Author: Awareness News

Navigating Mental Health in University: Understanding Burnout 

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Article written in partnership with Nova Pride Association.

In a recent study, Portuguese workers were deemed to be the most at risk of a burnout in the European Union. Based on variables such as the World Happiness Index, work hours, and disposable income, the study finds that employees might be facing a decline in mental health due to being overworked, underpaid, and therefore, less secure. Many companies are now trying to promote strategies for recognising symptoms and avoiding amounting stress. However, concerns over mental health have not been limited to the workplace. They have become increasingly present around university campuses as well, particularly in the wake of the COVID-19 pandemic. Due to lockdown-induced isolation and urgent shifts in teaching strategies, the crisis revealed the global need for better systems to support students and staff.  

Overall, the risk of burnout appears to have increased for both workers and those studying to join the workforce, which prompts us to examine the underlying factors contributing to this trend. It is important to acknowledge that burnout can be a pervasive issue, but it may affect individuals differently due to intersectional factors. These factors can range from industry-related challenges to more personal factors such as individual identity. This article will thus focus on the relationship between students and burnout, while zooming in on the unique challenges of business schools, as well as uncovering the vulnerabilities of those who experience minority stress. 

What is Burnout and How Does It Impact College Students? 

In the whirlwind of college life, where lectures, exams, and social activities often blur into one, it is not uncommon for students to find themselves overwhelmed. For freshmen and those studying abroad, the first few months can be especially challenging. “Should I already start studying to keep up with this scary way of doing algebra? Or should I have a coffee date with this classmate?” You will quickly feel like you are spreading yourself thin, and without noticing, the rush begins to take its toll. 

This sensation of chronic stress and exhaustion, emblematic of the modern college experience, is none other than burnout. Burnout, a term gaining increased recognition, is more than just feeling tired; it is a complex mental health issue that can profoundly affect the well-being of students. 

Defining Burnout: Burnout, in essence, is a state of prolonged and chronic emotional, physical, and mental exhaustion resulting from the relentless pressure of academic demands and other stressors. It is the feeling of being pushed beyond your limits, where enthusiasm and motivation wane, replaced by a persistent sense of depletion. Burnout is not a one-time experience; it is a slow burn, gradually intensifying over time. 

Causes and Symptoms: There are a myriad of factors that can trigger burnout. For college students, heavy workloads to social pressures are the most common factors. Academic demands, deadlines, and the constant presence of social media platforms like LinkedIn, which can be distracting and trigger feelings of inadequacy, contribute to emotional exhaustion. It’s easy to find yourself struggling to concentrate or dealing with persistent stress. Nevertheless, there are larger factors that can trigger burnout, extending beyond one’s college life. 

Amidst the ever-expanding discourse on mental health, it becomes strikingly evident that the universal and historical stigma attached to sharing emotional vulnerability remains an obstacle. Throughout the annals of human history, individuals have grappled with the deeply ingrained fear of appearing weak by baring their inner struggles. This profound apprehension has persisted as an unwelcome companion in our collective journey towards better mental well-being. Still, one can argue that there is a current shift in perspective with Generation Z. As opposed to their predecessors, this generation has demonstrated a greater willingness to embrace their emotional vulnerabilities. This shift is, in part, fuelled by the unprecedented access to information and resources, which has empowered them to overcome, or at least acknowledge, mental health challenges.  

Furthermore, stigma can manifest differently in diverse cultural settings. To grasp these variations, it is essential to examine the key social institutions that have shaped the social fabric of each culture. Social institutions are often the strongest determinants of stigma because they are responsible for defining social norms. In the case of Portugal, the profound influence of Catholicism has significantly shaped the local cultural landscape. While the formal teachings of Catholicism promote compassion towards any ailment, its practices might have the opposite effect, with its deeply ingrained notions of sin, guilt, and divine judgment potentially instilling a sense of fear in one’s relationship with their emotions, potentially prompting individuals to isolate themselves. Such isolation can further fuel the burnout process.  

Physically, burnout can manifest as symptoms that may seem like common colds, such as fatigue, sleep problems, and weakened immunity. This similarity to cold symptoms can sometimes lead people to overlook the possibility of burnout. Students experiencing burnout may also become emotionally detached and disengaged, losing the enthusiasm that initially drove their pursuit of higher education. 

A Slow Burn: Burnout is not a fleeting bout of stress that you can easily bounce back from. It is a persistent and prolonged condition that, if left unchecked, can stretch on for the duration of your college journey (and even after joining the workforce). It is the cumulative effect of continuous stressors with little relief, like a relentless academic calendar that barely leaves room for a breather. In the academic context, understanding burnout is pivotal for recognizing its onset and taking steps to mitigate its impact. After all, nobody wants their college experience to be remembered solely for exhaustion and disengagement. 

Navigating Burnout in the Intense World of Business Schools 

Business schools, renowned for shaping the leaders and entrepreneurs of tomorrow, offer a unique academic environment that comes with its own set of pressures. As students and faculty step into this world of high-stakes decisions, the risk of burnout becomes ever more pronounced.  

The Pressure Cooker: Business schools are synonymous with competition and high expectations. Students are often driven by their ambition to succeed in the cutthroat business world. The coursework can be relentless, demanding hours of study, group projects, and a thirst for staying ahead of the curve. The pressure to excel in this environment, to be the standout candidate in a highly competitive field, is palpable.  

Unique Stressors: Take Nova SBE, for instance, a hub for budding entrepreneurs and future business leaders. Here, the challenges are accentuated. Business students grapple with the daunting prospect of balancing a rigorous academic schedule with internships, networking events, and the aspiration to create the next innovative start-up. At the same time, this cutthroat environment has pushed business schools to also cultivate this pressure. On the surface, it may appear that professors are equipping students for success, but in reality, they might inadvertently perpetuate a harmful and stressful culture.  

Unveiling Burnout and Minority Stress: A Struggle Within University Walls 

As we unravel the complex reality of burnout within university settings, it is essential to shine a spotlight on an often-overlooked aspect: the profound impact of minority stress. Understanding this concept is critical for comprehending the unique experiences of marginalized groups within academia and, more importantly, for finding ways to alleviate their burnout. 

Defining Minority Stress: Minority stress, a chronic form of stress experienced by marginalized or underrepresented groups, can have significant implications for physical health and well-being. It results from the daily challenges, discrimination, and microaggressions faced by minority students and staff at the university, stemming from societal norms that may not fully embrace their identities, whether related to race, gender, sexual orientation, or other aspects. This ongoing stress is closely intertwined with the experiences of minority individuals and can have lasting effects on their physical development and long-term health. Notably, recent research has shown that gay individuals produce lower levels of cortisol, a hormone that aids in stress regulation, compared to their heterosexual counterparts. This lower cortisol production is due to the continuous activation of stress hormones during their adolescence, a time marked by discrimination and its associated challenges. This prolonged hormonal strain can impact the nervous system, potentially leading to health complications and difficulties in managing stress in adulthood, ultimately affecting their overall well-being. 

The Burnout Connection: Discrimination, microaggressions, and the lack of representation can act as potent catalysts for burnout among minority students and staff. Imagine being a student who constantly feels like they do not belong, facing subtle (or not-so-subtle) slights, or bearing the weight of expectations linked to their identity. The emotional exhaustion, disengagement, and reduced sense of personal accomplishment hit harder for individuals dealing with the additional burden of minority stress. 

Mitigating Minority Stress: To create a truly inclusive academic environment that mitigates minority stress and supports the well-being of all, universities must take proactive steps. Implementing strategies like sensitivity training, diversity, and inclusion initiatives, and providing safe spaces for open dialogue can go a long way in fostering a culture of acceptance. Representation, both in faculty and curricula, can help reduce feelings of isolation and invisibility among minority students. These efforts are not just a matter of political correctness but a vital step in reducing burnout and ensuring that every individual can thrive in the academic landscape. 

Coping Strategies for Burnout 

As burnout becomes an increasingly prevalent concern in university settings, it’s essential to recognize that there are coping strategies that can help students and staff navigate this challenging terrain. 

Mindfulness: Practicing mindfulness techniques can help individuals manage stress and prevent burnout. Techniques like meditation, deep breathing, and yoga can promote relaxation and emotional well-being. 

Acceptance: Acknowledging and accepting one’s limitations is crucial. It’s essential to understand that it’s okay to ask for help, take breaks, and seek support when feeling overwhelmed. 

