Tag: Approved

“WHAT’S the model? Have cake and eat it.” So read handwritten notes, snapped in the hands of an official of Britain’s ruling Conservative Party, as she left a meeting in Downing Street on Brexit strategy in late November. Britons seem keen to pick and choose from a menu of ties with Europe—in particular, to retain access to the single market while gaining more control over migration. Angela Merkel, the chancellor of Germany, is unwavering. In a speech in Berlin on December 6th she reiterated that Europe’s “four freedoms” are inseparable and inviolable. Countries hoping to share in the free movement of goods, services and capital must accept the free movement of labour as well.

The European project was meant above all to be a process of economic integration (intended, in the words of the Schuman declaration in 1950, “to make war [within Europe] not merely unthinkable but materially impossible”). Dissatisfaction with the EU often boils down to the suspicion that its original mission of economic integration has morphed into a misguided push for political union. Which one of these agendas does the free movement of people…Continue reading

Engine of progress

WHEN the covers come off the Vanguard Roadster at the New York Motorcycle show on December 9th the moment will mark the launch not only of a brawny new bike but also of a new brand with big ambitions. Vanguard is an audacious startup that reckons it can use the increasing digitisation of manufacturing to ride with the pack of long-established bike companies, such as Honda, Yamaha, Harley-Davidson, BMW and others, who are together set to sell some 500,000 motorcycles and scooters in America this year.

That might sound laughable. So far, Vanguard has built a grand total of one machine. At around $30,000, complete with a thumping 1.9 litre V-twin engine, it is priced at the premium end of the market (though well below the price of some superbikes, which can cost three times as much). But if Vanguard has its way, within a few years it will be selling several thousand motorcycles annually from a range of several different models.

What enables a startup to aim so high is the way digital technologies are lowering the cost of entry to manufacturing businesses that were once seen as the preserve of giants….Continue reading

THE response of bond, stock and currency markets to the result of Italy’s referendum, and the resignation of its prime minister, Matteo Renzi, was a jaw-breaking yawn. The euro fell a bit against the dollar, and then rallied. The yield on Italy’s ten-year bonds ticked up a few basis points and then fell to 1.89%. The markets had expected a No vote and priced it in, is one view. The calm probably also owed much to a belief that the European Central Bank (ECB) would act to stem any panic.

As The Economist went to press, the ECB’s governing council was widely expected to extend its monthly purchases of government and other bonds (“quantitative easing”, or QE) beyond March 2017. These purchases (which began at a monthly rate of €60bn and then increased to €80bn), plus the ECB’s myriad schemes to provide long-term liquidity to banks, have worked like a charm. Financing costs in the euro zone’s periphery have converged on those of core countries (see chart). All governments, apart from Greece, can borrow in bond markets at tolerable rates. A nagging worry is that the ECB cannot keep up this support…Continue reading

CHARLES KOCH may well be the most demonised businessman in America, with his younger brother, David, a close second. Journalists argue that he is the mastermind of the country’s vast right-wing conspiracy. Lunatics have made death threats. The ultra-rich, particularly those who made their original fortunes in oil and gas, are supposed to make amends by giving their money to liberal causes. The Kochs have instead spent hundreds of millions backing conservative political causes (though Charles Koch has no love for Donald Trump), lobbying for lower taxes and attacking the idea of man-made global warming.

Mr Koch doesn’t come across as Dr Evil. True, the headquarters of Koch Industries is a collection of black boxes outside Wichita, Kansas; the security screening is rigorous. But its CEO has more of the air of a university professor. Despite his $40bn fortune, he lives in a nondescript neighbourhood in one of America’s most boring cities, puts in nine or more hours a day in the office and lunches in the company canteen. He doesn’t seem that interested in his surroundings: complimented on the firm’s art collection, he says his wife takes care of that…Continue reading

Wild celebrations between Putin and Sechin

GLENCORE, a Swiss-based commodities company, and its biggest shareholder, the Qatar Investment Authority, are set to take a €10.2bn ($11bn) stake in the Russian oil giant Rosneft, giving them 19.5% of a business targeted by Western sanctions since Russia fuelled a war in eastern Ukraine in 2014. The unexpected deal, the largest in an ambitious Russian privatisation plan, delivers Vladimir Putin and Igor Sechin, Rosneft’s boss, a victory. The Russian state will keep control of the company, while filling a gap in the 2016 budget.

The transaction will also stir up old jealousies in the oil-trading business, which, as one industry participant puts it, is in “a pissing match to be top dog with Rosneft”, the world’s second-biggest crude producer. Last year Glencore was forced by the commodities slump to suspend its dividend, sell assets and issue $2.5bn of new shares. Its acquisitive boss, Ivan Glasenberg, had not been expected to make such an expansive move so soon.

