Google Library Case Loss May Spur Demands for Antitrust Probe & Is Obama Too Cozy With Google?

By Jeff Bliss
March 25 (Bloomberg) -- A judge’s rejection of Google Inc.’s bid to create the world’s biggest digital library will reinforce demands by company detractors for a federal antitrust investigation into its business practices, legal analysts said.

Google’s opponents will cite the ruling to support claims the company is seeking to control the Internet search market, Herbert Hovenkamp, a professor at the University of Iowa College of Law in Iowa City, said in an interview. The decision “will strengthen the hand of those who want to do an antitrust investigation.”

U.S. Circuit Judge Denny Chin on March 22 struck down a $125 million settlement between Google and publishers and authors to create a digital library, saying the deal would be unfair to authors. The Mountain View, California-based company, owner of the world’s most popular search engine, also has been accused of reducing competition in the search industry.

Attorneys general in Ohio and Wisconsin are weighing investigations, and Herb Kohl, chairman of a Senate Judiciary antitrust subcommittee, is planning to examine the company’s conduct.

Microsoft Corp. and other Google rivals are members of FairSearch.org, a group that opposes the company’s planned acquisition of Cambridge, Massachusetts-based ITA Software Inc., which provides online data for airline ticket prices.

EU Investigation

Microsoft’s Ciao from Bing, French legal search engine Ejustice.fr and Foundem, a U.K. price-comparison website, have filed complaints with the European Union. The EU is investigating whether Google is unfairly ranking its services higher than rivals in search results.

Google has defended its business strategy and accused Redmond, Washington-based Microsoft of a campaign to undermine the Internet search company.

Jonathan Jacobson, an antitrust lawyer working for Google, said that Chin’s ruling would hurt computer users.

“It is going to deprive consumers of the huge benefits that the settlement would have generated,” Jacobson, a New York-based lawyer at Wilson Sonsini Goodrich & Rosati, said on Bloomberg Television. “If Microsoft is out there trying to degrade the quality of Google search, do consumers benefit from that?” he said. “No, they don’t.”

Jacobson declined to comment on how Google will proceed legally.

Google’s focus should be on regulators, not rivals, said Charles “Rick” Rule, a Washington-based attorney who represents Microsoft, in a statement.

“Google’s antitrust problems are with the federal courts, the U.S. Department of Justice, state attorneys general, and the European Commission, all of whom have raised concerns about Google’s monopolistic conduct,” said Rule, head of the antitrust group at Cadwalader, Wickersham & Taft LLP.

Rare Searches

In reaching its now-voided settlement with publishers and authors, Google disguised its real purpose for scanning rare and out-of-print books, said Gary Reback, co-founder of the Open Book Alliance. The group includes libraries, authors and publishers as well as Microsoft, Amazon.com Inc. and Yahoo! Inc.

Google’s intent was to create an unfair advantage by scanning books without getting copyright permission, said Reback, an antitrust attorney for Menlo Park, California-based Carr & Ferrell LLP whose clients include Foundem. The scans then could be used to tweak the mathematical formulas that enable rapid retrieval of information about rare books, he said.

“Google puts itself in a position to answer those rare queries in a way no other competitor could,” Reback said.

Hovenkamp said that doesn’t necessarily suggest anticompetitive behavior. Google is “putting together a product so attractive for customers that customers want to go with it,” he said.

‘Not a Court Case’

The books decision also focus on issues, such as copyright and class-action law, that don’t apply to a broader anticompetitive argument, said Adam Kovacevich, a Google spokesman, in an interview.

The ruling likely won’t be a foundation for a broader case against Google, said James Grimmelmann, an associate professor of New York Law School and a critic of the Google books deal.

“This will be useful to Google’s detractors in building a case in the court of public opinion but not a court case,” he said. Legal analysts noted that the judge’s discussion of antitrust consumed only three pages of a 46-page opinion.

“It was a very minor point,” said Scott Gant, a partner at Boies, Schiller & Flexner in Washington who filed the first major objection to the Google Books deal. “This isn’t a kind of sea change” in federal court views of Google.

Still, the decision did show “Google can be defeated,” he said.

March 25 (Bloomberg) -- Gary Reback, an attorney at Carrell & Ferrell LLP, talks about antitrust issues facing Google Inc. (Source: Bloomberg) 

businessweek

100 C

Kitazawa: Surface temperatures below 100C

Japan's defense minister says the surface temperatures of all 6 reactors at the Fukushima Daiichi nuclear power plant are lower than 100 degrees Celsius.

In a news conference on Sunday, Toshimi Kitazawa quoted an expert from the Nuclear and Industrial Safety Agency as saying the data are very valuable because temperatures below 100 degrees confirm the existence of water in spent fuel rod storage pools.

