Talking points
- Pomp and ceremony in Beijing, violence in Hong Kong, for China's 70th
- Brussels and Dublin gave Boris' Brexit plan (ultimatum) a hard pass
- Donald Trump raged against the Democrats and alleged spies
- A German case was opened for VW's 'diesel-gate' scandal
- Bloody protests, with 30 dead so far, spiralled out of control in Iraq
- Saudi Arabia suffered a humiliating loss to Houthi fighters on home soil
- A judge ruled in Harvard's favour in the admissions discrimination lawsuit
- Uganda banned red berets favoured by opposition figure Bobi Wine
- Singapore's 'fake news' law came into effect to the chagrin of activists
- Facebook received another battering from European Union courts
Deep Dive
CEOs getting booted, stocks acting like frogs in socks, and trade wars brewing. At the risk of being too blunt: the economy looks cooked. The only thing is we don't know is whether it's medium-rare or well-done already.
Stocks rocked
Global equity markets bucked wildly this week, spurred by gloomy factory data out of the United States. The Purchasing Managers' Index (PMI) dropped to 47.8% – it's lowest level since early 2009, signalling a contraction in manufacturing. Economists and investors are now waiting with chewed fingernails to see whether the sombre manufacturing results presage a turndown in consumer markets. Unfortunately for them, there is already some evidence that this might be the case: both Ford and General Motors have warned of thinning margins in their latest quarterly results – results that are mirrored by automakers across the Pacific.
And since we live in an era where butterflies' flapping in Madagascar may well cause hurricanes in East Asia, Asian indexes copped 2% blows mid-week, and the Australian Stock Exchange (ASX) dropped by 3.5% over 48 hours. The Japanese are wary of American tariffs against the European Union (more on that later), the Australians are wary of China's factory gauge, and the Americans are wary of, well, everything. So all of the above sank as one bit of bad news begat another.
Can a recession in the manufacturing sector be curtailed to that industry alone? If Germany is the case study then the answer is a resounding no. The industrial turndown there has now measurably dragged down the services sector too. Those who make their crust divining the future from market tea leaves are in furious disagreement over whether all this means a global recession is on the horizon. Regardless of their prognostications, data from the bond markets reveal unmistakeable jitters; money is flowing, but only into the safest of safe bonds. A rally late in the week did little to settle nerves. The U.S.-China trade war isn't going anywhere, and Washington is set to open a new Western front against the EU. A World Trade Organisation ruling that European aerospace giant Airbus was being unfairly subsidised has triggered punitive tariffs from the Yanks. And all the while central bankers are slashing interest rates – often into unheralded negative territory – but it's becoming clearer by the day that monetary policy alone isn't going to stave off a downturn.
CEOs rolled
There are several places to look for a coming storm in the global economy. The unemployment and underemployment levels. The long- and short-term yield curve. The number of foreclosure signs on front lawns. We might tentatively add another to this list – the turnover of Chief Executive Officers. To put it bluntly, companies don't usually turf their bosses in the fat years. But last year they did – PwC estimated that a whopping 18% of top jobs were vacated in 2018. And even in just the last few weeks a good number of CEOs have found themselves facing pink slips and packing boxes.
The first of these, which admittedly wasn't this week but we've included for reasons that will soon be apparent, was Adam Neumann of WeWork fame/infamy . The messianic weed-smoking uber-landlord stepped down from the "tech" start-up he founded as its IPO prospects nosedived late last month. But WeWork is just one of many Silicon Valley unicorns that have been disappointing in 2019. The ride-sharing giants Uber and Lyft both posted underwhelming results after going public, as did the fitness cycling phenomenon Peloton. It appears that the market is slowly wising up to over-hyped and over-subsidised unicorns with questionable profit plans.
If WeWork was the office real-estate disruptor that became an unprofitable office real-estate leasor, then Juul is the tobacco industry disruptor that became part of the tobacco industry. By far the largest American vape-maker, Juul shot to power with a successful marketing campaign (cough cough) that only a liar or a lawyer could argue wasn't aimed at children. But the health authorities (and parents) eventually caught up with them and Juul's future is now looking quite hazy. CEO Kevin Burns is now ex-CEO Kevin Burns – replaced by none other than a former tobacco industry executive.
There was one other major departure this week but this one wasn't under duress. British grocery giant Tesco announced this week that CEO Ken Murphy was departing having completed a successful turnaround of the company. In recent years the old faithful grocer has been looking a little worse for wear, buffeted by the national economic woes of Brexit and fierce competition from the budget German raiders Aldi and Lidl. Murphy came on board a good five years ago – the first CEO from outside the company – and swiftly sold off non-core parts of the business. He doubled down on the local market with obvious success; he leaves having reported that pre-tax profit is up 6.7% on the previous year. Good for you Ken.
Worldlywise
In India, the absence of three things
On the 150th anniversary of Mahatma Gandhi's birth, Indian Prime Minister Narendra Modi announced that the rural areas of his vast and populous nation are now 100% free of open defecation . One of Modi's key campaign promises in 2014 was to bring the number of people who did not have access to latrines or toilets from 550 million down to 0. While we applaud this program – the positive benefits of toilet access are well documented – it must be noted that not everyone is buying the claim .
