The Iranian Presidential Election: Significance and Potential Outcomes

Lynx Global Intelligence

 

With less than a few days before Iran holds its presidential election, a victory for incumbent president Hassan Rouhani is likely. This comes despite blowback from his failure to deliver on political reforms, as well as the underperformance of the economy after Rouhani sold the nuclear accord and removal of sanctions to Iranians as a path to prosperity. Polls have shown that Rouhani may have 54% of the decided vote, sparking the possibility that he may win the election outright on Friday and avoid a runoff.  Polls are scheduled for May 19, with the possible run-off on May 26th.

A couple issues are working in favor of Rouhani and in disfavor of the conservatives. First, every incumbent Iranian president has gone on to serve a second term. With the 2009 election debacle and Green Movement protests still fresh in the minds of the ruling elites, stability and continuity are important factors in the race. Second, Rouhani’s base of reformist/moderate voters has remained solid. When turnout for an election is high, this tends to favor reformists like Rouhani. The conservative base, while mostly consolidated around former prosecutor and current custodian of the Imam Reza shrine, Ebrahim Raisi, is still partially fractured. Tehran mayor Mohammad Bagher Qalibaf, a former chief of the Iranian police force, enjoys significant support.

There are several concerns regarding the election and its outcome. No matter who wins the election, the nuclear accord is certain to remain in place. The Supreme Leader, Ayatollah Khamenei, has ultimate authority over foreign policy issues and the success of the nuclear accord is evidence of his tacit approval. Qalibaf has also indicated support for the agreement. However, a conservative victory would likely still come with risks. Both Raisi and Qalibaf have attacked Rouhani’s tepid economic record, pledging to increase subsidies to poor families and address youth unemployment. Their economic populism reminds the ruling class very much of Ahmadinejad’s destructive economic policies, a situation they do not want repeated.

There is a potential for social unrest. Ayatollah Khamenei warned recently that “disruptors” would be dealt with harshly. Should Raisi or Qalibaf pull off an upset that Iranian voters see as illegitimate, the possibility of protests increases. The regime would likely crack down immediately and decisively. Human rights abuses continue in Iran, but a very public repeat of anything resembling 2009 could give the international community a reason to reassess sanctions.

A victory by either Qalibaf or Raisi may embolden those who wish to see a more assertive Iranian foreign policy. A confrontation in the Persian Gulf or a missile test may invite the Trump administration to junk the nuclear deal. Earlier this year, the administration put Iran “on notice” after Tehran launched a test missile. A US pullout from the nuclear deal would, of course, be harmful to US investors interested in exploring the emerging market in Iran. While current restrictions on business with Iranian banks and the complexity of the sanctions themselves have deterred investors, it would be wise to continue to navigate these issues and prepare for an Iran that is ready to do business with US investors. Lynx Global Intelligence is prepared to provide on-the-ground knowledge of emerging markets in Iran, as well as clarify what the current risks are and explore ways of entering Iranian markets.

Some have suggested that Raisi’s candidacy is really a dry run for fielding a replacement for Supreme Leader Ayatollah Khamenei, who is suffering from prostate cancer. Raisi, a conservative cleric with considerable experience as a prosecutor, is also the custodian of the Astan Quds Razavi, the powerful foundation that manages the shrine of Imam Reza in Mashhad. Raisi is also a member of the Experts Assembly, which has authority to choose the Supreme Leader. Raisi is an untried candidate who has been criticized for his lack of charisma, but the regime may be testing the appeal of Raisi as a potential leader, as well as the resonance of his conservative message.

At the same time, it is too simplistic to see establishment groups in Iran such as the Experts Assembly through a binary reformist vs. conservative lense. Saeid Golkar, a visiting fellow for Iran policy at the Chicago Council on Global Affairs, has instead suggested viewing such groups as divided between “three pillars”: the state bureaucracy, the clerical establishment, and the military. Golar positions Rouhani close to the state bureaucracy, and Raisi with the military. Khamenei navigates these groups, and despite the fact that he has expanded the powers of his office, the Revolutionary Guard still exert significant influence in Iranian politics. Despite this complexity, the regime seeks continuity and an avoidance of any shock to the system—in this case, an unprecedented loss for an incumbent president. The replacement of Rouhani with an administration that may be inclined to pursue an aggressive foreign policy, economic populism, and further antagonize a nation that is ready for change is widely seen as a potentiality best avoided.

