the contest for the United States Presidency. Since Jackson won the popular vote in that state (and indeed the whole country), such straw votes gradually became more popular, but they remained local, usually city-wide phenomena. In 1916, The Literary Digest (an influential weekly magazine) embarked on a national survey and correctly predicted Woodrow Wilson’s election as president. Mailing out millions of postcards and simply counting the returns, The Literary Digest correctly predicted the victories of Warren Harding in 1920, Calvin Coolidge in 1924, Herbert Hoover in 1928, and Franklin Roosevelt in 1932. Then, in 1936, its 2,3 million voters constituted a huge sample, but they were generally more affluent Americans who tended to have Republican sympathies. The Literary Digest was ignorant of this new bias; the week before election day, it reported that Alf Landon was far more popular than Roosevelt. At the same time, George Gallup conducted a far smaller (but more scientifically based) survey in which he polled a demographically representative sample. Gallup correctly predicted Roosevelt’s victory. The Literary Digest soon went out of business, while polling took off. Nearly two centuries later, polls are still as relevant as ever, but how accurately do they still reflect the public opinion on political matters in today’s tumultuous world? Over the past two years, election polling has seen some spectacular misjudgments. Several organisations tracking the 2014 midterm elections did not catch the Republican wave that led to strong majorities in both houses; polls in Israel badly underestimated prime minister Netanyahu’s strength in 2015; and just recently, pollsters in Great Britain predicted a comfortable win for the Remain camp in the already historic Brexit referendum. All three of these examples reminded the world that pollsters can be awfully mistaken, so as much as we’d all like to (come on, let’s not kid ourselves here), we shouldn’t take Hillary Clinton’s comfortable lead over Donald Trump in the most recent polls for granted just yet. A few important trends What’s causing the seemingly increasing unreliability of polls? It appears that two main trends are driving this process: the growth of cellphones, and the decline in people willing to answer surveys. Coupled, they’ve made high-quality research much more expensive to do, and so there’s less of it. This has opened the door for less scientifically based, less well-tested techniques. To top things off, a perennial election polling problem — how to identify likely voters — has become even thornier. In terms of speed, the growth of cellphones is like few innovations in history. About 10 years ago, opinion researchers began taking seriously the threat that the advent of cellphones posed to the established practice of polling people by calling landline phone numbers. At that time, an estimated 6% of the public only ever used cellphones. For the first half of 2014, this had grown to 43%, with another 17% mostly ever using cellphones. In other words: a landline-only sample conducted for the 2014 elections would miss about three-fifths of the American public — almost three times the amount that it would’ve missed in 2008. Hence, in order to complete a 1,000-person survey, it’s not unusual for pollsters to have to dial more than 20,000 random numbers, some of which don’t even exist anymore. Dialing manually for cellphones takes a great deal of paid interviewer time, and pollsters also compensate cellphone respondents with as much as 10 dollars for their lost minutes. The best survey organisations complete about two of the more expensive cellphone interviews for every one on a landline, and for many organisations this is a budget buster that leads to compromises in sampling and interviewing. Inevitably, the quality of the research then drops. The second unsettling trend is the rapidly declining response rate. Back in the late 1970s, an 80% response rate was acceptable, and even then researchers would still worry about the 20% that they had missed. By 1997, because of answering machines and other technologies, the response rate had dropped to 36%, and the decline has accelerated; by 2014, the response rate had fallen to an all-time low of just 8%. This decline is worrisome for two reasons. First, of course, is representativeness. For some reason, well-done probability samples seem to have retained their representative character despite the meager response rate, but the risk of surveys failing to reflect the facts obviously increases as the rates drop. The risk isn’t always realised, but with very low response rates now common, we should expect more failed predictions based on these surveys. Second, low response rates have also had a significant impact on the cost. Survey organisations have to pay interviewers to complete between 700 and 1,000 cellphone interviews with a response rate of 8%, with multiple callbacks to numbers that don’t answer (or ineligibly young people). This means tens of thousands of calls dialed by hand, where not that long ago automatic dialers achieved a 100% landline sample. Of course, news budgets for the media organisations that underwrite so much of this research have also shrunk. This new reality has driven many election pollsters to the internet, where expenses are just a fraction of what it costs to do a good telephone sample. However, there are obviously major problems with internet polls. The first is what pollsters call ‘coverage error’: the simple fact that not everyone can be reached online, as estimates show that ‘only’ 87% of American adults are internet users. However, since internet use correlates inversely with age and voting habits, it makes this a more severe problem in predicting elections. While all but 3% of those aged 18 to 29 use the internet, they made up just 13% of the 2014 electorate. Some 40% of those aged 65 and older doesn’t use the internet at all, yet they made up 22% of all voters. The last big problem with election polling, albeit not a new one, is the fact that survey respondents often overstate their likelihood of voting. It’s not uncommon for 60% of all potential voters to report that they definitely plan to vote in an election in which only 40% of those people actually do. Pollsters thus have to guess who’ll actually vote, and organisations construct ‘likely voter’ scales from respondents’ answers to a bunch of questions about the election. However, research shows that there’s no single magic-bullet question (or set of questions) that correctly predicts voter turnout yet, and even if there was, people might still lie about their choice, possibly out of shame. Will Donald trump Hillary? The conclusion, then, is that polls haven’t become much more reliable at all since the last big presidential rundown in 2008; in fact, they might well have become less reliable, since it has gotten more and more difficult to draw a perfectly random sample of the population. Still, we humans are curious beings, and a sneak peek surely can’t hurt, right? A quick glance at BBC’s US election poll tracker, which looks at the five most recent national polls and takes the median value, tells us that Clinton has a comfortable lead over Trump — a solid 5% at the time of writing. Since Trump must win in most swing states in order to stand a serious chance of winning, the White House still seems far away for him. However, if there’s anything that this man has shown, it’s that you’ve only defeated him when the game’s really over. Bring it on — it’s gonna be a cracker. Gallup’s record in presidential elections is 85%, correctly predicting 17 out of the last 20 winners.

