US Business

The departure of controversial Facebook executive Sheryl Sandberg is unlikely to improve the troubled social media giant, whistleblower Frances Haugen told AFP.

Haugen, a former Facebook engineer who leaked internal documents last year suggesting the firm put profits before safety, pointed out that Sandberg’s replacement came from a team whose remit was to help the firm to expand.

The “growth team” was part of the problem and the decision showed the company was “not listening to the heart of the critiques”, she said.

Sandberg, the number two at Facebook parent Meta, shocked Silicon Valley last week by announcing she was stepping down after 14 years at the firm, steering its rise from niche social network to ad-tech juggernaut.

But she had increasingly become the public face of a firm beset by scandals over misinformation, data protection and even accusations of fuelling ethnic violence.

Haugen’s leaked documents suggested executives knew their platforms could fuel hate speech and damage the mental health of young people.

The revelations led to huge criticism of Sandberg and her boss, Mark Zuckerberg, whose business — renamed Meta in 2021 — also includes Instagram and WhatsApp.

– ‘Did she do enough?’ –

Haugen, speaking to AFP this week ahead of addressing a cybersecurity forum in Lille in northern France, said there was a “fundamental tension” about Sandberg’s role.

“Did she do enough to stand up to Mark, or to demand Mark be a better leader? I don’t think so.”

She praised Sandberg, though, for establishing a strategic response team in 2018 to combat efforts to misuse the network.

“Sheryl did set up the parts of the company that were actively concerned with the safety of people who live in fragile places like Ethiopia,” she said.

But she said it “doesn’t seem particularly promising” that Sandberg will be replaced by Javier Olivan, the head of Meta’s “growth team”.

In announcing Olivan’s promotion, Zuckerberg wrote on Facebook that he had a “strong track record of making our execution more efficient and rigorous”.

Haugen wished him luck in his new role but said the growth team embodied “many of the things that I consider problematic about Facebook”.

Much of Haugen’s criticism stemmed from a central accusation that Facebook had pursued growth and profit with no concern for the safety or wellbeing of its users.

The growth team was central to that effort.

“The fact that the person who got to replace Sheryl comes from that part of the organisation feels that they are not really listening to the heart of the critiques,” said Haugen.

Meta did not immediately respond to a request for comment.

– Optimism on Musk –

Haugen has never fitted the stereotypical whistleblower image of a scrappy outsider — she has wealthy backers and a slick campaign that has seen her addressing parliaments around the world.

She told AFP in an interview last year she planned to start a youth movement to help empower young people to take charge of their online lives.

Aside from Facebook, she is sanguine about other recent developments in tech.

The saga of Elon Musk’s on-off takeover of Twitter, for example, has left many commentators questioning whether the billionaire magnate might do more harm than good to the social media firm.

But Haugen reckons he might just be on to something, saying she was “cautiously optimistic”.

“Part of why Facebook makes bad decisions is because it’s a publicly traded company,” she said.

“Elon Musk taking Twitter private provides an opportunity to go and do the house cleaning that Twitter needs.”

And she is heartened by a new European Union law — known as the Digital Services Act — that forces social media to regulate content.

She said it should break open the tech giants to independent scrutiny, which was a “really, really good deal”.

Overall, she said her revelations had made a positive impact — Facebook has doubled its spending on safety and staff working on safety issues say they have more space to operate.

“I’m incredibly heartened by how seriously leaders around the world have taken us,” she said.

“We have different conversations now about what social media should be.”

Equity markets mostly fell Thursday as inflation fears gain momentum, with all eyes on the outcome of a European Central Bank policy meeting aimed at tackling soaring consumer prices in the eurozone.

The ECB is expected to announce the end date to its bond-buying stimulus, as concerns over the accelerating pace of inflation in the eurozone grip policymakers.

The stop is a prelude to the ECB hiking interest rates for the first time in more than a decade, following in the footsteps of other central banks who are raising borrowing costs.

In foreign exchange, the euro steadied against the dollar and pound.

