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The Economist: Briefing



Briefing



 



The decline of established American retailing threatens jobs

Wed, 10 May 2017 21:18:12 GMT

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IT DOESN’T look like much but Staten Island Mall is optimism in a cement box. Like all such retail spaces the temperature is carefully calibrated. Bland pop music wafts down beige halls. Its biggest tenants are America’s unholy trinity of struggling retailers: Macy’s, J.C. Penney and Sears, all of which are closing stores. This mall, however, is undergoing a rebirth.

Gangs of builders are hard at work on a 235,000-square-foot expansion, adding nearly a fifth to the current floor space. This will house more shops, a new cinema and restaurants. In the old part of the mall, struggling tenants are making way for new ones. Sears will soon occupy just a quarter of its former space; two European discounters, Primark and Lidl, are taking its place. GGP, a real estate investment trust (REIT) that owns the mall, reckons that the $231m it is pumping into the expansion will bring healthy returns by 2019. “Good real estate wins,” says Sandeep Mathrani, GGP’s boss. It helps that the mall is the...




The history of central banks

Thu, 27 April 2017 14:46:31 GMT

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TWENTY years ago next month, the British government gave the Bank of England the freedom to set interest rates. That decision was part of a trend that made central bankers the most powerful financial actors on the planet, not only setting rates but also buying trillions of dollars’ worth of assets, targeting exchange rates and managing the economic cycle.

Although central banks have great independence now, the tide could turn again. Central bankers across the world have been criticised for overstepping their brief, having opined about broader issues (the Reserve Bank of India’s Raghuram Rajan on religious tolerance, the Bank of England’s Mark Carney on climate change). In some countries the fundamentals of monetary policy are under attack: Recep Tayyip Erdogan, the president of Turkey, has berated his central bank because of his belief that higher interest rates cause inflation. And central banks have been widely slated for propping up the financial sector, and denting savers’ incomes, in the wake of the financial crisis of 2007-08.

Such debate is almost as old as central banking itself. Over more than 300 years, the power of central banks has ebbed and flowed as...




Averting a Chinese-American trade war

Thu, 30 March 2017 14:48:18 GMT

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IN 1784 the Empress of China set sail from New York, on the first American trade mission to China. Carrying ginseng, lead and woollen cloth, the merchants aboard dreamed of cracking open the vast Asian market. But the real profit, they found, came on their return, when they brought Chinese teas and porcelain to America. As other ships followed in its wake, the pattern became clear. Americans wanted more from China than Chinese wanted from America, and the difference was made up with a steady outflow of silver from America into China. The Empress had launched not just commercial ties between the two great countries but also an American deficit in its trade with China.

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The modern incarnation of this deficit is still driven by the flow of consumer goods, but nowadays electronic gadgets. In recent years it has reached a record size (see chart 1). When Xi Jinping, China’s president, meets Donald Trump—a meeting...




A tightening grip

Wed, 11 March 2015 20:18:10 GMT

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A SMALL factory in an industrial park outside Shanghai, churning out widgets you never see but probably use, provides a perfect snapshot of the state of global manufacturing today. Some workers at the Integrated Micro-Electronics (IMI) facility affix pieces by hand to circuit boards bound for digital displays on European stoves. Others stand at computers, guiding machines that press together components for cars’ steering systems. But IMI is important less for what it makes than for what it represents. A cog in long supply chains, it produces part, but never all, of brand-name consumer goods. It has operations around the world, but makes its most money in China. And it is starting to automate its factories there as wages rise.

Cheap Chinese labour has been crucial to the building of “Factory Asia”, the name given to the region’s complex of cross-border supply chains. Asia first emerged as a manufacturing power in the 1960s, when Japan began exporting electronics and consumer goods. Taiwan and South Korea followed its lead. By the 1980s Japanese firms were building plants across South-East Asia. But China’s opening up was the gamechanger. In 1990 Asia accounted for 26.5% of global...




