When compact disc first made its introduction into the mainstream market somewhere in the late 1980s, few people would’ve predicted that the then dominant audio format — vinyl — would still be around almost thirty years later. Clocking in at eighty minutes of music, CDs had a much longer running time than LPs, which could (and can) carry just twenty-odd minutes per side. Convenience won out over quality, for there was no more need to get your lazy ass off the couch when a side had just finished playing. In retrospect, however, it appears to have only won the battle, but not the war, because vinyl is currently making an impressive comeback, commonly known as ‘the vinyl revival’. One manifestation of this surprising recovery is Record Store Day, an annual event that celebrates the culture behind — and, in a sense, the very existence of — record stores across the globe. Saturday, April 16th saw the ninth edition of this event, which brings together fans, artists, and thousands of independent record stores from all over the world. In a broader sense, it’s a celebration of the fact that there’s still such a thing as ‘the music industry’ at all, which — although it might sound trivial — is not as straightforward as it seems, especially in view of all the streaming services that are quickly gaining ground on the more traditional (i.e. physical) means of listening to music. Record Store Day can be thought of as a swing back in the other direction; an attempt at getting people to appreciate records again — and the record stores that sell them, of course. On this day, held on the third Saturday of April, many record stores organise intimate in-store performances. On top of that, highly limited special editions of classic albums go on sale that you can only get your hands on through the event, and there are discounts on the regular collection as well. It just goes to show that vinyl isn’t dead, even if it looked like it was soon going to be. A short overview of history. The advent The origins of gramophone records, as vinyl is formally called, date back to the early 20th century. While initially coexisting with phonograph cylinder records, which saw the light of day as early as 1877, vinyl started replacing them in the early 1920s. While sales were initially quite tender, they reached a peak in the late 1960s and early 1970s, when popular bands like the Beatles, Led Zeppelin, Pink Floyd, and the Rolling Stones — just to name a few — came along and stole the hearts of many. The resulting snowball effect solidified vinyl’s position in the market, and it soon became the dominant audio format. The birth of this industry saw bands become less financially dependent on touring — a process that has completely turned around on itself in recent years, primarily due to downloading and streaming services. But before we get there, vinyl first had to be defeated by CDs — at least temporarily. The slowdown The 1980s saw the start of a new era in the music industry: that of CDs. While more convenient, many so-called experts were quick to express their doubts; was this really a positive development? In terms of audio quality, most people would say that yes, it definitely was. Although much has been said about the supposedly ‘warmer’ sound of vinyl records, CDs have much more storage space than LPs. This not only allows for longer playback, it also means that the music can be released in much higher bitrates than vinyl has space for, thus maintaining a higher audio quality. This is very much an ongoing process, because we actually have albums being released on Blu-ray nowadays, pushing up the audio quality even further — for all you audiophiles out there, you hear? There seemed no purpose left for vinyl, whose sales quickly started dropping, while CD sales rose. However, there always remained a market for real enthusiasts, who continued to prefer the tangible nature of vinyl over the convenience of compact disc. And just when CDs seemed to have found their place in the market, these funny things called ‘computers’ came along to change the world for good. More specifically, the internet did, and this would prove a blow too tough to handle for the CD industry. It didn’t take long before mass file-sharing became a big thing — so big, in fact, that entire artist discographies started being shared on The Pirate Bay, a website that provides torrents. To make matters even worse, streaming services have become more popular in recent years, sucking even more money out of the music industry. At this point, all hope seemed lost for record stores, which slowly but surely started to fall, one by one. The comeback However, if you look more closely, you’ll notice that it’s mostly the more generic record stores — the ones that also sell DVDs and whatnot — that struggle to survive. And that makes perfect sense, because practically everything that’s for sale there’s being shared online. However, while it’s true that the internet has done damage to more than one market alone, it hasn’t solely been a bad thing; it has also liberated markets, and such is the case for the music industry. One of the good things about the internet is that it has created a situation now where artists no longer have to rely on the music business mainstream; things like major record labels, music television, and commercial radio are all losing their power to the internet, thus creating more of a level playing field. It doesn’t matter if you make music that isn’t necessarily commercial; you can still reach an audience through the internet. This has given birth to a whole new generation of musicians who aren’t concerned with selling records, because they know all too well how difficult it is. This has proven to be a liberating thing, and it means that music again becomes about creativity, and less about trying to make a career. Record companies have also had to do their part. By releasing beautiful special editions of albums, they’re trying to offer something that’s more than merely a bunch of songs put together on a disc, stuck away in a sloppy jewelcase. Instead, they’re trying to make sure that this is something that you want to own. And then, of course, there’s the vinyl. Although it seemed unimaginable a decade or two ago, it’s actually becoming more and more common for albums to be released on vinyl again — a modest sign of recovery, perhaps, but a sign of recovery all the same. And make no mistake: it’s us — the younger generation — that’s buying most of it, despite having no nostalgic attachment to it. The future Only time will tell whether or not vinyl has any chance of surviving in the distant future, but there are good reasons to be mildly optimistic at the very least. One noticeable trend of the last few years is that the music business has diversified into two very distinct halves. On the one side you have popular mainstream culture, on the other side basically everything that’s completely outside of the mainstream. It seems to me that the more extreme the one becomes, the more there is a swing back in the other direction, which stems me hopeful for the future. This idea is nicely illustrated by the following quote from one of my own favourite artists, English rock musician and record producer Steven Wilson: “We’re in the midst of a revolution, and nobody really knows where it’s going to end up. We’ve moved from the golden age of the single — you might say the 1950s into the 1960s — into the golden age of the album, which kind of started with albums like Pet Sounds, Sgt. Pepper… The golden age of the album went right through until MTV came along, and then MTV changed everything and made it all about how you look, how you present yourself in three minutes, and how many beautiful women you can get in your video. That ended the great era for the album, and it all became about the pop video then for a while. And now we’re in completely another era, in which it seems that even the idea of music as a physical, tactile experience has gone. Now music is simply something that streams from the aether — through your laptop, your phone, or whatever — and you have no physical relationship with the music. To me personally, that’s really ugly, but then I’m old… I have nostalgia for the times of vinyl and even CD. I still love the physical product; I love the tactile experience of taking records out and putting them on the turntable. But here’s the thing: I see a lot of kids bringing me vinyl to sign now. I’m thinking that that’s a really positive development, because it says to me that the current generation, which has been born into the age of the internet — streaming, downloading — are rebelling against it. Not all of them, but a substantial minority, because there’s one thing that kids do really well, and that’s rebel against whatever is the norm. And the norm is streaming and downloading these days, so what’s really interesting now is to see young kids — rock fans, hip-hop fans, whatever they are — rebelling against that, and buying not CDs, but going back even further to something that has even more of that romantic, tactile, physical presence: the vinyl album. And that’s really encouraging to me, I have to say.” Most of you will know that being a musician is no lucrative business; it’s very hard work (49-hour workweeks being the average), yet the yearly income of most of these musicians doesn’t even pass the 10,000 euro mark — a truly appalling figure. Therefore, I’d like to encourage everyone to keep buying music, particularly in its physical form. It’s the only way that musicians can make a living through doing what they feel so passionate about: making music. The downfall of the physical product would be an enormous loss to the entire industry, because no record could ever be replaced by ones and zeros. Fortunately, we can already see a small shift taking place, which will hopefully prevent that horror scenario from one day becoming reality…

