Quarterly Profit | Volume IV Issue II

QUARTERLY P R O F I T March 2017

Volume IV Issue II

CONTENTS

3 Letter from the Editor 4 Hamilton is a Sports Paradise 8 Deregulation in a Trump Administration 10 Commerce Formal 12 The Liberal Government Deficit 14 Chocolatey Nightmare 18 Humans of DeGroote

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March 2017 | Volume IV, Issue II EDITOR IN CHIEF Anduena Sertolli

WRITERS Youssef Abdelhamid Nicholas McFarlane Krishna C. Nadella Kelvin Pau CREATIVE DIRECTOR Caroline Egan DESIGNERS Nicholas Chui Mercy Liu MARKETING DIRECTOR Alexandra Foote DIRECTOR OF OPERATIONS Rohan Bhatia PHOTOJOURNALIST Ashley Javier Follow us on Facebook & Instagram:

@quarterlyprofit Read online: http://issuu.com/quarterlyprofit Contact us: magazine@degrootecommerce.ca DISCLAIMER // All photos or logos used without sourcing are used in compliance with the Fair Use Law – for not-forprofit educational purposes. In no way do we assume owndership or affiliation with any images seen. If there are any questions or concerns, please contact us: magazine@degrootecommerce.ca ht tp ://copyright .mcmaster.ca/ F air_ Dealing

s always, the semester is flying by! I’d like to take this opportunity to thank our readers and everyone who has shown interest in contributing to this publication. The response to Issue I was phenomenal and grew with the introduction of our social media in February. Thank you DeGroote for your continuous support, and we wish you a happy new year!

The QP team has been hard at work, creating new, refreshing content, and constantly exploring unique ways to display it beautifully on an online platform. Our team is truly hardworking, from the executive team to our volunteer writers and designers. It’s always difficult to stay involved in university, but it is clear that the passion of our team keeps growing stronger.

I sincerely appreciate everyone for their dedication.

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hrough another “Call for Submission”, we were able to accumulate another wonderful variety of pieces by giving writers the freedom to explore different topics. In Issue II, read about why our current government deficit is in our best interest, then switch to a exposé on FAIRTRADE in relation to the cocoa industry.

On the final pages of this issue, you’ll notice something new.

Our photographer, Ashley Javier, entered this team with a vision to start a Humans of New York-spinoff – Humans of DeGroote. I was immediately intrigued by the idea and we are finally able to kick it off with this issue. What you see here is just a sneak peak, the rest of the people interviewed will be featured on our Instagram and Facebook pages: @quarterlyprofit. Be sure to follow us for upcoming Humans of DeGroote posts, where we will have genuine conversations with the DeGroote community. We believe everyone has something relatable to say and we want to showcase it through QP! Please enjoy Quarterly Profit, Issue II, and never hesitate to contact us through email or social media.

Anduena Sertolli, Editor-in-Chief

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LETTER FROM THE EDITOR

MANAGING EDITORS Nick McFarlane Miranda Neal

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Sports

By Kelvin Pau

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s someone who was passionate about watching and analyzing sports (I began watching the Toronto Raptors since I was five years old, and European Association Football three years ago), it has always been a dream of mine to find a club whose mission statement, values, and beliefs embraced collective sport. To my delight, I stumbled upon the McMaster Sports and Business Association (MSBA) last year. Having been a member for five months, it stimulated my interest greatly; notably, I was impressed with the Air Canada Centre tour and weekly Raptor game viewings at Boston Pizza, which united McMaster sports fans like myself together.

I had the pleasure of interviewing one of the founders, Varen Sylvester, who is the Co-President of the MSBA. Outlined in the next few pages is the transcript in full.

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paradise Hi Varen, thank you for doing this interview with me.

Thanks for having me here.

So tell me a bit about yourself.

I am a fourth year Commerce student, and looking back, I could not have made a better decision for my undergrad. I assumed I wanted to pursue a Commerce degree because I did not like Science nor essay writing, but my passion has always been playing and learning the business of sports. After Yoel, Gabriel (the other founders) and I tried to create the club

two years ago, we did not receive approval from the MSU since we only had an idea rather than a vision for the events we wanted to run. Obviously we were disappointed, but we reapplied last year and have successfully organized various sports activities to date such as a tour of the Air Canada Centre.

With the limited number of university level sports-related clubs in Canada, what makes yours specifically different from others?

Luckily for us, our location in Hamilton makes us stand out. The majority of

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sports clubs are in Toronto (University of Toronto, York, Ryerson) and Queen’s also has a big sports conference every year called the QSIC. In the future, we hope to host these schools for sport business events raising awareness of the industry amongst McMaster students and the Hamilton community.