Robber barons and silicon sultans

Tue, 30 December 2014 14:58:10 GMT

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IN THE 50 years between the end of the American civil war in 1865 and the outbreak of the first world war in 1914, a group of entrepreneurs spearheaded America’s transformation from an agricultural into an industrial society, built gigantic business empires and amassed huge fortunes. In 1848 John J. Astor, a merchant trader, was America’s richest man with $20m (now $545m). By the time the United States entered the first world war, John D. Rockefeller had become its first billionaire.

In the 50 years since Data General introduced the first mini-computers in the late 1960s, a group of entrepreneurs have spearheaded the transformation of an industrial age into an information society, built gigantic business empires and acquired huge fortunes. When he died in 1992, Sam Walton, the founder of Walmart, was probably America’s richest man with $8 billion. Today Bill Gates occupies that position with $82.3 billion.

The first group is now known as the robber barons. The second lot—call them the silicon sultans—could face a similar fate. Like their predecessors, they were once revered as inventive mould-breakers, delivering gadgets to the masses. But just like Rockefeller and...




Under-age and on the move

Thu, 26 June 2014 14:58:08 GMT

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A FEW weeks ago Helen Yovanna Mata, a 16-year-old Honduran girl, turned up at Corinto, a scruffy crossing on the border with Guatemala, with a backpack and a few papers. Two of the papers were death threats scribbled in scratchy ballpoint, another was a school document validating her story. One of the notes said: “We’re not kidding. You now have seven days [to leave]. We don’t want to hurt you, but you have to believe us. Death.” It was signed “M18”, the name of a violent Central American street gang. Honduran officials let her through to Guatemala, her first stop on an arduous journey north to the United States. No one knows if she got there.

Rising numbers of children are following in Helen’s footsteps. Corinto is abuzz with wiry, menacing men carrying dirty wads of banknotes who arrange for coyotillos—local kids turned people-smugglers—to lead migrants without passports through the subtropical hills into Guatemala. Since early this year, the vast majority of those migrants have been youngsters themselves, sometimes travelling alone, sometimes accompanied by their mothers. At night, when the coyotillos get to work, hordes of them...




Playing out the last hand

Thu, 24 April 2014 15:01:06 GMT

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On February 28th Warren Buffett released his 50th annual letter to shareholders. In April of last year, we considered how his succession might play out.

WHAT do the next 50 years have in store for Berkshire Hathaway, the conglomerate Warren Buffett has run with spectacular success for the past half century? It is an interesting question, Mr Buffett acknowledged in a recent note to The Economist declining to be interviewed about it; “so interesting that I recently assigned the same story to myself” and “I don’t want to step on my own lines.” But, he offers, “in 50 years, we can have lunch and compare the actual to the projected.”

Mr Buffett has joked that “I love running Berkshire, and if enjoying life promotes longevity, Methuselah’s record is in jeopardy.” In that spirit this newspaper looks forward to taking him up on the offer of lunch on or around his 134th birthday. But having built Berkshire Hathaway on his mastery of the insurance business, he will know that the actuarial tables seldom lie, and that the biggest challenge his beloved company will face in the next 50 years is the...




Conscious uncoupling

Thu, 03 April 2014 08:33:56 GMT

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WHEN Vladimir Putin was bribing Viktor Yanukovych, then the president of Ukraine, to turn down a trade deal with the European Union last year, one of the sweeteners was cheap gas. The copious Russian gas Ukraine burns through every year—it is a profligate user of energy—would be priced at just $268.5 per thousand cubic metres (tcm), which for 2013’s total of 28 billion cubic metres (bcm) works out at $7.5 billion. Since February’s revolution ousted Mr Yanukovych, gas has become a stick, not a carrot. On April 1st Alexei Miller, the chief executive of Russia’s gas giant, Gazprom, said that the price of Ukraine’s gas was going up by 44%, to $385.5 per tcm.

