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The Uhuru blueprint: What if PH had stayed in ICC?

ICC

By Dan Steinbock

Recently, the Philippines withdrew from the ICC opting for the path of US and Russia, China and India. To focus on a new economic future and the battle against drugs and corruption, the government shunned the Uhuru blueprint.

On March 17, the Philippines withdrew from the International Criminal Court (ICC), which has sought to investigate allegations that President Duterte had committed “crimes against humanity.”

The charges were pushed by controversial critics associated with former President Aquino’s Liberal Party and its allies, which – after the 2016 election meltdown – have sought domestic political change increasingly through international pressure.

Fast-forward to an imagined future: If the Philippines had not withdrawn from the ICC, Duterte’s government could have faced the Uhuru blueprint.

The Uhuru blueprint

The Uhuru case undermined the ICC’s credibility, wasting resources and causing gratuitous political turmoil. It also cost to Kenya as ICC’s lingering process began to penalise the perceived legitimacy of Kenya’s political leadership.

In 2010, then-ICC Prosecutor Luis Moreno Ocampo charged then-Deputy Prime Minister Uhuru Kenyatta, along with five other government leaders, as an indirect co-perpetrator in the violence that followed Kenya’s 2007-08 post-election violence. Ocampo accused them of “crimes against humanity.”

Despite the ICC process, Uhuru was elected Kenya’s president in 2013. He is a popular politician and the son of the legendary anti-colonial leader Jomo Kenyatta. However, opposition led by Raila Odinga hoped to benefit from his demise.

Reportedly, Odinga’s Orange Democratic Movement was named after the Ukrainian “Orange Revolution,” which billionaire George Soros had supported. Soros’s Open Society also funded the pro-Odinga key NGO and Kenyan think-tanks to stop President Uhuru from the 2013 general election. And yet, after a three-year juridical chaos, the ICC charges were dropped in March 2015 for lack of evidence.

Another show began ahead of the 2017 elections. In August, the bank account of Odinga’s daughter was frozen, and a pro-Odinga NGO received more than $5 million from Soros Foundation. In September, Uhuru was re-elected for a second term. Odinga challenged the outcome in the Supreme Court, which ordered a new election. Oddly enough, Odinga withdrew from October election, which resulted in Uhuru’s crushing electoral victory.

Instead of democratic competition, Odinga traveled to London where he met former UN Deputy Secretary General, Lord Mark Malloch Brown, the PR muscle behind Cory Aquino election win in 1986 and the Aquino family since then; and the chair of Smartmatic, whose election technology has unleashed controversies in many countries, including the Philippines. In 2007, Malloch Brown was named vice-chairman of Soros Fund Management and his Open Society Institute.

The Uhuru case undermined the ICC’s credibility, wasting resources and causing gratuitous political turmoil. It also cost to Kenya as ICC’s lingering process began to penalise the perceived legitimacy of Kenya’s political leadership.

When Uhuru served as deputy PM, Kenya’s growth surged to more than 10% in the early 2010s. During the ICC debacle, it more than halved to 4% in 2012 stabilising thereafter at a lower level. Concurrently, Kenyan shilling weakened from 80 to more than 100 the U.S. dollar; plunging more than 25%.

Several ICC cases suggest a similar sequence: First, the target country enjoys promising development. Political destabilisation ensues in the name of “people power.” Financial speculation penalizes economic growth and currency stability, causing capital outflows. If new leaders take over, privatisation of public assets tends to follow. Development potential weakens.

While only a probable future, even an imagined Uhuru blueprint leaves one apprehensive. Without withdrawal from the ICC, it could have recurred in the Philippines, especially as some of the key actors are identical (Soros, Malloch Brown) or comparable (transnationally-supported NGOs and think-tanks, Smartmatic interests).

The ICC liabilities

In Kenya, the ICC effort to prosecute President Uhuru led to the parliament’s call for withdrawal from the ICC and the 2013 African Union summit in which Uhuru accused the ICC of being “a toy of declining imperial powers.” There is good reason for frustration. For a decade or two, the ICC has gone after the poorest countries mainly in Africa, which has suffered the most from colonial plunder.

In Kenya, the ICC effort to prosecute President Uhuru led to the parliament’s call for withdrawal from the ICC and the 2013 African Union summit in which Uhuru accused the ICC of being “a toy of declining imperial powers.”

The ties of Ocampo to Soros-supported organisations stem from early 1990s, when the billionaire infused funds into a prominent real estate backer of the lawyer’s NGO in Argentina. Then, Ocampo worked for Transparency International, a corruption watchdog that has been criticised for bias against developing countries. A decade later, he joined a roundtable by Soros’s Open Society called “Restoring American Leadership – the ICC.”

When the UN Security Council assigned Ocampo to investigate war crimes in Libya, he reportedly shared confidential information with the French government, which was bombing Libya. After he indicted Gaddafi in 2011, he signed a lucrative $3-million contract to advise the Libyan oil billionaire Hassan Tatanaki, presumably to protect him from potential ICC prosecution. Reportedly, he also profited by routing monies to offshore companies in tax havens, as evidenced by the Panama Papers.

Importantly, the ICC’s ability to investigate and prosecute is severely restricted by its mandate. It can only prosecute crimes after its creation in 2002 – which conveniently suspends the worst genocides, crimes against humanity, war crimes and crimes of aggression; the four key international crime categories.

Today, there are more than 120 state parties to the Rome Statute. Over 30 countries have signed but not ratified the statute, and there are more than 50 non-signatory countries.

The ICC is financed “primarily” by its member states. About two-thirds of its budget comes from only 10 countries, especially Europe’s former colonial powers. Additional funding is provided – but not detailed – by “voluntary government contributions, international organisations, individuals, corporations, and other entities.” The net effect is a moral hazard. The ICC is not immune to external influence.

U.S., Russia, China and India are not ICC signatories. In Southeast Asia, neither wealthier countries (Singapore, Brunei, Malaysia) nor emerging economies (Indonesia, Thailand, Vietnam, Myanmar, Lao) have signed the Statute.

Philippines and ICC

Unlike his peers, President Aquino signed the Statute in February 2011, right before he aligned Manila’s foreign policy with President Obama’s security pivot to Asia – in contrast with almost all BRIC and ASEAN economies.

Since 2016, the effort to have the ICC intervene in Philippine matters has been further fueled by the domestic meltdown of the Liberal Party and the exploitation of human rights abroad, to advance political agendas at home.

Since its creation, the ICC’s credibility and judicial independence has been deflated.

The world needs a truly international criminal court – not one that targets the most vulnerable members of the international community.

The original commentary was released by The Manila Times on March 25, 2019.

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About the Author

Dr. Dan Steinbock is the founder of Difference Group and has served at India, China and America Institute (USA) Shanghai Institutes for International Studies (China) and EU Center (Singapore). For more, see https://www.differencegroup.net/

Development Should Guide US-Philippine Mutual Defense Treaty Review

US-Philippines Officials shaking hands

By Dan Steinbock    

In times of great uncertainty, strategic ambiguity offers little clarity. The review of the U.S.-Philippines Mutual Defense Treaty should be guided by the quest for sovereignty and economic development.

 

During his recent visit in the Philippines, Malaysian Prime Minister Mahathir Mohamad met Murad Ebrahim, the Filipino Muslim rebel leader who became a regional governor under the Malaysian-brokered peace deal. In the course of the meeting, Mahathir told to Murad that “it’s easy to shoot and kill, but it’s difficult to develop. If there is peace, then everything will come.”

Mahathir’s words offer guidance in intra-country divides, but also in inter-country friction, including the review of the decades-old Mutual Defense Treaty (MDT) with the United States.

In early March, Philippine defense secretary Delfin Lorenzana said the government should review the MDT to avoid provoking a potential armed conflict with China in the South China Sea. Lorenzana pointed out that the security environment in the region is today “much more complex” than in the early Cold War era, when it was drawn up. “The Philippines is not in a conflict with anyone and will not be at war with anyone in the future.”

Obviously, there are different views about the preferred future of the MDT in Manila, Washington and elsewhere. Typically, most are predicated on geopolitical arguments, treaty texts and interpretations of various statements.

Yet, Mahathir’s wisdom matters. Development is not viable without peace. In the long-run, it is the quest for economic development that should drive the MDT debate.

Sovereignty and “zero problems” foreign policy

Since the early 2000s, the rapid growth of the so-called BRIC economies has greatly inspired debates on economic development. As a large emerging economy with solid structural potential for the future, Philippines could draw from the lessons of these countries.

