Britain’s racial reckoning

The EU’s Polish pickle

India tackles cronyism

I, IKEAbot APRIL 21ST–27TH 2018

What’s become of

the Republican Party?

Contents The Economist April 21st 2018 3

6 The world this week Asia 31 North Korea Leaders The summits before the summit 9 American politics What has become of the 32 Politics in Japan Republican Party? Revenge of the factions 10 Poland and the EU 33 Quotas in Bangladesh A Polish pickle Making merit 10 The postal service 33 China and the Pacific Deliverance The Great Wharf Poland and the EU Europe’s 12 Indian business 34 Pakistan’s press illiberal democracies create Humbling of the tycoons Jamming Geo dilemmas. But it is time to cut 14 Artificial intelligence 36 Banyan Asia’s appetite for wildlife subsidies to flagrant On the cover The Kamprad test rule-breakers: leader, page10. The Republican Party is The hollowing out of the rule organised around loyalty to Letters China of law is doing lasting damage one man—Donald Trump. to Poland, page 43. Emmanuel 18 On Northern Ireland, 37 Customised news That is dangerous: leader, Macron’s ambitious plans for Syria, Brazil, Hungary, Censors try to catch up page 9. The president’s Europe look like getting stuck: 38 Cars pub quizzes Charlemagne, page 47 virtually complete takeover The licence-plate dream of the Republican Party was not a one-off, and it will not Briefing easily be undone, page19.By 19 America’s Republicans Middle East and Africa trying to protect the FBI, How the elephant got 39 Politics in Lebanon James Comey damaged it: its Trump Seats for sects Lexington, page 27 40 The war in Syria United States Assad’s next move The Economist online 23 Refugees 40 Iran’s economy Rial v reality Daily analysis and opinion to Yearning to be free? 41 Africa and climate change supplement the print edition, plus 24 Sean Hannity A burning issue audio and video, and a daily chart Fox and friends Economist.com 24 Juries 42 Social media in Africa Tweet like a jailbird Race in Britain Enoch Powell’s E-mail: newsletters and Tipping the scales predictions were wrong. But mobile edition 25 Property prices 50 years on, his poisonous Economist.com/email The burbs are back Europe speech continues to Print edition: available online by 26 Despondent farmers 43 Poland under PiS reverberate, page 48. The 7pm London time each Thursday A pig’s ear of a policy Change of state shameful treatment of Economist.com/printedition 27 Lexington 45 Armenia’s democracy Caribbean Britons worries Audio edition: available online James Comey’s book Meet the new boss other migrants, too, page 49 to download each Friday 46 Russia and Telegram Economist.com/audioedition The Americas Catch me if you can 28 Canadian politics 46 Spanish ham A different populism More equal than others 29 Borders 47 Charlemagne Half of Belize, please Macron in the mire Volume 427 Number 9088 29 Colombia’s peace process Published since September1843 A long final chapter to take part in "a severe contest between intelligence, which presses forward, and 30 Bello an unworthy, timid ignorance obstructing Trump and Latin values our progress." Editorial offices in London and also: Cronyism in India It is under Beijing, Berlin, Brussels, Cairo, Chicago, Madrid, Mexico City, Moscow, Mumbai, Nairobi, New Delhi, attack. Long may that last: New York, Paris, San Francisco, São Paulo, Seoul, leader, page 12. A new Shanghai, Singapore, Tokyo, Washington DC bankruptcy code is upending the Indian corporate landscape, page 54

1 Contents continues overleaf 4 Contents The Economist April 21st 2018

Britain 64 Financial markets Jitterbugs 48 Race and migration Fifty years down-river 65 Currency wars Tweeting the dollar down 49 The Windrush scandal Turning the boat around 65 The Hong Kong dollar peg Reserve power 49 Voting on Brexit Enough already? 66 Free exchange Business cycles 50 Russian propaganda Anglichanka strikes again Open Future: This week, 51 Bagehot Science and technology The Economist launches Open Mail shot America’s post office The pacifist illusion 67 Palaeontology Future, a global conversation should be privatised: leader, Tracking down the truth on the role of markets, tech- page10. Amazon is not the nology and freedom in the 21st International 68 Greenery only threat to universal postal Auf Wiedersehen, PET century. To find out more, visit services, page 59 52 Integrating refugees (1) economist.com/openfuture Making them welcome 70 Human evolution Born to dive 53 Integrating refugees (2) From asylum-seeker to 70 Astronomy Subscription service taxpayer Hello, neighbours For our latest subscription offers, visit Economist.com/offers 72 Artificial intelligence For subscription service, please contact by Some assembly needed telephone, fax, web or mail at the details Business provided below: 72 Sewage 54 Bankruptcy in India North America A better bog roll The Economist Subscription Center Exit, pursued by a tiger P.O. Box 46978, St. Louis, MO 63146-6978 55 WPP Telephone: +1 800 456 6086 Books and arts Facsimile: +1 866 856 8075 Ads and subtracting E-mail: [email protected] 73 Suffragism, 100 years on 56 Chinese telecoms Latin America & Mexico Not so phoney war Persuasion and the The Economist Subscription Center China’s economy After a good broken pane P.O. Box 46979, St. Louis, MO 63146-6979 56 Heineken in Congo Telephone: +1 636 449 5702 run of growth, China braces for Facsimile: +1 636 449 5703 Refreshing the parts... 74 Motherhood and writing bumps, page 61. By tightening Medea’s shadow E-mail: [email protected] censorship, the Communist 57 Entrepreneurship Subscription for 1 year (51 issues) 75 Apocalyptic fiction Party is taking a risk, page 37 America v China United States US $158.25 (plus tax) Planet of the apes 58 Airlines in Europe Canada CA $158.25 (plus tax) Shooting competitors 75 Rethinking death Latin America US $289 (plus tax) The only end of age 58 ESPN starts streaming A Netflix for sports nerds 76 Contemporary art in Italy The new Medicis Principal commercial offices: 59 Post offices The Adelphi Building, 1-11John Adam Street, London WC2N 6HT Going postal Tel: +44 (0) 20 7830 7000 80 Economic and financial 60 Schumpeter Rue de l’Athénée 32 Dismantling Deutsche indicators 1206 Geneva, Switzerland Statistics on 42 Tel: +4122 566 2470 economies, plus a closer 750 3rd Avenue, 5th Floor, New York, NY 10017 Finance and economics look at government debt Tel: +1212 5410500 61 China’s economy 1301Cityplaza Four, Life after digging 12 Taikoo Wan Road, Taikoo Shing, Hong Kong Robots and IKEA Flat-pack Obituary Tel: +852 2585 3888 furniture and the limits of 62 Buttonwood 82 Milos Forman artificial intelligence: leader, Other commercial offices: Christie, Cats and Rebel yells Chicago, Dubai, Frankfurt, Los Angeles, page14. Robots can now put copious chaps Paris, San Francisco and Singapore IKEA furniture together, 63 American banks page 72 Spring in their step 63 “Coco” bonds Lost in conversion

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Successfully Bridging the Gap Between Strategy Design and Delivery 6 The world this week The Economist April 21st 2018

young crown prince, is trying Sinisterra Front has refused to were meant to send a message Politics to modernise the conservative demobilise since a peace deal to pro-independence poli- Muslim kingdom. with the FARC guerrillas was ticians in Taiwan. signed by the Colombian Seeking another mandate government in 2016. This week Limited duties Turkey’s president, Recep the group kidnapped two The National Guard Bureau, Tayyip Erdogan, announced more people. which oversees America’s that parliamentary and presi- armed-force reserves, said that dential elections will be held 965 guardsmen have been in June, 17 months ahead of deployed to the Mexican schedule. He said the early border, considerably fewer polls were needed because of than the up to 4,000 that unrest in Syria, and in order to Donald Trump wants to patrol help move the country to an the area. The troops are not executive presidential system, involved in detaining illegal a shift approved in a referen- migrants. The barrage ofmissiles fired by dum last year which will give America, Britain and France at Mr Erdogan even more power. Puerto Rico endured another facilitiesinside Syria “signifi- islandwide blackout, this time cantly crippled” the ability of German public-sector work- because ofan industrial acci- the regime ofBashar al-Assad ers won a pay rise ofmore A judge in Trinidad and dent. The beleaguered electric- to produce chemical weapons, than 3% foreach ofthe next Tobago ruled that “buggery ity company had only just the Pentagon claimed. No two years. It is the largest laws”, which prohibit gay sex, restored power to almost all casualties were reported as a increase in government sala- are unconstitutional. A final Puerto Rico’s residents, seven result ofthe raid, which was a ries in years, and comes after decision about striking down months after Hurricane Maria response to the regime’s sus- metalworkers received a pay the law is set forJuly. tore a trail ofdestruction pected use ofchlorine and bump of4.3% in February. through the territory. sarin on civilians in the town Diplomatic offensive ofDouma, killing dozens of The European Commission Donald Trump confirmed that Mr Trump pardoned Scooter people. A security team doing recommended that Albania Mike Pompeo, the director of Libby, DickCheney’s former reconnaissance for UN and Macedonia be allowed to the CIA (who has been nomi- chiefofstaff, who was convict- inspectors was fired upon start talks on joining the EU. nated to be secretary ofstate) ed in 2007 ofperjury. Akey when visiting the town. Their western neighbours in met Kim Jong Un in North witness against him had re- the Balkans, Serbia and Mon- Korea recently for preparatory canted her testimony, and The White House said that tenegro, are already in negotia- talks about a summit between conservatives had long argued Donald Trump was not consid- tions. They would be the first the American president and that the conviction was a ering a new round of new countries to enter acces- the North Korean dictator. Mr miscarriage ofjustice. The man sanctions against Russia. That sion talks in five years. Trump said Mr Pompeo’s visit at the Justice Department who contradicted Nikki Haley, had gone well. Moon Jae-in, had ordered the probe into Mr America’s ambassador to the Italy’s president asked South Korea’s president, is Libby was one James Comey. UN, who had announced that Elisabetta Casellati, a member expected to meet Mr Kim next new penalties would be im- ofthe Forza Italia party found- week. Officials have been in posed on Russian firms help- ed by Silvio Berlusconi, a discussions about negotiating ing Syria with chemical weap- formerprime minister, to try to a formal end to the Korean ons. The White House said that broker a coalition deal in- war, forwhich no peace treaty Mr Trump stepped backfrom cluding the left-leaning popu- has been signed, even though punishing Russia furtherbe- list Five Star Movement and hostilities ended 65 years ago. cause he wants to maintain right-wing Northern League good relations, and that Ms parties. Italy has been without India’s finance minister, Arun Haley had experienced a government since an election Jaitley, assured markets that “momentary confusion”. “I on March 4th. the country was not running don’t get confused”, respond- out ofmoney, after cash ma- ed Ms Haley. Fidel’s younger brother chines in some parts ofthe Raúl Castro prepared to step country ran out. The amount Now sacked as head ofthe FBI Israel celebrated its 70th down as president ofCuba, ofcash in circulation has and with a bookto promote, anniversary, according to the ending nearly six decades of returned to normal levels since Mr Comey pilloried Mr Trump Hebrew calendar, with an rule by the Castro family. His the government abruptly in a TV interview, saying he elaborate ceremony in Jerusa- successor is Miguel Díaz-Ca- voided most banknotes in was “morally unfit” to be lem, during which Binyamin nel, though Mr Castro will 2016, but there has been a spike president. Mr Comey also Netanyahu, the prime remain secretary ofthe Com- in demand forcash in the past revealed that Mr Trump never minister, called the country a munist Party until 2021. few months. laughs. There wasn’t much “rising world power”. humour in Mr Trump’sTwitter Two Ecuadorean journalists China conducted live-fire response; he described Mr A screening ofthe superhero and their driver were mur- naval drills in the Taiwan Comey as a “slimeball” and movie “BlackPanther” marked dered by breakaway FARC Strait, the first such sabre- “slippery”. Robert Mueller’s the end ofa decades-old ban guerrillas, after being kid- rattling in the sensitive waters investigation into Russian on cinemas in Saudi Arabia. napped last month near the in three years. The state broad- shenanigans may determine Muhammad bin Salman, the Colombian border. The Oliver caster said the military drills who has the last chuckle. 1 The Economist April 21st 2018 The world this week 7

American officials insisted that profit of$2.8bn. Profit at since the summer of2015.But Business a ban on American companies JPMorgan Chase came in at a some households may still be from doing business with ZTE, record $8.7bn. struggling. Outstanding se- Martin Sorrell resigned as a Chinese maker oftelecoms cured borrowing has grown by chiefexecutive ofWPP follow- equipment, was not linked to The IMF’s latest forecast for more than 3% in the past year. ing an internal investigation recent altercations on trade. global growth painted a rela- into unspecified personal Among the parts ZTE sources tively rosy outlookforthe China’s economy grew by misconduct. He denies the are superfast processors from world economy, which it said 6.8% in the first quarter com- allegations. Sir Martin had led Intel and Qualcomm. America will benefit from America’s pared with the same three the group for32 years, turning maintains that ZTE has contra- expansionary fiscal policy.It months last year. it into a global powerhouse in vened a settlement reached raised its projections foral- advertising and market re- last year over its sales of pro- most all the world’s advanced The Supreme Court heard search by acquiring agencies ducts to Iran and North Korea. economies (bar Japan). But the arguments in a case that seeks such as Ogilvy & Mather and It is the latest measure curtail- fund also issued a starkwarn- to overturn online retailers’ Kantar Media. But revenue ing American links with Chi- ing about the rising level of 26-year-old exemption from growth stalled in part because nese telecoms suppliers, most- global debt, which reached collecting sales tax in states businesses cut advertising ly on security grounds. $164trn in 2016, higher than at where they do not have a budgets; WPP has shed a third the time ofthe financial crisis. physical presence. Most states, ofits market value over the Blockbuster and bricks-and-mortar retail- past two years. Sir Martin’s Netflix’s worldwide customer ers, thinkthis gives e-com- departure raises questions base grew to125m people in Britain merce an unfairadvantage. about whether the group will the first quarter. It expects to % increase on a year earlier breakitselfup. pass130m in the current quar- 3 Some harmony at the Fed ter. The streaming company’s Richard Clarida was nominat- Starbucks is to close its 8,000 share price has risen by more 2 ed by President Donald Trump Average cafés in America on May 29th than 70% so farthis year. earnings to be vice-chairman ofthe so that employees can receive 1 Federal Reserve, serving under training on racial bias. The The biggest banks in America Consumer prices Jerome Powell, the new chair- coffee chain is responding to a reported a good set ofearnings 0 man ofthe central bank. Mr 2016 17 18 social-media uproar sparked forthe first three months of Clarida is a widely respected Source: ONS by the arrest at one ofits stores 2018. BankofAmerica and professor ofeconomics at in Philadelphia oftwo black Morgan Stanley made quarter- A surprise fallin British con- Columbia University and men who had asked staffif ly net profits of$6.9bn and sumer prices to 2.5%, marking worked on economic policy at they could use the lavatory $2.7bn respectively,boosted by a12-month low, did not the Treasury during the admin- reserved for customers. revenues from share trading dampen economists’ expecta- istration ofGeorge W.Bush. He during a comparatively turbu- tions ofan interest-rate rise by is also a songwriter, releasing a Pick a number, any number lent period formarkets. Gold- the BankofEngland in May.In CD ofhis own acoustics-heavy TeslaMotors wants to man Sachs said its income a double helping forhouse- tunes in 2016. increase production ofits from trading was up by 31% hold finances, average earn- mass-market Model 3 to 6,000 compared with the same ings grew at their fastestrate in For other economic data and cars a weekby the end ofJune, quarter last year, helping it to a the three months to February news see Indicators section according to reports, in order to have some margin oferror to meet the current target of 5,000. The company has strug- gled to reach its previous goals and is making around 2,000 Model 3s a weekat present.

The Chinese government announced that it will scrap a rule that requires foreign carmakers to set up joint ventures with Chinese ones if they want to avoid import duties. This stipulation will end forelectric vehicles this year, a boon to Tesla’s hopes of opening a factory in China. It is a concession in the current dispute over trade between America and China, even though that row continues. This weekChina imposed a deposit of179% on imports of sorghum from America. The grain is used in livestockfeed and in baijiu, a strong liquor. A global conversation for 175 years The Economist has not only reported news, it has also championed values: a belief in human progress, distrust of powerful interests and respect for individual freedom. Yet in a period of populism and, in many parts of the world, of growing authoritarianism, these classical liberal values are under attack.

So we have launched Open Future, an initiative to remake the case for free markets and open societies in the 21st century. We want this exploration of ideas to involve our critics as well as our supporters, and to engage a young audience in particular. It includes articles, online debates, essay contests,  lms, events and more.

To nd out more, visit economist.com/openfuture

Zanny Minton Beddoes, Editor-in-Chief Leaders The Economist April 21st 2018 9 What has become of the Republican Party?

It is organised around loyaltyto one man—Donald Trump. That is dangerous LL presidents, Republican The cult ofloyalty to Mr Trump and his base affects govern- Aand Democrat, seek to re- ment in three ways. First, policymaking suffers as, instead of a make their party in their own coherent programme, America undergoes government by im- image. Donald Trump has been pulse—anger, nativism, mercantilism—beyond the reach of more successful than most. empirical argument. Mr Trump’s first year has included ac- From the start, the voters he complishments: the passage of a big tax cut, a regulatory roll- mesmerised in the campaign back and the appointment of conservative judges. But most of embraced him more fervently his policymaking is marked by chaos rather than purpose. He than congressional Republicans were ready to admit. After 15 was against the Trans-Pacifictrade deal, then forit, then against months in power, as our briefing explains, he has taken own- it again; for gun control, then for arming teachers instead. ership oftheir party. It is an extraordinary achievement from a Second, the conventions that buttress the constitution’s man who had never lived in Washington, DC, never held pub- limits on the president have fallen victim to Mr Trump’s care- lic office, who boasted ofgropingwomen and who, as recently less selfishness. David Frum, once a speechwriter for George as 2014, was a donor to the hated Democrats. W. Bush, lists some he has broken (and how long they have The organising principle of Mr Trump’sRepublican Party is been observed): a refusal to disclose his tax return (since Ger- loyalty. Not, aswith the bestpresidents, loyaltyto an ideal, a vi- ald Ford), ignoring conflict-of-interest rules (Richard Nixon), sion ora legislative programme, but to just one man—Donald J. runninga business forprofit (Lyndon Johnson), appointing rel- Trump—and to the prejudice and rage which consume the vot- atives to senior posts in the administration (John F. Kennedy) erbase that, on occasion, even he struggles to control. In Amer- and family enrichment by patronage (Ulysses S. Grant). ica that is unprecedented and it is dangerous. And third, Mr Trump paints those who stand in his way not Already, some of our Republican readers will be rolling as opponents, but as wicked or corrupt or traitors. Mr Trump their eyes. They will say that our criticism reveals more about and his base divide Republicans into good people who sup- us and our supposed elitism than it does about Mr Trump. But port him and bad people who do not—one reason why a re- we are not talking here about the policies of Mr Trump’s ad- cord 40 congressional Republicans, including the House ministration, a few of which we support, many of which we Speaker, Paul Ryan, will not seek re-election. The media that do not and all ofwhich should be debated on their merits. The are for him are zealous loyalists; those that are not are branded bigger, more urgent concern is Mr Trump’s temperament and enemies of the people. He has cast judicial investigations by style of government. Submissive loyalty to one man and the Robert Mueller into his commercial and political links with rage he both feeds off and incites is a threat to the shining de- Russia as a “deep-state” conspiracy. Mr Trump is reportedly mocracy that the world has often taken as its example. toying with firing Mr Mueller or his boss in the Department of Justice. Yet, if a president cannot be investigated without it be- Not what, but how ing counted as treason then, like a king, he is above the law. Mr Trump’stakeover has its roots in the take-no-prisoners trib- The best rebuke to Mr Trump’s solipsism would be Repub- alism that gripped American politics long before he became lican defeat at the ballot box, starting with November’s mid- president. And in the past the Oval Office has occasionally be- term elections. That may yet come to pass. But Mr Trump’sRe- longed to narcissists some of whom lied, seduced, bullied or publican base, stirred up by his loyal media, shows no sign of undermined presidential norms. But none has behaved quite going soft. Polls suggest that its members overwhelmingly be- as blatantly as Mr Trump. lieve the president over Mr Comey. For them, criticism from At the heart of his system of power is his contempt for the the establishment is proofhe must be doing something right. truth. In a memoir published this week (see Lexington) James Comey, whom Mr Trump fired as director of the FBI, laments Lookup, lookforwards and lookin “the lying about all things, large and small, in service to some But responsibility also falls to Republicans who know that Mr code of loyalty that put the organisation above morality and Trump is bad for America and the world. They feel pinned above the truth”. Mr Trump does not—perhaps cannot—distin- down, because they cannot win elections without MrTrump’s guish between facts and falsehoods. As a businessman and on base but, equally, they cannot begin to attempt to prise Mr the campaign he behaved as if the truth was whatever he Trump and his base apart without being branded traitors. could get away with. And, as president, Mr Trump surely be- Such Republicans need to reflect on how speaking up will lieves that his power means he can get away with a great deal. bear on their legacy. Mindful of their party’s future, they When power dominates truth, criticism becomes betrayal. should remember that America’s growing racial diversity Critics cannot appeal to neutral facts and remain loyal, be- means that nativism will eventually lead to the electoral wil- cause facts are not neutral. As Hannah Arendt wrote of the derness. And, for the sake of their country, they need to bring 1920s and 1930s, any statement of fact becomes a question of in a bill to protect Mr Mueller’s investigation from sabotage. If motive. Thus, when H.R. McMaster, a formernational security loyalty to Mr Trump grants him impunity, who knows where adviser, said (uncontroversially) that Russia had interfered in he will venture? Speaking to the Constitutional Convention in the election campaign, Mr Trump heard his words as unforgiv- 1787 George Mason put it best: “Shall that man be above [jus- ably hostile. Soon after, he was sacked. tice], who can commit the most extensive injustice?” 7 10 Leaders The Economist April 21st 2018