In a statement Glencore said it will put only €300m of its own equity into the deal. The rest of the…Continue reading

FOR the South Korean public, the sight of nine of their most powerful business chiefs, who are rarely seen, submitting to a day-long grilling by South Korean MPs on December 6th was remarkable (eight of them are pictured). During the hearing, broadcast live on television, the heads of CJ, LG, Hanwha, SK, Samsung, Lotte, Hanjin, GS Group and Hyundai, all family-owned conglomerates, or chaebol, denied they had sought favours in return for the billions of won they paid into two foundations controlled by Choi Soon-sil, a former confidante of President Park Geun-hye. (As The Economist went to press, Ms Park faced an impeachment motion by parliament over her ties to Ms Choi.) Samsung’s Lee Jae-yong, whose 20.4bn won ($17.6m) grant was the biggest, was the most intensively interrogated. On many minds was the last time big bosses were thus summoned, during an inquiry in 1988 into the corporate funding of a foundation run by then-dictator Chun Doo-hwan. Six of those tycoons’ sons were among those testifying this week.

He stoops to conquer

A NOTABLE American commentator, Charles Krauthammer, once explained Rupert Murdoch’s success in founding Fox News, a cable channel, by pointing out that he had found a niche market—half the country. The same may be true of Breitbart News, a conservative website whose fortunes have risen with those of Donald Trump, and whose chairman, Stephen Bannon (pictured), is Mr Trump’s chief strategist.

Milo Yiannopoulos, an editor at Breitbart, explained after Mr Trump’s victory that half of voters are “repulsed by the Lena Dunham, Black Lives Matter, third-wave feminist, communist, ‘kill-all-white-men’ politics of the progressive left.” Breitbart saw it coming a while ago, he added. The company’s expansion plans suggest it sees something coming in Europe, too. It already has a website in Britain and in January it will launch French and German sites.

Founded by Andrew Breitbart, a conservative journalist who died in 2012, the site is just nine years old. Its formula—outraging and fascinating readers with “click bait”, occasional fake news, polemics and attacks on mainstream media—has taken off. Ten days…Continue reading

IT DOESN’T take long to walk from Siemens’s old headquarters in Munich to its new one, inaugurated in June: the German industrial conglomerate has built it right next door. The design is cutting-edge, as are the building’s environmental features. It is packed with energy-saving sensors; channelled rainwater is used to flush the toilets.

General Electric, Siemens’s big American rival, will soon have a new base, too. But it takes three hours to drive from the old site in Fairfield, a Connecticut suburb, to the new one in Boston. Its building will also boast plenty of green technology, such as a huge canopy made of solar panels, as well as spaces that the public can enter, including co-working areas and lounges. There will be laboratories both for internal startups and some from outside. 

The two industrial giants aren’t so much showing off as signalling transformation. Both firms are going through the most profound change in their corporate histories, attempting to switch from being makers of machines into fully digital businesses. GE’s chief executive, Jeff Immelt, says the plan is to join the world’s top ten software firms…Continue reading

AS HACKERS wreak havoc with depressing regularity, the insurance industry finds itself forced to contemplate a whole new set of risks. They range from the theft of millions of credit-card numbers from American retailers to the disabling of the power grid, as happened in Ukraine last December. The dedicated “cyber-insurance” policies that companies offer against data breaches have become relatively routine. But the risks they insure under other policies are also affected by cyber-risks—and they are still struggling to understand this so-called “silent” cyber-exposure.

Insurance that protects firms who suffer data breaches has been on offer for around 15 years. It is much harder to put a precise value on, for example, stolen health records than on a property or car. Insurers sidestep the problem by covering only the direct costs that a company incurs from a hack. Typically, these include hiring a specialised forensics firm to work out exactly what was stolen, notifying affected customers (which 47 American states currently require), short-term business interruption and fines.

The industry will be shaken up by new EU data-protection…Continue reading

Under pressure

THESE are difficult times for Electricité de France (EDF), the country’s quasi-monopolistic electricity provider, serving 88% of homes. Outages at no fewer than 18 of the 58 EDF-owned nuclear reactors that provide three-quarters of France’s electricity have meant a slump in production: the company says annual nuclear output could fall to 378 terawatt hours (TWH), from 417 TWH last year. Eight reactors are currently lying idle and several may not restart for weeks or months. Power stations are burning coal at a rate not seen since the 1980s. As electricity imports and prices soar, officials are having to deny that a cold snap could bring blackouts.

The cause of the crisis—possibly faulty reactor parts throughout EDF’s fleet—suggests it may not be easily contained. France’s nuclear regulator, the Autorité de Sûreté Nucléaire (ASN), this summer ordered urgent tests of reactor parts, mostly bases of cylindrical steam generators. Inspectors are worried about high carbon levels found in steel forged by Creusot Forge, which is owned by Areva, another French firm, and by Japan Casting & Forging…Continue reading