Infoman

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  Infoman

  Revealed The $1bn Abramovich art collection

  Guardian 23/9/2023

  At first glance, the red-brick facade near a line of railway arches resembles an ordinary south London warehouse. A more careful observer may notice spiked railings, a steel door and imposing metal gates.

  On a cold February day in 2014, a precious cargo left this small fortress: a spectacular nude by the painter Lucian Freud. Benefits Supervisor Sleeping, a study of one of his bestknown models asleep on a well-worn sofa, the folds of her flesh filling the canvas, is recognised as a modern masterpiece.

  Bought at a New York auction in 2008 by the oil and gas oligarch Roman Abramovich for $33.6m, it was emerging from storage, to be displayed in his mansion at Kensington Palace Gardens, a few miles away.

  Most art lovers could only dream of owning such a painting. But for Abramovich, it was a mere fragment of a collection that the billionaire former owner of Chelsea football club could order up for private enjoyment.

  The Guardian can reveal that during an extraordinary spending spree spanning nearly a decade, Abramovich and his then wife, the US-based collector Dasha Zhukova, acquired what experts believe is one of the most significant private collections of modern art ever assembled, a trove of more than 300 works whose worth was estimated by the oligarch’s own assessors at nearly $1bn.

  “You could fill a museum with it; this is a stupendous collection,” said Andrew Renton, professor of curating at Goldsmiths, University of London. “It shows very good taste. If you have enough money, you can buy a piece of history.”

  The details have come to light thanks to the Oligarch files, a leak from the Cyprus-based offshore financial services provider MeritServus, analysed in collaboration with international media partners. MeritServus was placed under sanctions by the UK government in April after the Guardian reported on its work for oligarchs.

  The art world has long known Abramovich and Zhukova as big spenders. But until now, public awareness of what they collected was limited.

  The files reveal a collection that catalogues the history of modern art, featuring pieces by Monet, Mondrian, Matisse and Picasso, and Russian modernists such as Natalia Goncharova and Vera Rockline.

  Striking contemporary possessions include paintings by Freud, Francis Bacon, Paula Rego, Frank Auerbach and David Hockney.

  In the days before Russia invaded Ukraine, the files appear to show, Abramovich’s interest in the trust that ultimately owned the pieces was reduced, leaving Zhukova as the majority beneficiary, courtesy of a deed signed by the trustees.

  The deed did not require Zhukova’s knowledge or consent and is understood to have derived from the terms of her separation from Abramovich in 2016. It took effect in February 2022, just days after the UK government warned Kremlin-friendly oligarchs that their assets could be seized.

  For years many of the pieces were housed near the banks of the Thames in Vauxhall. Now, with Putin’s war entering its 20th month and Abramovich under sanctions in the UK and the EU, a jewel of the modern world’s cultural heritage remains in limbo.

  In autumn 1930, the avant-garde artist Kazimir Malevich was arrested

  and threatened with execution. Born in Kyiv when it was still part of the Russian empire, Malevich was a pioneer of abstract art, the figurehead of the Suprematist movement. Under Stalin, Malevich fell victim to a vicious campaign against modernist art, condemned as bourgeois. After his death, the fate of his works played out, first hidden from the Nazis, then transported around the world. Heirs of the painter fought battles for the return of his canvases.

  One piece, Suprematist Composition (circa 1919-20) was put up for auction in 2000, after the Museum of Modern Art in New York was forced to hand it back. The buyer was never disclosed. But by 2013 this emblem of Russian art and political history was in the hands of Abramovich.

  The work’s more recent travels are revealed by invoices for transportation to and from the warehouses of a British art storage specialist called Martinspeed, which has since been renamed Crozier Fine Art. “Crozier is a long-established company with global operations. It is our policy and practice to comply with the laws in the countries where we do business,” a spokesperson said.

  Like Freud’s canvas, the Malevich crisscrossed the Thames to and from the oligarch’s home, and in 2014, was lent to Tate Modern for a retrospective. The label next to the canvas, an arrangement of rectangles that for Malevich symbolised the building of a new reality, simply stated “private collection”, a common practice when lenders wish to remain anonymous.

  Abramovich could enjoy his collection not just in London but on his yacht and at his 1920s mansion on the Côte d’Azur, once a retreat for Edward VIII and Wallis Simpson.

  Documents reviewed by the Guardian suggest that, as of 2018, Abramovich had amassed 367 pieces, valued at $963m.

  The staggering collection could only have helped elevate Abramovich and Zhukova to the pinnacle of the international art scene. In June 2008, the couple hosted the official launch of the Garage Centre for Contemporary Culture in Moscow. The artist Jeff Koons was among the guests of honour, while Amy Winehouse gave a private concert.

  The daughter of a Moscow oil trader, Zhukova’s parents separated when she was a child and she grew up in the US. Today she is also a trustee of the Los Angeles County Museum of Art and the Metropolitan Museum of Art. Unlike her former husband, from whom she separated in 2016, Zhukova – who has now remarried – is a US citizen and is not subject to sanctions. She has also condemned Russia’s “acts of war” in Ukraine. Her two children with Abramovich were born in America, and she is raising her family there. She also retains ties to her ex-husband through the collection, documents suggest.

  The files, which run until March 2022, show that a company called Seline-Invest, originally incorporated in the British Virgin Islands and redomiciled in 2017 to Jersey, owned the pieces. It acquired them in 2017 and 2018 from the Harmony Trust, of which Abramovich was the sole beneficiary. Seline-Invest was in turn controlled by a Cyprus-based trust, the Ermis Trust Settlement, initially set up in 2010 for the sole benefit of Abramovich. In January 2021, according to the documents, the trustees and protectors of the trust – a mixture of Abramovich’s employees and directors of MeritServus – made Zhukova an “additional” beneficiary, with their children becoming beneficiaries upon his death.

  At that point, the former couple each held a 50% beneficial interest. But on 4 February 2022, three weeks before the invasion of Ukraine, the documents indicate trustees and protectors made a change, one that experts believe may have been prompted by the looming threat of sanctions.

  Via a “deed of amendment” Zhukova became “irrevocably entitled to 51%” of the trust’s distributions, the documents state. Abramovich was relegated to a minority beneficiary with 49%. A subsequent deed, from late February, barred Abramovich from increasing his interest.

  On 10 March, Abramovich was hit with sanctions by the UK, leading to the freezing of his assets, including Chelsea football club. The EU placed him under sanctions soon after. He is appealing against the decision, with his lawyers saying he was targeted for his prominence, not because he met the criteria. He has not been under US sanctions.

  Under EU, UK and US rules, any asset more than 50% owned by an individual under sanctions can be frozen. “The 50% rule works slightly differently in different jurisdictions,” said Tom Keatinge, the director of the Centre for Financial Crime and Security Studies. “But under any version of the rules, it would have been attractive to reduce the interest of a trust beneficiary who was likely to be sanctioned. A lot of this was happening in the run-up to the war.” Abramovich declined to comment. There is no suggestion that Zhukova has ever taken any steps designed to undermine sanctions, including in connection with the collection. The art was owned by the trust, rather than by her, and she could not make decisions on its behalf. The Guardian understands that no pieces from the collection have been sold or disposed of since the change of beneficial interest in February last year. She declined to comment on the record.

  When Leonardo da Vinci’s Salvator Mundi was sold at auction in 2017 for $450m, a new world record, at the centre of the deal was the renowned art expert Sanford Heller, who had advised the seller, another Russian multibillionaire named Dmitry Rybolovlev.

  Heller is one of the art world’s great fixers, arranging loans to exhibitions and guiding the wealthiest collectors towards pieces that will burnish their connoisseur credentials.

  In 2011, the documents show, Heller’s firm was hired by Abramovich’s Cyprus-based Harmony Trust on a $500,000-a-year retainer, starting a relationship that would endure for six years.

  A contract between the trust and Heller Group, found in the files, states the firm would provide “recommendations for the purchase and sale of art” and even had the right to act for the trust at auction.

  Even before Heller came on board, Abramovich – with Zhukova by his side – was willing to spend big, splashing more than $100m in a single weekend in 2008.

  The day after acquiring Benefits Supervisor Sleeping, they bought Bacon’s Triptych at Sotheby’s for $86m, a record for a postwar work. And with Heller’s expertise on call, the spending continued. At least 10 pieces were either bought for, or valued at, more than $25m.

  Now that war has returned to Europe, a question mark hangs over the collection. The last public loan appears to have been in 2021, when two Paula Regos were shown at her Tate Britain retrospective.

  In October 2022, when the National Gallery opened the first major Lucian Freud exhibition in 10 years, pieces from the Abramovich-Zhukova collection were absent. The collection is not subject to an asset freezing order, meaning in theory works could be bought, sold and lent. But Abramovich’s sanctions meant a loan agreement with the Ermis Trust could not go ahead, the Guardian understands.

