Better together?

REFORM of American health care was always expected to have an enormous impact on the sector. Sure enough, one of the more immediate effects was a frenzy of hospital mergers, as providers sought to raise their efficiency in response to measures in the Affordable Care Act of 2010, alias Obamacare, designed to curb their cost increases.

A similar consolidation among health insurers was also predicted. But since the new insurance exchanges set up under Obamacare only went into operation last year, it has taken until now for it to be clear how big the merger wave may be. The largest insurer, UnitedHealth, has approached the number three, Aetna. The second-largest, Anthem, is trying to buy the number five, Cigna—which on June 21st rejected Anthem’s $47.5 billion bid. And the number four, Humana, has been looking at selling itself to either Aetna or Cigna.

The frantic takeover activity seems to rest on the assumption that, should the Supreme Court reject, in the next few days, a case brought by opponents of Obamacare, the firms must be ready to move. The case claims that the subsidies 6.4m people are receiving, to help them...

from The Economist: Business http://ift.tt/1JlsAVf

The great gambler

HE WAS one of the great dealmaker capitalists of the past century. He bought and sold the MGM studios three times. He did more than anyone else to create the neon-lit fantasy land that is Las Vegas. He tried to buy Chrysler, and at one point was a big shareholder in Ford and General Motors. Kirk Kerkorian accumulated all the accoutrements of the mogul lifestyle: a lavish estate in Beverly Hills, friendships with Frank Sinatra and Cary Grant, three wives and a legendary divorce battle. (The third Mrs Kerkorian, who only stuck around for a month, tried to sue him for $320,000 a month in alimony and child support until it turned out that the child was the product of a liaison with a rival tycoon, Steve Bing.) Yet Mr Kerkorian was a very private man: he shunned the Hollywood social scene, and only saw the films he financed when they reached the cinema. After he hit 50, he focused obsessively on his tennis.

He was as self-made as you can get: the son of an Armenian immigrant farmer, he moved home at least 20 times as a child, started bringing in income at the age of nine, got sent to reform school for punching a teacher’s son and made a living as a boxer...

from The Economist: Business http://ift.tt/1JlsywI

Young blood

IN ARIZONA, Independence Day will come a day early this year. On July 3rd a new law will allow anyone to order a laboratory test, with no need to see a doctor. Tests for sexually transmitted diseases, pre-diabetes, vitamin levels and fertility will be on the menu. A cholesterol test can be had for $2.99. The company that lobbied for the legal change, and hopes to benefit most from it, is Theranos, a young and ambitious blood-analytics company from Palo Alto in Silicon Valley.

Theranos is already providing cheap, quick and easy tests—some with a three-hour turnaround—at clinics it is opening inside branches of Walgreens, a big pharmacy chain. The first clinics are in Phoenix, Arizona and in its Californian home town. Many tests can be done on just a spot of blood from a finger prick. The rest use only a tiny paediatric needle and, again, require only a small amount of blood. Theranos, led by Elizabeth Holmes, a charismatic young university drop-out (see article), believes its technology can...

from The Economist: Business http://ift.tt/1Jlszkb

Business and finance correspondent

The Economist is seeking a business and finance correspondent, based in New York. The successful candidate will have strong financial-analysis skills and demonstrate a deep interest in companies, management and finance. Applicants should send a curriculum vitae and an article of no more than 500 words suitable for publication. The closing date for applications is 31st August. Applications should be sent to nybizjob@economist.com

from The Economist: Business http://ift.tt/1Nk7s0q

The halo effect

“THERE is one and only one social responsibility of business,” wrote Milton Friedman, a Nobel prize-winning economist. “To use its resources and engage in activities designed to increase its profits.” Plenty of climate-change campaigners would argue with that (see article). But even if you accept Friedman’s premise and regard corporate social responsibility (CSR) policies as a waste of shareholders’ money, things may not be absolutely clear-cut. New research suggests that CSR may create monetary value for companies—at least when they are prosecuted for corruption.

The largest firms in America and Britain together spend more than $15 billion a year on CSR, according to an estimate last year by EPG, a consulting firm. This could add value to their businesses in three ways. First, consumers may take CSR spending as a “signal” that a company’s products are of high quality. Second, customers may be willing to buy a company’s products as an indirect way to donate to the good causes it helps. And...

from The Economist: Business http://ift.tt/1Nk7t4r

Spending on the Spree

Come shop with us

GERMANY’S neighbours in the European Union have long wished that its parsimonious citizens would save less and spend more, to boost the economy of the whole region. Might this now be happening, as Germany enjoys growth in both jobs and wages? Unemployment, down to 6.4%, has continued to fall despite the introduction of a national minimum wage in January. Last year nominal pay rose by 2.9%, and with inflation negligible it was the best year for real wage growth since 1999, notes Heiko Peters, an economist at Deutsche Bank.

Despite worries about the knock-on effects of a possible Greek exit from the euro, the German public’s confidence has climbed steadily, according to a survey by GfK, a market-research outfit (see chart). As a result, spending is beginning to tick upwards. And outsiders are noticing: earlier this month Hudson’s Bay Company, a Canadian retailer, outbid an Austrian firm, Signa, to buy Kaufhof, Germany’s biggest department-store chain.

...

from The Economist: Business http://ift.tt/1JlsxZJ

Riding the wave

THE halls at Fincantieri’s Monfalcone yard near Trieste in northern Italy are surprisingly quiet, as the vast blocks that will one day be turned into floating cities are welded together. On June 22nd Pierfrancesco Vago, executive chairman of MSC Cruises, added to their number when he flipped a switch to begin cutting steel plates for the first of the two new Seaside ships MSC has commissioned. The order is part of a €5.1 billion ($5.7 billion) investment in new ships by the Swiss-based firm, the world’s fourth-largest cruise operator.

Fincantieri has 14 ships in design or construction, and Virgin Cruises, a newcomer, wants it to make another three. In 2009-10 Fincantieri’s yards were operating at 50% of capacity. This year the figure will be 70-75%, and in 2016-17 over 90%, says Giuseppi Bono, its chief executive.

Things are humming at Europe’s other main builders too. On June 15th Carnival Corporation, the largest cruise operator, revealed details of an agreement to buy four whoppers from Meyer Werft in Germany and Meyer Turku in Finland. On June 19th the world’s biggest cruise...

from The Economist: Business http://ift.tt/1Jlss8u

A ghost bites back

YUKOS once epitomised the transformation of Russian business from its chaotic, robber-baron state in the 1990s to something approaching international norms. But the downfall in 2003 of the country’s largest and best-run oil firm exemplified something else: the way in which the Kremlin was seizing control of the commanding heights of the economy. A series of dubious lawsuits and auctions bankrupted and dismembered Yukos. Its boss, Mikhail Khodorkovsky, went to jail and most other managers fled abroad.

