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Fall 2019
Active Readings for Business
Corpus N°2

Guillaume Sarrat de Tramezaigues

guillaume.sarratdetramezaigues@sciencespo.fr

1/ « After the Parliament’s suspension », Time, 2019 Pages 2-3

2/ « Fears of the German recession », The Economist, 2019 Page 4

3/ « The cost of corruption », International Monetary Fund, 2019 Pages 5-8

4/ « Why are we so bad at choosing the right job ? », Harvard Business Review, 2019 Pages 9-10

Department of Economics– Sept. 2019

  

Article 1 2 
Time
British Prime Minister Boris Johnson Has Suspended the U.K.'s Parliament. What Happens Next?
BY IAN BREMMER
AUGUST 29, 2019

On Wednesday, Prime Minister Boris Johnson moved to suspend the U.K.’s Parliament shortly after
lawmakers return from their summer recess in early September. Queen Elizabeth has approved the
request for a suspension, though royal assent is largely considered a formality.

Johnson aims to stop his political opponents from forcing him to request another Brexit extension to avoid
a no deal exit from the European Union on October 31.

Why It Matters:
Since Boris Johnson secured the premiership in July, he has been trying to do one thing — convince
E.U. leaders that he is serious about a no deal Brexit, in the hopes that they would be willing to
renegotiate the Theresa May deal and secure better terms for the U.K. (and a political victory for himself).
E.U. leaders have rebuffed those efforts, but Johnson’s allies believe that they’ve been undercut by
Brussels counting on British MPs blocking the no deal effort.

That’s a risky calculation, as E.U. leaders have plenty of incentive to refuse to re-open Brexit negotiations
themselves—the economic hit to the U.K. will be much larger than it will be to the rest of the bloc’s 27
other members collectively. They also have to worry about setting a dangerous precedent for other
countries who also have flirted with the idea of going solo, and to retain the cohesiveness of the union
going forward. Capitulating to British demands to renegotiate would cause no shortage of political drama
on the continent, and with little upside.

Meanwhile, there is a majority of British parliamentarians who refuse to accept a no deal Brexit, and
plans were in the works to use Parliament’s return from summer recess next week to prevent that exact
scenario from happening. Jeremy Corbyn, the far-left leader of the center-left Labour party, has been
trying to see if there was sufficient support for him to call a no confidence vote, collapse the current
government and lead a caretaker government until new elections could be held (with Labour pushing for
a second referendum if voted into power).

There was little traction for this idea among the British public, but more importantly from MPs for whom
propelling Corbyn to 10 Downing Street would be almost as bad as a no deal Brexit. A cross-party group
of MPs instead decided to use legislative maneuvers to prevent a no deal Brexit by forcing Johnson to
ask the EU for another extension. Johnson and his team see that as weakening whatever leverage they
believe they have with the EU and, rather than let this scuttle their game of chicken with Brussels, have
moved to suspend parliament shortly after it comes back into session early next week.

What Happens Next:

In short, a constitutional crisis is what comes next. U.K. parliamentarians will argue that the voice of the
people is being suppressed by denying them a say in the final form Brexit will take, while Johnson and
his Cabinet will say that it is Parliament that is trying to suppress the will of the people by blocking Brexit.
MPs will try to pass legislation next week to prevent Johnson from moving ahead with his no deal Brexit,
but time will be likely be too short, possibly forcing a no confidence vote to bring down the government
in a last-ditch attempt to avoid a no deal Brexit.

All the while, European leaders will be watching the Brits continue to try to determine what Brexit actually
means, something they have largely avoided doing for the last three years.

The Key Quote That Sums It All Up:

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“Politicians don’t get to choose which public votes they respect.”— Boris Johnson
But do prime ministers get to interpret the results of those admittedly ambiguous public votes — the 3 
British public didn’t vote for a no deal Brexit specifically, and Johnson himself said that the odds of a no
deal Brexit were “a million-to-one against” just this summer — in whatever manner they choose?
Especially prime ministers that haven’t even won a general election?