Poland and the EU A Polish pickle

Europe’s illiberal democracies create dilemmas forthe EU. But it is time to cut subsidies to flagrant rule-breakers HERE was once no brighter harnessed in two ways. One, other member states can take a Tstar in Europe. Since shaking tough line with Poland in the haggling ahead. Parliaments in off communism in 1989 Poland countries like Germany and the Netherlands already find it has rivalled the bounciest Asian galling to send so much of their taxpayers’ cash to govern- tigers in GDP growth. It has be- ments that flout the rules. Asecond idea is to establish a way to come a vital NATO ally. But it is suspend payments to governments that violate the rule oflaw. also on the front line of what The EU faces a dilemma. Go soft on PiS’s leader, Jaroslaw France’s president, Emmanuel Kaczynski, and Europe’s next would-be autocrat will be em- Macron, calls a “European civil war” over the rule oflaw. boldened. But pushing too hard risks bolstering PiS’s claim The optimism that attended the EU’s great eastward expan- that meddling outsiders are undermining Polish democracy. sion in 2004 has given way, in some places, to angry, As the giant of eastern Europe, Poland matters. The EU’s grow- nationalist “illiberal democracy”. In Hungary,having nobbled ing east-west cleavages over migration and money cannot be the courts, media and public prosecutor, Viktor Orban is healed ifit is sent out into the cold. squeezing civil society and using state (and EU) funds to nur- ture oligarchs. Romania’s leaders endlessly seek to weaken A flicker ofhope anti-graft laws that might otherwise ensnare them. Perhaps prodded into action by the coming budgetary talks, But the gravest challenge is in Poland. Since taking office in PiS has lately tweaked some of its judicial reforms. The 2015 the nationalist Law and Justice (PiS) party has stacked the changes, on matters like judges’ retirement ages, are the first courts, skewed public media and stuffedthe bureaucracy with signs of compromise since 2015. But they are largely cosmetic. supporters (see Europe section). Its judicial reforms flagrantly The EU should (quietly) insist on much more before it consid- violate EU treaties. ThatmattersnotonlyforPolish democracy: ers lifting Article 7. Poland’s rulers must take steps to revive the EU countries have to trust each other’s courts to uphold the rule of law, starting with the restoration of improperly fired lawthatunderpinsthe single market. So lastyearthe European judges on the constitutional tribunal. IfPiS does not budge, the Commission invoked Article 7, an untested instrument that commission should be creative with the budget. Poland re- obliges governments to assess whether one ofthem is system- ceives three times as much from EU funds as it pays in, and atically undermining the rule oflaw. those subsidies go disproportionately to PiS’s rural supporters. In theory Article 7 can strip an offending country of its EU They need to understand that they cannot enjoy the benefits voting rights. In practice the unanimous vote that it requires is ofa club at the same time as they trample on its rules. impossible to secure, partly because illiberal governments This week Mr Macron repeated his call for a “hard core” of protect each other. So the commission is eyeing the EU budget, EU countries to pursue integration if others ignore their com- much of which is spent on transfers from rich countries to mitments. Poland’s government says it does not want to be left poorer ones. The last seven-year budget granted Poland nearly behind in Europe’s slow lane. But if it continues to undermine one-fifth ofthe EU’s cohesion funds. That looks like leverage. independent institutions and violate the rule of law, that is Negotiations over the next budget begin in May. It can be what will happen. 7

The postal service Deliverance

America’s post office should be privatised HE Founding Fathers grated to the internet. About half of what still lands in letter- First-class mail volume Tthought that operating a boxes is advertising. USPS’s revenue from its monopoly is United States, bn postal service was a crucial re- down by 35% in real terms since 2008. Seeking a survival strat- 100 80 sponsibility of the federal gov- egy, and with online shopping booming, the post office is fo- 60 ernment. The constitution al- cusing on delivering parcels. But it has no monopoly in this 40 20 lows Congress a monopoly on business, and its networkwas built forletters. Parcels still com- 0 delivering post. Today the Un- prise less than a third of revenue. Competition from the likes 2000 05 10 15 17 ited States Postal Service (USPS) of UPS, FedEx and DHL means that USPS is unlikely ever to is the third-biggest employer in America, behind Walmart and make enough money to plug its massive pension and health- the Defence Department. For most of the country’s history, care deficits, which together exceed $100bn. With its debt al- USPS provided the arteries along which information flowed. ready at the maximum allowed by law, USPS may also struggle Not any more. The number offirst-class letters has fallen by to invest enough to compete with nimbler rivals. almost half from its peak in 2001, as communication has mi- On April 12th President Donald Trump set up a task force to 1

12 Leaders The Economist April 21st 2018

2 examine USPS’s finances. His motives are fishy. He dislikes lyaboutthe regulation ofpostal markets. There isno contradic- Amazon, whose founder, JeffBezos, also owns the Washington tion between privatisation and the universal-service obliga- Post, a newspaper that is critical of Mr Trump. The president tion, the requirementto deliverto everyaddressin the country says Amazon is charged too little by the post office for delivery for a fixed price. In Europe the two are often combined. Ger- of its goods (a claim that is impossible to assess fully because man regulators can subsidise deliveries to remote rural areas the contract is private). The taskforce is made up of administra- by any operator, should the market fail to provide a universal tion officials, notindependentexperts. Butifittakes itsjob seri- service on its own. Whether this actually makes sense is a dif- ously, it should recommend privatising USPS and relaxing its ferent matter. Subsidising some deliveries was more defensi- monopoly power. ble when postmen carried armfuls of essential letters. It is One reason such a reform would benefit the public is that harder to justify now that they lug advertising and consumer Congress is incapable of managing the changes the post office goods. Broadband, ratherthan post, seemslike the appropriate badly needs. In recent years politicians have blocked plans to subject for a debate about universal service. Privatisation close obsolete facilities and to end costly Saturday deliveries. would make that conversation unavoidable. Democrats side with unions who say reform is unnecessary. Republicans worry about triggering a public bail-out of pen- Mr Zip, capitalist sion and health-care liabilities. Politicians have struggled with If Congress has struggled with even minor postal reforms, is the most basic tasks, such as filling seats on USPS’s board. there any hope that it could pass a sweepingone? It can take in- European countries have shown that market forces im- spiration from how Britain privatised Royal Mail. The govern- prove postal markets (see Business section). Every member of ment should assume USPS’s legacy pension and health-care the EU allows at least some competition for postal delivery. deficits, to make itmore attractive to investors, and also placate Competition hasspurred innovation and efficiency.Since Ger- workers by giving them shares in the new company. Republi- many privatised Deutsche Post in 1995, the firm has expanded cans would need to accept that the government should not massively.Along the way, it has pioneered delivery lockers, at pull the rug out from underneath retirees, and realise that if which consumers can pick up packages, and experimented taxpayers do not foot the bill fortheir benefits, consumers will with deliveries to parked cars. Britain privatised Royal Mail in have to instead. Democrats would need to concede that the 2013, allowing it to raise capital and evolve free from political purpose ofpolicy is to benefit the public, not to justify the exis- meddling. Compare thatwith America, where private couriers tence of government jobs and state-owned organisations. Pri- are not even allowed access to the public’s letterboxes. vatisation might not be what Mr Trump intends. But a large Privatisation would force the governmentto thinkrigorous- dose ofthe free market is what the post office needs most. 7

Indian business The humbling of the tycoons

Cronyism is underattackin India. Long maythat last OR decades, personal con- require large chunks ofcapital and lots ofinteractions with the Fnections have provided a government. That attracted plenty of entrepreneurs whose well-trodden path to success in core competence was using their connections with officials, in Indian business. State-owned order both to win the necessary permits and to secure financ- banks provided cheap financing ing from state-owned lenders. Many tycoons could count on for firms whose success often ministers to put in a word with a recalcitrant banker. Some rested on winning official ap- held political office themselves. If things went awry, bankers provals. If a venture soured, the would frequently extend repayment periods indefinitely, if taxpayer frequently ended up being left to shoulder losses. only to preserve their own blushes. Overburdened courts There are plenty of gifted businesspeople in India. But crony- were unequal to the taskofenforcing contracts. ism, not competition, has been the surest route to riches, even The unscrupulous among the tycoons went further still. afterthe partial dismantlingofthe “licence raj” nearlythree de- Some are thought to have padded cost estimates so that they cades ago. got bigger bank loans than required, meaning that they could A new era of Indian capitalism may be dawning. For the secure assets without putting any of their own money in. first time a large number of struggling tycoons face the pros- Whether a business was profitable was not always material, pect ofhaving their businesses seized from them. The fate of 12 since it could enrich owners in other ways—by awarding lucra- troubled large concerns is due to be settled within weeks; an- tive contracts to firms controlled by family members, say. other 28 cases are set to be resolved by September. Between This system is under a three-pronged assault. The first is a them, these firms account for about 40% of loans that banks reformed bankruptcy code that makes the seizure ofbusiness- themselves think are unlikely to be repaid. For enforcing a es easier (see Business section). A new set of dedicated courts, bankruptcy system that is usually skirted by those with con- backed by a cadre of insolvency professionals, is on hand to nections, the government of Narendra Modi deserves much help banks seize assets and sell them to fresh owners. To focus credit. Yet the job is farfrom done. the minds ofboth bankers and borrowers, ifno deal can be cut Consider first the system that is under assault. Industries within nine months—a jiffybyIndian legal standards—the firm such aspowergeneration, mining, telecomsand infrastructure is shut down and its equipment sold for scrap. This is the point 1

14 Leaders The Economist April 21st 2018

2 in the process now being reached by the first dozen defaulters. parties can raise funds through anonymous donations. The second threat to the tycoons is the grievous state of the MakingIndia less bureaucratic would also be a boon. Acer- state-owned banks. Their losses have ballooned. The authori- tain brand of tycoon has thrived because getting things done ties, tired of recurring bail-outs, are forcing them to recognise often requires sharp elbows and sharper business practices. which loans are unlikely to be repaid, and to initiate insolven- Magnates who are politically astute will still have an edge if cy proceedings in double-quick time. Though their gover- knowing how to dodge a price cap imposed on a ministerial nance remains parlous, at least these banks are no longer able whim, for example, is a surer guide to success than knowing to hide the extent oftheir problems. how to run a factory. Such shenanigans have not stopped. Third, most tycoons have lost influence in Delhi, as politi- cians from Mr Modi down realise the toxicity of being seen to Rich pickings be in cahoots with “bollygarchs”. Some of India’s grandest Reforming the state-owned banks is the most important task businessmen complain that they can no longer get in to meet of all. Their balance-sheets are where you find 70% of loans the prime minister, who much prefers wooing foreign bosses and nearly 100% of problems. Ensuring banks make commer- instead. To increase transparency, some state assets are now cial decisions can only realistically be achieved by privatising auctioned online. at least some of them. Privatised banks would also be free to To ensure permanent change will require deeper reforms, pay salaries to attract talented staff. The bosses at state-owned however. If wholesale ministerial corruption is reportedly banks currently earn under $50,000 a year, a pittance even by much reduced, there is still little clarity over how political par- Indian executive standards—and it shows. ties are financed. They will spend something like $5bn be- A decent financial system is the best defence against crony- tween now and federal elections expected in spring 2019, little ism. Sadly,this kind ofreform still seems to be anathema to Mr ofwhich will bepubliclyaccounted for.Toloosen the political- Modi. He hasmade a starton tacklingthe tycoons. But ifhe is to crony nexus further, it would help to end the system whereby entrench a revolution in Indian capitalism, he mustdo more. 7

Artificial intelligence The Kamprad test

IKEA furniture and the limits ofAI OMPUTERS have already That is something to bear in mind when thinking about the C proved better than people much-hyped effects of AI and automation, especially as AI at playing chess and diagnosing moves out of the abstract world of data and information and diseases. But now a group of ar- into the real world of things you can drop on your foot. On tificial-intelligence researchers April 13th Elon Musk, the boss ofTesla, an electric-car firm, said in Singapore have managed to that the production problems which have dogged his com- teach industrial robots to assem- pany’s high-tech factory were partly the result of an over- ble an IKEA chair—for the first reliance on robots and automation. “Humans are underrated,” time uniting the worlds of Allen keys and Alan Turing. Now he tweeted. Lots of jobs have physical aspects that robots that machines have mastered one of the most baffling ways of struggle with. Machines may soon be able to drive delivery spending a Saturday afternoon, can it be long before AIsrise vans, for instance. But, at least for now, they could well fail to up and enslave human beings in the silicon mines? carry a parcel to a flat at the top of a flight of slippery stairs, es- The research also holds a serious message. It highlights a pecially ifthe garden was patrolled by a dangerous dog. deep truth about the limitations of automation. Machines ex- cel at the sorts of abstract, cognitive tasks that, to people, signi- Not such a silly Billy fy intelligence—complex board games, say, or differential cal- Today’s AI systems are limited in otherways, too. They are pat- culus. But they struggle with physical jobs, such as navigating a tern-recognition engines, trained on thousands ofexamples in cluttered room, which are so simple that they hardly seem to the hope that the rules they infer will continue to apply in the count as intelligence at all. The IKEAbots are a case in point. It wider world. But they apply those rules blindly, without a hu- took a pair of them, pre-programmed by humans, more than man-like understanding ofwhat they are doing or an ability to 20 minutes to assemble a chair that a person could knock to- improvise a solution on the spot. Makers of self-driving cars, gether in a fraction ofthe time (see Science section). for instance, worry constantly about how their machines will AI researchers call that observation Moravec’s paradox, perform in “edge cases”—complicated and unusual situations and have known about it for decades. It does not seem to be that cannot be foreseen during training. the sort of problem that could be cured with a bit more re- Calibrating excitement about AI is tricky. Researchers com- search. Instead, it seems to be a fundamental truth: physical plain that great progress is quickly forgotten: as soon as a com- dexterity is computationally harder than playing Go. That hu- puter can do something, it ceases to count as “AI”. But those mans do not grasp this is a side-effect of evolution. Natural se- same researchers also tend to be more cautious about the fu- lection has had billions of years to attack the problem of ma- ture than many pundits. There is no reason, in principle, why a nipulating the physical world, to the point where it feels computer could not one day do everything a human can and effortless. Chess, by contrast, is less than 2,000 years old. Peo- more. But that will be the work of decades at least. Furniture- ple find it hard because their brains are not wired for it. assembly helps explain why. 7 A FORTUNE 50 CEO USES DOMO 15 TIMES A DAY TO RUN THE BUSINESS. ON HIS PHONE.

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The Economist April 21st 2018 Executive Focus 17

DIRECTOR OF ADMINISTRATION (D-1) VICE-RECTOR IN EUROPE (D-2) Duty Station: Tokyo, Japan Duty Station: Bonn, Germany

The United Nations University (UNU) is an international community of scholars, The United Nations University (UNU) is an international community of scholars, engaged in research, postgraduate teaching, capacity development, and dissemination engaged in research, postgraduate teaching, capacity development, and of knowledge in furtherance of the purposes and principles of the Charter of the United dissemination of knowledge in furtherance of the purposes and principles of the Nations, its Peoples and Member States. Charter of the United Nations, its Peoples and Member States.

The UNU Vice-Rector in Europe represents the Rector on special initiatives outside The Administration division is responsible for developing and implementing Japan and facilitates collaboration across the system of UNU research institutes as well administrative policies governing the United Nations University and its global as with stakeholders in and outside of the United Nations. The Vice-Rector promotes network of research and training centers and programmes. The division reviews and and facilitates the development of policy-relevant research within UNU and contributes promulgates organizational standards; oversees facility management operations; to policy discussions/development in UN entities, Member States, and with other key and, delivers services to internal clients in the areas of i nancial management, stakeholders. The Vice-Rector is also responsible for outreach efforts in Europe — including i nancial statements, as well as providing support for human resources specii cally with Geneva-based research and United Nations entities and the European management and procurement. The division is located at the United Nations Commission — as well as fundraising for research activities in the Vice-Rectorate and, University’s Headquarters in Tokyo and operates a service center in Putrajaya, more broadly, for the University. The Vice-Rector may also be assigned advisory or Malaysia. supervisory responsibilities for colleagues or units of UNU. The Position: The Director of Administration. The Position: The Vice-Rector in Europe. Qualifications: The Director should have an advanced degree in business or Qualifications: The Vice-Rector should have an advanced degree in a relevant public administration or other relevant i eld. academic discipline, such as law, political science, international relations, sustainability, environment, economics or development. Experience: At least 15 years of progressively responsible professional experience, at least ten years of which have been at a senior level in the area of administration, Experience: At least 15 years of work experience, including several years working including human resources management, i nance and budget planning and in a senior role at a think tank or other policy-oriented research institution, and work execution, preferably in an academic institution, development agency, or United experience with at least one United Nations entity or international organization active Nations entity. in the area of either development, peace and security, or sustainability.

Fluency in English is required. Fluency in French and German are highly desirable. Fluency in English is required. Fluency in official UN languages is desirable.

Application deadline: 15 May 2018. Application deadline: 15 May 2018.

Full details of the position and how to apply: Full details of the position and how to apply: https://unu.edu/about/hr/academic/vice-rector-in-europe.html#overview https://unu.edu/about/hr/administrative/director-of-administration.html#overview

DIRECTOR (grade AD 14)

Cedefop is the European Agency that promotes the development of Your skills vocational education and training (VET) in the European Union. • Strong management and leadership skills, including proven It provides information, research and analysis on VET, skills and experience in managing budget, i nancial and human resources in qualii cations. It supports evidence-based policy-making in areas such multinational and multidisciplinary environment. as the implementation of European tools or anticipation of skill needs, • High level of interpersonal and presentation skills, including written and improves understanding of qualii cations and skills to promote and oral communication/negotiation skills; proven experience in European cooperation, mobility and mutual learning. managing complex and politically sensitive relationships with different stakeholders. Your responsibilities • Good understanding of the EU VET policy, EU institutions and broader EU policies of relevance to Cedefop’s role and activities. • Prepare and implement Cedefop’s multiannual strategy and annual work programme. Please consult the Official Journal C111A of 26/03/2018 for a detailed • Ensure the quality of Cedefop’s work and advance the Agency’s vacancy notice including eligibility and selection criteria or visit our excellence and expertise on VET, skills and qualii cations. website. • Oversee the day-to-day management of the Agency fostering a sound Full vacancy notice in all official EU languages and registration of work environment. applications: • Ensure Cedefop is effectively represented at the most senior level in its dealings with the European institutions and bodies throughout http://www.cedefop.europa.eu/en/about-cedefop/recruitment/ the European Union, Member States, social partners and other vacancies stakeholders. The closing date for applications is: 08 May 2018 at 15.00 EET.

The Economist April 21st 2018 18 Letters The Economist April 21st 2018

A peace process Have you considered the deal Brazil was an aggravating Last but not least, Mr Orban cut by Greenland with the EU? factor. Lula faces other cases. is the only truly charismatic Yourbriefing on Northern Perhaps Northern Ireland The argument that he is leader in a fragmented political Ireland mentioned the impor- could gain similar status innocent is mere political market who projects strength tance ofgrants from the through the Overseas Associa- propaganda. Lula has had the and international standing. European Union (“Past and tion Decision as an overseas best lawyers, has argued in The hyped-up migrant crisis future collide”, March 31st). The territory.The rest ofBritain front ofall the courts and has and the Hungarian govern- EU’s PEACE programmes have would continue its Brexit always lost. His supporters ment’s permanent fight against been substantial, distributing while Northern Ireland and believe all manner ofconspira- the “new Moscow” (otherwise approximately €1.5bn ($1.9bn) Ireland would resume their cy theories that explain the fall known as Brussels) have in order to support Northern previous customs arrange- oftheir leader. They should greatly increased Mr Orban’s Ireland’s peace process at the ments. They would also hon- instead put their energies into strongman values and appeal grassroots. They are one of the our the Good Friday Agree- fighting hunger and poverty, at the ballot box. largest EU peacebuilding ment as “partners” in the EU. and forbetter education and ISTVAN DOBOZI interventions ever and one of NEIL OLSEN health services. Lula has Gaithersburg, Maryland the largest in Europe since the Salt Lake City destroyed his own fabulous Marshall Plan. Alas, scale does biography; it is now time to Let’s get quizzical not imply effectiveness. Striking Syria move on under new leaders. We looked at the second No one is more responsible for wave of PEACE programmes Yourleader calling foraction his downfallthan himself. and found no measurable against the Assad regime in That is unfortunate, forhim, effect on indicators ofpeace- Syria argued that, “the UN the left, and forBrazil. fulness in the communities cannot perform this taskas NELSON FRANCO JOBIM where spending was targeted. long as Russia wields its veto at Rio de Janeiro The communities that bore the the Security Council. So the brunt ofthe violence, to this burden falls on countries that To Viktorgo the spoils day, lag behind the rest of the believe that the rules-based province on the usual range of international order is worth When explaining the landslide socioeconomic indicators. upholding” (“The duty to ofViktor Orban’s Fidesz party Perhaps this is a case of deter”, April14th). What you’re in Hungary’s parliamentary money buying neither love saying is that as the UN cannot elections, you exaggerated the nor peace? uphold the international order “liberal Budapest” versus Having spent ten years on a TILMAN BRÜCK because ofa faulty and asym- “traditional countryside” team in a quiz league, I have to NEIL FERGUSON metric rule (the veto), the divide in the country (“Viktor say I did not recognise the International Security and solution is forvigilante coun- victorious”, April 14th). The happy picture you painted in Development Centre tries to take the law into their official election statistics show “Aquizzical country” (March Berlin own hands and thereby un- in fact that in Budapest, Mr 31st). Many ofthe quizzes in dermine the very internation- Orban’s centre-right Fidesz which I was involved were I have been travelling to and al institutions and rule of law party won more than a third of ridiculously competitive and working in Northern Ireland that the UN tries to uphold. the votes, farexceeding the resulted in some spectacular foreight years. I thinkneither What an utter failure of performance ofany other temper tantrums. Pens were the statistics you quoted (for logic. In addition, what moral party. The far-right Jobbik flung against walls. I still shud- example that less than 10% of authority do these vigilante party also did reasonably well. der at my captain’s reaction schooling is integrated) nor the countries have? And what Together these two parties on when one ofthe team changed province’s institutions, in- historical evidence is there to the right ofHungarian politics my answer ofEmmeline Pank- cluding the Stormont suggest the success oftheir tookhalfofthe votes in the hurst to Emily Pankhurst while Assembly, do justice to the vigilantism in Vietnam, Iraq capital city. So much forthe I was buying an interval pint. distance ordinary people have and throughout the cold war? myth ofliberal Budapest. We were once told we had travelled. Except fora small KRISHNA BODDU As you correctly flagged, wrongly named the emperor minority, most people are Ipswich the Hungarian economy’s ofJapan (apparently we said much more reconciled to reasonably good shape and “Agahito”, not Akihito), and normal life than you give them The case against Lula the “ugly but effective cam- one team nominated a man credit for. Their concerns are paign” focusing on threats to with a speech impediment as universal concerns ofhow to Contrary to what Bello Hungarian sovereignty helped question-master, because only make a better life, in or outside claimed (April 7th), Luiz Inácio Mr Orban. But there are other they could understand him. I the island ofIreland. Lula da Silva’s conviction was important factors not men- was glad to retire. Chances are that ordinary not based on “the doctrine of tioned in your article. In MIKE PAVASOVIC people will vote forpoliticians command responsibility”. The Hungary, Fidesz is the only Ashton-under-Lyne, who would sooner rather than prosecution laid out a detailed broad-based popular party Greater Manchester 7 later deliver the normality case surrounding the sale to whose key messages resonate they have sought after years of the formerBrazilian president with voters across the entire troubles. The real riskofthe ofa beachfront flat. That was country and all social classes. Letters are welcome and should be Brexit negotiations is a road- the circumstantial evidence on Fidesz won even among voters addressed to the Editor at The Economist, The Adelphi Building, blockto that normality ifa which Lula was convicted. with a college education. The 1-11John Adam Street, frictionless, invisible border Three appeals-court judges other parties exist essentially London WC2N 6HT does not continue. confirmed the conviction and on the fringes and are unable E-mail: [email protected] DEEP SAGAR increased the sentence, argu- to form an effective coalition More letters are available at: Economist.com/letters Berkhamsted, Hertfordshire ing that being the president of against the mainstream party. Briefing America’s Republicans The Economist April 21st 2018 19

