IN APRIL 2016, the International Consortium of Investigative Journalists (ICIJ) dropped a bombshell. Its articles about the “Panama Papers”, a leaked trove of documents which had been stolen from Mossack Fonseca, a Panama-based law firm, sent shock waves round the world—felling the leaders of Pakistan and Iceland, leading to multiple arrests and pushing several countries to tighten laws related to offshore financial dealings. The revelations also caused a further hardening in public attitudes towards offshore finance, which had been souring since the global financial crisis.
Now the ICIJ and its 95 media partners around the world—including the BBC and the New York Times—are back with another cache of pilfered files, this time dubbed the “Paradise Papers”. This latest batch of revelations, the organisation’s sixth substantial leak investigation, began on November 6th and will be rolled out over a week. It shines light on offshore transactions linked to hundreds of wealthy clients of Appleby, a Bermuda-based law...Continue reading
BACK in 1992, in his book "The End Of History and the Last Man", Francis Fukuyama argued that liberal democracy had triumphed. The return of authoritarianism in Russia, and the growing power of absolutist China, has undermined the argument at the geopolitical level. And events in recent years have caused questions on the ability of liberal democracy to flourish in some countries where it seemed established. The new nationalists that have emerged in Turkey, Poland and Hungary tend to regard disagreement with their policies as unpatriotic and are quick to brand opponents as being in the pay of foreign powers.
What used to be called "the Whig theory of history" saw civilisation steadily moving in a more open, liberal direction. In the late 19th century and early 20th centuries, countries became more democratic, first allowing most men and then women to vote. There were setbacks in the 1920s...Continue reading
LAST week brought some good news for those who are fans of both flying and country music. Warner Music Nashville, a record label, and Southwest Airlines announced that they will be bringing concerts to the skies. The scheme is an expansion of the airline’s existing “Live at 35” series, in which bands surprise passengers by playing a few songs in the plane’s cabin. Devin Dawson (pictured), an artist on the label, marked the occasion with a performance on a flight from Nashville to Philadelphia. He told Billboard, a music publication, that:
Some people don’t really enjoy flying; some people get very nervous and don’t like it. I hope that something like this [performance] is just a cool surprise for some [passengers] that helps them forget about their everyday woes, and I’ll just play a couple of songs to make them smile.
However, Mr Dawson’s enthusiasm was not...Continue reading
TO THE list of endangered travel facilities—which includes pay phones, communal aeroplane screens and concierges—there is one more to add: smoking rooms. Even a few years ago, guests were routinely asked whether they would prefer a smoking room or not. But today fewer hotels are offering smoking rooms and those that do have a vanishingly small supply.
According to the latest report from the American Hotel and Lodging Association, a trade group, the share of hotel rooms that are non-smoking has steadily risen from 74% to 97% over the last decade. And the proportion of hotels that only offer non-smoking rooms has jumped from 38% in 2008 to 85% last year.
For a business traveller with a tobacco habit, then, there are few options. Those seeking a dash of glamour will struggle, as 97% of luxury hotels do not have smoking rooms. Only among budget-hotel category—the lowest price segment of five listed in the survey—do the majority of...Continue reading
A FEW years ago, the news about the euro-zone economy was uniformly bad to the point of tedium. These days, it is the humdrum diet of benign data that prompts a yawn. Figures this week show that GDP rose by 0.6% in the three months to the end of September (an annualised rate of 2.4%). The European Commission’s economic-sentiment index rose to its highest level in almost 17 years. Yet when the European Central Bank’s governing council gathered on October 26th, it decided to keep interest rates unchanged, at close to zero, and to extend its bond-buying programme (known as quantitative easing, or QE) for a further nine months.
The central bank said it would slow down the pace of bond purchases each month, to €30bn ($35bn) from January. But Mario Draghi, the bank’s boss, declined to set an end-date for QE. A hefty dose of easy money will be necessary, he argued, until inflation durably converges on the ECB’s target of just below 2%. It shows few signs of doing so, despite the...Continue reading
FOR the umpteenth time in the past decade, a great turning-point has been declared in the government-bond market. Bond yields have risen across the world, including in China, where the yield on the ten-year bond has come close to 4% for the first time since 2014. The ten-year Treasury-bond yield, the most important benchmark, has risen from 2.05% in early September to 2.37%, though that is still below its level of early March (see chart).
