Asset | Economics, The Equilibrium, June 2013
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Transcript of Asset | Economics, The Equilibrium, June 2013
Study Tour 2013A journey to the greatcity of Istanbul, Turkey
Who’s Paying?!?The truth behind studentspending and income
Dr. Patricio DaltonInterview with the Microexpert of Tilburg University
June 2013 / Edition 2
Column: Supply and DemandThe Shale Gas Revolution
European Debt CrisisSyntrus Achmea Interview
Meet an active member; Jean-CarloExchange Story; Tilburg Vs. Rio
Prevention and the cost of Health Care
ASSET Economics
2
Table of contents3
45
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26
Preface
Column: Supply and Demand
8 Shale gas revolution
Interview: Dr. Patricio Dalton
Who is paying?!?
How is the first board doing?
Study Tour - Istanbul
ColophonThis magazine is a publication of study association Asset | Economics.
Editor-in-chiefDenise Klop
EditorsBoy van der VeldenJoost SlabbekoornFrancesco GerottoJoris van Twist
ColumnistNiek Stadhouders
DesignBoy van der VeldenJoost Slabbekoorn
Photography Eduard CoolsJoep Schoofs
Contact informationAsset | EconomicsRoom E1.05Warandelaan 25037 AB TilburgT: 013-4664040E: [email protected]: www.asset-economics.nl
CopyrightNo proportion of the information in this magazine may be reproduced in any form or by any means without the prior written consent of Asset | Economics
DisclaimerThe opinions expressed in the articles do not necessarily express the opinion of Asset | Economics
Puzzle
Interview: CFO Syntrus Achmea
Prevention and the cost of health care
European debt crisis
Exchange: Tilburg vs. Rio
Interview with an Active Member
3
Preface
The Magazine Committee
Dear reader,
Hereby I proudly present the second edition of The Equilibrium; the magazine of Asset | Economics. After the first edition in 2012, the new
committee decided to take the initial ideas a step further and the result lies in front of you. Many ambitions about the future of The Equilibrium
have been formed during the process, and I would like to thank all my fellow committee members for their hard work and determination.
In line with our own aspirations for the future, this magazine features various people who have followed their dreams and ambitions. Why would
one go on a mission to Antarctica? How can one combine doing research with making a direct impact for destitute children in Argentina? What is
the vision of influential people on Italy’s position and responsibility within the Euro crisis? All these people have one thing in common; they are
inspirational. I hope you will be inspired by their stories as much as I am. We are all hoping for many more inspirational stories, so remember to
always follow your aspirations and knock on opportunity’s door when it is time to do so.
Warm regards,
Denise Klop
Editor-in-chief
4
Equi
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yppl
y an
d de
man
d
In high school my economics teacher, suit and tie, used to pick up a
piece of crayon and draw a large diagonal cross on the blackboard.
A downward sloping demand curve, an upward sloping supply curve,
and markets clear when demand equals supply. I considered it true
and the first foundation on which all my future economic knowledge
would rest was laid. I found that in economics the state of equilibrium
condition is an integral part of most theories, a paradigm that underlies
many discussions, a condition that is assumed to always hold. But
can equilibrium theory really be called a law, a universal truth that
holds, no matter the circumstance? Is our blind trust in the state of
equilibrium justified?
The basic lemma of supply and demand that I described, as found
in every economics textbook 101, is mainly a representation of the
work of W.S. Jevons, who pioneered marginal economics. The figure
we all know and love made its appearance in an essay by Fleeming
Jenkin in 1870, and popularized by English economist Alfred Marshall,
describing the theory of supply and demand in his 1890s Principles
of Economics. In the 19th century Arrow and Debrieu proved that a
market-clearing equilibrium exists, given strict conditions, like perfect
competition. This means that equilibrium is reached only if there are
no market distortions. That is a big if. Let’s sum up some the conditions
necessary to obtain equilibrium: a large number of buyers and sellers,
perfect information, a future market with future prices and no external
effects. The million dollar question is to name a market that fulfills
these conditions. I can’t. All markets are regulated in some way.
Paradoxically, the market that comes closest to a perfect market, the
financial market, is actually the most regulated of all. Let me introduce
to you the law that never holds.
‘So what?’ I hear you think. It’s all about forces moving the economy
away from equilibrium or back to equilibrium. If the latter prevails,
I’d say the law is useful. But let me introduce the notion of unstable
equilibriums. As Marshall nested himself into mainstream economics, a
French economist was pushed into oblivion until recently. Leon Walras
came up with the general equilibrium theory in 1874, which basically
states that everything is connected. Perturbations in one market
distort equilibrium in another. If the horsegate affair drops the demand
for meat, not only does the price of meat drop, all other prices and
quantities in the economy respond. Looking at how the housing
crisis turned into a financial crisis, turning into a sovereign crisis and
back, this sounds reasonable. If the equilibrium changes continuously,
the law is of little use. Walras never really settled in mainstream
economics, mainly because of computational limitations back in the
days. Computable general equilibriums, although widely used by policy
makers, is to academics something like Fernando Torres: expensive,
but doesn’t score.
In France, Walras was not forgotten. Edmond Malinvaud postulated that
the stability of the equilibrium depends on the state of the economy.
He assumed that the pricing mechanism is the driving force towards
equilibrium, but the pricing mechanism does not always work equally
well. In a boom prices are flexible and equilibrium is reached. In a
crisis prices and wages are (downward) rigid and the price mechanism
breaks down. This could lead to lengthy crises, without forces pushing
the economy back to equilibrium.
Mathematician David Ordell convincingly argues in his book Economyths
that the economy, and particularly a crisis, is better explained by agent-
based models. Agent based models consist of persons connected to
each other like nodes in a web. The best predictor of you buying an
Ipad is not your age or income, it is the number of your connections
that own Ipads. People do not make decisions independently, but
are influenced by each other. Agent-based models are a popular side
branch of mainstream economics, explaining crises, exchange rates
and stock markets a little less incorrectly.
Lastly I’d like to point out the tipping points theory, as developed by
Marten Scheffer in his book Critical transitions in nature and society.
This theory states that small perturbations push the economy back
to equilibrium, but large perturbations do not (a tipping point exists).
Scheffer shows that major changing events are preceded by increasing
perturbations. This empirical observation also holds in economics, and
might predict crises the same way increased seismological activity
predicts volcanic eruptions.
To conclude, the recent crisis casts doubt on the usefulness of
equilibrium theory. Maybe it is time to look at the jurisprudence and
demote the law of supply and demand to a simple notion. When it
comes to equilibrium theory, one can only conclude with Confucius:
“True wisdom is knowing what you do not know.”
a law lacking jurisprudence
By: Niek Stadhouders
Supply and demand:
Tuitions increase. Inflation defies our wallets. Under aged unemployment
strikes the Netherlands. How does this affect the average Tilburg
University student? I did a little research around the E-building and
the results are astonishing. In the small group that participated in the
research there was a huge diversity in jobs and ways to gather funds.
Entrepreneurship and creativity roam the hallways and the results are
broad.
The variation and the amount of jobs were as such, that I needed
to cluster them into various segments. I decided to divide them into
study-related jobs, jobs around the University and tutoring, hospitality
and horeca, external financing (which is pretty much DUO and sugar
daddies), construction, skill-related (such as administrative work and
consultancy), sales (which include all the shops), unemployment and
extraordinary income.