“There is a sense of nervousness ahead of the ECB’s interest rate decision later today as the central bank looks to usher in a new era of monetary policy tightening,” noted Victoria Scholar, head of investment at Interactive Investor. 

“With euro-area inflation hitting a record high in May, the ECB is widely anticipated to begin hiking rates in July.”

Inflation around the world has reached the highest levels in decades, fuelled largely by soaring oil and gas prices.

Energy demand has surged as economies emerge from pandemic lockdowns, while supplies have been hit by the invasion of Ukraine by major producer Russia. 

Traders were also awaiting US inflation data due Friday.

Analysts expect the Federal Reserve to stick to its hawkish path and hike US interest rates by half a point for at least three more meetings this year as it tries to bring down American consumer prices.

“Until we reach peak inflation, which will trigger a less hawkish Fed and lower recession odds, it could be a gloomy summer for global stock pickers,” forecast SPI Asset Management’s Stephen Innes. 

There was fresh uncertainty over the economic outlook in China as Covid fears linger over the world’s second-biggest economy.

While data showed China’s exports rebounded strongly in May, with factories restarting and supply chains untangling as Shanghai slowly emerged from a gruelling lockdown, the metropolis will Saturday shut a district of 2.7 million people for mass coronavirus testing.

“There are lingering concerns that China’s brisk recovery could be a false dawn given that the zero-Covid strategy is staying firmly in place and that could mean rolling lockdowns will continue,” noted Hargreaves Lansdown analyst Susannah Streeter.

– Key figures at around 1015 GMT –

London – FTSE 100: DOWN 0.4 percent at 7,562.26 points

Frankfurt – DAX: DOWN 0.7 percent at 14,350.22

Paris – CAC 40: DOWN 0.3 percent at 6,427.47

EURO STOXX 50: DOWN 0.5 percent at 3,771.30

Tokyo – Nikkei 225: FLAT at 28,246.53 (close)

Hong Kong – Hang Seng Index: DOWN 0.7 percent at 21,869.05 (close)

Shanghai – Composite: DOWN 0.8 percent at 3,238.95 (close)

New York – Dow: DOWN 0.8 percent at 32,910.90 (close)

Brent North Sea crude: DOWN 0.3 percent at $123.20 per barrel

West Texas Intermediate: DOWN 0.2 percent at $121.89 per barrel

Dollar/yen: DOWN at 133.30 yen from 134.29 yen late Wednesday

Euro/dollar: FLAT at $1.0720 

Pound/dollar: DOWN at $1.2526 from $1.2535

Euro/pound: UP at 85.58 pence from 85.54 pence

Italian Prime Minister Mario Draghi on Thursday suggested an EU-wide scheme to protect citizens from higher energy costs resulting from Russia’s invasion of Ukraine.

“We must consider replicating some of the joint tools that have helped us recover swiftly from the pandemic,” Draghi told delegates gathered in Paris for a meeting of the Organisation for Economic Cooperation and Development (OECD).

He highlighted that inflation in the eurozone single currency area reached 8.1 percent in May — much of it driven by higher prices for energy including oil and gas following Moscow’s assault on its neighbour.

“Rising inflation is not wholly the sign of overheating (in the economy), but largely the result of a series of supply shocks,” Draghi said.

The former European Central Bank chief said the SURE unemployment support scheme, agreed by EU nations in 2020 as the first pandemic wave was breaking over the continent, could serve as a model.

It provided up to 100 billion euros ($107 billion) across the bloc to buttress national budgets sapped by the sudden need to aid large numbers of people with measures like short-time work schemes.

SURE “provided cheap and stable loans to the EU member states so that they could save jobs and support incomes”, Draghi said.

“A similar instrument — this time targeting energy — could ensure vulnerable countries have more room to help their citizens at a time of crisis” as well as “shore up popular support for our joint sanctions” against Russia, he added.

Prime Minister Boris Johnson on Thursday sought to reset his embattled leadership with a policy blitz to tackle Britain’s cost-of-living crisis, including contentious new measures to boost home ownership.

After narrowly surviving a no-confidence vote among his own Conservative MPs on Monday, Johnson is under pressure to turn the page on a series of scandals including lockdown-breaching parties in Downing Street.