actingin a way that helps his critics—for ex- How the elephant got its Trump ample by seeking to illuminate the nature of his business dealings—is now almost impossible for a Republican who wants to go on functioning as such. As Mr Corker WASHINGTON, DC put it, Republican voters “don’t care about The president’s takeoverofthe Republican Partywas not a one-off, and itwill not issues”. They just “want to know if you’re easily be undone with Trump.” Elected officials whose reservations EVER has a party abandoned, fled However, Mr Flake’s analysis is also about Mr Trump are not so strong that they “Nits principles and deeply held be- flawed. Mr Trump did not forthe most part want to spend more time with their fam- liefs so quickly as my party did in the face infect Republicans with new beliefs from ilies keep quiet, content just to vent when of the nativist juggernaut,” Jeff Flake, a Re- beyond their ken. He connected, and con- in trusted company. Some have rowed publican senator from Arizona, said in a tinues to connect, with what a significant back from previous criticism. In 2016 Mitt speech in March. “We have become strang- part of its base feels and with what it Romney, a former governor and presiden- ers to ourselves.” There is a lot of truth in wants. In so doing, he turned the anti-elit- tial nominee, denounced Mr Trump as a this. The speed with which the Republican ism the party has long fostered in its sup- “fraud”. Earlier this year he called out- Party’s establishment accommodated it- porters against its own leadership. In bursts about African migrants the presi- self to a candidate, and then a president, breaking taboo after taboo he did what dent was reported to have made “inconsis- who spurned all manner of norms and many in the base had long wanted to see tent with America’s history and anti- broke many bounds of decency, as well as done and to hear said. He is like the “psy- thetical to American values”. Now, seeking policy commitments, was indeed without choplasmic” monsters in David Cronen- a Senate seat in Utah, he has accepted Mr any precedent. berg’s horror film “The Brood”: the party’s Trump’s endorsement and salutes his “ex- Paul Ryan, the Speaker of the House, id made flesh. traordinary ability to understand how our went from refusing to campaign with Do- economy works to create jobs”—while nald Trump (after a recording ofhim boast- It’s good to be the king claiming to be “more of a hawk on immi- ing about sexual assault became public) to This undoubted and persistent connec- gration than even the president.” failing quickly to condemn him (when, as tion, coupled with a surprising amount of The takeover of the party’s institutions president, he spoke of“very fine people on loyalty from elsewhere in the party, makes is largely complete. As is usual when a both sides” of confrontations between the presidentprettymuch unassailable. Mr party’s candidate wins the presidency, the neo-Nazis and protesters in Charlottes- Trump, polls say, enjoys the support of 85% Republican National Committee (RNC) ville, Virginia). It now appears that Mr of Republicans, compared with 65% for Mr has become a subsidiary of the White Ryan cannot stomach his position—or, al- Ryan and 40% for Mitch McConnell, the House. In keepingwith the tenorofits new ternatively, that he thinks the voters will Senate majority leader. That does not ownership, it now has a website, LyinCo- not provide the Republican House major- mean he can get anything he wants. Con- mey.com, dedicated to attacking the for- ity he would need to continue in it after gress has been tougher on Russia than he mer head ofthe FBI (see Lexington). Ronna this November’s mid-term elections. On appears to have wished. His promise to re- McDaniel, who became the RNC’s chair April 11th he announced that he will not peal Obamacare has not been fulfilled. He last year, previously chaired Mr Trump’s seekre-election. Like Mr Flake himself, and has not (yet) pulled out ofthe Iran deal. His campaign in Michigan; Michael Cohen, his Bob Corker, a senator who memorably approach to trade goes against a lot of personal lawyer, who is under criminal in- compared Mr Trump’s White House to an party history, but on gun control, some- vestigation, is one of the RNC’s deputy na- “adult day-care centre”, not to mention 40 thing he has seemed to favour in the past, a tional finance chairs. other House Republicans—a record—he is tentative sally was nipped in the bud. Primaries for the November elections leaving the field ofbattle. But it does mean that criticising him, or will see hundreds of hopefuls competing 1 20 Briefing America’s Republicans The Economist April 21st 2018

2 to look as close to Mr Trump as possible. of the 15 presidents from the death of Lin- There will be no easyvictories, ifany victo- coln until the Depression. This was the The divergence 2 ries at all, for his critics. The ideological party of the union, northern cities, indus- United States, white voters, partisanship* campaign groups that Republicans had to trialists and protestants, run by classical By education, percentage points please during Barack Obama’s presiden- liberals who believed in a nightwatchman 10 cy—the Club for Growth, Heritage Action, state, contentto pickup a colonyor two but Democrats College degree the Senate Conservatives Fund—might leery of foreign wars. It came crashing 0 have been able to resist the trend. But they down along with Wall Street in 1929—at a have decided, for the time being, that Mr time when Democrats already had south- 10 Trump is the true conservative they want- ern whites, northern immigrants and ed all along. Catholics in their camp. With the Depres- 20 Some college He is not. What he offers politics is not a sion and the New Deal scrambling politics, Republicans High school conservative agenda. It is not an agenda, or the Democrats came into the ascendant. 30 an ideology, at all. It is a set of feelings— Republicans lost all but two of the nine 1992 95 2000 05 10 16 about patriotism, about who is a proper presidential elections between Herbert Source: *% of respondents who identify/lean to American and who is not, about foreign- Hoover’s win in 1928 and Richard Nixon’s Democracy Fund the Democratic Party, minus those who Voter Study Group identify/lean to the Republican Party ers, about elites, about sovereignty and in 1968; they held the House for just four of about power. This fits what Larry Bartels, a the 60 years between 1935 and 1995. political scientist at Vanderbilt University The passage of civil-rights legislation in fourstates and about a third as many votes in Tennessee, has found out by trawling the 1960s and the nomination of Barry as the winner, Bob Dole. through survey data. People who identify Goldwater for the presidency in 1964 In the early 2000s, with America at- as Republican are united by cultural issues brought about a new transformation. tacked by terrorists and mounting foreign rather than narrowly political ones. They Goldwaterpromised a return to the party’s invasions, many of these people rallied to tend to share respect for the flag and the small-governmentroots, railingagainst the the president: internal dissent in the party English language, and negative feelings to- Great Society notion that every problem turned to the matteroftaxes—the key issue, wards Muslims, immigrants, atheists, and needed a government programme and early on, for the activists known as the Tea gays and lesbians. thus setting the tone for Reagan. Civil Party. The culturally populist position re- United in this, they are oddly divided rights—also seen by some as a small-gov- emerged in 2008, when the party no lon- on issues that have often defined the right ernment issue—delivered lots of white ger needed to support a sitting president in America and elsewhere—such as what southerners. “As much as I hate to admit it, and some became smitten with the vice- the role of the state should be. Andrea Vol- George Wallace can’t be nominated. Ron- presidential candidate, Sarah Palin, an kens of the Berlin Social Science Centre ald Reagan can. He’s right on the issues,” Alaskan governor who compensated for and her co-authors compared the manifes- ran an advert forReagan in 1976, winkingat not knowing things by making Republican tos of the Republican Party with those of the governor of Alabama’s past offer of voters feel feisty. parties elsewhere and concluded that Re- “segregation forever”. This form of Republicanism attracted a publicans sit closer to France’s National number of former Democrats. John Sides Front than to the Conservatives in Britain The common clay of the New West ofGeorge Washington University says this or Canada (see chart1). When Reagan was elected four years later migration of working-class whites to the This is not Ronald Reagan’s Republican his party was balanced on three legs. Eco- Republicans “mainly occurred from 2009 Party. But then, as Reagan knew, parties re- nomic conservatives wanted government to 2015. It was not a consequence of the invent themselves. The Republicans have to spend less and tax less; social conserva- 2016 campaign” (see chart 2). Mr Bartels done so more than once since their party tives, including many evangelical Chris- concurs: “I find remarkably little change in was founded in 1854 as an appendage to tians, wanted the government to ban more partisanship between 2015, when Trump the anti-slavery movement. After the civil and permit less; and national-security was first emerging as a national political war it was in the ascendancy, providing 11 hawks wanted the government to wield figure, and late 2017,” he wrote recently. enormous power overseas. This coalition Many ofMr Trump’ssupporters joined the ran the gamut from the libertarian to the party before he did so himself. Odd one out 1 deeplyilliberal, butitsfactionshad enough Mrs Palin was the harbinger in 2008. In Political ideological placement in common for the top brass to keep things 2012 it was Herman Cain, a black fast-food By party, 2013 Party ideology* moving along. The economic conserva- restaurateur, lobbyist and Tea Partier who Left of centre Right of centre tives and national-security hawks, all well had never held elected office and wished United States represented among party activists, elected to cut the income-tax rate to 9%. He was Democrat officials and big donors, were allowed to leading the Republican field when he was Republican run things, so long as they paid sufficient accused of sexual harassment by several Britain regard to the social conservatives. Part of women—something which, in those inno- Labour the deal was they would not actually carry cent days, was enough to sinka candidacy. Liberal Democrat out their oft-stated aim to reduce govern- Mr Cain was not the only recipient of ment spending radically: more popular in the base’s wayward affections: it was clear- Conservative theory than in practice. Tax cuts, on the ly reluctant to settle down with Mr Rom- Canada other hand, were fine with all but the most ney. In the end it did. But his campaign New Democrat dour deficit hawks—the more the merrier. showed that the party was changing. After Liberal But within this odd, successful alliance Mr Ryan, his vice-presidential candidate, Conservative there was already a significant constituen- talked like a regular fiscal conservative France cy that wanted just what Mr Trump would abouttacklingthe deficitwith cutsto social Communist later offer. Pat Buchanan, a speechwriter security and Medicare, the campaign Socialist for Nixon, ran in the 1992 and 1996 prima- whisked him into a witnessprotection pro- National Front ries on a platform of opposition to immi- gramme. Never again was he allowed to Source: The Manifesto Project, *Left/right determination gration, free trade, gay rights and multicul- trouble elderly Republican voters who Andrea Volkens et al. by The Manifesto Project turalism. The second time round he won wanted to keep the government’s hands1 SEE hear TASTE SMELL TOUCH HUNDREDS OF DIFF nothıng but wha THE BEST FOOD ON TRADITION WITH comfort WITH WORLDS WITH A WI you want wıth T SERVED BY OUR freshly brewed SPECIALLY BUILT-IN OF MOVIES, DOCUM noıse cancellın FLYING CHEFS. TURKISH COFFEE. MASsAGING SEATS. AND MORE. denon headphon 22 Briefing America’s Republicans The Economist April 21st 2018

2 off their Medicare. Spending cuts were not on voting, “Us Against Them” by Donald opponents and rewarding loyalists. At for the party faithful: they were for other, Kinder of the University of Michigan and some point, though, the cycle will turn. To- less worthy people—a position that help- Cindy Kam of Vanderbilt, finds that voters day’s saviours will be tomorrow’s traitors. fully allied prejudice to prudence. who espouse racial stereotypes (“black Political parties centred on a single per- Vice-presidential candidatescould then people are lazy”) are indeed more likely to sonality fall apart after the leader goes. Sil- still be controlled by party machinery. be found in the Republican Party. But it vio Berlusconi founded two parties in Italy, Non-candidates could not be. Fox News, findsthatto be mainlybecause more white Forza Italia and People of Freedom. Both which came to dominate cable news in the people vote Republican. White Democrats proved fissiparous in his absence. But this 2000s, happily provided a platform for are pretty much as likely to hold such is an unlikely fate for the post-Trump Re- populist conservative politicians, includ- views as white Republicans are, and most publicans. It is hard for a party to collapse ing Mr Buchanan, Mrs Palin, Mr Cain and of them voted for Mr Obama. A majority completely in a two-party system. It is also many more, as well as forpopular, partisan of whites who voted for both parties in rare for one to become again what once it and peculiar hosts like Bill O’Reilly and 2016 said that it was important for whites was. Because the party was becoming Sean Hannity. It both articulated and en- to work together to change laws that are Trumpian long before Mr Trump tookover, forced a new and often increasingly ex- unfairto whites. it will no more go back to the 1980s in his treme post-Tea Party orthodoxy to which There was also something broader go- absence than to the 1880s. Mr Trump will party higher-ups had to pay heed. ing on. The rise of social media allowed not bequeath a set ofpolitical ideas as Rea- Mr Trump’s 2016 campaign might, in people to talk about politics in an unmedi- gan did those he had inherited from Gold- other circumstances, have fallen foul of ated way, reading and saying things that water and others. But the attitudes he has this—not least because he was clear about would never have been seen on broadcast ridden to office will still outlive him. wanting to keep spending on Medicare television or read in newspapers. Fox un- If Trumpism isto define the Republican and social security.But Fox is an entertain- derstood,tosomeextent,howthisnewun- Party forthe next decade or more, there are ment channel built on righteous indigna- fettered and often fact-free discourse three ways it could develop. The most wor- tion as well as a political operation, and in worked. MrTrumpknewitin hisbones. He rying would see the party choose another Mr Trump it faced for the first time a politi- could, and did, speak the language of vul- leader who, like Mr Trump, does not care cian whose star power outgunned it. The gar resentment like a pro. For many of his for the separation of powers, judicial inde- prime-time audience for Fox News is supporters, the more this was disapproved pendence or a free press, but unlike Mr around 2.4m. In its pomp “The Appren- of, the more valid and admirable it Trump goes about undermining them ef- tice”, Mr Trump’s reality show, was some- seemed. fectively. A second possibility is that the times watched by ten times that many.The party loses power and becomes the elect- disparity allowed Mr Trump to dictate Party of one ed wing of an anti-government move- termslike the starhe is. When Megyn Kelly, How long can his dominance persist? The ment, its default setting when the Demo- a Fox News anchor, asked Mr Trump some American right has an abiding characteris- crats hold power. mildly prosecutorial questions while tic that elsewhere is mostly found among There is a third possibility. Trumpian at- moderating a primary debate, Mr Trump left-wing revolutionaries: it eats its chil- titudes could lead to matching policies, threatened to boycott the network. Ms Kel- dren. Before Mr Trumpcame along, the cy- ones aimed at fashioning a new New Deal, ly was not removed, but Fox came firmly cle usuallyplayed outlike this: a challenger as Geoffrey Kabaservice of the Niskanen on to team Trump would win a Republican primary by ac- Centre, a think-tank, puts it. A national pro- cusing his opponent of being a Washing- ject America’s right could support might Don’t be stupid, be a smarty ton insider who had betrayed the conser- ease the rigidity of a movement some of What happened between 2009 and 2015to vative cause. He would then head off to which borders on anarchism in its hostility bring about the shift in non-college white Washingtonto rail against business as usu- to government and much of which voters Mr Trump profited from? The great al for a few election cycles before being at- equates compromise with treachery. But if recession which followed the financial cri- tacked in his turn as a representative of the based on white resentment, and thus in- sis of 2008 might suggest an economic hated establishment. tent on excluding some Americans from its cause; the presidency of Barack Obama At the moment this dynamic appears to promise, it could entrench as many pro- suggests a racial one. Neither explanation be workingin MrTrump’sfavour,silencing blems as it solved. 7 is wholly satisfactory. The Obama presidency began with credit shrinking, factories closing and homes being repossessed. But these condi- tions hit Democratic-voting minorities the hardest. Frustration at stagnant incomes could be to blame, but Mr Reagan and both Bushes were elected while median wages were growing only slowly. It is hard to see whya continuation ofthe same conditions should result in victory forMr Trump. And data released after the election showed that blue-collar wages had in fact been growing at their strongest pace in years. Among the Republican Party’s oppo- nents on the left, it is widely held that Mr Obama’s election drew out racial preju- dices of the sort Republicans have used since Nixon’s “southern strategy”. There is truth in this, though also some oversimpli- fication. The most comprehensive recent survey of the influence of racial attitudes An inspiring display of unity United States The Economist April 21st 2018 23

Also in this section 24 Donald Trump loves Sean Hannity 24 Racist laws on juries 25 Property prices and demography 26 Despondent farmers 27 Lexington: Comey’s book

For daily analysis and debate on America, visit Economist.com/unitedstates Economist.com/blogs/democracyinamerica

Refugees such as Iranian Bahais and Iraqi Yazidis, have also been harmed by the policy Yearning to be free? Bad luck change, facing admission declines of 98%. Admissions of Christians, which were roughly equal to those ofMuslims in previ- ous years, have now surged to 58% ofall in- coming refugees. NEW YORK The professed reason for the decline in admissions is to protect national security America is on trackto admit the fewest refugees in fourdecades through, as Mr Trump terms it, “extreme URING the Iraq war, Suleiman’s fam- trying to flee from Syria, which America, vetting”. The additional measures have Dily worked closely with the American along with Britain and France, recently been kept vague, to avoid giving “our play- army in Mosul, as interpreters. When Is- bombed to protest against a chemical- book to our enemies” in the words of one lamic State tookthe city over—and its fight- weapons attack, are having an even official. Under Barack Obama’s adminis- ers began driving around the city to search tougher time. Whereas 6,557 were admit- tration American screening was already for them—they fled east to Erbil, before IS ted in 2017, only 44 have been in 2018. Ad- amongthe toughest in the world, requiring came there, too. Suleiman (not his real missions from Iraq, Somalia and Iran have interviews, continuous background name) is now in Amman, Jordan, waiting declined by similarly steep margins. checks, fingerprinting and iris scans. For to hear about his long-stalled refugee case. During his campaign, Mr Trump pro- some applicants, the process could take Without a work permit, he is running out posed a “complete and total shutdown of over two years to complete. Under Mr ofcash. “Someone needs to tell me wheth- Muslims entering the United States”. He Trump’s administration, the process has er to go to jail, go to hell, or go to the United appears to be working steadily towards got more extreme still. States,” he says. that goal. From 2013 to 2017, Muslims made These checks appear to be effective. A For Iraqis seeking to flee to America as up 41% ofadmitted refugees. But more than recent study by the Cato Institute, a liber- refugees, Suleiman’s story is a typical one. halfway through the current fiscal year, tarian think-tank, found thatthe rate ofvet- In his first week in office, Donald Trump they make up just 17%. Beleaguered reli- ting failure, when a person with terrorist hastily signed a travel ban, suspending all gious minorities from Muslim countries, sympathies is allowed into America and refugee admissions for 120 days, which goes on to commit an attack, is vanishingly plunged travellers’ plans into chaos and small: one in 29m. The study also found triggered mass protests. The travel ban has Return to sender that the chance of an American dying at been withdrawn and resuscitated several United States, refugee admissions, ’000 the handsofan improperlyadmitted terro- times in response to legal challenges. Its rist was one in 328m. third incarnation, which is still in effect, 100 Bureaucratic tweaks are also slowing will be challenged before the Supreme 80 the flow ofrefugees. To be admitted, a refu- Court next week. It has already had a dras- gee applicant must be screened in person tic impact on refugee admissions. 60 by agents from the Department of Home- DHS DHS In fiscal year 2018, the first one com- 40 land Security ( ). But the has been pletelygoverned bythe Trump administra- reassigning agents who conduct these in- tion, America is on track to resettle only 20 terviews and has also reduced foreign trips The Econo- to carry out such screenings, leaving many 20,800 refugees according to 0 mist’s calculations—a 61% reduction from 2002 04 06 08 10 12 14 16 18* applicants in limbo. Medical and back- the previous year, and the fewest since Fiscal years ending September 30th ground checks expire after a set time, 1980, when the modern system of admis- Sources: Refugee Processing prompting some to restart the lengthy pro- sions was established (see chart). Those Centre; The Economist *Forecast cess. “Even without the travel ban, there 1 24 United States The Economist April 21st 2018