Taking Breaks: Regular breaks, both during study and work, are vital. Short breaks can rejuvenate your mind and prevent burnout. Ensure that you make time for leisure activities and relaxation. 

Time Management: Effective time management skills can help individuals maintain a healthy balance between academic or work responsibilities and personal life. Prioritizing tasks and setting realistic goals can reduce the pressure that contributes to burnout. 

Social Support: Building a strong support network is paramount. Having friends, family, or colleagues to talk to and lean on during challenging times can make a significant difference in managing burnout. 

Seeking Professional Help: When burnout symptoms become overwhelming, seeking professional assistance from counsellors or therapists can provide valuable insights and coping strategies. 

Conclusion 

In our fast-paced academic environment, burnout affects both students and staff, but it’s far from a uniform experience. Factors like individual identity and academic field-specific challenges play significant roles. While we observe a positive shift in society towards open discussions on mental health, particularly among Generation Z, stigma remains a hurdle. It takes different forms in various cultures, often influenced by social institutions. Recognizing unique stressors within academic disciplines like business schools is vital. Additionally, the impact of minority stress cannot be overlooked, making it essential to foster inclusive academic environments. 

Addressing burnout necessitates a multifaceted approach, including self-care, strong support systems, and institutional changes. By fostering cultures of acceptance and inclusivity, we can collectively work towards mitigating its impact, allowing both students and staff to thrive in their academic journeys. 

Sources 

HelpGuide, Huffington Post, Polígrafo, The Seattle Collegian  

Miguel Andrade

Core Aesthetics: Navigating the intersection of identity and consumerism

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Reading time: 7 minutes

Picture the following scenario: Your student self walks into campus for yet another day of lectures and tutorials and notices that the surroundings are composed of living embodiments of a multitude of famous aesthetics. The “clean girl” passes by you on the way to the library. In class, a vision of pastel perfection and floral patterns, reminiscent of cottage core’s effortlessly soft look sits next to you. On the way home, someone exudes the quintessential “thrifted” look, adorned head-to-toe in vintage core goods.

It is, in fact, a visual treat, and, as you fight back the urge to hit the “checkout” button on your meticulously curated shopping cart, composed of items from the various aesthetics that captivated you today, you stop to think: Where do I fit in?

Core Aesthetics: How did they come to be?

The rise of core aesthetics in the digital age is closely related to the decline of traditional subcultures. Subcultures, as defined by the Merriam-Webster’s Collegiate Dictionary, are an ethnic, regional, economic, or social group exhibiting characteristic patterns of behavior sufficient to distinguish it from others within an embracing culture or society. These often emerged organically among people with shared interests in music, art, literature, and political views. Examples of such are the 60s Hippies and the 90s Emo and Grunge subcultures.

90s Emo and Grunge
60s Hippie Movement

As they grew and became more mainstream, subcultures fell victim to oversimplification, thereby allowing companies to benefit from their universally recognizable elements. For instance, the punk subculture, known for its rebellious nature and incorporation of leather jackets and ripped jeans, has greatly influenced fashion and how it is perceived by young adults nowadays who can buy the individual elements without necessarily subscribing to the movement’s original values and ideologies.

Recently, however, there has been progressively less presence of these subcultures in modern society. As Peter Watts notes in Apollo Magazine (2017): “There is a sense that this ties in with the rise of the internet, with a more interconnected society removing that need for intensely localized scenes, which often coalesced around a single record or clothes shop or particular club or band. The wide availability of music allows young people to explore sounds across genres and timeframes which could also disrupt that need for a tribal identity.”.

This decline has given space for the birth of “online core aesthetics”. Unlike subcultures, these aesthetics lack the sense of community that characterizes subcultures, since its followers often lack uniform musical tastes, political ideologies, or even physical places to meet up. Additionally, core aesthetics are associated with young people and the need to belong to a specific group with defining features, hence the suffix “core”. This newfound trend, mainly unsuccessfully, attempts to mirror the organic evolution of subcultures but with a more digital and global approach. Even so, many of these aesthetics, such as the “tomato girl” or “mermaid core”, are introduced to the public, through magazine fashion articles and social media, while still in development, coalescing with companies whose primary goal is profit. By the end of one of the thousand articles on a new trend, there is a segment which relates to “how to dress like” such trend or aesthetic, incentivizing readers to buy the listed products. This, then, becomes a question of what comes first: The core aesthetic or the news article about such?

Core Aesthetics and Consumerism

In the past decades, people would resort to celebrities, models, and fashion magazines to set trends. As this group of institutions was narrow and not easily accessed, exposure to potential new trends was rather limited, keeping fashion cycles slower and almost effortless to control.

The rise of the internet has clearly accelerated products’ life cycle in the market and the evolution of core aesthetics. Online communities and media platforms provide the means for people to explore and express their different interpretations on fashion trends, while algorithms fragment online communities into taste-specific groups, eroding the notion of a universal mainstream, when, in reality, different individuals consume different “mainstream content”. This results in culture becoming less a focal point in young people’s identity, but rather the yearning to belong to an existing group.

Social media platforms such as Instagram, TikTok and Pinterest also serve as a stage for e-commerce and trust-based marketing, which, more often than not, breaks the consumerism dilemma into a simple choice for consumers. One example is that of Addison Rae, a TikTok content creator who, upon launching her makeup line, ITEM, initiated a trend by applying lip gloss, a product associated with the Y2K aesthetic, while holding her phone, showcasing her product. This ordinary trend propelled Rae’s net worth to 15 million dollars in 2022, since young girls who are still figuring their identity are pushed toward consuming the current trends to conform to a certain type of girl: clean girl, tomato girl, strawberry girl, and so on.

“Tomato Girl” Aesthetic
“Clean Girl” Aesthetic
“Y2K” Aesthetic

      

Along with core aesthetics, come micro trends which regard specific items in an aesthetic or fashion trend that become rapidly popular, while fading into the background rather fast as well. These fuel a lot of the consumerism patterns seen nowadays, since they are easily disposable as one’s primary closet pieces and usually incorporated in fast fashion catalogs, lasting but one season. Some examples are the House of Sunny’s hockey dress, patchwork jeans, and, more recently, the blueberry pink nails trends.

It is important to note that micro trends usually stem from small and sustainable brands, but uncontrollably expand into a fast fashion item that no one would wear within months, thereby not attributing brand recognition to the original designer.

Aftermath of the current overconsumption

Many aesthetics and trends rely on the romanticization of everyday life and self-care activities. Despite modern society’s awareness around overconsumption and its environmental impact, the pursuit of the perfect lifestyle through specific aesthetics is still a prevalent issue. In 2018, the recorded units of rigid plastic created for the beauty and personal care industry, which is greatly fomented by trends and aesthetics, amounted to 7.9 billion in the U.S alone. Most of the used plastic for packaging is not recyclable, yet still consumed around the world with 90% being mindlessly thrown away.

In the clothing industry, brands such as Shein, Zara, and H&M play a significant role in consumerism and the incorporation of core aesthetic items in people’s monthly or even weekly consumption of goods. In an environmental viewpoint, the overconsumption, and thereby, excessive manufacturing of clothing items represents 2 to 8% of annual greenhouse gas emissions, more than all international flights and marine shipping combined.

Discarded Clothes Warehouse

The aftermath of the mindless adoption of core aesthetics includes, along with environmental issues, the discarded clothing in landfills is set to amount to 134 million tons of material by the end of the decade.

Final Thoughts

It has become quite intuitive that social media, core aesthetics and consumerism are intertwined. However, aesthetics is not the sole motivator of overconsumption as, continuously, micro trends emerge and promote unnecessary consumption of goods with short-lived cycles within the fashion industry. It must be noted that not all aesthetics fall into consumeristic behaviors, as dark academia or cottage core already have a rich community base that is mostly detached from just overspending.

Sources: Statista, Vogue, Merriam-Webster, The New Yorker, Earth Day, Earth.Org, Apollo, Weller, Wivian. “The Feminine Presence in Youth Subcultures: the Art of Becoming Visible”. 2006. In http://socialsciences.scielo.org/ 

Madalena Zarco

Music: An Unconventional Weapon of Social Transformation 

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What do the songs “Imagine”, “Blowin’ In The Wind” and “We Shall Overcome” all have in common? Indeed, they gained significant popularity, topping music charts at the time, but more importantly, they all had a profound impact on society. With powerful messages of justice, equality, and peace, they have become, arguably, the strongest symbols of the causes they advocated, across continents and generations. 

