Economics

Lessons from Asian banks on their coronavirus response

ArticleBy Jacob Dahl, Vito Giudici, Sameer Kumar, Vishal Patwari, and Gabriele Vigo Lessons from Asian banks on their coronavirus responseOpen interactive popupFinancial institutions in countries initially affected by the pandemic moved quickly to safeguard their employees, transform their operations, and serve customers in new ways. As the COVID-19 outbreak continues to spread around the world, the humanitarian crisis has been accompanied by immense social and economic disruption. Almost overnight, whole countries have had to accept a new reality: everything has changed, and daily life may never be the same. Asian banks have already had to grapple with all of these factors, taking actions to maintain operations, protect their workforce, and keep customers informed. Their actions could offer a valuable template for banks around the world that are still amid the crisis and experimenting with initiatives. By focusing on three imperatives—ensuring business survival, fulfilling social responsibilities, and adapting to the new normal—banks can minimise disruption and continue to provide vital services to their customers. Ensure business survival In response to the pandemic, Asian banks moved quickly to shore up their operations and implement new approaches to mitigate operational disruptions. They prioritised several areas to identify issues or obstacles to business continuity and then experimented with new solutions and ways of working. Confirm resilience of internal operations To guide the pandemic response, many financial institutions formed a response-management unit composed of executive-level, cross-functional teams. These teams were empowered to make key decisions as well as communicate COVID-19 responses quickly and effectively across the organisation.1 Asian banks also had to shift to remote working for most employees, a move that required IT to ensure the organization’s infrastructure and systems could support such a shift. In defining remote and work-from-home setups, bank executives considered both the level of human interaction required for certain tasks and the degree to which […]

How a universal basic income can end financial exclusion

The main argument for a universal basic income (UBI) is that it would reduce poverty and income inequality. Yet UBI advocates often overlook a range of other potential benefits. Digital UBI payments can bring people into the financial system and build their financial capability, unlocking a range of development benefits for citizens and governments alike. Take Mongolia for example. In 2014, 92 percent of adults had a bank account—by far the highest share in the developing world. (By comparison, only 43 percent of adults are banked in similar lower-middle income countries.) Young adults, a population often financially disenfranchised, see some of the most impressive usage of financial services; account ownership among Mongolians aged 15-24 years old is 93 percent. Smart policies, digital payments, and greater inclusion of traditionally marginalised groups all helped Mongolia achieve nearly universal account ownership. The Mongolian Human Development Fund (HDF) distributes revenues from the mineral and mining sectors with the objective of redistributing wealth. A flagship program funded by the HDF is the Child Money Program (CMP), launched in 2012. As part of CMP, the government makes monthly electronic deposits into savings accounts opened in children’s names, helping to ensure that all Mongolians will eventually be banked. The program pays about $10 a month to all children aged 0 to 17, thus ensuring that the parents of every new born open an account in their child’s name. Alongside South Africa, Mongolia has one of the developing world’s largest shares of adults receiving government transfers—35 percent—with two-thirds of these payments made directly into bank accounts. Seventy percent of account owners in Mongolia make or receive any payment through their account, while in East Asia and the Pacific the share is 50 percent. These accounts aren’t only passively utilized to receive payments—they are also actively used for monthly cash management and longer-term savings. […]

A four-day working week will not only improve wellbeing – it could save the planet

A shorter working week has re-emerged as a prominent subject of political and economic discussion in recent years, with the TUC, the Green Party and Labour taking a reduction of working hours seriously as a policy that could increase workers’ well-being, boost productivity and face the challenges of automation. In Germany, the IG Metall, Europe’s largest industrial union, led a strike last year that mobilized 1.5 million workers and won the option to individually reduce working time from 35-hours per week to 28-hours per week, while securing the option to return to full-time employment afterwards. While a shorter working week is often framed as a tool to fix a broken economic model that is working for the few, rather than for the many, the increased interest in working time reductions coincides with the emergence of powerful global movements that highlight another crisis that is facing humanity today: the depletion of resources, the degradation of our natural environments and above all the rapid heating-up of our planet. Here, too, pressing issues of intra- and intergenerational justice emerge, with people in the global south and the poor more likely to suffer the fall-out of an economic system that largely favours the capital-owning class in the global north. For decades now, the sustainability debate has largely been dominated by calls for ethical consumption, rather than facing the systemic root of the problem: an economic system that prioritises profit-making over workers’ well-being and even the preservation of the very natural basis of our collective life. To develop a sustainable economic model, it is becoming clear that we need to break with the imperatives imposed by the necessities of capital accumulation (endless “growth”) and find a way to provide a decent standard of living while honouring planetary boundaries. At the same time, our current working time and […]

‘Don’t be the villain’: Niall Ferguson looks forward and back at capitalism in crisis

