China’s economy is on a tear. Factories are humming, and foreign investment is flowing in. Even so, the wealthy and powerful people atop some of the country’s most prominent companies are heading for the exits.
The latest are Pan Shiyi and Zhang Xin, the husband-and-wife team that runs Soho China, a property developer known for its blobby, futuristic office buildings. In striking a deal this week to sell a controlling stake to the investment giant Blackstone for as much as $3 billion, Mr. Pan and Ms. Zhang are turning over the company as high-profile entrepreneurs come under public and official scrutiny in China like never before.
Soho China did not respond to a request for comment.
China’s most famous tycoon, the Alibaba co-founder Jack Ma, has kept an uncharacteristically low profile since late last year, when the government began a regulatory crackdown on his companies and the wider internet industry. Colin Huang, founder of the Alibaba rival Pinduoduo, resigned as chairman in March, less than a year after he stepped down as chief executive. In May, Zhang Yiming, founder of TikTok’s parent company, ByteDance, said he would hand over the chief executive post to focus on long-term strategy.
Under the Communist Party’s top leader, Xi Jinping, nationalism has been resurgent in China, and the government has sought to exert more direct influence over the private sector. Even before this week’s sale, Mr. Pan and Ms. Zhang of Soho China had been avoiding the spotlight more than they did during an earlier, freer era of China’s economic revival.
going after businesspeople and intellectuals with big online followings. The police that year arrested Wang Gongquan, a friend of Mr. Pan’s and supporter of human rights causes, on charges of disrupting public order.
Mr. Pan and Ms. Zhang began selling off property holdings in China and spending more time in the United States. The family of Ms. Zhang and the Safra family of Brazil, long involved in international banking, teamed up to buy a 40 percent stake in the General Motors building in Manhattan.
They noted that the couple donated generously to Harvard and Yale but not to Chinese universities.
After media reports accused Soho China of “fleeing” Shanghai by selling projects there, Mr. Pan wrote on Weibo: “Buying and selling is normal. Don’t read too much into it.”
The company’s last big public event was the opening of Leeza Soho, a lithe, spiraling skyscraper in Beijing, in late 2019. Zaha Hadid, the famed architect who designed the tower and a friend of Ms. Zhang’s, had died a few years earlier.
Last year, Ren Zhiqiang, a retired property mogul and friend of Mr. Pan’s, was detained for an essay he shared with friends on a private chat group. The essay criticized Mr. Xi’s handling of the coronavirus outbreak and the direction he was taking the country. Mr. Ren was sentenced to 18 years in prison.
Today, Mr. Pan’s and Ms. Zhang’s Weibo accounts are filled with bland, friendly material: holiday greetings, book recommendations, photos of flowers in bloom outside Soho China buildings. Both of their accounts are set to display only the past half year’s posts.
On Wednesday night, minutes after Soho China announced the sale on its official Weibo account, Mr. Pan reposted the announcement without comment, in what online commentators called a “silent farewell.”
GENEVA — President Biden had three big tasks to accomplish on his first foreign trip since taking office: Convince the allies that America was back, and for good; gather them in common cause against the rising threat of China; and establish some red lines for President Vladimir V. Putin of Russia, whom he called his “worthy adversary.”
He largely accomplished the first, though many European leaders still wonder whether his presidency may yet be just an intermezzo, sandwiched between the Trump era and the election of another America First leader uninterested in the 72-year-old Atlantic alliance.
He made inroads on the second, at least in parts of Europe, where there has been enormous reluctance to think first of China as a threat — economically, technologically and militarily — and second as an economic partner.
Mr. Biden expressed cautious optimism about finding ways to reach a polite accommodation with Mr. Putin. But it is far from clear that any of the modest initiatives the two men described on Wednesday, after a stiff, three-hour summit meeting on the edge of Lake Geneva, will fundamentally change a bad dynamic.
when he refers to Beijing’s actions against the Uyghur population and other predominantly Muslim ethnic minorities as genocide.
So Mr. Biden toned down his autocracy vs. democracy talk for this trip. And that worked.
Yet while “Biden has gotten words from the Europeans, he hasn’t gotten deeds,” said James M. Lindsay, director of studies at the Council on Foreign Relations. “Settling some trade issues is a very good start. But it’s not how you start, but how you finish, how you translate the sentiments in the communiqués into common policies, and that will be very difficult.’’
Mr. Biden carefully choreographed the trip so that he demonstrated the repairs being made to the alliance before going on to meet Mr. Putin. Mr. Biden made clear he wanted to present a unified front to the Russian leader, to demonstrate that in the post-Trump era, the United States and the NATO allies were one.
That allowed Mr. Biden to take a softer tone when he got to Geneva for the summit meeting, where he sought to portray Mr. Putin as an isolated leader who has to worry about his country’s future. When Mr. Biden said in response to a reporter’s question that “I don’t think he’s looking for a Cold War with the United States,’’ it was a signal that Mr. Biden believes he has leverage that the rest of the world has underappreciated.
Mr. Putin’s economy is “struggling,’’ he said, and he faces a long border with China at a moment when Beijing is “hellbent” on domination.
“He still, I believe, is concerned about being ‘encircled,’ ” Mr. Biden said. “He still is concerned that we, in fact, are looking to take him down.” But, he added, he didn’t think those security fears “are the driving force as to the kind of relationship he’s looking for with the United States.”