Throughout history, music has consistently embodied the spirit of revolution, unity, and resilience. From the jazzy melodies of the Civil Rights Movement in the United States to the rhythmic rap of the 2021 Senegalese Protests, artists and musicians have often transformed their creations into anthems of discontent and hope. On behalf of wounded societies and particularly their youth, the lyrics call for justice and challenge the status quo. 

In this article, several historical examples are explored to better understand the role music has played in societies in bridging the gaps opened by social unrest and in fostering empathy on a broader scale. 

A universal language of harmonies 

Historical evidence has confirmed the role of music in conveying messages and preserving narratives due to its unique ability of transcending barriers of time and geography. Characterized by melodic and repetitive patterns, songs are easily understood and memorized, disseminating in informal contexts and creating cycles of transmission. Furthermore, music surpasses barriers of language and culture. When displaying simple harmonies and a catchy chorus, they manage to captivate even those who are unfamiliar with their lyrics, fostering unity among diverse audiences. 

It is often the simplest compositions that become the best sources of conflict transformation. In fact, “Bella Ciao” a well-known Italian song, with a refrain that is nowadays almost universally recognized, despite having its roots in the late 19th century, is a prime example of this. The song’s first adaptation to the context of social unrest was conducted by Italian partisans, who used it as an anti-fascist opposition anthem during the Italian civil war. It has since become a hymn of freedom and resistance, translated into many different languages and adapted to fit different contexts, always reflecting social discontent. As Money Heist’s creator, Alex Pina, puts it simply, “a song of struggle, which evokes a dream of freedom”. 

The power of lyrics 

Emotive lyrics and melodies allow individuals to passionately express their convictions with others. It is because of the sense of social well-being that one gets from sharing emotional states that music so frequently accompanies movements that build, and depend upon, solidarity. 

“No music alone can organize one’s ability to invest affectively in the world, [but] one can note powerful contributions of music to temporary emotional states” (Rhythm and Resistance, 1990). 

One example would be the best-selling single “Imagine”, a joint composition by John Lennon and Yoko Ono, written during the tumultuous period of the Vietnam War. Despite not containing an overt political message, as Lennon described it, “an ad campaign for peace”, it embodies the vision of those who long for global harmony. Decades after its original release, this popular masterpiece, continues to inspire people and has since become a permanent peace protest song and a lasting emblem of hope. 

A powerful tool for social justice and freedom 

Although social justice is typically thought of as a political agenda, many movements have used music as a way of inviting and maintaining broad-based participation in their initiatives. The paradigm of musical expression’s commitment to social justice was the political protest culture in the 60s of the Civil Rights Movement in the United States. “We Shall Overcome” by Pete Seeger is the classical example. It started as an old hymn sung by striking members of a union, when folk singer Pete Seeger learned the song and changed the “will” to “shall”. It became the unofficial anthem of the Civil Rights movement, becoming one of the most striking examples of music transcending mere entertainment and becoming the voice of the oppressed and the catalyst for societal transformation. The song has since appeared in diverse protests around the world. 

In the context of Portuguese history, the song “Grândola, Vila Morena”, performed by Zeca Afonso, represents yet another proof of the power music holds to inspire societal and political transformation. The song became an iconic anthem of the Portuguese democratic establishment. It held a crucial role in the events that unfolded on April 25, 1974, a peaceful military coup that overthrew Portugal’s authoritarian regime. The song was broadcasted on a radio station that day, setting the official start of the nonviolent uprising. The choice of this song was symbolic, as it conveys a message of hope, unity, and freedom. 

Throughout history, music has often also replaced speeches of hate, efficiently breaking cycles of indifference and oppression brought about by lack of social change. As an example, comes the song “Same Love” by Macklemore & Ryan Lewis, promoting marriage equality, which became the first Top 40 song in the United States to explicitly support same-sex marriage. 

The impact nowadays 

Music has been a peaceful vehicle for voicing public opinion and each era has had its unique features, players, and tools. We can observe a new era of protest music emerging, where rappers serve as not just artists but also as political voices. On March 6th, 2021, rapper Dip Doundou Guiss, a Senegalese hip-hop musician, posted a music video entitled #FreeSenegal, the slogan of a wave of demonstrations that had shaken the country during previous days. Explicitly supporting the protests and revolt, the video clip was played one million times just in the first day after being released. 

Artists are increasingly embracing their role as activists, using social media platforms to amplify their messages. This fusion of music and the internet has led to the development of a unique framework that transcends physical borders, enabling artists to inspire change and confront oppressive systems in a more lasting widespread way. 

In conclusion, as the world grapples with conflicts and social injustices, music stands tall as a universal language of resistance, resilience, and hope. Its melodies echo the cries for social change, reminding us of the power of the human connection. Through the harmonies of music, societies find the strength to resist, the courage to fight, and the inspiration to dream of a more just and equitable world. 

Sources 

  • History 
  • The Times of Israel 
  • IDEES 
  • Center for Strategic & International Studies (CSIS) 
  • Financial Times 
  • U Discover Music 

Catarina Ribeiro

Online Education: A Paradigm Shift

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Reading time: 6 minutes

Like any other structure of society, education is an ever-evolving affair that flows according to shifts in paradigms around politics, philosophy, and, of course, technology. The idea that learning could be performed in an online setting started to become more popular in the 2010s, with the rise in demand for online courses. Later, the COVID-19 pandemic emerged as a prominent landmark that established a new vision for what education could be, by creating an overnight necessity for the general implementation of mostly previously untried learning techniques that were based online.

The procedures that governments and faculties now designed to implement regarding education, specifically concerning the role of innovation, represent a crucial point, as they’re to decide on the establishment of efficient online educational infrastructures.

In this article, we aim to disclose how innovation is shaping the ongoing discourse on education, considering the economic and educational effects of its recent online development. We will explore the profound economic and educational impacts of these innovations, shedding light on their benefits and potential challenges.

An Ed-Tech Tragedy (UNESCO)

The transformative impact of online education

The economic implications of this shift are evident, as it reduces the need for physical infrastructures, commuting and other associated costs. This, in turn, results in cost savings for both institutions and students. Additionally, online courses often allow for a broader reach, attracting learners from all over the world and diversifying revenue streams for educational institutions

The educational impact of online learning is equally significant. Online education and remote work environments offer unparalleled flexibility. Students can choose when and where to study, enabling them to balance education with other responsibilities such as work or family. Students now have the flexibility to learn at their own pace as educational resources are accessible 24/7.

Online education presents a distinctive opportunity to provide personalised learning experiences due to its adaptability and flexibility, which fosters a more inclusive learning environment, accommodating individuals with diverse needs and learning styles, as it allows pupils to adapt the pace and style of learning to their preferences. This is due to innovations such as interactive multimedia, virtual classrooms, and AI-driven personalized learning that have made education more engaging and increasingly customisable. Moreover, online education has the potential to seamlessly combine skill development and degree attainment, aligning with the specific requirements of both students and the labour market. It can also revolutionise career planning and coaching services and deliver a unique and engaging learning environment. So, ultimately, this adaptability caters to the diverse needs of individuals pursuing online education, whether they are seeking a career change, community building, or connections with people from various backgrounds and regions.

Evolution of number of learners and enrolments in online learning

Innovations in online education have undoubtedly reshaped our economic and educational landscapes. They have opened new opportunities for cost savings, global collaboration, and individualised learning and work experiences. However, these innovations are not without their challenges and concerns, which must be addressed to ensure equitable access and a balanced work-life dynamic.

Some considerations when addressing e-learning 

The recent announcement of Sweden’s Minister of Education and Research Lotta Edholm, encouraging a shift to more traditional didactic devices, contrasting with their current hyper-digitalised approach, has been raising mediatic attention concerning the approach of innovation in education.

In that specific case, the government proposes a fallback in the complete digitalization of learning mechanisms, rather than an absolute abandonment of such practices. With this measure, there is an active attempt to recover the engagement of children with books and handwriting. This decision is representative of the many that have been arising lately, contributing to a much larger discussion on the extension to which society wants education to hinge on the digital and the online.

Online learning is often correlated with social isolation, which becomes an aggravated problem for the development of children that depend on school in order to enhance interpersonal relationships. Oftentimes, social isolation is a key contributing factor to mental health disorders such as depression and anxiety. E-learning also requires skills such as self-motivation and time-management, which many students struggle with, especially harming students with conditions such as autism or ADHD. It is difficult to replicate the learning environment of a classroom, particularly when considering that the experience of learning online is heavily affected by the environment and means that the students have at home. There is also the problem of technical difficulties, such as internet connection or even issues with devices, that hinder the learning experience as they create additional barriers and challenges.