  “It is regrettable that the trust that holds these works seems unable to lend them,” said the author and art market expert Georgina Adam. “These sanctions were imposed for good reason. Now, the consequence of Mr Abramovich’s investment in art is that the public are deprived of the opportunity to enjoy some of the greatest modern and contemporary works.”

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  2023/09/24
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  Infoman

  Learning from the mistakes of industrial policies past

  Many of the efforts to promote particular industries or implement trade barriers proved to be costly failures.

  Washington Post 23/9/2023

  The Biden administration has pursued a new and ambitious economic agenda, premised on the notion that the prevailing orthodoxy of the past few decades — specifically, the imperative to embrace free markets and free trade — was inadequate to the needs of the U.S. economy. That approach, according to the critics, gave priority to efficiency at the cost of inequality, a hollowing out of manufacturing and an overreliance on countries like China. President Biden, by contrast, has put together the largest program of public investment in the American economy in many decades, most of it designed to encourage a revival in manufacturing (specifically targeting the chip-making industry) and to transition the energy sector to renewables.

  Initial data from the Treasury Department suggests these policies have succeeded. Spending on the construction of manufacturing facilities has doubled since the end of 2021, mostly for computers, electronics and electrical goods. Nonresidential construction spending in general is up roughly 15 percent since the passage of Biden’s big infrastructure bill, and private sector spending is up by almost three times as much as public sector.

  In other words, the government’s policies and expenditures have been a catalyst for the private sector. Other advanced economies are not showing such large increases in manufacturing construction; they are happening mostly in the United States.

  These are impressive results. But the real test of these massive federal expenditures will become clear in the long run. In the short term, government spending and tax incentives create a boom, and the private sector will naturally jump in, eager not to miss out on the action. But does this create a sustainable set of companies and industries over time? What happens when the government money runs out (as it inevitably will)?

  This is where the United Auto Workers strike becomes an important test case of Bidenomics. On the one hand, autoworkers deserve raises; car companies are doing well and management (of course) has given itself hefty bonuses. But a key component of Biden’s economic plan is to make the United States a leader in the electric vehicle industry, which it sees as the future of automobiles. To help make that happen, the federal government is showering the industry with benefits — from a huge (up to $7,500) tax credit for buyers of an EV to a slew of subsidies for batteries, minerals and charging stations.

  All these supports make it possible for automakers to take on higher costs. Already, the Big Three spend far more on labor per hour than Tesla. U.S. factories pay their workers on average almost six times more than factories in Mexico and even 25 percent more than those in Japan.

  But the real challenge will come from China, which is taking the EV market by storm. Nearly two-thirds of the world’s EVS are made in China. BYD, the biggest of Chinese companies, topped Tesla this year to become the world’s No. 1 seller of EVS.

  American carmakers are shielded from Chinese competition. Donald Trump imposed a 27.5 percent tariff that American consumers must pay if they want to buy cars from China — building on protectionist policies that have meant higher costs and fewer jobs in America. But in the long run, tariffs keep American car companies in their high-cost bubble, shielded from the market. Chinese cars will soon dominate in large parts of the world, even in Europe, where tariffs are only 10 percent (so far).

  As the Wall Street Journal’s Greg Ip has pointed out, the real story of American manufacturing is that productivity has been stagnant, with output per hour having grown only an average of 0.2 percent a year since 2009, well below Taiwan’s average of 4 percent a year but also well behind Britain, Germany, South Korea, France and Italy. Productivity in the auto sector has crashed, down 32 percent from 2012 through last year, though Ip notes this probably includes pandemic-related disruptions.

  Biden’s economic team has hit many home runs. The massive increase in infrastructure spending was long overdue. Funding for research is now increasing in some areas (though it remains too low by historical standards). Helping computer chips, a critical industry, makes good sense.

  But the broader effort to revive manufacturing will be a challenge. Countries such as Japan, Germany and France have all made such efforts and yet, over the past several decades, manufacturing as a percentage of gross domestic product has declined at a steady rate in all of them. In the United States, it is down to 11 percent of GDP and about 8 percent of employment.

  Two scholars, Gary Hufbauer and Euijin Jung, studied 50 years of American industrial policy and concluded that the most successful efforts by far were those that funded basic research and development and opened foreign markets to American goods. Many of the efforts to promote particular industries or implement trade barriers proved to be costly failures. As the Biden administration implements these ambitious plans, it would do well to recall this history and make sure it is not condemned to repeat it.

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  2023/09/24
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  Infoman

  von der Leyen : Ukraine is fighting for its survival. It’s also fighting for our values.

  BY LALLY WEY­MOUTH Lally Wey­mouth is a se­nior as­so­ciate ed­i­tor at The Post.

  The Washington Post 23/9/2023

  Ursula von der Leyen, president of the European Commission, is the most powerful woman in Europe. A former German defense minister, she is one of the front-runners to become secretary general of NATO. Von der Leyen took time out of her schedule at the United Nations this week to speak to The Post’s Lally Weymouth. Excerpts have been edited for style and clarity:

  Lally Weymouth: You have done so much for Ukraine. You sent an important signal by visiting President Volodymyr Zelensky soon after Russia’s invasion in February 2022. Ursula von der Leyen:

  Indeed. Right after the start of the war, I was in Bucha. You could smell war. They showed me the mass graves. They had the body bags lined up. I could see for the first time with my own eyes the big holes in the apartment buildings the Russians had deliberately targeted with their missiles. War motivates you and strengthens your determination to support Ukraine in its fight to stay independent [and maintain] its territorial integrity.

  Do you feel that Ukraine’s future should be with the European Union?

  This war changes everything. After this war, you cannot be in between anymore. I am convinced if you look at the future that Ukraine will sooner or later be part of the European Union because it is unthinkable that Ukraine will be left between Russia and the European Union. It is impressive to see how the Ukrainians are reforming their country while fighting the war.

  Partly with your encouragement?

  Yes, of course. If you want to join the European Union, there are reforms a country must do: [It must] have a body of laws in place for anti-corruption and money laundering. These are deep structural reforms for any candidate country, which is quite a challenge. I am so impressed by the determination the Ukrainians show to join the European Union. Zelensky once told me that the only thing the soldiers at the front want to know is that their children will grow up protected in the European Union.

  The E.U. gave Ukraine candidate status in June 2022. How long will it take for Ukraine to get into the E.U.?

  It depends on when the country is ready to join. There are, of course, criteria for the judicial system, the rule of law and economic readiness. There is a whole set of criteria that needs to be fulfilled to be able to join the single market and the European Union.

  Would you guess it would be five years or quicker?

  I cannot give you any timelines. As I said, it depends on the speed of reforms.

  You have reiterated that the E.U. should expand to include Ukraine and Moldova.

  Yes. As I said, this war changed everything. But I’m convinced that the E.U. is only complete with Ukraine, Moldova and the Western Balkans. The alternative would be that they are on the other side — which is unthinkable.

  The European Union has given Ukraine substantial aid. Do you think there will be more aid packages forthcoming from the E.U.?

  Yes, for 2023, we are giving direct budget support of 18 billion euros — 1.5 billion per month. I have proposed to the council that, for the next four years, from 2024 to 2027, support for Ukraine should be 50 billion euros [about $53.3 billion]. This still has to be approved.

  How was that greeted by the member states?

  The member states are amazingly supportive of Ukraine. We know that Ukraine is fighting for its survival, but it’s also fighting for our values. The budget support we are giving them is to make sure that they can pay the basic salaries so that their government and country keep functioning, while we know their main task is to defend themselves against Russia. Then, of course, there has been a lot of member-state bilateral support with military capabilities. If you take it all together — budget support, military support, humanitarian support and refugee support — it is 77 billion euros.

  Some in the United States worry that support for Ukraine will weaken, especially in the Republican Party. Do you in Europe worry?

  The United States has been amazing, wonderful, reliable and supportive of Ukraine. I see that the support is bipartisan. There is a strong support in the Senate, the House and in the White House. I am convinced that this support will continue.

  People are worried that if the Republicans win the presidency, the support will definitely wane.

  Yes, but we also see that there is strong Republican leadership supporting Ukraine in both chambers. I am deeply convinced that we can count on them. As I said, Ukraine is fighting for our values. And if Ukraine does not win this war, what kind of a message would this send to other authoritarian regimes?

  What is your view of what is going on in Russia?

  Over the years, it has gotten more and more obvious that [Russian President Vladimir] Putin has a completely different view on Russia, Ukraine and the world. But this does not give him the right to invade Ukraine and commit war crimes.

  Do you think if Putin were to win, he would go on and invade other countries?

  With what we have experienced and seen, you can never exclude that.

  You were also behind the sanctions the E.U. imposed on Russia.

  Yes, the sanctions were a very clear message. Thanks to excellent cooperation with the White House, we had been working on sanctions for three months before the war started. Because we had done this, we were able to put heavy, biting packages of sanctions on the table in the early days of the war. This showed an impressive unity of the member states and a very determined reaction to this invasion.