As I have stressed since my 2014 Mabini lecture at the Foreign Service Institute, there is nothing automatic about strong growth potential. Vital economic, political and security shifts can support or penalize growth.

In light of Mahathir’s views, the most important lesson may well be the “zero problems policy,” which was developed a decade ago by former Turkish foreign minister Ahmet Davutoglu who lectured in Malaysia in the Mahathir era.

Historically, this approach has been typical to successful industrializers in the emerging world. From the 1980s to 2000s, China was largely focused on inward development, though gradually building international relations. The same goes for India’s industrialization in the past two decades. In Brazil, the most intensive phase of modernization occurred earlier but could only be completed in the Lula era.

Development is not viable without peace. In the long-run, it is the quest for economic development that should drive the MDT debate.

In Southeast Asia, the rise of Singapore only took off after Lee Kuan Yew’s leadership overcame race riots and began a decisive focus on development. In Vietnam, reunification and reforms could only move ahead after colonialism and triumphs against the French and U.S. neocolonial wars. In Indonesia, both Sukarno and Suharto sought rapid industrialization, but it was only completed with peace and stability in the era of Susilo Bambang Yudhoyono (SBY).

Of course, none of the large emerging economies have been able to avoid all conflicts, many of which stem from colonial legacies following artificial partitions (India), invasions and wars (China), and structural dependency (Brazil). Yet, the effort to reduce friction in foreign relations, in order to focus on economic development has been typical to successful modernization.

What these large emerging economies also share is their insistence on sovereignty. After decades, even centuries of colonial “divide and rule,” they want to control their own future. While all of them seek to cooperate and partner with other nations in different ways, they do not easily tolerate the military presence of other countries within their territories.

As evidenced by the Middle East, such presence is not just a reminder of colonial legacies but can violate their sovereignty and result in destructive proxy conflicts in the region.

 

Economic development first

Following the recalibration of the Philippine foreign policy, there is nothing so challenging in the country’s bilateral relations with China that could not be negotiated in a mutually satisfactory way over time.

But just as Manila would not easily tolerate an anti-Philippine stance by foreign troops in China, it is hardly surprising that Beijing has concerns about any military presence by third-party countries in the Philippines – especially in light of historical track-record.

The Philippines became U.S. colony after the Spanish-American war and the subsequent Philippine-American War. The promised independence materialized only after Japanese invasion and the end of World War II in 1946. Yet, a strong U.S. military presence remained in the country until 1991.

What Manila needs is strengthened sovereignty, strong ASEAN cooperation and development.

Following President Obama’s “pivot to Asia” in 2011, President Aquino and his foreign minister Albert del Rosario achieved the 2014 Enhanced Defense Cooperation Agreement (EDCA), as a sort of a prelude to more intimate collaboration with the anticipated presidency of Senator Mar Roxas in 2016.

The scenario was foiled by Duterte’s electoral triumph, which, reportedly, led to a regime change plan by former U.S. Ambassador Philip Goldberg in fall 2017.

In all these scenarios – from the late 1890s up to present – Philippines has been seen as a geopolitical platform to project U.S. hard power in the region, particularly vis-à-vis China, as most historians acknowledge.  

 

Toward peace, development and prosperity

When defense secretary Lorenzana said last December that the objective of the MDT Treaty review would be to “maintain it, strengthen it, or scrap it,” he presented three clear future scenarios to the country.

Any scenario that would maintain or strengthen the MDT runs the risk of undermining Philippine sovereignty, exposing the country to costly entanglements and potentially fatal conflicts in the region, which, in turn, would undermine the quest for economic development. Instead, what Manila needs is strengthened sovereignty, strong ASEAN cooperation and development.

Successful economic modernization is not viable without sovereignty and focus on development, as evidenced by the history of the BRIC economies (and that of the United States).

When the MDT was signed in 1951, the U.S. and advanced countries still dominated world growth, whereas emerging Asia was struggling amid poverty. Today, China and emerging countries fuel global growth prospects, while emerging Asia is catching up with higher living standards – but only as long as peaceful conditions prevail in the region.

So if economic development is to remain the national priority, these are the facts that should guide the review of the MDT in the new and far more complex security environment.

The original commentary was released by The Manila Times on March 18, 2019

Featured image: U.S. Department of State https://www.flickr.com/photos/statephotos/44736141682/

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About the Author

Dr. Dan Steinbock is an internationally recognized expert of the multipolar world. He is the founder of global consultancy Difference Group Ltd, which focuses on international business, international relations, investment and risk among and between advanced and emerging economies. He has consulted worldwide and been on media advisory boards of world’s leading media and management consultancies. His commentaries and interviews have been released by some 250 media outlets in all world regions. He has been part of and worked with leading research universities, think-tanks, and government agencies in the United States, Europe, China, India, and all world regions. He is founder of global consultancy DifferenceGroup. 

 

The Shift of the Philippine Peso Regime

By Dan Steinbock

In the Aquino era, the focus was on financial flows, which rested on a strong peso. In the Duterte era, it is on the huge investment drive, which can live with a weaker currency. The peso’s political economy is shifting.

Recently, international media have released contradictory peso reports. But the phenomenon is not new. For instance, Bloomberg’s Ditas Lopez first attributed the peso’s decline to Duterte two months before the actual election (April 27, 2016). Yet, after the election, the peso rose for weeks beating forecasts so that by late August 2016 even Bloomberg had to admit that he currency had completed the “best performance in Asia this month.”

That performance was mainly the net effect of a Duterte reassessment by the markets. Most media had vilified him as a threat (social media was a different story). But as Duterte launched his infrastructure agenda, observers realized that the country was not facing a “populist threat,” but a huge investment drive.

Yet, historically, infrastructure drives favor weaker currencies; a fact that got lost in the translation. Instead, much of the media, including Lopez, continued to lament that “Duterte’s peso rout runs counter to the booming Philippine economy” (September 29, 2016). The assumption was that a thriving economy must go hand in hand with a strong peso and that if this is not the case, then the economy cannot really be booming.

Perhaps that’s why Bloomberg later declared that “Asia’s ugly duckling of the year Is the Philippine peso” (March 2, 2017). Unfortunately, the facts told a different story: the peso erased the year’s loss as funds snapped up local stocks only a month later. That did not convince Lopez who now reported that peso is seen as “Asia’s worst performing currency next year” (December 22, 2017). Once again, peso was seen amid another “rout” (June 20, 2018).

The same story prevailed in early 2019, when Bloomberg reported that “peso faces new threat as Duterte gears up for poll” (January 7, 2019). With U.S. dollar at 53 peso, Lopez saw the peso among Asia’s biggest losers this year. Yet, it was followed by a very different piece, which was not authored by Lopez, but David Finnerty, Bloomberg’s foreign-exchange strategist who reported that “peso surprises to become Asia’s best currency” (March 3, 2019). By then, the peso had strengthened to 52. Yet, only hours later, Lopez, together with Siefrid Alegado, reported that “peso slumps as Philippines makes surprise Central Bank pick” (March 4, 2019). In this view, peso had plunged “most since 2013,” although the exchange-rate was 52.20.

As the peso has varied around 0.2% to 0.9% in the past two months, it may be prudent to ask whether such variation merits characterizations as “Asia’s biggest loser” or “Asia’s best currency.” Short-term fluctuations and ideological preferences of “strong” or “weak” peso seldom disclose long-term trends.

In reality, the underlying longer-term forces behind the short-term peso fluctuations seem to be structural. What we are witnessing a shift from one Philippine peso regime to another.

Toward the new peso political economy

Here’s the great difference between the Aquino and Duterte governments: In the Aquino era, the early promises to change the foreign direct investment (FDI) legislation paced an increase of capital flows in the early 2010s. But since the Aquino government failed to change the FDI legislation, these flows represented mainly portfolio and other investments, which eventually reversed into significant outflows. In the Duterte era, early optimism and promises to bring in more FDI have paced a dramatic increase of capital flows, which could be sustained until early 2020s (Figure 1).

 

* Capital Flows (In billions of U.S. dollars, + = inflow)
Source: Data from IMF (Sept. 2018)

Figure 1
In the Aquino era, financial flows ruled; in the Duterte era, investment counts*

 

When inflation reached an intolerable high of 6.7% last fall, it was boosted by a price effect associated with tax reforms, rising oil prices and a failure to manage rice prices. The slowing international economy penalized crude oil, which exceeded $75 in early October but is now around $56 (although a U.S.-Sino trade compromise could fuel prices again).

