Winners and losers

Will big firms benefit from the covid crunch?

It’s complicated, and the implications for competition uncertain



As the prospect of a widely distributed vaccine draws nearer—this week AstraZeneca and Oxford University announced results for their jab—bosses and investors are turning one eye away from the immediate struggle of coping with the pandemic and looking instead at the longer-term competitive picture. 

Who has won and who has lost? 

Like viruses, recessions usually come for the weakest first. Companies with sickly balance-sheets or frail margins quickly succumb. As promising startups become crushed closedowns, it is often the incumbents that have the resources to wait it out.

Yet the covid-19 recession has been sharper than normal, and more complicated. The world economy is expected to shrink by over 4% this year, the deepest downturn since the second world war, and there is still a risk of a double-dip recession. 

Bail-outs, central-bank stimulus and forbearance by banks and landlords have slowed the process of creative destruction and cut the number of defaults. Social distancing is laying waste to some industries while boosting others, as people find new ways to do old things.

As a result the normal pattern in which powerful firms gain more clout is less emphatic than you might expect—so far. Investors are struggling to get to grips with such an unusual outlook. 

This is partly why, although anticipated, the news on vaccines in the past few weeks has caused gyrations in financial markets as fund managers bet more heavily on firms they feared to touch just a few weeks ago.

What, then, is a good way to assess the winners and losers? In many businesses the incumbents will remain on top, because their entire industry has proved immune to online disruption. 

In other cases the incumbents will win—but because they have mastered new digital innovations. Finally, in some parts of the economy where technological change seems to have been speeded up, the running is being done by new entrants.

Live music is one industry that the pandemic has completely unplugged (see article). 

With concerts and festivals banned, Live Nation, the largest concert organiser, has seen its sales fall by 95% compared with a year ago. Yet with no way to replicate a mosh-pit online, the industry is not being disrupted so much as put in the deep freeze. 

As Live Nation’s buoyant share price suggests, it can afford to wait until life returns to normal. Many other industries, such as air travel, cannot move online. 

This year will do grave damage to airlines’ balance-sheets—their total debt has reached half a trillion dollars. (British Airways is literally selling off the family china to shore up its finances: half a dozen first-class teacups can be yours for just over $30.) 

But those that survive will find the skies less crowded.

Elsewhere there has been more digital disruption—but it is the incumbents that have benefited. Advertising has shifted even further online, where the duopoly of Facebook and Google rules. 

Likewise, much office-based work has moved to the home, leading to empty office buildings and abandoned photocopiers. The upshot of this disruption is that people are more reliant than ever on big tech firms that provide cloud services. 

Though the pandemic will cause permanent change to all such industries, the dominant names in each will be familiar.

Yet there is a third group of industries which have been disrupted in ways that threaten the incumbents. Live sport has more or less continued throughout the pandemic, as teams have found ways to test or quarantine players. 

But the absence of crowds has contributed to a plunge in tv viewership, the financial engine of the sports industry. Instead, people are tuning in more often to highlights clips, betting sites and other interactive ways of enjoying sport on social apps, threatening the cable-tv firms. 

In catering, a growing appetite for delivery services such as DoorDash, whose revenues this year have more than trebled, points to a future in which eating at home becomes more common. Food retailers and restaurants will have to adapt, or see their profits nibbled away.

And what is the picture for the economy as whole? 

If you look at America’s stockmarket, the shares of the biggest companies by sales have outperformed this year—but only in 33 out of 59 industries, and by a median margin of just two percentage points. 

In many areas the battle for supremacy is still raging. Thus, in e-commerce Amazon’s sales have surged but it faces revived competition in the form of Walmart’s online operation and Shopify, a digital upstart. 

Covid-19 has brought with it economic damage on a vast scale. Yet the rapid changes that have been forced on many industries are leading to innovation that will outlive the pandemic—and in some cases are leaving incumbents less mighty than before. 

Consumers and trustbusters alike must hope that these newly competitive parts of the economy remain hotly contested long after the pandemic abates.

Janet Yellen prepares for second act at pinnacle of US economic policymaking

Former Fed chair set to take helm at Treasury as coronavirus resurgence threatens recovery

James Politi in Washington and Colby Smith in New York

Janet Yellen, the former Fed chair, briefed Joe Biden In August on the slump triggered by the pandemic © AP


Shortly after Joe Biden picked Kamala Harris to be vice-president in August, Janet Yellen, the former US Federal Reserve chair, briefed the pair on the slump triggered by the coronavirus pandemic and what they could do about it.