Hybrid Warfare: Irregular Soldiers, Political Subversion, “Lawfare”, Cyberwarfare, and Violent Nationalism

With the current European elections, many speculate social influence and interference by Russia

By:  Matthew C. Bebb, Lynx Global Intelligence

 

Violent nationalism as a force of legitimacy

Putin has exercised a unique type of hard power in the past decade with the use of hybrid warfare. This has been evidenced in the 2008 Georgia conflict, the present-day Ukraine conflict, and confrontations with NATO and EU countries. Putin has rejuvenated Russian nationalism by incorporating the Orthodox Church into policy making. The Orthodox Church serves as Putin’s “right hand man” that gives him legitimacy and moral superiority. Furthermore, Putin’s nationalism emphasizes “Russianness” by stating that people who speak the Slavic language are all part of Russia. This gives Putin self-appointed validity when intervening in other sovereign countries such as Georgia and Ukraine. In both conflicts, Putin states that he was coming to the aid of “Russians”. These “Russians” were not Russians, but Ossetians, Abkhazians, and East Ukrainians. However, Putin marries history with language by alleging that these people existed under the Russian sphere throughout history and belong to Russia. Putin’s strong nationalism calls upon “patriots” to enforce nationalism at home (e.g. The Nightwolves motorcycle club, Slav Mobs that beat up foreigners and homosexuals, and xenophobic organizations).

Irregular soldiers, low intensity warfare, and NATO confrontation

Putin, along with many Russians, views the collapse of the Soviet Union as the greatest geopolitical catastrophe of the 20th century. This “catastrophe” was compounded during the Balkan Wars when NATO bombed Serbia. Furthermore, Slavic speaking countries such as Croatia, Slovenia, Albania, Poland and Macedonia pivoted away from Russia after the war and embraced EU relations. Consequently, this further weakened Russia’s sphere of influence in the Slavic world while also bringing his enemies (EU and NATO) into his backyard (Ukraine and Georgia). Thus, Putin has sought to engage in realpolitik strategy in Russia’s near abroad by staging military exercises in sovereign spaces in order to project strength, demonstrate its posture, and deter further encroachment into the Russian sphere. This has taken place in the form of dangerously close flybys of NATO ships, naval drills in the Arctic, flyovers in EU airspace, showing off new military hardware at parades, and threatening the use of its nuclear weapons if provoked.

For all this muscle flexing, Putin is smart enough to know that engaging in formal mil-mil warfare against the West would end in disaster. Instead, Putin has clandestinely sent unmarked Russian troops such as those seen in the Crimea land grab. Or he sends in regular Russian soldiers who pose as civilian rebel fighters such as those seen in East Ukraine. These irregular forces give him plausible deniability while exercising his hard power secretly. On the other hand, if NATO or other Western militaries were to intervene against these regular troops, Putin could react with full force stating that Russians were being attacked and he had no choice but to use military force. Fortunately, these conflicts have been low in intensity and have not yielded international intervention.

Political subversion 

Putin has also supported and/or sponsored movements that cause political volatility such as Euroskeptics parties, the Brexit movement, European ultra-right wing parties, European anti-immigration parties, and secessionist movements with pro-Russian goals. These parties represent a disconnect between the beliefs and values of the European Union and its institutions. Putin thrives on these dissidents because they undermine the legitimacy of the European Union and look to Russia as a model for governance.

Putin’s image of strongman authoritarianism and Russian exceptionalism are propagandized by government-sponsored media outlets such as Russia Today, Sputnik, and Pravda. Each of these sites are hosted in various languages in order to reach a broader audience. The disinformation campaign used by the Kremlin seeks to undercut EU goals and thwart the idea of American exceptionalism. Coupled with his media campaign are Russian cyberwarfare efforts that continually attack American economic and political secrets. This is another type of hybrid warfare that gives Putin plausible deniability by stating that these could be rogue hackers who don’t work for the government. However, it is widely acknowledged that along with Putin’s cyberwarriors are a horde of internet “trolls” who write disparaging comments on social media sites about the West.

Lastly, Russia’s role in the UN is a flagrant hypocrisy. Putin manipulates domestic and international laws in order to achieve his goals (i.e. lawfare). Putin advocates states’ sovereignties. In other words, no foreign power should have a say in another country’s business. That is unless, of course, you are Vladimir Putin. Russia has a habitual veto voter in the UN and undermines the international community’s progress toward addressing many issues. Putin also claims that Russia must maintain its sovereignty by eliminating potential fifth column agents within the Russian state (e.g. NGOs, foreign companies, and tourists).