With the MSBA in its infancy, how do you see the club growing in the future?

Our short term goal has been to raise awareness of the sports business industry at McMaster, and the recent sportsthemed McMaster World Congress event has helped accomplish that. In addition, we have spoken to the university about creating a major in sports business. We really think the demand is there since we have 40-50 students attending our events and 100 official registrants, with 200 more on our mailing list. Our long-term objective

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is to build connections in the professional sports industry, specifically with Maple Leaf Sports and Entertainment (MLSE) for future recruitment opportunities. We are confident these connections can be made since several of the key business leaders in the MLSE went to McMaster. This past year we also held a McMaster Sports Industry Conference, which we intend to make an annual event in the future.

Where do you see Hamilton’s sports landscape in the future?

From my knowledge, there has been talk of an NHL team coming in and potentially replacing the Hamilton Bulldogs as the sole hockey affiliate in the Steel City. Overall, I think the recent Ontario Coaches Sports Conference as well as the impact of varsity sports at McMaster plays an integral role in developing and nurturing the sports landscape in Hamilton.

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y experience with MSBA has motivated me to find a job in sports business and I encourage students with a similar passion to look for postings on OSCARplus, as well as speak to World Congress presenters about this exciting industry. As students and future business leaders, we have the ability to continue to grow the large sports business industry in Hamilton and be mentors for the MSBA, which has already done so much for Business undergraduates.

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CAN TRUMP OVERTURN THE VOLCKER RULE?

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t may be early, but 2017 has already gotten off to a bang with Donald Trump’s Presidency and the subsequent days since he took office in the White House. One of the many promises he made while on the campaign trail was removing regulatory burdens and opening up investor options. Specifically, President Trump is focusing on Wall Street Reform and the Consumer Protection Act of 2010, otherwise known as Dodd-Frank.

The recent order for a sweeping review of Dodd-Frank represents the most aggressive action taken by Trump to loosen regulations in the financial services industry. His plans are sure to face fierce criticism by Democrats who assert Trump’s intent is to undo change designed to safeguard average investors from the protocols of the global banking system.

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must be feasible. Believe it or not, it’s a lot more complicated than one may think. To provide insight on this matter, I recently spoke with David Westin (former President of ABC News) on Bloomberg Television, targeting one specific rule under Dodd-Frank, the Volcker Rule. Below is a transcript of our conversation: David Westin: So let’s start with the Volcker Rule and let’s remind ourselves about what exactly the Volcker Rule does before we talk about getting rid of it.

Krishna C. Nadella: Absolutely. So specifically, it is Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Generally speaking, it means commercial banks in excess of $50B capitalization are prevented from engaging in proprietary trading and investing in hedge funds or private equity. Essentially, it is a response to the concept of ‘Too Big to Fail.’

DW: So banks are unable to purchase securities for their own accounts and therefore have to trade with the account of others. As you say, the Volcker Rule is part of legislation, but it didn’t self-implement. There had to be regulations promulgated and it took a long time to do so. Why do you think that is?

KCN: Well, this is one of those unique rules that have multiple agencies associated with it. The Volcker Rule was originally endorsed in January 2010 by President Barack Obama but it wasn’t actually implemented until July 2015.

The applicable agencies to the rule are: The Federal Reserve The FDIC (Federal Deposit Insurance Corporation) The CFTC (Commodity Futures Trading Commission) The SEC (Securities and Exchange Commission) The OCC (Office of the Comptroller of the Currency) Since some of these agencies are more skewed toward banking than others, they have to work together and independently bring this rule to pass.

DW: So, President Trump comes in and asks those five agencies to get rid of those rules, but whether it happens is another story.

KCN: Exactly, the magnitude of enforcement is different among the various agencies. The FDIC, the OCC and the Fed all have the most legitimate power since they are banking agencies and the SEC and CFTC have a lot less. So having said that, how changes are enforced are certainly

up for debate and any repeals will have to be settled in due time in Congress.

DW: As a matter of practicality, what can the President do? How can Trump address the differences in power to enforce change?

KCN: That’s a great question. What we’ve been hearing at Bloomberg Enterprise Solutions when we talk to our clients is, ‘Change the regulators, not the regulation.’ In the next several years, President Trump has the opportunity to tap the Head of the SEC, the CFTC, the OCC, the FDIC and the Vice Chairman of Bank Regulation for the Fed. By appointing key stakeholders at the table, Trump can indirectly influence the enforcement of regulatory change.

DW: It sounds like prosecutorial discretion. So your clients must be asking you, ‘Ok, give me the bottom line, when am I going to get relief?’ What do you tell them?

KCN: I just tell them it is a waiting game.

