2017/04/20

China se inclina a favor de EU y lanza críticas contra Corea del Norte

Corea del norte y Estados Unidos noticias actuales: China se inclina a favor de EU ¿Se está inclinando China a favor de Estados Unidos en guerra contra Corea del Norte?. Los últimos acontecimientos podrían indicar que es así. Al parecer la paciencia de China está rozando el límite en cuanto a las prácticas nucleares de su socio y vecino Corea del Norte. Sus más reciente declaraciones a favor de las medidas de Estados Unidos podrían dar muestra de una leve inclinación de la balanza contra Pyongyang. Un día después de que el viceministro de Relaciones Exteriores de Corea del Norte dijera que Pyongyang probaría misiles semanalmente y usaría armas nucleares si eran amenazados, el Ministerio de Relaciones Exteriores de China expresó su preocupación y elogió las recientes declaraciones de Estados Unidos sobre la cuestión norcoreana.

¿Se está inclinando China a favor de Estados Unidos en guerra contra Corea del Norte?. Los últimos acontecimientos podrían indicar que es así.


Al parecer la paciencia de China está rozando el límite en cuanto a las prácticas nucleares de su socio y vecino Corea del Norte. Sus más reciente declaraciones a favor de las medidas de Estados Unidos  podrían dar muestra de una leve inclinación de la balanza contra  Pyongyang.
Un día después de que el viceministro de Relaciones Exteriores de Corea del Norte dijera que Pyongyang probaría misiles semanalmente y usaría armas nucleares si eran amenazados, el Ministerio de Relaciones Exteriores de China expresó su preocupación y elogió las recientes declaraciones de Estados Unidos sobre la cuestión norcoreana.
“Los funcionarios estadounidenses hicieron algunas observaciones positivas y constructivas… como utilizar cualquier medio pacífico posible para resolver el problema nuclear de la Península (coreana), lo que representa una dirección que creemos correcta y debe ser respetada”, dijo el portavoz chino Lu Kang.
“China se opone firmemente a todas las palabras o acciones que aumenten la rivalidad y la tensión”, dijo añadió.
Estas declaraciones serían las más claras en cuanto a la postura de China desde que se intensificaron los riesgos de guerra nuclear en la península coreana.
En sus declaraciones alarmantes del 14 de abril, enviado en un momento de suma tensión entre Corea del Norte y Estados Unidos, el ministro de Relaciones Exteriores chino, Wang Yi, llamó a todas las partes a no enviar mayores provocaciones para evitar llegar a una etapa irreversible.
“Llamamos a todas las partes a que se abstengan de provocar y amenazarse mutuamente, ya sea en palabras o acciones, y que no dejen que la situación llegue a una etapa irreversible e inmanejable”, dijo el funcionario chino.
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Has the ‘Dream Run’ for Indian IT Ended?

roadAfter years of sitting on piles of cash, Indian information technology (IT) services firms are suddenly dispensing some of it to their shareholders by way of buybacks. In mid-February, Tata Consultancy Services (TCS), India’s largest IT services firm, which has a cash pile of around Rs.40,000 crore ($6 billion), announced that it would buy back equity shares worth up to Rs.16,000 crore ($2.4 billion). This is TCS’ first buyback scheme since it went public 13 years ago and also the biggest share repurchase program in the country. (A few weeks before TCS’ announcement, Nasdaq-listed Cognizant Technology Solutions, which has the bulk of its workforce in India, declared a dividend payout and a share buyback of $3.4 billion.) In March, HCL Technologies said it would buy back Rs.3,500 crore ($340 million) of shares. Others like Wipro and Tech Mahindra are expected to follow suit. On April 13, announcing its results for the fourth quarter of fiscal 2017, Infosys said that up to Rs. 13,000 crore ($2 billion) is expected to be paid out to shareholders during 2018 in dividends, share buybacks or both. In addition, the company expects to pay out up to 70% of free cash flow next year in the same combination. Currently, Infosys pays out up to 50% of post-tax profits in dividends.
The buybacks are a move to boost share price and soothe investor sentiments. They are also designed to make them less attractive to predators. After years of giving high returns, the industry has been delivering below expectations; most Indian IT services firms have been performing below the Sensex, the benchmark stock index. Recent developments like U.S. President Donald Trump’s election and the ensuing controversy surrounding outsourcing and H1-B visas, and technology disruptions caused by digital transformation and automation are in fact threatening the very fundamentals of the $108 billion IT-BPO exports industry. That industry put India on the world map because of its high-quality, low-cost tech talent and a successfully executed offshore-global delivery model. (Indian IT firms use the H-1B temporary work visas in large numbers to fly their engineers to client sites in the U.S., which is their largest market accounting for over 60% of exports.) There are also pressures from other quarters, such as Brexit and the consequent delays in decision making; slowdowns in the banking and financial services sector, and reduced discretionary IT spending.