  You are in your last year as European Commission president. Would you like to run again for the presidency of the commission?

  I will decide toward the end of the year.

  There are rumors that President Biden and others would like you to be the next secretary general of NATO. What do you think of these rumors?

  These are rumors. Which job would you prefer?

  From the bottom of my heart — I’m born European. My first feeling of being at home was in Europe and I think it certainly is ingrained in my memory because my parents were passionate Europeans.

  I heard you have a very good relationship with President Biden. Do you get along well?

  Oh, yes. There is a very good cooperation. He knows Europe very well. He’s a very experienced leader.

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  2023/09/24
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  Infoman

  Online beauty filters

  BY TA­TUM HUNTER

  The Washington Post 23/9/2023 When it comes to the ethics of en­hance­ment, the an­swers seem to be in the eye of the be­holder

  Sonia Skrzesinski likes getting beauty advice on Instagram, but she’s picky about her sources.

  The 17-year-old prefers tutorials from creators who share her values, she said, which in this case means showing unaltered images of their faces. Plenty of people online — even influencers who review makeup products — use camera effects that smooth their skin, plump their lips or lift the outer corners of their eyes. For Skrzesinski, the practice seems ethically slippery.

  Skrzesinski and her peers are good at spotting a filtered face, but it’s getting tougher, she said. The lip-filling, eye-snatching filters that first drew attention on Snapchat and Instagram look crude compared with today’s beauty filters, some of which use artificial intelligence to reimagine your face in real time. A retouch job that might take hours on Photoshop takes seconds with Tiktok’s Bold Glamour filter or Instagram’s Glow. Even decidedly grown-up software such as Zoom comes with beauty effects that apply digital brows or lip color.

  People say they use beauty filters like makeup or cosmetic procedures, to enhance their faces, hide insecurities or tap into “pretty privilege.” But the more advanced the filters get, the more intense the pushback. Filters and Ai-powered face-tuning promote unrealistic and Eurocentric beauty standards, critics say. Social media companies, for their part, say filters are a tool for fun and self-expression. Everyday users are caught in the middle, with young women in particular struggling to strike the socially acceptable balance between looking attractive and “being authentic.”

  “If you wake up and you’re tired and you want to look like you’re not tired, that’s one thing,” Skrzesinski said, weighing when it’s okay to alter your face. “But if you wake up and you want to look like a different person that you’ve never looked like before and change the entire structure of your face, I think that that’s when it crosses the line.”

  The first Snapchat beauty filter appeared in 2015, and since then, the technology has spread to Instagram, Tiktok and countless other camera apps. Some beauty filters overlay freckles or eyelashes that glitch if you wave your hand in front of the camera. Others, such as Tiktok’s Bold Glamour, appear to use AI to remake your face in the image of a bona fide hottie. Snapchat will now save your editing selections — such as skin smoothing — and apply them as soon as you open the camera. On the back end, easy-to-use editing apps such as Facetune or Capcut let users slim their hips or whiten their teeth with a few button taps.

  People gripe about filtered images showing up on dating apps, Linkedin profiles and everywhere in between — but it hasn’t slowed the spread of altered images. Bold Glamour has been posted 128.5 million times even as Tiktok dodges questions about the effect’s use of AI. Tiktok declined to comment on the technology that powers Bold Glamour, its development of beauty filters and its rules around filters. It also declined to share usage metrics or respond to critics’ claims.

  Instagram’s policies ban filters that explicitly reference plastic surgery, for example by superimposing surgery lines, or that alter a user’s appearance to resemble a different ethnicity, said a spokesperson for Instagram parent company Meta. Meta declined to share metrics on filter use or respond to critics’ claims.

  Snapchat’s parent company said more than 250 million people on average use filters — which it calls Lenses — every day, making for 6 billion filtered snaps. Even if a user seems to prefer beauty filters, they’ll still see a variety of filter options in the app, a spokesperson said.

  For professional online creators, filters might help nab partnerships with aspirational brands, according to Jason Sizer, director of partnerships at influencer marketing agency Shuffle Presents.

  More simply, they save creators time. Amber Todaro, a hairstylist and content creator on Long Island, sometimes uses a face-altering filter to save time putting on makeup, the 29-year-old said. The filter also helps her content look uniform, she added.

  “When I wake up, I know. If I feel like my makeup’s not looking right or the lighting’s not right, I’ ll have a filter on there to feel good, I guess,” she said.

  For some posters, the filter is part of the package. Alix Earle, a lifestyle creator who grew her Tiktok account from relative obscurity to millions of followers in the past year, has said in videos she applies the skin-smoothing Blue Eyes filter to much of her content, in part to cover acne. A creator who goes by Pinkydoll, famous for her “non-player character” live streams on Tiktok, received pushback in August for allegedly using a filter that lightened her skin color.

  Neither Earle nor Pinkydoll responded to requests for comment.

  With so many eyes watching, deciding whether to use beauty filters can be fraught for creators. Sarah Palmyra, a beauty creator on Instagram and Tiktok, said it’s impossible to please everyone. Avoid the filters, and viewers leave mean comments about your perceived imperfections. Apply the filter, and they criticize you for trying to hide your flaws.

  “At one point I had people arguing in my comment section about whether I’d had a nose job,” Palmyra said. “It really is difficult to be out here taking all the criticism. I can understand how some creators feel like they need to put a wall up.”

  ‘Unwinnable standards’

  Some critics characterize beauty filters as evidence of increasingly homogenous standards (try Googling “Instagram face”). Others position filters as a pipeline to cosmetic surgery or a risk to mental health. A 2023 report from children’s advocacy organization Common Sense Media found that 1 in 5 girls said beauty filters affect them negatively — and subjects with depressive symptoms were even more likely to identify the filters as harmful.

  “We have heard from teen girls that beauty filters on apps like Snapchat and Instagram can intensify social comparison and body image issues,” said Supreet Mann, director of research at Common Sense Media.

  For young people, however, beauty standards and beauty filters present a chicken-and-egg conundrum.

  Rachel Desilver, a high school sophomore in Virginia, uses filters sporadically. It would be silly to condemn beauty filters wholesale, she said — sometimes they help her feel more confident — but she’s careful not to depend on them. Authenticity is important to her, the 15-year-old said, but there’s a fine line between enhancing yourself and losing yourself, and she’s not always sure where it falls.

  “I don’t think people should be like, as soon as you put on makeup or as soon as you get lip fillers you’re not yourself anymore,” she said. “But it’s the ship of Theseus question: If every single part of you gets replaced, are you yourself ?”

  Renee Knake Jefferson, a law professor at the University of Houston who has studied gendered double standards in the workplace, called beauty a “double bind.” Reject it, and watch your social and professional prospects shrink. Chase it, and watch people criticize your character and question your competence.

  “No matter what choice we make, we can't win,” Jefferson said.

  Makeup and plastic surgery have long been at the center of cultural debates about how much self-enhancement or self-expression is too much. Now, beauty filters have their turn, and it’s important we don’t repeat past mistakes, said Rosanna Smith, an associate professor of marketing at the University of Illinois at Urbana- Champaign who attempts in her research to measure tricky concepts such as online authenticity. (Remember when people used to joke about going swimming on a first date to make sure their partners were still attractive without makeup? Let’s leave that rhetoric behind when it comes to beauty filters, she said.)

  Parents and teachers should talk openly with kids and teens about beauty filters, said Devorah Heitner, author of the parenting book “Growing Up in Public.” Emphasize to your teen that wanting to feel attractive is normal and that a healthy use of filters should make them feel good and not bad, she said.

  Help kids get comfortable accepting their “essential” selves while also exploring their “existential” selves — who they are is okay, and so is who they want to be. Unpack together the particular look the filters tend to encourage. And if filters start to take up too much brain space, it might be time for a social media break.

  “You’re supposed to be sexy, but chaste. You’re supposed to be beautiful, but real. Those are unwinnable standards,” Heitner said. “And once you see that it’s unwinnable, maybe you won’t want to play.”

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  2023/09/24
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  Infoman

  Ukraine and its al­lies need a new plan

  Economist (UK) 23/9/2023

  The war in Ukraine has repeatedly confounded expectations. It is now doing so again. The counter-offensive that began in June was based on the hope that Ukrainian soldiers, equipped with modern Western weapons and after training in Germany, would recapture enough territory to put their leaders in a strong position at any subsequent negotiations.

  This plan is not working (see Briefing). Despite heroic efforts and breaches of Russian defences near Robotyne, Ukraine has liberated less than 0.25% of the territory that Russia occupied in June. The 1,000km front line has barely shifted. Ukraine’s army could still make a breakthrough in the coming weeks, triggering the collapse of brittle Russian forces. But on the evidence of the past three months, it would be a mistake to bank on that.