That left the company’s shareholders hugely out of pocket—and furious. But after a decade of litigation to establish jurisdiction and applicability of international law in the case, they are beginning to gain redress. Their biggest victory came with a $50 billion judgment against Russia last year by the Permanent Court of Arbitration in The Hague. Russia had signed an international agreement called the Energy Charter, which protects cross-border investment. Though Russia never ratified its membership and has now withdrawn from the treaty, the judges (including one nominated by Russia) ruled unanimously that it had breached the charter’s...

from The Economist: Business http://ift.tt/1Nk7rJS

Much hot air about gas

SIXTEEN years after the first discovery of commercial-scale natural-gas reserves under the Mediterranean off Israel’s coast, the country’s transition from dependence on imports to energy exporter is proving slow. Next week the government will publish a long-overdue outline for regulation of the natural-gas industry. There will be a new framework for pricing and competition in those fields that have already been discovered and licensed, and a long-term plan for the exploration and exploitation of yet-to-be-found undersea riches.

Opposition politicians and NGOs have been conducting a noisy campaign against the Israeli-American consortium that currently holds the licences to the largest gasfields, and against the sudden haste with which the new government, sworn in just six weeks ago, has been conducting its regulatory review. The head of the country’s competition authority, David Gilo, recently resigned after rowing with the prime minister, Binyamin Netanyahu, over how to break up the consortium’s monopoly over gas production. The finance minister, Moshe Kahlon, recused himself from any decisions on energy matters, because of his...

from The Economist: Business http://ift.tt/1JlstsO

Holmes is where the heart is

Too busy for costume changes

TECH entrepreneurs often have their own distinctive uniforms. For Facebook’s Mark Zuckerberg, it is jeans and a hoodie. For the late Steve Jobs, it was jeans and black turtleneck. Elizabeth Holmes has plumped for something smarter: matching black jacket, trousers and turtleneck. It saves having to decide what to wear each morning, she says with typical single-mindedness.

At the age of 19 Ms Holmes had an idea about how to improve the way blood tests are done. So she dropped out of Stanford University, where she was studying chemical engineering, and with money that had been set aside for her college education she quietly founded Theranos, a diagnostics company.

That was in 2003. She says she spent the next ten years in “stealth mode”, without press releases or even a company website. During that time she perfected a way of doing hundreds of tests cheaply and quickly on a drop of blood, using lab-on-a-chip technology. Today, aged 31, she is estimated by Forbes magazine to be worth $4.7 billion, and thus to be the world’s youngest self-made female...

from The Economist: Business http://ift.tt/1Nk7pS1

Roman carnival

Renzi considers Rome’s swamp

WHAT links a one-eyed bank robber and Europe’s biggest asylum reception centre to Sisters Marcella and Consolata of the Servants of the Congregation of Divine Providence? The answer: all are caught up in colourful recent scandals that menace the credibility and reputation of Matteo Renzi’s reforming government.

The latest involves the allegedly fraudulent bankruptcy of a chain of nursing homes. The two nuns were among those arrested. Police in Trani wanted to nab a senator, Antonio Azzollini, but could not because of his parliamentary immunity. Prosecutors have applied for it to be lifted. Mr Azzollini denies any wrongdoing.

He belongs to the New Centre Right (NCD), a junior partner in Mr Renzi’s coalition. The NCD, made up of erstwhile followers of Silvio Berlusconi, the former prime minister, has become an embarrassment to the government. Mr Renzi needs its support in parliament, yet polls show it has the support of less than 3% of voters. And its propensity for attracting unwelcome publicity seems limitless.

Already, two NCD ministers have left the cabinet under a...

from The Economist: Europe http://ift.tt/1GtuOfd

Forget the baguette

THESE are momentous days for sliced bread, at least in France. The land of the long crusty baguette boasts more artisanal bakers supplying freshly cooked loaves than any other country in Europe, says the International Association of Plant Bakers. Yet sales of pre-cut bread, wrapped in cellophane and twist-tied with plastic fasteners, are booming.

The market in packaged bread in France is now worth over €500m ($560m) a year, says Xerfi, a consultancy. In mid-June the country’s biggest industrial bakery opened in Chateauroux, with a surface area equivalent to six soccer pitches. Owned by Barilla, an Italian food group, the bakery will churn out 160m packets of sliced bread a year, almost exclusively for the French market. Last year sales of Harrys, its leading sliced-bread brand, reached 125,000 tonnes, up by 25% on 2007. Jacquet, a rival French baker, offers 18 different varieties of pre-packaged slices.

Why are the French suddenly so keen on sliced bread? Partly because of its long-lasting convenience at a time of squeezed lifestyles. Nothing beats a freshly baked baguette, but it is best eaten within hours of leaving the oven. France...

from The Economist: Europe http://ift.tt/1Jlu8Pf

Women at war

Beata will be hard to beat

WHEN Ewa Kopacz succeeded Donald Tusk as Poland’s prime minister last autumn, she became only the second woman in the job, after Hanna Suchocka in 1992-93. After the general election in October, the next government will again be led by a woman—but it may not be Ms Kopacz. Her centre-right Civic Platform (PO) is trailing behind its biggest rival, the right-wing Law and Justice (PiS) party. And at its convention on June 20th PiS announced that, if it wins, its deputy leader, Beata Szydlo, would become prime minister.

Ms Szydlo rose to prominence by managing the campaign of Andrzej Duda, who was elected president in May. Boosted by this upset, PiS now hopes to return to power after eight years in opposition. The choice of Ms Szydlo suggests the party has learnt from past mistakes. Jaroslaw Kaczynski, its veteran leader, had been expected to run a PiS government, as he did in 2006-07. But the success of the milder Mr Duda, who styled himself a moderate, persuaded Mr Kaczynski to stay out of the limelight and nominate Ms Szydlo instead. He called her “at once a completely extraordinary and ordinary...

from The Economist: Europe http://ift.tt/1GtuLjv

Coalition dreaming

THE inauguration of Turkey’s new parliament on June 23rd was a heady day for this wobbly democracy. Pious Muslim women were able to take the oath with their heads covered for the first time without being harassed by secular dinosaurs. Three Armenians, two Yazidis, a Syriac, a Roma and numerous Kurds and Alevis (and a total of 96 women) made for the most colourful chamber in the republic’s 92-year history. And though an openly gay candidate for the People’s Democracy party (HDP) did not win, his party easily cleared the 10% threshold imposed in the 1980s to keep small parties out.

None of the day’s cheer will have rubbed off on Recep Tayyip Erdogan, Turkey’s president, who brushed aside constitutional constraints to campaign for the incumbent Justice and Development (AK) party. He hoped AK would win enough seats to amend the constitution, either outright or via a referendum, to elevate the presidency from a quasi-ceremonial job into an executive one. In the event AK took only 258 seats, 18 short of a majority. Turkey faces coalition rule for the first time since 2002. Frenzied chat over potential partners has not let up since.

Many predict that AK will link up with the far-right Nationalist Action Party (MHP). The parties are ideologically close. For all his grandstanding about refusing to talk to the Kurds and reviving corruption probes against former...

from The Economist: Europe http://ift.tt/1Jlu7e6

Athenians at bay

WHILE Alexis Tsipras, the hard-pressed Greek prime minister, was struggling in Brussels to win concessions on a new bail-out deal, Alekos Flambouraris, his state minister, stayed in Athens to soothe angry members of his Syriza party. Its far-left faction feared that Mr Tsipras was about to cross his “red lines” and accept a tough austerity package, just as his predecessors had done in 2010 and 2012.