According to one person briefed on the conversation, Ms Yellen told the Democratic ticket that interest rates were low and likely to stay there for a long time, creating considerable fiscal space for new stimulus and investment.

The intervention was well-received by Mr Biden and Ms Harris, whose economic plan calls for billions of dollars of government spending. Now Ms Yellen, 74, is set to be nominated by Mr Biden to be the next US Treasury secretary, handing her a second act at the pinnacle of American economic policymaking.

Ms Yellen is a well-known quantity both nationally and internationally, given her four years at the helm of the US central bank between 2014 and 2018, fitting well with Mr Biden’s drive to fill his cabinet with competent institutionalists after the disruption created by President Donald Trump.

“Janet Yellen’s appointment will be universally welcomed, and rightly so, including by economists, foreign officials and markets, all of whom regard her as a highly experienced policymaker who delivered years of stability,” said Mohamed El-Erian, president of Queens’ College at the University of Cambridge and chief economic adviser to Allianz.

Ms Yellen “understands well the importance of close national and international policy co-ordination”, Mr El-Erian added.

She is smart, tough, and principled

Elizabeth Warren, Massachusetts senator

If Mr Biden follows through with her nomination and she is confirmed by the Senate, Ms Yellen will take over the management of US economic policy at a pivotal moment.

The recovery from the initial impact of coronavirus is showing significant signs of slowing amid fading fiscal support from Congress as new infections surge in many states. Even though a vaccine is on the horizon, many economists fear lasting damage to businesses and the labour market that could weigh on the performance of the economy for years.

And while financial markets appear to be in healthy shape, Mr Trump’s Treasury department, run by secretary Steven Mnuchin, has just moved to close some of the Fed’s emergency lending facilities, triggering a rift with the central bank that Ms Yellen is uniquely positioned to mend.

“I think she will do her best within the legal framework to reinstate as much of those programmes as she can,” said Eric Stein, chief investment officer for fixed income at Eaton Vance. “Given Yellen’s background at the Fed, her views will be very much in line with the Fed and she will want the Fed to be able to provide as much credit to various sectors of the economy as possible.”

Ms Yellen was born and raised in Brooklyn, New York, did her undergraduate studies at Brown University and earned her doctoral degree in economics at Yale University, where she specialised in the labour market.

Her government career took her to the Fed — where she met her husband George Akerlof, a fellow economist and Nobel laureate — and eventually into the White House as chair of the council of economic advisers under Bill Clinton.

Later, she would return to the US central bank as president of the San Francisco Fed in the years leading up to the financial crisis and at the beginning of the great recession, and later as Fed vice-chair.

When Barack Obama chose her to succeed Ben Bernanke as Fed chair in late 2013, he joked that she was “tough, not just because she’s from Brooklyn” and credited her with sounding an early alarm about the housing bubble.

“She doesn’t have a crystal ball, but what she does have is a keen understanding of how markets and the economy work, not just in theory but in the real world,” he said.

During her time leading the Fed, Ms Yellen presided over the start of the post-crisis tightening of monetary policy, ushering in a cycle of interest-rate rises that she approached cautiously, pausing along the way.

For some liberal economists, even those moves were excessively hawkish, and in retrospect the Fed disavowed them on the grounds that the economy could have benefited from sustained easy money without triggering a dangerous inflation spike.

Over that period, Ms Yellen’s tenure was marked by other changes at the Fed that have endured under her successor Jay Powell, including a growing focus on disparities in income and the role played by gender and race — issues that the central bank did not traditionally factor into policymaking.

Mr Trump even considered offering Ms Yellen a second term as Fed chair, but demurred after his aides thought it best that he select his own nominee. The president also questioned whether Ms Yellen, who is 5 feet 3 inches tall, was too short for the job, according to The Washington Post newspaper.

After leaving the Fed, Ms Yellen took a position as a fellow at the Brookings Institution, a Washington think-tank, and occasionally lamented the US president’s attempts to undermine the central bank’s independence as well as the administration’s lack of global economic leadership.

In an interview with the Financial Times in October 2018, Ms Yellen said that Mr Trump’s relentless verbal assaults were “whittling away the legitimacy and stature of institutions the public has traditionally had some confidence in”, adding: “I feel it ultimately undermines social and economic stability.”