  Asking for a ceasefire or peace talks is pointless. Vladimir Putin shows no sign of wanting to negotiate and, even if he did, could not be trusted to stick to a deal. He is waiting for the West to tire and hoping that Donald Trump is re-elected. Mr Putin needs war to underpin his domestic dictatorship; any ceasefire would simply be a pause to re-arm and get ready to attack again. If Ukrainians stop fighting, they could lose their country.

  Both Ukraine and its Western supporters are coming to realise that this will be a grinding war of attrition. President Volodymyr Zelensky visited Washington this week for talks. “I have to be ready for the long war,” he told The Economist. But unfortunately, Ukraine is not yet ready; nor are its Western partners. Both are still fixated on the counter-offensive. They need to rethink Ukraine’s military strategy and how its economy is run. Instead of aiming to “win” and then rebuild, the goal should be to ensure that Ukraine has the staying power to wage a long war—and can thrive despite it.

  The first recalibration is military. Ukraine’s soldiers are exhausted; many of its finest have been killed. Despite conscription, it lacks the manpower to sustain a permanent large-scale counter-offensive. It needs to husband resources, and to change the game. New tactics and technologies can take the fight to Russia. Ukraine’s tech-savvy entrepreneurs are ramping up drone production: Ukrainian drones recently destroyed Russian warships; its missiles seem to have damaged a big air-defence system in Crimea. Many more strikes are likely, to degrade Russia’s military infrastructure and deny its navy sanctuary in the Black Sea. Don’t expect a knockout blow. Russia has also scaled up its drone production. Still, Ukraine can hit back when Russia bombs it, and perhaps even deter some attacks.

  Alongside this offensive capability, Ukraine needs to boost its resilience. As well as heavy weaponry, it needs help with maintenance to sustain a multi-year fight: humdrum repairs, reliable supplies of artillery and training. More than anything, a long war requires better air defence. Ukraine cannot thrive if Russia blasts infrastructure and civilians with impunity, as it has for the past 18 months. Kyiv is a surprisingly vibrant city because it has effective defences against non-stop aerial attacks. The same set-up is needed for other cities, which is why squadrons of f-16s and more missile-defence systems are essential.

  An economic recalibration is needed, too. That means fewer highfalutin plans for post-war reconstruction and more attention to boosting output and capital spending now. The economy has shrunk by a third and almost half of Ukraine’s budget is paid for with Western cash. In an odd kind of wartime Dutch disease the currency, the hryvnia, has strengthened even as private investment has plunged. With around 1m people bearing arms and millions having fled from the country, workers are scarce.

  Ukraine’s economy needs to shift from relying on aid to attracting investment, even as the conflict keeps raging. From making more arms to processing more of what it grows on its farms, Ukraine has plenty of potential. The challenge is to get local and foreign firms to invest more, and to lure more Ukrainians back to the calmer parts of the country in the west.

  Better security can help. The stronger Ukraine’s air defences, the lower the risk that a new factory will be blown up. The farther Russia’s navy is pushed back, the more safely exports can flow through Ukraine’s ports on the Black Sea. But economic reforms matter, too. More must be done to curb Ukraine’s long-standing corruption, with a priority on making the judiciary clean and impartial. And more action is needed to make doing business easier, from recognising qualifications that refugees have earned abroad to offering firms war insurance.

  All this requires political will from Ukraine, but also from its friends in the West. In the long term, the best guarantee of Ukraine’s security is nato membership. Short of that, partners have promised a web of bilateral security guarantees. Equally important is what the European Union can offer: not just cash, but the prospect of membership. It is not easy to nurture a flourishing economy while being barraged with explosives—even Israel never had to face such a powerful aggressor. But Ukraine, unlike Israel, could one day be integrated into the world’s richest economic bloc. A roadmap for EU accession over, say, a decade, with clear milestones, would offer hope to Ukrainians and accelerate economic reforms, just as the same promise galvanised much of eastern Europe in the 1990s.

  A new member of the club

  For that to happen a shift in mindset is needed in Europe. It has committed as much weaponry as America and far more financial aid. Yet it needs to step up further. If Mr Trump wins in 2024, he may cut back American military assistance. Even if he loses, Europe will eventually need to carry more of the burden. That means beefing up its defence industry and reforming the eu’s decision-making so it can handle more members.

  The stakes could hardly be higher. Defeat would mean a failed state on the eu’s flank and Mr Putin’s killing machine closer to more of its borders. Success would mean a new eu member with 30m well-educated people, Europe’s biggest army and a large agricultural and industrial base. Too many conversations about Ukraine are predicated on an “end to the war”. That needs to change. Pray for a speedy victory, but plan for a long struggle— and a Ukraine that can survive and thrive nonetheless.

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  2023/09/24
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  Macau’s gamble : Daily Revenue Obligation (dro)

  Economist (UK) 23/9/2023

  MACAU IS BEST known as the casino capital of Asia. But the former Portuguese colony, on China’s south coast, is hoping to gain a reputation for more reputable ways to make money. In August trading began on the MCEX, an over-the-counter market that is the first of its kind. Investors are not exchanging currencies, debt or equity. Instead, they are buying the future revenues of businesses in mainland China.

  If successful, the exchange may help solve a problem that plagues smaller firms both in China and elsewhere: the difficulty of finding finance. Charles Li, a former boss of Hong Kong’s stock exchange and the creator of the new market, has said that investors tend to eschew lending to such businesses simply because the risks and rewards are poorly matched, with borrowers burdened if a venture flops and financiers short-changed if it goes well. For bigger companies, the solution is listing on a public market—something beyond the means of their smaller peers.

  Mr Li believes he may have solved this mismatch. mcex allows investors to buy and sell a new type of financial instrument called a Daily Revenue Obligation (dro). Contract owners gain a fraction of a business’s revenue for a fixed period of time, in effect buying the right to future income. Issuance has been strong. dros worth almost 2.2bn yuan ($300m) were offered on the exchange in the first month of trading.

  Selling future revenues is a good deal for small firms. Owners get access to capital without diluting their stake and without repayment obligations. For investors, the advantage is less clear (indeed, no information is available about their appetite so far). Micro Connect, which owns the exchange, claims they can enjoy “equity-like returns”. Their exposure is, however, rather large. Small firms often fail. Whereas a loan secured against assets has limited downside for its financier, the risk for a dro holder is limited only by the size of the investment. They have no claims on the assets of the business if it goes bankrupt.

  But Micro Connect does have a couple of selling points. If financial instruments designed to fund firms that banks won’t lend to and investors won’t buy sounds unpalatable, allocators can diversify their risk by buying up pools of dros, known as a “Daily Revenue Portfolio”. The underlying dros are unrated, but the pools are given a risk indicator under a framework

  developed by a Chinese rating agency, which relies on predictions of cash flows.

  Mr Li’s financial innovation also offers foreign investors something valuable: access to China. After decades of trying, overseas investors still have few good options. Cross-border private-equity deals have collapsed; “keepwell agreements”, between parent firms and subsidiaries, have been the subject of years-long court disputes. mcex promises to be different. dros are Macau-issued copies of contracts agreed on the mainland. Micro Connect takes on the enforcement risk in mainland China and offers investors the assurance of a contract enforceable under Macanese law.

  The company that issues a dro will have its revenues verified and disbursed by local banks each day, and recorded on a blockchain, providing investors with realtime insight into the performance of the business in which they have an interest. Although technology cannot eliminate accounting trickery, such as changing when invoices are issued, it can prevent fraud. It is almost impossible for a business to earn and not disclose cash revenues in China’s entirely digitised economy.

  China’s entrepreneurs may be especially eager to make use of the scheme now. Banks are scrutinising lending more closely owing to the economy’s struggles, so firms are looking elsewhere for capital. Many are turning to outfits beyond the banking system, known as “shadow lenders”, from which China Beige Book, a data firm, says borrowing is at near-record highs as a share of total lending. This helps explain why China’s smaller firms are keen. Whether these are the sorts of businesses in which foreign investors want to invest is another question entirely. ■

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  2023/09/24
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  Artificial intelligence Beyond the hype

  Economist (UK) 23/9/2023

  The first wave of excitement about generative artificial intelligence (ai) was like nothing else the world had seen. Within two months of its launch in November 2022, ChatGPT had racked up 100m users. Internet searches for “artificial intelligence” surged; more than $40bn in venture capital flowed into ai firms in the first half of this year alone.

  The craze for consumer experimentation has since cooled a little: ChatGPT use has fallen and fewer people are Googling “ai”. Son Masayoshi, a Japanese investor notorious for diving into already frothy markets, is thought to be interested in investing in Openai, Chatgpt’s creator. But a second, more serious phase is beginning. An entirely new industry centred on supercharged

  ai models is taking shape. Three forces will determine what it eventually looks like—and whether OpenAI stays dominant, or other players prevail.

