The way out of the crisis

1663.jpgJanuary 2009 | By Rafael Pampillon, Professor at IE Business School

Spain has the same symptoms as those that preceded the Great Depression. And just like then, the only way forward is to facilitate loans and increase public spending.

My colleague and friend Pedro Schwartz published an article (“Is Pampillón wrong?â?) here on 31 October in which he expressed his disagreement with the economic policy measures I propose for putting this economic crisis behind us. How does he differ?

1. Professor Schwartz disagrees with the diagnosis, and this is most important since a realistic diagnosis is fundamental if the right policies are to be applied. He considers that, although we are experiencing an ebb of the cycle, we are not on our way to a depression like that of the 1930s.

My diagnosis is different, since I consider that the Spanish economy is in crisis owing to an insufficient aggregate demand of unknown proportions and that, if we do not apply the right measures, we will very soon enter a long, deep recession.

We must remember that the Great Depression of the 1930s came from a fall in demand, which led to high levels of unemployment, negative economic growth and deflation. To overcome that crisis, expansive aggregate demand policies were applied, together with increases in public spending.

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Business schools and CSR

IE Focus - Business Schools and CSRJanuary 2009 | By Max Oliva, Professor at IE Business School

Business schools are playing a crucial role in the evolution of social responsibility. Having proved how important it is, they now face the challenge of how to develop it further.

CSR has evolved considerably in recent years. It has gone from being a stand-alone concept to being more and more aligned with business, with clear added value. Now that the “CSR, yes or no” debate has finally been won, we are in the “how” phase, rather than still talking about Friedmanâ??s theories (1.)

Business schools play a key role, from the dissemination and evolution of the concept, to involvement in the various conversations, how it should be integrated in the business strategy, how it should be gauged and managed, which parameters should be used, etc.

All this without losing sight of the role they play in putting talent in contact with the business world. On the one hand, business is interested in CSR as a strategy; 70% of businesses consider it a way to stand out from their competitors (2.). As far as talent is concerned, the increase in the number of people searching for work that not only satisfies economic and professional career requirements but that also offers the potential for contributing to society has increased by more than 70% over the last five years (3.)

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Digital Advertising, an anti-cyclical sector?

IE Focus - Digital Advertising, an anti-cyclical sector?January 2009 | By Manuel Alonso Coto, Program Director of the Master in Digital Marketing

Publicity and marketing is going through its worst crisis since the Great Depression. But not every aspect is suffering, given that online publicity is seeing enormous growth, driven in part by needs emerging from the economic crisis.

If we analyse the figures used by specialist agencies, the crisis that is heavily affecting almost every business sector could become an opportunity for digital advertising. In fact, it is already happening; it is the only sector that has grown (almost 20% so far this year) as everything else is shrinking. The cuts in marketing budgets mean that agencies are seeking channels with lower investment requirements than traditional GRPs, which are very expensive for the current budget. Thus, many firms that had not previously tried the digital medium as an advertising channel are taking their first steps and, in most cases, with good results. Hence digital advertising is growing. The crisis means that budgets that are far from negligible are moving online, and it is money that will not easily return to traditional media.

However, investments in the traditional advertising market in Spain could be reduced by 9.2% this year, the biggest fall of the last 30 years. Certain things occur with the arrival of a bearish economic cycle: individuals fist start saving by not buying long-lasting products, while businesses cut back on training and advertising. This reduction in investment in advertising brings the challenge of obtaining the same leads (or, if possible more leads, since the crisis will lower the sales-conversion ratio) with less impact; so they have to be of higher quality, more in line with the target. And that is where the great capacity for segmentation of digital advertising can be very helpful. Online segmentation techniques, such as behavioural targeting, should be given more consideration than ever.

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The time has come for an arsenal

IE Focus - The time has come for an arsenalJanuary 2009 | By Gayle Allard, Professor at IE Business School

Exceptional times require exceptional measures, such as deploying an arsenal of fiscal measures. Itâ??s the only way to combat the current economic crisis.

The tax incentive of 1.1% of the GDP approved today by the Cabinet of Ministers might be considered irresponsible at any other time; however, in the unsettled waters of today´s global economy, it is an appropriate move. What are missing are measures for correcting the structural problems that will make this crisis such a serious one for Spain.

The government is facing domestic recession and the almost certain first global recession since 1982. The monetary policy has made its move and the response has not been encouraging. Given this scenario, the European Commission has requested tax incentive packages and Zapateroâ??s government has responded by announcing new expenditure totalling â?¬11,000 million in 2009: â?¬8000 on public works through local authorities and smaller amounts for the car industry, the environment, R&D, the Dependence Act, the refurbishment of buildings and tourism. According to the president, the move will create around 300,000 jobs.

First of all, this package is necessary. At the present time, we should not waste time discussing its effect on the deficit before we proceed. The recession looks to be worse than any known by most of us and normal solutions would be particularly shy.

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English and Spanish

IE Focus - English and SpanishJanuary 2009 | By Rafael Puyol, Professor at IE Business School and President of IE University

Pride in a language is not compromised by using English or Spanish, the worldâ??s two most important languages. Holland shows Galicia, Catalonia and the Basque Country how itâ??s done.

Last week, an academic commitment took me to Amsterdam, an attractive city with a human face and an excellent selection of cultural options. I had not been there for several years and as soon as I landed in Schipol, I was pleasantly surprised by two things.

The first was that, besides their own language, all the Dutch speak excellent English. It doesn´t matter whom you speak to, where you speak to them or why you speak to them. Most educated people speak English, but in a taxi, a restaurant, a museum or in the street, it is spoken by drivers, waiters, porters or the police, and that defines Holland as a modern, international country.

The second pleasant surprise was the large number of people who can or try to speak Spanish. They do not feel uncomfortable when they speak it. They like to speak to Spanish-speakers in Spanish, whether to talk about the place they know or the fact that Real Madrid has five Dutch players or to comment on the way the Spanish national side play and even how they are capable of beating the Dutch.

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