In a speech later, he was to vow “more affordable energy, childcare, transport and housing”, according to excerpts released by Downing Street.

“And, while it’s not going to be quick or easy, you can be confident that things will get better, that we will emerge from this a strong country with a healthy economy,” Johnson added.

The scale of the inflationary crisis hitting millions of Britons was underlined as the price of filling up the average family car topped £100 ($125) for the first time, according to data from the RAC motoring group.

RAC spokesman Simon Williams called it “a truly dark day” for hard-pressed drivers, and urged the government to slash sales tax on petrol and diesel.

The government says much of the crisis is caused by factors beyond its control, such as the impact of the Covid pandemic and the war in Ukraine.

But with two difficult by-elections coming up this month, unhappy Tory MPs want bolder measures including tax cuts after 40 percent of them voted against Johnson on Monday.

– Back to the 80s –

Updating a signature policy of 1980s predecessor Margaret Thatcher, Johnson’s speech was set to detail a plan to enable more low-income renters to buy their own social housing.

Senior minister Michael Gove told Sky News that “home ownership is not just good for individuals, it’s good for society overall”.

He vowed the measures would help redress a crippling shortage in housing stock that has seen both purchase and rental prices rocket well out of reach of many Britons, especially younger adults.

But the opposition Labour party noted that the plan would need billions in extra money, which Gove admitted was not on offer, relying instead on existing funding at a time when the Treasury is already trying to rein in government spending.

“By their own reckoning, this will help a few thousand families a year,” senior Labour MP Lisa Nandy told BBC radio.

“For those families that will be very welcome,” she said, while warning it could make “the housing crisis worse for everybody else”.

Britain’s newspapers honed in on the surging prices on Thursday, with the Guardian, Daily Mirror and Johnson’s former employers at the Daily Telegraph featuring front-page stories on the record fuel costs.

But the conservative Daily Mail declared that “emboldened Boris Johnson will cut bills left, right and centre in his most radical move yet to ease the cost-of-living crisis”.

All the papers noted a warning from the Organisation for Economic Co-operation and Development (OECD) that Britain must cut taxes or raise spending, as it forecast the country would have the weakest economic growth in the developed world next year.

– Fight with EU –

Under current Conservative party rules, Johnson cannot be challenged again for a year, which leaves little time for any new leader to emerge before the next general election due by 2024.

But Johnson’s Tory enemies still appear to be manoeuvring, with reports that he faces a “war of attrition” and “vote strikes” to paralyse the government’s legislative agenda. 

Such “vote strikes” hurt Theresa May’s three-year stint in Downing Street, before she was brought down in 2019 by Johnson and his allies over how to execute Britain’s exit from the European Union.

The government is set to launch another counter-offensive on the Brexit front, by introducing legislation soon to rewrite a pact with the EU governing trade with Northern Ireland, unless Brussels agrees to changes.

Gove denied that Johnson was looking to divert attention following the confidence vote, by placating Brexit hardliners on the Tory backbenches.

“I don’t think it’s about picking a fight,” the minister said on BBC radio.

“It is absolutely right that we fix the problems with the Northern Ireland Protocol,” he said, after the territory’s biggest pro-UK party refused to join a new power-sharing government.

Most Asian and European markets fell Thursday as a rally in oil ramped up inflation fears, with top officials warning of more pain to come as the Ukraine war continues to push prices up and put further pressure on the global economy.

Buyers on Wall Street were in retreat again after data showed US crude and gasoline stockpiles sank, just as the summer driving season begins and a leading OPEC member warned demand would surge further as China reopens.

Adding to the gloom was the OECD’s sharp downward revision of its global growth outlook and doubling of its inflation forecast.

The glum mood was only slightly offset by ongoing optimism that Beijing’s tech crackdown was close to an end.

Both main crude contracts edged down but held most gains after jumping more than two percent Wednesday to three-month highs after figures showed the biggest US storage depot had seen a big fall in reserves last week, suggesting elevated prices were not deterring people from driving.