Kitazawa said Self-Defense Forces officials measured the temperatures from a helicopter using an infrared device on Sunday for a second consecutive day.
He said the surface temperature of the Number One reactor was 58 degrees Celsius, that of Number 2 stood at 35 degrees, Number 3 at 62 degrees, Number 4 at 42 degrees, Number 5 at 24 degrees, and Number 6 at 25 degrees.

nhk.or.jp

Apple, Google May Profit on a Tax Holiday

Those companies and others say they'll bring home billions in earnings—but only if they get a big tax break

By Peter Coy and Jesse Drucker
Google (GOOG) Ireland is not a branch office of the U.S.-based search giant. It's a separate corporation, and the IRS can't touch a dime that Google Ireland earns from its core business until it sends profits back home to the mother ship. The term of art for bringing the money back is repatriation—the same as for a soldier captured abroad.
U.S. multinationals have more than $1 trillion in profits stashed in overseas subsidiaries. Some of the companies with the most money squirreled away say they're prepared to bring a big chunk of it home. All they want in return is a temporary tax break that wouldn't cost the U.S. Treasury anything, since it's money that would otherwise be kept abroad and not taxed at all. The tax break would actually raise billions of dollars from applying the reduced tax rate to the money that's been repatriated.
What's not to like? John T. Chambers, Cisco's (CSCO) chief executive officer, told securities analysts in February that "you're now seeing political leaders at all levels understand" the case for a tax holiday on repatriated foreign profits. "I think this one has well over a 60 percent probability of being resolved in a positive way," he said. Although a lobbying campaign is just getting under way, Representative Brian P. Bilbray (R-Calif.) has already introduced a bill that would let companies bring home money tax-free if they used it for research and development or facilities expansion.
Aside from Cisco, the growing coalition for repatriation relief includes Adobe (ADBE), Apple, CA Technologies (CA), Duke Energy (DUK), Google, Microsoft (MSFT), Oracle (ORCL), Pfizer (PFE), and Qualcomm (QCOM)—powerhouses all. The group is seeking fundamental changes in tax law, but if it can't get them right away, it still wants the tax holiday. Its opening position is that there should be no conditions on how the money is used. Chambers argued in a Wall Street Journal op-ed last October that a repatriation might create as many as 2 million jobs.
It's a seductive argument—reap billions in tax revenue from money that's currently untaxed and generate economic growth to boot. On closer inspection, though, the coalition's argument has some logical loopholes. A nearly identical holiday passed by Congress in 2004 and taken mostly in 2005 did little to boost jobs or investment, according to several independent economic studies. Some economists say a holiday today might be even less effective because cash isn't a constraint in 2011—it's bountiful, thanks to the Federal Reserve's loose-money policy. U.S. nonfinancial corporations have $1.9 trillion in liquid assets, the Fed says. No more than half of that—probably significantly less—is offshore. (An unknown portion of the $1 trillion-plus in foreign-held profits isn't cash. It's tied up in foreign factories, offices, and the like and can't easily be repatriated.)
"The problem is lack of demand or lack of investment opportunities" in the U.S., says Dhammika Dharmapala, an economist and law professor at the University of Illinois. Plus, granting another holiday so soon might induce companies to stash even more money abroad, convinced that if they wait long enough another holiday will arrive, says Thomas J. Brennan, a professor at Northwestern University School of Law.
More --->


businessweek

Japan quake: Economy 'to rebound' after short-term pain

Insurance cost estimates range between $14.6bn and $34.6bn with the total rebuild bill far higher

Friday's earthquake and tsunami have left parts of Japan's economy "frozen", but analysts forecast that it will bounce back later this year.

Some of the country's leading producers, including the world's biggest carmaker, Toyota, have closed all of their plants in the country.
Analysts at Nomura expect that loss of production to dent the economy during this quarter and the next.
But they suggested growth would return in the third quarter.
"This disaster has in effect temporarily frozen the world's third largest economy," said Richard Soultanian of NUS Consulting, which specialises in the energy supply industry.
The Japanese economy, the third largest in the world, shrank at the end of last year and had been expected to return to growth in the second quarter of 2011.
"We now expect the Japanese economy to take longer than we expected to exit its current soft patch owing to the earthquake and tsunami," said Nomura analysts Takahide Kiuchi and Okazaki Kohei.

Stephanomics: The economic aftershocks

Sharon O'Halloran, a professor of political economy at Columbia University, said: "The question is: does this finally push them out of the deflationary spiral and allow them to get their economy back on track, or does it push them deeper down?"

The country's global car giants are expected to be the amongst the worst affected.
Nomura suggested that annual operating profits at Toyota, Honda and Nissan would be dented by between 3% and 8% this year.

'Extreme damage'
 
The electronics industry was also expected to be badly hit, with a report by Goldman Sachs saying there would be "extreme damage" across the electronics industry supply chain in the near term.
Sony suspended production at eight plants in the affected region and said it was not sure when production would restart.

Toshiba, whose products include semiconductors and nuclear reactors, also said it did not know when it would be able to re-open its chip factory in northern Japan.

But further down the line, economists said the disaster could boost economic growth.
The rebuilding effort will mean a huge boom in construction spending.
Shares in many Japanese building companies have already gained sharply in anticipation of the work that will be heading their way, partly funded by insurance companies.

Clues

 

Analysts are looking back to the Kobe earthquake of 1995 for clues as to how the Japanese economy will react to the latest earthquake and tsunami.

