Baby boom or bust: why South Korea is desperately trying to boost its birth rate

South Korea is in trouble. Last year, its fertility rate tumbled to a record low of 0.98 children per woman, less than half of the 2.1 needed to maintain a stable population. In the next seven years, it’s predicted that South Korea will become a ‘super-aged society’, meaning one in five citizens will be over 65 years old. This is considered one of the greatest threats facing the world’s 11th-largest economy. Huge declines in South Korea’s working-age population will lead to losses in innovation and productivity throughout the economy, while healthcare services are likely to be strained as demand from the elderly increases.

Since 2006, the South Korean Government has spent an eye-watering KRW 152.9trn ($128.5bn) trying to pull the birth rate back from the brink. Through its state allowance programme, expectant couples can claim KRW 500,000 ($420) to cover prenatal expenses, and subsidies worth KRW 107,000 ($89.90) a month are available for parents with children younger than five. Yet despite these efforts, the fertility rate remains abysmally low. The government is realising that it needs to rethink its approach, and fast.

The price of prosperity
Once upon a time, South Korea was actually trying to bring its fertility rate down. In 1960, women had, on average, six children each. To stabilise the population, South Korea began a family planning campaign encouraging parents to have a “small and prosperous family” by improving women’s education and access to healthcare services.

Confucianism, which upholds that women are solely responsible for the care of children, is still a highly influential school of thought in South Korean society

The thinking behind this campaign was that parents with fewer offspring would be better placed to invest in their children’s education. The South Korean education system is one of the most competitive in the world: when children are at an early age, their parents begin agonising over an eight-hour entrance exam for university that will have a tremendous impact on their social mobility and career prospects. Such a demanding system has helped engender nothing short of an economic miracle in South Korea: the economy grew 17-fold towards the end of the last century. But for the children and families that still go through this process every year, it is far from ideal.

“There is a high cost to the mother in emotional and financial pressures when raising children,” said Gavin W Jones, an emeritus professor at the Australian National University. “If the children don’t do well, the family’s reputation suffers.” These psychological stresses are only exacerbated by the huge financial burden of raising a child. Families in Seoul spend an astonishing 16 percent of their income on private after-school tuition to help their children study for exams. Childcare is also very expensive – despite the state allowance programme, many parents spend roughly $200 a month on childcare.

Today’s South Korean youth have lived and breathed this culture. They’ve seen their parents endure the stress and financial expense of raising a child, and they’re now questioning whether it’s such a crucial life event after all.

Baby strike
In South Korea, Millennials have another name: the ‘Sampo generation’, which translates to the ‘three giving-up generation’. The term is used to describe the cohort of young South Koreans who have relinquished three aspects of life: dating, marriage and children. This trend is particularly prevalent among the country’s young women; many are deciding not to raise a family as they are afraid that doing so would mean forfeiting their careers.

They’re right to be concerned: 40 percent of South Korean women leave the workplace for some time after having children. This creates what’s known as the ‘m-shaped curve’. When plotted on a graph, women’s employment in South Korea rises in their 20s, then plummets around the time they have children before rising again in their 40s, creating a distinct ‘m’ shape. It’s a phenomenon rarely observed in developed countries, and a sign of significant gender disparity in South Korea’s labour market.

Also impacting women’s decision not to have children is the simple fact that motherhood is incredibly taxing. Despite their participation in the labour market increasing, women have continued to take the brunt of domestic chores. Confucianism, which upholds the idea that women are solely responsible for care of children and the elderly as well as maintenance of the home, is still a highly influential school of thought in South Korean society – even among those with more progressive attitudes to gender, these deeply entrenched societal values can be difficult to shake off.

“According to the [Korean Women’s Development Institute’s] Gender and Family Household Survey, 86.1 percent of Korean couples in dual-earner families agree that housework should be equally shared between men and women,” Sirin Sung, a lecturer in social policy at Queen’s University Belfast, told World Finance. “However, OECD data suggests that Korean women still spend four times as many hours on unpaid family work compared with men.”