He set as the first test of Mr. Putin’s willingness to deal with him seriously a review of how to improve “strategic stability,’’ which he described as controlling the introduction of “new and dangerous and sophisticated weapons that are coming on the scene now that reduce the times of response, that raise the prospects of accidental war.”
It is territory that has been neglected, and if Mr. Biden is successful he may save hundreds of billions of dollars that would otherwise be spent on hypersonic and space weapons, as well as the development of new nuclear delivery systems.
But none of that is likely to deter Mr. Putin in the world of cyberweapons, which are dirt cheap and give him an instrument of power each and every day. Mr. Biden warned during his news conference that “we have significant cyber capability,” and said that while Mr. Putin “doesn’t know exactly what it is,” if the Russians “violate these basic norms, we will respond with cyber.”
The U.S. has had those capabilities for years but has hesitated to use them, for fear that a cyberconflict with Russia might escalate into something much bigger.
But Mr. Biden thinks Mr. Putin is too invested in self-preservation to let it come to that. In the end, he said, just before boarding Air Force One for the flight home, “You have to figure out what the other guy’s self-interest is. Their self-interest. I don’t trust anybody.”
David E. Sanger reported from Geneva and Steven Erlanger from Brussels.
SYDNEY, Australia — All across the Asia-Pacific region, the countries that led the world in containing the coronavirus are now languishing in the race to put it behind them.
While the United States, which has suffered far more grievous outbreaks, is now filling stadiums with vaccinated fans and cramming airplanes with summer vacationers, the pandemic champions of the East are still stuck in a cycle of uncertainty, restrictions and isolation.
In southern China, the spread of the Delta variant led to a sudden lockdown in Guangzhou, a major industrial capital. Taiwan, Vietnam, Thailand and Australia have also clamped down after recent outbreaks, while Japan is dealing with its own weariness from a fourth round of infections, spiked with fears of viral disaster from the Olympics.
the new outbreak in southern China will affect busy port terminals there. Across Asia, faltering vaccine rollouts could also open the door to spiraling variant-fueled lockdowns that inflict new damage on economies, push out political leaders and alter power dynamics between nations.
The risks are rooted in decisions made months ago, before the pandemic had inflicted the worst of its carnage.
blocked the export of 250,000 doses of the AstraZeneca vaccine meant for Australia to control its own raging outbreak. Other shipments were delayed because of manufacturing issues.
“The supplies of purchased vaccine actually landing on docks — it’s fair to say they are not anywhere near the purchase commitments,” said Richard Maude, a senior fellow at the Asia Society Policy Institute in Australia.
with the United States and Europe.
In Asia, about 20 percent of people have received at least one dose of a vaccine, with Japan, for example, at just 14 percent. By contrast, the figure is nearly 45 percent in France, more than 50 percent in the United States and more than 60 percent in Britain.
Instagram, where Americans once scolded Hollywood stars for enjoying mask-free life in zero-Covid Australia, is now studded with images of grinning New Yorkers hugging just-vaccinated friends. While snapshots from Paris show smiling diners at cafes that are wooing summer tourists, in Seoul, people are obsessively refreshing apps that locate leftover doses, usually finding nothing.
“Does the leftover vaccine exist?” one Twitter user recently asked. “Or has it disappeared in 0.001 seconds because it is like a ticket for the front-row seat of a K-pop idol concert?”
keep its borders closed for another year. Japan is currently barring almost all nonresidents from entering the country, and intense scrutiny of overseas arrivals in China has left multinational businesses without key workers.
The immediate future for many places in Asia seems likely to be defined by frantic optimization.
China’s response to the outbreak in Guangzhou — testing millions of people in days, shutting down entire neighborhoods — is a rapid-fire reprise of how it has handled previous flare-ups. Few inside the country expect this approach to change anytime soon, especially as the Delta variant, which has devastated India, is now beginning to circulate.
has threatened residents with fines of around $450 for refusing vaccines. Vietnam has responded to its recent spike in infections by asking the public for donations to a Covid-19 vaccine fund. And in Hong Kong, officials and business leaders are offering a range of inducements to ease severe vaccine hesitancy.
Nonetheless, the prognosis for much of Asia this year is billboard obvious: The disease is not defeated, and won’t be anytime soon. Even those lucky enough to get a vaccine often leave with mixed emotions.
“This is the way out of the pandemic,” said Kate Tebbutt, 41, a lawyer who last week had just received her first shot of the Pfizer vaccine at the Royal Exhibition Building near Melbourne’s central business district. “I think we should be further ahead than where we are.”
Reporting was contributed by Raymond Zhong in Taipei, Taiwan, Ben Dooley in Tokyo, Sui-Lee Wee in Singapore, Youmi Kim in Seoul and Yan Zhuang in Melbourne, Australia.
“I hear it from kids all the time: I want to get out of here,” said Kristin Johnson, a 24-year-old middle school teacher at Mount View who lives in Princeton, W.Va., about an hour’s drive away, and is itching for a teacher job to open there. “Those who do get an education know they can make more money somewhere else.”
Ms. Keys returned, in part, out of loyalty. “When I was in high school, we started losing a lot of teachers,” she said. “People feared there would be nobody there to take those jobs.” But a stable teaching job, as well as free housing at her grandmother’s old house, played into her calculations.