Greece desperately needs a deal: its terms were being fought over as The Economist went to press. Without one, it cannot pay pensions on June 30th, the day the current bail-out expires, and will also default on a €1.5 billion ($1.7 billion) debt to the IMF. If the bail-out is not renewed, Greek banks may lose the “emergency liquidity assistance” they have been getting from the European Central Bank. This has enabled the banks to survive six months of accelerating withdrawals by frightened depositors. By one recent estimate, €45 billion is now stashed under Greek mattresses. Without the ECB, capital controls would have been imposed, stifling an economy weakened by six years of recession.

Yet the terms of any new bail...

from The Economist: Europe http://ift.tt/1Jlu8P4

Hungary shuts the door

THIS week Hungary suspended its adherence to the Dublin regulation, which says that asylum-seekers’ claims must be processed in the first country they reach. The move came days after the Hungarians said they were building a four-metre-high fence on the border with Serbia. In the first three months of 2015, Hungary received 32,810 new asylum applications (70% of them from Kosovars), up from 2,735 a year ago. Germany takes in the most and Italy complains the loudest, but Hungary, followed by Sweden and Austria, has the largest number of asylum requests as a share of population.

from The Economist: Europe http://ift.tt/1GtuNYI

The ties that bind

AFTER a week of manic summitry the euro zone once again finds itself in the wearily familiar position of trying to stop Greece from going bust. Finance ministers once again convened in Brussels on June 25th in their latest attempt to do a deal before Greece’s current bail-out expires on June 30th. As The Economist went to press, the outcome was hard to predict. But it could not have been clearer that any agreement will cover only Greece’s immediately pressing needs. Despite very different ideologies, Greece and its creditors are locked together in the deathly embrace of their shared currency. And all this over a country with debts representing about 3% of the euro zone’s GDP.

The endless twists of the bail-out talks are confusing, but it does not take close study to see that the results are bad. After five years, two bail-outs and a debt haircut, Greece’s economy is 25% smaller than at its peak in 2008, unemployment stands at 26% and the public debt is nearly 180% of GDP. The public administration is broken, the old diseases of corruption and clientelism more rampant than ever. To obtain the money Greece needs to pay back...

from The Economist: Europe http://ift.tt/1Jlu8yN

Migrant brainpower

 

Many countries say their diasporas are valuable. But is this fact or flattery? One measure comes from the World Intellectual Property Organisation. Before September 2012 scientific and technical patents recorded not just where an inventor was working but also where he or she was born. It is thus possible to measure expats’ brain power. By this yardstick Britain, Canada, China, Germany and India have the most talented diasporas. Relative to their home populations, though, expats of African countries such as Ghana and Nigeria are the most accomplished. Between 2007 and 2012 more than nine-tenths of patents filed by people born in those countries were registered by expatriates. Surprisingly, a higher proportion of Brits who register patents are working abroad than is the case for Chinese people (20% v 17%). China’s liberal patenting system is one reason; another, perhaps, is the British talent for melting into other countries and thriving there.

from The Economist: International http://ift.tt/1BDGteI

Gone but not forgotten

IF YOUR surname is McNamara and you live outside Ireland, expect a letter. Ireland Reaching Out, a non-profit organisation financed largely by the Irish government, has pioneered what it calls “reverse genealogy”. Rather than waiting for people to trace their Irish ancestry, it constructs family trees from root to branch, tracking down the descendants of those who left for America, Australia and other countries. Volunteers then invite them to visit the homeland. It is a mighty task: Mike Feerick, the outfit’s founder, wants to build a database of the Irish diaspora containing 30m or 40m names.

Last year Ireland appointed its first minister for the Irish diaspora; this spring it unveiled a diaspora strategy. As well as Ireland Reaching Out, the government supports hundreds of groups that serve needy Irish emigrants or court successful ones. One of them, Connect Ireland, uses the diaspora as spies for inward investment: it pays for tip-offs that lead to foreign companies creating jobs in the country.

In the early 1980s barely a dozen countries had a ministry, a government department or some other official institution dedicated to their...

from The Economist: International http://ift.tt/1NeVMv7

Climate change

In May India was struck by a deadly heatwave. Temperatures as high as 47°C caused 2,200 deaths. This week a heatwave in Pakistan claimed the lives of hundreds more. As the chart shows, the number of extreme weather- and climate-related events is rising. Serious storms have more than doubled in frequency since the early 1980s. Floods and heatwaves have more than tripled. The human consequences may be serious. A study published this week by the Lancet Commission on Health and Climate Change suggests that previous estimates of the future effect of global warming on health, made by the World Health Organisation and the Intergovernmental Panel on Climate Change, are underestimates because they failed to take into account vulnerabilities caused by ageing, migration and population growth.

from The Economist: Science and technology http://ift.tt/1Jlt9OY

Coiled and ready to strike

DRONES may one day transform the way parcels are delivered, crops monitored and suspects apprehended. Those who talk up these possibilities, though, often neglect to mention the drawbacks of such robot aircraft—one of which is that most cannot fly for more than a quarter of an hour before they need to find a human being to swap their batteries for them or plug them into an electrical socket.

Joshua Smith, a computer scientist at the University of Washington, in Seattle, hopes to change that. In May he started a company called Wibotic that plans to recharge drones (and also earthbound robots) without them having to establish an awkward physical connection with a plug. A ’bot whose batteries were low would simply manoeuvre itself to within half a metre or so of a recharging station to top them up. LaserMotive, another Seattle-based company, is even more ambitious. It is developing a system designed to replenish the batteries of drones that are still aloft, using lasers and photovoltaic cells.

The idea of wireless power-transmission of this sort goes back more than a century. In 1893 Nikola Tesla (pictured), who was one of the pioneers...

from The Economist: Science and technology http://ift.tt/1GttCsa

Blood earth

Your friendly, neighbourhood muckspreaders

A HOLLOW tree, you might reasonably suspect, is a dying tree. But often that is not the case, especially in the tropics. Lots of trees in tropical forests remain alive long after their cores have rotted away—a tribute, it would seem, to their resilience. However, hollow trees are so common that a thoughtful ecologist might wonder if there were more to it than mere cussedness in the face of adversity. Perhaps hollowness is actually an arboreal advantage.

Christian Voigt of the Leibniz Institute for Zoo and Wildlife Research, in Berlin, is just such an ecologist and he did, indeed, have that thought. And, as he reports in this month’s Biotropica, he has now turned thought into action with some ingenious observations.

Dr Voigt developed a hypothesis based on three facts. First, the soils of many tropical forests are near-bereft of vital nutrients such as nitrogen and phosphorous. The huge mass of plants in such forests sucks these elements from the ground, and competition for what remains is intense. Second, hollow trees are favoured roosting...

from The Economist: Science and technology http://ift.tt/1Jlt9ym

Horsey, horsey, don’t you stop

RECEIVED wisdom, among both scientists and breeders, is that a modern, thoroughbred racehorse runs about as fast as it is possible for anything horse-shaped to run. Examinations of historical records, conducted over the past few years, have concluded that winning times have stagnated. Undermining received wisdom, though, is one of the most enjoyable pursuits in science. And, in a paper just published in Biology Letters, Patrick Sharman and Alastair Wilson of the University of Exeter, in England, have done just that.