As Treasury secretary, Ms Yellen will be forced to enter the political fray more than in her previous roles. Although she faced frequent grillings from Congress as a Fed official, including her own confirmation hearing, she will now have to negotiate with recalcitrant Republicans measures to boost the economy, and defend them to a deeply polarised American electorate.

Crucial to her nomination to the Treasury is the fact that she successfully managed to endear herself to the progressive wing of the Democratic party in recent years — more so than Lael Brainard, a current Fed governor who was also a leading contender for the Treasury job.

Not only did Ms Yellen stress America’s capacity to engage in deficit spending during her call with Mr Biden and Ms Harris in August, she also penned an op-ed in The New York Times newspaper that month with Jared Bernstein, a member of Mr Biden’s transition advisory board, appealing for large-scale stimulus.

“If senators still fail to resolve stalled negotiations . . . millions of needy Americans will suffer — and the overall economy could degrade from its current slow rebound in growth to no growth at all,” they wrote.

On Monday, Ms Yellen received a ringing endorsement from Elizabeth Warren, the Massachusetts senator known for her very liberal views on economic policy and hardline positions on banking regulation.

Ms Warren’s support suggests there could be little backlash from the left to her nomination, at least initially, of the kind that dogged former Treasury secretary Tim Geithner under Mr Obama.

“She is smart, tough, and principled. As one of the most successful Fed chairs ever, she has stood up to Wall Street banks, including holding Wells Fargo accountable for cheating working families,” Ms Warren wrote in a tweet that described Ms Yellen as an “outstanding choice”.

The ‘bloodsucking capitalist’ being lauded by Communist China

Entrepreneurs urged to follow Zhang Jian’s example after Jack Ma’s fall from grace

Tom Mitchell in Singapore

Xi Jinping visits Zhang Jian’s home town. The Chinese president has praised Jian as a ‘sage’ and a ‘role model’ © Xinhua/Alamy


Zhang Jian, a pioneering 19th century capitalist, has been brought back to life many times by the Chinese Communist party since his death in 1926, depending on its propaganda needs.

But his latest reincarnation, as a patriotic nation builder and philanthropist, marks his highest profile reappearance yet, championed by no less a communist puritan than President Xi Jinping.

This month Mr Xi, who has emphasised the party’s centrality in all aspects of life in contemporary China, visited Zhang’s hometown of Nantong, a Yangtze river port 100km north of Shanghai. He toured a museum founded by Zhang — China’s first — and reviewed an exhibition about the life of the famed entrepreneur.

Mr Xi visited Nantong just nine days after regulators halted what would have been the world’s biggest ever initial public offering — by Alibaba founder Jack Ma’s Ant Group — and a fortnight after the party’s Central Committee formally placed “self-reliance” at the heart of China’s long-term development strategy.

Sima Nan, a pro-party blogger and commentator in Beijing, said Mr Xi’s message to Mr Ma, China’s richest man with a fortune estimated at $59bn, was clear: if Ant’s $37bn IPO had proceeded, the online lender would have boasted a bigger market capitalisation than even state-owned Industrial and Commercial Bank of China, the country’s biggest bank.

“Ma is rich, has starred in films, conducted orchestras and criticised regulators,” Mr Sima said, referring to some of the billionaire’s celebrity exploits and an October 24 speech that angered Mr Xi, who then ordered regulators to suspend the Ant IPO.

“Zhang Jian built factories and founded over 370 schools. Ant poses systemic risks. It is important to see how both men made their money and how they spent it.”

Mr Xi said Zhang was a “sage and role model” for China’s entrepreneurs. “When you see a virtuous person, follow his example,” he added, calling on China’s private-sector business leaders to “strengthen their feelings for the country and assume social responsibilities”.

A spokesperson for Mr Ma declined to comment. The internet tycoon’s charitable foundation, which focuses on education and environmental protection, was valued at $4.6bn and had distributed $300m by the end of 2019. Mr Ma has also pledged 2 per cent of Ant's shares to charities, according to Chinese media reports.

Zhang Jian © Wikimedia


Mr Xi had first mentioned Zhang at a July meeting with business people. “Outstanding entrepreneurs must have a strong sense of mission and responsibility for the nation, and align their enterprise’s development with the prosperity of the nation and the happiness of the people,” he told them. “Zhang was a model patriotic entrepreneur.”

