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Sensemaker: Elite embarrassment

Friday 26 February 2021

What just happened

Long stories short

  • Joe Biden ordered US air strikes on Iran-backed militia targets in Syria that killed “up to a handful” of people.
  • Shamima Begum was told she can’t return to the UK to appeal the decision to strip her of UK citizenship for joining Isis.
  • Boris Johnson thanked Blackpink, the K-pop girl band with 35 million Instagram followers, for taping a message on the importance of acting against climate change. 

Elite embarrassment

In January, there’s Davos. All year round, there’s McKinsey. If ever one company served as a lightning rod for criticism of – and conspiracy theories about – global elites, it’s the consulting firm with 650 partners, dozens of governments on its client list and more than $10 billion in annual revenues (although as a partnership it doesn’t have to say how much more). 

None of which means the criticism is not deserved. McKinsey has now become the kind of case study its recruits read about at grad school. It has heaved its global managing partner overboard after a series of embarrassments that in a more conventional business might have caused heads to roll much sooner. These include:

  • advising Purdue Pharma on how to sell more opioids in the midst of an addiction crisis that cost nearly 50,000 lives in the US;
  • building a lucrative relationship with Saudi Arabia’s Crown Prince Mohammed bin Salman that has outlasted his alleged involvement in the butchering of the journalist Jamal Khashoggi;
  • repaying $43 million in fees to South Africa after a judicial inquiry there found evidence of irregularities in McKinsey contracts with multiple state and private sector clients;
  • accepting €4 million in fees from the French government to speed up a Covid vaccine rollout that has proved one of the slowest in Europe;
  • working with multiple state-controlled banks in Russia that are under US sanctions for alleged involvement in efforts to influence US elections;
  • hosting a corporate retreat in the desert outside Kashgar, a few miles from one of scores of Chinese internment camps set up for the “re-education” of Muslim Uighurs.

The managing partner being sacrificed in what one source (in the FT) called a “ritual cleansing” is a 54-year-old Scot, Kevin Sneader, who’s spent much of his career in China and has been running the firm from Hong Kong. One of the ironies of the mess he bequeaths to his successor, whoever that may be, is that he tried to tighten up McKinsey’s vetting of potential clients and lost the trust of some of his peers in the firm by apologising so often for their efforts.

Sneader agreed to a $573 million settlement for McKinsey’s role in the Purdue Pharma opioid scandal. That is roughly a twentieth of the firm’s turnover. McKinsey will survive. In purely commercial terms its present difficulties seem no more – or less – serious than Goldman Sachs’ involvement in the 1MDB scandal, from which the bank moved on after a similar combination of human sacrifice, crisis PR and multi-digit fines.

The question is what McKinsey survives as. Will it still be able to make a show of declining work of which it claims to disapprove and hiring only the pick of the world’s brightest, most ambitious graduates? Can it live on as the consultancy that girdles the planet with a velvet rope? Right now, that looks doubtful.

Wealth investment, fairness, prosperity

Exodus economics
If foreign-born workers are leaving the UK in droves, what will be the long-term effect on the economy? Bloomberg takes a look and foresees a 1 per cent hit to national output over five years as a direct result of the departure of 1.3 million earners, and a steadily worsening ratio of workers to pensioners between now and 2070. What’s more striking about this ratio, though, is that it’s heading in the wrong direction anyway. Even with steady inward migration the UK would find it harder and harder to support its elderly. This is of course the demographic squeeze being felt by all ageing rich countries, but on present evidence Brexit makes it worse, not better. Not that we weren’t warned.

New things technology, science, engineering

Hyundai recall
Fifteen reported fires have led Hyundai to recall 82,000 electric cars from all over the world to have their batteries replaced at a cost of $11,000 per car. The recall will set Hyundai back $900 million in all and CNN says it can’t think of an equivalent from the age of internal combustion – if you think of battery replacement as akin to replacing a whole engine. GM and Tesla have had fire problems too, but nothing like this. Hyundai blames LG, its battery supplier. LG blames Hyundai’s production lines. No one was injured in the fires and this doesn’t doom EVs, but it does emphasise the size of the prize for whoever makes the first cheap and properly nonflammable car battery. It will be huge.

Our planet environment, natural resources, geopolitics

Boulder problem
Greenpeace has been heaving big granite boulders into the English Channel. It’s a stunt, of course. The idea is to draw attention to the kind of trawling that scrapes the sea-bed bare – as long as big granite boulders aren’t there to snag the nets. Fishermen say the boulders are dangerous because snagged nets can capsize their trawlers, and Coastguard officials who motored alongside the Greenpeace boat with a megaphone said what it was doing was illegal. But this was in a marine protected area where bottom trawling is also supposed to be illegal and – stunt or not – the boulders will actually do what’s claimed of them. As ever, Greenpeace looks at its most effective taking high risks exposing high crimes on the high seas.

The 100-year life health, education, living, public poliCY

Unused vaccines
Earlier this week we mentioned a Der Spiegel article that called the Oxford/Astrazeneca vaccine “the vaccine nobody wants”. Now the Guardian reports that four out of five AZ vaccines delivered to EU countries have yet to be used. Angela Merkel admits the vaccine might have an “acceptance problem” in the EU. And why might this be? Her French counterpart has falsely claimed it doesn’t work well for the over-65s, and France, Germany, Poland and Italy have recommended that it be used only on under-65s despite the finding that even a single dose gives almost complete protection from serious illness. Macron said this morning he’d take the AZ vaccine, but a lot of damage has been done. You don’t have to be a fan of one vaccine over another to be disappointed when the elected leader in the home of the enlightenment gives misinformation a helping hand. 

Belonging identity, society, beliefs, countries

Davos gear
If the problem is looking too bulky in the cold, a lined Norwegian wool topcoat with a double collar and a starting price of $1,000 might be the solution. The NYT has given a former New York commodities trader called Michael Berkowitz the kind of publicity a retailer can usually only dream of by profiling him at length in the Norwegian wool coat that the paper says has become the ne plus ultra for plutocrats both real and aspiring. And I am hereby giving him a little more. It does look cool, in a cosy sort of way. 

Thanks for reading, and do share this around. 

Giles Whittell

Photographs Getty Images, Suzanne Plunkett/Greenpeace