In March this year, Apple fought with US Department of Justice about the privacy of the data of iPhone users. Later on, one of the most popular apps for communicating ,WhatsApp, has announced a new confidential policy. In summary, the new policy states that all of the media and messages one shares via WhatsApp are now encrypted and no one, even the app team itself, can read them. The same thing applies to voice calls. Another thing WhatsApp did is that now the messages you send are not stored anywhere except your phone and the phone of the person you are talking to. Why am I telling all this? Obviously, the problem of privacy on the Internet has been a huge deal over the last years. With the private pictures of celebrities revealed in 2015 and a recent release of face-recognizing apps, which allow finding people on social media just with one picture, the question pops up in one’s head – is there anything you can share and store without any risk? When sharing something on the Internet, you automatically sign up for anyone in the world to see it and, moreover, use it without your permission. The pictures you post aren’t so big a problem, as you are completely aware of them being on the net, but what about phone numbers? Or something private you share via messages? The main question is – how to protect your data, especially the most important ones, like your bank account and credit card information? First of all, for the protection of your payment information, you can use websites such as PayPal and Skrill. They allow you to pay on most of the Internet shops without revealing your credit card number, etc. For example PayPal, in order to protect customers from fraud, verifies all information one provides with Payment Processors and Credit Reference and Fraud Agencies. Also, only PayPal and Skrill know your payment information. Both of the websites proved to be trustworthy, so it is a nice and easy way not to reveal your payment information to every website you use. Secondly, you can install some special programs like security software, password protection schemes and encryption mechanisms, which will protect your laptop from the online criminals. Some of such programmes (for example BitLocker and VeraCrypt) allow you to encrypt the whole hard drive, so no one can read the files you store there. Another advice I can give is to have two e-mails and use one for any social media websites and random subscriptions or registrations, and keep the other one for work, studying and personal communication. This way your inbox will never be overflowed and it will be easier and more pleasant to use. One other good thing to do is to always switch off Bluetooth if you are not using it. Wireless services, like Wi-Fi in public places, can endanger your private data too. Moreover, you can check to what data the apps on your phone have access to. You know, when you are installing a new game on your phone, or a new social media app, you are usually asked to agree to some terms and conditions and then give access to some information…Usually, we just don’t read what is written there and just press «approve». Well, sometimes we should read. Also, you can go to the settings on your phone and switch off the access the app has, most of the time the app is still working fine after that. However, this does not work for all phones. Also, such services as iCloud, Dropbox or Evernote, which are basically an online storage of your information, can be easily hacked and accessed by others, so your information is no longer private. Some people also offer more radical steps, for example, create a paid e-mail account, stop using social media and sharing your location. Sounds like too much, right? However, it does make sense, although I cannot imagine anyone giving up all social media for more security. Finally, I want to say that the main basic thing one can do to protect their personal data on the Internet is not giving out your phone number, address, and other private information on random websites, which you are not sure of. Also, always log out and do not automatically save passwords on your computer to the most important websites (like your bank account), despite it being much more convenient. To be honest, when delving deeper into this topic I understood that protecting your private data basically requires you to stop using anything on the Internet, which sounds impossible. Still, I did not find one universal step to make sure that your data is secure. In general, I should say that following some steps mentioned above can minimize the risk of others getting access to your data to the minimum, however, none of these steps guarantees 100% security. #internet #privacy

This interview constitutes the second interview of the “The End of History” interview series. For an introduction to this interview series please see part I of the series. How would you feel about receiving a monthly paycheck that covers all your living expenses without you having to do anything in return? I am talking about money for nothing: you won’t even have to play a guitar on MTV. Sounds pretty good right? At this point I expect you to become slightly suspicious, because you know that things that look too good to be true tend to be precisely that and should therefore be discarded. But don’t do that yet, because the idea of “free money for everyone”, better known as basic income, is to be taken serious. Not only has it been gaining a lot of appeal in the last years, but basic income actually starts to become influential in the political domain. Although the idea of “free money” comes in many variants and under several different names – among others: basic income, social dividend, negative income tax and guaranteed minimal income – all of the variants revolve around the same principle: provide people with absolute financial security by giving them an unconditional monthly subsistence wage. Throughout history basic income (BI) has known some remarkable supporters, varying from human rights activist Martin Luther King to neoclassical economist Milton Friedman. This reflects one of the most salient aspects of basic income; it appeals to people all over the political spectrum. Simultaneously, many people are concerned about the economic consequences of BI. Often raised questions include: What will happen to labor supply? And, how can we ever finance basic income? In order to shed light on these questions, we have a talk with basic income expert Sjir Hoeijmakers. A pragmatic idealist When Sjir graduated cum laude in econometrics two years ago, everyone expected him to start his career in a big financial firm. After all, isn’t that what all gifted econometricians do? However, Sjir, touched by the idea of basic income, decided to take a radically different step. Today, Sjir lives of a basic income, which has largely been funded by donations, and is deeply involved in the political process surrounding Dutch basic income experiments. Aware of the fact that anything he says can affect the delicate political process in which he is involved, Sjir cleverly avoids making politically sensitive statements. That is, Sjir admits that he has personal preferences, but stresses that he is “not a lobbyist for basic income”. He rather prefers to argue that basic income comes in “so many promising variants and has so many potential advantages that we should at least investigate the possibility of implementing various aspects in our current social security system.” Sjir can hardly be caught on less sensible statements than this one and as the interview proceeds, his pragmatic approach to idealism becomes ever more evident. When asked what motivates him, Sjir tells about how fortunate he was to have a kind of “mental basic income”. That is, because of his excellent academic results, he always knew that he could easily get a job once graduated. This financial security allowed him to ask himself “what do I want to do? Rather than what can I do?” Or, using Sjir’s words: “Precisely the fact that I could easily get a job, allowed me to choose not to do so, but to choose for something I really want. I believe that this freedom has made me a lot more productive and useful”. It is the hope that basic income offers a viable way of providing “other people with this same freedom” that drives Sjir. Couch potatoes The most common argument against basic income goes as follows; if all people get a basic income no one will have an incentive to work and many people will choose to stop working. This, of course, is disastrous for the economy, which would have to deal with low labor supply and high labor costs. When confronted with this critique, Sjir remarks: “the funny thing is that most people answer yes if you ask them whether they would continue working if they had a basic income. At the same time, most people think that others would stop working. This constitutes a weird difference between how people think about themselves and how they think about others. Furthermore, if you look at the available scientific evidence there is no reason to assume that people will stop working after a basic income is introduced. Most research actually indicates that people will start working better because they will be happier, healthier and more creative.” Sjir recognizes that the famous Canadian Mincome experiment revealed that labor supply indeed diminished, be it by small percentages, after people received some form of guaranteed income. But he remarks that “it is questionable whether we should see this as a negative effect. The resulting drop in labor supply can be entirely explained by women spending more time taking care of their children and young adults finishing their education. So, is that a bad thing? Or does this reveal that the current system is deficient?” Of course, there is something to say for that. But the positive effects Sjir mentions are often difficult to quantify, since they have no specific monetary value. When I suggest that this might be inductive for a deeper measuring problem Sjir affirms that “the quantitative indicators we use to assess policies are too simplistic because they mainly focus on direct monetary consequences. The question is not whether we could quantify – be it imperfectly – all the consequences of BI. When it comes to evaluating social security policies our current perspective is too narrow, since the focus is on questions like: how long does it take before people get back to work? Whereas questions like: are people productive at their new job? Are they occupying the place of someone else? And how healthy are they? are hardly ever asked.” Imperfect experiments All we know about the possible implications of basic income has been derived from experiments. Of course, these experiments only give us imperfect information for they cannot match with the complexity of the real world. One of the biggest deficiencies of these experiments can be found in their temporary nature. That is, experiments have a limited duration, whereas an unconditional basic income would be permanent. One can expect the subjects of experiments to anticipate the end of the experiment and change their behavior accordingly. By an intuitive form of reasoning one could argue that the negative effects on labor supply would be bigger, were the subjects granted a permanent basic income. For this reason Sjir stresses “that it is very important that the experiments have a long duration. For if the duration is too short, you do not test the effect of financial security but the effect of a break in financial insecurity.” Another point of critique lies in the local nature of the experiments. For practical reasons, the biggest experiments so far have provided at most a couple of thousand people with a temporary basic income. On this scale, little can be said about the macroeconomic consequences of basic income. Some argue that BI undermines the very economy upon which its financing depends and fear that its introduction would cause massive inflationary spirals. Sjir believes that we have to admit that “the economy always is an experiment. An experiment that can fail, think for instance of the economic crisis.” He continues that “the biggest risk is doing nothing. The labor market is rapidly changing and we have big unemployment problems. If we do nothing to tackle these problems we are in fact also doing an experiment.” Concurrently, Sjir wants to clear up a popular misconception: “people often think about the introduction of basic income as a discrete step; from one day to another everyone suddenly receives a basic income, and then we just wait and see what happens. In reality, however, you would gradually introduce different elements of basic income as to see which aspects of it improve the current system and which do not.” Basic income related experiments in the Netherlands Since Sjir is directly involved in the basic income related experiments in the Netherlands, he is the perfect guy to give us an update about the progress of these experiments. When asked to do so he tells us that “there are currently nineteen municipalities