As a young man, Zhang aced the Qing Dynasty’s exams for scholar officials, giving him entrée into elite imperial circles. With state support, he founded a successful textile group and other enterprises. He was also sympathetic to reformist movements that aspired to modernise China so it could hold its own against a newly industrialised Japan and the European colonial powers.

Elisabeth Koll, a historian at Notre Dame university who has written a book about Zhang, notes that in contemporary portraits he appeared as comfortable in traditional Qing scholar outfits as he did in the western business suits preferred by modern reformers of the era.

“He was somebody who was very clever at moving back and forth between two worlds,” Prof Koll said. 

“I would characterise him as a conservative who, during a really difficult and messy time, wanted stability and peaceful development.”

     Chinese regulators scuppered the IPO of Jack Ma’s Ant Group © Marlene Awaad/Bloomberg


While Zhang was not an active participant in the revolutionary underground that helped precipitate the Qing dynasty’s collapse in 1911, he successfully navigated the political turbulence, ending up a minister in China’s first but shortlived republican government.

Disillusioned by the chaos of republican China, which quickly gave way to a fractured era dominated by regional warlords, Zhang retreated to Nantong, where he wielded enormous power.

Qin Shao, who teaches modern Chinese history at the College of New Jersey, argued that this made Zhang a problematic figure for Mr Xi. China’s president has made it clear that true patriots must also love the party and follow its dictates. Chinese pro-democracy activists, most notably in Hong Kong, have categorically rejected the notion that country and party are one and the same.

“Zhang went his separate way and built Nantong as a local, independent and self-governing model for the rest of China,” said Prof Shao. “If anything, he provides an excellent example of separating the political regime and the country, and serving the interests of the country instead of the regime.”

The ways in which the party has portrayed Zhang over the years says as much about the Communists as it does about Zhang. In the 1980s and 1990s, when Deng Xiaoping was encouraging market-oriented reforms, Zhang was celebrated for his capitalist innovations, such as founding China’s first shareholding company.

“The party sees what it wants to see in Zhang Jian depending on where economic policies and reforms stand,” Prof Koll said. “The way he was portrayed [during Deng’s rule] made perfect sense with the first wave of economic reforms, and now there is this whole focus on patriotism.”

By contrast, she added, Zhang was vilified during the Cultural Revolution as a “bloodsucking capitalist and exploiter of the working class — the usual story”.

But in Mr Xi’s China, the party prefers to overlook Zhang’s deserved reputation as a tough factory boss, whose largely rural workforce could be sent back to their nearby farms when orders slowed.

“Zhang Jian sets an example,” Mr Sima said. “When entrepreneurs get rich they should love the country more, rather than move money out of China then come back to make more.”


Additional reporting by Xinning Liu in Beijing

NATO Needs to Adapt Quickly to Stay Relevant for 2030, Report Urges

After France’s president said NATO was suffering “brain death,” the alliance sought advice on how to stay vibrant as it faces new challenges from Russia and China.

By Steven Erlanger

      The NATO headquarters in Brussels earlier this year.Credit...Virginia Mayo/Associated Press


BRUSSELS — A high-level look at NATO’s next 10 years recommends significant changes to confront the new challenges of an aggressive Russia and a rising China, urging overhauls to fortify the  alliance’s cohesion and to better coordinate with democratic allies around the world.

NATO did well boosting military deterrence after the Russian invasion of Ukraine and annexation of Crimea in 2014, the report commissioned by the alliance says. But with a similar challenge to the West arising from an ambitious and authoritarian China, it says the alliance now needs to make similar advances on the political side, including reaching out more consistently to Asian allies anxious about Beijing’s ambitions.

Covering 138 specific recommendations in some 60 pages, the report will be a major source of discussion on Tuesday, the start of a two-day meeting of NATO foreign ministers that is likely to be the last for Secretary of State Mike Pompeo. The report is scheduled to be released Tuesday evening, but its contents were described in advance to The New York Times by several people familiar with them.

The report was requested by the NATO secretary-general, Jens Stoltenberg, after President Emmanuel Macron of France said a year ago that NATO was experiencing “brain death” because of a lack of strategic coordination and American leadership.

According to a diplomat from a NATO country, the report is a kind of riposte to Mr. Macron but also an effort to respond to his legitimate criticisms of an alliance that has been slow to adapt its structures and its reach, and where decision-making is a cumbersome and often arduous process that hinders quick reaction.

