Dolce&Gabbana fiasco shows importance, risks of China market
By KEN MORITSUGU and COLLEEN BARRY
Monday, November 26
BEIJING (AP) — Don’t mess with China and its growing cadre of powerful luxury consumers.
Dolce&Gabbana learned that lesson the hard way when it faced a boycott after Chinese expressed outrage over what were seen as culturally insensitive videos promoting a major runway show in Shanghai and subsequent posts of insulting comments in a private Instagram chat.
The company blamed hackers for the anti-Chinese insults, but the explanation felt flat to many and the damage was done. The Milan designers canceled the Shanghai runway show, meant as a tribute to China, as their guest list of Asian celebrities quickly joined the protests.
Then, as retailers pulled their merchandise from shelves and powerful e-commerce sites deleted their wares, co-founders Domenico Dolce and Stefano Gabbana went on camera — dwarfed against the larger backdrop of an ornate red wall-covering — to apologize to the Chinese people.
“We will never forget this experience, and it will definitely never happen again,” a solemn-looking Gabbana said in a video statement posted Friday on social media.
The apology video , and the sharp public backlash that demanded it, shows the importance of the Chinese market and the risks of operating in it. More broadly, it highlights the huge and still-growing influence of China, a country that cannot be ignored as it expands economically, militarily and diplomatically.
These trends are intertwined in frequent outbursts of nationalist sentiment among consumers who feel slighted by foreign brands or their governments. It’s not the first time a company has apologized, and it surely won’t be the last. Mercedes-Benz did so in February for featuring a quote by the Dalai Lama on its Instagram account.
For Dolce&Gabbana, it could be mark the end of its growth in China, a crucial market for global luxury brands that it has cultivated since opening its first store in 2005 and where it now has 44 boutiques.
“I think it is going to be impossible over the next couple of years for them to work in China,” said Cary Cooper, a professor of organizational psychology and health at Manchester University in England. “When you break this kind of cultural codes, then you are in trouble. The brand is now damaged in China, and I think it will be damaged in China until there is lost memory about it.”
London-based Brand Finance consultancy estimates that the scandal could wipe up to 20 percent off the Dolce&Gabbana brand’s value of $937 million, which already places it out of the top 50 global apparel brands. They are 36th among all Italian brands, extending to sectors like automotive.
That could shake Dolce&Gabbana’s financial health. The privately held company does not release its individual sales figures. But Chinese consumers are responsible for a third of all luxury spending around the globe, according to a recent study by Bain consultancy. That will grow to 46 percent of forecast sales of an estimated 365 billion euros ($412 billion) by 2025, fueled by millennials and the younger Generation Z set, who will make a growing percentage of their purchases online.
“Without China, the hinterland for growth, D&G will obviously be in a weak competitive position and in danger of being eliminated,” the Chinese business magazine New Fortune said in a social media post Sunday. “This is one of the major reasons why D&G finally lowered its head. They really cannot survive without the Chinese market.”
While Dolce&Gabbana has displayed a knack for social media engagement, inviting millennial influencers with millions of collective followers to sit in their front rows or walk in their shows, that engagement has been a double-edged sword. Pop idol Karry Wang, who has drawn hundreds of screaming Chinese fans to the designer’s Milan showroom for season runway shows, was one of the first to disavow the brand, saying he was ending his role as Asia-Pacific brand ambassador.
Dolce found himself on the defensive several years ago after Elton John lashed out for comments that suggested he did not support gay couples using surrogate mothers to have children. At the time, more than 67,000 tweets urged #boycottdolcegabbana, while Courtney Love vowed to burn her Dolce&Gabbana garb and Martina Navratilova pledged to trash her D&G shirts.
Gabbana, who has 1.6 million Instagram followers, faced a more contained backlash earlier this year when he responded to a collage of Selena Gomez photos on Instagram with the comment, “She’s really ugly.”
Celebrities took to social media Wednesday to blast Dolce&Gabbana and said they would boycott the show, which was canceled. By Thursday, the company’s goods had disappeared from major e-commerce websites. The prevailing sentiment was captured by an airport duty-free shop that posted a photo of its shelves emptied of D&G products: “We have to show our stance. We are proud to be Chinese.”
The rapid escalation into a public relations disaster was fueled by social media. Individuals posted videos of themselves cutting up or burning their Dolce&Gabbana clothes, or picking them up with chopsticks and putting them in the trash. A parody of the offending Dolce&Gabbana videos, which featured a Chinese woman using chopsticks to eat pizza and an oversized cannoli, shows a white man trying to eat Chinese food with a fork and knife. At least three rap bands took up the cause with new songs.
