Mary Barket, a 66-year-old widow with a degenerative muscular disorder and no family around to help, has had seven different caregivers come through her home in the past six months.
On a recent Saturday morning, she was told by the home care agency that her caregiver wasn’t coming that day and that it couldn’t send a substitute, she says. Ms. Barket had one meal to last her until Monday, when the next caregiver was due.
“My hands don’t work. I can’t even open a box,” says Ms. Barket, who has ALS, or amyotrophic lateral sclerosis. “It’s a very tenuous situation.”
High turnover among in-home caregivers is straining the daily lives of America’s aging population, which relies on them to remain in their homes.
The median caregiver turnover rate—or the percentage of all caregivers who left or were terminated from jobs—was about 64.9% in 2021, according to a report by Home Care Pulse, a company that provides data and training to home care agencies. Though the number has improved from a peak of 81.6% in 2018, it represents a major supply gap, according to people in the home care industry.
Turnover among the 1,461 home care agencies participating in the 2022 HCP Benchmarking Report remained relatively stable during the pandemic, says Home Care Pulse president Todd Austin. Agencies increased wages and more offered benefits to recruit and retain workers, while also doing more to recognize workers as “care heroes” to improve job satisfaction, he says.
But the pandemic added to demand, as the high number of Covid deaths at long-term-care facilities contributed to the desire for people to remain in their homes.
Between 2008 and 2018, the number of home care workers more than doubled to 2.26 million from about 900,000, according to a 2022 report from the Home Care Association of America, an industry trade organization representing home care providers.
The Labor Department projects 25% employment growth in the next decade for home health and personal care aides, which includes those who work in group homes and day service programs, compared with an average expected growth rate of 5% for all occupations.
Even with rapid growth, home care agencies can’t meet demand. More than 85% of the home care agencies in the 2022 HCP Benchmarking Report turned down cases in 2021 due to the shortage, and 59.7% consistently turned down clients.
To help address the staffing problem, many home care agencies boosted incentives and bonuses and are offering training in areas like end-of-life care, meal planning and Alzheimer’s care, says Mr. Austin and others in the industry.
Ms. Espinosa helps Ms. Barket, who has ALS, change clothes.
Ms. Barket lives alone with no family in the area available to assist in her care. She relies on help from two home care agencies.
About 40% of agencies now offer signing bonuses, and 94% have increased pay, some by as much as $10 an hour based on experience, according to the 2022 report from the Home Care Association of America.
But wages remain relatively low. Median pay in 2021, the latest figure available, was $14.15 an hour, or $29,430 a year, for home health and personal care aides, according to the Labor Department.
The jobs are difficult in other ways, too—clients can be demanding, the work can be physically and emotionally taxing and the hours inconsistent.
Waiting list
In Lackawanna County, Pa., about 40 older adults are on a waiting list for in-home care, says
Jason Kavulich,
outgoing director of the county Area Agency on Aging, who was recently named Secretary of Aging for Pennsylvania. Six years ago, when he became director of the agency, there was no waiting list, he says.
“This is the postpandemic world,” says Mr. Kavulich. “People are not entering the help field. They have found other work.” To try to help meet demand, the county agency is working on a scholarship program at a local college for students to provide 15 to 18 hours of in-home care a week to older adults.
For families, high turnover adds a layer of uncertainty to the already stressful task of finding care for loved ones. Some families receive last-minute phone calls saying a worker isn’t coming, which leaves them scrambling to find a substitute so they themselves can go to work.
John Giurini, who shares a home with his 93-year-old mother and his sister in the Los Angeles area, says there had been times when he received a call the night before—or even the morning of—from the agency that provides full-time in-home care, saying the worker they expected for the next shift wasn’t available. Usually a substitute was sent but not always.
“We would not know in the morning who was coming to the front door” other than a name, says Mr. Giurini, assistant director of public affairs at the J. Paul Getty Museum.
He says rotating people in and out of the home is stressful for the family, but even more so for their mother, who has dementia and gets confused. One caregiver became combative with their mother about how much toothpaste she was using, and another young man ran personal errands instead of staying at the doctor’s office while their mother had a medical appointment, he says. He and his sister explored other options, including hiring a caregiver directly, rather than relying on an agency, but decided against it.
“Say you hire someone and are fortunate to find a good person. What happens when that person is sick?” he asks. An agency, at least, has other workers. Mr. Giurini says they have lucked out in the past six months with a caregiver from their agency who is attentive and professional.
They pay the agency $32 an hour and rates will increase to $35 an hour in February.
In-home care workers are generally employed by home care agencies, which are paid by individuals and families, or through private long-term-care insurance or Medicaid, Veterans Affairs or Medicare Advantage insurance, or by some nonprofit organizations.
Some home care companies have adopted technology to help provide consistent scheduling and care.
Jisella Dolan,
chief advocacy officer for Home Instead, which has 1,200 home-care franchises across the U.S., says the company uses a technology platform that coordinates scheduling and allows family members, using a downloaded app, to see who is coming each day, when, and if there are any changes.
Home Instead, which is a subsidiary of Honor Technology Inc., doesn’t guarantee it will find replacements if a scheduled worker isn’t available, but it strives to do so, she says. The company no longer has the waiting list for services that it did last year during the height of Omicron infections, she says.
Extra training
Home Instead also has training for those working with clients who have special conditions such as Parkinson’s and Alzheimer’s disease.
Routine and regularity are especially important for those with Alzheimer’s, says
Amy Goyer,
the family caregiving expert at AARP, who cared for and managed paid caregivers for her parents, including a father with Alzheimer’s, before they died.
“Every time you get a new paid caregiver, you have to train them,” she says. “ ‘This is what time my parents get out of bed. This is when they eat breakfast and lunch. These are the clothes my dad wears, the TV shows he watches and the music he listens to.’ ”
She advises families to have at least two caregivers, each with a different shift so one can fill in when the other can’t work, and to keep a checklist of daily routines with tasks and times listed for showers, meals, medications and getting in and out of bed, so those coming in on short notice know what to do. Families that can afford it can also hire a geriatric care manager to coordinate care and find backups, which is especially helpful if family members live out of town.
Ms. Espinosa, who was referred by the local ALS chapter, preps meals for Ms. Barket.
Frances Copeland says she had 10 caregivers in a 15-month-period between 2021 and 2022 for her 91-year-old mother, with the longest lasting eight months. “We had an occasion where two caregivers showed up and they stood outside arguing about whose day it was to be there,” she says.
Ms. Copeland, who is a certified nursing assistant and has been a caregiver for others, understands why some quit. “The pay isn’t great, and the clients can be demanding and critical,” she says. She recalls driving 45 minutes to one client’s house and being told to turn around and go back because she wasn’t needed that day.
Not all home healthcare agencies are comfortable working with people who have ALS or Alzheimer’s because of their advanced needs, says Jessie Meier, a social worker with the ALS Association Greater Philadelphia Chapter.
“The care is so personal and deeply intimate. You are helping a person shower, bathe and toilet,” she says, which makes familiarity even more important.
Ms. Barket, the widow, who lives in Bethlehem Township, Pa., says her family is small and distant. One brother lives in North Carolina and an aunt lives more than an hour away. Her daughter lives closer but has mental-health challenges and is unable to help with care.
Ms. Barket relies on caregivers from one agency, who come three hours a day, five days a week. Another caregiver, referred to her by the ALS Association, comes on a sixth day for three hours. The caregivers assemble meals in takeout containers, the lids laying across the top because she can’t get them off. She can’t carry a plate.
“My hands and wrists are too unstable at this point,” she says. If something falls to the floor, she tries to use a hangar to get it up to her. “I try to MacGyver everything,” she says. Unable to open drawers, she keeps clothes in a basket.
Each time a new caregiver arrives, she asks them if they know anything about ALS. If they don’t she tells them to Google it, so they understand her limitations. “I can’t fault caregivers, who are doing their best,” she says. “Ninety-five percent of them are wonderful.”
The unpredictability, though, is frightening, especially since her disease is progressive. On the recent Saturday when the caregiver couldn’t come, she says she had the “wherewithal” to call a friend who brought meals.
“Down the road, I won’t be able to speak,” she says. “Then what? It’s very scary at times.”
Ms. Barket says she has had seven different caregivers come through her home in the past six months.
Only in the past two years has the U.S. fully grasped that semiconductors are now as central to modern economies as oil.
In the digitizing world, power tools commonly come with Bluetooth chips that track their locations. Appliances have added chips to manage electricity use. In 2021, the average car contained about 1,200 chips worth $600, twice as many as in 2010.
The supply-chain crunch that created a chip shortage brought the lesson home. Auto makers lost $210 billion of sales last year because of missing chips, according to consulting firm AlixPartners. Competition with China has stoked concerns that it could dominate key chip sectors, for either civilian or military uses, or even block U.S. access to components.
Now the government and companies are spending billions on a frenetic effort to build up domestic manufacturing and safeguard the supply of chips. Since 2020, semiconductor companies have proposed more than 40 projects across the country worth nearly $200 billion that would create 40,000 jobs, according to the Semiconductor Industry Association.
It’s a big bet on an industry that is defining the contours of international economic competition and determining countries’ political, technological and military advantage.
“Where the oil reserves are located has defined geopolitics for the last five decades,”
Intel Corp.
INTC -0.59%
Chief Executive
Pat Gelsinger
declared at a Wall Street Journal conference in October. “Where the chip factories are for the next five decades is more important.”
President Biden at the groundbreaking ceremony for a new Intel semiconductor manufacturing facility in Ohio in September.
Photo:
James D. DeCamp/Zuma Press
As oil became a linchpin of industrial economies in the 1900s, the U.S. became one of the world’s largest producers. Securing the semiconductor supply is more complicated. While one barrel of oil is much like another, semiconductors come in a bewildering range of types, capabilities and costs and depend on a multilayered supply chain spanning thousands of inputs and numerous countries. Given the economies of scale, the U.S. can’t produce all of these itself.
“There’s zero leading-edge production in the U.S.,” said Mike Schmidt, who heads the Department of Commerce office overseeing the implementation of the Chips and Science Act, signed into law by President Biden in August, which directs $52 billion in subsidies to semiconductor manufacturing and research. “We are talking about making the U.S. a global leader in leading-edge production and creating self-sustaining dynamics going forward. There’s no doubt it’s a very ambitious set of objectives.”
The recent shortages that hurt the most didn’t necessarily involve the most expensive chips.
Jim Farley,
Ford Motor Co.
’s chief executive, told a gathering of chip executives in San Jose, Calif., in November that factory workers, meaning workers in North America, had worked a full week only three times since the beginning of that year because of chip shortages. A lack of simple chips, including 40-cent parts needed for windshield-wiper motors in F-150 pickup trucks, left it 40,000 vehicles short of production targets.
Until 2014, machines that treat sleep apnea made by San Diego-based
ResMed Inc.
each contained just one chip, to handle air pressure and humidity. Then ResMed started putting cellular chips into the devices that beamed nightly report cards on users’ sleep patterns to their smartphones and to their doctors.
As a result, regular usage by users climbed from just over half to about 87%. Because mortality is lower for sleep-apnea sufferers who consistently use their devices, a relatively simple chip could help save lives.
An employee assembled ResMed’s sleep apnea devices in Singapore on Dec. 27.Ore Huiying for The Wall Street Journal
ResMed redesigned its machines during the chip shortage.Ore Huiying for The Wall Street Journal
ResMed’s sleep apnea devices are assembled in Singapore.Ore Huiying for The Wall Street Journal
ResMed couldn’t get enough of the cellular chips during the chip shortage when demand for its machines went up, in part because a competitor’s devices were recalled. Some suppliers reneged on supply agreements. Patients faced monthslong waits.
Chief Executive
Mick Farrell
said he implored longstanding suppliers to give priority to his equipment, though his orders were relatively small. “I asked for more, more and more, and to please prioritize us,” he said. “This is a case of life and death—we’re not just asking for something that makes you feel better.”
The company redesigned its machines, which are assembled in Singapore and Sydney, to replace the chips in short supply with others more readily available. It sought out new chip suppliers. It even rolled back the clock and released a version of a device without the cellular chip.
Though the chip shortage has abated somewhat and the company’s newest breathing devices have the cellular chip back, Mr. Farrell worries chip supply could be a bottleneck.
In May, he was one of a group of medical-technology CEOs who pleaded with Commerce Secretary Gina Raimondo on a conference call for help. Ms. Raimondo’s staff asked other federal agencies to designate medical equipment as essential and helped connect buyers directly to manufacturers to bypass distributors.
Such pleas also lent urgency to the Biden administration’s efforts, led by Ms. Raimondo, to pass the Chips and Science Act. The U.S. has long been leery of industrial policy, under which the government rather than the market steers resources to particular industries. Many economists criticize industrial policy as picking winners. But many Republican and Democratic legislators argue that semiconductors should be an exception because, like oil, they have vital civilian and military uses.
Commerce Secretary Gina Raimondo in July.
