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Is Ginni the tonic for IBM?

“IT’S a normal transition,” says Virginia “Ginni” Rometty. Her promotion to chief executive of IBM, announced on October 25th, was carefully planned and smoothly executed—unlike recent changes at the top of Yahoo!, HP and Nokia.Yet the transition is also exceptional. In January, when she takes over from Sam Palmisano, the blonde, straight-talking Ms Rometty will become one of the corporate world’s most powerful women. IBM boasts annual revenues of $100 billion and a market capitalisation exceeding $210 billion—second only to Apple among tech firms.“Change at the top does not mean a change of strategy,” insists Ms Rometty. She worked with Mr Palmisano (who will remain as chairman) to develop the firm’s “roadmap to 2015”, which states that IBM wants to double its earnings per share by that year and ramp up growth in China and India.Ms Rometty has played a key part in two moves that have made such an ambitious growth strategy seem possible: the acquisition of the consulting arm of PricewaterhouseCoopers, which she helped integrate, and the development…

Original post by The Economist: Business

GIVEN that China is the world’s biggest carbon emitter, it is fair to be sceptical of its claims to greenery. Yet the emerging giant is already the world’s biggest manufacturer of such green technologies as compact-fluorescent bulbs and solar panels. And it aspires to become an environmental-policy leader too.The most recent five-year plan emphasised improvements in energy efficiency and laid out a vision for cleaning the air. Now the powerful State Council has formally announced that it will use tools favoured by market-minded economists: emissions-trading systems, perhaps including one for carbon dioxide, and green taxes. The details are not yet public, but this sounds important. It follows various regional experiments with emissions-trading and a resources tax (which affects petroleum but not solar power). If enforced with vigour—a big “if” in such a decentralised and corrupt place—these new policies could signal a shift towards a more efficient, lower-carbon economy.Why might China’s leaders impose green rules that many rich countries have balked at? There are several theories. It may be because they feel…

Original post by The Economist: Business

DO YOU remember back in old LA, when everybody drove a Chevrolet? The opening line of “Beach Baby”, a 1974 hit, is one of hundreds of gratuitous plugs that writers of pop songs have given to General Motors’ mass-market brand down the decades. Snoop Dogg’s “Ridin’ in my Chevy” is a recent, less family-friendly example. Chevrolet, which celebrates its centenary on November 3rd, is as woven into the fabric of American culture as Coca-Cola. Not all of its birthdays have been happy, but as it reaches its 100th its prospects are on the up. In the July to September quarter, a record 1.2m cars and pickups with the Chevy “bow-tie” badge on their bonnets were sold worldwide.In 1911, when William Durant, GM’s founder, was turfed out by the company’s bankers, he joined forces with Louis Chevrolet, a Swiss-born racing driver, to set up a new carmaker (later folded into GM, when Durant briefly regained control). At $2,150, their first car, the Classic Six, looked pricey next to Henry Ford’s $490 Model T. So in 1915 Durant met his rival head on with a model called the 490 and costing the same. Then Chevrolet really…

Original post by The Economist: Business

THE future of Barack Obama’s health law is uncertain. Its main provisions will not come into effect until 2014; the Supreme Court may strike it down before then. But America’s insurers are already transforming. They were big before; now they are growing bigger. On October 24th Cigna, an insurer based in Connecticut, said it would pay $3.8 billion for HealthSpring, which offers services and insurance to the elderly. It is the latest deal to extend insurers’ tentacles into new areas of health care. The question is whether they might actually improve it.Good, cheap health care has long eluded America. Doctors are paid for each service, so they deliver as many as possible, necessary or not. Insurers protect margins by micromanaging claims and hiking premiums. These perverse incentives are addressed, faintly, by Obamacare. For example, there are pilots to reward hospitals for the quality rather than the quantity of their care. Mostly, however, the reform deals with the symptoms of muddled incentives: high premiums and poor access.For insurers, reform holds opportunity and peril. From 2014 the law will require everyone to buy health insurance and offer subsidies to those who cannot afford it. As more people buy insurance, firms’ revenues will more than double to $1.2 trillion by 2019, predicts the Boston Consulting Group. However, profits will be squeezed, thanks to a new tax, a…

Original post by The Economist: Business

REDUCING the risks of climate change is not a technological problem. There are many ways to generate electricity, drive cars or grow crops without emitting much carbon dioxide—but they are expensive. According to the International Energy Agency, $13.5 trillion must be invested in low-carbon energy by 2035 to reduce emissions. That sort of money can be found only on capital markets. Yet investors’ appetite for green schemes is unproven.Hence growing interest in one of the more promising efforts to encourage it: “green bonds”. These instruments look like any other fixed-income offering except that the proceeds are invested in environmentally friendly projects. Estimating the size of the market is hard: according to Climate Bonds Initiative (CBI), an NGO, between $10 billion and $30 billion of bonds related to renewable-energy projects have been issued. Bonds that are explicitly advertised as green, mostly issued by the World Bank and other multilateral lenders, are easier to count. Around $5 billion-worth have been issued; by one estimate, they could amount to $30 billion by 2015.Some see an opportunity in…