“Companies that don’t respect us don’t deserve our respect,” Wang Zixin, team leader of CD Rev, a nationalist rap band, said by phone from Chengdu, the capital of Sichuan province. Its new song had been viewed more than 850,000 times on Weibo.
“We hope people will remember companies that have ever insulted China, and not forget about them when the fallout passes,” Wang said.
That sense of pride reflects a nationalism that has been encouraged by the government, often in disputes China has with other countries over other foreign products.
Sales by Japanese automakers plunged in 2012 amid tensions between islands both countries claim in the East China Sea. The clash also illustrated the complexity of Chinese sentiment: Industry analysts said buyers didn’t want to be seen in Japanese auto showrooms but went ahead with planned purchases once tensions had passed.
More recently, several foreign companies ran afoul of Beijing’s insistence that they explicitly refer to Taiwan, a self-governing territory, as part of China. Many complied, showing how important the Chinese market has become.
Delta, American and other airlines agreed to refer to Taiwan as part of China, and Zara now says “Taiwan, China” on its website after regulators criticized the fashion brand for calling Taiwan a country. Marriott announced it “respects and supports” China’s sovereignty after it was ordered to shut its China website for a week.
Actor Richard Gere, a supporter of the Dalai Lama, has told The Hollywood Reporter that movie studios balk at hiring him for fear of an official or public backlash that might affect ticket sales in China.
It remains unclear whether the D&G mea culpa video will stop the backlash — or if it will have implications for Made-in-Italy at large. The scandal erupted as Italy’s high-end furniture and design companies were making an annual presentation in Shanghai and as Miu Miu, the Prada Group’s little sister line, showed its cruise line in Shanghai.
Italian designers have so far refrained from comment. Dolce & Gabbana has remained conspicuously outside of the Italian Fashion Chamber, which organizes fashion weeks and acts as a lobby for the fashion industry.
Brand Finance’s luxury expert, Alex Haigh, said the scale of the Chinese reaction risked contagion in other markets, but that the brand could get ahead of the scandal if it makes sincere change. “They have made a big storm for themselves,” he said. “They need to wait a few months, and potentially do something like Volkswagen, when it had the emission scandal and repositioned itself as a more environmentally friendly electric-vehicle-first brand. Sometimes these issues can be a focal point for change.”
Italian commentators mused whether the Dolce&Gabbana protests were truly spontaneous or if there was some level of government control behind them. The government has publicly said the spat had no diplomatic element and would not comment.
“Anywhere in the world, an entrepreneur can make a mistake, use inappropriate language. Usually it is the consumers and the market to decide the seriousness of the offense,” the Milan daily Corriere della Sera wrote in a commentary. “Only in China is one forced to produce a humiliating video with public self-criticism, like in the time of Mao’s revolution. Now China feels powerful and is applying re-education on a global scale.”
Barry reported from Milan. AP journalists Joe McDonald and Dake Kang and researchers Henry Hou and Jiawei Chen contributed to this report.
Medicare for All — Point-Counterpoint
Point: No More Half-Measures — It’s Time for Medicare for All
By Josh Hoxie
Health care has been a hot-button issue in the United States for decades. Families struggle to afford increasingly expensive insurance premiums and higher and higher out-of-pocket expenses. The status quo — a deeply broken privatized, for-profit health care system — simply can’t last.
Medicare for All is a smart solution to address our nation’s health care crisis and one that is rising in public acceptance. More than 70 percent of Americans, including more than half of registered Republicans, support the idea of a single payer plan that would expand the current Medicare system to cover everyone.
The Affordable Care Act made strides in addressing our modern health care crisis, expanding insurance coverage to millions. Yet more than 10 percent of the country remains uninsured, a figure set to go up next year when the Republican repeal of the individual mandate goes into effect.
What’s needed now isn’t another piecemeal step forward, but bold, visionary policy.
Senator Bernie Sanders has led the charge for Medicare for All before and since his 2016 presidential campaign. With a recently elected Democratic majority in the House of Representatives — including vocal proponents of Medicare for All like Alexandria Ocasio-Cortez — prepare for health care to take a central role in forthcoming congressional debates.
Efforts to undermine Medicare for All have been lackluster at best. For instance, you may have heard that it costs money.
A report from the right-leaning Mercatus Center estimated that over 10 years, a transition to universal health care would cost $32.6 trillion. This statistic was cited by Republican politicians including House Speaker Paul Ryan and echoed across right-wing and mainstream media alike.
Buried below this startling figure, however, was a much more important point: Medicare for All would actually cost $2.054 trillion less than our current system over the same time.