When inflation exceeded Philippine central bank’s (BSP) target range, rate hikes followed; belatedly. In the early Duterte era, interest rate had been cut from 4% to 3%, which prevailed until early 2018, even as peso weakened from 47 to 50 in 2017 and to 52 by early 2018. It was only when the rate hikes hit almost 5%, that inflation declined and peso strengthened to 52 (Figure 2).

 

Figure 2
How rate hikes subdued the peso in late 2018

 

What’s ahead?

Overheating is expected to weaken in 2019. Thanks to government measures to promote food supplies, inflation eased to 4% in February. Higher real yields are supporting the peso government bonds, despite the BSP projection that the current account deficit (CAD) could widen to 2.3% of GDP in 2019. In the past, the quota system failed to keep rice price in control; now the new import tariff system should stabilize it. The slowdown of electronic exports, which account for more than half of Philippine exports, is associated with U.S. trade wars.

One reason for the contradictory peso projections by the media is that they misjudged the succession outcome at BSP. After the premature death of Nestor Espenilla, the potential candidate list by Bloomberg’s Lopez and Alegado featured some 10 insiders, private-sector executives and wild cards – but not the next chief of the Bank. In a shrewd move, Duterte named his budget secretary Benjamin Diokno as BSP’s new chief.

In the government, Diokno had pursued an expansionary fiscal policy to finance infrastructure investments, along with Duterte’s financial chief Carlos Dominguez III. In the coming months, Diokno might lean toward an interest-rate cut, but only as long as it can be justified with easing inflation.

Some observers feel uncomfortable with current account deficit. Yet, the widening CAD is the effect of the infrastructure drive, which requires imports that support infrastructure expansion. Yet, despite the CAD, peso proved Asia’s best-performing currency in February, when it was fueled by the record $2.9 billion of remittances in December. Also, foreign investment into Philippine stocks and bonds recorded a net inflow of $763 million in January; quadruple the level of the previous year.

Most currencies in emerging markets have depreciated with the U.S. Fed’s rate hikes. But as U.S. expansion may have peaked, the Fed seems less hawkish. Yet, peso outperformance may not persist, thanks to the extremely challenging international environment.

The Duterte fiscal expansion has potential to continue well into the early 2020s – as long as international headwinds can be kept at bay.

The original commentary was released by The Manila Times on March 11, 2019.

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About the Author

Dr. Dan Steinbock is the founder of Difference Group and has served at the India, China and America Institute (US), Shanghai Institute for International Studies (China) and the EU Center (Singapore). For more, see http://www.differencegroup.net/

The Looming UK Brexit Mess

Uk brexit mess

By Dan Steinbock

After the misguided referendum three years ago, the Brexit end-game is about to begin. In the UK, it means political division and fiscal erosion. Moreover, global growth prospects will not remain immune to turmoil in the world’s fifth largest economy.

Initially, London’s goal was to wheel and deal the best possible deal with Brussels. That became more difficult after mid-January when the House of Commons rejected PM May’s EU withdrawal agreement. The rejection compounded the odds for a risky and disorderly no-deal Brexit scenario.

The risks for volatility are also fueled by the impending European Parliament election in May 25-26, which is likely to strengthen Euroskeptics, anti-immigration forces, and radical right and left, at the expense of mainstream parties.

Behind official posturing, Brussels would likely prefer London to revoke the Article 50 of the EU Treaty, avoid Brexit and stay in the EU until UK lawmakers can agree about a future course. Yet, a no-deal Brexit scenario can no longer be excluded.

As the Brexit looms, political fallout is spreading. Recently, eight Labor members of the parliament left the party in protest at Jeremy Corbyn’s leadership to form a breakaway party. Days later, three Conservative MPs quit Conservative Party denouncing May’s “disastrous” handling of Brexit and its shift to the right.

The ex-Conservative MPs joined the former Labor lawmakers on the opposition benches in Parliament. Labor and Conservatives could face more resignations, with members of the new Independent group saying they expect more MPs to join them.

Some scenarios

London must cope with three Brexit scenarios by the March 29 deadline to exit the European Union (EU). In the first scenario – Brexit Deal – the EU divorce will materialize after Prime Minister Theresa May’s deal. That’s the markets’ base case.

In the second scenario – Brexit Deferral – the goal would be to shun a no-deal. This is an option that markets consider unlikely.

In the third scenario – No Brexit Deal – the objective would be to revoke the Article 50 of the EU Treaty to retain the current status quo. This scenario is perceived as improbable by the markets.

But what if May fails to secure a Brexit deal?

Then the Brexit Deal will be undermined, even though Brexit will still loom ahead. In turn, the Brexit Deferral scenario would result in an election or a second referendum, or both. The No Brexit deal would remain the same – Article 50 would be revoked to sustain the status quo.

These scenarios are the direct result of Conservatives’ double miscalculation.

How to undermine the future, twice

If the UK’s neoliberal economic policies peaked in the Thatcher years, they were sustained by labor governments led by Tony Blair (1997-2007) and Gordon Brown (2007-2010). After the global crisis, Conservatives’ David Cameron won a mandate to govern in a coalition with Liberal Democrats.

Cameron championed fashionable social causes, including same-sex marriage and the UN target for aid spending, but cut down government’s large deficits through harsh austerity measures. In 2011, he became the first UK PM to “veto” the EU treaty, to bargain better membership terms with Brussels. Two years later, he pledged that, should his Conservatives win the parliamentary majority in the 2015 election, the government would negotiate more favorable terms for British membership of the EU, before a referendum.

As the gamble failed, Cameron was succeeded by Theresa May, a veteran “law and order” Tory. Ed Miliband resigned as Labor’s leader and was followed by “hard left’s” Jeremy Corbyn. Both parties sought to defuse Euroscepticism that the right-wing UK Independence Party (UKIP) and Nigel Farage had popularized.

In April 2017, May announced a snap general election, “to guarantee certainty and security for years ahead.” Like Cameron in 2016, she thought she could capitalize on her popularity to ensure political consolidation before talks with Brussels. And like Cameron, she miscalculated.

Conservatives remained the largest single party, but lost their majority, resulting in a minority government.

The economic fallout

As the risk of a no-deal seems to be increasing, markets are re-pricing the Brexit’s economic consequences. The likely effects include a moderate recession after the first quarter of 2019. Given the current indications, the British economy could suffer a loss of some 5.5% GDP over three years; while the UK’s direct loss of trade globally could amount to almost 2% of its GDP over 2020-2021.

Ironically, Cameron introduced his referendum hoping to sustain the success of City’s financial institutions. Now U.K. banks seem most vulnerable, thanks to no-deal scenarios. The long-term economic erosion could result in rising corporate insolvencies and weaker collateral values, which will weaken bank asset quality.

The Bank of England (BoE) has already indicated that a no-deal Brexit could result in a reversal of the BoEs current gradual normalization of interest rates. As volatility broadens, an easing or an extended pause is more likely than continued tightening. In turn, markets no longer expect an upcoming rates hike by the European Central Bank (ECB) and are speculating about a new ECB round of stimulus spending via cheap bank loans. While these policies will be deemed pragmatic, the simple reality is that they will be predicated on more debt, disinflation and depreciation over time.

During the 2008 global crisis, UK’s annual growth rate took a severe hit, but bounced back by the early 2010s. The annual growth rate has been around 1.9% to 2.1% since then. Yet, the story of the British pound shows a very different picture (Figure).

 

Figure British Pound and UK GDP Annual Growth Rate, 2008-2019

At the eve of the global crisis, one pound was still almost 2 U.S. dollars. Despite a plunge to 1.40 around 2009, the pound rose to almost 1.70 in the early 2010s; a level it maintained until 2015. When the U.S. Federal Reserve began its normalization and Cameron declared the Brexit referendum, the pound began to plunge, hitting the low of 1.20 in 2017 and remaining around 1.30 U.S. dollar.

Since 2008, the UK growth rate suggests business as usual, yet the British pound has fallen more than by a third in the same period.

And the Brexit erosion is only about to start.

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About the Author

Dr. Dan Steinbock is the founder of Difference Group and has served at the India, China and America Institute (US), Shanghai Institute for International Studies (China) and the EU Center (Singapore). For more, see http://www.differencegroup.net/

Venezuela – US Attack Imminent?

By Peter Koenig

Imagine, the President of the self-declared, exceptional and unique Superpower, Donald Trump of the United States of America, has the audacity to threaten the Venezuelan military with their lives, if they keep standing behind the democratically elected President Nicolás Maduro, and defending his Government. An open threat – yesterday, 18 February, at a Miami University, in a speech of ‘fire and fury’; this time against socialistVenezuela with which he wants to finish, like with all other socialist nations – especially those in his ‘backyard’. So, Cuba, Nicaragua and Bolivia are next in Trump’s crosshairs – and / or the crosshairs of his handlers. Don’t forget, he is a staged and convenient fool for the “Deep State” or the “Profound Government” – whatever you want to call this secret clan of the Chosen People that intends to rule the world.