Juries Sean Hannity Fox and friends Tipping the scales

WASHINGTON, DC Michael Cohen has all the best clients NEW ORLEANS HEN Donald Trump’slawyer, Fox, let alone his 3m viewers, that Mr The racist origin oftwo states’ laws on Michael Cohen, was raided by the Cohen was his attorney.Happily for Mr W juries may help bring about change FBI last week, it was the biggest story in Hannity,the media company,which America. But the news moves fast in cannot afford to lose another big star to WO of the jurors who sat in judgment Trumpland. By April16th it was only the scandal in the wake ofBill O’Reilly’s Tat Willie Dunn junior’s murder trial in third-biggest sensation in the Manhattan sacking for sexual misdeeds last year, 2011 thought he had a plausible claim to courtroom where Mr Cohen and his and said it was surprised, but supportive. In a self-defence, and voted to acquit him. The the president’s lawyers had gathered in a less sticklerish sense, indeed, nothing other ten thought Mr Dunn was guilty not losing bid to stop the FBI reading his could be more appropriate than Mr of murder but of the lesser crime of man- documents. The second-biggest was the Hannity sharing the president’s lawyer. slaughter, and in Louisiana that’s good arrival ofthe porn star Stormy Daniels, Fox News is one ofMr Trump’smain enough. Mr Dunn is now about midway who is suing Mr Trumpand Mr Cohen to sources ofpolicy advice, and his comfort through a 20-year stretch in prison. be shot ofa hush agreement designed to blanket. It is where he tunes in to see how Whereas split verdicts are acceptable in stop her discussing an alleged affairwith his latest tweet is going down with his England, in America they can convict peo- the president. The biggest sensation was supporters, and to hear that they love ple only in Louisiana and Oregon, each of a revelation, wrung from Mr Cohen’s him, even if55% ofAmericans do not. which allows convictions in most felony lawyers by the judge’s order, that one of The news channel has supplied several cases when ten of 12 jurors agree. Now in his three legal clients was Sean Hannity. ofhis recent senior hires, including John Louisiana a proposal to put the question of Mr Hannity,whose Fox News show Bolton, the national-security adviser, a reforming the law before voters has was until recently the most popular on formerFox News pundit. And Mr Han- cleared the state Senate and is pending in cable-TV news, downplayed the relation- nity,another tough-talking New Yorker, the House; and in Oregon prosecutors, the ship. He said he had consulted Mr Cohen who feedsMr Trump’slove ofconspiracy law’s staunchest defenders, are talking only on minor issues, chiefly involving theories and hatred ofsnooty elites, is his about supporting a change. real estate. So not, he implied, hush agree- closest confidant on Fox. The shift of sentiment comes amid re- ments with porn stars. Even so, sticklers Mr Hannity’s future looks rosy.Mr newed discussion of the law’s shameful forjournalistic propriety found this a Trump’snominee forsecretary ofstate, historyand troublingeffects. TheAdvocate, trifle inappropriate. Mr Hannity had Mike Pompeo, is struggling to get con- Louisiana’s largest newspaper, recently an- lambasted the raids on Mr Cohen as a firmed by the Senate; maybe Mr Hannity alysed the outcomes ofnearly1,000 felony “witch-hunt”, without mentioning to could replace him? Don’t laugh. Really. trials. About two-fifths ended with split verdicts, which were 30% more likely when the defendantwasblack—as, in Loui- siana, most are. Though the state’s popula- tion is about one-third black, the prison population—the largest, per head, in the world—is two-thirds black. The newspaper also found that black people are heavily underrepresented on the juries that send people to jail, often for life. Mr Dunn was found guilty by an all- white jury, even though the community it was drawn from is nearly half African- American. It is not a great look for a Deep South state with a history of slavery and discrimination. Louisiana required unanimousverdicts for its first 80 years of statehood, but after the civil war newly enfranchised black people started to serve on juries. The split- You pretend to grill me and I’ll pretend to be angry verdict law was adopted as part of Louisi- ana’s constitutional convention in 1898, the stated purpose of which was “to estab- 2 are many, many ways to throw sand into to 45,000—the lowest ever—though the ac- lish the supremacy of the white race”. It the gears to keep the refugee pipeline from tual number will be less than half that. So aimed to ensure that, if a couple of blacks moving,” says Bill Frelick, director of the long as the White House does not articu- were somehow seated on a jury, their refugee programme at Human Rights late a policy of explicit exclusion, the votes could be ignored. According to Law- Watch, an advocacy group. chances of a successful court challenge are rence Powell of Tulane University in New Under American law, the executive low. “They’ve clearly found a legal way to Orleans, Louisiana felt the need for this branch has nearly complete authority over enforce the Muslim ban,” says Mark Het- law more than other southern states did refugee policy. With minimal involvement field, the president ofHIAS, a refugee-reset- because it had a unique tradition of “free from Congress, the president can set a cap tlementagency. “They’ve realised thatthey people of colour” (mixed-race free people, on the annual number of refugees admit- can turn up the security vetting and keep often ofSpanish or French origin, especial- ted. MrTrump, forexample, has set this cap everyone out.” 7 ly clustered in New Orleans), who were ag-1 The Economist April 21st 2018 United States 25

2 itating for political rights more forcefully tory”. Months later, in 1934, voters ap- as many Americans moved to New York’s than most newly freed slaves dared to. proved the law allowing split verdicts. suburbs as moved to the Big Apple. The Oregon’s split-verdict law was the pro- Today, split-jury verdicts play out in large metro areas that have added the most duct of a different sort of racism. It was quite different ways in the only two states people—Dallas, Houston and Atlanta, for passed in protest against a manslaughter that allow them. In Louisiana, the law’s example—have relatively small down- verdict handed down in 1933 in a widely racist stench remains, thanks to the state’s town areas and are dominated by residen- publicised case in which the accused mur- demographics and its struggles with mass tial neighbourhoods that feel every bit as derer was Jewish. Eleven jurors had sup- incarceration—which are attributable in suburban as Stepford. ported the murder charge, but there was part to a law that makes it easier for prose- The last time Americans fled the cities one holdout. The killer got a short prison cutorstowin theircases. Anti-Semitism,by for the suburbs, from the 1950sto the 1980s, term, spawning outrage. The Morning Ore- contrast, is of little moment in today’s Ore- they were driven primarily by fear of gonian opined that “the vast immigration gon, and the law merely gives a helping crime. This time the migration is the conse- into America from southern and eastern hand to prosecutors in getting defendants quence of the cities’ success, not their fail- Europe, ofpeople untrained in the jury sys- sent down. Nevertheless, change may be ure. Housing and rental prices in many of tem, have combined to make the jury of 12 coming to the state that brought the world the country’s largest metro areas have increasingly unwieldy and unsatisfac- “Portlandia”. 7 soared, inspiring residents to pack up and move out. In Los Angeles and San Francis- co median home prices are more than ten Property prices and demography times median household incomes. The ra- tio is only slightly better in Boston and Se- The burbs are back attle. A retired school teacher boarding a plane from Los Angeles to Austin, where she plans to move to the suburbs later this year, lamented: “Who can afford to live in Los Angeles any more?” HAYS COUNTY, TEXAS Older people are not the only ones making such moves. Taylor Felan, a 30- Americans are once more fleeing the cities forthe suburbs year-old banker, moved to San Marcos UST as Cody Butler and Joey Trombetta wise. Analysis of United States Census Bu- with his wife a year ago after they realised Jwere searching for a spot to open a sec- reau data by William Frey, a demographer that selling their shabby home in Austin ond branch of their Austin-based fitness at the Brookings Institution, a think-tank, would give them enough cash to build a boutique, Heat Bootcamp, they began los- shows that lower-density suburbs and ex- newone on an acre (0.4 hectare) lotin Hays ing business. Their clients weren’t trading urbs—areas separated from cities by rural County. He is far from alone. According to their kettlebells and TRX bands for some land—have been growing more quickly the National Association of Realtors, a other form of corporal torture; they were since the Great Recession, while the trade association for estate agents, more leaving town. “Every few months some- growth of urban cores is slowing. Since than half of Americans under the age of one would come up to us and say ‘Love 2012, considered the peakyearofthe urban 37—the majority of home-buyers—are set- you guys, but we need more space and renaissance, the growth ofurban cores has tling in suburban places. In 2017, the Cen- can’t afford it in Austin so we’re moving to fallen by half and exurban county growth susBureaureleased data suggestingthat 25- the suburbs in Hays County’,” Mr Trom- has quadrupled. to 29-year-olds are a quarter more likely to betta recalls. The buff business partners Looking at the same data, Wendell Cox, move from the city to the suburbs than to decided to follow their customers. After who runs Demographia, an urban plan- go in the opposite direction; older millen- outfitting an expansive space formerly oc- ningconsultancy in St Louis, found that be- nials are more than twice as likely. Eco- cupied by a grocery chain with rubber tween 2016 and 2017 nearly 438,000 net nomic recovery and easier mortgages have floors, mirrors, and red and blue mood residents left the counties that included ur- helped them on their way. lights befitting a nightclub, Heat Bootcamp ban cores, while suburban counties of the Despite the widespread perception that opened up in San Marcos, the quaint seat same metro areas gained 252,000 net resi- millennials are allergic to cars, gardens and ofHays County. dents. Growth in America’s three largest chain stores, they are actually less urban The county, where builders have trans- metropolitan areas is sluggish. Los Angeles than the previous generation. Analysis by formed farmland into gleaming new sub- grew by just 0.19% from 2016 to 2017, while FiveThirtyEight, a data-journalism web- divisions with slogans like “Where Austin New York expanded by 0.23% and Chicago site, found that while the share of 25- to 34- goes to grow”, expanded by 5% between actually shrank by 0.14%. In 2017, five times year olds with bachelor’s degrees living in July 2016 and July 2017. It is an extreme ex- hyper-urban neighbourhoods grew by 17% ample ofa wider trend sweeping America: from 2000 to the period between 2009 the resurgence ofthe suburb. The Great Re- Bye bye bright lights and 2013, as a whole millennials were less cession, combined with a mortgage crisis, United States, population in urban and suburban likely to live in urban areas than young hindered mobility and curtailed home- counties, % change on a year earlier people were in 2000. buying, dragging down the growth of the 2.5 As more young people decamp from suburbs. At the same time, urban cores be- the cities to the suburbs, Mr Frey wonders 2.0 gan to grow more quickly than they had Outer suburbs* if a hybrid might develop, where people before, inspiring questions about the fu- 1.5 who leave cities—especially the most vi- ture of America’s development. Academ- 1.0 brantand expensive ones—will gravitate to ics began theorisingthat perhaps the “back Urban core places with similar amenities. Or trans- 0.5 to the city” movement would endure, dri- + form them—asishappeningin San Marcos. ven by millennials who cared less about 0 Though it has its fairshare of cookie-cutter – white picket fences than about being with- 0.5 homes and strip malls, its well-preserved in strolling distance of cafés hawking cold 20010305070911131517 old downtown boasts a brewery and beer brew and avocado toast. Source: William H. Frey, *Counties in metropolitan areas garden, a yoga studio and, now, a boot- Recent migration trends suggest other- Brookings Institution with more than 500,000 people camp boutique. 7 26 United States The Economist April 21st 2018

Despondent farmers soyabeans languishing at $10 a bushel (compared with $17 in 2013) they cannot af- A pig’s ear of a policy ford to lose their biggest export market to Brazil and Argentina. Support for Mr Trump among farmers seems to be slipping. According to a survey by AgriPulse, a trade website, 67% sup- CHICAGO ported him in 2016 and 45% would now. In an apparent attempt to placate them, he The president’s protectionism is alienating his farmland fans suggested on April 12th that he might con- VERYONE in pork production is sider rejoining the TPP. But five days later, “Emore anxious than they have been The lean years he completed the full 360 degrees, tweet- for20 years,” saysJimmyTosh, a pigfarmer United States, net farm income, $bn ing that “I don’t like the deal.” from north-western Tennessee. As for the Farmers may get more joy from conces- grain farmers, he reckons things are worse 150 sions on the ethanol front. Under the Re- than at any time since the 1980s. The farm- 125 newable Fuel Standard, oil firms have to ers’ latest worry is the five-yearly Farm Bill, blend billions of gallons of ethanol into which was submitted to Congress on April 100 fuel each year. Around 38% of America’s 18th. But Donald Trump, whom they over- 75 corn is used to make ethanol, but the pro- whelmingly supported for the presidency, cess is of questionable value to the envi- has provided them with plenty of other 50 ronment, and the sale of fuel containing reasons to grouse. 25 15% ethanol is banned in the summer be- Times were already tough. Farm in- cause of smog. Mr Trump has suggested come has halved from a peak of $124bn in 0 that he might direct the Environmental 2013 to a forecast$60bn thisyear(see chart) 2008 10 12 14 16 18* Protection Agency to lift this ban. Another because the supply of global grains is out- Source: Department of Agriculture *Forecast possibility is an increase in the ethanol strippingdemand, the Chinese economy is mandate—the percentage that fuel must slowing and demand forethanol based on tariff on American pork imposed by the contain. At present it stands at 10%. “Even corn (maize) is slack. Chinese government on April 2nd in retali- an increase to 12% all year would be a huge The Farm Bill should be good news for ation forMr Trump’stariffs. boon for corn farmers,” says Decker Walk- farmers, covering, as it usually does, subsi- China is the third-largest market for er, a partner at the Boston Consulting diesforthem and, through the food stamps American pigs and the biggest market for Group. This would incense not just envi- programme, for the poor. The previous bill variety meats (pig feet, livers and hearts), ronmentalists (who already hate Mr included direct subsidies for farmers to the which most Americans do not eat. Last Trump), but also the oil lobby, which ob- tune of $7bn a year, a land-conservation year America sold China 496,000 tonnes jects to the cost of the ethanol mandate, programme costing some $5bn and crop of pork worth $1.1bn, or 20% of total pork and big buyers of animal feed, whose bills insurance, which comes at a price tag ofup exports. Farmers expect to lose most if not go up ifmore corn is used to make ethanol. to $8bn. In the past, a deal between Repub- all of this business. Domestic prices are, as But a shift in the ethanol rules would licans and Democrats has ensured that a result, expected to fall by $6-8 per pig. In not make up for losing the largest market both farmers and poor people got their Mr Tosh’scase this will translate into a loss on the planet. Farmers are keen on the cash. But the farmers are worried, this time ofup to $6m a year. open markets that have benefited them round, that Republicans are more deter- Soyabean farmers stand to lose even greatly. MrTosh says he has now moved to mined to cut welfare and less concerned to more than their peers farming livestock or the centre politically. At the upcoming Sen- protect farmers than they used to be. Not other crops. One-quarter of their produc- ate race in Tennessee he will vote for Phil long ago, Mr Trump suggested cutting crop tion is exported to China. With prices of Bredesen, the Democrat. 7 insurance by a third. Michael Conway, the congressman who submitted the bill, did not include the suggestion in his draft, but conservative groups such as the Heritage Foundation have lambasted the bill for, in their view, doing nothing to cut wasteful subsidy programmes. It will be bitterly de- bated over the coming months. But trade is the farmers’ biggest worry. MrTrump haspulled outofthe Trans-Pacif- ic Partnership (TPP), a colossal trade agree- ment between 12 Pacific Rim countries, threatened to leave the North American Free-Trade Agreement and slapped tariffs on imports of steel (25%) and aluminium (10%). All those moves are problematic for agriculture. Mr Tosh says that he has al- ready been hit by the steel and aluminium tariffs. He is planning to increase his herd of pigs from 750,000 to 950,000 and the costs of the new barns needed have gone through the roof thanks to the higher price ofrebar, a steel rod forreinforcing concrete. He expects to be hit even harder by the 25% Bringing home less bacon The Economist April 21st 2018 United States 27 Lexington The bad things good men do

By trying to protect the FBI, James Comey damaged it and sullied his own reputation would be seen as“non-political”. Itsuborned the authorityof the Democratic attorney-general, Loretta Lynch, to decide whether Mrs Clinton should face charges. It consigned the Democratic candidate to political purgatory; even many of her supporters henceforth believed she wascrooked. And farfrom insulating the FBI against accusations of bias, Mr Comey’s ruse united the elec- torate against it. Democrats accused him of gratuitously blacken- ing Mrs Clinton’s name. Republicans accused him of failing to punish her wrongdoing. That suspicion, in turn, prepared the ground for Mr Trump’s bigger assault on the FBI and Robert Mueller, the special counsel who now runs the Russia probe. Mr Comey’s tactic also established a pattern that would lead him, three months later, to intrude into the election more egre- giously. After a new trove ofClinton e-mails emerged, a couple of weeks before the poll, he broke rules against electoral interfer- ence by informing Congress that he was reopening his investiga- tion. Mrs Clinton’s polling lead collapsed, never to recover, even after Mr Comey let it be known, a couple of days before the elec- tion, that there was nothing to the new e-mails after all. Though it is impossible to prove he cost Mrs Clinton the presidency, it seems likely. That was some achievement fora discreet investiga- HROUGH the first half of 2016, James Comey, then FBI direc- tor dedicated to the sanctity ofblind justice. Ttor, wrestled with what he considered to be an awful pro- Mr Comey presents his book as a meditation on “ethical lead- blem. For almost a year his agents had been investigating Hillary ership”. And indeed the former prosecutor is plainly honest. An Clinton’s mishandling of classified information as secretary of illustrious career battling mobsters (whose values and methods state. Were this to result in a criminal charge, America would face he recallsamid the mirrored glass ofTrump Tower) and Dick Che- a crisis, for Mrs Clinton was the presumptive Democratic presi- ney on torture offers much proof of that. It also provides ground dential candidate. And like many Republicans back then, Mr Co- to trust Mr Comey’s word against Mr Trump’s over the circum- mey, a devout Christian interested in ethics, considered her Re- stances of his sacking. That conflict, which forms a relatively mi- publican opponent unfit to be president. Yet this was not Mr nor and unsurprising part of his book, could be important to Mr Comey’s worry. Mueller’s investigation, and there is little reason to think, as some Mrs Clinton, as he acknowledges in his memoir, “A Higher claim, that Mr Comey’s memoir has damaged his standing as a Loyalty”, was never in serious danger of being indicted. Former witness. His testimony has already been delivered to Congress. officials are charged with mishandling intelligence rarely and There is also no cause to suppose, as many Trump fans do, that only ifthey are shown to have done so knowingly, and there was Mr Comey is part of a “deep state” plot against the president. His little evidence that she had. The trouble was, millions of Repub- decision not to disclose the fact that Mr Trump’s team was also licans, deceived by decades of anti-Clinton conspiracy theories, under investigation, even as the scandal over Mrs Clinton’s e- were already convinced ofherguilt. MrComey’s “challenge” was mails raged, was another service to the president, albeit a defen- to spin the results of his investigation in a way that would deflect sible one. And the Russia probe that has grown from that seedling their inevitable anger and suspicion away from the FBI. He need- is hardly the “witch-hunt” Mr Trump says it is. It has led to several ed to close “the case in a way that maintained the confidence of criminal charges. Mr Comey, in short, has played an upstanding, the American people that their justice system was working in an attimesheroic, partin Trump’sAmerica. Yet, given hislead role in honest, competent and non-political manner.” bringingit into being, his bookis most useful as a guide to how an It is strange that Mr Comey, even now, defends this preoccupa- ethical leader screwed up. tion with howthe FBI’sdiscreetinnerworkingwasperceived, not on what it concluded. His well-written memoir, which combines Comey island a powerful argument for principled leadership with some acid Mr Comey’s error was to think his good intentions, chiefly his comment on Donald Trump’smendacious, “ego driven” alterna- concern forthe FBI’s independence, justified his overstepping the tive, contains a lot of advice to the contrary. “Lady Justice wears a boundaries of institutional propriety. His main excuse, that the blindfold,” he writes. “She is not supposed to peekout to see how bureau was fated to play a role in the 2016 election anyway—it her political master wishes her to weigh a matter.” When it came was investigating both presidential candidates, for goodness to dealing with presidents, he stuck by that. He was sacked last sake—emphasiseshisdifficulty. Butit isalso self-serving and illog- year after, he claims credibly, denying Mr Trump’s request to ical. The threat of politicisation, to which extreme polarisation back-pedal a counter-intelligence investigation into the presi- will make all independent institutions prone, argues for scrupu- dent’s campaign team. But when it came to the people who elect lous professionalism, not compensatory activism. Mr Comey, presidents, Mr Comey peeked, with dire consequences. who kept on his desk as a reminder of the FBI’s need for “over- He called a press conference at which he lambasted Mrs Clin- sightand restraint” a requestbyJ. EdgarHooverto wiretap Martin ton for being “extremely careless”—and then added, on the heels Luther King, had no excuse not to know that. His reputation will ofthat sensational news, that the FBI was letting her offthe hook. always sufferforhis horrendous error, however many thousands Itishard to imagine the universe in which MrComeythought this ofbooks he is about to sell. 7 28 The Americas The Economist April 21st 2018

Also in this section 29 A Central American border dispute 29 Colombia’s peace process 30 Bello: The spirit of Lima

