Discussion article for November 20th

Ikea 'deeply regrets' use of forced labour

Ikea has said it "deeply regrets" the use of political prisoners as forced labour in communist East Germany by some of its suppliers.

The Swedish furniture giant asked accountants Ernst & Young to look into the matter, dating back 25-30 years.

The study indicates that political and criminal prisoners were involved in manufacturing for Ikea suppliers.

It also said that Ikea representatives at the time knew that political prisoners were possibly used.

In the past Ikea had given contracts to the East German (GDR) government.

Former political prisoners of the Stasi, the feared secret police, said they worked on the furniture, leading to Ikea commissioning the Ernst & Young report in May this year.

Those former prisoners may now expect compensation.

Rainer Wagner, chairman of the victims' group UOKG, has previously said that Ikea was just one of many companies that benefited from the use of forced prison labour in the former GDR from the 1960s to 1980s.

The group is campaigning for compensation for many former prisoners, whom they say carry psychological and physical scars from the labour they were forced to do.

"Ikea has taken the lead on this, for which we are very grateful," Mr Wagner told a news conference in Berlin, where the findings of the report were presented.

Jeanette Skjelmose, Ikea's sustainability manager, said: "We deeply regret that this could happen. Using political prisoners in production has never been accepted within the Ikea Group."

She told the BBC that Ikea had met UOKG and had agreed "to financially support their investigation to go further and look at the whereabouts and situation for political prisoners in general in Eastern Germany".

Reduced risk

The company said that although it took steps to try to ensure that prisoners were not used in production, "it is now clear that these measures were not effective enough".

Ms Skjelmose added that Ikea now had one of the most rigorous codes of conduct for suppliers and this, together with close co-operation with suppliers and external inspections, effectively reduced the risk of something similar happening again.

She said the company carried out more than 1,000 audits every year to make sure suppliers were complying with its code of conduct.

Ernst & Young looked at 20,000 pages of documents from Ikea's internal records and 80,000 archived items from German federal and state archives.

They interviewed about 90 people, both current and former Ikea employees and witnesses from the former GDR.

"Ikea had contracts with GDR Enterprises to produce their furniture here," said Dr Hubertus Knabe, director of the Stasi Prison Memorial, a former prison that has been turned into a museum.

"They didn't ask who were producing their furniture and under what kind of conditions," he said prior to the report being published.

"In each case you are responsible [for] with whom you are dealing and if you are dealing with dictatorship, if you don't have a look under what kind of conditions your furniture is produced, then you are responsible for that." 

http://www.bbc.co.uk/news/business-20356945?print=true

Discussion article for November 20th

Who will dictate Europe's future?

Which country holds the key to the euro's fate? Which of the 17 members will turn out to be the "pivot state" - the country around which the future of the eurozone will turn?

I spent most of last weekend thinking about the future of Europe with economists, politicians and senior policy makers at a two-day seminar organised by the Centre for European Reform. (I know, I get all the fun.)

One way or another, this question kept on coming up - maybe because it's a useful way to think about the different paths which the euro could take from here.

Two years ago, you might have said Greece was the pivot state. Policy makers were convinced that a Greek exit from the euro would be the end of the whole thing. The effort to save the euro boiled down to a massive effort to keep Greece in.

Not any more. I don't speak to many City folk or European policy makers who are confident that Greece can stay in the single currency. But I would say a majority are fairly convinced that the euro will survive - even if some of them wish it were not so.

Ask the same question now, you might get "Spain" as the answer. The new confidence around the euro stems largely from the ECB's commitment to Outright Monetary Transactions (OMT) - to acting as a backstop for countries in the markets by buying their government debt. Spain is the country that programme was designed to help. So how and when it gets that help might well determine how this stage of the rescue strategy works out.

Longer term, though, you have to wonder whether we will continue to be quite so focussed on Spain. After all, it's not Spain that is responsible for 57% of the sovereign debt of the troubled eurozone economies - it's Italy. And come the spring, Italy will be looking for a new prime minister.

In their punchy new book, Democrisis, David Roche and Bob McKee say Italy is the "circuit-breaker" that could make a lot of the crisis go away: "Italy represents more than half of every form of measurable economic contagion of the eurozone sovereign debt crisis... If the markets believe Italy is 'saveable', a virtuous outcome is possible and contagion will go into reverse."

