Global Glance: January 19, 2016

A quick look at intriguing international stories

By John Bostwick, Managing Editor, Radius

Welcome back to Global Glance. This week we look at:

• Starbucks’ China expansion and its appealing new perks
• How the Ebola outbreak was declared over, then resurfaced the next day
• Income inequality in China and the US
   

Starbucks’ China Expansion and Its Appealing New Perks

Starbucks CEO Howard Schultz was in China last week at an event for local employees and their families. Starbucks now has 2,000 stores in China, and, as a press release describing the event explains, has plans to "accelerate its growth in China to achieve its goal to operate 3,400 stores by 2019.” Schultz thanked the company’s 30,000 China employees for their dedication while speculating that “over time, it’s conceivable that China could become our largest market.”

Schultz used the event to announce some employee perks starting this month that are sure to interest fellow multinationals. The first is a housing subsidy for full-time baristas and supervisors in China. As the press release explains, these eligible Starbucks employees “will receive a monthly housing allowance subsidy to help them overcome the initial financial challenges of starting their careers.” The allowance is expected to cover about half the cost of an employee’s monthly housing expenditures. In addition, Starbucks employees in China with 10 consecutive years of service may apply for a program called “Career Coffee Break,” which provides 12 months of unpaid leave for employees “to refresh themselves and more importantly, spend quality time with their loved ones and family.”

CNN Money reported last week on Starbucks’ activities in China, noting that while many other foreign food companies “have faltered — picking the wrong name or getting caught up in food safety scandals … Starbucks has done much better — it chose a catchy name (which means "Starry Hope") that sounds much like its English moniker, and adjusted its menu options to cater to local tastes.”

A Wall Street Journal article, also published last week, indicates that Starbucks is well-positioned to take advantage of China’s “exploding” coffee culture, even as certain sectors of the country’s economy (like manufacturing) are undergoing downturns. Here’s an excerpt: “Observers say consumer demand — which China’s economy is pivoting toward as it shifts away from investment-driven growth — won’t be derailed by the battered currency and stock markets.” In other words, while China’s economy is sputtering, it should still provide enough coffee-loving upper middle class customers to justify Starbucks’ continued expansion.

For another good article on Starbucks in China, check out this story from The Seattle Times, published last September. It’s about Jackie Xu, a graduate of China’s prestigious Tsinghua University who eschewed more highly paid professions to, as the Times puts it, “wear an apron instead.” The 27-year-old is now a manager of a flagship Starbucks store in Beijing. She’s been so successful that the company flew her to corporate headquarters in Seattle last year “to speak to thousands of US managers about Starbucks’ momentous growth in China as the world’s second-largest economy seeks to shift focus from export-oriented manufacturing to consumer-driven products and services.”

Back in Beijing, Xu is sometimes confronted in her store by former Tsinghua University classmates, now part of the white-collar world. She says of these encounters: “They always come to my store and say, ‘Your job looks so interesting and my job looks so boring.’” And starting this month, her job will also give her a 50% housing allowance.

Ebola Outbreak Declared Over, then Resurfaces the Next Day

A rare bit of good, if tempered, global news came last Thursday when the World Health Organization declared that “the end of the most recent outbreak of Ebola virus disease in Liberia and says all known chains of transmission have been stopped in West Africa.” This came 42 days — the equivalent of two Ebola incubation cycles — after “the last confirmed patient [in the affected countries of Liberia, Sierra Leone and Guinea] tested negative for the disease two times.”

Even the title of the story, however, cautioned that “new flare-ups are likely to occur,” as the virus can persist in survivors and “in rare instances be transmitted” for up to a year. Dr. Bruce Aylward, WHO’s Special Representative for the Ebola Response, is quoted as saying, “we still anticipate more flare-ups and must be prepared for them. A massive effort is underway to ensure robust prevention, surveillance and response capacity across all three countries by the end of March.”