I cannot help being amazed at what level of inhumanity we have arrived. Trump calls openly out to assassinate those who stand behind the legitimate President of Venezuela– and the rest of the world just looks on, watches and says NOTHING – zilch, zero – tolerates such atrocity coming from the mouth of a buffoon, aka the strongman of the self-proclaimed one and only superpower of the globe. – No, much worse – the so-called civilized west, the European Union, Canada, Australia, New Zealand, Japan – and some second- and third class puppet developing countries from South America, whose people are being starved while the elite admires and dances to the tune of the USA; united in what they call the “Group of Lima” (created in Lima in August 2017, to “safe” Venezuela).Members include, Argentina, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Honduras, Mexico, Panama, Paraguay and Peru.

In the meantime, Mexico, under her new leftwing President Andrés Manuel López Obrador, or simply, AMLO, abstains from any decision against Venezuela. To the contrary, Mexico is part of the “Montevideo Mechanism” that comprises Mexico, Uruguay, Bolivia and the member countries of CARICOM and seeks conflict resolution through dialogue with the opposition, for which the Maduro Government has been ready from the beginning of the conflict, but which has been boycotted by the opposition, as were the 20 May 2018 elections which the non-participating opposition now calls a fraud.

The Lima Group was initiated, as such unofficial clubs always are, to out-rule the official routes, by Washington. Similarly, Washington created “The Friends of Syria” – all with the objective to bring about “Regime Change”. In the case of Venezuela, to circumvent the official representation of the Americas – the OAS – Organization of American States. – Why? – Because the empire was unable to get the legitimate majority of the OAS members to side with them against Venezuela. So, they organized the Lima Group, a club of the willing, of the utmost corrupted vassals, who believe at the end of the days to receive some crumbs of ‘gracias’ from their northern master and tyrant – or the vassals’ leaders (sic) hope perhaps for a safe haven, a castle in Miami?

I often wonder whether such a dream of eventually, at the end of the day – the end of all days perhaps? – being saved by the surviving elite of the US of A in an untouched paradise, is also the dream of the European puppets, for example those that pull the EU’s strings – the Macrons, Merkels and Mays – and, of course, the rest of the EU, the puppets of the puppets? – What else could make them so miserably betray their people, hundreds of millions of people? – Do they have not an iota of morals left?

Coming back to Venezuela – the Buffoon calls for outright war against the Maduro regime – and to salvage the Venezuelan people, he sent US$ 20 million worth of “humanitarian aid” to Cucutá, border town in Colombia, which, of course, the Bolivarian army does not let enter Venezuela. There is no need for humanitarian aid, let alone for US$ 20 million worth, peanuts, as compared to what Venezuela buys on a daily basis in food and medical supplies.

The US southern military command, SOUTHCOM, stationed in Florida, is preparing an impressive military build-up.

Undeniably, the US warmongers – specially Bolton, Pompeo and Pence – are preparing for a hot war. Whether they will execute it, remains to be seen. But the Bolivarian military does not idly watch what may happen. They are ready to face any Yankee aggression. The US southern military command, SOUTHCOM, stationed in Florida, is preparing an impressive military build-up. The nuclear-powered aircraft carrier USS Abraham Lincoln, with 3,200 military personnel, 90 fighter planes and helicopters is positioned off the Florida coast, accompanied by the cruise missile carrier, USS Leyte Gulf, and the destroyers, USS Bainbridge, USS Gonzalez, USS Mason, and USS Nite. Joining the fleet is also the Spanish marine ship ESPS Mendez Nuñez.

The Spanish participation in this war game of criminal aggression is outrageous. The Spanish socialist leader, Pedro Sanchez (who certainly does not deserve the attribute of ‘socialist’), has also had the audacity requesting Nicolas Maduro to resign and call elections. Who is the (faltering) head of the fallen Spanish empire to meddle in another country’s internal affairs? – Maybe because the Spaniards can still not stomach having been defeated by Simón Bolívar, still feel superior and behave racist over the ‘brown’ Latinos, or maybe because he wants to please the masters in Washington – or simply because he needs popular support in his own country, as he is leading a minority, currently non-government and had to call snap elections for 28 April 2019?

There are, however, also Russia and China, solid, but rather quiet partners of Venezuela’s. Russia has made it clear, though, “Don’t mess with Venezuela”. Russia has two nuclear capable bombers, TU-160, deployed to the Venezuelan Caribbean island of la Orchila, where Moscow will establish, with the agreement of Venezuela, a permanent military base.

Both Russia and China have tens of billions worth of investments in Venezuela’s hydrocarbon industry. But besides the commercial interests, Russia and China vie for a multipolar world and want to guarantee the independence of Latin America, the sovereignty of the peoples of the Americas.

But besides the commercial interests, Russia and China vie for a multipolar world and want to guarantee the independence of Latin America, the sovereignty of the peoples of the Americas.

On 26 January 2019, the US dragged the “Case Venezuela” to the UN Security Council, in an attempt to condemn Venezuela and to trailblaze the path for a military invasion. However, while nine of the 15 UNSC members voted for a special meeting on Venezuela (Belgium, Dominican Republic, France, Germany, Kuwait, Peru, Poland, United Kingdom, United States), four voted against (China, Equatorial Guinea, Russian Federation, South Africa), with two abstentions (Côte d’Ivoire, Indonesia). The Russian Federation’s delegate countered that the Council has no role to play in a domestic matter that poses no threat to international peace and security. And right he is!

This UNSC event prompted a solidarity movement of more than 50 states, includingChina, Russia, Cuba, DPRK, Syria, Iran, Palestine, Nicaragua, and many more, supporting Venezuelan’s Foreign Minister Jorge Arreaza’s statement before the Security Council, declaring the illegality of unilateral coercive economic sanctions, and territorial invasions by the United States. As Carla Stea reports (https://www.globalresearch.ca/hands-off-venezuela-historic-stance-at-the-united-nations-against-us-imperialism/5668780), this new alliance “constitutes a formidable force which Western capitalism will antagonize at its own peril. This is a long overdue counterforce to Western domination of the United Nations, a domination based on money, on the large payments enabling the US and other capitalist powers to bribe, threaten and otherwise control the direction of the UN, and distort and destroy the independence, impartiality and integrity which the UN requires in order to maintain its legitimacy, and implement the sustained global peace and justice for which Franklin Delano Roosevelt created it.”

This new alignment of more than 50 states comprise more than half of the world’s population, to a large extent people who have been exploited, slaughtered and their countries raped and ravaged for hundreds of years by wester capitalist and colonialist powers. This alliance promises to become a solid new face in the otherwise western dominated and bought United Nations.

As to Venezuela’s fate, Trump has made vague indications of 23 February being the deadline for an assault on Venezuela. We will see whether this remains nothing but an intimidating insinuation, or whether it will be real. The latter case would be a disaster not only for Venezuela, and Latin America, but for the entire world. Will Trump’s handlers allow such blunder? – In any case, Venezuela’s armed forces are disposed to confront the empire’s nuclear aircraft carrier, missile launchers, countless fighter planes and the up to 5,000 US troops and mercenaries newly stationed in Colombia and ready to cross the border into Venezuela.  – And, not to forget, there are also Russia and China.

First published by the New Eastern Outlook – NEO

Image source: https://countercurrents.org

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About the Author

Peter Koenig is an economist and geopolitical analyst. He is also a water resources and environmental specialist. He worked for over 30 years with the World Bank and the World Health Organization around the world in the fields of environment and water. He lectures at universities in the US, Europe and South America. He writes regularly for Global Research; ICH; RT; Sputnik; PressTV; The 21st Century; TeleSUR; The Vineyard of The Saker Blog, the New Eastern Outlook (NEO); and other internet sites. He is the author of Implosion – An Economic Thriller about War, Environmental Destruction and Corporate Greed – fiction based on facts and on 30 years of World Bank experience around the globe. He is also a co-author of The World Order and Revolution! – Essays from the Resistance. Peter Koenig is a Research Associate of the Centre for Research on Globalization.

A Postcard from Malaysia

By Dan Steinbock

Not so long ago, Malaysia was set to lose years of economic progress. Today, following the re-imposition of economic discipline, the country is almost back on track.