The government has been slow to acknowledge the impact of gender inequality on the nation’s birth rate. Many women have accused it of being tone-deaf in its approach to the problem. In 2016, the previous government launched a heat map of marriages, births and women of childbearing age across the country, hoping this would encourage competition between different regions. Instead, it was taken down after one day due to a public outcry from South Korean women, who accused the government of seeing them as “reproductive organs”.

A change in direction
The government is finally starting to listen. Learning from his predecessor’s mistakes, President Moon Jae-in has focused the birth rate policy around improving gender equality. “We are now at the last golden time to fix a serious population problem,” Moon said in a speech launching the Presidential Committee on Ageing Society and Population Policy. “We must now focus on how marrying and giving birth doesn’t limit the lives of women.”

One way the government plans to do this is by encouraging men to play a more active role in parenthood. In July 2018, new measures came into place extending paternity leave to two years up from one, and guaranteeing new fathers 80 percent of their normal wages, capped at $1,338 a month. It was hoped this would reduce the childcare burden on women.

However, few men choose this option. Despite government campaigns to normalise paternity leave, men accounted for only 17 percent of parents who took it in 2018. “Men are concerned that the organisational culture of the workplace, which portrays those who take leave as less committed to work, may result in disadvantages for promotion and pay,” Sung said.

Sung also points out that even the gendered naming of these policies could be off-putting for men. “Maternity, paternity and parental leave provision all come under the ‘maternity protection’ scheme,” she said. “Changing the name of this scheme to ‘parental rights’ would help to challenge this gendered assumption.”

Another way the government could help working mothers is by addressing the shortcomings of state-run childcare programmes. Although families are given financial support from the state, this doesn’t guarantee them good childcare – mainly because there aren’t enough daycare centres to meet demand. It’s fairly common for families to remain on the waiting lists of state-run centres for over a year; the lack of affordable care is a key reason why women tend to leave their jobs and become stay-at-home mothers. It’s crucial that the government builds more daycare centres if it’s to convince women that motherhood is something they can comfortably pursue without losing their careers or financial stability.

All work and no play
The average South Korean works 2,113 hours a year – the second-most of all OECD member nations. The government has recognised the impact this might be having on its citizens’ ability to date and spend time with their partners; as a result, the working week has been cut from 68 to 52 hours. To enforce this, Seoul’s city hall cuts electricity to the building at 7pm on Fridays. Some private companies even broadcast reminders telling people to go home.

While this might improve the work-life balance of office workers, it has wide-reaching repercussions for the third of South Korea’s labour force in jobs with irregular hours. To compensate for the number of paid hours they’ve lost, many of these workers have had to take on second jobs. Some of them even work for as long as 19 hours a day.

Moreover, the policy won’t necessarily change the culture behind overworking, which can be just as detrimental to family life. The South Korean work ethic, instilled at an early age, means many prioritise their careers and finances over personal relationships. In a 2018 survey of 1,141 people, almost 70 percent of South Koreans said they were too focused on their careers to get married.

South Korea’s hyper-competitive culture – a source of progress for so long – is now contributing to a major downward trend in its economy. For decades, overworked husbands, stay-at-home mothers and intensely studious children have supercharged the country’s growth, but that growth has come at the expense of female empowerment, a healthy work-life balance and a stable birth rate – key elements needed for sustainable economic success. If the government can improve gender equality and create a better environment for raising a family, it may still be able to turn back the clock on this impending demographic crisis.

Riding the wave: how digital disruption will determine future market leaders

To say that the digital transformation or the digitalisation of business is in vogue is nothing new. Artificial intelligence, big data and biorobotics are just a few of the innovations that theorists claim will come to embody the Fourth Industrial Revolution, and are all markers of a wave of development that got underway a number of years ago.