This may not be enough to hold her, though. Even dating locally is complicated. Her boyfriend lives over an hour away, outside Beckley. “There is nobody here that is appealing,” Ms. Keys said.
Consider Emily Hicks, 24, who graduated from Mount View in 2015. She is at the forefront of Reconnecting McDowell’s efforts, an early participant in the mentoring program meant to expand the horizons of local youths.
She didn’t even have to leave home to get her bachelor’s degree at Bluefield State College, commuting from home every other day. Today she teaches fifth grade at Kimball Elementary School. Her father is a surveyor for the coal mines; her mother works for the local landfill. But her boyfriend, Brandon McCoy, is hoping to leave the coal business and has taken a couple of part-time jobs at clinics outside the county after getting an associate degree in radiology.
Her brother, Justin, who graduated from high school in June, is going to college to get a degree in electrical engineering. “I have no idea what I’m going to do after that,” he said. “But there’s not a lot to do here.”
There were two weeks left in the Trump administration when the Treasury Department handed down a set of rules governing an obscure corner of the tax code.
Overseen by a senior Treasury official whose previous job involved helping the wealthy avoid taxes, the new regulations represented a major victory for private equity firms. They ensured that executives in the $4.5 trillion industry, whose leaders often measure their yearly pay in eight or nine figures, could avoid paying hundreds of millions in taxes.
The rules were approved on Jan. 5, the day before the riot at the U.S. Capitol. Hardly anyone noticed.
The Trump administration’s farewell gift to the buyout industry was part of a pattern that has spanned Republican and Democratic presidencies and Congresses: Private equity has conquered the American tax system.
one recent estimate, the United States loses $75 billion a year from investors in partnerships failing to report their income accurately — at least some of which would probably be recovered if the I.R.S. conducted more audits. That’s enough to roughly double annual federal spending on education.
It is also a dramatic understatement of the true cost. It doesn’t include the ever-changing array of maneuvers — often skating the edge of the law — that private equity firms have devised to help their managers avoid income taxes on the roughly $120 billion the industry pays its executives each year.
Private equity’s ability to vanquish the I.R.S., Treasury and Congress goes a long way toward explaining the deep inequities in the U.S. tax system. When it comes to bankrolling the federal government, the richest of America’s rich — many of them hailing from the private equity industry — play by an entirely different set of rules than everyone else.
The result is that men like Blackstone Group’s chief executive, Stephen A. Schwarzman, who earned more than $610 million last year, can pay federal taxes at rates similar to the average American.
Lawmakers have periodically tried to force private equity to pay more, and the Biden administration has proposed a series of reforms, including enlarging the I.R.S.’s enforcement budget and closing loopholes. The push for reform gained new momentum after ProPublica’s recent revelation that some of America’s richest men paid little or no federal taxes.
nearly $600 million in campaign contributions over the last decade, has repeatedly derailed past efforts to increase its tax burden.
Taylor Swift’s back music catalog.
The industry makes money in two main ways. Firms typically charge their investors a management fee of 2 percent of their assets. And they keep 20 percent of future profits that their investments generate.
That slice of future profits is known as “carried interest.” The term dates at least to the Renaissance. Italian ship captains were compensated in part with an interest in whatever profits were realized on the cargo they carried.
The I.R.S. has long allowed the industry to treat the money it makes from carried interests as capital gains, rather than as ordinary income.
article highlighting the inequity of the tax treatment. It prompted lawmakers from both parties to try to close the so-called carried interest loophole. The on-again, off-again campaign has continued ever since.
Whenever legislation gathers momentum, the private equity industry — joined by real estate, venture capital and other sectors that rely on partnerships — has pumped up campaign contributions and dispatched top executives to Capitol Hill. One bill after another has died, generally without a vote.
An Unexpected Email
One day in 2011, Gregg Polsky, then a professor of tax law at the University of North Carolina, received an out-of-the-blue email. It was from a lawyer for a former private equity executive. The executive had filed a whistle-blower claim with the I.R.S. alleging that their old firm was using illegal tactics to avoid taxes.
The whistle-blower wanted Mr. Polsky’s advice.
Mr. Polsky had previously served as the I.R.S.’s “professor in residence,” and in that role he had developed an expertise in how private equity firms’ vast profits were taxed. Back in academia, he had published a research paper detailing a little-known but pervasive industry tax-dodging technique.
$89 billion in private equity assets — as being “abusive” and a “thinly disguised way of paying the management company its quarterly paycheck.”
Apollo said in a statement that the company stopped using fee waivers in 2012 and is “not aware of any I.R.S. inquiries involving the firm’s use of fee waivers.”
floated the idea of cracking down on carried interest.
Private equity firms mobilized. Blackstone’s lobbying spending increased by nearly a third that year, to $8.5 million. (Matt Anderson, a Blackstone spokesman, said the company’s senior executives “are among the largest individual taxpayers in the country.” He wouldn’t disclose Mr. Schwarzman’s tax rate but said the firm never used fee waivers.)
Lawmakers got cold feet. The initiative fizzled.
In 2015, the Obama administration took a more modest approach. The Treasury Department issued regulations that barred certain types of especially aggressive fee waivers.
But by spelling that out, the new rules codified the legitimacy of fee waivers in general, which until that point many experts had viewed as abusive on their face.
So did his predecessor in the Obama administration, Timothy F. Geithner.