The projections of industry body Nasscom (National Association of Software and Services Companies) mirrors the growing uncertainly. In sharp contrast to the heady growth of over 30% of previous years and in line with dipping growth in recent times, at the beginning of fiscal year (FY) April 2016-March 2017, Nasscom had forecast a growth of 10% to 12% (in constant currency terms). In November last year, it lowered the outlook to 8% to 10%. In February, for the first time in 25 years, Nasscom deferred giving the annual revenue outlook for fiscal 2018 by a quarter.
Other projections, too, are bleak. A few weeks ago, Goldman Sachs said that the revenues of the top five Indian IT services firms are likely to grow at a compound annual growth rate (CAGR) of 8% as compared to 11% during the FY 2011 to FY 2016 period. The U.S.–based Deep Dive/Everest Group IT services forecaster expects a 6.3% growth for the top five IT companies for calendar year 2017. For the industry as a whole (excluding multinational captive centers), the growth in 2017 is projected to be a mere 5.3%.
“For several years now, experts have been predicting that the dream run of the Indian IT services industry will soon be over. By all indications, that time has actually dawned now,” says Rishikesha T. Krishnan, director of the Indian Institute of Management Indore.
But this is not the first time that the industry is looking down a long dark tunnel. The Asian Crisis of 1997, the dot-com bubble burst of 2001 and the economic crisis of 2008 were all trying times. Each time, the industry managed to bounce back. So what is different this time around?
Lacking Strategic Relevance
Ravi Aron, professor of information systems at the Johns Hopkins Carey Business School, says Indian companies are struggling with a problem of strategic relevance. “The current protectionist regime in the U.S. and the anti-trade mood will result in legislations that may cause some temporary but not very large setbacks. The real problem for India IT services companies is that they occupy positions of very low strategic relevance with their clients.”
“For several years now, experts have been predicting that the dream run of the Indian IT services industry will soon be over. By all indications, that time has actually dawned now.”–Rishikesha Krishnan
Aron points out that several emerging technologies are changing how companies compete, the way they engage with customers and even the nature of work inside the firm. Big Data and analytics, artificial intelligence and robotics are all top of the mind not just for CTOs in corporations but also for all CXOs. “When we [business school faculty] talk to senior executives, they do not ask us to explain the difference between supervised and unsupervised learning in machine learning. Instead, they ask specific questions about how will machine learning have an impact on predicting customer response to products in retail financial services? Or, how can data mining be used to identify opportunities in new product development by analyzing and classifying patterns from transaction data?”
But Indian IT companies are operating on a different model altogether. They expect the clients to tell them what they want from these emergent paradigms and offer to find out a cost effective way of doing it. “They are not ready to deal with the ‘what aspects of business can I transform with technology’ question, which is of high strategic relevance,” says Aron.
Saikat Chaudhuri, executive director of Wharton’s Mack Institute for Innovation Management, adds: “Essentially, Indian IT firms have been stuck in the middle; they are not low-end providers anymore with low costs, neither have they been able to propel themselves to become high-end providers performing core work and high-margin services. At the same time, on the technology side, automation threatens to render obsolete much of the labor arbitrage work on the lower end; while political changes such as protectionism compound the problem.”
Keeping pace with technology and the changing requirements of clients is the most difficult challenge that the Indian IT industry is facing today, says D.D. Mishra, research director at IT research and advisory firm Gartner. Pointing out that the current situation is “very unique and we are possibly going through the most interesting phase of evolution in terms of IT services,” Mishra lists his key concerns: “We see that creative destruction has become a norm for many businesses. Re-skilling people is a big challenge, especially when you have a large workforce. The short supply of skilled labor will be one big inhibitor. Endpoints of the Internet of Things will grow at a CAGR of 32.9% from 2015 through 2020, reaching an installed base of 20.4 billion units. This will drive a lot changes in the business models and business opportunities which need to be tapped. And though tactical innovation is the strength of Indians, in my view, the cultural aspect around innovation is the most difficult change organizations will struggle with.”
Sudin Apte, CEO and research director at Offshore Insights, an IT advisory and research firm, says that Indian IT firms could survive the many challenges earlier — whether it was shortage of skills, fluctuating currency, macro-economic factors, growing competition from multinationals and pressure from clients to build skills such as domain expertise, program management and consulting capabilities — because “they had the benefit of the TINA (‘there is no alternative’) factor.”
But that is no longer true. Now, there are several point solutions available which are part of the enterprise resource planning ecosystem. Many business process providers offer specific business processes as well as cross industry processes on demand. Cloud and software-as–a-service (SaaS) companies are changing delivery and payment parameters. “The industry is facing structural changes. All aspects of a solution — what clients are buying, in what format they are buying, how they want to pay, what value they expect, competition — are undergoing change simultaneously. The gaps between what clients are looking for and what the Indian IT firms have to offer is widening. The industry has not faced such issues before,” says Apte.