UvA Recap – Triple Crown Accreditation for the FEB – by Daphne Sweers When wandering through the UvA in the past few weeks, you may have noticed the recently, prominently placed banners in the hallways with the text ‘Proud to be triple accredited’. Perhaps you also wondered, what does this exactly mean? In September, the UvA Economics and Business’ Amsterdam Business School has been accredited by the Association of MBAs (AMBA). This, together with previous achieved marks of quality from the Association to Advance Collegiate Schools of Business (AACSB) and European Quality Improvement System (EQUIS), marks the third accreditation to the UvA Economics and Business faculty. The three institutions examine business schools on different criteria and aspects. The AACSB has the widest scope, accrediting management and accounting programs. The EQUIS awards business schools specifically, whereas the ABMA is most specific with a solely focus on a business school’s portfolio of MBA programs. This ‘Triple Crown’ status affirms the strong reputation of the UvA’s Economics and Business section, reflecting the high quality of the faculty on all scopes. As worldwide only 1% of all business schools or faculties with a business programme have such status, it is not remarkable that the prominently placed banners serve to increase awareness about this achievement. Amsterdam Dance Event – by Michel Mijlof In the days from Wednesday 19 October till Sunday 23 October, Amsterdam will be the capital city of dance. More than 2200 different artists from around the globe will be performing in 140 of the best clubs in Amsterdam with a total of 450 events. Every year the ADE (short for Amsterdam Dance Event) Festival attracts 375.000 visitors from around the world and it is truly the biggest international club festival covering the whole spectrum of electronic sub-genres. ADE is also not just a music festival. There are also some pop-up events, leading brands that show their gear at ADE Playground, art events, film events and some educational talk events. Traditionally, during the first night of ADE the list of the DJ top 100 is be released. We – the Netherlands – have been leading this list for years. DJ Hardwell was number one for two years and DJ Tiesto and Armin van Buuren where number one for a couple of years as well. This year, DJ Martin Garrix is the new leader. He is just 20 years old and he also grew up near Amsterdam, namely in the town of Amstelveen. Economics Recap – by Raffaele Di Carlo 30-year-olds in 2016 have it much worse than their predecessors did at their age. This is the conclusion of the Institute for Fiscal Studies (IFS) that in early October published a report about the current wealth of young professionals all over Europe and especially in the United Kingdom. They found that on average the access to real estate and pension funds for over-30s has halved in the last decade, due to rising housing prices and struggling welfare plans, which led to the definition of millennials as a “cursed generation”. The situation on the market doesn’t seem any happier: as the dollar underwent an unprecedented appreciation following the fall of the pound and the early stages of the ECB’s quantitative easing, the oil market saw an unexpected rise in demand which OPEC countries struggle to keep up with. However, Russian and Nigerian representatives suggested an increase in supply is a possibility in the near future. The price of crude oil has reportedly fallen by more than 2% as of October 20th. Nevertheless, there seems to be some overconfidence in US corporations. A report by Bloomberg suggests average expenditures exceed cash-flows by over 30%, which means corporations are taking on increasing amounts of debt. While low interest rates and long terms make the debt sustainable in the long run, earnings are potentially constrained by such a capital structure, and with corporate profits falling for the last four quarters, the future doesn’t look too bright. China’s Economy: GDP Growth and Unsustainable Level of Debt – by Tsz-Tian Lu The Chinese economy has successfully met the government’s yearly target and market expectations so far, with its GDP growth at an annual rate of 6.7% in the third quarter, which remains unchanged from the previous two quarters of 2016. Two critical growth engines are retail sales and investment, especially real-estate investment. Although the result alleviates the fear over China’s economic slowdown, the costs of hitting short-term points and the burdens put on the financial system can be detrimental in the long-run. China’s debt to GDP ratio has exceeded 250% and continues to rise since the financial crisis in 2008. The two main causes responsible for the country’s unsustainable level of debt are inflated corporate debt levels and overheated property markets, which are also the two fundamental elements that fuelled China’s GDP growth. So far, the government has approved fierce policies such as debt-for-equity swaps to kerb the rise of debt level, and multiple harsh restrictions on trading properties to control skyrocketing new house prices; but the effects are yet to be determined. For now, the Chinese authorities’ challenges are to curb future debt increase and reduce the risk of property-related crisis but without slowing down the economic growth at the same time. British Currency Is Taking a Pounding – by Artur Rymer 4 months after the Brexit referendum, nothing seems to reflect the political and economic uncertainty more than the British Pound. On the 1st of October, it was valued at $1.3. Following the end of the Conservative Party’s conference 4 days later, it fell to $1.27. 2 days later, after French President Hollande’s call for “hard Brexit” stance from the EU, the Pound plummeted to a 31-year-old low in Asian markets and traded at $1.18. Having recovered to the $1.24 level, it again fell on the 11th of October to $1.21, among others, due to expectations of higher interest rates in the US. For the following week it fluctuated around $1.22, when it was announced that the British Parliament might have a final say on the final Brexit deal with the EU and the Pound rose to $1.23. On the evening of the 22nd of October, the British currency is worth $1.22, 22% less than on the eve of the referendum. It is difficult to still call the Pound a stable, safe-haven currency when investors try to get rid of it at every sign of trouble and buy it when the situation seems to be more optimistic. It now has characteristics of a currency not of a top, global economy, but that of an emerging economy. It is worth mentioning that technology and human error might be blamed for some of the currency’s fluctuations. Still, the downward trends on the forex market and the fact that at some of the UK’s airports you can receive less than €1 for £1 might suggest that the sun is setting on the British Pound. Business Recap – by Nando Slijkerman The IMF issued a research paper about China’s corporate debt problem. Conclusion: the debt of China’s corporates is increasing, rapidly. Robeco stated that the confidence of the Dutch investors is increasing again. Banking shares are rising again. Goldman Sachs and Morgan Stanley reported a better-than-expected profit, which means a 47% and 56% increase in their profits respectively. This is mainly due to the positive circumstances at the bond trading desks. Earlier this year, Morgan Stanley restructured the unit, cutting 25 percent of staff and appointing new leadership. Goldman’s trading and investment-banking core performed strongly, in line with rivals like J.P. Morgan Chase & Co. and Bank of America Corp. that also benefited from investors shifting around their portfolios in response to mixed signals from the Federal Reserve on interest-rate policy and uncertainty surrounding the UK’s exit from the European Union. AEX rose 2.4% which is in line with the DAX (+2.66%). The S&P 500 increased by only 0.25% and the NASDAQ also had a disappointing outcome (+0.18%). We can see the difference in market circumstances between Europe and America. Bulls for Europe and sideway markets for America, not good to do business in American financial markets. The rumors around NN’s Delta Lloyd takeover caused an enormous increase in their stock price, which resulted in a 38.9% increase over September. Saudi Arabia issued EUR 15.9 billions of obligations. Samsung Galaxy Note 7 Recall – by Yana Chernysh In the beginning of September, a lot of issues started to appear regarding the newest model of Samsung Galaxy Note phones. First, there were problems with the battery, as there were cases associated with phone explosion. After that, Samsung launched an exchange program and distributed “safe” phones. However, the exact same problem has occured again. People’s trust towards Samsung and its phones significantly dropped. That is why, in early October all of the phones could be freely exchanged at Samsung, moreover, they could be returned. Eventually, the sales of the phone stopped. On October 10th, Samsung issued an official statement that they cut the production and distribution of Galaxy Note 7. Samsung also encouraged consumers to return the phone. One of the effects of this situation is a drop in Samsung’s stock prices. As well as this, Samsung has to work hard to obtain the trust of the consumers again and cover the loss it had from developing, producing and distributing Galaxy Note 7. Politics Recap – by Magdalena Wiśniewska On October 2nd, the long-awaited peace deal between the government and the Revolutionary Armed Forces of Colombia (FARC) rebels has failed in the referendum. The voters considered the proposed agreement not to be enough after 52 years of war. The ceasefire is supposed to remain in effect independent of the vote score. If you would like to read more about the referendum and the situation in Colombia, check out Rostra’s article on the topic. On October 9th, a state of emergency was announced in Ethiopia, after the anti-government protest have turned violent. It will last for half a year and is feared to give the reigning president an abundance of power. On October 13th the world’s longest-reigning king, King of Thailand Bhumibol Adulyadej, has died at the age of 88. On October 17th, Iraq launched an offensive strategy to regain the city of Mosul, the last city to be under the control of the Islamic State. The actions are backed by U.S. air campaign. On the same day, Russia declared that the city of Aleppo will be given an 8 hours time span to evacuate civilians and wounded, as an answer for the UN’s demand of a 48-hours-long ceasefire. Battle for Mosul Begins – by Michael van Rhee The Iraqi army, supported by Kurdish troops on the ground and the international coalition in the air, has started its attack on Mosul, the last major Iraqi city that’s still in the hands of Daesh (ISIS). The attacks were preluded by a battle for Kirkuk, a city approximately 100 kilometers southeast of Mosul. Daesh has probably initiated these attacks out of revenge for the offensive that’s about to happen (desperate needs lead to desperate deeds…), but it was soon reported that the international coalition had taken control of the city. Now that it has, it’s making way to Mosul, where both parties are expected to go all out in a battle for the last major stronghold that Daesh still possesses in Iraq, and in a strategically critical region at that. Much like Kirkuk, Mosul is located in an area that’s known to be full of oil, which is a crucial source of income for Daesh, and thus vital to its survival. It’s expected that the international coalition will push IS out of Mosul and all the way back to Raqqa, its self-proclaimed caliphate. However, one thing is certain: it won’t be without bloodshed — a lot of it. Thailand’s Saddest Day – by Hải Đăng Vũ His Majesty King Bhumibol Adulyadej of Thailand was confirmed by the government officials to have passed away on October 13, 2016. When His Majesty turned 18 years old he was announced to replace his brother Ananda Mahidol, who was rumoured to be assassinated. At the time he was pursuing science studies and afterwards changed to law and political