Upcoming French Elections Pivotal for Europe’s Future

By Ziad Abouchadi,  Class of 2017

By Ziad Abouchadi, Class of 2017

Many thought that the 2012 French presidential elections could not have been any more dramatic, with the front runner Dominique Strauss-Kahn arrested in New York for rape charges. Since France will be holding its tight elections in eight weeks, deciding the future of both Europe and what remains of the liberal order, the stakes are high and tension palpable in the markets and elsewhere.  

There are two things to know about the French presidency. First, presidents are much more powerful in France than they are in the US as they can and have dissolved other branches of government in the past. This power gives the presidential election a vital importance. Second, French elections are unique in that they are decided in a run-off voting process. People vote among dozens of candidates in the first round, only to be given a choice between the two winners of the first round in a second round of voting. This is critical to understand the dynamics of the coming election as the candidate with the most supporters doesn’t necessarily win.

Marine LePen (Front National) is the clear leader in the polls even though her party has never won the election in 44 years of existence. Her populist nationalist anti-immigration and anti-EU political line rings true with one out of four French voters. If she were to win, she will have a clear mandate to have France exit the European Union and to implement Trump-like policies.

But while Ms. LePen’s large and loyal supporter base all but guarantees that she will win the first round of voting, it remains to be seen whether she will be able to convince voters beyond this group of core supporters to give her a chance in the second round.

LePen (left) and Macron (right) want to take France and Europe in completely opposite directions.

LePen (left) and Macron (right) want to take France and Europe in completely opposite directions.

The two contenders for the remaining spot on the second round are Emmanuel Macron (En Marche) and Francois Fillon (Republicains). Mr. Macron is a former investment banker who put in place his own political party to run for this election. He is supported by a little more than 20% of French voters, mainly young urban ones, for his socially liberal policies. He is the only unapologetic advocate of Europe, free trade, less regulation and a balanced budget.

Mr. Fillon is a more classical figure and represents the status quo in French politics. He languishes at a third position after being investigated for misuse of public money. He is a true Christian conservative, advocating state reforms and family values. Many see him as France’s Margaret Thatcher, which is not always a compliment.

Ms. LePen and Mr. Macron plan on revolutionizing French politics in different directions, ending decades of a two party system. The mere fact that they are leading in the polls suggests that business as usual will not be an option after this election. France will most likely either embark on a mission to consolidate its position in Europe and revitalize its job market or will exit the European Union with all the risks that that entails.

The Long Term Costs of Short Term Thinking

By Ali-Asghar Abedi,  class of 2021

By Ali-Asghar Abedi, class of 2021

Few predicted the election of Donald Trump as President of the United States. However, despite his lack of political credentials, he has demonstrated a talent for understanding what motivates the average American voter. Americans appear to be anxious about their future which, I will argue, may be explained by the short-term thinking that pervades American boardrooms.

Firstly, consider paid time off. Most Americans passively accept two weeks off per year and many do not use their full vacation allowance. Although this policy solves employers’ immediate staffing needs, a lack of vacation leads to greater incidences of depression and heart disease. Additionally, such miserly vacation policies make travel more difficult.

Nineteenth century German philosopher Alexander van Humboldt contended that the most dangerous world views are of those who have not viewed the world; a maxim that can be applied to this discussion. Restrictive time-off policies can undermine intellectual development which may make people more susceptible to dogma and likely to view foreign people and concepts with disdain or even as a threat.  Conversely, more generous time-off policies can help employees pursue travel and other intellectually stimulating endeavors that broaden perspectives, increase tolerance for ambiguity and cultivate more robust worldviews. This in turn better equips employees to build coalitions and solve complex problems. In addition, rested employees are likely to be more productive on the job.