He points to another disturbing trend: Even as global IT spending is growing, it’s not coming to India. Instead, most of it is going to other companies. “Look at the growth of firms like Salesforce.com, Amazon Web Services (AWS) and Workday. Even cloud divisions of Oracle and Microsoft Dynamics have been doing well and so are numerous firms like Tableau, Marketo, etc. There are around 200 or 250 companies which came from nowhere and are today in the range of $200 million to $1 billion,” says Apte.
“The real problem for Indian IT services companies is that they occupy positions of very low strategic relevance with their clients.”–Ravi Aron
New Skills Are Required
Krishnan believes that Indian IT firms were successful in riding multiple waves like the shift from mainframe to client-server, Y2K, internet and e-commerce, social media and the mobile because “the core skills needed to succeed didn’t change dramatically — essentially good programming skills plus the ability to manage large teams across geographies.” He notes that while the programming languages and platforms did change, the ability of Indian companies to train large numbers of software professionals in new programming languages in short timeframes allowed them to stay ahead.
However, the latest wave embracing big data, machine learning and artificial intelligence requires fundamentally different skills. It’s more research-intensive. “Many existing employees can’t be re-trained for these requirements. And India’s engineering education will be unable to meet these needs, at least not immediately,” says Krishnan. According to a recent McKinsey & Company report, more than half of the 3.9 million people employed in the Indian IT sector will become “irrelevant” in the next three to four years.
Ganesh Natarajan, industry veteran, chairman of Nasscom Foundation and founder and chairman of 5F World, a platform for skills, startups and social ventures in India, describes the current scenario as “a perfect storm” created by three forces. The first is digital transformation of clients with applications and infrastructure moving to the cloud and clients asking for new services like mobility, analytics and cyber security which cannot be delivered using the traditional dual shore model. The second is automation of knowledge work, which is seeing traditional manpower intensive offshore services like applications management, infrastructure support and testing becoming automated and reducing or, in some cases, eliminating the need for manpower. Third are the forces of protectionism that is leading to tightening of visas and making cross-border movement of people extremely arduous.
“Each of three forces can have severe ramifications for the Indian IT services industry. Digital transformation can take away as much as 20% of existing services volumes, automation can eliminate 30% of manpower and protectionism can reduce revenue opportunities and profitability by at least 10%,” says Natarajan.
Transform or Perish
Clearly, the rules have changed for Indian IT firms. The big question is: Can they in fact get back into the game?
Only if they differentiate themselves, says Kartik Hosanagar, Wharton professor of operations, information and decisions. He suggests two strategies. One, become a partner that can guide CEOs with strategic initiatives like digital transformation. This will require them to be part of the “what to do” and “why do it” conversations and not just “how to do it.” Two, specialize and build deep expertise in certain areas. For example, CMOs are increasingly spending on IT including custom IT implementations. Another such area is Big Data and analytics. “Organizing into divisions or perhaps into sub-brands, each with deep expertise, is the way to go,” he says.
According to a recent McKinsey & Company report, more than half of the 3.9 million people employed in the Indian IT sector will become “irrelevant” in the next three to four years.
Chaudhuri suggests that while Indian IT firms have been making investments over the past five years in emerging technologies, they now need to scale up those efforts and do so quickly. “They need to increase the investments in those areas drastically, and hire top talent from established Western firms and startups alike. At the same time, they also need to leverage acquisitions of small firms and/or build alliances to rapidly increase access to those capabilities and be part of an ecosystem.”
Indian firms need to be innovative, agile and flexible, says Gartner’s Mishra. “Thinking out of the box will differentiate the winners. They must be able to predict the changes faster and adapt themselves to leverage it much ahead of others.”
For Natarajan, the most important imperative is to re-skill employees for the new digital challenges at a rapid place. “The winners will be those who use technology to enable just-in-time and on-the-job learning and are able to equip their workforce with skills needed to pivot their own careers as well as the organization.”
Apte offers an additional prescription. Since Indian IT companies have grown mainly in the era of client-pushed business growth, their corporate functions such as strategy, planning, market research and strategic marketing are not very strong. “They need to ramp-up on all these fronts. They need to invest much more on sales and marketing, grow their selling sophistication and competitive positioning. They also need to embrace a truly global delivery model where 40% of resources are placed in on-shore, near shore and other alternate geographies,” says Apte.
Looking Beyond H1-B
While the possible tightening of the H-1B visas in the U.S. is giving most Indian IT firms the jitters, Aron suggests that they can in fact turn this temporary adversity to long-term advantage if they can acquire some additional capabilities. He explains: “First they need to invest in the ability to translate business needs into software features – these are professionals that can talk to users (business managers) and translate their needs into a set of software features and then create a system of codification that can transfer this to the offshore production location.” In a study based on multiple years of data on offshore information services, which Aron conducted with former Wharton doctoral student Ying Liu, they showed that such codification capability improved both the output and quality of work and lessened the need for onshore managers.