Those previous studies of equine velocity focused on results from the winners of a small number of elite races. Mr Sharman and Dr Wilson used two much bigger sets of data—one covering 2,243 races run in Britain between 1850 and 1996 and the other more than 50,000 races held (also in Britain) between 1997 and 2012.

In all, they looked at 616,084 times set by 70,388 horses. They found that, contrary to received wisdom, the average speed of racehorses has continued to increase—with a particularly rapid improvement after 1975. At the top of the sport, in elite competitions such as Royal Ascot, the picture is more complicated. Over middle distances (8-12 furlongs, a furlong being just over 200 metres) and long ones (14-20 furlongs) Mr Sharman and Dr Wilson found that winning times had indeed stagnated in recent decades....

from The Economist: Science and technology http://ift.tt/1GKiJ7C

Of rainfall and price rises

Dampening down inflation

ON A brutally hot day in May, Gani Patel is sitting in Vipin Seeds, a farm-supplies store in Jalna, a small town in a drought-prone region of India. The talk in the shop is of prospects for the monsoon, the three-month rainy season beginning in June. Business is slow. Last year’s rains were below normal, so farmers are short of cash. Mr Patel grows cotton and maize on his 12-acre farm in Bhakarwadi, around 45km from Jalna. In case the rains disappoint again, he plans to install a drip-irrigation rig to make the best use of the water he draws from his two wells.

Much in India’s economy depends on the monsoon. Farming is India’s largest employer. Three-fifths of the land under cultivation is watered only by rainfall. Food accounts for almost half of the consumer-price index, so prices ebb and flow with the rains. A forecast at the start of June by the India Meteorological Department that the rainy season would again fall short was worrying. Then the heavens opened. Rainfall across India in the first three weeks of June was 21% above its 50-year average. Mumbai had its wettest 24 hours in ten years...

from The Economist: Finance and economics http://ift.tt/1Nk6CAx

Wishful thinking

WALL STREET has been in buoyant mood in recent years. The S&P 500 equity index has reached repeated record highs. One might think that would be great news for America’s public-sector pension plans, which hold more than half their assets in equities.

Only up to a point. The latest report* from the Centre for Retirement Research (CRR) at Boston College estimates that the funding ratio of pension plans—the proportion of liabilities covered by assets—has risen from 72% in 2013 to (drum roll) 74% last year. A fifth of all schemes have a funding ratio of less than 60%—a group that includes not just the usual suspects in Illinois and New Jersey but some in Alaska, Arizona, Connecticut and Kentucky.

To make matters worse, this calculation makes a very generous assumption. Most liabilities of a pension plan fall well into the future—a stream of payments to current and future beneficiaries who may live into their 90s. These payments must be discounted to work out the sum in contemporary dollars needed to cover them, but at what rate? Private-sector pension plans are required to use long-dated AA-rated corporate-bond yields...

from The Economist: Finance and economics http://ift.tt/1Nk6AZF

Dragon v bear

Chinese shares’ manic rally had made them the world’s top performers over the past year, but they fell nearly 15% between June 15th and 19th, their sharpest sell-off since the depths of the global financial crisis. They have since bounced back a little, but it may be only a matter of time before the correction resumes. High-growth companies are still priced at more than 100 times last year’s earnings, redolent of the giddy heights of America’s dotcom bubble in the late 1990s. The only certainty is that more volatility is in store. Shares swung more than 7% within a few hours on June 22nd. Weaker trading volumes suggest that investors are starting to tire of the wild ride.

from The Economist: Finance and economics http://ift.tt/1Nk6AZD

Fight the power

ON JUNE 1st a pressure group called “Reclaim the Power” organised a day of action against the energy industry in Britain, including blockades of offices, protests at art galleries sponsored by oil firms and a 1960s-style “love-in” in which agitators lay in a bed outside one of David Cameron’s offices in an effort to persuade the prime minister to become greener.

Their actions were part of a wider campaign, marshalled by 350.org, that seeks to dissuade investors from owning shares in the companies that produce fossil fuels and thus contribute to climate change. So far the protesters have managed to persuade 220 cities and institutions to divest some of their holdings, varying from the very small (the Australian Guild of Screen Composers) to the large (the $21 billion endowment of Stanford University). This month the campaign landed its biggest recruit yet: Norway’s sovereign-wealth fund, which has assets of almost $900 billion, agreed to sell $9 billion-worth of shares in firms that mine coal and tar sands, a particularly polluting form of oil.

Divestment is not a new idea. A campaign against the apartheid regime in South Africa got...

from The Economist: Finance and economics http://ift.tt/1Nk6AZz

A light in the darkness

One of the 4m

SOME mountainous parts of Mexico are so remote that the electricity grid fails to reach them, let alone the banking system. A five-year-old social enterprise, Iluméxico, hopes to change that. It provides more than 20,000 people with loans to buy low-cost solar panels and batteries, enabling them to switch lights on, watch television and charge mobile phones, sometimes for the first time.

It also introduces them to the financial system via those same mobile phones. It has launched a pilot project enabling them to pay off the loans in instalments via an SMS-based payment system, Transfer, owned by Banamex, one of Mexico’s biggest banks. Most have no credit history, so Iluméxico takes a big risk in lending to them. Manuel Wiechers, its boss, says they are often late with their payments because rural incomes are unstable. But they are keen to maintain access to credit, so their ultimate default rates (currently 5.8%) are only slightly above the national average.

Until recently such people had little hope of getting credit other than from loan sharks or pyramid schemes. Mexican high-street banks...

from The Economist: Finance and economics http://ift.tt/1Jlro4s

Have your cake and eat it

 

CHINA’S blistering economic performance in recent years has brought advocates of democracy out in hives. GDP growth in the one-party state, at an average of 10% over the past decade, has easily outpaced that of its democratic emerging-market rivals. India saw annual growth of 6% over the same period; Brazil, just 2%. Some say that democracy is to blame for India’s and Brazil’s slower progress. Politicians in such places cannot lay the foundations for long-term growth, the argument goes, since voters want instant gratification. Are freedom and prosperity really at odds?

The idea is not new. In 1994 Torsten Persson of Stockholm University and Guido Tabellini, then of the University of Brescia, published a paper that argued that in democracies, vote-hungry politicians divert resources away from people who could use them more efficiently by lavishing spending on their constituents in the form of unemployment benefits and pensions. This and political gridlock, another unfortunate aspect of democracy, both tend to slow growth. Another...

from The Economist: Finance and economics http://ift.tt/1Nk6zF3

Treasure hunt

ANDY MURRAY, a tennis ace, made headlines this month—off the court as well as on it. He is teaming up with Seedrs, an up-and-coming British crowdfunding platform through which small companies sell stakes in themselves. The Scot will advise Seedrs on the health, sports and wearable-technology sectors as well as make the odd investment himself. Through such websites, individuals and funds provided over €1.5 billion ($2 billion) in equity and debt to European small and medium-sized enterprises (SMEs) in 2014, according to researchers at Cambridge University and EY, an accounting firm.