which have shown official interest in conducting an experiment including elements of a basic income. Four of those – Utrecht, Wageningen, Tilburg and Groningen – are discussing the possibility to start experiments with secretary of state Jetta Klijnsma, who recently said to expect that the first experiments could start on the 1st of January 2017.” Since the municipalities are dependent on central government approval, the bottle neck of the political process lies in The Hague. Sjir fears that “the experiments become a political plaything nationally, even though in the municipalities they have arisen from across the political spectrum.” During a vote in parliament last year, all parties except for Geert Wilder’s PVV and Prime Minister Rutte’s VVD voted in favor of allowing for various kinds of experiments. Noticeably, the proposed experiments are not true unconditional basic income experiments, because only people who are currently dependent on social security allowances (bijstand) are eligible for participating in the experiment. Nevertheless, Sjir sees great value in these experiments for they “introduce two important elements of basic income. First of all, the allowances in the experiment will be unconditional in the sense that the subjects will no longer have to meet a long list of criteria in order to receive their allowance and, second, the experiment will make an end to the poverty trap, since the subjects of the experiment will not lose their full allowance if they decide to start working.” Getting rid of capitalism’s whip Without a doubt, the introduction of BI would put in motion an unimaginable process of cultural and economic change. Perhaps the most profound change consists of getting rid of the symbolic whip of capitalism: the threat of being unemployed and, as a consequence, poor. When I share this thought with Sjir he adds that “you could actually see the whip of the free market as a market disturbance, because it forces people to take a job as fast as possible. In that sense, you could argue that basic income would liberate the labor market by creating a labor market in which people no longer rush to occupy any open position but carefully allocate themselves to a position in which they are more productive. Moreover, this would result in a fairer labor market in which salaries are not artificially low due to the fact that people are forced to take a job.” Basic income would also change our perception of work. To illustrate this, Sjir takes us to a birthday party: “Nowadays, if someone walks up to you at a birthday party and asks you what you do, the most important thing is that you do something. If you don’t have a job you feel ashamed and you would reply that you are ‘between jobs’. Maybe, if people had a basic income they would ask instead: why did you chose to do precisely that? In this context, people might actually start to feel responsible for what they do.” After all, basic income would give people the freedom to choose whatever they want. So, when can we expect to receive a basic income? Many may discard basic income as an implausible utopia. But Sjir optimistically sees how the international discussion gains momentum due to new basic income experiments in Canada and vivid political discussions about BI in New Zealand, England, France and the United States. In fact, if the majority of Swiss voters says ‘yes’ to basic income in June’s referendum, Swiss would be the first country to have an unconditional basic income. When I ask Sjir whether BI will ever be reality, he assures me that “basic income is not a utopia in the sense that it is implausible. People should know that basic income could actually happen. The end of slavery and equal rights for LBGT’s were once utopias as well, so why couldn’t we have a basic income? In ten to twenty years we might as well have one.” #Universalincome

Ikea, Facebook, Alibaba, Amazon, Google… These are just some examples of companies that have their foundation in the internet. Since its creation, it’s unquestionable that the internet opened doors to entrepreneurship, and potentiated the creation power of mankind. Economic analyses prove that with data from American planned investment in the 90-00’s. Even though taxes were higher with the Clinton administration, companies and people were investing in tech companies.The excitement about these companies was so high that it overruled budget cuts and a rather high interest rate. However, can this effect be quantified? Can we actually prove the power of the internet / fast flowing information, in economical terms? After extensive research, I found very few papers (to my own disappointment) talking about this matter. Using the USA as a reference, the “Hamilton Consultants for the Interactive Advertising Bureau” found two very interesting data about the effects of the internet in the American economy: Employment Value – The internet employs, only in the advertising sector, more than 1.2 million people, and it’s estimated that each position supports at least 1.54 other positions, internet-related or not. Payment Value – The direct economic value the internet provides to the rest of the U.S. economy is estimated to be $175 billion. Using the same multiplier as for employment, 1.54, then the advertising-supported internet creates annual value of $444 billion. Another study made by “MGI” (MCKINSEY GLOBAL INSTITUTE) shows even more significance in the role of the internet: The internet is responsible for at least 20% of the growth in GDP of developing countries over the past 5 years. If the internet were a sector, it would have more weight in GDP then agriculture and utilities. The enhancing participation of the internet in the economy only shows the shift towards a different type of economy than than of the early 2000s: more and more, the exploitation of information becomes the centre of a successful business. Companies like Ikea, which don’t have their own production (or at least it’s negligible compared to total production), Alibaba, and even Spotify primarily sell information. They connect people with a specific demand to producers with a specific supply, that being, cheap and good quality furniture, cheap utensils, or high and low quality music. The fact that there already exist companies that rely mainly on information to survive, proves that we live in a totally new economic environment. Some scholars that have been studying these phenomenons say that this might just be the tip of the iceberg of what is the so-called Fourth Industrial Revolution. In this new era, the main change in production would be the incorporation of technology in our lives, biologically speaking. But isn’t that what we already do with smartphones, tablets, and even information companies? Let me ask you a question. Nowadays, how do you search for new songs, if you are already signed in to Spotify, Deezer, or any other music app? Well, most likely you listen to suggestions that this app gives you. Or, if you need to research the cheapest prices of a product? Most likely you are going to look at Amazon or other websites that gather this information, right? These scholars fail to see that the incorporation of technology in our lives doesn’t have to be literally biological; it can also be related to the type of incorporation that we already use in our day-to-day lives. The internet and technology already changed the way we produced, connected, and consumed in the past decade, and our production system today is already completely different from the one we had in the beginning of the so called “.com” years. The lack of attention given to the type of changes we are suffering will surely have consequences in the future, but it already shows some symptoms of what could be a way worse disease: state-controlled internet centers; growth of economic volatility, especially in the financial system; economic consumption patterns that are spread throughout the world; and so on. Problems are going to keep emerging and solutions will hardly be found, unless we decide to really enter our new “.com” era. Even though humans are considered to be one of the most fast adapting living creatures in the world, we do take a lot of time to embrace big changes. It’s time to accept the fact that internet has brought to us a new type of economic system. We should accept this, study this new phenomenon thoroughly, and change the way we deal with all the new problems that this new “era” brings upon us. It’s time to move forward.

News from the FEB – by Yoeri Min Prof. dr. Han van Dissel has been reappointed as the Dean of the Faculty of Economics & Business at the University of Amsterdam. Han van Dissel was reappointed by the Executive Board after consulting the Faculty Works Council and the Faculty Student Council. The reappointment starts per August 2016, and is valid for a period of five years. On April 14th 2016, the prime minister of the Netherlands, Mark Rutte, gave a guest lecture in the Amsterdam Business School of the University of Amsterdam. During one of the series of lectures on ‘How does the Netherlands work’ by Alexander Rinnooy and Paul Schnabel, Mark Rutte talked about Dutch entrepreneurship and its successes, the strength of the Netherlands, and the role of the government within the Dutch economy. Afterwards, the attendees were able to ask the prime minister some questions. Venice of the North – by Artur Rymer Amsterdam is often called Venice of the North as, just like the Italian city, it is famous for its canals. However, although this term used to be an indication of beauty and status of the Netherlands’ most iconic city, it is now becoming an indication of a problem that has consumed Venice and now threatens to do the same with Amsterdam: the amount of tourists. According to predictions, by 2025 the amount of visitors in Amsterdam will rise by 35% up to 30 million of tourists per year. Because of the rising numbers and the effect of tourism on Amsterdam, the leader of the social-democratic PvdA (Partij van de Arbeid – Labour Party) in Amsterdam, Marjolein Moorman, has called for measures to tackle the problem. Among them is moving more than 300 festivals, that take place in the city each year, to the suburban areas, regulating the maximum amount of days that apartments in the center can be rented out through websites such as AirBnB, limiting the amount of hotels and introducing various tourist taxes. Tourism brings benefits to the local economy as tourists tend to spend a lot and thus support local businesses and increase tax revenues. However, it brings problems as well. Surging prices of food, rent, apartments and tourists walking on bike lanes affect us all. This is the beginning of an important discussion on how to make Amsterdam a place where both locals can live comfortably and tourists can enjoy their stay. Economics Recap – by Daniel Koudijs While the world worried over China, Oil prices and American elections, the Dutch economy continued to grow over the past few months. But under increasing weight of a concerned world economy, it finally broke. The Dutch statistical institute CBS reported a flattening of the business cycle in March. Where in the past months the institute’s so-called “business-cycle clock” showed improvements, in March the improvement halted and consumer sentiments fell. But the Dutch aren’t the only ones less positive. The IMF downgraded its overall economic forecasts for Europe, America and the emerging economies; citing concerns over “non-economic