World Excellence International Edition N°30 | Oct-Dec by Le Fonti S.r.l.

WORLD EXCELLENCE www.worldexcellence.com

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International Helmet Company

PLANNING OUR FUTURE PROJECTS The global sports protective equipment market is estimated to expand at a significant growth rate between 2018 and 2026. Meluccio Piricone explains how the company plans on meeting the standards

Meluccio Piricone CEO of International Helmet Company

WORLD AFFAIRS

ECONOMICS

SUSTAINABILITY

thE lost lEssons of World War i

Will italy sinK EuropE?

fossil fuEl doublEspEaK

Is has been 100 years since World War I ended, and the centenary was commemorated with great pomp

Despite political turmoil and emerging risks at the global level, the eurozone had an economic growth

Since the Paris climate agreement was signed in 2015, many policymakers have fallen for the gas and oil rhetoric

LONDON | OCTOBER 26th, 2018

contents

World affairs

oVErViEW

The End of Scandinavian Non-Alignment

Living With Climate Change

The Lost Lessons of World War I

Why Strenghtening Land Rights Strenghtens Development

The British History of Brexit

Fossil-Fuel Doublespeak

The Sino-American Cold War’s Collateral Damage

The Green Lobby’s Misdirected Anger

Page 6

What’s Happening NOW?

spotlight

Racing Towards a Bright Future

World Excellence The #1 Magazine for CEOs

International Subscription

Publisher/Director

Art Director

Guido Giommi

Nick Lowen

Editors, America:

Graphic Design

Rosalyn Williams

Giulia Andreoli

Editor, Asia:

Editorial Offices:

Eric Davide

Editors:

Alessia Annicchiarico, Claudia Chiari, Alessia Liparoti, Alessia Rosa, Simona Vantaggiato

sustainability

World Excellence International Edition - October / December 2018

Kate Rios

London, Milan, New York, Dubai and Hong Kong

innoVation & tEChnology

businEss & finanCE

EConoMiCs

Education in the Age of Automation

The Dollar and It’s Discontents

Will Italy Sink Europe

The Digital Divide is Impeding Development

The High Cost of High Finance

One Hundred Years of Ineptitude

Digital Disruption’s Silver Lining

Volume 30

Head Office

Copyright © 2018 All rights reserved. Reproduction in whole or in part is prohibited without the prior written consent of World Excellence. Information is based solely on sources believed to be reliable, though the accuracy has not been verified by World Excellence. Neither the information in World Excellence nor the opinions expressed should be taken as a solicitation for investment. World Excellence accepts no liability for actions based on the information herein.

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PAGE 67 Le Fonti Awards

London October 26th, 2018

October / December 2018 - World Excellence International Edition

OVERVIEW

WHAT’S HAPPENING NOW? - WEIE Market Review -

UNITED STATES OF AMERICA The privileges

The dollar

The crisis

The US gains three important economic benefits from the dollar’s key currency role. The first is the ability to borrow abroad in dollars. When a government borrows in a foreign currency, it can go bankrupt; that is not the case when it borrows in its own currency. More generally, the dollar’s international role enables the US Treasury to borrow with greater liquidity and lower interest rates than it otherwise could. A second advantage lies in the business of banking: The US, and more precisely Wall Street, reaps significant income from selling banking services to the rest of the world. A third advantage lies in regulatory control: The US either directly manages or co-manages the world’s most important settlements systems, giving it an important way to monitor and limit the flow of funds related to terrorism, narco-trafficking, illegal weapons sales, tax evasion, and other illicit activities.

The dollar leads all other currencies in supplying the functions of money for international transactions. It is the most important unit of account (or unit of invoicing) for international trade. It is the main medium of exchange for settling international transactions. It is the principal store of value for the world’s central banks. The Federal Reserve acts as the world’s lender of last resort, as in the 2008 financial panic, though we should recognize too that the Fed’s blunders helped to provoke the 2008 crisis. And the dollar is the key funding currency, being the major denomination for overseas borrowing by businesses and governments.

Back in 1965, Valéry Giscard d’Estaing, then France’s Minister of Finance, famously called the benefits that the United States reaped from the dollar’s role as the world’s main reserve currency an “exorbitant privilege.” The benefits are diminishing with the rise of the euro and China’s renminbi as competing reserve currencies. And now US President Donald Trump’s misguided trade wars and antiIran sanctions will accelerate the move away from the dollar.

World Excellence International Edition - October / December 2018

overview

The deepening relationship between Japan and India serves the goal of forestalling the emergence of a China-centric Asia. If they can leverage their relationship to generate progress toward broader cooperation among the region’s democracies, the vision of a free and open IndoPacific may be achievable.

INDIA

JAPAN

Abe and his Indian counterpart, Narendra Modi, recently held a summit that opened the way for a military logistics pact that would give each country’s armed forces access to the other’s bases. Beyond instituting a joint “two plus two” dialogue among the countries’ foreign and defense ministers, Abe and Modi agreed to deepen naval and maritime-security cooperation and collaborate on projects in third countries, including Myanmar, Bangladesh, and Sri Lanka, to enhance strategic connectivity in the Indo-Pacific. At the summit, Japan and India devised a new motto for the bilateral relationship: “Shared security, shared prosperity, and shared destiny.” Cooperation between India and Japan builds on, among other things, the trilateral India-Japan-US “Malabar” naval exercises. Malabar has become an important component of the effort to defend freedom of navigation and overflight in the Indo-Pacific region, through which two-thirds of global trade travels. If India signed a military logistics agreement with Japan, as it has with the US, the Indian navy would be better able to expand its footprint to the western Pacific, while enabling Japan to project its naval power in the Indian Ocean.

On his week-long tour of Asia, US Vice President Mike Pence has been promoting a vision of a “free and open” Indo-Pacific region, characterized by unimpeded trade flows, freedom of navigation, and respect for the rule of law, national sovereignty, and existing frontiers. One country that seems willing to contribute to realizing this vision is Japan. In fact, Japanese Prime Minister Shinzo Abe is the originator of the “free and open Indo-Pacific” concept that lies at the heart of President Donald Trump’s new strategy, the successor to Barack Obama’s unhinged “pivot” to Asia. Having historically punched above its weight internationally, Japan is responding to China’s muscular rise by strengthening its own position in the region. Taking advantage of its considerable assets – the world’s third-largest economy, substantial high-tech skills, and a military that has recently been freed of some legal and constitutional constraints – Japan is boosting its geopolitical clout.

October / December 2018 - World Excellence International Edition

World affairs

Joining forCEs With nato

THE END OF SCANDINAVIAN NON-ALIGNMENT Massive NATO exercises in Norway this fall will include forces from two key non-NATO countries: Sweden and Finland. With no time to waste, Scandinavia is finally breaking fully with the Cold-War era doctrine of neutrality, and embracing a more prudent and proactive defense policy. Carl bildt

toCKholM - Having debarked from ports in western Sweden, military convoys from various NATO countries are crowding Swedish streets and prompting the police to issue trafﬁc warnings. They are on their way to Norway, where some 50,000 soldiers, airmen, and seamen will come together for NATO’s largest military exercise in years. The operation – “Trident Juncture” – has a clear goal: to demonstrate the alliance’s ability to defend Norway against a foreign aggressor.

There is no need to name the potential aggressor. Obviously, it is not Sweden or Finland, both of which have contributed soldiers to the exercise. During the Cold War, Finland did occasionally come under Soviet pressure as the Kremlin sought to expand its room for maneuver. But it always remained ﬁrm in its commitment to defend its Nordic and Western identity. Similarly, Sweden has always abstained from joining NATO, owing to its longstanding

World Excellence International Edition - October / December 2018

geopolitical neutrality, and out of solidarity with the Finns. And while Denmark and Norway did join the alliance, they long opted out of hosting foreign forces during peacetime. But in recent years, Northern Europe’s security landscape has changed. In response to Russian aggression and revisionism, NATO has deployed battalion battle groups in Estonia, Latvia, and Lithuania, as well as air force squadrons to police those countries’ skies. And in

both Sweden and Finland, defense spending is increasing, and there is an ongoing debate about whether to upgrade the privileged partnership with NATO to full membership. For its part, Sweden already acknowledges that its territory would fall well within the theater of NATO operations should a conﬂict arise in Northern Europe, and this realization has increasingly factored into its own security policy and defense preparations. The Swedish foreign-policy establishment understands that any threat to the sovereignty of the Baltic countries or Norway would also be a threat to Sweden’s security. Hence, Sweden is not just participating in Trident Juncture, but also developing a security partnership with Poland to see to the defense of the Baltic Sea area. Sweden’s deepening partnership with NATO is a far cry from its

Cold War-era doctrine of nonalignment. Back then, the custodians of neutrality would have shouted down any hint of collaboration with NATO and the West as an act of treason. The strategy was to persuade the Kremlin that no such thing could ever happen. But, of course, it was always a charade. The Soviet Union had recruited enough high-level assets in the Swedish government to know about its secret ties to the West. Whatever the Swedish people were led to believe about their country’s neutrality, the Soviets knew it was a lie. Now the ruse is over: full-scale military integration with NATO is in the ofﬁng. Still, full NATO membership remains a controversial issue in Sweden. In the old days, Swedish foreign policy was torn between two very different approaches. On one

October / December 2018 - World Excellence International Edition

hand, Sweden was an extroverted activist, sounding more like a nongovernmental organization than a nation-state; on the other hand, it maintained a hyper-realist “deep security” policy, albeit one that was talked about only in low voices behind closed doors. To this day,

time adjusting to new geopolitical realities. For example, Finland has explicitly said that it considers NATO membership to be an important option for its security policy, which is something that the Swedish center-left has not yet been willing to countenance.

