The Credit Suisse Magazine Since 185 Issue 3 Aug./Sept. 200 International Edition

N orth Greenland Join Gerry Hofstetter on a Light Art Expedition Elves in Iceland More Than Just Folklore to Northerners

Hans-Ulrich Meister The CEO Credit Suisse Switzerland Microfi nance What Five International Experts Have to Say Outlook Will We Seek a “Bubble Repetition”? Nobel Laureate Krugman On the Financial Crisis Experience the Arctic. Some moments in life are unrivalled. The M/V Prince Albert II penetrates deep into areas that other ships are unable to reach. Experience the adventure of a real expedition and enjoy breathtaking natural spectacles coupled with the stylish comfort of luxurious travel. Silversea - expeditions of the highest calibre.

EXPEDITION CRUISES IN THE ARCTIC

THE M/V PRINCE ALBERT II Norway & Svalbard, intensive 9 July ‒ 19 July 2010 Tromsø ‒ Magerøy Island ‒ Skarsvag (North Cape) ‒ Bear Island ‒ Svalbard ‒ Longyearbyen From Norway, the M/V Prince Albert II sets course for the North Cape and Bear Island and then on to the glaciers, fjords and polar bears of Svalbard with its main island Spitsbergen. Experience nature up close ‒ on Zodiak excursions or during walks through the green tundra of this unique group of islands. • 10 nights in an Adventurer Class Suite • Exclusive all-inclusive service • English and German spoken on board From $ 5371.- p.P.* • Lectures and readings in English and German incl. 35% Silver Sailing Savings

Iceland, Greenland and the Canadian Arctic 7 September – 25 September 2010 Reykjavik – Vestmannaey Island – Skjoldungen – Prince Christian Sound – Qaqortoq – Hvalsey – Arsuk Brae – Iqaluit – Akpatok Island – Saqlek Fjord – Battle Habour – L’anse aux Meadows (Newfoundland) – Twillingate – St. John’s Massive glaciers that calve mighty icebergs. Isolated Inuit settlements, whose inhabitants brave the harshness of nature. A rich marine animal kingdom with imposing whales, agile seals and perhaps even polar bears. All of this awaits you on a unique journey through Greenland and the Canadian Arctic. • 18 nights in an Adventurer Class Suite • Exclusive all-inclusive service • English and German spoken on board From $ 8542.- p.P.* • Lectures and readings in English and German incl. 40% Silver Sailing Savings

*Travel to and from the port is not included in the price. We would be glad to personally advise you. Additional travel dates and categories upon request.

Further information and bookings: Kuoni Concierge Bellevueplatz 5 CH-8024 Zurich Tel. +41 (0)44 224 33 00 E-mail: [email protected] www.kuoni.ch Editorial 3

The North has many faces. If you talk about the North to an Argentinian, he’ll gush about the subtropical rainforest at the Iguacu waterfalls, the dusty Andean plateaus, the saguaro cacti at the Quilmes ruins and the heat of the Salinas Grandes del Noroeste salt desert. The landscape is out of sync: The North of Argen- tina fairly accurately mirrors a European’s associations with the South, which in itself would have yielded an intriguing bulletin story. But this time, we have decided not to broaden the thematic focus to include as many surprising angles and per- spectives as possible, but instead to confine the topic – the North – to a very narrow geographic framework. Our stories are situated almost exclusively above the Arctic Circle, where often in summer the sun never truly sets. For the purposes of this publication, we’ve defi ned the North as a geographic point of orientation and terminus.

We spoke to the explorer and entrepreneur Frederik Paulsen, who has repeatedly visited the point where East, West, and even North converge, and South is the only direction remaining: the North Pole. We then accompanied the Swiss light artist Gerry Hofstetter on his expedition to the glacier at Ilulissat, Greenland, where he projected spectacular images onto icebergs to raise awareness about the urgency of addressing climate change. The North is also a place where people live. We visited the indigenous people of the Arctic regions, the Inuit, in the Canadian territory Nunavut, who carve a path that straddles the wilderness, tradition and modernity. And, of course, we have included a report on legendary Nordic creatures: Although the Icelanders are an independent-minded nationality, over 80 percent would rather not rule out the existence of elves, just to be on the safe side ...

“The fascination with the North is not something you can put into words – you have to experience it,” says Frederik Paulsen. We’ve made an attempt to do so, never- theless. Enjoy a cool respite from the summer’s heat and let the new bulletin take you to the faraway world of the fascinating North.

On a concluding note, good news from the editorial office: At the end of June, bulletin was awarded two silver medals at the 10th congress of the Best Corporate Publishing forum in Berlin, in the categories “finance and insurance” and “inter- national communication.” We are particularly honored in view of the high caliber of the 600 international magazines in the running. Daniel Huber, bulletin Editor-in-Chief Gold Winner

Gold Winner

Award Recipient Photo: Cédric Widmer

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Why we need it and the new role role new the and it need we Why Will the the Will champions to Zurich board meeting board Zurich to champions 2,000 Mobile advertising set to soar to set advertising Mobile The new artistic director of the the of director artistic new The An expert interview on the the on interview expert An An exclusive interview with with interview exclusive An new workplaces in the energy energy the in workplaces new www.credit-suisse.com/infocus Inspiring exhibitions in in exhibitions Inspiring Award goes to fl to of goes agship Award US Nordic singers and targeted targeted and singers Nordic resume its status as as status its resume Why a recession can can recession a Why Interview with the the with Interview Sweden’s Kjell Kjell Sweden’s New Music Director Director Music New 150 Contents years after after years 5 North T he north, one of the four cardinal points of the compass, has captivated humans since the dawn of time. The direction is revered in numerous ancient cultures, ranging from the Egyptians to the Chinese. It also plays a prominent role in modern cartography, where the north features at the top of most maps. Introduction North 

Text: Dorothée Enskog generally corresponding to the hues of corn. The various native American tribes assigned these colors differently, with the Aztec One of the seven wonders of the ancient world, the Great for instance attributing the color black to the north and the Pyramid of Giza, is aligned almost exactly with the North Pole. It Cherokee indicating it with the color blue. Other cultures did not is believed that the ancient Egyptians monitored stars in the use compass directions, instead relying on other indications. On Little and Big Dipper to calculate the exact direction. They as- Hawaii, for instance, directions were described as toward the sociated north with eternity and the afterlife, where the pharaoh’s sea or on the seaside (makai), or toward the mountains or inland spirit would travel after death. The ancient Greeks also revered (mauka), while in ancient Egypt, directions were defined as upstream north, with Mount Olympus – being their most worshipped or downstream. mountain and where the principal gods of Greek mythology Geographic Versus Magnetic North resided – symbolizing the north. In Dynastic China, the emper- ors were believed to derive their power from the dragon god at When it comes to navigation, a vital distinction must be made: that the celestial North Pole. In Nordic mythology, the god of sea the geographic and magnetic north are not identical. The geographic and water, Njord, derives his name from the word north. And north, more commonly known as the North Pole, is a fixed point found in premodern German dialects, the word north actually means at 0 or 360 degrees on our modern maps where all lines of longitude “to the left of the rising sun.” But the importance of the north converge. These lines, used to establish our time zones, are so closely is not confined to ancient cultures alone. It also plays a prom- located to each other at the North Pole, that the Artic region has its inent role in modern cartography. own unique time zone. The North Pole, also known as the true north, is the northernmost point on the earth’s surface. This means that if you North-Up Map Orientation were to stand there, all points would be south of you. In contrast, the The first maps appeared as early as in prehistoric times. They magnetic north is located hundreds of kilometers south of the North were more conceptual than geometric, depicting mountain Pole, northwest of the Canadian island of Sverdrup. This point is slowly ranges, lakes or rivers with dwellings along them. The first drifting across the Canadian Artic. The Geological Survey of Canada has world map appeared around 500 B.C., illustrating the Bab- calculated that the magnetic north currently moves some 40 kilometers ylonian representation of cosmos – a flat and round world on average every year, in a northwestern direction. As this rate has in- with the city of Babylon in the center. The orientation of creased over the past century, the north magnetic pole could actually this map is based on prevalent winds – with northwest at swing out of the Canadian Artic, and into Siberia in the long term. The its top – rather than following the perpendicular plan we are needles of traditional magnetic compasses point toward this moving point. used to with the four cardinal points: north, west, south and As a result, early navigators using magnetic compasses had to learn to east. Placing north at the top of maps and east on the right deal with the difference between the geographic and magnetic north. is a convention that originated with the Greek astronomer and GPS Uses Heading-Up Orientation geographer Ptolemy, who lived and worked in Alexandria, Egypt, during the second century. But as Christianity took its stronghold The Global Positioning System (GPS), invented by the US Department over Europe, the (European) maps were dominated by religious of Defense and fully operational since 1995, is making the use of mag- views. These medieval world maps, known as T-O maps (orbis netic compasses redundant. It also challenges the conventional north- terrae), placed east at the top with Jerusalem, located near the up map orientation. GPS technology uses satellites and ground stations middle of the known world at the time, occupying the central to calculate geographic positions to the meter or centimeter. These position. With the advent of the Renaissance, new discoveries portable navigation systems largely work with heading-up orientation, would change the shape of the known world, and cartographers also known as current instantaneous direction. This means that a map would resume Ptolemy’s north-up map orientation when drawing appearing on a GPS receiver adjusts the direction of travel as the user maps. Other basic conventions that over time would become uni- moves, so that the direction of travel always points at the destination, versal in the field of cartography included depicting water as blue, thus providing visual cues as to which way to turn. A GPS receiver is land masses as brown, and vegetation as green. The first true today one of the fastest and most convenient ways to accurately de- world map, known as “Universalis Cosmographia” and drawn up termine the true north day and night, and – in all but the most severe in 1507, is credited to German cartographer Martin Waldsee- weathers – replacing historical orientation methods or instruments such müller. It is quite close to our modern world maps, despite the as the sun, the stars and the compass. But should the batteries of the fact that it is more than 500 years old. GPS run out, you would still be better off with a map and a magnetic compass always pointing north. < Map Orientations in Other Cultures

Many non-European cultures also used north, east, west and south to indicate directions, though they often added a fifth di- rection – the center. In Dynastic China for instance, the center was synonymous with China itself. The Chinese associated the four other cardinal directions to a specific color, season, element and an emblematic animal. The north corresponded to black, winter, water and the tortoise. In the Americas, many traditional indigenous beliefs also included five directions. Each direction,

Photo: Frank Schwarzbach, Michael Kesslerwith the exception of the center, was associated with a color

Credit Suisse bulletin 3/09 Between Arctic Wilds and Modernity By creating the Arctic territory of Nunavut 10 years ago, the Canadian government fi nally sealed the end of colonialism. The result is an ice-cold experiment in combining the modern world with the ancient traditions of the Inuit.

Even in Iqaluit, the capital of the territory, hunting is part of Inuit life. Two hunters prepare to take their boat out into Frobisher Bay. Inuit North 

Text: Gerd Braune, from Iqaluit Nunavut

Andrew Beveridge-Tagornak’s workstation is dominated by a number of computers. The 27-year-old Inuk works as a computer technician for the Qikiqtaaluk Information Technology Corporation in Iqaluit, the capital of the federal territory of Nunavut. When he has time in the summer months, he drives out to Frobisher Bay to fish with friends or with older Inuit. Or he goes out into the tundra to hunt caribou. This is the traditional life of the Inuit, the indigenous people of the Arctic, and a welcome change of scen- ery from everyday life in the office. “We have the new technologies, but we also have our traditions,” says Andrew. Nunavut has now existed for just over 10 years. On April 1, The Territory of Nunavut Nunavut, a territory of some two 1999, the official act was passed that officially separated the million square kilometers in the Canadian East Arctic, was area of Nunavut from the Northwest Territories, conferring on created through the division of the Northwest Territories the new area the status of an independent territory with its own 10 years ago. The 2 communities are accessible only via government. Nunavut means “our country” in Inuktitut, the Inuit sea or air. There are no road connections. The capital Iqa- language. A total of 85 percent of the new territory’s inhabitants luit (“place of many fish”) has 6,000 inhabitants. A total of are themselves Inuit. The creation of Nunavut represented the 30,000 people live in Nunavut, which represents a fifth of fulfillment of a dream – at last the native people of the Arctic the Canadian territory and is more than five times as large were able to have a say in the running of their traditional lands. as the Federal Republic of Germany. The Nunavut Act was based on the Nunavut Land Claims Agreement between Resurgence of Inuit Pride the Inuit and the Canadian government in Ottawa, an “Fortunately, our children will never experience what it means to agreement that led to more than 356,000 square kilome- grow up under the yoke of colonialism. Our forefathers lived ters of land being ceded to the Inuit in 13. The Inuit are through an era in which their independence and human rights now free to decide themselves what happens on their were taken away,” says John Amagoalik, who is now 62 years land. The territory also includes 38,000 square kilome- old. For many he is seen as the “father of Nunavut,” as he played ters in which they have not only “above-ground” rights a substantial role in negotiations with the government over the of use, but also claim to any deposits that lie below. Nunavut Act and the associated land claims. “There was a time when many of my generation were not proud of their Inuit iden- tity, but were also not sure if they wanted to be Canadian citizens. We’re now seeing the resurgence of Inuit pride and yet we’re Arctic Greenland also loyal Canadians.” But after 10 years of Nunavut’s existence, Ocean the Inuit also know that their dreams can only gradually be ful- filled on the back of a strong territory with vibrant communities Baffin Sea that can stand on their own feet economically. Amagoalik attri- Alaska Qikiqtaaluk (Baffin) butes the disappointment of many Inuit to high expectations. Pangnirtung “People have to understand that it takes time to correct the neg- Kitikmeot Iqaluit Frobisher ative developments of the past. I think we’re now accepting that Bay Kivalliq reality.” North Nunavut In November 2008, Eva Aariak became premier of the terri- Pacific Hudson Canada Bay tory of Nunavut and thus head of the territorial government. A native Inuk originally from Arctic Bay, far to the north, she ran a business in Iqaluit before taking the office of languages com- missioner, a role in which she helped to establish Inuktitut as an official living language. “I’m tired of people describing Nunavut in United States North Atlantic terms of our problems, failures and worries,” says the politician, whose necklace of choice is adorned with a small golden ulu, the traditional curved knife with which Inuit women carved flesh and fat from the skins of slain animals. “We need to be aware of our problems and limits, but we also need to focus on our strengths.”

Youngest Population in Canada

Nunavut finds itself playing catch-up with the rest of Canada. It has the youngest population in the country – and the fastest- growing. The population growth of 10 percent is twice that of the remainder of the country. Some 53 percent of the inhabitants of

Photos on pages 8–13: Gerd Braune Nunavut are 25 years old or younger, as opposed to 31 percent >

Credit Suisse bulletin 3/09 10 North Inuit

Resolute, numbering just 300 residents, is the second-most northerly community in Canada. It lies on the south coast of Cornwallis Island, looking out onto the legendary Northwest Passage that goes through the Arctic Archipelago. Resolute is the starting point for expeditions to Ellesmere Island and to the North Pole.

bulletin 3/09 Credit Suisse Inuit North 11

in Canada as a whole. The creation of jobs is therefore one of the dream of.” The Arctic College in Iqaluit offered the necessary train- government’s primary concerns. At 15 percent, the unemployment ing program together with universities in the south. When Omik is rate is twice as high as the Canadian average. The younger genera- asked to cite the outstanding achievement of Nunavut, one thing tion is significantly less educated: Of the20- to 24-year-old “Nuna- springs to mind: the language of her people. “If I call up a local gov- vummiut” – as the natives of the territory describe themselves – ernment office, someone answers me in Inuktitut. This gives me some 65 percent have not graduated from high school. For many confidence in my identity as an Inuk.” Inuktitut is now one of the few generations, school was a symbol for a way of living and thinking original native languages of Canada not threatened with extinction. imposed by western civilization. Teachers came from the south. Whale Hunting Provides Vitamin-Rich Maktaaq The social problems are immense: There is a severe housing short- age, and lung disease is twice as common as elsewhere in Can- The 27 communities of Nunavut are like laboratories in which an ex- ada, aided by the effects of overcrowded apartments and the periment is being conducted to combine modernity and tradition. The almost incessant cigarette consumption even by young people. Internet is part of everyday life in even the most remote communities Infant mortality is higher and life expectancy lower. Drugs and that are only accessible by air – and even then not daily. When the alcohol abuse are a pressing problem in many communities. The hunters head out into the wilds they have their GPS devices with them, suicide rate, placing Nunavut in an unwelcome first place inter- but can fall back on their traditional navigation skills in the event of nationally, is a catastrophe. Psychologists see this as a conse- technological failure. Living on the land is a part of the Inuit soul. When quence of a culture shock brought on by the rapid transition from families go “camping,” this bears no relation to the stereotype of a fam- nomadic society to modernity. ily vacation in western society. Families create a summer camp with tents far from their communities where they hunt and collect berries Inuktitut – A Thriving Indigenous Language and herbs. Cooperatives in the communities offer goods that have been But the successes are equally visible. More and more teachers flown in from the south, including milk products, fruit, vegetables and in Nunavut schools are now themselves Inuit, and primary school meat. But most Inuit prefer “country food” – the traditional fare that teachers are almost exclusively Inuit. The number of high school still makes up the menu in many family homes: fish, mussels and graduates has doubled in 10 years, even if this does remain far be- crabs, caribou and seal meat, and maktaaq – the external blub- low the national average. Companies in Nunavut are training young ber and skin layer of a whale, which can be eaten either raw or people. Lawyers, nurses and local government employees are cooked. Whenever beluga whales are spotted in the bays near drawn from the Inuit population. Sandra Omik started off in Pond local communities, it causes a great local stir. Whales mean meat. Inlet as an employee in an attorney’s office established by the gov- The white whales, thousands of which inhabit Arctic waters, are ernment in the Arctic North, and she is now herself a lawyer after a specialty. On the coast of Cornwallis Island, a number of ki- completing law school. “When I gained the opportunity to attend lometers from the community of Resolute, the clan of Simeonie law school I was very surprised. I could think of only one thing: Amagoalik have had a bonanza: Several whales are lying on the This means attending a university – something I’d never even dared shingle beach. The corpses are skillfully stripped down until >

Left The Inuit use snowmobiles to cross the frozen fjord of Pangnirtung to reach open sea where they hunt seals. Right Inuit have slaugh- tered a beluga whale and are dismembering it on the beach. The meat will provide food for many families.

Credit Suisse bulletin 3/09 12 North Inuit

only the skeletons remain. Both young and old feast on the vitamin- rich maktaaq. “That meat will feed a lot of families,” says one, point- ing to the huge chunks of flesh that lie on the beach. Sharing is an integral part of Inuit life. In December last year, hundreds of narwhals became trapped in the ice near Pond Inlet, and were slaughtered to prevent them from suffering a slow and distressing death through suffocation. The meat was distributed among several communities in the north of Baffin Island as well as on Ellesmere Island. Inuit The Inuit (singular: Inuk) are the native people of the Arctic, Coastal Areas Become More Accessible from the Bering Strait between Siberia and Alaska and over to Green- Hunting may continue to play a part in Nunavut land. The word simply means “people.” Until a few years ago, they were life, but the territory also plays a part in the glob- mostly known as Eskimos to outsiders. This term, meaning “eaters of al economy, both on a large and small scale. Arts raw flesh,” was given to them by neighboring Native American tribes. and crafts, sculptures, prints and tapestries from The Inuit of Canada consider the word Eskimo to be pejorative. From the Arctic – such as those produced in Cape a genetic, linguistic and cultural standpoint the Inuit of the Arctic are Dorset or in Pangnirtung – are popular around a single people with a shared origin, according to Dr David Morrison, the world. The mining industry has become a key director of the Archaeology and History Department of the Museum element in the local economy. The industry may of Civilization in the Canadian capital Ottawa. However, there are a only be in its infancy here, but mining corpora- number of regional linguistic and cultural differences between the tions have discovered commodity reserves indigenous people of Alaska, Canada and Greenland (“Kalaallit throughout Nunavut and are in the process of de- Nunaat”). This development began around 800 years ago. In the first veloping mines. Gold, silver, diamonds, uranium, half of the 13th century, the people then living only in northwest iron ore, nickel – the list of commodities is a long Alaska began to migrate east, probably in search of greater whale one. There are also deposits of crude oil and nat- resources. This journey finally led them to the coast of Baffin Island. ural gas in waters not far from the coastline. Cli- Just a few decades later they reached Greenland. Morrison believes mate change is making the Arctic and its waters that they crossed the strait between Ellesmere Island and the more accessible, as well as more attractive for northwestern coast of Greenland between around 1260 and 1280. shipping and economic activity. However, the same As they traveled east, the Inuit moved into regions that had previ- climate change also poses a great threat to the ously been inhabited by the Dorset people, also known as the Tunit people of the far north and their culture: The indig- or Palaeo-Eskimos/Inuit, a race that appears to have shared enous people of the Arctic see not just the animal little genetic inheritance with the other Inuit. Today’s Inuit say world threatened, but also a large part of their sus- that they have inhabited the Arctic for thousands of years or tenance. Both the culture and the traditional life of “since time immemorial,” a claim that is valid if restricted to the Inuit have been shaped by the ice, which is be- Alaska or if it encompasses the Tunit race. It was at Baffin Bay coming increasingly fragile and unreliable. Caribou that the Inuit came in contact with the Vikings, from whom herds are changing their trails. Seals are leaving their they first acquired iron. The Inuit then had further contact with traditional waters. Animals and plants never seen in Europeans in the second half of the 16th century, when ex- the Arctic before are appearing. And coasts that play plorers such as Martin Frobisher ventured into the region. home to Inuit settlements are eroding as the under- lying permafrost begins to thaw.

“Things are progressing. Not rapidly, but steadily.”

Nonetheless, the people of Nunavut are looking op- timistically to the future despite their problems. “I am pleased that we have Nunavut,” says Andrew Bev- eridge-Tagornak. The young computer specialist epit- omizes what Nunavut stands for: living in the modern world, but at the same time adhering to old traditions. “Things are progressing. Not rapidly, but steadily.” He is confident “that Nunavut will help us to live in both worlds.” On which note he switches off his computer and heads outside to meet up with friends, who are already waiting for him. To go hunting, as has been the Inuit way for centuries. <

bulletin 3/09 Credit Suisse Inuit North 13

Top left The Uqqurmiut Centre for Arts and Crafts in Pangnirtung is renowned for its tapestries and printed graphics. The photo shows Leetia Alivaktuk producing a stencil print. Top right Simeonie Amagoalik is a respected elder and a distinguished artist in Resolute. Here he is making a polar bear out of soapstone. Bottom left Nunavut is a young territory. This photo shows young mothers in Iqaluit. Bottom right Mountain-biking through the snow: children in Pangnirtung.