Surprisingly, the majority of 27% uses external financing of which
33% is fully financed by their rich daddy (which basically consisted
of the entire Accounting & Finance department). The runner up was
sales with 19%, where you expect to see a lot of shoe and clothing
salespeople. However, 23% of these sales people work in ice salons
and 28% in supermarkets. The next biggest group is hospitality and
horeca, all of the students that go to work at night and return home
just before the start of the first class. This holds at least for the ones
serving your beer at the bars, and they represent 73% of this group.
The other people in this group spend their free time waiting tables in
restaurants, performing in a band or working in the theater.
These three sectors represent 62% of our total population.
The other segments are way smaller, but of course, the most interesting
jobs can be found in these small segments. During our visit we ran into
an active member of
Asset | Economics, who claims to be seasonally unemployed and
identifies herself as a victim of Dutch weather. Near the SBIT part
of our building we run into a professional poker player who earns
quite some bucks by challenging strangers worldwide in online poker
tournaments. Just down the hall I meet a few entrepreneurs, who have
decided to market their products in the form of apps and try to turn this
into a business model. But if you want to study in style, there is only
one job that is truly overshadowing any other job, and that is being
the son of a famous person. And according to our water proof research
methods only 1,5%... is the son of Adrie Koster.
5
Equilibrium W
ho is paying?!?
Where do students get their money from?
Who is paying?!?How students get by
By: Boy van der Velden
12% - Study related
16% - Hospitality / Horeca
27% - External �nancing3% - Construction
19% - Sales / Basic
4% - Extraordinairy income
7% - Skill related
10% - Unemployment
Equi
libriu
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nter
view
: P
atri
cio
Dal
ton
Tilburg University boasts a winning team of professors and researchers.
They come from all over the world and bring their experience to the
campus, in a perfect atmosphere of open-mindedness, curiosity and
internationality. The classrooms, offices and labs are the very place
of their work, where they interact with eager students about issues
they study and discover. The ideas that have been put forth by these
remarkable minds are the result of a process that goes by the name
of research. Research, in fact, is the systematic investigation into and
study of materials and sources in order to establish facts and reach
new conclusions; a somewhat vague definition that captured our
curiosity and led us to go deeper inside this world. The interest couldn’t
be greater when coming to the Social Sciences Faculty, and especially
the Economics Department. What really happens behind the wall of
those offices? What does it mean to be a researcher and what is, really,
research?
To answer these questions, we interviewed Patricio Dalton, professor
of Microeconomics 1 and 4 and researcher in the field of Behavioral
and Development Economics. He is 38 years old, good-looking, fit
and extremely enthusiastic. He loves sports, in particular football
(don’t call it soccer, you would drive him ballistic…), which he used to
play when he was young. He is a big fan of San Lorenzo, one of the
biggest football teams in his home country, Argentina. Besides playing
the guitar, he loves listening to all kind of music, from Rock & Roll to
Classical, from Electronic to Latin-American. No surprise, some rumors
also maintain he is a rather good dancer. And don’t forget he has a PhD
in Economics, graduated from the University of Warwick with a thesis
on Behavioral Decisions: Theory, Implications and Applications. We
couldn’t help asking him what the secret of his success and charisma
is. His reply? Simple, passion. Yes, passion, the very reason that led
him outside South America, towards Europe.
“Most of my colleagues that have the chance to leave Argentina
come from wealthy families. They are from a part of the society that
can afford going to elitist schools and have great opportunities and
perspectives. I didn’t belong to that elite, my mother was a housewife
and my father was an entrepreneur that most of the times ended up
making wrong business decisions. I was able to break through despite
a disadvantageous socio-economic background, and I would attribute
this to an internal conviction to give 100% of me in whatever I do.”
Patricio explains his past and is not quite sure about the exact reasons
that led him to be an academic in Economics in Tilburg. Maybe it
was a combination of his parents’ strictness to make him do things
well combined with absolute freedom to let him chase his dreams.
Maybe it was his extreme curiosity to understand why people make
systematically irrational choices in everyday life and they still manage
to survive and be happy.. What he is confident about though, is that
ambitions have a key role in someone’s development. We wanted to
know how strong the links between his background and the research
he conducts are. Clearly, there is an autobiographical trace within his
work when he confesses:
“Economics is all about rationality. But real-life experiences contradict
this assumption. Without allowing for systematic human mistakes
economic models are just incomplete. Perfect rationality is only a
simplifying assumption, arguably unrealistic. It is useful only as a
benchmark, but if we want to understand reality, we are bound to
6
Dr. Patricio DaltonBy: Francesco Gerotto & Denise Klop
Equilibrium Interview
: Patricio D
alton
use realistic assumptions. That is why I ended up studying Behavioral
Economics”
Understanding the implications of making wrong choices is one of the
goals of Patricio’s research. In particular, he studies the intersection
between not fully rational choices and development. He makes a very
strong argument about the complementarity of wealth and aspirations.
In his opinion, a necessary ingredient to success is to believe in own
capacity to be successful in challenging and novel activities. Living in
poverty impacts peoples’ expectations and aspirations. This in turn
makes it more difficult for the poor to escape from poverty”. In line with
this, the rich are better off than the poor. Because a rich person has
more material resources, he can compensate the lack of determination
with other means. The poor, instead, need to rely more on their beliefs.
Hence, when those beliefs are constrained by external circumstances,
only the well-off can hope to succeed, while the poor shall perish.
However, when aspirations are not restrained, the poor have a greater
incentive to perform well, because it feels like a once-in-a-life-time
occasion which they cannot spoil.
In light of this, Dalton has begun to investigate whether raising
aspirations can help raise levels of achievement among the poor,
Together with co-authors he is conducting a field experiment with
the Orchestras for Children and Young Students in Buenos Aires.
They want to examine whether the aspirations of children from very
deprived backgrounds are raised by their participation in classical
music orchestras. The researchers will examine whether their regular
participation has spill-overs in other dimensions such as educational
performance.
“It is a very complex project. The goal is to measure the change in
the kids’ life brought about by the orchestras. It is an unrepeatable
opportunity for the children, and they are aware of it. We selected 40
of the poorest schools in Buenos Aires, went to the municipalities and
offered the plan. Later, 20 out of the 40 schools have been randomly
selected, and the lucky ones gained access to the instruments and
classes with the bests Argentinean classical musicians. We have ran
a baseline survey and now we are doing the preliminary analysis of
the data. Although some may think it is a bad invested luxury good, it
is not. This program is improving these children’s lives. The teachers
are among the most renowned artists of Argentina, and the feedback
from the students is positive; they feel valued and watching their
professor in a tour around the world gives them extra incentives to
work hard. That’s exactly what I was talking about. Poverty is not just
about material disadvantage. It is a much more complex issue that
also involves non-material disadvantages like lack of aspirations and
self-confidence. With this program, we expect that the children will
gain these non-material resources which are also needed to escape
from poverty”
When we asked Patricio about his time in Tilburg, he told us that he
enjoys his time here in Tilburg. “I consider myself very lucky in finding a
job in one of the best universities for research in Behavioral Economics
of Europe. Moreover, I like the company here, there is a marvelous
group of researchers with which I have very stimulating conversations,
always feeding our brains with new knowledge. You may define us
nerds but we actually enjoy wondering about everything.”