The roots of discontent with global capitalism run deep, according to the historian. By looking back, business leaders can get a clearer view of what’s coming. Capitalism is in crisis, as usual. There will always be people questioning the legitimacy of the system. As Joseph Schumpeter wrote in Capitalism, Socialism and Democracy, published in 1942, capitalism has at its heart creative destruction, and that creates pain; it creates losers. This is the normal state of affairs, and we shouldn’t be surprised that it’s going on. Without the financial crisis, the trends that were increasing income inequality might have led to some kind of political backlash. But trends often need a crisis to bring them to the forefront of people’s minds. That’s one of the lessons of history: trends, if they unfold over decades, don’t necessarily produce big political outcomes; there needs to be some kind of catalyst. In 2008–09, we had the biggest financial crisis since 1929. It was perfectly clear at the time—and I remember writing this in early 2009—that there would be a backlash. The shock was an enormous one. It affected some countries—Greece, for example—as severely as the Great Depression. If there had not been some kind of reaction, that would have been remarkable. It took the financial crisis to make everybody start talking about inequality, even though if you look at the data on income or wealth inequality, it had been widening since the 1980s in the United States, and indeed in quite a few other countries around the world. Nineteenth-century parallels To understand where we are now, you need to go back to the late 19th century, which saw a period of extraordinary globalization. I tend to think of it as the first age of globalisation: enormous increases in trade, in capital flows, in migration. And then […]

Lessons from China on how to drive sustainable growth

The Chinese dream will see us break the link between growing incomes, rising production and degradation of the environment. Our businesses should continue to grow even as our cities, farmland and entire ecosystems become greener and more sustainable. Long-term wealth creation should go hand-in-hand with sustainability. Earlier this year, Lyu Jun, Chairman of COFCO Corporation, described how the commercial case for sustainable production is lagging behind the moral one. Since his article was published as part of the World Economic Forum 2019 Annual Meeting, we have been actively demonstrating the commercial value of sustainability. In July, my company partnered with a consortium of 21 banks to engineer a $2.3 billion loan. Under the terms of this loan, we pay a lower interest rate if we can meet a series of annual targets on sustainability. Any interest saved will be re-invested into initiatives that increase our sustainability performance even further. Sustainability earns us money. This loan demonstrates some of the keys to sustainable growth. Here are five of them: Finance is emerging as a major driver of sustainability. Government policy and consumer preferences can certainly shift corporate behaviour, as tariffs on soy have shown. And most consumer-facing businesses are adapting to their customers’ preferences for more sustainability. But I see a more interesting role for the banks, whose influence is immense. The financial sector is shifting quickly towards sustainability as the links to reduced risk and better financial performance become clear. In the first half of this year, the issuance of sustainability-linked loans leapt 63% to $44 billion, as much as in all of 2018. Money talks. Innovation will be part of any solution While the public sector has limited funding resources, private investment and capability could play an instrumental role in achieving sustainable agricultural development goals. But current levels are not enough to […]

The middle-class dream is moving beyond millennial reach

Do you feel like your cost of living is rising? If so, you’re not alone. Years of low income growth and increasing prices have made the “squeezed middle” a reality for many, with new research showing young people’s prospects are among the hardest hit. The middle class is shrinking in most countries and represents an out-of-reach dream for younger generations, according to the OECD’s report Under Pressure: The Squeezed Middle Class. Just 60% of millennials – people born between 1983 and 2002 – are part of middle-income households in their twenties, compared with almost 70% of baby boomers. “The middle class used to be an aspiration,” the report says. “However, there are now signs that this bedrock of our democracies and economic growth is not as stable as in the past.” A healthy middle class matters, not just for equality and inclusion, but also because it propels consumption growth and investment and generates tax income that helps fund social safety nets 1The OECD defines middle class as a range around the median household income, which varies from country to country. In the US, that’s between about $23,000 and $62,000, whereas in Mexico it’s about $4,000 to $10,000. While the absolute amounts vary from country to country, the global patterns are clear: income growth is sluggish and the cost of goods and services associated with a middle-class lifestyle are increasing. One in five middle-income households spend more than they earn, and over-indebtedness is higher for them than for both low-income and high-income households, the report says. In addition, automation and the Fourth Industrial Revolution have destabilized the labour market, creating uncertainty around job prospects and opportunities for many people. These themes are echoed in the World Economic Forum’s Inclusive Development Index, which ranks economies using three pillars: growth and development, inclusion, and intergenerational equity and […]

Why the latest inter-Korea summit matters

The detente between North and South Korea continues, with South Korean President Moon Jae-in (right) pushing on regardless of the United States. -Benjamin Habib, Lecturer in International Relations, Department of Politics and Philosophy, La Trobe University. Last week’s fifth inter-Korean summit provided another round of iconic moments in a year of extraordinary drama in Korean Peninsula politics. From Moon Jae-in’s address at the Arirang Mass Games to the leaders’ photo-op on the shores of the crater lake at Paekdusan, the three-day summit produced plenty of symbolism. More importantly, it increased the detail and scope of confidence-building measures agreed in the earlier Panmunjom Declaration. Much of the commentary in the wake of the summit has focused on what the Pyongyang Declaration means for the potential denuclearisation of North Korea. To view the summit through the narrow lens of nuclear politics would be to overlook the significance of deeper patterns that are emerging from inter-Korean détente. Filling in the details The first notable feature of the Pyongyang Declaration is the increased depth of military-to-military confidence-building measures, as articulated in its attached annex. One of the questions emerging from the Panmunjom Declaration related to how that document’s vague commitments to cooperation would be fleshed out in detail. In the Pyongyang Declaration are measures for increased conflict management procedures and greater operational level consultation. This includes a series of measures along the demilitarised zone (DMZ) and Northern Limit Line maritime boundary to reduce the risk of confrontation. A holistic approach to security There is a clear human security focus in the breadth and depth of the Pyongyang Declaration that has moved inter-Korean engagement well beyond denuclearisation. Human security is about protecting individuals and communities from threats to their well-being and survival. This might be from traditional security threats of war or persecution, or from […]