Inside the I.R.S. — which lost about one-third of its agents and officers from 2008 to 2018 — many viewed private equity’s webs of interlocking partnerships as designed to befuddle auditors and dodge taxes.
One I.R.S. agent complained that “income is pushed down so many tiers, you are never able to find out where the real problems or duplication of deductions exist,” according to a U.S. Government Accountability Office investigation of partnerships in 2014. Another agent said the purpose of large partnerships seemed to be making “it difficult to identify income sources and tax shelters.”
The Times reviewed 10 years of annual reports filed by the five largest publicly traded private equity firms. They contained no trace of the firms ever having to pay the I.R.S. extra money, and they referred to only minor audits that they said were unlikely to affect their finances.
Current and former I.R.S. officials said in interviews that such audits generally involved issues like firms’ accounting for travel costs, rather than major reckonings over their taxable profits. The officials said they were unaware of any recent significant audits of private equity firms.
No Money Owed
For a while, it looked as if there would be an exception to this general rule: the I.R.S.’s reviews of the fee waivers spurred by the whistle-blower claims. But it soon became clear that the effort lacked teeth.
Kat Gregor, a tax lawyer at the law firm Ropes & Gray, said the I.R.S. had challenged fee waivers used by four of her clients, whom she wouldn’t identify. The auditors struck her as untrained in the thicket of tax laws governing partnerships.
“It’s the equivalent of picking someone who was used to conducting an interview in English and tell them to go do it in Spanish,” Ms. Gregor said.
The audits of her clients wrapped up in late 2019. None owed any money.
The Mnuchin Compromise
As a presidential candidate, Mr. Trump vowed to “eliminate the carried interest deduction, well-known deduction, and other special-interest loopholes that have been so good for Wall Street investors, and for people like me, but unfair to American workers.”
wanted to close the loophole, congressional Republicans resisted. Instead, they embraced a much milder measure: requiring private equity officials to hold their investments for at least three years before reaping preferential tax treatment on their carried interests. Steven Mnuchin, the Treasury secretary, who had previously run an investment partnership, signed off.
McKinsey, typically holds investments for more than five years. The measure, part of a $1.5 trillion package of tax cuts, was projected to generate $1 billion in revenue over a decade.
credited Mr. Mnuchin, hailing him as “an all-star.”
Mr. Fleischer, who a decade earlier had raised alarms about carried interest, said the measure “was structured by industry to appear to do something while affecting as few as possible.”
Months later, Mr. Callas joined the law and lobbying firm Steptoe & Johnson. The private equity giant Carlyle is one of his biggest clients.
‘The Government Caved’
It took the Treasury Department more than two years to propose rules spelling out the fine print of the 2017 law. The Treasury’s suggested language was strict. One proposal would have empowered I.R.S. auditors to more closely examine internal transactions that private equity firms might use to get around the law’s three-year holding period.
The industry, so happy with the tepid 2017 law, was up in arms over the tough rules the Treasury’s staff was now proposing. In a letter in October 2020, the American Investment Council, led by Drew Maloney, a former aide to Mr. Mnuchin, noted how private equity had invested in hundreds of companies during the coronavirus pandemic and said the Treasury’s overzealous approach would harm the industry.
The rules were the responsibility of Treasury’s top tax official, David Kautter. He previously was the national tax director at EY, formerly Ernst & Young, when the firm was marketing illegal tax shelters that led to a federal criminal investigation and a $123 million settlement. (Mr. Kautter has denied being involved with selling the shelters but has expressed regret about not speaking up about them.)
On his watch at Treasury, the rules under development began getting softer, including when it came to the three-year holding period.
Monte Jackel, a former I.R.S. attorney who worked on the original version of the proposed regulations.
Mr. Mnuchin, back in the private sector, is starting an investment fund that could benefit from his department’s weaker rules.
A Charmed March
Even during the pandemic, the charmed march of private equity continued.
The top five publicly traded firms reported net profits last year of $8.6 billion. They paid their executives $8.3 billion. In addition to Mr. Schwarzman’s $610 million, the co-founders of KKR each made about $90 million, and Apollo’s Leon Black received $211 million, according to Equilar, an executive compensation consulting firm.
now advising clients on techniques to circumvent the three-year holding period.
The most popular is known as a “carry waiver.” It enables private equity managers to hold their carried interests for less than three years without paying higher tax rates. The technique is complicated, but it involves temporarily moving money into other investment vehicles. That provides the industry with greater flexibility to buy and sell things whenever it wants, without triggering a higher tax rate.
Private equity firms don’t broadcast this. But there are clues. In a recent presentation to a Pennsylvania retirement system by Hellman & Friedman, the California private equity giant included a string of disclaimers in small font. The last one flagged the firm’s use of carry waivers.
The Biden administration is negotiating its tax overhaul agenda with Republicans, who have aired advertisements attacking the proposal to increase the I.R.S.’s budget. The White House is already backing down from some of its most ambitious proposals.
Even if the agency’s budget were significantly expanded, veterans of the I.R.S. doubt it would make much difference when it comes to scrutinizing complex partnerships.
“If the I.R.S. started staffing up now, it would take them at least a decade to catch up,” Mr. Jackel said. “They don’t have enough I.R.S. agents with enough knowledge to know what they are looking at. They areso grossly overmatched it’s not funny.”