Apparently, he is truly maximizing his utility in Tilburg. After his paper
on aspirations and poverty we asked him if he has other project in mind
and that is what he replied:
“At the moment I am very much puzzled by how to increase productivity
in small and medium enterprises in Africa, not only looking at the
external constraints the entrepreneurs face, but also to study the non-
material constraints they may suffer from. Examples of the former are
attitudes, aspirations, beliefs, preferences, cognitive biases, etc; the
latter are simply the external context.”
He concludes saying that very soon the boundaries between Sociology,
Psychology and Economics will disappear, in favor of a new holistic
approach that merges all the different methods of analysis. He
forecasts: “In the near future there will be no distinction between these
disciplines; we will all be social scientists”
7
8
Equi
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hale
gas
rev
olut
ion
For long it has been known that layers of slate at two to four kilometers
below the surface contain natural gas. However, only recently the
extraction of this gas has become technically and economically
feasible. In the 90s, the American entrepreneur George Mitchell
combined the techniques of fracking and horizontal drilling to extract
natural gas from layers of slate. Unlike conventional natural gas, shale
gas is not stored in large reservoirs underground but it is trapped in
small fractures in the shale. By drilling horizontally and pumping large
amounts of mixture of water and chemicals under high pressure into
the stone layers, the fractures are cracked and the gas is released and
can be captured. This process is called fracking.
“The US has been the only industrialized country that has been able to decrease its emissions of
greenhouse gasses in the last five years”
Shale gas is not only present in the United States; it can be found all
over the world. There are also large stocks of shale gas available in
Europe, China, Mexico and Argentina. However, the US is far ahead in
drilling for shale gas compared to the rest of the world. The high shale
gas production caused energy prices to decline sharply in the US over
the last year. The abundance of cheap energy has caused many energy
intensive industries that previously moved out of the US to relocate
there, boosting the US economy. The rise in domestic production of
gas also lowers the dependence of the US on foreign countries for its
energy needs. Fracking is now also used in the US to drill for oil, so
expected is that the US will become completely self sufficient in its
energy production within the coming years. Furthermore, according
to the research firm IHS, the lower energy imports have caused a 10
percent decline in the US trade deficit.
As previously mentioned, Europe is probably also well endowed with
shale gas. For example, the Dutch research institute TNO estimates
that there is about 500 billion m3 of shale gas in the Netherlands.
However, so far European governments are reluctant to join the shale
gas hype and some countries, like the Netherlands, have banned drilling
until further notice. The use of chemicals in the process of fracking
is controversial and is the main reason why European governments
have not yet allowed drilling for shale gas. A main driver behind the
bans is the Europeans themselves who are skeptical towards shale gas.
Commonly in Europe, the state owns all resources below the surface,
even though the land is privately owned. Therefore, land owners in
Europe mostly experience the downsides of drillings on their property
since the revenues go to government. On the contrary, land owners in
the US own the resources themselves and therefore encourage drillings
because it means big bucks and easy money.
There are many benefits attached to shale gas for European countries.
Especially Eastern-European countries could lower their dependence
on Russia for the supply of gas. Russia has proved itself an unreliable
w
At the moment when the general belief was that the production of fossil fuels has peaked
and energy prices were soaring, the extraction of natural gas from layers of shale deep
underground causes a true energy revolution. What’s up with this so called shale gas?
Shale gas revolution: a game changer?
By: Joost Slabbekoorn
w
Shale gas revolution: a game changer? Equilibrium Shale gas revolution
partner over the past years with repeated, credible threats to stop the
supply of natural gas if their demands were not satisfied. However,
even when bans on drilling in Europe are not lifted, Europe can still
profit from the shale gas revolution. New techniques to liquefy natural
gas make it possible to transport natural gas by ship whereas previously
this was only possible using pipelines. Therefore, the possibility of
importing cheap shale gas from the US will cause prices to drop in
Europe anyhow and can diminish the influence of Russia.
“It is expected that the US will become completely self sufficient in its energy production within the
coming years”
The shale gas revolution in the US already affects Europe, however in a
dubious way. The abundance of cheap gas in the US makes industries
switch from coal to gas as its energy source. The result is a substantial
drop in coal demand, and therefore the price of coal also sharply
declined. Cheap energy available for Europe! At first sight, this seems
to be a positive thing, but burning coal is the worst energy source in
terms of emission of greenhouse gasses and other nasty things. The
availability of cheap coal has caused many European manufacturers and
energy producers to substitute cleaner energy sources for coal causing
higher emissions of greenhouse gasses in Europe. On the contrary,
due to the increased usage of natural gas, the US has been the only
industrialized country that has been able to decrease its emissions of
greenhouse gasses in the last five years!
All in all, the production of shale gas will certainly have a huge impact
on the (economic) relations in the world. Whether European countries
lift bans on drilling or not, they will profit from the availability of shale
gas by reduced energy prices. However, exploitation of the European
shale gas reserves would mean that Europe can secure itself a cheap
and clean energy source for a considerable amount of time. For this
reason, it is worth considering starting to drill in Europe too. Britain has
already lifted their ban so let this be an example for the rest of Europe.
Frack to the future!
9
Shale gas: how does it work?
10
Equi
libriu
m H
ow is
the
firs
t bo
ard
doin
g?
A few years ago, there was no study association for economics students
at Tilburg University. Most economics students who were interested
in joining committees did so at the Faculty Association, which had
several committees and activities especially for economics students. As
every other field of study already had its own study association, a new
association for economics students would naturally fit in the structure
of the Faculty Association. In cooperation with TiSEM, Asset founded
Asset | Economics in the summer of 2009. Then, the first board was
formed and they started off with the association.
“In the beginning our main focus was to attract as many active members as possible by organizing
activities whilst spending almost no money”
Chantal explains how she joined the board of Asset | Economics: “I was
an active member at the Faculty Association and I considered a board
year there. However, they asked me to become a board member of the
newly founded study association. I had to think about it, I considered
it to be a great opportunity but I knew it was not going to be easy.”
Indeed it was not easy. Founding an association means beginning from
scratch. As External Affairs Officer, Sophie was responsible for attracting
sponsors to the new association: “Of course I believed that there would
be companies interested in us, but I also wanted to think outside of
the box which companies that could be. Furthermore, it was really
difficult to get an idea of the amount of money we could charge. I had
to start from scratch approaching companies”. However, being under
the umbrella of the Faculty Association did help a lot. New economics
students who joined Asset automatically became a member of Asset |
Economics. Furthermore, Asset | Economics received a loan from the
Faculty Association as starting capital. Companies already knew the
name Asset, which helped a lot in approaching them. Furthermore,
there was ample of help from other associations, who for example
kindly helped by providing the furniture.
All the committees and activities from Asset aimed at economics
students were transferred to the new association. However, the board
had to work hard to get the association running: “In the beginning
our main focus was to attract as many active members as possible by
organizing activities whilst spending almost no money”, explains Bart.
The intensive promotion of the association by the first board paid off,
as they quickly gathered a sizable group of active members.
“You learn to work in a team, and you really get to know yourself.”
The first board experienced the start as being the hardest part. After
the first half year, many things were sorted out and the association
got ‘running’. Of course, in this process, the board had some heated
discussions. Elin: “We always took plenty of time for our lunch, invited
active members to join us and used it to catch up with each other.”
v
You wouldn’t tell but Asset | Economics is just four years old. The people in the first
board of our beloved association are already graduated and working. Let’s meet them
and look back at the start of Asset | Economics!