risks” as the main reason. In a climate of feeble economic growth, political stability is threatened as populist and nationalist sentiments become stronger. In turn, political uncertainty can depress long-term investment and consumer expectations even more, leading to a downward spiral of lower and lower economic growth (see for example Brazil’s current malaise). The IMF added some government advice to their forecast revision: advanced economies stuck in low growth and low inflation should focus more on long-term reform of their product and labour markets. Bold and determined governments are needed to save countries from collapsing inward, both economically and politically. The Netherlands is no exception. Politics Recap – by Yana Chernysh On the 22nd of March, a terrorist attack occurred at Brussels airport. Two explosions by the Islamic State took place in the departure hall. 13 people were killed and 89 were wounded. Later the same day, another explosion went off at metro station with 20 people killed and 190 wounded. On the night of the 2nd of April, the conflict between the unrecognised Nagorno-Karabakh Republic and Armenia on one side and Azerbaijan on the other has begun. More than 50 people have already been killed and the conflict is growing, with a risk of becoming a regional war. On the 13th of April, parliament elections were held in Syria. There were more than 3.5 thousand candidates aiming for 250 spots in the parliament. Some countries, for example, Germany, do not acknowledge the results, as the ongoing war in Syria does not allow having open and honest elections. On the 12th of April, two Russian jet fighters were flying close to the US navy on the territory of the Baltic Sea. Both countries state that it was an indicator of aggression from the other side. Earlier, in January this year, a similar incident happened with a Russian jet fighter and a US air scout on the territory of the Black Sea. Now, countries are analyzing the case. In the middle of the month, anti-government protesters have occupied the streets of Macedonia. The protests were followed by a presidential pardon for 56 politicians involved in the corruption scandal. Rousseff in for a Ride – by Michael van Rhee The Brazilian Parliament has recently started a vote that could well cost President Dilma Rousseff her job. The opposition is hoping to gain a two-thirds majority for the proposal in order to begin an impeachment against Rousseff, who has been fiercely accused of covering up state deficits. Prior to the vote, there was a two-day long debate in the House of Representatives, and if the opposition manages to find a two-thirds majority there, the matter must go to the Senate, where a simple majority will suffice to temporarily put President Rousseff out of her function. In that case, the Senate will start a trial against her, with the ultimate goal of — at least for her critics — depositing her altogether. The president’s party is furious about these attempts; according to them, all of this is nothing less than a disguised coup. However, coup or not, things are clearly pretty tense in Brazil, where thousands of people are demonstrating in front of the country’s parliament building in the capital city, Brasilia. Additional security is doing its job for the moment, but as polls show that as much as 60% of all Brazilians have lost faith in their president, Rousseff is in for one hell of a ride. The Netherlands Said ‘NO’ to Ukraine in the Referendum – by Olga Kowalska The potential Ukraine-EU treaty on a closer political and economic cooperation was rejected by the 61 percent of Dutch referendum voters. The turnout was noticeably low, because only 32.28 percent participated in voting, which is just above the 30 percent threshold required to make the outcome legitimate. Even though the referendum was only advisory and results are not legally binding for the government, Mark Rutte promised to take the outcome into consideration and to try to renegotiate the agreement. In January 2016, the Ukraine–European Union Association Agreement was already applied, but since The Netherlands still has not ratified it, the treaty remains only provisional. The outcome of referendum was symbolically seen by many as a public expression of Dutch scepticism towards the European Union. This is a sensitive topic now, especially in the light of the current Dutch EU’s rotating presidency. More on the referendum can be found here and here. The Not So Democratic Debate – by Brunno Fontanetti Brooklyn, 14th of April 2016: two Democrats start a debate that could determine who is going to win the next american presidential election – I prefer not to believe that Trump has even a slight chance of winning. Bernie’s nomination would clearly be a more liberal option for the young people, who wouldn’t vote for Hillary unless she was their only choice. However, the fierce and savage debate on Thursday showed that now the game has changed. Senator Bernie Sanders and the former Secretary of Defense Hillary Clinton participated in what was called one of the hottest debates the Democratic party has ever had. Bernie went for the core issues he has been using to undermine Hillary’s campaign: Wall Street support, lack of transparency when talking about her campaign donors and, the cherry on top of the cake, her support of the Iraq war. Clinton, on the other hand, attacked Bernie’s unclear opinion about gun control, as well as his intangible proposed solutions, like splitting big banks. In an ocean of political despair, and what it seems to be one of the most competitive US elections of the 21st century, Clinton and Bernie come to light as interesting options for the next american president. Next Tuesday, 19th of April, the state of New York will decide their Democrat and Republican candidate, let’s hope that the best men, or woman, wins. Business Recap – by Michel Mijlof It seems  that the economy and business world are doing pretty well lately. The Dutch stock exchange AEX was at 451 points, which is the highest this year. Another example is that the oil prices, specifically the Brent Crude Oil price, are recovering. Currently, the price is at €44 and this is also the highest oil price of the year. All the OPEC countries, excluding Iran, decided to lower their oil production. Therefore, as the supply will be lower, the price will rise. Despite the nice, new annual records for some indices, the world economy is still not stable. The volatility is high due to the anxiety of terrorism, ‘Brexit’ and other factors. This month also the ‘Panama papers’ were leaked and this will definitely affect the business world. In particular, Amsterdam could be affected quite harsh because of the so-called ‘shelf companies’. These companies do not have any activity here but are just settled in Amsterdam because the Dutch law allows companies to pay corporate income tax in the Netherlands instead of their home country. As a result, they can avoid the high taxes such as 30% or 40% at home and pay taxes in the Netherlands, where it is just 25%. Cinema Chain Reverses Decision to Allow Mobile Phone Use During Films – by Antoine Steen US cinema chain AMC, which operates more than 5,000 screens in almost 400 cinemas in the US, has made a U-turn on a controversial plan to allow customers to use their mobile phones during films in some locations. The company’s chief executive Adam Aron had suggested that the idea could draw young adults to the cinema. Perhaps unsurprisingly, the plan received huge criticism on social media, with cinema-goers bombarding AMC with messages. In response to the outcry, the cinema chain released the following statement: “This is an idea we have relegated to the cutting room floor… there will be no texting allowed in any of the auditoriums at AMC Theatres”. Stephan Hawking’s Nanocrafts – by Magdalena Wiśniewska On 12th of April, at the One World Observatory in New York City, Stephen Hawking, supported by Yuri Milner and Mark Zuckerberg, launched ‘a mission to the stars‘. The initiative, called a Breakthrough Starshot, aims to develop a ‘nanocraft‘ – a gram-scale robotic space probe driven by a light beam. It will be able to gain to 20 percent of the speed of light and, if successful, could reach Alpha Centauri in about 20 years after launch. The nanoship would be able to supply the images of all the planets encountered on its interstellar travel and is predicted to be executed within a generation. The budget for the project is supposed to amount to $100 million. It right away became a number one position on the list of attempts to discover extraterrestrial life. Stairway to Court – by Raffaele Di Carlo “There’s a lady who’s sure all that glitters is gold, and she’s buying a stairway to heaven…” may very well be some of the most well-known lyrics of all history of music, not to mention the characteristic intro of the song with its smooth arpeggios. But what if the chords that comprise it were the fruit of somebody else’s work? This question constitutes the core of a lawsuit moved by the 60s band Spirit against the Led Zeppelin, started in 2014 and now reopened for inspection by judge Gary Klausner, with the final ruling planned for the end of May.  Michael Skidmore, representative of Spirit’s guitarist Randy Wolfe, who passed away in 1997, claims that Jimmy Page and Robert Plant  heard the intro chords of the song Taurus, composed by Wolfe, while the Led Zeppelin and Spirit were on tour together, and then directly copied it into Stairway to Heaven without ever crediting Wolfe. The Led Zeppelin deny ever coming in contact with Spirit. It is fairly common in art to borrow, copy and rearrange ideas, and especially descending chromatic four-chord progressions such as those in the intro to Stairway to Heaven are all but rare in the music industry, however, there is more at play: the intro is considered the “trademark” of the song, which has today an estimated worth of some 525 million dollars in royalties; a fortune that may have been in the wrong hands all along. Were the lawsuit successful, Skidmore would be awarded 50% of that fortune, however, only time will tell. TSB Employees Now Create Psychological Profiles of Their Customers – by Ioana Nicolau Nowadays, the use of big data by all kinds of companies is no surprise. However, in these times, it looks like TSB (retail and commercial bank in UK) made a step further and started to carry out gsecret psychological tests on customers. As a result, people seeking a loan will be labelled as one of four personality types: logical thinker, amiable, controller or emotional expressive. It is likely that these people will not be that thrilled about having their bank placing them in these strange categories. The bank obviously came out with a sweet explanation with regards to the matter: Rachel Lock, human resources director at TSB, said the bank was simply treating customers as individuals: ‘I’m bemused and perplexed in this day and age that some people still seem to think that customers should be treated on the bank’s terms. At TSB, we’ve always thought the opposite; customers should be treated on their terms.” This approach represents  the latest attempt by banks to boost their profits by taking advantage of personality traits. Similarly, RBS has developed a data strategy called ‘personology’ to track customers’ behaviour and spending habits. It is believed that around 800 analysts go through every aspect of an account holder’s finances to build up an in-depth profile.