Secondly, management teams across the country are highly under pressure (often from hedge funds and mutual funds favoring shorter term returns) to impress Wall Street by beating quarterly EPS estimates. Such quarterly capitalism has seen CEOs and CFOs offer increasingly higher dividends and stock buybacks. For example, over the past three years The Gap has counter-intuitively increased dividends successive years of declining net income. Every dollar spent on returning cash to shareholders is a dollar that cannot be spent on investing longer-term growth via capex, R&D, eco-initiatives or human capital development. Attracting investors seeking longer-term returns may help avoid the pitfalls of quarterly capitalism. For example, management at Sky plc (Europe’s leading pay TV provider) attributes much of the firm’s success to 21st Century Fox’s large controlling stake which allows the C-suite to play the long game.

Today’s rapid pace of change compounds the impact of short-term thinking. Think of the household names that didn’t exist twelve years ago: Facebook, Twitter, YouTube, Uber, Snapchat, Airbnb and Whatsapp. The emergence of these firms and the coming third internet wave (pertaining to IoT) has eliminated the need for many of yesterday’s jobs. Moreover, according to the World Economic Forum, 65% of the jobs that today’s primary school children will end up holding do not exist today. In such a time, there is an urgent need to invest in employee education and training.  

This lack of training is a particularly acute development given the prospect of automation. Faced with minimum wage pressure, restaurants are motivated to reduce reliance on human capital. Why pay someone $15 per hour when an iPad can take an order and a robot can make a pizza? Furthermore, complex tasks and functions no longer require human input. Today, robot lawyers are helping people get out of parking tickets and claim airline compensation; investment banks are hiring math PhDs to their trading desks to write complex algorithms and the world is moving towards driverless cars and robot pilots.

More than trade deals, automation and a lack of training threatens the future livelihood of many American workers

More than trade deals, automation and a lack of training threatens the future livelihood of many American workers

Overcoming short-term thinking does not necessarily require legislative or regulatory solutions and may instead be achieved with a change in management incentives (e.g. compensation structure). In additionally, assembling a diverse Board of Directors could help prevent management teams from operating in an echo chamber and highlight the long-term consequences of decisions.

Considering the long-term is particularly warranted because short-term thinking has left many Americans short-changed. When the overwhelming majority of economic gains since 2008 go to the top 1%, it's not unreasonable to conclude that the American Dream is in peril. Driven by anxiety, voters affected by short-term corporate thinking opened Pandora’s Box. The result can be seen in the country’s choice for 45th President.

Al is a first year MBA student who is trying to balance business interests with social impact

I am a Mexican, Mr. Trump.

By Rafael Tuachi , class of 2017

By Rafael Tuachi, class of 2017

By now you are probably annoyed at how much people have been discussing the results of the presidential election, or about how appalled people are about them. Given how close the election was, the experience must have been at the very least nerve-wracking. I won’t discuss the results, or offer my critique of them. I will speak from the heart because I am Mexican, and I am nervous.

I don’t know or care about what the upcoming administration holds in store for the likes of me. People have proved time and time again that the “average Joe” is quite resilient, regardless of inertia at the public policy level, as they will be implemented over long periods of time, during which Latinos, Muslims, Blacks and other minorities will eventually adjust. What keeps me up at night is the problem of perception that Mr. Trump’s campaign infused in the American population. Millions in the USA pride themselves of being open-minded, but we have to face the reality that this is not the world at  least 60 million Americans, through no fault of their own, were wooed into. I am not talking about the ones who were ex-ante racists, but of those whose view was neutral or absent, but that now are ruled by a proponent who came to power advertising his propaganda. These people were essentially taught that it is ok to hate, because it gets the job done (at least it did for Trump). The results are obvious and immediate; Twitter is testament to that.

I am nervous and scared because policies like the ones in the minds of Trump-voters (even if they do not exist and will never be proposed) give free range to speak out directly against minorities with arguments fitting of the 1940’s. I’m not saying that America has gone 70 years into the past in terms of social politics, but I am implying that many people certainly have a reason today to rewind their mentalities– after all, the president thinks that way, right?

Certain behaviors have seemed to become normalized after the election.

Certain behaviors have seemed to become normalized after the election.