WEighing thE options

IN SWEDEN AND FINLAND DEFENSE SPENDING IS INCREASING, AND THERE IS AN ONGOING DEBATE ABOUT WHETHER TO SUPPORT NATO EVEN MORE. the same clash of cultures stands in the way of a rational debate about security policy. As for Finland, it always had plenty of the second approach, but almost none of the first. And in the absence of much domestic disagreement, it has had an easier

Nevertheless, with Trident Juncture, Swedes will see a Swedish-led brigade (comprising Swedish and Finnish units) join with NATO forces in a large-scale defense drill. They will witness the extent to which the Swedish, Finnish, and Norwegian air forces are already integrated. And they will watch

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as Finland leads naval exercises in the Baltic Sea. In the years ahead, Sweden will continue to move closer to NATO. Joint exercises will lead to deeper operational alignment and the establishment of common deterrence capabilities for all of Northern Europe and the Baltic Sea area. To be sure, today’s mobilization is not driven by an acute threat from Russia. But Russia’s aggressive effort to modernize its military all but requires the West to increase its own defense capacity in the region. We need to send a clear message that opportunistic acts of aggression will be answered, both now and in the future. By preparing a proper defense, we can ensure peace and stability in the region, which is a prerequisite for moving toward a more constructive relationship with Russia in the long run. WEiE

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World affairs

history Must not rEpEat itsElf

THE LOST LESSONS OF WORLD WAR I A combination of willful blindness, utter complacency, and intense stubbornness on the part of Europe’s leaders subjected their countries to two devastating wars in the twentieth century. With nationalism and populism once again flourishing across the West, the risk of another large-scale conflagration is rising fast. dominique Moisi

aris - It has been 100 years

since World War I ended, and the centenary was commemorated this month with great pomp in Australia, Canada, France, and the United Kingdom. Germany sent high-level authorities to France to mark the occasion, reafﬁrming the reconciliation between the two countries. But the fact that Franco-German reconciliation did not occur until Europe had suffered another devastating war demonstrates how fragile peace can be, especially when political leaders are as shortsighted as they often are. The Cambridge historian Christopher Clark aptly titled his 2012 book on the origins of WWI The Sleepwalkers. Through a

combination of willful blindness, utter complacency, and intense stubbornness, Europe’s leaders subjected their countries to a conﬂict that shattered an entire generation. By the time WWI erupted, it should have been clear that industrialization and the transportation revolution had transformed warfare. The Crimean War of 1853-1856 had over one million casualties; the American Civil War of 1861-1865 resulted in over 600,000 deaths. Despite these experiences, Europe’s leaders clung to the nineteenthcentury military theorist Carl von Clausewitz’s dictum that, “War is the continuation of politics through other means.” So politics continued in the form of war, resulting in 20 million military and civilian casualties.

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Yet not even that was enough to wake up the sleepwalkers. In the years following the Armistice, Europe’s leaders failed to transcend the divisions that WWI had laid bare, with the tensions between the French and Germans being particularly destabilizing. This failure was reﬂected in the Armistice itself, which imposed excessively harsh requirements on Germany, including billions of dollars in reparations payments, due at a time when the country faced a deep economic crisis. Meanwhile, international oversight was too weak, with the League of Nations remaining largely silent in the face of dangerous developments, such as Adolf Hitler’s remilitarization of the Rhineland. The US Senate’s rejection of the League

World affairs

of Nations in 1919 – and thus of the principles of internationalism and multilateralism that President Woodrow Wilson had promoted – certainly didn’t help matters. More fundamentally, WWII erupted because nationalism was allowed to continue to fester. French Prime Minister Georges Clemenceau, for one, remained deeply nationalistic and, in particular, vehemently anti-German. But while behaving like Clemenceau might win the war (especially if a power like the United States shows up to offer crucial help), it cannot win the peace; hard nationalism naturally leads to conﬂict. Yet, today, a major world leader, US President Donald Trump,is behaving very much like Clemenceau. This holds serious implications not just for the US, but also for Europe. To be sure, French President Emmanuel Macron embraces the “Wilsonian principles” that Trump rejects. But, as the interwar period starkly showed, if core rules and principles are not accepted by all, the institutions they underpin cannot be sustained. WWII accomplished what even WWI could not: it ended the era of European global dominance. While Europe has grown and prospered since 1945, it has not regained the global leadership status its major countries once possessed. This leaves today’s European Union at the mercy of a US that has rejected multilateralism and embraced nationalism.

MorE dangEr than in thE past

THE SHEER SCALE OF DESTRUCTION THAT COULD BE WROUGHT BY TODAY’S WEAPONRY MAY INVITE SOME SEMBLANCE OF RESTRAINT. Of course, plenty of the risks Europe faces lie within its own borders. In France, for example, many are brushing off the warnings issued by Macron – or, more concretely, by their history books – as they push back against their president’s efforts to take up the mantle of multilateralism. The risk today is that generations that have not known war will reproduce the chain of events that lead to it. This risk is exempliﬁed by the recent “yellow vest” protests in France against an environmental tax on fuel. The protests were also intended to be a broader rebuke of Macron, whom many blame for their declining spending power. The protesters probably think that they are acting in the spirit of the 1789 French Revolution, a spirit that the French periodically revive in their country’s politics. But they are actually reenacting the 1930s, with its right-wing protest movements and militias. This is not to say that French citizens – and, in particular, young people – have nothing about which to complain. Unemployment has remained too high

for too long, and while France has largely escaped the spike in income inequality seen in other countries, such as the US, systemic inequalities are pervasive. But the fact is that the emotional rejection of any person or institution even remotely associated with established “elites” – including mainstream political parties and trade unions – lends itself to exploitation by populist demagogues. And history could not be clearer about the risks generated when such demagogues secure power. The world has changed profoundly over the last century. Our economies are more deeply intertwined than ever before, and the sheer scale of destruction that could be wrought by today’s weaponry may invite some semblance of restraint. But, as Trump’s erratic presidency – including his challenges to longstanding alliances and reckless nuclear posturing – starkly demonstrates, the structures we have created to preserve peace are far from foolproof. With populations across the West embracing nationalistic and populist ideas, we are again dancing on the rim of a volcano. WEiE

World affairs

rEMainErs Vs lEaVErs

THE BRITISH HISTORY OF BREXIT It is now all but certain that Britain will leave the EU in March 2019 without a workable divorce settlement. The only question is whether this outcome will be the economic catastrophe that most observers fear. robert skidelsky

14 World Excellence International Edition - October / December 2018

World affairs

ondon - Since June 23,

2016, when 52% of British voters backed withdrawing from the European Union, the “Brexit” debate has been tearing British politics apart. Although the Brexit referendum was nonbinding, then-Prime Minister David Cameron’s government, expecting a vote in favor of “Remain,” had promised to honor the result. Britain, late to join the EU, will be the first member state to leave it, with the exit date set for March 2019. Remainers alternate between blaming Cameron for his

recklessness in holding the referendum and his incompetence in managing it, and castigating the Brexiteers for swamping the voters with lies. At a deeper level, the Brexit vote can be seen as part of a transatlantic peasants’ revolt, making itself felt in France, Hungary, Italy, Poland, Austria, and of course the United States. Both explanations have merit, but both ignore the specifically British roots of Brexit. Britain had stood alone against a Hitler-dominated continental Europe in 1940, the moment

of recent history recalled with most pride. Years later, Margaret Thatcher voiced a common British sentiment in her usual emphatic manner. “You see,” she once said to me, “we visit, and they’re there.” Despite former Prime Minister Tony Blair’s stated intention, Britain was never “at the heart” of Europe: it was. In their 42 years in the EU, the British have always been an awkward, Euroskeptical partner. Approval of membership has only briefly been above 50%, and by 2010 was dipping below 30%. A referendum back then most likely would have

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World affairs

resulted in an even bigger majority for leaving. The United Kingdom did not sign the 1957 Treaty of Rome, which joined the EU’s six original members – Germany, France, Italy, the Netherlands, Belgium, and

Horse. Remainers conveniently forget that when Britain voted in 1975 to remain a member of the EEC – after joining in 1973 – the referendum was based on the lie that membership had no political

balanCing nEEds

IN THE WAKE OF THE BREXIT DECISION, THERESA MAY HAS BEEN CAUGHT BETWEEN THE DEMANDS OF BREXITEERS AND THE FEARS OF THE REMAINERS. Luxembourg – in the European Economic Community. True to its traditional policy of divide and rule, it organized the sevenmember European Free Trade Association as a counterweight in 1960. But the UK stagnated, while the EEC prospered, and Britain applied for entry in 1963. Britain’s motive was mainly economic – to escape the EEC’s external tariff against British goods, by joining a more dynamic free-trade area. But the motive of preventing the formation of a political bloc was never absent, and ran counter to the European founding fathers’ dream of a political union. In the end, French President Charles de Gaulle vetoed the UK’s membership bid, viewing Britain as an American Trojan

implications. In fact, the EU’s founders, especially Jean Monnet, saw ever-deeper economic union as a way to forge ever-deeper political union. In 1986, Thatcher signed the Single European Act (which set the objective of establishing a single market), apparently believing that it was only an extension of free trade in goods to services, capital, and labor. But Britain’s semi-detached status was conﬁrmed by the Maastricht Treaty of 1992, under which Thatcher’s successor, John Major, obtained (together with Denmark) an exemption from the requirement to join the euro. More obviously than anything preceding it, the single currency was a touchstone of willingness to proceed toward political union. After all, as the events of 2008-9 showed, a common currency without a

16 World Excellence International Edition - October / December 2018

common government cannot be made to work. In the wake of the Brexit decision, Cameron’s hapless successor, Theresa May, has been caught between the demands of Brexiteers like her erstwhile foreign secretary, Boris Johnson, for “control of our borders” and the fears of the Remainers concerning the economic and political consequences of leaving. She hopes for an exit from the EU whereby Britain would retain

World affairs

will fail to survive serious scrutiny on either side of the Channel. And that means that Britain will leave the EU in March 2019 without a workable divorce settlement. The only question is whether this outcome will be the disaster most observers fear. I am unpersuaded by the Remain argument that leaving the EU would be economically catastrophic for Britain. The loss of settled EU arrangements would be balanced by the chance for Britain to rediscover its own way, not least in ﬁscal and industrial policy. Experience suggests that the British are most resilient, most inventive, and happiest when they feel in control of their own future. They are not ready to give up their independence.

the benefits, but avoid the costs, of membership. This hope is embodied in the government’s just-published White Paper, “The Future Relationship between the United Kingdom and the European Union.” In it, the government seeks an “Association” that would leave Britain within the EU’s external tariff area for all trade in goods made in Britain and the EU, but free to conclude its own free-trade agreements with everyone else. The single market in services would be replaced

by a special agreement allowing EU clients unrestricted access to London’s ﬁnancial services, while avoiding a common regulatory system. A new “framework for mobility” would aim to continue to “attract the brightest and the best, from the EU and elsewhere,” while curtailing (in unspeciﬁed ways) EU citizens’ freedom to work in Britain. Nothing is more certain than that the White Paper’s jejune attempt to have it both ways

My main worry is the loss of the chance for Britain to help shape the political future of Europe. The organization Britain will be leaving is far from marching conﬁdently ahead to political union. It is riven with conﬂict. German Chancellor Angela Merkel is almost as powerless as May; neo-fascists are in, sharing, or close to power in several European countries. Almost the entire weight of the European project rests on the shoulders of French President Emmanuel Macron. It would have been good to have Britain by his side, rather than drifting out to the Atlantic. WEiE

October / December 2018 - World Excellence International Edition 17

World affairs

thE thrEaths of a nEW Cold War

THE SINO-AMERICAN COLD WAR’S COLLATERAL DAMAGE Despite the low probability of a direct military clash between the US and China, a Sino-American cold war would undoubtedly produce collateral damage so far-reaching and severe that the very future of humanity could be jeopardized. But it is not too late for the US and China to change course. Minxin pei

larEMont - The escalating trade feud between the United States and China is increasingly viewed as the opening campaign of a new cold war. But this clash of titans, should it continue to escalate, will cost both parties dearly, to the point that even the winner (more likely to be the US) would probably ﬁnd its victory Pyrrhic. Yet it is the rest of the world that would pay the steepest price. In fact, despite the low probability of a direct military clash between the US

and China, a new cold war would undoubtedly produce collateral damage so far-reaching and severe that the very future of humanity could be jeopardized. Already, bilateral tensions are contributing to an economic decoupling that is reverberating across the global economy. If the end of the Cold War in 1991 launched the golden age of global economic integration, the beginning of the next cold war between the world’s two largest economies will undoubtedly produce division and

