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Stefaan De Rynck

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Stefaan De Rynck

Tag Archives: Leadership

2014 European elections: an electoral shake-up, and a similar Parliament?

20 Friday Dec 2013

Posted by Stefaan De Rynck in EU Politics, Leadership

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elections, European Parliament, far right, Leadership, populism

From January onwards, the election heat will rise in Brussels. Next May, people in 28 European Union countries can vote for a new European Parliament. With widespread anger at austerity and record unemployment numbers in some countries, French President François Hollande fears for an institutional paralysis. More neutral observers, such as LSE professor Simon Hix, predict a breakthrough of anti-European forces. MEP Graham Watson of the UK Liberals sees a scenario that leads to “chaos”.

The next European Parliament: change so that all can stay the same? Photo Reuters

The next European Parliament: change so that all can stay the same? Photo Reuters

That scenario is unlikely, however. The mainstream parties have a very large majority right now. While the centre-right European People’s Party is likely to lose seats in many countries, it would need the equivalent of a political earthquake to topple it from its leading position, especially because the EPP is likely to have a reasonable result in some of the biggest countries. Social-democrats may actually do better than in 2009 in some bigger countries. In Britain, their 2009 score was particularly bad under the Gordon Brown government, and in Germany the recent national result for the centre-left beat the 2009 European result. This could make up for losses in other countries.

But another dangerous and more likely scenario than the one of paralysis could be the following: far-right and far-left parties make substantial gains, while the centre-right and centre-left keep a workable majority. And after a brief period of soul searching on the gap between citizens and Europe, the centrist parties in the European Parliament go back to business as usual.

So the impact on the actual workings of the Parliament of a massive protest vote may actually be minimal. But the impact on the Council and the general political impact in Europe may be more important. Imagine a not unlikely scenario whereby the Front National in France, Geert Wilders in the Netherlands and the UK Independence Party in Britain gather the most votes in their countries. Also the far left Syriza could come first in Greece. The governments in power will want to harden their stance and become less easy to work with in the search for compromises. Continue reading →

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Who are the most powerful politicians?

13 Friday Dec 2013

Posted by Stefaan De Rynck in Leadership, Public Policy

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Democracy, Leadership, Merkel, Obama, Putin

Ranking political leaders is a tricky matter. Forbes’ list of most powerful people recently put Russian President Vladimir Putin ahead of “the handcuffed” Barack Obama, with German Chancellor Angela Merkel trailing closely behind. But can one really compare individual leaders and their power across different political systems?

Obama: "I checked the pictures on Angela's smartphone. She has no selfies". - Photo German government

Obama: “I checked the pictures on Angela’s smartphone. She has no selfies”. – Photo German government

Let’s start with Obama versus Merkel. Democracies are often lumped together and opposed to authoritarian regimes. But this ignores the wide variation between the countries within the democratic family. Germany is a consensus democracy based on a proportional electoral system. While the US President often comes into office with less than half of the popular vote (or with just over 50% as currently for Obama), the parties forming a German government have usually the support of large majorities. The German executive controls policy-making and legislation, whereas forces in both executive and legislator determine the American President’s agenda. The White House is expected to beg and cajole legislators, or defers the initiative to Congress as with the mini-budget deal this week. Such a situation would be unthinkable in Germany.

Under Merkel Germany’s economy has boomed. Her 2013 election result Continue reading →

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Surprise surprise? You haven’t been paying attention

14 Thursday Nov 2013

Posted by Stefaan De Rynck in Leadership, Public Policy

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financial crisis, Greenspan, Leadership

Will an ecological crisis surprise us, just like the 2008 financial crisis did? This question sets up a trap, because there was no surprise in 2008.

What is going up so fast: house prices, derivatives' trades, global warming emissions? Are we in for a surprise?

What is going up so fast: house prices, derivatives’ trades, global warming emissions? Are we in for a surprise?

In the latest issue of Foreign Affairs Alan Greenspan, the former Federal Reserve Governor, endorses a pervasive narrative that economists “never saw the crisis coming”. But that narrative is wrong. Ample warning signs announced the looming financial disaster before 2008. Policy makers and regulators simply chose to ignore them.

If plenty of indicators herald the arrival of bad stuff, acting as if you are surprised only demonstrates that you were not paying attention or did not care enough to get into action.

A new book Guardians of Finance by James Barth, Gerald Caprio and Ross Levine claims that financial regulators were aware of what was going on, but that their deep-seated assumptions on finance and free markets obfuscated reality and led to inertia. With the vast amount of books out on Lehman Brothers, AIG and other firms, we already knew that many financial players saw themselves as dancing and drinking the night away, waiting until the music would stop and the lights go on.