Credit Suisse bulletin 3/09 Illuminating 14 North Lichtkunst Ideas Within the Arctic Circle I n April 200, Gerry Hofstetter embarked on his seventh Light Art Expedition. This took him far north to Ilulissat in Greenland, where the internationally renowned a rtist illuminated the icebergs of the Kangia Icefjord, a Unesco World Heritage site. b ulletin provided exclusive coverage. Lichtkunst North 15 16 North Light Art

Text: Andreas Schiendorfer

“Maybe,” says Thorwald. We are discussing the possibility of sailing on his ship, the “ESLE,” out to the icebergs at the end of the Kangia Icefjord during the night, so as to finally execute the first light art projections. But it seems that the word “maybe” in these parts really means “not very likely” or even “out of the question.” A phenomenon like this hasn’t been seen in the last ten years: The pack ice from the polar region has rendered the port of Ilulissat and Greenland Greenland is hoping to achieve full independence the nearby coastal area almost unnavigable. During in 2021, the 300th anniversary of the island’s colonization by the day, and with a great deal of patience and expe- Denmark. A further step on the road to independence for Kalaal- rience, it might be possible to shunt the ice plates lit Nunaat – as the Inuit call Greenland – was achieved on June onto one another, but it’s a different matter at night, 21, 200, the national holiday, with a new statute taking effect when temperatures of minus 20 degrees make the that will give Greenland greater autonomy. This follows earlier ice too thick. We would simply get stuck. “Terrible,” steps such as Greenland’s official recognition as a Danish prov- adds the skipper, shaking his gray-haired head. He’s ince with equal rights in 153, the achievement of partial au- referring to the wind. For weeks now it’s been blow- tonomy in 1 and its secession from the European Union in ing from the wrong direction. But then in Greenland 1985 so as to protect its waters from overfishing. The Green- the calendar is set by nature herself. She is perfect- landers are now dependent upon Denmark only in the spheres ly entitled to wreak havoc on any minutely planned of foreign policy, defense and monetary policy – and on Danish itinerary. Swiss light artist Gerry Hofstetter, who is subsidies amounting to 430 million euros. But the Greenland- trying to improve awareness of the consequences of ers are hoping to unlock new national resources and generate global warming, accepts the situation without com- increased revenues from tourism and foreign investment. The plaint. At some point during the 12-day trip it must Greenlanders have propelled themselves into this new era with surely be possible to achieve his aim from the ship. a new government: The left-of-center Inuit Ataqatigiit (“soli- But even if that fails, there are always the helicopters. darity of people”) party led by Kuupik Kleist won the recent For its part, the team is certain that Hofstetter will elections “by an avalanche.” The social democratic Siumut reach into his box of tricks and come up with an alter- party, which enjoyed almost unrestricted rule for the previous native strategy that very evening. three decades, came undone through their failure to resolve Maybe. “Immaqa, as we natives say,” explains Jens- problems such as unemployment, alcohol abuse, family Ole, our ship’s mate and language teacher. Ataaseq, one, breakdown, sexual assault, a high suicide rate and cronyism. Marluk, two, we learn to count. It goes up to five in Green- Ultimately, the party fell victim to the fact that Greenland land until the hand is used up, then comes the other hand, underwent the kind of development in 60 years that typi- and finally the 10 toes. “The whole body,” one might say, cally took a century and a half to unfold elsewhere. But which is quite literally what is meant by “inuk naallugu” – the life expectancy has doubled to 60 years. No one wants Greenlandic term for 20. A nice concept. But not one we to give up the benefits of modern life and turn back the have time to savor. Hofstetter puts down his mobile phone wheel of history. Greenland is 2,650 kilometers long and leaps to his feet: “We’re off. We’ll be lighting up the and up to 1,000 kilometers wide. With a surface area of airport first, in two hours. Then we’ll take our Land Rover to almost 2.2 million square kilometers, it is more than the bridge and illuminate the pack ice from above. That 50 times larger than Switzerland, yet contains less than should work.” It can’t do any harm to project the logo of Air 60,000 inhabitants. Greenland and the national colors of red and white (sun >

Left In the middle of April, the port of Ilulissat is still full of pack ice driven down from the polar region. Center Gerry Hofstetter consults with skipper Thorwald Jensen. Will it be possible to take the ship out? Maybe. Right The icebergs on the horizon beckon from an impossible distance. At least some smaller

icescapes interspersed throughout no-man’s land can be reached and illuminated. Photos pages 14–21: Frank Schwarzbach, Michael Kessler bulletin 3/09 Credit Suisse Light Art North 1

Gerry Hofstetter uses his light art to draw attention to the problems of global warming and environmental destruction in a striking way. Our earth needs looking after: a projection on the port of Ilulissat with fishing boats caught in the pack ice. This photograph was taken from a bridge because it was not possible to go out to sea on the ship, as planned.

Credit Suisse bulletin 3/09 18 North Light Art

and snow, respectively) onto the airport building. After all, the ex- Greenland. My mind wanders back to Hofstetter’s goodnight pedition will be relying on the goodwill of the airport authorities on story, of Nono the Greenlandic boy who dreams of one day see- a good few occasions, yet special authorization is required for each ing real king penguins, which only exist in the cold Antarctic. night flight by helicopter to the Kangia Icefjord. Hofstetter knows I read how these creatures can dive as deep as 500 meters and what’s important. Not for nothing was he a banker, helicopter pilot that their hunting grounds are now as much as 800 kilometers and mountain grenadier in his former life. He has almost no end of off the coastline, twice as far as before: a consequence of global hair-raising stories to tell. Like the doe in the Puschlav region of warming. the Engadine that drove three elite US soldiers off a precipice, or Global warming. It’s a ubiquitous phrase – almost to the point the hunter attack with what was apparently live ammunition during of overkill. Particularly in our hotel, as it was here that German the visit of a German general. But there’s a right time for everything. Chancellor Angela Merkel found the perfect backdrop for her What matters now is the mission, the light art, complete concentra- speech in August 2007 that called on the international commu- tion. The images of the port exceed all expectations. The globe in nity to address the issue of climate protection. Research activity the child’s hand has an understated and thus haunting effect on was stepped up considerably as part of the International Polar the observer. Things can’t go on as they are. When will we finally Year, an initiative that lasted from March 2007 to March 2009. cast off our egoistic apathy? By the time the whole of Greenland’s And yet the extent of what we really know is still remarkably little, ice has melted away the sea level will have risen by six to seven with the data assembled differing with regard to the increase in meters! It’s now Thorwald’s turn to suddenly see his own likeness, water and air temperature, the thickness of the ice cap, the reced- larger than life, lying in the harbor. And then suddenly there are ing of the glaciers. And not even nature herself is cooperating even reindeer racing along. Time for another change of location. properly, even though you would imagine it would be to her advan- The reindeer trot onward in the running projector, now moving tage. In 2008, it was possible to walk across the ice to nearby along the walls of the houses, looking impudently into a cozy front Disko Island for the first time in ages, and the late-season pack room. In the rearview mirror we can make out a number of aston- ice enveloping the port of Ilulissat was also rather off-message. ished faces at the window. And yet a negative development is clearly under way that will have A light artist is a creature of the night by nature. Dawn and unforeseeable consequences. This much was confirmed to me by dusk are his element, just before sunset and then again just be- the Swiss climate researcher Konrad Steffen, who has been con- fore sunrise – the blue hour, as it’s known. In Greenland, mid-April ducting research in the Swiss Camp research base near Ilulissat and mid-September are particularly alluring. As for the midnight for almost 20 years. But it’s also something confirmed by Robert sun in summer, the tourists can have this to themselves. But one W. Corell, an environmental protection expert from the renowned thing about this routine works well: When we return, breakfast Heinz Center in Washington, who is closely associated with Al Gore. is laid out ready for the “normal” hotel guests and finds eager He comes here to the Hotel Arctic several times a year to give pri- takers. But first there’s work to be done – together with Hofstet- vate lectures to influential families on environmental protection. He ter, the photographers and cameramen have to go through their too is drawn to the photo session in the hotel lobby – he loves the night’s booty, now amounting to a good 6,000 shots. And though concept of corncobs on icebergs. “Aren’t you the guy who came over to sleep would be a good idea, I find myself looking out into the Washington and illuminated the National Cathedral for three nights to distance, the great silence, letting the incessant hues of white commemorate its 100th anniversary?” he wants to know. “Any chance work their magic on me. I feel the fascination of the Arctic, an you could project a few formulas onto an iceberg for me some time?” almost physical presence, irrespective of whether my eyes are Business cards are exchanged as the question is put. open or shut. I open up Peter Hoeg’s bestseller “Smilla’s Sense Greenland has less than 60,000 inhabitants and is visited by around of Snow.” Just a few pages. This story of an Inuit’s daughter is 35,000 people every year. This is a country in which you could easily bedtime reading back home. But in Greenland you can’t get lose yourself – if only there were roads to take you there. All of which away from yourself. Your thoughts are no longer free. makes the airports interesting meeting points. In Kangerlussuaq, for There are still ways of distracting yourself, of course, most example, Sven Vaa explains that he wants to obtain high-quality pre- notably with the Internet, which has now proliferated throughout mium bottled water on Disko Island for Greenland Springwater AG. >

Left Preparations for the planned expedition by ship. Center On the first day, the pack ice is already impressively thick, and at night the conditions are significantly more difficult. Right The expedition goes to sea on a single occasion: Gerry Hofstetter gives his photographer precise instructions. bulletin 3/09 Credit Suisse Light Art North 1

Gerry Hofstetter projected thought-provoking images on the glaciers of Ilulissat. Above: Flocke, a resident of the Nuremberg Zoo, on a fleeting visit to her native climes. How long will polar bears continue to survive in Greenland? Below: An impressive waterfall – is this a vision of the country’s future? What will the consequences be? If Greenland’s ice melts completely, the sea level will rise over six meters.

Credit Suisse bulletin 3/09 20 North Light Art

He is enthusiastic about the idea of healthy, high-alkaline water and impressed by the Swiss entrepreneurs who have ended unemployment in the small settlement of Qeqertar- suaq with a single stroke. Whether the quality of this water will justify the long transportation journeys remains to be seen. But Vaa is utterly convinced it will be a success, particularly in Scandinavia and Asia. Many other discussions also make it clear that Greenland is at a turning point, on the threshold of a new era, and not just politically. Global warming will fa- cilitate navigation via the Northwest Passage and make it Kangia Icefjord Unesco World Heritage Site The World easier to unlock natural resources, as well as attracting an increas- Heritage list, first drawn up by Unesco in 1975, currently ing number of tourists and foreign visitors. It will also clearly have comprises 80 landmarks spread across 148 countries. a number of positive repercussions for the native population. To the north of the Arctic Circle there are just five: the As a larger circle of people gathers, an inevitable discussion Kangia Icefjord of Ilulissat, Russia’s Wrangel Island, the ensues: Is light art actually art? As Gerry Hofstetter observes, it Rock Art of Norway’s Alta, the Laponia wilderness still is at any rate unique. The shadows thrown by the contours of the inhabited by the Sami people and the so-called Struve icebergs, the effects of nature, of light, of snowfall. True, he mus- Arc, a geodetic chain of survey triangulations named es, one could perhaps position Flocke, the polar bear from Nurem- after a Baltic astronomer and stretching some 3,000 ki- berg Zoo, on an iceberg from the comfort of one’s desk with a lometers from Hammerfest in Norway through Sweden, modern computer, but this would be sterile and ultimately lifeless Finland, Russia, Estonia, Latvia, Lithuania and Belarus rather than authentic. Because of the complexity of the organiza- to the Moldovan capital of Chisinau. The most impor- tion, but also for technical reasons, no one is likely to repeat an tant glacier in Greenland, the Sermeq Kujalleq, and expedition like this in a comparable way. That’s why, when under- the associated Kangia Icefjord were together declared taking his major projects, Hofstetter carefully documents the whole a World Heritage site in 2004. Literally “southern glacier,” “making of” process, taking an uncompromising stance where copy- the Sermeq Kujalleq is one of the fastest and most right is concerned. productive glaciers in the world. It flows up to 40 meters a day in summer and produces (“calves”) around a 10th Naja Habermann, manager of the local Unesco World Heritage of Greenland’s icebergs, amounting to some 35 cubic site, is keen on the light art idea. Nonetheless, regulations have to kilometers of ice per year. The icebergs can drift as far be complied with, such as no night flights over the Kangia Icefjord. as the 40th parallel before they melt away. It was one Only the icebergs on the edge of the fjord – which we call the “Matter- of these icebergs that sank the Titanic in 112. The horn” and the “Swiss Cheese” – are being targeted. But these are Sermeq Kujalleq has been continually receding since still particularly large and impressive. Hofstetter and his assistant 1850, a process that has accelerated significantly in stand by the open helicopter doors, loading slide after slide into the the last few years. For this reason, although the Ice- projector. They work at a frenzied pace with numb fingers: Little is fjord is often cited as having a length of 40 kilometers left of the “blue hour.” The journalist meanwhile sits out back in the in guidebooks, it is now 58 kilometers long. This pro- warmth, fighting sleep. What’s the word for camel in the Inuktitut cess is being driven mainly by the increasing tem- language, he wants to know. “We don’t have a word for camel. We perature of the water below the glacier tongue that don’t need one, because there are no camels here.” Immaqa – maybe. stretches out into the sea. The glacier has now re- Naja smiles. < treated to terra firma, which is why it is expected to recede at a slower rate and produce smaller  More information and photos on Greenland, global warming icebergs. and light art can be found at www.credit-suisse.com/bulletin, www.gerryhofstetter.ch and www.eisberge.ch.

Left Helicopter flights have a key role to play because of the pack ice. Center The doors stay open during the exploratory flight by day and the light art expedition by night. Right From land, part of the team watches the two helicopters at work. bulletin 3/09 Credit Suisse Light Art North 21

A fata morgana in the ice desert. Gerry Hofstetter’s light art juxtaposes seemingly paradoxical elements. The dictates of climate are being undermined. The world is upside down. On the planned Kilimanjaro expedition he’ll probably be “accompanied” by Greenland huskies. A gimmick? Maybe. But maybe that’s what we call it to escape the inconvenience of taking our thoughts to their logical conclusions.

Credit Suisse bulletin 3/09 Iceland in the 22 North Elves Firm Grip of Elves T hey live in rocks and crags, and are generally well-disposed to human beings. But woe betide those who disturb their repose. Elves are an integral part of life for the idiosyncratic Icelanders who inhabit the far north of Europe. Elves North 23

Text: Ute Eberle surface of the moon. Bilious green lichens cover hillsides that no human feet have yet touched. Boiling-hot geysers shoot “You need to be still, and expect nothing,” says Hermundur Rosenkranz. out of the ground, glacial lakes clink, sulfur fields bubble away, “Then you will see the hidden people.” As the 49-year-old from Reykjavík waterfalls gush from on high. Steam billows out of volcani- recounts, he has so far had some six encounters with the Huldufólk – or cally heated hills. Fog appears to rise out of nothing. And in elves as many call them. The first time he was just four years old. “There summertime the air twinkles until the eye believes it is seeing were children coming out of the rocks. I was so small that I didn’t think things. anything of it at the time.” They Look Like People and Drink Coffee “You need to sit yourself down at a crossroads on June 24,” says Sigurbjörg Karlsdóttir, a tourist guide in Hafnarfjördur. “According to It is hardly surprising that early settlers believed all sorts of tradition, you’ll then see elves moving to and fro. But it’s important not natural spirits dwelt here. Gigantic trolls, so they reckoned, to talk to them, otherwise you’ll go mad.” spewed out glowing lava. Gnomes and fairies were believed to “You have to be polite to the invisible ones,” says Petur Matthiasson, scamper between the bushes and the rocks. The underlying spokesman for the Icelandic Highways Administration. “They don’t like tradition for such phenomena had been brought over from the being surprised. But they will move if you ask.” The Administration has Scandinavian and Celtic regions, but while these tales of yore also been known to reroute roads so as not to disturb the Huldufólk. were paid little attention in their original settings, they began to But it’s been years since that last happened, adds Matthiasson reas- “creak with life” in Iceland, as Valdimar Hafstein, researcher of suringly. No, he protests, the Icelanders do not really believe in elves. anthropology and folklore at the University of Iceland, wrote some “We’re just uneasy about denying the possibility of their existence.” years ago. But just one particular kind of elf – the Huldufólk – appears to live firmly on in everyday Icelandic life. Remote but Not Backward “According to legend, they look similar to humans and have a Some 800 kilometers of ocean separate Iceland from the northwest similar way of life,” says Hafstein. “They have cows, produce hay, of Scotland. It is the most remote country in Europe. Just over row in boats, skin whales, and pick berries. They have priests 300,000 people live here, close to the Arctic Circle, on an island that and sheriffs, and go to church on Sundays.” This parallel popu- is two-and-a-half times as large as Switzerland. In many respects lace is believed to live in rocks and crags, but their internal abodes they are almost aggressively modern. Mobile phones, the Internet are rumored to be surprisingly comfortable. Behind windows and and SUVs are part and parcel of everyday life. Entry to many health doors that mortal eyes generally cannot see are alleged to be clubs is controlled by iris scanners. Thanks to hydroenergy, even cozy kitchens in which the elves drink coffee and bake pancakes. Reykjavík’s sidewalks are heated. Biogeneticists evaluate the geno- In the Ásbyrgi gorge in the north of the country, they are even types of the population. And this country has such a low illiteracy supposed to have built a concert hall, while some say there is an rate, such a high life expectancy, such a high level of education and elfin cafe to be found behind the waterfall in Hellisgerdi. Various purchasing power that it topped the United Nations’ Human Devel- surveys show that every second Icelander believes in elves. Others opment Index in 2008. The electorate re- show that the number of confirmed believers cently voted in the first openly gay prime min- is lower, but that the underlying trend is sim- ister anywhere in the world, after the former ilar: The vast majority of the island’s popula- government was brought down by the eco- tion – up to 80 percent – at least cannot say nomic crisis. for sure that elves do not exist. “If you asked And yet the past is always only a short an Icelander what he would do if he wanted drive away. Two-thirds of the population are to build a Jacuzzi in his garden but first had clustered around the capital Reykjavík, with to blow up an obstructing rock – in which the remainder living on a thin strip of land elves were supposed to exist – you’d find most along the coast or in sheltered valleys. By would refrain from such an act, just to be on contrast, other parts of the interior still look the safe side,” says Terry Gunnell, professor much as they did hundreds of years ago. It of folklore at the University of Iceland. was the Vikings of Scandinavia in their long- Good-Natured but Quick to Anger boats who first populated this country from the ninth century onward. Iceland is a volca- This is because, although generally perceived nic island. It sits on a seam between the as good-natured, elves are quick to seek tectonic plates of North America and Eurasia. vengeance against those who do them wrong. Glaciers and fields of lava cover large ex- Such as the farmer who thoughtlessly built panses of the country. Just 0.07 percent is his cellar into a rock, even though the neigh- suitable for agriculture. bors had warned him that it contained elves. Shortly afterward, so the story goes, his Impossibly Wild Landscapes Iceland is said to be covered by a dense network of energy lines, also known as daughter mysteriously fell ill and died. Unhindered by trees – with the exception of ley lines, along which elves tend to make And then there were the construction the odd dwarf birch – the wind sweeps across their homes. workers clearing an elvish stone out of the plateaus so barren that NASA once sent its way of a new road, and in so doing broke it.

Illustrations: Beate Frommelt astronauts here to acclimatize them to the The next day some 70,000 young trout >

Credit Suisse bulletin 3/09 24 North Elves

In hardly any other country is faith in technological progress as strong as in Iceland. Yet to play it safe, Icelanders would rather not tangle with elfin rock dwellers. Elves North 25

were found dead at a nearby fish farm. One leave the mound undisturbed. Even the of the workers’ bulldozers had mistakenly cut workers who were supposed to lay down wa- through a water pipe, went the official line. ter pipes here in the 1970s struggled with Elf sabotage, reckoned many. technical difficulties that many believed were Hafstein points out that stories of this na- of a suspicious nature. So much was this the ture do the rounds of the Icelandic media case that the Icelanders who were later al- “pretty much every summer.” When workers located the plot for building purposes re- fall sick or break their limbs, when machinery solved to build their house somewhere else goes wrong, or when mishaps in general pile in the city instead. The municipality, for its up, people are quick to see the hand of the part, showed understanding for their predic- invisible ones. Road construction is the most ament and duly paid them compensation. affected of all, explains the researcher. “Oth- Teaching in the “Elfin School” er prime candidates are housing construc- tion, the relocating of cables and factory “The Huldufólk exist,” asserts Skarphédinsson. extensions.” To keep problems to a minimum, For 18 years now he has been airing his con- staff from the Highways Administration now victions in his own “Elfin School,” a classroom take soundings as a matter of course to see with a lectern and blackboards right on if “something like an elfin church” might be Reykjavík’s city limits. A typical Friday in in the way, says spokesman Matthiasson. At summer will see tourists come here to sit times the Ministry has even employed its own through a lecture lasting several hours, with elfin liaison officer responsible for negotiat- the subject matter also extending to dwarves In Iceland, rocks in which elves are ing with the invisible ones. Sometimes work presumed to live are left untouched during and mythical creatures, yet in winter it is Ice- is postponed in order to give them time to road construction. landic children that listen attentively. Of move. On other occasions a rock is relocat- course, the children have already heard the ed, or the road is built around it. And some- old myths and legends at home, as Skarphé- times the workmen simply ignore the pur- dinsson points out. “But I tell them what re- ported wishes of the Huldufólk – at their own ally lies behind it all.” Rumors that elvish men risk, of course. have sometimes sought sexual relations with Every 20th Icelander likes to claim they human women “appear to be false,” he says have seen elves. The most famous witness – determinedly. a piano teacher by the name of Erla Stefánsdóttir – attests that To the folklore researcher, it’s hardly surprising that Icelanders are a particularly large number of these creatures are dwelling in Hafnar- prone to believe in elves, even today. After all, they are living in a fjördur, a port some 15 minutes’ drive from Reykjavík. Resourceful land brimming with wholly invisible forces. “You switch on the tap entrepreneurs in the area are already offering regular “elfin tours” for and the water comes out boiling hot. The wind is so strong that it tourists. can knock you over, while earthquakes can bring down your house,” says Gunnell. “An earthquake is another force you cannot see.” Interviews With 800 People Who Have Encountered Elves Indeed, studies have shown that Icelanders are generally open However, the greatest expert on Iceland’s invisible world will not be to the notion of the supernatural. For example, a large majority found in the island’s capital. And yet he himself has never seen an elf. believe that dreams can prophesy the future. Three-quarters of But Magnús Skarphédinsson has interviewed almost 800 people who the population aren’t prepared to rule out the possibility of com- claim to have done so, and even after two decades of research his municating with the dead. And seven in every ten believe guard- eyes still sparkle with enthusiasm behind his glasses when he talks of ian angels may exist. the Huldufólk. He reports that most of these events are just brief en- As Hafstein has established, “disruptive elfin activity always counters. “The elves run away and disappear into a rock or a crag.” crops up in connection with development campaigns – new build- However, Skarphédinsson also occasionally hears of long-standing ing areas, infrastructure measures, factory works and other friendships between the two peoples. A man from the east of the island projects to expand the city.” Behind it all, he believes, lies a com- recounted having played for years with two elfin children on the iso- bination of nostalgia, feelings of guilt and the fear of change. In lated farm of his parents. “Such relationships typically begin in childhood, other words, for many Icelanders the elves perhaps embody a as young elves often fail to obey the rules about not showing themselves longing for the supposedly idyllic existence of a bygone era. < to people,” says the Icelander, who harbors no doubt at all that such stories are true. According to Skarphédinsson, this particular friendship came to an end because the Huldufólk moved away. “The elfin father was a doctor and accepted a post in Norway.” He happily escorts visitors to number 102, Álfhólsvegur, a rocky, empty plot in a residential street in the Reykjavík suburb of Kópavogur. During the laying of an asphalt road, so many accidents and mechanical failures occurred when the working party tried to remove some of the

Illustrations: Beate Frommelt stone that the summary decision was taken to narrow the road so as to

Credit Suisse bulletin 3/09 26Passion for North North Pole the Pole Few people have explored the myth of the North Pole as thoroughly as Frederik Paulsen. The CEO of the family-run pharma group Ferring travels to the world’s polar regions several times a year. Two years ago, he even dived to the ocean fl oor at the North Pole in a submersible Russian capsule. North Pole North 2