Photo:
Anna Moneymaker/Getty Images
Soon after the act passed, Intel, which had pushed Congress to pass the legislation for two years, broke ground on a $20 billion project in Ohio. The Commerce Department will announce guidelines next month for how the law’s manufacturing subsidies will be awarded.
American scientists and engineers invented and commercialized semiconductors starting in the 1940s, and today U.S. companies still dominate the most lucrative links in the semiconductor supply chain: the design of chips, software tools that translate those designs into actual semiconductors, and, with competitors in Japan and the Netherlands, the multimillion-dollar machines that etch chip designs onto wafers inside fabrication plants, or fabs.
But the actual fabrication of semiconductors has been increasingly outsourced to Asia. The U.S. share of global chip manufacturing has eroded, from 37% in 1990 to 12% in 2020, while mainland China’s share has gone from around zero to about 15%, according to Boston Consulting Group and SIA. Taiwan and South Korea each accounted for a little over 20%.
The most cutting-edge manufacturers of advanced logic chips, the brains of computers, smartphones and servers, are
Taiwan Semiconductor Manufacturing Co.
—a foundry that makes chips designed by others—and South Korea-based
Samsung
Electronics Co. Intel comes in third. Memory chips are primarily made in Asia by U.S.- and Asian-headquartered companies. Lower-end analog chips, which often perform just a few tasks in consumer and industrial products, are produced around the world.
Region’s Share of activity
Circuit designs
and software
CPUs and other
digital chips
Activity’s Share of total
Data storage and
computer memory
Equipment used
to make chips
Chip-manufacturing
materials
Chip assembly
and testing
Chip makers are spending billions on new factories that could boost the country’s share of manufacturing…
…but significant obstacles remain, including slow growth in the number of U.S. engineering students.
U.S. semiconductor investments in the next 10 years
Citizenship of graduate students and postdoctoral appointees in U.S. engineering programs
Materials/
suppliers
$9 billion
U.S. citizens
and permanent
residents
Chip-making
factories
$186.6 billion
Region’s Share of activity
Circuit designs
and software
CPUs and other
digital chips
Activity’s Share of total
Data storage and
computer memory
Equipment used
to make chips
Chip-manufacturing
materials
Chip assembly
and testing
Chip makers are spending billions on new factories that could boost the country’s share of manufacturing…
…but significant obstacles remain, including slow growth in the number of U.S. engineering students.
Citizenship of graduate students and postdoctoral appointees in U.S. engineering programs
U.S. semiconductor investments in the next 10 years
Materials/
suppliers
$9 billion
U.S. citizens
and permanent
residents
Chip-making
factories
$186.6 billion
Region’s Share of activity
Circuit designs
and software
CPUs and other
digital chips
Activity’s Share of total
Data storage and
computer memory
Equipment used
to make chips
Chip-manufacturing
materials
Chip assembly
and testing
Chip makers are spending billions on new factories that could boost the country’s share of manufacturing…
…but significant obstacles remain, including slow growth in the number of U.S. engineering students.
Citizenship of graduate students and postdoctoral appointees in U.S. engineering programs
U.S. semiconductor investments in the next 10 years
Materials/
suppliers
$9 billion
U.S. citizens and
permanent residents
Chip-making
factories
$186.6 billion
Region’s Share
of activity
Circuit designs
and software
CPUs and other
digital chips
Activity’s Share of total
Data storage
and computer
memory
Equipment used
to make chips
Chip-manufacturing
materials
Chip assembly
and testing
Chip makers are spending billions on new factories that could boost the country’s share of manufacturing…
U.S. semiconductor investments in the next 10 years
Materials/
suppliers
$9 billion
Chip-making
factories
$186.6 billion
…but significant obstacles remain, including slow growth in the number of U.S. engineering students.
Citizenship of graduate students and postdoctoral appointees in U.S. engineering programs
U.S. citizens
and permanent
residents
Region’s Share
of activity
Circuit designs
and software
CPUs and other
digital chips
Activity’s Share of total
Data storage
and computer
memory
Equipment used
to make chips
Chip-manufacturing
materials
Chip assembly
and testing
Chip makers are spending billions on new factories that could boost the country’s share of manufacturing…
U.S. semiconductor investments in the next 10 years
Materials/
suppliers
$9 billion
Chip-making
factories
$186.6 billion
…but significant obstacles remain, including slow growth in the number of U.S. engineering students.
Citizenship of graduate students and postdoctoral appointees in U.S. engineering programs
U.S. citizens
and permanent
residents
The concentration of so much chip production in three hot spots—China, Taiwan and South Korea—unsettles U.S. military and political leaders. They worry that if China achieved dominance in leading-edge semiconductors, on its own or by invading Taiwan, it would threaten the U.S. economy and national security in a way Japan, an ally, didn’t when it briefly dominated semiconductor manufacturing in the 1980s.
Starting around 2016, U.S. officials began blocking Chinese efforts to procure front-line chip companies and technology. Many in Washington were blindsided last July when a Canadian research firm reported that China’s largest chip maker,
Semiconductor Manufacturing International Corp.
, had begun to manufacture 7-nanometer chips—a level of sophistication thought beyond its ability.
With little warning, on Oct. 7, the U.S. government installed the broadest-ever restrictions on chip-related exports to China. The U.S. had long been willing to let Chinese semiconductor capabilities advance, as long as the U.S. maintained a lead. The new controls go much further, seeking to hold China in place while the U.S. and its allies race ahead.
A ceremony marked the beginning of bulk production of 3-nanometer chips at a Taiwan Semiconductor Manufacturing Co. facility in Taiwan on Dec. 29.Lam Yik Fei/Bloomberg News
A circuit board on display at Macronix International Co. in Taiwan.Annabelle Chih/Getty Images
A ceremony marked the beginning of bulk production of 3-nanometer chips at a Taiwan Semiconductor Manufacturing Co. facility in Taiwan on Dec. 29, left. A circuit board on display at Macronix International Co. in Taiwan, right.Lam Yik Fei/Bloomberg News; Annabelle Chih/Getty Images
Meanwhile, U.S. officials hope federal subsidies will lead to factories that are sufficiently large and advanced to remain competitive and profitable long into the future. “We have got to figure out a way through every piece of leverage we have…to push these companies to go bigger,” Ms. Raimondo said in an interview. “I need Intel to think about taking that $20 billion facility in Ohio and making it a $100 billion facility. We’ve got to convince TSMC or Samsung that they can go from 20,000 wafers a month to 100,000 and be successful and profitable in the United States. That’s the whole game here.”
That ambition comes at a delicate time for chip makers, many of whom have seen a sharp drop in demand for electronics that were hot during the early days of the pandemic. Intel is paring capital spending amid the slump, and TSMC said this week that weak demand could lead it to cut capital expenditures this year.
To defray the chip companies’ investment needs, Ms. Raimondo has approached private infrastructure investors about participating in chip projects, modeled on
Brookfield Asset Management Inc.’s
co-investment in Intel’s Arizona fabs. Last November she pitched the idea to 700 money managers at an investment conference in Singapore organized by Barclays Bank.
She also approached chip customers including
Apple Inc.
about buying chips these fabs produce. “We will need big customers to give commitments to purchase [the fabs’ output], which will help de-risk deals and show there is a market for these chips,” she said.
Those efforts appeared to pay off in December when TSMC announced it would up its investment to $40 billion in leading-edge chips at a facility already being built on a vast scrubby area north of Phoenix. Formerly home to wild burros and coyotes, it now teems with construction cranes and takes delivery of some of the most advanced manufacturing equipment in the world.
At a ceremony that month attended by Mr. Biden and top administration officials, including Ms. Raimondo, Apple Chief Executive
Tim Cook
and
Advanced Micro Devices Inc.
chief
Lisa Su
pledged to buy some of the facility’s output.
Workers at TSMC’s manufacturing facility in Phoenix in December.
Still, TSMC told the Commerce Department in a public letter that despite excitement about its plans and local, state and potentially federal subsidies, costs were higher than if a similar operation were built at home.
Morris Chang,
TSMC’s founder, said in November that the differential could be 50%. TSMC said it sent more than 600 American engineers to Taiwan for training.
Outside the U.S., Europe has its own plans to double its share of global production over about 10 years, while authorities in Taiwan, China and other Asian nations are pouring money into the sector. TSMC, in addition to its Arizona project, is building a chip plant in Japan and is looking at potential investments in Europe.
The high cost and scarcity of qualified labor in the U.S. has hampered previous efforts to reshore electronics manufacturing. Mung Chiang, president of Purdue University in Indiana, said computer and engineering students are drawn to chip design or software, areas where American companies are leaders, rather than manufacturing.
“Even if they say, ‘Yes, semiconductor manufacturing sounds really good, I want to do it,’ well, where can they learn the real, live experience?”
In response, Purdue has created a dedicated semiconductor program it hopes will award more than 1,000 certificates and degrees annually by 2030 in person and online. In July,
SkyWater Technology,
a Bloomington, Minn.-based foundry, said it would build a $1.8 billion fab on Purdue’s campus, prospectively supported by Chips funding.
Developing a domestic supply of talent is only half the battle. The U.S. also depends on foreign countries for many key inputs to semiconductors.
The lasers that imprint tiny circuit blueprints on silicon wafers use purified neon gas, made from raw neon typically harvested from large air-separation units attached to steel plants. Those facilities produce the neon when they separate oxygen from the air for use in steel furnaces.
There Aren’t Enough Chips—Why Are They So Hard to Make?
Since the steel industry largely moved out of the U.S. over the past half-century, there is currently very little neon gas being produced domestically. Most has come from Ukraine, Russia and China, but Russia’s invasion of Ukraine has left China as the world’s main source.
“Is this a risk for the U.S.? Absolutely,” said Matthew Adams, an executive vice president at Electronic Fluorocarbons LLC, a Massachusetts-based company that imports, purifies and sells neon and other gases. “A prolonged ban of neon exports from China to the U.S. would shut down a significant portion of semiconductor production after inventories are exhausted.”
A handful of other raw materials used in chip making, such as tungsten, which is transformed into tungsten hexafluoride and used to build parts of transistors on chips, are similarly sourced primarily from China. To truly untie the U.S. chip industry from China would entail undoing several decades of globalization, something industry leaders say isn’t practical.
After working for years to catch up on U.S. technology, China has developed a chip that can rival Nvidia’s powerful A100. WSJ unpacks the processors’ design and capability as the two superpowers race for dominance in artificial intelligence. Illustration: Sharon Shi
Even if the U.S. doesn’t succeed in securing the entire semiconductor supply chain, it does have a chance to reverse the recent historical pattern of losing leadership in one manufacturing sector after another, including passenger cars, railroad equipment, machine tools, consumer electronics and solar panels.
“I don’t think we’ve ever done this before: Try in a conscious, targeted way to regain market share in an industry where we were once the leader, but then lost it,” said
Rob Atkinson,
president of the Information Technology and Innovation Foundation, which advocates government support of manufacturing.
—Liza Lin contributed to this article.
Write to Asa Fitch at asa.fitch@wsj.com and Greg Ip at greg.ip@wsj.com
As smoke crept through the 21-story apartment building in far western China, panicked messages filled the residents’ chat group. “On the 16th floor, we don’t have enough oxygen,” a woman gasped in an audio message. “Soon our children won’t be OK.”
Another person added a plea about the people in apartment 1901: “They wouldn’t be able to open the door. Can you break into it and take a look? There are many children inside.”
Many who heard the reports were shocked, not by a tragedy in the remote city of Urumqi, but because it had taken firefighters three hours to control the fire. People across the country believed the delays happened in part because of the pandemic restrictions that have been a running source of discontent throughout the country. The impact has reached into the heart of Chinese politics.
Excerpts of residents’ panicked conversation began to circulate on social media, along with videos of the emergency response. They showed fire crews struggling to get around barriers to approach the building. Videos showed fire crews’ water streams falling short of the fire as its flames slithered toward the top of the apartment tower.
Pandemic controls imposed by Chinese authorities around, and possibly inside, the apartment building had delayed the fire response, neighbors and family members of those killed have said. That would mean that the death toll, which many believed was much higher than the official tally of 10, was ultimately in part a product of China’s strict, already widely detested zero-tolerance Covid policy. The government denies all that.
Outrage spilled onto the streets of Urumqi, the capital of the heavily Muslim Chinese region of Xinjiang, where residents had been locked down for more than 100 days. Footage of the fire and the protest in Urumqi spread on Chinese social media and on the popular do-everything app
WeChat.
Firefighters sprayed water on a residential-building fire in the city of Urumqi that killed 10 and triggered protests against Covid-19 lockdowns.
Photo:
Associated Press
To large numbers of Chinese people who have had the experience of being locked inside their own apartments because of Covid controls, the words and images flowing out of Xinjiang conjured a scenario that seemed terrifyingly plausible.
“The 100-plus day lockdown is real. The many deaths from Covid controls are real. Discontent has accumulated and is destined to erupt,” said a user on the Twitter-like
Weibo
platform in one widely endorsed comment about the fire.