An Ed-Tech Tragedy (UNESCO)

Furthermore, for many low-income students, online courses are a poor substitute for in-person learning. In that sense, online learning can end up accentuating inequalities when it comes to acquisition of appropriate technological devices, guarantee or even access to stable internet connection and proper maintenance. This is supported by an UNESCO report – “An Ed-Tech Tragedy” – which discloses the worsening in disparities resulting from education becoming largely reliant on technology during the COVID-19 pandemic.

Interesting Facts and Data-Driven Perspective on the Evolution of Online Education

These facts shed light on the remarkable evolution of online education and its growing prominence in recent years. The data from the World Economic Forum underscores Coursera’s – a leading platform that provides courses online – exceptional growth trajectory, with its user base expanding significantly from 2016 through 2022, culminating in an impressive 92 million users. A notable aspect is the platform’s resilience in 2021, as it managed to sustain its upward momentum. The proliferation of online learning has witnessed an extraordinary expansion, with enrolment figures skyrocketing from a relatively modest 26 million in 2016 to a truly impressive 189 million by the year 2021. This substantial growth underscores the profound impact and increasing acceptance of online education on a global scale.

Statistics from the National Center for Education reveal a seismic shift in the landscape of higher education. In 2019, a mere 2.4 million students exclusively pursued online education, but the onset of the COVID-19 pandemic triggered a nearly 200% surge, resulting in 7 million students embracing online learning.

Furthermore, a forward-looking perspective presented by Statista highlights the United States’ dominance in the global online learning market, with a projected revenue of $74.8 billion in 2023. These statistics align with research findings, indicating that a substantial portion of American graduate students, specifically two out of every five, perceive online education as offering a superior overall educational experience compared to traditional classroom instruction. These facts collectively underscore the transformative impact and increasing acceptance of online education in contemporary society.

Evolution of number of learners and enrolments in online learning

Conclusion

Many educational institutions are exploring hybrid models that combine the best of both online and in-person experiences. This approach allows for increased flexibility while maintaining valuable face-to-face interactions. Hybrid models can bridge some of the gaps associated with remote work and online education, catering to various learning, and working styles.

The future of education is likely to continue evolving in response to technological advancements. As we navigate this ever-changing landscape, it is essential to strike a balance between harnessing the benefits of innovation and addressing the associated challenges, with a commitment to creating inclusive, accessible, and sustainable educational environments for all.

References

The Guardian, World Economic Forum, Mckinsey, Statista, Financial Times, UNESCO

Authors

Pedro Teixeira

Francisca Pereira

Demystifying Turn of the Tide 

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Turn of the Tide is everywhere. The new Portuguese Netflix show, which is beating national records, proclaimed its spot in the world’s top ten non-English shows of Netflix the previous week. The series created by Augusto Fraga follows the life of Eduardo (José Condessa) and his friends: Sílvia (Helena Caldeira), Carlinhos (André Leitão) and Rafael (Rodrigo Tomás), whose lives transform with the arrival of a ton of cocaine to their quiet village, Rabo de Peixe.  

The launch of the seven episodes has brought back discussion about the events that inspired the TV series, unveiling forgotten journalistic work that aimed to demystify and portray the case and its repercussions. 

Rabo de Peixe is situated on the north coast of the island of São Miguel, in Azores, and more specifically, in the municipality of Ribeira Grande. In 2001, the village’s main activity was fishing, and nowadays, it continues to be a prominent source of economic activity.  

2001 was also the year in which a Sun Kiss 47 yacht that was carrying on board more than 500 kg of 80% pure cocaine appeared on the scene of the peaceful village. Antonio Quinci, an Italian drug dealer, was transporting its cargo from Venezuela to Spain and, on its way, was forced to make an unprogrammed stop in the island of São Miguel because of damages on the rudder. Aware of the fact that it would be impossible to go directly into the harbor due to the content in its possession, Antonio decides to hide the contraband in a cave in Pilar da Bretanha and pick it up later.  

The police investigation stated that the bales of cocaine were bound by an anchor beneath the water and tied by fishing nets and chains, but as the waves started to pound the inlets, the netting securing the bales unraveled. Suddenly, dozens of packages were spreading throughout 70 kilometers of coast, having many people reporting it back to the authorities, and some not. 

Initially a fisherman discovers the hiding place for some of the drugs and alerts the authorities, which eventually leads to many more substantial information from the citizens. In the end of the operation the authorities reported a total amount of marginally less than 500 kg of cocaine, the value that stayed on the official record. However, many believe that number to be inaccurate and that due to the complexion of the boat, it should be way larger.  

All of a sudden, statements about the uses of the cocaine that wasn´t apprehended were circulating all over the island. Nowadays, many of the stories that reach us are more of combination of fact and fiction. Small drug dealers multiplied, and the drug became more accessible: From small beer glasses filled with the drug and selling packets of cigarettes full of cocaine (500 escudos) to stupider claims, such as frying meat with the powder instead of flour. 

That spike on the offer of drugs augmented the number of overdoses for a while, taking the hospitals into a state of alarm. There were claims that almost every day someone would enter the hospital in a delusional state, mostly because of a mixture of cocaine with opposite effect drugs, as heroine or tranquilizers.  

Still working on finding the cocaine that remained on the island, the police came across a package hidden under a fake hall on a yacht, which lead them to Antonio Quinci. Two weeks after his arrest, Antonio climbed the prison wall into freedom, and jumped into a waiting scooter. The guards didn´t end the rescue because they were afraid of accidently shooting the citizens passing by. But can one really escape from an island? Fifteen days after, with the hope of catching him becoming fairly low, the fugitive was found: Two cops went to a house where there was suspicion of a man being in possession of cocaine, and while inspecting the hen house, they found Antonio. The convicted went back to jail, where he would end up serving a sentence of ten years in Coimbra.  

The effects that the case had on the island cannot be measured. Some lived it through stories and through friends, having no direct impact on their lives. However, the events have certainly introduced an addiction that, otherwise, wouldn’t find a way of prospering on that island in Azores.  

Webgrafia:

Matthew Bremner, Blow up: how half a tonne of cocaine transformed the life of an island, The Guardian https://www.theguardian.com/society/2019/may/10/blow-up-how-half-a-tonne-of-cocaine-transformed-the-life-of-an-island

Macarena Lozano, Rebeca Queimaliños, translated by Heather Galloway, Snow blind: how half a ton of cocaine destroyed a tiny Portuguese island, El País https://english.elpais.com/elpais/2017/12/08/inenglish/1512720697_264543.html

Luís Ribeiro, Quando a coca deu à costa, Visão https://visao.pt/atualidade/sociedade/2023-05-26-uma-equipa-de-reporteres-da-visao-estava-em-rabo-de-peixe-quando-a-coca-deu-a-costa-e-fez-a-reportagem/

Carolina Amado, Rabo de Peixe lembra cicatrizes, mas “nunca a comunidade se sentiu tão abraçada”, Público Rabo de Peixe lembra cicatrizes, mas “nunca a comunidade se sentiu tão abraçada” | São Miguel | PÚBLICO (publico.pt)

Francisca Pereira

INVESTING IN GOOD FAITH: THE ISLAMIC FINANCIAL SYSTEM 

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Reading time: 8 minutes

 Have you ever looked at something, and imagined what it would be like if it were… different? Say, what would the education system look like without the written word, or arithmetic without the concept of zero? Or what would the financial system be without interest? Many centuries ago, in Europe and all the Christian world, collecting interest was forbidden by the Church on the grounds of immorality, being universally recognized as a sin – the sin of Usury.  

Nowadays, the official stance of most western nations with respect to interest is significantly different – not only is it not condemned, but is actually regarded as a vital part of our economies. And it definitely is. It is impossible to imagine how our current financial system would ever work without this tool. Interest is a crucial part of loan taking, house buying, and savings. Politicians talk about it, economists worry about it, investors use it to generate returns. The concept of interest is inseparable from the concept of money itself. In most of the world, at least. 

Like the Catholic Church once did, some still consider interest to be immoral, or simply impossible to reconcile with their religious beliefs. Such is the case of the Islamic Faith.  

THE ISLAMIC VIEW 

Before we look at how this financial system is different from the main one, it is worth spending some time understanding its foundations.