Investors have been expecting bond yields to rise for a while. A survey by JPMorgan Chase found that a record 70% of its clients with speculative accounts had “short” positions in Treasury bonds—ie, betting that prices would fall and that yields would rise. Meanwhile a poll of global fund managers by Bank of America Merrill Lynch (BAML) in October found that a net 85% thought bonds overvalued. In addition, 82% of the managers expected short-term interest rates to rise over the next 12 months—something that tends to push bond yields...Continue reading
POPULISM is the weapon not just of the downtrodden. As the crisis in Catalonia demonstrates, the rich have economic anxieties of their own. Catalonia has an identity distinct, in important ways, from that of the rest of Spain. But the recent drive for independence has been energised by anger over the flow of fiscal redistribution from rich Catalans to their countrymen: people seen, in parts of the restless north-east, as thankless and lazy as well as alien. Paradoxically, globalisation has inflamed separatism around the world by raising the question Catalans now confront: to whom, exactly, do we owe a sense of social responsibility?
Every country or restive region has its own idiosyncratic history. Yet over the long run national borders are surprisingly malleable. Some circumstances offer better prospects for the small and newly independent than others. The smaller the country, the more easily its government can satisfy its people’s political preferences. A broadly satisfying compromise...Continue reading
ONE of the more persistent beliefs about the global economy is that Asians are more frugal than others. Explanations have drawn on culture (the self-discipline of Confucianism), history (memories of privation) and public policy (flimsy social safety-nets forcing people to save). For Lee Kuan Yew, the founding father of Singapore, and other theorists of “Asian values”, thrift was one of them. Whatever the true reason, data long supported the basic claim that Asian households were indeed careful with their cash. But over the past few years consumers across the region have done their best to prove that prudence was perhaps just a passing phase.
Household debt in advanced economies has generally declined as a percentage of GDP since the 2008 global financial crisis, according to the Bank for International Settlements. In a number of Asian countries, however, it has been going in the opposite direction (see chart). The biggest increase has been in China, where households have borrowed about $4.5trn over the past decade. But Chinese...Continue reading
SUPERLATIVES surrounded the General Agreement on Tariffs and Trade (GATT) when it was signed on October 30th 1947. A press release heralded it as “the most far-reaching negotiation[s] ever undertaken in the history of world trade.” The Economist grumbled it was “one of the longest and most complicated public documents ever issued—and one of the hardest to comprehend.” The Daily Express, a British newspaper, growled: “The big bad bargain is sealed.”
The agreement’s complexity matched the tangle of global trade affairs. In the preceding decades a thicket of protectionism had strangled commerce and slowed recovery from the Depression of the 1930s. The GATT’s length matched its scope. It included both tariff cuts and promises to forswear new duties. Covering 23 countries responsible for 70% of world trade, it came to embody the rules-based multilateral system.
After 48...Continue reading
KEEN, no doubt, to stay alive, drug traffickers tend to be prompter payers than most. For software firms, this is just one of many clues that may hint at the laundering of ill-gotten money. Anti-money-laundering (AML) software, as it is called, monitors financial transactions and produces lists of the people most likely to be transferring the proceeds of crime.
Spending on this software is soaring. Celent, a research company, estimates that financial firms have spent roughly $825m on it so far this year, up from $675m last year. Technavio, another research firm, reckons the market is even bigger and will grow at more than 11% annually in coming years. This is partly because authorities are increasingly quick to punish institutions that let down their guard. Deutsche Bank, for example, has been hit with fines worth at least $827m this year alone. Governments, eager to appear tough on crime, are urging prosecutors to go after not just institutions, but also their employees.
YOU could forgive Janet Yellen, the chair of the Federal Reserve, for feeling peeved. With unemployment at just 4.2%, and inflation at 1.6%, she is close to achieving the Fed’s two goals of curbing joblessness and pinning price rises at 2%. Ms Yellen is a Democrat appointed by Barack Obama in 2014. The tenures of past three Fed chairs were all extended by presidents from the other party. Yet as we went to press, President Donald Trump was expected to nominate Jerome Powell, a Republican on the Fed’s board, to replace Ms Yellen.