Now, dollars tabulated in the trillions are admittedly hard to comprehend, but the point here shouldn’t be missed. According to a right-leaning think tank’s own research, Medicare for All would expand health care to every person in the country and save a ton of money.
That same Mercatus study found a typical family could save about $6,000 over a 10-year period. A recent Rand Corporation study looking just at New York found that most individuals in the state would save around $3,000 per year.
Among the major cost savings of switching to a universal health care system is the potential to reduce bloated administrative expense associated with private health insurance. Overhead for traditional Medicare is just 1.1 percent while all of Medicare — including its private plans — is just over 7 percent.
Private insurers’ administrative cost is nearly double, at 13 percent. This could have something to do with the fact that, as Axios points out, the 64 top health care CEOs made a combined $1.7 billion last year.
To quote Senator Sanders directly, “The United States has the most expensive, inefficient, and bureaucratic health care system in the world.”
The United States remains the only country in the industrialized world that doesn’t guarantee health care as a human right to all its citizens. And we pay more than anyone else for the broken patchwork system we have now.
The transition to Medicare for All would be a lot less complex than you might imagine.
Steffie Woolhandler, David Himmelstein and Adam Gaffney of Physicians for a National Health Program laid out how it could work in a recent article for The Nation. Spending on things like premiums, co-pays and deductibles would simply shift to tax payments that would fund an expanded Medicare system, they explain.
“For instance,” they point out, “the $10 trillion that employers would otherwise pay for premiums could instead be collected as payroll taxes.” As would the $7.7 trillion households currently pay annually for premiums and the $6.3 trillion currently paid in out-of-pocket expenses.
If this idea of a universal system sounds crazy, consider the fact that every other industrialized country has already made this transition and seen both improved health outcomes and reduced costs.
Medicare for All is an idea whose time is coming.
ABOUT THE WRITER
Josh Hoxie directs the Project on Taxation and Opportunity at the Institute for Policy Studies. He wrote this for InsideSources.com.
Counterpoint: ‘Medicare for All’ Would Create Misery for All
By Chris Talgo
For more than a century, Democrats have dreamed of nationalizing America’s health care system, but they have never been closer than they are now to enacting their single-payer fantasy.
Dozens of Democrats in the U.S. Senate and House have signed on to Sen. Bernie Sanders’ “Medicare for All” plan over the past year, and support for the program among Democrats appears to be growing.
Although flowery promises about providing high-quality health care to all Americans sound nice, the truth is Medicare for All would be a nightmare for tens of millions of families.
First, Medicare for All would push the United States even further over the fiscal cliff and put the country at grave risk of being unable to pay its existing obligations without printing trillions more dollars. According to a study by the Mercatus Center, Medicare for All “would add approximately $32.6 trillion to federal budget commitments during the first 10 years of its implementation (2022–2031).”
Even worse, the study’s authors say their “estimates are conservative because they assume the legislation achieves its sponsors’ goals of dramatically reducing payments to health providers, in addition to substantially reducing drug prices and administrative costs.” In other words, the $32.6 trillion figure is pie-in-the-sky scenario. More realistically, Medicare for All will cost trillions more than Mercatus’ estimates.
Paying for this outrageously expensive program would require a monumental tax increase, one of the largest in American history. The Mercatus report estimates, “A doubling of all currently projected federal individual and corporate income tax collections would be insufficient to finance the added federal costs of the plan.”
A primary reason the economy is now experiencing unprecedented growth is because Republicans promised and passed tax reform and reduced the size and power of the federal government. Rolling back those improvements by doubling tax rates would likely trigger an economic disaster that would make the recession of 2008-09 look like the Roaring Twenties.
In addition to causing economic chaos, Medicare for All would reduce the quality of health care services for millions of Americans. Economics and common sense dictate that if the government were to artificially increase health care demand, by providing everyone with health insurance, without increasing health care supply, shortages and rationing would be inevitable. This is precisely what’s occurring in Canada, which implemented its single-payer system in 1984.
Today, the Canadian system is overwrought with long wait times and a host of other problems. Indeed, wait times in Canada are so egregious that “1,040,791 patients who waited for medically necessary treatment last year each lost $1,822 (on average) due to work time lost,” according to the Canada-based Fraser Institute.
In some cases, Canadians are forced to wait months to receive care. The Fraser Institute notes the average wait time for patients needing “medically necessary elective orthopaedic surgery” is an astounding 41.7 weeks, about 10 months.