  The first factor is computing power, the cost of which is forcing model-builders to become more efficient. Faced with the eye-watering costs of training and running more powerful models, for instance, Openai is not yet training its next big model, gpt-5, but gpt-4.5 instead, a more efficient version of its current leading product. That could give deep-pocketed rivals such as Google a chance to catch up. Gemini, the tech giant’s soon-to-bereleased cutting-edge model, is thought to be more powerful than OpenAI’s current version.

  High computing costs have also encouraged the proliferation of much smaller models, which are trained on specific data to do

  specific things. Replit, a startup, has trained a model on computer code to help developers write programs, for instance. Opensource models are also making it easier for people and companies to plunge into the world of generative ai. According to a count maintained by Hugging Face, an ai firm, roughly 1,500 versions of such fine-tuned models exist.

  All these models are now scrambling for data—the second force shaping the generative-ai industry. The biggest, such as Openai’s and Google’s, are gluttonous: they are trained on more than 1trn words, the equivalent of over 250 English-language Wikipedias. As they grow bigger they will get hungrier. But the internet is close to being exhausted. Many model-makers are therefore signing deals with news and photography agencies. Others are racing to create “synthetic” training data using algorithms; still others are trying to work with new forms of data, such as video. The prize is a model that beats the rivals.

  Generative AI’s hunger for data and power makes a third ingredient more important still: money. Many model-makers are already turning away from Chatgpt-style bots for the general public, and looking instead to fee-paying businesses. OpenAI, which started life in 2015 as a non-profit venture, has been especially energetic in this regard (see Business section). It has not just licensed its models to Microsoft, but is setting up bespoke tools for companies including Morgan Stanley and Salesforce. Abu Dhabi plans to establish a company to help commercialise applications of Falcon, its open-source ai model.

  Another approach is to appeal to software developers, in the hope of getting them addicted to your model and creating the network effects that are so prized in tech. OpenAI is offering tools to help developers build products using its models; Meta hopes that llamA, its open-source model, will help create a loyal community of programmers.

  Who will emerge victorious? Firms like OpenAI, with its vast number of users, and Google, with its deep pockets, have a clear early advantage. But for as long as computing power and data remain constraints, the rewards for clever ways around them will be large. A model-builder with the most efficient approach, the most ingenious method to synthesise data or the most appealing pitch to customers could yet steal the lead. The hype may have cooled. But the drama is just beginning.

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  2023/09/23
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  Estate agent’s view Landlords are leaving while wealthy sellers are thriving

  The Guardian 22/9/2023

  After years of seeing landlords pile into the Yorkshire buy-to-let market, Bruce Collinson’s estate agency has seen an exodus of late.

  What was once a lucrative investment has become a headache as higher borrowing costs caused by rising interest rates have added to a long list of pressures – from the withdrawal of mortgage interest tax relief to the reduction in capital gains tax allowance in recent years.

  Large numbers of landlords were selling up, said Collinson, a consultant and chartered surveyor at Leeds estate agency Adair Paxton. As a result, the supply of homes to rent is shrinking. Coupled with soaring demand, this has driven up rents across the country, causing misery for tenants.

  Compared with lettings, the sales market is quieter, Collinson said, though “the prosperous bits of Yorkshire are holding up remarkably well”, he added, referring to the golden triangle between Harrogate, York and north Leeds where prices range from £400,000 to £1m for upmarket homes. The market for mid- to lower-priced homes has slowed, though. “And that is largely driven by affordability because of the escalation in mortgage interest rates,” he said.

  Collinson welcomed the Bank of England’s decision yesterday to keep interest rates on hold at 5.25%, after raising them 14 times since the end of 2021. He said it was “likely to forestall the threatened implosion of the residential market”. Economists have outlined two possible scenarios: the Matterhorn – a short, sharp shock where interest rates are raised steeply, which would bring inflation down more quickly but also probably trigger a recession – and the “table mountain” approach – a sustained squeeze where interest rates do not rise much further but stay at their peak for longer. The Bank appears to be leaning towards the latter. Collinson said he favoured “a plateau but with a 10% incline so rates … gradually ease back”.

  The estate agency had a busy spring as usual, then “in July and August my phone stopped ringing”, Collinson said, attributing that to the rising base rate. “But my phone started ringing again this month,” he said, as customers’ expectations grew that interest rates were close to their peak.

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  2023/09/22
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  Support for European populist parties surging, study finds

  Hen­ley Europe cor­re­spon­dent

  The Guardian 22/9/2023

  Almost one-third of Europeans now vote for populist, far-right or far-left parties, research shows, with wide support for anti-establishment politics surging across the continent in an increasingly problematic challenge to the mainstream.

  Analysis by more than 100 political scientists across 31 countries found in national elections last year a record 32% of European voters cast their ballots for anti-establishment parties, compared with 20% in the early 2000s and 12% in the early 1990s.

  The research, led by Matthijs Rooduijn, a political scientist at the University of Amsterdam, shared exclusively with the Guardian, also found that about half of antiestablishment voters supported far-right parties – and this was the vote share increasing most rapidly.

  “There’s fluctuation, but the underlying trend is the numbers keep rising,” Rooduijn said. “Mainstream parties are losing votes; anti-establishment parties are gaining. It matters, because many studies now show that when populists secure power, or influence over power, the quality of liberal democracy declines.”

  In a sign of how far the rise of the nativist far right has shifted Europe’s politics rightwards, the researchers considered classifying several better-known centre-right parties as borderline far-right. “We talked a lot about reclassifying the UK’s Conservatives, Mark Rutte’s VVD in the Netherlands, Les Républicains in France and the ÖVP in Austria,” Rooduijn said. “In the end we didn’t because nativism was not their core focus. But we may in future.”

  The PopuList was launched five years ago in partnership with the Guardian. This year it identifies 234 anti-establishment parties across Europe, including 165 populist parties (most either far left or far right). It classes 61 parties as far left and 112 as far right (most, but not all, populist).

  Usually combined with a rightwing or leftwing “host ideology”, populism divides society into two homogenous and opposing groups, a “pure people” versus a “corrupt elite”, and argues politics should be an expression of the “will of the people”.

  Its supporters say it is a democratic corrective, privileging the ordinary person against elites, vested interests and an entrenched establishment. Critics say populists in power often subvert democratic norms, undermining the judiciary and media or restricting minority rights, sometimes in ways that will long outlast their mandates.

  “For populists, everything that stands between ‘the will of the people’ and policymaking is bad,” Rooduijn said. “That includes all those vital checks and balances – a free press, independent courts, protections for minorities – that are an essential part of a liberal democracy.”

  Joining Hungary’s self-professed illiberal leader, Viktor Orbán, and Poland’s ruling Law and Justice party, several populist far-right leaders and parties including Giorgia Meloni in Italy and, in the Nordic region, the Finns party and the Sweden Democrats, have recently entered or are underwriting government coalitions.

  Others are seeing a big surge in popularity. Austria’s Freedom party is comfortably ahead in the polls a year from elections, Germany’s AfD has doubled its prospective vote share to 22% and is lying second, ahead of the centre-left SPD, while Marine Le Pen looks on course to have her best run yet at the French presidency.

  A multitude of factors lie behind the trend, according to the researchers, who examined parties that had won at least one seat or 2% of the vote in national parliament elections since 1989. “Far-right parties, in particular, have broadened their voter base and are forging coalitions of voters with very different concerns,” said Daphne Halikiopoulou, a comparative political scientist at the University of York and a PopuList co-author.

  “Their big issue was always immigration. That’s still there, but cultural concerns now account for only a small part of their electorate. They’ve gone way beyond that core following.”

  People were now voting far right “who never used to and you wouldn’t expect to: older women, urban voters, the educated middle class. They’re willing to trade democracy for something, to say: ‘I know this leader is authoritarian – but at least he’ll bring economic stability.’”

  Mujtaba Rahman, of the Eurasia Group, said centre-right parties were “adopting more hardline positions on climate, immigration and LGBTQ rights, but there are limits to how successful this may prove”. He said: “Most far-right parties have moved decisively to the centre on economic and foreign policy, and in their views of the EU.”

  In next year’s European parliament elections, he predicted another centrist majority. “Moving to the far right is unlikely to be the panacea many parties believe.”

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  2023/09/22
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  "This time, let’s treat Brand’s victims with greater respectMa­rina Hyde

  The Guardian 20/9/2023

  The old, white, wealthy and healthy have access to miles more public footpaths in their local neighbourhoods than poor and ethnically diverse communities in England and Wales, according to a study.

  The whitest areas enjoy 144% more local footpaths than the most ethnically diverse areas, and the most affluent parts have 80% more local paths, defined as within a 10-minute walk of the area, according to research published by the Ramblers.

  The analysis of more than 140,000 miles of public rights of way reveals that public footpaths are missing from communities that could most benefit from the public health gains associated with them, while fewer footpaths are being included in or are close to modern housing estates.

  The provision of public footpaths near new housing has steadily declined since the 1970s. Housing estates built in the 1990s have 19% more local public footpaths than those mostly built in the 21st century.