18 World Excellence International Edition - October / December 2018

fragmentation. It is easy to imagine a world divided into two trade blocs, each centered on a superpower. Trade within the blocs could continue, or even ﬂourish, but there would be few links, if any, between them. The global financial system would also unravel. President Donald Trump’s administration has shown just how easy it is for the US to hurt its foes (such as Iran) by using sanctions to deny them access to the dollar-denominated

international payment system. Given this, America’s strategic adversaries, China and Russia – and even its ally, the European Union – are trying to establish alternative payment systems to protect themselves in the future. Such economic fragmentation, together with the deeper geopolitical tensions that a cold war implies, would devastate the world’s technological landscape. Restrictions on technology transfers and linkages, often justiﬁed by national security concerns,

would give rise to competing and incompatible standards. The Internet would splinter into competing domains. Innovation would suffer, resulting in higher costs, slower adoption, and inferior products. But the first area to be struck by deep fragmentation would be global supply chains. To avoid being hit by US tariffs, companies manufacturing or assembling USbound goods in China would be forced to move their production

facilities to other countries, most likely in South and Southeast Asia. In the short term, such a wave of relocations – China stands at the center of global manufacturing chains – would be hugely disruptive. The fragmented supply chains that emerge would be much less efﬁcient, as no single country can match China in terms of infrastructure, the industrial base, or the size and skill of the labor force. Yet, if the US and China actually decided to engage in a prolonged cold war, the economic

October / December 2018 - World Excellence International Edition 19

World affairs

consequences – however dire – would be dwarfed by another consequence: a lack of sufficiently strong action to combat climate change. As it stands, China produces over nine billion metric tons of carbon dioxide per year, making it the world’s largest emitter. The US comes in a distant second, emitting about five billion metric tons annually. If these two countries, which together are responsible for 38% of annual global CO2emissions, are unable to find common ground on climate action, it is all but guaranteed that humanity will miss its last chance to prevent catastrophic global warming. A Sino-American cold war would make such an outcome far more likely. The US would insist that China drastically cut its emissions, because it is the world’s number one polluter in absolute

terms. China would counter that the US bears more responsibility for climate change, in both cumulative and per capita terms. Locked in geopolitical competition, neither country would be willing to budge. International climate negotiations, already monumentally challenging, would end in deadlock. Even if other countries did agree on measures, the impact would be insufﬁcient without the US and China on board. The one hope humanity would have would lie in technological innovation. Yet such innovation – including the rapid progress in renewable energy over the last decade – has depended crucially on the relatively free ﬂow of technologies across borders, not to mention China’s unique ability to scale up production and reduce costs quickly. Amid cold war-fueled economic fragmentation – especially the

20 World Excellence International Edition - October / December 2018

aforementioned restrictions on trade and technology transfers – urgently-needed breakthroughs would become much more difﬁcult to achieve. With that, a technological solution for climate change, already a long shot, would effectively become a chimera. And the greatest existential threat humanity faces would be realized. It is not too late for the US and China to change course. The problem is that, in deciding whether to do so, Trump and his Chinese counterpart, Xi Jinping, will probably focus primarily, if not exclusively, on national interests and personal political calculations. This is short-sighted. Before these two leaders irreversibly doom their two countries to spend the next decades locked in a devastating and avoidable conﬂict, they should carefully consider what that would mean not just for the US and China, but for the entire world. WEiE

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spotlight

intErnational hElMEt CoMpany

RACING TOWARDS A BRIGHT FUTURE During the last Le Fonti Awards in London International Helmet Company won the prize as an Excellence in the â&#x20AC;&#x153;Sports Protective Equipmentâ&#x20AC;? sector. Since the market is estimated to expand in the upcoming years, Meluccio Piricone, CEO of the company, is confident that the company will meet the standards which had been set when they decided to enter this sector. alessia rosa

22 World Excellence International Edition - October / December 2018

spotlight

ondon - During the last Le Fonti Awards in London you were recognized as an Excellence in the “Sports Protective Equipment” Sector. How would you like to comment on this victory? To be awarded as an Excellence in the “Sports Protective Equipment” Sector only after two years since I started my activity as CEO of International Helmet Company gives me the awareness that me and my team are on the right path to reach the goals set when I decided to enter this sector, in other words to bring International Helmet Company to be a benchmark on the market of sports protective equipment through the selection and acquisition of projects and brand with big potential as already done with Vemar. Personally speaking this victory makes me particularly proud, in consideration of the fact that I have discovered this sector only two year ago thanks to the opportunity to buy the brand Vemar. Professionally speaking I was born as corporate consultant specialized in company restructuring and reorganization and management control and in 1995 I founded KTC Fiduciaria SA (headquarter in Manno – Switzerland), the company assisted me as advisors in the setup of IHC, in the acquisition of the brand Vemar and in the closing of the license agreement with Simpson

USA for the development and commercialization of helmets for motorbike sector. The global sports protective equipment market is estimated to expand at a significant growth rate between 2018 and 2026. There is a significant demand for new and innovative products. According to you, what is the potential of this sector and what are your forecasts? From my perspective, the global sports protective equipment market in the next years will grow as the estimation say. The ﬁrsts signals

in the growth rate, especially in the medium-high segment of the market will come from the expansion of countries as China, India where the motorbike soon will become a leisure object, for a large part of the young generation and for the medium high classes, and not only a means of locomotion to move from one place to another. In the mature markets, in my opinion, the growth will be directly connected with the capacity of the companies to invest in new and innovative products and to convert the way on how to promote the products especially the helmets,

What’s nEXt?

“WE ARE FOCUSED ON QUALITY AND SAFETY AND AROUND THESE TWO CONCEPTS WE ARE PLANNING THE FUTURE PROJECTS” -MELUCCIO PIRICONE, CEO OF INTERNATIONAL HELMET COMPANY of this growth, it was possible to touch: - during the last EICMA where a lot of people, not only professionals of the sector, showed their wish to buy a motorbike and consequently a protective equipment and ﬁrst of all a helmet; - in orders collected that compared to the last year have been grown more than our best prospective scenario. In the next years a good impact

the use of which is mandatory in most of these countries. In both direction IHC is moving as I will better explain below. The aim of your Company is to connect organizational skills and financial solidity with Italian design. Your first challenge has been the acquisition of a prestigious Italian brand, VEMAR, ready to become a new benchmark in the global

October / December 2018 - World Excellence International Edition 23

spotlight

Meluccio Piricone, CEO of International Helmet Company, with Guido Giommi, President of Le Fonti, at Le Fonti Awards event in Milan

helmets market. What will be your future goals and projects? “Connecting organizational skills and ﬁnancial solidity with Italian design, tradition, and know-how is the aim of IHC as you correctly said. We moved in this direction when we decided in 2016 to buy the brand Vemar. Now, after two years I can say that the challenge was won. From zero we have: - a totally new range of products (9 helmets in plastics and composite) completely redesigned from scratch; - a brand with a more markedly international dimension while respecting the historicity and Italianness of the brand; - our products currently distributed in 36 countries. This, of course, is only the starting point to achieve our future targets that:

- in terms of revenue means 10 million turnover in the next three years, through an expansion of the markets where currently our products are distributed; and - in terms of brand proposition means focalizing on considering the helmet not a mere accessory to be used because mandatory, but a necessary and indispensable element to allow the motorcyclist to live the experience and the emotions that the road can offer. Then, we are focused on quality and safety and around these two concepts we are planning the future projects and the communication ways of the company. About new projects, ﬁrst we are thinking and evaluating new materials that respecting the standards of safety, make the helmet lighter and comfortable for the wear; second, we are patenting a device that will

24 World Excellence International Edition - October / December 2018

prevent the motorbike from starting if the helmet is not fastened. To sensitize the final users about the importance of the helmet we are moving in two direction: - cooperation with the medium and high school to organize seminaries about the importance of the use of the helmet, - opening a flagship concept stores (the first will be opened soon in Manno) where the potential clients before deciding whether to buy or not a helmet will be instructed about the importance of using, wearing and fastening the helmet in a properly way. The potential client has to dedicate the right time to select choose and buy the right helmet for him as he normally does when deciding to buy a motorbike; today this happens rarely, this is our main challenge for the future. WEiE

Unilever

Banca Generali

RAI

Cucinelli

Segafredo

Vodafone

LE FONTI AWARDS

UPCOMING

Awards Ceremonies and Gala Dinners MILAN Le Fonti CEO Summit & Awards February 28th, 2019

MILAN Le Fonti CEO Summit & Awards March 6th, 2019

HONG KONG Le Fonti CEO Summit & Awards March 29th, 2019

SUBMIT YOUR CANDIDACY Philip Morris

www.lefontiawards.com

Carrefour

sustainability

thE ConsEQuEnCEs of global WarMing

LIVING WITH CLIMATE CHANGE The debate over climate change is no longer about what causes global warming. Rather, the issue for policymakers is how to ensure that billions of at-risk people and businesses around the world can rapidly adapt and ensure that their communities are as resilient as possible. patrick V. Verkooijen

28 World Excellence International Edition - October / December 2018

ottErdaM - For anyone

still undecided about the consequences of global warming, the summer of 2018, one of the hottest on record, should have tipped the scales. Across far-flung longitudes and latitudes, regions are struggling with the fallout from large-scale climaterelated events. In the southern United States, cities and towns pummeled by Hurricane Florence in September were still drying outwhen Hurricane Michael brought more flooding in October. In California, firefighters are battling the embers of the largest wildfire in state history. And in parts of Latin America, Europe, Africa, and Asia, agricultural output is in freefall following months of stifling heat. Cooler weather has done little to ease the suffering. According to the National Oceanic and Atmospheric Administration, “moderate” to “exceptional” drought conditions cover 25.1% of the United States. But “extreme” and “exceptional” drought – the worst categories – expanded to cover 6.3% of the country, up from 6% in midSeptember. Regions in Australia also are struggling with the worst drought in a generation. In fact, for a growing number of people around the world, floods, landslides, and heatwaves – Japan’s

October / December 2018 - World Excellence International Edition 29

sustainability

summer in a nutshell – is the new normal. A recent study in the journal PLOS Medicine projects a fivefold increase in heat-related deaths in the US by 2080; the outlook for poorer countries is even worse. The climate debate is no longer about causes; fossil fuels and human activity are the culprits. Rather, the question is how billions of at-risk people and businesses can rapidly adapt and ensure their communities are as resilient as possible. Even if the world meets the Paris climate agreement’s target of limiting the increase in

global temperature to 2º Celsius relative to pre-industrial levels, adaptation will still be critical, because climate extremes are now the new normal. Some communities have already recognized this, and local adaptation is well under way. In Melbourne, Australia, for example, planners are working to double the city’s tree canopy by 2040, an approach that will lower temperatures and reduce heatrelated deaths. Similarly, in Ahmedabad, a city of over seven million people in Western India, authorities have launched a major initiative to