Recent News Confirming Information Warfare Feb. 21, 2017

Defense Minister Shoigu, backed by his top brass army generals, addressed the State Duma on February 21st. The usual protocol for addressing the Duma on security matters adhered by Shoigu along with his predecessors was a private affair. These plenary sessions were always declared state secrets, and members of the Duma were not allowed to share any information with journalists. However, during last week’s address by Shoigu, there were press present and live stream media provided by the Defense Ministry. Replying to questions from Duma members, Shoigu shared that four years ago Russia secretly created an “information warfare directorate” within the defense ministry. This is a new branch of the military that will be engaged in cyber warfare “counterpropaganda.” Apparently, this will involve hacking into databases and Internet trolling. Duma officials were caught off guard when Shoigu publicly disclosed what was once secret information, now being put on blast for state media.

Colonel General Vladimir Shamanov, a former chief of the Airborne Troops and the current Duma defense committee chair, told journalists these new troops will “protect [Russia’s] national defense interests and engage in information warfare,” including cyber warfare. Retired Colonel General Leonid Ivashov, the former head of the defense ministry’s international cooperation department, insists Russia should be more aggressive in information warfare “to open up concealed Western data in the US and in Germany to expose their lies”. The hacking of e-mail accounts to dump their contents into the public domain could seem to fit the Russian understanding of “information warfare.”

Agriculture as it Used to Be: Cuba’s Natural Crops have Massive Potential in Upscale Markets

By:  Colin Gaiser, Lynx Global Intelligence

 

When the United States relaxed travel restrictions to Cuba in 2015, it was an exciting moment for those of us who were always drawn to the island by photos of surreal, pastel-colored buildings and streets lined with classic cars. And Cuba is indeed an exciting place to visit — yet beyond the famous old city of Havana is a lush 110,000 km2 island, where 30 percent of land is used for agricultural production.

Cuba’s climate could hardly be better for agriculture — lying just south of the Tropic of Cancer, Cuba has a tropical climate with temperatures moderated by year-round northeastern trade winds. It also has a predictable, May-October rainy season. And while Cuba is historically better known for tobacco and sugar, the island also grows ample amounts of coffee, potatoes, rice, numerous tropical fruits, and citrus (the island is actually the world’s third-largest producer of grapefruit).

Organic and Sustainable

Unfortunately, a combination of Castro regime policies, lack of access to fuel and supplies after Soviet Union’s collapse, and the island’s economic and political isolation have made agricultural production relatively inefficient. A lack of fertilizer and modern agricultural technology hampers yields. And while the government has turned land over to independent farmers to lease, it still requires most of them to grow food for the state.

However, there is an upside: This unique situation left Cuba’s agriculture largely organic, dominated by small-scale farms (many in urban areas) that rely on more natural methods of production. With many Americans willing to pay a premium more for organic, sustainably sourced products, Cuban agricultural products could be very attractive to the upscale market.

Plus, there is reason to believe more economic liberalization is not far off. Raúl Castro is scheduled to hand over power to Miguel Díaz-Canel, his younger vice-president, in February 2018. Díaz-Canel supports increasing internet access (currently very spotty) as well as more economic openness, which is strongly endorsed by public opinion in both Cuba and the United States.

Brewing a New Market

Coffee, in particular, is a likely beneficiary of more economic openness. Despite a drop in overall production since the 1990s, it is one of the first Cuban agricultural products accessible to American citizens within the United States.

Swiss-based Nespresso is the first company to make Cuban coffee available to Americans. Though not on store shelves yet, for a limited time one could order their Cafecito de Cuba coffee pods online or over the phone. While this is just a small step toward providing Americans the experience of drinking Cuban coffee, the thawing relationship between the two countries makes one optimistic about the possibilities of coffee on the luxury market.

In the meantime, the president of Nespresso USA, Guillaume Le Cunff, has stressed that Nespresso is interested in developing a long-term arrangement to ensure a steady supply of Cuban coffee for U.S. customers. This project would also work to improve living conditions for Cuba’s farmers. Such a combination of a novel, high-quality product along with real corporate responsibility could strike a chord in the U.S. premium market.