The One Major Misconception:

That Johnson is hellbent on a no deal Brexit. A no deal Brexit will deliver a significant hit to the British
economy, and economic knocks will probably make it harder for him to get re-elected down the line
(leaving aside all the domestic political blowback that forcing through a no deal Brexit will entail). What
Johnson wants is to claim credit for forcing Brussels to back down, preside over a managed Brexit and
to run in general elections as the man who secured a deal for the United Kingdom when no one else
could. The question is what he’s willing to risk — personally, and on behalf of the U.K. — to get that
outcome.

What to Say About It at a Dinner Party:

Boris’s willingness to break traditional political norms in pursuit of an elusive Brexit deal makes his
approach much more like methods we’ve seen recently from Donald Trump than those of his predecessor,
Theresa May. But unlike Trump, Johnson presides over a parliamentary democracy, where premiers have
more power over the legislative agenda. Whether that means he can actually pull off Brexit, no deal or
otherwise, remains to be seen.

The One Thing to Avoid Saying About It:

If you thought that the Brexit referendum was bad, wait until the U.K. holds a snap election, which some
will treat as a de facto second Brexit referendum and others… won’t.

At a certain point, maybe insisting on a no deal Brexit is the most merciful thing the Europeans can do.

Department of Economics– Sept. 2019

  

Article 2 4 
The Economist
Fears of a German recession are rising
A downturn in Europe’s biggest economy could spread across the region
Aug 29th 2019

FOR DECADES Germany has been Europe’s economic engine. Now it is sputtering. Having narrowly avoided a
recession last year, it is teetering on the brink once again. Output fell by 0.1% in the second quarter compared with
the previous three months. Some forecasters, such as DIW, an economic think-tank in Berlin, expect a further
contraction in the third quarter. Deutsche Bank, the country’s biggest lender, said this month that it believes the
economy is already in recession.

The trouble has been concentrated in Germany’s export-oriented manufacturing sector, which has shrunk for four
consecutive quarters. Car production has taken the biggest hit, falling by 17% over the past year, owing in part to
slowing demand from big trading partners, such as China and Britain, and a shift in consumer tastes away from
German diesel motors. All this, and an escalation in the trade war between America and China, has battered
business confidence. On August 26th the Ifo business-climate index fell to its lowest level since the worst of the
euro-zone debt crisis in 2012. The labour market has not escaped unscathed. A growing number of manufacturers
are seeking to cut costs by putting employees on “short-time work” schemes.

What would a recession in its largest member state mean for the rest of the euro zone? In the past two decades of
currency union, recessions have tended to be synchronised (see chart). Work by the IMF suggests that such
synchronisation has only increased in recent years. Indeed, economic growth across the rest of the euro zone has
slowed recently, albeit less sharply than in Germany. But it is not certain that Germany’s manufacturing woes will
ultimately tip the bloc into recession. The euro area’s biggest downturns, during the global financial crisis and the
sovereign-debt crisis, were triggered by shocks—such as a seizure in the market for credit—that affected all of its
members. Not all of the euro zone is as exposed to trade as Germany.

For now the European Central Bank is unlikely to take any chances. Inflation is already well below its target; slowing
growth adds downward pressure. Financial markets are pricing in an interest-rate cut at the bank’s policy meeting
on September 12th. Some economists are even expecting the bank to restart its bond-buying scheme, in the hope
of jump-starting the economy.

Department of Economics– Sept. 2019

  

Article 3 5 
International Monetary Fund
FINANCE & DEVELOPMENT, SEPTEMBER 2019, VOL. 56, NO. 3
The Cost Of Corruption
Graft results in lost tax revenue, but it also takes a social toll
Paolo Mauro, Paulo Medas, and Jean-Marc Fournier

In 2013, Brazilian investigators working on a routine money-laundering case stumbled onto something far bigger:
a bribery and bid-rigging scheme involving state-controlled oil giant Petrobras. Operation Car Wash, as the probe
came to be known, discovered that some of Brazil’s largest construction and engineering firms had paid billions of
dollars in bribes over a period of years to secure lucrative contracts from Petrobras. The scandal implicated dozens
of government officials and politicians.