  The bottom five local authority areas for public footpath provision in England and Wales are Norwich, North East Lincolnshire, Liverpool, Southampton and Blackpool; the best are Rossendale, Stroud, Monmouthshire, Malvern Hills and Calderdale.

  People in Norwich have on average just 129 metres of public rights of way within 800 metres (a 10-minute walk) of where they live, while in Rossendale in east Lancashire, on the border with Greater Manchester, on average people enjoy 9,232 metres of footpath within a 10-minute walk.

  The worst parliamentary constituency for public paths is Liverpool Riverside, followed by Cardiff Central.

  “We’ve overlooked our paths as critical national infrastructure,” said Jack Cornish, the Ramblers’ head of paths. “This research [shows] that governments are missing an open goal. It’s clear that availability of paths close to people’s homes has a massive impact on health outcomes – at the moment it’s the old, the healthy, the wealthy and the white that are primarily enjoying the benefits.”

  According to the study, undertaken by the New Economics Foundation (NEF) for the walking charity, the inequalities could be addressed by reinstating “lost” rights of way, as well as protecting existing paths.

  If public rights of way had been fully recorded and protected over the past eight decades, every community would have on average 38% more local public paths than they do today. The most deprived communities in England and Wales would benefit from about 63% more paths in their local area if all public paths had been accurately registered in legal records from the 1950s onwards.

  The Ramblers is campaigning for “lost” public paths to be registered before a 2026 deadline. The charity is also calling for new paths, particularly to enable residents of new edge-of-town developments to reach green countryside and town centres on foot, and the creation of green urban corridors to encourage more walking in busy cities where there are plenty of roads but fewer peaceful, pedestrian-friendly avenues.

  Despite hundreds of studies showing the physical and mental health benefits of being active in green spaces, previous Ramblers research suggests that on average only 57% of adults report living within five minutes’ walk of a green space. This drops to 46% for households on incomes lower than £15,000 a year.

  The NEF analysis suggests that doubling the average length of paths in a neighbourhood would result in an additional annual 78.5m walks being taken in nature across England and Wales. The study calculates the government would need to invest an extra £650m each year – £12 a person – to expand the path network and address the inequalities of access.

  Cornish said: “It needs to be targeted at local authorities after 13 years of austerity. If local authorities can raise the level of provision, that additional investment would pay dividends because you get almost £2bn of wellbeing value from the network, and that’s not including economic and tourism benefits.”

  The Ramblers is calling for stronger planning rules that stipulate footpath provision around new housing, and investment to improve existing paths and make them more accessible. According to a YouGov survey for the Ramblers, 56% of people with disabilities said they did not use public footpaths because of physical barriers. “We’ve got thousands of stiles in fields that haven’t seen a cow for 50 years,” said Cornish.

  Investment in public footpaths is popular, with 71% of nearly 5,000 adults surveyed in the YouGov poll backing such moves.

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  2023/09/20
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  Watchdog finds no evidence of banks shutting customer accounts over political views

  ­Mako­rtoff Bank­ing cor­re­spon­dent

  The Guardian 20/9/2023

  The UK’s financial regulator has found no evidence showing that banks have shut or denied accounts to customers based primarily on their political beliefs, according to a preliminary review launched after the Nigel Farage “debanking” row.

  Despite growing concerns that customers have been quietly discriminated against because of their political views, the Financial Conduct Authority (FCA) said initial findings showed the primary reason for accounts being closed, suspended or denied was either that the account was inactive, or that there were concerns that the customer was involved in financial crime.

  “While no bank, building society or payment firm reported to us that they had closed accounts primarily due to someone’s political views, further work is needed for us to be sure,” said the FCA chief executive, Nikhil Rathi.

  That will involve verifying the initial data gathered from 34 banks, building societies and payment companies covering the year to June, including cases in which accounts were closed because the customers posed a “reputational risk”.

  Banks have the freedom to choose with whom they do business, and can legitimately refuse to do business with some individuals who, for example, may be under sanctions, or closely associated with such a person. The FCA said “we want to assure ourselves that these criteria are not being interpreted too broadly”.

  It said payments companies – rather than banks or building societies – accounted for the majority of cases where accounts were denied on the basis of reputational risk.

  Rathi said the “time was right” for a debate on “how we balance access to bank accounts with the threat of financial crime, as well as firms’ reasonable risk and commercial appetites. An important question for policymakers is whether all individuals, businesses and organisations should have the right to an account, as is the case in some other countries.”

  While the review was launched in response to Farage’s battle with NatWest’s private bank Coutts, it is understood the data does not cover his case, given that the bank never followed through with the closure. Farage said in July that Coutts’s new boss had offered to retain his account.

  The FCA is also looking into whether politically exposed persons (PEPs) – who include MPs, peers, leaders of UK political parties and senior ranking military officers – are unfairly being denied banking services.

  Banks are required to more closely monitor the accounts and transactions of PEPs, since they are considered to be at a higher risk of bribery or corruption.

  Both issues gained traction after Farage launched a campaign against Coutts, which had planned to shut his accounts.

  The former Ukip leader originally claimed the decision to shut his accounts had been linked to his status as a PEP. While it was later revealed to have been linked to commercial considerations as well as alleged reputational risks related to his political views, the saga poured fuel on the debate about the use of discretion relating to PEPs.

  The scandal turned into a freedom of speech controversy that intensified after it emerged that Alison Rose, the chief executive of Coutts’s owner, NatWest, had discussed the matter of Farage’s accounts with a BBC journalist.

  Rose eventually resigned amid government pressure at the end of July, and the chief executive of Coutts, Peter Flavel, was asked to leave days later over the mishandling of the situation.

  NatWest has hired lawyers for a wide-ranging investigation, due to report at the end of October.

  Commenting on the FCA’s report, the Treasury minister Andrew Griffith said: “Free speech is a fundamental human right … everyone must be able to express their lawful opinions without fear of losing the vital access to a bank account.”

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  2023/09/20
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  Britons opt to improve, not move

  But­ler

  The Guardian 20/9/2023

  British consumers are continuing to spend on improving their homes and gardens as an alternative to moving amid soaring mortgage rates and a surge in household bills, according to the owner of B&Q and Screwfix.

  Sales at Kingfisher’s UK and Irish business rose 1.7% in the six months to the end of July as homeowners bought 11% more insulation materials at B&Q in an attempt to offset winter heating bills and were also revamping bathrooms and gardens.

  “As people are moving less they spend more time to renovate and maintain,” said Thierry Garnier, the chief executive. “We have seen good take-up in kitchen and bathrooms, with a lot of [bathroom] projects.”

  In the UK, Kingfisher continued to see a “healthy consumer” despite the cost of living crisis and this year’s unpredictable weather, he said.

  Sales of barbecues and garden furniture were hit by the wet conditions in early spring, but this month’s hot weather had led families to buy more fans and garden furniture than usual. “We see very good momentum,” Garnier said, suggesting that low unemployment, and savings made during the pandemic, had cushioned many from increases in the cost of living.

  However, shares in Kingfisher fell almost 8% yesterday morning after the company revealed it had wiped £44m off its profit expectations for the year, saying it now expected to make £590m, after poor performance at its Polish and French chains.

  Total sales rose 1.1% to £6.9bn in the half year to 31 July but pre-tax profits sank by a third to £317m amid higher operating costs.

  Garnier blamed the “challenging macroeconomic climate” in Poland for an 11% fall in sales at established stores and a 64% drop in local profits as high inflation and rising interest rates affected consumers confidence.

  In France, where sales fell 3.8% in the half year and profits slid by a fifth, he said consumer sentiment was affected by concerns about food price inflation and worries about pension reform, as well as by poor weather.

  However, the group will open 20 more Screwfix stores in France, adding to nine already open, and will expand Screwfix online into 20 European countries over the coming months.

  It will open five more Castorama stores in Poland, two fewer than previously planned, and is closing two experimental franchise outlets in Saudi Arabia.

  Garnier said Kingfisher was expecting inflation on DIY goods to be lower across all the countries it operates in over the coming months as the cost of some raw materials was coming down, although that was being offset by higher energy and labour costs.

  He added: “Factories in Asia and China are not full so will have the ability to negotiate prices down, and on top of that there are much lower freight costs – divided by 10 more or less from 2020.”

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  2023/09/20
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  India Booming Property Market

  Economist (UK) 16/9/2023 Naren­dra Modi’s clean-up finds suc­cess

  A VISITOR does not have to look far for signs of India’s property resurgence. Cranes dot the skylines of Delhi, Hyderabad and other cities. In Bandra, a swish suburb of Mumbai, more than 100 buildings are being redeveloped. Across the country, the number of new projects has hit a level last seen in 2012. Pre-sales by big developers are rising at double-digit rates.