Eight years have passed since the financial crisis of 2008 and many European countries, including the Netherlands, have only just surpassed their pre-crisis GDP level. The image of a waving line representing an economy going down and back up again in cycles is one of the most elementary concepts of economics; yet recent recovery has shown nothing of the like. Growth over the past years has been slow and fragile, not just in the Netherlands. We are used to seeing economies gain momentum and soar out of the depths of a depression: what has happened to the business cycle? This article is an extension on the original version published in the printed version of Rostra Economica. In this version I discuss in more detail several arguments, some of which are quite technical. Over the last years, several theories have been put forward that try and explain the disappointing recovery. The one that has gained the most attention in economic debate is the so called “secular stagnation hypothesis”. This term originally dates back to the years following the Great Depression, but was revived by Larry Summers in 2014. Secular, or structural stagnation represents the idea that “sick recoveries die in their infancy and depressions feed on themselves.” Instead of focusing on short-run deviations from equilibrium like the majority of economic science, secular stagnation focuses on structural issues that hold back growth. In general, secular stagnation focuses on two pillars: the potential growth rate and the output gap. The potential growth rate is the rate at which potential GDP grows: the theoretically maximum level of output that can be achieved using an economy’s production factors. The output gap is the gap that exists between the levels of actual and potential output. A negative output gap means actual output is below potential; a positive gap means the opposite. According to the secular stagnation hypothesis, the weak growth over last year’s comes from both a drop in the potential growth rate and a persistent negative output gap. The first holds back actual growth by not increasing its potential, the second by making actual growth consistently not live up to its potential. Understanding the difference between the two is crucial, yet complicated. So by analogy, when comparing the economy to a car, potential growth would be the maximum speed achievable with your engine while the output gap would be factors constantly slowing down the car down. When your engine doesn’t get any faster and you are driving on bad tires, accelerating becomes really hard. As we see in the graph below, this describes quite accurately the Dutch economy over the last years. The first pillar: a lower long run potential growth The question is: why have both these pillars underperformed? This is where academic opinions start to diverge, as many (often country specific factors) are emphasized. Starting with potential growth, economic literature puts forward four “headwinds” as explanations: demographics, education, inequality and government debt. Out of these, demographics is the most significant to the Netherlands. When a country’s labour force grows the potential output it can produce grows as well. Simply put, output in an economy equals what is produced in an hour (labour productivity) times the hours worked (labour supply). When both stop growing, so does output. Looking at the Netherlands, labour force participation has been stable for 15 years, meaning the economy has not really made more hours since. Meanwhile, productivity growth has fluctuated around zero since the crisis. The combined effect of these trends looks like this: It becomes clear that demographics have done nothing to drive potential economic growth in the Netherlands. The effects of education, inequality and government debt on potential growth are less pronounced, yet are far from negligible. Firstly, education can boost economic growth by increasing a worker’s productivity as well as his income. In the past century we have seen landmark educational gains with strong effects on the economy’s potential growth. Arguments have been made that these gains have finished and that it seems unlikely will see experience something similar in the future. When looking at education in the Netherlands, we indeed find that enrolment rates in primary and especially secondary education steadily increased over the past century, but  have stabilized since 1990. The so called “education revolution” appears to be finished, but does this mean we can no longer expect education to be driver of economic growth? If we look closer at trends in education we find something else with which we are all familiar: in around a 100 years the number of university students has grown by a factor 86, while the population has grown by a factor of 3. University, or tertiary, education has increased exponentially which in turn has made our labour force very highly educated: in 2015 around 34% of the Dutch labour force had received tertiary education (OECD). Though we cannot directly assume this will benefit economic growth in the same way the education revolution has, it seems reasonable to more tertiary education is not reducing potential growth. As such, education does not appear to be a strong force of secular stagnation in the Netherlands. Secondly, inequality can suppress long run potential growth when income gains mainly benefit the few. When income becomes concentrated with a few, economic theory suggests the propensity to spend will decrease and effective demand will fall. Though both income and capital inequality in the Netherlands are present (the latter more so then the first, see for example Van Bavel, 2014), both do not appear to be strong enough to significantly limit long run potential growth. Though the trend over the past years shows a worsening, which eventually could limit potential GDP growth. A third additional reason for lower long run potential growth relates to public debt. As public debt is reaching historical highs, the government’s ability to support the economy could in the future become limited. Restricted by the rules set by the Maastricht treaty (3% deficit/GDP and 60% public debt/GDP) room for fiscal expansion through debt issuance is limited at high levels of debt/GDP. In the long run this could deepen future recessions and structurally worsen consumer expectations as they become aware of their government’s limit ability to counter and intervene economic recessions. The graph below shows the development of the public debt to GDP ratio and its components over the past 20 years. First we see the debt over GDP ratio decreasing as a result of growing GDP and relatively stable public debt. But after 2008 we see the opposite, GDP growth stabilizes while public debt rises. In this period the ratio rose from roughly 43% to 70%. How bad is this ratio? As with inequality, there is no optimal economic value for the debt/GDP ratio (though the benchmark proposed by the IMF is 60%). When comparing the Netherlands with other European countries the ratio looks less excessive compared to the EU average of 86%. As such the current public debt to GDP ratio seems not yet detrimental to long-run potential growth. The second pillar: a structurally negative output gap The second pillar of secular stagnation relates to the output gap. Here we look at forces that consistently ensure actual GDP growth is below potential GDP growth. In the literature, four main issues are found to be relevant to this pillar: long-term unemployment, income growth, balance sheet recession effects and the real natural interest rate gap. Especially balance sheet recession effects appear to be relevant for the Netherlands. Proposed by Richard Koo, this argument states that following the burst of a debt-financed bubble we see a tendency towards private debt minimization. In the wake of a recession, asset prices collapse while debt remains, causing individual “balance-sheets” to run into a deficit. As a result, companies and households prioritize paying off existing debts before taking on new loans or making investments. They become more austere: paying down debt (or saving more) while spending less. Though reasonable on the individual level, this decreases an economy’s aggregate demand, and in the long run can have very powerful and lasting consequences, as for example Japan’s lost decade. In the Netherlands, the main type of household debt is the mortgage on a house. The graph below shows the long run development of household mortgages, GDP and housing prices. We clearly see the rapid expansion of households mortgages from 54% of GDP in 1995 to close to 100% in 2008. Following the crisis, housing prices fell into a slump and mortgages went underwater; basically bankrupting the household balance sheet. The situation in the Netherlands prior and following 2008 is quite favourable for balance sheet recession effects to take hold and strengthen the negative output gap. CBS data on Dutch household saving and consumption post 2008 confirm this, as the first saw a strong increase while the second fell sharply. Dutch companies are left out of this analysis for they are generally not exceptionally leveraged, making it harder to distinguish balance-sheet recession effects. Three other arguments are put forward in the literature as explanation of a structural negative output gap: long-term unemployment, income growth and the real natural interest rate gap. Starting with the first, high unemployment can keep output from reaching its potential when unemployment fails to improve in the wake of a recession and it becomes a long-term drag on economic growth. In the Netherlands long-term unemployment has gone from 1.4% to 3.1% since 2008. Though we have seen high long-term unemployment before 2008 as well, the current share of short-term unemployment (4.4% out of 7.4%) is exceptionally low. The total unemployment rate has stabilized around 7% for the last two years; a level not seen since 1996 when it stood at 7.7%. When looking within the EU the Netherlands end up in the middle with overall EU unemployment standing at 10%. However, opposed to the Netherlands, most EU members have seen their unemployment rate decrease over the last two years. Long-term unemployment is a problem of the Dutch economy. This argument is further supported when looking at data on the Dutch NAIRU, the non-accelerating inflation rate of unemployment. The NAIRU can be thought of as the equilibrium rate of unemployment: below this level inflation expectations will rise, above this level they will fall and cause disinflation. Looking at the graph below we see that the structural output gap of the past years largely corresponds to a period of above NAIRU unemployment rates. This suggests unemployment as a reason for economic underperformance as well as the observed falling level of inflation. In short, unemployment can be assumed a main cause for the output gap. A second reason for sustained negative output gaps is income growth. Output gaps can be the result of weak income growth when economic growth is not translated into real income growth. Evidence from the Netherlands shows that household mean income has barely grown since 2008, just 0.6% on average. As such, income growth in the Netherlands has been weak and has done little to support economic recovery. The final argument I will consider here relates to the so-called real natural interest rate gap. The real natural interest rate is a theoretical concept introduced by Wicksell (as the neutral interest rate) and most commonly defined as ‘’ the real short-term interest rate consistent with output at its potential level and a stable rate of inflation’’. This definition immediately shows its relevance to the topic of this article: if the real interest rate structurally deviates from the real natural interest rate, this could keep output from reaching potential. The real natural interest rate gap has been put forward as the main reason for structural stagnation by Larry Summers in his ‘’new secular stagnation hypothesis’’. He suggests that if the natural real interest rate has fallen significantly below zero, it might be the case that with nominal interest rates fixed at the zero lower bound (ZLB) and ample inflation, the real interest rate is unable to reach its natural level. What evidence of Summers’s ‘’new secular stagnation hypothesis’’ do we find in the Netherlands? First we need to estimate the path of the natural real interest rate in the Netherlands. Secondly, we need to compare this estimate to the real interest rate to see whether a gap between the two has existed that prevented output from reaching potential. Since