Overwhelming technological disruption will be one of the main challenges facing societies in the coming decades and will present significant tests in terms of cultural transformation. The investment advisory industry is not immune to these difficulties. Already, global corporations are growing inorganically in the investment sector by betting on and integrating with fintech firms, which use algorithms to automatically process everything from account openings to tracking investments. This approach provides benefits such as 24-hour access to services, fixed cost savings and competitive commissions. Clearly, the race to dominate new technologies has begun; now, the winners and losers will start to become clear.

Sophisticated services
At BCI Asset Management, we are aware of global technology trends and appreciate that each region will enter the race in its own time and way, depending on how deeply technology penetrates different markets. The company understands these new parameters and is committed to growing its knowledge and incorporating these technologies with the advice we deliver to our clients. It all starts with the modernisation of our investment process.

The race to dominate new technologies has begun; now, the winners and losers will start to become clear

In recent years, we have introduced new technologies for data analysis, programming and processing with the aim of making better investment decisions. In doing so, we have achieved greater efficiency in our existing routines, many of which are now automated, freeing up time for thinking about new investment themes.

Our team has added new programming languages to its systems, allowing us to generate a proprietary fair-value model for Latin American fixed incomes. This process, formerly based on an econometric multivariate model, is now a model with dynamically calibrated parameters employing a complex algorithm for processing large volumes of data and thousands of iterations to produce a better fit for customers.

Another benefit of the digital revolution is that increasingly sophisticated data science is available. When we research companies to invest in and the issuers whose debt we acquire, we can access more reliable data, which is available in real time and is collected more efficiently than through meetings with a company’s management team.

Acquiring skills
At BCI Asset Management, we are embracing new technology and acquiring knowledge by training our analysts and portfolio managers not only so that we have experts on our team, but so that our entire investment unit has a common language that is in keeping with industry developments. In this regard, we believe we are pioneers in Chile when it comes to incorporating new technologies into the investment process. In fact, the investment team looks for these skills when screening applicants and bringing on new hires. In other words, it is no longer enough to only have specific financial training: we are now looking for innovative thinkers who already have skills in programming, data science and analytics.

These key changes are necessary for businesses to live up to clients’ requirements and earn and keep their trust. Today, BCI Asset Management serves all segments of the industry: individuals, private banks, corporations and institutional investors. With total assets under management worth over $10bn, we are also the fastest-growing fund management company in terms of average managed mutual fund value in 2019.

Our new corporate purpose is to dare to make a difference. We believe we are well aligned with our target audience, which increasingly demands access to distinctive value offerings across segments. In 2020, we will continue to consolidate our presence in Latin America while delivering expert advice derived from our evolving industry knowledge. We will also remain engaged in the digital race that is captivating our industry and, in doing so, continue to lead the asset management business in the region.

India delivers surprise corporate tax cut

India’s Finance Minister Nirmala Sitharaman announced on September 20 that the corporate tax rate would be lowered to 22 percent from 30 percent. It is hoped the $20.5bn stimulus package will spur private investment and help bring India out of a six-year low in economic growth.

The markets responded positively to the news. After the announcement was made, the country’s Sensex index leapt up by 4.5 percent.

The 22 percent corporate tax rate applies to companies that do not receive incentives or exemptions. For those that do, the corporate tax rate will be lowered to 25 percent down from 35 percent, while some new manufacturing firms will see their corporate tax rate cut to 15 percent from 25 percent.

India could be in prime position to attract more investment from companies that are trying to avoid supply chain disruptions caused by the US-China trade war

Unemployment in India is currently at a 45-year high and discontent has been rising in the country, particularly in rural areas. So far, the central bank has cut interest rates four times this year.

The cut will lose the economy $20.5bn in tax revenue and has raised concerns that Prime Minister Narendra Modi’s government may struggle to meet its fiscal deficit target of 3.3 percent for the year. However, the move is considered a much-needed boost to the economy. Bond yields in India rose to an almost three-month high as speculation mounted that the government may need to borrow more if it’s to meets its targets for 2019-20.

When Modi first came to power in 2014, investors welcomed an administration they thought would bring a wave of pro-business reforms to the economy. Many now feel that Modi has failed to live up to expectations. At the start of 2019, India was the world’s sixth-largest economy; it has since fallen to seventh place.