Within days, the protest would spread throughout China, growing into the largest show of public defiance the Communist Party has faced since the 1989 pro-democracy protests at Tiananmen Square. The demonstrations have posed a rare challenge to the recently extended rule of Chinese leader
Xi Jinping,
compounding the government’s challenges over how to ease its Covid restrictions.
Large protests erupted across China as crowds voiced their frustration at nearly three years of Covid-19 controls. Here’s how a deadly fire in Xinjiang sparked domestic upheaval and a political dilemma for Xi Jinping’s leadership. Photo: Thomas Peter/Reuters
China has experienced public outrage over its strict Covid-19 restrictions before, most of which the authorities had managed to contain online. Going back nearly three years, the death from the coronavirus of Li Wenliang, a doctor who was punished for warning others about the initial outbreak in Wuhan, unleashed a flood of grief and anger.
This September, a bus crash in Guizhou province that killed 27 people who were being sent to quarantine in the middle of the night raised an outcry about steps taken to control the coronavirus.
Mourners in Hong Kong paid their respects in February 2020 to Chinese physician Li Wenliang. Dr. Li raised early alarms about the coronavirus outbreak in Wuhan but was silenced by police, only to die of the disease himself.
Photo:
jerome favre/EPA/Shutterstock
More recently, after an announcement that Covid restrictions would be eased led to little actual change, public frustration spilled out onto the streets. Workers at
Foxconn Technology Group’s
main plant in the city of Zhengzhou, the world’s largest iPhone factory, clashed with police while protesting a contract dispute with roots in pandemic lockdowns. In some Beijing neighborhoods, people argued with officials over the legality of controls.
In maintaining the lockdowns in Xinjiang, local authorities have been able to rely on the country’s most advanced and suffocating security apparatus, originally built to carry out a campaign of ethnic re-engineering against the region’s 14 million Uyghurs and other Turkic Muslims.
Most if not all of the fire’s victims belonged to these groups, according to relatives and overseas Uyghur activists. Discrimination by China’s Han majority against Turkic minorities has long fueled ethnic tensions in the region, which exploded into deadly race riots in Urumqi in 2009.
Yet in the past week, the sides found common cause, at least temporarily, in anger over the fire.
According to an official account published in the state-run Xinjiang Daily newspaper, the blaze began on the 15th floor, in the apartment of a Uyghur woman who was having a bath in a home spa when a circuit breaker flipped. She flipped it back, then was alerted by her daughter to the smell of smoke. When she re-emerged from the bathroom, flames had risen to the wooden ceiling from the bed.
A community worker arrived just as they were fleeing the flames, according to Xinjiang Daily. He called the fire service at 7:49 p.m. last Thursday, then helped rush the pair and their neighbors downstairs.
A still taken from a social media video shows a fire truck shooting water at the burning residential building in Urumqi. The fire and delays in fighting it proved a catalyst for nationwide protests against Covid-19 lockdowns.
Photo:
REUTERS
At the ground level, burning debris had begun falling over the doorway. Those who couldn’t leave through the front gate in time had to climb out of a window from an apartment, the newspaper reported.
Firefighters didn’t reach some of the apartments until around 90 minutes after they were called, according to posts on the chat group.
Video footage showed that traffic-control structures had to be removed as a line of fire trucks waited, causing delays. The government denied the structures had been installed for pandemic-control reasons.
At a press briefing convened late Friday night as protests unfolded, officials said that three fire trucks from a nearby station arrived at the scene five minutes after the fire was reported, but they were blocked by cars that had to be moved.
On social media, residents said those cars had been parked there for months during the fall Covid lockdown, and the engines couldn’t start.
Li Wensheng, Urumqi’s fire chief, said at the press briefing that some residents’ “self-rescue abilities were weak,” a comment that added to the simmering anger.
The Xinjiang and Urumqi governments didn’t respond to requests for comment.
Han residents of Urumqi led the protests that unfolded in the freezing night air the day following the fire. Uyghur residents have faced the strictest lockdowns and largely stayed home out of fear they would bear the brunt of any reprisals, overseas activists said.
Demonstrations were fueled by the group chat conversations and footage of obstructed fire trucks, as well as by videos circulating online that appeared to capture the screams of people from the smoldering building. “Open the gate!” one woman could be heard shouting in horror in one video.
On Saturday night, several female students stood for hours on the campus of Communication University of China in Nanjing, holding blank sheets of paper in silence, widely taken to be a reference to Chinese censorship. A male student from Xinjiang offered a tribute to the victims in Urumqi and to “all other victims nationwide,” saying he had been a coward for too long.
A man was arrested on a Shanghai street when protests erupted following a deadly apartment-building fire in China’s Xinjiang region.
Photo:
hector retamal/AFP/Getty Images
That same night, dozens of people in Shanghai gathered for a vigil with flowers and candles near a street named after Urumqi. Passersby joined in, and the crowd grew into the hundreds. Just past midnight, some demonstrators began chanting for Mr. Xi to step down.
Similar protests emerged in half a dozen Chinese cities and more than a dozen university campuses in the following days. In several instances, demonstrators chanted “We are all Xinjiang people.” Others called for democracy and free speech.
Chinese authorities have devoted enormous resources to building domestic security and surveillance systems specifically designed to prevent such wide and unified outbreaks of dissent. While protests aren’t uncommon, scholars who study China say they are almost always local events with little capacity to spread.
The Cyberspace Administration of China issued guidance to companies on Tuesday, including Tencent Holdings Ltd. and ByteDance Ltd., the Chinese owner of short video apps TikTok and Douyin, asking them to add more staff to internet censorship teams, according to people familiar with the matter. The companies were also asked to pay more attention to content related to the protests, particularly any information being shared about demonstrations at Chinese universities and the fire.
In imposing its stringent Covid controls, human-rights activists and other observers say, the Communist Party created an issue that China’s citizens only have to look out their front door to understand. Some Uyghurs affected by the fire said the fear and frustration stemming from pandemic controls crossed deep-seated ethnic divides.
Marhaba Muhammad, now a resident of Turkey, said she read news of the fire with a sense of horror. She recognized the building as the home of her aunt, whom she last visited in 2016, shortly before leaving China. The family lived in apartment 1901, the subject of one of the desperate messages left in the residents’ chat group.
Ms. Muhammad said she and her family abroad learned that the aunt, Qemernisahan Abdurahman, 48, had died in the apartment, along with four children age 5 to 13.
Ms. Abdurahman’s husband wasn’t there. He and an elder son were detained as part of the crackdown in Xinjiang in 2017 and now are imprisoned, said Ms. Muhammad and her brother, Abdulhafiz Maiamaitimin, who lives in Switzerland.
“This news is so painful. No one imagined,” she said.
Qemernisahan Abdurahman, 48, with 3 of her four children who died in the fire in Urumqi.
Photo:
Marhaba Muhammad
In apartment 1801, directly below where Ms. Muhammad’s aunt and children died, a woman also died along with her children, according to Abduweli Ayup, a Uyghur activist in Norway who spoke with relatives and neighbors of the fire victims.
Han Chinese don’t have to fear the level of oppression faced by Uyghurs, Ms. Muhammad said, referring to the Chinese government’s detention of upwards of a million Uyghurs and other Turkic Muslims in internment camps and prisons—a practice the United Nations has said may constitute a crime against humanity.
Yet “after the fire, they realized that Uyghurs today would be the Chinese tomorrow,” she said.
Police have targeted protest participants by using some of the surveillance techniques honed in Xinjiang to target Uyghurs. In chat rooms used to organize demonstrations, protesters have reported police scanning the smartphones of pedestrians for overseas apps such as Twitter and Telegram, a common experience on the streets of Urumqi.
A lawyer representing more than a dozen protesters taken by police said she believes many of her clients were tracked through mobile-phone data, another echo of the Uyghur experience in Xinjiang.
On Tuesday, Chinese-Australian activist and cartoonist Badiucao, who goes by one name, reposted a widely shared video of police on the Shanghai subway checking the phones of passengers on Twitter. He appended a single phrase: “Xinjiang-ization.”
Protesters in Beijing lighted candles during a protest against China’s strict zero-Covid measures.
Photo:
Kevin Frayer/Getty Images
Write to Austin Ramzy at austin.ramzy@wsj.com and to Wenxin Fan at Wenxin.Fan@wsj.com
MYKOLAIV REGION, Ukraine—A global revolution in warfare is dramatically tipping the scales of the conflict between Ukraine and Russia, putting in the hands of front-line troops the kind of lethality that until recently required aircraft, ships or lumbering tracked vehicles. It also has the capacity to change battlefields far from Eastern Europe.
Able to pick off Russian military bases, ammunition depots and infrastructure far behind front lines, Ukraine’s 16 Himars helped its troops this summer halt a bloody Russian advance. Since last month, Ukrainians have seized back swaths of territory in their country’s east and ground down Russian troops in the south. Washington recently pledged to deliver another 18 Himars.
Within Kyiv’s arsenal, Himars offer a unique combination of range, precision and mobility that allows them to do the job traditionally handled by dozens of launchers firing thousands of shells.
By shrinking launchers and nearly guaranteeing hits on targets, Himars and the other equipment are upending century-old assumptions about how wars must be fought—and particularly about military supplies. Himars’s vastly improved accuracy also collapses the massive logistical trail that modern infantry has demanded.
“Himars is one part of a precision revolution that turns heavily equipped armies into something light and mobile,” said
Robert Scales,
a retired U.S. Army major general who was among the first to envision Himars in the 1970s.
Last month The Wall Street Journal gained rare access to a front-line Himars unit.
Lt. Valentyn Koval said the four Himars vehicles in his unit have destroyed about 20 Russian antiaircraft batteries.
Before a rocket hits its target the men can be on their way back to camp.
One evening at dusk the men in this unit were making dinner when orders for their fifth mission of the day arrived: to target Russian barracks and a river barge ferrying munitions and tanks 40 miles away.
Six men piled into their two Himars: a driver, targeter and commander in each, accompanied by the battery commander and a security detail in an armored personnel carrier. The commander plugged coordinate data into a tablet computer to determine the safest location for firing.
Within minutes, the two Himars rumbled out from cover under an apricot grove toward the launch spot in a nearby sunflower field. Thirty seconds after arriving, they fired seven missiles in quick succession. Before the projectiles hit their targets, the trucks were returning to base camp.
Ten minutes later came another pair of targets: Soviet-era rocket launchers some 44 miles away. Off rolled the Himars again and fired another barrage of missiles.
Soon after, the soldiers were back at camp and finishing their dinner. Some pulled up videos on Telegram showing the fruit of their labor: burning Russian barracks.
Ukraine’s Himars rockets, which can fly 50 miles, have hit hundreds of Russian targets, including command centers, ammunition depots, refueling stations and bridges, choking off supplies to front-line units. Since stopping Russia’s spring advance across Ukraine’s eastern Donbas region, they are now targeting retreating Russian forces.
Ukrainian commanders estimate that Himars are responsible for 70% of military advances on the Kherson front, the unit’s commander, Lt.
Valentyn Koval,
said. The four vehicles in his unit have killed hundreds of Russians and destroyed about 20 antiaircraft batteries, he said.
Lt. Koval poses next to a Himars.
Russian artillery—like most such systems since World War I—lacks precision. To destroy a target, troops generally level everything around it. Gunners following maps rain shells in a grid pattern that aims to leave no terrain in a quadrant untouched. Russian forces in Ukraine are lobbing dozens of shells per acre to hit one objective, analysts say.
Himars can do the job with one rocket carrying a 200-pound explosive warhead. Each Ukrainian Himars carries one six-rocket pod that can effectively land the punch of more than 100,000 lbs. of traditional artillery.
Artillery is cumbersome. During Operation Desert Storm in Iraq in 1991, it accounted for more than 60% of a U.S. division’s weight. Moving it demands soldiers, trucks, fuel and time, plus additional soldiers and vehicles to protect those supply operations.
All that support sucks resources and makes a juicy target, as the world saw in the opening days of the Ukraine war, when a Russian supply convoy halted by Ukrainian attacks outside Kyiv became a 40-mile-long sitting duck.
“It’s not just the precision of Himars that’s revolutionary,” said Gen. Scales. “It’s the ability to reduce the tonnage requirements by an order of magnitude or better.”
A sergeant dismounts from the Himars vehicle he commands.
Ukrainian soldiers prepare to load Himars munitions.
The supply chain for Himars units consists of factory-packaged rocket pods stashed at pickup points in the nearby countryside and usually hidden by foliage. A cargo truck deposits the camouflage-green pods—each a little bigger than a single bed—at a string of designated locations, not unlike a commercial delivery route.
Himars teams drive to the ammo drop spots, where a waiting three-man loading team removes spent pods and swaps in full ones within five minutes, using a crane integrated into the vehicle.
“Himars is one of, if not the most, efficient type of weapons on the battlefield,” said Lt. Koval, a jocular 22-year-old with a Pokémon ringtone on his cellphone. “This gives us an opportunity to react quickly, hit in one place, move to another, and destroy effectively.”