That is a pittance compared with the €926 billion of total new external funding made available to European SMEs the year before, mostly by banks. But the amount is more than doubling each year. That is heartening, since European banks, nursing big losses from the financial crisis and trying to rebuild their capital ratios, have trimmed lending to businesses by 12% over the past six years.

Crowdfunding is just one of a number of ways in which European SMEs, typically far more reliant on bank financing than their American counterparts (see...

from The Economist: Finance and economics http://ift.tt/1Jlrr03

Wooing Islamists with a beer festival

IN CHINA’S far western region of Xinjiang, the authorities are fearful. What they call terrorist attacks carried out by Uighurs, a Muslim ethnic group that regards Xinjiang as its homeland, have killed 400 people in the past couple of years. The latest such incident, on June 22nd, left 18 people dead near the southern city of Kashgar. In recent months officials in Xinjiang claim to have broken up more than 180 terrorist groups—at least one of them reportedly set up by Uighurs who had fought with Islamic State in the Middle East. State television recently aired footage of children being turned into “killing machines” for global jihad at a training camp near the border with Afghanistan and Pakistan. China’s rhetoric is overblown, but the country is right to worry about terrorism. In March last year a group of Uighurs knifed 31 Chinese civilians to death at a railway station in the south-western city of Kunming.

China recognises that part of the problem is a home-grown one: that many of Xinjiang’s 10m Uighurs have felt left out of the country’s economic boom. Thanks, not least, to its oil and gas industries,...

from The Economist: Leaders http://ift.tt/1KcDpHK

The loss of El Dorado

IT WAS wonderful while it lasted. For much of this century Latin America saw robust economic growth, a big fall in poverty and a swelling of the middle classes. Now the good times are over. Emerging markets everywhere are subsiding like a cooling soufflé. But Latin America has gone stone cold. The IMF expects growth of just 0.9% in 2015, which would be the fifth successive year of deceleration. Many economists are talking of a new normal of growth of only 2% or so a year—less than half the region’s pace during the boom.

What has gone wrong? The short answer is that the great commodity supercycle triggered by the industrialisation of China is over. Rising exports of minerals, soya beans and fuels lifted many South American economies. Without that fillip the region has converged downwards to the 2.4% long-term growth rate of Mexico, which is not a big commodity exporter.

Worse, the commodity bonanza prompted distortions that may limit new sources of growth. Many Latin currencies became overvalued, wounding the competitiveness of non-commodity firms. Consumption soared; investment sagged. While Asia built factories, Latin...

from The Economist: Leaders http://ift.tt/1CvYCGw

Bound over

RUSSIA is one of the West’s biggest headaches. Vladimir Putin’s Kremlin has menaced its neighbours to the point where NATO is strengthening defences in the Baltic states. The European Union has just renewed economic sanctions imposed after the attack on Ukraine. But governments are doing less to bring home to the regime in Moscow the consequences of its actions than Western law courts, where Russia faces a barrage of litigation from investors whose assets it has expropriated.

The Kremlin’s contempt for the rule of law in Russia was exemplified by the looting of Yukos, once the country’s biggest and best-run oil company. Its independent-minded boss, the tycoon Mikhail Khodorkovsky, was a political irritant as well as a very rich man. So in a series of spurious lawsuits Yukos was broken apart. After a questionable auction in 2004, its best assets ended up with Rosneft, a state-controlled oil company run by a close ally of Mr Putin’s.

At the time that seemed a clear victory for the Kremlin. But more than ten years later, the shareholders of Yukos, who were left many billions of dollars out of pocket, are making striking headway in their...

from The Economist: Leaders http://ift.tt/1KcDmfe

From rubbish, beauty

AT PRECISELY 5pm each working day, from 1958 until 1975, Nek Chand, inspector of roads for the Public Works Department of the city of Chandigarh, would climb onto his bicycle. But he did not head for home. Instead he turned north, towards the Shivalik Hills and the damp, mosquito-prickling forest. The road, good at first, soon became a bumpy track and then disappeared completely. Dense brush tangled in his wheels. “There were no roads to come or go,” he remembered. “Who would come here and what for?”

What he went for was to add one more rock, or a few more stones, to the secret world he was building there. The best specimens lay by the Ghaggar river, with strange man-or-woman shapes, and seemed to call out to be rescued. He brought these “individual souls”, at weekends or under cover of darkness, to the space he had cleared with his bare hands in the jungle, and laid them out in patterns in the landscape. A small mud hut, its walls inlaid with perfect fist-sized stones, became his centre of operations.

To the south the great Swiss-French architect Le Corbusier was building a new Chandigarh, a “city beautiful” based on right angles and...

from The Economist: Obituary http://ift.tt/1LxnvK9

No smoking

THEY have chained themselves to the White House fence, blockaded Australian coal ports with dugout canoes and mooned the offices of a British minister. But protesters from a green pressure group called 350.org have had their greatest success doing something far duller: petitioning institutional investors to “divest” from stocks and bonds issued by firms that peddle fossil fuels. Opponents of divestment marshal arguments from theory and practice to pooh-pooh such campaigns. But that is both to misunderstand the goals of the activists and to dodge hard questions about how best to serve the interests of their clients.

Denigrators of divestment point out, rightly, that selling a security does not materially reduce the price if there are lots of buyers still out there. Any buyer is likely to have fewer qualms about the firm or country concerned than the seller, so the pressure for immediate change may actually dissipate as divestment proceeds. That is why some fund managers, like Hermes, argue that engagement with polluting firms is better than walking away. In the case of fossil fuels, the sceptics add, divestment has the wrong target: state-owned firms...

from The Economist: Leaders http://ift.tt/1IfSSXH

Chronicle of a war foretold

Ghost Fleet: A Novel of the Next World War.By P.W. Singer and August Cole.Houghton Mifflin Harcourt; 404 pages; $28.

GEORGE TOMKYNS CHESNEY’S “The Battle of Dorking”, published in Blackwoods Magazine in 1871, was a story about innovation that proved to be an innovation itself. It related, in the form of a memoir written some 50 years in the future, the downfall of Britain at the hands of Prussia, beginning with the destruction of the Royal Navy by high-tech “fatal engines” and culminating in the defeat of the army in the titular battle. An instant cause célèbre—leaders in the Times and all that—and a runaway success, it produced a swathe of imitators and a new way of talking about war that has proved popular ever since.

A distinctive feature of the new genre was that it frequently presented new technologies as decisive, both a thrilling idea and a necessary device if, as the norms of the genre required, dominant nations were to be portrayed, initially at least, as victims. The books also often had messages to impart—of...

from The Economist: Books and arts http://ift.tt/1Nk6AIW

The lifesaver

Jonas Salk: A Life.By Charlotte DeCroes Jacobs.Oxford University Press; 559 pages; $34.95 and £22.99.