Right at this point in time with the current administration, we’re really talking about a lot of ambiguity because we don’t know what’s actually going to happen. Remember, the Volcker Rule is part of Dodd-Frank, which is a 38,000-page document. Before repealing starts, the government needs to fully understand the document in its entirety. Maybe the compromise is a half-measure, where the $50B benchmark is raised to $100B. To see the full video, please click on: ht tps ://www.bloomberg.com/ news/videos/2017-01-26/can-president- trump-overturn- the - volcker-rule

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Question: The Liberal Government has Forecasted a $30bn Deficit this Budget. Is this in Canada’s Best T Interest? he Liberal’s $30 billion deficit is in Canada’s best interest and the $30 billion figure is just about the right amount. An increase in government spending will increase GDP and aggregate demand for the consumption of goods and help close the output gap. Even though Canada has paid off a minimal amount of national debt in recent years, the trade-off of repaying principal and interest must be considered. When weighing the costs and benefits, the federal government must determine whether the Canadian economy will grow faster than debt and interest levels. Despite high Conservative spending following the 2008 financial crisis, Canada’s debt-to-GDP ratio is healthy and interest rates are low, which significantly mitigates the risk in running a deficit.

While it is impossible to predict the future with certainty, the Bank of Canada claims there is low probability another Great Recession is around the corner. Currently, Canada holds about $1.1 trillion in com12

bined federal and provincial debt

By Nicholas McFarlane which is about 61% of the $1.8 trillion national GDP figure. Through observation of developed nations around the world, the IMF estimates that the ideal debt-to-GDP ratio for developed countries is 60-62%. $30 billion is an attractive number since it would place Canada on the outer limits of this range. While this figure is skewed by highly indebted countries like Japan and Italy, Canada has hovered around the 60% mark in recent years paying 10 cents/dollar of tax revenue to service debt and experienced minimal financial constraint.

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ith a rise in government spending, the intent of the Liberal government is to ensure that public consumption and investment at least remains flat or increases to prevent a decline in output. The Bank of Canada has supported

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this message by planning to lower interest rates even more, so it is important to maintain a deficit to prevent an offset to consumption growth. Prime Minister Trudeau’s budget will increase consumption by raising incomes for the elderly by $947 through Guaranteed Income Supplements, as well as those unemployed by extending EI benefits 5-20 weeks longer. In addition, the budget includes a Canada Child Benefit, which is a positive tax-free net gain for families, despite being in part subsidized by cuts to the Fitness and Arts & Crafts tax credits.

In the refugee case, Canada is taking out debt now and expecting a return in the distant future. This will lead to price inflation in the short run since output stays the same. Known as the Modigliani life cycle theory, maintaining a consistent level of consumption throughout the business cycle is especially advantageous for consumers during economic downturns.

Currently, Canada has relatively low aggregate demand for goods after the collapse of oil prices from 2014-2015 and the feeble 1.4% growth in Canada’s GDP last year. To help Canadians through this slow period, investment in projects with returns or increased consumption in the shortrun will help offset inflation arising from the increase in government spending.

This raises the moral argument against deficits since future generations are held accountable to repay current debt. However, since real income and standard of living usually increase over time, consumers can still behave dynastically and buy more during troughs in the business cycle. Adults today may see stealing future wealth from their children as immoral, but the key is to invest in projects that will provide them with economic benefit as well, namely, infrastructure. With Canada’s low interest rates, investing in these projects now would result in a higher net present value. In the latest federal budget, approximately $6 billion has been allocated for infrastructure projects.

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rime Minister Trudeau’s budget is not perfect and there is certainly a case to be made that there should be more investment in infrastructure. As the Bank of Canada has empirically discovered, it has been global rather than domestic factors that have lead to Canada’s sluggish GDP growth in recent years. The best solution is to grow Canada’s economy from within rather than waiting for international circumstances to change and the latest federal budget will help accomplish that.

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upporters of Ricardian equivalence, however, would contend demand for goods will not increase since deficits do not raise public consumption. Coined by famous economist, David Ricardo, this ideology claims consumers will save the money from tax breaks today for our children to pay taxes in the future.