Canadian politics self-rule. Acentury later, agrarian socialists won control of provincial governments in A different kind of populism the western prairies. Nonetheless, occasional victories by political outsiders have mostly been limit- ed to the provinces. Because Canada’s OTTAWA population is concentrated in Ontario and Quebec, federal elections have hinged on Anti-elitist politicians are starting to court immigrants ratherthan demonise them. the east, where politics have focused on That is no reason forliberals to be complacent placating Quebec’s separatists. Voters else- VER since Doug Ford became the leader çois Legault, a cultural nationalist, is lead- where had reason to feel ignored. Eof Ontario’s centre-right Progressive ing polls for a provincial election in Octo- Only in 2006 did a candidate from the Conservative Party on March 10th, he has ber. And in Alberta, a recently unified hinterlands win by opposingthe Montreal- been asked if he is Canada’s Donald party led by Jason Kenney, a conservative Toronto axis. The dourStephen Harper did Trump. The two have much in common. accused of sharing Mr Trump’s penchant not look like a cowboy populist, but struck Big, beefy and blond, Mr Ford inherited a for “alternative facts”, enjoys a vast lead. a chord by accusingdistant overlords in Ot- large product-labelling company, yet cam- National polls tell a similar story. By last tawa of stifling Canada’s energy-rich west paigns against elites who “drink cham- month the ruling Liberal Party, led by Jus- with regulation. Moreover, his calls for pagne with their pinkies in the air”. He tin Trudeau, had fallen into a rough tie with family values and law and order resonated loathes regulation and taxes, and vows to the opposition Conservatives (see chart). with immigrants in suburban Ontario as repeal Ontario’s carbon cap-and-trade sys- After a long spell basking in global adula- well as with his base in rural Alberta. tem. Two books about his late brother Rob, tion as an antidote to Mr Trump, Canada is Mr Harper spent a decade in power. Toronto’s crack-smoking mayor, paint the no longer populist-proof, liberals worry. Once he could no longerrun asan outsider, surviving Ford as impulsive, undisci- Political upheaval is not new to Cana- voters swung back to the establishment; plined, indiscreet and a bully. da. After Canadians declined to join the re- Mr Trudeau is the son of a former prime However, the comparison falls apart volting American colonies, rebellions minister. But in office, Mr Trudeau has in- when it comes to immigration. Mr Ford be- erupted in Ontario and Quebec in 1837 vited populist scorn, only partly because moans the loss of 300,000 manufacturing against appointed leaders who resisted of his dynastic leg-up. Policy-wise, he en- jobs from Ontario, but blames an incom- raged the right by planning a national car- petent Liberal Party, not foreigners. Far bon tax and making non-profits applying from bashing immigrants, he aims to woo The rise of the centre-right for grants pledge to support legal abortion. socially conservative ones. For example, Canada, centre-right parties’ margin over He was also mocked fordressinghis family he wants to repeal a sex-education curricu- closest rival, percentage points in Bollywood garb on a trip to India, and lum for primary schools that lists six gen- Last federal election result: Liberal majority holidaying on a private Caribbean island. 40 ders and four sexual orientations. Many Alberta There is little demand for Trump-style immigrant parents pulled their children United Conservative 30 isolationism in Canada. With trade equiv- Ontario Party GDP from classes when it was launched in 2015. Progressive 20 alent to 64% of , it would strike voters Even a colour-blind populism could be Conservatives as absurd. And even a whiff of racial preju- 10 dangerous. Some of Canada’s new popu- + dice would be political suicide in a country 0 list leaders are reckless with facts, impa- – where 20% of citizens are immigrants tient with legal constraints and make bud- 10 (compared with 13% in the United States) get-busting promises. And they might win. Quebec and the native-born are obsessed with be- Federal Coalition for 20 Quebec’s Future Polls suggest that Mr Ford will capture the Conservative Party ingnice. Far-rightgroupsare active in every premiership of Ontario, the country’s sec- 30 Canadian province, but they are small. 2015 16 17 18 ond-most-powerful office, at an election Violent zealots, such as the shooter who Source: National and provincial polls on June 7th. In Quebec, the party of Fran- killed six Muslims in a Quebec City1 The Economist April 21st 2018 The Americas 29

2 mosque to protest Mr Trudeau’s welcom- fishing and logging by Guatemalans. A de- ing ofrefugees, are even rarer. MEXICO feat, however, would be catastrophic. Gua- Instead of ethnic division, Canada’s temala’s demand covers a large hunk of Carib. populists offer unrealistic fixes. For exam- BELIZE Sea the mainland, several islands and a wide ple, Mr Ford says he will fire the head of swathe of sea territory. In total, the court Ontario’selectricutility,which the premier Adjacency zone Belmopan would rule on an area containing 43% of cannot do. Mr Kenney wants a referendum Belize’s people, 50% of its exports and 38% Main Administered on federal revenue-sharing, from which roads by Belize, of its GDP. “If Belize wins, we win noth- Alberta cannot withdraw.Both promise to claimed by ing,” says Osmond Martinez, a professor at Guatemala pay for tax cuts with unspecified savings. Galen University in Belmopan, who ex- Puerto And all populists claim to defend the Barrios pects Belizeans to vote no. “If we lose, we masses against corrupt elites. GUATEMALA lose12,000 [square] km ofour country.” The targets of such attacks vary. In On- If the case does reach the ICJ, the court tario, where the premier is openly lesbian, Guatemala HONDURAS is expected to take up to four years to rule. Mr Ford’s alpha-male persona appeals to City New And now that Guatemala has in effect giv- highway 100 km men who find MrTrudeau’s feminism grat- en Belize a veto over its own dismember- ing. In Alberta, Mr Kenney—who crafted ment, if Belize does vote no, passions are Mr Harper’s outreach to conservative non- chunk of Central America’s Caribbean likely to wane further. Residents along the whites—rails against Ottawa and crony coast is far older than Belize itself. In the frontier tend to get along. Belize, which capitalism. And in Quebec, nativism has 1700s Spain agreed to let Britain cut timber considers itself a Caribbean country,is be- flourished. Its Francophone residents have in the northern half of modern Belize. coming more Latin as Spanish-speaking long fought to protect their language and Britons searching for mahogany crept migrants flock in. And next year Guatema- culture. Mr Legault may not call immi- southwards. After Spain retreated from la, according to its president, Jimmy Mo- grants rapists—this is Canada, after all—but Latin America in the 1800s, Britain formal- rales, will get at last what Britain never he does want to cut their inflow by 20%, ly took over the entire territory, naming it built: a four-lane, $600m highway running and subject them to a “values test”. British Honduras. The new state of Guate- 200km (135 miles) to the Caribbean coast. The entry of the populists does not en- mala said it had “inherited” the region Footing much of the bill is not its old rival, sure an early exit for Mr Trudeau. Andrew from Spain. Guatemala gave up its claim in Britain, but a new friend: Taiwan. 7 Scheer, the federal opposition leader, will 1859, in exchange forBritain building a road need to court culturally anxious Quebeck- from Guatemala Cityto the Caribbean. But ers, assembly-line workers in Ontario and the road nevermaterialised, and Guatema- Colombia’s peace process western cowboys alike—a feat that only Mr la declared the treaty void. Harper has achieved so far. He has sought The dispute remained an irritant for A long final to keep his party free of unsavoury influ- most of the 20th century. Both Britain and ences. In January he expelled from his cau- Guatemala intermittently deployed troops chapter cus a senator whose website maligned the to the region, and the threat of invasion by work ethic of indigenous Canadians. Guatemala’smilitarydictatorscontributed BOGOTÁ Nonetheless, he will need to win the vot- to the relatively late decolonisation of Be- Attacks by a rump guerrilla force show ers now backing Mr Ford and his ilk at the lize; it did not gain independence until1981. that organised crime remains a threat next election in 2019. Perhaps the best test Although Guatemala recognised Belize in of the country’s reputation formoderation 1991, it reasserted its territorial claim eight UAN MANUEL SANTOS chose his words is whether he can run a competitive race years later. The two countries have set up Jcarefully after signing a peace deal with without making ridiculous promises or an “adjacency zone” 2km wide to separate Colombia’s FARC guerrillas in 2016, offi- tarring his opponents as un-Canadian. 7 them. Tensions occasionally flare over cially ending a 50-year-long conflict. “To- shootings ofpeople crossing the border. day marks the beginning of the end of the Only in 2008 did their leaders bury the suffering, the pain and the tragedy of the Borders in Central America hatchet. After years of stalled talks, they war,” the president said, well aware that re- agreed to resolve the dispute at the ICJ—if integrating the FARC into society would Half of Belize, and only if both countries’ voters ap- bring its own travails. Overall, the peace proved via referendum. That is the latest process has succeeded; the Colombian please sign that old grudges are fading. Guatema- countryside is saferthan it has been in gen- la long ago dropped its demand from its erations. Buta fewholdoutsstill trouble Mr constitution, and no longer reserves three Santos, whose presidency ends on August empty seats in congress marked “Belize” 7th, and will test his successor as well. Guatemala votes to demand the and draped in its national colours. With On April 13th Lenín Moreno, the presi- majorityofits neighbour’s territory the country’s political agenda dominated dent of Ecuador, announced that two of T SOUNDS like an outrageous act of pro- by corruption and crime, a decade passed his country’s journalists and a driver had Ivocation. In a referendum on April 15th, before it held its referendum. Although been killed near the Colombian border. Guatemalan voters chose to file a claim at 89% of people who voted chose to file at They had been kidnapped on March 26th the International Court of Justice (ICJ) de- the ICJ, turnout was just 26%. “Most people by the Oliver Sinisterra Front, a gang of manding sovereignty over 53% of Belize, consider it irrelevant,” says Fernando Car- 70-80 former FARC guerrillas who refused their eastern neighbour. The Belizean gov- rera, a former foreign minister. to demobilise and broke off from the orga- ernment, however, responded with con- Now it is Belize’s turn. The government nisation. Led by an Ecuadorean named gratulations, saying the result “contributes says its electoral roll will not be ready until Walter “Guacho” Artízala, the splinter further to the strengthening of democracy, 2019. Perhaps surprisingly, some Belizeans group has sought to retain a piece of the lu- peace and security”. It had reason to be support a “yes” vote. Winning at the ICJ crative trade making cocaine in southern sanguine: the most likely outcome is that would not only lift an age-old cloud over Colombia and northern Ecuador and ship- nothing will happen. the country, but also bring international ping it via the Pacific Ocean. Its fighters of- Guatemala’s demand for a bigger law to Belize’s side when policing illegal ten attack Ecuadorean security forces. 1 30 The Americas The Economist April 21st 2018

2 Mr Moreno promised last month to their former members. However, the new an media have published stories alleging send 12,000 soldiers and police to the re- FARC have not proven as reliable a partner that one of the sources of the shipment in gion to fight drug gangs, and in response to as Mr Santos might have hoped. On April question was none other than the Oliver the abductions the two countries have ar- 9th Colombian authorities arrested Seuxis Sinisterra Front. Mr Santrich vehemently rested 43 alleged members of the front. But Hernández Solarte, a FARC official who deniesthe charges. Butifevidence emerges determined guerrillas in mountainous ter- goes by the name Jesús Santrich and was to support such links, tenuous public sup- rain can prove remarkably resilient. On slated to take up one of ten Congressional port for the peace deal—the first draft of April 17th the Ecuadorean government an- seats reserved for the new party in July. He which was rejected by voters in a referen- nounced that the Oliver Sinisterra Front was charged with conspiring to export ten dum—could weaken even further. Colom- had kidnapped two more of its citizens, tonnes ofcocaine. bia’s presidential candidates are paying and played a disturbing video of the cap- FARC leaders have decried his arrest as close attention. Iván Duque, the front-run- tives in which they plead fortheir lives. an effort to discredit their party, and de- ner, hascampaigned on revisingthe pact to After transforming themselves into a manded that he not be extradited to the remove the FARC’s reserved legislative political party and renouncing violence, United States. Relying on reports from lo- seats and exclude drug-trafficking crimes the FARC have condemned the attacks by cal and American investigators, Colombi- from the deal’s lenient special court. 7 Bello The spirit of Lima

Even in the age ofDonald Trump, most ofLatin America supports American values. That could change HE last time the leaders of 30-odd this year. But at least the Americas’ heavy- Tcountries from the Americas met, in weights are not watching in silence. Panama in 2015, the presidents of the Un- “Democratic governance against cor- ited States and Cuba, longtime enemies, ruption”, the theme Mr Kuczynski picked shook hands. When the group recon- before he became a casualty ofit, was less vened in Lima this month, the bonhomie contentious. All the countries vowed to was gone. Raúl Castro, who is due to step do more to fight the scourge. As with the down as Cuba’s president on April 19th, declaration on Venezuela, this commit- did not come. His foreign minister, Bruno ment is mostly symbolic. The assembled Rodríguez, attended in his stead and lam- leaders, many of whom are caught up in basted “United States imperialism”. Do- scandals, cast themselves as priests, not nald Trump, who ended the detente with penitents. Brazil’s president, Michel Cuba, stayed home too. He sent his vice- Temer, extolled judicial investigations of president, Mike Pence, to denounce graft without mentioning his own efforts Cuba’s “despotic regime”. The stand-ins to avoid prosecution. Mexico’s Enrique blasted each other with quotations from Peña Nieto touted his country’s new Latin America’s liberator, Simón Bolívar. “anti-corruption system”, which lacks an Mr Pence: “A people that loves freedom gathering showed that the region can, fora independent prosecutor. It fell to Wilfred will in the end be free.” Mr Rodríguez: while, weather erratic engagement by the Elrington, Belize’s magnificently bearded “The United States seems destined by United States. On trade, Mr Trump’s pro- foreign minister, to admit that “none of Providence to plague America with tor- tectionist threats even have a silver lining, us…is in a position to cast the first stone.” ments in the name offreedom.” encouraging Latin countries to strengthen The Inter-American Convention Mr Pence probably thought he had links with each other. But what will hap- Against Corruption, signed in 1996, did won the duel. On the biggestquestion fac- pen when today’s leaders leave the scene? not succeed at preventing it. If the “Lima ing the summiteers—addressing tyranny The regional response to the crisis in commitment” fares better, it will be be- and hunger in Venezuela—the big coun- Venezuela has been led by the 14-country cause some countries’ judiciaries are em- tries agreed with the United States. This “Lima group” formed lastyear. (The United boldened and voters are angrier. Graft is a owes little to American leadership. Mr States wisely did not try to join, letting Lat- big issue in Brazil’s and Mexico’s elec- Trump is the first United States president in America take the lead). It was Pedro Pab- tions. In Peru, Colombia and Brazil prose- to skip an Americas summit since they lo Kuczynski, Peru’s formerpresident, who cutors are pursuing powerful politicians. began in 1994 (his excuse was the strike on disinvited Venezuela from the event, de- But democracy, which summoned up Syria). His absence reinforced the impres- spite protests by Cuba and others. Sixteen the spirit of Lima, could also banish it. In sion that his views on Latin America float summiteers, including Mr Pence, called on Mexico the front-runner is a left-wing between indifference and contempt. Venezuela to ensure that the presidential populist, Andrés Manuel López Obrador. Many leaders in Lima may have agreed election in May will be fairand to allow in Brazil’s election, meanwhile, is wide with both Bolivarian propositions. aid for the hungry. They were visibly frus- open. That puts the Lima group at risk of The biggest countries sided with the trated that they could do little more than losing its two biggest members. Voters United States because they are democra- cajole. Any sanctions tough enough to could easily be tempted by populists cies, with moderate leaders who are ap- sway the regime riskhurting ordinary Ven- vowing to clean up corruption. But such palled by the slow-motion disaster in ezuelans, said Martín Vizcarra, who be- candidates are unlikely to build strong in- Venezuela. The United States can endorse came Peru’s president in March after Mr stitutions, which are the best bulwark their actions even if it did not inspire Kuczynski was forced out, partly by a con- against it. Latin America’s luck could run them. Similarly, it was democracy that flict-of-interest scandal. The response was out. That is when the United States might drove the other big initiative in Lima, bol- muted in part because some of the leaders be most sorely missed as a steady partner stering efforts against corruption. The in Lima are lame ducks, due to be replaced fordemocracy and clean government. Asia The Economist April 21st 2018 31

Also in this section 32 Political factions in Japan 33 Protests about quotas in Bangladesh 33 China v Australia in the Pacific 34 Press freedom in Pakistan 36 Banyan: Asia’s relentlessly growing demand for wildlife

For daily analysis and debate on Asia, visit Economist.com/asia

North Korea The subsequent summit between America and North Korea threatensalmost The world’s most dangerous talk show the opposite outcome. Mr Trump and Mr Kim both talk about denuclearisation, and appear to have high expectations. But they see the forthcoming meeting through en- GANSEONG tirely different lenses. Mr Trump seems to believe that a com- Just because America and South Korea are willing to talkto the North does not bination oftougher sanctions and military mean they understand each other threats has brought Mr Kim to the negotiat- UDDENLY, everybody wants to talk to Moon, the “best president ever”. The price ing table. Once there, Mr Trump suggests, Sthe hermit king. On April 17th the Wash- of “reunification stocks”, such as railways he should presenta plan forcomplete, veri- ington Post reported that Mike Pompeo, the and construction companies, shot up. fiable and irreversible nuclear disarma- director of the CIA, met North Korea’s Meanwhile elderly conservatives staged ment. In the meantime America’s “maxi- leader, Kim Jong Un, over the Easter week- protests on Seoul’s subway against what mum pressure” on North Korea, including end. President Donald Trump more or less they see as a sell-out to the communists. the possibility of pre-emptive military ac- confirmed the story during a meeting with “If the summit is a success we can have tion, would not be relaxed. After North Ko- Japan’s prime minister, Shinzo Abe: “We the place up and running again in a rea begins dismantling its nuclear pro- have had direct talks at very high levels, ex- month,” says Woo Gye-keun of South Ko- gramme, anything might be possible. tremely high levels, with North Korea.” rea’s unification ministry. He is referring to Mr Kim, in all likelihood, has some- Mr Trump further indicated that his the inter-Korean transit office near Gan- thing very different in mind. Whenever summit with Mr Kim was likely to take seong, through which hundreds of thou- North Korea has talked in the past about place by early June. In the meantime, he sands of South Koreans passed at the “denuclearisation of the whole Korean said, he had given his “blessing” to talks height of a past period of detente, to enjoy peninsula”, it has made it clear that any re- about formally ending the Korean war (the cultural exchanges, family reunions and ductions of its own nuclear arsenal would shooting stopped in 1953) at a summit on hikes in the mountain park just across the depend on the departure of American April 27th between Mr Kim and Moon border in the North. The subsequent cool- forces from South Korea and the removal Jae-in, South Korea’s president. On April ing of relations left Mr Woo and his staff of the “nuclear umbrella” that America ex- 18th a senior South Korean official con- with nothing to do but scrub floors and tends to both South Korea and Japan. firmed that talks about a permanent peace dust countertops in the giant steel-and- Mr Kim would undoubtedly like to get agreement and a possible security guaran- glass building, in the hope that the tourists some relieffrom sanctionsand lockAmeri- tee for North Korea were on the table for would eventually return. ca into a drawn-out process of “phased, the inter-Korean summit, along with a synchronised measures to achieve peace”. joint statement about “denuclearisa- Cold showers needed He probably thinks that Mr Trump is pre- tion”—a polite term forscrappingNorth Ko- Alas, both summits are likely to disap- pared to talk to him directly only because rea’s nuclear arsenal. point, but in different ways. The South- North Korea is on the verge ofwielding nu- Suddenly, not only did the two sum- North talks will probably skirt hard topics clear missiles that could hit the American mits, which many had suspected would such as human rights. Moreover, restarting mainland. (No sitting American president never take place, seem on track; there was even cross-bordertourism, letalone heftier ever met Mr Kim’s father or grandfather, also a prospect of real discussions. The trade or investment, is impossible given from whom he inherited the job of dicta- term jongjun, which translates roughly as the dense thicket of international sanc- tor.) The summit is thus a recognition by “end of war”, began trending on Naver, tions around the North. Instead, Korea- America ofhiscountry’sstatusasa nuclear South Korea’sbiggest search engine. On so- watchers expect a focus on simpler goals power. Jonathan Pollack of the Brookings cial media, people rushed to thank Mr such asagreeingto regularfuture meetings. Institution, a think-tank, regards it as “mag-1 32 Asia The Economist April 21st 2018

2 ical thinking” to suppose that Mr Kim has eningthe alliance with South Korea and Ja- portant under Japan’s old system of multi- any intention ofgiving up his nukes. pan. North Korea and its protector, China, seat constituencies, whereby each district That does not mean that Mr Kim will have long wanted to decouple America elected 4-6 representatives. This arrange- come to the summit empty-handed. Mr from its regional allies. ment meant that LDP candidates in effect Pompeo must have been given enough en- Might Mr Trump accept such a dismal competed against one another, explains couragement to think it worth the presi- offer? It would be reassuring to think that Yasuhide Nakayama, an LDP politician, dent’s while to turn up. Mr Kim’s aim may the hawkish Mr Pompeo would counsel and needed the money and machinery of be to offer a concession big enough to en- against it. But Mr Trump likes Mr Pompeo, a faction to gain an advantage. tice Mr Trump into the kind of protracted his nominee as the next secretary of state, The abolition of multi-seat constituen- negotiation that would suit the North Ko- largely because he skilfully panders to the cies in 1994 undermined the main ratio- rean despot nicely. One possibility might moods and instincts of his boss. It would nale for strong factions, however. That be a moratorium on tests of nuclear de- also be characteristic of Mr Trump to play gave party leaders a chance to assert them- vices and of missiles with enough range to for the headlines and leave others to con- selves. Whereas Japan had previously rat- hit America. Mr Kim could hold out the front the thorny details. Gary Samore, a tled through prime ministers as the fac- prospect of never deploying such weap- former adviser to Barack Obama, thinks tions jockeyed (it has had more than twice ons in return for the lifting of some sanc- that even ifthe talks go nowhere it is better as many since the second world war as tions and progress towards the peace to talk than to prepare for war. But like Mr Britain), Messrs Koizumi and Abe have treaty that he hopes might eventually lead Pollack, he haslowexpectations. Asanoth- been the longest-serving since the 1960s. to the departure ofAmerican troops. er Obama administration official ruefully Mr Abe has concentrated power in the cab- For his part, Mr Trump could boast of observed, talking to the Kim family is like inet secretariat, vastly expanding its staff. honouring his commitment to remove the going to Taco Bell. Youmight go looking for His inner circle bypass ministries and the threat to America of North Korean mis- something new, but you always end up party’s own mechanisms to write policies, siles, albeit at the cost of potentially weak- with the same thing. 7 especially on military and economic is- sues, says Harukata Takenaka of the Na- tional Graduate Institute forPolicy Studies, Politics in Japan a research institution. The party leadership selects the LDP’s Revenge of the factions electoral candidates and makes appoint- ments within the bureaucracy. Advance- ment depends more on showing loyalty to the leadership than to any faction. Mr Abe nods to factions when sharing out junior TOKYO government posts, but gives the most pow- erful ministriesto his preferred candidates. The prime minister,scourge ofthe LDP’s cliques, may fallvictim to them All this accelerates the drift away from HE last thing that Shinzo Abe, Japan’s rival factions. These are strangely formal the consensual politics of the post-war Tembattled prime minister, needed this institutions, with their own leaders, offices years, says Kenneth Mori McElwain of the week was a swipe from his mentor. Jun- and bank accounts. Most of the party’s University of Tokyo. The Hosoda faction ichiro Koizumi, a former prime minister MPs are a member ofone. (the largest, to which Mr Abe belongs) is who ushered Mr Abe to political promi- Factions date from the LDP’s origins as more ideological than the others, notes Ar- nence in the early 2000s, said it was time an alliance of disparate right-wing groups thurStockwin, anotherpolitical scientist. It for his protégé to quit. If Mr Abe clings to united only around the goal ofkeeping the is “interested in promoting a set of policy power as his popularity ebbs, Mr Koizumi left from power, says Takashi Inoguchi, a ideas that go back to the 1950s”. Hence Mr warned, hisLiberal DemocraticParty(LDP) political scientist. Theywere especially im- Abe’s unpopular drive to rewrite Japan’s could suffer in next year’s election for the pacifist constitution. upper house ofparliament. The less doctrinaire factions do still In fact, Mr Abe faces elections before matter, however, as vehicles to support then, in September, to secure a third term their leaders’ ambitions, argues Tobias as leader of the LDP. Having led the party Harris ofTeneo Intelligence, a consultancy. to a series oftriumphant election victories, A recent internal spat involving the LDP’s most recently forthe lowerhouse ofparlia- third-largest faction could thus spell trou- ment last year, he had been considered a ble. Fukushiro Nukaga, its leader, was shoo-in. Indeed, the party changed its forced to quit in March, largely because of rules to allow him to run. But since then a his failure to secure cabinet posts for its seriesofscandalshascaused MrAbe’ssup- members. His replacement, Wataru Take- port in the polls to slump to its lowest level shita, has taken a more confrontational since he began his second stint as prime line, threatening to withdraw support for minister in 2012. He now seems likely to Mr Abe in the leadership election. face a challenger in the autumn vote, Many in Mr Takeshita’s faction are also which would leave his fate in the hands of unhappy about the scandals dogging the the LDP’s fissiparous factions. While Mr prime minister. Taro Aso, the deputyprime Abe was visiting America this week, some minister and leader of the second-biggest LDP grandees met for dinner, which the faction, mayfancyhimselfa kingmaker. As press interpreted as an incipient plot. for Mr Koizumi, he may sense a chance to An old joke about the LDP is that it is clear a path for his son, Shinjiro, a prime neither liberal (it has an authoritarian, stat- ministerial hopeful who has yet to align ist bent), nor democratic (it has ruled Japan himself with any faction. The factional for all but four years since 1955), nor even politics that Mr Abe has done so much to much ofa party,since itisa weasels’ nestof Abe is failing to gain faction erode may yet prove his undoing. 7 The Economist April 21st 2018 Asia 33