THE 1910s were not always kind to New York. In mid-1916 the city faced a polio epidemic that killed a baby every 2½ hours. Hospitals were full, and paralysis would leave many survivors in wheelchairs, on crutches or bedridden for life. Two years later a vicious form of influenza killed over 33,000 New Yorkers and 20m worldwide.

Jonas Salk, born in 1914 in a tenement in the city, was spared. In her biography of the man who developed the first polio vaccine and played a major role in developing the first flu vaccine, Charlotte DeCroes Jacobs, a professor emerita of medicine at Stanford University, weaves together intimate and historical details. She paints a picture of a sensitive, genuinely kind idealist who pursued what he thought was right with gentle but unrelenting tenacity.

The first half is a fascinating—and at times nauseating—tour of vaccine-making’s past: myriad monkeys sacrificed gruesomely on the altar of science; zealous researchers drinking minced rat brain teeming with polio to prove the...

from The Economist: Books and arts http://ift.tt/1Nk6Ac8

On the cocaine trail

Zero Zero Zero.By Roberto Saviano.Penguin Press; 416 pages; $29.95. Allen Lane; £20.

ROBERTO SAVIANO’S first book, “Gomorrah”, put him in grave danger. An exposé of the Neapolitan mafia, the Camorra, it sold over 10m copies. But it also struck a nerve with its subject, and death threats soon followed. Mr Saviano, an Italian journalist, now moves between safe houses under 24-hour police protection. He dedicates his new book “to all my Carabinieri bodyguards. To the fifty-one thousand hours we’ve spent together and to those still ahead.”

His movement may have been curtailed, but not his anger or ambition. His latest book, “Zero Zero Zero”, is an exploration of the global cocaine trade, from the foothills of the Andes to the nightclubs of Europe. It is a well-trodden trail, but the book provides a useful overview of the industry, explaining the incongruous mix of co-operation and cruelty in each link of the supply chain.

Cocaine-trafficking is risky but enormously profitable. As Mr Saviano points out, a kilo of the drug costing $1,500 in Colombia fetches $12,000-$16,000 in Mexico and $77,000 if it makes it to Britain. According to the accountant of Colombia’s Medellín drug mob, the group was trafficking 15 tonnes of cocaine into America every day in the 1980s. Thirty years later, the figures are still staggering. In Italy...

from The Economist: Books and arts http://ift.tt/1Nk6wZP

Lacking spark

If you build it, will they come?

IN SPITE of the enormous success of the Guggenheim museum in Bilbao, the €130m ($145m) design chosen for the Helsinki outpost will not quieten misgivings about the foundation’s aspiration to create a global cultural network.

The competition was won by an indistinct jumble of pavilions faced in charred wood that reflects all too well the ambiguities of the Guggenheim’s intentions. The design, announced on June 23rd, is as quietly deferential as Frank Gehry’s Bilbao design is self-consciously flamboyant. Along a quay now devoted to parking and a port warehouse, the Paris-based Moreau Kusunoki Architectes have proposed nine loosely arranged pavilions, six of which house gallery suites. Glassed-in passages and gathering spaces among the pavilions glue them into an ensemble.

The pavilion roofs turn up in identical gentle curves, with the taller ones huddling at the base of a tower topped by a restaurant—a lighthouse for dining. The visitor experience is rather shapeless, too. Most people will make their way from the city centre along a cheerless esplanade to a broad entrance plaza. They wander around a...

from The Economist: Books and arts http://ift.tt/1Nk6wJi

Getty got it, good

IT IS not every day that you get a phone call announcing the discovery of a long-lost Baroque masterpiece, even if you are the director of the Getty Museum in Los Angeles. When Alexander Kader, Sotheby’s head of European sculpture, rang Timothy Potts, the boss of the Getty, in March, saying he might have found Gian Lorenzo Bernini’s first marble carving of a pope, Mr Potts booked himself on a plane to London.

“Bernini was the master of the ‘speaking likeness’,” he says. “He found a way of breathing life into marble, of capturing the essence of a person. Not just the physical likeness of the pope, but his personality and stature, his benevolent seriousness and living presence. It makes you go weak at the knees when you see it, even if you know nothing of the artist.”

Pope Paul V’s nephew, Cardinal Scipione Borghese, commissioned the sculpture shortly after the pope’s death in 1621. On its completion it was displayed in Villa Borghese alongside another famous Bernini bust of the cardinal himself. In 1893, when the family fell on hard times, it was sold at auction in Rome, having first been photographed for the catalogue. Along with this snapshot, the bust...

from The Economist: Books and arts http://ift.tt/1Nk6xwU

Still in the shadows

Deng Xiaoping: A Revolutionary Life.By Alexander Pantsov and Steven Levine.Oxford University Press; 610 pages; $34.95 and £22.99.

BIOGRAPHERS of Communist-era leaders in China face enormous challenges. Since Mao Zedong took control of the country in 1949 its most powerful figures have hardly ever given interviews to journalists. Those who have lived or worked closely with these politicians tend either to sing their praises, condemn them out of hand (usually from the safety of exile) or, in most cases, keep quiet. Official policy documents, even secret ones, are often coloured by the biases of their drafters, whose aim may be to distort or exaggerate a leader’s preferences in order to promote the interests of a faction. A plethora of rumour clouds the picture further.

Writing about the life of Deng Xiaoping is one of the toughest challenges of all. For stretches of his career Deng was among Mao’s closest henchmen; separating his views at the time from those of Mao is fiendishly difficult. From 1978, two years after Mao’s death, until the early 1990s, Deng’s was the hand that guided China’s extraordinary economic transformation. Yet during this period he often operated behind the scenes; others held the post of Communist Party chief. After his retirement in 1989, he continued to play an important role with no more title than...

from The Economist: Books and arts http://ift.tt/1Jlrh8Q

Zen and the art of moneymaking

Enlighten your wallets here

THE white steel lady overlooking the South China Sea has three heads, three bodies and toenails bigger than human heads. Guanyin, the Buddhist goddess of mercy, stands atop a temple on a man-made islet, each of her heads facing a different way. Her public-relations staff call the six-year task of putting her there, in the resort town of Sanya on tropical Hainan island, “the number one statue-project in China”. The structure’s height, at 108 metres, was intended to be auspicious: Buddhists consider the number sacred.

Good fortune was certainly on the minds of local officials when they approved the project, in which the local government has a share. It was intended to be a money-spinner. It costs 60 yuan ($9.66) just to get in the lift that whisks visitors up to pray at those giant feet. That is on top of 126 yuan to enter the Nanshan Cultural Tourism Zone with its Auspicious Garden, Temple of 33 Guanyins and colourful Dharma Door of Non-Duality with its 94,000 portals. Guanyin is clearly not intended as a magnet for the faithful who have given up worldly possessions. Visitors are gouged without compassion, even...

from The Economist: China http://ift.tt/1eJ9Kea

Tongue-tied

“I CAN speak Chinese, I’m so awesome!” reads a sign on the wall of the Mingde primary school in Shufu, a town near the oasis city of Kashgar in the far western province of Xinjiang. Nearby, children’s artworks hang beneath another banner which proclaims: “The motherland is in my heart.” Though every pupil at the school is Uighur, one of China’s ethnic minority peoples, most lessons here are taught in Mandarin—a very different language from their Turkic one. It is the same at ever more schools across the region. Educating young Uighurs in Mandarin may one day help them find work—but it is also a means by which the government hopes to subdue Xinjiang and its many inhabitants who chafe at rule from Beijing.