Reconstruction following the Kobe quake cost $100bn (£62bn), of which $3bn was paid for by insurance.
The areas hit by the 1995 disaster were more industrialised, accounting for 12% of GDP according to Merrill Lynch Bank of America estimates.
By contrast, the region hit by the latest destruction accounts for just over 7%. But the area's nuclear facilities are an extra headache and estimates of insurance payouts for this disaster range between $14.6bn and $34.6bn.
Insurers and analysts stressed that it was still too early to accurately assess the damage caused by the quake, the most powerful to hit Japan.
"We can't say what the impact will be. The situation on the ground is changing," said Rolf Tanner, a spokesman for Swiss Re.
"It will take some time before we can come forward with an estimate of the losses on the ground."
Toshihiko Matsuno, senior strategist at SMBC Friend Securities, said: "When we look back at the Kobe earthquake, it took about a week to get an overall picture of the magnitude of the damage."

China's Facebook Syndrome

Censorship hinders access to China's online markets

By Brendan Greeley and Mark Drajem

Since 2009, China has blocked Facebook, the world's largest online social media network. This year, Renren, one of China's largest social networks, plans to raise $500 million on the New York Stock Exchange (NYX). So a Chinese social network can tap U.S. capital markets, but American social networks can't tap Chinese consumer markets. Does that sound fair?
If Facebook grew corn or built cars, the cry would go out that China was putting up barriers to trade. That hasn't happened because U.S. officials and politicians have typically viewed China's Internet censorship as a human rights, not a trade, problem. That's changing—slowly. The Office of the U.S. Trade Representative, which negotiates trade deals, has been reviewing the idea of Internet censorship as a trade barrier at least since 2007. A nonbinding clause protecting "cross-border information flows" is part of the still-unratified Korea-U.S. Free Trade Agreement. And on Mar. 7 the trade office told Bloomberg Businessweek it is "considering proposals" for stricter language in the Trans-Pacific Partnership, an agreement under negotiation with Pacific-Rim countries such as Vietnam, Australia, and Malaysia (not China).
Here's the problem: While the USTR has been quietly inserting language in trade agreements, perhaps to cite as precedent in some future negotiation with China, it's playing a game of inches. China's Internet users, some 400 million-strong, make up the largest Internet market in the world, one U.S. social networks are largely prevented from competing in. But if the U.S. moved more aggressively and brought a trade case before the World Trade Organization, it could alienate China, disrupting trade in other products—and the outcome would be uncertain. "They are definitely trade barriers," says James Bacchus, a lawyer at Greenberg Traurig in Washington and a former WTO apellate judge. "Whether they are illegal under WTO trade laws is another matter."
Andrew McLaughlin, who then directed global policy for Google (GOOG), first presented the argument to the trade rep's office in a 2007 visit. Google, which still operated in China, suspected Chinese users' traffic to foreign websites was being slowed. Chinese university students had to pay a fee to visit foreign sites. The trade office was interested, and asked Google to gather evidence. "My recollection," says McLaughlin, "is that we were not the only people they had heard from."
Two years later, Hosuk Lee-Makiyama, then a trade negotiator for Sweden, wrote a paper suggesting that WTO member states, including China, are legally obliged to allow Internet services to cross borders without restrictions. Since then he says he's fielded requests for clarification from governments "on both sides of the debate." Google approached the trade office again when President Barack Obama began assembling his trade team in 2009. On Mar. 7 the USTR in an e-mail described barriers to trade for social networks as "a complex issue we are beginning to focus on."
As Google has continued to draw attention to the issue, trade officials are still only beginning to focus on it. Google, meanwhile, left the Chinese market in 2009. Twitter and Facebook, which declined to comment, have not complained openly about lack of access. "If you want to work here," says Bill Bishop, an independent analyst based in Beijing, "you don't complain about this stuff." Even Google spokeswoman Niki Fenwick, in an e-mail, says censorship is first a human rights issue, adding: "When a government blocks the Internet, it is the equivalent of a customs official stopping goods at the border."

U.S. financiers and investors seem indifferent to Chinese barriers. In addition to Renren, several Chinese companies that offer services comparable to banned American social networks are listed on U.S. stock exchanges or planning offerings. In December, Goldman Sachs (GS), which declined to comment, ushered Youku, a YouTube-like video sharing service, onto the New York Stock Exchange (YOKU). YouTube is frequently blocked in China. Brookside Capital, a unit of Bain Capital, and the TCW Group, a Los Angeles investment manager, are Youku's two largest institutional investors.
The U.S. is feeling little pressure from domestic interest groups to take a harder line. The standard WTO admission agreement, which China signed, includes exceptions for enforcing national values and protecting public safety; if the U.S. were to complain to the WTO, China would almost certainly avail itself of them. Lee-Makiyama, now at the European Centre for International Political Economy, says China often applies a different standard to foreign companies, a violation of the WTO agreement. China has argued that foreign sites contain pornography. So does Baidu (BIDU), a Chinese search engine, says Lee-Makiyama. Though "the WTO can't get rid of censorship," he says, a WTO case could compel China to abandon its worst practices, including the complete blocking of sites without notice or remedy and the lack of transparency on censorship standards. McLaughlin, the former Google executive, has often wondered why Congress hasn't demanded more from the U.S. directors of Chinese companies listed in America. "This is the one tool we have," he says, "that is extraordinarily potent."
The U.S. could pick up the pace soon. Ron Wyden, chairman of a Senate subcommittee on international trade, on Mar. 9 pressed Ron Kirk, the U.S. Trade Representative, to make "binding and enforceable agreements on data flows" a priority. "I believe the Internet will become the biggest shipping lane in the world," Wyden said. "I am talking about keeping the Internet open. That's what we haven't put the focus on."