Modi also used the same speech to zero-in on another ubiquitous part of Indian life that he wishes to see consigned to the dustbin of history: single-use plastics . He said, "hygiene, protection of environment and protection of life were of keen interest to Gandhi, plastic is dangerous to all these three goals". While he stopped short of announcing a total ban, the PM wants to work towards the goal of eliminating their use by 2022. Another laudable project.
And last but not least on Modi's wish-list? Onions. No, really. Monsoonal rains have wiped out vast supplies of this most-critical ingredient . As a result, the price of a kilo of onions has soared 200%, putting them well out of reach for the country's poorest citizens. Modi is well aware of the need to get onions back into kitchens – his BJP party's 1998 loss in New Delhi was partly attributed to prohibitive onion prices. Onions are to Indian cuisine what cricket is to Indian sport.
Jokowi unleashed
The wave of support that returned Joko Widodo to Indonesia's top job has crested. Barely six months have passed since he romped home – the swearing-in ceremony is slated for October 20 – but he has already revealed an unpopular and sharp change of tack. An early warning sign was the proposal (which still may pass) to defang an effective anti-corruption body. But that was a mere entree for a package of sweeping reforms targeting everything from the corporate tax scheme to the criminal code. Indonesia's presidents are limited to two five-year terms and with no elections left to win Jokowi is off the proverbial leash. To quote the man himself, "I have nothing to lose."
The president has gone to great lengths to draw attention to the necessity of making the Indonesian economy more competitive. Loosened employment laws would ostensibly attract greater foreign investment at a time of great economic uncertainty in the region (see: Trump's trade war). But the reformist agenda also shoves its way into the criminal code, with surprisingly harsh restrictions of gay rights, free speech and a frankly ludicrous ban on sex outside of marriage. Some of this appears to be a sop to his religious conservative running mate, Ma'ruf Amin. The president's promise to heal the lingering wounds of 1965-66 (when perhaps one million communists, socialists and ethnically Chinese Indonesians were slaughtered) has been rubbished by new laws criminalising the expression of communist ideology.
Several weeks of destructive protests should leave you with no doubts about the popularity of these changes. Thousands of students marched last week against the new laws (a worrying sign for the government as Indonesian universities have historically been the fulcrum of political upheaval). Thousands more workers this week. But Jokowi has given no sign that he will be deterred.
The Best of Times
Click the link
A bloody land grab during Partition. A fortune squirrelled away in London. An ageing prince, and the legal battle to prise it from the grasp of a sovereign nation. This story has it all , and yes, we are happy to write the screenplay if any producers are reading this.
The right to repair
Fridges gradually stop refrigerating, washing machines tumble with ever-more threatening clunks, and dishwashers just won't start. White goods fail over time, which is only natural. But all too often they end up at the rubbish dump, rather than the repair shop. A new European Union law aims to curtail this distressing trend. The 'eco-design' legislation requires white goods manufacturers to make spare parts readily available to consumers in need. Great news.
The Worst of Times
When the river runs dry
When discussing ground-water over-extraction, the plight of Indian farmers comes to mind. Unquenchable bore wells are sunk lower and lower into the water table until they cannot feasibly descend any further. Meanwhile, towns and communities run dry. And now, another less-explored risk of pumping too much ground water has been laid bare – the impact it has on s urface river levels . A new study shows that by the middle of this century, rivers themselves will be at risk as the ground water flows that supplement them disappear.
African swine fever
New figures show that by year's end more than half of the pigs in China will be dead. In the year since the disease emerged in China, it has already spread to more than 50 countries – countries that collectively account for 75% of the world's total pork production. Hundreds of millions of pigs have already been dumped in deep graves – roughly one quarter of the global pig population. It's taken a virus with no vaccine to reveal the scale and vulnerability of factory farming.
Weekend Reading
Quote of the week
"We live for gravity biking here. It's a way of life for anyone who lives up in the communes."
– Estiven Hurtado is one of the many natives of Medellín's poor hilltop neighbourhoods who have created a new death-defying sport. Read their stories .
Headline of the week
More than 430 Nigels gather in Worcestershire pub to 'celebrate Nigelness' amid fears the name will die out. – Evening Standard
Special mention
The staff of whichever consulting company (our money is on McKinsey) received a request to provide a cost estimate for Trump's alligator-filled moat . That would surely have been a truly dystopian – and quite mad – project to work on. Presumably the next project coming down the pipeline from the White House will be a cost estimate for reanimating dinosaurs to eat immigrants.
Some choice long-reads
- Businessweek tastes the stick of butter that conquered America
- Financial Times finds that AI is blind to the colour of your collar
- Al Jazeera explores the psychology of false confessions
EDITOR'S NOTE: They arrive on the promise of work. They hand over their passports. They live in cramped, crowded conditions. They work 10 hours a day in 45-degree heat. They die of heat exhaustion and dehydration – hundreds every year. They are erecting the stadiums in which the world's greatest sporting spectacle will unfold, and the stands on which the world's monied tourists will savour it.
When you are enjoying the spectacle of the 2022 FIFA World Cup in Doha, remember the thousands of bodies on which these modern-day pyramids will have risen.
Tom Wharton