How is the first board doing?
From left to right: Elin Hekman (Treasurer), Bart Compen (Chairman), Chantal Remorie (Secretary) and Sophie Houwen (External Affairs Officer)
By: Joost Slabbekoorn
11
Equilibrium H
ow is the fi
rst board doing?
The funny thing about starting an association is that many things you
introduce will turn into a habit, as other boards simply continue the
practice: “The silly line we used to describe the voting procedure during
the General Members Meeting is still there” says Bart (laughing). Also,
the home bar of Asset | Economics is still Heuvel 15. However, this has
not always been the case. After a disappointing experience with a first
bar, the board conducted a pub crawl to search for a new one. After a
friendly talk with Toon, the bartender of Heuvel 15, they decided that
this would be the perfect home bar and it has been so ever since.
In retrospect they would have done things slightly different. Looking
back, the board thinks that they were a bit too thrifty. They were
reluctant to spend money but they reckon it would have been nice
if the association had contributed more money to social activities.
However, due to the thrift and hard work of the first board, a solid
foundation has been laid for the association to grow. All four of them
agree that the experience and the skills they learned are of great value
to them now. Sophie: “You learn to work in a team, and you really get
to know yourself.” They had an unforgettable experience and the board
is glad to see the association is still developing.
Bart Compen is Analyst
Private Equity and
Infrastructure at MN, a
pension administrator.
His team selects private
equity fund managers
for pension funds. He
chose this job because
he is interested in Asset
Management and Private Equity, specifically as
one sees how companies operate and how value
is added.
Sophie Houwen is
Assistant Advice at
the Pensions Actuarial
Insurance Services
department of PwC. She
is a consultant in the
area of pensions, which
includes amongst others
employee benefits (such
as designing pension plans), calculations and
valuations. She likes the combination of working
with numbers and explaining those to clients.
Furthermore, PwC is a large organization so there
are many challenging projects and opportunities.
Elin Hekman is Associate
at the Assurance
department of PwC,
therefore she is not
an economist but an
accountant. She monitors
the control protocols
and verifies the financial
statements of companies.
She likes the fact that accountancy is a true
profession and that her job is very specific.
Chantal Remorie is
Business Controller at
the TweeSteden Hospital
in Tilburg. She analyzes
management information
to advise the organization
and support in investment
analysis, about human
resources, finance and
production and also supports the management
with financial issues. The main reason for Chantal
to work in a hospital is her affinity with the health
care sector.
Life after study
12
Equi
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urop
ean
debt
cri
sis
Euro zone recession: 2008. Everything started some time before,
when in 1997 the Asian financial crisis led the mighty investor America
to withdraw its capital from the unstable developing countries. As a
reaction, Malaysia, the Philippines and South- Korea became the new
global creditors, offering cheap funds to recover from negative growth
trends and stimulate the domestic economy. On the other side of the
Ocean, in the US, interest rate were dropping, and banks, with the
support of sloppy rating agencies, allowed bad credit households to
make insolvent loans. Very soon the inexpensive mortgages drove real
estate prices to skyrocket, thus starting the housing bubble. It was
the beginning of the end. The subprime crisis led to the collapse of
Lehman Brothers, unable to repay their debts, and in England, the
bank run on Northern Rock bank run shocked the European markets.
Later, Greece starts crumbling, under the austerity pressure and a
self-fulfilling prophecy of mistrust. At this time, also Italy steps in and
enters the equation of the crisis.
With a bewildering government debt history, Italy owes more than
100 percent of his GDP to financing countries since 1992. Jointly with
a fragile government, unable to cooperate, the Italian peninsula also
faces a downward sloping trend in growth, which has recently been
negative. All these reasons contribute to today’s depression in the
markets and loss in credibility, which is one of the most important
drivers of the Euro zone recession. In fact, when Euro countries that
invested in Italy stop believing and fear a default, they pull interest
rates on government bonds up, and prices down, aggravating the
Italian debt even more. The consequences are tremendous on the
population: heavy taxation, unemployment, unrest, decrease in
consumption, cuts on education and health care and more generally, a
fall in social welfare. The outcome is instability and uncertainty, along
with corruption and evasion. At least, this is what the media and the
academic literature explain. But what does an Italian really think? How
does he survive the recession? Has he got any hope of redemption?
And also, what are his expectations? For this interview, an Italian
entrepreneur and a banker were interviewed.
Franco works in a metal leasing and scrap trading company. He is an
entrepreneur and, above all, a human-being. He has 10 brothers and
a son, and he really believes that the values of family and education
are pillars to everyone’s future career. Carmelina is a banker. She is a
sportswoman, always smiling and very self-confident. She never loses
her pragmatic attitude though, very down-to-earth and scientific when
it comes to explanations. These intimate connoisseurs of a reality that
affects both their private and public life gave their precious viewpoint
on the Italian situation; a situation they face every day.
You had chances to know personally the history and the evolution of
the economy of your country, to what would you attribute role of cause
and catalyst?
Franco starts off by making a comparison. “The actual crisis is a
phenomenon that does not affect the entire globe. Areas like Asia,
India, Australia, New Zealand and South America are developing fast
and the standard of living there is much higher compared to the past.
The US and Europe are stagnating, especially Portugal, Spain, Greece
and Italy.” According to him, the cause goes necessarily beyond mere
economic reasons. “In Italy for instance, misgovernment and corruption
are the very reasons, while the loss of social identity, traditional values
and trust for institutions is the catalyst.”
Carmelina seeks the origins in the past. “In the aftermath of the
Second World War, the fast capital growth of Italy led banks to become
looser, thanks to new financial intermediaries such as derivatives and a
policy of thrift that fuelled a speculative bubble in the financial system.”
According to her, the catalyst is the deregulated financial system. “The
climax was reached in the 1990s and went on until 2000. The effects
were devastating, because the first buyer of financial derivatives
and target of the speculative attack was the government, thereby
augmenting its debt exponentially.”
European debt crisis:An Italian perspectiveBy: Francesco Gerotto
13
Equilibrium European debt crisis
Which are the consequences, especially the ones you experience at
first hand?
A main consequence mentioned is the decrease in the standard of
living for the middle-class, reflected by the scarcity of food and social
security provisions, more expensive and under-ranked universities,
crime and a waste of resources. As Carmelina states, “there are fewer
and fewer opportunities for investment, more unemployment, delayed
pensions, and cuts on research, education and health care. This causes
unhappiness and pessimistic markets.”
What would you get rid of in the first place? And what would you
implement in the current system?
The answer is clear and both agree; Italy requires more checks
and balances. “We need less bureaucracy, with a more efficient and
sound control system. Also, it is also important that we do not tighten
incentives to grow.” Furthermore, facilitations in the employment
process for the youngest, a concrete reduction in taxes and public
spending, invest in schooling sector and improve public services are
needed. “I would also eliminate the fiscal pressure”, Carmelina adds.
What is the role of the government in the crisis, to which extent is it
guilty?
The state is not the direct cause but had and is having a fundamental
role. “In Italy there is this tedious manner to think about yourself
and yourself only. If no one is able to reach agreements, why should
politicians be? We complain, but we deserve our government. Once
educated to a social living, we can hope for and claim a government
that is not self-interested, but interested in Italy,” Franco says.