I am nervous not because of what the economy might do, or how the tax cuts will drive deficits up. I am nervous that if I go walking on the street or climb into an Uber, the driver or my fellow pedestrians might yell at me, or attack me, simply because I am Mexican… and to think that the US *was* a model country, a beacon of light to be followed. On a larger scale, I am nervous of what the ramifications will be for generations of college and grad students, American or otherwise, with foreign heritage, to have as many opportunities by how corporations will perceive them, simply by the shift in mindset of what is permissible brought by the new administration.

I am optimistic, however, that people cannot be that ignorant and retrogressive. My mom used to say “think wrong and you’ll get it right!”. I pray to God, that in which America trusts, that she was wrong.

Rafael Tuachi (’17) is a Mexican Boothie living in the States, scared but hopeful.

The state of the other Union

By Ziad Abouchadi , class of 2017

By Ziad Abouchadi, class of 2017

While an election year is about to end in the US, an extremely vital political year is starting in Europe. With Dutch, French and German general elections scheduled for 2017, voters will decide the future of the old continent. All three elections will be harshly fought with the established parties on one side and populist ones on the other.

In France, after an extremely unpopular first term, socialist Francois Hollande may become the first incumbent President to be absent of the ballot. 70% of voters wish Mr. Holland resigns from the political life forever, making him the least popular president since the war.

He is blamed for the state of the economy, the crumbling of the ideals of the EU and several terrorist attacks under his watch. To his credit, he has begun the process of structural and labor reforms that so many countries desperately need but it was too little and too late to have any effects by the election date.

Consequently, his departure will leave the field open for a fight between the French right (Alain Juppe) and the extreme right (Marine Le Pen). The likely absence of the left from the second round of the elections will focus the political discourse to anti-immigration, anti-trade and anti-EU. Just recently, the government dismantled the refugee camp in Calais as a signal to the UK that French priorities have shifted from the EU to France. Since France will have a strong say in what happens to Europe post-Brexit, the rhetoric may have destabilizing effects well outside the French borders.

Marine Le Pen (left, France) and Geert Wilders (right, Netherlands) lead the European anti-EU wave.

Marine Le Pen (left, France) and Geert Wilders (right, Netherlands) lead the European anti-EU wave.

The results of the elections in the Netherlands and Germany will be based solely on immigration policy, rather than the state of the economy. The right-wing Alternative for Germany (AfD) has moved from a fringe party to a serious contestant for next year’s elections. Since Angela Merkel decided to make the dramatic decision of accepting Syrian refugees, her electoral base has been slowly eroding in favor of AfD. As she has been defeated in many local elections, she is now weakened and increasingly unpopular.

In the Netherlands, the far-right Party for Freedom of Girt Wilders is the most likely to win the general elections since it is the highest polling party at the moment. The party’s manifesto is an interesting read, calling for the closure of all mosques, a ban on the Koran and immigration from Islamic countries. The party is also famously Eurosceptic, calling for a Dutch version of Brexit that would signal the end of the Union.

Uncertainty over politics and the future of the European Union has been the biggest drag on the continent’s investment and growth since 2010. The President of the European Commission, J.C. Juncker said it best: “We all know what to do, we just don’t know how to get re-elected after we’ve done it”. Let us hope next year’s elections will be the catalyst that will unleash the full potential of the European Union and save it from self-inflicted irrelevance.

Ziad is the editor of the Opinion column of Chicago Business.

The president America needs

Many voters are still not convinced by the options they face in the upcoming presidential election. The candidates have been scrutinized under different angles, to the point where the most important thing is forgotten: Beyond whether we like them, can the candidates do the job?  Voting should be about solving the issues one cares about, not just a popularity contest.