studies in Switzerland. He was the longest-serving living monarch of a country, which stood for more than 70 years. In general, the Thais are very appreciative of the work of His Majesty and they could not understate his commitment and determination for developing the country. His earliest achievements to the Thai people are the Royal Development Projects, covering various fields including fishery, agricultural farming practices and the construction of dams for the prevention of flooding during monsoon season. When the issues were mitigated, the King established Research Centers for the purpose of advanced scientific studies and continually endorsed the proposal of “Sufficiency Economy”, in which he stressed out the importance of having the right balance in sustainability and development. His political stance was however controversial when he was believed to endorse military coups and his unclear position on the lèse majesté, the prohibition of insulting the royal family. Towards the end of his reign, he was awarded by the United Nations the UNDP Human Development Lifetime Achievement Award. The 2016 Nobel Prizes – by Leonie Ernst The announcement of every year’s Nobel Prize winners is an exciting moment during the month October. On Alfred Nobel’s birthday (10 December) all awards will be given to ground-breaking researchers in seven different categories. The winners receive a sum of money equal to 8 million SEK (around 825 thousand EUR) and, of course, everlasting glory and praise. This year’s winners in their categories are: Physiology or Medicine: The Japanese Yoshinori Ohsumi was rewarded for his discovery of mechanisms for autophagy. Autophagy is the process by which human cells destroy themselves in order to keep the body alive. Mutations in the process can cause diseases and Ohsumi’s findings led to a new paradigm in which this process is better understood. Physics: This Nobel prize was split between the British David J. Thouless and duo Duncan Haldane and Michael Kosterlitz for “theoretical discoveries of topological phase transitions and topological phases of matter”. Chemistry: The trio of the British J. Fraser Stoddart, French Jean-Pierre Sauvage, and Dutch Bernard Feringa developed a so-called ‘molecular machine’. In this machine, molecules can extend controllable actions, which brings chemistry to a whole new level. Peace: Probably the most important Nobel Prize is the prize for peace. This year’s winner is the Colombian President Juan Santos, who has negotiated to bring the civil-war that plagued the country for 50 years to an end. Although the agreement he made with the FARC was rejected by the country in a referendum, his efforts are praised. Economics: Although the Sveriges Riksbank Prize in Economic Sciences is officially not called a Nobel prize, the Finnish Brengt Holmström and British-American Oliver hart may call themselves Nobel prize winners for their contributions to contract theory. Literature: The fact that the songwriter Bob Dylan has won the Nobel prize for Literature surprised no one more than the musician himself. He was not even mentioned by the bookmakers, who predicted the Japanese Murakami would be rewarded. Dylan has not yet acknowledged the prize and is unreachable for any comments. It seems as if he feels burdened by the fact that his lyrics are valued literature, but some people argue his silence indicates his arrogance. We will see whether this great songwriter decides to show up on the 10th of December in Sweden or whether he refuses the honour provided by the Nobel Foundation.

Less than two weeks ago, the Prime Minister of Luxembourg, Xavier Bettel, has suggested that the Schengen Area should be suspended for 24 hours in order to show the citizens of Europe what it means to live without it. He said: “Shutting the frontiers for a day would show people what it means to wait two hours to get into Italy or Spain, to have controls everywhere, to block all exchanges.” He also added: “One day. So that people see what it is to be outside Europe. It’s terrible what I’m saying, but it would be good for people to understand.” Of course, one could certainly argue that a leader of a European Union Member State should not threaten to suspend one of the privileges that European citizens have been enjoying for quite a while, just to show them how good they have it. However, for several years we have been constantly hearing a lot of criticism towards the Union and its work and, although at least some of it is legitimate, very little is being said about quite a few of the positive aspects. So which one is the Schengen Area? And what is it in the first place? I will do my best to answer these questions for you (and for myself as well). The free movement of persons is one of the four key freedoms that the EU is supposed to fully implement across its Member States. The Schengen Area is the key agreement that allows for that freedom. It has been first signed in 1985 in a Luxembourg village of Schengen, outside of the EU’s predecessor’s – the European Economic Community’s – legal framework. In 1990, the Schengen Convention, dealing with the implementation of the Schengen Area, was signed. Next, throughout the first half of the 90s, it evolved into a border-free zone and common visa policy agreement between several of the European countries, culminating in its establishment in 1995, with 7 countries participating at the time. In 1997, the Schengen has been written into the Treaty of Amsterdam, making the Schengen Area part of, the already existing, European Union’s legal framework. The Treaty came into force in 1999. Although only 5 European countries have been there in Schengen in 1985, the agreement has been continuously enlarged since the very beginning. Currently, there are 26 states that have signed the agreement and have been fully accepted as members of the Schengen Area. Out of the EU Member States only 6 are not part of Schengen: Ireland and United Kingdom (due to special agreements they are not obliged to join, despite being part of the EU) and Bulgaria, Croatia, Cyprus and Romania (they are obliged to join, however, first they need to meet the requirements and receive unanimous approval from the European Council, which, for political reasons, is currently difficult). On top of that, EFTA countries (i.e. Iceland, Liechtenstein, Norway and Switzerland) are also members of the Schengen agreement. Additionally, Monaco, San Marino and Vatican City are de facto members due to their open-border agreements with the Schengen Area countries (Italy and France). The main goal of the Schengen Area is to abolish border control checks between the member countries. Before, crossing a border in Europe could take several hours (even more in some cases), which was frustrating not only for tourists, but especially for those who did it frequently, e.g. workers living close to borders or transporting industry workers. Therefore, Schengen not only ensured the free movement of persons, but also helps to facilitate the other two other of the EU’s freedoms: the free movement of services and the free movement of goods. Anyone who can legally enter one of the member countries is allowed to travel across the area freely. On top of that, Schengen Area citizens do not need their passports to cross borders, instead they only need their IDs. Additionally, Schengen coordinate their visa policies towards the third countries – establishing a free-border zone within the Schengen Area necessitated a more strict external border in order to ensure continued security across the member states. In general, the Schengen Area also deals with harmonising rules and laws of all its members, that deal with border-crossing, visas, border security and checks, both within the area and at its external border. The Schengen Area certainly greatly benefits its citizens and businesses alike. Crossing a border in Europe is now as easy as travelling from one city to another within a single country. This makes it convenient for tourists, who have to spend less time at the frontiers, for workers who can easily travel to work each day across borders and to businesses who can save a lot of time and, thus, money when importing or exporting their goods across the continent. It is now also more coherent for people from outside of the EU – they do not have to apply for visas and permits in every country in which they stay. Although it’s difficult to estimate the economic benefits of the Schengen Area (or the costs of abolishing it), especially that it is now simply entrenched within the legal framework and culture of the continent and also because of the sheer volume of persons and goods crossing borders every day. Still, according some of the estimates go at around €110 billion in the next decade! And this is just in terms of money. The foregone opportunities, the inconveniences, the costs for businesses and employees and the additional spending for border control could very well turn out to be much higher. Just like about everything, the Schengen Area also has its drawback. Abolishing border controls means that member states have little to no control over who is entering their country by land. This could prove to be a huge threat to security and it has been used as an argument by many politicians across the continent as to why the Schengen Area should be suspended or even abolished, particularly in the wake of the migrant crisis. However, two things need to be pointed out here. Firstly, according to the Schengen agreements, the member states can temporarily suspend open borders due to important security reasons. For example, this year, France suspended Schengen because of the terrorist attacks in Paris and Nice, due to Euro Cup 2016 and due to Tour de France. On the other hand, Poland suspended it due to the NATO Summit in Warsaw this summer and World Youth Days. Secondly, closed borders do not prevent terrorist attacks or other threats to security. In fact, the amount of deaths in Western Europe as a result of terrorism has been decreasing (with a surge in 2015 due to attacks in Paris) since before the Schengen Area has been established. That is not to say that Schengen Area has prevented terrorism. Rather, it is meant to show that opening borders does not necessarily mean that threats to public security will increase. Nonetheless, it is indeed more difficult to control who is entering the country and, after all, the terrorists responsible for the Paris attacks in November 2015 have been operating from Brussels, Belgium, outside of France. An additional problem with opening the internal borders is that strengthening the external ones has become a necessity. This has hurt economic activity and cross-border communities on the Schengen’s frontiers, e.g. in Poland, which, before the Schengen Area, were subject to some special regulations and thus could flourish. Still, under certain conditions, the so-called local border traffic can facilitate the movement of people (e.g. until recently, local border traffic facilitated exchange between Russia’s Kaliningrad region and two of Poland’s regions). Is the Schengen Area beneficial for Europe? Or are its drawbacks significant enough to get rid of it altogether? Well, Schengen continues to facilitate cultural, personal and economic exchange in the EU. It’s been there for quite a while and the new generations don’t even realise what crossing borders looked like before. It has entrenched itself as one of the most visible results of the EU’s policies and, perhaps because of that, we sometimes take it for granted. The drawbacks on the other hand are manageable. Security has not been significantly threatened due to opening the borders, as some claim. Still, all the member countries have to continue cooperating in this area to ensure that their citizens are safe. Therefore, unless national sovereignty and full control over borders are imperatives for you, the economic and political benefits of the Schengen Area should be easily observable. Therefore, if suspending it for 24 hours (or more) is necessary for us to preserve it, then maybe Luxembourg Prime Minister’s idea isn’t that bad after all.