Carmelina looks at it from a different perspective. “The new government
is facing the bitter reality of a threatening debt. This is the result
of very low purchasing power in the past, which was compensated
with seigniorage that ended up raising inflation sky-high. Moreover,
increasing tax rates is not a solution itself, government spending must
be drastically moderated and until now the government was not able
to avoid tax evasion.”
Who deserves your trust?
A difficult question for both, “I would give my trust to very few people
and only to honest and hardworking persons that still believe in the
future and have dreams”. Examples for Franco are Pope Francesco,
the European Parliament and development or research institutes.
Carmelina on the contrary, believes in the ECB and the EMU. “I believe
in Mario Draghi and interest rates below 0.30 that allow cheap funding
for small firms. I believe in stability promoted through control.”
Privatize or nationalize non-viable institutions?
Franco smiles, “Privatize”. Carmelina agrees, and thinks it’s important
to stimulate competition and to leave the market free to reach
equilibrium. Control is necessary nonetheless.
What would you do to get out of the recession?
Franco focuses on a social reform, whereas Carmelina believes in
financial changes. “First things first, we need to re-educate the
next generations to a social behavior and teach them the values of
community and brotherhood. This has to be accompanied by a reduction
in the bureaucracy, a cut on taxes and expenses, a liberalization of
the economic branches and finally fuel households’ trust through a
campaign of social advertising focused on for example externalities and
economic awareness.” Carmelina thinks reforming the financial system
is important. She proposes to lower the cost of money to increase
incentives to invest, stimulate corporations to hire young workers, and
cut taxes, especially on property.
How can the Conclave, the election of the new President Napolitano
and the Prime Minister Letta affect the loanable funds and stock
market, creating huge fluctuations within days?
According to Carmelina, every election is hope for a change. “The link
between these three figures is the promise of stability when taking over
their predecessors. The new Pope is somehow a symbol, a person who
deserves trust and is able to encourage people to carry on during these
times of crisis. In the same way, investors also believe that a successful
or unsuccessful election can change the fate of the country.
What do you think about the euro?
Franco is sure Italy needs the euro and the integration in the Euro zone.
“I believe in a federal Euro area and in cooperation. Going back to the
lira means lowering our purchasing power, which although stimulating
exports, would reduce our foreign competitiveness.”
Confronting the two thoughts, a pattern emerges. In fact, both Franco
and Carmelina, who experience the crisis on their skin, feel the need
of a reform, a change that allows improving the economy and, more
generally, the world they live in. This is possible only by intervening
on a social and institutional level at the same time, ensuring a sound
financial system and promoting education. The underlying goal is, of
course, structural stability, a renewed trust, and a new and necessary
equilibrium.
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Leaving the rainy cold city of Tilburg behind us for a week we fly off
towards a historic city in West Turkey, with various formal and informal
visits ahead of us, scheduled with military planning. A city that has had
various names throughout history; a city straddled by the Bosporus,
with over 2600 years of history the city of Istanbul.
After a late departure on Friday night and a star dinner at the terminal’s
Burger King, we got on a plane to our destination. After a tour through
the Asian part of Istanbul, we arrived at the Gakos House Hostel in
the city center. Our hostel was just 15 minutes from the great Taksim
square, and within crawling distance of the lively Turkish nightlife. We
didn’t have much time to adapt to this new environment.
Tired from the journey, but strengthened by this new inspiring
environment, we took on the Turkish public transport and visited
the famous Blue Mosque. Unprepared for this religious landmark
and overexcited by the sunny weather, us touristy creatures hadn’t
prepared for the strict religious clothing regulations and had to
reschedule the visit to later in the week. After this first encounter with
Turkish culture we decided to embrace our differences with the Turkish
culture and visited a shisha-bar where we smoked traditional hookah
while enjoying various cold beverages. This small gathering led to an
incredible karaoke-night on the fifth floor of the venue with various
study tour artists performing. A performance by our very own Charlie’s
Asians, Linda, Roos and Jessica and various questionable male duos
that shook the stage.
Late October, the Study Tour Committee’s primary assembling. 159 days of planning, brainstorming and bookings further, twenty participants got on a plane at Schiphol. The Study Tour 2013 has begun, we’re off to Istanbul!
STuDy TOuR ISTANBuLBy: Boy van der Velden
Equilibrium Study Tour
On the second day of the journey the study tour really took off. We
started the Crazy 88, where the teams within the study tour had to
earn points by making photos of various settings.
These settings involved; bananas, moustaches, team photos, planking
photos and various other pictures of predetermined circumstances. The
first of these photos were generated near the beautiful Dolmabahçe
Palace built by the empire’s 31st sultan around the 1840s, a pearl of
Ottoman History and a must-see for everyone.
After traveling back in time it was time to relax, so we got on the
Bosporus cruise were we traveled down the great river that is the
Bosporus which embodies the border between Europe and Asia. After
arriving back at the harbor the fellowship returned to the hostel and
left for a night out in a traditional Turkish bar where we enjoyed some
Turkish live music. In the sounds of traditional guitar tunes, another
day came to an end.
The next morning brought us a visit to the famous Topkapi Palace, this
time our cultural visit heirs from the Byzantium time, the largest palace
in Istanbul, and home of Ottoman Sultans for over 400 years until the
sultans were moved to the Dolmabahçe setting.
After this inspiring visit it was time to suit-up and become international
businessmen for our first formal activity, a visit to Borsa Istanbul,
the Turkish stock exchange. After a lecture on Turkish GDP, world
economic growth rankings and flight distances we got to take a look
at the action: the trading floor of the exchange. The Borsa Istanbul
turned out to be a modern and inspiring environment where you can
see the impact of western civilization and development.
After this formal visit a small delegation decided to have a few beers at
a venue we stumbled upon. Little did this small delegation know, this
bar was about to become the setting of one of most epic evenings of
the study tour.
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Study Tour 2013 - Istanbul
Study Tour 2013 - Istanbul
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The evening started out as any other evening, dinner, small talk,
the enjoyment of a few drinks. But that changed rapidly when the
realization came that five stories up, a party on the rooftop was waiting
for us. Within seconds the situation escalated. Sipping beer and wine
became shots everywhere, conversations became dance battles, the
floor became a bonfire and at a certain point there was someone on
the bar waving an umbrella. A night to remember, but also a night that
had to end at some point, as any other.
The following day the prestigious Koç University trip was planned,
identified as being the best university in Turkey. Expectations were met
at arrival of this magnificent setting. In the mountains outside Istanbul,
a brand new state of the art university was constructed. We were given
a tour by two northern American former students who made us familiar
with the great facilities offered by the school. After a lecture by one
of the professors we thanked the Koç delegation for their help during
our stay and returned to the city of Istanbul for a visit to the Basilica
Cistern.
The Basilica is an underground wonder constructed many centuries
ago to provide the sultan’s palace with water and is famous for being
a setting in the Bond film From Russia with Love. A hundred and fifty
feet above us the Blue Mosque had waited for our return. In a second
attempt we got to experience one of the largest mosques in Turkey. An
impressive structure overall, even in these modern times.
Another day in Istanbul arrived; a day to get our behinds moving, so
we took a boat to the Prince Islands where the ladies enjoyed a ride
in a horse and carriage, and the guys competed in a tour around the
island on mountain bikes. After the exercise it was time to relax, time
to experience three hundred years of relaxation history, a visit to the
Hamam.