Here are some randomly picked data that regulators knew before 2008:

1. The FBI recorded a rise in mortgage frauds by 272% from 2004 to 2008, and issued public warnings.
2. In Ireland, house prices rose by 250% from 1995 to 2006; the bank Anglo Irish expanded by 40% a year from 1999 to 2006 (every year!).
3. Greenspan’s Fed allowed banks to reduce capital drastically by purchasing credit default swaps, an insurance product. By 2006 the Fed knew of AIG’s fragility as a result from selling tons of such credit insurance, and thus knew of the fragility of the banks that had purchased the swaps.
4. Gillian Tett writes in her book Fool’s Gold that the New York Fed became very concerned about the spectacular rise in Credit Default Swaps already in 2004, especially because of the opaque nature of the trades.
5. Debt of Spanish household and nonfinancial firms went from 70% of GDP in 1997 to 170% of GDP in 2008.
6. In 1998 the CFTC (the US regulator for swaps) proposed to regulate over-the-counter derivatives, but no one heeded the call. That same year hedge fund LTCM blew up in part because of OTC products.
7. Many bank reviews before 2007 by the FDIC, a US bank regulator, signalled that banks’ exposures to risks were too large, but no one followed up.
8. Multi-billion dollar losses by rogue traders demonstrated the taking of excessive risks.

Government agencies and experts are gathering data on the possibility of an upcoming ecological crisis, just as they did on the financial crisis. A United Nations’ report of a few weeks ago showed carbon dioxide emissions today that are unprecedentedly high. The negative impact already hits communities around the world, and the longer we wait, the costlier the adaptation will be. If only financial regulators had stopped the party well before 2008, we would not pay the huge price of adaptation now. In the US, 15 million people more are in poverty today compared to 2000, and nearly all of this increase happened since 2008. In Europe, the rapid turnaround of the economy in countries like Greece and Portugal tests the limits of what societies can bear.

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Getting rich slowly – by selling frozen water

04 Monday Nov 2013

Posted by Stefaan De Rynck in Leadership

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getting rich slowly, ice trade, Leadership, starting a business

In 1833 Frederic Tudor, a Boston merchant, shipped New England ice to hot, humid Calcutta in India. Nearly half of the cargo arrived intact after a voyage of several months. The story of Tudor is a lesson in how to overcome failure and get a business off the ground.

Spy Pond in Arlington MA - Frederic Tudor harvested ice here for his Boston-based global trade

Spy Pond in Arlington MA – Frederic Tudor harvested ice here for his Boston-based global trade

It was on a trip to Havana with his brother John Henry in 1801 that Frederic got the idea of sending ice to the tropics. Where others saw a ludicrous fantasy, he saw a lucrative market. And he persisted through a decade of adversity. Newspapers and family friends mocked him. Tudor spent time in jail for failure to pay his debts. He fell into a depression. But he died a millionaire.

His problems on the way to getting rich were plentiful. Once Tudor got the ice to hot places, consumers did not know how to preserve or even use the novel product. He turned to what social media today would call influencers and gave away free ice to local bartenders in the Caribbean islands. After creating demand and when faced with competitors, he would sell below cost, waiting for other traders to literally melt down.

But before he could even think about reaching consumers, Continue reading →

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Shopping on Thanksgiving? Time to talk turkey

22 Tuesday Oct 2013

Posted by Stefaan De Rynck in Leadership, Public Policy

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Black Friday, Leadership, regulation, sales, shopping hours, Thanksgiving

If your brother or sister earns a living at JCPenney you may have to cut short the Thanksgiving family time spent together. At 8pm, the retailer announced last week, most of its 1,100 stores will open their doors. JCPenney had no choice. Macy’s announced a few days ago that it will be open as well, breaking with a century and a half tradition. Two years ago, Toys R Us started this, and Wal-Mart, Target and others followed suit last year.

2012 Black Friday Stampede (Brian Davies, AP)

2012 Black Friday Stampede (Brian Davies, AP)

Why does JCPenney have no choice? This is a classic case of the Prisoners’ dilemma in game theory. The best outcome of the game occurs when all retailers cooperate (i.e. stay closed on Thanksgiving). But the incentive to defect is extremely strong, in the hope that your shop could be the only one open and boost its sales. Continue reading →

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Do governments solve problems, or merely apply solutions?

