Economist 4/13/15

  1. ON MAY 7th Britain is holding a general election to choose a new government.The country is a constitutional monarchy, so electors will be voting solely for their local members of parliament (MPs) rather than directly for a head of state.Most countries now have some form of “proportional representation” (PR) system, whereby the number of legislators in a parliament more or less reflects the number of votes cast for each political party. In Britain, however, it’s all about the number of MPs rather than voters.There are 650 parliamentary seats up for grabs, the vast majority of them (533) in England, the biggest and most populous part of the United Kingdom. Scotland has 59 seats, Wales 40 and Northern Ireland 18. On average, each seat corresponds to 92,000 people, or 68,000 electors. Traditionally, under the first past the post system, parties have only needed to get a bit over a third of the popular vote to secure a majority of MPs and so form a government. Tony Blair’s last great election victory, in 2005, was achieved with only 35% of the popular vote. This was nonetheless enough to give him a majority of 64 seats in parliament.The system has thus favoured strong, one-party rule, and so a strong executive.That may now be changing. This is mainly because the smaller parties are taking an ever bigger share of the popular vote, and so might now begin to win more parliamentary seats.At the last election in 2010 the Scottish National Party (SNP), the Green Party and the UK Independence Party (UKIP) amassed just 6% of votes together.This time, however, all these parties have been polling over 5% each—the SNP considerably better in Scotland.
  2. GE’s finance arm is one of America’s largest financial entities, with assets of half a trillion dollars, about the same as Lehman Brothers had in the run-up to the financial crisis of 2008. It does everything from consumer loans to property. It exists because of Mr Welch.Without a big base of deposits it financed itself with debt. It had high leverage and as a result appeared highly profitable. In Mr Welch’s last year in charge, in 2000-01, the finance arm had a return on equity of 23% and contributed 41% of the company’s profits.Then came the financial crisis. Short-term debt markets dried up, making it hard for GE to roll over its $72 billion of commercial paper. Earnings from the finance arm collapsed. The firm received a government bail-out and was forced to cut its dividend.In the aftermath Mr Immelt recognised that the finance arm had to be shrunk.The initial plan was to cut the contribution of finance from about 40% of GE’s profits to 25%. In 2014 he spun off Synchrony, its consumer-finance arm, to this end.Mr Immelt’s new plan goes much further: finance will be shrunk to below 10% of profits.Yet there are still two big uncertainties. The first is how easy it will be for GE to wind down its financial arm. Some $27 billion of real estate will be sold, mainly to Blackstone and Wells Fargo, but there are a further $165 billion of assets which need to be wound down or to find a new owner.The second uncertainty is how strong GE is without its financial-services arm.
  3. The mirrors in Fredric Brandt’s clinics showed the possibilities, and the profits, to be gained from the skilful application of needle and syringe.Botulinum toxin was known chiefly as a deadly nerve poison: it took Dr Brandt to make it a household name, for in minute doses it is a boon, freezing the muscles that furrow and crinkle. His clinics were the world’s largest buyer of Botox; he called it simply “bo”.The “Baron of Botox” had a weekly radio show, and a range of cosmetic products, whose catchy names (Needles No More, Crease Release) were matched by exotic prices and carefully worded claims about their effects.He lived alone, with three adopted stray dogs in Miami, and his collection of modern art in New York, sheltered by permanently drawn curtains from the sunlight he hated for the damage it did to skin.
  4. Elliott Management looks to enforce court rulings demanding that Argentina cough up $2 billion it owes to the hedge fund.The case involves $65m suspected of having been embezzled and laundered abroad by Lazaro Baez, a building tycoon with ties to Cristina Fernández de Kirchner, Argentina’s president, and her late husband (and predecessor), Nestor. Elliott joined the sleuthing, its logic being that any stolen money was misappropriated state funds and could therefore be grabbed to satisfy judgments in its favour.The money trail led to Nevada, home to 123 brass-plate firms that Elliott suspected of being linked to the alleged fraud. But piercing the corporate veil in the state is far from easy. Its record-keeping requirements are minimal even by American standards. Satisfied that MF was an “alter ego” of Mossack, a judge recently ruled that Mossack was subject to the jurisdiction of American courts and had to comply with the information subpoena. Mossack is an industrial-scale incorporator of anonymous companies. Shells it helped set up (but is not legally liable for) have been linked to tax evaders and kleptocrats. Mossack says it does not advise clients on the use of companies it forms.

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