Philippa Kaur

VISITORS TO a big supermarket in America these days could be forgiven for feeling disoriented. From one angle, all-American consumerism is on full display as in normal times: throngs of people struggling to steer overflowing trolleys in a straight line. Retail sales (excluding cars) rose at a seasonally adjusted rate of 1.8% in August, compared with July, the fastest monthly rate since March. Other images, however, look distinctly unAmerican. To their horror, some shoppers discover empty shelves where their favourite brands of biscuits, detergents, pet food and loo roll typically reside—the result of supply-chain disruptions as outbreaks of the infectious Delta variant of covid-19 shut factories and ports around the world.Unlike in the early days of the pandemic, when shops were stripped bare by panic-buying, America’s consumers mostly have alternatives to pick from. But the shortages are a sign that things in the country’s $5.6trn retailing industry are not back to normal. If the supply shock were not enough, retailers must simultaneously deal with demand from shoppers once again keen to stroll around aisles rather than scroll through apps. Having survived the initial pandemic upheaval, they are now in the throes of another.Start with the bottlenecks. Congestion in ports from China to California has pushed shipping costs to record highs. Domestic trucking costs are up, too, as a result of the surge in online deliveries. This is less of a problem for expensive things like iPhones than it is for the sort of cheaper wares peddled by most big retailers, where shipping constitutes a bigger slice of the list price. Walmart went so far as to charter vessels directly to ensure steady supplies.At the same time, companies face a shortage of labour. Depending on whom you ask, this is down to workers being spooked by Delta, coddled by generous pandemic-era benefits or re-evaluating their lives and careers in the wake of the pandemic. Whatever the reason, the result is the virtual disappearance of customer service at large stores. Helpers that normally direct shoppers to the right shelf are nowhere to be found. With many cash registers closed, long queues form at the few that remain open. In-store placards that used to promote products are now soliciting employees. In August Walgreens, a chain of chemists, said it would raise wages, matching a move earlier in the month by its main rival, CVS. Target raised wages earlier this year. Walmart has done so multiple times over the past 12 months. As with higher shipping costs, this puts pressure on margins. And additional expenses might be coming in the form of federally mandated covid-19 tests for employees who refuse to get vaccinated. This month the Retail Industry Leaders Association, which counts Target among its members, warned about insufficient testing capacity in the country to meet this requirement.The shift back to bricks and mortar presents a second set of problems. E-commerce, which shot up from 11% of American retail sales before the pandemic to nearly 16% in the panicky second quarter of 2020, has fallen back to 13% of the total. Target’s comparable digital revenues grew by just 10% year on year in the three months to June, down from nearly 200% in the same period last year. Meanwhile, offline sales shot up by a third in the second quarter, compared with a year earlier, to $1.4trn, handily outpacing e-commerce (see chart 1). Coresight Research, a firm of analysts, reckons that so far this year shop openings have exceeded closings (see chart 2). If this trend continues, it would be the first time since 2016 that America has added new outlets.The retailers’ investments in online capabilities will not go to waste. Once seen as a costly mistake, Walmart’s $3.3bn takeover in 2016 of Jet.com, an e-merchant, gave America’s mightiest conventional retailer a platform on which it built a successful digital business. Some 3,000 of its 4,700 domestic stores now offer same-day deliveries. Similarly, Target’s $550m acquisition of Shipt, a same-day delivery platform, a year later formed the basis of an integrated technological network that now stretches from a data centre in India to its 2,000-odd stores in America. Even Amazon seems to recognise that the future is “omnichannel”, mixing digital and in-store experiences, as it plans to expand its relatively piddling physical footprint, possibly with a chain of department stores. Consumers’ rediscovery of the pleasures of in-person shopping helps explain why the online giant no longer looks unstoppable; its share of American retail sales actually declined from 7.8% in the first three months of 2021 to 7% in the subsequent three (though it remains above its pre-pandemic level of under 6%). In principle, Target, Walmart and their brick-and-mortar peers stand to benefit more from the move back to bricks and mortar than the beast of Bezosville. But shoppers’ stampede to their outlets requires another reallocation of resources, before the retailers’ foray into cyberspace was complete.Investors