A new era dawned in Malaysia in May 2018, when the opposition coalition led by Dr. Mahathir Mohamad and Anwar Ibrahim secured a simple majority in a historical election. When Mahathir will return to retirement, opposition leader Anwar is expected to replace him in about two years.

In the 2018 election, their coalition – Pakatan Harapan (PH) – won 113 seats against the ruling coalition (United Malays National Organization, UMNO and its allies) that had not lost an election since 1957.

Last year, Malaysia’s economy grew 4.7% year-on-year. Despite fiscal consolidation and challenging international conditions, the country is set to sustain its growth path in 2019. It is an extraordinary achievement after years of political turmoil.

The Najib regression

As the sixth Prime Minister of Malaysia, Najib Razak ruled the country from 2009 to 2018. His early tenure was marked by economic liberalization measures, including cuts to government subsidies, loosening of foreign investment restrictions, and reductions in preferential measures for ethnic Malays in business.

After the 2013 election, the neoliberal economic policies gave way to greater efforts at political consolidation, including the pursuit of critics on sedition charges, the imprisonment of opposition leader Anwar Ibrahim, the implementation of a consumption tax (GST), and the embarrassing scandal involving state investment firm 1Malaysia Development Berhad (1MDB).

That’s when Malaysia lost its economic discipline. The changing fortunes can be illustrated by the fluctuations of Malaysian ringgit. Between 2009 and 2013, US dollar was still about 3-3.60 MYR. As economic prospects weakened, so did the ringgit. Between 2013 and 2018, US dollar amounted to 4.40 MYR (Figure)

 

Figure Malaysian Ringgit, 2009-2019

Eventually, the massive 1MDB corruption debacle led to rallies calling for Najib’s resignation, spearheaded by the grassroots movement Bersih. Following his release in 2004, Anwar Ibrahim became the leading figure in the opposition and helped coalesce the opposition parties into the Pakatan Rakyat, which contested the 2008 and 2013 general elections.

These protests culminated in the Malaysian Citizens’ Declaration by Mahathir, the rise of Pakatan Harapan and NGOs to oust Najib. The 2018 election triumph paved the way to Mahathir to become the world’s oldest elected leader at 93. He said his coalition would not seek revenge but would “restore the rule of law”.

Recently, Anwar Ibrahim seconded those views. He said Malaysia “will not compromise” in its talks with Goldman Sachs over the 1MDB corruption scandal, and the bank “must bear responsibility.” The nation has a responsibility to uncover any crimes the investment bank may have committed.

 

Fiscal consolidation

Between 1974 and 2004, Mahathir’s Malaysia experienced a period of rapid modernization and economic growth, as his government initiated a series of bold infrastructure projects. During his reign, Malaysia was transformed into an ASEAN tiger. Politically, Mahathir was dominant, winning five consecutive general elections and fending off a series of rivals for the leadership of UMNO.

The final test came with the aftermath of the Asian financial crisis in 1998. While much of Asia succumbed to IMF-imposed austerity, Malaysia did not. Instead, Mahathir pursued a heterodox model of economic policies, including currency and capital controls, while deterring George Soros’s speculative efforts to derail the economy.

In the West, Mahathir was demonized as an authoritarian dictator who was intent on undermining his own economy. In reality, his mix of policies ultimately helped Malaysia endure a shallower GDP loss than crisis-afflicted Indonesia, South Korea, and Thailand.

Now Mahathir’s objective is fiscal consolidation to surpass the policy mistakes of the Najib years, while stabilizing a more robust growth path. It is a challenging task that must be implemented amid America’s new protectionism and U.S. tariff wars.

Moreover, Mahathir has had to suspend several multibillion-dollar projects, including China-backed initiatives, in a bid to target Malaysia’s estimated $250 billion national debt and other liabilities.

Early signs are promising. In 2019, economic growth is likely to be around 4.5%; in 2020, 4.2%. Private consumption is the key contributor as consumers have loosened their purse strings amid an improving labor market and lower consumption tax.

However, investment growth is lingering as several high-profile projects have been put on the back-burner following the new government’s fiscal rationalization.

 

Preparing for 2020 contingencies

As the new government’s first budget suggests, the focus is on institutional reforms, improving the standards of living, particularly for the lower income groups, as well as encouraging entrepreneurship. The fiscal deficit is projected to narrow to 3.0% of GDP by 2020; and to 2.0% in the medium-term.

It is a typical Mahathir mix: people first, good governance, self-sufficiency, but openness to international trade and investment.

Yet, there are two key risks to the fiscal target forecast. On the one hand, growth could be less than anticipated, thanks to the challenging external environment. On the other hand, revenue flows could prove more volatile than expected, given the higher dependence on oil-related revenues, which account for almost a third of total.

While the government’s expansionary efforts are limited by the ongoing fiscal consolidation, Malaysia can still rely on more accommodative monetary policy. In 2019, monetary policy is expected to be stable. As international headwinds are likely to escalate in 2020, the central bank could opt for a more dovish stance.

Until recently, neoliberal policies have often been portrayed as “natural” for post-industrializing Asia. In reality, such policies tend to boost oligarchs and shun the rule of law. Led by Dr. Mahathir Mohamad and Anwar Ibrahim, Malaysia’s political reset shows that neoliberal trajectory and corruption are not an inevitable destiny.

Malaysians deserve a better, sovereign future.

Feature image source: https://edition.cnn.com

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About the Author

Dr. Dan Steinbock is the founder of Difference Group and has served at the India, China and America Institute (US), Shanghai Institute for International Studies (China) and the EU Center (Singapore). For more, see http://www.differencegroup.net/

Stay Ahead of the Next Disruptive Change Through Research-Based Excellence

As one of the Top 15 business schools in Europe, EDHEC Business School – operating from Paris, Nice, Lille, London and Singapore, has spelled out its educational credo as “professional development through research-based excellence”, and the EDHEC PhD in Finance is the culmination of this ambition.

Today we sat down with EDHEC PhD in Finance Programme Director, Prof. Abraham Lioui, who talked about the unique PhD programme they offer, and the culture of excellence and brand signature that EDHEC adheres to that lets it stay at the forefront of top quality academic research and sets it apart from other business schools i.e. to Make an Impact.

 

Good day, Dr. Lioui! Thank you for taking the time to talk to us today. To start, we would like to know what a day looks like for an academic leader like you?

Fortunately, given the three hats I have, it is very rare that one day resembles the day before or the day after. As the Director of the PhD programme, two activities are particularly demanding but not less enriching: staffing of the core and elective courses as well as performing a quality control of the research output of our students. To stay at the forefront of top quality academic research, we need to adapt permanently the curriculum of the programme to guarantee good training for our students whilst keeping them up to date with the latest developments. To reach this goal, I spend a large portion of my day scanning newly published papers in academic journals as well as working papers platforms. Different from a standard academic degree, thesis submissions in this programme happen on a continuous basis. While it is time demanding to provide useful feedback, it is not less enriching since each thesis is focusing on a different subject. All in all, my activities during the day are diversified but I rarely end a day feeling I wasted time!

 

“It is the only PhD programme in the world targeting finance professionals/executives. The PhD programme is the instrument EDHEC has put in place to expose professionals to the most recent academic discoveries but not less to sharpen their critical thinking.”

EDHEC Business School is known for its culture of excellence and brand signature: Make an Impact. Can you tell us more about the attributes/features that set EDHEC apart from other business schools?

The PhD in Finance Programme is an excellent marker of this motto as well as of the unicity of EDHEC. It is the only PhD programme in the world targeting finance professionals/executives. EDHEC does believe that academic advancement may lead to disruptive innovations as well as higher efficiency of markets and institutions. The PhD programme is the instrument EDHEC put in place to expose professionals to the most recent academic discoveries but not less to sharpen their critical thinking. We do believe that professionals are not less capable than young Master graduates of coming up with original ideas and executing them according to the highest academic standards.

 

What excites you most about the PhD in Finance Programme? How do you cultivate a unique design for its curriculum?

The most exciting part of my job is the intellectual challenge. Each year, between 5 and 10 students enter their dissertation stage. To guarantee that an idea is original, one has to master extremely well the literature and obviously be creative. Since I centralise all the research proposals, I spend a lot of time with our students in identifying potentially important and interesting gaps in the literature. To stay original, our system of electives given by top scholars from all over the world works nicely in exposing our students to the most recent literature but not less learning from people with rich experiences and amongst the best experts in their respective field.

 

With the competitive nature of the financial industry, especially in times of intense innovation and globalisation, how do you guarantee the competitiveness of your students and develop them to be the key players in tomorrow’s financial industry?