The Hamam is a Turkish bath where you can enjoy a massage, or
just steam your troubles away. A visit to Istanbul will not be complete
without a few hours in the Hamam. In the evening we enjoyed a
nice dinner and the match of the year, Galatasaray vs. Real Madrid in
Equilibrium Study Tour
the Champions League and subsequently, a visit to an underground
nightclub ironically located on the fifth floor. Slowly, the study tour is
coming to an end.
Day 6, our last day, the day of the Galata Tower, the day for a formal
visit to the Dutch Consulate, where they just celebrated 400 years
of political relations between the Netherlands and Turkey, but mostly,
the day that we would visit the Grand Bazaar. This was, of course,
the most important visit of the week according to most of our female
participants.
4 hours of souvenir hunting, shopping and the overall acquisition of any
useless item that fits in your suitcase, absolute mayhem, and a perfect
end to a great study tour. Tired but satisfied, devastated but enriched.
The study tour came to an end. It was a great cultural experience, an
incredible trip, with extraordinary people.
Thanks to the committee for their great work in the organization of
the trip. And thanks to all the participants for making the journey
unforgettable.
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The Study Tour Committee
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In February 1991, on a small island within the Kingdom of the
Netherlands, an environmentalist is born, ready to make a change in
the world. Not in his early days however, but after his mother pushes
him to become a boy scout he was introduced to the environment and
the earth. With a backpack full of ambition packed by his parents in his
early days, Jean-Carlo decides to change to world a little bit at a time.
At the age of 16 he enters a competition to join an Arctic expedition
organized by Robert Swan, an environmentalist himself targeting
Curaçao as a small community with a big oil refinery and little
environmental awareness. Jean-Carlo and two others, Diane Copini-
Rigaud and Arthur Nieuw, win the competition with a project called
E Palu (the tree), where they created a poster that could be used in
schools as a way to teach primary school students about trees and how
they create oxygen by consuming C02.
After long preparations the expedition to Antarctica began. An
experience of a lifetime and the basis of environmentalism in the future
of this 17 year old that experienced the entire trip in complete awe.
After the adventure that is the arctic, a period of speeches began. By
visiting high schools and universities, and sharing his experience about
the journey, he creating awareness on Curaçao about environmental
issues worldwide.
“I traveled to Antarctica to see with my own eyes how this grand continent is being put in danger
by climate changes occurring worldwide”
After returning from Antarctica and just before coming to the
Netherlands, Jean-Carlo organized a project called The Green Bus. They
lived in a double-decker bus for a week using nothing but sustainable
resources like solar and wind energy, and became instantly famous on
the small island. For this project he teamed up with Andrew Servania,
who is currently studying in Breda.
One can imagine it must be an amazing experience to be famous on
such an island when you just turned 17. The fame was nice according
to Jean-Carlo: “I could use it for all future projects and events as a
promotion tool, people recognized me in the street and I got a lot of
free beers when I visited bars, which is also not a bad result of fame.”
Jean-Carlo organized all this, and his other events during his high
school period at the Radulphus College in Curaçao.
“The weather is nice in Holland”
The next step was already known by him since he started high school
in Curaçao. “I’m going to Tilburg University, in the Netherlands.” Why
Tilburg you ask? Because originating from a small and close community,
he was attracted to the coziness of Tilburg University. The coziness, the
large economics department, sustainability center and of course the
environmental economics course at Tilburg University attracted him.
He joined Asset | Economics during his second year. During his bachelor
his entrepreneurial drive was tickled again and he decided he wanted
to organize again. He joined the Economics Dinner committee and was
so pleased with the process that he immediately started with the Case
Day committee.
Jean Carlo is currently wrapping up his bachelor with honors and is
ready to start his masters in September. If you think he is done here
in the Netherlands you are wrong. After graduation he has decided to
20 20
Interview with an active member
Jean-CarloAlves da Silva
By Boy van der Velden
Equilibrium Interview
with an active m
ember
stay in the Netherlands for a while to work and gain new experiences.
That, and enjoying the Dutch the climate of course, according to Jean-
Carlo. “The weather is nice in Holland; temperatures that are around
29 degrees everyday eventually annoy you”. Even teaching or given
lectures and speeches about environmental issues might be an option.
Maybe someday even politics.
For the moment he is pleased with his current situation. At university
he remains scoring among the highest of his class, has just been
promoted to the “topklasse” of the Ballroom Dancing competition into
C-class of the ballroom dancing league DMN. Besides these skills Jean
Carlo enjoys arching and gaming in his spare time.
Facts on Jean-Carlo
* JC is the “Benjamin” at his Arching association “De Vriendschap”.
* JC has been in a relationship for the last four and a half years.
* His girlfriend’s name is Sasha Perozo.
* JC dances at “Van Opstal” in Tilburg.
* JC speeched about environmental awareness in Michigan USA.
* JC trained for his arctic trip by sitting in a freezer at -20 degrees
celcius in Curaçao.
* He did this while reporters waited outside.
* JC and his arctic team were welcomed back like a star after his
adventure.
* All other information can be found on www.jc-dasilva.nl.
Activities JC:
Studying Economics at Tilburg University, Currently
Case Day, Asset | Economics, 2013
Economics Dinner, Asset | Economics, 2012
The Green Bus, 2010
Antarctica Competition, 2010
Inspire Antarctica expedition, 2010
Michigan International Camporee, 2010
Speeching at Schools, 2010
Graduating HAVO, 2010
E Palu Project, 2010
Random facts:
Uma is superhot Donny is not
Hein be hating
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Name: Jean-Carlo Alves da SilvaDate of Birth: February 2nd, 1991Profession: Student / EnvironmentalistS t u d y : E B E , t h i r d y e a rCountry: Curaçao, Netherlands AntillesUn ive rs i ty : T i l bu rg Un ive rs i ty I d o l : R o b e r t S w a n W e b s i t e : J C - d a S i l v a . c o m
By Boy van der Velden
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By: Denise Klop & Joris van Twist
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We interviewed two fellow students about their international
experiences; Izabella Mundim Brito, a Brazilian student who is studying
in Tilburg, and Ivo van Well, a Dutch student who went on exchange
to Rio de Janeiro.
Izabella is 29 years-old and comes from the capital of Brazil. She lived
and studied in Sao Paolo and finished her bachelor in San Carlos.
She worked at IBM for four years, after which she decided to do her
masters in the Netherlands. Izabella is in the International Committee
at Asset | SBIT and helped organizing the study trip to Brazil. She has
been in Tilburg since August last year, and is now writing her thesis.
Ivo is 21 years-old and studies Economics in Tilburg, where he also
participates in the Outreaching Honors Program. He is a board member
of AIESEC and an active member at Asset | FIRST. Next to this, he
enjoys playing soccer and going out with his friends. From July to
January, he studied at Fundação Getulio Vargas in Rio de Janeiro.