have faith that the biggest firms can withstand these pandemic aftershocks just as they did the original covid-quake in March 2020. The combined market capitalisation of the three largest bricks-and-mortar generalists—Costco, Target and Walmart—has swelled to around $730bn, from $520bn or so at the start of the pandemic (see chart 3). In the past year Costco’s and Target’s share prices have outperformed even that of Amazon, by a factor of two and nearly four, respectively. Look beyond the biggest retailers, which have more or less maintained their market shares throughout the pandemic, and the picture is one of wreckage. As in many sectors, covid-19 put struggling merchants out of their misery. Last year nearly 9,600 shops shut for good, while fewer than 4,000 opened, according to Coresight. Casualties include such venerable names as Neiman Marcus (a department store for the wealthy) and JCPenney (one for everybody else). Targets and Walmarts may be buzzing with activity. But derelict shopping malls marooned amid the cracked concrete of empty parking lots have replaced rustbelt factories as the poster children of creative destruction’s toll. ■ More

A FEW MONTHS ago Kim Beom-su looked like the face of responsible capitalism in South Korea. In March the billionaire founder of Kakao, which runs the country’s most successful messaging app and a slew of other digital services, promised to give away half his wealth for charitable causes, the second Korean tycoon to make that pledge. Now he is making headlines for some less salubrious reasons. Antitrust officials have reportedly set their sights on his private holding company for allegedly failing to report properly on its shareholders and affiliates.The apparent move against Kakao’s founder is the latest salvo in an ongoing battle. Like their counterparts in America and China, South Korea’s technology giants have come under scrutiny. Officials worry that as firms such as Naver, which began life as a search engine, and Kakao have expanded into anything from ride-hailing to personal finance, they have picked up the bad habits of the chaebol. These sprawling conglomerates were instrumental in making South Korea rich and continue to dominate its economy. But they are notorious for murky governance structures, oligopolistic business practices and close ties with the political elite.Over the past few weeks politicians have ramped up the rhetoric. “Kakao has turned from a symbol of growth and innovation into a symbol of old greed,” Song Young-gil, a leader of the ruling Minjoo party, told the National Assembly this month. “We will find a way to stop its rapid expansion and help it coexist with small-business owners,” he warned.The same day regulators ruled that some financial services offered by Kakao and Naver violated consumer-protection laws because the platforms were not registered as intermediaries. The two companies will now be required to abide by brokerage regulations. Spooked investors dumped Kakao and Naver shares, shaving a tenth, or $11bn, off their combined stockmarket value.Korean trustbusters, for their part, are investigating allegations that Kakao’s taxi-hailing service favours its own pricier cabs. They want e-commerce platforms to draw up proper contracts with third-party sellers, and specify what commissions they earn. In August Coupang, the country’s biggest e-commerce firm, was fined 3.3bn won ($2.8m) for pressing suppliers to lower prices. South Korea’s largely unregulated crypto-exchanges will have to register as legal trading platforms.The techlash is not limited to domestic tech darlings. On September 14th regulators fined Google $177m for not allowing versions of its Android operating system to be installed on locally made smartphones. And last month South Korea became the first country to oblige Apple and Google to accept alternative payments systems in their app stores.App developers like Epic Games, which suffered a courtroom defeat against Apple in America on September 10th, welcomed the move. The maker of “Fortnite” invoked the South Korean law to try to get its app reinstated on Apple’s app store, from which it had been booted for breaching rules that barred such in-app payments. Apple has refused.Lim Jung-wook, a venture capitalist, applauds the government’s instincts to protect consumers and small suppliers. But he reckons stricter rules will do little to curb the tech companies’ power in the long run. “These firms’ services are too convenient for them not to keep growing.”Nonetheless, faced with sinking stock prices, the Korean firms have begun to respond. On September 14th Kakao announced a new 300bn-won fund to help small suppliers and promised to scrap new services such as flower delivery that compete with mom-and-pop businesses. Mr Kim promised that the company would “throw away” its old growth model and replace it with one that fostered “social responsibility”.Coupang has chosen a more combative approach. It insists that its platform has made it easier for small firms to get their products to consumers. And it is appealing against the antitrust fine, claiming that the penalty serves to protect chaebol such as LG, which brought the complaint. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Business section of the print edition under the headline “The other techlash” More