Quotas in Bangladesh China and the Pacific Making merit The Great Wharf

Wellington Australia is nervous about the growing Students topple a corrupt system Chinese presence on its doorstep NDIA reserves a share of jobs in govern- HE new wharf at Espiritu Santo island Iment for people of particular castes. In Tin Vanuatu is one of the longest in the Bangladesh, the dividing line is history. South Pacific. Built by Chinese contractors The ruling Awami League, which led the with a loan from the Chinese government, country’s independence movement, re- it can accommodate three cargo ships or serves 30% of public posts for descendants two cruise liners at the same time. But it is of those who fought in the war of seces- not its capacity that has attracted attention sion from Pakistan in 1971 (a further 26% go in nearby Australia (see map). Press reports to other groups). Students, who have been there suggest that the governments of Chi- agitating for reform since February, want na and Vanuatu have been discussing the 90% of public posts to be awarded on mer- establishment of a Chinese naval base on it. On April 11th Sheikh Hasina Wajed, the Espiritu Santo. Although Vanuatu’s foreign prime minister, faced with a spiralling se- minister, Ralph Regenvanu, roundly dis- ries of demonstrations and sit-ins, ap- The government is doing a bit of both missed the reports, Malcolm Turnbull, peared to accede to theirdemands, promis- Australia’s prime minister, took the story ing to abolish all the quotas. But there has bureaucracy has issued some 250,000 doc- sufficiently seriously to say, “We would been no official follow-up, and supporters uments certifying the bearer as a freedom view with great concern the establishment of the quotas are now planning counter- fighter. Many recipients obtained them ofany foreign military bases in those Pacif- demonstrations. through bribery. Others use forgeries. ic Island countries.” Vanuatu’s prime min- The anti-quota protests, suspended for Bangladesh’s campuses are calm for ister has since reassured him in person that now, first erupted on the campus of Dhaka now. Yet the dissent has evolved into a no base is in the offing. University on April 8th. They quickly broad critique of the League’s entire ap- China has greatly expanded its pres- spread, gripping public and private univer- proach to politics, which continues to sow ence in Pacific countries in recent years, sities across the country. In Dhaka, the cap- divisions based on the events of 1971. The mainly by financinginfrastructure projects ital, police used tear gas, batons and water students are proving nimbler than a gov- like the wharf. But Chinese firms have div- cannons to disperse students and frustrat- ernment led by ageing loyalists of the rul- ersified beyond such development ed jobseekers. Hundreds were injured. The ing family. One placard, referring to Sheikh schemes into commercial construction. authorities’ heavy-handed response and Hasina’s generally revered father, the Mining, including the $2bn Ramu nickel the deployment of the Awami League’s country’s founding president, read: “In mine in Papua New Guinea and gold and thuggish student wing, the Bangladesh Bangabandhu’s Bangladesh, discrimina- bauxite mines in Fiji, has also attracted Chhatra League, only inflamed the prot- tion will not be tolerated.” Chinese capital. ests. So did Matia Chowdhury, a firebrand Hossain Zillur Rahman, an economist Australian officials are clearly spooked. student leader in the 1960sand now a cabi- based in Dhaka, suggests that an underly- Last year the country’s spy chief, NickWar- net minister, who said the protesters were ing employment crisis is increasing the ner, persuaded the prime minister of the the sons and daughters of those who col- protests’ potency. Although birth rates Solomon Islands to drop a deal with Hua- laborated with the Pakistani army in 1971. have plunged, two-thirds of Bangladeshis wei, a Chinese telecoms firm, to lay a sub- Students hacked government websites to are under the age of 35. The government sea internet cable to Australia. Instead, the post messages demanding quota reform. has promised to create 2m new jobs every Australian government is financing the Rashed Khan, one of the leaders of the year. But the workforce is growing much project itself. In January Australia’s inter- protests, says they will resume if the gov- faster than jobs are being created. Youth national development minister, Concetta ernment does not call off the prosecution unemployment exceeds10%. Fierravanti-Wells, accused China of delib- ofseveral ofthe students involved for van- The simmering dissent comes as the erately indebting Pacific islands by con- dalism. He claims plainclothes police Awami League, which has run Bangladesh structing “useless buildings” and “roads to stuffed him and two other leaders of the forthe past nine years, prepares for an elec- nowhere”—comments the Chinese gov- movement into a van, and handcuffed and tion in December. Other political parties ernment dismissed as “full of ignorance blindfolded them, before releasing them are in disarray. Sheikh Hasina’s bitter rival, and prejudice”. 1 without charge. “All political movements Khaleda Zia, the leader of the Bangladesh are banned in this country. We can be kid- Nationalist Party (BNP), the main opposi- napped at any time,” he complains. tion, is in jail. The BNP is not even sure if it PACIFIC OCEAN Bangladesh has seen many “quota prot- will participate. Its electoral ally, the Ja- maat-e-Islami, has been barred. The only PAPUA NEW ests” in recent years. Only 44% ofall public GUINEA SOLOMON posts are filled on merit. Manystudents ap- plausible sources of dissent are the army ISLANDS prove of the existing quotas for women and students. The question, says Deba- SAMOA (10%), religious and ethnic minorities (5%), priya Bhattacharya, an economist, is Espiritu Santo FIJI the disabled (1%) and to ensure jobs for whether “we can still have an election VANUATU people from all parts of the country (10%). whose result we cannot predict”. For the Vava’u But they revile the system of favouritism ruling party, the 23m newly eligible young TONGA and patronage built by the ruling party, of voters since the last proper poll in 2008 AUSTRALIA which the 30% quota is a centrepiece. The must be a worry. 7 1,000 km 34 Asia The Economist April 21st 2018

2 There is no doubt that external debt is to the main shipping lane between Asia Geo off the air. Instead they blame the ca- piling up all over the Pacific. Vanuatu’s and Europe. Vanuatu, by contrast, is a ble companies, such as Wateen and World- stands at around a third of GDP,and much less strategic spot. Call. Yet in private, cable operators freely around half of that is owed to China. Sa- Moreover, ifChina does want to build a admit to military pressure. According to a moa’s debt amounts to 50% of GDP, base, Vanuatu would be a peculiar choice. report in the Hindu, an Indian newspaper, around 40% of which is owed to China. Its government has changed 24 times since those who refused to cutGeo were taken to Two-thirds of Tonga’s debt, which is also independence in 1980. The constant politi- safe houses and threatened. about half of its GDP, is held by China. cal intrigue sometimes manifests itself in Executives at the channel worry that Tonga came close to default in 2013. China foreign-policy rows. Fiji, which has been at this time the ban aims to put it out of busi- was not willing to write off any of its debt, odds with Australia ever since a military ness for good. The army has been trying to but did suspend repayments forfive years. coup in 2006, is much better disposed to- silence “all dissent”, saysAyesha Siddiqa, a But leaving Pacific governments be- wards China. More deeply indebted political commentator, ahead of elections holden is a far cry from building a naval Tonga, meanwhile, has an enticing har- to be held this summer. Geo particularly base. The Chinese navy ventures only oc- bour at Vava’u in the country’s north. angers the top brass by favouring a former casionally and cautiously into the distant What they all have in common, however, prime minister, NawazSharif, who says his reachesofthe Pacific, usuallyinthe formof is a knack for exploiting geopolitical rival- ousting last year by the courts was also in- a courtesycall bya hospitalortraining ship ries (oscillating between China and Tai- spired by the army. to a friendly country such as Fiji. China wan has been a common ploy) to win Geo is vulnerable partly because it only has one foreign base at the moment, more foreign aid. Time, perhaps, for Aus- lacks defenders. Officials from the ruling in Djibouti in the Horn of Africa, right next tralia to build a few nice, long wharves. 7 Pakistan Muslim League-Nawaz (PML-N) have mostly kept silent. “Where is the prime minister?” rages Mr Jawad. When Press freedom in Pakistan ministers speak at all, they blame the Paki- stan Electronic Media Regulatory Author- Jamming Geo ity (PEMRA), a body largely under their control, for failing to force cable operators to restore the channel. In fact, the PML-N, like the opposition, is keener to kowtow to the army than to defend media freedom. Islamabad In previous eras, the courts might have stepped in. But the judiciary and the army The country’s most popularand courageous channel is underattack have been getting on well of late. When ANA JAWAD pinches the bridge of his Geo’s ban was brought up in the Supreme Rnose. For much of the past month the Court on April 16th, Saqib Nisar, the chief directorofnews at Geo TV, Pakistan’s most justice, lambasted the channel, which has popular channel, has marshalled his team been starved of advertising revenue, for of correspondents in the knowledge that failing to pay salaries. He sneered, incor- broadcasts of their work have been myste- rectly, that Mr Mir, the journalist who was riously cut in most of the country. Post-it shot, drove a Mercedes. On the same day notes scrawled with frowny faces stick to the High Court in Lahore was indulging in his office window,requesting unpaid sala- some censorship of its own: a new ruling ries. “Weare already in the grave, with one orders PEMRA to ensure that no channel hand sticking out,” he says. airs any “anti-judiciary speeches” by The blackout began in late March. PML-N leaders. Many of Pakistan’s 73m-odd cable sub- Pakistan’s boisterous media were once scribers began to complain that they could a brightspotin itsunsteadydemocracy, but no longer watch Geo’s offerings. Not only the current assault has sapped journalists’ had Geo News disappeared, but so had spirits. “I am thinking of doing a cookery sports and entertainment channels (upset- show tonight,” sighs Murtaza Solangi, a ting fans of the Indian soap operas they talk-show host, since so much else is offthe carry). Viewership of the news fell by 70% menu. Reporting on the Pushtun Protec- inthefortnighttoApril15th,accordingtoof- tion Movement, a tribal protest group that ficial figures. That was not all. Newspapers criticises human-rights abuses by the owned by Jang group, the conglomerate army, has been banned in print and on TV. behindGeo,wentundelivered.Atthecom- “It is worse now than under direct military pany’s offices in Karachi, city officials cut Live or let die? rule,” adds Mr Solangi. the internet cable. Geo’s rivals are propped up by their These troubles stem from Geo’s bold nalist. (He survived.) Geo claimed that the owners’ investments in other industries. editorial stance. In the 16 years since Paki- head ofInter-Services Intelligence (ISI), the The Jang group, in contrast, is involved stan granted licences for privately run tele- country’s main spy agency, which is only in the media. It required big loans to vision channels, Geo has carved out an dominated by the army, had ordered the survive its previous period out of favour. identity as the one most willing to chal- attack—a rare public denunciation ofan in- On April 17th the service went back on air lenge the army. This is a lonely role. Almost stitution usually referred to only in whis- in parts of the country. But journalists say all of its rivals parrot the military line. pers. (ISI denies any involvement.) On that managers have instructed them to be less Many denounce Geo as an agent of India, occasion, too, the channel was mysterious- critical of the courts and army and harder an absurd accusation spurred by its cam- ly dropped by cable companies. on Mr Sharif. It remains to be seen if Geo, paign in 2010 forpeace with the old enemy. The army has not made any public whose name sounds like the Urdu for In 2014 unknown assailants shot Geo’s statement about the latest ban. In private, “live”, will come back as its vigorous old Hamid Mir, the country’sbest-known jour- the top brass deny that they have ordered self, orin a zombified form. 7 Capitalism vs. Socialism: Comparing TIME ED O T FF I E Economic Systems IM R L Taught by Professor Edward F. Stuart 70% NORTHEASTERN ILLINOIS UNIVERSIT off LECTURE TITLES 1 O 1 1. Gorbachev’s Hello and the Soviet Goodbye R D AY ER BY M 2. Adam Smith, Karl Marx, Keynes, and Friedman 3. How to Argue GDP, Infl ation, and Other Data 4. British Revolution: Industry and Labor 5. American Capitalism: Hamilton and Jef erson 6. Utopian Socialism to Amana Microwave Ovens 7. The Bolsheviks: Lenin, Trotsky, and Stalin 8. Soviet Planning and 1,000 Left-Foot Shoes 9. Economic Consequences of European Peace 10. How FDR and Keynes Tried to Save Capitalism 11. Social Democracy in Europe 12. Sweden’s Mixed Economy Model 13. French Indicative Planning and Jean Monnet 14. British Labour Party and National Health 15. Social Welfare in Germany: Bismarck to Kohl 16. Soviet Bloc: Conformity and Resistance 17. Two Germanies: A Laboratory in Economics 18. The Soviet Union’s Fatal Failure to Reform 19. “Blinkered and Bankrupt” in Eastern Europe 20. From Chairman Mao to the Capitalist Roaders Where Does Capitalism 21. After Deng, China Privatizes and Globalizes 22. Asian Tigers: Wealth and State Control 23. European Union: Success or Failure? Begin and Socialism End? 24. Both Sides Now: Experiment in Slovenia Economics is really about people and their lives, and societies have pursued the ideal system for centuries, one that can balance Capitalism vs. Socialism: competing desires for freedom and security. No one has found perfect Comparing Economic Systems equilibrium—but some major contenders have emerged, all of which Course no. 5006 | 24 lectures (30 minutes/lecture) are variations of capitalism and socialism. Determining which, if any, is the best possible option in a definitive way, however, is a Sisyphean task and one riddled with complications. SAVE UP TO $190

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Pitythe world’s animals: Asia’s demand forwildlife only grows in north-east India have killed 74 in the past three years alone. Name your charismatic species and measure decline. Be- tween 2010 and 2017 over 2,700 of the ivory helmets of the hel- meted hornbill, a striking bird from South-East Asia, were seized, with Hong Kong a notorious transshipment hub. It is critically en- dangered. As forthe tiger, in China and Vietnam its bones and pe- nisfeature in traditional medicine, while tigerfangsand clawsare emblems of status and power. Fewer than 4,000 tigers survive in the wild. The pressure from poachers is severe, especially in In- dia. The parts ofover1,700 tigers have been seized since 2000. The brutal economics of extinction leads to two conclusions. Those holding valuable stocks of a particular creature have little interest in saving it in the wild. And it pays to generate new de- mand and supply. Both conclusions favour well-organised inter- national criminal syndicates. Asia’s wildlife mafias have gone global. Owing to Asian de- mand for horns, the number of rhinos poached in South Africa leapt from 13 in 2007 to 1,028 last year. The new frontline is South America. A jaguar’s four fangs, ten claws, pelt and genitalia sell for $20,000 in Asia. Between 2013 and 2016 authorities in Bolivia seized 380 jaguar fangs. VEN the Minahasan people, who pride themselves on eating South Africa auctions permits to hunt a few rhinos each year, Ebushmeat, call the collection ofstalls at Tomohon, in the high- with the proceeds supposed to fund conservation. This has pro- lands of North Sulawesi, the “extreme market”. There is certainly vided cover for poachers. One Thai smuggler used prostitutes to something extreme about the serried carcasses, blackened by pose as legal trophy hunters; the dead beasts’ horns ended up in blow torches to burn off the fur, the faces charred in a rictus grin. Asia. Schemesto farm animals, which some said would undercut The sheer range of species on the slabs is also astonishing: reticu- incentives to poach, have proved equally harmful. Lion parts lated pythons, warty pigs, flying foxes (a type offruit bat) and the from South African farms are sold in Asia as a cheaper substitute Sulawesi giant rat (no, it doesn’t taste like chicken). Especially as for tiger, or passed off as tiger—either way, stimulating demand. Christmas and Easter approach, other specimens find their way The farming of tigers in China, Laos, Thailand and Vietnam pro- to the market, including crested macaques and a tree-dwelling vides cover for the traffickingofwild tigerparts. Meanwhile, wild marsupial, the adorable Sulawesi bear cuscus. animals retain their cachet—consumers ofrhino horn believe the The pasar extrim speaks to Sulawesi’s striking biogeography. wild rhino grazes only on medicinal plants. The Indonesian island straddles the boundary between Asiatic and Australian species—and boasts an extraordinary number of From eco-warriors to eco-detectives species found nowhere else. But the market also symbolises how The anti-trafficking regime laid out under the Convention on In- Asia’s amazing biodiversity is under threat. Most of the species ternational Trade in Endangered Species, or CITES, struggles to on sale in Tomohon have seen populations crash because of keep up. But change is in the air. Wildlife NGOs are hiring ex-cops overhunting (habitat destruction has played a part too). Fewer as sleuths and working with governments to provide intelligence than 6,000 crested macaques now inhabit the forests. The cuscus on trafficking networks. In Indonesia the Wildlife Conservation hangs on by its fingertips—or its curling, prehensile tail. Society (WCS), an American NGO, helps bring half of all cases of The appetites of the locals are not the only worry. An hour’s wildlife crime to court. Of those cases, says Dwi Adhiasto of the drive from Tomohon is Bitung, terminus for ferry traffic from the WCS, nine-tenths end in convictions, compared with just half Moluccan archipelago and Papua, Indonesia’s easternmost prov- when it is not involved. ince. These regions are even richer in wildlife, especially birds. The arrest in Thailand in January of Boonchai Bach, head of Trade in wild birds is supposedly circumscribed. Yet the ferries one of Asia’s biggest wildlife-trafficking networks, was cause for are crammed with them: Indonesian soldiers returning from a cheer. Butmanyweaklinksremain, notleastcorruption and poor tour in Papua typically packa few wild cockatoos or lories to sell. enforcement in Cambodia and Laos, the preferred smuggling One in five urban households in Indonesia keeps birds. Bitung routes into China and Vietnam. Scott Roberton of WCS in Viet- feeds Java’s huge bird markets. The port is also a shipment point nam says governments are getting more serious about wildlife on a bird-smuggling route to the Philippines and then to China, crime, with China taking the lead. But authorities in different Taiwan, even Europe. Crooked officials enable the racket. countries do not collaborate enough against the traffickers. The trade in animal parts used for traditional medicine or to Curbing demand may prove even harder. Consuming rhino denote high status, especially in China and Vietnam, is an even horn has no more medicinal value than chewing your nails. Yet bigger racket. Many believe ground rhino horn to be effective demand for rhino leapt in Vietnam on rumours that a govern- against fever, as well as to make you, well, horny. Javan and Su- ment minister had been cured of cancer by it. Some younger, matran rhinos were not long ago widespread across South-East more affluent Asians are growing interested in eating wild meat. Asia, but poaching has confined them to a few tiny pockets ofthe Back in Sulawesi, some conservationists want Minahasan pas- islands after which they are named. Numbers ofthe South Asian tors to thunder from the pulpit against bushmeat—even though rhinoceros are healthier, yet poachers in Kaziranga national park their bellies might argue otherwise. 7 China The Economist April 21st 2018 37