businessweek

A multi-track global economy

Stephanie Flanders  | 17:30 UK time, Friday, 11 March 2011

We always talk about the economy in black and white - it's boom, or bust, or if we're really unlucky, a double dip.
But what if the future is simply grey? That's the question I was discussing with guests on the Bottom Line this week. I was interested to know whether a long period of slow growth might be more challenging, for some businesses, than a short, sharp shock.
The point was brought home to me lately when we interviewed an insolvency expert for the television bulletins. He reminded me of an astonishing fact - that the corporate insolvency rate in the UK is currently at a 30-year low. But, he said, the first couple of years of an economic recovery are often the worst for business failures, especially if growth is slow to pick up. The longer companies are forced to operate well below their usual capacity, the greater the chance they will eventually go bust - even after making it through the toughest recession in more than 20 years.
I've banged on about this before - it all goes back to the so-called "endogeneity" of our supply, and the worry that slow growth will become a self-fulfilling prophesy by destroying capacity and skills.
It all made me interested to hear what my studio guests would say about living with a slow growth. They were Rupert Soames, chief executive of mobile energy group, Aggreko; Neal Gandhi, chief executive of international business services company Quickstart Global and David Haines, chief executive of German bathroom fittings company Grohe.
Surprise surprise, they could barely comprehend the concept of a slow growth economy - all of their businesses are doing so well. (When's the last time you heard an interview with a chief executive talking about how bad his company was doing?!) But there was a good reason why they might all be thriving. None of them depended on the UK market for their growth.
Grohe has been doing well, even in the slow UK market, but where the bathroom business has taken off is, you guessed it, in the Bric countries. As so often in these conversations, all roads inevitably lead to China.
We also spoke about why the German economy is doing so well - and whether royals should get mixed up with promoting Britain's business interests. You might be surprised to hear that Prince Andrew got a big thumbs up from the guests. When the palace was looking for endorsements last week, it should have phoned them.
But most interesting, to me, was a theme that I have come across a lot in the last few weeks - the notion that the digital economy, combined with a more integrated global economy, has smashed all previous ideas about what a "global" firm looks like.
As Rupert Soames commented, in the old days they said you had to reach a certain critical size before you could even think about exporting, or opening offices abroad. Now you see tiny niche players, with customers from around the world. The fact that Germany's SMEs have always worked this way is, famously, a big part of the country's economic success.

Neal Gandhi's business helps UK companies set up outposts abroad, providing them with office space and staff in places such as India and China, so they don't have to cope with the time and expense of doing it themselves.
He's been working with an online gift recommendation service based in southern England. Just a few weeks after the business got started, a well-known TV personality in Argentina happened to stumble upon their service, and tweeted about it. Suddenly, Argentina was by far their biggest market. That's not something you can plan for. But, happily for them, Argentina grew by 7% last year.

About Stephanie Flanders

I'm Stephanie Flanders, the BBC's economics editor. This is my blog for discussion of the UK economy, how it relates to the rest of the world, and how it affects us all.










bbc.co

The Brawl Over Debit-Card Fees

Big retailers and banks, each claiming to represent the consumer, are trying to sway Congress on card swipe fees

By Robert Schmidt and Phil Mattingly

housands of credit union members visited Capitol Hill on Mar. 3 to warn that a Federal Reserve proposal limiting the swipe fees collected on debit-card purchases is anti-consumer. A cap on fees banks collect from merchants, they told lawmakers, will force card-issuing credit unions and banks to cancel reward programs, eliminate free checking, and impose annual fees.
A week later, about 170 small business owners flew into town with the opposite message. The Fed plan is pro-consumer, they said, because it will help lower retail prices while preventing card issuers from profiting at their expense—money that goes to fatten bankers' bonuses.
Framing brawls about money as essentially consumer issues is a time-honored tactic in Washington. However, the debit-card fee issue is primarily a conflict between big business and big banks. Up for grabs is $16 billion in annual revenues. That's the amount merchants collect—at an average of 44 cents per debit-card swipe—and turn over to banks. Retailers have been complaining for years about the hefty fees. The fight is reaching a crescendo as an April deadline nears for the Fed to decide what is a "reasonable" fee, as required under last year's Dodd-Frank financial regulation law. "This is a battle between the large retailers and the large banks," says Clifford Rossi, executive-in-residence at the University of Maryland's Center for Financial Policy, who has done financial industry-sponsored research on swipe fees. "The voice lost in the shuffle is the consumer's."
The central bank in December proposed capping the payment at 12 cents, causing the banks to scramble for a legislative fix. Fed Chairman Ben Bernanke said during a February congressional hearing that "it's certainly possible" the Fed plan could result in higher bank fees for consumers. The Fed chief said his hands were tied unless the law is changed.
The lobbying is getting personal. Retailers in early March released radio spots targeting one of the fee cap's most vocal opponents, Senator Jon Tester (D-Mont.), who is up for reelection next year. "Millions of dollars leave Montana's main street to line the pockets of fat cats on Wall Street," says the ad, paid for by the Montana retail and convenience store associations.
The prospect of choosing sides has given pause to even the most seasoned lawmakers, given the political clout both banks and retailers wield back home. Six-term Senator Carl Levin (D-Mich.) says he's reconsidering his vote for the fee cap, named for its author, Senator Dick Durbin (D-Ill.). "I voted for Durbin," says Levin, "but I promised some folks I'd review the matter and that's what I'm doing right now."
Prodded by the banks, a small group of senators from both parties is preparing a measure that would postpone the rule. House Republicans are also looking to delay the rule for two years while the government studies the potential economic effects.
Retailers such as Target (TGT), Wal-Mart (WMT), and Best Buy (BBY) have the most to gain under the Fed proposal. They say they will pass the savings to customers through reduced prices—a promise that would be difficult to verify. On a February earnings call, a Home Depot (HD) executive said the rule would save the company $35 million a year. A Bank of America (BAC) analyst on the call sent the comment to financial lobbyists to use in their campaign, says one lobbyist involved who requested anonymity to discuss industry strategy. (Home Depot told the Fed it would use the money to benefit consumers.)
Major banks such as Citigroup (C), JPMorgan Chase (JPM), and Bank of America are leading the opposition, says Durbin, but publicly keeping quiet. "There's a lot of money on the table," Durbin says. "The big banks and big credit-card companies are keeping as low a profile as humanly possible," using the small lenders "as their beards." Overall, the Fed rule could cause the banks to lose more than $12 billion in fee revenue. The card-issuer lobbying arm, the Electronic Payments Coalition, has pledged to spend $11 million to lobby Congress to change the plan. Even small banks, which Durbin's provision excluded, are upset. The exemption could hurt them if retailers hesitate to accept cards charging higher swipe fees.
In case they lose in Congress, JPMorgan, Bank of America, and other lenders are already moving to eliminate popular rewards programs and add new checking-account fees. Maybe that will provoke consumers to finally add their voice to the debate.
The bottom line: Major banks and large retailers both claim to be on the consumer's side as they lobby Congress over debit-card swipe fees.