the natural real interest rate is a theoretical concept, numerical estimates are complicated to obtain and often the result of complex statistical. A more intuitive understanding of the natural interest rate and its trend is found by looking at its underlying determinants, mainly productivity and population growth. As stated earlier in this article, both productivity and population growth in the Netherlands have stagnated in a way similar to those seen across the EU. Labour productivity growth has steadily declined while population growth has stagnated: both putting a downward pressure on the real natural interest rate. From the similarity in trends between the Netherlands and Europe in general, we can reasonable assume the natural real interest rate in the Netherlands has followed a similar downward path as Europe. The current real interest rate in the Netherlands is approximated to be below zero. The nominal rate (using the annualized short-term interest rate as a proxy) has been near zero for four consecutive years, while inflation (using the basic CPI as a proxy) has steadily declined and has averaged 0.3% in 2015. Though the real interest rate is perceived to be negative, it is likely the real natural interest rate has seen a significantly steeper decline and lies even lower; an indication of a structural real interest rate gap. We can assume the Netherlands, like the rest of Europe, is suffering from structural real interest rate gap which prevents output from reaching its potential. Secular stagnation is a cause for concern in the Dutch economy. Both a decline in the potential growth rate and a persistent negative output gap have weakened economic growth over the past years. The first, mostly as a result of a stagnant labour force and weak productivity growth. The latter mainly due to balance sheet recession effects: households become more austere after the crisis as a result of excessive leverage and falling housing prices. These problems are not easily solved. Secular stagnation has deep roots and will require firm policy changes if it’s effects are to be resolved. What makes this even more challenging is that modern economic theory is largely structured around short-term business cycle deviations. The revived importance of structural factors on the economy will pose many new challenges in the near future. Without an adequate revision of both policy and academics aimed at solving the structural issues raised by secular stagnation, economic growth in the Netherlands and many other countries is likely to remain disappointing in the years to come. #Dutchgrowth #gdp #longtermgrowth #secularstagnation

At times confused for being a part of France, Monaco is a sovereign nation since 1861. The country is a Principality (a distinctive type of monarchy), by means through which it is ruled by a Prince, not by a king. The House of Grimaldi came to power in the 13th century and has been ruling the Monegasque state with brief interruptions since then. In the general public’s mind, the microstate represents the house of casinos, Formula 1, Grace Kelly and actually, of everything that is luxurious. But one of its other outstanding features (especially for the wealthy ones), is its well-known tax haven. The country manages to keep its books balanced without placing heavy tax burdens on its residents and this has been ever since 1869. The same so-called “tax paradise” is also present in Andorra, the Bahamas, Bermuda and UAE. Nevertheless, with its streets dripping in bling, Monaco is by far one of the most interesting places to discuss. To be clear, the country is not a completely “tax-free” area. It shares the VAT system with France, charging 19.6% VAT on all goods and services. In addition, companies face a 33% tax on profits unless they prove that three-quarters of their turnover is generated within the state. In turn, residents of Monaco benefit from a 0-personal income tax regime and do not have to pay capital gains tax nor wealth tax. Foreigners officially residing in Monaco and people with the Monegasque nationality can sit back and enjoy this. However, French nationals who are residing in Monaco do have to pay personal income tax that is determined in accordance with the principles of French tax law. Inheritance and gift taxes also have a special scheme, being applied only to assets situated within Monaco. In the case in which the assets are situated on the Monegasque territory, its residents pay a modest tax on them. But particularly, if assets are transferred within heirs in the direct line, then no gift or inheritance tax is actually applicable! Now, how do you become a resident of Monaco? Besides being offered a contract by a Monegasque employer or holding an authorization to start up a business in Monaco (which is well known as being really hard to obtain), the third way requires you to deposit a modest amount of at least half of a million euro in a Monegasque bank. As a result of this, Monaco is now praised not only for being the country with one of the lowest unemployment rates in the world (of 2%), but also the country with the lowest poverty rate in the world and the highest number of millionaires and billionaires per capital. Monaco’s relaxed fiscal policy has raised a lot of harsh criticism at the country and implicitly, at its head of state, HSH Prince Albert II. With time, this favorable fiscal environment has been leading super wealthy foreigners to flock to Monaco in order to “bury” their money. The country is carrying the reputation of an offshore tax haven and has been accused of protecting the wealth and privacy of some rather controversial residents. On a bigger scale, financial crime investigators explicitly accuse places such as Monaco for lending a hand to the biggest financial institutions for hiding troubled assets offshore in order to keep them out of regulators’ radar. Many see a direct link between the ability of these institutions to store a fortune in offshore shells and the financial crisis. In the middle of the financial meltdown, banks were believed to be playing a game – it is believed no bank lend to each other because everybody had “bad stuff” in offshore accounts, but nobody was able to know how much the other had. As a consequence, the market got frozen. In order to distance itself from the association with an offshore tax shelter, Monaco has started to sign bilateral agreements that foster cooperation against tax fraud with respect to international criteria. The country implemented taxation on bank interest income of non-residents, the interest gained being further directed to their home countries. Still, the European scheme does not comprise taxation on gift or inheritance assets and hardly allows information exchange with other jurisdictions. However, the efforts previously mentioned were not made in vain, leading to the exclusion of Monaco from OECD’s “grey list”. The country is constantly striving to prove its will to fight its illegal flows of money and continues to sign information exchange treaties with other jurisdictions. Monaco promptly signed 12 Tax Information Exchange Agreements (TIEAs) in 2009 and up until today, their number rose to 27. Just as an intriguing coincidence, Monaco signed its first TIEAs with countries that have the same golden ghetto image – Andorra, Bahamas, Lichtenstein, San Marino and Samoa. In the end, it is most probable that Monaco will not strip off this grey halo too soon. Nicholas Shaxson, an expert in the harmful impacts of tax evasion, seems to be strengthening the idea that nowadays, taxing the rich is just a fairytale: “Most worrying is how hard the world has found it to crack down on places such as Monaco. Leaders at a G20 summit in 2009 declared “the era of banking secrecy is over” and promised a big crackdown. They delivered modest changes, but the overall result looks more like a whitewash. It leaves a sour taste, and a question: why do we still tolerate these offshore bolt holes? The answer: because our wealthiest and most powerful élites want them. In this age of austerity, we need a better reason.” Now, should I stereotype my boss for having his residence in Andorra?

When 11.5m files are leaked from the database of a law firm specialising in setting up offshore companies, you can expect to unearth something interesting, and the Mossack Fonseca documents have not disappointed. But the blitz of names, relationships and alleged criminal wrongdoings has clouded the story. The leak has unveiled the offshore holdings of more than 140 officials and politicians, including 12 current and former monarchs, prime ministers and presidents, as well as the holdings of at least 33 companies and people blacklisted by the United States for alleged business relationships with rogue states, terrorists or drug lords. Who’s Involved? Sigmundur Gunnlaugsson, the Prime Minister of Iceland, a country with a population of 323,000 – less than half that of Amsterdam – stepped down after the leaks revealed that he owned an offshore company with his wife that he didn’t declare when entering parliament. Gunnlaugson denied having breached the rules, saying that his offshore company was simply a holding company, as opposed to a commercial activity, and therefore didn’t have to be declared. UK Prime Minister David Cameron has been under pressure over his now-sold shares in a Bahamas-based offshore trust fund set up by his late father. There are no allegations that he has done anything wrong – he paid income tax on the profit he made – however, questions have been raised over whether the £300,000 he inherited from his father benefited from tax haven status. Sergei Roldugin, an old friend of Russian President Vladimir Putin, has been linked to a company behind $2bn in tax-free funds, with the evidence suggesting Rodulgin is a proxy for Bank Rossiya, which has been designated a “crony bank” for top Kremlin bigwigs by the US. Putin has dismissed the reports, claiming that Rodulgin earned his money importing musical instruments. In China, eight former or current members of the Politburo Standing Committee have been found to have set up offshore companies, while the brother-in-law of Chinese President Xi Jinping has also been mentioned in the leak. Other key figures linked to the documents include Ukraininan President Petro Poroshenko, FIFA ethics committee member Pedro Damiani, and perhaps the world’s greatest football player, Lionel Messi, to name just a few. Indeed, the list of notable individuals named in the Panama Papers is long enough to warrant its own Wikipedia page. What to Make of This? Naturally, the details are as murky as the tax affairs they describe. An allegation here, an accusation there. The vast majority of stories on the affair don’t allege criminality, they merely allude to it. Of course, not all of the business conducted through Mossack Fonseca is related to criminality – much of it is related to simple tax avoidance, which is perfectly legal (in contrast to tax evasion). But for the public figures linked to the leak, it looks bad. Many of the politicians and world leaders implicated can brush off the revelations, not having to rely on popular support for their power, but for leaders such as Sigmundur Gunnlaugsson and David Cameron, the news has had major consequences, even if the accusations are relatively minor. The public wants to see heads roll and the media, as well as opposition politicians, are feeding off this atmosphere. In the UK, calls have been made for cabinet ministers to publish their tax statements, which could herald the beginning of a climate in which voters expect to have a right to know where their representatives made their money. It will also be interesting to see if David Cameron is pressured into taking action against Britain’s secretive offshore industry, given that half of the companies exposed in the leaks were incorporated in the British Virgin Islands – a British Overseas Territory. Perhaps the biggest casualty in the Panama Papers affair is public trust. None of the Panama Papers revelations so far are surprising at all, however, they serve as a reminder that there is a group of powerful people who are effectively able to operate to different rules from regular folk. And without any way of measuring the significance of the claims made in the leak, it is hard to develop a nuanced opinion on how damaging these kinds of tax arrangements are. The evidence linking various people to offshore companies is clear but not damning. Nevertheless, while the detail is thin on the ground, the story is likely to evolve as law enforcement agencies around the world launch investigations in response to the revelations.