Such shady dealings aren’t limited to emerging market economies like Brazil, of course. In one spectacular case in
the 1970s, politicians in Japan accepted bribes to approve contracts to buy US military aircraft. This scandal was
one of the motivations for the passage of a law forbidding US companies to pay bribes abroad. But wherever it
appears, corruption, or the abuse of public office for private gain, distorts the activities of the state and ultimately
takes a toll on economic growth and the quality of people’s lives.

Depending on its extent, corruption can have a profoundly detrimental effect on public finances as governments
collect less in tax revenue and overpay for goods and services or investment projects. But the cost of corruption is
greater than the sum of lost money: distortions in spending priorities undermine the ability of the state to promote
sustainable and inclusive growth. They drain public resources away from education, health care, and effective
infrastructure—the kinds of investments that can improve economic performance and raise living standards for all.
Public trust diminished

How does corruption limit revenue? For one thing, it can harm the ability of governments to collect taxes in a fair
and efficient way. Corrupt legislators may introduce tax exemptions or other loopholes in exchange for bribes,
reducing revenue potential. And the more complex and opaque the tax system, the easier it is for officials to exercise
discretion in its administration and demand bribes or kickbacks in return for a favorable outcome. An example: in
a 1996 case reported by the New York Times, municipal workers allegedly accepted bribes to make it appear that
unpaid taxes had actually been paid. More broadly, the distortion of tax laws and corruption of tax officials reduce
public trust in the state, weakening the willingness of citizens to pay taxes.

Curbing corruption can yield significant fiscal benefits. Our research suggests that revenues are higher in countries
perceived to be less corrupt; the least corrupt governments collect 4 percent of GDP more in taxes than those at
the same level of economic development with the highest levels of corruption. Some countries have made progress
over the past two decades, and if all countries were to reduce corruption in a similar way, they could gain $1 trillion
in lost tax revenues, or 1.25 percent of global GDP.

Hot spots
While corruption can occur almost anywhere, it is most prevalent in a few hot spots. One involves natural resources,
especially oil and mining. The outsized profits associated with extraction of natural resources are strong incentives
for payment of bribes, or even state capture, where public policies and laws are influenced by corrupt practices to
secure control over a country’s natural wealth. Indeed, resource-rich countries tend to be more corrupt because
they struggle with weaker institutions and poor accountability in the use of their natural wealth.

Corruption is also prevalent among state-owned enterprises, where management may be susceptible to undue
influence by civil servants and elected officials. As a result, state-owned enterprises in vital sectors like energy,
utilities, and transportation are less profitable and efficient in countries with more corruption. Several high-profile
corruption probes involving such firms underscore the risk of abuse of public resources, including Petrobras in
Brazil, Elf Aquitaine in France (before it was privatized), and Eskom and Transnet in South Africa. Research
suggests, moreover, that corruption is one of the main reasons private companies tend to be more productive than

Department of Economics– Sept. 2019

  

state-owned firms. Strikingly, in countries where corruption is less prevalent, the type of ownership is much less
relevant to the explanation of the difference in performance between firms (Baum and others, forthcoming). 6 
Government purchases of goods and services are another hot spot, partly because of the large amounts of money
involved; public procurement accounts for 13 percent of GDP, on average, among members of the Organisation
for Economic Co-operation and Development, which represents 36 advanced economies. Procurement related to
public investment is particularly susceptible because big projects often have unique features, which make it harder
to compare costs and easier to conceal bribes and inflate costs.

This is why grand corruption is usually associated with complex and costly projects such as construction and
defense equipment. By comparison, it is harder to collect bribes on teachers’ and health care workers’ wages. As
a result, spending on education and health is likely to be lower where corruption is high, making it less likely that
worker productivity and living standards will improve. Among low-income countries, the share of the budget
dedicated to education and health is one-third lower in more corrupt countries (see chart).