Russia’s best truck-based rocket launchers, by contrast, can require around 20 minutes to set up in the launch spot and 40 minutes to reload—critical time when the enemy tries to return fire. The Himars can drive faster and has an armored crew cabin.
Ukrainian Himars teams stay lean by spending weeks in the field without returning to a larger base. Lt. Koval’s unit, which received the first Himars in June, has spent the past three months sleeping in tents beside the launchers or inside nearby support vehicles.
Soldiers prepare food and coffee while waiting for the call to file more rockets.
Photo:
Adrienne Surprenant/MYOP for The Wall Street Journal
The men, trained by U.S. instructors outside Ukraine, remain on standby for new targets, switching into action and just as casually returning to mundane activities like making coffee or playing cards.
On the front armor of one Himars, the soldiers painted a white grin below the Ukrainian word for “workhorse.” On the other, whose odometer shows it has traveled over 13,000 miles, they stenciled 69 black skulls, commemorating significant confirmed hits.
Mission details arrive as geographic coordinates, with a target description and instructions on whether to use explosive missiles for armored targets or fragment charges for hitting personnel. Targeting tips come from sources including U.S. intelligence and partisans in occupied territories.
The Himars commanders then pick a suitable launch location and guide the vehicles into place. Inside the cab, the vehicle commander sits between the driver and the targeter, who feeds the mission data into a computer. When the vehicle reaches the launch site, the targeter presses one button to angle the missiles skyward and another button to fire.
The missiles roar into the night sky with a burst of flame, leaving a cloud of smoke over the field. The launcher is lowered and the vehicle speeds back to its tree cover.
“We are the juiciest target in the region,” said Lt. Koval. “So we need to maneuver to survive.”
A Himars on the road to an operating position in a field.
Smoke lingers in a sunflower field after a Himars fired a rocket.
Maneuverability is exactly why Himars was created as a downsized version of a tank-like weapon, the Multiple Launch Rocket System, which has also been provided to Ukraine by the U.K. and Germany. First used in Desert Storm, before the advent of precision artillery, massed batteries of the 12-rocket vehicles unleashed so much explosive force and shrapnel that Iraqi troops dubbed it “steel rain.”
MLRS’s heft means that only the largest military cargo jets can airlift it and they land far from the fighting. To move distances on land requires a flatbed truck. Himars was envisioned as a lighter, more agile version.
The push for nimble units equipped with lightweight gear became part of a broader effort to streamline the U.S. military after the Cold War that reached its peak under Defense Secretary
Donald Rumsfeld
starting in 2001, but was sidetracked by wars in Afghanistan and Iraq.
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Himars, on wheels and with only six rockets, was a project that stayed on track. One initial shortcoming, the Pentagon discovered, was that six cluster bombs didn’t pack enough punch to destroy many targets. GPS-guided artillery, rolled out in the mid-1990s, gave Himars new life. Precision meant the rockets didn’t need to explode together for a giant blast. They could each pick off a different geolocated target.
“The precision revolution changes everything,” said Gen. Scales, who considers the transformation to be the kind of epoch-making military shift that redefines warfare and will now tip battlefield advantage from massed armies to small infantry units.
Such shifts were rare in the past, including the eclipse of infantry by horse-mounted warriors around the fourth century and the introduction of gunpowder to Europe a millennium later, said Gen. Scales, a military historian who served as commandant of the U.S. Army War College.
Others came around the U.S. Civil War with the introduction of precise rifles and artillery and machine guns, which proved so deadly in World War I, and at the start of World War II, when the German blitzkrieg merged motorized transportation with radio coordination of troops.
Now, inexpensive microprocessors are putting what Gen. Scales dubs “cheap precision” in the hands of Ukrainian soldiers.
“If I enter the coordinates of this hole,” said Lt. Koval, standing by a molehill the size of a shoebox, “it will hit this hole.”
One Himars has 69 skulls stenciled on it, one for every verified hit.
On one particularly busy day in late August, the two Himars under Lt. Koval’s command worked in tandem with two others. When his pair ran out of ammunition, they dropped back to reload while the other duo advanced to fire. Lt. Koval said they tag-teamed for 37 hours without stopping to sleep and hit roughly 120 targets, enabling Ukrainian infantry to break Russian lines around the southern city of Kherson.
Washington was initially reluctant to provide Ukraine with Himars, fearing such a move could cause Moscow to retaliate against the U.S. or its allies in the North Atlantic Treaty Organization. It has declined to supply more powerful rockets which can be fired up to 185 miles and would enable Ukraine to destroy sturdier targets, like concrete bridges that they have so far only been able to blow holes through.
In a sign that Ukraine’s additional firepower is taking a toll on Moscow’s forces, Russian Defense Minister
Sergei Shoigu
has told Russian troops to make Ukraine’s long-range weaponry a priority target.
Himars operators say the biggest threat comes from Russia’s kamikaze drones, buttressed recently by more effective Iranian systems, but they feel well protected by Ukrainian anti-air systems and special forces. Lt. Koval’s crew abandoned two firing missions this summer out of caution when a drone was spotted nearby, but he said no Himars have been hit.
“We’re always on the move,” said Lt. Koval.
So far no Himars have been hit by enemy fire, Lt. Koval said.
Write to Stephen Kalin at stephen.kalin@wsj.com and Daniel Michaels at daniel.michaels@wsj.com
Jack Cronin found San Francisco-area homes too expensive or too far from the city center to buy when he lived there in 2020. The tech worker still wanted a piece of the hottest housing market of his lifetime, so he started looking farther afield.
Last year, the 28-year-old used a website called Roofstock, which provides listings and data for investors interested in rental properties, to buy a three-bedroom home outside Jackson, Miss., for $265,000. Mr. Cronin, who now lives in New York City, has never visited Jackson nor met the tenants in his home, lightly landscaped with bushes and crepe myrtle trees. It’s enough to know that a management company collects $2,300 a month in rent for him.
To counter the impact of a decline in global commerce and persistent shortages of labor, commodities and energy, central bankers might lift interest rates higher and for longer than in recent decades—which could result in weaker economic growth, higher unemployment and more frequent recessions.
The Federal Reserve’s current round of interest-rate increases, which economists say have pushed the U.S. to the brink of a recession, could be a taste of this new environment.
“The global economy is undergoing a series of major transitions,” said
Mark Carney,
former Bank of Canada and Bank of England governor, in a speech at an economics conference in March. “The long era of low inflation, suppressed volatility and easy financial conditions is ending.”
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This new era would mark an abrupt about-face after a decade in which central bankers worried more about the prospects of anemic economic growth and too-low inflation, and used monetary policy to spur expansions. It also would be a reversal for investors accustomed to low interest rates.
The challenges for policy makers will take center stage from Thursday to Saturday when they gather for the Kansas City Fed’s annual retreat in Jackson Hole, Wyo., being held in person for the first time since 2019.
The Fed could still succeed at curbing inflation by raising interest rates. Postpandemic headwinds might abate or fail to materialize if protectionism and geopolitical risks recede, labor productivity improves, a slowdown in China’s economy reduces demand for global commodities, or new technologies reduce the costs of developing new energy sources.
Mr. Powell with Mark Carney, then Bank of England Governor, in Jackson Hole, Wyo., in 2019.
Photo:
Amber Baesler/Associated Press
“Since the pandemic, we’ve been living in a world where the economy is being driven by very different forces,” Fed Chairman
Jerome Powell
said on a June panel discussion in Portugal. “What we don’t know is whether we will be going back to something that looks more like, or a little bit like, what we had before.”
European Central Bank President
Christine Lagarde
on the panel offered a more pessimistic appraisal: “I don’t think that we are going to go back to that environment of low inflation.”
The new environment reflects the stalling or potential reversal of three forces that pushed inflation down in recent decades by limiting workers’ ability to win higher wages and companies’ ability to raise prices.
• Force 1: Globalization. Increased flows of trade, money, people and ideas flourished with the Cold War’s end and China’s entry into the international trading system in the 1990s. Multinational companies using new technologies constructed global supply chains focused on driving down costs by finding the cheapest place and workers to produce products. Worldwide competition drove prices lower for many goods.
This helped keep U.S. inflation stable. Over the 20 years ending in 2019, U.S. goods prices rose an average of 0.4% a year, while services prices grew 2.6% annually, leaving “core inflation”—which excludes volatile food and energy prices—around 1.7%.
After the pandemic and the Ukraine war disrupted supply chains, many business leaders adopted new processes to increase reliability even if they cost more, such as by moving production closer to home or buying from multiple suppliers. And tensions between Western democracies and Russia and China raise concerns about a possible further retreat from globalization and rise of protectionism, which would raise production costs.
“If you had all of your supply chain in just one country, you have to question why take that risk in a world where pandemics could hit or country relations could deteriorate or wars could happen between countries,” said Richmond Fed President
Tom Barkin,
a former McKinsey & Co. executive. It is difficult to predict just how durable such changes will be, he added.
• Force 2: Labor markets. In an August 2020 book, “The Great Demographic Reversal,” former British central banker
Charles Goodhart
and economist Manoj Pradhan argued that the low inflation since the 1990s had less to do with central-bank policies and more with the addition of hundreds of millions of low-wage Asian and Eastern European workers, which held down labor costs and prices of manufactured goods exported to richer countries.
A farmworker adjusts sprinklers in Ventura County, Calif., in 2021.
Photo:
patrick t. fallon/Agence France-Presse/Getty Images
Mr. Goodhart wrote that global labor glut was giving way to an era of worker shortages, and hence higher inflation.
Meanwhile, the U.S. labor force has roughly 2.5 million fewer workers since the pandemic began, compared to what it would have if the prepandemic trend in workforce participation had continued and after accounting for the aging of the population, according to an analysis by Didem Tüzemen, an economist at the Kansas City Fed. Its growth had already slowed before Covid-19, reflecting an aging population, declining birthrates and less immigration. The slower growth rate of the U.S. workforce could force wages higher, feeding inflation.
Wages rose about 3% annually before the pandemic. Average hourly earnings grew 5.2% in the year ended in July.
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Roughly a million people moved to the U.S. annually in the years after the 2007-09 recession. That pace began to taper during the Trump administration and turned into a trickle after the pandemic started. The slowdown left the U.S. with 1.8 million fewer immigrants of working age—about 0.9% of the working-age population—than if pre-2019 immigration trends had continued, according to research by Giovanni Peri, a labor economist at the University of California, Davis.
Mr. Powell in a May interview pointed to the potential for reduced immigration to create a “persistent imbalance between supply and demand in the labor market.” He added: “If you have a slower growing labor market, you’re going to have a smaller economy.”
• Force 3: Energy, commodity prices. Energy and commodity firms haven’t heavily invested in new production over the past decade, creating risks of more persistent shortages when global demand is growing. When the Fed broke the back of high inflation in the early 1980s, then-Chairman Paul Volcker enjoyed some helpful tailwinds in the form of decadelong investments in oil.
Before the emergence of these three factors, the Fed could raise rates at a leisurely pace and could pursue policies that simultaneously kept unemployment and inflation low, something economists later dubbed the “divine coincidence.”
That was possible when the main threats to the economy were “demand shocks”—pullbacks in hiring, consumer spending and business investment—which slow both inflation and growth, as in the recessions of 2001 and 2007-09.
Ben Bernanke, then Fed chairman, testifies on Capitol Hill in 2008.
Photo:
Susan Walsh/ASSOCIATED PRESS
The Fed cut rates to near zero in 2008 to stimulate economic activity, held them there until 2015, then raised them at a glacial pace by historical standards. The unemployment rate fell below 4% in 2018, and inflation stayed at or just below the central bank’s 2% target. After raising the fed-funds rate to around 2.4% at the end of 2018, Mr. Powell cut rates slightly following a growth scare in 2019.
Those experiences heavily shaped the Fed’s initial response to the pandemic in 2020. Fearing another decade of sluggish growth and too-low inflation, it cut rates to near zero and promised to keep providing stimulus even after the White House and Congress aggressively boosted federal spending.
‘Supply shocks’
Rather than reducing economic demand, the forces that emerged during the pandemic were what economists call “supply shocks”—events that curtail the economy’s ability to provide goods and services, which in turn hurt growth and spurred inflation. Covid-19 lockdowns and stronger demand for goods disrupted supply chains, as did Russia’s Ukraine invasion and the West’s financial counterassault. Labor shortages emerged across the U.S.
With supply shocks, the Fed faces a harder trade-off between growth and inflation, because attacking inflation invariably means damping growth and employment. In such an environment, “there is no divine coincidence anymore,” said
Jean Boivin,
a former Bank of Canada official who heads the BlackRock Investment Institute.
The Fed and most other central banks initially misread the economy because, in early 2021, price increases could be traced clearly to the effects of the pandemic, affecting a small number of goods, such as used cars. By the end of the year, however, higher inflation had become increasingly broad-based.
One measure produced by the Dallas Fed, called a “trimmed mean” annual inflation rate, which excludes the most volatile categories to capture an underlying trend, rose from 2% last August to 3.5% in January and 4.3% in June.
