Unit 6. World Economy. New Dangers

Script 1:

When the crisis started, governments helped save the world economy. Now they are the problem.

Last year it is countries. The eco­nomic crisis, which seemed to have eased off in the latter part of 2009, is once again in full swing as the threat of sovereign default looms.

Europe's leaders are strug­gling to avert the biggest financial disaster in the euro's 11-year history. This week all eyes have been on Greece. If it defaults, it will be the first EU member to do so. As The Economist went to press EU leaders were meeting to dis­cuss what to do, and there was talk of a German-led rescue scheme. If it happens, other European candidates may be queuing up. Bond markets are worried about the capacity of Spain, Ireland and Portugal to repay their debts, forcing these countries to increase taxes and cut spend­ing, even as they remain mired in recession.

Europe's troubles have given investors good reason to wor­ry; but they are not the only cause for concern. Policy changes around the world have also spooked investors. China's gov­ernment began to rein in its lending binge last month, worried about accelerating inflation and asset bubbles. India's central bank has raised reserve requirements and Brazil's fiscal stimu­lus is being phased out. The rich world's big cen­tral banks are gradually unwinding the emergency liquidity facilities they introduced at the height of the crisis. "Quantita­tive easing", the process of printing money to buy longer-dat­ed securities, is coming to an end – or at least being put on hold.

All this has knocked asset prices. Stock-markets are down sharply, commodity prices have tumbled and volatility is up. The MSCI World Index of global share prices has fallen by almost 10% from its peak on January 14th. Optimism about a "v"-shaped recovery is being replaced with pessimism about a double-dip recession, as fears grow that policymakers will be forced, or will mistakenly choose, to remove monetary and fis­cal props too soon.

Script 2.

Supply chains in China

Apple uncovers poor conduct at some of its contractors

Apple is renowned for the control it exercises over every element of its business, from design to marketing. The resulting products, to its fans, verge on perfection. But there are clearly some steps in the manufacturing process that it does not supervise so closely. According to a report the firm released on February 23^rd, the treatment of workers at several of its contractors in various countries broke both local laws and Apple's own standards. Such problems are thought to be rife at Western firms' suppliers in China in particular, but are seldom brought to light. Even Apple's account raises more questions than it answers.

Apple says some of its suppliers hired underage employees, dumped hazardous waste illegally, made staff work unrea­sonable hours and paid less than the minimum wage. They also violated Apple's own standards by discriminating against pregnant women, providing inadequate safety equipment and impos­ing onerous recruitment fees on workers. Remedial steps, the company says, have already been taken. But it does not speci­fy where these events occurred or how many people were affected. Over the past three years the firm has increased the number of facilities audited each year from 39 to 102. But how much of its production this represents is not dis­closed. The report does, however, ob­serve that Apple's suppliers are good at protecting its intellectual property, if not their workers' rights.

To be fair, Apple was under no obliga­tion to commission the report or make its findings public. What is more, the report claims, "During most of our audits, sup­pliers stated that Apple was the only company that had ever audited their facility for supplier responsibility,"

China's reluctance to grant visas to foreign reporters and its censorship of the press does allow factories to elude the kind of scrutiny that would be rou­tine elsewhere. But even China may have limits. On February 25th the People's Daily, a government mouthpiece, report­ed that 62 workers had been poisoned in a poorly ventilated factory in Suzhou run by Wintek, a Taiwanese manufacturer that makes products for firms including Apple and Nokia.

To defuse concerns about their con­tractors' conduct, some Western firms, such as Nike, have made their entire supply chains public. That is something that Apple, which is notoriously secre­tive, remains unwilling to do.