30 World Excellence International Edition - October / December 2018

cover roofs in reflective paint to lower temperatures on “heat islands,” urban areas that trap the sun’s warmth and make city living unbearable, even at night. These are just two of the many infrastructural responses that communities around the world have undertaken. But adapting to climate change will also mean managing the longterm economic fallout of extreme weather, and this is a requirement that countries are only beginning to take seriously. Consider water scarcity. According to a 2016 World Bank analysis, drought-related water crises in

sustainability

Africa and the Middle East could reduce GDP in these regions by as much as 6% by 2050. That would be painful anywhere, but it would be devastating in regions already rife with political turmoil and humanitarian crises. At the same time, rising sea levels will cause severe damage to coastal areas. The decline in property values will have far-reaching implications not only for individual wealth, but also for the tax bases of communities and the industries that serve them. A related concern is that homes and businesses around the world

will eventually become underinsured or even uninsurable, owing to the frequency of weatherrelated catastrophes. ClimateWise, a global network of insurance industry organizations, has already warned that the world is facing a $100 billion annual climate risk â&#x20AC;&#x153;protection gapâ&#x20AC;?. No single international organization or authority has all the answers to the cascade of challenges that climate change has triggered. But some are taking key leadership roles and pushing governments and local communities to act with more urgency. One of the more

promising initiatives to accelerate solutions, launched just this week, is the Global Commission on Adaptation, chaired by former UN Secretary-General Ban Ki-moon, Microsoft co-founder Bill Gates, and World Bank CEO Kristalina Georgieva. Over the next 15 years, the world will need to invest some $90 trillion in infrastructure improvements. How these projects proceed, and whether they are designed with low-carbon features, could lead the world toward a more-climate resilient future â&#x20AC;&#x201C; or they could undermine food, water, and security for decades to come. WEiE

October / December 2018 - World Excellence International Edition 31

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thE nECEssity of sECurE land tEnurE

Why strengthening land rights strengthens development

There are only two ways for the world to avoid what most scientists refer to as disastrous global warming. One way is to stop economic growth, which would be immoral, while the other would require us to deploy our greatest natural resource. Mahmoud Mohieldin & anna Wellenstein

ashington d.C. - For most of the worldâ&#x20AC;&#x2122;s poor and vulnerable people, secure property rights, including land tenure, are a rarely accessible luxury. Unless this changes, the Sustainable Development Goals (SDGs) will be impossible to achieve. Land tenure determines who can use land, for how long, and under what conditions. Tenure arrangements may be based both on ofďŹ cial laws and policies, and on informal customs. If those arrangements are secure, users of land have an incentive not just to

implement best practices for their use of it (paying attention to, say, environmental impacts), but also to invest more. An international consensus has emerged regarding the importance of secure land tenure for development outcomes. In 2012, the Committee on World Food Security, based at the Food and Agriculture Organization of the United Nations, endorsed the Voluntary Guidelines on the Responsible Governance of Tenure as the global norm on this front. Yet the norm is not being applied

32 World Excellence International Edition - October / December 2018

widely enough. In fact, only 30% of the worldâ&#x20AC;&#x2122;s population has legally registered rights to their land and homes, with the poor and politically marginalized especially likely to suffer from insecure tenure. In Romania, for example, many Roma have less secure farmland tenure than their non-Roma neighbours. Likewise, in Southeast Asia, hill tribes rarely have legal rights to their indigenous holdings, which are often located in state forests. In Zimbabwe, a customary divorce

sustainability

settlement may result in allocating all family lands and property (and even children) to the husband, with the wife left to return to her father or another male relative. In Sarajevo, thousands of apartments have been deemed illegal due to outdated urban plans and missing building permits, locking families’ most valuable assets outside the mainstream economy. By stifling economic growth, inadequate land-tenure systems perpetuate poverty and marginalization. But the opposite

is also true: strong, properly enforced land rights can boost growth, reduce poverty, strengthen human capital, promote economic fairness (including gender equity), and support social progress more broadly. Moreover, secure land rights are essential to reduce disaster risk and build climate resilience, which is an urgent imperative at a time when climate change is already fueling more – and more frequent – extreme weather. When such disasters displace people and destroy their homes, properly maintained land records provide the baseline for compensation and reconstruction of shelters, and help affected communities rebuild better. Reﬂecting the importance of secure land ownership to the SDGs’ success, the World Bank Group is now working with developing countries to improve their landtenure systems and expand the coverage of legally recognized and registered rights. For example, in Indonesia’s Kalimantan and Sumatra provinces, we are helping to promote the standardization of land rights, with particular attention to women and indigenous communities, while deﬁning state forests’ boundaries using participatory methods for mapping and registration. Already, World Bank Group efforts have enabled one million hectares of indigenous land in Nicaragua – over 30% of the country’s territory – to

be demarcated, titled, and registered, a process that has beneﬁted some of the country’s most vulnerable groups. This initiative also aimed to improve Nicaragua’s capacity to respond promptly and effectively to emergencies. New projects are now being prepared in Mozambique and Tanzania to provide customary settlements with communal titles that will ensure legal recognition of their common holdings, thereby strengthening the protection and management of these assets. In the 2017-2019 period, the World Bank’s portfolio of investment lending for land administration and security of tenure is projected to grow by 39%. This is important progress. But realizing key SDG targets – which are fully aligned with the World Bank Group’s own twin goals of ending extreme poverty and boosting shared prosperity – will require a much larger investment program focused on strengthening land tenure across the developing world. To that end, the World Bank Group is engaging with partners at the local, national, and global levels to strengthen countries’ commitments and mobilize resources to achieve the ambitious target of achieving adequate land and property rights for all by 2030. Land is at the heart of development. Secure land tenure is thus vital to building the inclusive, resilient, and sustainable communities that will propel economic and social progress well into the future. WEiE

October / December 2018 - World Excellence International Edition 33

sustainability

ChallEnging oil and gas industry ClaiMs

FOSSIL-FUEL DOUBLESPEAK On paper, almost every government in the world is committed to reducing greenhouse-gas emissions and keeping global temperatures limited to 1.5Â°C above pre-industrial levels. But too many governments, parroting the oil and gas industryâ&#x20AC;&#x2122;s misleading claims, are actually supporting the expansion of fossil-fuel production. lili fuhr & hannah McKinnon

34 World Excellence International Edition - October / December 2018

sustainability

Erlin - Since the Paris

climate agreement was signed in 2015, too many policymakers have fallen for the oil and gas industry’s rhetoric about how it can help to reduce greenhouse-gas emissions. Tall tales about “clean coal,” “oil pipelines to fund clean energy,” and “gas as a bridge fuel” have coaxed governments into rubber-stamping new fossil-fuel projects, even though current fossilfuel production already threatens to push temperatures well beyond the Paris agreement’s limit of well below 2° Celsius above pre-industrial levels. The International Energy Agency (IEA) estimates that in 2016, investment in the oil and gas sector totaled $649 billion, and that fossilfuel subsidies within the G20 countries amounted to $72 billion. And by 2030, investments in new gas projects across G20 countries are expected to surpass $1.6 trillion. Clearly, the industry has pulled out all the stops to expand production and profits before the world moves to a decarbonized economy. And so far, it is succeeding, because it has convinced governments of multiple falsehoods. For starters, there is the claim that natural gas can be a “bridge fuel” to a stable climate even though its climate impact often equals that of coal – or worse. In reality, a “dash for gas” would consume almost two-thirds of G20 countries’ combined carbon

budget by 2050. Worse, new gas production often displaces not coal, but wind- and solar-energy projects, both of which are now cheaper than coal and gas in many regions. The fact that most new investments in gas production assume at least a 30year operational timeline should be evidence enough that they are not geared toward reducing emissions anytime soon. One would expect the European Union to lead the way toward a decarbonized future. But, if anything, it seems to be doing the opposite. Since 2014, the EU has allocated €1 billion ($1.16 billion) to the natural-gas sector. And though the European Commission’s proposed 2020-2027 budget would reduce such funding, it would allow member states to continue spending taxpayers’ money on fossil-fuel production. Yet, according to a study by British climate scientists Kevin Anderson and John Broderick, in order to meet its climate commitments, the EU must phase out all fossil fuels by 2035. Another industry canard is that income from oil and gas expansion is needed to fund the transition to a clean economy. This incoherent claim has underpinned policy in Canada, where the authorities continue to push for major new tar-sands pipelines. Most recently, the government stepped in and paid the Texas-based energy ﬁrm Kinder Morgan $3.4 billion for a 65-year-old pipeline in order to

October / December 2018 - World Excellence International Edition 35

sustainability

ensure its planned expansion, which the company had deemed too risky. This use of public funds is particularly objectionable because it threatens to

into older oil reservoirs to extract otherwise inaccessible crude oil, signiﬁcantly boosting production, and thus greenhouse-gas emissions.

EXploiting thE situation

SINCE 2014, THE EU HAS ALLOCATED €1 BILLION TO THE NATURAL-GAS SECTOR. lock in the very energy sources that are driving dangerous climate change. Implicit in any major new investment in energy infrastructure is that operations will continue for decades, as even if demand and prices fall dramatically, an owner or investor will prefer some income return on that capital rather than nothing. As a result, politically and legally, it is much harder to shut down a project than to stop it before it starts. A third ingredient of fossil-fuel flimflam is so-called clean coal, often relying on carbon capture and storage (CCS) technologies. Governments and the energy industry have long framed CCS as a silver bullet for climate change, and thus as a perfect excuse for postponing meaningful reductions in fossil-fuel use. And now, CCS is even being promoted as an enabling technology for magical schemes that can “suck” carbon out of the atmosphere. CCS was originally developed for enhanced oil recovery (EOR), whereby pressurized CO2 is pumped

The technique has been used for more than 40 years, particularly in the United States. But it is costly in terms of both money and energy: a coal-ﬁred power station that adopts CCS must burn even more coal in order to produce the same amount of energy. The main reason that oil companies have become such strong proponents of CCS is that it offers them a source of subsidized CO2 for use in EOR. Companies such as Shell and Statoil have spent decades and billions of dollars on CCS research and development, and all they have to show for it is a few commercialscale CCS operations. It is already clear that CCS is commercially viable only when used for EOR, which means that coal itself will never be a clean fuel, even if modern ﬁlters can be used to reduce particulate air pollution. A final claim often made by oil and gas companies is that they can execute any given project more “cleanly” than