“This is looking like the 1990s turned on its head,” said Stephen Cecchetti, a Brandeis University economics professor. “Every forecaster back then underestimated growth and overestimated inflation systemically for almost the whole decade. Now, it looks like we’re in for the reverse of this, which will be very, very unpleasant because it means we’re suddenly going to hit trade-offs.”
A wheat field burns after Russian shelling in Ukraine in July.
Photo:
Evgeniy Maloletka/Associated Press
The low-inflation environment of the past 30 years caused consumers and businesses to not think much about price increases. Fed officials now worry that even if prices rise temporarily, consumers and businesses could come to expect higher inflation to persist. That could help fuel higher inflation as workers demand higher pay that employers would pass onto consumers through higher prices.
“The risk is that because of a multiplicity of shocks, you start to transition to a higher-inflation regime,’’ Mr. Powell said on the June panel. “Our job is literally to prevent that from happening. And we will prevent that from happening.”
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Last year, Mr. Powell suggested he was skeptical of the idea that the forces underpinning globalization would shift overnight, as Mr. Goodhart suggested. But he has given more attention to the idea in the aftermath of the Ukraine war, which has highlighted the potential for significant economic and financial fallout from geopolitical conflicts.
By sending inflation, and especially energy prices, to such elevated levels, the war could serve as a trigger “to make people realize that inflation—and quite high inflation—is a real possibility,” said Mr. Goodhart. In turn, that could weaken the public’s confidence that “everything will go back to normal.”
“The argument of central banks, that they will get inflation back to target at 2% two years from now, is becoming increasingly implausible because they’ve said that all along and, of course, they haven’t achieved it,” he said.
Recession risk
The Fed’s aggressive interest-rate increases this year could be the first example of what happens with U.S. monetary policy in this new environment. Faster and bigger rate rises create greater risks of recession and could upend popular investment strategies by leading to more frequent losses for the two main components of traditional asset portfolios—stocks and long-term U.S. Treasury bonds.
The closed doors of the Pasadena, Calif., community job center during the coronavirus outbreak in May 2020.
Photo:
Damian Dovarganes/Associated Press
Fed officials have raised the fed-funds rate by a cumulative 2.25 percentage points this year, the fastest pace since they began using the rate as their primary policy-setting tool in the early 1990s. The rate influences other borrowing costs throughout the economy.
The Fed began with a quarter-point increase in March, followed by a half-point rise in May and increases of 0.75 point each in June and in July. At their meeting last month, officials debated how and when to dial back the pace of those increases, according to minutes of the meeting released Aug. 17.
An important shift occurred between Fed officials’ May and June meetings, when Mr. Powell secured consensus that they would need to raise rates high enough to slow growth. Through the summer, Fed officials have been unusually united over their goal, but if the labor market cools and the economy slows, Mr. Powell could face a trickier task forging agreement.
Several former Fed officials who have worked closely with Mr. Powell say he is likely to err on the side of raising rates too much, rather than too little, because tolerating excessive inflation would represent a much greater institutional failure for the central bank. Mr. Powell has hammered home the primacy of lowering inflation to the Fed’s 2% target.
“We can’t fail on this,” Mr. Powell told lawmakers on June 23, describing the Fed’s commitment as “unconditional.”
After months of Russian forces making painfully slow gains in Ukraine’s east, the focus of the war is moving to the south, where a potentially decisive phase of the conflict will play out.
Ukraine has used long-range artillery and rocket systems, including the American M142 Himars, to halt Russia’s grinding advances in the east, destroying ammunition dumps, command-and-control centers and air-defense systems that appear to have limited Moscow’s ability to supply its front lines. Now, with the help of these Western weapons, Ukraine says it is mounting a counteroffensive to take back the southern port city of Kherson.
Russia continues its bombardment of cities across Ukraine including in the early hours of Sunday, when it launched an assault on the port of Mykolaiv, killing a prominent businessman. But for Ukraine, Kherson is an important strategic objective as the largest population center occupied by the Russians and the first city to fall. As a port, it is economically important to the Ukrainians and taking it back would deny Russian forces access to the southern coast toward Odessa.
Mick Ryan, a military strategist and retired major general in the Australian army, said the offensive will force Russia to make hard decisions about keeping troops in the Donbas or moving them south to protect Kherson.
If the Ukrainians retake the city, he said, they could be in a position to threaten Russia’s main Black Sea naval base, 150 miles away, at Sevastopol.
The Ukrainian effort to retake Kherson represents a significant development in the conflict, said Gen. Ryan. “If the Ukrainians can take that back, that will be a turning point,” he said. “But we’re not at a turning point yet.”
Ukrainian soldiers fire a 155mm shell from a Western-supplied M777 Howitzer at a Russian military position in Ukraine’s Kharkiv region, July 23.
Photo:
Joseph Sywenkyj for The Wall Street Journal
Eliot Cohen, a military historian and strategist with the bipartisan policy research group the Center for Strategic and International Studies in Washington, said Kherson carried great symbolic importance.
“Taking back the original city that the Russians took without much effort in the beginning, would be psychologically very significant,” he said. It would be a bigger deal than either Ukraine’s recapture of Snake Island in June or the sinking of Russia’s flagship, the Moskva, in April.
Military offensives are more challenging than defensive operations. Analysts caution that Ukraine shouldn’t – and likely won’t – rush into the fight in the south because it must continue to check Russian advances in the east. But demonstrating that it can retake ground in the south would provide an important victory for Ukrainian morale and show its backers, particularly those in Europe as the continent faces a tough winter with likely energy shortages, that their support is yielding results on the ground.
If Ukraine’s push to dislodge Russians from Kherson fails or falters, however, it could weaken support for Kyiv’s fight in some Western capitals. Ukrainians are likely to continue fighting whatever happens, but an unsuccessful campaign could prompt more calls for a negotiated settlement, particularly from parts of Western Europe facing reduced flows of Russian natural gas.
U.S. officials say Ukrainian forces are advancing in the south, and public assessments from British defense intelligence suggest the counteroffensive in Kherson is gathering momentum. The British intelligence said Thursday that Ukrainian forces have likely established a bridgehead south of the Ingulets River, which forms the northern boundary of the Kherson region, and have damaged at least three bridges that Russia uses to deliver supplies to the area. One—the 1,100-yard Antonivsky bridge near Kherson city—is now probably unusable.
This has exposed Russia’s 49th Army, stationed on the west bank of the Dnipro River, and has cut off Kherson city from other occupied territories, the British intelligence said. On Saturday, they said Russian forces were highly likely to have established two pontoon bridges and a ferry system to compensate for the bridge damage.
A road bridge across the Dnipro River was damaged by Ukrainian missiles July 20.
Photo:
Sergei Bobylev/WAASS/Zuma Press
This phase of the war will look different from the first one, when Moscow unsuccessfully mounted an effort to strike at Kyiv and topple the government of President
Volodymyr Zelensky,
and the second that continues in the east, where grueling exchanges of artillery fire have yielded modest advantages for Russian forces at great cost.
Mr. Cohen says this phase will likely have parallels with what happened in the last year of World War I, when the Germans on the one side and the British and Australians on the other sought to “break in” past the front lines, exploit weakness and infiltrate forces.
This requires “meticulously planned operations, which take one bite at a time out of the enemy’s front line. And then you move artillery forward, you consolidate your position, let them counterattack if they want to, and then you take another bite,” he said.
Analysts point out that this phase won’t depend on artillery alone. Konrad Muzyka, president of Rochan Consulting, military analysts based in Gdansk, Poland, said, “Himars cripple Russia’s ability to conduct offensive operations, but they won’t force the Russians to leave Ukraine. For that you need manpower and armor.”
This brings in the big unknown: “We don’t know what the structure of the Ukrainian army is, we don’t know its number of troops or the state of their morale,” he said. Ukraine has lost thousands of soldiers in recent months and many good leaders.
Chris Dougherty, a former U.S. Defense Department strategist now at the Center for a New American Security, said that, despite all the materiel the West has given to Ukraine, it probably still lacks the equipment and trained forces to retake ground successfully and quickly.
“The worry I have is we give advanced equipment to the Ukrainians and they use it to stop the bleeding,” he said. “That makes sense if you’re bleeding to death. But what’s the next thing you do?” He said Russia has been unable to capitalize on its massive artillery blitzes to take significant ground, and Ukraine risks falling into the same trap.
Ukrainian soldiers on the front line near Izyum.
Photo:
Manu Brabo for The Wall Street Journal
Mr. Dougherty said he doubts Ukrainian forces can take ground in the east, where Russian forces are well dug-in, but thinks they can do it around Kherson or other areas in the south, where operations by partisans have already been hitting Russian targets.
“They have to make sure the Russians can’t rapidly reinforce from another area,” he said. “And the Ukrainians have to make sure they take advantage of what they have – partisans and intelligence inside Kherson.”
“The Ukrainians have to find a way to hit weak points in the Russian line and hit them in the rear of their line. Nothing panics an army like knowing their line is getting hit in the rear,” he said.
Some military analysts said that given Western military resources and hardware, economic aid and critical intelligence assessments about Russian military movements, the balance in the south is shifting to the Ukrainians.
Russia has already lost tens of thousands of soldiers killed and injured in its efforts so far, and analysts suspect many units are on the brink of exhaustion. They will be looking out for indications that the Russian army is becoming brittle and signs of mutiny, desertion, combat refusal and surrenders. Meanwhile, evidence is growing that the Russian economy is hurting from Western-led sanctions.
“My view is the momentum is sort of gradually swinging to Ukrainians,” said Mr. Cohen. “In war, unpredictable things happen. People make mistakes. All that… Nothing is a certainty. But at the moment, would I rather have the Ukrainian hand to play with or the Russian hand to play? I would rather have the Ukrainian hand, provided that the West continues to pour military support and some economic support in there.”
Russian Navy members patrol in front of a headquarter of Russia’s Black Sea Fleet in Sevastopol.
Photo:
Agence France-Presse/Getty Images
Write to Stephen Fidler at stephen.fidler@wsj.com and Daniel Michaels at daniel.michaels@wsj.com
Mr. Birchall, a straight-laced, 48-year-old wealth manager who rose to become Mr. Musk’s top deputy and the head of his family office, had growing concerns about a new power player in the
Tesla Inc.
TSLA 0.74%
CEO’s orbit.
Mr. Musk was increasingly relying on a new adviser, a 34-year-old, Russian-born ex-professional gambler named
Igor Kurganov.
Mr. Kurganov spent some of the pandemic sleeping in Mr. Musk’s home, where they chatted late into the night about how the world’s richest person might use his fortune to help shape the planet through a giving strategy known as “effective altruism.”
Mr. Kurganov had no experience in finance or security but was suddenly a central figure in both areas for Mr. Musk. He had moved from London to Texas and replaced some of Mr. Musk’s protection detail with new hires of his own. Not long after, the Tesla CEO told Mr. Birchall that he was so taken by the younger man’s ideas that he wanted to leave him in charge of his charitable giving, dispersing funds from Mr. Musk’s vast private fortune, currently around $230 billion, as he saw fit.
“Elon,” Mr. Birchall told his boss, according to three people briefed afterward. “You can’t.”
The clash between the two men, and their dueling efforts to gain the upper hand with Mr. Musk, provides a peek into the often tumultuous private workings of Mr. Musk’s inner circle. As Mr. Musk’s breakneck, $44 billion bid for Twitter shows, the entrepreneur can be prone to quick decisions, ones that he can reverse just as quickly as he makes them. That deal is now in peril, with Mr. Musk trying to walk away and
Twitter
TWTR 4.00%
suing him to complete it.
All the while he is egged on by a rotating crew of investors, underlings and ever-changing friends whose power and personal wealth is closely tied to their proximity to Mr. Musk, according to people who do business with him.
Two men in particular have pulled the Tesla CEO in opposing directions.
Mr. Birchall is an Eagle Scout and practicing Mormon who doesn’t smoke or drink and grew up traveling California as part of a song-and-dance troupe called “The Birchall Family Singers.” He declined to be interviewed through a representative of Mr. Musk’s foundation.
Mr. Kurganov is a high-roller with a reported more than $18 million in poker winnings, with long hair and beard and a peaceful demeanor. He has said in a podcast interview that he dropped out of college because he was smoking too much marijuana. He didn’t respond to requests for comment.
Igor Kurganov, shown playing poker in a tournament in 2016, became a top adviser to Mr. Musk on charitable giving.
Photo:
Joe Giron/World Poker Tour
Last winter, Mr. Musk came to a compromise between the two. He allowed Mr. Kurganov to oversee $5.7 billion in Tesla shares that the CEO pledged late last year to eventually donate to charity. The rest of Mr. Musk’s overall fortune remained under Mr. Birchall’s purview.
That decision wasn’t, however, the end of the fracas.
This account is based on interviews with more than a dozen people close to Messrs. Musk, Birchall and Kurganov, including associates of the Musk Foundation and investors.