Interview: Daniel Huber

bulletin: There are probably only a very few people in the world who know the North Pole as thoroughly as you do. What is it that fascinates you about this place? Frederik Paulsen: I find it rather difficult to put into words. It’s something you have to experience. There is a very special atmo- sphere there: a mixture of cold, the special light this time of year and reflections on the ice. The experience is indescribable. Do you see the North Pole as a kind of magical place influ- enced by special magnetic force fields? No, I wouldn’t say that. I find that concept a bit too spiritualized. Frederik Paulsen grew up in Sweden and stud- What do you recall from your diving expedition to the ocean ied chemistry at the University of Kiel in Ger- floor at the North Pole? many. He has worked for his family company, Well, first of all it became pitch black very quickly – not least be- Ferring, since 1976, and took the helm as CEO cause we were beneath a layer of ice around a meter and in 18. The international pharmaceutical group a half thick. We descended more than 4,000 meters in the has its headquarters in St-Prex, on Lake Geneva. darkness, and didn’t switch on our lights until we reached the Paulsen, 58, lives in Paris and Lausanne. He ocean floor. supports a large number of social and cultural And now there’s a titanium Russian flag on the seabed projects in places such as Bhutan, Russia and down there, all alone in the darkness? Germany. That’s true. But there are plenty of other places on the earth where you’ll find flags of this type. How did you, as a Swede, end up financing this very Russian expedition – for it was celebrated as such – to the seabed at the North Pole? Every year I try to embark on four polar expeditions. Such an un- dertaking is only possible if you’re working on several projects at the same time. Ultimately, not all of them will come to fruition, be it because of poor weather, a failure to obtain the necessary ap- proval, or for some other reason. There are always huge uncertain- whom I got to know on my expedition to view a frozen mammoth ties involved. The project to launch an expedition to the seabed at in Siberia. the North Pole was initiated back in 2000. But the original initia- How did you come across this mammoth? tors of the project lacked the funding as well as political support. Ah, that’s a long story. Essentially, I was told about it by an- When I met these people later, I revived the project, which was other friend who is a mammoth researcher. And so in 2003 we then dormant, and activated the necessary contacts. invited two other mammoth researchers, rented an Antonov How essential was it to conduct the expedition under the aircraft, and spent four weeks flying around Siberia until we Russian flag? finally found the mammoth in question. It was extremely well The Russians were the only people with the necessary tools for the job. preserved. The head was frozen in a block of ice. You could Only they possess the required combination of atomic icebreakers, even still make out the eyes. It was then exhibited two years special helicopters and of course these two deep-sea capsules. later at the 2005 World Expo in Japan, where it caused a But in addition, the expedition is also supposed to have been minor sensation. conducted under the flag of New York’s Explorers Club. How did Despite your having financed the expedition to the North that come about? Pole to a substantial degree, you yourself descended to The Explorers Club is an extremely well-respected and serious opera- the seabed only some time after the first diving capsule. tion. At their Annual Dinner, you feel as if you’ve been taken back in We consciously planned it that way, because we wanted to time 200 years to the colonial era. Everyone has a tale to tell of an even give our Russian friends precedence. And it was particu- wilder expedition than the last. They serve up outlandish snacks involv- larly important to them that they should be the first ones to ing grilled mealworms, grasshoppers and scorpions. And there’s a reach the bottom. special committee that ascertains which expeditions are worthy enough So who does the North Pole belong to? to be conducted under the flag of the club. Our expedition was deemed Oh, that’s a difficult one. Where the South Pole is con- sufficiently worthy, and we genuinely did bring a club flag along with cerned, there is a clear agreement between scientists and us. Afterward there was a ceremonial handing-over of a personal copy governments for the Antarctic region, and it functions extreme- of the flag, which now has pride of place in my office. This is the high- ly well. Things are different up in the Arctic. Here there are est accolade of all for a member of the Explorers Club. many competing commercial interests and no legal mechanism How does one become a member of New York’s Explorers Club? in place. To complicate the picture, around 20 percent of all the This is something that can only be conferred through the recommenda- world’s oil and natural gas reserves are believed to be slumber-

Photos: Editions Paulsen tion of an existing member. I was put forward by an American friend ing in the depths of the Arctic. Even as recently as 20 years >

Credit Suisse bulletin 3/09 28 North North Pole

ago this was of no interest, as the state of technology simply did lead to huge areas of Greenland and in particular Siberia suddenly not allow boreholes to be drilled that deep. Now such exploration becoming inhabitable and open to cultivation. is feasible. At the moment, a special committee of the UN is in Do you have a dream that you still want to fulfill as an explorer? the process of deciding who owns what. And the countries bor- My aim is to visit all eight poles of the Arctic and Antarctic. dering the region have until a certain date to justify their claims. Why are there eight? During your expedition, among other things you took ground There are four poles in both the Arctic and the Antarctic: geographic, samples that were supposed to prove that this region is part of magnetic, geomagnetic and the pole of inaccessibility. the Russian mainland, thereby cementing Russia’s claim. What is a pole of inaccessibility? Was this attempt successful? In the Arctic Ocean this is the point furthest from any land mass. In When you have a clearly separate island that is inhabited, estab- the Antarctic it is the point of land furthest from the Southern lishing your borders is a relatively simple procedure. But without a Ocean. fixed land mass, the potential claim scenarios are open to any de- How many of these poles have you yet to reach? gree of complexity. Basically, however, the existence of a chain of Five of them I’ve already been to. I’ve yet to reach the two geomag- mountains under the ocean that is somehow connected with a fixed netic poles or the magnetic South Pole. Actually, my last two ex- land mass may be put forward as an argument for ownership under peditions were designed to take me to the geomagnetic North Pole. certain circumstances. As to whether our samples from the North This is a very difficult undertaking, as you rely on the logistical sup- Pole will support this thesis or not, only time will tell. Essentially, port and approval of governments. As a result, some of the prepa- these underwater mountain chains could be claimed by Greenland rations took more than two years. And then the weather turns on as well as Russia. The Russians want around a half of the unclaimed you, or something else goes wrong, and you’re back to square one. Arctic region. But we’re not giving up. < Do you see evidence of any global warming during your polar voyages? I don’t want to scaremonger. But global warming is already all too present and observable in the polar regions. Most people are unaware that there are quite natural cycles of ice ages and phases of warm- ing. Every 120,000 years things go one way and then the other.  bulletin is giving away five northern encyclopedias! Today we are quite clearly in a warming phase. But it’s all happening The “Practical Dictionary of Siberia and the North” much too quickly. Developments that previously lasted maybe 10,000 is a comprehensive reference work of 1,104 pages years are now being witnessed within 10 years. And this is the crux on the Arctic North of Russia, containing more of the problem: Neither animals nor people can adjust naturally to than 500 illustrations. It was published by Frederik Paulsen through his own publishing house set the accelerated pace of change. That’s what makes this such a big up specifically for that purpose. You can enter the problem. The warming phenomenon itself wouldn’t be so bad. It will draw at www.credit-suisse.com/bulletin.

The expedition to the ocean floor at the North Pole is successful: Frederik Paulsen returns to the surface of the Arctic Ocean from a depth of more than 4,000 meters, and emerges triumphant from his diving capsule MIR II. Planted on the seabed is a Russian flag made of titanium. bulletin 3/09 Credit Suisse Credit Suisse 2

Credit Suisse

Business / Sponsorship / Corporate Citizenship

holders of political mandates, which Junya Tani, head of Private Banking Asia Pacific allow for an exchange of experience Japan, is also upbeat about the while also serving the purpose of Private Banking Services growth opportunities. The local fi- continuing education. Around 100 Now Available in Japan nancial expert is confident that he holders of political mandates recent- can offer his clients more than other ly took the opportunity to attend a Credit Suisse can look back on financial institutions that operate in podium discussion on the subject of nearly 40 years of successful invest- Japan. “Which tools should be used to com- ment banking and asset manage- bat the economic crisis?”, led by ment operations in Japan. Since President of the Council of States mid-May, the bank has also been Switzerland Alain Berset and National Councilors active in the private banking sector Brigitte Häberli-Koller and Ruedi of the world’s second-largest econ- Biking to Work Noser. Subsequently, they were omy. “In Japan there are between backed up by – and also challenged 5,000 and 10,000 households with In 2008, around 45,000 people in Americas/Asia Pacific by – a number of workshops on top- financial assets of over 10 million Switzerland from 875 companies New York Philharmonic to ics such as “Crisis management at US dollars,” explains Paul Kuo, CEO took part in the summertime “bike to Tour Japan With Alan Gilbert the municipal level” or “Work-life Japan. “Generally speaking, these work” campaign. Credit Suisse staff balance: between work, politics and investors need the leading, custom- members alone chalked up 145,000 Alan Gilbert will be the first music family.” ized financial solutions that an inte- kilometers. The project will be con- director of the New York Philhar- grated bank with comprehensive tinued through 2009 – as bulletin monic to have been born in New York expertise in the private banking and went to press, the participants were City. In mid-September he will take investment banking fields can offer.” still pedaling away. Credit Suisse up his new post with a world pre- miere by Magnus Lindberg. It is Karl Landert New Member of hardly surprising that he has come to the Executive Board appreciate the Finnish composer in residence at the orchestra. After As a signal of the major importance all, Gilbert conducted the Swedish accorded to IT, Chief Information Royal Philharmonic in Stockholm for Officer Karl Landert was appointed eight years and is married to Swedish a member of the Executive Board at cellist Kajsa William-Olsson. His the end of June. The appointment is mother, on the other hand, violinist at the same time a recognition of the Yoko Takebe, was born in Japan. outstanding service that Karl and This is one of the reasons why the over 10,000 IT experts around the next tour, starting on October 8, world have provided for the bank. will commence in Japan. In addition, there will be a concert in Tokyo with works from the US-Japanese Very Europe, Middle East and Africa Young Composers program. Here, children with a limited musical back- Greater Presence in Qatar ground compose performance works for the New York Philharmonic. Credit Suisse has operated in the This will also be the orchestra’s first Middle East for four decades and appearance in Vietnam. currently has offices in Abu Dhabi, Christo and Jeanne- www.credit-suisse.com/sponsoring Beirut, Doha, Dubai, Cairo, Manama Claude illustrate their and Riyadh. In Qatar, Credit Suisse projects years ahead Financial Services (Qatar) LLC com- of time in colorful, menced its activities in 2006 at the true-to-detail sketch- Switzerland Qatar Financial Centre in Doha. es. A view of the Mandate Holders Meet Since then, the office has dealt suc- Arkansas River. cessfully with the needs of high net Switzerland/Americas “We support Switzerland’s political worth individuals (HNWI) and insti- militia system and are proud of the tutional clients. This summer, the Over the River – Three Years to Go to Competition fact that around 300 staff members team, under the leadership of Alad- hold a political office at the municipal din Hangari, began offering the entire Credit Suisse has supported the artist couple Christo and Jeanne-Claude or cantonal level,” emphasizes Hans- range of integrated bank solutions, since 2005 with documentary exhibitions – most recently at the Fondation Ulrich Doerig, Chairman of the Board including investment banking and de l’Hermitage in Lausanne. In “Over the River – Project for the Arkansas of Credit Suisse. The bank supports asset management services. River, State of Colorado,” the development of their vision dating from 1992 them by offering flexible working could be followed. The exhibition provides a taste of the upcoming imple-

Photos: Chris Lee | Wolfgang Volz | Editionshours Paulsen and organizing meetings for mentation scheduled for summer 2012. www.overtheriverinfo.com

Credit Suisse bulletin 3/09 30 Credit Suisse

“The crisis has clearly shown that being close to clients is crucial” Hans-Ulrich Meister looks back on his first “intense” year as CEO Credit Suisse Switzerland, and explains how clients will benefit from the restructuring of the private client business.

bulletin: You took up your position as new workforce of 47,000 employees, 21,000 markets. As a globally networked economy CEO Credit Suisse Switzerland on are based in Switzerland. The majority and leading financial center, Switzerland September 1, 2008, just before the great- of our clients are domiciled here, and we needs its own banks with international est crisis faced by the finance industry operate a significant part of our global investment banking operations. The gap since 12. Does that constitute good or business from our Swiss base. All this that would be left if Switzerland’s two bad timing in your view? requires an equivalent level of expertise internationally oriented large banks were Hans-Ulrich Meister: Well, it was obviously to fall by the wayside could not be so easily anything but a gentle start. But that wasn’t filled by foreign institutions. The current such a great problem for me, as I came crisis has shown that large foreign banks here with wide experience in the banking “Our international business are very quick to retreat to their domestic business. What’s more, you become well has a very direct benefit markets in times of crisis. acquainted with new staff and a new for Swiss companies and What can you do to improve public organization very rapidly in difficult and our financial center.” acceptance of the large banks? challenging situations. So in this sense, the Redouble our efforts to get our views pressure I found myself under also had its across to the public at large and create positive aspects. and infrastructure. The wider environment understanding for the economic impor- Looking back over the last year, what has in Switzerland is also of great importance tance of globally active banks. We need to brought you the most satisfaction? to us. By this I mean the opinions and cultivate closer contact with authorities, On the one hand, the fact that we were able actions of Swiss policymakers and the super- politicians and the wider public – some- to resolve our problems quickly and through visory authorities in particular. It is pre- thing that we have neglected during our own efforts. During the critical phase cisely in the current situation that we need the period of strong global economic in October, we strengthened our capital base people to understand the significant role growth. We have been far too reticent in immensely with the help of private investors. globally active banks play in our economy clarifying our position. People from outside At the same time, we also reduced the and our financial center, and the important banking – and even many of those who risks in Investment Banking and implemented contribution they make. work within it – find our industry very a business model that is more strongly The last 18 months have shown above complex. Moreover, almost no one is aware focused on clients – and therefore involves all that the international banking business that Credit Suisse purchases 2.3 billion a lower level of capital and a lower degree involves risks as well as growth potential. francs’ worth of goods and services in of risk. But in addition, as head of Credit Our international business has a very direct Switzerland every year – a large proportion Suisse Switzerland I was particularly benefit for Swiss companies and our of which is sourced from SMEs. Or take our pleased that Swiss clients retained their financial center. More than 50 percent of contribution to education in this country – confidence in us throughout the crisis. For Swiss gross domestic product is generated and I don’t just mean the more than example, Credit Suisse generated a net by the export industry. Switzerland’s inter- 1,200 apprentices, interns and university inflow of new assets last year in Switzer- national companies employ some 2.5 million graduates who are found within our ranks. land as well as abroad. employees abroad. All these companies Many employees of smaller banking How important is Switzerland to rely on support to conduct their foreign institutions have gained their professional Credit Suisse? business. They need flawless international experience at foreign branches of the large Switzerland is our domestic market and the payment transaction processes, export banks. As a large international company,

backbone of our business. Of our global financing and the backing of the capital we are hardly ever likely to achieve the Photo: Rainer Wolfsberger bulletin 3/09 Credit Suisse Credit Suisse 31

same roots among local communities as a small company. But what we can achieve is recognition that Credit Suisse pos- sesses valuable expertise, offers first-rate products and services, and makes a significant contribution to both the Swiss economy and Swiss society. The large banks are accused of applying more stringent risk criteria and thus cutting off the money supply to the SME segment. How would you counter this accusation? Well, we should be very clear about a couple of points here. As things stand today, 55 percent of all unsecured lending to SMEs is provided by the two large banks. What’s more, at Credit Suisse we have not

“Credit Suisse purchases 2.3 billion francs’ worth of goods and services in Switzerland every year.”

changed our credit approval standards. So any talk of a credit crunch doesn’t stack “In 2008 – and in the first quarter of 2009 – we have actually seen an increase in credit volumes,” up. The credit approval process is based says Hans-Ulrich Meister, CEO Credit Suisse Switzerland. on three important criteria. The first of these involves scrutiny of all the key data of a company – such as revenues, profits, losses and future budgets. The second entails an evaluation of company manage- ment and its dependencies. The third criterion is the analysis of the market environment. So if this environment then impacts company revenues, this in turn leads to a reassessment of risks and therefore inevitably to more intensive negotiations ... … and presumably also to lower credit Profile volumes. Hans-Ulrich Meister took over the role of CEO Credit Suisse Switzerland So far this has not been the case. In on September 1, 2008, at the same time becoming head of Private & 2008 – and in the first quarter of 2009 – Business Banking Switzerland and a member of the Credit Suisse Executive we have actually seen an increase in credit Board. He previously worked for 20 years at UBS, where he also held volumes. The corporate client business is leading positions in the private and corporate client banking business as absolutely vital to the success of the integrated bank. If an entrepreneur feels he member of the group managing board. Meister is a graduate of the Zurich has been badly treated by us, we are hardly Higher School for Economics and Administration (HWV), and has also likely to acquire him as a private client. completed the Advanced Management Program at the Wharton School and But the fact remains nonetheless that we the Harvard Business School. Now 50, Meister is married and has three are in a recession. Many companies are teenage children. He has called time on an active handball career after having a more difficult time of it right now. 20 years, and now limits his athletic pursuits to tennis and skiing with his And there are a number of difficult situa- family. Meister is also an avid musician: He plays the accordion and the tions, extending right through to actual piano, and conducted a local music group for many years. bankruptcies, where of course the risk >

Credit Suisse bulletin 3/09 32 Credit Suisse

of losses for us increases greatly. As a sional career dating back 40 years, bank, sometimes we have to say no. Best of Corporate Publishing as well as on countless discussions. We are currently seeing a restructuring Double Silver for bulletin It is clearly divided into four different of the private client business in Switzer- areas – People, Governance, Risks land. How will clients benefit from this in Every year, the representative indus- and Particular Challenges – each of try body Forum Corporate Publishing which has 12 sections and 12 sub- concrete terms? selects the best of more than 600 sections. The handbook contains The crisis of the last 18 months has clearly publications submitted. At the orga- around 1,900 real-life examples. shown that being close to clients is crucial. nization’s annual congress in Berlin In Switzerland, we have a large number of at the end of July, all four magazines entered by Credit Suisse achieved affluent clients with assets of up to one Nurturing Young Talent impressive accolades. bulletin, the million francs. So far, these clients have oldest bank periodical in the world, Zurich in the Spotlight been looked after in only a third of our received double silver, not only in the as Movie City branch network. If we are to succeed in “Business to Clients, Finance and the future, we need to be able to offer our Insurance” category, but also as a special prize in the particularly cov- expertise comprehensively in all branches, eted “International Communication” and increase our client proximity. It’s category. “Global Investor,” a maga- not surprising that our competitors have zine also designed by the Stäfa- slogans such as “Always close to the based Arnold. Inhalt und Form, re- client” and the like. In addition, there is ceived silver too, as did the client magazine Bonviva. The employee another segment of very affluent clients magazine one was accepted into the that requires all the services that an “The world’s best “Hall of Fame” after winning a third integrated bank can provide. Here we banks. A short list: gold medal. The 5th Zurich Film Festival will take […] That leaves place from September 24 to Octo- ber 4. Headed by Karl Spoerri and Credit Suisse and Nadja Schildknecht, the festival man- Handbook by Hans-Ulrich Doerig JPMorgan to take agement has once again expanded “If we are to succeed in the the grand prizes. “Strive for Credibility” the program. There will now be five future, we need to be Credit Suisse has Golden Eye awards, each garnering able to offer our expertise had its share of In the competitive environment of the a cash prize as well as promotional comprehensively in all future, both employees and organi- support worth a total of 200,000 mishaps during zations will need to continually prove francs: Best International Feature branches, and increase our the crisis, but it their worth, be it with respect to vi- Film, Best German Language Fea- client proximity.” was quick to scale sion, mission and strategy, knowl- ture Film, Best International Docu- down its balance edge, expertise, capabilities or val- mentary Film, Audience Award and ues. Other key aspects that will be Variety Award. More than 30 debut, sheet, had plotted subjected to scrutiny include innova- second or third works will be shown. will be increasing the advisory quality. We a credible strat- tiveness, market position, operation- In addition, two artists will be hon- can achieve this by serving these clients egy for its invest- al management and skillful handling ored for their lifetime achievements: from selected locations where our global ment bank and of the expectations of the media and A filmmaker will receive the Tribute different stakeholders. One of the to … award, won last year by Costa- expertise is represented by qualified pulled well ahead central factors here is credibility. Gavras following previous victories advisors and specialists operating with of UBS, its main Hans-Ulrich Doerig, Chairman of by Oliver Stone and Stephen Frears. the necessary resources and infrastructure rival in wealth Credit Suisse, is in no doubt: “People Meanwhile, an equivalent prize, the behind them. Here our competitors are management.” with the right capabilities and a clear Golden Icon, which was won last not the regionally rooted cantonal banks objective who strive for credibility year by Sylvester Stallone, will go to May 21, 200, and peak performance will deliver a legend of the screen. The excite- and Raiffeisen institutions but the purely www.economist.com success to their companies as well as ment of the festival will be further private banks. This restructuring is themselves.” His handbook “Strive for enhanced by special line-ups such a growth initiative and is designed to Credibility” is based on personal ex- as New World View and Out of Com- provide our clients with an even better periences assembled over a profes- petition Premieres, the digital film competition Onedotzero and the Zu- service in keeping with their needs, and rich Master Class. thus gain us additional market share. www.zurichfilmfestival.org Daniel Huber

Wealth of experience from a career spanning 40 years. bulletin 3/09 Credit Suisse Credit Suisse 33

City and Hanoi) as well as China Success in the (Beijing, Shanghai, Suzhou, Guang- Far North zhou and Hong Kong). Together with Osec – the umbrella organization for Switzerland’s up-and- the promotion of exports, imports coming footballers are per- and investments, as well as for the forming their socks off. promotion of Switzerland as a busi- The U1s were beaten at ness location – a multifaceted itiner- ary has once again been drawn up the European Champion- that will allow participants to forge ships by Holland only at the initial contacts and to develop an semifinal stage, and also a ssessment of the market opportuni- qualified for the World Cup ties in Asia as well as the challenges in Nigeria in October. The posed by actual market entry. With the support of Credit Suisse, U1 men’s and women’s Connect China – a platform for the sides also qualified for the exchange of knowledge and ex- final stages. perience between Switzerland and Progress is being made China – will host a specialist daily in women’s football: six of event in Zurich on September 10, en- the first team’s players are titled “How the Chinese Think: Op- portunities in Times of Crisis.” Par- under contract abroad – ticipants will include two German Marisa Brunner and Martina e xperts on China, Harro von Senger Moser (SC Freiburg), and Frank Sieren. Vanessa Bürki (Bayern www.credit-suisse.com/kmu/ chinareise; www.connect-china.ch Munich) – as well as playing Partnerships with Swiss Export and the Swiss Venture Club (SVC) for top-five teams – Lara Exports the Lifeblood of Switzerland Dickenmann (Olympique High Level of Client Satisfaction Lyonnais), Gaëlle Thalmann The Swiss Export Day in May is always a highlight in the calendar for the ex- Expressed (Turbine Potsdam) and port industry. In addition to interesting talks by Gerard van Kesteren, Kühne + Ramona Bachmann Nagel, Werner Bloch, Man Turbo AG Switzerland, Patrick Hofer-Noser, Swiss Best Global Custodian 200 (pictured) at Umea IK in Solar Systems AG, Espace Mittelland, which was awarded third place in the SVC Prize for Entrepreneurship (see page 37), Professor Lino Guzzella from Every year, the London-based firm Sweden. Bachmann is in the Swiss Federal Institute of Technology, Mayor Elmar Ledergerber and light R&M Consultants conducts a client her third season alongside artist Gerry Hofstetter (page 14), there was particular attention given to the satisfaction survey to identify the best talk by Nordic superstar economist Kjell A. Nordström (page 38). In June, global custodian, whereby some 800 Swiss Export also participated in the specialist event “Opportunities and institutions worldwide are judged Challenges in the Chinese Domestic Economy,” one of a number of SVC according to a total of 40 different training events, and involving Urs Buchmann, head of Corporate Banking, criteria. Global Custodian Solutions Credit Suisse Beijing. Exporters should also take note of the article “Swiss of Credit Suisse, headed by Patrik Export Economy in an Age of Crisis” (page 56). Frieden, was the overall winner this www.swiss-export.ch; www.swiss-venture-club.ch year just as it had been in 2008, top- ping three categories, including Port- folio Manager. Global Custodian So- magazine, “Credit Suisse also shone lutions looks after pension funds, in- Praise for In Focus in the Multimedia category. The bank surance companies, foundations and Stocks Assesses the operates what is essentially its own public-sector institutions. Global Cus- Websites of Top Companies TV studio – in the In Focus section of tody is a complete services package Marta, the world’s leading the Web site, the user can obtain in- for the centralized management of female footballer. Both the Stocks, Switzerland’s leading inves- vestment tips via Web TV; the service large and globally diversified securi- U1s and the senior na- tor magazine, analyzed the websites is also available as a podcast, for ex- ties holdings, providing individual re- tional side are benefiting of Switzerland’s top 30 companies ample via Apple’s iTunes. A number ports and pursuing the objective of from the shareholders’ perspective, of client magazines can be obtained ensuring transparent, comprehensi- from the stunning rise in with a breakdown into the following online free of charge.” ble and efficient organization of se- quality among women foot- categories: Content and Topicality, www.credit-suisse.com/infocus; curities management. ballers from central Swit- Design and Navigation, Multimedia, www.stocks.ch Texts: Andreas Schiendorfer zerland. The senior team, and Interactivity. In an article entitled coached by Beatrice von “Huge Gulf Between Compulsory and Freestyle,” the specialist publi- Siebenthal, is looking to Business Preview cation identified substantial differ- qualify for the 2011 World ences. Credit Suisse emerged on top. China and Vietnam: Cup in Germany, but must “The large bank performed strongly First-Hand Information first assert itself in a group in most categories.” The bank was including Ireland, Russia, praised not just for the wealth of in- The traditional SME Asia trip orga- Israel and Kazakhstan. formation it provided, but also in par- nized by Credit Suisse will this time ticular for its clarity and its user- run from November 4 to November

Photos: Gaetan Bally, Keystone | Jean-Marc Mähr www.ramonabachmann.ch friendly nature. “Finally,” wrote the 15, taking in Vietnam (Ho Chi Minh