Meanwhile, White House Press Secretary Karine Jean-Pierre said officials expect Friday’s keenly awaited consumer price index will be “elevated”.

The comment lifted expectations that the Federal Reserve will stick to its hawkish path and hike interest rates by half a point for at least three more meetings this year as it tries to bring down inflation from four-decade highs.

Analysts said investors were unlikely to get any reprieve until crude — a key driver of inflation since Russia’s invasion of Ukraine — was brought under control.

“A pullback in crude would be crucial for any prolonged risk rally, given implications for inflation expectations,” said SPI Asset Management’s Stephen Innes. 

“And for the central bank fraternity intent on frontloading rates, chapter two of the current playbook reads that aggressive tightening risks a material decline in housing, consumer confidence, and consumption that will eventually drive their respective economies into recession and send stocks tumbling.

“So until we reach peak inflation, which will trigger a less hawkish Fed and lower recession odds, it could be a gloomy summer for global stock pickers.”

He added that prices were expected to rise further for now as China emerges from months of lockdown, a sentiment that United Arab Emirates Energy Minister Suhail Al-Mazrouei agreed with.

“With the pace of consumption we have, we are nowhere near the peak because China is not back yet,” he told a conference Wednesday. “China will come with more consumption.”

And OANDA’s Jeffrey Halley said difficulties monitoring Iran’s nuclear compliance meant a nuclear deal with Iran — and the release of its crude onto world markets — was “as far away as ever”.

The unease about rising prices and rates saw all three main indexes fall on Wall Street, with focus on the European Central Bank’s policy meeting later Thursday and the release of US inflation data Friday.

The ECB is expected to begin winding down its massive bond-buying programme and signal a rate hike is in the pipeline.

Asian traders followed suit Thursday.

Hong Kong dropped, even as tech firms continued to benefit from hopes that China’s crackdown was almost over, while Shanghai, Sydney, Seoul, Singapore, Taipei, Manila and Wellington were also in the red.

Traders were nervous about news that officials in Shanghai will lock down a district of 2.7 million people Saturday to conduct mass coronavirus testing, highlighting the problems they have in running an economy while chasing their zero-Covid strategy.

There was little reaction to news that China’s exports surged last month.

Tokyo, however, was marginally in positive territory as the yen sat at two-decade lows owing to widening monetary policies of the United States and Japan, which shows no signs of lifting rates. Mumbai, Jakarta and Bangkok also edged up.

London, Paris and Frankfurt opened lower.

Investors were jarred by a report from the Organisation for Economic Co-operation and Development, which said it had cut its 2022 growth outlook to three percent — from 4.5 percent predicted in December — owing to the Ukraine war.

It also doubled its inflation estimate to 8.5 percent, a 34-year high. 

“The world is set to pay a hefty price for Russia’s war against Ukraine,” wrote the OECD’s chief economist and deputy secretary-general Laurence Boone.

And Anna Han, at Wells Fargo Securities, told Bloomberg Television: “Our view is that the chance of recession by the end of 2023 is 40 percent or so.” 

– Key figures at around 0720 GMT –

Tokyo – Nikkei 225: FLAT at 28,246.53 (close)

Hong Kong – Hang Seng Index: DOWN 1.0 percent at 21,795.62

Shanghai – Composite: DOWN 0.8 percent at 3,238.95 (close)

London – FTSE 100: DOWN 0.2 percent at 7,581.81

Brent North Sea crude: DOWN 0.2 percent at $123.29 per barrel

West Texas Intermediate: DOWN 0.3 percent at $121.75 per barrel

Dollar/yen: DOWN at 133.83 yen from 134.29 yen late Wednesday

Euro/dollar: DOWN at $1.0716 from $1.0720 

Pound/dollar: DOWN at $1.2520 from $1.2535

Euro/pound: UP at 85.59 pence from 85.54 pence

New York – Dow: DOWN 0.8 percent to 32,910.90 (close)

US President Joe Biden on Wednesday urged leaders of the Americas to prove that democracy works as he laid out plans to boost economic cooperation and improve health and food access in a region where China has been making growing inroads.