The blended rate that Indian IT firms offer their clients usually combines a mix of offshore and onshore wages at 70:30 or 80:20 ratios. By developing this capability, Aron says, the onshore presence can be reduced to 2% to 3% of total project capacity. “By deepening this capability, Indian IT majors can actually make this a long-term competitive advantage and wean themselves away from the need for large numbers of H-1Bs.”
Indian IT firms could survive the many challenges earlier … “because they had the benefit of the TINA (‘there is no alternative’) factor.”–Sudin Apte
Another way to reduce dependence on H-1B visas is to focus more seriously for business from ASEAN, Middle East and Africa and other emerging markets. Currently, the bulk of their overseas client revenues come from the U.S. and Europe. “In ASEAN, the Middle East and Africa, a wave of automation is beginning to take place. IT spending in many of these countries is set to increase by 8% to 22% according to some industry reports. Many of these countries do not have local firms with the ability to strategize and provide consulting services and sell them on top of an ‘IT stack’ – a set of technology solutions that will make the strategies work. The time is right for Indian IT majors to take on these markets,” says Aron.
Of course, the challenge for Indian IT firms is that they need to make all these above suggested changes even while continuing to deliver the services that bring them the revenues at present. Some of them have already started making their moves. TCS, for instance, has been on a massive re-skilling exercise and has trained more than half of its 380,000 employees on digital platforms. Tech Mahindra is looking at its DAVID (digital, automation, verticalization, innovation and disruption) offering to keep pace with the evolving needs of its clients. It is also looking to collaborate and crowd-source instead of trying to build everything in-house and is working with more than 15 startups.
At Infosys, CEO Vishal Sikka is passionate about his ‘zero-distance’ strategy. In a recent interview with Knowledge@Wharton, Sikka said: “The idea is that we don’t just do what we are told, but in every single project, no matter what it is, no matter how mundane, no matter what area it is in, you do something innovative. You find some problem and you solve that problem, you go beyond the charter of the project and do something innovative to delight the client, and do something that they did not expect. Something bigger than what you were thinking about.”
The direction is right. Now it remains to be seen if Indian IT reaches the destination.

The United Airlines Debacle and the Morality of Capitalism

unitedThe video of the United Airlines passenger who was recently dragged out of his seat screaming from an overbooked flight was seen around the world. Since then, the debate has centered around the practice of overbooking seats in the industry and the legal responses of airlines. But morality should have a place in corporate America, according to Father James Martin (@JamesMartinSJ), a Jesuit priest, editor at large at America magazine, author of Jesus: A Pilgrimage and  The Jesuit Guide to (Almost) Everything: A Spirituality for Real Life, and consultor to the Vatican’s Secretariat of Communications Office. He is also a graduate of the Wharton School.
In this opinion piece, Martin argues that a capitalist system that leads to human degradation is inherently immoral. For companies to change, he writes, their measure of success cannot hinge entirely on their profitability but should take into account the common good and welfare of others. Only then will true change occur. (previous version of this article originally appeared in America.)
Here is why United Airlines kicking off and countenancing the assault of a paying customer is a big deal: It helps to reveal how corporate America often puts rules before people and how capitalism often places profits before human dignity. (I am speaking not only as a Jesuit priest, but as a Wharton School graduate, someone who considers himself a capitalist and who has worked in corporate America for several years.)
Overbooking is a device that most airlines use to maximize their profits. Unfilled seats mean lost revenues. This means that some people will inevitably be bumped from flights. But in the airline’s economic calculus, this is deemed an acceptable trade-off. A customer’s inconvenience is subordinated to profits.
You can already see the inherent problem.
The passenger — a physician named David Dao whose family escaped Vietnam during the 1970s — had bought a ticket from United. So, as a consumer, Dao was justified in expecting that he would be able to use it. That is, as any Wharton grad knows, part of the essence of capitalism: a fair exchange of money for goods or services. But the airline decided they had “overbooked” when some airline employees needed last-minute seats on the flight. So they asked passengers who had already paid if they would be willing to relinquish their seats. They offered increasing levels of money to make it more palatable. Several took the offer.
“A toxic cocktail of capitalism and corporate culture led to a man being dragged along the floor.”
Not surprisingly, Dao did not want to leave. Why should he? He had paid for his seat and was anxious to reach his destination. As my business law professor would point out, the airline had also entered into a contract with him. And the argument that the airline had the right to eject him is, to me, fallacious. It was not any sort of emergency. No matter what the fine print said, Dao had a right to expect to fly that day.
Likewise, the argument that overbooking reduces the price of tickets, and therefore ends up actually helping the consumer, is also something of a dodge. This is because the goal of the corporation is not to reduce the price of tickets and provide savings for customers, but to maximize profits for shareholders. An airline reduces ticket prices to increase volume, which raises revenues. Airlines are not charities.