IT IS NOTHING new for foreign firms to endure shakedowns by the Chinese Communist Party. As far back as revolutionary times, Chairman Mao’s victorious troops did not directly confiscate foreign-owned assets as their Bolshevik forerunners had done in Russia. Instead, they wore them down with higher taxes and fines so big that eventually companies gave away their assets for nothing. In one memorable case dug up by Aron Shai, an Israeli academic, a British industrialist in 1954 professed to be handing over everything to the Communists from “large blocks of godowns (warehouses) down to pencils and paper”. And yet, he complained, Comrade Ho, his opposite number, continued to haggle “like a pre-liberation shopkeeper”.Though multinationals have flocked back to China since, the government’s nit-picking has continued, encompassing everything from technology transfer to how freely firms can invest. There have been big improvements, but the pettifoggery is a constant reminder, as one American puts it, that companies should not get “too big for their britches”. Western firms operate in China on sufferance and one day the country may seek to replace them.As a result, some may have felt a sense of Schadenfreude that Chinese firms, not Western ones, have been the main victims of President Xi Jinping’s recent effort to socially engineer a new type of economy. In the past week alone the government has taken steps to reduce barriers between tech giants Alibaba and Tencent, and, according to the Financial Times, ordered the break-up of Alipay, a financial super-app owned by Alibaba’s sister company, Ant. Some go so far as to draw flattering comparisons between Mr Xi’s efforts to emasculate China’s tech “oligarchs” and the way governments in America and Europe are going after Western tech giants.The heavy-handedness, though, is chilling to an unusual degree. So is the capriciousness. Kenneth Jarrett, a veteran China watcher in Shanghai for the Albright Stonebridge Group, a consultancy, says the question on everyone’s lips is “who might be next?” The crackdowns occur against the backdrop of rising tensions between China and the West that leave multinationals stranded in a sort of semilegal limbo. For many the lure of China remains irresistible. But the perils are catching up with the promise.Besides banks and asset managers, some of whose investments in China have taken a big hit in recent months, several types of multinational firm are at risk. One group includes those that make most of their money in China from pandering to a gilded elite who flaunt their $3,000 handbags and sports cars. Another encompasses companies that irritate their customers for what can be construed as Western arrogance; Tesla, the electric carmaker, is an example. A third category includes European and American makers of advanced manufacturing equipment and medical devices that China feels it should be producing itself.As usual, the threats come in the form of policy announcements that sound deceptively bland. One, “common prosperity”, is a catch-all phrase extending from a reduction in social inequality to more coddling of workers and customers to the nannying of overstressed youngsters. Its most obvious impact is on Chinese tech, tutoring and gaming firms, which have lost hundreds of billions of dollars in market value as a result of government crackdowns. Yet multinationals, too, have been caught in the fallout. In a few days in August the valuation of European luxury brands, such as Kering, purveyor of Gucci handbags, and LVMH, seller of baubles and bubbles, tumbled by $75bn after investors finally took Mr Xi’s common-prosperity agenda seriously.Mr Xi does not intend to force Chinese consumers back into Mao suits. But his war on flamboyance, especially among the rich who may spend at least $100,000 each a year on foreign brands, threatens the most lucrative end of the market. It also imperils luxury marques that charge consumers in China more than they do in their outlets in, say, Milan. Flavio Cereda of Jefferies, an investment bank, expects the government to keep supporting a growing middle-class luxury market, since aspirational purchases reflect economic success. If China were to mess up the experiment, the shock could be huge. Its consumers account for 45% of the world’s spending on luxury, he says. “No China, no party.”