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A member of the Islamic community is supposed to comply with certain rules and guidelines, living their lives according to the teachings of the Faith in order to lead a moral life. To this code of conduct, we call Sharia (or Shari’ah) Law. Sharia is a complex subject. It requires interpretation of the will of God, something that has divided humankind for millennia. We are not likely to solve it in 1400 words. It is not the purpose of this article to explore the religious and legal complexities of Muslim-majority countries. Sharia law exists, and millions of people in the world follow it. Our focus is on how Sharia, and by extension the individuals that try to guide their actions by it, think of financial transactions. 

The Institute of Islamic Banking and Insurance states the objectives of Islamic Financial Transactions (i.e. Sharia compliant financial transactions) as follows: 

  • To be true to the Sharia principles of equity and justice; 
  • Should be free from unjust enrichment; 
  • Must be based on true consent of all parties; 
  • Must be an integral part of a real trade or economic activity such as a sale, lease, manufacture or partnership. 

The first three points can be considered more or less subjective – what constitutes equity, injustice or true consent are open for debate. Interesting as that debate may be, it falls out of our scope today. Let us then look at the fourth point. 

Sale, lease, manufacture and partnerships are no strangers in the traditional financial system. The key is the one missing – can you spot it? That’s right – debt! Debt-based instruments, so common in traditional financing, don’t have the same centrality in its Sharia compliant counterpart. Why is that? Well, we’ve stated the reasoning before: the Islamic Financial System absolutely prohibits paying/receiving “any predetermined, guaranteed rate of return”, that is, interest.  

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But why does the Islam forbid someone to be compensated for departing from their capital for a period? Doesn’t it recognize the Time Value of Money (the notion that having money right now is more valuable than the promise of the having money in the future)? As a matter of fact, it does! The difference is in understanding what constitutes capital. Ask any non-Islamic banker, investor or economist, and they will almost surely tell you that money is capital – a production factor, something that can be used to create more wealth. Islamic thinking draws a line: money is only seen as potential capital. It is only considered actual capital when it is employed in an actual productive activity together with other resources. Simply put, money sitting still is not productive, so you are not entitled to any compensation for lending it to someone who will actually put it to use. 

PRINCIPLES AND INSTRUMENTS 

So, what can actually be done inside this system? Well, any activity that complies with some basic principles: 

As previously discussed, interest (riba) is forbidden. It is regarded as an “unjustifiable increase of capital whether in loans or sales”. This is the central principle ruling mutual dealings. Borrowers and lenders should equally share the profits and risks – profits are a symbol of a successful enterprise, while interest is a cost independent of success, only on the side of the borrower. A supplier of funds is not a creditor, but an investor. Since money has no purpose unless tied to a real asset, speculation and gambling (maysir) are forbidden. Uncertainty or asymmetrical information (when one of the intervenients possesses information that the other one has no access to) are also prohibited in any transaction – contracts are sacred, and agents have a duty to disclose all relevant information beforehand. Hoarding is also not permitted, as well as trade in forbidden commodities (pork, alcohol, dealings with casinos, etc.).  

Many instruments that are present in the traditional financial system are also used by the Islamic Financial System. The most basic ones, which can then be combined to create more complex products, are cost-plus financing, profit-sharing, leasing, partnership and forward sale. 

APPLICATIONS 

As you can see, Islamic Financing is no more than a selection of the financial instruments and products that comply with certain religious and, especially, moral principles. If you think about it, it is not so different from how a food restriction works – if you and your friends go to dinner, the vegan friend will order something with no meat, the one with a seafood allergy will probably not get the shrimp, and some may choose to get water instead of wine or other alcoholic drink. And, of course, you are perfectly free to order a salad if you’re not vegan, or to ask for no peanuts in your dessert even if you have no allergy. And you are equally free to partake in a Sharia-compliant financial transaction, whether you are a Muslim or not! 

People can invest in an Islamic Financial Product regardless of their faith 

Islamic finance has been growing, and not only inside the Muslim Community. Its principles appeal to many, and it does have some advantages over the traditional system: as interest is forbidden, predatory loans can’t happen at all; income and wealth are more equally distributed, as every intervenient receives a part of the profits, regardless of how much capital they had at the beginning of the enterprise; speculation is forbidden, meaning the system is not so exposed to market bubbles (goodbye, 2008-like financial crisis!); and it is significantly more transparent and accessible. Many argue that it can help lift many out of poverty, especially if combined with ideas like Microfinancing. These characteristics indicate that Islamic Finance may be better equipped for sustainable development, a point that may prove to be of great importance in the years to come.  

Of course, it has some significant disadvantages too: it does not provide funds for all businesses (religious prohibitions prevent it from dealing with pork, alcohol and gambling firms) and, for all its efficiency in allocating resources to businesses with a greater chance of success and encouraging money to be fueled into real and productive activities, it can be argued that it does not maximizes investment profits (as interest is not charged). 

There is another detail that is worth pointing out: Islamic Finance comes with a moral compass (or at least a baseline). Whether this is a positive thing or not will probably depend on the degree to which you agree with the moral principles it is rooted in, but it is, undoubtedly, a point of difference between this system and the traditional one. 

The islamic Financial System serves millions of people worldwide

It is easy for some to look at the presented characteristics and to regard this system as limiting. We cannot argue it may not be limiting, but it is so in order to provide an option that answers the needs of millions of people, who do not wish to compromise their faith in exchange for a piece of wealth. Different cultures have different approaches, and we live in a wonderfully differentiated world. Imagine how boring it would be otherwise. 

Sources: Institute of Islamic Banking and Insurance, Corporate Finance Institute, Investopedia, World Bank, Blossom Finance, Wikipedia 

Joana Brás

Leonor Cunha

The never-ending discussion on CEO compensation 

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Reading time: 7 minutes

CEO compensations are again a motive of discussion, as inequality rises: 

Chief Executive Officers’ (CEO) compensations are once again the topic of the moment, with several news coverages reporting increases in the earnings of the ultimate day-to-day firm managers, in the last year of 2022.  

For example, Dara Khosrowshahi, Uber Technologies Inc.’s CEO saw a total increase in compensation of 22% in the last year alone, culminating in a total payment of $24.3 million. According to the report issued by the Securities and Exchange Commission, his payment was composed of a $1 million base salary, stock awards of around $14.3 million, $5.9 million in options, a $2.9 million bonus and a “symbolic” $170 thousand compensation for personal travel and security costs. James Gorman’s salary, CEO of Morgan Stanley, rose 13% to $39.4 million, of which $1.5 million in base salary, $7.5 million in a cash bonus and stock awards of $30.4 million. According to Reuters, these numbers reflect a ratio of 274 to 1 when comparing Gorman’s pay to the median pay of an employee in 2022, an increase from the previous year’s ratio of 255 to 1. American CEOs of oil companies experienced a large growth in their pay checks as well, as their record profits were driven by the increase in energy prices, with ExxonMobil’s CEO, Darren Woods, having a 52% raise in his payment of $35.9 million. However, the same cannot be said for the median oil company worker, who saw a decline in the average salary, with those of Exxon seeing a decrease of 9% to a total yearly salary of $171,582. Moreover, just this week, Alphabet and Google’s CEO, Sundar Pichai, was reported to earn $226 million, which included stock awards of $218 million. This represents more than 800 times the annual pay of a median employee and it is subject to controversy and outrage as the company has been cost-cutting with their employees through layoffs that have already started, following Google´s plan to cut 12,000 jobs, representing around 6% of its total workforce. 

These numbers express a growing concern in today’s society, with the rising disparity between CEO’s average salary and the median worker. In fact, in June 2022, the Institute for Policy Studies released a study including the top 300 publicly traded US firms, in which it was concluded that the average pay gap between CEO and median worker jumped to 670 to 1, an increase of 31%, from 2020’s 604 to 1. In total, 49 firms had ratios higher than 1,000 to 1, signalling that, for each dollar the median employee received, the company’s CEO would earn more than $1,000. Furthermore, in more than a third of surveyed companies, the median worker salary did not keep up with inflation. 

Figure 1: Aggregated CEO-to-worker compensation ratio for the 350 largest publicly owned companies in the U.S. from 1995 to 2021

Figure 2: Ratio between CEO and average worker pay in 2018, by country

However, such large differences in pay do not occur in every country. There are cross-national differences which relate to the culture of the country in question. Indeed, the average US executive compensation is significantly higher than that experienced in Europe or Asia. This relates to the fact that Asian countries, like Japan, favour group rewards while others, such as China, value other aspects more highly, namely promotions or potential political careers. Nevertheless, for the sake of exemplification, in this article, the US will be used as a case study. 