Schmidt is a reporter for Bloomberg News. Mattingly is a reporter for Bloomberg News. 

businessweek

Japan. Tsunami.

Tsunami Slams Japan After Record Earthquake, Hundreds Dead

 March 11, 2011, 3:06 PM EST

By Stuart Biggs and Aaron Sheldrick

(Updates with aftershocks, Obama comments, starting in third paragraph. See EXT2 <GO> for news on quake.)

March 12 (Bloomberg) -- Japan was struck by its strongest earthquake on record, an 8.9-magnitude temblor that shook buildings across Tokyo and unleashed a seven-meter-high tsunami that killed hundreds and engulfed towns on the northern coast.

Japan. Tsunami.

Hundreds more were reported missing after waves as high as 23 feet swept ashore, according to state broadcaster NHK, which showed footage of flood waters sweeping away buildings and vehicles. Airports were closed and bullet train services suspended, and an emergency evacuation order was issued for a nuclear power plant north of Tokyo.

More than a dozen aftershocks greater than magnitude 6 have rocked the region, Dave Applegate, a senior adviser at the U.S. Geological Survey, told reporters on a conference call.

“They will continue for not just days, weeks but months and potentially years,” Applegate said.

Prime Minister Naoto Kan appealed to the Japanese people to “act calmly,” in a nationally televised address after convening an emergency response team.

U.S. President Barack Obama, saying he was “heartbroken” over what he called “a potentially catastrophic disaster,” called Kan and offered “whatever assistance is needed.”

Bracing for Tsunami

The Philippines, Indonesia and Chile were among more than 20 nations told to be ready for a possible tsunami, after an alert by Pacific Tsunami Warning Center. Taiwan roads later reopened and the Philippines and Indonesia reported no unusual waves.

Tsunami waves began reaching the western U.S. coast as communities from southern Oregon to Los Angeles braced for swells and rough seas. Parts of southern Oregon were expected to be hit by five-to seven-foot waves and residents of coastal cities moved to higher elevation, said Michael Allegre, a spokesman for the state’s Office of Emergency Management.

The tsunami’s effect will be blunted in the U.S. as it hits at the lowest tide point of the day, the National Oceanic and Atmospheric Administration said.

The world’s strongest earthquake in more than six years struck at 2:46 p.m. local time yesterday 130 kilometers (81 miles) off the coast of Sendai, north of Tokyo, at a depth of 24 kilometers, the U.S. Geological Survey said. It was followed by a 7.1-magnitude aftershock at 4:25 p.m., the agency said.

6.6  bl

Evacuation Ordered

An evacuation order was issued to residents living within 3 kilometers of a reactor at the Fukushima Dai-Ichi nuclear power plant operated by Tokyo Electric Power Co., said Chief Cabinet Secretary Yukio Edano. An emergency order was issued earlier, the first of its kind.

“One of the reactors can no longer be cooled,” Edano told reporters. “Therefore, we’ve decided to request an evacuation just in case there’s an emergency.”

Eleven units of Tokyo Electric’s six thermal-power plants were shut, while 22 hydro plants were halted, the company said in a statement. About 3 million homes serviced by Tokyo Electric were without electricity, it said.

Japan stocks slid, led by insurers. Oil for April delivery slumped 1.5 percent to $101.19 a barrel at 1:48 p.m. in New York and earlier fell as much as 3.6 percent to $99.01 for its biggest drop since November. The MSCI World Index, a gauge of stocks in developed markets including Japan, erased a loss of as much as 0.5 percent while the Standard & Poor’s 500 Index gained 0.5 percent to 1,300.93.