Credit Suisse bulletin 3/09 34 Credit Suisse

works of the European avant-garde, brought Art Museums Are Home together in P aris by well-known Russian col- To the Whole World lector families. From Courbet to Picasso. Works from the Summer in particular is a good time to stroll through museums, for instance Pushkin Museum, Moscow. Pierre Gianadda in Lugano, Martigny or Zug. You can stimulate your mind and cool off at the Foundation, Martigny, until November 22. same time.  www.gianadda.ch

Kunsthaus Zug Roman Signer: A Retrospective as a Testimony to Friendship

lic realizes what experts have known for a The fact that the rela- Museo d’Arte, Lugano long time: Rotraut is much more than the tively small Kunst- Yves Klein & Rotraut: sister of Günther Uecker, the widow of Yves haus Zug repeatedly The Lightness and Force of Color Klein or the wife of Daniel Moquay; she is an attracts attention on artist who merits recognition in her own an international scale right. (with the result that In Lugano the works of Yves Klein and an expansion of the Rotraut are being shown together for the first museum is being considered) is due in no time – an additional, unique attraction. small part to Christine and Peter Kamm. The couple put together a major collection of Yves Klein & Rotraut. Museo d’Arte, Lugano, works by S t. Gallen-based artist Roman until September 13. Next exhibition: Signer, a friend of theirs. The donation, now Körper, Automation, Roboter, October 25 to completed, has made the Kunsthaus the What if? What if the French painter, sculptor February 21, 2010.  www.mdam.ch owner of the most significant public Signer and performance artist Yves Klein had not collection after the National Gallery in Berlin died of a heart attack just six months after and the Kunstmuseum in St. Gallen. The ret- marrying Rotraut Uecker ? Anyone who ex- Pierre Gianadda Foundation, Martigny rospective, “Works 1975 – 2007,” very much plores the oeuvre of the co-founder of New From Courbet to Picasso: worth seeing, not only makes this abundantly Realism – and the exhibition in Lugano, The Best of the Pushkin Museum clear but is also an homage to the artist’s staged in collaboration with Galerie Gmurzyn- patron, Peter Kamm, who died in early ska and the Yves Klein Archives, is a colorful The Pierre Gianadda Foundation arose out 2008. opportunity to do precisely that – can hardly of a tragic incident. No sooner had builder On August 16, the exhibition “The Moving believe that this avant-garde artist and pre- Léonard Gianadda discovered the remains of Museum” by Olafur Eliasson, one of the best- cursor of pop art died at the age of just 34 a Gallic-Roman temple in Martigny in 1976 known contemporary Scandinavian artists, after only eight years of artistic activity. Klein than his brother, Pierre, died. He dedicated will come to an end. This is the sixth project was known primarily for his monochromatic the Foundation, which houses both a perma- to be realized in Zug. The seventh, the compositions. He also achieved notoriety by, nent exhibition and attractive temporary ex- planned documentation of previous projects, for example, having models covered with blue hibitions, to his brother. will hopefully not be too long in coming. paint roll around on paper during a perfor- In 2004, visitors were able to admire sig- mance while an orchestra played his “Mono- nificant works from the Philipps Collection in Roman Signer, Works 15–200, donated by tonous Symphony,” which consisted of a Washington, D.C., and in 2006 they came to Christine and Peter Kamm. Kunstmuseum Zug, single sound. The force of his colors lives on. view exhibits from the Metropolitan Museum August 30 until November 22. His special ultramarine blue, with a hint of of Art in New York. Now the journey takes  www.kunsthauszug.ch red, which he had patented as International them to Moscow, to the A. S. Pushkin Mu- Klein Blue, exerts an irresistable pull on view- seum of Fine Arts – and back again, as the ers, literally drawing them into the picture. museum focuses less on Russian and Slavic Rotraut loves colors, too. Even more so art than on Western European works. People than in the pictures, this is evident in her may remember that the Pushkin Museum sculptures, 22 of which are temporarily already staged an exhibition in Martigny in adorning public spaces in Lugano. Although 2005 dedicated to French painting. The ex- made of iron, aluminum or bronze, they are hibition “From Courbet to Picasso” deals with notable for their lightness. They dance lightly the period from the second half of the 19th through the city, beckoning exhibition visitors century until the end of the 1930s, compris-

to undertake a cultural tour. The general pub- ing a variety of styles and attractive major Texts: Andreas Schiendorfer Photos: Rudolf Steiner, Kunsthaus Zug, donated by Christine and Peter Kamm | Les deux saltimbanques, 1901, 73 x 60 ©The State Pushkin Museum of Fine Art, Moscow | Rotraut, ADAGP, Paris | Stephanie Pilick, Keystone | Tallandier, Keystone bulletin 3/09 Credit Suisse Credit Suisse 35

1

2 3

1 The Kunstmuseum Zug owns a major collection by the St. Gallen-based artist Roman Signer. Pictured here: Piaggio auf Schanze, Chocholov/Poland, 2003. 2 The Pierre Gianadda Foundation is showing masterpieces from the Pushkin Museum in Moscow. Pictured here: Pablo Picasso, Harlequin and His Companion. 3 Sculptures by Rotraut (Moquet-Klein) have been placed throughout Lugano. Here: Cro Magnon Plaza (private collection).

Credit Suisse bulletin 3/09 36 Credit Suisse

European Tour presented the world premiere Alan Gilbert Takes Over of Steven Stucky’s “Rhapsodies for Orches- tra.” But now, with Magnus Lindberg, a Com- The Baton poser in Residence has been appointed for the very first time, and the American baritone The 25th music director of the New York Philharmonic will make his debut with Thomas Hampson will be at his side as Artist a world premiere. An Asian tour will follow shortly afterwards, with an exciting in Residence. educational project in Japan and the orchestra’s first ever trip to Vietnam. First Tour Goes to Second Homeland

Although Gilbert’s father, Michael, retired from the orchestra in 2001, his mother, violin- After seven years as music director, in June ist Yoko Takebe, is still a member. Surely it’s Lorin Maazel said farewell to the New York no coincidence then that the orchestra’s first Philharmonic and its loyal audiences with tour will take the New York-born conductor Benjamin Britten’s “War Requiem” and to Asia, with the first concert set for Tokyo Mahler’s “Symphony of a Thousand” (Eighth on October 8. The 2009 Asia tour will also Symphony). In between he conducted the be making stops in South Korea, Vietnam, Second Symphony of Jean Sibelius, Finland’s Thailand, Singapore, the United Arab Emir- most famous composer. ates and Turkey. It’s possible that Maazel’s choice of Sibe- The 60th Country on the Orchestra’s Map lius was deliberately prophetic, designed to herald his successor Alan Gilbert. For on On October 16, 2009, all eyes will be on Hanoi, September 16, at the opening night gala at as the orchestra has never played in Vietnam Avery Fisher Hall, Gilbert will debut with the before. The New York Philharmonic’s perfor- world premiere of a new work by the most mance in what will be its 60th country is not famous living Finnish composer, Magnus New York Philharmonic’s 25th music director, Alan likely to be as controversial as the one a year Gilbert, is set to take the orchestra on tour through Lindberg. This will be followed by the soprano Asia this October with stops in seven countries. and a half ago in Seoul. Lorin Maazel com- Renée Fleming’s interpretation of the exotic mented on it in an interview with Credit Suisse “Poèmes” by Olivier Messiaen. The gala will bulletin: “In responding to classical music, conclude with the wonderful “Symphonie such as Hector Berlioz, the program features people from different classes do find com- fantastique.” modern music that is less frequently played. mon ground. There are moments engraved More than anything, it creates plenty of in my mind that bring that forth, for example Composer and Artist in Residence space for new discoveries. This is not totally the first time the ‘Star-Spangled Banner,’ the Right from his first concert as music director, new for the orchestra, as adventurous musi- national anthem of the United States, was Gilbert will be displaying his broad range of cal journeys are in fact a specialty of the New played by the New York Philharmonic in interests. In addition to classic composers York Philharmonic. For example, its 2008 North Korea in February 2008 to an audi- ence of mostly Korean government officials. They cheered when it was over. That was an extraordinary event. I don’t think any greater example can be given of bringing people to- Very Young Composers in Tokyo and New York gether through music.” That will surely con- Since 2006, members of the New York Philharmonic have tinue to be the case, even if sudden miracles participated in educational programs in Tokyo’s Minato have turned out to be an extremely rare oc- school district. And since November 2008, David Wallace, currence in the real world of global politics. Wendy Law, Janey Choi and Jon Dok, founders of the Very Another remarkable event scheduled as part of this tour will be the orchestra’s free Young Composers (VYC) program, have been holding work- open-air concert to be held at the Esplanade shops and interactive performances to show their Japanese in Singapore, which will bring classical music colleagues how to use music to build bridges between to a large number of people who would oth- cultures. In the VYC program, which also runs in New York erwise never have had the opportunity to and Shanghai, children with little exposure to music colla- attend such a concert, principally for finan- borate to compose a work to be performed by professionals. cial reasons. Andreas Schiendorfer These works are performed each spring by the Teaching Artists Ensemble of the New York Philharmonic in 21 New York primary schools. A concert for teachers, students and their families was held in Tokyo in July. bulletin 3/09 Credit Suisse Credit Suisse 3

in the Espace Mittelland region. Little won- Recognition for Swiss der, then, that at the end of March the orga- nization’s president, Hans-Ulrich Müller, was T ourism Industry able to welcome some 2,300 guests from business, politics and the arts to the BEA At the end of March, Gstaad Palace, a five-star hotel that has been exhibition hall. And although it was already managed by the Scherz family for 60 years, won second prize in the Espace the seventh time that the prizes were being Mittelland entrepreneurship awards of the Swiss Venture Club – testimony awarded, the jury – chaired by Markus Leib- to the pronounced quality ethos that pervades this sector. undgut of McKinsey – had no trouble at all finding six eligible candidates. On the con- trary: If anything, it was difficult to rank the Tourism is a cornerstone of the Swiss econ- With only a few exceptions, quality aware- various finalists. In the end, the winner was omy. In 2008, revenues from foreign visitors ness has asserted itself everywhere. And Jakob AG of Trubschachen, a global supplier totaled a massive 15.6 billion Swiss francs, “quality” refers not only to the standards and of architectural rope systems. Third prize thus making tourism Switzerland’s fourth- services offered, but also to the “soft” hos- went to the Lyss-based company 3S Swiss biggest export industry – roughly on a par pitality factors. with watchmaking. All in all, tourism accounts Fifth Award for the Sector for every 10th job in Switzerland. That is about 335,000 full-time equivalents, with This is also reflected in the Swiss Venture the hotel industry alone accounting for some Club’s regional entrepreneurship prizes. Al- 90,000 of those positions. Consequently, though the majority of award winners are the health of tourist-sector companies and highly innovative technology companies, a of the hotel industry in particular is crucial to number of hospitality enterprises have now Switzerland’s future well-being, especially at also made it through to the finals: Hotel Hof difficult times like the present. Weissbad (runner-up in 2004), Grandhotel Giessbach (fourth place in 2006 ), Albergo More Quality Awareness Losone (third place in 2007) and Gstaad During the boom years of the 1990s, the Palace (second prize in 2009). An award Swiss hotel industry was accused – rightly or (fourth prize in 2008 ) has also gone to Reka wrongly – of becoming a little complacent. Reisekasse. The latter shows that quality A 15-million-franc investment that makes business After all, tourists seemed to be streaming awareness and excellent customer focus sense: the new Spa & Health Club. Pictured here: into Switzerland automatically and in growing apply not only to the top-price segment. one of the intimate private spa rooms. numbers. By the time of the 2001– 2002 The Swiss Venture Club’s entrepreneur- downturn, however, that had all changed. ship awards are particularly well established Solar Systems AG. Tied for fourth place were Schwab-Guillod AG of Müntschemier, Stett- ler Saphire AG of Lyss and Ziemer Group of Port.

Family Management: The Key to Success

And the second prize went, as mentioned, to Gstaad Palace. “We are one of the few lead- ing hotels that are still family-owned,” says Andrea Scherz, who has managed the hotel for the past 12 years. “That’s our key to suc- cess. A lot of families have been coming to the Palace for generations. You could say we have grown up together. For us, the emo- tional links that bind the regular guests to our family and the hotel are vital.” In the peak season, regulars account for about 80 per- cent of overnight stays. It’s no secret that many VIPs have fea- tured on the guest lists at Gstaad Palace: Roger Moore, Robbie Williams, Liz Taylor and Margaret Thatcher, to name but a few.

Photos: Chris Lee |Gstaad Palace Built in 1913, Gstaad Palace is managed as a family firm. But it is also notable that when they are >

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in Gstaad these celebrities behave quite naturally and are by no means unapproach- Capitalism in Flux able. The local population attach a lot of im- Businesses will have to adapt radically if they are to survive the portance to discretion when they see Palace massive societal changes that lie ahead of us, according to Kjell Nordström, guests strolling through the village or drop- professor at the Stockholm School of Economics. ping in to buy cheese at the Molkerei – which, incidentally, was an SVC finalist in 2007. The family atmosphere at the Gstaad Palace “mountain and vacation hotel” is one aspect of its success. A second one is that, like most family firms, it puts particular em- Capitalism is not an ideology; it is a machine phasis on sustainability. “Our thinking isn’t that can only do one thing. “It can sort the driven by profit and shareholder value but efficient players from the inefficient ones. It by the company’s long-term prospects,” rewards the efficient ones with profits and the inefficient ones with bankruptcy. The machinery of capitalism has no morals, no intention, no direction – and it doesn’t make judgments. It behaves in the same way as the force of evolution in nature.” This was the thesis put forward by Kjell Nordström at the Swiss Export Day in Zurich. Capital- ism will also change radically in the years ahead, due to fundamental societal changes. Businesses will have to adapt their business models to deal with these upcoming trans- Knowledge, presented absolutely perfectly. formations.

Feminization and Urbanization

Hans-Ulrich Müller, president of the Swiss Venture “More and more women are entering higher Nordström has also identified another trend: Club, has awarded the prize; Andrea Scherz is education, whether in Sweden, Morocco, the “Since 1989 approximately 3.6 billion people being interviewed. United Arab Emirates or Spain. This fact is have become part of the capitalist world, going to lead to marked changes in the world including new markets like Ukraine, Vietnam says Scherz. “As a result, we don’t take of business in the next few years because and Pakistan. All these countries still have anything out of the company except our there are few areas where the differing at- infrastructure needs and will become impor- managers’ salaries, and plow all the operat- titudes of men and women toward risk have tant markets, but they will grow more slowly ing profit back into the business.” The most such a fundamental impact,” explains Nord- than they did over the past 20 years.” recent big investment was the Spa & Health ström. Women will take on more and more Talent and Technology as Drivers Club. Opened at the end of 2007, it was important functions. He is convinced that this particular enhancement which, for “this will take numerous risks out of the sys- The US will continue to dominate the global Andrea Scherz and the hotel and chalet tem. This might be a good thing in some economy “because the US are an idea, not guests, and probably also for the SVC jury, areas such as medicine, finance and traffic a country. Anyone can become an American clinched the prize for Gstaad Palace. control, though risk-taking will obviously be within a couple of years. Europe and Asia As proprietor, Andrea Scherz had decid- necessary in some fields.” Another massive are not attractive for really talented people. ed to authorize 4 million Swiss francs for societal change is the soaring number of This means that there is less innovation and the construction of a subterranean staff single households. This “single-ization” has growth there.” Businesses have to innovate. garage in addition to the 15 million Swiss an impact on housing, the size of packaging “Technology and talent are the key drivers of francs for the spa. “For us, finding excep- and even the demand for financial services value creation. Successful businesses suc- tional staff is one of the biggest challenges. and infrastructure. ceed in establishing a monopoly for a limited So I am convinced that this investment will The rapid urbanization of the planet will period.” pay off.” Andreas Schiendorfer also impact businesses. “Today, approximate- “Only extreme adaptation or extreme at- ly 52 percent of people live in towns and traction works. The secret of success lies in cities. By 2040 this number will have risen not trying to combine both strategies.” And to 90 percent, and the other regions will then Nordström concludes: “Never before have become an economic wasteland. This means so many people had the chance to live a life that businesses will concentrate on urban that is really worth living, including in Africa.  The full text of the interview with Andrea Scherz is available at population centers and that national borders And it is technology and capitalism that www.credit-suisse.com/bulletin. will increasingly lose their significance.” make this possible.” Dorothée Enskog bulletin 3/09 Credit Suisse Credit Suisse 3

on Sunday. Hug became junior world champion Oldest Chess Club to Host in 1971, Polgar in 1988 and 1990 at the U12 and U14 levels, respectively (Polgar doesn’t Ten World Champions play against other women as a matter of prin- ciple). The third “bogus” world champion is Vik- The best chess players of the past 50 years can be admired at the Champions tor Korchnoi (alias the Lion of Wohlen), who simultaneous and rapid tournaments at Zurich Central Station on August 22– 23. plays (or has played) in the world elite for lon- ger than anyone else, but twice lost a world championship battle with Anatoly Karpov. He The game of chess was invented in Asia – versary – not least thanks to support from nevertheless became senior world champion supposedly in India, but possibly in China or Credit Suisse and the Accentus charitable in 2006. Persia too. Switzerland, however, can boast foundation (Swiss Chess fund). Otherwise, however, all FIDE and PCA of having the oldest chess club in the world: world champions since 1969 bar three (Khalif- Four Very Interesting Events the Schachgesellschaft Zurich, established man, Kasimdzhanov and the now deceased in 1809. August 15 to 19 sees a two-part Jubilee Open Over time, the club became a renowned at Zurich’s Kongresshaus, consisting of the organizer of leading chess events. For in- Accentus Open and the Alois Nagler Memo- “Playing against Topalov stance, world champion Emanuel Lasker rial master tournament, for which around 30 will be a great challenge.” played simultaneous exhibitions in Zurich on grandmasters have registered. Viswanathan Anand four occasions between 1888 and 1919. Other A week later, Zurich Central Station is the greats – including Alekhine, Euwe and Botvin- venue for a meeting of the giants who have Fischer) will be present in Zurich. Legends nik – followed in his footsteps. One of the very dominated the chess scene during the past such as Spassky, Kasparov and Karpov will first high points was the 1953 Candidates 50 years. Depending on the method of count- come up against the current world elite, in- Tournament, won by Vasily Smyslov. In the ing, either seven or ten world champions cluding Ponomariov and in particular world 1959 anniversary tournament, Mikhail Tal will be sitting down to play 200 matches in champion Viswanathan Anand, Vladimir beat Gligoric and a then 16-year-old Bobby the Champions simultaneous tournament on Kramnik (the world champion he dethroned), Fischer. To mark the 70th birthday of Viktor August 22 and then compete against each as well as new challenger Veselin Topalov. Korchnoi in 2001, the three world champions other in the Champions rapid tournament on Will a face-to-face duel prove too much, or Spassky, Kasparov and Kramnik took part in August 23. As Garry Kasparov and Boris will they be ambitious enough to play to win a rapid chess tournament. Spassky no longer play in competitive chess at this top tournament? Andreas Schiendorfer It’s not really possible to better that, you tournaments, Judit Polgar – the world’s best might think: Yet that’s exactly what is happen- female chess player – and Werner Hug from  Interview with world champion Viswanathan ing on the occasion of the club’s 200th anni- the Schachgesellschaft Zürich will be playing Anand at www.credit-suisse.com/bulletin

06– 07 5–85 3– 85–3 02– 04 69–72 05–06 00 –06 3– 00 Ruslan Ponomarjow Boris Spassky Garry Kasparov PCA PCA FIDE FIDE FIDE FIDE FIDE FIDE FIDE Vladimir Kramnik VesselinTopalov Anatoly Karpov

From 1993 to 2006, the chess world was split into the FIDE (Fédération 00 – 02 0– to date Internationale des Echecs) and PCA (Professional Senior World Werner Hug Champion Champion Champion Viktor Kortschnoi Junior World Junior World Judit Polgar FIDE FIDE Chess Association). Viswanathan Anand

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1

2 3 Photos: Bernd Uhlig | Marco Borggreve | Fritz Haseke | IMG Artists | Dario Acosta | Mats Bäcker | Sabine Hauswirth | Mathias Bothor | BerndThissen | Susanne Schwiertz 1 In 2005, Adam Fischer was musical director of Mozart’s “Così fan tutte” under the direction of Ursel and Karl-Ernst Herrmann. This time, Claus Guth takes the director’s seat. Photo: Russell Braun (Guglielmo), Christoph Strehl (Ferrando), Tamar Iveri (Fiordiligi) and Maite Beaumont (Dorabella). 2 The Freiburg Baroque Orchestra makes its third guest performance in Salzburg – the first was in 2004 (with Cecilia Bartoli), and the second in 2006 – with Handel’s “Theodora.” 3 View of the Large Hall of the Mozarteum, built from 1910 to 1914. The final concert of the Young Singers Project will be held here on Wednesday, August 26.

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The Game of the Mighty Luigi Nono (1924 –1990) “Al Gran Sole Carico D’Amore” – The Salzburg Festival, with some 200 performances and events, is again Hope and Utopia the pinnacle of a summer of culture. This year’s theme – The Game of the Mighty – is unsettling and provocative. Who are the mighty? And what is their game? Salzburg blends entertainment and earnestness.

Theodora, a Christian in 305, steadfastly re- Young Singers Project fuses to make a sacrifice to Jupiter and is Talented Opera Singers Given therefore to be sent to a brothel. The officer A key work at the 2009 festival, Jürgen Final Polish in Salzburg Didymus, performed by Bejun Mehta (photo), Flimm calls it “a great requiem to lost hope is able to prevent this, but their love ends in and failed utopias.” It is based on the idea of death. The role of Theodora is performed by the presence of the eternal feminine in life, Christine Schäfer (photo), an international battle and love. The collage-like “azione sce- star who has been singing at the Salzburg nica” is among the great masterpieces of Festival to great acclaim since 1995. modern opera.

Theodora. G. F. Handel. Freiburg Baroque Al gran sole carico d’amore. L. Nono. Vienna Orchestra, Salzburg Bach Choir, conducted by Philharmonic, conducted by Ingo Metzmacher Ivor Bolton. Directed by Christoph Loy. Christine (photo). Directed by Katie Mitchel. Tanja Andrijic, 1 30 From July to August , highly talented Schäfer, Bejun Mehta. Premiere July 25 Elin Rombo, Sarah Tynan, Anna Prohaska, young opera singers who have already com- (7 performances). Virpi Räisänen (photo). Premiere August 2 pleted most of their training will get a final  www.salzburgerfestspiele.at (4 performances). professional polish from a number of suppor-  www.credit-suisse.com/bulletin tive festival artists. The results will be pre- sented on August 26 at the closing concert Wolfgang Amadeus Mozart (1756 –1791) in the Mozarteum, and in six master classes “Così Fan Tutte” – Justifiably a A New Artistic Director for Salzburg open to the public, which will be taught by Perennial Festival Favorite From Flimm to Pereira, and From Thomas Quasthoff, Christa Ludwig and Pereira to Homoki, It’s All Musical Michael Schade. Among the young singers, Chairs to Directors and Conductors the names to watch are Sara Hershkowitz, Anna Siminska, Alisa Kolosova, Christina Daletska (photo), Terry Wey (photo) and An- drei Bondarenko: They will be the stars of tomorrow.