The problem is not just Britain’s stricter immigration rules. Other workers, in Britain and elsewhere, have left the hospitality industry looking for more stable employment, said Kate Shoesmith, the deputy chief executive of the Recruitment & Employment Confederation, which represents recruitment companies and agencies.
Daily Business Briefing
Restaurant and hotel workers, who can’t work from home, have been scarred by unexpected changes in lockdown rules that have pulled them in and out of work at short notice. Despite the success of Britain’s vaccination program, the delta coronavirus variant is threatening to delay the full lifting of social distancing restrictions in England later this month.
Some people “are not confident there won’t be another lockdown,” Ms. Shoesmith said.
Many workers have moved on to less strenuous jobs that don’t require such late nights and long shifts, such as in call centers or in retail or other customer service roles. Adecco, a large recruitment agency, sent out a request to tens of thousands of job seekers to gauge their interest in working in hospitality. Just 1 percent responded.
Ms. Shoesmith said recruiters expected some European Union nationals to eventually return to Britain to work, “but the vast majority won’t; that’s the anticipation.”
To help fill the gap, there is a broad sentiment that the industry must make hospitality an appealing career for Britons, one worth aspiring to, with training and opportunities for promotion. For now, though, this work is often considered just “a job you do in between other things,” as Ms. Shoesmith put it.
UKHospitality has teamed up with work coaches in government job centers. It wants them to promote hospitality as a “career of choice” and think beyond entry-level or front-of-house positions.
Until then, the shortage of workers is a drag on countless businesses.
In more than three decades in the industry, said John Crompton, the director at Hillbrooke Hotels, he had never known a staff shortage like this. The company, which has four “quirky luxury” hotels and inns in eastern and southern England, needs to hire at least 50 people.
A few years ago, while on a work trip in Los Angeles, I hailed an Uber for a crosstown ride during rush hour. I knew it would be a long trip, and I steeled myself to fork over $60 or $70.
Instead, the app spit out a price that made my jaw drop: $16.
Experiences like these were common during the golden era of the Millennial Lifestyle Subsidy, which is what I like to call the period from roughly 2012 through early 2020, when many of the daily activities of big-city 20- and 30-somethings were being quietly underwritten by Silicon Valley venture capitalists.
For years, these subsidies allowed us to live Balenciaga lifestyles on Banana Republic budgets. Collectively, we took millions of cheap Uber and Lyft rides, shuttling ourselves around like bourgeois royalty while splitting the bill with those companies’ investors. We plunged MoviePass into bankruptcy by taking advantage of its $9.95-a-month, all-you-can-watch movie ticket deal, and took so many subsidized spin classes that ClassPass was forced to cancel its $99-a-month unlimited plan. We filled graveyards with the carcasses of food delivery start-ups — Maple, Sprig, SpoonRocket, Munchery — just by accepting their offers of underpriced gourmet meals.
tweeted, along with a screenshot of a receipt that showed he had spent nearly $250 on a ride to the airport.
“Airbnb got too much dip on they chip,” another Twitter user complained. “No one is gonna continue to pay $500 to stay in an apartment for two days when they can pay $300 for a hotel stay that has a pool, room service, free breakfast & cleaning everyday. Like get real lol.”
Some of these companies have been tightening their belts for years. But the pandemic seems to have emptied what was left of the bargain bin. The average Uber and Lyft ride costs 40 percent more than it did a year ago, according to Rakuten Intelligence, and food delivery apps like DoorDash and Grubhub have been steadily increasing their fees over the past year. The average daily rate of an Airbnb rental increased 35 percent in the first quarter of 2021, compared with the same quarter the year before, according to the company’s financial filings.
set up a $250 million “driver stimulus” fund — or doing away with them altogether.
I’ll confess that I gleefully took part in this subsidized economy for years. (My colleague Kara Swisher memorably called it “assisted living for millennials.”) I got my laundry delivered by Washio, my house cleaned by Homejoy and my car valet-parked by Luxe — all start-ups that promised cheap, revolutionary on-demand services but shut down after failing to turn a profit. I even bought a used car through a venture-backed start-up called Beepi, which offered white-glove service and mysteriously low prices, and which delivered the car to me wrapped in a giant bow, like you see in TV commercials. (Unsurprisingly, Beepi shut down in 2017, after burning through $150 million in venture capital.)
These subsidies don’t always end badly for investors. Some venture-backed companies, like Uber and DoorDash, have been able to grit it out until their I.P.O.s, making good on their promise that investors would eventually see a return on their money. Other companies have been acquired or been able to successfully raise their prices without scaring customers away.
Uber, which raised nearly $20 billion in venture capital before going public, may be the best-known example of an investor-subsidized service. During a stretch of 2015, the company was burning $1 million a week in driver and rider incentives in San Francisco alone, according to reporting by BuzzFeed News.
But the clearest example of a jarring pivot to profitability might be the electric scooter business.
Remember scooters? Before the pandemic, you couldn’t walk down the sidewalk of a major American city without seeing one. Part of the reason they took off so quickly is that they were ludicrously cheap. Bird, the largest scooter start-up, charged $1 to start a ride, and then 15 cents a minute. For short trips, renting a scooter was often cheaper than taking the bus.