Nikkei Tumbles

Japan’s Nikkei 225 Stock Average tumbled 1.7 percent as the earthquake struck less than half an hour before the market closed. The yen strengthened 1.3 percent against the dollar.

Japan has mobilized 8,000 troops and 300 planes and has asked the U.S. military personnel stationed in the country to aid victims, Edano said. Tsunami warnings will continue for more than another day, he said.

“We’ve asked for help from the U.S. military stationed in Japan,” Edano told reporters in Tokyo. Options being considered include allowing firefighting helicopters to land on the USS Ronald Reagan, an aircraft carrier, for refueling and transporting medical supplies, he said.

Navy spokesman Lieutenant Commander Justin Cole said various vessels in the U.S. fleet are being repositioned to eastern Japan to assist, if needed.

Obama said at a press conference Friday at the White House that there has been no sign of radiation leaks from Japan’s nuclear power plants and that he has directed Energy Secretary Steven Chu to provide whatever aid Japan needs.

“Obviously, you’ve got to take all potential precautions,” Obama said.

The U.S. Air Force is helping deliver coolant to a damaged Japanese plant, Secretary of State Hillary Clinton said.

Buffeting Coast

In the space of an hour, tsunami waves swept inland, buffeting Japan’s coast from Erimo in the northern island of Hokkaido to Oarai, Fukushima, about 670 kilometers to the south, according to the Japan Meteorological Agency. The waves reached as far as 20 kilometers inland, NHK reported.

Boats smashed into walls as the tsunami struck, inundating buildings and flyovers with black water full of debris across stretches of coast north of Tokyo, NHK images showed. Hundreds of cars were washed around like toys and one large building was lifted off its foundations and dragged into the ocean.

Farmland was flooded with burning debris in some other areas as the tidal surge swept inland. Large boats were left stranded after the water surged back to sea.

Fires Break Out

A fire at Cosmo Oil Co.’s refinery in Chiba, outside Tokyo, was spreading, a Fire Department spokesman said. JX Nippon Oil & Energy Corp. shut refineries in Sendai, Kashima and Negishi.

Toru Yoshihashi, 48, was in Ginza, one of Tokyo’s upscale shopping areas, when the earthquake struck. “The ground suddenly started shaking,” he said. “I stayed outside and watched all these tall buildings sway. I’ve never seen anything like this before.”

At Sumitomo Trust & Banking Co. in the capital, strategist Ayako Sera said “traders kept working through the quake” and were “grabbing the edges of our desks and holding on.”

Tokyo’s streets filled with traffic and pedestrians trying to get home after train services were closed. Government buildings are being opened for people to take shelter in the capital after officials urged residents not to try to walk home.

Subway Shut Down

Tokyo’s subway system, the world’s busiest with about 8 million riders a day, shut down, leaving commuters to wait hours for taxis or search for somewhere to spend the night. Commuter trains serving the city and suburbs were also halted.

Office workers stood in lines for taxis at the city’s central railway station while buses picked up passengers who stood in a 100-meter queue.

East Japan Railway Co., the nation’s largest train operator, stopped all Tokyo-area commuter services and its Joetsu, Tohoku and Nagano bullet-train operations.

“Japan has a rigorous earthquake building code and excellent tsunami warning system and evacuation plans -- this event will likely provide a severe test for all of them,” James Goff, co-director of the Australian Tsunami Research Centre and Natural Hazards Research Lab at the University of New South Wales, said in an e-mailed statement.

Flights Halted

Tokyo’s Narita Airport, Japan’s main international gateway, restarted some flights after stopping services earlier. About 13,800 passengers had been stranded, Ryoko Yabe, a spokeswoman for the airport, said by phone. The airport gave the travelers water and food, she said.

There was no visible damage to runways, she said. Tokyo’s Haneda airport, Asia’s second-busiest by passengers, resumed flights, the transport ministry said.

All Nippon Airways Co., Japan’s largest listed carrier, has canceled 131 flights, affecting 32,700 passengers, and diverted another 24, it said in a faxed statement. Japan Airlines Corp. said at least 27 flights were affected.

Yesterday’s temblor was the biggest since a 9.1-magnitude earthquake triggered a tsunami off northern Sumatra, Indonesia in December 2004 that left about 220,000 people dead or missing in 12 countries around the Indian Ocean.

Like Indonesia, Japan lies on the so-called “Ring of Fire,” an arc of volcanoes and fault lines surrounding the Pacific Basin. A 6.9-magnitude earthquake in Kobe, western Japan, killed more than 6,000 people in 1995, while the 7.9- magnitude Great Kanto Quake of 1923 destroyed 576,262 structures and killed an estimated 140,000.

Avoid the Coast

The Japan Meteorological Agency told people to avoid coastal areas and evacuate to higher ground because of possible aftershocks, according to an official at a press conference in Tokyo shown on NHK.

The airport in Sendai, a city of 1 million people 310 kilometers north of Tokyo, was flooded by the tsunami, according to NHK footage.

Japan’s central bank set up an emergency task force and said it will do everything it can to provide ample liquidity. The BOJ, which has already cut its benchmark rate to zero in an effort to end deflation, had last month said the economy was poised to recover from a contraction in the fourth quarter.

The Ministry of Finance said it was too soon to gauge the economic impact of the temblor.