“In a sense, I’m probably immortal.” It’s one of the many quotes that Dutch football legend Johan Cruijff, who tragically passed away recently after a six-month struggle with lung cancer, will be remembered for. The man is widely considered to have been our greatest football player of all time, if not our greatest sportsman ever — at least, I can’t think of someone else from the top of my head. Just two months before his death, he had even been quite optimistic about his disease: “I feel like I’m 2-0 up in the first half. The game isn’t over yet, but I’m sure that I’ll win in the end.” Alas, it wasn’t to be… However, despite dying at a relatively young age (68), Cruijff’s legacy is an enormous one — one to be very proud of. His ideology of dominant, attacking football is still successful to this day, with his former club FC Barcelona playing it to perfection in recent years, reaching highs that it couldn’t possibly have dreamed of before Cruijff — or El Salvador, as he was typically called — came to the rescue. (Just do me a favour and don’t mention Ajax, okay?) Let’s shed some light on this ideology by analysing the man’s most ingenious quotes, translated into English by yours truly. Enjoy! “I like to do work, as long as it’s work that I like.” Well, let’s get going then, old bugger! The idea behind this one is simple: if you make work appealing to people, they’ll do it more happily. “If you want to achieve something with a group of people, respect should be at the heart of it all.” It’s a cliché to say it, but it’s a cliché because it’s true… In fact, I feel that this is the case for a lot of these quotes. Cruijff excelled at stating the obvious — sometimes so obvious that you hadn’t even thought of saying it — in rather poetic ways. However, that doesn’t make them any less true. This particular quote requires no further explanation. Respect should be at the heart of every organisation, be it a football club or a big company. (Besides, that’s what football clubs are by now.) “Why shouldn’t you be able to beat a richer club? I’ve never seen a bag of money score a goal.” Companies or not, Cruijff took his opponents for what they were: football clubs with — you guessed it — football players. Cruijff was never impressed with the amount of money on their bank accounts, but instead focused on their weaknesses. Similarly, even very rich multinationals have weaknesses (think about size and inflexibility), and they can be exploited as long as you’re creative. “There are many people who can point out that a football team is playing poorly; there are fewer people who can point out why it’s playing poorly; and there are just a handful of people who can point out what needs to happen in order to make it play better.” Speaking of outperforming others: we all know that the qualities of your personnel — your human resources — influence the performance of your company a great deal. Much like in football, you need leaders who have the vision to determine where to take the company next. If Cruijff had been a businessman, he would undoubtedly have been the captain of the ship — in other words: the CEO. “Players who aren’t true leaders, but do try to be, always bash other players after a mistake. True leaders on the pitch already assume that others will make mistakes.” Cruijff is spot on about leadership here. Clearly, not everyone is as natural a leader as he was, and frankly, he would’ve made little effort to refute that; he was a real know-it-all if ever there was one. “It’s the most sensible to listen to others as much as possible, for that benefits your general development. If you pick up even 10%, you’ll already be way ahead of others.” This is where all that wisdom must’ve been coming from. This is a quote I particularly like myself, because I appreciate a good listener. (You know what they say: speech is silver, silence is golden.) However, personal development is an important topic for businesses too, as they try to implement ‘lifelong learning’ — an increasingly popular concept — into their human resource management. They say that listening has become a lost art, but as Cruijff so rightfully points out, good listeners are often good learners too. Plus, I’m sure that I’m not the only one who appreciates a good listener! “If I ask you to show me what you’re capable of, you would show me what you’re capable of. But that would also tell me what you’re not capable of, for you wouldn’t show me that.” This is another one of those quotes that you might have to think about twice before it starts to make sense. However, it’s a good thing to keep in mind if you ever happen to be the one conducting job interviews. We all make ourselves look better than we really are on our CV’s, and sometimes we do this by deliberately hiding critical information — willingly and knowingly, as the Dutch would say. Let Cruijff remind you why. “If you select the best player for each position, you wouldn’t have a strong team, but rather a team that falls apart like loose sand.” Much like in football, hiring people is about finding the right person for the right job, such that the whole becomes greater than the sum of its parts. Many past dream teams in football — Real Madrid springs to mind — failed due to a lack of cohesion, and the same thing could happen to a company, Beware of that. “What would you rather have? A good first eleven, or eleven good individuals?” Apparently, even geniuses like the odd rhetorical question! “Quality without results is pointless. Results without quality is boring.” Just winning was never enough for Cruijff; if possible, his teams had to entertain its supporters by playing attractively — again, this ideology of dominant, attacking football that I mentioned earlier. I’m pretty sure that most companies can relate to the second part of the statement, let alone the first. “It’s a law of football that great success is often followed by big disappointment.” Ain’t that the truth! It’s one thing to become the biggest fish in the pond, but it’s another to remain it for an extended period of time. This is just as valid in a business context, although it has to be said that brand awareness doesn’t erode as quickly as players’ reputations do. Let’s be grateful for that… “It’s better to go down with your own vision than with someone else’s.” A truth like a cow. (Yes, this is a Dutch saying, and no, I don’t know the logic behind it.) “I’m still convinced that you should do it the way that I do it, for otherwise, I wouldn’t do it.” Success or failure, Cruijff stuck to his guts — a sign of confidence that all leaders should possess. Only then can you be a successful businessperson. “The greatest task of human cognition is to comprehend that it cannot comprehend.” I’ll leave you with these wise words. Finally, some last words about the man’s sudden death. When the news came in, it was rather shocking, even to me — a 22-year-old who has never seen Cruijff play live, let alone in person. It’s not easy to comprehend how big the man truly was, but if you’ve seen the many beautiful tributes all around Europe, you can at least start to get an idea. Cruijff wasn’t just a formidable player and manager, but also a real visionary of the game whose influence can still be seen at the very highest level. Personally, I can’t think of someone who has left a greater legacy to the world of football than Cruijff has, and it makes me a proud Dutchman to say that we brought forth this admirable person. As for where he might be right now? “I don’t believe in God. In Spain, all 22 players make the sign of a cross before they enter the pitch. If that worked, all matches should therefore end in a draw.” Johan Cruijff, 1947-2016. May he rest in peace.

As I have already described briefly in an article two months ago, Political situation in Poland is getting worse every month. It is not even 6 months yet since Law and justice party (PiS) has gained the full power over Polish politics and they have managed to breach the constitution, ignore the Constitutional Tribunal verdict and ignore the EU recommendation and letter of concern. And the proposition of a new anti-abortion law, created on the strictly Catholic values exerted by bishops and presented last week, is a cherry on the top of their reign hitherto. If the law passes, Poland would have one of 5 most restrictive anti-abortion laws in the world, more restrictive even than Iranian. It forces rape victims and mothers whose life is in danger to give birth. It forces women to give birth to children seriously genetically damaged and it forbids in-vitro fertilization. It also penalises miscarriages with up to 3 years in prison. This is no longer a discussion about the morality of conscious abortion. This is an attack on women’s human rights and it is a pure cruelty. Again, as it has already happened a few times before during those six months, thousands went out into the streets to protest under the banner of ‘No to torturing women!’. Protesting were encouraged to bring coat hangers as a symbol of risky, inhuman alternative for legal abortion. And the slogans heard were, mildly saying, harsh and literal. Examples, obviously rhyming and sounding better in Polish, were: ‘My vagina, my problem. Prime Minister, watch yours!’; ‘My uterus in not a chapel.’; ‘You don’t want an abortion? Then don’t get one!’. Media are flooded with the strict articles condemning the idea, feminist societies are buzzing with frustration. And the only argument that seems to have a potential to prevent the law from gaining power is… lack of money for the implementation. Photo Source: Jennifer C. In a conversation with a Dutch friend I mentioned that we are supposedly getting one more day off from work from Easter. He expressed his surprise claiming that he was sure that even in Poland Catholic church is getting less powerful. The problem is that it is not only about the church anymore. It is mostly about the country’s vision of 66 years old bachelor, who loves cats and watches Rodeo to get relaxed in the evenings. It is about the government getting more and more similar to a dictatorship by not even a party, but by that party’s leader. I did really not want to make this article about the uteri’s’ freedom or Poland. I wanted to reach further. Because the main question that pops up in my mind today is much more complex and sophisticated. I wonder what has to happen, in a nowadays bureaucratic world, which sticks together thanks to million of laws and treaties, what has to happen for us to go into the streets? What has to happen to shake our ground and wake us up from the narcissistic numbness? And what is more, what has to happen to make a peaceful protest, counting even for a million, to change something? If I agree with it or not, I can see a goal in ignoring the excesses of Turkey. In the end it is not the European Union and we do need them to help us with the refugee crisis. But hey, Poland is here, just slightly to the east. We are hosting the NATO summit this July. And frankly? There is nothing you really want from us right now, we are not holding THAT much power. So why would the EU just tolerate our disobedience? I am aware that Poland is not the most ‘Western’ of the countries, despite our ambition for last 30 years. But it is not Africa or the Middle East anymore. It is not as distant to tend to ignore and pretend it does not concern us. I am not a politician or a policy maker, but looking around and seeing Ukraine’s conflict with Russia, the refugee crisis and, frequent lately, terrorist attacks I think that the EU cannot afford those strange distortions in one of the biggest of its member countries. And because of that, maybe naively and idealistically due to my age, I wonder what has to happen to make anybody react with more decisive political and economical tools than just by sending another disapproving note? Would sending political opponents to jail be enough? Because as Polish euro-deputy Michał Boni says, this is coming next and quite soon enough.