But those fees didn’t represent anything close to the true cost of a Bird ride. The scooters broke frequently and needed constant replacing, and the company was shoveling money out the door just to keep its service going. As of 2019, Bird was losing $9.66 for every $10 it made on rides, according to a recent investor presentation. That is a shocking number, and the kind of sustained losses that are possible only for a Silicon Valley start-up with extremely patient investors. (Imagine a deli that charged $10 for a sandwich whose ingredients cost $19.66, and then imagine how long that deli would stay in business.)
Pandemic-related losses, coupled with the pressure to turn a profit, forced Bird to trim its sails. It raised its prices — a Bird now costs as much as $1 plus 42 cents a minute in some cities — built more durable scooters and revamped its fleet management system. During the second half of 2020, the company made $1.43 in profit for every $10 ride.
“DoorDash and Pizza Arbitrage,” about the time he realized that DoorDash was selling pizzas from his friend’s restaurant for $16 while paying the restaurant $24 per pizza, and proceeded to order dozens of pizzas from the restaurant while pocketing the $8 difference, stands as a classic of the genre.)
But it’s hard to fault these investors for wanting their companies to turn a profit. And, at a broader level, it’s probably good to find more efficient uses for capital than giving discounts to affluent urbanites.
Back in 2018, I wrote that the entire economy was starting to resemble MoviePass, the subscription service whose irresistible, deeply unprofitable offer of daily movie tickets for a flat $9.95 subscription fee paved the way for its decline. Companies like MoviePass, I thought, were trying to defy the laws of gravity with business models that assumed that if they achieved enormous scale, they’d be able to flip a switch and start making money at some point down the line. (This philosophy, which was more or less invented by Amazon, is now known in tech circles as “blitzscaling.”)
There is still plenty of irrationality in the market, and some start-ups still burn huge piles of money in search of growth. But as these companies mature, they seem to be discovering the benefits of financial discipline. Uber lost only $108 million in the first quarter of 2021 — a change partly attributable to the sale of its autonomous driving unit, and a vast improvement, believe it or not, over the same quarter last year, when it lost $3 billion. Both Uber and Lyft have pledged to become profitable on an adjusted basis this year. Lime, Bird’s main electric scooter competitor, turned its first quarterly profit last year, and Bird — which recently filed to go public through a SPAC at a $2.3 billion valuation — has projected better economics in the years ahead.
Profits are good for investors, of course. And while it’s painful to pay subsidy-free prices for our extravagances, there’s also a certain justice to it. Hiring a private driver to shuttle you across Los Angeles during rush hour should cost more than $16, if everyone in that transaction is being fairly compensated. Getting someone to clean your house, do your laundry or deliver your dinner should be a luxury, if there’s no exploitation involved. The fact that some high-end services are no longer easily affordable by the merely semi-affluent may seem like a worrying development, but maybe it’s a sign of progress.
BELFAST, Northern Ireland — The pandemic was hard on David Milliken, who sells drums, flags and pro-British banners from his brightly-colored shop in Sandy Row, a loyalist stronghold in Belfast. But now, he said, “things have started to open up again,” especially since “the unrest is back.”
Two months ago, Sandy Row exploded in flames as masked demonstrators hurled stones and gasoline bombs at the police to protest what they call the “Brexit betrayal.” With the loyalist marching season kicking off next month, there are fears that the eruption of violence was only a warm-up act.
Like others in Sandy Row, Mr. Milliken, 49, said he did not want a return to the Troubles, the bloody 30-year guerrilla war between Catholic nationalists, seeking unification with the Republic of Ireland, and predominantly Protestant loyalists and unionists, who want to stay in the United Kingdom.
iconic military victory over a Catholic king, James II, in 1690.
the 1998 Good Friday Agreement, which ended decades of sectarian strife, in part by tamping down Northern Ireland’s identity politics. Brexit has reawakened those passions, and they could flare further next year if, as polls currently suggest, the main Irish nationalist party, Sinn Fein, becomes the biggest party in a field of divided, demoralized unionists.
the Northern Ireland Protocol, a post-Brexit legal construct that has left the North awkwardly straddling the trading systems of Britain and the European Union. The protocol grew out of a deal between London and Brussels to avoid resurrecting a hard border between Northern Ireland and the Republic of Ireland. The catch is, it requires checks on goods flowing between the North and the rest of the United Kingdom, which carries both a commercial and psychological cost.
“It has hit the community here like a ton of bricks that this is a separation of Northern Ireland from the rest of the United Kingdom,” said David Campbell, chairman of the Loyalist Communities Council, which represents paramilitary groups that some say are stirring up unrest.
Mr. Campbell said that the paramilitaries actually tried to keep people off the streets. But he warned that unless the protocol was either scrapped or radically rewritten, violence would break out again during the marching season.
bitter divorce with the European Union.
Jonathan Powell, a former chief of staff to Tony Blair, the British prime minister at the time of the Good Friday Agreement, acknowledged that, “Biden could be important on the protocol.”
“Britain is rather friendless outside the E.U., so there is a limit to how far they can go against what the administration wants,” Mr. Powell added.
Until now, Mr. Johnson has taken a hard line in negotiations over the protocol. His senior aide, David Frost, says it is up to the European Union to propose remedies to the disruptions of the border checks. If it does not, Britain could abandon the protocol — a move the European Union says would breach the withdrawal agreement, though the bloc’s officials briefly threatened to scrap the protocol themselves in January.
the Democratic Unionists, a Northern Irish party that supported Brexit and has now fallen into disarray because of the fierce blowback from Mr. Johnson’s deal.