United Nations Secretary-General Ban Ki-moon said the UN “stands by the people of Japan and we will do anything and everything we can” to help.

“The world is shocked and saddened by the images coming from Japan this morning,” Ban told reporters Friday in New York.

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Oil rise 'to hit airline profits'

Airlines will see their profits almost halve this year because of the recent jump in oil prices, the International Air Transport Association (Iata) says.
Net profit for the industry will be $8.6bn (£5.3bn) in 2011, down from $16bn in 2010, Iata said. It had previously forecast earnings of $9.1bn.
According the group, rising oil prices will pose the biggest threat to carriers' earnings this year.
Last week, Brent crude hit a two-and-a half-year high of $119 a barrel.
There have been concerns about the extent of the impact on oil supplies as unrest in Libya and the Middle East continues.
Analysts warned that if the protests spread to other oil-producing countries, then crude prices may jump further.
"If it continues to spread, Middle East tensions may reach a point where a war could start and that could ignite an incredible rally," said Ryoma Furumi of Newedge Japan.
Offsetting costs Iata said that even though it expected overall passenger numbers to grow by 5.6% in 2011, and cargo transport volumes to rise by more than 6%, the high oil prices were squeezing profit margins.

Fuel accounts for almost 40% of an airline's operating costs and so far the companies had resisted passing on all of their bigger fuel bill to consumers, Iata said.

Jet fuel prices have almost doubled since early 2009, but average return fares during the same period have risen by 20%, the airlines' association estimated.
Giovanni Bisignani, Iata's director general, warned that while the increase in ticket prices and fuel surcharges may have been enough to offset the rising cost for now, any further increase in oil prices would have a detrimental effect on airlines.
"There is very little buffer for the industry to keep its balance as it absorbs shocks," he said.
"Today oil is the biggest risk. If its rise stalls global economic expansion, the outlook will deteriorate very quickly."
Regional imbalance

Iata said that global growth in the airline industry would be patchy as economies expanded and recovered at different speeds.
Asia-Pacific is forecast to do better than many other regions because many of its economies are growing steadily.
However, earnings there will also be under pressure.
Iata forecast that airlines in the Asia-Pacific region will deliver a collective profit of $3.7bn in 2011, down from the $7.6bn that they made in 2010.
It added that airlines from the region were more vulnerable to the impact of rising fuel prices due to the fact that they had done relatively little hedging to protect themselves against a surge in costs.
They were also being hit by a slowdown in trade and cargo demand from China after the government there put in place measures to fight inflation.
In Europe, airlines are expected to struggle as travel demand is hampered by recession and slow growth, and fears over the European debt crisis, Iata said.

Why Teachers and Their Critics are Failing

It's wrong to demonize teachers, but they and their unions must embrace radical change to get the public to support efforts to recruit top talent

By Chris Farrell
What's amiss with this picture? Talk to any chief executive about the workforce of the future and they'll passionately argue for the need to boost America's K-12 educational performance. They'll point out that the U.S. has lagged behind for years in global assessments of student achievement, especially in math and science. Yet governors in hard-pressed states are cutting back on primary and secondary educational spending, with some state leaders proposing draconian reductions.
Many governors and state legislators are convinced that the public education system is badly broken. Education reformers pushed an agenda of testing and accountability for more than two decades, including the Bush Administration's No Child Left Behind legislation and the Obama Administration's Race to the Top initiative. Expenditures per student almost doubled in real terms from 1981 to 2007, from $5,639 to $10,041. The measured results have been largely mediocre. From the attacks on teacher unions in the documentary film Waiting for Superman to the charter school movement bankrolled by private philanthropists, a narrative has emerged that teachers and their unions are to blame for the education shortfall.
The demonizing of public school teachers and their unions is mostly misplaced and definitely destructive. Ever since "A Nation at Risk," the landmark 1983 Reagan Administration commission's alarming call for education reform, enthusiasm has waxed and waned for various changes that range from national standards to smaller class size and on to charter schools. Yet the lesson of the past three decades is that there is no silver reform bullet or any single culprit to blame when it comes to the condition of K-12 education. The big risk that governors are courting with their budget-cutting policies is that teaching will become an even less attractive profession. To prevent such a dire outcome, the onus falls on teacher-union leadership to act boldly and embrace the sort of radical work rule changes that could boost the teacher talent pool and the retention of good teachers. "There are alternative futures for the U.S. economy and if we don't deal with the quality of our schools, we end up with a much worse future," says Eric Hanushek, a veteran education economist at the Hoover Institution.

Good Teaching Matters

The quality of the teacher workforce matters. Think back to good teachers you had in elementary, middle, and high school. Maybe it was a first grade teacher that sparked a lifelong love affair with reading. Perhaps a high school science instructor inspired the dream to become a doctor. Not to mention that bad teachers do enormous damage, from crushing creativity to turning students away from classroom learning.
Scholarly research confirms the critical role played by teachers, even though measuring and identifying quality remains controversial. For instance, Hanushek estimates that really good teachers—defined as those with large measured gains in student test scores—are worth $400,000 more annually in student lifetime earnings for a class of 20 than are average teachers. Similarly, a team of scholars led by Harvard University economist Raj Chetty looked at the earnings of some 12,000 adults that had participated in a kindergarten education experiment in Tennessee in the early 1980s. The results imply that quality teachers from that single year generated earnings gains of $214,000 for a classroom of 20 students.
A look at how Singapore, Finland, and South Korea recruit teachers is suggestive. These countries are currently among the world's highest-ranked systems, drawing 100 percent of their teachers from the top third of university graduates, according to McKinsey & Co. In sharp contrast, 23 percent of teachers come from the top third of the academy in the U.S., with only 14 percent of top talent teaching in America's high-poverty schools. Almost all the 900 students the consulting firm interviewed at top-tier colleges saw teaching as unattractive for professional growth and compensation.