Besides excruciating wait times, what else can Americans expect to endure if Medicare for All were to become a reality? One of the most significant problems would undoubtedly be that innovative procedures and practices would become much harder to develop. Thousands of doctors would likely choose to retire early because provider payments would need to be slashed by at least 40 percent.
The middle class would be hit especially hard in a Medicare for All system, because many lower-income people who don’t pay much in taxes but are now responsible for paying for their health insurance would suddenly be free from that burden, pushing it onto middle-income families.
It would become much more difficult to develop new prescription drugs as well. Since U.S. drug companies would be paid much lower reimbursement rates for their medications, their research and development departments would likely shrink faster than their profit margins in a Medicare for All scheme. Some drugmakers might even choose to leave the United States in favor of a country with a more favorable model.
The U.S. health care system is far from perfect, but real progress will only occur once we get government out of health care. Increasing government’s role in this industry would only make matters worse. After all, if government can’t effectively run the Postal Service, VA hospital system, DMVs, or Amtrak, why would we trust them with our multi-billion-dollar health care industry?
ABOUT THE WRITER
Chris Talgo is an editor at The Heartland Institute. He wrote this for InsideSources.com.
Llewellyn King: Blockchain, Smart Cities and the Urban Revolution
By Llewellyn King
Blockchain, the decentralized, open-ledger system that can record permanently multiple transactions, is about to come into its own as the world’s cities move toward digitalization. It portends the kind of urban revolution that cities haven’t seen since water-borne sewage enhanced city livability.
These “smart cities” of the future, big and small, will compete to be the most-wired, most-attractive places for high-tech talent and investment. From Orlando to San Antonio and from Boston to Seattle, the race is underway.
The big telephone companies like AT&T and Verizon want to wire cities for their 5G and universal WiFi, involving new “short towers.”
Smart cities are cities that are getting ready for the future. The infrastructure which needs to be developed and deployed includes:
—An electric grid that senses and manages demand instantly; that allows for two-way flows, as from a self-generator into the utility grid or a customer who wants green power only.
—5G technology that will operate on any device and carry city communications to a new level, like knowing the location of every ambulance and which traffic lights must change to speed one through without hitting a firetruck barreling toward the same destination.
—Traffic lights that dim when there is no one on a street, or street lighting that dims when the moon is full or when there is no traffic.
—Monitors linked to computers that can identify potential failures in old water or sewer pipes.
Holding it all together — the sinew of smart cities — will be blockchain. It’ll be the recording system that will tell whether electricity is flowing from a community generating facility (like a solar farm) and how it’s blending with the utility company’s own generators to the amount of power flowing to street lights.
Blockchain is set to become the ledger of everything, from the billing for your local taxes to keeping track of parking tickets. It will also be a data treasure trove for future planning.
Blockchain is associated with bitcoin and other cryptocurrencies. That’s because it’s not only the system on which those cryptocurrencies were based, but it’s also a powerful tool with multiple uses far beyond them. The original developer of bitcoin, believed to be Satoshi Nakamoto, used blockchain to guarantee the integrity of the new money.
Some blockchain enthusiasts, including many in the big tech companies like IBM, believe and have often said that it can be a bigger disrupter than the internet. They’re passionate about the blockchain future, as are the big financial institutions where use will speed and verify transactions.
Others, working in the trenches of bringing about the blockchain revolution are more cautious. Chris Peoples, founding and managing partner of the Baltimore-based innovation strategy firm PP&A, says that one must be wary of the hype. Blockchain, he says, “does promise to open new avenues of value for both organizations and the common good. However, with the technology still undergoing rapid development in the areas of speed, consensus and scalability, it will require the continued support from industry and government to reach its full potential.”
The smart city upside: Cities will become more livable, more manageable and the quality of life for all should improve. The downside: All the sensors and electronic surveillance could represent a new and very real threat to privacy.
There are also questions how much of the brave new urban world we want to have. Proponents of smart cities believe that a time will come when, with autonomous vehicles, the family car will disappear in favor of driverless, ride-sharing vehicles. An app on your phone will summon one and off you’ll go, probably reading your emails as you’re driven safely, thanks to artificial intelligence and blockchain, to your destination. Maybe. People haven’t abandoned their own cars for public transportation.
My view is people want their own stuff in a car — the old newspapers, the box of peppermints and the furry dice hanging from the mirror. A blockchain-enabled future of smart cities is dandy if we can keep our inefficient humanness.
We aren’t all yearning to be efficient in everything. We treasure a bit of muddle. I hope we can teach that to the computers and put it into immutable blockchain.
ABOUT THE WRITER
Llewellyn King is executive producer and host of “White House Chronicle” on PBS. His email is email@example.com. He wrote this for InsideSources.com.