The party recently deposed its leader, Arlene Foster, and is squabbling over how to prepare for elections to the Northern Irish Assembly in May 2022. That has opened the door to something once thought inconceivable: that Sinn Fein could emerge as the largest party, with the right to appoint the first minister.
With Sinn Fein’s vestigial links to the paramilitary Irish Republican Army and bedrock commitment to Irish unification, an Assembly led by the party could prove far more destabilizing to Northern Ireland’s delicate power-sharing arrangements than the post-Brexit trading rules, which are difficult to explain, let alone use as a rallying cry.
But Sinn Fein’s leaders say that, with a growing Catholic population and the fallout from Brexit, momentum is on their side. The unionist parties supported Brexit, while they opposed it. They view the campaign against the protocol as a futile effort that only lays bare the costs of leaving the European Union.
“You have a very stark choice,” Michelle O’Neill, the party’s leader and the deputy first minister of Northern Ireland, said in an interview. “Do you want to be part of inward-looking Brexit Britain or outward-looking inclusive Ireland?”
Another question is how the authorities will deal with further unrest. In April, the police moved carefully against the rock-throwing crowds, treating them as a local disturbance rather than a national security threat. But if the violence escalates, that could change.
Monica McWilliams, an academic and former politician who was involved in the 1998 peace negotiations, said, “Loyalist threats, or violent actions, against a border down the Irish Sea may no longer be seen as a domestic problem.”
But the greater challenge, she said, is reassuring unionists and loyalists at a time when politics and demographics are moving so clearly against them. While there is little appetite in the Irish Republic for a near-term referendum on unification, Sinn Fein is within striking distance of being in power on both sides of the border — a development that would put unification squarely on the agenda.
In Sandy Row, the sense of a community in retreat was palpable.
Paul McCann, 46, a shopkeeper and lifelong resident, noted how real-estate developers were buying up blocks on the edge of the neighborhood to build hotels and upscale apartments. The city, he said, wants to demolish the Boyne Bridge — a predecessor of which William of Orange is said to have crossed on his way to that fateful battle with James II — to create a transportation hub.
“They’re trying to whitewash our history,” Mr. McCann said. “They’re making our loyalist communities smaller and smaller.”
For Gordon Johnston, a 28-year-old community organizer, it’s a matter of fairness: loyalists accepted the argument that reimposing a hard border between the north and south of Ireland could provoke violence. The same principle should apply to Northern Ireland and the rest of the United Kingdom.
“You can’t have it both ways,” he said. “You either have no borders or you have violence in the streets.”
SAN ANTONIO HUISTA, Guatemala — An American contractor went to a small town in the Guatemalan mountains with an ambitious goal: to ignite the local economy, and hopefully even persuade people not to migrate north to the United States.
Half an hour into his meeting with coffee growers, the contractor excitedly revealed the tool he had brought to change their lives: a pamphlet inviting the farmers to download an app to check coffee prices and “be a part of modern agriculture.”
Pedro Aguilar, a coffee farmer who hadn’t asked for the training and didn’t see how it would keep anyone from heading for the border, looked confused. Eyeing the U.S. government logo on the pamphlet, he began waving it around, asking if anyone had a phone number to call the Americans “and tell them what our needs really are.”
soared in 2019 and is on the upswing once more.
have risen, malnutrition has become a national crisis, corruption is unbridled and the country is sending more unaccompanied children to the United States than anywhere else in the world.
That is the stark reality facing Ms. Harris as she assumes responsibility for expanding the same kind of aid programs that have struggled to stem migration in the past. It is a challenge that initially frustrated her top political aides, some of whom viewed the assignment from Mr. Biden as one that would inevitably set her up for failure in the first months of her tenure.
Her allies worried that she would be expected to solve the entire immigration crisis, irked that the early reports of her new duties appeared to hold her responsible for juggling the recent surge of children crossing the border without adults.
linked to drug traffickers and accused of embezzling American aid money, the leader of El Salvador has been denounced for trampling democratic norms and the government of Guatemala has been criticized for persecuting officials fighting corruption.
Even so, Ms. Harris and her advisers have warmed to the task, according to several people familiar with her thinking in the White House. They say it will give her a chance to dive squarely into foreign policy and prove that she can pass the commander-in-chief test, negotiating with world leaders on a global stage to confront one of America’s most intractable issues.
critics denounced as unlawful and inhumane. Moreover, members of the current administration contend that Mr. Trump’s decision to freeze a portion of the aid to the region in 2019 ended up blunting the impact of the work being done to improve conditions there.
But experts say the reasons that years of aid have not curbed migration run far deeper than that. In particular, they note that much of the money is handed over to American companies, which swallow a lot of it for salaries, expenses and profits, often before any services are delivered.
Record numbers of Central American children and families were crossing, fleeing gang violence and widespread hunger.
independent studies have found.
“All activities funded with U.S.A.I.D.’s foreign assistance benefit countries and people overseas, even if managed through agreements with U.S.-based organizations,” said Mileydi Guilarte, a deputy assistant administrator at U.S.A.I.D. working on Latin America funding.
But the government’s own assessments don’t always agree. After evaluating five years of aid spending in Central America, the Government Accountability Office rendered a blunt assessment in 2019: “Limited information is available about how U.S. assistance improved prosperity, governance, and security.”