Good Teachers Are Quitting

The U.S. is slipping ever-farther behind. The list of job ills is long. In recent years many major metropolitan school districts uncertain about their budgets couldn't even tell their teachers—especially the younger ones—whether they would be employed until at least August. Union rules in many parts of the country don't allow administrators to take into account teacher quality when making layoffs. Teachers often end up dipping into their own funds for classroom supplies. Now teachers find their pay and benefits under assault as a growing number of governors square off against state and local government workers. "The teachers with the strongest credentials find something else to do," says Richard Murnane, an economist at the Harvard Graduate School of Education. "The people left aren't the best, on average."
A examination of 31 initial state budget proposals shows that at least 13 states are eyeing extremely steep cuts in pre-kindergarten and K-12 spending. According to the Center on Budget and Policy Priorities, among the biggest cuts is the proposal in Texas to eliminate funding for pre-K programs that serve almost 100,000, mostly at-risk children—over 40 percent of pre-kindergarten students. The Lone Star State could also reduce K-12 funding to 23 percent below the minimum amount required by the state's education finance law. Mississippi Governor Haley Barbour's budget fails for the fourth year in a row to meet the state's statutory obligation to support K-12 schools. It would underfund school districts by 11 percent, or $231 million. These numbers translate into miserable working conditions.

GDP Loses Trillions to Poor Education

The economic cost of a mediocre educational system is high. The Program for International Student Assessment (PIRA) assesses the knowledge of 15 year olds from the 34 Organization for Economic Cooperation and Development (OECD) nations, as well as 31 other countries and education systems such as that in Shanghai. The U.S. numbers released in December 2010 were average, with students from nine other places doing better than their U.S. peers in reading literacy. In science and math, two crucial subjects in an era of rapid technological advances, 18 places did better in science and 23 outperformed in math. Consultants at McKinsey figure that if the U.S. had closed the achievement gap with the best-performing nations from 1983 to 1998, America's gross domestic product could have been $1.3 trillion to $2.3 trillion higher than it actually was in 2008. To put this in perspective, during the recent recession the U.S. economy fell about $1 trillion short of its output potential.
What is to be done in an era of tight budgets and sharp ideological divisions? Learn from leading-edge businesses and focus, for now, on human capital. Just as companies that compete in knowledge industries can't grow without talented workforces, the value added by education in a knowledge economy can't exceed the quality of its teachers. "Schools should be more like highly successful businesses, focusing on the long-term and creating value, while many businesses should be more like highly successful schools, thinking about the long-term and creating value," says Michael O'Keefe, former president of Minneapolis College of Art and Design and since 1987 co-chair of the Program on Education at the Aspen Institute.
Since quality is an elusive concept, it's more effective for unions and education administrators to focus on getting rid of poorly performing teachers—fast. Hanushek figures replacing the bottom 5 percent to 8 percent of teachers with average teachers would move the U.S. toward the top of international science and math rankings. Randi Weingarten, president of the American Federation of Teachers, on February 24th proposed that tenured teachers with an unsatisfactory performance be given a year to improve or they could be fired 100 days after that term is up. It's her fast-track proposal, but it isn't fast and it's far too little. Is it progress to be able to fire a teacher with a poor evaluation after 465 days? That's unacceptable.

Teachers, Consider the UAW's Fate

Like it or not, teachers' unions are facing their General Motors moment. They can emulate the United Auto Workers and fall into the trap of continuous small changes that don't shift the underlying workforce dynamic, a strategy that badly backfired for the once-proud automaker and its workers. Or the unions can seize the initiative and take the lead in overhauling moribund workforce rules that alienate too many parents, political leaders, and, worst of all, deter talented recruits.
The goal of the profession should be to recruit even-better-educated teachers. For instance, Teach for America, founded in 1990, successfully recruits graduates with top talent from major universities and directs them to high-poverty schools. The program could be expanded. (And Congress should reverse its recent move to eliminate the program's annual federal appropriation of some $21 million because technically it's an "earmark.") Unions should embrace, rather than fight, alternative licensing programs to attract future teachers.
Changes along these lines would necessarily be wrenching and would eventually cost more money. "It would require both severance packages for those deselected and higher pay for those who would then have a riskier job," says Hanushek. But it would be money well spent.
Here's the thing: Improving the quality of the current teaching workforce and recruiting top talent isn't an education panacea. It's simply a piece of a complicated reform puzzle. It also offers a way to break through the current political logjam. Without nurturing policies that attract, develop, reward, and retain talent, the goal of boosting student achievement will remain elusive. Everyone will lose.

Farrell is contributing economics editor for Bloomberg Businessweek. You can also hear him on American Public Media's nationally syndicated finance program, Marketplace Money, as well as on public radio's business program Marketplace. 

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