The GLOBE Leadership Seminar on Leadership in Humanitarian Crisis

Posted on Leave a commentPosted in International Affairs

The very first DSJ issue a year ago covered the topic of leadership. As a fluid concept, leadership is very difficult to pin down, and even more difficult to teach. Most research effort has gone into what leadership signifies in the corporate world. The meaning of leadership in humanitarian crisis, on the other hand, is an emerging field, and it is essential that humanitarian leadership should be discussed. Why? Almost all evaluation reports on disaster response discern the lack of leadership as the biggest problem. The failure of humanitarian assistance may have been excused in the beginnings of large-scale responses, i.e. following the genocide in Rwanda in 1994. Lessons were learnt and the response mechanism constantly evolved, but when the devastating tsunami struck on Boxing Day 2004 the humanitarian reaction was nothing short of embarrassingly poor. Consequently, the United Nations commissioned a report and implemented the so-called cluster system in order to improve coordination and coherence among the myriad of humanitarian actors swarming in after every emergency. But still the biggest lament in the evaluation of the Haiti earthquake was – surprise, surprise – the lack of leadership. And it does not look like the situation is going to improve anytime soon.

Against this backdrop, the organisers of the GLOBE Leadership Seminar sought to raise awareness among aspiring humanitarians and invited 25 participants with very diverse backgrounds: students from the Fletcher School in Boston, from the University of St. Gallen and from CEIBS in Shanghai as well as field staff from the ICRC. Braced for a super intense week of lectures and workshops, the participants started off in St. Gallen with more theoretical inputs on leadership, governance, negotiations and teamwork. With the exception of a short stop-over at the headquarters of the ICRC in Geneva, the rest of the GLOBE seminar took place in the European Centre of Tufts University in Talloires, a picturesque town in the French Alps. For one part, there were speeches from inspiring stakeholders driven to improve disaster response through extremely various approaches be it technology, a more efficient cooperation with the military, or private sector involvement. For the other part, participants were divided into groups and asked to develop a ‘code of leadership’ and a corresponding training programme.

The GLOBE seminar did not reinvent the wheel – it neither revolutionised the approach towards disaster response nor found the Holy Grail to humanitarian leadership. First and foremost, the GLOBE was an amazing enriching and instructive experience for all participants on a personal, academic and professional level. Additionally, some important lessons that are valid even outside the humanitarian context were stressed, for example that in order to be a good leader one has to be able to follow. Nonetheless, a lot of unanswered questions remained in the end: how do you reconcile risk-taking and accountability in the decision-making process? Where exactly is the line between disaster management and leadership? Is humanitarian leadership really that different – if at all – from leadership in other contexts?

Why Europe needs to open its labour market, not just its borders

Posted on Leave a commentPosted in Research & Academia

Over the past few months, nationalists across Europe have been spreading fears over the current crisis related to the large influx of asylum seekers and refugees. Especially in Germany, movements such as Pegida accuse the people escaping civil wars, dictatorships and famines of exploiting the European welfare systems and at the same time taking away jobs from the locals.

Whereas most economists would agree that the crisis is likely to challenge the budget balances of many European countries, the question with regard to the implications of supply shocks on labour market outcomes remains. When looking at past economic research conducted in this area, the answer is at best unclear.

Probably the most famous example of a sudden increase in the labour supply is the Mariel boatlift from April 1980. Within six and half months, 125’000 of mostly young, low-skilled Cuban nationals (56% men) were allowed to leave the island and arrived off the coast of the Miami area. The event increased Miami’s entire labour force by 7% before the lift was revoked on 31 October 1980. When studying its implications, Card (1990) found almost no effects on the low-skilled labour markets in the area – neither on wages nor on unemployment rates.

Similarly, Hunt (1992) found only marginal labour market effects when studying the return of the pied noir, i.e. French nationals living in Algeria and other Maghreb countries, to France after Algeria gained independence in 1962. Carrington and de Lima (1992) conducted a comparable study on Portuguese returning from the country’s colonies in Africa – with almost identical, insignificant research outcomes.