  Behind the increasingly frenetic activity are all the catalysts you would expect in India: demand from the country’s growing population of well-to-do people, insufficient supply and deterioration of existing buildings in the harsh climate. But if the catalysts have not changed, the underlying structure of the market very much has. Attempts by Narendra Modi’s administration to clean up after a property crash in the mid-2010s seem to be paying off.

  Before the crash, India’s property industry had a rakish edge. An army of small developers had emerged who were known for sharp suits, Bollywood ties and, beneath their glitz, lots of grit. Stories spread of money derived from padded construction bills and dodgy bankers, along with complicated land purchases routed via family members. Later, court cases provided evidence that such tales might not have been fanciful. As a result of corruption, projects were derailed, people waited years for flats and demand for properties fell.

  Among the changes introduced by Mr Modi’s government in 2016 were requirements for developers to pay above-market interest rates on deposits for flats in delayed projects, creating an incentive for completion. Diverting deposits for different projects was banned. Financial institutions were pressed to tighten lending and monitoring. The clean-up is far from complete: in the state of Maharashtra, home to Mumbai, officials recently noted that 308 projects involving 60 firms are in some stage of insolvency. But slowly bankruptcies are becoming less common.

  After a period of stagnation, developers with plausible claims to fulfil projects have seen their valuations soar over the past three years: Delhi Land & Finance from $5.1bn to $15.8bn, Godrej Properties from $3bn to $5.5bn and Oberoi Realty from $2bn to $5bn. Confidence is returning to the broader market, too. Data tracked by Morgan Stanley, a bank, and jll Research, a consultancy, indicate that purchases in the most recent quarter were a fifth higher than the average over the previous year. Activity has been especially strong in Bangalore, Hyderabad, Mumbai and Pune.

  In the same way a depressed residential market can have a broader impact on a country’s economy—as is supremely evident in China at the moment—the opposite is true as well. The current healthy housing market in India helps explain why growth has remained strong, and the stockmarket registered large gains, despite a slowdown in exports and crucial industries, not least technology. Construction in India employs more than 50m people and comprises 7% of gdp. The property industry is a big customer for cement, steel, glass and white goods, along with credit. Past problems may have rightfully cast the sector in a negative light. Now, much like Mumbai’s towers, it is on the up. ■

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  2023/09/19
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  Keep digging Metals

  Economist (UK) 16/9/2023 How to avoid a 6.5bn-tonne green-met­als crunch

  Will there be shortages of raw materials for the energy transition?

  EVERYONE WANTS more metals. In recent months Britain has inked a deal with Zambia, Japan has sealed one with Namibia and the eu has shaken hands with Chile. The bloc’s negotiators also started talks with the Democratic Republic of Congo; America’s, meanwhile, visited Mongolia. This scattershot campaign, which is also targeting the Philippines and Saudi Arabia, has a single aim: obtaining the minerals required for rapid decarbonisation.

  Seventy-two countries, accounting for around 80% of global emissions, have committed themselves to net-zero targets. According to the Energy Transitions Commission (etc), a think-tank, hitting them by 2050 will require 15 times today’s wind power, 25 times more solar, a tripling of the grid’s size and a 60-fold increase in the fleet of electric vehicles (evs). By 2030 copper and nickel demand could rise by 5070%, cobalt and neodymium by 150%, and graphite and lithium six- to seven-fold. All told, a carbon-neutral world in 2050 will need 35m tonnes of green metals a year, predicts the International Energy Agency, an official forecaster. Adding aluminium and steel, the etc expects demand between now and then to exceed 6.5bn tonnes.

  This is why policymakers fear an almighty supply crunch. The etc expects shortages of market-breaking magnitudes by 2030: some 10-15% for copper and nickel, and 30-45% for other battery metals. When dwindling stocks cause prices to rise, producers will lift output and customers will use scarce materials more efficiently. What demand remains unmet after this will be destroyed, however, as wouldbe buyers that cannot or will not pay higher prices are forced from the market. Too much of such demand destruction will kill the green transition. The question, then, is simple. Can the crunch be minimised?

  Start by considering the metals in question. Three are widely used in industry: aluminium and steel for panels and turbines, and copper for everything from cables to cars. Then come those powering evs: cobalt, lithium and nickel, which make up battery cathodes, and graphite, the main anode element. Except for nickel, which is also an ingredient in stainless steel, all these have only niche applications. The last group features magnetic rare earths like neodymium, found in ev motors and turbine generators. These are required only in minuscule amounts.

  The search for such metals is made slightly less urgent by a discomforting fact: climate policies are unlikely to restrain global warming to 1.5°C above pre-industrial levels, as assumed by most forecasts. Moreover, many future-gazers also assume that demand for green gear, and thus metals, will rise in a linear fashion, even though some countries will no doubt start to sprint only in the final yards. Steel, for which green uses will remain a drop in the ocean, will probably stay abundant. Cobalt, a byproduct of other sought-after metals, may outpace demand for ever.

  But difficulties remain. Industry oracles asked by The Economist predict copper supply gaps of 2m-4m tonnes, or 6-12% of potential demand, by 2030. They also foresee a shortfall of lithium of 50,000-

  100,000 tonnes, a 2-4% deficit. Nickel and graphite—plentiful in theory—could cause problems because batteries require pure material. There are too few smelters to refine bauxite into aluminium. Outside China, next to no one produces neodymium.

  These will be hard problems to overcome. Yet three levers may lower the pressure. First, producers may extract more supply from existing sources, which can be done straight away but will produce limited quantities. Second, firms may open new mines, which could solve the problem entirely but will take time. The limitations of these two levers make a third the most important, at least over the next decade: finding ways to change what customers want.

  Quick wins could come from reusing more material. Such gains will be greatest for aluminium, copper and nickel. All are widely recycled, but higher prices will motivate spending in a fragmented industry. bhp, a big miner, has backed a nickel-recycling upstart in Tanzania. Huw McKay, the firm’s chief economist, reckons that scrap could represent 50% of the total copper supply in a decade, up from 35% now. Rio Tinto, another mining giant, is investing in aluminium-recycling centres. Last year startups focused on battery-metal recycling raised $500m, a record.

  More metal could come from restarting mines. Not many are idle: a post-covid surge in demand has already reduced slack. Even if prices double, cost curves for copper and nickel indicate that just a few mines would reopen. But aluminium is an important exception. Since December 2021 soaring energy costs have caused 1.4m tonnes in annual smelting capacity (2% of the world’s) to shut in Europe. A 25% rise in prices would lure much of that back, reckons Graeme Train of Trafigura, a trader.

  The greatest hope lies in technologies that squeeze supply from deposits. New firms are developing chemical processes that extract copper from ores with low metal content, making waste exploitable. Using the tech at scale could yield an extra 1m tonnes of copper a year without much cost, says Daniel Malchuk of Jetti Resources, one such firm. Meanwhile, in Indonesia, the world’s largest nickel producer, miners are using “high-pressure acid leaching” to turn low-grade ores into material fit for electric cars. Three billion-dollar plants have been built, and nearly $20bnworth of projects have been announced. Daria Efanova of Sucden Financial, a broker, reckons that Indonesia could produce 400,000 tonnes more of top-grade nickel by 2025, filling part of the 900,000-tonne supply gap she projects by 2030.

  Yet these new techniques are uncertain, and in some cases come with drawbacks such as pollution. Starting new mines, the second lever, would bring larger gains, even if slowly. McKinsey, a consultancy, calculates that if the 382 projects in cobalt, copper, lithium and nickel that have at least commenced a pre-feasibility study were to be finished by 2030, it would keep markets just about balanced. These projects would represent a huge increase in production: there are around 500 cobalt, copper, lithium and nickel mines operating at present. To open on time, they will have to overcome a number of difficulties.

  Full metal racket

  The first is a lack of funds. McKinsey estimates that to fill supply gaps by 2030 annual capital expenditure in mining will have to double to $300bn. cru, another consultancy, reckons that spending on copper alone must hit $22bn in 2027, compared with an average of $15bn in 2016-21. Although not yet fast enough, investment by big miners is rising. Customers are entering the fray, too. General Motors, a carmaker, is investing $650m in Lithium Americas, a miner in Nevada. catl, a Chinese battery firm, is spending billions to source cobalt and lithium. Since the start of the year pension and sovereign funds have invested $3.7bn in private mining assets, the most since 2013. And about $21bn in capital raised by private-equity firms since 2010 is also chasing deals.

  This will take time to make a difference, however, since digging new mines takes ages—from four to seven years for lithium to an average of 17 for copper—and delays have been worsened by a paucity of permits. Egged on by activists, governments and regulators are increasingly blocking projects on environmental grounds. Between 2017 and 2021 it took an average of 311 days for new mines in Chile to gain approval, compared with 139 in 2002-06. Meanwhile, the metal content of copper ores mined in stable countries is falling, forcing miners to look to dicier locations. Twothirds of the new supply planned by 2030 sits in countries that in 2020 ranked below 50th in the World Bank’s “ease of doing business” index. Reko Diq, a project led by Barrick Gold, a Canadian firm, containing one of the world’s largest untapped copper deposits, sits between Iran and Pakistan.