“Dual circulation” is another buzz phrase with troubling overtones. It is an attempt to promote self reliance in natural resources and technology, partly in response to fears that a dependence on Western suppliers could make China vulnerable to geopolitical and trade pressures. But it also poses a threat to Western multinationals in China by reducing imports of technology and creating a “buy Chinese” mentality. Friedolin Strack of BDI, a German industrial federation, notes that state firms in China have reportedly been given procurement guidelines that mandate domestic supply of devices such as X-ray machines and radar equipment.Between a bloc and a hard placeIt is all becoming a catch-22. On the one hand, America, Europe and allies are in a geopolitical contest with China, which they accuse of human-rights abuses in places like Xinjiang, home to the oppressed Uyghur minority. The West wants to restrict what technologies its firms sell to China and what materials, such as cotton, they source there. On the other hand, China asserts its right to retaliate against companies it thinks are wading into geopolitics.Jörg Wuttke, president of the EU Chamber of Commerce in China, says the size of China’s market makes it worth the discomfort. “The biggest risk is not to be in China,” he insists. Yet anyone with a long-term perspective might see Mr Xi’s undisputed personal authority, his gamble to reshape the Chinese economy, and the dark geopolitical backdrop as more than enough reasons to ponder an exit. It may never come to that. But as in post-revolutionary days, sometimes all it takes is one too many shakedowns to convince even the hardiest industrialist to throw in the towel. ■This article appeared in the Business section of the print edition under the headline “Who will be next?” More

IF CHIEF EXECUTIVES are the monarchs of the corporate world, the cadre of well-paid staff they deploy from head office to oversee operations across the planet are their ambassadors. In the golden era of globalisation, sending an expatriate Western executive to a distant emerging market signalled the place was being taken seriously. That model was starting to feel out of date before covid-19 made foreign travel a misery. As Zoom and remote work have become the norm, is shuffling emissaries across the world even worth it anymore?Some 280m people live in a country other than their own, often because of their job. Many toil on building sites in the Gulf or mind brats in Manhattan. High-flying expats are the most cosseted of these migrants. Their exalted status, should it need to be pinned down, is secured by snagging a housing allowance, school fees for the brood, annual flights home and a healthy salary bump. Some business folk have turned into perennial business wanderlusters, making a career out of flitting from Mumbai to Abu Dhabi to Lagos.The business case for expats had started to look stretched in recent years. Moving staff to the ends of the Earth made sense when it was tricky to find globally minded (and English-speaking) employees over there. But globalisation has worked its magic. If an American investment bank in Shanghai wants a bright number-cruncher with a top-tier MBA, it has plenty of local candidates to choose from. They will cost a fraction of what it would take to move a transplant—and already speak the language.Getting head-office staff to up sticks for Jakarta has been getting harder, too. In decades past a compliant “trailing spouse” took on the responsibility of keeping a household running in far-flung places. Now she (as is still more often the case) is likelier to quibble about the impact on her own career. A survey carried out by the Boston Consulting Group found 57% of workers globally were willing to move to a foreign country for work in 2018, down from 64% four years earlier.The figure fell even further, to 50%, once the pandemic hit. Many expat haunts, such as Hong Kong, Singapore and Dubai, went through looser lockdowns than America or Europe. But that often meant throttling foreign travel or imposing weeks-long quarantines for returnees. The prospect of a trip to see family for Christmas, or of a weekend getaway to Bali, is part of what makes living in Singapore attractive. Once that goes the trade-off between career and personal life starts looking uncomfortably different.Many foreigners who had once been given royal treatment felt treated like second-class citizens. Some hesitated to leave their country of assignment for fear of not being able to get back in. Others had to wait longer than locals for vaccines. Clubby communities no longer made space for outsiders. As Hong Kong, once the spiritual home of expatdom, has fallen into China’s ambit, Western imports have started to look like a vestige of the colonial past.This speaks to a broader economic shift that has dented the need for expats. Once upon a time they used to be the ones able to facilitate access to foreign capital and know-how, often from Western sources. Now money is abundant and the most exciting business opportunities are emerging markets doing business with other emerging markets, particularly in Asia. You don’t need a Westerner to show you how to do that. The world they understand is no longer as relevant.Expats are not just expensive perk-baggers (as this stand-in Bartleby, a foreign correspondent in his day job, can attest). Companies have cultures and processes which are forged at headquarters, and which envoys can