A Bright Future

While the timetable is unclear, Cuba seems destined to liberalize and become more economically open to the rest of the world — and when this occurs, the challenge will be to maintain the sustainable, organic quality of Cuban agricultural products. This will not just be attractive to American consumers, but also necessary to maintain the magnificent environment and biodiversity of Cuba. Both the economic and social returns on investment could be huge for companies that take on this challenge.

 

 

Sources:

https://www.nytimes.com/2016/06/22/dining/cuba-us-organic-farming.html?_r=0

https://www.usatoday.com/story/news/world/2016/06/20/cuban-coffee-sold-in-united-states-nespresso-technoserve/86117020/

http://www.economist.com/news/americas/21719812-revolutionary-economy-neither-efficient-nor-fun-what-tourist-industry-reveals-about

https://www.entrepreneur.com/article/273135

 

North Korea: Recent Developments

By:  Trevor Jones, Lynx Global Intelligence

 

The strategic calculus has not changed around North Korea, but some details have. Unlike the recent cruise missile strike in Syria, kinetic action against North Korea would have far reaching consequences for businesses and governments in the region. Kim Jong-un relies on bellicosity for domestic legitimacy and international attention. He would react to an attack on his country with violence directed primarily at South Korea, sparking an exchange with dire regional consequences. The risk of mass migration across borders and the attendant challenges of millions of North Koreans fleeing a war is something neither China, nor South Korea, wants.

It is wrong to assume that because the US took unilateral action against the Assad government, that it will do so against Kim Jong-un’s military apparatus. The US is not, yet, directly threatened by North Korean missiles, and stands to lose much in the way of resources and energy fighting a land-based Asia war. Allowing China to shore up the threat is preferable.

It is possible that the Trump administration, having learned cruise missiles control news cycles, will search for the threshold required to attack North Korea, but voices in the region will call for restraint. Nevertheless, Japan’s Prime Minister Shinzo Abe did not miss an opportunity to link action in Syria with North Korea last week, stating the North was prepared to fill warheads with sarin, the same chemical agent that provoked response in Syria.

Both the strike in Syria and posturing around Korea have alternately satisfied and frightened various corners of the foreign policy elite. Many will agree that a United States that is willing to provide global leadership, through the organizing principle of deterrence, is better than a rudderless international political system. Others will counter that this thinking leads to unnecessary and wasteful intervention. Limited kinetic action is not possible in North Korea, due to hardened and geographically disparate targets.

While regional governments ponder and plan to prevent these contingencies, business continues as usual. From last weekend’s Business Insider:

“Asia trades as if North Korea wasn’t a problem,” Federico Kaune, the head of emerging markets debt at UBS Asset Management, told Business Insider. “Quite frankly, I don’t think markets are pricing in fully — or not even to some extent — the North Korean risks.”

 Geoffrey Wong, head of global emerging markets and Asia Pacific equities at UBS Asset Management, told Business Insider that the situation today is “very different” from the past, and that markets aren’t pricing in the current North Korean risk right now.

The global business community should begin understanding how to price in geopolitical shocks. Current pricing models do not fully account for these potentialities, only qualitative assessment of political realities will do. This analysis requires a mix of skills in an ever-broadening array of fields (intelligence, business risk, demographic analysis etc.) A kinetic conflict on the Korean peninsula would involve market disruptions across dozens of industries. Shipping lanes would clog, oil and gas infrastructure would reorient to a war footing and financial markets would swing wildly.

While the overall strategic calculus around the North Korea situation has not changed, the country did display new weaponry during last weekend’s parade, and a firm strategy from the Trump administration has yet to be delivered. Just because an event carries a low probability, does not mean it carries a low impact. In the case of North Korea, details matter.

The Paris Climate Agreement and Future Business Implications

Pursuing the goals of the Paris Climate Agreement will ensure businesses long-term success while allowing them to participate in the reshaping of the economy while saving the environment.

By:  Jenya Sakaeva, Lynx Global Intelligence

 

In light of recent political events, the environmental future of the United States, and consequently the world, may look quite bleak. Fortunately, as the saying goes, every cloud has a silver lining. For the planet’s climate, this silver lining could be businesses big and small leveraging their power for global good. While the Trump Administration has yet to formally withdraw from the 2015 Paris Climate Agreement, the executive orders to date signify the United States’ noncompliance with the goals set forth to prevent global temperatures from rising another 3.6 degrees Fahrenheit. This is a point when scientists have agreed the Earth will be irrevocably locked into “a future of severe droughts, floods, rising sea levels, and food shortages” [1].