The agency problem as a potential explanation: 

To truly comprehend where these differences arise from, one must start by understanding what an agency is.  An agency is a contract by which one party, the principal, grants authority to another party, the agent, to act on his behalf in a particular matter. Consequently, the agent – which may be a CEO – is expected to act in the best interests of the principal – in this case, the shareholders – and, normally, is not held liable for his actions as long as he acts under his fiduciary duty. However, an agency problem occurs due to the separation that exists between the management and shareholders, such that both parties’ interests are not aligned, with CEOs potentially acting in their self-interest due to several reasons, like imperfect contractability or the fact that actions are not perfectly observable. In order to mitigate this problem, many times CEOs are attributed compensation that is related to their firm’s performance, such as stock options or golden parachutes to align incentives. 

The medium-class lifestyle seems more and more distant: 

To say that things are not going well in the United States and many other advanced countries is an understatement. Discontent is widespread in these parts of the world, namely in the US, displaying the world’s most severe corporate inequality, in which the gap between a company’s highest and median pay – known as its pay ratio – should not be as sky high. 

Income inequality has resulted in a substantial gap in society, making it more challenging for individuals to attain a middle-class standard of living. This divide not only demoralizes the workforce but also shrinks the chances for billions of people to earn a liveable wage. Moreover, income inequality is a deterrent to economic growth, as it is estimated to reduce demand by 2-4%. Adding to that, the accelerated inflation rate, which will have the most significant impact on low-wage earners, emphasizes the necessity for businesses to prioritize policies that elevate the average worker.  

A significant majority of Americans (close to 75%) view the economic disparity between the wealthy and the less affluent as a critical issue, and their concerns are well-founded: income inequality ratios between the highest and lowest percentiles have been steadily rising over the past five decades. Americans have thus an informed sense that there is a misalignment in the proportion of exorbitant CEO pay vis-à-vis lower-wage workers. Relatedly, a majority of Americans (66%) recognize wage stagnation as a significant issue, and slightly over half (51%) feel that there are not sufficient prospects to improve their financial status. Roughly half of Americans also recognize wage discrimination against Black individuals and women as significant problems.  

Figure 3: Assessment of the inequality and discrimination as problems in the U.S.

What can be done?: 

The CEO compensation issue needs to be addressed, and companies should consider limiting the pay of their top executives to prevent it from growing excessively. Such a cap could have positive effects on the workforce if the excess compensation is redistributed among them. A recent study by the Financial Times revealed that capping CEO pay could help alleviate financial insecurity among low-wage workers. For instance, if the top 110 publicly traded US companies were to set a $1 million limit on their CEO pay, workers in these companies could potentially receive an additional $400 per month. 

Lawmakers in seven US States are collaborating to propose higher taxes for wealthy individuals and corporations in their respective state legislatures. Many of the new proposals suggest taxing the overall wealth of the rich, not just their annual income. In 2021, ProPublica released a report based on leaked tax documents from wealthy individuals, revealing how they evade paying income tax. The report showed that, in some instances, the wealthiest billionaires avoid income tax altogether by accumulating wealth through stock and property ownership, which are taxed at lower rates than income. As part of his budget proposal last spring, US president Joe Biden introduced a 20% “wealth tax” at the federal level, which would apply to an individual’s total income, including growth in assets, such as stocks.  

According to Sarah Anderson of the Institute for Policy Studies, companies should not view measures to reduce income inequality as punitive, but rather as potentially beneficial for them. Anderson believes that narrowing income gaps can actually improve a company’s bottom line by motivating employees and ensuring they feel fairly rewarded. She suggests a fair ratio of 25:1, where the median pay at a company should be $200,000 if the CEO earns $5 million. Companies have the option to reduce CEO pay, increase worker pay, or pay higher taxes, which can then be used to address inequality in other ways. 

All in all: 

The message from the public is clear: corporate leaders, including CEOs, have a responsibility to address income inequality in America by prioritizing worker wages and financial sustainability. Nobel prize winner Joseph E. Stiglitz emphasizes that paying taxes is the first element of corporate social responsibility. 

To build fairer economies, it is crucial to ensure that the lowest-paid workers can meet their basic living costs. Americans believe that companies can contribute to this by raising their minimum wages to a decent pay. 

Sources: MarketWatch, Reuters, The West Australian, The Guardian, CNN Business, BBC, Financial Times, Institute for Policy Studies, ProPublica, Grenness, Tor; “The Impact of National Culture on CEO Compensation and Salary Gaps Between CEOs and Manufacturing Workers” in ResearchGate 

Hannah Ribeiro

Pedro Teixeira

Brexit delays shorten the fuse in Northern Ireland 

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Brief context: the Troubles 

From the late 1960’s until the late 1990’s, the historically contested region of the United Kingdom, Northern Ireland, experienced decades of sectarian tensions and constant politically driven violence known by many as the Troubles. These conflicts were motivated by disagreements between the Protestant loyalists, who wished to remain a part of the UK, and the pro-secession Catholics, who fought for the union of Northern Ireland (NI) with the Republic of Ireland (ROI), resulting in the death of more than 3500 people throughout the years.  

In 1998, the Good Friday Agreement was signed, managing to attenuate the tension between the dominant protestant parties and the catholic minority. This settlement established a power-sharing government, in which the two sides served together, facilitated disarmament, and even abolished the border checks between NI and the ROI. Since then, Northern Ireland has made remarkable progress and, twenty-five years later, it was commonly understood that the former period of violence and instability was put behind in history. 

The Good Friday Agreement

Is this too good to be true? What happened since? – Brexit  

Recently, Brexit has thrown a wrench in the peace process: the twenty-fifth anniversary of the Good Friday Agreement has been overshadowed by the Brexit-related trade impasses, which prompted increasing doubts in the region’s hard-won gains. Furthermore, the newly set trade and border arrangements have brought discontent among Protestants, sparking newfound concerns and buried conflict. 

In Northern Ireland, about 56% people voted in favor of staying in the European Union, with the Democratic Unionist Party being the only major Northern Irish party to support the separation. The majority of votes were clear on their motives, since the EU was directly involved in the funding of reconciliation programs, amounting to almost 2 billion euros since 1995. 

Following the vote for Britain to leave the EU, many questioned what new agreements were to come regarding trade and customs, but one question in particular gathered the most interest and concern: What was going to happen between NI and ROI, to the only land border between the two separating blocks? The UK had two choices: either draw the border in the island of Ireland, returning to a hard border between the once in conflict regions and threaten the Good Friday Agreement, or draw it in the Irish Sea, effectively separating NI from the rest of the UK. Despite Boris Johnson claiming that there would be no checks on goods going from NI to Great Britain (GB), the government ultimately decided in favor of the latter, creating the Northern Ireland Protocol.  

Issues on the agreement quickly arose as it became clear that this decision was not supported by the NI’s Democratic Unionist Party (DUP) and the European Research Group (ERG) – a group of British Brexiter members of parliament –, criticizing what they understood to be too many checks and the continuous jurisdiction of the European Court of Justice over NI, pressuring the government for a renegotiation. Nevertheless, negotiations stalled for years, with successive governments failing to come to a resolution. It came as a surprise, therefore, when Rishi Sunak’s government announced that it had reached a deal with the EU in the form of the Windsor Framework. 

Democratic Unionist Party
European Research Group( ERG)

The new compromise established regulations for green lanes – goods moving from GB to NI, requiring only minimal checks – and red lanes – goods moving from GB and through NI to the ROI, requiring the whole range of checks imposed by the EU. Moreover, agreements were reached regarding the democratic deficit between the regions. Previously, NI was subject to not only present but also future EU regulations, with the understanding being that if the region would maintain access to the block’s single market, it would have to comply with its rules. Under the new accord, however, roughly 1700 pages of EU regulations would not be enforced in NI, meaning only some 3% “strictly necessary” rules would be applicable in the province. The deal also gives NI an emergency break option, the Stormont brake, under which changes to EU agricultural, goods, and customs rules can be vetoed by the northern Irish assembly if expressed “in a detailed and publicly available written explanation” why the rule has a significant impact on NI’s citizens’ everyday life. Under those circumstances, the rule would be suspended, and it would be up to a joint UK and EU committee to renegotiate the directive.  