The two countries could not be more different, and we notice that
both Ivo and Izabella see many differences in terms of transportation,
studying, partying, and general culture. Izabella likes small cities, and
“Tilburg has all the big brand stores and even a McDonalds, which you
will never find in small cities in Brazil. The busses drive smoothly and
you can get near your destination easily. During weekends, the city
is pretty much empty which was also happened in my student city in
Brazil.” She practiced riding a bicycle before she came here, because
she knew she would have no life in Tilburg without one. “It is getting
more popular in Brazil as a way of transportation, but cars are not used
to bikes which makes it quite dangerous”. Ivo had to get used to larger
distances, and when going out he first had to make a 45 minute bus
drive. “The traffic in Rio never stops, it goes on 24/7. There is always
a way to get home, even in the midst of the night.” Whether he ever
felt unsafe? “Never. Of course things happen but it is always aimed at
getting your wallet, so if you cooperate you are fine.”
Classes in Brazil are smaller than in Tilburg, and the atmosphere is
more informal. “For example, the name list was on alphabetic order
of the first name. The professors in Tilburg usually hardly remember
my name, but in Rio they really got to know me as a person. One
time, we even had dinner and drinks with some of the professors,” Ivo
explains. His professors were very internationally oriented. “I had one
course in Portuguese and I basically sat there twice a week listening to
people speaking a language I didn’t understand. Luckily the professor
was American so I was able to write my final assignment in English,
and I didn’t even need the course material to do so. The professors
really stressed the importance of participation and motivation, and they
cared less about pure knowledge than in Tilburg”.
Izabella is not loving the timing of lectures. “In Brazil you will never have
lectures during midday, since lunch is very important. This means we
have lectures from eight until noon, and from two in the afternoon until
six. In Tilburg we even have exams during lunch!”. Also, most Dutch
students go into their master straight after bachelor, while Brazilians
usually work first. “In Brazil, companies prefer work experience over
RioEquilibrium
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23
versus
a masters degree”. She really likes the campus, “It reminds me of my
home university. It is really open and surrounded by forest. All
equipment such as computers is new, I like that.”
In Brazil, there are very few study associations compared to the
Netherlands. Izabella and Ivo are active members of one of the
Asset associations, which is something they missed both in Brazil. Ivo
explains, “There are hardly any associations. We had one, but you
did not really feel involved and I didn’t do many activities with them.
I really missed the association life in Rio, and in that respect I was
glad to come back to Tilburg.” He still met many people, for example
through his roommates and the many parties he attended. “Every day
there are about four Facebook events for parties, and you can choose
the ones you like best. Facebook was really important.”
Both agree that dancing is more important than drinking when going
out in Brazil. “Do not get me wrong, it is not that we do not drink.
But you guys drink a lot! In Brazil we dance more. In Brazil we always
have one day a week with a big party, and in Tilburg there are a
few days when you can go out,” Izabella states. For Ivo, the dance
culture required some adjustments and he took dancing classes. “In
The Netherlands, we might shake our hips once or twice but that’s
it. We talk much more when going out, but in Rio that’s not the case.
Rio has a much clearer dance culture, and you’re expected to dance
as sexy as possible. I was not used to doing this of course. During
dancing classes, I received some private sessions because I could not
really keep up with the group. They did not speak English so I didn’t
understand everything, but in the end they told me I had more talent
than the average Brazilian!”
Izabella did not really experience a culture shock, but compared to
Brazil she noticed that we have a relatively closed culture. “Everybody
is nice, but keeps distance and never invites you to their home. In
Brazil, we like to kiss and hug a lot and switch friends often. In Holland,
if you make friends they are for a longer period of time. This distance is
something that I appreciate less about the Dutch culture. For example,
when I did not have any classes, I had little to no interaction with
anyone and that made me kind of lonely.” She also finds it striking
that Dutch people give money as a gift. “In Brazil we only do that at
weddings and otherwise we just give actual gifts.” What Izabella likes
most about the Netherlands? The freedom and safety.
You might wonder what she thinks of the Dutch cuisine. Well, different.
“The Dutch food is a lot of potatoes, potatoes and more potatoes. But
I think it is fine. In Brazil we basically eat rice everyday with beans and
some meat. I really like the diverse choice of food in the supermarkets
though. Also, you have a lot of fried food and almost everyone has a
frying pan at home.”
The language was a little troublesome for Ivo at first. He memorized
some standard questions and lines, but never really understood the
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answers. “It was hard to communicate with people at first, but at
the end I mastered the basics of Portuguese. I mostly talked English
though.” However, his biggest culture shock was the fact that he had to
be very patient. “Sometimes, you can stand in line at the supermarket
for 45 minutes, which can be frustrating. I coped with this by simply
accepting it and not making a tight planning. It will frustrate you even
more once you miss another appointment.”
The Brazilian atmosphere was also something Ivo liked best. “Everybody
is always smiling. The weather is great, beaches are wonderful and
people are really enjoying life. So, the disadvantage that people are
relaxing a lot is also the advantage. In the Netherlands we spend so
much time on planning which could also be spend on enjoying life at its
utmost. Sometimes we take life too seriously. I hoped I would bring a
little bit of this mindset back home with me, but unfortunately I might
be even busier than I was before.” So, sometimes it might be a little
inefficient, which he also noticed when traveling. “One time, we made
a trip to Pantanal, which is a very large wetland area. When we were in
the airplane, they suddenly decided to make a stop on another airport.
You can get very annoyed with this, but you’ll have to accept it. It’s just
a pity that you have less time to enjoy your vacation.”
The situation in the Favelas was confronting for him. “The richer
Brazilians do not want to know what happens in these slums. I have
been in the Favelas a lot, and have organized some events such as a
soccer tournament. One time, I teamed up with an NGO to organize a
IvoRio
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Equilibrium Exchange: Tilburg vs. R
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tour through the Favelas with a barbeque, motor ride, samba music
and much more. We wanted to show the rich Brazilians the other side
of the coin. We promoted the event to almost 400 Brazilians, and only
four of them were a little bit enthusiastic. In the end, we did organize
the event but mainly exchange students subscribed. I was surprised
that many people were ignoring the circumstances in which their own
people live.”
Ivo would really like to return to Brazil one day, and show the country
to his future family. With a smile on his face he imitates, “Look, this
is where dad studied!”. If there’s a chance to be in Brazil for a longer
period of time again, he would seriously consider it. However, he
would make sure that he completely masters Portuguese so he can
easily communicate with everybody. When we asked Izabella whether
she would like to return to the Netherlands one day, she confidently
answered “Of course! I like the culture, it is more open than other
European countries and people are not easily offended. So whenever I
come to Europe, the Netherlands would definitely be a good option!”.
IvoRio
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On a cloudy morning I meet with the team leader of Client Portfolio
Management Thomas Verschuuren of Syntrus Achmea, one of the
leading pension fund administrators in the Netherlands. Syntrus
Achmea is pension fund services provider for more than 80 pension
funds.
A suitable setting for this meeting one might think since general
consensus these days is that financial institutions are struggling.
Are they? Are the Dutch pension funds struggling due to the current
financial situation and investment climate? Is the situation really as bad
as everyone expects? Or is it just the overall feeling of negativity that
overshadows the healthiness of this 870 billion euro industry?
I meet Thomas in the Syntrus Achmea office in De Meern near Utrecht,
in a modern and light building near the A12 highway. Pensions have
been a trending topic in the news lately. With smaller funds being lifted
and merged with larger ones and the total amount of pension funds
decreasing, as well as headlines about the low coverage ratios of the
pension funds over the last years.
How does the services provider of over 80 pension funds in the
Netherlands experience the crisis, with the media writing about
decreasing coverage rates, falling interest rates and increasing
investment risk?