36 World Excellence International Edition - October / December 2018

anyone else. Energy companies have been racing to announce new technologies and measures that supposedly improve the efficiency of their current operations, as if that should give them the right to increase production unabated. But, as with the rest of the industry’s doublespeak, this logic more often than not leads to further lock-in, as firms sink ever more funding into unproven negative-emissions technologies and other measures that will perpetuate dependence on fossil fuels. For example, the Canadian province of Alberta, home of the tar sands, is investing $304 million explicitly to “help [oil sands] companies increase production and reduce emissions.” At a time when science and expertise are increasingly being dismissed as elitist conceits, governments that know better should not be helping fossil-fuel companies profit from the mounting climate crisis. The industry’s spin machine threatens to trap us all in a dangerous status quo. The global climate movement is redefining leadership on this issue, but nongovernmental organizations and activists alone cannot usher in a decarbonized future. Governments that claim to be committed to the Paris accord must offer a robust plan for phasing out fossil fuels, rather than supporting that sector’s continued expansion. WEiE

sustainability

thE grEatEst natural rEsourCE

The Green Lobby’s Misdirected Anger

oston - In August, when

US President Donald Trump proposed to freeze fuelefﬁciency standards for cars and trucks, environmentalists and their supporters were outraged. Now, the temperature of the debate has risen again, following a special report by the Intergovernmental Panel on Climate Change (IPCC) that highlights the urgent need to take drastic action to curb carbon dioxide emissions. While the environmentalists’ efforts to combat climate change are laudable, their reactions to these developments

are misdirected. The strategies for reducing emissions that they advocate barely move the needle and are, in many cases, counterproductive; giving companies and governments a “ﬁg leaf.” We need a real-world strategy for tackling climate change that marshals the world’s technological resources without imposing crippling restrictions on economic growth. Much of the backlash that followed the Trump administration’s proposed relaxation of vehicle emissions standards has centered on two aspects of the 500-page report on which

38 World Excellence International Edition - October / December 2018

it is based. First, the administration accepted that the change will increase greenhouse-gas (GHG) emissions, but claimed that the increase would be inconsequential. Second, the administration estimates that global temperatures will increase by 3.5° Celsius (6.3° Fahrenheit) by 2100 if no action is taken. These assumptions provoked ﬁerce criticism; the Boston Globe published the headline: “The Trump Administration Content to Sit Back and Watch Planet Warm.” Ten days later, the IPCC report reignited the debate. It argued that

sustainability

limiting global warming to 1.5°C above pre-industrial levels – the goal set by the 2015 Paris Accord – will require draconian measures such as halting the use of internal combustion engines and deploying renewables to generate 75% of the world’s electricity needs. These measures will eliminate CO2 emissions, according to the IPCC, but may not be enough. A 1.5°C increase in global temperatures is now accepted as inevitable, and warming is likely to reach 2°C before the end of the century. There are a number of reasons for these pessimistic projections. While many consumers in developed countries proclaim support for sustainability, they are generally not willing to pay for it or inconvenience themselves. Citizens of developing countries want a higher standard of living, regardless of the impact on global temperatures. Companies are responding to these mixed signals with weak, token actions to curb emissions that do not affect their bottom lines. Governments and politicians shun any policies that threaten jobs or job creation. The result is that consumers are encouraged to partake in “feel good” activities. For example, separating trash and using cloth bags while shopping are largely meaningless behavioural changes. For example, household trash accounts for a mere 3% of the solid waste produced in the United States. Companies follow the lead set by consumers. An example is the (ineffective) ban on plastic straws

ModEratE support is not Enough

GOVERNMENTS ARE PART OF THE PROBLEM, NOT THE SOLUTION. introduced by McDonald’s, which continues to serve beef, which is a major contributor to global warming, owing to the methane produced by cattle. (Methane is 28 times more potent as a GHG than CO2.) Finally, governments are part of the problem, not the solution. The US government withdrew from the Paris climate agreement, and the Australian government has weakened its commitment to it. The German government was complicit in the emissions scandal that engulfed the country’s auto industry, and Germany’s GHG emissions have not come down during the last decade. In fact, it is likely that Germany will not meet its 2020 or 2030 targets, despite pushing other countries to adopt them. A clear-eyed assessment of the current state of affairs will reveal that the immediate battle is already lost, which brings us to the Trump administration’s controversial emissions policy. The report that sets out the policy shows that the emperor is indeed naked. Small, incremental sustainability initiatives are inadequate and hence pointless, needlessly frustrate economic growth and job creation, and enable developed countries to insist on economic concessions from developing countries that they have no right to demand. When viewed through this lens, the

administration’s fuel efﬁciency report does not look as crazy as it has been made out to be. There are only two ways, I believe, for the world to avoid what most scientists refer to as disastrous global warming. First, we could stop economic growth, because the idea of “green growth” is a fallacy promulgated by environmentalists who seem to be engaged in wishful thinking. Such an extreme action would require the world to reinvent the way economic activity is measured. And it would involve ethically dubious policies such as forced population control. Second, the rich world could launch a “Manhattan Project” to develop and scale technologies that can rid the planet of GHG accumulation. These may include carbon sequestration and geoengineering, as well as innovations such as plant-based meat, alternatives to concrete for structures, and nuclearfusion power generation. The second approach offers a realworld solution to the global warming crisis that avoids the moral pitfalls of the ﬁrst (which include leaving billions of people trapped in poverty). We can combat global warming only if we deploy our greatest natural resource: human ingenuity. WEiE

October / December 2018 - World Excellence International Edition 39

INNOVATION & TEChNOLOGY

Will robots taKE oVEr?

EDUCATION IN THE AGE OF AUTOMATION The race is on between technology and education. The outcome will determine whether the opportunities presented by major innovations are seized, and whether the benefits of progress are widely shared. lee Jong-Wha

40 World Excellence International Edition - October / December 2018

INNOVATION & TEChNOLOGY

Eoul - As digital technologies and automation have advanced, fears about workers’ futures have increased. But, the end result does not have to be negative. The key is education. Already, robots are taking over a growing number of routine and repetitive tasks, putting workers in some sectors under serious pressure. In South Korea, which has the world’s highest density of industrial robots – 631 per 10,000 workers – manufacturing employment is declining, and youth unemployment is high. In the United States, the increased use of robots has, according to a 2017 study, hurt employment and wages. But while technological progress undoubtedly destroys jobs, it also creates them. The invention of motor vehicles largely wiped out jobs building or operating horse-drawn carriages, but generated millions more not just in automobile factories, but also in related sectors like road construction. Recent studies indicate that the net effects of automation on employment, achieved through upstream industry linkages and demand spillovers, have been positive. The challenge today lies in the fact that the production and use of increasingly advanced technologies demand new, often higher-level skills, which cannot simply be picked up on the job. Given this, countries need to ensure that all of their residents have access to high-quality education and training programs that meet the needs of the

labor market. The outcome of the race between technology and education will determine whether the opportunities presented by major innovations are seized, and whether the beneﬁts of progress are widely shared. In many countries, technology has taken the lead. The recent rise in income inequality in China and other

that deep reform is essential to facilitate the development of digital knowledge and technical skills, as well as nonroutine cognitive and non-cognitive (or “soft”) skills. This includes the “four Cs of twenty-ﬁrst century learning” (critical thinking, creativity, collaboration, and communication) – areas where humans retain a considerable advantage over artiﬁcially

protECting EMployEEs

THE ARTIFICIAL INTELLIGENCE REVOLUTION WILL BE HUGELY DISRUPTIVE, BUT IT WILL NOT MAKE HUMANS OBSOLETE East Asian economies, for example, reflects the widening gap between those who are able to adopt advanced technologies and those who aren’t. But education-job mismatches plague economies worldwide, partly because formal education fails to produce graduates with skills and technical competencies relevant to the labor market. In a report by the Economist Intelligence Unit (EIU), 66% of executives surveyed were dissatisfied with the skill level of young employees, and 52% said a skills gap was an obstacle to their firm’s performance. Meanwhile, according to an OECD survey, 21% of workers reported feeling over-educated for their jobs. This suggests that formal education is teaching workers the wrong things, and

intelligent machines. The process must begin during primary education, because only with a strong foundation can people take full advantage of later education and training. And in the economy of the future, that training will never really end. Given rapid technological progress, improved opportunities for effective lifelong learning will be needed to enable workers to upgrade their skills continuously or learn new ones. At all levels of education, curricula should be made more ﬂexible and responsive to changing technologies and market demands. One potential barrier to this approach is a dearth of well-trained teachers. In Sub-Saharan African countries, for example, there are some

October / December 2018 - World Excellence International Edition 41

INNOVATION & TEChNOLOGY

44 pupils for every qualiﬁed secondary school teacher, on average; for primary schools, the ratio is even worse, at 58 to one. Building a quality teaching force will require both monetary and nonmonetary incentives for teachers and higher investment in their professional

ICT can also help to address shortages of qualiﬁed teachers and other educational resources by providing access across long distances, via online learning platforms. For example, the Massachusetts Institute of Technology’s OpenCourseWare enables students

All efforts to bolster education should emphasize accessibility, so that those who are starting out with weaker educational backgrounds or lower skill levels can compete in the changing labor market. Well-designed and comprehensive social safety nets –

development. This includes ensuring that teachers have the tools they need to take full advantage of information and communication technology (ICT), which is not being used widely, despite its potential to ensure broad access to lifelong learning through formal and informal channels. According to the EIU report, only 28% of secondary-school students surveyed said that their school was actively using ICT in lessons.

around the world to reach some of the world’s foremost teachers.

including, for example, unemployment insurance and public health insurance – will also be needed to protect vulnerable workers amid rapid change. The artiﬁcial intelligence revolution will be hugely disruptive, but it will not make humans obsolete. With revamped education systems, we can ensure that technological progress makes all of our lives more hopeful, fulﬁlling, and prosperous. WEiE

This points to the broader value of international cooperation. The education challenges raised by advancing technologies affect everyone, so countries should work together to address them, including through exchanges of students and teachers and construction and upgrading of ICT infrastructure.