disseminate. They in turn will imbibe new ways of doing things that can be transferred back to other bits of the business. Having an outsider somewhere in the organisational chart of a distant subsidiary can provide reassurance no funny business is taking place there. However, penny-pinching bosses might now consider whether regular Zoom calls will not achieve much the same thing for a fraction of the cost—not least if employees the world over are going to be working from home at times anyway.The surest way to signal commitment to a market these days is not by importing top talent but by nurturing it locally. Many companies that proudly deployed expats now boast of appointing local bosses to head up each country. That isn’t a reversal of globalisation so much as an affirmation of it.For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Business section of the print edition under the headline “End of the travelling circus” More

AT THE END of the month the production line of a Toshiba factory in Dalian will come to a halt, 30 years after the Japanese electronics giant opened it in the north-eastern Chinese city. Once a totemic example of global supply chains expanding into China, the closure exemplifies how these are being reconfigured. The short answer is: delicately and at the margin.Toshiba’s plant in Dalian has spanned a sea change in Asian business patterns. When it opened, Japan was the undisputed linchpin of the region’s trade and manufacturing networks. By 2019 Japan’s $390bn in intermediate-goods trade with big Asian economies was vying for runner-up status with South Korea and Taiwan. China, with $935bn-worth, was way ahead.Hourly wages commanded by Chinese workers have risen tenfold in nominal terms this century, to $6.20. That is still a quarter of Japanese rates but twice the pay of Thai workers, who were at parity with Chinese ones as recently as 2008. If that were not enough, geopolitical tensions are souring relations between the increasingly heavy-handed Chinese Communist Party and the world’s rich democracies.These trends help explain why China’s share of Japan’s new outbound foreign direct investment has steadily declined since 2012. The number of manufacturing affiliates that Japanese companies have in China stopped growing almost a decade ago, while new affiliates elsewhere in Asia—notably India, Indonesia, Thailand and Vietnam—have continued to mushroom. Toshiba will offset some of the forgone capacity with expansion in some of its 50 factories back home and also in Vietnam, one of its 30 overseas facilities. It is tapping the Japanese government’s year-old subsidy scheme to encourage reshoring and diversification of supply chains (and whose unspoken aim is to reduce reliance on China).Many other Japanese firms find themselves in a similar situation. This month OKI Electric Industry, a smaller Japanese electronics-maker, announced that its factory in Shenzhen, set up 20 years ago, would stop making printers. That capacity would move to existing factories in Thailand and Japan. Still, most are not rushing to exit China altogether. A survey last year for the Japan External Trade Organisation, a government body, found that 8% of Japanese companies said they were planning to reduce or eliminate their Chinese presence, less than the average for Japanese firms in other countries. Many global companies, from Hasbro (an American toymaker) to Samsung (a South Korean technology giant) are making a similar calculation. Toshiba itself will maintain a second, part-owned factory in Dalian.Even the most tub-thumpingly patriotic executive would hesitate to sever ties with the world’s second-biggest economy. This would disrupt profitable relationships with Chinese suppliers and manufacturing know-how. Such things take years to forge. But at the margin, where companies find themselves pressed by the imperatives to cut costs and guarantee stable future supplies, China no longer looks like the place to be. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Business section of the print edition under the headline “Marginal revolution” More

CONCERNS ABOUT the health of corporate America are many and varied. Chief executives are chastised for their apparent short-termism. Their companies are berated for fetishising shareholders over everyone and everything else. Elon Musk, boss of Tesla, an electric-car maker, grumbles about a surfeit of business-school graduates who are stifling innovation. President Joe Biden frets as much about American companies losing out to China as Donald Trump did (albeit with less bile). He also worries about the concentration of power among America’s biggest firms.All this paints a picture of America Inc that looks stodgier, more parochial and increasingly monopolistic. If true, that would be bad news for the spiritual home of free-market capitalism. But is it? The Economist set out to test all three hypotheses about American business: that it is less dynamic, less global and more concentrated. The results appear nowhere near as bleak as the doom-sayers