15 Tuesday Oct 2013

Posted by Stefaan De Rynck in Leadership, Public Policy

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indicators, Leadership, moscovici, policy-making

Are governments driven by a search for better solutions, or do they apply existing solutions to new problems?

Can a country be competitive and enjoy life?

Can a country be competitive and enjoy life?

At a Harvard talk last week French Finance Minister Pierre Moscovici was questioned aggressively by a Chinese official. The claim by the Chinese economist was that France can never become competitive because of its addiction to holidays and short working weeks. And as Moscovici tried to corner the questioner with the higher productivity of French workers, someone else took the relay baton for bashing French economic policy. Part of the audience reacted approvingly, as often happens in US public debates when France is being criticized. Continue reading →

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Political leadership: should party unity trump clear purpose?

07 Monday Oct 2013

Posted by Stefaan De Rynck in Leadership, Public Policy

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government shutdown, Leadership, Republicans, US politics

Let’s assume that House Republican leader John Boehner is a reasonable man, as Democrats repeatedly say. Let’s also assume that he wants a Republican candidate to win the 2016 presidential elections. His behavior in the shutdown saga so far undermines these two assumptions. What then does Boehner value most in today’s crisis management? It must be the unity of his Republican caucus in the House. But chasing that value damages Republican prospects for future elections.

John Boehner and Democratic Senate leader Harry Reid secretly whispering - Photo taken from Tea Party News Network site

John Boehner and Democratic Senate leader Harry Reid secretly whispering – Photo taken from Tea Party News Network site

In the 2012 fiscal crisis, Boehner was outvoted when a majority of House Republicans pulled him back from a compromise with Obama on more taxes for the rich in exchange for expenditure cuts. Today, off the record Republican statements illustrate uncertainty about their end game. The Speaker is floating in order to avoid antagonizing some of his own members. Continue reading →

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Can you trade in a shotgun for a car?

01 Tuesday Oct 2013

Posted by Stefaan De Rynck in Leadership, Public Policy

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auto loans, Dodd-Frank, financial regulation, Leadership

I googled buying a used car in the Boston area upon arriving here, and now I get ads like: “$0 dollar Down/Low Monthly Lease Payment. Bad Credit, No Credit, No Problem!”

Picture taken at the lot of a used car dealer - Boston area (Medford)

Picture taken at the lot of a used car dealer – Boston area (Medford)

No problem for whom? Subprime car loans did not get much coverage in the financial crisis compared to bigger brother subprime mortgages. But the business model is similar, and it is partly based on predatory lending. This picture was taken on a car lot that I visited last week. Continue reading →

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Divided leadership in the biggest world economies?

26 Thursday Sep 2013

Posted by Stefaan De Rynck in EU Politics, Leadership

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debt ceiling, Euro crisis, Leadership, US politics

Lack of leadership is how many have characterised the European Union over the past years. Europeans reacted too slowly to the Euro crisis, it is argued, and kicked the can down the road as their divisions prevented them from defining a sound economic policy. But the current polarization in Washington and the vitriolic rhetoric against political opponents beats what I have witnessed in Brussels.

The episode over a possible government shutdown next Tuesday by the House Republicans, and a Treasury alarm note over a mid-October default continue an American saga that started two years ago. In 2011 a first round of haggling over the debt ceiling occurred, with Standard and Poor decreasing by a notch its US credit rating. To end the saga, political leadership in today’s Washington requires not so much finding common ground, Continue reading →

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The Boston Red Sox turnaround and lessons for leadership

22 Sunday Sep 2013

Posted by Stefaan De Rynck in Leadership

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baseball, boston, coach, John Farrell, Leadership, red sox

As a newcomer to the Boston area I rejoiced on Friday night when the Red Sox clinched the division championship in the Eastern baseball league. I started reading about how the Red Sox evolved from worst to first in just a year. With many players upping their game this season, this turnaround could teach us lessons on organizations and leadership.

This team is without superstars, sports commentator Glenn Stout said. It exported its star players to the LA Dodgers last year. And without too much pressure at the season’s beginning, remaining players started improving. They became a cohesive team, partly also due to the marathon bombings in April. That Boston tragedy gave the Red Sox the extra purpose to support the city’s recovery. “We all love each other, and we play for each other”, said first baseman Mike Napoli during Friday night’s celebration. And the players grow beards together, which they tug in a sign of camaraderie.

One lesson from this is that taking some dominant personalities away can raise the effectiveness of a team in certain situations. Continue reading →

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  • Crimea and Kosovo, one stands where one sits
  • What kind of EU democracy is emerging?
  • The German Judge and the Italian Banker

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