Secretary General Jens Stoltenberg of NATO, second from left, had requested the report following President Emmanuel Macron’s comments on the poor health of the organization due to a lack of strategic coordination and American leadership.Credit...Al Drago for The New York Times


A co-chairman of the 10-member group of experts, A. Wess Mitchell, told NATO ambassadors in a private briefing that the report showed that “NATO is alive and kicking both in its cerebral function and its muscle tissue.’’

In an interview, Mr. Mitchell, a former U.S. assistant secretary of state for Europe, acknowledged that the quotation was accurate. He said that the report was aimed at the future for an alliance whose last formal strategic concept was written a decade ago, when a different kind of relationship with Russia was hoped for and in which China was not even mentioned.

“Our intention is to be candid about the challenges to NATO, with a tone of well-grounded optimism,’’ Mr. Mitchell said. The main message, he said, is that “NATO has to adapt itself for an era of strategic rivalry with Russia and China, for the return of a geopolitical competition that has a military dimension but also a political one.’’

NATO, he added, is “first and foremost an alliance of Euro-Atlantic democracies, and must evolve politically to match its military evolution.’’

In this new world, internal division is damaging, Mr. Mitchell said. “That strategic competition makes schisms inside potentially more dangerous, because they can be exploited. So it also puts an emphasis on political cohesion.’’

To that end, the report does not recommend the scrapping of NATO’s principle of consensus, but suggests ways to speed up decisions. For example, numerous NATO partnership decisions with countries like Israel and even Austria are being held up by one country, in this case Turkey. The report suggests that such disputes be raised to the ministerial level, not left with the anonymity of ambassadors.

China is a significant part of the report, and it recommends setting up a consultative body to coordinate Western policy toward Beijing and to highlight Chinese activities  that could affect Western security. Those include issues like spying, supply chains, information warfare and arms buildups.

With its technological ambitions, military expansion and trade policies, China can no longer be seen as simply an Asian player, the report argues, and NATO has been slow to respond to the challenge.

The report urges the creation of analytical centers better able to study disruptive and emerging technologies and to better use artificial intelligence, so the alliance can enhance its security and deterrence against cyber and hybrid warfare, beyond the traditional battlefield.

Shipping containers at a port in Qingdao, China. The NATO report recommends setting up a consultative body to look into Chinese activities that could affect global supply chains.Credit...Agence France-Presse — Getty Images


It should also use those capacities to improve the fight against terrorism and to better coordinate policies that defend NATO’s southern members, which are less worried about Russia than about Islamist terrorism and state-sponsored wars, like in Libya, that create uncontrolled migration.

The report is also blunt about the problems of democratic adherence inside the alliance, arguing that with ideological rivals like Russia and China, the political health of the alliance matters more.

It recommends creating a Center of Excellence for Democratic Resilience and recommitting all members to the principles of the NATO founding treaty, whose prologue commits them to uphold “the principles of democracy, individual liberty and the rule of law.”

The report also urges closer coordination with the European Union and its own military efforts and ambitions. It recommends a permanent staffing link and a more explicit encouragement by NATO of E.U. efforts toward a more capable European defense, so far as they strengthen the alliance, contribute to fairer burden-sharing and do not exclude non-E.U. allies.

A senior diplomat from a  NATO country called the report comprehensive, a foundation from which Mr. Stoltenberg can build recommendations to political leaders from the alliance for their next summit meeting, expected early next year. NATO is expected, as the report urges, to approve the preparation of a new strategic concept to replace the one of 2010.

The European Union has already begun  preparations to work with a new Biden administration. The European Commission and the European Council are studying proposals to work together with the United States on issues like health and pandemics, trade, climate, data protection and antitrust enforcement and screening of sensitive foreign investments, aimed particularly at China.

For the NATO report, Mr. Mitchell and his co-chairman, Thomas de Maizière, a German legislator and former defense minister, were joined by other experts from various NATO countries, including Hubert Védrine, a former French foreign minister; Marta Dassu, a former Italian deputy foreign minister; and Tacan Ildem, a senior Turkish diplomat and NATO’s former assistant secretary-general for public diplomacy.



Steven Erlanger is the chief diplomatic correspondent in Europe, based in Brussels. He previously reported from London, Paris, Jerusalem, Berlin, Prague, Moscow and Bangkok.