Censorship Also in this section No laughing matter 38 The licence-plate ordeal

BEIJING AND SHANGHAI By tightening censorship, the Communist Partyis taking a risk T THE end of last year Bytedance, one entertainment which, while posing no di- have also shut down the microblog ac- Aof China’s most talked-about technol- rect challenge to the party, fail to promote counts ofcelebrity-gossip writers. The cen- ogy firms, seemed to have the world at its party views. Personalised news services sors’ reasoning may be that tattle about feet. Since its founding in 2012 more than using artificial intelligence have enabled film stars might lead people to believe that 700m users had tried out its apps, which users to wall themselves off from puff it is also acceptable to peddle rumour serve people with a diet of news, funny pieces about the party’s latest achieve- about politicians. Or they may have sim- videos and memes, tailored to individual ments. (Jinri Toutiao’s slogan, featured in ply decided that reading such news diverts users’ tastes by clever algorithms. The Bei- the advertisement pictured above, prom- people’s attention from the latest utter- jing-based company had been valued at ises readers “only what you care about”.) ances ofPresident Xi Jinping. more than $20bn and embarked on a buy- David Bandurski of the China Media Pro- ing spree abroad in a bid to go global. ject, a research group in Hong Kong, says Xi’s amazing The picture now is less rosy. On April that “party leaders are aware of this.” This Efforts to boost MrXi are reachingunprece- 9th state media reported that Chinese reg- is why MrZhangnow promises to do a bet- dented heights. Pictures of him are com- ulators had suspended Bytedance’s flag- ter job of promoting “authoritative media” manding increasing amounts of space on ship app, Jinri Toutiao (Today’s Headlines) through his services. the front pages of official newspapers. Last forthree weeks. Theyhad also banned out- Censors are also paying more attention month a film called “Amazing China” be- right anotherofits products, a joke-sharing to content they regard as “lowbrow”: mate- came the country’s highest-ever grossing app called Neihan Duanzi, which special- rial deemed licentious, sexist or likely to documentary, in large part because gov- ised in bawdy humour and had more than encourage what the party regards as im- ernment offices and state-linked compa- 20m active users. Officials said its “vulgar moral behaviour. State media have report- nies have been encouraged to block-book and banal” content had upset people. Two ed disapprovinglyon the uploadingof vid- screenings for their staff. The film dwells days later Zhang Yiming, the firm’s foun- eos to one of Bytedance’s platforms by on the achievements of Mr Xi. In February der, issued an apology online saying he teenage mothers who do not appear con- the media regulator said that it would des- was “filled with guilt and remorse” that his trite about having children before the legal ignate 5,000 cinemas as “People’s The- apps had taken “the wrong path”. He said age for marriage. Cultural commissars are atres”. These will have to devote more time his company had not understood that becoming quicker to suppress anything to films such as “Amazing China” that pro- “technology must be led by socialist core they regard as non-mainstream, from hip- mote socialist values. values.” He pledged that it would do more hop music to tattoos. The national football The censors’ shifting priorities are a to spread “positive energy”. team recently took to the field with their challenge for Chinese tech firms. Compa- Bytedance’s travails, and those of three inkhidden under bandages. niesthatoperate social-media platforms or other firms that also had to suspend their In the past ten months officials have allow users to share content have their news-aggregating apps, suggest that cen- also been clamping down on gossip. Some own in-house censors. In his online apolo- sors are trying to catch up with new tech- portals have replaced their feeds offering gy, MrZhangofBytedance said he planned nology. Officials appear to worry that peo- news about celebrities with alternatives to expand his team of them by two-thirds, ple can immerse themselves in news and directing users to patriotic fare. Regulators to 10,000. But such employees are often 1 38 China The Economist April 21st 2018

2 unsure how to interpret the government’s Driving directives. Last year the New York Times re- ported that regulators had circulated a less- One country, three systems than-helpful list of 68 types of material that internet firms were expected to ex- punge, ranging from media that promote “unhealthy marital values” to posts that blur lines between “beauty and ugliness”. Satisfying the censors also involves fi- In big cities a licence plate can cost more than a car. Yetthere is an alternative nancial risk. Bytedance and similar com- panies will find it much more difficult to at- IU LEI has been waiting to buy a car for abound with illegal offers by lottery win- tract and retain users without content that Lmore than seven years. Sadly, MrLiu, an ners to rent out their plates. The average is “borderline risqué”, says Bhavtosh Vaj- engineer from Beijing, has had no luck in yearly fee forone is about12,000 yuan. payee of Bernstein, a research firm. Offi- the capital’s licence-plate lottery. Intro- Beijing’s system also breeds corruption. cials’ distaste for news packaged by algo- duced in 2011, this system for allocating SongJianguo, then head ofthe city’s traffic- rithm could impede China’s development number plates aims to tackle the city’s pro- management bureau, was jailed for life in of artificial intelligence, since news aggre- blems of rage-inducing congestion and as- 2015 for demanding backhanders in ex- gators such as Toutiao offer a profitable phyxiating pollution. Under the scheme, change for rigging the lottery. Abribe of at means ofimproving such technology. the cityimposesannual quotason the issu- least 200,000 yuan was reportedly need- Above all, the partyitselfistaking a risk. ing of new licence plates. Buying a car re- ed to guarantee victory. MrSong pocketed In the decade or two before Mr Xi took quires proof that one is in hand. Obtaining a tidy 24m yuan before getting caught. over, people were given wider leeway to a plate involves entering a bimonthly Even today, 70% of Beijingers believe the amuse themselves as they wished as long draw. The odds of winning fell from 6% in lottery involves dodgy goings-on. as they avoided politics. Officials may February 2011 to an all-time low of 0.2% Shanghai’s auctions help avoid the cre- have reckoned that such an approach this February (see chart). In the latest one ation of a black market. Yet they are unfair would reinforce stability by giving people 2.8m people contended for6,460 plates. on the less well-off. Average winning bids less reason to resent the party. Mr Xi, by In Shanghai, the financial capital, there have risen by a third in less than three contrast, is trying to revive the party as an are also strict quotas. Unlike their counter- years. Residents moan that owning a car enforcerofmorality and taste. By stamping parts in Beijing, however, city officials put has become the preserve of the super-rich. on citizens’ small pleasures he could irri- the plates up for auction online. At the The city says it reinvests proceeds from its tate many people who had previously most recent monthly sale, around 217,000 auctions in public transport. But in class- shown no interest in politics. bidders battled for 9,855 licence plates. The conscious Shanghai, owning a car is as The biggest fans of Bytedance’s now- average winning bid was 88,176 yuan much a status symbol as a means of trans- defunct humour app, for example, were ($14,022), more than it costs to buy many port. Obtaining a plate from elsewhere men without great prospects living in domestically made cars. Last year Shang- does not help much. Shanghai, like some smaller cities. That the app helped them hai raised 12bn yuan in licence-plate sales, other big cities, bans cars with non-local form groups of like-minded individuals in about 2% ofits total revenue. platesfrom usinginner-cityroadsfor much the real world and engage in pranks such Yet it is a hybrid model used in the ofthe business day. as honking their car horns in a coded se- southern city of Guangzhou that has be- Guangzhou thinks it has hit upon the quence may help explain why the authori- come the favoured approach among right compromise. By combining the lot- ties shut it down. But by trying to insert policymakers in China’s biggest cities. Un- tery and auction systems it aims to make more propaganda into such people’s lei- derthissystem, some platesare distributed everyone happy. Those with deeper pock- sure time, officials could end up making by lottery and the rest sold at auction. ets can bid at auction, and poorer folk still the party seem like a bore who doesn’t Since Guangzhou adopted this approach have a shot at winning the lottery. But a re- know when to shut up. in 2012, three other large cities—Shenzhen, cent study by Jinhua Zhao and Shenhao In recent weeks, among the country’s Hangzhou and Tianjin—have adopted it. Wang of the Massachusetts Institute of more than 700m internet users, there has None ofthe three methodsisideal. Start Technology shows that the benefit of such been evidence of unhappiness with the with Beijing’s. Some people place a much a system is less than meets the eye. party’s meddling. On April 13th Sina higher value on owning a car than others. The coexistence of an auction reduces Weibo, one of the country’s biggest social- The lottery system takes no account of the number of lottery participants, but media platforms, declared a three-month that. This fuels a black market. Websites only slightly. Lottery entrants in Guang- effort to purge itself of posts containing zhou still have a tiny chance ofsuccess; the pornography or promoting violence or ho- winning odds were just 0.8% in the most mosexuality—topics that had been ruled Dream on recent lottery draw in March. Meanwhile, off-limitsby the regulator. It is possible that China, car licence plates auction prices are not necessarily lower in Sina decided to mount its campaign in a cities with mixed systems. In December Beijing lottery, Shanghai auction, highly public manner in order to show off plates awarded price of winning bids* the average winning bid for a licence plate its zeal to the party’s media watchdogs. % of total applications Yuan, ’000 in Shenzhen, forexample, set a national re- Angry people flooded the site with cord of95,100 yuan. messages lambasting the firm’s intoler- 10 100 There is still hope forpeople like MrLiu, ance of homosexuality. Even the People’s 8 80 however. To fight pollution, officials in Daily, a party mouthpiece, weighed in nearly all big cities are allocating separate 6 60 against Sina. On April 16th the company quotas of licence plates for buyers of elec- said it would no longer target gay content 4 40 tric or hybrid cars. Such vehicles are also that was not smutty. The incident marked a 2 20 heavily subsidised. In fact, Mr Liu’s wife rare victory foronline freedom and forgay has just applied for an electric-vehicle rights. It was also a reminder of how con- 0 0 plate. These are offered on a first-come first- 2011 13 15 18 2011 13 15 18 tentious and how unpredictable China’s served basis. The odds are much better. Source: Government statistics *Average expanding censorship has become. 7 Only fourpeople are vying foreach one. 7 Middle East and Africa The Economist April 21st 2018 39

Also in this section 40 Assad’s next move in Syria 40 Iran’s economic problems 41 Africa, carbon emitter 42 Squashing social media in Africa

For daily analysis and debate on the Middle East and Africa, visit Economist.com/world/middle-east-africa

Sectarianism in Lebanon civil war of 1975-90. They tend to award contracts to friends, family and supporters. Chopping up the tree of state The public payroll has expanded as big- wigs jostle to give jobs to their co-religion- ists. Several government agencies, such as the postal service and transport authority, BEIRUT guzzle fat budgets but do little work. The waste associated with confessional gover- Lebanon’s religious quota system leads to paralysis and corruption. Many want it nance costs Lebanon 9% of GDP each year, reformed, but they are afraid to act according to the World Bank. T IS difficult to escape the grip of religion corruption. Take the electricity system, But though many want to abolish the Iin Lebanon. The rules that govern mar- which badly needs an upgrade. Supply power-sharing system, few are prepared riage, property rights and inheritance are falls far short of demand, leading to daily to act. Fear is one reason. In an experiment administered by religious courts. Well- blackouts. But instead of doing anything, conducted by the Lebanese Centre forPoli- to-do secular Lebanese can fly to Cyprus to rival political parties blame each other for cy Studies, 70% of people agreed to sign a marry in civil ceremonies. But once back the problem—and then profit from it. Many petition calling for the abolition of the sys- home, if their relationship goes sour, Mus- Lebanese use expensive generators to light tem. The figure dropped to 50% when peo- lims still have to deal with religious judges, their homes. The businessmen running ple were told their names would be made who rule on divorce, alimony and child the units are often connected to sectarian public. Most Lebanese depend on a politi- custody. leaders, who take a cut. cal party for financial support. Sectarian Lebanese are increasingly fed up with When politicians squabble it is often leaders provide jobs, cover hospital fees this way of doing things. The number of over how to share the spoils of power, not and pay for schooling. “We have Stock- believers has steadily declined since 2011. because they disagree on policy. Many holm syndrome,” says Jawad Adra of In- Today almost a quarter of people say they were warlords during the sectarian-fuelled formation International, a consultancy in are not devout, according to Arab Barome- Beirut. “Our leaders hold us hostage, but ter, a pollster. Nearly half say they are only they are also our nurses.” somewhat religious. Trust in clerics and Out of whack Some groups would inevitably lose the clergy has never been so low. Lebanon, political representation by sect power ifthe system were abolished. Chris- This helps explain why more and more March 2016, % of total tians, for example, get half the seats in par- Lebanese want to overhaul the way the Voters Parliamentary seats liament, based on their estimated share of country is run. On winning independence 015102520350the population. But the last national cen- in 1943, Lebanon’s leaders agreed to divvy Muslim sus was held in 1932. Many fear a new one up political power among the country’s re- Shia would inflame sectarian tensions—for ligions. The system has been tweaked over Sunni good reason. According to voter-registra- the years, often in response to outbreaks of tion lists obtained by The Economist in violence, but not fundamentally changed. Druze 2016, Christians make up only 37% of vot- The president is always a Maronite Chris- Alawite ers (see chart). That number is likely to tian, the prime minister a Sunni Muslim shrink further, as Lebanese Muslims are Christian and the speaker a Shia Muslim. Seats in younger and reproducing faster. parliament and government jobs are split Maronite Among Muslims the system helps Sun- Other between Christians and Muslims. Christian nis, whose power has been eroded by the Many blame the power-sharing system collapse of Saudi support and the tum- Sources: National Democratic Institute; The Economist for government paralysis and pervasive bling fortunes of their main political party. 1 40 Middle East and Africa The Economist April 21st 2018

2 There are more Shia than Sunni voters. But 300 or so fighters in the area, but they are Turkish troops/rebels TURKEY the influx of over 1m mostly Sunni Syrian lightly armed and widely reviled. Vicious refugees, who are now roughly a quarter infighting among the rebels has delighted Aleppo Kurds of Lebanon’s population, complicates the Med. Sea the regime. situation. Absorbing them as citizens Raqqa Idlib poses a dilemma for Mr Assad and Euph would upset the sectarian balance. IDLIB ra his allies. The province is guarded by Turk- Rebels te Optimists say a new electoral law that SYRIA s ish soldiers, who are monitoring the cease- Two confirmed Government institutes proportional representation will air strikes fire. If, as expected, the regime attacks, its make it easier for reformers to win seats Homs Islamic forces would need to confront or skirt Tur- LEBANON T-4 air base State when Lebanon holds parliamentary elec- One key’s bases. Some think the Turks would confirmed IRAQ tions on May 6th. But candidates who rage air strike Douma cede some territory to prevent a full-scale Eastern Ghouta 100 km against sectarianism have failed to con- Damascus Yarmouk assault on Idlib. Much depends on wheth- vince many voters that they could provide Areas of control er Russia, which is working with Turkey to April 16th 2018 the same benefits as vote-buying incum- ISRAEL Sources: IHS Conflict Monitor; negotiate an end to the war, would support bents. And some voters question the wis- Institute for the Study of War an offensive deep into the province’s dom of throwing out a system that, since JORDAN Strike locations: Pentagon densely populated areas. the civil war, has kept the peace between Mr Trump, for his part, has said he religious groups. Abolishing it might lead winning the war. His soldiers recently cap- wants to withdraw American troops from to a sectarian power struggle, they say, tured Eastern Ghouta, a suburb of Damas- Syria, where they are fighting IS alongside suckingin othercountries, such asIran and cus of which Douma is part, after a brutal Kurdish-led forces in the north-east. There Saudi Arabia. Lebanon’s neighbours serve weeks-long offensive. Hours after the is talk of replacing the Americans with an as cautionary tales. chemical attack, the only rebels still stand- Arab force, which the regime has promised Gradual reform may be the best way ing in the area agreed to the terms of a Rus- to fight. The war may become still more forward. For example, parliamentary can- sian-brokered surrender. Some handed complicated. 7 didates could be allowed to run without over their weapons and will join the re- having to name their religion or sect. Sec- gime’s security forces; others were bused tarian parties could still divide up seats un- north to Idlib province. Iran’s economy der the current formula, but their share of Now the regime’s forces are massing on parliament would shrinkas the number of the edge of Yarmouk, another suburb of Rial v reality secular MPs rose. Such reforms, though, Damascus that is occupied by Islamic State would require political elites to change the (IS). Some of the jihadists have already rules of a game from which they benefit. fled. The rest will either surrender, cut a Until that happens, Lebanon will continue deal or fight a battle they will lose, say an- 7 to limp along. alysts. A similar fate awaits rebel groups DUBAI that control a small adjacent area. Russia Mullahs rig the price ofmoolah wants them to reconcile with the regime The war in Syria and join the fight against IS. OR the second time in as many months, Rebels in other parts of the Syrian inte- FIran’s “dollar patrol” is on the streets. Assad’s next move rior are also on the ropes. Cut off from in- The country’s currency, the rial, has lost a ternational support, those still in control of third of its value on the black market since townsnearHomshave tried to strike a deal September. On April 9th it sank to a record with Russia that would allow them to stay low of 61,000 to the dollar (when the offi- in the area. But Mr Assad, who has vowed cial rate was 37,850). The next day the gov- BEIRUT AND DAMASCUS to retake the entire country, is unlikely to ernment imposed a rate of 42,000 and tolerate their presence on the main high- vowed to arrest anyone who bought or Where Syria’s dictatoris likely to strike way that runs north from Damascus. “I can sold rials for what they are actually F THE cruise missiles that slammed into see every remaining rebel pocket in the worth—as it did during the previous cur- ISyria on April 14th rattled President centre ofthe country falling in the next few rency crisis, which was only in February. Bashar al-Assad, he did his best not to months,” says Emile Hokayem ofthe Inter- Some are nonetheless flouting the show it. Hours after America, Britain and national Institute for Strategic Studies, a rules, demanding 56,000 rials or so for a France struck three facilities connected to think-tankin London. dollar. There were long lines and, surprise, Mr Assad’s chemical-weapons pro- What happens in the last big rebel surprise, dollar shortages at the handful of1 gramme, his office posted a video of him strongholds, on the country’s borders, is strolling confidently into work. Russian harder to predict. In the south, where a politicians who met him later in the day fragile ceasefire holds, Mr Assad would The collapsing currency said he was in a good mood. need Russian and Iranian help to defeat Iranian rial per $, inverted scale Mr Assad may have feared a bigger re- the rebels quickly. But relying too heavily sponse from the West. Donald Trump, on Iran and its proxies risks provoking Isra- 0 America’s president, had vowed to make el, which has already struck Iranian bases 10,000 Official his regime pay a “big price” for gassing to in Syria. Jordan, which has backed the re- 20,000 death more than 40 people in the town of bels, would probably tolerate the regime’s 30,000 Douma on April 7th. But the missiles de- return to its border if it didn’t lead to a new 40,000 stroyed only a handful of buildings and wave of refugees. The war has hurt Jor- 50,000 probably failed to wipe out all of Mr As- dan’s economy; it just wants it over. Unofficial sad’s poisonous arsenal. Nor did they dent In the north, where a separate ceasefire 60,000 his ability to rout, with conventional is in effect, the situation is even more com- 70,000 weapons, what is left of the rebellion in plicated. Rebels control much of Idlib, 2011 12 13 14 15 16 17 18 Syria’s seven-year civil war. home to 2m people. The most powerful Sources: IMF; Professor Steve H. Hanke, Aided by Iran and Russia, Mr Assad is groups are led by jihadists. Al-Qaeda has Johns Hopkins University The Economist April 21st 2018 Middle East and Africa 41

2 exchanges using the official rate. A lack of ed for doffing their headscarves in public to have suffered from prostate cancer. The confidence in the rial reflects a lack of con- to protest the official dress code. In Febru- presumed front-runner,Ebrahim Raisi, em- fidence in the economy. The housing mar- ary there were deadly clashes between the barrassed himselflastyearwhen he ran for ket is stagnant and the banking sector is police and Sufis, who have long been ha- the presidency—and lost by 19 points. shaky. Iranians are snapping up foreign rassed by the authorities. After a rare Whoevertakescharge will inherita restive, currency because it is one ofthe few sound uproar in parliament this winter, Mr Rou- youthful country that has been misman- investments available. hani backtracked on plans to cut subsidies. aged for decades. The nuclear pact created Something similar happened in 2012. Looming over all this is the question of hopes for change. Unmet expectations Back then Iran was under crippling sanc- who will succeed Ali Khamenei, the 78- may pose a biggerthreat to the regime than tions and suffered from an annual infla- year-old supreme leader who is rumoured sanctions ever did. 7 tion rate of around 25%. Many Iranians thought those days were over when, in 2015, Iran signed a deal with world powers that imposed restrictions on its nuclear programme in exchange for sanctions re- lief. President Hassan Rouhani expected to attract large amounts of foreign invest- ment and recoup $50bn in frozen assets, equivalent to12% ofGDP. Those benefits have not all material- ised. The governmentisquickto blame Do- nald Trump, the American president, who is threatening to withdraw from the agree- ment (and may do so next month). The fear of fresh sanctions no doubt dampens in- vestment. So do American sanctions(relat- ed to other aspects of Iran’s behaviour) that remain in place and discourage big banks from handling Iranian transactions. In 2016 Iran recorded just $3.3bn in foreign inflows. Israel, with a similarGDP and one- tenth the population, drew $12.3bn. But Iran’s corrupt, opaque economy would probably be struggling even with- Africa and climate change out Mr Trump. Companies linked to the Revolutionary Guards have revenues A burning issue equivalent to a large share of GDP. Their empire spans construction, mining and telecommunications. A foundation linked to the supreme leader holds $95bn in as- sets, according to an investigation by Reu- JOHANNESBURG, LUSAKA AND NAIROBI ters in 2013.Many banks are on the brink of Africa’s big emitters admit they have a problem insolvency, in part because of pyramid schemes that swindled millions of poor N HOUR east of Johannesburg, on the the country’s petrol (a technique that Iranians. The head of parliament’s eco- Arolling highveld plains, six massive helped the old apartheid regime cope with nomic committee said in April that some cooling towers sit around two belching sanctions). A petrochemical complex in $30bn in capital fled the country at the end smokestacks. The Kendal power station the town ofSecunda owned by Sasol, a big oflast year. (pictured) isamongthe world’slargest, pro- energy and chemicals firm, is one of the From the outside Iran looks ascendant, ducing 4.1 gigawatts (GW) from burning world’s largest localised sources of green- using proxies to expand its reach across the coal. Afew kilometres down the road there house gases. Middle East. In Syria it is establishing a per- is anothercoal-fired plant, Duvha, which is Zambia is anotherexception. Itburnsso manent military presence. In Yemen it only slightly smaller. An even bigger one, much vegetation that its land-use-related dragged arch-rival SaudiArabiainto a ruin- Kusile, is under construction next door. emissions surpass those of Brazil, a notori- ous warat little cost to itself.At home, how- When sub-Saharan Africa comes up in ous—and much larger—deforester. On a re- ever, the regime looks increasingly brittle. discussions of climate change, it is almost cent descent into Lusaka, four fires were In late December thousands of Iranians invariably in the context of adapting to the visible from the aeroplane. “If you had unexpectedly took to the streets to vent consequences, such as worsening come 30 days later, it would have been their frustrations. A subsequent poll by the droughts. That makes sense. The region is worse,” says Davison Gumbo of the Cen- University of Maryland found that 69% of responsible for just 7.1% of the world’s tre for International Forestry Research, a Iranians think the economy is in bad greenhouse-gas emissions, despite being non-profit. Most burning happens during shape, up from 49% two years earlier. Two- home to 14% of its people. Most African the dry season, which starts next month. thirdsofthem blame mismanagement and countries do not emit much carbon diox- South Africa and Zambia may be ex- corruption, rather than sanctions. Nearly ide. Yet there are some notable exceptions. treme examples, but they are not the re- halfthinkIran spends too much money on Start with coal-rich South Africa, which gion’s only big emitters (see chart). Nigeri- foreign adventures. belches out more carbon dioxide than Brit- an households and businesses rely on The protests stopped after the regime ain, despite having 10m fewer people and dirty diesel generators for14GW of power, killed or locked up lots of protesters, but it an economy one-eighth the size. Like near- more than the country’s installed capacity is now battling discontent on other fronts. ly all of its power plants, many of its vehi- of10GW. Subsistence farmers from Angola Dozens ofyoungwomen have been arrest- cles depend on coal, which is used to make to Kenya use slash-and-burn techniques to1 42 Middle East and Africa The Economist April 21st 2018