Ultimate fixer
For a man of immense resources, Mr. Musk is a minnow in the world of big-dollar philanthropy. Compared with other magnates such as
Microsoft Corp.
co-founder
Bill Gates
and
Amazon.com Inc.
founder
Jeff Bezos,
whose wealth, like Mr. Musk’s, is tied up in shares of their companies, Mr. Musk has said little concrete about his approach to giving. He didn’t respond to requests for comment.
Mr. Musk’s personal foundation gave away $23.6 million in fiscal 2020, the most recent year for which data is available, filings show. That represented roughly 0.02% of his net worth as of the end of that year, according to Forbes rankings.
Though Mr. Musk is known to favor his own counsel most of all, the man in charge of his foundation since 2016 has been Mr. Birchall, one of the longest standing in his inner circle.
Jared Birchall is a top deputy to Mr. Musk and head of the firm managing his fortune.
Photo:
Patrick T. Fallon/Bloomberg News
The alliance reflects Mr. Birchall’s role as the ultimate fixer for Mr. Musk, taking care of matters large and small. In addition to handling billions in assets, Mr. Birchall in 2018 under a pseudonym registered the website www.justballs.com, for example, after Mr. Musk mused online that he might want to own the domain name someday, legal documents show.
Mr. Birchall entered the technology world through finance. After his brief singing stint with his siblings—he is one of 11 children—he attended Brigham Young University.
He then spent a year at Merrill Lynch, where he was discharged for what the firm described in a filing as “sending correspondence to a client without management approval.”
Mr. Birchall eventually moved into private wealth and crossed paths with Mr. Musk about a decade ago while working as a client adviser in
Morgan Stanley’s
southern California offices. There, he impressed Mr. Musk by helping arrange hundreds of millions of dollars of loans from the investment bank at a time when the Tesla co-founder was strapped for cash, a person close to Mr. Musk says. When Mr. Musk started a private firm to manage his own money roughly six years ago, he tapped Mr. Birchall to run it.
Mr. Birchall’s work for Mr. Musk has at times led him into strange public controversies and lawsuits. After a British spelunker criticized Mr. Musk’s offer to help rescue a youth soccer team trapped in a flooded Thailand cave in 2018, Mr. Birchall created a fake email address under the name “James Brickhouse” to hire a private investigator to investigate the man, according to court documents.
Mr. Musk during a Tesla event in Shanghai in January 2020.
Photo:
Aly Song/REUTERS
Mr. Musk subsequently called the man “pedo guy” in a tweet, though he later apologized and said it was a joking taunt. The spelunker unsuccessfully sued Mr. Musk for defamation in a Los Angeles federal court.
In addition to his role helping manage Mr. Musk’s fortune, Mr. Birchall is also a director of his tunneling startup, Boring Co., and chief executive officer of Mr. Musk’s Neuralink, which aims to make a brain implant that could be used by quadriplegic patients to control a computer or other devices.
When Mr. Musk announced in 2020 he would move from California to Texas, Mr. Birchall moved his family there, too. He has since become the closest thing Mr. Musk has to a public face in the Texas capital, handling business and attending events on Mr. Musk’s behalf.
“No one else you reach out to who is close to Elon is going to return your calls,” says Tyson Tuttle, former chief executive of Austin semiconductor manufacturer Silicon Valley Labs.
‘Make big moves’
Mr. Kurganov first became friendly with Mr. Musk socially.
Born in Russia but raised in Germany from age 4 by parents who were engineers by trade, Mr. Kurganov grew up in a working class, immigrant household, according to an interview he gave to the Paul Phua Poker podcast.
In his 20s, he gained a level of fame as a professional poker player. Beginning around a decade ago, he began playing high-stakes tournaments in Las Vegas and racking up wins, fellow poker players say. He earned particular renown in 2012 when he won a €1,080,000 purse in Monte Carlo.
He was known as an aggressive player, and had the respect of his fellow pros, the players say. “Igor had a willingness to play a lot of hands and make big moves,” says one of them, Dan Smith.
Though he was spending much of his time in Las Vegas, his personality didn’t match the city’s loud stereotypes. One person who knows him says he was often drawn into long, philosophical conversations on topics such as the rise of artificial intelligence in poker. Mr. Kurganov was concerned that a computer program could be built that could beat even the most talented human player.
Ging Masinda, a Las Vegas marketer and acquaintance of Mr. Kurganov, says the flashiest thing about him is that he sometimes wears eyeliner. “There’s a kid in him,” she says.
In a 2015 interview on the Poker Life Podcast, he said he was developing an accounting app for poker players. He also co-founded the organization Raising for Effective Giving, designed to help poker players, as well as fantasy-sports players and finance professionals, find the right charities to which to donate their winnings, according to archived webpages.
REG was focused on effective altruism, an approach to giving that suggests that inherently subjective qualities such as relative charitable need can be quantified. It’s still a niche approach, because many charitable experts say it can encourage an impersonal, utilitarian approach to complicated moral issues.
Mr. Kurganov and Liv Boeree at an event in San Francisco in 2016.
Photo:
Kelly Sullivan/Getty Images for The Ocean Gala
Mr. Kurganov’s social life, the fellow poker players say, revolved around his longtime partner, fellow professional poker player Liv Boeree. Ms. Boeree has long been friends with the recording artist Grimes, who was first romantically linked to Mr. Musk in 2018. Around the same time, Mr. Musk made Ms. Boeree one of the handful of people he follows on Twitter.
“She was elated” about the follow, according to Joe Stapleton, a poker commentator who spoke to her about it.
The two couples began spending time together. Messrs. Musk and Kurganov bonded over a shared love of Burning Man, the free-spirited desert festival that both regularly attend. Ms. Boeree, meanwhile, stayed close with Grimes; the two women posted photos together on social media. Ms. Boeree didn’t respond to requests for comment, and Grimes, whose legal name is Claire Boucher, couldn’t be reached.
The introduction to Mr. Musk came as Mr. Kurganov was soon to retire from professional poker with millions in personal winnings. Yet his poker accounting app had never gotten off the ground, and REG remained small-fry in terms of the amount of money it directed.
REG said on its website that it directed $3.1 million in charitable giving in 2019, the most recent year mentioned, which the organization said “reflects all donations that have been significantly influenced by us.” The amount couldn’t be independently verified. REG didn’t respond to requests for comment.
When the pandemic hit, Messrs. Kurganov and Musk became closer. Mr. Kurganov laid out a vision in which he might be able to help Mr. Musk combine his interest in science and his vast fortune, for the greater good.
Mr. Musk, known to be open to new ideas, was intrigued by the prospect of an approach to giving that no other major donor had yet tried, according to people familiar with the matter. He gave Mr. Kurganov a job vetting grant requests from his foundation.
When Mr. Musk moved to Texas, Mr. Kurganov and Ms. Boeree soon followed.
A launch facility under construction in Brownsville, Texas, in February for SpaceX, one of Mr. Musk’s companies.
Photo:
Mark Felix/Bloomberg News
‘Donation decisions’
By last August, two years after retiring from poker, Mr. Kurganov had an official email address at the Musk Foundation and was heavily involved in the charity. That month, he corresponded with Chris Carberry, CEO of the nonprofit Explore Mars Inc. The group was looking to raise $600,000 to spirit an Afghan girls robotics team out of the war-torn country.
Mr. Kurganov was skeptical about the cost. “Regarding the price breakdown, what I’m trying to find out is what the expenses will be specifically—I imagine there are additional costs to simply the flight costs, but am still surprised that the total cost scales linearly with the number of people,” he wrote in an email reviewed by The Wall Street Journal.
Mr. Carberry, who didn’t respond to requests for comment, was disappointed but not dissuaded. In another email, also reviewed by the Journal, he wrote to an associate “We have worked effectively with Igor in the recent past. Igor makes the day-to-day donation decisions.”
To Mr. Birchall, that was an untenable situation. He was legally head of the foundation, and as he saw it, Mr. Kurganov was a newcomer who suddenly had immense influence on what to do with Mr. Musk’s money, he told people.
Mr. Birchall also learned that a Federal Bureau of Investigation agent had begun making preliminary inquiries into Mr. Kurganov as part of his job to watch for foreign interference in U.S. companies, people familiar with the matter say. The FBI agent was concerned that a newcomer had so quickly been welcomed into Mr. Musk’s inner circle, the people say.
Mr. Kurganov hasn’t been accused of wrongdoing. An FBI spokesperson didn’t respond to a request for comment.
Mr. Birchall, alarmed that Mr. Musk could be drawn into a federal investigation, this spring again pressed his internal case against Mr. Kurganov, people familiar with the matter say. It was inappropriate, in Mr. Birchall’s view, for Mr. Kurganov to have a central role in the $5.7 billion in shares that Mr. Musk had promised to donate.
During this period, Mr. Birchall was a constant presence at Mr. Musk’s side as his boss pursued Twitter. He helped line up billions of dollars in financing and spoke to shareholders and investors on Mr. Musk’s behalf about the future of the social-networking service.
By spring, the Tesla CEO’s bid for Twitter required him to put up tens of billions of dollars in personal funding and was consuming much of his attention. Meanwhile, Tesla’s stock was dropping as the broader market pulled back, pinching Mr. Musk’s net worth.
Mr. Birchall in May asked Mr. Musk to remove Mr. Kurganov from his post at the foundation.
Mr. Musk agreed to let Mr. Kurganov go, the representative of the foundation says.
None of Mr. Musk’s money was ultimately spent on projects related to effective altruism, the representative says, and Mr. Kurganov’s Musk Foundation email was switched off roughly six weeks ago.
—Elisa Cho and Rebecca Elliott contributed to this article.
In April of 2017, the U.S. leader of the Society of Jesus stood before cameras at Georgetown University and apologized for the Jesuits’ sale of 272 slaves to three Louisiana plantations in 1838. “We have greatly sinned,” said the Rev. Timothy Kesicki.
Georgetown rechristened a campus dormitory once named for the long-ago school president who had helped arrange the sale. The former Mulledy Hall was now to be called Isaac Hawkins Hall, after the enslaved patriarch of the 272.
One of Mr. Hawkins’ fifth great-granddaughters felt anxious and skeptical as she participated in the ceremony. Mary Williams Wagner, a retired IT manager living in Arizona, represented a group of nearly 100 relatives pushing for monetary compensation from the Jesuits. Nobody on the podium mentioned the idea.
“We were just pawns,” she recalled recently. “They had a script and they wanted to present it to the media and we were just props to their show.”
The drive for racial reconciliation and reparations that has broken out at U.S. institutions in recent years was meant to settle long-standing tensions. It is often stoking new ones. Amid pledges and battles, pressure campaigns and apologies, fissures are opening on the issue that have inflamed emotions on all sides.
The rhetoric around reparations touches on high questions of morality and ethics, such as what, if anything, the descendants of enslavers owe to the descendants of the enslaved. But the process often boils down to practical negotiations. Factors such as money and ego come into play, along with thorny questions such as how to account for the modern consequences of long-ago systems and structures, and the most effective ways to redress past wrongs.
In the Jesuits’ case, the debate has cleaved the community along generational lines, with some older priests resisting any sort of reparations at all. Descendants of the enslaved, meanwhile, have fractured into feuding camps over the question of direct compensation.
The case has been closely watched. Georgetown belongs to a consortium of 50 schools including Harvard, the University of Virginia and Brown which have pledged to study and confront the role slave ownership played in their histories and the impact that legacy has today. No one sees an easy road ahead.
“The original sin of slavery has taken hundreds of years to address. Georgetown doesn’t expect to be able to ameliorate it in a short number of years,” said Georgetown spokeswoman Meghan Dubyak. “Our work is ongoing and it really is meant to be a long-standing effort at the university.”
Mary Williams Wagner, a descendant of Isaac Hawkins, at her home in San Tan Valley, Ariz.
Photo:
Cassidy Araiza for The Wall Street Journal
Reparations have been a periodic topic of debate since the waning days of the Civil War, when General William Tecumseh Sherman promised 40 acres and a mule to formerly enslaved families in a swath of confiscated Southern coastland. After
Abraham Lincoln
was assassinated, the proposal was rescinded.
Over the generations, calls for reparations have waxed and waned, with the term itself taking on a broad and elastic meaning. More than 150 years after the war ended, advocates today argue that reparations are still needed to address the nation’s persistent racial wealth gap. In 2019, the median white household had a net worth of $188,200, which was nearly eight times that of the typical Black household, $24,100, according to a Brookings Institution analysis.
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In recent years, the nationwide debate on race has given the effort new life. In Congress, a Democratic-backed House bill introduced more than three decades ago by Rep.
John Conyers
to create a commission and process for studying reparations now has the backing of 196 members. In 2019, Evanston, Ill., a liberal-leaning suburb of Chicago, implemented reparations for Black residents for past housing discrimination. In January, the city selected the first 16 recipients to receive grants of up to $25,000 for home down payments, mortgage payments or home repairs, according to the city. California also is actively studying the issue.