Have you ever thought about all these electric, self-driving cars, smart houses that change the temperature and regulate the lights when you need it and thought “the future with them will be so nice and easy”. Well, the future is here. In the suburbs of Melbourne, Australia, Tesla Town is being created. The official name is YarraBend, as it is situated near the river Yarra. There are 60 houses in total with the price range from 1.48 to 2.1 million dollars. The sales started middle of October and it is expected that people will start moving in at the beginning of 2017. The main feature that makes this town unique is that it works only on solar panels and battery storages made by Tesla Motors. The panels give enough energy for the town to provide for itself. Moreover, there is enough energy even to charge your electric car. Among other features that the citizens of YarraBend will have are the high-speed internet, a “tech-concierge” and a special app, that provides all the necessary information like weather, transport timetable and all the important news within the community. The town also includes bike paths, several children’s playgrounds, and sports facilities. Sounds like the perfect place to live, right? The developers of this project wanted to combine technological innovation with people’s wellness and also take care of the environment. The main goal that is being pursued is making living eco-friendly. It has been already proved that the citizens are expected to produce 80% less waste and consume 43% less water and 34% less energy due to the environmental sustainable developments made especially for this project. One of such developments is an accumulator called PowerWall, which will be used in every house. It does not require any servicing and it has a 10-year guarantee. Let’s take a closer look at what this device is all about. To start with, PowerWall itself is a battery that is put on the wall, which also requires a system of solar panels, that can be situated on the roof of the building or in the backyard. This system can be used as the main energy provider, or as a backup. Moreover, the extra energy provided by this system can be sold to your neighbors. The main purpose of this invention is, if not to get rid of the gas and oil industries completely, then to at least make them less important in the energy business. This will lead to global changes in the energy infrastructure of our planet. While now the PowerWall system is used only by the YarraBend and some people testing it in different cities, the aim is to make it available for everyone. This can be quite a challenge, as the price of the panel is in the range of 3000-3500 dollars, the solar panels excluded. However, Tesla offers to pay for the panel in installments, the first one being 1.5 thousand dollars and then 15 dollars per year for the next 10 years. Although this panel can work for 1-2 days after being fully charged, it is advised to have at least two in your home or office. The concept of YarraBend sounds very researched and ready to be introduced to the world. But is it only one city? Can the concept of “eco-friendly” living be applied everywhere? Personally, I think that the project itself is very future forward and indeed can make a difference in the way people are used to living. However, I am not sure that the technology used in YarraBend will be used outside this city anytime soon. The reason would be that, first of all, the research, the production and installing it in regular houses is going to be expensive. Secondly, some people are just not ready for this technological changes and will not trust it enough to give up on the way that has been working for them for so many years. And lastly, the concept of solar panels and Tesla PowerWall relies directly on the amount of sun in the particular area, which can be a problem for countries where the sunny days are rare. I think the solution for the first problem can be not applying the technology to existing houses, but building new “Tesla” ones and selling them, the way it is done in YarraBend. Also, the increasing of people’s awareness of the benefits that alternative sources of energy bring through educational and governmental information programs can help solving another problem mentioned above. Finally, wind and water can also be used as alternative source of energy, depending on the region, although it still requires future research and development. I think that the whole concept of eco-friendly goods and services is on peak now, so Tesla Motors is applying correct strategy to attract customers. Moreover, its intentions to take care of the environment do deserve some recognition. It is always interesting to follow Tesla’s developments and its newest products, and YarraBend is not an exception. In the nearest future it will become clear if the concept is working and if, possibly, more and more people will switch to this type of energy consumption.

Life in the Classical Era was tough: high child mortality, low life expectancy, early-stage medicine. Not to mention the chances of dying in battle in one of the many petty wars between city-states that plagued the Hellenic Peninsula way before the rise of Rome. However, even back in the day, there was an occasion even the most barbaric tribes held so sacred they would lay their weapons aside for a while and watch in awe: the Olympic Games, held in the Greek city of Olympia, home of the majestic temple of Zeus, to whom the celebration was originally dedicated. Every four years, the finest athletes from all of the Greek city-states and colonies would gather to take part in a series of competitions, including athletics, gymnastics, boxing and ancient wrestling, at the end of which the winners would receive a conspicuous monetary reward, undying glory and the iconic crown of laurel leaves. The ancient Olympic Games ran successfully for over a thousand years, until the Roman Emperor Theodosius I and the Bishop of Milan Ambrose finally dismissed them as a pagan ritual. Just like the ancient Olympics, the modern ones were designed in 1894 as an occasion to restore peace and brotherhood in Europe after the brutal conflicts that had ravaged the continent during the 19th century, in the spirit of fair competition and the luxuries of the Belle Époque. While they overall failed in their intents of pacification, they did succeed in restoring the quadriennal tradition of the Games. As the city of Olympia is no longer suitable for an event that attracts hundreds of thousands of supporters from all over the world every year and requires facilities way better engineered than the ancient Greek ruins, the host is by convention designed by a vote among all candidate cities. It is organized by the International Olympic Committee, quite a while in advance, years before the actual Olympic Game in question takes place. This year, the vote concerned the designation of the host city for the Olympics of 2024, and it appeared to have finally chosen Rome, the Eternal, as one of the favorite candidates for this prestigious role. The news was welcomed by the Italian National Committee for the Olympics (CONI) as an omen of economic rebirth for the Italian capital and as an opportunity to showcase Italian sportsmanship to the world. However, by what many would define as a fortuitous coincidence, 2016 was also a year of mayoral elections in Italy, and whether to actually carry out such a noble but costly endeavor easily became matter of political dispute. Now, the mainstream view about the Olympic Games is that they are a great way to advertise the host’s country and culture to the world – thus possibly boosting tourism-related revenues – and also an opportunity to stimulate the local business environment via sponsorships and procurements, especially concerning the necessary infrastructure. However, the extent of these effects largely depends on the characteristics of the host country. Let’s take a look, for example, at this year’s Olympics, which took place in Rio de Janeiro. The iconic “green pool” at the Rio 2016 Olympics. In 2008, when Rio was chosen as host for the 2016 Games, Brazil had one of the highest projected rates of economic growth among developing countries, and many observers believed that hosting the Olympics would give its soaring economy the last push needed to rightfully enter the First World. But eight years are an extremely long timespan in the modern world, and many things happened on the way to 2016 that nobody could foresee: first of all, Brazil’s economy suddenly stopped growing as a result of the deep political turmoil following President Dilma Rousseff’s impeachment and the ongoing corruption scandals within the Brazilian government, as well as the crisis involving petrol giant Petrobras. With a rising inflation – estimated at 10% per year – and unemployment at