If picked, Mr Powell—also an Obama appointee—would stand out from recent incumbents. He would be the first Fed chairman since William Miller, who left office in 1979, with no formal economics training; and, according to the Washington Post, the richest since the 1940s.
Mr Powell, who is 64, is a lawyer-turned-banker. His first role in Washington was at the Treasury during the...Continue reading
BIC CAMERA, a Japanese electronics retailer, accepts payments in so many ways that the list nearly obscures the till: credit, debit and pre-paid cards; mobile wallets; ApplePay and Alipay; and, in some stores since April, bitcoin too.
Efforts are under way to wean Japan off genkin, or cash. Handling notes and coins is expensive for businesses; many operate on tight margins because a persistent lack of inflation has inhibited price rises. The government reckons more cashless payments could help the economy, too, encouraging people, including a growing number of tourists, to spend more. (And help it collect more tax.) Entrepreneurs think the data that come with cashless methods could promote new business.
Yet cash still dominates. Thank a preponderance of ATMs in ubiquitous konbini (convenience stores), safe cities where people are happy to carry wads of cash, and wariness about handing over personal data. Last year cash accounted for 62% of consumer transactions by value,...Continue reading
MICHAEL WOODFORD, the first non-Japanese president of Olympus, likened the camera-maker’s board members who sacked him in 2011 to “children in a classroom”. Mr Woodford had confronted Tsuyoshi Kikukawa, the company’s imperious chairman, over a $1.7bn hole in its finances. Mr Kikukawa responded by orchestrating a show of hands in a boardroom coup that sent the Englishman packing. It all fitted a cliché of Japan’s boardrooms as an all-Japanese, all-male club where wizened bosses ruthlessly enforce wa, or harmony.
Gradually, the serenity is being disrupted. Nearly 15% of companies in the Nikkei 225 stock index now have at least one non-Japanese on their boards. That is still less than half the share in Britain’s FTSE 100, but it is up from 12% in 2013 and the trajectory seems set. Japan’s biggest bank, Mitsubishi UFJ, and Takeda, its largest pharmaceuticals company (which in 2015 appointed its first foreign chief executive, a Frenchman) announced the appointment of foreign directors this year. Of...Continue reading
ON A Sunday afternoon, just beyond London’s M25 ring road, shoppers participate in the ritual that is a trip to IKEA. Fuelled by a lunch of Swedish meatballs, they negotiate their way around the 400,000-square-foot maze of a store, past children playing hide and seek and couples arguing over the merits of a PAX over a HEMNES wardrobe. Hours later, they emerge, wearily pushing trolleys loaded with flat-pack furniture and far more tea lights than they had intended to buy. The joy of assembly still awaits them.
This experience has changed remarkably little since the late 1950s, when IKEA, which is still privately owned, set up its first store in southern Sweden and found that people would travel long distances for low-cost, self-assembled goods. IKEA has become the world’s largest seller of furniture, with over 400 shops around the world and €38bn ($42bn) of revenue.
But now it is acknowledging that customers might want to...Continue reading
THE Japanese make cars that last but replace them relatively quickly. The average car in Japan is three years younger than in America. This combination of durable manufacturing and dutiful consumption of a prized national product works out well for the rest of the world; many countries import older Japanese cars in bulk. Secondhand vehicles fill vast parking lots in Japan’s port cities, awaiting shipment to New Zealand, the United Arab Emirates and elsewhere.
The third-most-popular destination is Myanmar, which imported over 80,000 used Japanese vehicles in the first nine months of this year, according to Japan’s International Auto Trade Association. Drivers believe that Toyotas, Hondas and Nissans can stand up to the country’s pockmarked roads, a faith not yet shown in South Korean and Chinese cars.