Xinjiang began to fall under China’s control in the mid-18th century. It was then mainly populated by ethnic Uighurs, whose culture and Muslim faith set them apart from much of the rest of China; Kashgar is far closer to Kabul and Islamabad than it is to Beijing. Despite the migration into Xinjiang of Hans, China’s ethnic majority, minorities (mainly Uighurs) still make up 60% of its residents, compared with less than 10% in China overall.

...

from The Economist: China http://ift.tt/1CvYlDf

The tracks of their tears

FOR more than three decades, since well before Hong Kong’s transition from British to Chinese sovereignty in 1997, politics there has split into two camps. On one side have been those now loosely known as “pan-democrats”, who have argued that only a democratic system can safeguard the freedoms Hong Kong enjoyed (without the democracy) under the British, and that China should be coaxed and hectored into granting it. On the other, “pro-Beijing” politicians have argued that fair elections were less important than smooth relations with the new sovereign power, which would then allow a slow but steady expansion of democratic rights. This month has suggested that both sides have been wrong. The long struggle for democracy, which culminated in last autumn’s 79-day camp-out in central Hong Kong by umbrella-wielding campaigners, has suffered a definitive defeat.

A vote in Hong Kong’s legislature (“Legco”) confirmed that voters among the territory’s 7.3m people will not after all elect their next chief executive directly in 2017. This had become the democrats’ central demand, and the issue over which people took to the streets last year. But on June 18th Legco’s “pan-dems”, with a...

from The Economist: China http://ift.tt/1eJ9Ke4

Learning the lessons of stagnation

IN JUNE 2006 Luiz Inácio Lula da Silva, then Brazil’s president, went to Itaboraí, a sleepy farming town nestled where the flatlands beside Guanabara Bay meet the coastal mountain range. He announced the building of Comperj—the Rio de Janeiro petrochemical complex, a pharaonic undertaking of two oil refineries and a clutch of petrochemical plants. With forecasts of 220,000 new jobs in a town of 150,000 people, Itaboraí geared up for a boom.

Today it is almost a ghost town. Its straggling main street adjoins an unopened shopping mall and is punctuated by a score of blocks of flats and office towers, one with a heliport on the roof, all finished in the past few months and all plastered with “for sale” signs. “A lot of people bet on this new El Dorado in Itaboraí and it didn’t happen,” says Wagner Sales of the union of workers building Comperj.

What did happen? Private firms that were supposed to join Petrobras, the state-controlled oil giant, in investing in the petrochemical plants took fright when a shale gas boom in the United States slashed costs for their competitors there. Lula and his successor, Dilma Rousseff, burdened...

from The Economist: The Americas http://ift.tt/1GtqtZp

I spy, you spy

WHEN it emerged two years ago that America’s National Security Agency (NSA) was spying electronically on European leaders, France’s Socialist president, François Hollande, called it “totally unacceptable”. He had words with the Americans and there was a minor fuss, but it soon died down.

There was a similar show of indignation on June 24th, after the revelation by WikiLeaks that from 2006 to 2012 the NSA had spied on three French presidents: Mr Hollande and his two centre-right predecessors, Nicolas Sarkozy and Jacques Chirac. After an emergency meeting of the French national defence council, the Elysée again called the practice “unacceptable”. The Americans had given “undertakings” to France in 2013 and 2014, which should be “strictly respected”. Yet this time the protests are more awkward, since France is busy legalising electronic-eavesdropping powers for its own spies.

The revelations, published on June 23rd by Mediapart, a website, and Libération, a daily, have not so far unveiled state secrets. They consist of classified NSA reports, based on intercepted phone calls by French presidents and senior officials, mostly in Paris, Washington and New York. Among the documents is a list of French surveillance targets and their telephone numbers, including the president’s mobile. The American embassy in Paris, understood to be the...

from The Economist: Europe http://ift.tt/1KcoHAO

The right to die

IT IS easy to forget that adultery was a crime in Spain until 1978; or that in America, where gay marriage is allowed by 37 states and may soon be extended to all others by the Supreme Court, the last anti-sodomy law was struck down only in 2003. Yet, although most Western governments no longer try to dictate how consenting adults have sex, the state still stands in the way of their choices about death. An increasing number of people—and this newspaper—believe that is wrong.

The argument is over the right to die with a doctor’s help at the time and in the manner of your own choosing. As yet only a handful of European countries, Colombia and five American states allow some form of doctor-assisted dying. But draft bills, ballot initiatives and court cases are progressing in 20 more states and several other countries (see article). In Canada the Supreme Court recently struck down a ban on helping patients to die; its ruling will take effect next year. In the coming months bills will go before...

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Breaking out

Strutting its stuff

Destruction Was My Beatrice: Dada and the Unmaking of the Twentieth Century. By Jed Rasula. Basic Books; 365 pages; $29.99.

DADA was arguably the most revolutionary artistic movement of the 20th century. From its birth in the grim wartime winter of 1916, over the course of a few raucous performances at the Cabaret Voltaire in Zurich, it stretched the boundaries of aesthetic possibility to breaking-point, elevating randomness, cacophony, insult and plain silliness into legitimate forms of artistic expression. The experimental nightclub created by Hugo Ball and his mistress Emmy Hennings introduced many of the techniques that would be deployed by later innovators, from pop appropriation to hip-hop-style sampling, from photomontage, installation, assemblage and other non-traditional mixed-media mash-ups, to performance art and art that consisted of nothing but pure idea.

As Jed Rasula, of the University of Georgia, reveals in an eloquent new history, Dada’s legacy was as much a chronicle of failure as triumph. For those who congregated at the Cabaret Voltaire and then went on to spread the “virgin microbe” across the globe, the goal was not to rejuvenate art—which most rejected as the product of a bourgeois culture they despised—but to remake the...

from The Economist: Books and arts http://ift.tt/1Gjec97

Unnatural selection

Primates of Park Avenue: A Memoir. By Wednesday Martin. Simon & Schuster; 246 pages; $26 and £16.99.

NORTH of New York’s 59th Street and just east of Central Park is the natural habitat of a peculiar breed of higher-order primates. Among the females, a fiercely competitive tribal culture and a dramatic imbalance in sex ratios (reproductive females outnumber males by a factor of two to one) have yielded some evolutionarily extravagant adaptations. Food is plentiful, but calories are severely restricted and often consumed as fluids. To reinforce status and strengthen monogamous pair-bonds, females engage in extremes of ornamentation and elaborate “beautification practices”, which include physical mutilation and gruelling endurance rites. Although they appear powerful, these females occupy a socially precarious position: they rely on males for access to scarce resources and their lives are almost wholly consumed by descendant worship. Because children are such costly status objects, large numbers are a conspicuous sign of wealth.

Such are the customs and rituals of motherhood on Manhattan’s Upper East...