Hillary Clinton is not the mere lesser of two evils, she is the most competent presidential candidate in decades

Hillary Clinton is not the mere lesser of two evils, she is the most competent presidential candidate in decades

For a start, most voters expect Clinton not to be able to tackle the ugly Washington practices nor to break the political status quo. That is a fair assessment out of an unfair expectation. If you are frustrated with the way Washington works, you should be. But the real problem is that Senators reelection rates are above 90% (95% for the House). Are they that popular? Not really. These are the people that make laws, not the President. These are the people that have the power on domestic policy, not the President. These are the people that frustrate you, not the President. Their seats are so safe and secure, that they don't have any incentive to reach across the aisle or compromise, resulting in vitriolic discourse, divisiveness and frustration. Notwithstanding election rhetoric, expecting any president, Clinton or otherwise, to change that is beyond naïve. Two reasons:

  1. The US is the only developed country where self-interested politicians govern the redistricting process (gerrymandering), tailoring their district to only include people that vote for them. Congressmen choose voters instead of voters choosing congressmen.

  2. Turnout rates for congressional elections are the lowest they have ever been and declining. 60 to 70% of minorities don’t show up to vote and are then surprised that their voice is not heard.

Until that is fixed (by pushing your Senator to support anti-gerrymandering bills and not forgetting to vote), all that can be expected from a president is to work around the current structure to move the country forward. One’s personal preference might be for a conservative or liberal agenda, but until we find a way to eliminate differences of opinions, compromise is the best we can hope for. Ms. Clinton is a unifier, to the right of most Democrats and to the left of most Republicans. If elected president, she will have the needed credibility with the left wing of her party (Sen. Sanders and Warren come to mind), with Republicans, technocrats and CEOS alike. A stance less confortable or appealing than pure ideology but, contrary to the latter, with a certain usefulness beyond election rallies. 

Declining Congressional elections turnout rates. Source: U.S. Census Bureau

Declining Congressional elections turnout rates. Source: U.S. Census Bureau

On the international front, if the presidency had a job description, it would have Hillary’s resume as the ideal candidate. She has shown herself to be thoughtful, ponderate and open to being wrong. She is one of the most seasoned politicians in Washington, experienced in international negotiations and crisis-resolution. She is committed vis-à-vis strategic allies to restore the ties that have been strained during the Obama’s second term. She has a clear vision for what the international role of the US should be, between Obama’s isolationism and Bush’s hawkishness. No other candidate, left or right, holds a candle to Hillary’s grasp of the world stage and the necessary role that the US has to play in it.

Furthermore, the widely held belief that Clinton is the lesser of two evils is a myth. Running any country, a fortiori the USA, is a grueling and thankless task. As such, it requires resilience, level-headedness, prudence, a minimum grasp of facts and the willingness to be advised, just to name a few. Clinton is not the lesser of two evils: she is the most competent presidential candidate facing the most unscrupulous, empty, demagogic soapbox orator in decades. 

If it is so clear cut, why is it that there is still a contest? One reason is that the next president will likely nominate 4/9 Supreme Court justices (a replacement for late J. Scalia, and three likely ones for Ginsburg, Kennedy and Breyer). If all the new appointed justices are on the liberal side of the spectrum, the balance would move from 5 to 4 in favor of conservatives to 3 to 6 in favor liberals. that would dramatically change the balance of power in one the most relevant institutions in the US, with rippling effects decades afterwards.  As a result, the Republican party is rightly halfheartedly supporting Trump and focusing on the Congressional elections, trying to avoid losing by a historically wide margin, which would give Democarts free rein to nominate justices. Even though the presidential election is lost, it still makes sense for the party not to lose by a wide margin.

Another reason is that is populism is raging worldwide and it will take sociologists years to determine what is fueling it. Easy radical slogans, from the NHS millions to the Mexican wall, find attentive ears looking for a radical change. We should remember that for all the attention grabbing headlines, the US is doing pretty well. Its economy is the most dynamic in the world, its military unchallenged, the price for discriminating against minorities is rising every day and most people, if given the choice, would move to the US. Radicalism is an intellectually lazy path and we owe it ourselves to exert the highest standard of scepticism toward the political fringes that come with simple solutions to civilizational problems. The challenges are real and pressing but shouldn’t excuse throwing the baby with the bathwater.

By Ziad Abouchadi, Class of 2017
This opinion is representative of views held by the author and do not necessarily represent the opinions and beliefs  of the editor in chief or the entire Chicago Business staff.