It should come as no surprise, then, that test scores tend to be lower in countries where corruption is more prevalent.
While students in more corrupt countries may spend as much time in the classroom as those in other countries, the
quality of instruction is worse. This is not just about spending less on education. In some countries, access to
teaching jobs in public schools is influenced by bribes or connections. Teacher absenteeism is a widespread form
of petty corruption in several developing economies, and a study in Brazil found evidence that where federal
transfers to local governments for education spending are partially lost to corruption, dropout rates are higher and
test scores worse.

Georgia’s success
Reducing corruption is a challenge, but it can bring substantial benefits. Countries that reduce corruption
significantly are rewarded with surges in tax revenue. This was the case in Georgia, where in 2003 a new
government launched an aggressive campaign to reduce corruption from very high levels. The result: tax revenue
jumped from 12 percent to 25 percent of GDP in five years, even as tax rates were lowered.

Georgia’s success reflected a new culture of tax compliance: the share of people who felt it was never justifiable to
cheat jumped from about 50 percent to almost 80 percent. Improvements in services, including lower crime rates

Department of Economics– Sept. 2019

  

and fewer power outages, and renewed trust in government made people more willing to pay taxes. Higher revenue
also made it possible to clear wage and pension arrears, further bolstering confidence in government. 7 
What’s the best way to combat corruption? Major political changes occasionally present opportunities for ambitious
reforms and rapid improvements, as in Georgia. But in most cases, progress is likely to be gradual. Success
requires political will, perseverance, and a commitment to continuously upgrade institutions over many years. To
better understand the institutional characteristics that are important in promoting integrity and accountability, we
studied a large set of countries. Our analysis yielded some specific lessons for policymakers:
The chances of success are greater when countries improve several mutually supporting institutions to tackle
corruption.

They should start with areas of higher risk—such as procurement, revenue administration, and management of
natural resources—as well as effective internal controls. A fiscal governance framework also requires a professional
and ethical civil service as a key pillar. The heads of agencies, ministries, and public enterprises must promote
ethical behavior by setting a clear tone at the top.

Governments need to keep pace with evolving technology and opportunities for wrongdoing. Our analysis found
that when governments invest in information and communication technologies and transparency increases, there
are fewer opportunities to ask for bribes. For example, in Chile and Korea, electronic procurement systems have
been powerful tools to improve transparency and curtail corruption.

Promoting transparency and a free press helps increase accountability. Colombia, Costa Rica, and Paraguay are
using an online platform that allows citizens to monitor the physical and financial progress of investment projects.
Our cross-country analysis shows that a free press enhances the benefits of fiscal transparency in curbing
corruption. It is not enough to release data; it must also be widely disseminated and explained. In Brazil, the release
of the results of audits affected the reelection prospects of officials suspected of misuse of public money, and the
impact was greater in areas with local radio stations.

Department of Economics– Sept. 2019

  

8 

In addition to efforts to strengthen domestic institutions within countries, international cooperation is crucial. More
than 40 countries have made it a crime for their companies to pay bribes to gain business abroad. Countries can
also aggressively crack down on money laundering and reduce transnational opportunities to hide corrupt money
in opaque financial centers.

Curbing corruption can be a daunting task, but it is necessary to restore public trust in government. The fight against
corruption can also bring significant economic and social gains over time. It starts with domestic political will,
continuous strengthening of institutions to promote integrity and accountability, and global cooperation.

Department of Economics– Sept. 2019

  

Article 4 9 
Harvard Business Review
Why are we so bad at choosing the right job ?
Tomas Chamorro-Premuzic
AUGUST 20, 2019

What would be your perfect job? Although there are well-defined parameters around what people actually want
from work, our career-related choices are not always consistent with those parameters — even when we are
consciously aware of them.

Consider that most of us want just three specific things from our jobs, namely:

 A sense of competence and mastery: acquired by being given the chance to perform above the
expectation of our role, and to grow through learning opportunities that make us better.
 A sense of community or affiliation: the product of fair and respectful relationships with colleagues, and
the sense that one is appreciated at work. This is why company culture is such a pivotal factor in driving
satisfaction or dissatisfaction among employees.
 A sense of meaning and purpose: a feeling that we are devoted to something that matters, and that
aligns with our core values and drivers.