an all-time high of 11.2%, Brazil is now facing one of its worst economic recessions ever, which automatically sent the Olympics to the bottom of the list of Brazil’s priorities. The fairly predictable outcome was that as of 2016, Rio was absolutely unprepared to host an event of such magnitude: by July, just a month before the start of the Olympics, the Organizing Committee admitted less than a half of the buildings in the Athletes Village had passed the necessary safety tests required to host the competing teams. Anecdotes have it, the US basketball team decided to reside on a cruise ship rather than the Village exactly for this reason. Those who did defy the odds and went to the Village had to deal with leaks, plumbing issues and structural problems of the buildings. In addition, some failures in the hydraulic and sewage systems caused the iconic “green pools” during the diving and water polo competitions, raising health concerns from the athletes. Combine these issues with the unfortunate coincidental outbreak of the Zika virus and the endemic level of crime in the city and you might have a fairly accurate picture of just how disastrous those Games were. If you consider the billions invested in the organization of the event, you would be right in thinking everybody would have been better off if the Games had just been held somewhere else. Even before becoming mayor of Rome, Virginia Raggi, candidate for the Five-Star Movement, had been campaigning against the burden of the Olympics with her party. However, in early October, the decision became definitive, causing the CONI to withdraw the candidacy of the city to host the Games. The decision raised much concern within Italian politics, as many believe hosting the Olympics to be an opportunity that should not be forgone light-heartedly. But is it really? The overall cost of hosting the Olympics was calculated by the CONI and predicted to be €9.7 billion, amount that would be reduced to €4.2 billion, considering that part of the infrastructure had already been planned for other purposes. But Luca Cordero di Montezemolo, President of the Italian Organizing Committee, suggested the costs would have been widely made up for by a 2.4% increase in GDP and the creation of 180,000 jobs all over the eight-year period. Italian Prime Minister Matteo Renzi also strongly endorsed the initiative, claiming that the organization of the Olympics had been planned to be “the vanguard of economic and ecological sustainability”. So why would Ms. Raggi (and her party) be against this opportunity for growth? Once again, it’s related to some very peculiar characteristics of the host country. The Five-Star Movement, which Virginia Raggi represents, was born in the wake of Silvio Berlusconi’s political demise as a popular initiative to increase the political involvement of Italian citizens, with the objective to fight corruption and create an alternative to the “usual suspects” of Italian politics. Under the leadership of a comedian, Beppe Grillo and a programmer, Gianroberto Casaleggio, the Movement then derailed into some sort of political delirium tremens, even publicly advocating conspiracy-related nonsense such as anti-vaxxer propaganda and alternative cures to cancer; but that’s another story. The Mayor of Rome, Virginia Raggi. Now, Italy has a certain reputation for generating quite a lot of corruption in prestigious occasions such as World Cups, Olympics and Universal Exhibition – and the 2015 EXPO in Milan was not an exception – especially when it comes to the construction of the necessary infrastructure. Considering the amount of work required to build an Olympic Village, it is reasonable to believe somebody might find it appealing, for example, to secretly coordinate the auctions of the public procurements for those structures in such a way that all the participants maximize their profit, possibly delaying the process for quite a while and enormously inflating the costs or, for instance, to bribe a few inspectors here and there so they will turn a blind eye on buildings which do not pass the safety checks. This is exactly the kind of concern that finally led Ms. Raggi, who claims to be true to the original intent of the party to fight corruption, to decide against the Olympics. But then, again, aren’t this sort of risks always embedded in this sort of international competitions? And isn’t the Italian economy after all capable of absorbing an eventual loss, considering the possible profits? Should then anybody just give up on hosting great events for fear of corruption? There are quite a few lessons we can learn from all this. The first is that are no absolute truths in Economics: what is an opportunity for profit for one country does not necessarily need to be for another. The second is that organizing an event eight years before it actually takes place is not really a brilliant idea, as literally anything can happen in such a long time. The third is that poor Olympics are worse than no Olympics at all.

“The social pact, far from destroying natural equality, substitutes, on the contrary, a moral and lawful equality for whatever physical inequality that nature may have imposed on mankind; so that however unequal in strength and intelligence, men become equal by covenant and by right.” – Jean-Jacques Rousseau, The Social Contract. Contracts have existed since the beginning of civilization: in feudalism, peasants would pay taxes in the form of crops for their king based on a verbally agreed contract ; in the medieval ages, you would swear your life to protect a king, and he would give you a piece of his land to live ; during the industrial revolution, you would get paid to work a certain amount of hours per week. And this is only the economical aspect. Many sociologists and philosopers use the concept of contract, just like the quote of Rousseau shows above, to explain social interactions and norms. The importance of contracts in our lives was never so clear as it was on this 10th of October, when the economists Bengt Holmström of the Massachusetts Institute of Technology (MIT) and Oliver Hart of Harvard University won the Nobel prize for their revolutionary view on the contract theory. Be aware: like many economic concepts, contract theory may seem like a simple concept, but it is not. Business insider defines contract theory as : “ the design of formal and informal agreements that motivate people with conflicting interests to take mutually beneficial actions.” That being said, let’s look at why their theory was so praised in the economical world. Holmström’s research approached the lack of informativeness in principal-agent theory: “This principle suggests that optimal contracts should structure compensation based on all outcomes that can potentially provide information about actions that have been taken. In the case of setting an executive’s compensation, for instance, that means a firm would reward the executive based on not just its own performance but also the performance of other firms in that sector — as way of evaluating not just the actions the executive took but those that he or she could have taken.” – MIT Holmström has also approached the free-riders problem when a firm’s income is split among it’s employees: he discovered that this model makes moral hazard problems more frequent in companies, such as the ones we saw during the Financial Crisis of 2008, or in the Enron case, in 2001. He suggests that outside ownership of firms can produce more flexible compensation and boost individual incentives. Hart, on the other hand, focused his research on privatizaton of public companies, more specifically, how ownership structures and contractual arrangements affect companies governance and boundaries. He researched the American prisons, and how private prisons lack on quality more then public ones, because of the incentives managers have to reduce costs. The Royal Swedish Academy of Sciences offers this example to better explain his suppositions: “Suppose a manager who runs a welfare-service facility can make two types of investment: some improve quality, while others reduce cost at the expense of quality. Additionally, suppose that such investments are difficult to specify in a contract. If the government owns the facility and employs a manager to run it, the manager will have little incentive to provide either type of investment, since the government cannot credibly promise to reward these efforts. If a private contractor provides the service, incentives for investing in both quality and cost reduction are stronger.” The improvement in contract theory has a direct affect on the better formation of all institutions in our society, and a better understanding of this, results in a better society.  Let’s just hope that “the guys up on the hill” will hear what Holmström and Hart have to say.