That makes Italy sound very much like the pivot state: the country whose future could dictate everyone else's. The fact that an Italian now runs the European Central Bank is the icing on the cake.

You might ask where Germany fits in all this. After all, we're used to thinking Germany holds the euro's future in its hands. But the notion of a pivot state goes beyond sheer power, or economic heft - the pivot state isn't necessarily or even usually the biggest country. Rather, it's the fulcrum that helps to tip history one direction, or another.

There is one large nation that I hear investors and policy makers talk about more and more as the pivotal state of Europe - but it's not Germany. It's France.

It's still possible that events in Spain or Italy will determine whether the euro survives. But if it does last, France is most likely to determine the kind of eurozone it is, and whether Germany and its people feel happy to play along.

Almost without anyone noticing, France has become an even more state-dominated economy than it was 30 years ago, with government spending of nearly 60% of GDP and a tendency to raise taxes first, and talk about spending cuts a lot later.

Many in France - including on the right - think that combination is sustainable, thanks to French companies' world-beating manufacturers. In some key sectors, they are truly second to none. France also has much better demographics, looking ahead, than either Germany or Italy.

But Chancellor Merkel does not take such a sanguine view. And nor do many international investors.

That is why market watchers and not a few German officials were paying very close attention to President Hollande's big press conference last Tuesday. They want to know whether he can combine concrete economic reform with his call for less austerity. If he does not, then Germany knows that the harsh budget arithmetic in the new Stability and Growth Pact will not add up even for France - let alone the likes of Spain.

For all these reasons, the socialist president of France may well be the European politician who has the most say in dictating the future of the euro - especially after next year's German election.

To be clear, I think the euro will probably survive. But history may judge that it was President Hollande who decided, in 2013, whether Europe was going to have a squidgy, Latin kind of monetary union - or the austere Germanic one described in the new fiscal treaty. 

http://www.bbc.co.uk/news/business-20354081?print=true

Discussion article for 20th of November

Google Has Officially Eaten the Newspaper Industry

By Will Oremus

 | 

Posted Monday, Nov. 12, 2012, at 2:31 PM ET

38

In the first six months of 2012, Google raked in more ad revenue than U.S. print newspapers and magazines combined.

Statista / Creative Commons

Five years ago, I sat in an auditorium at Stanford University and listened to Marissa Mayer explain how much Google cared about the financial fortunes of the newspaper industry. Here's an excerpt from the Stanford News Service report about the panel discussion, in which Mayer, then Google's director of search and user experience, joined old-media bigwigs like the New York Times' Bill Keller to ruminate on the future of journalism:

Mayer, as the lone panelist from a purely web-based company, spoke of depending on trusted content providers like those seated beside her and of having a stake in seeing their news organizations prosper financially so reporters and editors can continue to be paid to produce quality stories. ... "For us, it's really about partnering with content providers and ultimately finding distribution and monetization channels for them."

The newspaper industry was willing to play along, if only for lack of a better idea. Gary Pruitt, then the CEO of McClatchy Newspapers and now CEO of the Associated Press, said, "We take comfort from Charles Darwin's observation that it's not the strongest species that survives, nor the most intelligent, but the ones most responsive to change. We just need to be adaptable."

Flash forward half a decade, and it turns out that newspapers weren't the strongest, the most intelligent, or the most adaptable. They've continued to churn out the same content while watching their advertisers steadily flee for sites like Craigslist, Yahoo, the Huffington Post/AOL, Facebook, and yes, Google. Some European papers today are belatedly trying to band together to prevent Google from displaying their headlines without paying royalties.* There's no guarantee that such a scheme would have worked even in 2007, given the Internet ethos that information wants to be free. But it might have had a better chance then than today.

The chart above, from Statista's Felix Richter, plots Google's digital advertising revenue against the print advertising revenue of all U.S. newspapers and magazines. If Google and content providers are indeed "partners," it's pretty clear that one partner is getting a lot more out of the deal than the other. And as for that stake Google had in helping newspapers monetize online? Well, The Guardian's Roy Greenslade estimates that Google's total revenue also now exceeds that of the entire U.S. newspaper industry even when you count digital ads.

If Google did have a stake in the newspaper industry's success, now might be a good time to go ahead and pull it out. The blood's probably already dry.

*Correction, Nov. 13: This post originally stated that European papers are trying to prevent Google News from aggregating their headlines. In fact, they want compensation for headlines and links that appear in non-news search results, as well.