August 26, 7:30 p.m., Mozarteum. Final concert of the Young Singers Project. Mozarteum Orchestra, One can go a year or two without “Così fan conducted by Ivor Bolton.  www.mozarteum.at tutte,” but festival audiences will soon start to miss it. Here it is in a new production, for Artistic directors and conductors continue to the 34th time at Salzburg. As in 2005, it will change bases. Jürgen Flimm (photo, left), George Frideric Handel (1685 –1759) be conducted by Adam Fischer and directed artistic director of the Salzburg Festival, has “Theodora” – Homage in a Minor by Claus Guth. Three leading roles will be not renewed his contract, which expires in Key to a Great Composer performed by top Scandinavian singers: The 2011. In 2010, he begins a five-year tenure Swedish soprano Miah Persson (photo), who as artistic director of the Staatsoper Unter made her Salzburg debut in 2003, sings den Linden in Berlin. His successor from fall Fiordiligi, the Finnish tenor Topi Lehtipuu, 2011 will be Alexander Pereira (photo, right), who debuted in Salzburg in 2005, plays who has been with the Zurich Opera House Ferrando, and the Danish stellar baritone, for 19 years. Pereira will be followed by Bo Skovhus (photo), is Don Alfonso. On Au- Andreas Homoki, from the Komische Oper gust 21, Joel Pietro of Spain will stand in as Berlin. The successor to Franz Welser-Möst, Ferrando. Pietro is a graduate of the 2008 who starts in 2010 as general music director It’s been two hundred years since George Young Singers Project! at the Vienna State Opera, will be Daniele Frideric Handel died in London. Reason Gatti, principal conductor at the Zurich Opera Così fan tutte. W. A. Mozart. Vienna Philharmonic, 2012 enough to present his wonderful oratorio conducted by Adam Fischer. Directed by Claus House. In , he will be succeeded by “Theodora,” composed in minor keys, which Guth. Miah Persson, Topi Lehtipuu, Bo Skovhus. Fabio Luisi, principal conductor of the Vienna made its London debut in 1750. In Antioch, Premiere July 30 (9 performances). Philharmonic. Andreas Schiendorfer

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team player in general. She has filled a num- Mary or Elizabeth? ber of leading positions with women she has worked with, on and off, for the last 15 years, For the first time, the Schauspielhaus Zurich has a new female artistic director in but is keen to stress that she is happiest of the person of Barbara Frey. The new season kicks off on September 17 with all working in mixed groups. “There is no need the play “Maria Stuart” by Friedrich Schiller. This drama centers on two powerful for the men to fear a hostile takeover,” she women who embody different religious creeds – and share the trait of loneliness. says with a smile. And how does she interpret her role as director? “We’ve talked of the importance of the team. This is something I take seriously. And I don’t want to be a director who always has something to say on every issue. I prefer the stance of ‘productive silence’ and much prefer to let my work, i.e. the plays that I pro- duce, speak for me.”

A Play as Tense as Any Thriller

It’s therefore no coincidence that she is opening the new season at the Schauspiel- haus with the famous drama “Maria Stuart.” An homage to the great German dramatist born 250 years ago? “It’s certainly a fabulous drama, a thriller played out in the last days of Mary Stuart, when it was already clear to her that she was going to die,” explains Frey. “But it’s just a happy coincidence that Schiller is a part of our season. What fascinates me is the intriguing dramatic situation involving two women who hold power and represent two different systems, Protestantism and Catholicism.” Who is the stronger? Who elicits our sym- pathy the most ? Of course, the new director is keen not to give too much away. But she does emphasize that the erotic, passionate Mary lacks leadership skills and makes the wrong decisions at key moments. By con- trast, she points out how Schiller paints a Barbara Frey will open the new theater season with “Maria Stuart.” Credit Suisse is supporting the new very human picture of Elizabeth in the mono- production as part of its partnership with the Schauspielhaus Zurich dating back to 2000. logues. “What she achieved is worthy of ad- miration. After all, she reigned for just under 45 years, brought peace and ushered in a The Schauspielhaus Zurich, with its “Pfauen” In April 2007, the Schauspielhaus selected unique cultural golden age – so she was a (next to the Kunsthaus) and “Schiffbau” ven- its first-ever female artistic director, appoint- genuine ruler. True, her character is often ues, is widely recognized as one of the lead- ing Basel’s theater director Barbara Frey in described as being extremely volatile. But ing theaters of the German-speaking world. the role for the 2009/2010 season. Frey made she made a virtue out of necessity …” It rose to international prominence during the a name for herself as resident director at two Andreas Schiendorfer Second World War as an émigré theater, and leading Berlin theaters, the Schaubühne and would later host the premiere performances the Deutsches Theater, as well as through of almost all the plays of famed Swiss play- countless productions at other key venues wrights Max Frisch and Friedrich Dürrenmatt. throughout Europe. Its reputation for quality has continued Team Player Plans to Bolster Ensemble  Maria Stuart. Directed by Barbara Frey, throughout the modern era: In 2002, 2004 premiere September 1, 200, and once again in 2007, the Schauspielhaus A key objective is to further strengthen the Schiffbau Halle 1. Zurich was awarded the Nestroy Theatre theater’s company, in contrast to her prede-  A detailed interview with Barbara Frey can be Prize for the best theatrical production in the cessor, who was keen on bringing in guest found at www.credit-suisse.com/bulletin.

German language. actors. Frey sees herself as an out-and-out  www.schauspielhaus.ch Photos: Eva-Maria Züllig | JoëlTettamanti bulletin 3/09 Credit Suisse Credit Suisse 43

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Editors Daniel Huber (editor-in-chief, dhu), Marcus Balogh (mb), Dorothée Enskog (de), Regula Gerber (rg), Mandana Razavi (mar), Andreas Schiendorfer (schi), Michael Krobath (mk)

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surprising­ linkages­ between­ his­ photographic­ journeys­ of­ discovery.­ Discover­ This publication is for information purposes only. It does not more­ at­ www.credit-suisse.com/sponsorship­ >­ Art­ >­ Credit­ Suisse­ Collection.­ constitute an offer and is not a recommendation by Credit Suisse to buy or sell securities. Indications of past performance are no André­Rogger,­head­of­Art­Unit guarantee of a positive performance in the future. The analysis and conclusions contained in this publication were established by Credit Suisse and may already have been used for transactions by Credit Suisse Group companies prior to being made known to clients of Credit Suisse. The opinions expressed in this document are those of Credit Suisse at the time of going to press. (We reserve the right to make amendments.) Credit Suisse is a Swiss bank.

Credit Suisse bulletin 3/09 44 Credit Suisse

specifications. These include: a compact Building a Good Climate building shape, heat-insulating external build- ing components, energy-efficient windows, Credit Suisse is renovating its biggest office building, the Uetlihof in Zurich, in constant ventilation, optimum lighting and line with the environmentally sound and health-promoting Minergie P-ECO energy-efficient office equipment. Annual standard. Some 2,000 staff will move from the city center to the new building. heating oil consumption of no more than 3 liters per square meter is the environmen- tal gain offered by so-called passive build- ings of this kind. And there’s a lot more to be said about the UH heating system, including In December 2008, in freezing conditions, Uetlihof building (UH 1), the branch office and the fact that the new building complex will work began on the environmentally friendly the auditorium to reflect contemporary primarily use waste heat from the computing renovation of the Uetlihof 2 building (UH 2) needs. center. The excess heat produced throughout in Zurich. Against the background of work- The new workplaces will be designed in the year in the UH will be used to supply a place centralization as part of the space line with the latest scientific findings. As well local heating network. The nearby driver and strategy for Zurich – most city workplaces as clear boundaries and work niches, the new vehicle licensing office, for example, plus will be transferred to the periphery – the big- building will offer open spaces for communi- around 400 pension fund properties and the gest office block in Switzerland will be built cation and exchange. The aim is to create a Migros shopping complex in Brunaupark will on the foundations of UH 2 and certified in working environment that provides space for be heated all year round from the UH. accordance with the Minergie P-ECO envi- innovation and spontaneity. However, what In its new initiative, “Credit Suisse Cares ronmental standard. The foundation stone is groundbreaking is primarily the decision to for Climate,” the bank has undertaken to con- was laid on June 22, marking the official have the building certified under Minergie serve the earth’s natural resources, to keep starting signal for the building project. Approx- P-ECO. As previously mentioned, the new operational energy costs low and to actively imately 2,000 workplaces will be relocated UH 2 would be the largest office building in promote the use of renewable energy sources. to the new building by the fall of 2011. Other the country to be certified under this con- In doing so, it wants to act as a role model, aspects of the building program will include struction standard. The project specifies that embrace its environmental responsibilities the renovation of the main entrance to the the construction must meet all of the label’s and make a measurable contribution toward

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1 and 2 Groundbreaking ceremony on June 22 with many VIPs: City Councilor Kathrin Martelli as well as Credit Suisse representatives Martin Kull,

Rolf Krummenacher, Luther Terry, Josef Meier and Daniel Bucheli (from left). 3 A computer simulation of the new Uetlihof 2 building in Zurich. Photos: Rainer Wolfsberger | Credit Suisse | Antonin Kratochvil, ICRC, Vll bulletin 3/09 Credit Suisse Credit Suisse 45

meeting its global climate protection obliga- tions. Credit Suisse is taking a major step O ur World – Your Move: toward these objectives with the UH 2 proj- ect. The additional Minergie P-ECO certifi- A Call to Action cation also guarantees that the construction The Red Cross Red Crescent marks three major anniversaries this year. methods and materials meet stringent eco- Rather than celebrating, the International Committee of the Red Cross and logical and health standards. These include, the International Federation of Red Cross and Red Crescent Societies is for example, optimum daylight conditions, promoting “Our World – Your Move” to remind all of the part they can play low noise emissions, negligible pollution of to reduce suffering. office air and a generally pleasant working environment. These measures ensure that Credit Suisse employees will enjoy healthy working conditions. Valérie Clapasson Fahrni On June 24, 1859, French and Italian troops confronted Austrian forces on the Lombard Energy Efficiency Week plains near Solferino. More than 40,000 sol- diers were wounded or killed. They were left In March 200, UH 1 hosted on the battlefield, suffering without food, an Energy Efficiency Week water, first aid or shelter. A Swiss business- which drew 800 visitors. man, Henry Dunant, was traveling through Employees became familiar Italy. He witnessed the horrors of the Battle with the new UH 2 building of Solferino and reached out to help the and used the interactive wounded soldiers, regardless of which side watt calculator to calculate they had fought on. Haunted by what he had seen, Dunant their personal energy wrote a book called “A Memory of Solferino.” footprint. Based on how In it he explained: “All can, in one way or much they travel, how they another, each in his own sphere and within “Our World – At War” displays images by photogra- phers James Nachtwey, Ron Haviv, Christopher live and what they eat, his own limitations, do something to help the Morris, Franco Pagetti and Antonin Kratochvil. They good work forward.” traveled to war-torn countries to capture the look visitors could calculate the of war as reflected in the faces of countless victims. energy they use on a daily Dunant encouraged the creation of a neu- tral and impartial organization to protect war basis and find savings wounded – the body that would later become videos and blogs about the work done by opportunities. They were the International Committee of the Red Cross volunteers and other people committed to advised by specialists from (ICRC). He suggested that voluntary relief helping others. the Credit Suisse compe- societies should be established to care for Jakob Kellenberger, president of the tence center for operational the injured. In addition, he proposed that an ICRC, underscores the importance of the energy and environmental international principle be created to serve as campaign, which is especially significant in management, as well as by the basis for these societies, an idea that times of economic crisis: “We are all respon- developed into the Geneva Conventions, sible for making the world a better place. experts from the Minergie which will turn 60 in August. Each one of us can do a little bit to help oth- association and the Zurich ers – whether it’s by spending a little time The Challenges of Our Time electric company. The aim with an elderly neighbor or by offering food of the city administration is Every day people around the world face a and shelter to a family that has become to achieve a maximum per variety of challenges such as war, hunger, homeless as the result of war.” poverty, displacement, separation of families, capita power consumption “Our World – At War” Photo Exhibition climate change and natural disasters. To re- of 2,000 watts by 2050. mind people of this sad reality, and to encour- As part of the campaign “Our World – Your These reductions are to be age them to act, the world’s largest human- Move,” the ICRC and five of the most impor- achieved primarily through itarian network launched the campaign “Our tant war photographers of our time, James savings and more efficient World – Your Move” in May 2009 – a campaign Nachtwey, Ron Haviv, Christopher Morris, home appliances. In addi- supported by Credit Suisse as a member of Franco Pagetti and Antonin Kratochvil of tion, carbon emissions the ICRC Corporate Support Group. the VII Photo Agency in New York, organized are to be reduced by cutting People around the world are called upon the photo exhibition “Our World – At War.” to make a difference in the lives of others. Mandana Razavi back on fossil fuels and They are invited to learn more at the Web site increasingly opting for www.ourworld-yourmove.org. The Web site  For more information about the exhibition, renewable energy sources. includes personal accounts, photographs, please visit www.ourworld-yourmove.org.

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delighted by the creative work and Earthquake in Italy the success of the project, Benita Collection for Victims of the Refson, Chief Executive of The Disaster in Italy Place2Be, commented: “I’m con- vinced that this project has helped Credit Suisse employees donated to increase the children’s self-con- a total of 70,000 euros during the fidence.” Mandana Razavi April fund-raising campaign for the victims in Italy. The Credit Suisse Disaster Relief Fund matched this Lucerne contribution on a 2:1 basis with a 140,000-euro donation. In addition, Human Rights Forum the Credit Suisse EMEA Foundation donated 13,000 euros, bringing the total amount raised to 223,000 euros. The donated funds will be allocated to rebuilding projects in the Abruzzo region. Daniela Bertoli

Art Project for Children Young Artists at the National Gallery in London Swiss Museum of Transport in Lucerne In collaboration with the charitable Do human rights protect religions, Escher Statue for Swiss organization The Place2Be, the or do they curtail their freedoms? National Gallery and Credit Suisse And do human rights constitute Museum of Transport made it possible for around 40 common ground or are they a bone school children from the London of contention for religious groups? During his visit to Central Switzerland on May 6, Brady boroughs of Brent, Greenwich, These were among the current top- Southwark and Enfield to take part ics addressed by leading experts W. Dougan (left) made a brief visit to the Swiss Museum in an art project of a special kind. from Switzerland and abroad under of Transport in Lucerne. Accompanied by Werner Raschle, Last autumn, the children visited the motto “Human Rights and Credit Suisse’s regional head of Central Switzerland the National Gallery as part of a Religions” at this year’s International (middle) and Roger Suter, the new regional head of Private project entitled “The Line of Vision,” Human Rights Forum in Lucerne Clients, Dougan presented a statue of Alfred Escher on and at the workshops that followed (IHRF), held from May 5 to 6. had the opportunity to be inspired This year saw Credit Suisse act as behalf of the Credit Suisse Foundation to the museum, by the exhibits of the various artists an IHRF partner for the first time. which is celebrating its 50th anniversary. to create their own works of art. The forum program offered In his acceptance speech, the museum’s Daniel Lauter- Since April of this year, it has also those attending not only lively dis- burg (right) explained why a sculpture of Credit Suisse’s been possible to admire the works cussion about the actual topic of of the young up-and-coming artists the forum but also informative founder has a place of honor at the entrance to the Gotthard at the National Gallery. Clearly contributions on the human rights tunnel exhibition: “Escher founded Credit Suisse in 1856. situation today. The event is staged But many fail to realize that its actual purpose was to on an annual basis by students at finance development of the rail network in order to speed Lucerne’s Teacher Training College, up the industrialization of Switzerland. Alfred Escher was in cooperation with the UN High Commission for Human Rights and the key figure in the construction of the Gotthard tunnel.” the Swiss Federal Department Dougan was impressed by the history of the famous tunnel of Foreign Affairs. Fabian Huwyler and by Escher’s extraordinary life. Janine Händel, head of the Credit Suisse Foundation Jubilee Fund, was also de- lighted: “The Swiss Museum of Transport has the ability to fascinate young and old alike – an ideal platform for our founding father.” Mandana Razavi

Credit Suisse is convinced that corporate responsibility toward the environment and society at large is a key factor for economic success. Photos: Martin Stollenwerk | Credit Suisse | John Rae for ACCION International

bulletin 3/09 Credit Suisse Dossier Microfinance

Th e United Nations is striving to reduce poverty among the world’s population by a half before 2015. Around one and a half billion people must live on less than 1.25 US dollars a day (purchasing power parity). One suitable instrument for combating poverty is microfinance: Poor people who were not previously considered credit- worthy receive on the basis of trust a small loan that they can use to set up their own business. Credit Suisse has been committed to microfinance since 2001. Consequently ,we offer our clients innovative solutions that invest in sustainable microfinance institutions.

48_Roundtable 52_Africa 54_Yunus 48 Dossier Microfinance

Credit Suisse supported Microfinance Projects Country Program Regional Programs Worldwide

Kadita A. T. Tshibaka Rupert Scofield John Tobin María Otero Urs Egger Opportunity Inter- FINCA, Washington Credit Suisse, Zurich ACCION, Washington Swisscontact, Zurich national, Washington/ Illinois

With more than 400,000 FINCA provides financial Credit Suisse provides ACCION International Swisscontact supports voluntary savings clients, services to the world’s financial assistance to is a leading non-profit small and medium one million loan clients and lowest-income entrepre- microfinance projects, and organization in the micro- enterprises (SMEs) in over 800,000 microinsurance neurs so they can create involves its own employees finance area. ACCION 20 countries by providing clients, Opportunity jobs, build assets and in order to develop the runs programs aimed at advice and training. It International is one of the improve their standard of requisite expertise in the providing disadvantaged develops the capacity of largest microfinance living. FINCA provides an sector. people with a means of financial intermediaries organizations in the world. array of services including  www.credit-suisse.com/ freeing themselves from to provide financial services It is a leader with regard loans, savings, and credit citizenship poverty. that support the growth to building, owning and life and health insurance to  www.accion.org of SMEs. operating regulated banking more than 40,000 clients  www.swisscontact.ch institutions for people in living in 21 developing poverty. countries.  www.opportunity.org  www.villagebanking.org

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Microfinance Roundtable Where There Is a Will, There Is a Way Many people around the world continue to struggle with poverty. For those who are industrious, innovative and determined, microfinance can provide a way out of poverty. We spoke with leaders of our four partner organizations in the microfinance field as well as with the head of Public Policy – Sustainability Affairs at Credit Suisse about the background, objectives and anticipated developments in the sector.

bulletin: What do you say to the critics United Nations recognition and the Nobel Microfinance Capacity who dismiss a world without poverty as Peace Prize. And, the commercial model Building Initiative wishful thinking? has become a generally accepted way of The microfinance sector has Kadita A. T. Tshibaka: Having grown up achieving scale and sustainability. Investing in the Democratic Republic of the Congo, in microfinance has ultimately become an seen exponential growth I know both the sobering reality of the industry in and of itself. in recent years. Despite the challenges and the remarkable changes Rupert Scofield: That’s actually the access to billions of dollars that are possible. I’d invite critics to spend biggest change. There are millions of in capital and a continued more time with people around the world clients involved, thousands of institutions demand for services, there who are working their way out of poverty – offering financial services, and there have not been enough to experience the passion, ingenuity and are hundreds of billions of dollars invested intellectual capital that exists at all levels. in the sector. trained people to keep up Rupert Scofield: We clearly have the with the growth of this sector. financial, human and technological re- This is why Credit Suisse sources to solve the problem of poverty “I know both the sobering has established the Micro- in our lifetimes. reality of the challenges finance Capacity Building Urs Egger: Reducing poverty is the and the remarkable changes Initiative. This program pro- overarching goal of international devel- vides the requisite training opment cooperation. But achieving that are possible.” this goal needs coordinated efforts at Kadita A. T. Tshibaka to thousands of microfinance national and international levels. The staff around the world, and driving force for socioeconomic devel- facilitates access to financial opment is private initiative. services for those at the John Tobin: History contradicts them and Urs Egger: Many microfinance institutions base of the income pyramid. the evidence proves them wrong. Many (MFIs) have qualified for investments of In this process, Credit Suisse parts of Western Europe, North America international funds. This fact shows their and Southeast Asia, where poverty was progress in internal management and works with its four partner commonplace, are now affluent. market orientation. organizations to foster re- María Otero: Microfinance has already Kadita A. T. Tshibaka: The sector has search and innovation, as well proved that the poor are creditworthy, changed dramatically. Loan products are as constructive dialogue, and the industry has proved that it’s now more flexible, and savings and and to develop best practices investment-worthy. Today, it only reaches insurance have grown to be core offerings and new solutions for finan- from 50 million to 100 million poor for organizations that want to help clients cial inclusion. entrepreneurs, and we estimate that the effectively navigate economic hardships. potential market is 750 million to a billion Without savings and insurance, clients are  www.credit-suisse.com/citizenship worldwide. So, we have to scale faster. at risk of slipping back into poverty In what ways has the microfinance sector because of unforeseen circumstances. changed over the last 10 years? John Tobin: The industry has grown ex- María Otero: Microfinance has evolved plosively, and we have seen a real growth from a once-arcane development strategy in interest from our private banking

Illustration: Photodisc into the common vernacular – it has received clients – particularly since microfinance >

Credit Suisse bulletin 3/09 50 Dossier Microfinance

represents a combined financial and is to leave as much of the fruits of our philanthropic funds may not use this money social investment. Socially Responsible clients’ labors in their hands, we accept to buy down interest rates. Investing (SRI) has become an important a less-than-profit-maximizing return María Otero: The borrowers’ main concerns investment class. on our capital. We seek investors with the are arguably more focused on whether Do you believe that the shift towards same goal; investors who need a fair – they’ll be able to secure a loan, how best to commercialization is inevitable for but still attractive – return on their capital, utilize the money, and if they’ll earn enough all players in the microfinance sector? but for whom getting a high social return to pay for education for their children. Rupert Scofield: There are two types is equally important. of players in the sector now – those who Kadita A. T. Tshibaka: We focus on sustain- basically pursue it as a business and, ability in all of our operations. Because “To reach broad scale – for them, pure commercialization makes of the fact that we build, own and operate to service all the people perfect sense. Then there are other regulated commercial banks that serve who could benefit from organizations for which microfinance is one the poor, we are able to achieve both of the many tools used to combat poverty. breadth and depth of outreach. Moreover, inclusive financial services – a savings-based approach to microfinance requires an MFI to not only provides clients with a safe way eventually be profitable.” “We clearly have the to secure their earnings, it also helps us to María Otero financial, human and tech- operate sustainably. Urs Egger: Swisscontact is specialized in nological resources to training and improving the management How can multinational companies solve the problem of poverty skills of MFIs and small enterprises. By its contribute to alleviating poverty? in our lifetimes.” Private Sector Development Strategy John Tobin: Multinationals must target Rupert Scofield providers of financial services as well as their philanthropic contributions strategi- their clients can improve their performance. cally. Before we undertake a Corporate Swisscontact doesn’t provide capital, Citizenship initiative, we first learn as much John Tobin: We don’t see commercial- but facilitates the transfer of know-how. as we can about the particular field, ization as inevitable for all MFIs. Some John Tobin: Credit Suisse is not a micro- identify best-in-class partners, and define will continue to operate as not-for-profit finance institution, but we are active our vision and goals early in the process organizations, while others will be run in the microfinance industry in several ways together with our partners so that we are more like businesses. that distinguish us from others. We are a all building toward the same goals. We María Otero: Individual and corporate leader in microfinance investment products also invest heavily in developing a construc- philanthropy remains critical for the through our association with the respons- tive dialogue with our partners. This allows “seed capital” needed to enter those new Ability funds. We are also a leader in IPOs our own units to benefit from the experi- markets. To reach broad scale and of microfinance institutions. Moreover, we ence gained. offer comprehensive financial services, are committed to strengthening technical Kadita A. T. Tshibaka: Multinationals are an MFI must first be profitable. skills at microfinance institutions and in a unique position to support technology Kadita A. T. Tshibaka: While sustainability thereby contribute to an overall strengthen- initiatives that provide access to financial and accountability are important stan- ing of the sector through our Microfinance services for those previously shut out of dards for the entire industry, a sector built Capacity Building Initiative (see box). the banking system. In addition, they can around profit-taking could make it more Do you believe it makes a difference leverage their intellectual capital to help difficult to reach people at the bottom for borrowers, whether this capital stems train the new generation of social entrepre- of the pyramid. from philanthropic resources or from neurs that are coming of age in the Urs Egger: We believe that profitability a private institution? developing world. is a criterion for the sustainability of Kadita A. T. Tshibaka: Approaching clients Urs Egger: Corporate social responsibility an economic actor. The activities of an as equal partners matters more than how considers alleviating poverty as a part MFI must therefore be profitable in the you generate capital. of the business model of the company. mid-term perspective. Urs Egger: We are convinced that the Companies from the financial sector can in What approach does your organization/ best basis for developing MFIs is by addition offer financial products for MFIs. institution pursue? generating local savings. If the capital of María Otero: We need the private sector María Otero: The “commercial” approach – MFIs stems from a grant basis however, in order for microfinance to reach scale, i. e., we seek to develop, through technical the danger of use in non-sustainable and a profit motive must exist for commer- assistance and investment, MFIs that purposes may arise. cial entities to participate. After all, are profitable and sustainable – and ones Rupert Scofield: To microfinance clients, private-sector resources would help make that can ideally, eventually, tap the capital what matters are the terms on which the poor richer, and those microfinance markets. We focus on innovation. the credit is offered and the long-term institutions that make money would earn Rupert Scofield: Since FINCA is focused commitment of the MFI. Even organizations the capital needed to extend credit and on the bottom of the pyramid, and our goal that benefit from a high percentage of other financial services to more people. bulletin 3/09 Credit Suisse Dossier Microfinance 51