Pursuing the goals laid out in the COP21 Paris Agreement will set businesses on a course of action that will lead to sustained success. In Lynx’s previous post, https://tinyurl.com/mnqbq9q, we outlined the ways in which corporate social responsibility and ethical business practices bring long-term prosperity to those who participate in them. Addressing climate change is a part of corporate social responsibility.

Why should businesses uphold the Paris Climate Agreement?

 A changing climate poses many risks to business. First, there is the risk of depleting natural resources that are either raw materials in a company’s product, or necessary to the process of manufacturing or shipping those products. There are tangible, physical risks associated with damage to facilities or manufacturing centers from a more extreme and volatile climate and weather events. Of course, there are financial risks that lack of natural resources or extreme weather will result in. Market risks in the form of shifting consumer preferences, behaviors, and demand are equally prevalent. Additionally, companies face reputational and regulatory risks for poor performance in climate related endeavors.

The Paris Climate Agreement is historic in terms of the goals set and number of countries that have committed to take them seriously. This reflects the global understanding of the multitude of issues stemming from climate related problems. The time to act is now.

In the words of some of our economy’s biggest players, “Implementing the Paris Agreement will enable and encourage businesses and investors to turn the billions of dollars in existing low-carbon investments into the trillions of dollars the world needs to bring clean energy and prosperity to all” [3].

The Paris Climate Agreement creates a global landscape in which business opportunities are plentiful. As the world economy and political powers move towards achieving reduced emissions and capping temperature rise, businesses will see a need to change their practices to support their country’s commitment to the agreement. Evaluating the strategic decisions now can put you ahead of the curve, but failing to adjust just means a more turbulent transition further down the road. Aside from political agendas impacting businesses and the Paris Climate Agreement, there are also economic, social and technological reasons to begin honoring the agreement sooner rather than later.

According to a business briefing on the topic by Cambridge University, “Companies such as GE, Unilever, Nike, IKEA, Toyota and Natura are already reaping the benefits of offering ‘green’ products and services, a market which has grown to over $100 billion” and “Unilever’s purpose-driven brands are growing at twice the rate of the rest of their portfolio and if GE’s Ecomagination was a standalone business, it would be a Fortune 100 company.” [4] Additionally, there are many economic opportunities to invest in renewable energies and new technologies, while oil prices may vary globally and contribute to higher energy prices.

Socially, consumers are increasingly more aware of the sustainability efforts and initiatives of the companies they purchase from and their behaviors are shifting to favor those businesses with more commitment to the environment. Patagonia is a classic example of a company that embodies the ideals of the Paris Agreement within the core functionalities of its strategy, and is rewarded for that by consumers. On the other hand, businesses that ignore these social patterns often witness consumer backlash and reputational damage.

Technology is already a rapidly evolving field in which some businesses have seen immense success. In order to reach the goals set forth in the Paris Agreement, many more technological advances will have to bridge the gaps between where we are now and where we aim to be. This presents businesses with huge potential. New business models, like the circular economy, have begun to emerge as an innovative response to dealing with climate problems. “Smart” technologies are becoming more customary in our daily landscape, from wearable technology to transportation solutions, and even smart cities. Also, the role of big data will only grow as the world tries to understand how to enact technological changes and incorporate them into society.

While the political approach to the Paris Climate Agreement remains uncertain in the United States, the rest of the world remains committed to the deal. As we know, neither climate nor the economy exists independently in one country or another. We live in a global world and a global economy, and businesses that realize the opportunities within the goals of the agreement will be successful in the long-term across many different aspects.

 

 

[1] https://www.nytimes.com/2017/03/28/climate/trump-executive-order-climate-change.html?_r=0

[2] http://www.cisl.cam.ac.uk/publications/publication-pdfs/A-New-Climate-for-Business.pdf

[3] http://www.lowcarbonusa.org/

[4] http://www.cisl.cam.ac.uk/publications/publication-pdfs/A-New-Climate-for-Business.pdf

 

Does Corporate Social Responsibility and Ethical Business Practices Pay?

In an increasingly globalized marketplace, CSR and ethics are crucial not only to businesses, but also to their stakeholders involved. How does one turn these concepts commonly believed to be weaknesses into strengths?