When Dao was unwilling to give up what he had paid for, he was forcibly removed from his seat by security officers, who ended up bloodying him and dragging him along the floor of the plane. In a press conference later that week, according to The New York Times, Dao’s lawyer “listed his client’s injuries: a broken nose, a concussion, two knocked-out teeth and sinus problems that may require reconstructive surgery.”
When we watch the video of the event something in us says, “That’s not right.” Pay attention to that feeling. It is our conscience speaking. That is what prompted the widespread outrage online — not simply the fact that people who have been bumped from flights share in the man’s frustration, but the immorality of a system that leads to a degradation of human dignity. If corporate rules and the laws of capitalism lead to this, then they are unjust rules and laws.
The ends show that the means are not justified.
Someone in authority — pilots, stewards, ground crew — might have realized that this was an assault on a person’s dignity. But no one stopped it. Why not? Not because they are bad people: They too probably looked on in horror. They did so because they have been conditioned to follow the rules.
Those rules said this: First, we may sometimes overbook because we want to maximize our profits. Second, we can eject someone because we have overbooked, or if we decide that we want those seats back, no matter what a person can reasonably expect, and no matter how much of an inconvenience this is. Third, and most tragically, human dignity will not get in the way of the rules. A toxic cocktail of capitalism and corporate culture led to a man being dragged along the floor.
That is why bland “nothing-to-see-here” defenses of the ills of corporate America and of the dictates of capitalism bother this capitalist and former corporate employee so much. They fail to see the victims of the system.
Is this a “first-world problem”? Yes, of course. Most people in the developing world could not afford a ticket on that flight. But it is very much a “whole world problem” because the victims of a system that places profits before all else are everywhere. The same economic calculus that says profits are the most important metric in decision-making leads to victims being dragged along the floor of an airplane and eking out an existence on the floor of a hovel in the slums of Nairobi. The privileging of profits over people leads to unjust wages, poor working conditions, the degradation of the environment and assaults on human dignity.
“As long as profits are seen to be the only measure of success, employees will subordinate everything — including compassion — to that goal.”
A day after the incident, Oscar Munoz, United’s chief executive, apologized for the treatment of the passenger, saying that “no one should ever be mistreated this way.” Agreed. He also said, tellingly, that employees “followed established procedures” and that he “emphatically” stood behind them.
What is the solution, then, to a system that gave rise to such treatment? To recognize that profits are not the sole measure of a good decision in the corporate world. To realize that human beings are more important than money, no matter how much a free-market economist might object. To act morally. And to respect human dignity.
How do companies do that? If they want to encourage employees to behave morally in stressful situations — of the kind that the United staff faced — how can they frame rules that encourage employees to express compassion rather than to suppress it? I believe the most essential thing is to admit that, despite what I was taught in Econ 101, profits cannot be the sole measure of a corporation’s success. And as long as profits are seen to be the only measure of success, employees will subordinate everything — including compassion — to that goal.
Once the common good and the dignity of each person are introduced into the equation, then such things as compassion, kindness, and care for the poor and the environment will come to be understood as values that are every bit as important as efficiency, aggressiveness and hard work. In other words, once you introduce another goal into the equation, then the priorities of the corporation and its employees shift a bit. And, incidentally, it makes for happier employees and a happier organization, because who wants to work for a hard-hearted company?
Of course, this approach may not work in every instance. Some companies and managers may be too blinded by the pursuit of profit to behave compassionately. In such situations, do governments have a role in requiring companies to follow management practices that encourage compassionate behavior in corporations? In other words, could regulations make companies act more morally?
I believe they could. This is what, in essence, government regulations about work hours, family leave and equal pay try to do — inject compassion into corporations and place human dignity in the forefront of a company’s operations. Limiting work hours, providing more generous family leave benefits and requiring equal pay for men and women, are all ways of looking at people compassionately, respecting their dignity and essential human needs. There could be other ways, through government regulation, of ensuring that corporations consider not only the needs of their own employees, but also the ways that their businesses will affect the “common good,” that is, the community at large.
Thus, regulations caring for the environment, what Pope Francis calls our “common home,” are important. But in terms of the inner workings of the corporation, and whether people are treated compassionately on the job, I believe that change has to come from the top. If a CEO is kind, compassionate, and truly cares for the well-being of her or his employees — not just their economic well-being, but what we Jesuits like to call the “care of the whole person” — then these goals will naturally trickle down to all levels of management.
People naturally look for mentors in how to manage. If they see compassionate management, they will take their cues from this. This, to my mind, leads to a healthier organization, and also encourages people to think more compassionately about their customers, clients and that most important of moral goals: the common good.

What Turkey’s Referendum Means for the Country’s Future

TurkeyWharton's Bulent Gultekin and Steven A. Cook from the Council on Foreign Relations discuss Turkey's referendum results.