42 World Excellence International Edition - October / December 2018

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INNOVATION & TEChNOLOGY

to bridgE thE gap

THE DIGITAL DIVIDE IS IMPEDING DEVELOPMENT By the end of the next decade, growth, productivity gains, and human development will be determined by levels of integration into the digital economy. To guard against new forms of inequality, the international community must do more to help developing countries close the connectivity gap

Mukhisa Kituyi

EnEVa - It is easy to assume

that access to the digital economy is ubiquitous, and that online shopping is the natural evolution of commerce. For example, in July, Amazon sold more than 100 million products to consumers worldwide during its annual Prime Day event, a $4.2 billion bonanza that included sales of table salt in India, Coke Zero in Singapore, and toothbrushes in China. But ﬁgures like these mask the fact that for many people in developing

44 World Excellence International Edition - October / December 2018

countries, the road to e-commerce is riddled with potholes. Simply put, the growth of e-commerce is not automatic, and the spread of its beneﬁts is not guaranteed. Some of the obstacles are logistical. On the tiny South Paciﬁc island of Tuvalu, for example, fewer than ten streets in the capital, Funafuti, are named, and only about 100 homes have a postal address. Even if everyone in Tuvalu had access to the Internet (which they don’t; only 13% of the country’s population had broadband in 2016, according to

INNOVATION & TEChNOLOGY

the World Bank), delivery of goods purchased online would be difﬁcult. Elsewhere, billions of people lack bank accounts and credit cards, and in many developing countries, consumer-protection laws do not extend to goods purchased online. These challenges are particularly acute for people in Sub-Saharan Africa, in remote island states, and in several landlocked countries. By contrast, in most developed economies, well-functioning postal systems and strong legal frameworks mean that products can be purchased online and delivered without a second thought. But e-commerce is only one facet of the evolving digital economy. Innovation, production, and sales are all being transformed by technology platforms, data analytics, 3D printing, and the so-called Internet of Things (IoT). By 2030, the number of IoTconnected devices is expected to reach 125 billion, compared to 27 billion in 2017. Moreover, this rapid pace of digital tethering is occurring even as half the world’s population remains unconnected from the Internet. If left unaddressed, the yawning gap between under-connected and hyper-digitalized countries will widen, exacerbating existing inequalities. Levels of digitalization may even inﬂuence whether countries are able to achieve the Sustainable Development Goals set by the

international community for tackling challenges like hunger, disease, and climate change. That is why I believe more must be done to support poor countries as they strive to integrate into the digital economy. How that economy will develop is difﬁcult to predict. But we already know that actions taken by governments, donors, and development partners will determine the way forward. One effort – the Going Digital project, launched by the OECD in 2017 – is helping countries seize opportunities and prepare for technological disruption. Areas of focus include competition, consumer protection, innovation and entrepreneurship, insurance and pensions, education, governance, and trade. It is a holistic approach that specialists in development cooperation should emulate. Moreover, by the end of the next decade, information and communication technology (ICT) will drive economic growth and power productivity gains. To thrive, people will need new skills and knowledge, and countries will require updated policies to protect online users. Small companies, including those owned and operated by women, will be especially vulnerable to the changing business environment. Unfortunately, only 1% of all funding provided by Aid for Trade – an initiative by World Trade Organization members to help developing countries improve

their trading infrastructure – is currently being allocated to ICT solutions. Similarly, multilateral development banks are investing just 1% of their total spending on ICT projects, and only about 4% of this limited investment is being spent on policy development, work that is critical if digital economies are to be well regulated. At my organization, the United Nations Conference on Trade and Development, we are creating strategies to help developing countries leverage their assets and improve digital capabilities. One initiative, “eTrade for all,” is aimed at making it easier for developing countries to source financial and technical assistance. Since the program’s inception two years ago, nearly 30 global partners have been recruited, and an online platform has linked governments with organizations and donors to share resources, expertise, and knowledge. The G20 is also planting its flag on this issue; in August, I joined G20 ministers in Argentina to discuss what can be done to spread the benefits of the digital transformation. Needless to say, the meeting could not have come at a better time. Still, while programs and summits can offer the world’s developing and leastdeveloped countries a place to start in their push for greater connectivity, more support is needed if we are ever to close the digital divide. With billions of people still below the first rung of the digital ladder, the climb to prosperity is becoming more challenging than ever. WEiE

October / December 2018 - World Excellence International Edition 45

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INNOVATION & TEChNOLOGY

thE truth liEs in thE MiddlE

DIGITAL DISRUPTION’S SILVER LINING For much of modern history, export-driven industrialization and natural-resource wealth were viewed as the only mechanisms for sustained growth in developing countries. But today, new technologies are giving countries more control over their social and economic fortunes. Mark suzman

EattlE - Technology is

often oversold as either a panacea for the world’s problems or an unshakeable curse inﬂicting disruption and displacement on the most vulnerable. But historically, neither of these characterizations is accurate. From the steam engine to the personal computer, inventions have

transformed societies in complex ways. On balance, however, technology has always created more jobs and economic opportunities than it has destroyed. That trend is likely to continue. Why am I so upbeat? Because everywhere I look, leaders are repositioning their economies to

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ensure that technological change and automation are assets rather than liabilities. As the University of Oxford-based Pathways for Prosperity Commission recently observed, with “optimism and collective action,” so-called frontier technologies can empower even the poorest countries. For much of modern history, export-

INNOVATION & TEChNOLOGY

driven industrialization and naturalresource wealth were viewed as the only mechanisms for sustained growth in the developing world. But today, new technologies, and the ability to combine them with old innovations, have given people more say over their economic fortunes. For example, the Africa Soil Information Service, which is funded by the Bill & Melinda Gates Foundation, has combined remote sensing software and opensource data to lower the cost of soil mapping by 97%. This has given Africa’s smallholder farmers new tools for making evidence-based decisions about their operations, thereby increasing crop yields and reducing operating expenses. Similarly, Twiga Foods in Kenya is using technology to optimize its supply chain by matching rural fruit and vegetable growers with small- and medium-size vendors in Nairobi. Twiga’s approach has helped farmers access more lucrative markets, increased consumer choice, and dramatically reduced postharvest losses and waste. Digital inclusion can be a powerful force, particularly for women. Go-Jek, a ride-sharing and food-delivery service In Indonesia, has increased drivers’ income by an average of 44% while connecting many of its suppliers, who are usually women, to banking services for the ﬁrst time.

To be sure, capitalizing on the transformative potential of technology will require investing more money in people, particularly in women and children. As we argued in this year’s Gates Foundation Goalkeepers Report, better health care and education – two pillars of the World Bank’s “human capital index” – can unlock productivity and innovation, reduce poverty, and generate prosperity. These gains are essential to countries’ ability to achieve the targets set by the United Nations Sustainable Development Goals. Harnessing technology will also require sensible economic reforms, better infrastructure, more capable institutions, and strategies to deliver digital solutions to marginalized populations. Some countries are already taking these steps. Indonesia, for example, has launched an ambitious program to connect an additional 100 million people to broadband, a recognition of the importance that connectivity plays in fostering economic opportunity. And yet, for the bulk of the world’s “bottom billion,” basic phone and Internet services remain prohibitively expensive. That is why governments, donors, and the private sector must work together to create business and pricing models that allow for cost recovery while still providing an adequate level of digital service to the poorest consumers. One poverty-

reduction strategy worth exploring is communal access to technology. Affordability is not the only factor that keeps technology out of the hands of the poor. The digital divide mirrors larger patterns of social discrimination, especially for women. Wherever women live, they are about 40% less likely than men to have ever used the Internet, which suggests that social inequities are also driving disparities in digital access. Closing this gap is vitally important. When women have access to the full range of digital services – from mobile banking to telemedicine – they are generally wealthier, healthier, and better educated. As policymakers in both developed and developing countries make decisions and investments that will shape the landscape in which technological change unfolds, it is gratifying to see countries engaging in meaningful dialogue about their digital futures. As long as citizens who understand technology and its ramiﬁcations are included in these conversations, it is possible to design solutions that meet everyone’s needs. Today’s cuttingedge technologies are evolving at a dizzying speed. But with foresight and preparation, the world can minimize the disruption they will inevitably cause to ensure lasting and inclusive growth. If we coordinate our investments in people with our spending on innovation, the new “digital age” will leave no one behind. WEiE

October / December 2018 - World Excellence International Edition 49

business & finance

sEEKing altErnatiVE payMEnts ChannEl

thE dollar and its disContEnts Having unilaterally reimposed sanctions on Iran, US President Donald Trumpâ&#x20AC;&#x2122;s administration is threatening to penalize companies doing business with the Islamic Republic by denying them access to US banks. But that could hasten the dollarâ&#x20AC;&#x2122;s demise as the main global currency. barry Eichengreen

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business & finance

russEls US President Donald Trump’s unilateralism is reshaping the world in profound and irreversible ways. He is undermining the working of multilateral institutions. Other countries, for their part, no longer regard the United States as a reliable alliance partner and feel impelled to develop their own geopolitical capabilities. Now the Trump administration is eroding the dollar’s global role. Having unilaterally reimposed sanctions on Iran, it is threatening to penalize companies doing business with the Islamic Republic by denying them access to US banks. The threat is serious because US banks are the main source of dollars used in cross-border transactions. According to the Society for Worldwide Interbank Financial Telecommunication (SWIFT), dollars are used in nearly half of all cross-border payments, a share far greater than the weight of the US in the world economy. In response to the Trump administration’s stance, Germany, France, and Britain, together with Russia and China, have announced plans to circumvent the dollar, US banks, and US government scrutiny. “Plans” may be a bit strong, given that few details have been provided. But the three countries have described in general terms the creation of a stand-alone ﬁnancial

entity, owned and organized by the governments in question, to facilitate transactions between Iran and foreign companies. Those companies will presumably settle their claims in euros, not dollars, freeing them from dependence on US banks. And insofar as the Europeans’ specialpurpose ﬁnancial vehicle also bypasses SWIFT, it will be hard for the US to track transactions between Iran and foreign companies and impose penalties. Is this scheme viable? While there is no purely technical obstacle to creating an alternative payments channel, doing so is certain to enrage Trump, who will presumably respond with another round of tariffs against the offending countries. Such, unfortunately, is the price of political independence, at least for now. Having learned a painful lesson about dependence on the dollar, will other countries move away from it more generally? The fact that the dollar is used so widely makes doing so difﬁcult. Banks and companies prefer using dollars because so many other banks and companies use dollars and expect their counterparties to do likewise. Shifting to another currency would require coordinated action. But with the governments of three large European countries having announced just such coordination,

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business & finance

such a scenario can no longer be excluded. It is worth recalling how the dollar gained international prominence in the ﬁrst place. Before 1914, it played essentially no international role. But a geopolitical shock, together with an institutional change, transformed the dollar’s status. The geopolitical shock was World War I, which made it hard for neutral countries to transact with British banks and settle their accounts using sterling. The institutional change was the Federal Reserve Act, which created an entity that enhanced the liquidity of markets in dollardenominated credits and allowed US banks to operate abroad for the ﬁrst time. By the early 1920s the dollar had matched and, on some dimensions, surpassed sterling as the principal vehicle for international

transactions. This precedent suggests that 5-10 years is a plausible time frame over which the US could lose what Valéry Giscard d’Estaing, then France’s ﬁnance minister, famously called the “exorbitant privilege” afforded it by issuing the world’s main international currency. This doesn’t mean that foreign banks and companies will shun the dollar entirely. US ﬁnancial markets are large and liquid and are likely to remain so. US banks operate globally. In particular, foreign companies will continue to use dollars in transactions with the US itself. But in an era of US unilateralism, they will want to hedge their bets. If the geopolitical shock of Trump’s unilateralism spurs an institutional innovation that makes

