Economist 4/16/15

  1. Little seems to have changed in Belarus, a landlocked country of 10m souls, tucked between Poland and Russia, since it emerged blinking into independence after the Soviet disintegration in 1991. Statues of Lenin dot the wide, well-ordered streets of Minsk, the capital. Alexander Lukashenko, the mustachioed strongman who has ruled for over 20 years, will undoubtedly win a fifth term in November’s presidential election. In 2010 an opposition demonstration after a fraudulent presidential vote was put down brutally by Mr Lukashenko’s goons. Seven of the nine other presidential candidates were imprisoned. European Union sanctions, including a travel ban on Mr Lukashenko, remain in place.Mr Lukashenko, a long-serving if unreliable ally of Vladimir Putin, condemned Russia’s annexation of Crimea and did not join its embargo on EU agricultural exports. He is playing the same old game: balancing one giant neighbour (the EU) against the other (Russia). Along with Armenia and Kazakhstan, Belarus has joined Russia’s Eurasian Economic Union, which bills itself as a rival to the EU. Of the six countries in the EU’s Eastern Partnership (EaP) programme, Belarus has the highest income per person bar oil-rich Azerbaijan (a nastier autocracy). It avoided the chaotic privatisations of Russia and Ukraine, and has no oligarchs straddling business and politics. Day-to-day corruption is minimal, public services mostly work, and unemployment is low, even if the official figures are massaged.Yet Belarus’s economic model is creaking, and the troubles of its Russian patron exacerbate its difficulties.Real wages are falling, and workers in state-owned firms have been forced to take compulsory unpaid holidays. After 20 years of isolation, officials realise they need European advice and money.
  2. SIX words startled corporate Germany on April 10th: “I’m at a distance from Winterkorn.” Ferdinand Piëch, the chairman of the supervisory board at Volkswagen, directed them at the carmaker’s chief executive.Mr Piëch does not have the power to dump Mr Winterkorn summarily from VW, which is a peculiar hybrid of family business, state-owned enterprise and public company. A holding company for the Porsche and Piëch families—the descendants of Ferdinand Porsche, who created the original “people’s car” for Adolf Hitler—owns a minority stake but a majority of votes. The state of Lower Saxony has a 20% stake, and its economy minister has backed Mr Winterkorn. Employee representatives have half the seats on VW’s supervisory board; Now, only Toyota sells more cars worldwide, and VW may soon overtake it. But its operating-profit margin, hovering for several years at around 6%, papers over big differences between the group’s brands. Audi, a premium brand, made an operating profit of 9.6% in 2014, and has done particularly well in China and America, the two largest markets for cars. Skoda, a mid-market brand with roots in communist-era Czechoslovakia, has been a success story, with a margin of 7.2% .But the Volkswagen brand’s operating margin for 2014 was just 2.5%, far short of its 6% target.
  3. RIKERS Island, New York City’s largest jail, is a tough place.The jail is facing countless charges of abuse and neglect. In 2013 staff reportedly used force against adolescents 565 times, resulting in 1,057 injuries. Preet Bharara, a federal attorney, claims there is a “culture of violence” against young inmates at the jail.Many of the jail’s prisoners are simply awaiting trial for misdemeanour offenses, too poor to post bail. Hundreds of inmates have been waiting for more than 270 days, and six prisoners have been mouldering without conviction for six years, according to the New York Times. A report released earlier this year found that more than half of New York City’s inmates could not afford a bail of $2,500 or less.Bill de Blasio, New York’s mayor, says improving the conditions at Rikers is a “moral obligation”.A big part of the plan is to reduce wait times for trials, which have lengthened over the past two decades. The mayor hopes to keep people off Rikers Island in the first place by streamlining the court summons process. As it stands, many people ignore summons or do not understand them, which causes them to miss court dates or not pay fines or even plea guilty to offences unnecessarily, which can lead to a stint to jail.
  4. On April 15th the European Commission sent a “statement of objections”, an indictment of sorts, to Google, accusing it of abusing its dominant position in the internet-search market and reviving an antitrust case that has dragged on for five years. In Europe Google handles more than 90% of web searches, making it the place to be for many advertisers. Whether it has harmed consumers by using its dominant platform to steer them away from rival services and towards its own, such as Google Shopping, is at the heart of the case.Instead of getting bogged down in negotiations with Google over how exactly it should redesign its search-results pages to give rival services more prominence, Ms Vestager wants the case to set broad principles of fairness that Google would have to adhere to.The commission’s move against Google is not overtly political and protectionist. However, it is part of a broader trend. As Mr Oettinger’s speech shows, Europe is belatedly discovering its failure to develop many of the platforms underpinning the online economy. Much of the world’s digital territory has in effect been ceded to America without a fight.
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