This is ominous news for Europe. Ukraine already owes Gazprom $1.7 billion, according to Mr Miller. If Ukraine continues not to pay its bills—and without outside help, it cannot—Gazprom can cut it off. Such a dispute need not, in principle, have any effect on the gas that flows through Ukraine to other countries farther west (see map). But if Gazprom reduces the flow of gas to reflect the fact that Ukraine no longer has a right to its 28bcm, and Ukraine takes some of that gas anyway, or if Gazprom shuts down the pipelines going through...




Ready to take off again?

Thu, 02 January 2014 16:00:50 GMT

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PASS through the gates of the Bombardier plant in Querétaro and you leave the Mexico of potholed roads and blaring horns behind: welcome to a strangely serene place called North America.

In the car park neat lines of vehicles all face the same way—almost unthinkable elsewhere in Mexico. The factory is run by a woman—ditto. Enter the building where the cockpit, fuselage and tail section of Bombardier’s new eight-seat Learjet 85 business jet are being made and it looks more like a laboratory than a factory.

Technicians with face masks work behind glass in a dust-free room. Instead of metal, layers of carbon fibre cut by laser are moulded and baked in a giant oven to make a seamless fuselage (pictured). There are no pungent, oily smells, no urgent, whining drills, no soul-stirring hammering. It would be the dullest factory visit your correspondent has ever made—were it not for what it says about the future of North America.

With the exception of the wings, which are made in Northern Ireland, the Learjet 85 is a North American story. Bombardier, a Canadian firm based in Montreal, took over Learjet, an American firm, in 1990. When the Mexico-made carcass reaches...




Change management

Thu, 10 October 2013 15:00:40 GMT

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THE master of business administration is one of the success stories of our time. Since it was first offered by Harvard Business School (HBS) in 1908, the MBA’s rise has seemed unstoppable. Having conquered America, it reached Europe’s shores in 1957 when INSEAD, a French school, launched a programme. In the past couple of decades, Asia, South America and Africa have succumbed. Today, it is the second most popular postgraduate degree in America (after education).

Whereas 40 years ago, American colleges graduated similar numbers of lawyers and MBAs, nowadays nearly four times as many students pass out with a business-school master’s degree than with a law-school one (see chart). Although demand among Americans is plateauing, the slack has been taken up by emerging markets, particularly in Asia. India now has around 2,000 business schools, more than any other country. China has fewer, but their numbers are growing quickly. It has an estimated 250 MBA programmes, graduating around 30,000 students each year. This is less than half the number it will need over the next decade, according to Hao Hongrui of DHD, a consultancy.

Yet for all its success, these are demanding...




Which MBA?, 2013

Thu, 10 October 2013 15:00:39 GMT

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CHICAGO UNIVERSITY’S Booth School of Business retains first place in The Economist's annual ranking of full-time MBA programmes. The school has taken top spot in three of the last four years. Chicago’s career-placement statistics are particularly impressive, with graduates getting jobs in a wide range of industries and earning an average basic salary of $115,000, a 66% increase on their pre-MBA salary. Students, meanwhile, give stellar marks for the education they receive, the quality of their classmates and the school’s careers service. American programmes occupy the first four places and account for 16 of the top 25 schools.

The leading European school is IESE in Spain, which, despite a tough domestic economy, still manages to place many of its students in high-flying jobs, mostly abroad. Queensland is the best-ranked school from outside these regions. The rise of Hong Kong University, the top Asian school, has been precipitous. It breaks into the top 25 for the first time because of improving salary statistics and the fact that its students profess such delight with the programme.

This is the 11th time The Economist has published its ranking. Each year, we...




Ground truths

Thu, 12 September 2013 16:46:00 GMT

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ON SYRIA’S 360km-long border with Jordan, rebel fighters are not waiting for anyone else to come and clobber Bashar Assad’s regime; they are resolved to do it themselves. They claim to control 100km (60 miles) of the frontier’s more fertile western segment, with forces reaching up to 40km north towards Damascus. On September 11th, Mr Assad’s birthday, reports suggested a significant new advance. At the start of what may prove the biggest battle yet in this region, rebel sources claimed that a force of some 8,000 fighters had captured the northern approaches to the city of Deraa. If so, they have encircled a large government garrison that has been pounding rebel-held villages with artillery.