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it easier for European banks and companies to make payments in euros, then the transformation could be swift (as it were). If Iran receives euros rather than dollars for its oil exports, it will use those euros to pay for merchandise imports. With companies elsewhere earning euros rather than dollars, there will be less reason for central banks to hold dollars in order to intervene in the foreign exchange market and stabilize the local currency against the greenback. At this point, there would be no going back. One motivation for establishing the euro was to free Europe from excessive dependence on the dollar. This is likewise one of China’s motivations for seeking to internationalize the renminbi. So far, the success of both efforts has been mixed, at best. In threatening to punish Europe and China, Trump is, ironically, helping them to achieve their goals. Moreover, Trump is squandering US leverage. Working with the Europeans and the Chinese, he could have threatened Iran, and companies doing business there, with comprehensive and effective sanctions had there been evidence that the country was failing to live up to its denuclearization obligations. But working together to ensure Iran’s compliance was, of course, precisely what the Joint Comprehensive Plan of Action, renounced by the Trump administration earlier this year, was established to do. WEiE

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business & finance

a doublE-EdgEd sWord

thE high Cost of high finanCE There is a ring of plausibility to the argument that with finance, as with luxury goods, you can have too much of a good thing. Recent research suggests that a high degree of financialization of the economy may impede growth. howard davies

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business & finance

ondon As the United Kingdom’s Brexit negotiations stumble on, other European countries are using the period of uncertainty about the future regulation of the continent’s financial markets to tempt firms and activities away from London to rival centres. The French have been particularly active in support of Paris, but Frankfurt, despite lukewarm support from the government in Berlin, has not been far behind. And other cities like Luxembourg, Dublin, and Amsterdam have laid out their own welcome mats. Bankers have not been so popular for a decade or more. But should other cities wish to emulate London and become a global financial centre? Do they know what is good for them and the national economies of which they are a part? The 2008 global financial crisis has prompted some rethinking about the pros and cons. Hosting a major financial centre is, of course, unambiguously good for Porsche dealerships, upmarket champagne bars, and table dancing clubs. But some argue that the drawbacks in terms of the effect on the rest of the economy are too serious to ignore. Andy Haldane, the Bank of England’s chief economist, has described the banking industry

as a “pollutant,” at least in part. “Systemic risk,” he says, “is a noxious by-product” that “risks endangering innocent bystanders within the wider economy.” Some countries, the UK among them, continue to bear “the social costs to the general public from banking crises.” But it may be argued that regulatory reform, particularly the far higher capital requirements established by the Basel Committee on Banking Supervision for systemically signiﬁcant banks, has signiﬁcantly reduced the risk of incurring those

Cecchetti and Enisse Kharroubi of the Bank for International Settlements (BIS), have argued that an excessively large ﬁnancial sector damages productivity and growth. One reason for that outcome is the distortion of skill allocation. The ﬁnancial sector, which typically pays more than most others, draws scarce high-level skills away from areas of the economy in which they may contribute more to productivity. When I was Director of the London School of Economics, I was struck by the fact that in a school offering

thE iMpaCt of brEXit

OTHER EUROPEAN COUNTRIES ARE TRYING TO TEMPT FIRMS AND ACTIVITIES AWAY FROM LONDON TO RIVAL CENTRES costs. Research has shown that so-called tier one capital ratios above 13% cut the risk of banking collapses sharply. The risk can never be reduced to zero, but the stress testing carried out by regulators shows that most major banks can now survive very extreme economic shocks. The Bank of England models a 4.7% contraction in GDP and a 33% fall in house prices, and so far the banks have survived. Other studies, however, point to other adverse side effects arising from hosting a super-sized ﬁnancial sector. For example, Stephen

a wide range of social sciences and humanities, not simply finance and economics, in some years more than 30% of the graduating class took financial jobs. Many engineering graduates from London’s Imperial College were seduced by investment banks, which paid them extravagantly for inventing elaborate financial structures rather than bridges or machine tools. A second negative side effect, according to Cecchetti and Kharroubi, stems from the preference of bank finance for investment in real estate, where

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business & finance

collateral is available, rather than less easily assessed investments in technology-based businesses. Their calculations suggest that a high degree of financialization of the economy, certainly well below the level in the UK in recent years, may impede growth. Other studies suggest that the negative effects begin to be felt when credit to the private sector exceeds 80-100% of GDP. During the financial crisis, the ratio in the UK was around 180%, and it had been well over 100% for some time. And others argue that a large finance sector may bolster the exchange rate, making other exports less competitive. More contentious research recently published by the University of Sheffield goes much further, and attempts to estimate the economic cost incurred as a result of Britain’s specialization in high finance. The

authors arrive at a figure of £4.5 trillion ($5.9 trillion), or two years of GDP at 2018 levels, for the period from 1995 to 2015. If that analysis is correct, we should be packing bankers off to Paris in specially chartered Eurostar trains, sealed to prevent them from attempting to jump off before they reach the Channel Tunnel. Moving Lombard Street to the Boulevard Haussmann could be more effective than any of the other attempts we English have made to harm our nearest neighbours over the centuries. But how robust are these calculations? There is a ring of plausibility to the argument that with finance, as with luxury goods, you can have too much of a good thing. The supposed impact on growth, however, assumes that some of the skilled people shed by the financial

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sector will move elsewhere in the economy, rather than following the finance jobs wherever they go. There is no guarantee that this will happen, or that employment lost through finance sector moves will be compensated by growth elsewhere. UK manufacturing has underperformed for reasons other than finance, including poor management and bad labour relations. It looks, however, as though the UK is about to engage in a real-world experiment that tests these theories. Unless there is a surprising breakthrough in the Brexit negotiations, which produces a future free-trade regime for both services and goods, a substantial relocation of financial activity to the continent, and to Ireland, will occur over time. If and when that happens, we must hope that the BIS economists, derided in London while it was riding high, are not entirely wrong. WEiE

ECONOMICS

CoMproMisE is nECEssary for thE uE to WorK propErly

WILL ITALY SINK EUROPE?

Italyâ&#x20AC;&#x2122;s coalition government has been generating headlines with its pursuit of populist economic policies that threaten to leave eurozone fiscal rules in tatters. But before EU authorities respond, they should bear in mind that if Italy does not achieve stronger GDP growth, political conditions there could deteriorate further. Jim oâ&#x20AC;&#x2122;neill

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ECONOMICS

ondon - Despite political turmoil and emerging risks at the global level, the eurozone has had two years of strong economic growth, at least by its own historically disappointing standards – and even with the United Kingdom lurching toward withdrawal from the European Union. But with the emergence of a populist government in Italy this year, it is no longer safe to assume that the eurozone’s worst days are behind it. Italy was the ﬁrst country that I studied when I entered the ﬁnancial world back in 1982, so I have a special affection for it. I was working for a very large American bank at the time, and I can still remember joining frequent transatlantic conference calls to discuss Italy’s debt-to-GDP ratio. The question on everyone’s mind was when the country would default; but it never did. Instead, Italy muddled through, and has continued to do so ever since. Still, now that the Italian government seems poised for a standoff with the EU, it would not be surprising if worries about a default were to re-emerge. As my experience more than 30 years ago shows, Italy’s economic problems far predate its adoption of the euro. It has long had poor productivity by European standards, and that translated into relatively low trend growth in the pre-euro decades. At the same time, occasional spurts of faster growth regularly sowed

the seeds for various crises, often resulting in devaluations of the Italian currency, the lira. Of course, there are some who now yearn for the days when the lira could be weakened to restore growth. That is no longer an option under the single currency. But what the pre-euro romanticists overlook is that euro membership has given Italy low inﬂation, and thus lower interest rates. Moreover, there is reason to

France, Germany, Japan, the United Kingdom, and the United States). Still, the mainstream political parties that governed Italy until this year did not deliver the nominal GDP growth that the country needs. As a result, Italians elected an unconventional coalition whose program combines the policies of the populist left with those of the populist right. While the League party promises to cut taxes, the Five Star Movement (M5S) is pursuing a form of basic income.

an unConVEntional Coalition

THE PROGRAM COMBINES THE POLICIES OF THE POPULIST LEFT WITH THOSE OF THE POPULIST RIGHT. think that lira devaluations did more harm than good. Even if they offered an occasional competitive boost, they stood in for tougher structural reforms that would have increased productivity over the long term. There are also some who believe that the eurozone’s fiscal and monetary framework locks Italy into weak nominal GDP growth, possibly too-low inflation, and high debt. Yet before the new government took office, Italy’s cyclically adjusted fiscal deficit – as opposed to its underlying debt position – was often rather restrained compared to the rest of the eurozone, as well as the other members of the G7 (Canada,

But what Italy needs is a broad structural reform program to improve productivity. That is the only way to achieve a higher long-term growth rate, given the country’s demographics. In addition to enacting policies to boost the labor-force participation rate among women, Italy must provide more attractive opportunities for its young people. For its part, the EU should do more to help Italy take the tough steps it needs. The European Commission, the European Central Bank, and the German government have erred in insisting on rigid enforcement of

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ECONOMICS

the EU Stability and Growth Pact, particularly the 3%-of-GDP cap on fiscal deficits. Although some countries have been allowed to breach the deficit cap during challenging times, Italy is almost never afforded much accommodation, owing to its high debt levels. Yet as the experience of Belgium and Japan shows, high government debt can be reduced only

more broad-minded in how it pursues its inflation target of just under 2%. That target, along with Germany’s own 2% target, leaves Italy locked into a state of low inflation, even when it could benefit from more monetary-policy stimulus. Under these conditions, the EU authorities would do well

plain and simple. Some will say that it was a mistake to have allowed Italy into the eurozone in the ﬁrst place, and that an optimal currency zone should have been more discriminating in its membership. But the German and French business communities insisted that the monetary union must include some of Italy’s more competitive companies. And

through sustained economic growth. Complicating matters further, some reforms to boost long-term productivity can actually reduce growth in the short term. Thus, any government enacting such measures will need to have the option of pursuing counter-cyclical stimulus. Another problem concerns monetary policy. The ECB could stand to be

not to oppose the current Italian government’s plans too aggressively. If mainstream liberals are worried about the implications of a democratically elected populist government, then they should worry even more about what could come next if economic circumstances worsen. At this stage, Italy needs stronger nominal GDP growth –

once Italy was considered eligible, so, too, were many other countries. At the end of the day, those with the power to set and enforce EU ﬁscal and monetary rules know full well that the eurozone could not survive a Greek-style crisis in Italy. It is their responsibility in the months ahead to make sure it doesn’t come to that. WEiE

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ECONOMICS

a CEntury of EConoMiCal short-sightEdnEss

ONE HUNDRED YEARS OF INEPTITUDE

The 2008 crisis will most likely be remembered as a watershed moment – and not because it served as an effective wake-up call for policymakers. On the contrary, that crisis – and the failure of leaders to discern, much less act on, its lessons – may well open the way for many more crises in the coming decades. helmut K. anheier

Erlin - The global financial and economic crisis that began in 2008 was the greatest economic stresstest since the Great Depression, and the greatest challenge to social and political systems since World War II. It not only put financial markets and currencies at risk; it also exposed serious regulatory and governance shortcomings that have yet to be fully addressed. In fact, the 2008 crisis will most likely be remembered as a watershed moment, but not because it led to reforms that strengthened economic resilience and removed vulnerabilities. On the contrary, leaders’ failure to

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ECONOMICS

discern, much less act on, the lessons of the Great Recession may open the way for a series of fresh crises, economic and otherwise, in the coming decades. However serious those crises turn out to be, historians a century from now will likely despair at our shortsightedness. They will note that analysts and regulators were narrowly focused on fixing the financial system by strengthening national oversight regimes. While this was a worthy goal, historians will point out, it was far from the only imperative. To prepare the world to confront the challenges posed by globalization and technological development in a way that supports sustainable and equitable growth, governance institutions and regulations at both the national and international levels must be drastically improved. Yet not nearly enough has been invested in this effort. Beyond regional bodies like the European Union, international financial governance has remained largely untouched. Worse, because the partial fixes to the financial system will enable even more globalization, they will end up making matters worse, as strain on already-inadequate governance and regulatory frameworks increases, not only in finance, but also in other economic and technological fields.