Of course, it would be naïve to assume that every person in the world has access to a career that ticks all three
boxes. But, at the same time, workers everywhere are expected to attain these goals, regardless of macro-
economic circumstances, potential, and talent. As a result, most people have an innate desire to pursue a version
of their perfect job, or at least improve their current role — something academics call “job crafting.”

This is not a bad thing. Optimizing your job to match your abilities and interests will likely improve how you feel and
perform, something that almost seems too obvious to require scientific proof. Still, studies have been done, and
unsurprisingly they show that job crafting is positively linked to employee engagement and employability, defined
as the ability to get and keep desirable jobs and to remain relevant in the market throughout your career.
Other research shows that job crafting enhances worker wellbeing.

A more relevant question may therefore be: If people are generally clear about what they want (and need) from
work, why do so many of us make the wrong decision when choosing a job, particularly when we do have other
choices?

Research points to a few a reasons:

Money talks – and people listen. As meta-analytic studies show, there is almost zerocorrelation between pay and
job satisfaction. For example, lawyers earning $160,000 per year are as satisfied with their jobs as nurses making
$35,000 per year. However, although money doesn’t satisfy, it still motivates. We make many, many, decisions
focused on financial incentives, especially when it comes to our jobs. Even when people say that they would happily
take a pay cut if they could work less, commute less, or have a more enjoyable job, they often don’t actually make
those choices, and prefer to stick to the higher salary.

People are (too) good at tolerating bad jobs. We are probably more likely to put up with a bad job than a bad
relationship. In fact, despite the popular view that people are happy with uncertainty and disinterested in long-term
careers, the opposite is in fact true. When it comes to jobs and careers, it is really a case of “better the devil you
know.” You can put people in meaningless roles and under bad managers, and they will still be reluctant to try
something else, which explains the pervasiveness of low employee engagement scores even among the most
successful companies in the world.

Poor self-awareness limits smart choices. As I illustrate in my latest book, people are generally quite inept at
evaluating their own talents. Even when they do decide to “follow their passions” there is just no guarantee that
they will end up doing something well, let alone that it is useful or in-demand. This means that there is not always

Department of Economics– Sept. 2019

  

a clear ROI to taking risks and changing careers. A good example is the recent influx of entrepreneurial or start-up
activity. Despite the appeal of this “entrepreneurship porn” to a large number of young individuals who are excited 10 
by the idea of being their own boss and solving problems that excite them — the prospects of attaining even
marginal success are low. Sure, the tiny minority that may end up creating the next Apple or Google could end up
giving a great deal back to society. But for each of those success stories there are millions of major failures. On
average, people who quit traditional employment to work for themselves will end upworking more to earn less and
contribute less to the wider economy — when, in many cases, they may have been happier and more successful
working for someone else.

It’s hard to know what to expect. Organizations spend a great deal of time marketing their jobs and careers in a
highly desirable and appealing way. Job branding or company branding is an integral part of the war for talent. Look
at any company website and you will see convincing statements about their commitment to diversity, innovation,
corporate social responsibility, lifelong learning, and agile culture. Even trivial jobs camouflaged with sexy titles can
appear quite desirable: “head prioritization ninja,” “director of possibilities,” “chief happiness officer,” and “global
identity engineer,” to name just a few. Regardless of your background, expertise, and industry, a successful hiring
process requires finding the right person for the right role, which means applicants must have a proper
understanding of the role itself. If your expectations for a role are too far off from reality, then it will be very hard for
you to make the right career move to begin with.

In order to land the job you really want, you need to be clear about what you are good at, what the job in question
is really like, and de-emphasize financial incentives to fulfill other values and career drivers. Above all, you will
probably benefit from being less resilient so you are less likely to put up with a bad job or a bad boss. The important
thing to remember is that only a minority of people ever regret quitting a job. This implies that people tend to stay
in jobs for longer than they should. As Hippocrates famously noted, Ars longa, vita brevis. It takes a long time to
develop expertise and become skilled. Life is short — so don’t be afraid to choose the path you actually want.

Department of Economics– Sept. 2019