  As a result, new supply will be a solution only in the long run, perhaps after a spell of high prices. The lion’s share of adjustment in the next decade will come down to demand—the third lever. This side of the equation, which is more difficult to model than future production, is poorly understood. But it is probably more flexible than is commonly realised.

  Auto- and battery-makers are a type of buyer the metals market has never had before. Fiercely innovative and price-sensitive, such firms tackle issues at the first sign of a supply squeeze. They have already achieved a lot by “thrifting”, or discovering small ways to use less metal. The typical electric-car battery now contains just 69kg of copper, down from 80kg in 2020. Simon Morris of cru reckons that the next generation may need just 21-50kg, saving up to 2m tonnes of copper a year by 2035.

  More can be achieved through substitution. Nickel-manganese-cobalt chemistries that contain as much cobalt as nickel, known as nmc 111, are being phased out in favour of nmc 721 and 811, which contain more nickel. These account for a quarter of ev-battery cathodes, up from zero in 2017. Meanwhile, a cheaper but less energydense lithium-iron phosphate (lfp) mix is conquering the booming Chinese market, where city-dwellers are less concerned by a shorter driving range. Indeed, lfp now represents 30% of ev cathodes worldwide.

  Graphite anodes are also being doped with silicon, which is hyperabundant. In March Tesla, an ev-maker, said it would build a motor that did not need rare earths.

  Sodium-ion batteries, which replace lithium with sodium, the sixth-most abundant element on Earth, may in time triumph. Because of their low energy density, they will first be used for stationary storage, where volume is less of a constraint.

  Customer preferences will play a part. People like to be able to drive their ev for 600km on a single charge—but few travel such distances often. As lithium runs scarce, carmakers may build short-range vehicles that can be boosted by a portable battery, slimming the standard pack. At the right price, adoption could be fast.

  Copper, which cannot easily be engineered out of grids, is the chief problem. But here, too, consumption shifts could help. cru estimates that green demand as a share of total copper demand will rise from 7% to 21% in 2030. That is a big chunk, but leaves lots of supply that could move to green applications when shortages emerge. As the cost of metal rises, sales of phones and washing machines, which also contain copper, will probably decline sooner than those of wires and solar panels, especially if the clean-tech market is propped up by governments.

  By the late 2030s there will probably be enough new mines and recycling. The question is how big the disruption will be in the interim. Things will surely be tight. Since supply will be concentrated, local unrest, geopolitical conflict or bad weather could hit markets. Simulations by Liberum Capital, a bank, suggest a miners’ strike in Peru, or three months of drought in Indonesia, could tip the copper or nickel markets in 2028 into 5-15% supply deficits. But with nimble buyers, steadfast governments and luck, the green-metal bump need not cause an electric-car crash. ■

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  Infoman

  Survival guide under BIG TECH

  Economist (UK) 16/9/2023 How to thrive in the shadow of the tech gi­ants

  BIG TECH keeps getting bigger. So far this year the combined market value of America’s five digital behemoths—Alphabet, Amazon, Apple, Meta and Microsoft— has soared by half, to around $9trn. That is almost a quarter of the total for the S&P 500, an index of America’s largest companies (which has risen by just 17% in the period). The five account for almost 60% of sales, profits and spending on research and development of all the technology firms in the index. They are widely expected to be the main winners from the artificial-intelligence (AI) revolution.

  Governments view this dominance with increasing trepidation. On September 12th America’s Department of Justice began a courtroom showdown with Google and its corporate parent, Alphabet, in the biggest antitrust case in two decades, accusing it of abusing its internet-search monopoly (see next article). This month an EU law labelled the big five as digital “gatekeepers”, which bars them from bundling some services and discriminating against third parties on their platforms, among other things. The giants have grown so gigantic, the world’s trustbusters argue, that they suck all the oxygen out of the tech ecosystem, driving challengers to extinction or, at best, making it hard for anyone else to prosper. Just ask Snap, Spotify or Zoom.

  Like natural ecosystems, though, commercial ones present opportunities for newcomers. To keep growing at the blistering rates their investors expect, the big five pay most attention to markets vast enough to make a meaningful difference to their revenues, which collectively touched $1.5trn last year. That means they ignore certain areas that are smaller but potentially still lucrative. The ingenious companies that identify such niches and are able to exploit them don’t just get by, but thrive in the shadow of the giants.

  Take Garmin. Founded in 1989, it pioneered the commercial use of GPS-navigation systems. By 2008 it had nabbed almost a third of the market for portable navigation devices, mostly dashboard-mounted units for cars, which were some 72% of the company’s sales. Then Google released its Google Maps app, first, in 2008, for Android smartphones and then, four years later, for the iPhone. Motorists could simply use their phones to find their way, rather than forking out for a dedicated device. By 2014 Garmin’s revenues from its automotive segment had slumped by half compared with six years earlier, to $1.2bn.

  A year later big tech delivered another blow. Apple launched its first smartwatch, which risked undermining Garmin’s growing business of selling devices for fitness and outdoor enthusiasts. This time, however, the smaller company withstood the assault (see chart 1 on next page). It focused on high-end watches and fitness trackers, some of which sell for several times the price of the top-end Apple Watch. In doing so it has built a loyal user base of mountaineers, runners and other assorted fitness fanatics; in April Mark Zuckerberg, Meta’s exercise-fanatical boss, posted a photo of his Garmin watch after finishing a 5km run in good time.

  George Livadas of Upslope Capital, an investment firm, believes that Garmin is one of the few companies that has created

  a premium brand in a market with an available Apple alternative. Today its total annual revenues of almost $5bn are roughly twice what they were when the first Apple Watch hit the shelves. Smartwatches and fitness trackers contribute almost 60% of the firm’s sales (with most of the rest coming from professional navigation systems for ships and aircraft, see chart 2).

  Another company to successfully exploit an underserved tech niche is Dropbox. Steve Jobs, Apple’s co-founder, once dismissed the San Francisco-based cloudstorage firm as a “feature, not a product”. Founded in 2008, it has battled Apple, Google and Microsoft (and for a while, Amazon) throughout its life. Its bigger rivals all bundle cloud storage with other services; customers who sign up for Google’s Gmail, for instance, receive some free online storage. But those offerings, though often free, lack Dropbox’s functionality.

  According to Rishi Jaluria of the Royal Bank of Canada, early on Dropbox recognised that many users needed more than just a place to stash files. Photographers and other creative types want to store highresolution files without worrying about file size, for example. These users are often ready to pay for the convenience. By developing features that appeal to them, most recently an AI-powered search tool to find and summarise documents, Dropbox has continued to attract new subscribers.

  An exploitable niche can also be geographic. MercadoLibre, an Argentine ecommerce firm, is a case in point. Its days might have seemed numbered when Amazon entered Brazil and Mexico, its biggest markets, in 2012 and 2013, respectively. Not so. A decade later MercadoLibre accounts for a quarter of all e-commerce trade in Latin America. The closest Amazon has come to challenging the regional shopping giant is in Mexico, but even there its market share is half that of its rival.

  MercadoLibre has succeeded by adapting its business model to local conditions. It quickly identified poor infrastructure, which raised costs for sellers and degraded the buying experience for shoppers, as a hindrance to growth. The firm has invested in its own logistics network, which transports 90% of its parcels. Its payments service, MercadoPago, is a popular option in a region with rampant fraud. Small innovations like offering points towards free delivery have helped it win over price-conscious Latin Americans. The company also plays up its local roots to win over customers. Ariel Szarfsztejn, its head of commerce, describes it as “built by Latin Americans”. In April, as Amazon was slashing its workforce worldwide, MercadoLibre announced plans to hire 13,000 people.

  Witness the fitness

  Finding a niche is not enough to guarantee success. Garmin, Dropbox and MercadoLibre have other things going for them. All three still have at least one of their founders in executive roles. Winning against big tech requires an obsessive focus on product development and the stomach for long-term investments. It helps to have experienced operators at the helm who aren’t swayed solely by quarterly targets.

  Crucially, the three companies also make money—a big selling point for investors at a time of rising interest rates, which make the promise of tech hopefuls’ future profits less attractive than earnings in the here and now. In 2022 Garmin, Dropbox and MercadoLibre raked in $974m, $553m and $480m, respectively, in net income. That is peanuts next to Alphabet’s $60bn or Apple’s $100bn. But the trio’s operating margins look healthy for smartwatch, cloud and e-commerce businesses. The market capitalisation of Garmin has tripled since 2015, to over $20bn. MercadoLibre’s has quintupled, to $70bn. Dropbox is worth $10bn, not too far off its peak amid the pandemic-era mania for all things digital. Who said anything about extinction? ■

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  2023/09/19