The Maryland Jesuits’ history of slavery was well documented. The Catholic order founded what was then Georgetown College in 1789. During an economic crisis in 1838, the order replenished the school’s finances through the sale of 272 slaves.
In 2015, amid student protests, Georgetown launched a committee for “Slavery, Memory, and Reconciliation,” which made recommendations to President
John DeGioia
about how the institution could acknowledge and address its past. The Jesuits and Georgetown acknowledged past wrong-doing. They had detailed books and records that enabled descendants and genealogists to connect the dots between people enslaved hundreds of years ago and people alive today.
When the effort was announced, it caught the eye of Richard Cellini, a Georgetown alumnus and Italian-American entrepreneur and activist attorney. He emailed a committee member, Georgetown Prof.
John Glavin,
and asked if any descendants from the 1838 sale had been identified and whether the Jesuits were considering reparations. Prof. Glavin wrote back: “The problem with making some sort of reparation to the descendants of the slaves sold south is that, as far as we can tell, all of them quickly succumbed to fever in the malodorous swamp world of Louisiana.”
That turned out to be wrong. Mr. Cellini began googling “Georgetown, slaves and Louisiana,” and found a story about those descendants that was written by a genealogist. Driven, he said, by a sense of moral outrage and his own Jesuit education to do the right thing, he created a group he called the Georgetown Memory Project. He invested $50,000 to search for the descendants of slaves who labored for Georgetown and the Jesuits. Within months, a genealogist he hired had located 100 descendants of the 272 slaves the school sold in 1838, and he became an advocate for financial reparations.
A university spokeswoman said Prof. Glavin’s email reflected his own personal opinion and not the institution’s.
Georgetown President John DeGioia consulted Kenneth Feinberg, the head of the U.S. government’s September 11 Victim Compensation Fund, for advice about reparations.
Photo:
joshua roberts/Reuters
One descendant of Isaac Hawkins turned out to be
Joseph Stewart,
who had recently retired from
Kellogg Corp.
, where his roles had included vice president of corporate affairs and chief ethics officer. He was also a trustee of the charitable W.K. Kellogg Foundation and chair of its board. After learning of his ancestry in August 2016, he joined with Mr. Cellini to create a new group, the GU272 Descendants’ Association.
It grew quickly, incorporating a range of descendants from struggling blue-collar workers to professionals and civil servants. A leadership team of about a dozen people emerged. Some still lived within an hour’s drive from the tiny Louisiana town of Maringouin where many of their enslaved ancestors had been sent.
Early board meetings were optimistic, even heady. As they connected, descendants weighed the possibility of devising a blueprint for other institutions struggling with the legacy of slavery.
Mr. Stewart was a driving force. Raised in Maringouin, he had attended segregated schools, where he was a standout athlete and a Catholic altar boy. He studied nutrition at Southern University and worked for several public school systems and colleges managing food-service programs before joining Kellogg.
The board discussed how reparations could be paid, including the maintenance of the cemetery in Louisiana where many former slaves and their descendants are buried and scholarships for the children of descendants. Mr. Stewart spoke of “economic security” for descendants.
Joseph Stewart holds a cross decorated with cotton he picked in Louisiana at the St. Bernadette Catholic Church in Port St. Lucie, Fla., where he owns a home.
Photo:
Vanessa Charlot for The Wall Street Journal
The association envisioned a $1 billion fund capable of dispersing $50 million a year. That would include distributions of $50,000 a year to 150 families in perpetuity, according to Mr. Cellini. Other suggestions emerged from the approximately 5,000 living descendants; one group proposed a one-time payment of $2.5 million per person, he said.
Members made use of the online slavery archives at Georgetown to explore the school’s founding and later prosperity. They learned that Jesuit priests arrived in North America in 1634. By 1700, they had purchased slaves and established tobacco plantations on more than 12,000 acres along the Potomac River in southern Maryland. Over the next 164 years the Jesuits enslaved about 1,100 people, according to Sharon Leon, an associate professor of history at Michigan State University.
Over that period, Jesuits started dozens of other Catholic colleges and high schools, using funds from slavery as the seed capital. Some details are still coming to light. Asked last summer if it was aware that profits from slavery capitalized its founding, Loyola University in Baltimore said it wasn’t but found it “deeply troubling.” In December, the school launched a task force to investigate its past ties to slavery.
GU272 organizers tried to broach the subject of reparations for the unpaid labor of their ancestors with the modern-day Maryland Jesuits, but complained they were brushed off. Shortly after the 2017 apology at Georgetown, they sent a letter to the Jesuits’ top leader in Rome—effectively going over the heads of the Americans. They complained that “for more than a year we have literally been ignored,” and requested Rome launch an investigation.
By the time the American Jesuits arranged a meeting with a handful of descendants’ delegates a few weeks later, tensions were running high. In an ornate conference room with a 20-foot ceiling and portraits of dozens of cardinals lining the walls, descendants sat on one side of a long table, Jesuits on the other.
Father Robert Hussey, then the head of the Maryland Jesuits with a Phd in economics, left the descendants with the impression that he was dead-set against reparations. Just what he said is in dispute. According to three people in the room, Father Hussey said nobody on his side of the table had ever owned or sold anyone, and nobody on the descendants’ side was ever bought or sold, and therefore they owed each other nothing. A spokesman for the Jesuits said Father Hussey denies making that statement but declined to specify what he did say.
Graduation day at Georgetown University last May.
Photo:
Gabriella Demczuk for The Wall Street Journal
One descendant, Cheryllyn Branche, a retired principal of a Catholic high school in New Orleans, said afterward: “It took all the strength I could possibly muster not to get up, reach across the table, and punch Father Hussey in the nose.”
Soon after, Father Kesicki, then the leader of the Society of Jesus for Canada and the U.S., took over the Jesuit side of negotiations. His prior experience included apologies to victims of clerical sexual abuse. One of his first acts was to send a conciliatory letter to an attorney representing descendants, writing of Father Hussey’s purported statement, “I do not believe these words.”
Other Jesuits were skeptical, he said. Some expressed surprise that they should be expected to do anything, he said. Pushback especially came from older priests who had dedicated their lives to educating young people—particularly poor and Black students. “Wasn’t that reparations enough?” he said they asked.
Father Kesicki began to meet and talk with a number of people about what the Jesuits should do. One of the emails he responded to was from Mr. Stewart.
Eventually Father Kesicki flew out to Michigan to meet with Mr. Stewart in his home in Battle Creek. There the debate took another turn: Instead of demanding tens of millions of dollars in cash payments, Mr. Stewart now spoke of a “moral path” that would lead the country toward racial reconciliation while also helping to set aside money for scholarships for future generations of descendants.
“What we are trying to do is much bigger than cash in your pocket, which you don’t know what happened to after you spent it,” he said in a later interview.
Rev. Timothy Kesicki addresses a ‘Liturgy of Remembrance, Contrition and Hope’ at Georgetown University on April 18, 2017.
Photo:
Allison Shelley/For The Washington Post/Getty Images
Mr. Stewart said his perspective was in part shaped by the roughly 20 trips he took to apartheid-era South Africa in the 1980s and 1990s, where Kellogg had tasked him with working with Black workers at the company’s plants. He said he concluded that the path toward equality lay in self-empowerment through education, community investment and efforts to advance human rights and social justice, not necessarily through direct payments.
That approach resonated with Father Kesicki, who besides opposition from older Jesuits was calculating the cost of reparations, especially in the wake of the sexual abuse settlements which cost the church about $3 billion.
“We’re mindful of that,” he said. “We’ve had a diocese, even a Jesuit province, go bankrupt.” It also offered a path that avoided both courts and wholesale individual payments, and left the Jesuits in charge of determining how much money to spend and how to spend it.
“The beauty, again, of the moral response was, you shouldn’t focus on ‘What’s the out-of-pocket?’ ” Father Kesicki said. “It’s ‘How much good can we do and how much do we want to commit to it?’ ”
At Georgetown, Mr. DeGioia was reaching a similar conclusion as he spoke to Kenneth Feinberg, the one-time administrator of the U.S. government’s September 11 Victim Compensation Fund and an adjunct professor at the law school.
“He wanted to know how to best provide some type of remedy here that will preserve the integrity of the institution and the reputation of a great university,” Mr. Feinberg said.
Cheryllyn Branche, a retired Catholic-school principal from New Orleans, is a leader of the descendants association.
Photo:
L. Kasimu Harris for The Wall Street Journal
In a 90-minute conversation, Mr. Feinberg cautioned Mr. DeGioia that direct reparations would inevitably create discord. Some people who thought they should get them would necessarily be denied. Broader programs that addressed societal racism would avoid those land mines, he said.
“I warned him about the problems that would arise if Georgetown began providing individual checks to eligible claimants,” he said. “Who is eligible? What proof? How much money? What about others deemed ineligible?” I did not counsel in favor or against, but I told him in my 9/11 experience there were a fair number of dissatisfied, discontented claimants. It became very divisive.”
By 2018 the descendants had organized themselves into three distinct groups. All championed different types of reparations. To get them to unify their approach, Mr. Stewart arranged for the Kellogg Foundation to set up a meeting.
Ms. Williams Wagner was there representing one group with more than 100 descendants. Born a Catholic and educated in Illinois Catholic schools, she said she felt betrayed by the church when she learned of the sale of her ancestors to plantations in Louisiana—known for some of the most depraved conditions for slaves in America.
“It was so ingrained in us about honoring and respecting the church,” she said. “And then you find out they had not respected us. They had abused us and had betrayed us.”
Mr. Stewart steered the meeting toward the creation of a foundation and then appointed her as a member of the leadership team, she said. She had assembled a squad of eight attorneys who were experts in reparations and slavery. All had agreed to work pro bono.
But Mr. Stewart successfully lobbied to keep lawyers out of the negotiations, Ms. Williams Wagner said. She said she wasn’t invited to future meetings. Mr. Stewart, intent on presenting a unified voice from descendants, emerged as the primary negotiator with the Jesuits.
She didn’t hear from Mr. Stewart again for more than two years, she said. In 2021, he arranged a Zoom call with about 100 descendants to explain the deal that he and his allies had reached with the Jesuits.
Kenneth Royal examines reproductions of documents from the Jesuits’ sales of the slaves.
Photo:
L. Kasimu Harris for The Wall Street Journal
Under the deal, the Jesuits agreed to raise $100 million for a new foundation dedicated to fighting racism, hiring an outside company to raise it. The order said it would aim to become “the moral and intellectual leader in the pursuit of truth, racial healing and transformation in America.” It set up a Descendants Truth and Reconciliation Foundation that would raise up to $1 billion. Half the money is earmarked for programs to create “truth, racial healing, transformation and reconciliation,” while a fourth will help pay educational expenses for descendants and 15 percent will support elderly and infirm descendants. Ten percent is to cover overhead.
Georgetown also agreed to donate $1 million to the foundation and to establish a $400,000 charitable fund to pay for health-care costs and education programs in Maringouin. It gave descendants legacy status, providing their children an inside track for admissions.
In the call, Mr. Stewart praised the deal as a turning point in race relations in America.
“We have broken through between slave owners and enslaved,” he said, a recording of the meeting shows. “We have jumped all the way from the bitterness from no 40 acres and a mule to a new partnership that starts to build toward a billion dollars.”
Descendants were kept on mute as he spoke. But in the chat function, participants began to lash out.
“How many descendants do you actually represent?” one typed. “Let us Speak!” typed a second. “All of you are doing the same thing that the Jesuits did to our ancestors!!”
No vote on the deal was taken. As the news sunk in, Ms. Williams Wagner fell out with her brother Earl, who sided with Mr. Stewart and called him a visionary leader. By her estimate, 80% to 90% of descendants opposed the deal, with working-class rural descendants from the South more likely to feel their voices were ignored.
Joseph Stewart holds a photo that includes from left to right: Earl Williams Sr., Cheryllyn Branche, the Rev. Arturo Sosa, SJ Superior General of the Society of Jesus; Mr. Stewart, and Father Timothy Kesicki, SJ, then-president of the Jesuits Conference of the United States and Canada.
Photo:
Vanessa Charlot for The Wall Street Journal
Ms. Branche, who had been involved with the contentious meeting with Father Hussey, agreed that Mr. Stewart’s deal had the best chances of making a long-term impact. She joined the foundation’s new board. “If I get $50,000 right now, maybe I can do something with that, but what does that mean for those who come after me in terms of what it does in their lives?” she said. “If we build this foundation, we make a difference for generations to come.”
Others fought back. One group drew up a petition which has so far been signed by 189 people. It reads in part: “We, the Descendants of the Maryland Mission Slaves, did not participate in the secret talks that led to the creation of the recently-announced ‘Descendants Truth & Reconciliation Foundation,’ nor was an election of descendant representatives ever conducted.”
Another descendant, Davita Smith-Robinson, said she first heard about the possibility of reparations in 2017. She had multiple ancestors enslaved by the Jesuits before they were sold to plantations in Louisiana, she said.