Innovation is probably the ultimate competitive advantage a firm can think of. The knowledge we pass onto our students is all tailored to have an impact, preferably a quick and strong one, on the industry. Our programme aims to improve the human capital of our students by training them but not less teaching them how to train themselves through constant critical thinking.

 

“The knowledge we pass onto our students is all tailored to have an impact, preferably a quick and strong one, on the industry. Our programme aims to improve the human capital of our students by training them but not less teaching them how to train themselves through constant critical thinking.”

What’s the most challenging when addressing the needs of your participants? How do you meet their expectations and have them better prepared?

There is a permanent discussion with our students during their studies and when they become alumni. We conduct regular surveys to collect feedback on the content of the programme and the potential gaps we need to fill. Following one of these surveys, we created three MOOCS on programming languages for finance research; they train our participants on fields which are not usually covered in a PhD programme. The most challenging for us is the legitimate request of our candidates to see instantaneously the link between what we teach them and what they do on a day to day basis in their job.

 

As the world advances, moving up the value chain becomes more challenging. What do you think are the important qualities a finance professional must have in order to drive finance functions successfully into the future?

A manager in any industry faces a degree of immediacy in her decision-making. The financial industry is no exception. The challenge thus is to manage the business as an ongoing one while having a clear view of where the business should go for the medium long term. Understanding the trends and the threats is crucial, and equally important is the ability to operationalise within complex organisations the co-existence of short-term and long-term acting forces.

 

With your research interest focusing on Portfolio and Asset Pricing Theory, Derivatives and Risk Management, can you tell us the most significant development you’ve witnessed thus far in the  investment/asset management industry? 

In the last decade, the widespread discredit of active management is probably the most striking development in the financial industry. The number of index providers exploded together with the development of the ETF industry. After years of warning from the academia that mutual funds for example did not deliver alphas, retail investors are now more prone to passive investing than ever before.

 

“A manager in any industry faces a degree of immediacy in her decision-making. The financial industry is no exception. Understanding the trends and the threats is crucial, and equally important is the ability to operationalise within complex organisations the co-existence of short-term and long-term acting forces.”

There has been much speculation recently in the press about the impending global crash in 2020 and the inevitable fallout it will cause. What’s your view about the current state of the global economy in a few sentences?

The global economy is dominated by three big players; the U.S., China and Russia. Political risk originating from the international relations is huge and financial markets, which are forward looking by nature, are concerned with the potential impact it has on the real economy (growth, unemployment, etc). Europe could have played the role of an island of peace. Unfortunately, the Brexit and election outcome in Italy have just amplified the worldwide political uncertainty. Interest rates increase by Central Banks is a clear signal that they prepare for the worst. Given the zero lower bound we have reached for interest rates, they will be left with no other instrument than the balance sheet in case of a crash. Given the current huge total of balance sheet, Central Banks have almost no margin. All in all, markets hate uncertainty and they let politicians know it!

 

People in the upper echelons naturally have a lot on their plate. How do you make sure that you maintain a healthy lifestyle, both in your professional and personal life? What are your favourite routines?

I work rarely during weekends and in the evening when I go back home. My workday is fully dedicated to my job but when I go back home I spend all my time with my family. Same in the weekend. Fortunately, we also have generous holidays in France in general and at EDHEC in particular. I do take breaks from time to time.

 

What makes a job well done for you? When do you feel happiest and accomplished?

Ultimately when I succeeded in what motivated me in the first place to do this job: efficient transfer of knowledge to my students! I feel happy when I receive a mail, a message on LinkedIn, or by any other means from former students describing how what they learned in class has been useful for their interview, current work, etc.

 

“Keep an eye on what has been published by academic scholars. They often offer a perspective that is very hard to have when overwhelmed by the routine. One needs to prepare for the next disruptive change.”

Lastly, any other messages you wish to share with our readers, particularly to those who aspire to establish a career in the financial industry?

Yes, definitely: keep an eye on what is published by academic scholars. They often offer a perspective that is very hard to have when overwhelmed by the routine. Firms are not prone to deep debates and permanent questioning of their practices. This is obviously understandable but one needs to prepare for the next disruptive change.

Thank you very much, Dr. Lioui. A pleasure speaking with you.

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About the Interviewee

Abraham Lioui, PhD is a Professor of Finance and the Head of Data Science, Economics and Finance Faculty, as well as the Director of the PhD in Finance Programme at EDHEC Business School, France. He has received various teaching awards and has supervised over 100 doctoral and master students. His main research interests include Portfolio theory and dynamic asset allocation, Pricing and hedging of derivatives, Asset pricing theory, and Monetary policy and asset pricing.

On the Delicate Art to Balance Trust and Control to Promote Performance

By David de Cremer and Jakob Stollberger

In every relationship, trust plays a valuable role to ensure that both ends are not met with infidelity and injustice. Successful companies for that matter compel their employees to apply trust and control on a proportionate rate to deliver just that.

Trust matters to organisations in important ways. The presence of trust has been demonstrated to affect a wide range of variables at both the individual and organisational level, which all combined promote the overall effective functioning of any organisation (Kramer, 1999). For example, when employees trust each other they will report higher job satisfaction, display more voluntarily citizenship behaviours, exchange information more quickly and frequently, and experience greater well-being and happiness at the work place. Organisations in turn benefit from such highly motivated and effective employees, as companies that are effective in fostering a trusting work culture perform better, create more revenue and ultimately lead their industry by being innovative (Colquitt, Scott, & LePine, 2007; Dirks & Ferrin, 2002). If trust has so many benefits, why is it then that so few companies really succeed in establishing a trust culture?

As we all know, organisations are complex hierarchical structures that create frequently conflicts of interests and feelings of fear to be exploited. Trust is commonly defined as people’s willingness to be vulnerable to the actions of others, because they consider the intentions of the other to be honest and caring about interests of others (Rousseau et al., 1998). Many organisations will therefore try to control the complexity of their work setting for trust to blossom. But it is exactly in this effort to try to control the self-interest of employees and coordinate efforts in more transparent and accountable ways that trust may be more difficult to achieve than ever. Why?

It is no secret that people do not like to work in uncertain business settings. The human desire to reduce uncertainty is known to be pervasive and the recent decade of corporate failures and crises has translated this desire into a cry for increased transparency across different industries and work cultures. In most cases, fear dominates and as a result creates work places where one tries to install a sense of control among its employees by employing monitoring systems. Although companies may engage in these practices, few of them are actually able to install a culture of trust where employees are not afraid to be vulnerable to each other. From a rational point of view this may make little sense. If decision-making is made transparent and control systems exist that can punish bad behaviour (and if needed reward good behaviour) then the work place should be considered as a safe environment and voluntarily cooperation should prosper. Research however shows that when control systems are implemented, employees may indeed cooperate but not because they intrinsically trust the others but more because of an induced extrinsic type of trust. This extrinsic type of trust is also referred to as the trust people have in the control system itself and the consequences it reveals, but it does not include trusting the intrinsic intentions of the others. Specifically, employees will cooperate with others and trust them to deliver because they know that else they will be punished by the control system. This kind of trust is installed when a control system is implemented, but will also disappear quickly once this system is removed. Once a control system is removed, employees will not intrinsically trust others, because the reason why they trusted others initially is not in place anymore (Mulder, Van Dijk, De Cremer, & Wilke, 2006). Indeed, if the system is gone there is no reason anymore to trust others.

The presence of trust has been demonstrated to affect a wide range of variables at both the individual and organisational level.

Another effect that emerges in the presence of a control system is that the increased transparency and accountability makes people feel uncomfortable. We know from much research in psychology and behavioral economics that people are not 100% rational beings. Rather than optimising their behavioural strategies and decisions based on the knowledge that they have, human emotions can disrupt logic and systematic processing of data in ways that may lead them to behave in ways that cannot be predicted by rational models. This is also the case when it comes down to working in transparent work settings. If transparency is established then everyone knows what and how everything is happening. From a rational point of view, one could then say that such an optimal situation of knowledge gathering should motivate employees more to contribute their ideas, knowledge and efforts to the organisation. However, when asked, most people will say that they do not like or even simply refuse to work in a completely transparent setting. So, rather than seeing employees become more loyal and motivated to contribute to the company, we notice that enhanced transparency actually leads employees to take a distance from the company as they feel more stressed and uncomfortable in dealing with such controlled work environment.