With the new corporate tax rate cut, Modi may be able to make amends with businesses and investors. According to Sitharaman, the rate cut will put India on an equal footing with its Asian peers. This means India could be in a prime position to attract more investment from companies as they try to avoid supply chain disruptions caused by the US-China trade war.

Federal Reserve makes emergency intervention for first time in a decade

The Federal Reserve was forced to intervene in the US financial markets after overnight borrowing rates skyrocketed as high as 10 percent, more than four times the Fed’s rate. To ease the strain on the markets, the Fed came to the rescue with a $53bn injection – its first emergency intervention since 2008. Another cash injection of up to $75bn is expected on September 18.

During its overnight repo operation, the Fed purchased securities to inject money into the system and stop borrowing costs from exceeding the target range

Borrowing cash overnight through repurchasing agreements – commonly known as repos – is an often overlooked but nonetheless critical part of the financial system. Repos ensure that Wall Street firms and banks have enough liquidity to carry out their daily operations. Companies use US Treasury securities and other bonds as collateral to raise cash quickly, usually overnight, and then repay their loans with interest the next day and get their bonds back.

During its overnight repo operation, the Fed purchased securities to inject money into the system and stop borrowing costs from exceeding the target range. As soon as the Fed announced its decision, the repo rate dropped.

Many analysts agree that the sudden rise was largely down to two short-term factors: over the past few days, companies had withdrawn funds to pay their quarterly tax bills. At the same time, there was a sudden influx of Treasury securities due to the settlement of previously auctioned debt. This created high demand within the repo market at a time when the cash supply was low.

However, this alone should not have caused such turmoil in the market. One of the key underlying issues that may have exacerbated the repo market crisis is that bank reserves at the Fed have been steadily falling. With fewer excess reserves, banks are left vulnerable to short-term funding stresses.

Unlike in 2008, the sharp rise in the repo rate is not indicative of an imminent financial crisis. However, it implies that the Fed is losing control over short-term lending. It also suggests that Wall Street is struggling to absorb the record sales of Treasury debt, which is being used by the Trump administration to fund a swelling US budget deficit.

Oil price surges after attack in Saudi Arabia

Oil prices saw their biggest jump on record as markets reopened on September 16, after an attack on a Saudi Arabian oil facility at the weekend caused huge disruption to global markets.

About 5.7 million barrels have been affected by the strike on Saudi Aramco’s Abqaiq oil facility in Buqyaq, cutting more than half of the country’s production and removing about five percent of global supplies. As a result, Brent crude, the international benchmark for oil prices, leapt almost $12 when markets reopened, climbing to $71.95 a barrel, in the biggest intra-day jump in dollar terms since 1988. Analysts believe it may be the single worst sudden disruption to oil markets ever.

Analysts warn that this attack may not be the last and that retaliation by Riyadh or Washington against Iran could create further turmoil within global energy markets

The attack, which the US claims was coordinated by Iran, has sent shockwaves through the world’s financial markets. Shares fell in early trading in Europe, with the FTSE 100 down 0.2 percent and Germany’s DAX index falling by 0.5 percent. Haven assets like gold surged, while commodity-linked currencies like the Norwegian krone and Canadian dollar also rose.

The market is likely to remain unstable until there is more clarity around how long it could take Saudi Arabia, the world’s biggest exporter of crude oil, to restore output. The kingdom has said it will tap into stocks from its large storage facilities. However, this may not be sufficient to meet demand in the long-term.

“Saudi Arabia has enough reserves to cover the shortfall over the next week, but if the outage extends, then filling the gap with the right type of crude quality could be a challenge,” Vima Jayabalan, Research Director at Wood Mackenzie, told World Finance.

Analysts warn that this attack may not be the last and that retaliation by Riyadh or Washington against Iran could create further turmoil within global energy markets. The main importers of Saudi crude – India, China and Indonesia – will be particularly vulnerable to such disruption in the oil supply. The sharp increase in oil prices also comes at an inopportune time for the global economy, as higher energy costs could spell trouble if the economic slowdown continues.