Welcoming leaders to Los Angeles for the Summit of the Americas, Biden acknowledged differences — with Mexico’s leader refusing to come — but made an impassioned plea for democracy as the best way forward.

“When democracy is under assault around the world, let us unite again and renew our conviction that democracy is not only the defining feature of American histories, but the essential ingredient to Americas’ future,” Biden said. 

“At this summit, we have an opportunity for us to come together around some bold ideas, ambitious actions, and to demonstrate to our people the incredible power of democracy.”

In a theater that plays host to the Emmys, delegations snacking on popcorn watched a Caribbean-influenced dance show choreographed by Emilio Estefan and listened to pop star Sheila E who, in a fitting choice, covered The Beatles’ “Come Together.”

Biden laid out a new regionwide economic plan that was large on ideas but short on commitments, with no promises of further market access or funding.

In an echo of US political debates, Biden said that the United States was looking for economic growth “from the bottom up and the middle out and not the top down.”

“What was true in the United States is true in every country — ‘trickle-down economics’ does not work,” he said to applause.

– More than ‘state dollars’ –

In an implicit contrast to Beijing, Biden’s national security advisor, Jake Sullivan, said the United States was worried less about flashy announcements than about supporting more inclusive growth.

“The United States has never seen its comparative advantages in the world as just leveraging huge numbers of state dollars, but rather leveraging all of the tools available to us,” he told reporters on Air Force One.

Biden announced an initiative worth $300 million to tackle food insecurity — on the rise as Russia’s invasion of Ukraine disrupts grain exports — by coordinating with the hemisphere’s major agriculture nations including Argentina, Brazil and Canada.

The White House also announced a new Americas Health Corps that aims to improve the skills of 500,000 health workers across the region, building on the lessons from Covid-19, which hit the Western Hemisphere especially hard.

China has stepped up its role in Latin America during the pandemic, moving early to supply vaccines, and US nemesis Cuba has long exported its state-employed doctors. 

The announcement comes a day after Vice President Kamala Harris detailed $1.9 billion in private sector investment in impoverished and violence-ravaged El Salvador, Guatemala and Honduras.

The troubles in the so-called Northern Triangle, as well as Haiti, have generated a soaring number of migrants to the United States, setting off a domestic furor as Donald Trump’s Republican Party demands efforts to stop them.

– Meeting with ‘Tropical Trump’ –

Draining US diplomatic energy ahead of the summit, Mexican President Andres Manuel Lopez Obrador refused to attend as he insisted that Biden invite the leftist leaders of Cuba, Nicaragua and Venezuela, shunned on the grounds that they are autocrats.

Mexican Foreign Secretary Marcelo Ebrard attended in Obrador’s stead. Speaking to his counterparts, Ebrard called the exclusion of the three countries “a strategic error” and said Mexico would look at ways to reform regional institutions.

Biden will have a potentially awkward first meeting Thursday with President Jair Bolsonaro of Brazil, Latin America’s most populous nation. 

A Trump supporter, Bolsonaro has raised doubts about the legitimacy both of upcoming voting in Brazil and, on the eve of his trip, of Biden’s own election.

Sullivan said that Biden would not shy away from the topic and would discuss the importance of “open, free, fair, transparent democratic elections.”

The Summit of the Americas is the first in the United States since the inaugural edition in 1994 was held in Miami under Bill Clinton, who proposed a free-trade zone that would span the hemisphere — but exclude communist-ruled Cuba.

The White House billed Biden’s summit as an update to Clinton’s vision. But the US political mood has since dramatically soured on free trade, with Trump rising to power denouncing liberalization as harmful to US workers. 

The Americas Partnership for Economic Prosperity announced by Biden will look at coordinating on standards and supply chains but will not offer new market access — a key incentive offered to the region by China, with its billion-plus consumer market.

Biden last month similarly unveiled an Asian partnership on setting economic standards as he visited Tokyo.

But unlike in Asia, the United States already has free trade deals with a number of major Latin American nations including Mexico, Chile, Colombia and Peru.