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Multiple choice

After Roe: The Lost History of the Abortion Debate. By Mary Ziegler. Harvard University Press; 367 pages; $39.95 and £29.95.

WHEN America comes to pick its next president one thing is sure: the two candidates will take opposing views of a 40-year-old lawsuit. As the country has become more tolerant of homosexuality, abortion has been left standing as the prime insignia of affiliation in the culture wars that have raged for decades. One Republican contender, Scott Walker, intends to sign a bill in Wisconsin banning abortion after 20 weeks, with no exceptions made even in cases of rape or incest. Another, Rick Perry, has presided over the closing of most of the abortion clinics in Texas. The arguments on both sides have become wearily familiar. Mary Ziegler’s book on Roe v Wade, the 1973 case in which the Supreme Court struck down state bans on abortion, resurrects the strange ancestry of the pro-life and pro-choice camps, which, in reality, are anything but.

Arguments over whether a mother should have the right to terminate the fetus she is carrying and, if so, at what stage in the...

from The Economist: Books and arts http://ift.tt/1GjebSB

Who are you calling a rogue?

A target for sanctions

SAROSH ZAIWALLA occasionally serves as an international arbitrator, judging commercial disputes. But he is better known for standing and fighting than for sitting in judgment: Mr Zaiwalla jabs thorns in the sides of Western governments by challenging their international sanctions in court, on behalf of blacklisted companies, banks and individuals. “Sanctions are better than going to war, but it has to be done legally. You can’t just go after any old third party,” he thunders.

The case with which Mr Zaiwalla’s London-based law practice is currently engaged is that of Bank Mellat, of Iran. It was placed on a sanctions list by Britain in 2009 on account of alleged links to Iran’s nuclear programme. The bank challenged this in British courts, and in 2013 the country’s Supreme Court ruled in Mellat’s favour, saying that singling it out had been “irrational” and “disproportionate”. The bank is now seeking £2.3 billion ($4 billion) in damages from Britain’s Treasury for loss of business. Its claim will go to trial next year, if mediation produces no settlement.

Bank Mellat is not alone....

from The Economist: Business http://ift.tt/1fjK3Rc

Buying up the shelves

Every little rebate helps

MEETING angry shareholders is an experience few company bosses savour. Yet on June 26th Dave Lewis, the new chief executive of Tesco, Britain’s largest supermarket chain, will have to do exactly that. The firm will hold its first annual meeting since revealing that it had inflated its profits by £263m ($421m) through wrongly booking rebates from suppliers—prompting his predecessor’s departure. Since then little has gone right for Tesco: sales have continued to slide, and the falling value of its property has forced it to declare a pre-tax loss of £6.4 billion for the year to February. Worse still, a Serious Fraud Office inquiry has been opened into the accounting scandal, which could cost the firm more than the error itself.

Some have asked whether Tesco’s 32-year relationship with its former auditor, PwC, was among the root causes of the crisis. The Financial Reporting Council (FRC) has launched an inquiry into PwC’s audits of Tesco, and last month Tesco replaced PwC with another auditing firm. But the large and undisclosed rebates that Tesco, like many other grocery chains, gets from...

from The Economist: Business http://ift.tt/1G7a50z

Change is in the air

IN TECHNOLOGY the next big thing usually starts small and scrappy. Incumbents ignore it, trapped in their ways of doing things, until it is too late. This is what happened with Skype. Telecoms carriers at first dismissed the internet-telephony service, but it has taken a chunk of their most profitable business: last year users made 248 billion minutes of international calls on Skype, compared with 569 billion minutes on conventional networks, according to TeleGeography, a market-research firm.

A string of wireless startups are hoping to trigger a similar disruption. Their bet is that over the next few years mobile phones will switch to sending most calls, texts and data via Wi-Fi hotspots, relegating the cellular network to being a mere backup. If this eventuality comes to pass, it could change the economics of the industry and cut users’ bills drastically.

Going “Wi-Fi first”, as the concept is called, was pioneered in 2012 by Free, a French mobile operator, to fill the gaps in its cellular network. The idea has since been refined by three American startups: Republic Wireless, Scratch Wireless and FreedomPop. The...

from The Economist: Business http://ift.tt/1G7a24P

Keep seatbelts fastened

FEWER aircraft were on display at the Paris air show, which opened on June 15th, than when it was last staged two years ago. Perhaps 120 planes and other flying machines stood on the French tarmac compared with 150 in 2013 (the show is held in Britain every other year). But this is far from a sign of gloom. Sales of big commercial jets are on a steep climb, and planemakers are busy getting their factories ready for another big increase in output.

Order books are bulging at Airbus and Boeing, the duopoly that dominates the market. The European firm forecasts that about 32,000 aircraft seating over 100 passengers will be delivered in the next 20 years (see right-hand chart). Its current backlog of 6,400 planes will take a decade to deliver. Boeing’s 5,800 will occupy it for eight years. And more orders piled up during the show. But the boom brings risks. The aircraft giants have to deliver the planes. And the market must absorb the new capacity.

Increasing production has proved troublesome in the past. Boeing’s attempts in 1997 to increase output of the 737, its most popular model, failed dismally. Neither suppliers nor its...

from The Economist: Business http://ift.tt/1fjK1J2

Beware of sandstorms

APOSTLES of globalisation have a habit of disregarding the Middle East. Antoine van Agtmael, the man who coined the term “emerging markets”, barely mentions the Arab countries in his 2007 book, “The Emerging Markets Century”. This is understandable. The region has an extraordinary talent for disappointing. Emerging markets are supposed to produce enough opportunities to justify the headaches. In the Middle East the headaches are often overpowering.

The region certainly has opportunities. Its ample supplies of oil and gas make it highly attractive for basic industries such as petrochemicals and aluminium smelting. Governments, in the Gulf especially, are making efforts to attract foreign firms, as part of a drive to diversify their economies. The Gulf states are striving to improve their positions in the World Bank’s ranking of countries by ease of doing business. This week Saudi Arabia opened its stockmarket to foreign institutional investors. The Middle East’s growing, and often wealthy, population should make it a promising market for consumer businesses.

However, the problems are mind-boggling—and they are not the sort that an MBA...

from The Economist: Business http://ift.tt/1fjK1sE

A torch-bearer for Chinese capitalism

THREE years ago one of the many companies started by Liu Chuanzhi, the chairman of Legend Holdings, held its annual meeting in a city in the Chinese interior. As is usual, the conglomerate invited various officials to the opening banquet. But when people went to pay their respects to the most important figures in the room, it was Mr Liu, rather than the local Communist Party chief, who had the biggest queue of people wanting to speak to him.

That is because Mr Liu is the leading light of Chinese entrepreneurial capitalism. Legend is best known for spawning Lenovo, now the world’s biggest maker of personal computers, in which it still holds a big stake. But Legend has a range of other business interests, from agriculture to car hire to dentistry (see diagram), and fingers in all sorts of other pies through its private-equity arm, Hony Capital.

Lenovo has been listed in Hong Kong since 1994 but now...

from The Economist: Business http://ift.tt/1fjK1sA