How Close Can You Go #2 – Mark Schilstra, Managing Director and Executive Committee member of KAS Bank “Back in the days when I was fifteen years old, I worked my socks off to buy a new stereo system. Every Thursday, every weekend, every holiday I worked at the local supermarket for three-and-a-half years to finally get the stereo system. This does not show that I had the most spectacular job, but it shows that I was willing to sacrifice to get something!” The second article of Rostra’s HCCYG series is here! This time, I could sit down with Mark Schilstra, Managing Director and Executive Committee Member of KAS Bank. An inspiring person, with a relentless motivation and dedication. First something about KAS Bank. KAS Bank N.V. is a European specialist for the safekeeping and administration of securities and high-end risk and reporting services. They focus entirely on wholesale securities services to professionals in the pensions and securities industries. Currently KAS Bank has over EUR 450 billion Assets under Administration. It has offices in Amsterdam (very near to Dam Square), Frankfurt, and London. As a private client, it is possible that you don’t know the bank because it only deals with institutional clients, but within the pensions market, KAS Bank is one of the biggest and most valued players in Europe, and even received the Custodian of the Year award last year. I walk through the doors of the marble entrance, someone at the reception recognises me. “Back in town?” she says. Last year, I worked here as an Investment Management Services Analyst. After a little chat, I receive my visitor pass and walk through the gates on my way to grab a coffee and wait for Mark Schilstra. A few minutes later, Mark walks out of the elevator to pick me up. Mark Schilstra, born in 1971, is responsible for multiple departments within KAS Bank. As Managing Director Operations, he is responsible for over 300 FTEs(!). With his MD position, he is a member of the Executive Committee, which consists of the Board of Directors and the Management Board - a very prestigious position at a bank. Mark began to study in 1990 at the University of Amsterdam. He studied Business Economics (bachelor and master) but found Econometrics far more interesting. During his master Business Economics, he started to study Econometrics, also at the University of Amsterdam, and graduated cum laude (bachelor and master) in 1997.  While studying Econometrics, he worked as an Assistant Professor where he gave lectures in Mathematics and Statistics to Economics students. Holding multiple positions, he graduated from a post-doctoral study in Financial Analysis (RBA) and another post-doctoral study in Risk management (RMFI, cum laude). If you have ever read the book ‘Liar’s Poker’ or some other piece of art by Michael Lewis, you know that this was the time for econometricians. “When I graduated from Econometrics, I was asked by MeesPierson Securities to join them at the dealing room with sales derivatives and structured products. I was trading derivatives and structured products behind my desk with multiple screens and two phones. During the 90’s, this job was the top of the bill! Unfortunately, this job is a lot less interesting nowadays than it was back in the 90’s. Today, it is much more structured, and moreover, most of it is automated.” When I asked Mark about the atmosphere in the dealing room he answered: “My first year in the dealing room was horrible. It puts one in mind of a fraternity. The whole first year was like hazing. Constantly being bullied by more experienced traders was the most common thing of the day. On one of my first days, I received a list on which was what everyone wanted to drink. On the list, there were not drinks like coffee and tea, but all kind of complicated cocktails. So what should you do with it? Should you throw it away, like I did, or should you go get the cocktails? Both are wrong. You could not do anything right during your first year. If you threw it away, you were screwed, but when you go get the drinks, the next time you were given a list with food which was far more complicated than the drinks were. Another time, I had my carton of milk on my desk. When I walked away from my desk to get something, they mixed my milk with some liqueur.” I was surprised by hearing these things. It matched completely with all the things Michael Lewis wrote in his book. When I told Mark that I have read this book, he laughed and said: “In the first chapter of that book, they made some kind of bet for ten million dollars. Exactly this happened to me in my first year as a trader. They came to me and wanted to bet with me about the opening price of the Dow Jones. The only thing that I did not know when I worked there for less than a week, was that it was President’s Day next day, so the Dow was closed. It did not matter what I did, I lost anyway. So after my first week, I could give the half of my monthly salary to them.” After working for three years at the dealing room, MeesPierson was taken over by Fortis Investment Bank. “That was the moment that I wanted to make a move. Even though I was one of them already, I was tired of the dealing room and all those hazing activities that came along with it. At Fortis, there was a front office, which was the dealing room for example, and a back office. The front office was for the cool guys and the back office was for the… the weirdos. A mid office did not exist so, if you knew something about how a dealing room works, you could get a good job within the mid office. I switched from the dealing room to the controlling department and became Head of Controlling at Fortis Investment Bank. Later on, I became Head of Operational Risk because I found this more challenging with my econometrics background. Fortis was taken over by ABN Amro and I was promoted to Global Head of Risk management where I was responsible for the global risk operations of ABN Amro. This takeover was not the smoothest takeover ever, so on my management level, there were a lot of fights. I was almost forty years old and was tired of these internal fights, so I decided to stop working and started studying again. During my post-doctoral study in Risk Management, I came in contact with the Chief Risk Officer of KAS Bank, which was one of my professors. He told me about KAS Bank and that I should take a look at it. That was actually the first time that I applied for a job.” Mark made a CV and applied at KAS Bank where he became Managing Director. I asked him about the things that are very important to him when looking at candidates for a job. “When reviewing CVs, I mostly look for candidates who demonstrably finished something within a relatively short period. This could be in a work-related environment such as projects or internships, but also with sports achievements. When someone has achieved a top performance in sports, it is really valuable to me. This shows that someone has the motivation and dedication to do something, and is willing to sacrifice to achieve a goal. Most of the time, these candidates are very successful in the workplace. The fact that someone has done a little of everything is one of the most horrible things to me. You will see at work that those people will take multiple projects but do not finish any of them. Good grades are also important to me. When you study something, which should be the first priority, I want to see that you master the curriculum and you are not doing by getting a six minus (C or D equivalent). Work is also a really important factor for a student. I find working during your study a standard thing. If you have not worked during your study, you do not know any value of money. That is just unacceptable to me. It does not even matter if you have worked in a supermarket or at a bank. This indicates that you have a goal in life. Back in the days when I was fifteen years old, I worked my socks off to buy a new stereo system. Every Thursday, every weekend, every holiday I worked at the local supermarket for three-and-a-half years to finally get the stereo system. This does not show that I did the most spectacular job, but it shows that I was willing to sacrifice to get something!” To get in a top management position, you need to have some skills. You need to be analytical, inter-personal, and solution oriented. But how do you get there? “Well, there is not such a thing as a golden rule. You just need to do it, but the moment you see more than only your own job, you will get close. It is important to see the whole picture. What do my actions mean to the bank? How can I influence the bank’s operations by my own actions? Can it be more efficient? When you are asking this to yourself, you are on a good track.”

Colombia is a country in which truth and legend intertwine on a daily basis, where everything is possible and impossible at the same time, and there is sometimes more truth in the old folk’s tales than in official news reports, just like one of Gabriel Garcìa Màrquez’s novels. Garcìa Màrquez also used to say that people never realize that starting a war is way easier than finishing it, and the undeniable truthfulness of this statement is still having painful repercussions on the country: the very soil of Colombia is soaked in the blood and tears of a people that has not seen peace in over a century. For while the country may technically be at peace with its neighbours, it has been torn apart by intestine disorders for way too long. The very birth of Colombia as we know it today was an act of rebellion, led by the mythical figure of Simòn Bolìvar, against the former Spanish rulers. Even after the colony seceded from Spain in 1819, it was broken down by civil wars, resulting in the separation of Venezuela, Ecuador and Panama from the former Greater Colombia. Since 1905, when the last civil war ended with the independence of Panama, Colombia has been involved in several conflicts both in the Southern American scenario – against Perù – and on its own territory. The heavy political turmoil that followed the end of the Second World War caused many political movements in Colombia to rise up in arms to follow the path of guerrilla, the “little war”. In the spirit of the Cold War, the Colombian government found itself facing militias of both communist and fascist inspiration (not to mention the cocaine cartels and their mercenary armies) that aimed to take over the rule of the country, paramilitary groups that are still active as of today and continuously threaten the stability and safety of Colombia. Among the former, the most infamous and influential guerrilla group is the FARC. The Fuerzas Armadas Revolucionarias de Colombia (FARC, or Colombian Revolutionary Armed Forces) were founded in 1964 by Manuel Marulanda Vélez as a result of the violent repression of the protest movements of Colombian farmers by the government. The survivors of the army’s crackdown, who escaped the attack and started hiding in the jungle and on the mountains, managed to gather enough followers to their cause and organized a real army with the intention of turning Colombia into a socialist state. After 20 years of relentless fights, in 1984 the Colombian government, led by President Belisario Betancur Cuartas, agreed to a deal which would allow the FARC to participate in the country’s elections as a normal party, named Uniòn Patriotica. In 1985, the Uniòn Patriotica managed to elect 14 members of Parliament; however, the candidates and many other members of the party were assassinated in the following