Greece’s new prime minister must rebuild investor confidence

On July 8, the Greek electorate voted in Kyriakos Mitsotakis, leader of the centre-right party, New Democracy. Mitsotakis won by a landslide, with 39.85 percent of the vote.

“I asked for a strong mandate to change Greece. You offered it generously,” said Mitsotakis in his victory speech. “From today, a difficult but beautiful fight begins.”

Mitsotakis’ victory is a momentous occasion for Greece and all of Europe. When the leftist Syriza party was voted in on a pledge to end austerity and tear up the bailout programme, it was one of the first populist parties to gain momentum in Europe. However, its leader, Alexis Tsipras, fell out of favour with the Greek electorate after imposing harsh fiscal measures in return for an €89bn ($99.8bn) bailout from the EU – effectively breaking his campaign promises.

Greece owes €266bn ($297bn) in debt to its troika of lenders, and although unemployment dropped to 17.6 percent in April, this figure is certainly still too high to be worthy of much celebration

As a pro-business conservative from a political dynasty, Mitsotakis’ victory marks a shift away from populism and a return to the mainstream in Greek politics. The new prime minister has pledged to cut taxes, create jobs and encourage foreign investment. However, he would be right not to underestimate the size of the challenge ahead of him, as the Greek economy is still plagued by chronic financial difficulties. Unemployment is the highest in the EU, and in 2018 the World Economic Forum ranked Greece’s overall competitiveness as the second-lowest in the EU. The country desperately needs to gain market access and see capital injected into its economy if it’s to experience a full recovery.

Not out of the woods
Greece surprised the world this year when the Athens Stock Exchange enjoyed a 26 percent boom, outperforming the European average. This was partly in anticipation of Mitsotakis’ win, which has been well-received by investors. After his victory was announced, Greek 10-year bonds fell by 14 basis points to all-time lows of 2.014 percent. This is a remarkable turnaround, considering yields reached 40 percent at the height of the eurozone turmoil. Investors taking risks on Greek’s illiquid debt saw returns of over 20 percent as a result – the best performance in the eurozone. But Thanos Papasavvas, Founder and CIO of ABP Invest, believes the bond market’s performance isn’t sustainable.

“I believe the bonds are expensive at these current levels of two percent. I think they’re overvalued,” said Papasavvas. “As for the stock market, it’s had a phenomenal rally. It’s risen just over 50 percent since the beginning of this year. The strong momentum may have a correction, but valuations are still quite attractive from a long-term perspective”

Of course, returning to the markets at all is still a step in the right direction. Greece’s bailout programme ended last year, meaning the country could once again stand on its own two feet, but there is still work to be done. Greece owes €266bn ($297bn) in debt to its troika of lenders, and although unemployment dropped to 17.6 percent in April, this figure is certainly still too high to be worthy of much celebration.

“Unemployment hasn’t lowered as quickly as it did in Spain, Ireland or the other peripherals,” Papasavvas told World Finance. “The reason why that’s been the case is down to some of the underlying issues in the Greek economy. One of them concerns non-performing loans. About 41 percent of all Greek loans are non-performing loans. And that’s what’s keeping the banks on the back foot, because they can’t do their work, they can’t lend money to companies and households.”

Because of the heavy burden of non-performing loans, Greek banks can’t lend the capital needed to boost manufacturing and services and to increase employment. Had these non-performing loans been tackled earlier, they might not have spiralled out of control as they have. However, the close relationship between bankers and politicians slowed reform. The country’s leaders also failed to pursue claims against business and households, concerned that doing so might deepen the crisis. One of the great challenges facing Mitsotakis will be digging the banks out of this debt and clearing their balance sheets in a way that doesn’t deter the banks’ shareholders. If he can do this, he will remove one of the major barriers to something the Greek economy sorely needs: foreign direct investment.