would have you believe.Start with dynamism. Scholars have long argued that it isn’t what it used to be. Ten years ago Tyler Cowen, an economist at George Mason University, warned that the American economy was in the midst of a “great stagnation”. The reasons cited by Mr Cowen and others range from more red tape to fewer transformative technologies such as aeroplanes and telephones, because the low-hanging fruit had been plucked. Symptoms of the malaise included fewer employers being created, fewer companies going public and fewer investments made by existing ones. The share of workers employed at firms less than a year old fell from 4% of total employment in the 1980s to around 2% in the 2010s. Around three-quarters of the workforce is employed by a company that is more than 16 years old, up from two-thirds in 1992.Economists are still debating just how great the stagnation really was. One thing is certain, though: since the start of the covid-19 pandemic America Inc has been anything but stagnant. Applications to start new businesses have soared. In the first six months of 2021 around 2.8m new businesses were born, 60% more than in the same period in pre-pandemic 2019 (see chart 1). Many are small enterprises created by people stuck at home during lockdowns. A third of the new applications were in retail, in particular the online variety. Business starts in other e-commerce-related areas, including trucking and warehousing, have surged, too, notes John Haltiwanger of the University of Maryland. The quit rate, which indicates churn in the labour market, is at a record high. Nearly 3% of workers left their job in July, presumably because they believe they can get a better one.Larger contenders are also thriving. Take America’s biggest startups. CB Insights, a data firm, found that in 2019 an average of five unlisted firms became “unicorns” with valuation of over $1bn. Since the start of 2020 that figure has swelled to 12 (see chart 2). Many older unicorns have gone public. Airbnb, a holiday-rental firm, was the biggest American initial public offering (IPO) of 2020. Its valuation surged past $100bn on the first day of trading. Since the start of 2020 the average number of monthly IPOs has climbed three-fold, to around 80 (see chart 3). In that period American firms have raised nearly $350bn, more than they did in the preceding seven years added together. Some of the ferment comes out of necessity. A survey by the Kauffman Foundation, a think-tank, finds that the share of new entrepreneurs who are starting businesses because they spy an opportunity rather than because they lost their jobs dropped from 87% in 2019 to 70% in 2020. But the “physiological shock” of the pandemic may also have led people to re-evaluate their lives, says Kenan Fikri of the Economic Innovation Group, another think-tank. Some of them handed in their notice and struck out on their own.With the Federal Reserve flooding markets with newly created cash, investors had plenty of capital to back businesses of all sizes. According to Jim Tierney of Bernstein, an investment firm, the market is favouring disruptive new entrants such as Robinhood, a broker catering to day-traders. With fewer than one retail trader for every 70 at Charles Schwab, recently listed Robinhood already boasts half the incumbent firm’s market capitalisation. Small wonder American unicorns are eager to list, says Mr Tierney.Cheap capital is also encouraging the established beasts of American business to boost their investment plans. American companies’ spending on equipment, structures and software grew at an annualised rate of 13% in the first half of the year, the fastest since 1984. Apple, the world’s most valuable company, will spend $430bn in America over a five-year period, 20% more than it had previously planned. Intel is splurging some $20bn a year on new microchip factories.Wave mechanicsIf dynamism was ever in retreat, then, it no longer appears to be. Even Mr Cowen has all but declared the great stagnation over. What about American companies’ global stature? World trade as a share of planetary GDP peaked in 2008. In America imports and exports as a proportion of output have declined since an all-time high of 31% in 2011 to 26%. Mr Biden’s policies show a preference for jobs at home over free trade. Covid-19 has disrupted some supply chains, prompting some pundits to predict a wave of reshoring. “The era of reflexive offshoring is over,” declared Robert Lighthizer, Mr Trump’s trade representative, in the New York Times in 2020. Before the pandemic some data were indeed hinting that corporate America was becoming less global. Dealogic, a research firm, estimated that cross-border mergers and acquisitions by American firms as a share of domestic M&A activity declined from 16% in 2014 to 9% in 2019. In the past 18 months, however, this figure has jumped back to around a fifth, thanks in part to all that cheap capital. Other indicators of internationalism have barely budged. Kearney, a consultancy, tries to capture the extent of