By:  Marc Babel, Lynx Global Intelligence

 

Companies spend hours, months, years, lifetimes to build a reputation that they can hang their hat on.  It only takes seconds to lose that reputation if ethical business practices aren’t fostered throughout the entirety of an organization. The word, ethics, is drawn from the Greek word, ethikos, which signifies character – the distinctive, noteworthy quality of an individual or organization. Perhaps one of the best qualities of ethics is that it is well understood across all cultures, languages, races, and income levels.

At best, organizations believe ethics to be an intangible idea that should be promoted in the stockholders’ annual report but nothing on which a financial analyst or CPA can calculate a rate of return. After all, ethics are not a profit center but a cost center, right?  It won’t generate revenue or attract new stockholders, will it?  Customers can’t tell a highly ethical firm from one who puts it on the back-burner, can they?

Research from The Institute of Business Ethics, leaders in promoting corporate ethical best practices, has shown for the first time that companies with a clear commitment to ethical conduct outperform those that don’t [1]. Using four indicators of business success – economic value added, market value added, price/earnings ratio volatility, and return on capital employed – it compared two groups of companies: those with a demonstrable commitment to ethical behavior through having a published code of business ethics and those without [1]. Their performances were then analyzed over five years to discover the firms with established ethics had clearly superior metrics in these indicators.

Furthermore, the market research organization GfK NOP surveyed 5,000 consumers in the United Kingdom, United States, France, Spain, and Germany and discovered a third of those claimed they would pay a 5 to 10 percent premium for the products and services from an ethical company over its competitors [1]. Another survey performed by Gfk NOP uncovered that 80 percent of U.S. and European consumers are willing to pay more for goods and services from a company with a well-regarded labor and environmental record [1]. Clearly it is becoming more difficult for the C-suite to justify watered down versions of ethical conduct in their firms.

Forty-five years ago, Milton Friedman penned a famous article for The New York Times Magazine whose title appropriately abridged his main opinion: “The Social Responsibility of Business Is to Increase Its Profits.” Friedman has since maintained his position of having no patience for those who believe otherwise, claiming corporate social responsibility is merely pure and unadulterated socialism [2]. Do firms owe their complete allegiance to the benefit of shareholders alone? John Mackey, the founder and CEO of Whole Foods, is one businessman who disagrees with Friedman. Mackey holds that Friedman’s view of capitalism ardently ignores the humanitarian facet common to many businessmen in the 21st century. According to Mackay,

“I strongly disagree. I’m a businessman and a free market libertarian, but I believe that the enlightened corporation should try to create value for all of its constituencies. From an investor’s perspective, the purpose of the business is to maximize profits. But that’s not the purpose for other stakeholders–for customers, employees, suppliers, and the community. Each of those groups will define the purpose of the business in terms of its own needs and desires, and each perspective is valid and legitimate.” [2]

Mackay does believe this can be done without holding profit hostage.  The challenge many of those on board with his train of thought is how much attention does each stakeholder receive in terms of value?  Mackay believes there is no magic formula for everyone, however, it can be a dynamic, fluid approach that attempts to satisfy stakeholders since stakeholders are usually satisfied for short periods at a time.

Some refute corporate social responsibility on the grounds that using resources and funds towards philanthropy is blatantly stealing from investors. After all, by legal definition, a firm’s assets belong to the investors, right? A firm has a fiduciary responsibility to maximize shareholder value; therefore, any activities that don’t maximize shareholder value are violations of this duty. If you feel altruism towards other people, you should exercise that altruism with personal resources, not with the assets of a corporation that doesn’t belong to you.

While that may be true, this argument is not wrong as it is too narrow. It is important to have an understanding with the investors since most firms can “hire” their initial investors, not vice versa. When philanthropy is regarded as a fundamental ethics practice in the corporate vision, shareholders and investors are bound by any investment to this type of corporate culture. Shareholders of company stock do so voluntarily, so if the philosophy of corporate social responsibility of a firm does not match with their own, they are free to exit their relationship with said firm.

The business model that Whole Foods has embraced could represent a new form of capitalism, one that more consciously works for the common good instead of depending solely on the “invisible hand” to generate positive results for society. The “brand” of capitalism is in terrible shape throughout the world, and corporations are widely seen as selfish, greedy, and uncaring. This is both unfortunate and unnecessary, and could be changed if businesses and economists widely adopted the business model of Whole Foods [2].