Whereas these findings may seem counterintuitive, Freeman (2006, p.157) identifies three potential explanations:

  1. A large influx of cheap labour force may trigger migration flows of low-skilled workers to other parts of the country. Given the stark discrepancies in wage earnings across regions over long periods of time, however, this argument of internal migration may at best partially explain the results.
  2. The influx of low-skilled labour attracts capital investments in labour-intensive industries, thereby softening the pressures on the labour market through increased demand. The validity of this trend has not yet been sufficiently studied by economists.
  3. Given that the skill and educational levels of the immigrants starkly differ from the ones of the native population, the increased labour inputs serve as compliments rather than substitutes on labour markets; a trend clearly exemplified with Mexican immigrants in the United States.

Going back to the initial point, economic research does not indicate that the current influx of asylum seekers and refugees would hurt the European labour markets. Even if the scale of the population flows is greater than in the studies mentioned above, the inflow is dissipated across various regions and countries. Also, the current population arriving possesses varying skill levels from manual labourers up to doctors and lawyers. This variance should additionally help absorb the effects of the supply shock in different sectors of the labour market.

Therefore, in order to overcome the current crisis, European countries ought to speed up the asylum granting processes and swiftly open up their labour markets, as this would boost the stagnating economies and, at most, mildly affect unemployment rates and wages. At the same time, integrating refugees and asylum seekers to the labour force would quickly ease the rising pressure on welfare spendings and overcrowded asylum stations.

Have a look at the following papers mentioned above for studies on the economic impacts of large labour market supply increases:

Card, D. (1990). The Impact of the Mariel Boatlift on the Miami Labor Market. Industrial and Labor Relations Review, 43(2), 245-257.

Carrington, W.J. & de Lima, P.J.F. (1996). The Impact of the 1970s Repatriates from Africa on the Portuguese Labor Market. Industrial and Labor Relations Review, 49(2), 330-47.

Freeman, R.B. (2006). People Flows in Globalization. Journal of Economic Perspectives, 20(2), 145-70.

Hunt, J. (1992). The Impact of the 1962 Repatriates from Algeria on the French Labor Market. Industrial and Labor Relations Review, 45(3), 556-72.

The Most Patient Country

Posted on Leave a commentPosted in Economics & International Markets

Which country do you think is the most patient one?

bild_comic

India! At least according to the American Express Global Customer Service Barometer, which evaluates the experiences of more than 1000 customers when contacting a customer service. Indian customers are willing to wait 16 minutes for a customer service agent for help, a lot more than their fellow customers from the Netherlands (7), Germany(7) or Japan(6). What do you think, does that fit with your personal experience?

Also check out our new issue on the topic patience, which will be available at the university after 14th December!

The UN Security Council – has it become obsolete?

Posted on Leave a commentPosted in Uncategorized

On 24 October 1945, the Charter of the United Nations entered into force, with the victors of World War II – the Republic of China (today: People’s Republic of China), France, the Union of Soviet Socialist Republics (today: Russian Federation), the United Kingdom, and the United States – representing the five permanent members of the newly established Security Council. Together with 46 other states, these five powers formed the United Nations whose primary objective is to maintain international peace and security. Today, at its 70th anniversary, the United Nations counts 193 member states. Whereas the number of membership has significantly changed over past years, the structure has remained as in 1945 – powers concentrating on the Big Five. Is this structure in line with the current state of affairs?

According to Art. 24 of the UN Charter the Security Council has the primary responsibility to maintain international peace and security. It is the only UN body that has the authority to issue legally binding resolutions, including sanctions, force by arms, and blue-helmet peacekeepers. For a resolution to be passed, nine of the 15 non-permanent members of the Security Council must vote for it. Any of the five permanent members, however, can block any resolution by interposing its veto. One of the more recent prominent examples is the Security Council’s paralysis over Syria caused by Russia, which has used its veto power four times in order to freeze resolutions on the issue. While Russia fears danger for its ally, the regime of Bashar al-Assad, more than 220,000 Syrians have died and more than 11 million have left the country as refugees.