Turkish President Recep Tayyip Erdogan has claimed victory following this week’s referendum that would would replace the country’s parliamentary system with a powerful presidential system — a move that could let him stay in office until 2029. Following a close vote — 51.4% for “yes” vs. 48.6% for “no” — international election monitors noted election irregularities and indicated that the vote was not a true measure of popular will. Chief among the problems they cited was media domination by the “yes” campaign. Opposition parties have demanded recounts.
The referendum will do away with Turkey’s parliamentary system, instead turning to an executive presidency with few curbs on the power of that office. The vote followed a failed coup in July 2016, and members of the opposition contend there has been a campaign of intimidation by Erdogan supporters to sway the vote that included the jailing of some journalists and opposition leaders. The country has also been under a state of emergency since the coup attempt.
There has not been this much election “unfairness” in Turkey since 1946, according to Wharton finance professor Bulent Gultekin, a top advisor to two former Turkish prime ministers and also formerly governor of the Central Bank of the Republic of Turkey. “The legitimacy of the referendum is really in question,” he said. “He’ll have a very difficult time governing the country – there is a question of legitimacy…. There is also a sense of dissatisfaction … and people are feeling quite cheated.”
Gultekin made these and additional comments on the Knowledge@Wharton show, on Wharton Business Radio on SiriusXM channel 111. (Listen to the podcast at the top of this page.) Joining Gultekin on the show was Steven A. Cook, a senior fellow at the Council on Foreign Relations. Cook is the author of the upcoming bookFalse Dawn: Protest, Democracy, and Violence in the New Middle EastTheir discussion includes what is likely to happen to Turkey’s economy going forward, and the effect of the referendum’s results on Turkey’s efforts to join the European Union. Cook noted that Turkey is the only experiment in the Muslim world as a secular society, and there is a chance that effort could now be lost. “People are more worried about that sort of change and are more mobilized than in any other election.”
An edited transcript of the conversation follows.
Knowledge@Wharton: You’re seeing this unfold firsthand. How much concern is there over the vote?
Bulent Gultekin: There is quite a bit of concern in the country, and not [only] with the vote — even before that. There was a concern that the country was moving into some sort of a totalitarian regime, a one-man rule. Even though he’s supposed to be an impartial president, Erdogan has been acting almost like a man above the law. He has been pretty much violating the constitution ever since he was elected by popular vote in Turkey.
The reason for this election — I don’t think there was any real economic or political reason — is mostly for self-preservation. Erdogan doesn’t seem to trust the army, police and even probably his own party, especially after the coup attempt last July. Then there is another complication in Turkish politics that you don’t see elsewhere. We had this unusual affair [involving exiled cleric Fethullah] Gülen, who managed to infiltrate just about all institutions, particularly the judiciary, government, police and army. And I think that created some political infighting, or at least a fight within political Islam.
“[Erdogan’s] loss in major cities is quite a significant change. This is where people are mobilized. The rural areas are very strong in party apparatus.”–Bulent Gultekin
So, Erdogan wants to control, and he wants to be unaccountable. I think this referendum was about one man. And, of course, there is another reason underneath. Erdogan has been [fighting] with the Republican regime of modern Turkey [which has ruled] since 1923 [when Mustafa Kemal Atatürk became president]. He represents political Islam. He is the product of a secular society, but he always has these instincts to go back, or at least to use Islam for his political objectives. He’s been an exceedingly successful campaigner, and he has extremely well-oiled election machinery in the party.
I served as chief adviser to two prime ministers in Turkey. I served as the governor of the Central Bank…. In 1991, I even managed election campaigns for the ruling party. Then I set up my own party in 2002 to run against Erdogan and the ruling parties at the time. I’ve never seen such an election in the history of Turkey. That is, Turkey since 1946. The campaign was extremely unfair. They used the entire state support, which is illegal. And though successful from a political stance, [Erdogan] turned it not into a referendum on the constitution, or even regime change. He realized that he might have difficulty and turned it into more of a personality issue — whether they would choose him against the opposition — and he used Islamic themes [to win].
But despite all that, there have been significant allegations of fraud. My guess is that these allegations are serious. And it was pretty close – 51% to 49%. There is this very serious legitimacy shift. So Erdogan is going to have a very difficult time ruling.
Knowledge@Wharton: You mention the concerns over the voting in this referendum and the fact that there were many votes that were accepted that weren’t certified. They weren’t stamped as being official votes. So the concern is with the closeness of the referendum vote to begin with. If there were a number of votes that fell into that category, then it could potentially flip the result?
Gultekin: It could. I don’t have the data to say what would have been the case. The legitimacy of this referendum is really in question. But there are other issues that are silver linings in the whole thing. This time, the NGOs and the civil society were mobilized to a degree I have never seen in Turkey. The results are also quite indicative. The most important result of this referendum is that Erdogan lost Istanbul. That has been his power base since 1994, since he won the election as mayor. That’s very significant. He was expecting to win about 60% to 70%. But this did not occur.