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t is impossible not to recognize the fact and workers as they work to improve their that we are living in a globalized world. lives and their communities” This vague From the ethnic clothing we wear, to the statement may seem inspiring, even life vast diversity in race and culture of the changing. However, the facts show otherpeople we meet, to the range of exotic wise. One of FAIRTRADE’s most popular music we listen to, there is almost always stances is its complete opposition to child some global influence. This is thanks to labour. This proves one of the shortfalls of our striving global communications sys- the promises of this organization. It has a tem. Our oral, literate, and electronic proven inability to properly educate itself communication outlets have boosted our about its partners’ cultural backgrounds. international trade trends dramatically For instance, a case by FAIR (Forum for within even this past decade. This is es- African Investigative Reporters, 2012) pecially true in the context of one of the shows the sheer inevitability and imporworld’s largest industries: food. Food has tance of child labour in the West African been exchanged around the globe for cocoa industry. centuries and one of the most demanded treats being cocoa. However, behind the “In Cameroon, Ghana and Ivory Coast, all accessibility of delicious chocolate de- farmers interviewed wanted their children lights is a very high price. to go to school, but addThe massive and growthat, in order to pay They could not ed ing demand for cocoa school fees, they could not do without the do without the children’s has greatly outpaced supply, and ultimatehelp on weekends and at children’s help ly forced the leading harvest time.” on weekends producers, the majority from Western Africa, As demonstrated by this to take inhumane measures to meet the study, not only are FAIRTRADE’s inidemand. The solution? FAIRTRADE: an or- tiatives useless to the aid of farmers, but ganization that specifically caters to the they can even be harmful to the families avoidance of these unruly practices! Or they are attempting to help. Furthermore, does it? The FAIRTRADE organization is in- FAIRTRADE has a history of creating indeed shamelessly engaging in unethical ter-farmer conflict within the industry. To practices as well, consequently showing avoid this, many farmers tend to group the negative side of our globalized trade their efforts to create cooperatives. In an system.

Ivorian cooperative named Cooperative Agricole KAVOKIVA de Daloa, farmers FAIRTRADE appears to engage in many complain about their leader, Fulgence forms of unethical practice, with a nota- N’Guessans’ choice to join and promote ble specialty in lack of ethical humani- the FAIRTRADE initiative: tarian practices. The worst part is: we’re “The pumps are broken (...) no one is going out of our way to pay elevated coming to repair them just like no one premiums to support it. FAIRTRADE (2016) came to maintain them when they were claims “When you buy products with the new. The same goes for two out of three FAIRTRADE Mark, you support farmers wells. The ambulance bought with FAIR-

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TRADE money has been out of service almost from the start�

This proves that FAIRTRADE simply does not care for maintaining, repairing or replacing any resources that, ironically, are celebrated on the FAIRTRADE websites and through their own reports.

FAIRTRADE is clearly missing the bigger picture. Certain basic humanitarian rights are not at all acknowledged by the organization. For instance, a documentary lead by Dr. Roy Maconachie (2016) in partnership with the University of Bath showed that there is an unacceptable level of gender inequality within the West African cocoa industry, particularly in Ghana. Women spoke openly about how they worked for countless hours and received little or no compensation whilst their husbands would collect all the proceeds from cocoa sales. This further demonstrates just how selective FAIRTRADE has been with its humanitarian practices and standards.

the industry. Ultimately, the FAIRTRADE organization is not as angelic as they make themselves out to be. Through its ignorance of foreign culture and selective policies, its humanitarian practices are definitely sub-par. Our increasingly globalized world along with its multitude of facilitated communications systems has allowed this ignorance, as consumers are still taking companies’ claims at face value. It is important for us to use our international communications efficiently in order to expose such unethical behaviour from even the most praised organizations.

Perhaps next time we hit the shops we should consider regular cocoa products at regular cocoa prices to avoid such an expensive and emotionally driven scam, that may be doing more harm than good.

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AIRTRADE is clearly using a flawed practice to belittle the African farmers in order to sustain its dominance within 17

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DeGroote

Humans of

Advice to first years “If I were to give advice to first years in commerce, it would be to ‘Just Get Out There!’ I know first and second year, especially in second year is really hard, in terms of adjustment and courses. This is because you really need to set time to just do stuff for yourself, to get out there to meet people and have fun. It’s such an important aspect in University to meet people and socialize, but to also finding a balance between both.”

- Priscilla Thomas, Level IV B. Commerce How would you describe your University experience thus far?

“First year wasn’t as good as second year just because I was shy and I didn’t know what I was doing; I didn’t really have a goal or a plan in mind. All I did in first year was literally, school, gym and then back to res; I didn’t really go out there to bond with my roommates or with other people. My res experience wasn’t that good because I didn’t open myself up to my roommates because it felt like we had different interests. But coming into second year was a lot better because I lived with people I actually liked and I joined a lot more clubs on campus like Dragon Boat and AIESEC. It feels like I’ve made deeper and stronger connections from joining these clubs. Second year helped me grow the most in terms of solving problems academically, I know which stream I want to focus on either Marketing or HR, and I’ve met a lot more people.”

– Michael, Level II B. Commerce 19