Attracting much-needed investment
Ever since the debt crisis began, Greece has been blacklisted by investors. Today, investments as a percentage of GDP are currently less than 13 percent, the lowest of all eurozone countries. Graded at B1 by Moody’s, the country is not eligible for global indexes that are tracked by investors. In recent years, this has made its debt the preserve of hedge funds, which tend to make quick exits from markets and therefore stoke volatility as a result.

In order to progress, Greece needs to pull sizeable long-term investments into the country. Mitsotakis pledged to issue permits for the Skouries mining project in his very first month of office, and to push for the development of the Hellinikon Project. He’s right to treat these projects as a priority: Eldorado Gold halted work at the Skouries gold mines of Northern Greece in 2017, after the Greek Ministry of Environment and Energy delayed the issuance of permits. Similarly, the country’s €8bn ($8.9bn) Hellinikon Project – which aims to develop Athens’ former airport complex into a business hub and tourist destination – has seen significant delays. Lamda Development, the consortium behind the mega-investment, has accused the Greek Government of presenting them with “insurmountable obstacles”. For foreign investors, such setbacks are sure to ring alarm bells.

“As long as the largest direct foreign investment deals in the country do not progress, Greece appears as not being friendly to investments, and this is the wrong message the country is sending,” said Dimitris Dimitriadis, Managing Director of Hellas Gold, the Greek arm of Eldorado Gold.

Athens has pledged to achieve government budget surpluses, before debt costs, of 3.5 percent of GDP for the coming years. This high surplus target has created a reduction in public investment and slowed economic recovery.

Investors will be watching closely to see if Mitsotakis can deliver on his promises and effectively execute these large-scale investment projects. There are signs investor confidence may already be increasing: ratings agency Moody’s upgraded Greece’s ratings from B3 to B1 this year, citing the momentum behind the country’s reforms. Meanwhile, a survey by Metron Analysis presented at the InvestGR Forum in June, found that 60 percent of CEOs at 35 multinationals active in Greece said they would pursue furthering their investments. This figure represnts an increase of 53 percent from last year.

Overcoming obstacles
However, challenges remain. Also at the InvestGR conference, a survey of 40 CEOs was presented, showing that companies remained reluctant to invest in Greece until sizeable reforms were pushed through. High levels of bureaucracy, the heavy burden of non-performing loans in the country’s banks and delays in the justice system are endemic problems within Greece. Mitsotakis is well aware that injecting more capital into the economy depends on his successful pushing through of these reforms.

This is likely to prove a challenge: although Mitsotakis has a majority, his opposition did not exactly suffer a crushing defeat. If they remain united under Alexis Tsipras, the Syriza party could present obstacles to reform. “The question is, how forceful will his opposition be?” said Papasavvas. “And – as and when they are forceful – how willing will the New Democracy party be to stay close to Mitsotakis, and fight this through?”

There is another obstacle to Mitsotakis’ vision for an investment-friendly Greece: this is, of course, the troika of Europe. Athens has pledged to achieve government budget surpluses, before debt costs, of 3.5 percent of GDP for the coming years. This high surplus target has created a reduction in public investment and slowed economic recovery. Analysts are already arguing that Greece looks unlikely to meet its target this year.

Eurozone finance ministers have said key targets would not be changed. “Commitments are commitments, and if we break them, credibility is the first thing to fall apart,” said Eurogroup President Mário Centeno. However, if Mitsotakis can present an attractive enough vision of a newly reformed Greece, then renegotiations could be on the table. To do so, he will need to push through reforms and attract foreign investment. If he is successful, Greece may finally shake off its reputation for debt and financial ruin.

Top 5 most influential and inspirational US economists

It’s hard to overstate how much the face of American economics has changed in the past 100 years. Following the Great Depression, post-war Keynesian economics emerged as the dominant force in economic thought, only to be overtaken in the coming decades by the the advent of freewheeling laissez-faire economics – which is now experiencing an existential crisis of its own. Behind these seismic shifts were the economists who have helped to shape modern America. World Finance lists the men and women who have had a significant impact in developing US economic theory and influencing policy.