With the Security Council’s failure to act in Ukraine and Syria, voices pointing out the body’s increasing lack of legitimacy have become louder. The body is not representative, it is claimed. After 1945, the geopolitical realities have changed dramatically and it is questionable whether the Big Five reflect today’s world order. There are, for example, no African or Latin American states among the permanent members. Moreover, some argue that the body’s decision-making procedures make it dysfunctional. The power of veto has prevented the Council many times from addressing pressing international issues.

Proposals to reform the Security Council have been around since the UN’s 40th anniversary. Up to the present, however, it has not been possible to adapt any of these suggestions. This year, at 70th anniversary of the UN, the reform of the UN Security Council is again on the agenda. Will we make it this time? And what is a proposal supposed to look like for the UN to do a better job in the future? Please, share with us your thoughts on this issue.

 

 

 

 

Optimism bias or the search for rainbows

Posted on Leave a commentPosted in Economics & International Markets

panglossian. adj: marked by the view that all is for the best in this best of possible worlds; excessively optimistic.

Last week I came across a word that so aptly describes my opinion of all analyst reports on the global market outlook over the past six months, it almost suffices to characterize the term in bold typeface, size 24, and leave it on this page for your peaceful rumination.

A report published by the Independent Evaluation Office of the International Monetary Fund (IMF) in February of last year – as well as a Working Paper published by Giang Ho and Paolo Mauro of the IMF’s African Department later in July of that year – found that the World Economic Outlook, a flagship publication of the IMF, exhibited consistent overoptimism during periods of global and regional recession. Ho and Mauro, in particular, note that the longer the horizon of the forecast, the more optimistic it is – and that projections are “optimistic all round – both for countries whose recent growth has been above average … and for countries with below-average past growth”. They also mention that a forecast for a country about to enter an IMF supported program also tends to exhibit optimism … but that is a different matter.

The IMF is not the sole perpetuator here. An Economic Letter published by the Federal Reserve Bank of San Francisco earlier this year also noted the tendency for overoptimism in its observation that “since 2007, Federal Open Market Committee … real GDP growth forecasts have typically started high, but then are revised down over time as the incoming data continue to disappoint”. They cite a variety of explanations, most interesting of which is a comment that the FOMC participants might “overestimate the efficacy of monetary policy following a balance-sheet recession”.

Is it heuristics? Ho and Mauro cite various studies by pundits in behavioural economics – Thaler, Kahneman, and Tversky to name a few – who have found systemic evidence of the prevalence of optimism bias in comprehending future, unknown events. Though this may be one explanation, the tribulations of conducting economic forecasts are not unknown to the conscientious economist. We eschew outlier status; Edward Luce, recently commenting for the Financial Times (where I learnt of said new favorite word mentioned above), attributes this to group thinking, saying “forecasters seek safety in numbers … no one was ever fired for being collectively inaccurate”.

It is getting embarrassingly obvious, however, that the numbers for real wages, or unemployment, or economic growth that we are given on paper seem to ill reflect the reality of what we see on the ground. Perhaps we need our leaders to stop telling us to be patient, and start telling each other to act.

Who is going to win the 2015 Nobel Prize in Economics? Who is your favourite?

Posted on Leave a commentPosted in Uncategorized

On Monday, the Sveriges Riksbank will award the Prize in Economic Sciences in Memory of Alfred Nobel 2015. Wikipedia provides a list of past winners. Since 2000, 26 of the 31 laureates were U.S. citizens. Also this time many of the favourites are American.

photoSource: http://bit.ly/1OrXuhc

The good news is that there is also a Swiss name wandering around for years, namely Ernst Fehr, Professor and Director of the Institute for Empirical Research in Economics at the University of Zurich. The bad news: He is actually not Swiss, but Austrian.

The list of possible winners is long. Who is your favourite? Post it under this text and tell us why you think this economist will make it. If you need inspiration, check out the running list by Thomson Reuters.

My last year’s pick was Ben Bernanke. This year I go for Michael Woodford. Why? I like choosing outsiders. Moreover, he works on monetary policy and its effects on the real economy. How to stimulate growth in times of zero interest rates seems a timely topic.