Original post by The Economist: Business

No Davos invite this year

RAJAT GUPTA is one of the American elite. He has sat on the boards of Goldman Sachs and Procter & Gamble. For years he led McKinsey, a global consultancy. In 2005, when Kofi Annan was secretary-general of the United Nations, he made Mr Gupta his “special adviser for management reform”.His connections have now landed him in trouble. Raj Rajaratnam, a hedge-fund manager and friend to whom Mr Gupta allegedly passed confidential information, was sentenced on October 13th to 11 years in jail, the longest insider-trading sentence ever doled out in America. Now Mr Gupta faces the possibility of time in jail. On October 26th he was charged with five counts of securities fraud and one count of conspiracy. Mr Gupta denies any wrongdoing.According to the indictment, Mr Gupta called Mr Rajaratnam several times after he learned non-public information involving Goldman Sachs and Procter & Gamble. After a phone call when Goldman’s board members were informed that Berkshire Hathaway, Warren Buffett’s investment outfit, was going to invest $5 billion in the bank, he…

Original post by The Economist: Business

FARMERS tend to be a gloomy lot. “Worse than last year, better than next” is their characteristic response when asked about economic conditions. But they should be a bit more cheerful at the moment. American farmland values have doubled since 1990 in real terms; on the same basis British farmland prices are up by 135% over the past decade.Even more remarkably, farmland prices have been much more resilient than residential and commercial property values in the wake of the credit crunch. British prices are more than 15% above their early-2008 levels.In a way this is rather odd. Economists agree that this is the worst crisis since the second world war; there has been talk of another Depression. Yet farm values have held up much better than they did in the 1930s or even in the 1980s, when prices fell by around a third in real terms as commodity prices dropped and the Federal Reserve used high interest rates to squeeze inflation out of the system.The Federal Reserve Bank of Kansas City, situated in the heart of America’s farm country, concluded earlier this year that the surge in farmland prices had been…

Original post by The Economist: Business

AMERICAN policymakers are pulling every lever they can to revive the economy, from fiscal stimulus to quantitative easing. The big exception has been regulatory policy. From environmental protection to bank oversight, the rule book has steadily thickened in recent years. Republican critics of Barack Obama think this explains America’s economic malaise. Scrap the rules, they claim, and the economy will spring to life. Nonsense, responds the Treasury. In a recent article, Jan Eberly, an assistant secretary for economic policy, scrutinised the behaviour of corporate-bond yields, corporate profits and other indicators. She found no evidence that regulatory uncertainty is holding businesses back from hiring or investment; weak demand is the big culprit.Yet regulation, if not a prime suspect, could still be an accomplice. Rules raise costs by compelling businesses to do things differently. That is acceptable if the benefits—whether cleaner air or stabler banks—justify the costs. Ever since the administration of Ronald Reagan, presidents have required federal regulators to demonstrate precisely that. There is a growing…

Original post by The Economist: Business

AS GREECE flirts with disaster and several other European countries buckle under heavy debts, creditors’ experience with Argentina should serve as a sobering reminder about the mess that can follow a sovereign default. A decade after the Latin American country welshed on $81 billion, disgruntled creditors are still chasing their money. The litigation, and Argentina’s defiance in the face of judgments against it, complicate its plans to return to international capital markets.Argentina’s default, after a severe economic crisis, sparked social unrest and runs on banks. It subsequently presented creditors with a take-it-or-leave-it offer of 35 cents on the dollar. They considered this derisory: previously, delinquent countries had typically paid 50-60 cents. But the government stood firm and roughly three-quarters of the bondholders took part in a debt exchange in 2005. More joined in 2010, bringing the total to 93%.But the rest, holding $6 billion-worth of debt (excluding accrued interest), continue to insist on a higher payout, pointing to Argentina’s strong commodity-led recovery. They were able to hold…

Original post by The Economist: Business

“THIS is a referendum on modern-day corporate Japan,” fumes Michael Woodford, a Brit cast down from the heights of Olympus, a Japanese camera maker. Mr Woodford was ousted as the company’s president on October 14th, after barely six months in the job. Tsuyoshi Kikukawa, the 71-year-old chairman, blasted him for failing to hew to Japanese cultural practices. The board voted unanimously at a ten-minute meeting where Mr Woodford was not allowed to speak. Take a bus to the airport, he was told.Mr Woodford says his sacking may have more to do with some very large and unusual transactions that he challenged Mr Kikukawa and other executives to explain. They stonewalled him, according to internal company correspondence reviewed by The Economist.Mr Woodford alerted Olympus’s auditors, commissioned a review by an outside forensic-accounting group and asked for the resignations of Mr Kikukawa and an associate. He has since handed a dossier on the matter to Britain’s Serious Fraud Office—much of the money flowed from Olympus’s accounts in Britain.Olympus paid $687m in advisory fees relating to the purchase in 2008 of Gyrus, a British firm that makes medical instruments. The money went to AXAM, a firm incorporated in the Cayman Islands, and AXES, a firm in New York. The owners of AXAM/AXES are unknown. Neither firm can now be traced. Olympus paid a generous $2.2…

Original post by The Economist: Business