Advocates of CSR ought to reflect on the fact that the “triple bottom line” and the bogus pay scheme which rewards bad performance with riches have something important in common: the idea that the interests of “mere owners” should not be allowed to come between managers and their personal objectives [3]. Broken corporate governance and CSR are close relations. You often see them together.

However, CSR can be regarded as the antithesis to short-termism. Managers are increasingly seeing the importance of placing more of an emphasis on long term goals mixed with ethical practices alongside the short-term goals of profit. Companies deliver superior results when executives manage for long-term value creation and resist pressure from analysts and investors to focus excessively on meeting Wall Street’s quarterly earnings expectations [4]. New research, led by a team from McKinsey Global Institute in cooperation with FCLT Global, found that companies that operate with a true long-term mindset have consistently outperformed their industry peers since 2001 across almost every financial measure that matters [4]. As shown below:

ethics 2

While this can’t necessarily be the result simply of long-termism in the form of ethics and corporate social responsibility, it is hard to argue that those aspects didn’t contribute. For corporations, social responsibility has become a big business. Companies spend billions of dollars doing good works — everything from boosting diversity in their ranks to developing eco-friendly technology — and then trumpeting those efforts to the public.

Extensive research performed by The Wall Street Journal has delved into the consumer mind, uncovering just how much ethics can pay.  Results concluded that oftentimes, those consumers that will pay a premium for ethically sourced products will outweigh those that seek a cheap product without regards to ethics [5]. The lessons are clear. Companies should segment their market and make a particular effort to reach out to buyers with high ethical standards, because those are the customers who can deliver the biggest potential profits on ethically produced goods [5]. All stakeholders are becoming a priority in the 21st century. Firms employing corporate social responsibility and ethical practices will be the ones receiving long term benefits while pushing the envelope on the benefits capitalism can bring to society.

 

[1] http://www.fraud-magazine.com/article.aspx?id=374

[2] http://reason.com/archives/2005/10/01/rethinking-the-social-responsi

[3] http://www.economist.com/node/3555286

[4] https://hbr.org/2017/02/finally-proof-that-managing-for-the-long-term-pays-off

[5] https://www.wsj.com/articles/SB121018735490274425

 

Overview: The Future of the Republic of Turkey Remains Unclear After Failed Coup d’état

Turkish politics have taken a nationalistic turn as domestic affairs spiral out of control. Massive expulsions of bureaucrats, journalists, academics, businesses and political opponents continues to worry the international community.

By:  Zana Silevani, Lynx Global Intelligence

 

Turkey’s significance in the international community

Historically, the Republic of Turkey has served the international community as a commercial hub which has facilitated international trade, communication and intercultural exchange for decades. Modern day Turkey is an extremely valuable partner as it has characteristically carried on it’s traditions of free trade, military cooperation and fortified secular values. Turkey has established it’s presence in the international community—it holds tremendous weight when discussing economic and political affairs. The economic and strategic value of Turkey is attributed to it’s physical coordination as it is situated in a unique geopolitical position. Turkey borders Syria, Iraq, Iran, Armenia, Georgia and Bulgaria with Russia and Ukraine just across the Black Sea.

turkey-2

In 2014, The Republic of Turkey ranked in as the 27th largest economy in the world [2]. The dynamic nature of the Turkish economy has facilitated strong partnerships with it’s primary import trade partners: China ($24.6B), Germany (23.5B), Russia ($14.7B), Italy ($12.3B) and the United States ($11.8B)—it’s largest export destinations: Germany ($16.9B), Iraq ($10.8B), the United Kingdom ($10.3B), France ($7.87B) and Italy ($7.58B) [2]. Furthermore, as a critical member of the North Atlantic Treaty Organization (NATO), Turkey is an important asset for US interests in the Middle East and Europe. Geopolitical configuration and a versatile economy puts partnerships with Turkey at a high priority, but the many successes of the Republic of Turkey overshadow the murky essence of recent Turkish political developments. Turkish nationalists such as President Reccep Tayyip Erdogan and his Justice and Development (AK) party have consolidated executive power after the recent Summer 2016 coup d’etat attempt which has resulted in the arrest and detainment of thousands of people accused of aiding the coup.