Rupert Scofield: From my point of view, be undermined, because of the com- the most interesting contribution they paratively high costs of making small loans. can make is to figure out how to partner Developed nations such as the US can with MFIs to bring MFI clients into the seek to influence and guide policy, to formal economic sector, either by providing expand multilaterals’ capacity to provide services to these entrepreneurs, buying assistance on regulatory frameworks their products, or participating in some and credit reference systems that are way in their economic ventures. necessary for engaging private banks in What type of contribution can politics microfinance. achieve in this effort? And lastly, how do you believe the micro- Urs Egger: The politicians in developing finance sector will develop in the future? countries should provide an enabling envi- Rupert Scofield: First, we have to look ronment for poverty reduction by offering at how many people the sector is reaching basic education for their population – right now. I think the current estimate is including the poor. They should develop 154 million people. I think that number will Lichthof Exhibit infrastructure, and follow a fiscal and trade double to 300 million plus during the time Credit Suisse has been policy which is in favor of the private frame you’re talking about. If we can involved in microfinance sector. Industrial countries should open accomplish that, we will, basically, have since 2001, and thus played their markets to products from developing incorporated a billion and a half people at countries. the bottom of the pyramid into the formal a pivotal role in the found- financial sector. I think the industry is ing of responsAbility Social more likely to reach these levels through Investments AG. In May “Corporate social respon- increasing commercialization. 200, for example, money sibility considers alleviat- John Tobin: We see only future growth – for in the global microfinance the MFIs, for borrowers and for investors. ing poverty as a part of fund is invested in about Urs Egger: I, too, believe that the basis 200 MFIs in 43 countries, the business model of the of microfinance will be broader with more company.” strong and sustainable institutions. In thereby reaching close to Urs Egger addition to that part of the sector serving 300,000 microentrepreneurs. the poor, banks should have developed Credit Suisse also offers financial products for the needs of small a wide range of advisory Rupert Scofield: Political leaders, in and medium-sized enterprises. Developing services within the micro- both developing countries and wealthy this class of enterprises is necessary to finance sector and has countries, must provide the political overcome the un- and underemployment will to keep poverty alleviation high on challenge of the partner countries. led landmark transactions the agenda. In many developing countries, María Otero: If we keep pursuing the such as the IPO of Banco this means adjusting regulatory require- commercial approach, engage the capital Compartamos in April 200 – ments accordingly. markets and scale up, we’ll reach hun- the first everIPO in the Kadita A. T. Tshibaka: Governments in dreds of millions of entrepreneurial poor, microfinance sector. From developing countries need to be encour- making significant progress toward building June 11 to July 2, 200, aged to create the infrastructure that genuinely inclusive financial systems. the Credit Suisse Lichthof, enables microfinance institutions to reach Kadita A. T. Tshibaka: As the industry more people in highly efficient and effec- continues to mature, the danger is that on Zurich’s Paradeplatz, tive ways. Governments need to craft it will drift further upstream toward a was home to the touring regulations that recognize the unique more secure client base. It’s critical that exhibition entitled “Micro- qualities of MFIs. we continue to focus on those with the finance – A Social Investment John Tobin: NGOs, corporates and govern- greatest needs – those who have been That Creates Opportunities.” ments need to work together to develop displaced, those in rural areas, those whom The exhibition allowed the ground rules that create the right traditional institutions consider unbank- incentives so that microcredits are devel- able. If we maintain that focus, we can visitors to gain some insights oped and fostered, thus improving the then envision a world in which the poor into the workings and suc- living conditions of millions. have fair access to economic opportunities cess story of microfinance. María Otero: If, for example, developing- and the hope to move beyond poverty. nation governments impose interest- Mandana Razavi rate ceilings, or implement low-cost micro-  Use the reply card in the magazine finance schemes of their own to curry to order your free DVD “Microfinance –

Photo: Credit Suisse political favor, microfinance initiatives can An Investment in World Development.”

Credit Suisse bulletin 3/09 52 Dossier Microfinance

by John Hatch, and active in a number of Aligning Business With African countries such as the Democratic Republic of the Congo, Malawi, Tanzania, Social Issues in Africa Uganda and Zambia. And while the business models of the world’s various microfinance The role of business in society has recently drawn increased attention. initiatives may differ from one another, their Historically, debate centers on two notions: the idea that the sole purpose basic tenet of extending affordable credit of business is to maximize shareholder value, and also the view that to poor clients has introduced a novel, self- charitable organizations should focus on social issues and thus not make sustaining approach to tackling social initia- any profit. Social entrepreneurs are joining in – amid increasing support tives in poor countries. In this context, micro- from social and business circles. finance as a social entrepreneurial venture has helped raise incomes, improve education standards, and open opportunities for some of the world’s poorest people.

Social Entrepreneurial Innovations The concept of social entrepreneurship relies venture by charging interest on its loans to on entrepreneurial strategies to achieve social these women and then recycling the capital But social entrepreneurship is certainly not change, combining the passion of a social to help other women. limited to microfinance. In fact, the Schwab mission with entrepreneurial pragmatism and The success of the microfinance concept Foundation for Social Entrepreneurship high- innovation to simultaneously create both social has also spread to other regions, including lights a very wide variety of social innova- change and economic value. Essentially, social Africa. Indeed, microfinance in Africa has a tions – including but not limited to microfi- entrepreneurship is a response of the private particularly meaningful role, since Africa nance – that are successful in addressing sector to mainstream society’s demand that continues to be one of the world’s poorest social and environmental challenges in a sus- businesses be good stewards of the environ- regions, with enormous deficits in terms of tainable, effective way. For example, Dignified ment and society. people having access to basic human ser- Mobile Toilets (DMT) in Nigeria is a social en- This does not mean that social entrepre- vices – including credit facilities. The most trepreneurial initiative started by Isaac Duro- neurs shun profit-making value propositions; prominent microfinance institution operating jaiye that supplies safe, sanitary public toilets on the contrary, social entrepreneurial ven- in Africa is The Foundation for International for a small fee in African regions where children tures often use their profits from their main Community Assistance or FINCA, founded regularly die of diarrhea due to bad sanitation. business to cross-subsidize their charitable work. India’s Aravind Hospitals, for instance, perform 250,000 eye operations a year, do- ing 60 percent of their work for free. In this context, social entrepreneurs are not moti- Africa Is a Continent in Transition and will probably be the vated primarily by the incentive to maximize most important emerging market in coming years. Its 00 profits, but also by directly improving a social million people are increasingly better educated and have situation. In short, the social entrepreneur’s greater self-awareness about their role in the world. Africa raison d’être is “more-than-profit.” may become the world’s most important energy producer Microfinance as a Powerful Tool in the future because of its abundance of natural resources. Perhaps the most prominent example of social As part of this development, Arthur Vayloyan, head of In- entrepreneurship is microfinance, which re- vestment Services and Products in the Private Banking divi- fers to the provision of financial services to sion, invited potential investors to Tanzania in the middle poor people who would otherwise not qualify of June in order to give them an overview of the economic for access to financial and credit facilities. circumstances in Africa on the basis of this special example. One of the many prominent social entrepre- neurs is Muhammad Yunus, founder of the The journey to Tanzania was already the sixth “field trip” Grameen Bank and winner of the Nobel Prize to be organized by Credit Suisse. The concept is based on in 2006. Mr Yunus has demonstrated that providing as much information as possible in a limited period microfinance can function as a very powerful of time. The participants learned more about this up-and- tool to fight poverty, and at the same time coming continent by meeting with well-known figures from create economic value. By extending micro- politics, business and research, as well as visiting local loans to women, Yunus has enabled desper- businesses. The people met included professionals active in ately poor women in rural Bangladesh to expand small businesses in weaving baskets their given field and microentrepreneurs integrated within and making pots. The Grameen Bank sub- their respective communities and networks, who helped to sequently sustains its social entrepreneurial provide an accurate picture of local economic activities. bulletin 3/09 Credit Suisse Dossier Microfinance 53

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1 3

1 APOPO Rats trained to detect mines (info at www.apopo.org  Images Field Work). 2 FINCA Microcredits, Angelina Sanyemba, Education Entrepreneur in Zambia (info at www.villagebanking.org  Client Stories). 3 Riders for Health, Philemon Simanyo, a health worker in Zimbabwe (info at www.riders.org  Riders Annual Report 2007).

DMT manufactures the toilets and provides age and maintain its vehicles with a message presents another humanitarian challenge in them without cost to poor women and youth that proper maintenance can save 50 per- Africa since over 55 percent of cases are not wishing to franchise them. In turn, franchisees cent of costs of a vehicle over six years. diagnosed before patients die. While this oversee the scheduled maintenance of the With over 900 well-serviced vehicles, health initiative is still funded by donations, the in- toilets and keep 60 percent of the income, and development workers have increased novation should be able to generate income passing the rest back to DMT, which subse- their visits to remote communities in Africa to feed the enterprise into the future. quently uses the money to buy new toilets. by 300 percent, and today over 11 million Twenty-First Century Pioneers The business model aims to improve public people receive regular, reliable health care health, sanitation and encourage social thanks to Riders. These are just some of the many examples transformation by creating job opportunities And perhaps one of the most innovative of how social entrepreneurial initiatives are for poorer Africans. of African social entrepreneurship ventures, emerging in the African and in the global Another example in Africa of a successful APOPO, founded by Bart Weetjens, trains development context. These initiatives are social entrepreneurial venture is the organi- rats to detect mines left behind from African blurring the distinction between making zation Riders for Health (Riders). This orga- conflicts. This is possible since rats can de- money and offering charity, and as such are nization was founded by a British motorbike tect the vapor landmines emit from the ex- offering a refreshing perspective on the role enthusiast husband-and-wife team who dis- plosives within them. The animals scratch the that business can and should have within covered that medicine, vaccine and food dis- soil’s surface in the vicinity of the mine upon society. And if the German Federal President tribution in rural Africa was being severely detection, and are too light to set off the Horst Köhler is correct in saying that “the limited since vehicles were not being prop- landmines themselves. The “HeroRATS” are humanity of our world will be measured erly maintained. Riders introduced motorcy- now accredited according to the Interna- against the fate of Africa,” social entrepre- cles as an efficient way to deliver health care tional Mine Detection Standards, and can neurs are likely also to play an instrumental and food services to previously inaccessible, cover 16 times the area of a human deminer role in transforming the social conditions cur- rural parts of Africa. The organization places in one day. These rats are also being trained rently endured by many people in Africa and

Photos: www.apopo.org | FINCA International |emphasis www.riders.org on building local capacity to man- to detect pulmonary tuberculosis, which re- in the world beyond. Robert Ruttmann

Credit Suisse bulletin 3/09 54 Dossier Microfinance

Muhammad Yunus travels the world to speak about microfinance and social enterprise. This interview with Professor Yunus took place at the Liechtenstein Dialogue at the University of Applied Sciences Liechtenstein, in Vaduz.

bulletin 3/09 Credit Suisse Dossier Microfinance 55

Consigning Poverty to the Museums In the mid-1970s, Economics Professor Muhammad Yunus realized that microfinance could be an effective tool in the fight against poverty. He and his Grameen Bank went on to receive the Nobel Peace Prize in 2006. Yunus has expanded his cause and is now making a case for social business enterprises.

bulletin: On October 1, 183, you founded families around the world – even in the US, were from the reality of the impoverished the Grameen Bank in Bangladesh. How where this cause has been espoused by population. I decided to undertake a case did you celebrate your 25th anniversary? Hillary and Bill Clinton, among others. Our study of poverty in the neighboring village Professor Muhammad Yunus: To be honest, internal surveys have shown that 64 per- of Jobra with my students, with a view we didn’t. The principle of Grameen Bank, cent of female borrowers who have been to finding a practical way of improving the namely the granting of microcredits to poor supported by us for at least five years have local situation. rural communities not previously consid- pulled themselves above the poverty line. This catastrophic famine is still fresh ered creditworthy, actually goes back Where Bangladesh is concerned, I am in the minds of many people. Was it the aid to 1976. So really we have been around for confident that we will meet the millennium provided by the industrialized nations 32 years. But our main celebration came target of the United Nations, namely that was insufficient? on December 10, 2006, when we were to reduce the number of people living in Bangladesh was and remains grateful awarded the Nobel Peace Prize. Public poverty by half before 2015. for any help provided to it. But philanthropy recognition of our system was a source of Although you have no doubt explained is not the right way to solve the problem great delight and satisfaction for us. For this on many occasions, could you of poverty sustainably. Similarly, the many years, financial experts had been briefly describe how your work on behalf development programs that aim to improve opining that it simply could not function, as of the world’s poor began? education and infrastructure do not reach it was based on trust alone rather than the When I was studying in the US in 1971, the those most in need. The greatest misun- provision of collateral. struggle for independence in Bangladesh – derstanding of all is the general assumption The Grameen Bank and you personally which had been part of the newly founded that we need to help poor people to received the Nobel Prize not in economic country of Pakistan since 1947 on account develop new skills. All that is needed is to sciences, but rather for peace. Does of the population’s Muslim majority – had ensure that the skills that already exist find your bank contribute toward peace? just begun. When I was born, the “Land of their expression. Every person has their I am absolutely certain that it does. Poverty the Bengalis” was still part of British India. own skills. deprives the individual of any control over I returned home to do my bit toward building What specifically did you find out his fate. In this sense it can be considered up our very poor country as a professor in Jobra? a destroyer of human rights. But when you We encountered a woman named Sufiya get to the point where poverty has deprived Begum, who weaved wonderful bamboo half the world’s population of their funda- Poverty deprives the individ- chairs. However, she had no way of mental human rights, this represents a ual of any control over his escaping her poverty. The moneylender major threat to world peace. Poverty leads fate. In this sense, it can be provided her with the necessary finance to to the loss of hope, something that often considered a destroyer of obtain her raw materials, but only on the drives people to acts of despair. To my human rights. condition that she sold her chairs to him, mind, it is a more dangerous threat than and at a price determined by him. This either terrorism or religious fundamentalism. unfair arrangement and the extortionate Where are you today in your fight of economics at the University of Chittagong. interest involved ensured that her income against poverty? I tackled the question of poverty because remained at a derisory two pennies per The Grameen Bank currently has more I was surrounded by poverty everywhere day. We found 42 victims of this kind of than 2,300 branches, approximately I looked, and could not close my eyes to it: money-lending practice in the same village. 25,000 staff, and almost 7 million borrowers. In 1974 and 1975 our country was ravaged The overall sum required to extract them The repayment rate stands at 98 percent. by a catastrophic famine. When I saw how from this vicious circle was 856 teka – less Our philosophy is now applied in most an incalculable number of people were than 27 US dollars. I paid this paltry sum countries around the world – by the end of starving to death on the streets, I realized myself. This enabled the women to sell

Photo: Hans Schürmann 2006, microfinance had helped 100 million how far removed our economic theories their products freely, to set their prices >

Credit Suisse bulletin 3/09 56 Dossier Microfinance

according to demand, and thereby generate Experimental Grameen Branch of the determined to invest the profit they earn in significantly higher revenues. Agriculture Bank – for this purpose. the education of children and the improve- It seems breathtakingly simple. But Although we achieved close to a 100 percent ment of their living situation (the Grameen you still had to convert these findings into repayment rate, there was still resistance to Bank also grants construction loans), while a credit-lending system … the idea of extending this activity to other men are more liable to use profits for their Indeed. And this was much more difficult regions. Ultimately, the only way we could own ends. At the same time, this also than I ever thought it would be. We couldn’t proceed was to set up our own bank, the enabled us to improve the social situation of find a single bank prepared to grant loans Grameen Bank. What makes us stand out women. For example, we will only grant a to poor people, even though we were only as a bank is that we don’t wait for custom- loan if a woman belongs to a group of five talking about amounts of up to 30 US ers to come to us, but instead we approach members. This produces a positive kind of dollars. They said they couldn’t do such a them. Grameen means “village,” and that group pressure, but also a feeling of thing without the corresponding security – means we are closely involved and that we solidarity. Women who had previously and obviously that is something that those show the necessary patience. barely been able to leave their house ended who live below the poverty line are unable Why is it almost exclusively women who their isolation and found friends. Several of to provide. Nonetheless, at some point the benefit from your loans? these groups then formed themselves into Agriculture Bank expressed its willingness The motivation to repay a loan is particularly a center. Women learned to organize to set up its own branch in Dobra – the strong with women. In addition, women are themselves, demonstrating great aptitude

Through the extension of microcredits to the world’s poor, millions of people now have their first real opportunity to climb out of poverty. Thanks to the work of Nobel Prize winners Muhammad Yunus and the Grameen Bank, coupled with the emergence of social business enterprises, poverty-stricken individuals can rely on their skills to earn real income beyond subsistence levels. bulletin 3/09 Credit Suisse Dossier Microfinance 5

for this task. Some 16 principles were jointly This joint venture with a Norwegian com- What other goals do you personally established that members of the bank pany is a leading player in the supply of want to achieve? would have to adhere to. For example, this mobile telephones in Bangladesh, and has I am working to achieve a world in which means that not only do we work to abolish now become the largest private company there will be a poverty museum in every the curse of dowry and child marriage, we in the country. Around 300,000 “telephone country, so that people will be able to also promote family planning. ladies” have made their mobile telephones remember the time when poverty was Have there been adjustments to available to other members of the village, a widespread affliction. And everyone will your conceptual model with the passage thereby making a very good living for a wonder why it took so long for this bane of time? number of years. The level of telephone of mankind to be finally banished forever. Little has changed in principle, but the ownership has now become so great that Andreas Schiendorfer bigger the Grameen Bank became, the the telephone ladies have had to move into more it became clear that we would have other areas, such as the Internet. It has to adapt better to the prevailing local been demonstrated clearly that poor people parameters. For this reason we introduced are perfectly capable of using the latest a more flexible system in 2001/2002 to technology. enable us to react faster. For example, we By establishing Grameen Danone and now support borrowers in providing for their Grameen Health Care Services you have old age, and have set up a special savings now taken things a step further. What fund to protect the family from the negative are these “social business enterprises”? consequences of someone dying. Whereas Social businesses are still run according earlier we required a fixed interest rate of to commercial criteria – in other words they 20 percent for a company loan, to be repaid have to be self-supporting and have a in weekly installments, and 8 percent for corresponding degree of efficiency and a construction loan, we can now tailor rates cost awareness – but investors receive no profit, only their investment back. The goal of all these companies is the maximization “I have great faith in social of social benefit. Specifically, the joint companies. I see a funda- venture with a large French foods manu- mental willingness every- facturer, Grameen Danone, provides the where to support them.” rural population with yoghurts that are enriched with vitamins and other nutrients. It not only creates new jobs, but simulta- more flexibly to the situation of the individ- neously improves the quality of children’s ual borrower. In 2004, we launched a health. Grameen Health Care Services program for the poorest of the poor – the is setting up eye clinics throughout the beggars – to whom we lent 15 US dollars country in which the treatment tariffs are

on an interest-free basis, leaving it up structured according to the financial Muhammad Yunus is hoping to banish poverty to them when and how much they would circumstances of the patient. altogether through investment in social companies. repay. The success of this scheme has Is this then a pioneering experiment in Profile been sensational: We now have more than your view? 100,000 so-called stumbling members, I have great faith in social companies. I see From 1976, Muhammad Yunus of whom a 10th have given up begging and a fundamental willingness everywhere to (born 1940) began building up the are working full-time as traders. support them. One day they will be listed Grameen Bank in his homeland Meanwhile, the Grameen Bank has on a special social stock exchange, making of Bangladesh, granting microloans grown into a group of considerable size … a significant contribution to eliminating to the country’s poorest citizens The battle against poverty has actually led poverty alongside mankind’s existing and thereby enabling them to live a to the founding of 25 Grameen companies, instruments. human existence. An economic solely on the basis of practical requirements. You are now 68 years old. Have you scientist by training, Yunus has For example, Grameen Shakti provides turned your thoughts toward the future of received countless awards for his our borrowers who live a long way away from the Grameen companies when you yourself work, including 26 honorary doctor- a public power supply with solar power are no longer actively driving them forward? devices. Grameen Uddog has dedicated Microfinance institutions generally, and the ates and the Nobel Peace Prize itself to the export of handwoven Grameen Grameen Bank in particular, are now so well in 2006. His latest book, “Creating Check textiles since 1994, while Grameen established that they function without input a World Without Poverty,” in which Shamogree, founded just two years later, from me. There is still a way to go where he explains the system of social sells these on the domestic market. social companies are concerned, but I’m a businesses, received the Corine

Photos: Roger Richter | Hans Schürmann Particularly noteworthy is Grameen Phone. long way from being too tired to continue … Future Award in 2008.

Credit Suisse bulletin 3/09 58 Economy Mobile Advertising Marketing: “ Mobile Advertising” Set for Take-Off

The global advertising market took a severe battering during the economic crisis, and is experiencing a double-digit fall in sales this year. By contrast, mobile advertising – i.e. advertising on mobiles – is enjoying strong growth. The increasingly simplified use of mobile Internet with hand-held smartphones provides great potential for this still small market.

Text: Uwe Neumann, Equity Research Europe, Zurich

Tom, a trendy 18 -year-old Londoner, is just Within a year, the number of customers for the mobile Internet opened up new opportu- preparing for a Friday night out when he re- the service has doubled to 200,000, and Blyk nities for advertisers on this platform. Among ceives a text message on his mobile phone. plans to soon roll out its clearly successful other data, industry research firm AdMob Nothing new about that – except that this concept to other European countries. publishes monthly market shares of advertis- text message asks him how he would like to ing impressions sent via the various mobile New Momentum Thanks to the iPhone arrange his hair. Three alternatives are sug- operating systems (> see figure 1). With a share gested: “kind of smart,” “sort of messy” or This is just one example of how advertising of 43 percent, Apple’s iPhone is way ahead “somewhere in between.” Once he has made can assert itself through mobile devices. This of Nokia’s Symbian, despite the fact that his choice and sent back his answer via a type of advertising was proclaimed to have a there are a significantly smaller number of free text message, he receives his styling tip big future some time ago. So far, however, installed iPhones than there are Nokia de- in the form of an image together with adver- success has been modest and has lagged vices. A growing trend is also likely to be tising for a brand of hair gel. The manufac- far behind industry estimates. In 2008, ad- evident for the Google-initiated “open source” turer of the hair gel in question has launched vertising through mobile telephony amounted operating system, which is supported by a an advertising campaign via mobile telepho- to some 2 billion US dollars globally, a figure wide range of telecom service providers and ny through the alternative mobile media ser- that is truly derisory in comparison to the device manufacturers. A number of new An- vices provider Blyk. traditional advertising market, worth some droid smartphones are likely to hit the market Since 2008, British-based Blyk has been 300 billion dollars in just the US alone. The in the second half of 2009. As far as the pursuing an innovative business concept with introduction of the Apple iPhone clearly pro- advertising agency Publicis is concerned, the growing success: Customers may make calls vided an injection of momentum for the mo- increasing dissemination of broadband-en- and send text messages free of charge if bile telephony advertising market. Compared abled smartphones is proving an important they are prepared to receive advertising mes- to other mobile phones, the larger screen, driver of the mobile advertising market. As sages on their mobile phones in return. It the more user-friendly nature of built-in func- part of its Digital Day in the middle of last year, appears that younger users between 16 and tionalities (GPS compatibility, simple video the company cited Japan in particular, where

24 are particularly receptive to this offer. downloads, etc.) and the ease of access to the 3G smartphone has achieved market > Photos: activeMOBILE, a brand offer by AdLINK Internet Media AG Switzerland | made available by Apple

bulletin 3/09 Credit Suisse Mobile Advertising Economy 5

1 2 3

1 Mobile banner advertising Advertising banners activated on the mobile portal work in the same way as traditional newspaper advertisements. 2 Mobile shopping vouchers Thanks to coupons received via text message that can be shown at the checkout, the customer benefits from special offers on price reductions. 3 Mobile Internet application What was previously only possible via the PC is now also an option when out and about: Thanks to applications, goods can be ordered via the mobile phone. E-shopping has thus become even more attractive.