The loss in major cities is quite a significant change. This is where people are mobilized. The rural areas are very strong in party apparatus. This probably had a significant impact on the vote. This equation is not really very different from the U.S., if you look at the red states vs. the blue states. Turkey along the coastal lines voted predominantly no; the rural areas voted yes, and the southeast, Kurdish areas also voted no. So Erdogan managed to split the country into three.
But I would call this probably the beginning of his end. He’s going to have a very difficult time governing the country. There is a question of legitimacy. This has never happened in any election in Turkey. No one ever questioned the legitimacy. So I don’t know how long this is going to last, but there is certainly a very strong sense of dissatisfaction. People are almost feeling cheated.
Knowledge@Wharton: Erdogan’s expectation was that he would win about two-thirds of the votes. When the election cycle came around again in 2019, he wouldn’t have that much of an issue. Now that it’s 51-49, and you mentioned Istanbul as well, is he potentially a leading candidate, or do you not see him as even a potential leading candidate going into 2019?
Gultekin: He’s going to be the leading candidate. Erdogan has no choice. He’s like a man on a bicycle. He has no choice but to pedal. The moment he’s out, he’ll be in deep trouble. There are very serious allegations of corruption about him and his family. Many people argue that this is all to save himself and his family, which is a very sad thing to say about Turkey these days. But no, he will be in the running. It’s very difficult to make predictions in politics, but I won’t be surprised if they call an early election soon.
Knowledge@Wharton: What’s the reaction so far from Europe? Turkey has been trying to push, especially recently, to join the European Union (E.U.). I would think something like this would not sit well with the E.U.?
Gultekin: Well, there are two views. One is sort of a naive view that [Europe] might look at Turkey with concern. But I’m sure that a lot of countries — France, Austria and others — are experiencing relief that this is the Turkey they want to see. And this will be the end of Turkey’s adventure with the E.U. But they may worry about what might happen and how to deal with Erdogan eventually.
Turkey’s accession to Europe has never been guaranteed. Europeans have been pretty stingy about that. If they had really helped Turkey like the E.U. helped the Eastern European countries after the fall of the Berlin Wall, Turkey would have been in a very different situation. And I would call that Turkey paying a very high price for the Cold War, being pretty much left out afterwards.
Knowedge@Wharton: If Erdogan does win the elections in 2019, that sets him up to be President of Turkey for how long?
Gultekin: I’d say it’s going to be another two terms. So it will add 10 more years — almost 2029.
Knowledge@Wharton: Do you think we will see more potential uprisings like [the one that] was attempted this summer in Turkey?
Gultekin: That was a coup. But we also saw civil protests a few years ago in Taksim. It all started with the protest to protect a green area in the center of the city. A sort of civil society in the country has been growing, which is very promising. I doubt whether Turkey will have another coup. The coup came from a group, the supporters of Gülen. There are a lot of unanswered questions about that affair.
“My guess is people are going to resist. People are not going to take freedom, secularism and democracy for granted. They just have to fight for it.”–Bulent Gultekin
Knowledge@Wharton: What do you expect, then, to see from the people of Turkey over the next several months?
Gultekin: There has been a pretty repressive environment in Turkey, in academia and elsewhere, and the media is pretty much nonexistent, pretty much owned by the government. It remains to be seen whether young people are willing to leave the country, or decide to stand up and resist — in the sense of fight or just work for the future of the country. There is some anecdotal evidence that a lot of youngsters want to leave the country. They always worry is it going to be tricky like Iran after Khomeini.
My guess is: I don’t think it’s going to happen. I don’t know if Europe is a better place nowadays for Muslims. Turkey is a predominantly Muslim country. My guess is people are going to resist. People are not going to take freedom, secularism and democracy for granted. They just have to fight for it. It’s not going to be easy, because Erdogan and these people, political Islam, have demonstrated that they have no ethics whatsoever. So anything can be expected. People are expecting the worst, but I think they will brace for it. Nothing will surprise them from now on.
Knowledge@Wharton: There was a call by the opposition for this referendum vote to be canceled. It doesn’t seem the chances of that happening are very high, correct?
Gultekin: There might be some technical issues that I don’t know, but my guess is this government is not going to pay any attention to legalities.
Knowledge@Wharton: What is the status of the Turkish economy right now under President Erdogan?
Gultekin: Right now the economy is doing reasonably well, but we see some signs of fatigue, because the growth rate is going to come down. Erdogan spent most of his time politicking, as opposed to building the country for the next jump — to get out of the middle-income trap. And, of course, the success has been pretty much maintaining a decent fiscal discipline. There was a massive stimulus in the economy, which is not going to be sustainable. So I expect because of the lack of investment over the last 10 to 15 years in the country, growth is going to come down. The population is young and is going to have a very difficult time with unemployment. So I don’t see the same high growth rate that we observed in the previous 10 years. As a result, I don’t expect bright days in the near future.