1 – Milton Friedman
Milton Friedman was one of the most important economic thinkers of the 20th century. Widely considered to be the figurehead for laissez-faire economic policy, he argued for free-market monetarism: the belief that the total supply of money in the economy is the key determinant of economic growth.

His theories on the free market directly opposed the dominant model of Keynesian economics, which proposed that fiscal policy was more important than monetary policy, and government spending should therefore be used to control the volatility of the business cycle. Friedman believed such intervention inevitably led to large deficits, sovereign debts and high interest rates. “The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy,” he wrote in his seminal work, Capitalism and Freedom. Friedman believed the market should be left free, and monetary policy should be used to keep the money supply steady, allowing for the natural growth of the economy.


2 – Alan Greenspan
In his 19-year-long tenure as chair of the US Federal Reserve, Alan Greenspan oversaw one of the most prosperous economic periods in American history and was heralded as an economic maestro. An ‘inflation hawk’, Greenspan focused primarily on lowering interests rates and controlling prices to curb the risk of an economic downturn.

Today, his legacy is controversial. The monetary policies Greenspan implemented during his tenure are thought to have played a significant role in the economic crisis of 2008. Having slashed interest rates throughout the 2000s, it’s thought that he encouraged irresponsible lending practices, which contributed to the housing bubble and ultimately helped create the subprime mortgage crisis of 2007.

Greenspan has been reluctant to accept responsibility for the crisis, but he has acknowledged that the events of 2008 exposed a flaw in the ideology of deregulation, of which he had been a strong proponent. “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity (myself especially) are in a state of shocked disbelief,” he said at a 2008 congressional meeting.

According to The Washington Post, unemployment figures showed the greatest improvement since 1948 during Yellen’s term as chair of the Federal Reserve


3 – Janet Yellen
Even today, economics remains very much a man’s world. Since the early 2000s, the share of women studying economics in the US has declined. However, there are signs of progress that are certainly worth celebrating. One of these is the career of Janet Yellen.

In 2014, Yellen became the first woman to hold the position of chair of the US Federal Reserve, making her arguably the most powerful economist in the world at the time. In the same year, Forbes named her the second-most powerful woman in the world, behind only Angela Merkel, while Bloomberg included her in its 2016 Most Influential list.

In her role, Yellen made reducing unemployment her primary concern, giving it priority over curbing the risk of inflation. Her tenure has largely been deemed a success in this regard. According to The Washington Post, unemployment figures showed the greatest improvement since 1948 during her term as Fed chair. She is also one of the most heavily cited female research economists in the world.


4 – Irving Fisher
Through his theoretical work, Irving Fisher made huge contributions to the foundations of modern financial economics. In the 1987 Palgrave Dictionary of Economics, James Tobin called him “America’s first mathematical economist”. According to Tobin: “Much of standard neoclassical theory today is Fisherian in origin, style, spirit and substance.”

Many of Fisher’s theoretical workings underpin modern economics. His connection between changing money supplies and price levels, for example, contributed to the founding of monetarism. Fisher also created a definitive understanding of capital and income that persists today: he defined the value of capital as the present value of the flow of (net) income that the asset generates. In addition to this, Fisher was the first economist to distinguish between real and nominal interest rates. His understanding of this relationship, called the Fisher Effect, is still applied to analyses of monetary supply and international currency trading.


5 – Alice Rivlin
In her journey to become a leading expert on US budget policy, Alice Rivlin faced her fair share of obstacles. In 1952, her application for a postgraduate degree in public administration was turned down because she was a woman of “marriageable age”. However, this did not stop her from reaching highly esteemed positions in the world of economics. She was the founding director of the Congressional Budget Office (CBO) and the first female director of the Office of Management and Budget, appointed under US President Bill Clinton.

The CBO carries out non-partisan analyses of budget and economic issues. Rivlin played a central role in turning the agency into a powerful and respected institution, and advocated for its continuing independence throughout her life. She also focused on fiscal policy and federal budget issues during her time at the Brookings Institution. Commemorating her death, Brookings said in a post: “Rivlin’s expertise and skills — and her unique ability to build bridges across political parties — played key roles in the formation of US economic policy for more than half a century.”