If Deraa were to fall, it would be a signal victory. It is a more important strategic prize than the town of Qusayr on the Lebanese border, the fall of which to Mr Assad’s army in May was heralded as turning the tide in his favour. Along with a heavily fortified border-post farther south, it represents the government’s last stronghold in Syria’s south-west corner. This offensive is the fruit of months of preparation, and the result of quietly intensified efforts by the rebels’ main...




Going another round

Thu, 12 September 2013 11:18:49 GMT

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“AMERICA is not the world’s policeman—terrible things happen across the globe, and it is beyond...




Flight paths for a cloudy future

Wed, 27 March 2013 16:07:10 GMT

(image) Feel the economic benefit

WHEN an Avro Lancastrian—a modified bomber with no gun turrets and a small amount of room for passengers—became the first scheduled flight to take off from Heathrow in 1946, the airport’s passenger terminal was just a row of tents. But it had plenty of room to grow. Within a year, it saw 63,000 passengers. Within five years that had grown to 796,000.

Now, with five terminal buildings (one closed at present) and 193 destinations, Heathrow welcomes 70m passengers a year. It is the world’s third-busiest airport; only Atlanta and Beijing see more people come and go. And room to grow is hard to find. Limits on how, and at what time of day, its two runways can be used mean they can take no more flights. The London suburbs press up against the perimeter.

The company that owns Heathrow has long wanted to build a third runway to the north of the existing two. The most ambitious form of such a plan, the company says, would increase the number of flights the airport could handle by 46%. But the idea is fiercely opposed by many who live near the airport. Under European Union (EU) law, big airports have to draw up action plans to...




The mixed fortunes of a fuel

Thu, 03 January 2013 16:05:39 GMT

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IN A high-tech world, dirty black lumps of coal might seem like an anachronism. Yet coal is far from a thing of the past. However whizzy your iPad, your wall-mounted television or your electric car, the chances are that it is powered by the stuff. Coal-fired power stations provide two-fifths of the world’s electricity, and there are ever more of them. In the doubling of the world’s electricity production over the past decade, two-thirds of the increase came from coal. At these rates, coal will vie with oil as the world’s largest source of primary energy within five years. As recently as 2001, it was not much more than half as important as oil (see chart).

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The main factor has been the unslakable thirst for energy in China, which in 2011 overtook America as the world’s biggest electricity producer. In 2001, according to the International Energy Agency, a club of rich nations, Chinese coal demand was about 600m tonnes of oil equivalent (25 exajoules). By 2011 China’s coal demand had tripled—a...




The unwelcome renaissance

Thu, 03 January 2013 16:05:39 GMT

(image) But wait—there’s more…

WHILE coal production and use plummet in America, in Europe “we have some kind of golden age of coal,” says Anne-Sophie Corbeau of the International Energy Agency. The amount of electricity generated from coal is rising at annualised rates of as much as 50% in some European countries. Since coal is by the far the most polluting source of electricity, with more greenhouse gas produced per kilowatt hour than any other fossil fuel, this is making a mockery of European environmental aspirations. How did it happen?

The story starts, again, with American shale gas. As American utilities shifted into gas, American coal miners had to look for new markets. They were doing so at a time when slowing Chinese demand was pushing down world coal prices, which fell by a third between August 2011 and August 2012 and is below $100 a tonne. These prices make European utilities willing buyers. European purchases of American coal rose by a third in the first six months of 2012.

Compared with the rock-bottom price of gas in America, coal is not all that cheap. But it is a bargain compared with the price of gas in Europe. Although gas can be...