Credit Suisse bulletin 3/09 60 Economy Mobile Advertising

penetration of almost 100 percent, while the conservative minimum. There is still no evi- 1 Two operating systems dominate number of viewers of mobile phone TV has dence of any in-house advertising strategy the mobile advertising market doubled to 20 million in just six months. being developed. Vodafone’s advertising rev- In 200, the iPhone operating system enues are predominantly limited to the dis- achieved the greatest global market share Joint Strategy Called For of advertising impressions, followed by play advertising that appears on the “Voda- Nokia’s Symbian. Source: AdMob mobile metrics Industry forecasts as to the potential of the fone Live” mobile portal. Telecom groups mobile advertising market differ wildly. While clearly fear both the possibility of their net- 43% iPhone OS ABI Research and Gartner promise a boom- works becoming inundated with Internet- 36% Symbian OS 9% RIM OS ing market that could reach the 24-billion- style spam mail and the associated customer 5% Windows Mobile OS 3% Android dollar mark in 2013 thanks to the market irritation. Swisscom, for example, believes that 2% Hiptop OS 2% Palm OS entry of the major Internet platforms such as only relevant offers such as shopping vouch- Google (YouTube), Microsoft ( MSN ) and ers would be accepted on mobile phones. Yahoo (> see figure 2), skeptics are warning According to Swisscom, other advertising against overoptimism and estimate a maxi- services that might be acceptable include 2 Huge growth predictions for mum market size of 3 to 4 billion dollars by those that save the mobile phone owners revenues from mobile advertising 2012. In their view, this market is threatened money and time, e.g. locality-specific offers Thanks to the market entry of the major above all by the excessive zeal of advertisers, involving the receipt of shopping coupons via Internet platforms, revenues are expected which could lead to an infringement of indi- text message when visiting a shop or a tip to increase from 2 billion (2008) to 24 billion dollars (2013). Source: Gartner viduals’ private sphere and the loss of ac- via video message as to where special user- ceptance among consumers for this form of specific offers can be found in a given area. advertising. To avoid such a development, Plethora of Market Players Enter the Fray USD billion they argue, participants throughout the value 30 creation chain – i.e. telecom providers, media In addition to the telecom providers and many 25 companies, mobile manufacturers and Inter- smaller start-up companies that have differ- 20 Revenues net companies – ought to be forging a com- ent forms of specialization in the mobile ad- 15 mon path, but as yet there is no evidence of vertising markets (like the above-mentioned 10 such an approach materializing. Indeed, the Blyk, or Yoc in Germany, which develops 5 different parties involved have differing in- specific mobile telephony brand portals and 0 terests. In the assessment of Credit Suisse, processes opt-in push campaigns), the ad-

06 07 08 09E 10E 11E 12E 13E a new intelligent advertising market is emerg- vertising-financed Internet platforms such as ing in the mobile telephony network that in Google, Facebook, MySpace (News Corp.), many areas is being driven by familiar Inter- MSN (Microsoft) and Yahoo are now also net platforms. This is likely to take market increasingly entering the fray. share away from established advertising mar- These companies are likely to benefit kets in TV, radio and print media. greatly from the much larger user interfaces now available on mobile devices, as these Sensitive Client Data make it much easier to access the Internet. In particular, mobile advertising is attributed Surfing the mobile Internet is therefore like- two advantages over traditional media. First, ly to become as easy as it is on fixed con- there is a greater global pool of individuals nections. This is being ensured by mobile and to be reached than in any other medium smartphone manufacturers who also want a thanks to the number of mobile devices (in slice of the pie. While Apple has every chance excess of 3.5 billion) currently in circulation. of carving out a share of the mobile advertis- Market penetration significantly exceeds that ing market thanks to its much-visited iTunes of televisions and PCs. Second, more target- platform, other manufacturers do not as yet ed use can be made of advertising than in possess a similarly successful strategy for other media thanks to the customer data held attracting advertisers. It is not yet clear who by telecom service providers (demographics, will prove the most successful in the battle usage, time preferences, localization). This for market share in mobile advertising. While is expected to lead to a higher response rate, this new distribution channel will pose in- something that can be critical in advertising creased competition for traditional advertis- success. Understandably, however, telecom ing companies, mobile marketing is likely to services providers are taking a very circum- offer new growth possibilities for successful spect approach to the use of customer data recent Internet and communication platforms and are proving reluctant to exploit it. For such as Google, Facebook, MySpace and example, Vodafone has drawn up a clear in- Twitter. In our view, telecom providers and ternal guideline that restricts the use of cus- the small start-up companies can expect to tomer data for advertising purposes to a very carve out only a niche presence. < bulletin 3/09 Credit Suisse Keating Economy 61 Outlook: A New Bubble May Be Forming

As we begin to see the initial signs that the worst of the storm may have already been weathered, investors must now focus on what comes in its wake. The road ahead may be uncertain, but it is sure to be one paved with both opportunities and dangers.

Text: Giles Keating, head of Global Research, Zurich

Over the next few years, we could see the start of the year, still have large loans to write burden of this debt, but when faced with economy slip toward a depression, or a new off, which will probably restrain the supply of painful political decisions, the temptation for bubble, or something in between. All three credit. All this is likely to keep economic policies to lean in a direction that causes in- are possible, but the most likely outcome in growth subdued in the US and in Europe. In flation rather than deflation will be strong. our view is that a new bubble emerges, as contrast, many emerging countries in Asia What does this mean for asset prices: the US and some other governments bias and Latin America appear set to return to equities, commodities, real estate? It is like- their policies to avoid downside risk. Like all robust growth. Most of them built up large ly to point toward a new bubble. After all, bubbles, this one would eventually burst, per- external reserves and sound internal financ- Mr Bernanke, the current chairman of the haps due to inflation or a sharp fall in inves- es during the boom years. This gives them Fed, wrote powerful academic papers nearly tor willingness to buy government debt. the freedom to expand domestic demand to 10 years ago which argued that central banks make up for the shortfall in exports caused should ignore asset price bubbles as long as A New World Emerges From the Recession by the weakness of the rich countries. The consumer price inflation seemed under con- The boom of 2003 – 2007 was built on rapid center of gravity of global growth is thus ex- trol. And it is likely to remain under control credit growth, especially by US consumers, pected to shift firmly to emerging countries. for the next 12 to 18 months, given the amount and was fuelled by relatively low interest We see these trends continuing and believe of spare capacity in the world economy, rates set by the US Federal Reserve and oth- the eight largest emerging countries (exclud- which tends to hold consumer prices down. er central banks. The crash came as housing ing those dominated by energy) could ac- So this could well be a period when a new and other assets used to collateralize that count for half of global growth over the next bubble starts to develop, as investors gradu- credit began to fall from their peaks, and it five years. ally become reassured by signs that the eco- became apparent that many borrowers would nomic recovery is gathering pace, and yet Policy Is Likely to Lean Toward Expansion have trouble repaying the debt. The crisis central banks and governments keep the pol- was most intense between September 2008 All this suggests a sober outlook for people icy levers set toward expansion to avoid trig- and March of this year. Investor confidence in the US and Europe: unemployment reach- gering a return to depression risk. has since improved. Government intervention ing new peaks this year and then declining Looking further ahead, the risks are likely to support banks finally created a virtuous only slowly, real incomes subdued, with credit to gather. Consumer price inflation may be- circle, with investors hurrying to subscribe tight. Policymakers can be expected to do come less well-behaved, as spare capacity for new bank equity at prices which had be- what they can to limit the effects of this on is used up, and rapid growth in emerging come attractive. A similar upward spiral was their voters. They are likely to minimize the markets puts upward pressure on oil and oth- visible for some of the weaker corporates, danger that this unappealing central scenario er commodity prices. Confidence in govern- which became able to raise new capital to shifts even further toward the downside. This ment debt may start to decline as it becomes rebuild balance sheets. And in the real econ- suggests that policy is likely to err on the side apparent that governments are quick to talk omy, output reductions brought inventory lev- of expansion: interest rates staying lower for about stabilizing borrowing, but are slow to els down to such low levels that at last, there longer, with government tax and spending act. Eventually, these factors could become could be a prospect of production rising. plans continuing to have an expansionary powerful enough to burst the bubble, if in- US consumers have little appetite to re- bias. The very large debts being built up by deed one has developed. But history tells us turn to the high levels of borrowing that fuelled the US and many other countries point the that bubbles often run on for longer than the earlier boom. Banks in both Europe and same way. It is unlikely that any country will many expect. So there are opportunities here the US, though much more stable than at the deliberately try to use inflation to reduce the for investors, as well as dangers. <

Credit Suisse bulletin 3/09 62 Economy Entrepreneurs Adversity: The Mother of Innovation T he global economic crisis continues, bringing with it a host of dire consequences, a nd an overwhelming sense of uncertainty throughout the global economy. Yet, there a re those who recognize the opportunities that arise as a result.

Text: Matthew Rees

The World Bank has forecasted that the highlights the overlooked dimension of re- tailing lending, entrepreneurs are accus- global economy will contract 1.7 percent this cessions – they can be the ideal moments tomed to seeing opportunities where others year – the first global decline since World War II. for aspiring entrepreneurs to pursue their see ill-advised gambles. As fashion icon and That suggests an environment in which indi- dreams. entrepreneur Giorgio Armani has said: “An viduals cling to what they have, avoid taking There are countless examples of products entrepreneur shows his true colors in a pe- risks, and hope that the economic climate and companies getting started in the midst riod of crisis, not in a period when everybody doesn’t worsen. of severe economic downturns. The electric is having success.” Don’t tell that to Ethan Nicholas, an Amer- razor, the car radio, and DuPont’s nylon were Entrepreneurs Poised to Seize the Day ican who created an application – “app” in the all launched during the Great Depression. common parlance – for Apple’s iPhone in the The technology for Xerox copies was devel- There are four factors beneficial to entrepre- evenings after coming home from his full- oped by a worker who was laid off in the neurship in a recession. time job at Sun Microsystems. Though a pro- early 1930s and grew frustrated making First, with layoffs culling employees from fessional programmer, he had no experience handwritten copies at his part-time job. companies in nearly every field, millions of designing for Apple. He studied Web sites Computer maker Hewlett-Packard was workers are eager for wages and for the op- to learn how to program for the iPhone. The not only launched near the end of the Depres- portunity to contribute to economic growth. result: a tank artillery game that skyrocketed sion, but saw a resurgence in innovation and In addition to workers who have already been to number one in Apple’s App store. He quit market share beginning with the US reces- separated from their jobs, many others have his job at Sun the same day, and has realized sion of 1969 – 70. The US experienced mul- had their hours reduced and are considered more than 800,000 US dollars in income tiple recessions in the 1970s, but the decade “underemployed.” In the US, more than two from his work. still gave rise to iconic companies such as million workers fall into the latter category. Apple, Microsoft and Genentech. Federal Furthermore, many of these workers are Recession Not Necessarily Bad for All Express, which helped to revolutionize ship- highly skilled – in fields such as finance, en- Other programmers have similar stories, and ping and supply chain management for count- gineering and law. With slim job prospects several companies devoted to producing less companies, is also a child of the ’70s. but marketable skills, these professionals are iPhone apps have been launched. The New Does the severity of the current recession turning to temporary contract-based work to York Times captured the zeitgeist with its ob- make this time different? While business ac- tide them over until full-time employment servation that “modern Horatio Alger dreams tivity has been depressed, with millions of comes along. As a result, today’s entrepre- revolve around a SIM card.” The “app” story jobs having been eliminated, and banks cur- neurs can engage people with a range of bulletin 3/09 Credit Suisse Entrepreneurs Economy 63

skills to get their idea from the drawing board to the market. The second entrepreneurial advantage in a recession is the reduced costs of launching a new venture. While investment funding may be harder to come by as banks and venture capitalists rein in their exposure, the capital that is available can be stretched. Costs for office supplies, real estate, profes- sional services and wages are depressed. Furthermore, the proliferation of commu- nications technology and online information has made it possible for many entrepreneurs to avoid traditional business start-up costs entirely. Web sites offer legal and financial forms for free or at minimal cost. And a laptop and mobile phone allow an entrepreneur to interact with suppliers, producers and cus- tomers anywhere in the world. With start-up costs low, entrepreneurs have the opportunity to minimize expenses while revenue is nonexistent. By doing early- stage development work during a recession, With companies, consumers and banks reining in new companies will be positioned for growth spending and avoiding risk, all of the necessary when the economy recovers – reaping a high- conditions are in place for the entrepreneurial spirit er return on their initial capital outlay. to flourish – and take big ideas from the chalkboard The third factor in entrepreneurs’ favor is and transfer them into the marketplace. that many larger businesses use downturns as a time to retrench. The traditional wisdom for established businesses to follow in a Consumers and investors are reining in recent boom.” On a global scale, the World downturn is to pare down – to focus on core spending and investment because they don’t Bank’s Doing Business blog finds that the business lines, to cut expenses, and to invest feel secure, and they don’t necessarily trust entrepreneurial spirit remains strong. A recent only (or mostly) in proven products and ser- today’s economic actors. But soon they will survey of entrepreneurs in eight emerging vices that deliver clear results. look for new outlets for their money, and op- markets indicated that most respondents While management experts have more re- portunities that represent a break from dis- have been impacted by the global downturn cently advised companies to grow through a credited, outdated or inefficient firms will be and expect it to get worse, “but, they also recession, keeping the accelerator on research attractive. People with innovative products foresaw that, on average, their businesses and development and scoping out new busi- and organizations will benefit. would grow by 31 percent and the number of ness opportunities, many large firms are slow employees by 12 percent.” Opportunities Abound Everywhere to change. They also have stakeholders – This shouldn’t be a surprise. Entrepre- workers, shareholders and suppliers – who While the US is home to countless businesses neurs tend to be optimistic, visionary and are counting on reliable results. that started during recessions, this dynamic confident. In recessions, as most people Entrepreneurs and start-ups are not con- is at play elsewhere. In Israel, for example, swear off risk, entrepreneurs venture out to strained by these expectations. They have adversity has been a catalyst for entrepre- discover what may be hiding just around the the freedom to focus on what they do best – neurship, as investor Dan Senor and journal- corner. The payoff could be big. Entrepre- innovation. During a recession, larger com- ist Saul Singer spell out in their forthcoming neurs with the ideas and courage to start panies will be less likely to operate in the book “Start-up Nation: The Story of Israel’s new ventures today are destined to be the same innovation space, and new firms will Economic Miracle.” business icons of tomorrow. < face fewer competitors in the race to reach India may also be poised for entrepreneur- the market. ial growth linked to the downturn. The coun- The fourth benefit for entrepreneurs during try’s homegrown talent and its young people a downturn is that the foundation on which educated abroad have more reason to pursue old economic models rested has been dam- work in India as job prospects in other econ- Matthew Rees is a former White House aged. The celebrated economist Joseph omies – particularly the US – dry up. This speechwriter and Schumpeter, the father of the idea of “crea- growing pool of talent in India should fuel the the founder of Geono- tive destruction,” once said that all business- country’s entrepreneurial engine. As The mica (www.geono- mica.com), a writing es are “standing on ground that is crumbling Economist has pointed out, India’s returning and consulting firm. beneath their feet.” During a recession, the high-skilled workers have “helped to fill some

Photo: Noë Flum ground crumbles faster, forcing change. of the skills gaps created by the country’s

Credit Suisse bulletin 3/09 64 bulletin 3/09 Credit Suisse Credit 3/09 3/09 bulletin Economy Credit Suisse Credit US Renaissance US >

Fotos: Muster Mustermann | Muster Mustermann US Renaissance Economy 65 T he USA: R enaissance of the Economic Power?

T he financial and economic crisis was not the only phenomenon to jar theUS : A structural shift in favor of the emerging countries is also under way in the global economy. T he US must reinvent itself in order to protect its leadership role in a new world order.

Text: Thomas Herrmann, head of Global and Developed Economics

After what is likely to be the longest and So what are the prospects for an American sance is likely to mean more public interven- deepest recession in postwar history, a lot is Renaissance – in terms of profound change tion and tighter regulation. The large fiscal set to change in the United States. What new and the imperative to reinvent itself? Presi- spending programs and substantial amounts role will the US economy and society take on dent Obama has already announced various of public money that have been pledged to in a radically different world order? We think changes. Even if they can be affected by stabilize banks and the financial system al- that a structural shift is unfolding that will factors other than his administration’s initia- ready point strongly in this direction. lead to a loss of relative importance of the tives, it is important to stress that the US Cultural Dominance in Jeopardy US economy as emerging markets are in- economy has many strengths, which should creasingly able to exploit their growth poten- ensure that the country remains a significant The United States is home to the largest, tial by investing more in education and public player in the global economy. In many areas most innovative and (at least before the crisis) health and developing their financial services where emerging markets are easily realizing the most liquid financial market. Over the and markets. We thus believe one strong progress, the US economy is already among past years the economy benefited strongly trend set to continue over coming decades the best and remains the benchmark. The from global demand for US investments, par- is the transition from US hegemony to a role World Bank’s “Doing Business” survey for in- ticularly in the form of securitized debt, which as part of a multipolar world. In the past, the stance, which takes into account various fac- financed a large current account deficit. The US economy has responded to shocks with tors that measure the ease of starting and United States imported far more than it ex- flexibility, continually proving its resilience. maintaining a business, ranks the US econ- ported. The debt largely comprised govern- For that reason in particular, rising debt levels omy as the third-best location. ment and corporate debt, of course, but also were accepted as part of the package. This While fundamentals like a free-market debt backed by consumer (and other, includ- time, however, the changes will be funda- economy, private property rights and inter- ing mortgage) loans. While companies in mental in scope, and the economic order will national economic competition should survive emerging markets often face obstacles when

Photo: Mark Lennihan, AP, Keystone be transformed in a more far-reaching way. in principle, in the current context a renais- seeking to obtain finance on capital >

Credit Suisse bulletin 3/09 66 Economy US Renaissance

world order. A key success factor with respect Close to 100 countries around the world still to the US economy has been the high level rely on a reserve currency, some fully pegged of innovation, as reflected by enormous R&D to the US dollar, while others have more flex- expenditure and the large number of patents ible models. The trend to a more multilateral emanating from the US. From light bulbs to exchange rate system is expected to con- IT and home entertainment technology, to tinue in the coming years. As it does so, the aerospace, American entrepreneurship has share of the US dollar in global reserves will driven or played an important role in the de- begin to decline. With increasing diversity of velopment of key technologies and products. central bank reserve assets, and an increas- The leading universities and well-qualified ingly diverse range of reserve holders them- labor force also contributed to this success selves, a tripolar world is likely to take shape. story. A growing knowledge base in emerg- The euro is increasingly posing that challenge ing markets, the spread of knowledge via from Europe, and in the longer run, the Chi- telecommunications and information technol- nese renminbi may well be both liquid and Strong US consumption stimulated ogy, global mobility, as well as an awareness flexible enough to represent Asia’s primary growth worldwide. of the importance of innovation already pose role in the multilateral system. a big challenge to maintaining innovation In summary – the US economy has numer- markets, US consumers were able to tap leadership and protecting intellectual prop- ous strengths that many other economies can these markets as their loans were sold on in erty. To uphold both, collaboration will probably only dream of. Among them are the highly securitized form. This led to a debt-fueled become more important than in the past. boom of private consumption, which has now Ecology as Growth Driver come to an end. Over the past two decades, consumers in the US have spent a lot – at With 300 million inhabitants, the US accounts times, more than they earned. Even during for roughly 5.5 percent of global population, the last recession, when the labor market yet consumes approximately 25 percent of deteriorated, consumers offset the lost in- the world’s annual oil output. According to come from labor with additional credit, and OECD statistics, Portugal is the only country kept spending. Now consumer spending pat- with more cars per 1,000 inhabitants. US car terns appear to have adjusted. After achiev- sales already shifted in favor of more fuel- ing a virtually zero – or even negative – sav- efficient vehicles when oil prices approached ings rate in recent years, consumers are cur- 150 USD/bbl. Even if the key factor choking rently investing money (freed up e.g. through car sales in recent months has been lack of lower oil-related expenses). Consumption credit, the trend toward more fuel-efficient growth has been, on the back of ever-rising cars and technologies looks likely to hold debt, a key pillar of US growth – and due to steady. This applies both to private expendi- Driving innovative force: research at the the importance of the US economy, of global ture (including energy-efficient homes) and Massachusetts Institute of Technology (MIT). growth as well. public expenditure, as the new administration In its long-standing role as a key driver of is likely to provide key impetus. The US has consumption, the United States has also had no national energy grid capable of transfer- developed financial market (despite the prob- a significant influence on global lifestyles, ring electricity from one major region to an- lems this has caused), excellent physical and from (fast) food and fashion to entertainment. other, and this is restricting the proliferation human capital, a flexible labor market and Many of these categories of cultural and thus of certain alternative energy technologies. high labor productivity. The US has been an also economic dominance will face new com- innovation driver (not just in terms of products, petition (Bollywood films, Asian cuisine, new but also development processes) and now is regional brands more strongly anchored in challenged to maintain this position. Energy local culture). Strong consumer brands can consumption is an area where it could poten- certainly offer opportunities as demand grows tially realize efficiency gains. A key growth in emerging markets.T he question is, however, driver of the past two decades was credit who will benefit if the products are both pro- growth on the back of financial market liquid- duced and sold locally in emerging markets? ity due to the global “hunt for yield.” This en- gine has stopped, and is unlikely to be revived More International Collaboration anytime soon. Consumers are adjusting their At the early stage of the last wave of global- spending habits to more sustainable levels, ization, it seemed as if a logical division of which should continue to weigh on US growth international labor between the knowledge- rates over coming years. While the US econ- and service-oriented industrialized econo- omy remains the world’s largest, the catch-up mies and the global sweatshops in Asia and process of “the rest” and the return to a more

other emerging markets would be the new Public transportation gains ground. multipolar world are likely to continue. < Photos: Frank Franklin II, AP, Keystone | David Sailors, Corbis | Steve Dunwell bulletin 3/09 Credit Suisse Inflation Economy 67 Inflation: Why We Need It and the New Role O f Central Banks

Central banks have an important role to play not only in times of exceptional financial market stress, but also during the normalization process. There is nonetheless a significant difference between the respective tasks. To prevent the global economy from falling into deflation, reflation is initially required before inflationary pressure can then be brought under control.