The reprieve in West Africa was in fact cruelly short. Just one day after the WHO’s declaration, The Washington Post reported that according to the Associated Press a corpse tested positive for the virus in Sierra Leone. WHO statistics show that Sierra Leone has borne the brunt of the epidemic, with almost 4,000 deaths. According to Thursday’s WHO declaration, across the three West African countries, Ebola has “claimed the lives of more than 11,300 people and infected over 28 500,” a shocking kill rate of nearly 40%.

If you want to learn more about Ebola, which is part of a family of viruses called filoviruses, I recommend Richard Preston’s masterfully written 1994 book The Hot Zone. A plug that appears on my edition’s dust flap, from Stephen King, sums up my own reading experience: “The first chapter of The Hot Zone is one of the most horrifying things I’ve ever read in my whole life … and then it gets worse.”

Of course, a lot of time has passed — and more research has been conducted — since the publication of Preston’s book. This NPR piece has an interview with David Quammen, who wrote Ebola: The Natural and Human History of a Deadly Virus, published in 2014. According to Quammen, many of the vivid passages in The Hot Zone describing the symptoms of the disease do not square with reality, and that “Ebola is not like how it’s portrayed in the book.” He doesn’t (of course) dismiss the seriousness of Ebola, but, he says, because it’s not a respiratory virus, “it’s not likely to spread like wildfire around the world.” He predicts that the next pandemic “is more likely to be an influenza or a coronavirus than it is to be Ebola.”

Income Inequality in China and the US

There has been much talk in recent years about income inequality in the US, especially from left-leaning political candidates, but the talk often lacks statistical support from credible sources. That’s the nature of talk, I guess, but even respected economists may address the subject in writing without giving much evidence to support their arguments. Why, just five minutes ago I read an opinion piece by Paul Krugman from last Friday’s New York Times titled “Is Vast Inequality Necessary?” It explores three “stylized models of where extreme inequality might come from,” noting that the real US economy contains elements of each model. Here’s a characteristic passage: “the rise in incomes at the top largely reflects the soaring pay of top executives, not the rewards to innovation.”

I find Krugman’s argument compelling, but I doubt it will convince any right-leaning readers, mostly because he doesn’t support his argument with statistics. Obviously, the short piece has no academic pretentions, but it, like many other discussions about income inequality, fails to slake our thirst for determining the actual extent to which wealth is unequally distributed in this country and others.

A short article in last Friday’s Financial Times gives a glimpse. The article is actually primarily about income inequality in China. According to a recent Peking University study, that nation has “one of the world’s highest levels of income inequality,” with “the richest one percent of households owning a third of the country’s wealth … [and] the poorest 25 percent … [owning] just one per cent of the country’s total wealth.”

The Times article further explains that China’s Gini coefficient, a common income inequality measure, now stands at 0.49, and that “the World Bank considers a coefficient above 0.40 to represent severe income inequality.” One Chinese university professor boils down the situation, which is reflected in the study: “To put it simply, the poor [in China] are getting poorer and the rich are getting richer.”

China’s “severe” Gini score is all the more remarkable when you consider that it’s nominally a communist nation, built on such ideals as liberating the working class and abolishing private property. President Xi Jinping has vowed to fight the trend, writing recently (as quoted by the Times), “We want to continuously enlarge the pie, while also making sure we divide the pie correctly. Chinese society has long held the value of ‘Don’t worry about the amount, worry that all have the same amount.’” Numbers show the fight will be a long and difficult one.

Interestingly, the Times article notes that the world’s foremost capitalist stronghold is more or less “tied” with China in terms of Gini coefficient. The US stands at 0.41 according to the World Bank’s most recent numbers (from 2013), just above the "severe" threshold.

For more information, check out the World Bank’s table showing income distribution or consumption by country, including the Gini coefficients of most countries. You can also access the Organization for Economic Cooperation and Development’s Income Distribution Database, which “benchmarks and monitors income inequality and poverty across countries.”