One U.S.A.I.D. evaluation of programs intended to help Guatemalan farmers found that from 2006 to 2011, incomes rose less in the places that benefited from U.S. aid than in similar areas where there was no intervention.
Mexico has pushed for a more radical approach, urging the United States to give cash directly to Central Americans affected by two brutal hurricanes last year. But there’s also a clear possibility — that some may simply use the money to pay a smuggler for the trip across the border.
The farmers of San Antonio Huista say they know quite well what will keep their children from migrating. Right now, the vast majority of people here make their money by selling green, unprocessed coffee beans to a few giant Guatemalan companies. This is a fine way to put food on the table — assuming the weather cooperates — but it doesn’t offer much more than subsistence living.
Farmers here have long dreamed of escaping that cycle by roasting their own coffee and selling brown beans in bags to American businesses and consumers, which brings in more money.
“Instead of sending my brother, my father, my son to the United States, why not send my coffee there, and get paid in dollars?” said Esteban Lara, the leader of a local coffee cooperative.
But when they begged a U.S. government program for funding to help develop such a business, Ms. Monzón said, they were told “the money is not designed to be invested in projects like that.”
These days, groups of her neighbors are leaving for the United States every month or two. So many workers have abandoned this town that farmers are scrambling to find laborers to harvest their coffee.
One of Ms. Monzón’s oldest employees, Javier López Pérez, left with his 14-year-old son in 2019, during the last big wave of Central American migration to the United States. Mr. López said he was scaling the border wall with his son when he fell and broke his ankle.
“My son screamed, ‘Papi, no!’ and I said to him, ‘Keep going, my son,’” Mr. López said. He said his son made it to the United States, while he returned to San Antonio Huista alone.
His family was then kicked out of their home, which Mr. López had given as collateral to the person who smuggled him to the border. The house they moved into was destroyed by the two hurricanes that hit Guatemala late last year.
Ms. Monzón put Mr. López in one of her relatives’ houses, then got the community to cobble together money to pay for enough cinder blocks to build the family a place to live.
While mixing cement to bind the blocks together, one of Mr. López’s sons, Vidal, 19, confessed that he had been talking to a smuggler about making the same journey that felled his father, who was realistic at the prospect.
“I told him, ‘Son, we suffered hunger and thirst along the way, and then look at what happened to me, look at what I lost,’” Mr. López said, touching his still-mangled ankle. “But I can’t tell him what to do with his life — he’s a man now.”
LONDON — The top economic officials from the world’s advanced economies reached a breakthrough on Saturday in their yearslong efforts to overhaul international tax laws, unveiling a broad agreement that aims to stop large multinational companies from seeking out tax havens and force them to pay more of their income to governments.
Finance leaders from the Group of 7 countries agreed to back a new global minimum tax rate of at least 15 percent that companies would have to pay regardless of where they locate their headquarters.
The agreement would also impose an additional tax on some of the largest multinational companies, potentially forcing technology giants like Amazon, Facebook and Google as well as other big global businesses to pay taxes to countries based on where their goods or services are sold, regardless of whether they have a physical presence in that nation.
Officials described the pact as a historic agreement that could reshape global commerce and solidify public finances that have been eroded after more than a year of combating the coronavirus pandemic. The deal comes after several years of fraught negotiations and, if enacted, would reverse a race to the bottom on international tax rates. It would also put to rest a fight between the United States and Europe over how to tax big technology companies.
has been particularly eager to reach an agreement because a global minimum tax is closely tied to its plans to raise the corporate tax rate in the United States to 28 percent from 21 percent to help pay for the president’s infrastructure proposal.
EU Tax Observatory estimated that a 15 percent minimum tax would yield an additional 48 billion euros, or $58 billion, a year. The Biden administration projected in its budget last month that the new global minimum tax system could help bring in $500 billion in tax revenue over a decade to the United States.
The plan could face resistance from large corporations and the world’s biggest companies were absorbing the development on Saturday.
“We strongly support the work being done to update international tax rules,” said José Castañeda, a Google spokesman. “We hope countries continue to work together to ensure a balanced and durable agreement will be finalized soon.”
said this month that it was prepared to move forward with tariffs on about $2.1 billion worth of goods from Austria, Britain, India, Italy, Spain and Turkey in retaliation for their digital taxes. However, it is keeping them on hold while the tax negotiations unfold.
Finishing such a large agreement by the end of the year could be overly optimistic given the number of moving parts and countries involved.
“A detailed agreement on something of this complexity in a few months would just be lighting speed,” said Nathan Sheets, a former Treasury Department under secretary for international affairs in the Obama administration.
The biggest obstacle to getting a deal finished could come from the United States. The Biden administration must win approval from a narrowly divided Congress to make changes to the tax code and Republicans have shown resistance to Mr. Biden’s plans. American businesses will bear the brunt of the new taxes and Republican lawmakers have argued that the White House is ceding tax authority to foreign countries.
Representative Kevin Brady of Texas, the top Republican on the House Ways and Means Committee, said on Friday that he did not believe that a 15 percent global minimum tax would curb offshoring.
“If the American corporate tax rate is 28 percent, and the global tax rate is merely half of that, you can guarantee we’ll see a second wave of U.S. investment research manufacturing hit overseas, that’s not what we want,” Mr. Brady said.
At the news conference, Ms. Yellen noted that top Democrats in the House and Senate had expressed support for the tax changes that the Biden administration was trying to make.