Text: Anja Hochberg, head of Global Economic Research, Zurich

They play their part in intensive discussions, ducers do of course adapt to the situation. can all too easily spark off the next crisis. An but are also now increasingly the subject of But in a deflationary environment, the adjust- example of this knock-on effect can be found discussion. In the current debate over the ment processes are even more drastic. in the genesis of the current crisis. This crisis future of the global financial system and the didn’t start with the credit crunch, the bank- When Warehouses Are Empty outlook for the global economy, central banks ing crisis, or the first signs of liquidity short- have a polymorphous role to play. Warehouse inventories – the “buffers” of the ages in the money markets. Nor did it start They ensure the supply of liquidity to the economy – are also dragged down in sympa- with the subprime crisis – the crisis in the economy via traditional measures, but also thy, since manufacturers themselves also American real estate market that was deemed via unconventional ones. They have cut inter- play a purchasing role, for example with re- to have triggered the developments. There’s est rates to almost zero. This is very much in spect to raw materials, intermediate goods no doubting that mortgage standards had keeping with their traditional mandate, name- and services. From a commercial perspec- fallen to unacceptable levels, and it is equal- ly the guaranteeing of price stability. Except tive, holding stock makes no sense if end ly clear that the underlying business models that, on this occasion, prices are not spiral- prices are continually falling, even to the ex- should be subjected to close scrutiny. But ing higher but for the time being (still) falling. tent of falling below cost or production prices. the carefree granting of credit to consumers As far as many central bankers are con- The economic costs of such a scenario would and the interest in securitized loans on the cerned, falling prices actually present even be high. This is why central banks, aided by investor side were phenomena that could greater risks for price stability. And not just generous fiscal measures, are consistently only have occurred under specific conditions: because deflation is much less common than taking measures that are both conventional a long period of historically low interest its inflationary counterpart, but because (e.g. interest rates) and unconventional (e.g. rates. when interest rates are close to zero, guard- purchasing government bonds). When com- Interest Rates Were Unjustifiably Low ians of monetary policy have fewer cards to pared to a deflationary spiral, the economic play, and the danger of a downward eco- costs of inflation appear to be significantly In an article entitled “Housing & Monetary nomic spiral lasting many years is great. lower, as inflationary pressure is easier to Policy” written in September 2007, John Tay- Falling prices have an impact not only on control – at least in developed economies. lor, professor of economics at the University demand (consumers, investors) but also on Even if there is a danger of strangling eco- of Stanford, shows that the US key interest supply (production) in an economy. As a gen- nomic growth, continually tightening the in- rate of 1 percent in 2004 was actually only eral rule, the desire to purchase tends to fall terest rate screw is always an option. By con- about a quarter of what was justified by the in an environment of falling prices, because trast, timing the application of “ultralight” fundamentals. According to the calculations there is an expectation of being able to buy monetary policy correctly and gauging the of his model, interest rates should have been the object in question even more cheaply in appropriate rate of normalization is an ex- gradually rising from as early as 2002 rather the near future. And so demand falls. Pro- tremely difficult task. And if it is botched, it than being cut even further – which is what >

Credit Suisse bulletin 3/09 68 Economy Inflation

actually happened. Professor Taylor does, omy, and developed countries in particular, however, agree with the position of central perform significantly below their potential, 1 Oil Fueling Inflation Energy prices heavily influence the rate of bankers when we move forward to the end even a substantially increased money supply inflation. A sustained high oil price could of the last interest-rate-raising cycle. Inter- will not translate into increased demand and thus drive current rates above the historical est rates reached their cyclical peak of 5¼ thus have the effect of driving up inflation. average by the end of the year. Source: Bloomberg, Credit Suisse percent at the end of 2006. But starting the In deciding when this gap between current rate-raising process earlier, in keeping with and potential output has closed, central Professor Taylor’s model, would have meant bankers have to make assumptions as to YoY US CPI that this process would have played out over when the economic recovery will be sus- 6% 100% two more years, thus resulting in a signifi- tainable, i.e., when it can progress without 5% 80% 60% cantly flatter trajectory of rising rates. This monetary and fiscal support. If these depen- 4% 40% would have entailed a much less dramatic dencies of economic development are still 3% 20% credit bubble, which in turn would have re- in place, any curtailment of looser monetary 2% 0% –20% sulted in a less painful correction process. policy would also herald the end of the eco- 1% –40% Or might have done, because what was nomic revival. We only need to look at the 0% –60% available to Professor Taylor when calculat- example of Japan to see how dangerous a –1% –80% ing his optimum interest rate trajectory was premature move away from low interest 2006 2008 2010 not available to central banks at the time rates can be. US CPI these decisions were made: concrete data On the other hand, inflationary expecta- WTI, rhs Scenarios for different oil prices: as to the nature of growth and particularly tions play a crucial role in determining future WTI = USD 80, rhs WTI = USD 60, rhs inflation in the period 2002 – 2006. inflationary developments. Such expecta- WTI = USD 40, rhs In the current stage of the economic cy- tions feed directly into the price-forming cle, too, central bankers are having to make mechanism in the market, be it with respect decisions in uncertain situations. As the to goods or salaries. As long as a production 2 Global Economy in Shock measures taken by central banks can take gap clearly exists, i.e., production is not run- Global industrial production sank by up to 18 months to fully impact on the real ning at full capacity, increased inflationary approximately 10 percent in the fourth quarter. economy, central bankers continually have expectations will not translate into higher Although there are now clear signs of stabilization, it’s the sharpest downturn to make assumptions regarding future eco- prices and thus inflationary reality. since World War II. Source: Bloomberg, Credit Suisse nomic and inflationary developments. In ad- In times of rising unemployment, wide- dition to the so-called endogenous variables spread wage increases are difficult to im- such as economic development, exogenous plement because of increased inflationary YoY, ppp-weighted factors such as the price of oil, and ex- expectations (the so-called wage-price 5% change rates also have a significant role to spiral). Nonetheless, the makers of mone- 0% play. Added to this are the above-mentioned tary policy need to watch these inflationary –5% structural changes that feed through only expectations closely to ensure that they do –10% gradually. As is shown by the development not become reality as the recovery picks up –15% of the price of oil and inflation in the first pace. 1996 2000 2004 2008 few months of 2008, these classical uncer- If we take so-called inflation swaps as a Global industrial production tainties can be of a considerable magnitude. measure, there is already evidence of a par- A simple simulation ( > see figure 1) that sets adigm shift having taken place. Whereas at out different oil price scenarios shows the the end of last year the market viewed a 3 Inflation Expectations Shift Upward direct and strong repercussions for the de- deflationary scenario as being on the cards The economic improvement will be initially velopment of inflation. for the next one to three years, this year accompanied by a rise in predicted inflation. However, in the current economic cycle there is already a built-in assumption that However, the adjustment process may well be only in its beginning stage. (although crisis cycle might be a better rates of inflation will rise. Source: Bloomberg, Credit Suisse term) account also needs to be taken of the However, in the view of Credit Suisse, the additional uncertainty provided by the un- process of adjusting to inflationary expec- known extent of monetary and fiscal eco- tations has not yet reached its peak. Given YoY nomic support. That this is likely to have an the great economic uncertainties, central 3% inflationary impact is a plausible and virtu- bankers are more likely to want to wait for 2% ally undisputed thesis. Where monetary pol- evidence that the recovery is sustainable 1% icy is concerned, however, the relevant before resuming vigorous steps with regard 0% question is when and to what extent this to interest rates. This may risk overdoing –1% will be the case. things where inflationary expectations and –2% inflationary reality are concerned in the Monetary Policy – An Imprecise Science 1Y 5Y 15Y 20Y 25Y 30Y medium term, but it should equally be an US inflation expectation, current On the one hand, this will be determined by error that can be corrected within a similar 1 month ago 3 months ago the real economy. As long as the global econ- timeframe. < 1 year ago bulletin 3/09 Credit Suisse Useful to Know Economy 69 U seful to Know Jargon and Books From the World of Economics

NAFTA [North American Free Nordic Investment Bank (NIB) True North Trade Agreement]: The joint eco- [instrument to promote economic nomic agreement between Canada, development]: Founded in 1976, True North: Discover Your Authentic Leadership Mexico and the US dates back to the  Nordic Investment Bank is By Bill George and Peter Sims 1992, and entered into force on designed to support collaboration Jossey-Bass, 2007 January 1, 1994. When measured between the governments of Den- in terms of the number of consum- mark, Finland, Iceland, Norway ers in its member countries and and Sweden, including the autono- 247 pages overall economic power, the trading mous areas of Greenland, the Faroe ISBN: 978-0787987510 bloc covered by the North American Islands and the Aland Islands. Free Trade Agreement  NAFTA In 2005, Latvia, Estonia and Lithu- represents one of the world’s most ania joined the NIB, thereby facili- Considering the intangible nature of leadership, those who read significant free trade areas. Since tating an appropriate and modern about it want to know that those who write about it have the proper the agreement entered into force, continuation of existing cooperation experience. The authors of “True North” certainly qualify. Bill George trade barriers and customs duties agreements. Headquartered in have been gradually abolished, with Helsinki, the NIB is designed to is a management professor at Harvard Business School, a member full implementation of the agree- promote economic activity. As such, of several corporate boards, and the former chairman and CEO ment scheduled for completion by it finances investment and export of Medtronic, the medical technology stalwart. Co-author Peter Sims 2015. The agreement envisages projects requiring the involvement is the founder of an investment firm. Together they interviewed not only the liberalization of trade in of institutions and companies from goods and services, but also with several Scandinavian countries, 125 leaders to discover what authentic, ethical leadership is and what respect to investment conditions. as well as projects that are in the it requires. This book represents the fruits of their comprehensive This encompasses the protection “general Nordic interest.” research. Authentic leadership, they say, depends on your internal of intellectual copyright and the en- compass, your “true north,” which guides you toward your real vironment, as well as ramifications North-South Conflict [conflict of identity. getAbstract recommends this book to anyone who leads in the sphere of labor rights. interest between industrialized Ever since its inception, NAFTA and developing countries]: At the others. The authors see leadership as a quest, not a destination. has been a subject of vigorous beginning of the 1970s, the mutual It is an excellent starting point for your journey. © getAbstract debate. On the one hand, lower dependency between the industrial- customs duties have the effect of ized and non-industrialized parts increasing trade, which is why in- of the world became clear during ternational companies for the most the dispute over the price of oil. The Leadership Code part support the agreement. On As a consequence, both developing the other hand, fears of its implica- countries and industrialized coun- The Leadership Code: Five Rules to Lead By tions have also been widespread, tries began to pursue what was at By Dave Ulrich, Norm Smallwood and Kate Sweetman for example the concern of US times a harsh policy of confrontation. Harvard Business Press, 2009 trade unions that an unacceptable The drivers of the differences of number of jobs would be lost to opinion that came to be known as Mexico. In addition, social and the  North-South Conflicts were 190 pages environmental groups also take a commercial, political, military and ISBN: 978-1422119013 dim view of the expansion of trading cultural interests that at times could volumes and the corresponding hardly have been less reconcilable. This book is to leadership what a compass is for uncharted terrain. repercussions for the environment Among other demands, developing Just like the northward-pointing needle, it provides valuable and health. As is evident from eco- countries pressed for a new inter- orientation in an area where you might otherwise easily get lost. nomic studies, however, what has national economic order that would emerged above all is a shift in trade; make amends for the exploitation Dave Ulrich, Norm Smallwood and Kate Sweetman have accom- the more time that elapses, the suffered during the colonial era and plished an almost impossible task: They have sifted through greater the proportion of imports in- thereby pave the way for a new an overwhelming amount of information on the nebulous subject to NAFTA countries from their fellow partnership between North and South of leadership, and have actually made sense of it. They have member states, rather than from based on equality. The industrialized other countries around the world. nations in turn adopted an over- synthesized their research into five essential rules that they call whelmingly negative stance toward the “Leadership Code.” They tell readers how to strategize, execute, these demands. Today, a funda- involve employees, develop a base of talented people and grow mental overhaul of the relations as leaders. Filled with business vocabulary, this is a book by busi- between the northern and southern parts of the world appears for a nesspeople for businesspeople. Nonetheless, getAbstract recom- number of reasons to have failed – mends it to current and aspiring executives who want a compass to at least for now. rg guide them as they follow the elusive path to great leadership.

© getAbstract

© getAbstract. You’ll find five-page summaries of these books onwww.getabstract.com

Credit Suisse bulletin 3/09 0 Leader Paul Krugman “I focus on crises” Ten years ago, Paul Krugman warned of the problems that would lead to the current crisis in his book “The Return of Depression Economics.” Last year, the professor and trenchant columnist was awarded the Nobel Memorial Prize in Economic Sciences. In the following interview he talks of the reasons for the crisis, the lessons to be learned and life as a Nobel Memorial Prize winner.

Interview: Daniel Huber bulletin: There are very few winners emerging from this crisis, Looking back, where do you see the major cause but you seem to be one of them, because foreseeing this of the current economic crisis? crisis a decade ago probably won you the Nobel Memorial Prize For me this is quite clearly the steady expansion of debt, in Economic Sciences. particularly in the US. But this is actually a trend that dates back Paul Krugman: Well, I think I’m enough of a humanitarian to wish around 25 years. The indicator I use most often is household things hadn’t turned out this way. debt relative to income, which had been stable for a generation Would you consider yourself a pessimist or a realist? until the beginning of the 1980s, when it began rising inexorably In my view, it seems they’re the same thing right now. But over the and eventually reached 100 percent of GDP on the eve of the course of my career I have become focused on crises, as they crisis. However, this alarming development was even welcomed have always interested me. I look at the current situation through by many people, who saw it as a confirmation of markets function- this lens too. In other words, I’m more interested in a potential ing properly. But in retrospect you have to say that people were problem than the possible upside. I think I’m a realist, but with a taking on much more than they could handle. It is worth none- pessimistic streak in the things I focus on. theless recalling some of the excesses of recent years in partic- Why did nobody listen when you first warned of an emerging ular: the limitless granting of credit, the excesses in Eastern global economic crisis 10 years ago? Europe, and other developments that have now come home to First of all, the housing bubble helped to make things look good roost with a vengeance. for quite a while. People were very reluctant to question that Have we already passed the nadir of the crisis? bubble for a variety of reasons. Part of it was just a general ten- Short-term economic forecasting is a bit like staring into a crystal dency to assume that the market must be right, while some of ball. But nonetheless it appears that the pace of decline has it was an unwillingness to quarrel with what looked like a success- now slowed, and that the worst of the crisis is over. You no longer ful model. When people are making lots of money, to tell them that have to brace yourself for yet more horrible news when you turn their success is based on unsound foundations is not a popular on your computer in the morning. There are still negative surprises, thing. When you get through a crisis, as we did in the late ’90s, of course, but there are also now positive ones. Overall, it still the natural inclination is to pat yourself on the back and persuade does look like things are getting worse, but at a slower pace than yourself that it was your own wisdom and foresight that got you before. That’s an important step forward, but it doesn’t mean through it. But privately you say to yourself: Oh my God, that was that we can now say we’re on the road to recovery. We have a long

a close miss. way to go before we reach that stage. The falling-off-the-cliff > Photo: David Levene bulletin 3/09 Credit Suisse Paul Krugman Leader 1

Credit Suisse bulletin 3/09 2 Leader Paul Krugman

stage may have been stopped for now, but that doesn’t mean that normal times are just around the corner. The current economic situation can be compared to a patient who has been rushed to the emergency room in critical condition and has only just been saved.

“The falling-off-the-cliff stage may have been stopped for now, but that doesn’t mean that normal times are just around the corner.”

Sure, we may have succeeded in warding off the Great Depression version 2.0, but that doesn’t mean the patient is ready to leave the hospital. Quite the opposite: He’s still very sick and we have no idea when he will recover. Are there any examples from the past that could point a way out of the current crisis for us? The answer to that is rather depressing, as there are no good historical role models for recovering from this kind of slump. Paul Krugman was born in New York on February 28, The only appropriate example is Japan, which experienced a lost 153. He is professor of economics at the University decade of economic stagnation, and then had a quite convincing of Princeton, a highly respected columnist for the recovery from 2003 onward on the back of a strong surge in New York Times (on Mondays and Fridays), and the exports. However, this recovery was almost exclusively driven by author of various works on economics. Last year a growing trade surplus thanks to exports to China and the US. he was awarded the Nobel Memorial Prize in Eco- This time the whole world is caught in a slump, so unless we nomic Sciences on the basis of his “analysis of trad- can find another planet to absorb our global trade surplus, that’s ing structures and centers of economic activity,” not a route out. Going back further, you have the historical according to the official wording of the Royal Swedish precedent of the Great Depression, which was ended by a very Academy of Sciences. In addition to his academic large job creation program better known as World War II. Two work, Krugman has continually been in demand as a observations can be made here with respect to the current crisis: consultant, including in 182 on Ronald Reagan’s First, that any program of any comparable size in the modern Council of Economic Advisers, as well as a decade era would be impossible, except in the event of another major mili- later during the presidential candidacy of Bill Clinton. tary conflict. Second, governments came into the last world war He is believed to have declined an appointment to in relatively good economic shape in terms of their debt levels. the White House following Clinton’s victory, however. So they had more leeway to pursue an expansive economic policy. You can find Krugman’s controversial blog for the New But why didn’t the world slide back into depression when York Times at http://krugman.blogs.nytimes.com. the war was over? My theory is that private sector balance sheets were massively repaired during the war as no new credit was available, so that in- debtedness fell sharply in proportion to income as a result of growth and inflationary effects. The consequence was that both households and companies emerged with very little debt. And this in turn led to a very strong economy even after wartime spending came to an end. But if that’s the moral of the story, you have to ask yourself: Can we now envision government fiscal policies being sufficiently sustainable to permit that kind of recovery of private sector balance sheets? After all, let’s not for- get that governments came into this crisis with relatively high levels of debt to GDP. How does Europe stand compared to the US with respect to recovery? Even though the center of gravity of the crisis was in the US initially, the European recession is every bit as bad. So it’s hard to say which recovery will take place sooner. One thing that is clear,

however, is that although the decline in GDP looks similar on both Photos: David Levene bulletin 3/09 Credit Suisse Paul Krugman Leader 3

sides of the Atlantic, the human cost is disproportionately great in size of the US economy, and maybe even bigger. However, the the US. This is above all due to the weakness of the US social market value of Chinese GDP is substantially less than that. safety net and the lack of employment protection. True, time and So, even a large rise in Chinese economic growth, while obviously again we hear how important it is to have a flexible labor market, helpful, wouldn’t change the fact that China isn’t even remotely but when a crisis of this magnitude comes along, a certain degree big enough to act as the world’s locomotive just yet. In 20 years it of rigidity in the labor market is something of an advantage. For may be a different story, but not now. all these reasons, the Americans are suffering much more than My town council is about to give away 50-franc vouchers to Europeans in the current crisis. On the other hand, I am convinced each local resident in the near future in order to stimulate that the UK will be the first of the major European economies spending. Do you think that measures of this kind can help to emerge from the recession. As the country is not part of the beat the crisis? Eurozone, it has seen a much greater depreciation of its currency, The Japanese have tried to do exactly that. The problem, first a factor that is going to be very much to Britain’s advantage over of all, is that funds of this kind cannot – at least in practice – the next year. be earmarked for a particular purpose. If you give somebody a What role does China have to play in this crisis? With its huge 500-dollar spending voucher, irrespective of what products potential, might it not act as a kind of locomotive and thus limit it’s supposed to be spent on, the recipient can simply reallocate the extent of the crisis? his or her spending so that it’s just like having an additional China is the economy of the future. Though didn’t we use to say 500 dollars in income. And given that it wouldn’t be a permanent that of Brazil? And now we say – Brazil is the country of the future program, people would probably save most of it – even though and always will be. But with China it’s different: This country is they would have to spend the thing itself, they would offset this by not just a perpetual land of the future, but will sooner or later actu- saving elsewhere. And it will add to government debt, unless ally be the world’s largest economy. If we go by the estimates of you’re literally throwing cash away, without resolving the problem. purchasing power parity, the Chinese economy is already half the Far better from my viewpoint would be to simply spend the money, >

the danger of hyperinflation was accordingly An Evening With Paul Krugman low, a stance that was queried by various guests during the subsequent discussion. T he fourth Credit Suisse Salon, held in London in June with selected There were also a large number of other guests, saw Nobel Prize winner Paul Krugman discuss the causes of the questions from an interested audience, all of current financial crisis, as well as the lessons to be drawn from it. which the eloquent Nobel Prize winner an- swered with plenty of wit and charm. dhu The venue for the evening event could hardly first positive signs indicating that the worst have been more appropriate. Trenchant pro- of the crisis might have already passed. Next  Further pictures of the event as well as information on the Credit Suisse Salon fessor of economics from Princeton, Paul up was former British Prime Minister Sir John series can be found at Krugman, gave a talk entitled “Reshaping the Major, who in addition to chairing the open www.credit-suisse.com/bulletin. Global Financial System” to around 50 invited discussion throughout the evening intro- guests in the King’s Gallery of Kensington duced Paul Krugman with a brief laudation. Palace. The magnificent building has out- Krugman then talked for around half an lasted many an economic crisis since it was hour, starting off by recounting some well- built in the middle of the 17th century. This meaning advice from his wife that he shouldn’t Credit Suisse Salon was the first ever event be so pessimistic all of the time. Unfortu- to be hosted by a private company in the nately, Krugman had to admit he found it royal apartments of Kensington Palace. difficult to preach optimism as things stood. The host for the evening was Walter Berch- In his talk, the Nobel Prize winner in Eco- told, CEO of Private Banking, who in his wel- nomic Sciences painted a rather sober pic- come address posed the question as to ture of the current global economy, and ex- whether the latest crisis would be a blessing pressed little hope for any rapid upturn in the or a curse for the next generation. The first near future. He explored historical parallels, up-to-date appraisal of the current situation above all in the Japanese economic crisis of was given by Giles Keating, head of Global the 1980s and to a lesser extent in the Great Paul Krugman (left) in conversation with Research at Credit Suisse. He highlighted the Depression of the 1930s. His assessment of Sir John Major and host Walter Berchtold.

Credit Suisse bulletin 3/09 4 Leader Paul Krugman

for example by building bridges or investing in other infrastructure anything that contradicted their predetermined points of view. projects. However, this is a long process that would also lead to an By contrast, I see the current leadership as competent, even though increase in indebtedness. it’s still early days. Whatever else you may say about the Obama Many people fear that the Fed has printed vast amounts administration, though they have their own political convictions, of money and that sooner or later we will end up with severe they are open to new things and willing to entertain the alternatives. hyperinflation. There’s no doubt in my mind that the greatest 20th-century There has been a slight increase in the money supply in the US, American president was Franklin Roosevelt. Certainly, he was although we don’t know exactly where this is distributed. Among no intellectual or brilliant deep thinker, but nor did he pretend other things, this has to do with the fact that it costs nothing to to be. His strengths lay more in surrounding himself with people hold cash with interest rates at zero percent, as well as reflecting who were. He was comfortable with himself and his vision of the fear that banks are not totally safe, despite all reassurances what the country should be – and that’s precisely what we need. to the contrary. In the 1990s, the only consumer durable that was Won’t you miss the Bush administration a little bit? selling well in Japan was safes. But mostly what’s happened is After all, it gave you plenty to write about in your columns that banks are accumulating huge reserves at the Fed, on which in- for the New York Times … terest is paid. That’s very different from printing money. What Today, I can devote the majority of my columns to genuinely seri- this actually amounts to is the Fed becoming America’s bank. The ous discussions. Sometimes I’ll be critical, at others I’ll praise, while sometimes I’ll suggest improvements. But the discussions are once again taking on a constructive nature instead of all this insanity that we had to deal with for such a long time. “But the fact remains that How has your life changed over the past year since winning we certainly don’t have any real the Nobel Memorial Prize? Probably less than you’d think. I was already a public figure inflation right now, nor do I before, participating closely in public debate through my columns. anticipate our seeing any in the So I didn’t suddenly go from cloistered academic life to the spot- light of the open world. However, the Nobel Memorial Prize did near future.” provide me with greater credibility. It’s easier to persuade people that they should listen to me. I was working just as hard then as I do today, the only difference now being that my profile has risen. banks themselves have been reluctant to lend. Instead, they’re But I don’t think it’s changed my life all that much. parking their money either in treasury bills or at the Fed. The Fed Were you expecting to get this award? is then going out into the market and buying up asset-backed Not exactly. It was a possibility, but I didn’t expect it at all this past paper. In other words, the Fed is taking over a significant part of year. Indeed, I made a point of putting it out of my mind. After the financial intermediary role. But the fact remains that we cer- all, you can spend 20 years waiting and asking yourself: “Am I going tainly don’t have any real inflation right now, nor do I anticipate our to get it this year?” and that can drive a person crazy. So it actually seeing any in the near future. came as a complete shock when I got the phone call. So when and above all how can we bring about recovery? You were informed by phone? In the worst case we could face a decade or so of economic stag- Indeed. Prizewinners are informed by telephone, but my first nation. It would be much better if someone could invent a ground- thought was that this was a practical joke with a very fake breaking new technology that required a great deal of investment Swedish accent. that would then drive recovery around the world. So if you know And what did you do then? of anything, please let me know. I actually have an optimistic and I went on the Nobel Web site to make sure it wasn’t a practical perhaps rather outlandish hypothesis that environmental policy will joke. Then I called my wife, because I wasn’t at home, I was in prove a big driver of recovery. If we actually move to do something Washington for a meeting on the financial crisis. She was on about climate change – and the US does now appear ready to the train at the time, and when I told her she was dumbfounded. take this step – this will give a signal to businesses that they really And then after a moment’s pause, she said “We just don’t have should start investing in the reduction of their CO2 emissions, time for this.” which in turn could benefit the economy at large. But I have no way Heinrich Rohrer, the Nobel Prize winner from Switzerland, told of substantiating this view with any numbers, so I’m not going to me that at some US universities you get a reserved parking start shouting this from the rooftops. space when you’re a Nobel Prize winner. Have you taken up your Let’s talk about leadership. What traits should a good leader honorary parking place at Princeton? bring to the table? You’re not the first person to ask me that. The first time I heard A leader has to pursue a certain goal – they have to be leading it, I couldn’t believe that such privileges existed. But it turns for something. They also need a good dose of flexibility. I think it’s out that other Nobel laureates from Princeton have insisted on important that leaders be capable of collaborating successfully such a thing. Personally I refuse to do that, I find it ridiculous. < with strong people around them, that they be willing to listen to others and not feel intimidated. In the political sphere, my view is that we had bad leadership in the US over the last eight years because we had decision-makers at the top who didn’t want to hear bulletin 3/09 Credit Suisse Our world is in a mess. It’s time to make your move. ourworld-yourmove.org Some think standing ovation. We think successful partnership.

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