Even after significant progress, both sides were seemingly unwilling to budge further. While the Sinn Féin Social Democratic and Labor Party expressed optimism, NI’s other major party, the DUP, expressed doubts, insisting there was “still some work required” as some concerns revolving the ECJ remained unattended. They were quickly joined by the ERG that said they would not support a deal that allowed a role for the ECJ. Ursula von der Leyen was also quick to clarify that the ECJ would remain the final arbiter of the EU law.  What role would the ECJ have if the Stormont brake were to be, in the eyes of the EU, unjustly activated, remains unclear. 

What comes next? 

If Sunak’s government can convince the EU to waiver the jurisdiction of the ECJ in NI and convince the DUP to agree to the new conditions, the deal would be finalized, and the issue resolved. Nevertheless, this looks extremely unlikely, as not only would the EU likely be adamant on the ECJ’s role to maintain EU rules and jurisdiction in place, but the DUP has historically given little concessions over their idea of complete separation of the UK from the European block of 27. This leaves the government with two options: scrap the deal – appeasing Brexiters, though leaving the issue unresolved, and irking along the way both the EU and the British public that are increasingly fed up with the Brexit movement – or move forward with the deal – effectively relying on the British labor party votes to approve it in the parliament, though irritating the other major political party – the conservative parliamentary party. 

As was the case for its two predecessors, many predict that the government will follow the first option. Nevertheless, if Sunak can break the trend, there is a chance for the deal separating the UK from the EU to finally reach its conclusion. 

Sources: HISTORY, Council on Foreign Relations, Intelligencer, NBC News, Associated Press News, BBC News, Brookings, Reuters, Customs4trade, The Guardian, European Commission 

Manuel Rocha

Madalena Zarco

Commons: Tragedy or Comedy? 

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The four categories of goods, given their degree of excludability and rivalry

Definition “rivalrous and non-excludable goods”. Big words. And what do they mean, exactly? Well, let’s break it down. First, excludability: an excludable good is a good/resource that someone can bar (or limit the access to) other people from using. Second, rivalry. Despite the name, rivalrous goods are not the ones that lose their temper when their football team is losing. Rivalry simply means that if one person uses the good, someone else will either have less of the good to use or be unable to use it at all. Think of the shirt you are (presumably) wearing now: while you wear it, no one else can. Music, for example, is just the opposite – if someone is listening to a song, there won’t be any less of the same song for others to hear (unfortunately, in some cases). With these 2 characteristics, we divide goods into 4 categories: private goods, the excludable and rivalrous ones; club goods, excludable but non-rivalrous; public goods, neither excludable nor rivalrous; and the ones we will be focusing on, the non-excludable and rivalrous goods, the commons. 

So, common goods are the ones that everyone has access to (or at least it would be hard to block anyone from using them), while also being diminished with every utilization, that is, there is progressively less quantity available the more they are used. Now, you may recognize this description as the one of most natural resources: fish in the sea, mineral deposits, the shells at the beach…Consequently, it is easy to see the problem that arises from these characteristics: their sustainability. 

THE TRAGEDY 

The Tragedy of the Commons. Despite the rather theatrical name, it is neither a Shakespearean play nor a Mexican soap opera (we’ve checked). 

This Tragedy is an economic term coined in 1968 by Garrett Hardin to describe the phenomenon of over-exploitation of common-pool resources: users of the common good behave opportunistically, seeing the resource as “free”, since they cannot be excluded from it, so they reap all the benefits without taking in the costs, which ultimately leads to depletion.   

The extinct dodo

We do seem to have a tendency to explore every resource we can until thorough extinction (I mean, when was the last time you saw a dodo around?), with no regard for their long-term (or even short-term) sustainability. The rationale is rather simple: if it belongs to everyone, it belongs to no one, so you should be quick to grab as much as you can before it’s over. 

The problem with this is, as we’ve seen, the risk of depletion. And this is not merely childish or selfish behavior. This is, in fact, very standard rational economic behavior. Every user can be immediately better-off by taking more than what is sustainable to take, so they do it, until inevitably the resource is gone. Individuals have no direct incentive to behave sustainably. Sustainability is often in the best interest of a community, but not necessarily of a single person. See the problem?  

NEED A SOLUTION? ELIMINATE THE PROBLEM 

This is the standard economics’ layout of the issue – and standard economics presents a solution. Think of a small forest, of around 30 trees, and 3 lumberjacks. Every year, in the spring, the lumberjacks come and take down trees to sell the wood. Now, the forest is capable of regenerating: if they leave at least 3 trees standing, next year 30 will be there again (it’s a very mathematically exact forest). What would be optimal? Easy, right? Each lumberjack could take down 9 trees, and all could come back next spring to get more. But each one has an incentive to outperform the others, sell a lot of wood and get rich. So, each takes as many trees as they can, leaving none in the forest. How can we prevent this?  

The forest and lumberjacks’ metaphor

Whatever we do, the good will not magically become non-rivalrous, but we can do our best to make it excludable. In other words, if the problem arises from collective ownership of the resource, then the solution is surely to change that ownership form. One way to do this is to effectively switch ownership to the government, who then regulates who has access and how much of the resource can be consumed. In our magic forest example, this would mean passing a law stating that each lumberjack could take no more than 9 trees every year. 

It should be noted that this solution requires some form of enforcement – a surveillance authority to ensure regulations are upheld, as well as a penalty in case of breach of the system. These are usually provided, or at least legitimized, by the same governmental authority that controls the resource. 

Such top-down, centralized solutions suffer from certain inherent problems, namely rent-seeking (one entity trying to gain some profit without further contributing to the productivity of the system – like governmental officials trying to collect bribes from the citizens to grant them access to the resource), principal-agent conflicts (when there is a conflict of interest between the citizens and the agent meant to act in their behalf, like the government representative) and knowledge issues (the government may not be fully accurately aware of the needs of the population). 

If state control is not the ideal answer, then maybe we should go in the opposite direction: privatization. Maybe each person could be given a part of the resource to explore (say, each lumberjack is given a certain amount of trees), and trade between themselves, so that each gets the best deal they can potentially obtain. 

If state ownership is not the solution, how about privatization?

Unfortunately, this is not a perfect solution either. Besides the physical impracticability of dividing up some of these goods, there is again the issue of enforceability. Besides, this solution comes with a problem at the very beginning: each person is given a part of the resource to exploit – but… given by whom? Often enough, such a project of privatization requires a government taking control of the resource and then assigning its exploration as it sees fit. So, at its very core, this solution is not so different from the first. Both rely on a higher authority defining and enforcing regulations to limit the use of the common good. They follow a very simple logic: if commons are so tragically doomed, then our efforts should focus on tackling their core characteristics, what makes them common goods in the first place.  

So far, we have looked at the problem and formulated solutions assuming this is how individuals act when faced with a resource to share. But do we always have the behavioral standards of a preschooler? Thankfully, no. In fact (poor dodos aside), we are actually very capable of collectively managing common resources. 

OSTROM’S THEORY 

In 2008, economist Elinor Ostrom was awarded the Nobel Prize in Economic Sciences (becoming the first woman to receive it). The reason? Her breakthrough research on common-pool resource management.  

Elinor Ostrom

Ostrom took a different approach to the problem. Hardin had looked at common goods and their rivalrous and non-excludable nature and tried to explain their over-exploitation based on standard economic theory’s behavior predictions: people behave selfishly and without considering others or the future; therefore, the Tragedy is only natural. Ostrom, on the other hand, decided to start from observation, not from assumptions. And what did she discover? Examples, many in fact, of sustainable management of a common-pool resource! This real-life examination allowed her to arrive at a new theory. In all these successful cases, the management was done by the local communities! Yes, the solution was right there in the name all along.  

So, all we need to do is to leave common goods alone, trusting local communities to handle the matter? Great! Economics is so easy (…said any economics freshman right before their first midterm season…). The theory is, of course, slightly more elaborated.  