 

Our Economic Possibilities – A (not so) Gloomy Outlook

Posted on Leave a commentPosted in Economics & International Markets

“We are suffering from a bad attack of economic pessimism. It is common to hear people say that the epoch of enormous economic progress […] is over; that the rapid improvement in the standard of life is now going to slow down […]; that a decline in prosperity is more likely than an improvement.”

EZGDP

Statements like the one above seem like a forceful formula repeated now only by a few American politicians in their campaigns. Indeed, the world economy does not show any sign of rapid catching up after the Great Recession that started 7 years ago. The European economy is still operating under reduced capacity with unemployment on high levels, especially in so called “success story” countries. China seems to slow down after an era of incredible growth. The UK can base its employment recovery mostly on a huge stagnation in labour productivity, a kind of slump that characterises many post-recession economies at the moment. Janet Yellen is still reluctant to raise rates, exactly because the United States as the only real driver of global economic growth do not show any sign of overheating at the moment.

The real problem, however, is not the actual developments (economic growth is mediocre and not catastrophic) but the apparent inability of policy makers around the world to find a successful medicine against the disease of low growth. They find themselves in a situation, where traditional policy recipes do not (yet) show the desired effects. Central Banks around the globe have lowered interest rates to a minimum and provided additional liquidity in order to push down long run rates and influence expectations. During the actual crisis, many governments relied on stimulus packages to increase economic activity. Others engaged in fiscal austerity, with limited success. Abenomics in Japan could go into history as a half-hearted try to lift a country out of a never-ending economic depression.

So you might say that the outlook seems quite gloomy. But there is hope. Maybe it is even worth listening to those declaring that another great expansion of opportunities is just around the corner. And perhaps we just need to be a little more patient. Unfortunately, patience is by far not the most widespread human virtue. But neither was it back in 1930, when a British economist called John Maynard Keynes wrote down the words above. 85 years later the economic possibilities for his grandchildren are greater than even the most optimistic Keynes could have imagined.

 

Meet our Professors: #1

Posted on Posted in Meet our Professors

A brand new video series launched by Nina Karnaukh and Igor Posdeev, two PhD students at the HSG, will shine a light on a new professor each week.

This week, we broadcast an interview with Prof. Angelo Ranaldo.

Prof. Angelo Ranaldo plays guitar with his friends in a garage? Wanted to be a football player as a child? What are his advices for doing research? Find out this and much more in our first video-interview.

45th St. Gallen Symposium: Insurance, Natural Catastrophes and Economic Development*

Posted on Leave a commentPosted in Economics & International Markets, International Affairs

Nepal is one of the least developed states in the world. As if poverty was not enough, the worst earthquake in 81 years hit the small country in April with another big earthquake following in May. The natural catastrophes caused thousands of deaths, wiped out entire villages and destroyed buildings. The result: disaster. The slow progress in recent poverty alleviation has almost been nullified, as many people saw the bases of their income devastated. Moreover, public goods such as key transport infrastructure have been severely damaged as well, complicating relief efforts even further. But where does insurance fit into the picture?

Fact is that almost nothing of what was destroyed in Nepal had previously been insured, neither privately nor publicly. This raises serious concerns of how reconstruction is to be financed, particularly long-term. Had the Nepalese government bought sovereign disaster risk insurance, the issue would have been by far less strenuous due to compensations. However, it is not always easy to explain the benefits of insurance to government officials. Insurance is a long-term business, so even if a finance minister is convinced of the benefits of such a scheme, his or her successor might not be, and the insurers have to start from the beginning. Additionally, there is the question of timing: facing a one-in-a-century risk of a natural catastrophe occurring, when is the appropriate moment to buy insurance? Would the money not better be invested in something else? Allegedly, the Haitian government decided days before the devastating earthquake in 2010 to shift their insurance towards less coverage in the unlikely case of an earthquake towards more coverage in the rather frequent cases of hurricanes. It seems a rational decision particularly given the growing disastrous effects of climate change, but consequently the Haitian government was paid out the meagre sum of USD 8 million after the earthquake.