Meanwhile, enormous financial investments focused on securing a higher rate of return are likely to fuel technological innovation, further stressing regulatory systems in finance and beyond.

benefit from under-regulation and weak governance in the short term, making today’s crises more difficult to prevent. Complicating matters further, the systems affected by today’s

thE 2008 finanCial Crisis

THE GREATEST ECONOMIC STRESS-TEST SINCE THE GREAT DEPRESSION Major technological advances fueled by cheap money can cause markets to change so fast that policy and institutional change cannot keep up. And new markets can emerge that offer huge payoffs for early adopters or investors, who benefit from remaining several steps ahead of national and international regulators. This is what happened in the run-up to the 2008 crisis. New technology-enabled financial instruments created opportunities for some to make huge amounts of money. But regulators were unable to keep up with the innovations, which ended up generating risks that affected the entire economy. This points to a fundamental difference between global crises of the twenty-first century and, say, the Great Depression in the 1930s or, indeed, any past stock-market crashes. Because of the financial sector’s growth, more actors

crises extend well beyond any one regulatory body’s jurisdiction. That makes crises far unrulier, and their consequences – including their long-term influence on societies and politics – more difficult to predict. The next crises – made more likely by rising nationalism and a growing disregard for science and fact-based policymaking – may be financial, but they could also implicate realms as varied as migration, trade, cyberspace, pollution, and climate change. In all of these areas, national and international governance institutions are weak or incomplete, and there are few independent actors, such as watchdog groups, demanding transparency and accountability. This makes it harder not only to prevent crises – not least because it creates opportunities for actors to game the system and shirk responsibility – but also to

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ECONOMICS

respond to them. The 2008 crisis cast a harsh spotlight on just how bad we are at responding quickly to disasters, especially those fueled by fragmented governance. To be sure, as the Hertie Schoolâ&#x20AC;&#x2122;s 2018 Governance Report shows, there have been some improvements in preparing for and managing crises. But we must become more alert to how developments in a wide range of fields â&#x20AC;&#x201C; from finance to digital technologies and climate change â&#x20AC;&#x201C; can elude the governance capacities of national and international institutions. We

should be running crisis scenarios and preparing emergency plans for upheaval in all of these fields, and taking stronger steps to mitigate risks, including by managing debt levels, which today remain much higher in the advanced economies than they were before the 2008 crisis. Moreover, we should ensure that we provide international institutions with the needed resources and responsibilities. And by punishing those who exacerbate risks for the sake of their own interests, we would

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strengthen the legitimacy of global governance and the institutions that are meant to conduct it. As it stands, inadequate crossborder coordination and enforcement of international agreements is a major impediment to crisis prevention and management. Yet, far from addressing this weakness, the world is reviving an outdated model of national sovereignty that makes crises of various kinds more likely. Unless we change course soon, the world of 2118 will have much reason to regard us with scorn. WEiE

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LONDON Le Fonti Awards 2018 On October 26th, 2018 the world’s leading corporate stars reunited for the VIII annual Le Fonti Awards Gala and CEO Summit in London. Le Fonti Awards are held each year in multiple locations recognizing industry leaders in banking, business, economics, ﬁnance, sustainability, law, healthcare, food, insurance and e-commerce. This year, the London Gala & CEO Summit was held at the London Stock Exchange, a prestigious venue located in The City of London, hosted by the inﬂuential journalist, Sky Journalist Jenny Ellice. The title of the CEO Summit round table was “Key risks and challenges for 2019”, a discussion which revolved around recent market trends and evolution and focused on the themes of disruption and sustainability.

LE FONTI AWARDS

CEO & TOP

EXECUTIVES OF THE YEAR

Augusto Mitidieri Sintetica

Michele Cicchetti DWF Italy

CEO OF THE YEAR CSR

MANAGING PARTNER OF THE YEAR FAST GROWING ITALY

Augusto Mitidieri Sintetica

Michele Cicchetti DWF Italy

For being an international excellence in the pharmaceutical sector, with particular reference to pain therapy. Thanks to the charisma of its CEO, Augusto Mitidieri, and a highly professional team, Sintetica is conﬁrmed as one of the most growing companies in the market and attentive to the criteria of CSR.

For creating in less than a year, a law firm that became a catalyst for important international deals. For leading the growth of the firm, in terms of lawyers and successes, achieved thanks to a lean, young and full practice management model. For charisma, strong expertise and the ability to attract talents, increasing the benefit for customers.

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LE FONTI

CORPORATE

AWARDS

Cube Labs

Jaspers-Eyers Architects

1 International Helmet Company

2 Leroy Merlin EspaĂąa

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LE FONTI AWARDS

EXCELLENCE OF THE YEAR INNOVATION & LEADERSHIP LIFE SCIENCES

EXCELLENCE OF THE YEAR ARCHITECTURE BELGIUM

Cube Labs

Jaspers-Eyers Architects

For creating a new business model in the world of technology transfer, that starts in the laboratory, from direct dialogue with scientists, to the participation of academic spinoffs with high investment potential. For representing a modern asset class of “made in Italy Life Sciences”, holding with investments in value, eligible for listing on the Stock Exchange.

For being one of the most respected architectural practices in Belgium and Europe, constantly working hard to achieve excellence in design, perfectly in balance to both cost and time and to bring international perspectives to local projects.

EXCELLENCE OF THE YEAR INNOVATION & LEADERSHIP SPORTS PROTECTIVE EQUIPMENT

EXCELLENCE OF THE YEAR RETAIL SPAIN

International Helmet Company

Leroy Merlin España

For the commitment in combining organizational ability with Italian design and know-how, through the support of a compact team, with high skills in product development and marketing.

For helping people improve their living environment and lifestyle by taking an interest in each customer’s plans. For placing great importance on training employees to help them develop personally and professionally.

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LE FONTI LEGAL AWARDS

Francesco Rotondi LabLaw

Guido Carlo Alleva Alleva & Associati

Giovanni Paolo Accinni Studio Legale Giovanni Paolo Accinni e Associati

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LE FONTI AWARDS

LAWYER OF THE YEAR ITALY

LAWYER OF THE YEAR BRIBERY & CORRUPTION LAW ITALY

Francesco Rotondi LabLaw

Guido Carlo Alleva Alleva & Associati

For his authoritativeness on legal reasoning in the labour market in light of the gig economy, industry 4.0 and new industrial relations. He stands out as a highly innovative professional, and stands apart from the rest thanks to legal proposals that reﬂect the new cultural paradigm and social responsibility projects.

For his prestige conduct when holding posts related to large-scale international proceedings and the acquittals obtained. Particularly worthy of mention is the case of the alleged maxi bribe paid to Nigerian public ofﬁcials for the exploitation of an oil ﬁeld, and the case of asbestos in the establishments of a well-known IT company.

LAWYER OF THE YEAR BOUTIQUE OF EXCELLENCE COMMERCIAL CRIMINAL LAW ITALY

Giovanni Paolo Accinni Studio Legale Giovanni Paolo Accinni e Associati

For the high preparation, the completeness and concreteness of the consulting activity in the ﬁeld of Commercial Criminal Law and for the support to a national and international clientele combined with a signiﬁcant teaching activity.

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LE FONTI

BROKER & FINANCE

AWARDS

BP Prime

International Broker Art

BROKER OF THE YEAR FOREX & CFD INSTITUTIONAL

EXCELLENCE OF THE YEAR INNOVATION & LEADERSHIP ART BROKER

BEST MULTI-BANKING SOLUTIONS COMPANY OF THE YEAR GLOBAL

BP Prime

International Broker Art

Fides Treasury Services

For his unique trading platform and the ﬂexibility to create a customized solution that connects the users to the top-tier liquidity providers with ultra-low latency execution. For being a landmark in the forex and CFD market, both for retail and institutional investors, making their trading experience easier and optimising their returns.

International Broker art is renowned for its profound knowledge and innovative creativity in the world of ﬁnance that is applied to art. For the deep knowledge and ability to innovate the world of ﬁnance applied to art.

For its ability in conﬁrming its successful business model and its leadership in the multi-bank connectivity industry for the fourth year in a row. For being a trustful partner and a landmark for the communication through any channel among clients and banks thanks to pioneering solutions and a charismatic CEO.

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AWARDING THE BEST IN CLASS Submit your candidacy today for the Le Fonti Awards

e Fonti Awards® is an annual awards ceremony recognizing organizations that demonstrate corporate excellence in the fields of business innovation, leadership, technological achievement and employee engagement. Now in its 8th year, it is recognized as one of the world’s leading ceremonies of business awards and personal honors support services. Each awards ceremony is held in a leading strategic financial center such as Hong Kong, Dubai, London, Singapore, Milan and New York. Moreover, each ceremony includes an exclusive roundtable discussion amongst panelists about topics ranging from leadership, to organizational skills, to business strategy and more. The nomination, selection and announcement under the awards winners section is completely free-ofcharge. LeFonti®’s scientific committee along with a team of legal, economic and financial journalists based in over 120 countries receive nominations in

various awards categories throughout the calendar year for the relevant countries, regions and sectors which are pertinent to the category. They can be written submissions or on-line nomination forms and surveys. Our research team will first examine a nomination for a company or individual candidate to ensure that it meets the award’s specific criteria in the selected category. Then, the judging panel, comprising the research team and editors of our magazines (World Excellence - Italy, Le Fonti LEGAL, Finanza & Diritto, Asset Management, New Insurance and our English language publication, World Excellence - International) will evaluate all suitable nominations received for that awards category, provide verdicts and select a winner. To nominate a company for one of our awards please complete our online nomination form by visiting our website, www.lefontiawards.com or send an email info@lefontiawards.com.

74 World Excellence International Edition - October / December 2018

6 1. Warsaw Spire - Warsaw, Poland 2. Deloitte & KPMG HQ - Brussels Airport 3. European Parliament - Brussels, Belgium 4. Quatuor Building - Brussels, Belgium 5. Spectrum - Brussels, Belgium 6. Manhattan Center - Brussels, Belgium 7. Nike European Logistics Campus - Laakdal, Belgium

Excellence of the Year Innovation & Leadership Sports Protective Equipment