years, possibly by other guerrilla groups, and as a consequence the Uniòn Patriotica was disbanded and the FARC came back into action, gaining even more strength and support. By 1998, the FARC had become so influential that President Andrés Pastrana decided to negotiate a new deal, negotiations which were encouraged by the United States with a significant economic and military aid. As it happens, as soon as the United States entered into play the situation escalated in an unexpected way: in the belief that US support would give the Colombian army the decisive edge needed to finally eradicate the guerrilla, President Pastrana and his successors – Alvaro Uribe and Juan Manuel Santos – decided to interrupt the ceasefire and launch a large-scale military operation to eliminate the FARC. The campaign lasted over ten years and was largely unsuccessful, also because of the strong popular support that the FARC enjoy in many regions of Colombia. As a result, both the FARC and the Colombian army (and the Colombian population, unfortunately) suffered heavy losses, but no progress was made towards a resolution of the conflict. As of 2008, the FARC still counted 8,000 to 16,000 effectives, and as of 2011 controlled 20-25% of the territory of Colombia. Facing the impossibility of a military victory, in 2012 both parties finally agreed to meet in Havana, Cuba, to initiate what promised to be a final negotiation. While this theoretically implied a truce, the two sides continued their skirmishes until 2015. Then President Santos and the new leader of the FARC, Timoléon Jiménez, completed the final draft of the peace proposal, which was then signed and made public in 2016, at the presence of the Secretary General of the United Nations, Ban Ki-Moon. A referendum, scheduled for October 2nd, was expected to finally legitimize the treaty and bring a 50-year long war to its end. Only, it didn’t, because the result of the referendum was slightly against the deal, by 50.25% against 49.75%, against all odds. “Why is such an important matter even submitted to referendary vote?”, you might be wondering. The reason is, indeed, very simple: the terms of the deal itself imply major changes to the Constitution of Colombia, which means that, under Colombian law, such changes must first be approved by the main constituent (the people). This is called principio de substituciòn constitucional and cannot be taken lightly: if anybody could modify the Constitution freely, it would be like not having a Constitution at all. Hence why the chance of ending such a terrible conflict was delegated to a referendum. Did the Colombian people choose wisely? That’s a completely different matter. According to the terms of the treaty, after the referendary approval of the deal, Colombian troops would have withdrawn from the warzone as to allow FARC members to move to “Temporary Hamlet Zones” safely, under the supervision of the United Nations. In these specifically designed areas, the FARC militia would have turned all of its weapons and military equipment in and surrendered. Any FARC member not facing major charges of violations of human rights could have then been granted pardon and reintegrated into Colombian society, after contributing to the removal of landmines and FARC military infrastructure from Colombian territory. Members charged with such allegations, or that refused to cooperate with UN authorities, would have faced prison sentences of up to 20 years, unless they admitted to such crimes, in which case they would have endured a reduced sentence. In addition to a safe surrender, the Colombian government agreed to take many reforms suggested by the FARC into consideration, especially a rural reform aimed at improving the conditions of Colombian farmers: it is estimated that around 1% of the Colombian population owns more than 50% of the land, following a very ancient feudal model of latifond. Thus, the Colombian government would consider a reform for the redistribution of land and the development of better infrastructure, education and services in rural areas, with special emphasis on putting an end to child labour in farms. Moreover, former FARC members would have received a limited amount of parliamentary seats in order to transition from a guerrilla group to a de facto political party, with special protection as to avoid the massacre that occurred in 1985. Surprisingly enough, the agreement does involve any measures about the involvement of the FARC in the Colombian cocaine trade: the guerrilla group was in fact at the very least in contact with the drug cartels (another plague of the country) from which it collected a tax aimed at financing its operations. Although the leaders of the group often stated their divergence from common drug traffickers, they did in some way benefit from the trade. However, this is not taken into account. According to the Colombian public opinion, the deal went way too soft on the FARC: the 50-year long war against the guerrilla caused more than 7 million victims, half a million of which Colombian civilians, and many citizens don’t see the conditions determined in the peace deal as a sufficient retribution for all the harm caused in the conflict. This partly explains the unexpected outcome of the referendum. However, there are several external factors that should not be neglected. The most important, in my opinion, is the still relevant influence of the drug cartels in Colombian politics: a country at war cannot fully dedicate itself to eradicating crime. The Narcos are the party that most benefits from the on-going state of conflict between the government and the FARC, and their connection to Colombian politics may have influenced the outcome of the referendum through propaganda and the spread of misleading data on the peace deal. This is, of course, pure speculation and should not be taken seriously by any means, though I believe this is something that should be reflected upon. So did Colombians make the right choice? Probably not. “Pride, the never-failing vice of fools.”, said Alexander Pope, and I pretty much agree with him. The general sentiment of the Colombian people is at the very least understandable, and yet I believe that some peace and stability, no matter the cost, could greatly benefit Colombia, allowing the country to finally face its demons and establish order in a land ravaged by war. Keeping the country torn between factions, at the cost of more lives, helps crime thrive and presents the prospect of future military “intervention” from other players, and is definitely not the solution. “The dreadful night has passed”, recites the Colombian national anthem. Perhaps not yet.

Despite all of the seemingly global political shifts towards more protectionism and nationalism, highlighted by the astounding outcome of the Brexit referendum mid-June, Japanese voters have decided themselves to maintain the status quo, as Prime Minister Shinzo Abe, the founder of Abenomics, received its much-needed support by getting 33.5 percent of voters to maintain the country’s ruling Liberal Democratic Party (LDP). The main opposition party was defeated by a significant margin; the ballot revealed that they only received as much as one-third of supporters compared to those of LDP. Economists and financial experts perceived that Abenomics was the determining factor for this election. However, one question remains to be answered: Is reigning Abenomics proving to be successfully implemented in this thriving domestic economy or was it merely an indication of unconvincing policies proposed by their counterparts? HOW DID JAPAN FALL INTO A SLUMP? The Japanese economy, since the collapse of the national financial system in the early-1990s, has yet to show any signs of recovery to any desired level. To tell the tale, the optimism of Japanese investors during the 1980s initiated a speculative behavior at the beginning of 1990s. Combined with excessive risk-taking, subpar assessment of credit risk, SMEs were highly vulnerable to market sentiment. Japanese Central Bank (JCB), however, failed to realize the upcoming dangerous consequence of this over-confidence reaction of the market, and thus not recognizing the need of adjustment in interest rates accordingly to market changes. Only when the economy plunged too deeply into overheating, JCB replied with a modest increase in interest rates, but far from what could have anticipated if the adjustments were made earlier. The aftermath of this hike is a bubble burst, stock market chaos, followed by a complete collapse of the banking sector. In the hope of reinvigorating the economy, seeing that investments started to suffer quite dramatically as some of the domestic banks declared bankruptcy, JCB decided to lower their current interest rates. The downward spiral lengthened until the end of the 1990s where Central Bank set the rate to almost 0 percent. It is theoretically impossible for rates to go lower, which discourages people to place their savings in commercial banks and hence putting less money in circulation. Expansionary policies (e.g. decreasing taxes and funding public infrastructure) were also initiated to encourage investments and consumption, but the effect was relatively modest and hence accumulation of borrowing funds over the years inevitably snowballed into a massive public debt at 144 percent annual GDP in 2000. The Japanese economy started to recover later on as demands for Japanese product increased as the clock turned to the 21st century, but the global economic recession afterward certainly put Japan into another unfavorable situation. In 2012, after the first unconvincing tenure as Prime Minister in 2006-07, Shinzo Abe was re-elected into the most prestigious position in the House of Councilors. This time though, witnessing the economic downturn, he had enough preparation for his ambitious economic reform policy: Abenomics. THE EARLY SUCCESS The vibrant missionary of Abenomics is to re-establish macroeconomic development and dynamism that was experienced during the 1980s, the most prosperous period in Japanese history – obviously with a much more cautious mentality. As it has always been, the massive plan is directed to tackle some of the most identifiable problems within the domestic scene, weak economic demands with evidently dampened economic growth, ever-increasing government debt and sluggish inflationary figures. A structural reform, similar to the transition observed in the United Kingdom during the 1960s, is necessary to shake the stagnating economy; however, in order to recover, maintain and improve domestically in a gradually more medium-term setting, starting within a global economic disappointment, the cabinet believed that quantitative easing and fiscal stimulus are the solutions to answering those pressing concerns. The “three-arrow” plan, in the presumption that the combination of the three is greater than its individualities, was carried out in the hope to lift Japan out of recessionary period. The government initiated its stimulation plan by spending more than 10 trillion yen at the beginning of 2013, where almost a third of that amount was used to encourage more private investment and local economies. The Bank of Japan also reacted by pulling off qualitative and quantitative easing measures (QQE) by purchasing bonds and exchange-traded funds to directly inject more money supply into the market, with the target of doubling monetary base and outstanding amounts of government bonds. A 142-page document titled “Japan Revitalization Strategy” published