reshoring by looking at the total value of manufactured goods imported from a list of 14 trading partners, including China, Vietnam and Malaysia, relative to American manufacturing output. Between 2018 and 2020 this ratio has stayed stable at around 13%.Some companies are, it is true, adapting their supply chains. They are seriously considering moving manufacturing out of China, says Jan Loeys of JPMorgan Chase, a bank. But those companies are mostly eyeing nearby countries, often in addition to rather than instead of their Chinese suppliers. American imports from from Taiwan rose by 35%, or $11bn, in the first seven months of 2021, compared with the same period in 2019. But those from China increased by nearly as much in dollar terms.American companies also continue to sell a lot to foreigners. The Economist looked at the share of revenue earned abroad for non-financial firms in the Russell 3000, a broad index of American firms. Some industries, such as professional services, have seen their domestic share of sales increase, as lockdowns around the world hampered foreign contracts. Others, such as entertainment, have become more reliant on foreign sales; Netflix now books 54% of its revenue abroad, up from 40% a few years ago. Imax, a cinema chain, has made over two-thirds of its revenue this year from Asia, up from two-fifths in 2017.Overall, the median firm’s foreign sales as a share of its total sales has stayed roughly flat at 15%. So has the revenue-weighted average, which has oscillated around 35%. Two in five firms make more than half of their sales overseas, a proportion that has also remained more or less constant in the past four years. CEOs fall over themselves to signal their international ambition during earnings calls. On July 27th Tim Cook, who runs Apple, named 14 countries where the iPhone-maker’s sales reached a record high for the third quarter. “I could go on…It’s a very long list.” On the same day Kevin Johnson, boss of Starbucks, said he was “very bullish” about the coffee-pedlar’s prospects in China. Power dynamicsThe third area of concern is market concentration. In 2016 we published an analysis that divided the American economy into around 900 sectors covered by the five-yearly economic census. Two-thirds of them became more concentrated between 1997 and 2012. The weighted-average market share of the top four firms in each sector rose from 26% to 32%. The latest census data, which include years up to 2017, show that the trend did not reverse. But did it accelerate? Although concentration edged up in around half of industries between 2012 and 2017, the weighted-average market share across all industries remained at 32%.More recent census data will not be published for years. So in a separate analysis we looked at the market share of the top four firms in in the Russell 3000. In seven of the ten sectors, the revenue-weighted market concentration was a bit higher in the past 12 months than it had been in 2019. Similarly, Bank of America, which has tracked that the Herfindahl-Hirschman index, a gauge of market concentration, for firms in the Russell 3000 since 1986, hit a new high in 2020.This could be because deep downturns like last year’s covid recession tend to favour big firms with healthy balance-sheets. Big tech in particular has benefited from the pandemic shift to all things digital. America’s five technology titans—Apple, Microsoft, Alphabet, Amazon and Facebook—notched up combined revenues of $1.3trn in the past 12 months, 43% higher than in 2019. They are America’s five most valuable firms, accounting for 16% of the country’s entire stockmarket value—considerably higher than the 10% attributable to the five biggest American firms in the past 50 years, according to calculations by Thomas Philippon of New York University’s Stern School of business.In hard-hit industries, meanwhile, cash-rich survivors have been snapping up struggling rivals and contributing to an M&A bonanza. Between January and August American companies have announced deals worth almost $2trn. The sectors which saw the biggest rise in concentration were those disrupted by the pandemic, such as real estate and consumer goods (where the top four firms’ share has jumped by around four percentage points since 2019). Some big firms are getting a larger slice of a shrinking pie. Among energy-services companies, such as Haliburton, the top four increased their market share from 59% to 75%, even as the industry’s revenues fell by almost a quarter.All this would be worrying—were it not for other concomitant trends. The tech giants, for example, are increasingly stomping on each others’ turf. Nearly two-fifths of the revenues of the big five now come from areas where their businesses overlap, up from a fifth in 2015. Facebook wants to become an e-merchant, Amazon is getting into online advertising, Google and Microsoft are challenging Amazon in the computing cloud, and Apple is reportedly building a search engine.Such oligopolistic competition is not ideal, perhaps, but much better than nothing. And money flowing to newly listed disruptors and to corporate capital budgets implies that companies and investors are spying fresh opportunities for future profits, including at the expense of incumbents, should they become complacent. American business could use some more pep here or there—who couldn’t. But it does not scream sclerosis, either. More