No longer the place to be

Thu, 04 October 2012 15:05:52 GMT

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NOT so long ago business students flocked to Europe. Compared with their American counterparts, European schools were cheaper and their student bodies more diverse, both attractive features—and the salaries of European MBA graduates were often higher, too. Some of these attractions remain undimmed. But they are no longer enough to bring in the punters. Data from The Economist’s latest ranking of full-time MBA programmes (see article) suggest the appeal of an Old World business education has gone into a rapid decline.

The intakes of many of Europe’s flagship full-time MBA programmes have plummeted (see chart). Enrolment on Aston Business School’s MBA, for example, more than halved in the past academic year, falling from 129 students to 59. By far the biggest drop was among Asian students. HEC School of Management in Paris enrolled 181 full-time MBAs in the past academic year compared with 233 the previous one. It is a similar story across Europe. Some smaller schools have been desperately scrabbling around to find the 30 students that some MBA rankings see as the minimum for a course...




Losing the blues

Thu, 04 October 2012 15:05:52 GMT

DESPITE its reputation as a finance powerhouse, and a churner-out of super-quants, the return of Chicago’s Booth School of Business to the top of The Economist’s full-time MBA rankings is proof that it is a well-rounded school. Our ranking measures the things that MBA students themselves say are important. Not surprisingly, for a degree that can cost more than $100,000, the extent to which a programme opens new career opportunities comes highest on their list. In this regard, Chicago has few peers. Its graduates find employment in the widest range of industries; its students gushed about its careers service.  Chicago has topped the ranking for two of the past three years, briefly losing its crown to Dartmouth’s Tuck school last year. North America and Europe account for all the schools in the top 25. The highest-placed school from outside those regions is the University of Queensland, at 27th. The highest-placed Asian school is the University of Hong Kong, which ranks 41st. The Economist ranks schools on four measures: their ability to open new career opportunities; personal development and educational experience; the salary increase graduates can expect; and the potential to network. Data are collected from schools and from a student questionnaire. The full ranking and methodology can be found here....




The future is black

Thu, 19 January 2012 16:07:07 GMT

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STAB a finger at the middle of a map of India and you will hit Nagpur. Some 20 miles (32 kilometres) north-west of the city is a sloping tunnel bored into the rock. Ride two miles down into the gloom, hanging from a wire, and after a torch-lit hike past underground streams and conveyor belts you arrive at a black wall. Sweating men are rigging it with tubes of explosives and wire detonators. Soon they will blast it apart, and down should tumble tonnes of India's most important commodity: coal.

In coal India has something as abundant as people. As more Indians enjoy the trappings of middle-class life and the country industrialises, demand for coal-fired electricity will continue to rise smartly, roughly in line with economic growth. India may not have much oil or gas to call its own but it has the world's fifth-largest coal reserves. And it has successfully raised a mountain of the other raw material needed to turn carbon into sparks: capital. Some $130 billion has been ploughed into the power industry in the past five years. Of that, $60 billion or so has come from the private sector—probably the largest-ever private-sector investment India has seen.

Possessing...




Counting the cost of calamities

Thu, 12 January 2012 16:04:23 GMT

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THE world's industrial supply chains were only just recovering from Japan's earthquake and tsunami in March when a natural disaster severed them again in October. An unusually heavy monsoon season swelled rivers and overwhelmed reservoirs in northern Thailand. The floodwaters eventually reached Bangkok, causing a political crisis as residents fought over whose neighbourhoods would flood. But before that the economic toll was being felt farther north in Ayutthaya province, a manufacturing hub. The waters overwhelmed the six-metre-high dykes around the Rojana industrial estate, one of several such parks that host local- and foreign-owned factories.

Honda's workers rescued newly built cars by driving them to nearby bridges and hills. The factory ended up under two metres of water and is still closed. Honda was hardly alone: the industrial estates that radiate out from Bangkok are home to many links in the world's automotive and technology supply chains. Western Digital, a maker of computer disk drives which has 60% of its production in Thailand, had two of its factories closed by the floods, sending the global price of drives soaring.

Thailand is no stranger...