 

The failed 2016 coup attempt and a new face for the Republic of Turkey

July 15, 2016—chaos erupted as a faction of the Turkish military took up arms and attempted to overthrow President Erdogan. The military began with the occupation of the Bosphorus bridge which connects the two shores of Istanbul then attempted to control key points in the Turkish capitol of Ankara [3]. The separatist faction which called themselves the Peace at Home Council, were defeated when loyalists to Erdogan’s existing regime thwarted the coup attempt and restored power. Using state operated media (TRT) Erdogan was able to garnish support to abolish the coup and rally his supporters. At least 90 people were killed and nearly 1,100 more were injured during the coup attempt [3]. The coordination of the coup was ultimately blamed on the exiled cleric Fethullah Gulen who resides in Pennsylvania, USA and is a long time opponent of President Erdogan and his Justice and Development party. The coup attempt resulted in massive material losses, but ideological damage in Turkish civil society took the harshest damage as President Erdogan began a campaign aimed at suppressing opposition through detainments and arrests. Thousands of bureaucrats, academics, political leaders and military personnel have been expelled, arrested, or detained as a result of allegations of involvement in the coup.

The failed July 15, 2016 coup d’etat attempt in Turkey shook the foundations of the state and thrusted Turkey away from it’s traditional secularism and towards civic nationalism. President Erdogan has utilizes a parliamentary state of emergency to bypass constitutional provisions and mobilize political power to the executive branch. President Erdogan and his Justice and Development party have undertaken considerable measures to consolidate executive power [1]. After the summer of 2016, the Turkish state has detained over 35,000 individuals thought to have some sort of tertiary involvement in the influence or potting of the 2016 coup d’etat attempt [1]. Over 17,000 individuals have been arrested in connection with the coup attempt—one third of Turkish security forces have been arrested on specific charges. Arrests after the coup are based on allegation of affiliation with the Gulen movement. Ultimately, Erdogan has delineated executive power to suppress Kurdish influence in Turkey. Kurdish mayors, lawyers and activists have been expelled from their posts and accused of having ties to Kurdish separatist organizations. The new far-reaching executive authority has monopolized AK party initiatives.

 

The new US administration and the future of US-Turkey relations

In early February 2017 President Trump and President Erdogan publicly voiced mutual admiration for one another in a late night phone call, but the US has not established a stance on it’s future with President Erdogan. In the phone call president Erdogan remained firm in his stance to influence decisions which favor disarming Kurdish YPG militias in Syria. The US administration has not commented on future endeavors with Kurdish militias in Syria, but continues to maintain Turkey’s NATO status as a crucial geopolitical asset to strategic operations in Syria. Because of the geopolitical importance of Turkey in air/ground campaigns, Erdogan must cooperate and deter interest in weakening the Kurdish front against ISIS.

The US must leverage Turkish cooperation to grant Kurds in Syria resources to continue to engage ISIS on the ground in northern Syria. The YPG have proven to be non-confrontational and malleable to US interests on the condition of material support. The YPG are a crucial indigenous force who provide essential tactical and intelligence support to US Special Operations Command personnel on the ground in Syria. Ultimately, President Erdogan perceives the new US presidency as an opportunity to initiate communication which supplements Turkish interests in cooperation in the Syrian Civil War. Turkey is seeking to strengthen ties with the US to ultimately influence US military cooperation with Kurdish factions in Northern Syria. Through the recent radical political transition in Turkey in the summer of 2016 was drastic, President Erdogan remains opportunistic in seeking to gradually restore US-Turkish relations which experienced significant strain towards the end of 2016 with the departure of president Obama.

Granting Turkey greater autonomy to influence US defense policy will significantly alter US-Kurdish partnership in Syria. Turkey will ultimately remain a formidable and valuable US defense partner. Though Turkey has taken an abrupt nationalistic and at time anti-western turn, the United States needs Turkey as a partner to supplement it’s campaigns in Iraq and Syria. Turkey provides invaluable resources to the US with optimal strategic capabilities in the global war on terror.

 

[1] http://www.newyorker.com/news/news-desk/the-end-of-democracy-in-turkey

[2] http://atlas.media.mit.edu/en/profile/country/tur/

[3] http://www.businessinsider.com/turkey-istanbul-military-bridges-2016-7

[4] (image) https://www.wired.com/2016/07/turkey-coup-livestream-map/

[5] (image) https://twitter.com/alivelshiot/status/499693038328094720