At least four generations of her ancestors had earned no income and owned no property during slavery, she said. That set the stage for financial struggles that continue to this day, she said. Ms. Smith-Robinson has lived in an EconoLodge in Foley, Ala., since Hurricane Ida decimated her home in Louisiana last year. She said she shares a single room with her son, mother, aunt and disabled brother. In exchange for rent and a small salary, she works as a maid and breakfast attendant.
Reading online that there would be no cash reparations for descendants, Ms. Smith-Robinson said she “felt sick to my stomach. I was like, ‘We’re being tricked again.’”
Mr. Stewart’s co-founder, Mr. Cellini, quit the GU272. He said Mr. Stewart had kept too much secret, and that he disagrees with Mr. Stewart’s decision not to press for direct reparations. Another board member, Sandra Green Thomas, also quit after clashing with Mr. Stewart. She called the new foundation’s stated ambition to dismantle racism “an impossible, lofty and ironic goal.”
Descendant Sandra Green Thomas stands at one of the sites where Jesuit slaves from Maryland disembarked in the New Orleans area.
Photo:
L. Kasimu Harris for The Wall Street Journal
“We all know that racism is not a disease of the African-American community, it’s a disease of the white community,” she said. “So what they want to do is raise money to cure white people of their racism, but use us as the fundraising tool, and I don’t think that that’s an appropriate use of those funds. I think it would be better used closing the racial wealth gap experienced by descendants.”
Mr. Stewart defended how he went about negotiating a deal and said the blowback is uncomfortable.
“It’s painful, but there’s not been time in my life living as a boy growing up in Maringuoin and looking at slavery that it hasn’t been painful in one way or the other,” he said. “It is always painful, but it’s no reason for us to turn around and get caught up in the fighting among ourselves.”
In Maryland, the Jesuits have been selling off parcels of one-time plantation land. According to a spokeswoman, proceeds from the sales have, among other things, supported a retirement facility and health-care for aged and infirm Jesuits. Another former plantation that is going on the market will fund a contribution to the descendants’ foundation, she said.
Meanwhile, about 400 descendants have hired a Maryland lawyer to continue to pursue direct reparations.
A view of Georgetown University from the Potomac River.
Photo:
Gabriella Demczuk for The Wall Street Journal
Write to Lee Hawkins at lee.hawkins@wsj.com and Douglas Belkin at doug.belkin@wsj.com
Lettuce Entertain You Enterprises Inc., a Chicago-based restaurant group, has added a 3% “processing fee” to checks at many of its restaurants.
Harley-Davidson Inc.
added a charge last year to its motorcycles to cover rising material costs.
Peloton Interactive Inc.
in January began charging $250 for delivery and setup of some of its indoor bikes, a service that was previously included free.
Companies are finding all kinds of ways to make consumers pay for rising costs. Often that is not reflected in the posted price.
The Labor Department’s consumer-price index, which measures how much consumers pay for goods and services, rose to 7.5% in January compared with the same month a year earlier—the biggest rise since February 1982.
The index accounts for some changes that raise consumers’ costs, such as smaller package sizes and some fees attached to hotel packages or car purchases. But it can miss other ways in which dollars don’t stretch as far– a hotel that changes sheets only between guests, a theme park that cancels its free airport shuttle, or an auto dealer that requires customers to buy a protective paint coating with a car.
With supply-chain challenges, pent-up demand and a tight labor market leading to inflation, businesses are looking for subtle ways to pass along rising costs. Particularly in the food business, companies have long used what the industry calls weight-outs, or shrinking package contents instead of raising prices, during economic distress periods such as the 2007-2009 recession.
“There is a lot more to come,” said
Doug Baker,
head of industry relations for FMI, a food-industry trade organization. “Everything is on the table in an effort to deal with those cost increases, and at the same time, not make it too difficult for consumers to shop.”
A global computer-chip shortage has reduced vehicle inventories just as Americans were buying cars in record numbers, pushing up prices for new vehicles. In many cases, they are selling for thousands of dollars above manufacturers’ suggested retail prices, said Tom McParland, founder of Automatch Consulting, which helps consumers find vehicles.
“They’re calling it a market adjustment fee,” said Mr. McParland. “That’s the new thing they are doing: hiding markups with substantially overpriced accessories like mud flaps and cargo protectors.”
Ford Motor Co.
and
General Motors Co.
have said they are cracking down on dealerships using that tactic.
Harley fees
Base prices on Harley-Davidson’s motorcycles haven’t gone up much in recent years, the Milwaukee company said. But to cover rising costs, it added a mandatory materials surcharge last year, which dealers are passing on to customers. Dealers said the fee, which varies based on the model, is easier for the company to adjust than base motorcycle prices when costs decrease.
Dealers said the fee is $850 to $1,500 a bike. Harley this week told analysts that the surcharges helped boost revenue during the fourth quarter last year.
Harley-Davidson added a fee to its motorcycles to cover rising material costs; a dealership in Louisville, Ky., this week.
Photo:
Luke Sharrett/Bloomberg News
Some restaurants are adding new fees in response to escalating costs for food and packaging, and for wage increases executives say are needed to keep cooks and servers.
Brinker International Inc.’s
Maggiano’s Little Italy in October 2020 started charging $5 for a second, to-go pasta dish offered as part of a two-entree deal. For about a decade before the pandemic, the chain had offered a second classic pasta dish free.
“We’ve had no push back,” Maggiano’s president Steve Provost told investors last October. A Brinker spokeswoman said the price change allowed the company to invest more in the value of its carry-out offerings.
When Michael Pfeifer, a marketing professional, picked up the check for his meal at
RPM
Seafood in Chicago this week, he was surprised to find a 3% Covid surcharge added to the bill. “What’s next?” he said. “A dishware rental fee?”
The fee, added in the spring of 2020, offsets the cost of pandemic-related government regulations and mandates, said RJ Melman, president of Lettuce Entertain You, which owns RPM. “These fees can be removed and refunded for any guest that requests,” he said, “no questions asked.”
Peloton, according to its website, is adding the new $250 fees on bikes and a $350 delivery-and-setup fee for some of its treadmills. It cut the price of its original stationary bike in August to $1,495 from $1,895. With the added fees, the total price is now back up to about $1,745, as the company dealt with slowing demand and its own rising costs.
Peloton declined to comment on the fees. In an earnings call on Tuesday, Peloton CFO
Jill Woodworth
said that the fees could cut into consumer demand but that they were part of a “critical learning” process as the company restructures and cuts costs for the post-pandemic era.
Walt Disney Co.
’s Disney World in Orlando stopped offering free airport shuttles—known as the Magical Express—this year, leaving Disney guests to pay for their own transportation. The parks added several fees last year while keeping the base ticket price at $109. A fast-pass system that let park guests make reservations for rides, which used to be free, was discontinued and replaced by a new system that costs $15. And some popular rides, like Star Wars: Rise of the Resistance and Space Mountain, now cost between $7 and $15, on top of the park admission ticket.
Disney offers “a wide range of options to match different budgets and interests,” said Disney spokesman Avery Maehrer.
At its theme-park restaurants, Disney is trying to avoid across-the-board price increases, Disney CFO
Christine McCarthy
told analysts in November. “We can substitute products. We can cut portion size, which is probably good for some people’s waistlines,” she said. “But we aren’t going to go just straight across and increase prices.”
Consumer backlash
Consumer pressure has led some companies to back off added fees, including
Frontier Group Holdings Inc.
The airline, which uses a la carte pricing that lets frugal travelers choose to forgo amenities, in May 2021 added a $1.59-per-flight-segment Covid-related fee. After consumer backlash, Frontier in June stopped breaking it out as a component of its base fare but it didn’t stop charging it. Frontier didn’t respond to requests for comment.
In a press release it said: “The charge, which was included in the airline’s total promoted fare versus an add-on fee, was meant to provide transparency and delineate what portion of the fare was going toward COVID-related business recovery.”
Some of
Marriott International Inc.’s
Autograph Collection hotels had been charging a “sustainability fee” of about $5 a night. The company that manages the properties, Innkeeper Hospitality Services LLC, says it covered things like more-efficient HVAC systems.
They stopped charging the fee several weeks ago, “because we understand that while we believe in environmentally responsible stewardship, not everyone cares about our planet’s health,” IHS CEO Amrit Gill said. He said Marriott had asked the company to stop charging the fee. Marriott declined to comment.
The Biden administration has begun to look into some forms of hidden fees, which it calls “junk fees.” The administration says the amount being charged is not always tied to the costs faced by the company providing the goods or services. The Consumer Financial Protection Bureau is seeking public input on financial services, such as bank overdraft fees, while the Transportation Department is planning actions on airline baggage fees.
John Fiorello, a father of four in Torrington, Conn., was dismayed to see prices rising in his local grocery-store aisles but was initially pleased to see that the blocks of cheese he usually buys hadn’t gone up much in price—perhaps 10 cents, he said. Then he noticed that the package had shrunk, to 12 ounces from 16.
“I picked up the block and said, ‘this is definitely smaller,’ ” Mr. Fiorello said. “It just adds an extra layer of stress.”
Shrinkflation, as economists call it, tends to be easier for companies to pass on to consumers. Despite labels that show price by weight, research shows that most customers look at only the overall price.
The food industry has long shrunk package contents instead of raising prices during economic-distress periods; a Salt Lake City grocery store in October.
Photo:
George Frey/Bloomberg News
“There are sizes that people remember, like a half gallon of ice cream,” said John Gourville, a Harvard Business School professor. “Once you break from iconic sizes, it’s pretty easy to move from 13 ounces to 12 ounces.”
Over the years, tuna cans have come to contain less tuna and toilet-paper rolls less tissue, said
Burt Flickinger III,
managing director of Strategic Resource Group, a consulting firm that works with consumer-product companies. “Historically,” he said, “it’s called a ‘cheater pack.’ ”
Companies have become more sophisticated and use multiple tactics to protect their profitability, he said. They can pull back on discounts, stop making low-selling products and create new varieties that sell for higher prices
Downsized Oreos
Oreo-maker Mondelez International Inc. raised prices by an average of 6% to 7% in the U.S. last month, but it wasn’t enough to make up for its higher costs, the company said. So Mondelez has been introducing new sizes and flavors it says are more profitable.
Oreo’s new 110th Birthday chocolate confetti-cake cookies cost about 10 cents more than regular Double Stuf Oreos at several grocery stores, even though the new flavor comes in a slightly smaller package. At a
Target Corp.
store in Chicago, the limited-edition birthday Oreos, which came out January, cost $3.79 for a 24-cookie package and the Double Stuf ones cost $3.69 for a 30-cookie package.
Retailers set the final prices. Mondelez said it charges the same for the two products, and its limited edition flavors are typically different-sized packages than regular ones. A Target spokesperson said: “We’re priced competitively throughout the markets we do business.”
Economists and analysts at the Labor Department’s Bureau of Labor Statistics monitor prices of thousands of goods and services. They can account for shrinkflation, because they track the cost of certain products by weight and quantity—so a cereal box that costs the same amount but now has 30% less volume would be registered as a price increase.
They said their efforts can’t identify every fee or dropped amenity, such as a hotel room rate that remains the same but that no longer includes fresh towels or a hot breakfast. “We do not capture the decrease in service quality associated with cleaning a room every two days rather than one,” said Jonathan Church, a BLS economist.
Disney World in Florida added several fees last year while keeping the base ticket price at $109; the Magic Kingdom last summer.
Photo:
Joe Burbank/Orlando Sentinel/Associated Press
Jeremiah Mayfield and Carlos Larrea stayed at Alohilani Resort in Honolulu in December and opted for a $75 a-night upgrade to “club level” for free food and drinks. But they said they could rarely use it because the resort didn’t have enough staff to replenish the club-level amenities. After complaining, they were offered free dinner.
Alohilani General Manager Matthew Grauso said that quality and efficient guest service are top priorities and that he tries to remedy any shortfalls immediately, adding, “The pandemic has presented a unique set of challenges within the hospitality industry.”
“We gave them hell for it,” Mr. Mayfield said. “We paid $800 a night. We never expected it would be so scarce in terms of service and amenities.”
Many hotel chains are replacing complimentary hot breakfast buffets with a snack bag. Some fitness centers and pools remain closed, and housekeeping doesn’t refresh rooms daily. Some guests feel like they are getting less for their money.
InterContinental Hotels Group
PLC, which owns Holiday Inn, said it has been working with hotels to return amenities and make it right if guests aren’t satisfied. “Hotel teams have been overcoming many challenges including supply chain and labor shortages, changing health guidance and regulatory requirements,” an IHG spokesperson said.
On a recent trip to St. Louis, Meg Hinkley booked a Holiday Inn because it said online that it offered room service. When she arrived, the restaurant was closed, so there was no room service. She said she would have stayed at a lower-priced hotel if she had known. “I was paying for that convenience.”
—Heather Haddon and Bob Tita contributed to this article.
Write to Annie Gasparro at annie.gasparro@wsj.com and Gabriel T. Rubin at gabriel.rubin@wsj.com