Ostrom laid down a set of conditions under which local community management – what she called management through collective action – of common resources can be optimal: 

  1. Define clear boundaries of the common resource 
  1. Rules governing the use of common resources should fit local needs and conditions 
  1. As many users of the resource as possible should participate in making decisions regarding usage 
  1. Usage of common resources must be monitored 
  1. Sanctions for violators of the defined rules should be graduated 
  1. Conflicts should be resolved easily and informally 
  1. Higher-level authorities recognize the established rules and self-governance of resource users 
  1. Common resource management should consider regional resource management 

Let’s think of what this looks like in the previous 30-trees-for-3-lumberjacks example: 

First, the community should clearly set down who the resource is meant for. By community, we mean the people who live and work within the ecosystem the forest in inserted in – a village where the lumberjacks live, the market they trade on. The group allowed to explore the resource is the lumberjack professionals – they are the ones who make their livelihoods from the forest. It should also be clarified how much of the resource can be taken, and the lumberjacks should take part in the rule making. The people in the village know better than anyone how the forest works: they know at least 3 trees must be left for the forest to regenerate, and have an interest in its sustainability, and the lumberjacks want to reap the benefits of its exploration. Besides, people are more likely to comply with rules they helped write themselves. Of course, the forest must be monitored, and if someone takes more than their share they must be punished by the community. But this punishment should be gradual – not immediately banning, but warning, sanctioning and informal social condemnation (the offender should feel ashamed to break the rules). If there is any disagreement regarding the forest, it should be able to be resolved quickly, in an informal way. The community should also feel assured that their rules will not be overturned by a higher authority. Lastly, they should remember that the forest does not stand alone. It is part of a larger system that should be had in mind, so that resources are explored in a way that does not hurt the rest of the system. 

CONCLUSION 

Common-pool resources management is a puzzling subject. They can be invaluable tools for the subsistence and development of local communities, or they can be consumed to extinction in a heartbeat. Ostrom’s Co-operative Collective Action Management Theory is a clever and helpful way to think about sustainability, one of the greatest challenges of our century. Her work proves observation and context are important tools for economic research, perhaps the most important ones.  

Sources:Investopedia, Wikipedia, Harvard Business School, American Enterprise Institute, Aeon, Corporate Finance Institute 

Leonor Cunha

Joana Brás

The Collapse of SVB: A Cautionary Tale for the Financial Sector 

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Growing concerns on the stability of the financial sector 2023 has seen a wave of bank failures, from Credit Suisse in Switzerland to Signature and Silicon Valley Bank (SVB) in the United States (US). These recent collapses of prominent banks have sparked concerns about the stability of the financial sector, leading to a surge in Google searches for “financial crisis” not seen since 2008.  Given the already-present fears of a recession, the collapses only added to the public’s anxiety, shaking consumer confidence in the economy. While the situation is unsettlingly familiar, the uncertainty and fear of contagion remain daunting. This latest banking crisis highlights the potential side effects of financial disarray and underscores the need for swift and effective intervention to restore stability. To exemplify the bank failures and bankruptcy, this article will focus on the case of SVB.  

A perfect combination of events leads the “bank of start-ups” to collapse 

Known as the “bank of start-ups”, especially for those in the tech sector, California-based SVB was established in 1983, with the mission of helping “individuals, investors and the world’s most innovative companies achieve their ambitious goals”, counting as their clients start-ups and tech companies of the likes of Shopify or Insight Partners. In 1988, they went public through an IPO on Nasdaq and, in 2008, they went international. But how did a bank that was the 16th largest bank in the United States, reporting, in Q4 for 2022, $212B in assets, $342B in total client funds and $74B in total loans, collapse on the 10th of March? 

Silicon Valley Bank

The short answer to this question revolves around the typical suspect when referring to the failure of banks: bank runs, which are a self-fulfilling prophecy. However, in the case of SVB, it can be seen as a perfect combination of events which led to this disastrous outcome. The first motive can be linked to the Federal Reserve’s decision to increase interest rates to fight the increasing inflation rates, which are corroding American consumers’ purchasing power. This macroeconomic environment would lead SVB’s long-term investments in government bonds to be eroded as SVB had $21 billion invested with an average yield of 1.79%, as they had been purchased when interest rates were near the zero-lower bond. In comparison, currently, a 10-year Treasury bond has a yield of around 3.9%. Simultaneously, startups were raising fewer rounds of venture capital investment, due to the current economic environment, which decreased the amount of deposit inflows and increased the outflows. So, SBV’s cash decreased, such that the bank had a lower amount of resources to finance its operations. Consequently, in order to raise funds, SVB resorted to the sale of their government bonds. However, as they were yielding a lower interest than those that investors had access to if they bought directly from the government, this led SVB to sell a portion of said bonds at a discount to compete with the competitive market, resulting in a loss of $2 billion. The ultimate blow to SVB’s credibility would be the capital raise announcement, resulting in a generalised panic amongst SVB’s depositors, as more than 90 percent of them exceeded $250,000 in guaranteed Federal Deposit Insurance Corporation (FDIC). At the end of last year, according to the Wall Street Journal, SVB had over $150 billion in uninsured deposits. Fear led to large withdrawals, with depositors pulling out $42 million, in just one day alone. Consequently, SVB’s stock plummeted.  

To avoid a widespread panic and broader contention, despite appearing that SVB’s problems spilt over to Signature Bank, the government intervened in the form of California regulators shutting the bank down and placing it in receivership under the FDIC with SVB’s senior managers, including its CEO, Greg Becker, being removed. SVB’s collapse has been deemed as the 2nd largest in American history, only losing to Washington Mutual which collapsed in the 2008 Financial Crisis. Furthermore, in an unusual decision, the FDIC agreed to guarantee all SVB deposits, even those above the $250,000 per account threshold.  

SVB stock price performance month-to-date in US dollars
Annual nº of US commercial bank failures and total associated assets

What else is being done? 

Deputy Treasury Secretary, Wally Adeyemo, sought to reassure the public about the health of the banking system after the sudden collapse of SVB, in an exclusive interview to CNN, stating: “Federal regulators are paying attention to this particular financial institution and when we think about the broader financial system, we’re very confident in the ability and the resilience of the system”. In reality, the 2008 financial crisis prompted stricter regulations in the United States and around the world. In response, regulators imposed more rigorous capital requirements on American banks, with the aim of preventing the collapse of individual banks from having a ripple effect on the wider economy and financial system. 

Following the collapse of SVB, federal regulators acted promptly to mitigate depositors’ losses and restore trust in both the banking system and the broader economy. To achieve this, they put into effect a series of measures aimed at reassuring the public and bolstering confidence in the financial sector. The government introduced a program called the Bank Term Funding Program (BTFP) – a lender of last resort facility- which serves as a safety net for financial institutions. This program, which is backed by the Federal Reserve, provides loans to banks, credit unions, and other deposit-taking institutions in times of need. The loans can last for up to one year and enable these institutions to meet the needs of their depositors without having to resort to selling their high-quality securities at short notice.

Discount Window Borrowing

Another way the government relied on to regulate the financial industry differently was through a discount window, a facility that offers banks the option to borrow cash on a permanent basis, typically for short periods, such as a few days or weeks. From March 9 to March 15, borrowing at the discount window escalated from $4.6 billion to $152.9 billion, before declining to $88.2 billion by March 29. However, the decrease was mostly offset by augmented borrowing through the BTFP. 

Numerous banks overseas borrow and lend in U.S. dollars. Although foreign central banks possess the capability to print their own currencies, like Euros, Yens, and British pounds, to lend to their struggling banks, they do not have the authority to print U.S. dollars. In response to the Global Financial Crisis, the Federal Reserve initiated a sequence of agreements with foreign central banks, whereby it would exchange U.S. dollars for foreign currencies with other central banks. On March 19, 2023, the Federal Reserve announced that it would conduct daily swaps at least until the end of April to enhance the efficacy of the swap lines.

In the end, the FDIC’s race to find another bank willing to merge with SVB to safeguard unsecured deposits was successful as First Citizens Bank purchased SVB’s remaining assets, deposits, and loans. 

Conclusion 

Bank failures like this have happened before—there were more than 550 banks shut down between 2001 and the start of 2023. But this one was particularly newsworthy due to its dimension, being the second-largest bank failure in US history. 

There is now less anxiety about the stability of the banking sector due to the significant regulatory reforms put in place after the crisis in 2008 and the steps taken by the Federal Reserve following the collapse of SVB to improve confidence in the banking system and prevent future banking failures. The risks of broader contagion are thought to be limited for now but, even if a recession occurs, analysts don’t think it would be as long lasting as the Great Recession. 

According to Mike Mayo, a senior bank analyst at Wells Fargo, back in the prior crisis “Banks were taking excessive risks, and people thought everything was fine. Now everyone’s concerned, but underneath the surface the banks are more resilient than they’ve been in a generation.” 

Sources: The Economist, TIME, Silicon Valley Bank, Wall Street Journal, CNN, The American Prospect, CNN Business, Investopedia, Brookings, Expresso 

Hannah Ribeiro

Pedro Teixeira