“IN COMPLEX ANTITRUST cases there is rarely a complete win or a complete loss.” That was the prediction of a lead lawyer in the blockbuster antitrust lawsuit pitting Epic Games, the maker of “Fortnite”, a popular video game, against Apple, the world’s most valuable technology company. A few days later, on September 10th, a federal judge in California, Yvonne González Rogers, proved him right. Her much-awaited ruling is a mixed bag for both parties.A skim of the 185-page decision suggests that Apple can claim to be the bigger winner. Broadly speaking, Epic had accused the tech giant of abusing its de facto monopoly over the iPhone and the App Store by, among other things, forcing the games-maker to use Apple’s in-app payment system and to pay excessive commissions of up to 30%. Not so, the judge argued. In her view, the relevant market is not the iPhone or the App Store, but “digital mobile gaming transactions”, where Apple competes with Google’s Android operating system. Although Apple controls more than half of this market, that does not amount to wrongdoing. “Success is not illegal,” Ms González Rogers wrote, adding that no evidence was presented to suggest that Apple erected barriers to entry or engaged in conduct decreasing output or innovation.Tim Sweeney, Epic’s boss, did not hide his disappointment. “Today’s ruling isn’t a win for developers or for consumers,” he tweeted defiantly. He vowed to fight on “for fair competition among in-app payment methods and app stores for a billion consumers”. Apple, for its part, did not hold back its satisfaction. In a statement, Kate Adams, Apple’s general counsel, called it “a resounding victory”. “We’re extremely pleased with this decision.”On closer inspection, though the bag begins to look decidedly more mixed. For one thing, the judge said that the court did not decide that it is impossible to show that Apple is an illegal monopolist—only that Epic had failed to do so. She also found that, contrary to Apple’s protestations, the App Store’s operating margins, which one of Epic’s expert witnesses put at 75%, are “extraordinarily high”. Most importantly, Ms González Rogers ruled that although Apple did not violate federal antitrust law, it had engaged in anticompetitive conduct under California’s competition law. It did so by banning developers from including information in their apps that tells users how they can subscribe or buy digital wares outside the App Store. Such “anti-steering” provisions, the judge ruled, “hide critical information from consumers and illegally stifle consumer choice”.The decision will take effect in 90 days, though both sides are expected to appeal. The case may end up in America’s Supreme Court. Whatever its final outcome, it will pile more pressure onto Apple to loosen its tight control of the App Store. This could dampen its juicy margins and weaken Apple’s services business, which analysts expect to be one of the firm’s main sources of growth and profits. “This is a negative for Apple, it will put pressure on its effective take rate,” observes Pierre Ferragu of New Street Research, a research firm. Apple’s share price fell by more than 3% after the verdict was handed down, shaving $85bn off its market capitalisation, three times unlisted Epic’s private valuation.Perhaps in anticipation of the verdict, Apple has recently made some concessions. On August 26th, in a settlement with app developers, it agreed to allow them to email users about payment methods outside of the App Store. On September 2nd, in another settlement, this time with Japan’s Fair Trade Commission, it consented to letting apps that provide access to digital content, such as books and music, direct users to other ways to pay. Apple will also have to comply with a new South Korean law banning app stores, including its own and Google’s, from requiring users to pay using the stores’ payment systems. The European Union and even America’s polarised Senate have similar laws in the works. Apple may, just about, be able to claim a victory in the courtroom battle against Epic. But the drawn-out regulatory world war is far from over. More

THE STOCKMARKET index of Germany’s bluest chips is getting a makeover. Any week now the DAX will gain ten new members, bringing the total to 40. The newcomers will be the most valuable German firms not already in the index (so long as they can show two years of positive earnings before interest, taxes, depreciation and amortisation). The new DAX could reach €2trn ($2.4trn) in market value, from €1.6trn today. A few faster-growing members may boost the index’s mediocre returns. But probably not by much.Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More