at Kantei (Ministers’ residence) during the summer of 2013 also followed, was designed to tackle the abysmal growth problem, in the hope of producing a 3-percent nominal GDP growth rate/2-percent real growth for the next 10 years. Abe’s strategies to rescue its economic problems cover multiple aspects including attracting more foreign investments whilst abolishing unnecessary legal obstructions, enhancing their domestic technological and physical infrastructure, utilizing human resources capabilities – by involving more women in the workforce – , and encouraging the establishment of SMEs initiatives throughout Japanese regions. Additionally, being faced with societal problems such as population aging (with an estimated 30% of its population over the age of 65 in 2030), Japan also carefully looked into public provisions such as healthcare and environmental programs and looked to ensure standards and quality of living for all demographics of Japanese citizens. One of the more concerning societal issues for Japan is oddly enough, adaptability in catching up with the global market tendency. Therefore, the government is also focusing on how to orientate domestic businesses towards international market by putting more emphasis on the preparation for enterprises for such engagement in trade agreements, most notably TPP or FTAAP. A comprehensive framework was put in place. During a short span of one year after this major announcement, Japan did experience positivity and optimism throughout the entirety of the market. Some of the key performance measures that were the objectives of the reform, GDP and inflation, definitely showed favorable progress. The commitment of the government had brought more growth to the market, touching at 2 percent real GDP rate for the fiscal year 2013 (which begins in April). NIKKEI 225 index also increased by 60 percent year-on-year. Consumer price index also returned to positive figures (0.35%) after suffering below-zero inflation five consecutive years after the global financial crisis. Although some might argue that there need to be some significant improvements for a rather ambitious long-term goal of 2 percent annual increase on real growth; nonetheless it was a remarkable result that the authority could be happy of. Although Japanese citizens are enjoying a high standard of living, it is somewhat peculiar to think that Abe’s belief that the economy centering itself on promoting a growth strategy is the way ahead. There are indeed several possible explanations. Market sentiment in Japan for the last decade for Japan had remained low throughout the last decade: GDP registered on average of merely 1 percent growth, in addition to the fact that private investment had halved over the 15 years prior to Abenomics. Furthermore, the economic turmoil will keep escalating as the massive aging population problem is looming larger and continuing to stress government budget, although current healthcare expenses per capita for Japan is the lowest out of the G7 countries and only accounted less than a half compared to figures in the United States, according to OECD. However, the cumulative expenses for healthcare could be devastating if the government fails to react appropriately when the number of elder people is growing at a worrying rate. The violent earthquake that hit Fukushima did not help alleviate the recovery process either. THE MIGHTY DOWNFALL Despite having had considerable success on the mission to rescue the economy, Abe’s views towards reviving the economy were heavily contested with loads of skepticism and criticism posed by global economists. They were questioning whether there was any appropriate academic rationale behind the establishment or the sustainability of the plan, as they did not believe the desired results (in particular, 2-percent average real growth) could be obtained by the end of 2022. More incoming criticisms targeted to social and political matters as well. Over time, these weaknesses, both theoretically proven and dealt in practical settings, have become more visible. The world saw the gigantic collapse of global petroleum price. The explosion that hit the oil market saw its unit price dipping to the low-60s in December 2014 compared to the mid-110s level that was seen only just half a year before. The radical change weakened Chinese appetite for foreign imports and motivated its policy afterward to revolve around consumer goods rather than reliance on being an export hub. Japan, the fourth-largest exporter to China, was particularly damaged by the extraordinary policy shift undertaken by China, and figures showed that aggregate exports only increased by 5 percent in 2015, incomparable to almost double-digit percentage growth with exports in 2013 (statistics). Imports were also significantly affected, especially imports of natural resources for domestic production, which increased to 5.5 percent. The fundamental calculation of current accounts would tell you that there is a negative trading balance – an economic variable that Japan should take more attention to. The second source of failure, which directly originated from the revised policy but was barely mentioned about, is the adjustment of consumption tax; in more detail, the tax bracket was increased to 8% from 5%. What the government was attempting to do was to decrease corporate tax so as to encourage more private investments and attract foreign funds into the market. Therefore, simply put, it was believed that a decrease in this tax category would be compensated by a rate hike in consumption tax, as the incurred debt by the government had already plunged too deeply. This was believed to create a “chain” effect such that when corporates profits improved, these surpluses would result in higher wages for employees; or would be transferred to other smaller companies and boost SMEs industry performance in general, which attracts more private investment. However, the expected consequence did not happen, and rather by neglecting the fact that weakened demand is actually the underlying reason to the underperforming economy, the reduction in consumers’ consumption was more detrimental than the positive counter-reaction on investment. Therefore, tax revenue collection was negatively affected by such consequence and hence spurred some heightening political debate. While large corporations benefit from retaining a higher proportion of their profits, consumers, on the other hand, have to bear the costs of these privileges. It came to no surprise that many accusations about the flawed policy were directly aimed towards the macroeconomic mismanagement by the “dishonest” and “corrupted” LDP, as some politicians claimed. Learning from this lesson, Abe announced to postpone another consumption tax hike to 10 percent, which was previously announced to come into effect in 2017. The purchase of assets and government bonds (JGB) following QQE program guidelines was expected to bring about a confidence boost to the stock market, an increase in inflation expectation (illustrated by CPI index) coupled with a slight reduction of interest rate (which had been extremely close to 0 percent at the point). However, the large-scale forceful injection of the money supply will depreciate the domestic currency with respect to other non-fixed international exchange rates, with the intention of having depreciation for rather short-term to encourage more market activities for the long term. Monetary base during first QQE scheme enlarged by 70 trillion yen, with accelerated expansion of monetary base moving forward. However, this yielded literally no economic value: simply printing money does not create wealth; and the commitment to/obsession of defeating deflationary pressures turned out to be ineffective. Real inflation continued to shatter any initial expectations set in Abenomics, with CPI index figures sitting at 0.8 percent for 2015. The Central Bank, with multiple failed attempts to revitalize the economy, pioneered the implementation of the unprecedented negative interest rates. Most economists, including FED chairman Janet Yellen, opposed to the idea – it is merely a trick of currency manipulation, where a country deliberately devalues their own currency to be more competitive with other markets, making their exports sector more attractive towards overseas consumers. In conclusion, continuing currency devaluation measures and imposing negative interest rates are still not doing any better, proving that solving this economic problem by supply-side policies is not the most credible solution to mitigate the adverse effects of` the macroeconomic scenario of Japan. How well are demand-side policies performing? Multiple fiscal stimulus packages, totaling almost 100 trillion yen since 2012, have been transferred to the market to fuel consumption but no significant effects were felt after the initial success. It was also revealed that the realized amount of money being expended to new constructions was substantially less than what was announced by the government, while the rest of the packages were mostly used for social programs and maintenance of public infrastructure in the aftermaths of natural disasters. Together with the anticipation of a consumption tax hike on goods, not only were customers more reluctant on their spending, but companies also hit back on production as well, which discouraged even more investment. While external demand is hit hard by the Chinese economic vulnerabilities, the more recent happenings of Brexit will almost certainly not help Japan in adding any dynamism into the national investing environment. Some non-economic factors were also contested about the “Revitalization” strategy of Abenomics. Firstly, there has been criticism towards the government’s commitment to female participation in the workforce. Though the initial plan is to encourage women to successfully be employed and hold managerial positions, so far the job market has been reluctant to behave in such way and the cabinet has shown no signs of responding to the current situation. And ironically enough, the cabinet of Abe is largely dominant by male politicians. Workers are more adaptive into the international competition but progress is slow. Productivity level also deterred and breakthrough innovations only happen few and far between. SO, WHAT’S NEXT? The dominance of Japan is sadly long gone; the gigantic household names as we know them: Mitsubishi, Sony, Toshiba, Toyota, and of course (how would we forget) Nintendo are all currently struggling to strengthen their foothold in the international market. Many changes are made to restructure Abenomics but all of them has failed to materialize the dream of making Japan great again. Worldwide economists have suggested on some modifications to the plan, but Japan is only carefully listening and investigating those ideas before executing them. However being too conservative now (as the nature of party itself) is not a sound strategy either when the economy is in desperate need of new energy. Nevertheless, Japan is still very respectable in the entirety of the world, and its economic lessons, past and present, are invaluable to the upcoming generations of economists. Whatever we may say, when the attention of the world focuses on Japan in 2020 for its coverage of the Summer Olympics, we will be more exposed to the more information about its true economic scenario and specifically, how the management apparatus will resolve itself out of its ever-been-so-long recessionary mantra. #abenomics