Tags: Sorrell | America | brand | damage

WPP CEO: 'Brand America' Doing Poorly

Friday, 25 Oct 2013 08:32 AM

By Michael Kling

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"Brand America" has been damaged by spy scandals and dysfunction in Washington, says Martin Sorrell, CEO of U.K.-based WPP, one of the world's largest advertising firms.

"There has been some damage," Sorrell told CNBC, adding that the government paralysis and political extremities "have caused significant damage to Brand America abroad."

Edward Snowden, a former National Security Agency contractor, is releasing a continuous stream of revelations about U.S. spying activities, creating scandals and angering U.S. allies the country has spied on. Most recently, Germany was upset about allegations that the United States monitored the mobile phone of Chancellor Angela Merkel.

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And then there's the political animosity and extremism that prompted a 16-day government shutdown, a debt ceiling battle and a brush with default.

In another hit to the nation's reputation, President Obama cancelled his trip to the Asia-Pacific Economic Cooperation summit, missing important meetings with foreign leaders, to remain in Washington during the government shutdown.

"And of course Russia and President Putin have gained a considerable amount of political capital around the world because of the efforts to resolve Syria," Sorrell noted, referring to the Putin-brokered agreement to stop a U.S. attack on Syria.

Standard & Poor's estimates that the shutdown sucked out about $24 billion from the economy, trimming fourth-quarter GDP growth by 0.6 a percentage point.

Sorrell agrees the government deadlock was bad for business. His own company might see little impact, but unfortunately a political crisis could return early next year, he stated.

The political parties in Congress agreed to fund the government only until Jan. 15 and extend the government's borrowing limit until Feb. 7, although the Treasury Department could take what it calls "extraordinary measures" beyond that date for a short time.

"We could expect quite reasonably more political turbulence . . . that is the most serious issue," Sorrell explained. His customers, he said, would probably remain cautious, which could hurt spending and hiring.

Some experts say the decline of "Brand America" will encourage other nations to invest their assets in other countries and to rely less on the U.S. dollar.

"The world cannot depend on America anymore," Francis Lun, CEO of GEO Securities Limited, told the Web news service RT

The Chinese "are setting up currency swaps with other countries, they’re looking for other assets in which they can invest, they want to get rid of their dollars. They would prefer to move to the euro."

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