The word globalisation is out of date. This is what should replace it

The word globalisation has lost its relevance and lustre with the emergence of the new global economy of the 21st century. In fact, it’s become an anachronism. Its deficiency is that it’s not a new concept which creates nuances of confusion. Globalisation describes the international outreach of countries for the purpose of economic, social, political and cultural liaisons. Global linkages between countries through military conquest, colonisation, multilateral free trade agreements and cultural exchange existed in an uninterrupted continuum in the evolving history of humankind. Historically, however, the process of globalisation has taken different forms, and its meaning has changed and mutated since it was first used in English in the 1930s. For lack of a better word, the term received an extension to its lifeline until the end of the 20th century despite the profound structural changes and technological advances that began to take place in the 1980s. Therefore, globalisation has come to be used to represent “modern” 20th century economics and social processes, including the instant exchange of money enabled by internet technologies. Yet because of its varied historical use, it does not truly reflect the electronic and digital empowerment that has been unleashed by the information technology revolution. Therefore, globalisation is not an accurate descriptor of the 21st century and the internet-driven transformational change sweeping the international economic landscape. And so I have coined the term internetisation which I believe should replace the concept of globalisation. Internetisation: Time, geography are irrelevant Internetisation is the contemporary face of globalization. It includes the modern tools of electronic globalization and embraces the digital connectivity and empowerment of the internet and the World Wide Web. Although we could widen the term globalisation to include internetisation, I believe it is better to replace the word globalisation altogether because the long duration of its […]

Five leadership priorities for 2017

In the picture: Thais hold candle lights as they pray to celebrate the new year at Sanam Luang park in Bangkok, Thailand January 1, 2017. REUTERS/Chaiwat Subprasom. As the past year has demonstrated, leaders must be responsive to the demands of the people who have entrusted them to lead, while also providing a vision and a way forward, so that people can imagine a better future. True leadership in a complex, uncertain, and anxious world requires leaders to navigate with both a radar system and a compass. They must be receptive to signals that are constantly arriving from an ever-changing landscape, and they should be willing to make necessary adjustments; but they must never deviate from their true north, which is to say, a strong vision based on authentic values. That is why the World Economic Forum has made Responsive and Responsible Leadership the theme for our annual January meeting in Davos. As leaders in government, business, and civil society chart a course for the next year, five key challenges will warrant their attention. Firstly, they will have to come to grips with the Fourth Industrial Revolution, which is redefining entire industries, and creating new ones from scratch, owing to groundbreaking advances in artificial intelligence, robotics, the Internet of Things, self-driving vehicles, 3D-printing, nanotechnology, biotechnology, and quantum computing. These technologies have only begun to show their full potential; in 2017, we will increasingly see what used to be science fiction become reality. But, while the Fourth Industrial Revolution could help us solve some of our most pressing problems, it is also dividing societies into those who embrace change and those who do not. And that threatens our wellbeing in ways that will have to be identified and addressed. Secondly, leaders will have to build a dynamic, inclusive multi-stakeholder global-governance system. […]

What is GDP, and how are we misusing it?

www.themirrorinspires.com The Elephant in the Conversation on FaceBook You shouldn’t judge a country by its GDP. Gross Domestic Product (GDP), and growth thereof, has been widely used over the years to measure economic progress. But what is GDP, and why does it matter? Mathematically it is the sum of consumption, investment and government spending (plus exports, minus imports). It is regularly cited in discussions related to the economic health and wellbeing of countries and regions, with some governments such as China going so far as to set specific targets for GDP growth (placed between 6.5 and 7% at the recent National People’s Congress in the new Five Year Plan). And even without specific targets, the evolution of GDP remains a fixation for governments around the world and is also a regular topic on the agenda of global and regional groupings such as the G20 and the European Union. What does GDP miss out? Amid this GDP obsession, it is easy to forget that it was not initially intended for this purpose – it merely provides a measure of the final goods and services produced in an economy over a given period, without any attention to what is produced, how it’s produced or who is producing it. Simon Kuznets, who defined the modern version of GDP in the 1930s, specifically cautioned against using it as a measure of welfare. Yet its relatively straightforward measurability has led it to be used widely over the decades for precisely that purpose. Of course, GDP is highly correlated with a lot of the things that we prize in a society: good education, quality infrastructure, functioning markets. And yet, as has been […]

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