Along with increasing climate change concerns, insurance product variety as well as concerns of the insurance industry regarding the widening climate change and natural catastrophe protection gap augment: the proportion of insured losses is decreasing relative to non-insured losses. Without insurance, states are more vulnerable as they have to be able to fund their function as the ultimate reinsurer ex-post. Although the gap is smaller in more mature markets, even developed countries are not very well prepared for climate change induced catastrophes as the example of Hurricane Katrina in the US in 2005 exemplifies. For developing countries, the case is even more acute, but only a few small island states in the Pacific take advantage of the insurance products available. As the front door approach of addressing finance ministers did not prove too successful, the insurance industry took the backdoor and convinced rating agencies to include disaster preparedness in sovereign risk ratings. Slowly, the need for insurance and its public value is sinking in, as it is recognised that the costs of inaction outweigh the costs of action.

On the other hand, it is debatable how genuine the need is. Insurance companies are encouraging sovereign disaster risk insurance products. Hence, there has to be a potentially lucrative market. So is it simply a business development strategy? The public value of insurance is blatantly obvious in the examples of Haiti or Nepal, and a case can even be made for developed countries. Nonetheless, there is a very fine line between benefits for society at large and interests of the insurance industry to expand their market.

 

 

*This article provides insights from a work session that falls under the Chatham House rules. Therefore, only the information accumulated during the session can be used.

The St. Gallen Symposium: Tuning in to the Topic ‘Proudly Small’

Posted on Leave a commentPosted in International Affairs

Professor Bruno Frey, former senior professor of economics at the University of Zurich, provided the first admittedly rather Western-centric view on this year’s topic proudly small. He encouraged especially the young generation to “move to the 21st century by considering new possibilities: flexible, dynamic, and diverse entities” instead of thinking in terms of nation states, a notion he considered passé.

His argument began with proudly small and the statement that “smallness is the basis of our society.” Philosophically, humans think in terms of individuals rather than in the dimensions of nations or even regions. From an economic stance, “small firms are very active and dynamic” as the start-ups trend reflects. Small countries are in vogue – just look at Scotland or Catalonia – as well as incredibly successful in terms of high per capita income like in Singapore or Switzerland, or happiness as in Scandinavian countries. In a next step, he turned to efficiently large as he observed that “the world is dominated by large entities.” Brands like Skoda and Porsche are no longer independent but are part of a bigger corporation. Logos from e.g. H&M line the streets in our cities around the globe. Big countries such as the US and China dominate. 28 European countries merged into the European Union. From a macro perspective then, “you can see obviously that large is efficient.”

Facing the dilemma of being caught between proudly small and efficiently large, Professor Frey then rejected the normal compromise to stick to the middle as “the worst solution possible.” Instead, he put forward two propositions. First, the mind-set of fixed borders and nation state should be abandoned as they inhibit problem solving. Second, new entities that are “flexible and dynamic and care for diversity” should be devised. How is this to be done? In a first step, the problem needs to be identified, and in a second step the borders are to be chosen so that the areas are appropriate to solve the particular issue at hand. Professor Frey made his case according to his concept of functional overlapping competing jurisdictions (FOCJ), a kind of governance model across political units and similar to multinational enterprises and vaguely resembling the Swiss system.

The call to think beyond nation states can definitely be applauded and may even be desirable in our increasingly globalised world, as borders and jurisdictions blur and the biggest challenges like climate change are global in nature. However, it is not a radically new idea. Neither is Professor Frey’s demand for change. For example, the notion of a world government, a unified global political authority, has existed for centuries and even millennia, and also knows no national borders. Yet, Professor Frey’s invocation to move to a completely decentralised system of the FOCJ is a bold one. Nonetheless, the critique of feasibility weighs heavy. Although the European Union may be a spring of hope that we actually live in a post-Westphalian system, the reality of how the EU defends her external borders can lead one to despair. Overall, the introduction to the Symposium was thought provoking but rather less pragmatic.