France struggles with Fiat fallout

For some time now, French President Emmanuel Macron has been stressing the need for European industry champions. Supportive of the proposed deal between Alstom and Siemens that was eventually killed off in Brussels, Macron also seemed to rubber stamp the Fiat/Renault tie-up. Finance Minister Bruno Le Maire was given the crucial green light to support the merger, given that France owns a 15 percent stake in Renault. The merged entity would need to abide by a list of commitments to secure French Government support.

However, Macron’s administration potentially wrong-footed concerned parties with a requested delay to the merger so that Japanese stakeholders could first be consulted. Renault’s alliance with Yokohama-based Nissan had been a key area of uncertainty for the outcome of the proposed merger. Fiat then threw in the towel, arguing that the “political conditions in France [did] not currently exist” for the deal to go forward. Macron — a former investment banker championing economic liberalisation — ended up stymying the deal, in a fashion akin to so many dirigiste French presidents of the past. Meanwhile, Italian Deputy Prime Minister Matteo Salvini — known for his nationalistic policies — lamented the collapse of a cross-European project.

Last month, President Macron declared “European naïveté” needed replacing with fresh European oversight of Chinese investment in the continent.

The state of play
At May’s Mergermarket M&A Executive Club conference in Paris, panellists praised Macron for defusing the gilets jaunes movement without abandoning his liberalising reform agenda. They were convinced that France is becoming an increasingly popular place for luring investment from overseas.

Over the past six years, the contribution of inbound M&A to France has varied wildly: a mere 35.2 percent back in 2013 and touching a low of 34.7 percent in 2018. Nonetheless, peaks of 75.2 percent and 70 percent recorded in 2014 and 2016 were trumped by the 80.7 percent seen year-to-date in 2019, according to Mergermarket data.

Further, China is among the more prolific acquirers of French targets. Its trade dispute with the US has directed its interest increasingly towards Europe. France in particular is becoming a popular hunting ground, despite the recent social unrest, revealing good confidence in the country’s economic outlook.

Last month, President Macron declared that “European naiveté” needed replacing with fresh European oversight of Chinese investment in the continent. This could be seen, along with the politically charged collapse of the Fiat/Renault merger, as evidence of France returning to the old playbook.

If investment from China comes with strings attached, any deal could be viewed as a national security risk by both the left and the right. Equally, if wanting to shield against Chinese state-backed economic power games, it would seem prudent to ensure Japan remains onside as an Asian ally. The game’s afoot to become Japan’s primary territory for European investment now that Shinzo Abe’s administration and domestic companies have lost faith in a British Government hell-bent on a hard Brexit.

Striking a deal
EU competition rules saw off the Siemens/Alstom merger, yet Le Maire and German Economy Minister Peter Altmaier presented a joint industrial manifesto earlier this year, seeking to amend merger control legislation to allow European champions to emerge and compete on the world stage.

Examining recent deals that France has struck indicate that the country is producing forward-thinking corporations, which are attracting overseas investment due to France’s stable economic and political environment. Such a mindset among large cap companies has helped prompt more foreign players to regard France as ripe for investment, and follows an emerging small to mid-cap group of companies, especially within the field of technology, that is also garnering international interest. As such, about 30 percent of small-cap companies end up in the hands of foreign bidders.

In addition, French opportunities may emerge, as stock market volatility has slowed equity capital market activity. As volatility continues, France’s IPO pipeline remains narrow after various companies pulled plans to go public, which could instead turn towards sale routes that may further appeal to international buyers.

Sika AG’s €2.2bn ($2.4bn) takeover of chemicals company Parex Group in January, and BlackRock’s €1.3bn ($1.5bn) buyout of investment software provider eFront two months later, collectively garnered fewer headlines, and less numerous clichéd column inches, than Fiat/Renault. However, they do highlight France as a place in which to do deals.