What is the result of companies focussing primarily on control strategies to enhance their trust beliefs about their employees? By promoting transparency on the work floor and as such being able to monitor the decisions and actions taken by the work force, does not lead to more trustworhy behaviours within the company but actually to less trust when employees work together. Does this indicate that monitoring systems are always bad news when it comes down to promoting a trust climate within the company? Not necessarily. As we noted earlier, when employees know that their actions are being monitored (as transparency is high), they will be confident that they can work together with others as exploitative behavior is very likely to be punished by the company (via its control systems). However, this extrinsic type of trust is not sufficient to build trust in a sustainable manner. The primary reason for this is that monitoring and control systems in organisations are usually employed in ways that reinforce the perception among employees that the control system is an end in itself and not a means towards an end. What does this mean? Too often companies do not explain well why they employ a control system and in what way and for what purpose they will use the data gathered via a transparent system. It is especially the lack of explaining the purpose behind the control system that creates an ambiguous situation about the reason for the control system and hence the real intentions of the company. It is human nature that in ambiguous situations, people are more inclined to interpret the situation in more negative rather than positive intentions. As such, employees will not give the company using a control system the benefit of the doubt and be more likely to conclude that the control system exists because the organisation does not trust its employees and therefore control is the ultimate purpose or an end in itself.

If trust however is so important to the performance of organisations, is having oversight over one’s workforce and being in control of important decisions then always a bad thing? Of course not. Control and trust can go together, but it is important to know that trust and control are not the same thing. Trust is good and control can be good, but only if used wisely. This implies understanding only control will not reveal trust and trust on its own will not promote optimal performance. To achieve this kind of balance requires a company culture that actively tries to promote insights into human nature and motivation and integrates those insights in the efforts of the organisation to make more transparent and monitoring systems acceptable to employees without damaging their intrinsic motivation to establish trusting relationship with the others and the organisation as a whole.

Trust is commonly defined as people’s willingness to be vulnerable to the actions of others, because they consider the intentions of the other to be honest and caring about interests of others

A company that is led by a leader who emphasises the need to continuously learn more about human motivation to improve management efficiency in building work cultures that create innovation and a sustainable level of competitiveness is Huawei. Huawei is founded by Ren Zhengfei in 1987 in Shenzhen, China. In the meantime, the company has developed into one of the world leading telecom companies. The founder is someone who is fascinated by thinking about what drives humans and how these insights can be used to benefit Huawei in its aim to provide the best service and products to customers at a global level (Tao, De Cremer, & Chunbo, 2017). He does not shy away to use these insights to experiment with different incentive methods and leadership training sessions. Throughout these phases of experimentation, Ren Zhengfei has concluded that trust and control need to be aligned in terms of communication (what is the meaning and interpretation of the control system in place), so that both can be present at the same time.

Being in balance – in his view – thus means that control cannot be too present. As he noted last year when discussing the new Human Resources (HR) practices in Huawei: “As the company continues to grow, we need to improve our performance assessment methods. Need to harvest more crops within the boundaries of internal and external compliance. To achieve this, we need to strip out process checkpoints that are set because of lack of trust and we need to ask for fewer reports. The role of HQ is to provide support and service.” This idea rests on the assumption that too many checkpoints make that employees will feel that their worth of being an employee at Huawei is only considered within a metric framework in which humanity is slowly taken out of the equation.

Does this mean that Ren Zhengfei does not believe at all in the concept of control as part of the management system? Not at all. He very much does so, but in more sophisticated ways. His favorite way to reflect the need to pursue balance in any management activity and thus also in the strategy to build a trusting work climate is the fire place. In the fire place, flames represent the passion and energy employees bring with them in the company. According to Ren Zhengfei it is the ability of any good leader to unleash this human capital by relying and trusting on the motivations and ambitions of employees to do well. At the same time however, it is necessary that the flames are also contained and therefore a fire place is limited as well. The image of a restricting fire place suggests that leadership can be seen as delegating and giving freedom to employees which enhances employees’ experience of feeling trusted, but at the same time develop a control system that is guiding and prevents escalations that will negatively disrupt the work climate.

How does Huawei approach the establishment of such a balance in their daily management practices? In this process, the company considers three management pillars as important to building trust in a work setting where control systems are being used:

1. Give responsibility to employees

The old Chinese management style influenced by Confucian values, included a strong emphasis on respect for the existing hierarchy. The manager at the top made the decisions and in line with the idea that the older and more powerful manager also guides the others lower on the hierarchy as a father figure, he acted in a very hands-on way. However, in both the East and the West the idea has been embraced that a higher position on the hierarchical ladder cannot go together with a kind of micro-management style. Instead, the higher you are in the hierarchy the more you should delegate because this signals to employees that you trust them and willing to give them responsibility over the tasks and projects allocated. Or as Ren Zhengfei puts it: “We should set rules, and draw clear boundaries, but also leaving enough space in between the lines. That way we delegate more authority to our field teams.”

In addition, an increased sense of responsibility will also go together with a sense of ownership where employees will consider the task they are responsible for truly as their own. In this specific case, Ren Zhengfei very much emphasises the learning process involved in the act of taking responsibility. In his words: “Where the business happens, you have to let business managers take responsibility. That is the only way they will learn about their responsibility.” Such actions have strong motivational power and can thus be coordinated by incorporating insights from human nature into your management system. In Huawei this idea of making employees responsible for the tasks they do in order to encourage ownership has been translated into the saying that within Huawei any talented employee can become an entrepreneur within the family of Huawei.

2. Fairness of the outcomes earned

Huawei as an organisation is run with the belief that innovation is best achieved by creating a trusting work climate to satisfy the entrepreneurial motives of the employees. At the same time, the company aims to establish the benefits of such a trust climate within the context of a guided management system. This dual approach means that this type of balance between trust and control can only be sustained if the resulting outcomes and achievements are regarded as fair by the employees.

Building a fair work culture is however not an easy thing to do in the technology industry. In fact, it has been suggested that work cultures in this specific type of industry is less motivated to build inclusive relationships where the job and its outcomes are experienced as fair (De Cremer, 2018). Corroborating this view, a recent survey by the Kapor Center for Social Impact and Harris Poll showed that a significant number of employees working in technology companies raised the issues of unfair practices as one of the major sources of stress and low job satisfaction (The Guardian, 2017). Ren Zhengfei has tried to promote feelings of fairness in several ways.

When control systems are implemented, employees may indeed cooperate but not because they intrinsically trust the others but more because of an induced extrinsic type of trust.

First of all, by enhancing the sense of entrepreneurship among Huawei employees (especially the knowledge workers), Ren Zhengfei aims to speak to the sense of ownership of these employees. Specifically, Huawei adopts the assumption that when the most creative employees are given freedom and responsibility to pursue their projects like entrepreneurs, that the outcomes they will receive will also be experienced as more fair. Indeed it is the belief of Huawei that the rewards, salaries and bonuses employees receive as a function of how successful they are as an entrepreneur within the company make that these outcomes are perceived as more legitimate and hence fairer. To achieve this, Huawei has designed a system in which the most qualified employees are provided equal access to a pool of project opportunities that could earn them higher salaries, bonuses and promotions. Of course, the distribution of outcomes and rewards will not be equally, as it will depend on the performances of those employees, which corresponds with the notion of equity. The harder you work the more you can earn. It is important to note here that working overtime is only rewarded extra if the work addresses directly the needs of their customers. Projects in overtime that do not reveal direct positive consequences for the welfare of the customers are not paid out extra (De Cremer & Tao, 2015a).

The importance of equity in keeping employees motivated and willing to perceive the organisation as fair was demonstrated by the decision of Dan Price, CEO and majority owner of Gravity Payments, to increase the minimum salary for all his employees to $70 000. Initially everyone at the company was a big fan of this enlightened capitalism. Nevertheless after a while, some of the most skilled employees left the company as they did not consider this policy to be fair – they resented the fact that the highest raises seemed go to the ones who showed the least skills. Huawei is very cautious to avoid such a Dan Price scenario and therefore provides a strong sense of ownership among those employees acting like entrepreneurs, so they also feel (at least partly) responsible for what they earn.