The response is clear. Of course, the financial crisis changed the
markets since changing regulation does have an impact, but the
pension funds still have a considerable amount of capital available.
Clients of Syntrus Achmea, in this case the boards of pension funds;
decide how they want their capital invested and decide the amount of
risk they are willing to take. Syntrus Achmea supports the boards in an
appropriate investment strategy.
“Pension funds are pretty healthy”
An important metric for a pension fund is the coverage ratio. Due to a
decline in stock exchanges, historical low interest rates and increasing
life expectancy, the coverage ratio has decreased over the last years
up until 2009. Fortunately the ratios have been increasing lately and
have already returned to a level with a better safety margin. Though
the coverage ratio is still relatively low, the pension funds’ capital has
never been this high.
How is the situation in real estate and private equity? With the housing
bubble and the stock markets collapsing in the past years, the situation
for real estate and private equity is problematic. As we have seen in
the news lately, stock markets are regaining strength, the real estate
market however remains difficult.
“The pension industry offers interesting career perspectives”
Private Equity is used within the investment portfolio as indexation
and in order to add a little upside. Real estate is also included in the
portfolio but in limited amounts in order to compensate for inflation.
Portfolios are relatively strong by using A-locations and A-investments.
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Thomas VerschuurenTeam Head Client Portfolio Management
Syntrus Achmea
Equilibrium Interview
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The pensions industry is being looked after by the pension fund boards
and services providers like Syntrus Achmea. There are still enough
challenges in the next few years with the Eurocrisis, new regulatory
requirements for pension funds and a public debate about pensions.
From a student perspective the pension funds might appear difficult
and sort of dusty as an angle for their future careers.
As we have experienced during the Case Day of Asset | Economics
provided by Syntrus Achmea, pensions can be very appealing,
challenging and even fun to work with. If you enjoy investment and risk
management in a dynamic environment, and you want to know more
about this topic or Syntrus Achmea as a potential future employer, you
can always contact Asset | Economics.
How is our pension build? The 3 pillars of Dutch Pensions
The AOW (de Al-gemene Ouder-doms Wet) is financed through premiums by the government and general govern-ment resources.
The collective employment payments by the employer. Every employee pays an amount of their salary to the pension fund.
The third pillar is constructed in-dividually. There are several ways to build a pen-sion outside the collective system. Examples are bank savings or pension insur-ance.
1 32
Globally, costs of health care are rising fast. In the period 2000-2009
in the OECD costs for health care rose 4.7 percent on average. The
biggest spender as percentage of GDP is the U.S. (17.6 percent in
2010), followed by the Netherlands (12.0 percent). Only about a
quarter of the growth in health care is related to demographics, such
as aging and prevalence of welfare illnesses (COPD, diabetes, heart
failure, obesity). About another quarter is related to new treatment
possibilities, and the rest is sheer growth.
Healthcare is pushing away other public spending, especially in a
time of zero economic growth, and governments feel the urge to limit
the growth of public health care spending. One apparently obvious
solution would be to invest in prevention of illnesses. In table 1 the
costs of behavior-related illnesses are presented for residents in the
Netherlands. You can see that for example 86 percent of lung cancers
are attributable to smoking. This means that prevention of smoking
could decrease health care costs with possibly 280 million euro.
Table 1 also provides us with a rationale for doing what we students do
best: drinking! The next beercantus could prevent your next coronary
infarct, and save society 500 million in costs for strokes. Cheers!
So does this table provide us with a cheap solution to the rising health
costs, the famous easy pickings? Obviously not. With an incidence of
100 percent the greatest cause of death is birth. People die, be it not
from COPD then some other (more expensive) illness will do the trick.
If prevention measures save a person from lung cancer, that same
person might get dementia, Parkinson’s, and fracture a couple of hips
on the way to the hospital. And then I didn’t mention the costs of
residence or retirement benefits!
Actually most health care costs are made in the last life year, regardless
of age. So from a sustainable health care point of view prevention will
not do any good. The personal benefits are large though, in the form
of increased quality of life. The costs to society are almost as large, in
the form of increased social services. I see some freerider options here,
but in my role as public servant I would recommend to you smokers:
keep on steaming, you’ll reach the harbor faster!
Equilibrium P
revention and the cost of health care
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Prevention and the cost of health care
By: Niek Stadhouders
Graph 1: Health care spending as percentage of GDP (2010)
Table 1: Contribution of unhealthy behavior to the cost of health care of causally related illnesses for residents in the Netherlands, aged 20 or older in 2010
Niek Stadhouders graduated his Masters’ in Economics at Tilburg
university in 2012. After his graduation he followed a postacademical
education for policy economist at the ministry of Health, Welfare and
Sports in The Hague. The articles are written on his own title, and are
not representing the view of the Dutch Ministry of Health, or are in
any way attributable to the Ministry or its representatives. For more
information about the articles, contact [email protected].
About the author:
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Attributable to (in percentages) Costs in million euro Smoking Obesity Inactivity Alcohol Diabetes 1.137 7 51 10 0 Lung Cancer 326 86 0 0 0 Cancer Others 1.618 12 8 5 8 Acute Myocard Infarct 706 40 15 16 -16 Chronic Hart Failure 545 15 12 0 0 Stroke 1.918 22 6 24 -26 COPD 880 79 0 0 0 Arthrose Hip 150 0 14 0 0 Arthrose Knee 146 0 29 0 0 Lower Backpain 1.116 0 7 0 0 Total 8.543 24 13 9 -6
How is our pension build? The 3 pillars of Dutch Pensions
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e Einstein’s Conundrum
Some have said Einstein’s riddle is the worlds hardest riddle. It isn’t. The story is that Albert Einstein created it as a young man, and claimed that 98 percent of the world population couldn’t solve it. Though I’m not certain of the true origin, it is a tough one, and it is a good way to exercise your brainpower. Here it is:
- There are five houses next to each other on a street, painted five different colors.
- A person of different nationality lives in each house.
- The five home owners each drink a different beverage, smoke a different brand of cigar and keep a different pet.
Einstein’s riddle is simply this: Who owns the fish?
Of course, you need the necessary clues:
1. The British man lives in a red house.
2. The Swedish man keeps dogs as pets.
3. The Danish man drinks tea.
4. The Green house is next to, and on the left of the White house.
5. The owner of the Green house drinks coffee.
6. The person who smokes Pall Mall rears birds.
7. The owner of the Yellow house smokes Dunhill.
8. The man living in the center house drinks milk.
9. The Norwegian lives in the first house.
10. The man who smokes Blends lives next to the one who keeps cats.
11. The man who keeps horses lives next to the man who smokes Dunhill.
12. The man who smokes Blue Master drinks beer.
13. The German smokes Prince.
14. The Norwegian lives next to the blue house.
15. The Blends smoker lives next to the one who drinks water.
First of all, a chart is the most useful tool for riddles like this. Make a chart with five columns for the five houses, and five rows for house color,
nationality, type of drink, type of cigar, and finally, pets. This gives you 25 boxes to fill in. Since clue #8 states the man in the middle house drinks
milk, you can start by filling in that one. Now you are on your own. This is a decent riddle, and especially fun for those who like riddles with systematic
solutions. Even if you can’t get the solution, you’ll get a good mental workout doing Einstein’s riddle.
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See you next year!