Knowledge@Wharton: Good morning, Steven Cook. What was your reaction to how the referendum played out?
Steven Cook: Well, it was not pretty by any stretch of the imagination, and there are obviously allegations of electoral fraud. All that being said, however, President Erdogan has already made it clear that there is going to be no way that the outcome will be reversed. And Turkey’s authoritarianism will deepen as he takes up more and more power, scheduled to begin with the general elections of 2019.
Knowledge@Wharton: So what are the expectations that he will continue as president in 2019 at this point?
Cook: I think it’s abundantly clear that he is going to be the AKP’s (Adalet ve Kalkınma Partisi) candidate. Just as they have dominated the media landscape and other areas of the country in order to get the outcomes that they wanted in both this referendum as well as the general elections of 2015, one will expect that the party and President Erdogan will pull out all the stops to ensure that he is once again reelected, and that he will stay in power until 2029 and perhaps even beyond.
Knowledge@Wharton: The accepting of the ballots that weren’t certified is obviously the big point of contention in this whole process. Here in the U.S., almost every time we have some sort of election, there is concern of some level of election tampering. So I guess we shouldn’t be surprised that this is occurring in this referendum vote.
Cook: Well, we shouldn’t be. Although, in 2010, the AKP-dominated Parliament passed a law that would have made it more difficult for this kind of electoral tampering, ensuring that unsealed, unauthenticated ballots were not counted. This time, they used their influence with the supreme election board to ensure that those ballots were counted. So they ran counter to their own law in order to secure this electoral outcome for President Erdogan.
American presidents overlooked some of the excesses of the Turkish government, in order to secure their cooperation for a variety of other purposes.”–Steven A. Cook
Knowledge@Wharton: I want to get your opinion on how this plays out in Europe, and the impact that this has in that region, since Turkey has been trying to see if they can get into the E.U. for quite some time now?
Cook: Turkey has had a long-term goal of joining the E.U. But that has been on life support at best for the last 10 years or so. Europeans haven’t wanted to walk away, because they didn’t want to be accused of double standards and being Islamophobes. And the Turks haven’t walked away, because they didn’t want to let the Europeans off the hook. I can’t imagine that the result of this referendum, which gives President Erdogan sweeping powers and undermines checks and balances in the system, will enhance Turkey’s candidacy for E.U. membership. And, of course, President Erdogan has already announced that there may be a referendum on the continuation of Turkey’s candidacy. So Turkey is isolated from its European partners, in part because of crises that the Justice and Development Party manufactured in the run-up to this election, stirring up trouble among Turkish populations in Holland and Germany. Then there is this question of E.U. membership and whether Turkey will walk away.
Knowledge@Wharton: What is your greatest concern now for Turkey going forward, assuming that President Erdogan wins reelection in 2019?
Gultekin: Erdogan was greeted very warmly in the U.S. and Europe when he won the election. I haven’t changed my mind since 2002. Erdogan is more of a counterrevolutionary. I think he has been known for that, and he never actually hid that. So what I worry about is the change in the regime. And this country has been the only experiment in the Muslim world as a secular society. And that may be lost if they continue in this fashion. I don’t want to say it’s going to be lost. But that’s the highest and worst risk. That’s the most dangerous thing that might happen.
Will it happen? We shall see. I think people are more worried about that sort of change and are more mobilized this time than in any other election, because they see the dangers of complete reversal of the regime. That’s what I see as the most problematic or the most profound change. In the West, with the economy and [other factors], we’ve had crises back and forth, and will eventually come back to some sort of equilibrium. But a fundamental shift in the orientation of this country is quite crucial, not only for Turkey, but for the Muslim world and the Middle East. And Europe, for that matter.
Knowledge@Wharton: Do you make anything of President Trump calling President Erdogan to congratulate him in the wake of this referendum vote?
Cook: Well, it was certainly odd, given the fact that the OSCE (Organization for Security and Co-operation in Europe) observers called the referendum unfair. It puts the U.S. in some strange company, with, for example, the Palestinian terrorist organization Hamas, or the Palestinian authority, the government of Djibouti in Turkmenistan. Those are the people who have called President Erdogan to congratulate him.
But my sense is that President Trump’s call was an effort to mitigate the tension between the U.S. and Turkey as the U.S. accelerates its operations against the Islamic State in Syria, in cooperation with Syrian Kurdish groups that the Turks regard as terrorists. It’s a fact of life that Turkey is strategically important to the U.S. and that Ankara sits literally at the geographic center of some of America’s most pressing foreign policy problems. [In the past] American presidents overlooked some of the excesses of the Turkish government, in order to secure their cooperation for a variety of other priorities.