Second, Ren Zhengfei perceives Huawei as an organisation wealth can be shared with everyone who contributes significantly to the existence and growth of the company. It is an implicit assumption that Huawei belongs to everyone in the company and that therefore Ren Zhengfei expects everyone to act like bosses themselves. If this can be achieved then Huawei employees will maintain a culture of great entrepreneurial spirit, allowing the company to stay motivated to learn and innovate where possible. An interesting consequence is that by building Huawei as an employee-owned company (Ren Zhengfei owns 1.4% of its shares – and he is currently thinking about reducing this percentage even further – whereas the rest is owned by the Chinese employees (not foreign employees!)) a consequence is clearly that employees will experience even a stronger sense of ownership. The result of such personal ownership management strategy is that employees will feel responsible by making them see their own efforts as the primary input into the rewards they receive and therefore are likely to perceive almost any reward as a fair one. This way of working also makes that existing gaps between what employees earn are more easily acceptable. Gaps that exist in terms of wealth distribution are often a source of fairness concerns. If this gap becomes too big, people become less motivated and will search for ways to beat and cheat the system. As noted earlier, the fact that the relationship between feeling responsible for their own salary (to some extent) and the knowledge that the founder shares most of the wealth generated by the company among its employees will enhance a feeling of fairness based on input-output logic.

3. Leadership

Work cultures where too many control systems are in place leave no room for leadership to have any influence. This is an important fact to take into account because one of the main key factors of leadership is that leaders are able to influence others, preferably in ways that motivates and inspires them to contribute to the welfare and interests of the collective. Huawei has always been keen on having a clear way of leading (see De Cremer & Tian, 2015b) so, this is another reason why the company has shied away from being too controlling and leaving more room to delegate and hence allow trust to be formed. In fact a recent trend in Huawei is that managers in Huawei need to be more able to take the perspectives of the ones they lead (to understand their needs and as such respond to those needs) and be compassionate (to deal with failures and learn from it; De Cremer & Tian, 2017).

Leadership can be seen as delegating and giving freedom to employees which enhances employees’ experience of feeling trusted, but at the same time develop a control system that is guiding and prevents escalations that will negatively disrupt the work climate

Is the focus on these kind of leadership styles a simple fat where Huawei joins the massess to deliver what the public wants? Knowing Ren Zhengfei’s passion to rely on science and using experimental approaches towards working with human needs and emotions (De Cremer & Tian, 2016), the choice for this leadership style is evidence-based. Indeed research shows that being willing to be compassionate towards the concerns of others and hence taking their perspective releases the neurochemical oxytocin, makes that more trusting relationships are formed. Specifically, neuroimaging research shows that compassionate leaders motivate employees to trust their bosses (Boyatzis, Passarelli, Koenig, Lowe, Mathew, Stoller, & Phillips, 2012) and increase loyalty among their employees (Qiu, Qualls, W., Bohlmann, & Rupp, 2009). One way to increase perspective towards the working conditions of employees is to ensure that the company not only looks at what you eventually achieve but also evaluates how you arrived at the outcome. In the words of Ren Zhengfei when he talked about the change in the Human Resource assessment system at Huawei: “HR is going to transition to a trust-based assessment system. We will look at how many crops have been harvested, but also how right the soil has become.” How many crops harvested refers to what you achieved and will account for 70% of your assessment, whereas the right soil will refer to how you work and in what kind of work culture and this will account for 30%. With respect to the latter criteria (the “how”), it is important to note that Ren Zhengfei does not simply focus on whether the employee complies with ethical standards and practices, because that would still be a controlled way of compliance. No, for that 30% he looks at the supervisors and those in leadership positions to ensure that they create the right conditions for employees to do well in the right manner. As such, leadership skills and being compassionate and supportive towards your subordinates is a crucial condition to maintain the delicate balance between trust and control.

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About the Authors

David De Cremer is provost chair, professor of management and organisation at National University of Singapore (NUS) Business School, a fellow at the University of Cambridge, and a fellow at the Hoover Institution at Stanford University. Before moving to NUS he was the KPMG endowed professor in management studies at Cambridge Judge Business School. He has published over more than 250 academic articles and book chapters and is the author of the book Pro-active Leader: How to overcome procrastination and be a bold decision-maker and and co-author of “Huawei: Leadership, culture and connectivity.”

 Jakob Stollberger is assistant professor at Aston Business School, Aston University, UK. Jakob’s research examines the interplay between leadership, emotions, and innovation at work. He also works as a practitioner consulting businesses in these areas. Prior to joining Aston Business School, Jakob held research positions at Judge Business School, University of Cambridge and the University of Birmingham.

 

How Can Loans Help Those With a Bad Credit History

Document bad credit with sign we can help.

Having a bad credit history can impact significantly on your lifestyle. It means that you will be unlikely to be accepted for a loan and if you are, you will end up paying large amounts of interest as providers will consider that you are a bad risk. There are companies who specialise in loans for those with bad credit but charges are high.

A lender such as Citrus Loans wants to see that you can maintain regular payments on an amount of credit and that there is a history of you doing that. If you have defaulted in the past or if you have been taken to court, it is important that you work to repair your credit history.

It is important when taking out a loan that you consider your budget and consider any changes that are likely over the course of the loan.

This can be done by taking out a loan. Even at a high rate of interest, it would be worth taking out a small loan and paying it back over a short period of time. That will show on your credit file and encourage the lenders to consider you as less of a ‘bad risk’. It is not wise to take out a large loan at this stage as payments are likely to be high and you would not want to default again. It is important when taking out a loan that you consider your budget and consider any changes that are likely over the course of the loan. Is your job likely to change or are your outgoings likely to increase? Budgeting is important as you do not wish to default again.

If you are a member of a Credit Union, it may be worth approaching them as they tend to offer a more favourable rate of interest on their loans or if you are in no hurry, join a Credit Union and take out a loan with them at a later stage.

Credit Cards are often easy to come by and people use a credit card to help with their credit score. It works in much the same way as a loan in that you are effectively borrowing money and then paying it back so if you were to use your credit card during the month and then pay it back at the end of the month, you are again building evidence of your ability to handle credit. It is always advisable to set up a direct debit with your bank which will allow payment of the card in full every month as it can be difficult to remember if you have to do it manually.

A loan of any type, paid according to the terms agreed can reassure lenders that you are a risk worth taking.

In summary, a loan of any type, paid according to the terms agreed can reassure lenders that you are a risk worth taking. By taking out a loan, you are offering that evidence. It may take more than one loan which is why credit cards can also be a useful tool. Remember though, taking out too much credit can have an adverse effect as the lender assumes that you will not be able to afford more. Every time you apply for a loan, the lender will run a credit check and too many credit checks can be problematic and reduce your overall credit score so guard against applying to too many lenders at the one time.

What You Must Know Before Playing a Free Spins No Deposit Casino Game

Free Spins bouns, slot machine games banner, gambling casino games, slot machine illustration with text Free Spins, vector illustration

Online casinos are hugely popular these days, providing a convenient, low stress and fun way to play your favorite slots or table games. Many online casinos offer a free play/practice option on certain titles for those who like to try things out, but of course these never offer any chance of winning actual cash. That’s where the sites which offer free spins like no deposit online baccarat which have the chance of being converted into real cash, without you needing to make the [usually compulsory] upfront cash deposit, come into their own.

These are not always as easy to find as they used to be, but the chance to get something for nothing is always worth hunting down. Of course, there are a few restrictions, so if you are interested in playing a no wager free spins casino game take a look at the following things you should know before you get started.

Not all online casinos have the same rules and restrictions in place, but what is mentioned here is pretty typical. We recommend you read the terms and conditions of a particular casino before joining.

 

Why free spins-no deposit offers are made

Ultimately these offers are all about capturing new members, and with so much competition around offering something free with no upfront cash commitment is attractive and eye-catching.

 

You must be completely new to the site

Even if you know for sure you have never tried to register with a particular online casino you could still find your application rejected due to it being considered a dupe account. Before you complain take a moment to check if you have accidentally broken the rules. For example – being a member of another online casino in the same corporate group would make you ineligible for an offer like this, as would someone else in your household being registered already. Neither of these things are obvious, but both disqualify you from joining.

 

You will be checked out

Online casinos work hard to make sure players who are ineligible to gamble due to age are excluded, so applicants will be asked to verify their age, usually before the first withdrawal is approved. Players should be of legal age to wager in the country they are a resident of, and everyone will need to complete a registration form which includes sharing their mobile telephone number.

 

Free spin options

Some sites allow players to choose which slots they play, others limit this to a couple of particular games. Watch out for time limits too, as most free spin rewards have quite a short shelf life once awarded.

 

The long road to cashing out

Rare sites allow layers to withdraw winnings made from free spins immediately and without penalty, but most impose various rules. The most common thing to come across concerns ‘wagering’ – which could mean anything won must be wagered through the system say 30 times before it can be taken out. Wagers on slots often count as 100% value, but other games may count for less, or even nothing.

 

Free spins with no deposit are fun, but be sure you understand how they work on a site to get the most out of them.

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