There is only one problem, which is that Japan drives on the left, Myanmar on the right. As a consequence, most of Myanmar’s...Continue reading
STANLEY and Sidney Goldstein would scarcely recognise their creation. In 1963 the brothers opened a humble storefront in Lowell, Massachusetts, selling health and beauty products. Determined to put customers first, they named their enterprise Consumer Value Stores. Today the Goldsteins’ startup, soon afterwards sold to a bigger firm, is nothing short of a health-care Goliath.
Revenues at CVS Health reached $177bn last year, riches which come from 9,700 retail pharmacies and from its operations in mail-order drugs and sales of more expensive speciality medicines. The firm commands nearly a quarter of the American market for prescription drug sales (see chart). It is also the biggest pharmacy-benefit manager (PBM) in America, a type of middleman that negotiates bulk discounts on drugs with large pharmaceutical firms on behalf of employers and insurers.
AIRLINE bosses are often household names due to their attention-seeking behaviour—from the foul-mouthed rants of Michael O’Leary, chief executive of Ryanair, to the model-flanked antics of Richard Branson of Virgin Atlantic. But even in an industry filled with characters, Akbar al-Baker, Qatar Airways’ chief executive, stands out. He is known in the industry for behaving unpredictably at press conferences and for his colourful attacks on rival airlines. The word “crap” often comes up, as a description for new jets from Airbus and Boeing, and also (in a quote from July): “there is no need to travel on these crap American carriers” on which “you will be served by grandmothers”.
Mr Baker could do with some allies just now. Since June, Saudi Arabia, the United Arab Emirates, Bahrain and Egypt have imposed a blockade on Qatar, banning its flag carrier’s jets from their skies. That has resulted in the cancellation of over 50 daily flights to these countries,...Continue reading
PUT the word Bitcoin into Google and you get (in Britain, at least) four adverts at the top of the list: "Trade Bitcoin with no fees", "Fastest Way to Buy Bitcoin", "Where to Buy Bitcoins" and "Looking to Invest in Bitcoins.". Travelling to work on the tube this week, your blogger saw an ad offering readers the chance to "Trade Cryptos with Confidence". A lunchtime BBC news report visited a conference where the excitement about Bitcoins (and blockchain) was palpable).
All this indicates that Bitcoin has reached a new phase. The stockmarket has been trading at high valuations, based on the long-term average of profits, for some time. But there is nothing like the same excitement about shares as the was in the dotcom bubble of 1999-2000. That excitement has shifted to the world of cryptocurrencies like Bitcoin and Ethereum. A recent column focused on the rise of initial coin offerings, a way for...Continue reading
ONE recent morning in Salem in the state of Massachusetts, a witch ran out of wands. Teri Kalgren, the owner of Artemisia Botanicals, an apothecary and magic shop, attributed the shortage to a witch-inspired boom. People have long flocked to Salem to learn about the infamous witch trials of 1692, in which Puritan hysteria led to the executions of 20 people (and two dogs). But since 1982 when the city introduced Haunted Happenings, a daylong Halloween festival for local families, the event has expanded to a commercial celebration lasting a month that attracts 500,000 tourists.
Last year tourism pumped $104m into Salem and funded some 800 jobs. The revenues have been increasing by 5-6% every year, says Kate Fox of Destination Salem, the city’s marketing arm. Tourists can buy a spell kit, visit a witch museum, take a walking tour (ghostly, feminist or literary-themed) and have their fortune told. On the opposite coast, Scott Michaels has watched his...Continue reading
TRAVEL advisory notices, which alert passengers to the risks of going to certain places, are standard business for frequent flyers. But last week brought an unusual one. The National Association for the Advancement of Coloured People (NAACP), America’s oldest civil-rights organisation, warned black flyers about the dangers of travelling with American Airlines.
The NAACP says that “a pattern of disturbing incidents” has been reported by black passengers specifically about American Airlines. Such incidents “suggest a corporate culture of racial insensitivity and possible racial bias”. Of the four incidents that the NAACP cite, two involved prominent black activists, PR Lockhart notes at Vox, a news site. Although the NAACP does not mention them by name, one is thought to be Rev William Barber, a former NAACP leader in North Carolina. He was removed from a flight from Washington, DC, after he responded to rude comments...Continue reading