The fair isle of Lesbos, in the Northern Aegean Sea, used to be the seat of a very peculiar institution of Ancient Greece: the thìasos, some sort of prestigious sorority for wealthy teenage girls who wished to practice the cult of Aphrodite. The island gave birth to the possibly most well-known Greek poetess, Sappho, who inspired generations of poets up to the present day. It also happens to be the reason why homosexual women are called “lesbians”, but that’s another story. In the last few years, however, the worldwide image of the island changed quite radically as it became known more as a haven for Middle Eastern refugees than as a place of culture: news reports showing Lesbos’ sandy shores swarming with immigrants in miserable conditions had become pretty much a daily routine, and the EU’s phlegmatic responses proved of little use in countering the problem of a country already burdened by an unbearable economic pressure and now facing an unexpected stream of more or less legal immigration. Recently, much to the relief of historians and Greek border patrol agents and coastal guards alike, things have started to change, for the engines of European politics have apparently finally started rotating: their first move was a deal, signed in agreement with Turkey on the 18th of March, aimed at preventing undetected infiltrations among the refugees and asylum seekers that enter EU territory every day. As noble a goal as that may seem, the means by which the European Union plans to achieve it might be considered at the very least debatable. But let’s discuss the deal in detail. Under the plan, Greece agreed to arrange a bureaucratic structure capable of processing the asylum requests coming from new migrants. After March 20th, every asylum seeker processed on Greek soil is to be returned to Turkey in exchange for an (approved) refugee from a Turkish refugee camp. As you have probably noticed, at its heart the deal is about making Turkey do the paperwork to discern the “good guys” from the “bad guys” for the rest of Europe. So what’s in it for them? You might remember that Turkey’s quest for EU membership has been more or less frozen since its start in 1995. Well, part of our side of the bargain consists in accelerating the liberalization of visas for Turkish nationals, as well as reprocessing Turkey’s application for EU membership. In addition, EU member states will finance the resettlement operations for refugees residing in Turkey for an amount between 3 and 6 billion euros (depending on who you ask). It is not the first time that the EU has decided to outsource the problem of screening immigrants and refugees in order to protect European territory; as a matter of fact, such an agreement has already existed with Morocco since 2013 and used to exist with Colonel Gaddafi, who agreed to strengthen border controls for the streams of immigrants flowing through Libya towards the EU in exchange for support for Libyan nationals working in the European Union. The ethical implications of both deals are very similar. Although trading uncertain asylum applicants for already-approved and certified ones might be a more convenient activity than any European politician would be willing to admit in public, we should always keep in mind what sending the others back means. What will be of the pending applicants once they get deported to Turkey? Aerial View of the Za’atri Refugee Camp, Syria. Turkey is a country at war, any way we look at it. While terrorist attacks are spreading all over the country – the most recent one unfolding in Ankara, the capital, on the 13th of March – the South-East is outright ravaged by the rebellion of the Kurdish Workers’ Party (PKK), that has occupied several cities, including Diyarbakir, and the consequential governmental effort to reconquer the region by means of land and air raids. The South-East also happens to be where the Syrian and Iraqi borders are located and where the vast majority of the refugee camps have been built. This means that Syrian and Iraqi refugees – which constitute the vast majority of the concerned population – basically escape one war zone, only to enter another. Nevertheless, Turkey alone hosts more refugees than any other country. According to a report released by the United Nations High Commissioner for Refugees (UNHCR), as of December 2015 Turkey welcomed a population of around 1.9m refugees, asylum seekers and stateless persons; of these, 1.5 million are Syrians, and the overall number is expected to grow in 2016. Roughly 2m people are in danger of being caught in the cross-fire of the Turkish-Kurdish conflict every day. Furthermore, there have been claims from human rights associations, such as Amnesty International, that Turkish border patrol agents have been shooting refugees on their way into Turkish territory. Does this mean that the Turkish government is evil? Wrong question. Does this mean Turkey is probably not the safest place to ship thousands of refugees to every day? Better question. Turkey’s Prime Minister, Recep Tayyip Erdogan. Despite any such arguments, the European Union deemed Turkey a “safe harbor” for refugees, which implies that the deal will be enforced as planned, starting today. There are, however, still several unknowns at play. For example, it is not clear whether Greece possesses the actual bureaucratic and financial ability to organize mass shippings of refugees back to Turkey and file their asylum applications. Also, there is no guarantee that Europe will uphold its side of the bargain; public opinion vehemently opposes the prospect of Turkey entering the European Union, mainly due to the authoritarian turn of Prime Minister Recep Tayyip Erdogan’s government, which is allegedly guilty of suppressing freedom of speech, press and association in the country. So what is the point of it all? Well, it is much like a gamble. In the first place, it might actually serve its purpose of making the integration process of the already approved asylum seekers from Turkey quick and painless for a while (until traffickers and smugglers find another route, that is). This would likely help the image of the European democrats and moderates, which took a dive after the disasters of Cologne and the like. On the other hand, it would help Erdogan’s propaganda by shielding his questionable policies behind the aegis of EU politics, if the EU were to welcome Turkey’s application for membership. It is then safe to conclude this deal is borne more out of desperation from both sides than actual commitment to solve the refugee crisis. Although their name appears in the text of the agreement, their interests are not exactly at the top of the list.

The world is changing. After the financial crisis of 2007/2008, economic growth was supposed to recover, but it did not. Central banks all over the world cut interest rates sharply to just above zero percent. It did not help either. Then, quantitative easing was invented: if the standard recipe does not work, why not try something less conventional? Again, it did not work. “So, what is your solution?”, people may have asked Mario Draghi. Draghi concluded that the new policies were not powerful enough and decided to push the cut in interest rates and the pursuit of quantitative easing even further. Will this help? Nobody knows. But if it does not, not everyone will be surprised. What else can be done? A policy that has not been tried thus far is to rely on helicopter money. The term helicopter money stems from a famous quote by Milton Friedman in 1969: “Let  us  suppose  now  that  one  day  a  helicopter  flies  over  this  community and  drops  an  additional  $1000  in  bills  from  the  sky, … Let  us  suppose further  that  everyone  is  convinced  that  this  is  a  unique  event  which  will never be repeated”. Concretely, helicopter money could take the form of central banks crediting money to everybody’s bank accounts (or to let governments offer tax credits to tax payers). This may sound crazy, but wait. What central banks are doing now is printing money, that is handing out money for free. This is very similar to the idea of helicopter money. But helicopter money policies may be more effective. The purpose of free money is to increase spending on consumption and investment in order to boost economic growth. The route taken now relies on commercial banks borrowing this money from central banks and lending it to firms and households. However, helicopter money is given directly to households and firms; the impact on consumption and investment may therefore be stronger. let me give you a reassurance (or disappointment): it will not happen Personally, I do not like the idea of helicopter money. But before explaining, let me give you a reassurance (or disappointment): it will not happen. Why? Because there are numerous ways to allocate money over the population: focus on low incomes, focus on high incomes, give equal amounts to everyone regardless their income, give more to special interest groups, and so on. The political and legal issues that arise look so complicated that helicopter money policies will never be implemented. But let us for the moment sidestep this issue and ask what would be the economic effects of distributing free money to consumers and firms? Would it work? Well, not for sure. Consumers and firms alike may distrust the central banker’s or government’s intentions and reason that in the future taxes will be increased. Hence, they may decide to set the free money apart and spending on consumption and investment may fail to increase. On the other hand, if consumption and investment do increase, the question is for how long. In the end, more money means higher prices, which will again reduce output. free money will depress labour force participation But these are not the reasons I dislike the idea of helicopter money. What are these reasons then? Well, there are two; the first is that free money will depress labour force participation. Intuitively, this seems quite obvious. Why should one work for money if it is handed out for free? But it is not only intuition. Economic experiments on the effects of a negative income tax done in the US tell us the same: people reduce their working hours if they are given money for free. And non-experimental data echo the same message: non-labour income correlates negatively with labour force participation. a policy of helicopter money cannot be a one-off experiment The second reason is that a policy of helicopter money cannot be a one-off experiment (although this is a popular assumption in the literature). Even a small positive effect on spending would lead people to consider the experiment a success, because the costs of the experiment are virtually zero. In any democratic society, the experiment will be repeated over and over again and the policy will become permanent. The combination of these two aspects is explosive. Because even when the negative effect upon labour force participation were small, it would be great if the experiment were continuously repeated. Now, lower labour force participation means lower output, lower income and thus lower consumption. Even thus in case helicopter money would first stimulate the economy, the economy would eventually shrink rather than grow. The long-term costs of helicopter money policies exceed the immediate benefits. Or, as the English say: penny wise, pound foolish. #ecb #economicgrowth #helicoptermoney #monetarypolicies