2 fertilise fields with ash and to make char- plants. So do the Chinese, who want to ance, inconvenience, or needless anxiety” coal, which nearly 1bn Africans use to keep their engineers busy now that they with a digital device, but journalists were cook. This, plus the breakneck growth of have stopped building coal-fired power already cowed. One was arrested for com- extractive industries, explainswhyAfrican plants at home. plaining on Facebook about police harass- forests are disappearing at a rate of 0.5% a Yet it is not all gloom. The UN’s newer ment. Even in Kenya, where there is more year,fasterthanin South America. Because green-finance initiatives are proving more freedom of speech, restrictions were trees sequester carbon, cutting them generous to Africa than its old Clean De- mooted ahead of last year’s election. In counts as emissions in climate accounting. velopment Mechanism, which has chan- January,a prominent Kenyan blogger,Cyp- Other countries are following South Af- nelled just 2.5% ofits resources to the conti- rian Nyakundi, was arrested for allegedly rica’s lead and embracing coal, the filthiest nent since 2001. Many ofAfrica’s proposed defamingthe interior minister. fuel. A dozen of them are building or plan- coal plants, including the one planned for Internet penetration in much of Africa ning new coal-fired power plants totalling Lamu, may never get built. Several coun- is still low,but it is growing quickly.In Tan- 40GW, according to Coalswarm, a watch- tries are intrigued by hybrid plants where zania, roughly23m people (outofa popula- dog. A big one planned for the old port most electricity is generated by solar pan- tion of 55m) used the internet last year, ac- town ofLamuin Kenya is one ofmanyChi- els, but diesel provides the spinning re- cording to the government. That was up nese-backed coal projects in Africa. serves, says Mr Agenbroad. Adaptation 16% on 2016. As more people get access, the Policymakers at the latest African cli- will remain Africa’s chief climate concern elite are beingchallenged like never before, mate summit, which concluded in Nairobi forthe foreseeable future. Butitis no longer says Nanjira Sambuli, a Kenyan activist. on April 13th, acknowledged the conti- the only one. 7 Will the new laws silence digital dissi- nent’s carbon problem. But they worried dents? Uganda’s charge can probably be that development might slow if Africa collected directly by mobile-phone opera- meets its commitment under the Paris cli- Social media in Africa tors—but it is unlikely to stop people from mate agreement, which aims to limit glo- gossiping. The effect of Tanzania’slaw will bal warming. The two imperatives often Tweet like a depend on how the government enforces pull in opposite directions. Africa’s sunny it. In a country with an annual GDP per skies and long, blustery coastlines offer jailbird headofjust$900, fewbloggerswill pay the near-limitless solar- and wind-energy po- fee. But, as Mr Platnumz has found, the law tential. But what African economies need NAIROBI can be used to arrest people for posting now are “spinningreserves”, which can re- nearly anything online. To improve en- African governments want to control spond quickly to volatile demand, says forcement, the government has proposed what is said online Josh Agenbroad ofthe Rocky Mountain In- installing CCTV cameras in internet cafés. stitute, a think-tank in Colorado. Fossil fu- NTHE West, when celebritiespostreveal- Some of Africa’s savvier leaders have els deliver this; renewables do not. Iing videos on Instagram, they may find made the internet work for them. Uhuru Foreign aid, on which many African themselves mocked by tabloids and gossip Kenyatta, Kenya’s president, hired Cam- countries depend, often leads to more websites. In Tanzania they can be arrested. bridge Analytica to help him get re-elected emissions. To ensure that their money is On April16thDiamond Platnumz, a Swahi- last year. The British firm is under fire for used efficiently, and not stolen, Western li rapper (pictured), known for such ditties obtaining data on millions ofFacebook us- development agencies favour large tried- as “Bum Bum”, was arrested afterposting a ers in dubious ways. One of its executives and-tested projects, such as fossil-fuel clip ofhimselfkissinga woman. According boasted of writing “all the speeches” for to Tanzania’s information minister, Harri- Mr Kenyatta and having “staged the whole son Mwakyembe, Mr Platnumz’s “inde- thing”. Facebook and Twitter messages, Emitters, big and small cency” fell foul of a new law intended to not necessarily associated with the cam- Sub-Saharan Africa, greenhouse-gas emissions regulate social media. Itispartofa growing paign, promoted fake stories and targeted

Selected countries, 2014, tonnes of CO2 equivalent trend of African governments trying to Mr Kenyatta’s challenger. All over Africa, 7 Including land-use change and forestry control what is said online. anyone is free to slime the opposition. Excluding land-use change and forestry Tanzania’s vaguely worded law, which came into effect last month, seems to re- 0 100 200 300 400 500 quire almost anyone who publishes con- South Africa tent online in the country to buy a licence for2.1m Tanzanian shillings(around $900). Nigeria The government says its aim is to fight “im- morality” and hate speech. No one imagi- Zambia nes that political speech will be spared. Tanzania Any content “that causes annoyance, threatens harm or evil, encourages or in- Angola cites crime, or leads to public disorder” can lead to a writer’s licence being revoked or a Sudan 5m shilling fine. A similar law, introduced Congo in 2015and ostensiblyaimed atcyber-crim- inals, has ensnared people for insulting the Cameroon president in WhatsApp groups. Other east African states are tightening Ethiopia up, too. Uganda’s government has pro- Mozambique posed a daily charge for social-media use on mobile phones of 200 Ugandan shil- Uganda lings ($0.05), to reduce what President Kenya Yoweri Museveni (a prolific tweeter him- Britain self) calls excessive “gossiping”. In 2016 Source: World Resources Institute Rwanda made it illegal to cause “annoy- You have the right to remain silent Europe The Economist April 21st 2018 43

Also in this section 45 Armenia’s democracy 46 Russia and Telegram 46 Spain’s ham snobs 47 Charlemagne: Jupiter in the bog

For daily analysis and debate on Europe, visit Economist.com/europe

Poland under PiS never touched Poland. Meanwhile, Po- land’s economic performance has been Change of state nothing short ofextraordinary. The economy has grown for 26 consec- utive years. GDP per person has nearly tre- bled since 1990 (see chart, next page). Since 2000 manufacturing’s share of the econ- WARSAW omy has grown, and inequality has fallen. Poland was the only EU country to weath- The hollowing out ofthe rule oflaw is doing lasting damage erthe crisisof2008-09 withouta recession. OR a glimpse ofPoland underthe popu- poster-boy of post-communist transition For an illustration, drive north from Flist Law and Justice (PiS) party, tune in to into the EU’s problem child. In March a Warsaw into Mazowsze. The region is as the news on the state television channel, judge in Ireland refused to extradite a Pol- gorgeous as a Chopin concerto, an undu- Telewizja Polska (TVP). The opening se- ish defendant to his homeland, worried latingquiltofcereal fieldsand birch groves, quence, a computer-animated tour of Pol- that he might not get a fairtrial. but in the 1990s its towns were unromanti- ish landmarks, homes in on the clock tow- And PiS isn’t done. Mr Kaczynski, who cally down-at-heel. Today it is dotted with er of Warsaw’s royal castle. The capital’s holdsno office otherthan MP yetacts as Po- handsome farmsteads. Tractors are still most recognisable building, the towering land’s de facto leader, recently told a right- mostly Polish-made Ursuses, but now Soviet-era Palace of Culture and Science, is wing weekly that there are “parts ofour re- come with air-conditioningand sound sys- nowhere to be seen. Then the anchors ap- ality which must not merely be moder- tems. In the cobbled market square of Pul- pear, and proceed to praise PiS slavishly nised but ploughed over”. His party, he tusk, a town of 20,000, and down the road while branding its critics treacherous mused, needs at least three terms in office. in the village ofGolymin, shops offer luxu- crypto-communists. That prospect sends liberals scrambling ries unimaginable two decades ago: $100 This combination of subtle and brazen for a stiff drink. It is a headache for the EU. Nike sneakers and wine at $20 a bottle. nationalist revisionism captures the two- In December the European Commission Such wealth accumulation was well and-a-half years of PiS rule. The party has triggered proceedings against Poland un- under way by 2015. Yet PiS won both the purged the public administration, made it der Article 7 of the EU treaty, which could presidential and parliamentary elections illegal to accuse the “Polish nation” ofcom- ultimately lead to suspending its voting that year. In Pultusk, in the parliamentary plicity in the Holocaust, and peddled con- rights. In March, after the commission re- election, the party claimed 46% ofthe vote, spiracy theories about the aeroplane crash jected Poland’s justifications of its reforms, nine percentage points above its national in 2010 which killed then-president Lech the government proposed softening them, average. In Golymin, it got 58%. Kaczynski and 95 others outside Smo- for instance by limiting the justice minis- Fatigue with the centre-right Civic Plat- lensk, in Russia. It has turned a blind eye to ter’s power to replace district-court presi- form (PO) played a part. PO had grown chauvinism among its supporters, while dents. But even if PiS yields further, the complacent after eight years at the helm. In prosecuting peaceful counter-protesters at griefit has caused Poland will not go away. 2014 its charismatic leader, Donald Tusk, the monthlycommemorationsofthe Smo- stepped down as prime minister to be- lensk disaster led by Lech’s twin brother, The nationalist international come president of the European Council, Jaroslaw (pictured), who is PiS’s chairman. At first glance, the party’s ascendancy fol- leaving his party rudderless. Its politicians Most troubling, PiS has neutered the lows a familiar script. From Viktor Orban were caught on tape discussing matters of constitutional tribunal and given lawmak- in Hungary to Donald Trump in America, state in filthy language. They said nothing ers and ministers more power over the ap- populists have converted economic mal- terribly damning, but it left a bad smell. pointment of judges, threatening their in- aise and fear of immigrants into electoral Many voters were in any event growing dependence. It has sown deep divisions success. Yet Poland departs from that script fed up with finger-wagging elites telling within Poland and with its allies in the in important ways. Immigration is negligi- them to work harder to get ahead. This European Union, as well as with Israel and ble; the wave of Syrian migrants in 2015, dual weariness, with the PO and the America. It has transformed Poland from a which initially crossed through Hungary, post-1989 gospel of self-improvement, 1 44 Europe The Economist April 21st 2018

2 played into Mr Kaczynski’s hands. He and a loss at the polls looked imminent). More his brother were among the leaders of the egregiously, the governmentignored sever- Solidarity movement who negotiated Po- al unfavourable rulings. land’s bloodless transition to democracy. The second feature of PiS-style democ- But Jaroslaw, especially, felt that it let ex- racyisrulers’ freedom ofaction. The justice communists offthe hooktoo lightly. minister doubles as the chief prosecutor, In 2001the Solidaritycoalition split into deciding which transgressions to prose- the PO, which embodied the post-1989 con- cute (Smolensk counter-protesters) and sensus, and the anti-elitist PiS. It appealed which to ignore (marchers with illegal fas- to those who, like the Kaczynskis, felt they cist flags). A draft law would sackthe entire deserved more, and who sensed that, diplomatic corps and let the foreign minis- while they might be prospering, well-con- ter rehire whomever he wants. nected insiders were doing better. In 2005 In this worldview cadres are every- PiS took a quarter of the vote, enough for a thing. According to an analysis by the Fo- plurality in parliament. But its unruly co- rum of Civic Development, a think-tank in alition with two other anti-establishment Warsaw, 37 PiS laws have led to the sacking parties collapsed two years later. of more than 11,300 civil servants. The By 2015 Poles’ sense of being short- party decides which ex-communists are re- changed had grown, not because they pentant patriots (PiS’s ranks are full of such were worse off, but because their aspira- figures), and which are unreformed ene- tions outpaced reality. Many had experi- mies ofthe state. Many ofthe latter, includ- ence of western Europe, where 2m or so ing military top brass, have been purged. had sought work since Poland joined the Keeping her hopes up If this sounds like an affront to the con- EU in 2004. Interviews with denizens of stitution, the PiS-dominated tribunal Pultusk-like towns by Maciej Gdula, a so- country in the Soviet bloc to topple seems unperturbed. It judged 88 cases last ciologist at Warsaw University, reveal that communism—can turn xenophobic. At last year, halfas many as in 2015, nearly always PiS supporters are neither left behind nor November’s independence-day march, sidingwith the government. When the civ- frustrated with their lives. But they want some openly carried fascist banners. il-rights ombudsman, Adam Bodnar, chal- more—and they want it now. Until 2015 pro-European elites main- lenged PiS’s reforms ofthe tribunal, includ- PiS promised them less condescension tained a guardrail against such sentiments. ing the dodgy investiture of three judges, and more protection. In Andrzej Duda it PiS has dismantled it. “No Brussels bureau- his complaint was rejected by a panel that found a young, affable presidential con- crat will tell us what democracy is,” sums included two ofthe judges in question. tender who outmanoeuvred Bronislaw up one person close to Mr Morawiecki. Does PiS, which won 38% of the vote in Komorowski, the PO’s respectable but dull What is democracy, according to PiS? 2015, have a mandate to rip up the incumbent. Beata Szydlo, Mr Kaczynski’s First, it is majoritarian. Any constraint post-1989 social contract? Mr Morawiecki pick for prime minister, was less divisive amounts to “legal impossibilism”, Mr Kac- plays down Mr Kaczynski’s talk of revolu- than the chairman, who kept a low profile. zynski’s term forwhat his liberal critics call tion. But, he adds, “every contract can be Aided by images of migrants pouring into checks and balances. The opposition is giv- amended.” Polish institutions need a western Europe, PiS exploited fears of a en short shrift. Legislation is pushed shake-up, he says. Courts average 685 days Muslim invasion. The centre-left split into through as private-members’ bills, which to enforce a contract, the fourth-slowest in two camps, neither of which got enough unlike government proposals can dis- Europe. None of the provisions in the judi- votes to enter parliament. PiS won an un- pense with public consultation. In 2016 cial reforms, he says, is unique to Poland. precedented absolute majority. 40% of PiS’s 181 draft laws were submitted With control of parliament and a sym- in this way, up from 15% and 13% in the pre- Wolfin Italian wool pathetic president, PiS prime ministers— vious two parliamentary terms. It is a cunning sales pitch. No single move first Ms Szydlo and, since December, Ma- Lacking a supermajority to amend the looks revolutionary in isolation. Lithua- teusz Morawiecki—set about delivering on constitution, PiS did the next best thing nian supreme-court justices are appointed campaign promises. They recklessly re- and nobbled the constitutional tribunal. It and dismissed by parliament at the presi- versed a PO pension reform by cutting the replaced five judges seated by the previous dent’s request. In Denmark and Sweden retirement age, introduced a monthly ben- parliament (including two who, admitted- ministers appoint members of the judicial efit of 500 zlotys ($148) per child starting ly, the PO had appointed irregularly when council. As blatant as the state media’s with the second-born, reformed the justice populist tilt is, PiS claims it is only correct- system (ostensibly to make it more effi- ing its historically liberal bias. cient), and went after evasion of value- Up, up and away Mr Morawiecki, a millionaire former added tax, raising receipts by 23%. This flur- GDP per person* as % of EU15 banker, was promoted to prime minister in ry of activity made PiS’s critics look like December at the orders of Mr Kaczynski, weak, privileged naysayers. Meanwhile, 80 who had tired ofMs Szydlo. He is worldlier the economy continues to grow at 4%, Czech Republic Poland and cleverer than his predecessor, and wages are up and inflation is subdued. 60 speaks fluent English. Where Ms Szydlo PiS is aided by an underlying conserva- shunned Brussels, he engages. Hungary tive streakin Polish society. In the 1990snot 40 Yet when it comes to ridding the state of even the left-wing governments champi- Romania the (mostly imaginary) remnants of oned social liberalism. Poland’s abortion Bulgaria communism, Mr Morawiecki appears to law is among Europe’s strictest. The global 20 be a true believer. In the 1980s his father #MeToo movement against sexual harass- founded a radical splinter ofSolidarity. Mr ment has been more #NotMe in Poland, 0 Morawiecki, then a teenager, was kid- outside a few feminist circles. Pride in Po- 1990 95 2000 05 10 16 napped by the secret police, beaten and land’s undoubted virtues—it never collab- Sources: “Europe’s Growth Champion” *At purchasing- told to dig his own grave, but refused to by M. Piatkowski; IMF; UN power parity, 2011$ orated with the Nazis, and was the first give up his father’s whereabouts. In con-1 The Economist April 21st 2018 Europe 45

2 trast to many party colleagues, his disdain trend. In the shortterm itmayconstrain the for the old regime seems genuine. But this Poll of Poles supply of labour. According to one esti- zeal may lead him to push Poland closer to Poland, voting intention, % polled mate, the child benefit has discouraged the sort of “illiberal democracy” which Mr 103,000 women from work. Labour-force Orban has created in Hungary, and which 50 participation among young women is at a Election result PiS Mr Kaczynski makes no secret ofdesiring. 19-year low. The lower retirement age will 40 Poland is not quite Hungary. Its civil make matters worse. This, plus the expect- EU society is livelier. Its economy is more di- 30 ed fall in aid after 2020, prompted Fitch verse and lacks media oligarchs, notes Jan- PO and Standard & Poor’s, two ratingagencies, Other parties Werner Müller, a scholar of populism at 20 to revise Poland’s potential GDP growth Princeton University. Viewership of TVP rate down to 1.5-2.6% in the next decade. news is falling, while independent news- 10 Worst ofall, PiS’s assault on Poland’s in- P S papers benefit from the i version of the Centre-left parties stitutions undermines citizens’ trust in “Trump bump”. Where other populists 0 them. Itscampaign to paintthe judiciary as 2015 16 17 18 cosy up to Vladimir Putin, Mr Kaczynski a corrupt clique—complete with billboards loathes Russia, which he blames (with lit- Sources: CBOS; Polish electoral commission depicting a drunk-driving judge—doubt- tle evidence) forthe Smolenskcrash. less contributed to fallingconfidence in the PiS is not immune to criticism. Propos- certainty. Laws affecting entire sectors are justice system, down from 41% in 2015 to als to regulate independent media have rushed through parliament. A ban on Sun- 32%, according to a Eurobarometer poll. been shelved. So have efforts to outlaw all day trading was passed in January and At best, PiS’s illiberal reforms might be abortions, after thousands of women took came into force in March. Mr Morawiecki’s reversed by the next party that wins an to the streets. Courts have mostly dis- talk of national champions and “national election. But they have set a precedent: fu- missed the charges against anti-PiS protes- capital” risks putting offforeigners. ture governments may repeat the cycle of ters. Ms Szydlo’s decision to award herself State capitalism of the sort the prime court-packing and purges. In the worst and her cabinet 2.1m zlotys before her de- minister seems to favour may weigh on case, Poland may have started down the motion may cost PiS in local elections in productivity. This needs to rise for growth authoritarian road already travelled by the autumn. “Bonus-gate” may explain its to persist as the population, which dipped Turkey and Hungary. Today few see this as slide in some recent polls. below 38m in 2015, continues to shrink. likely.But when such things shift, they shift The party is not as monolithic as myth Few expect the child benefit to reverse the fasterthan anyone expects. 7 would have it, either. In March Mr Duda broke ranks and vetoed a bill which would allow communist-era soldiers to be Armenia stripped of rank. A faction leery of Mr Mo- rawiecki’s rise has tried to clip his wings. Meet the new boss Neither he nor Mr Kaczynski controls Zbig- niew Ziobro, the Jacobin justice minister, who leads his own group in parliament. Then there is the EU. Besides the Article 7 proceedings, a growing chorus of mem- ber states wants future EU aid to be tied to An unpopularpresident switches to prime minister rule-of-law considerations. Faced with a choice between revolution and EU money, BELIEVE that one person must not as- Many Armenians are unconvinced. Hov- which flows disproportionately to its “Ipire to the reins of power more than sep Khurshudyan of the Armenian Centre poorer rural base, PiS may thinkagain. twice in a lifetime,” Serzh Sargsyan, then for National and International Studies, a But even ifPiS’s wrecking job were halt- president ofArmenia, declared in 2014. But think-tank, calls the change “groundless”. ed, deep scars would remain. Society has the unpopularMrSargsyan, whose second The new, convoluted electoral system al- split into warringcamps. APO leaderlooks (and final) consecutive term as president mostguaranteesMrSargsyan’sRepublican bemused when asked if he has friends in expired on April 9th, was just kidding. On party a majority. PiS. Mr Morawiecki’s aides react similarly April 17th the national assembly, stacked After a decade in power, Mr Sargsyan to a question about pals in the PO. with loyalists, elected him as the country’s has little to boast of. The economy, reliant Purges of the military and intelligence new prime minister. Even many members on remittances from Russia, has barely services have strained relationships with ofthe biggest “opposition” group voted for grown. Unemployment is at nearly 20%. allies. Diplomatic fallout from the Holo- him. If imitation is the sincerest form of Three in ten Armenians fall below a pover- caust law, which America and Israel see as flattery, Vladimir Putin must be smiling. ty line of $2.90 a day, more than in 2008. whitewashing the role some Poles played, Around 10,000 protesters in Yerevan, The borders with Azerbaijan and Turkey has been disastrous. Poland risks becom- the capital, took to the streets before the are closed. Foreign investors are deterred ing like Turkey, a prickly ally important vote, chanting “Reject Serzh!” Police used by corruption. Oligarchs control the main only because ofits strategic location, says a tear-gas to disperse them. With hindsight industries, Mr Sargsyan among them. Washington insider. Mr Sargsyan’s intentions have long been The new prime minister has a three- The economy, though healthy, could be clear. Constitutional changes he enacted in pronged agenda. First comes economic in- better given the ruddy global outlook. Its December 2015, which take effect this tegration with the European Union, Arme- rate of convergence with western Europe month, grant the prime minister nearly all nia’s second-largest trading partner after has slowed. A tight labour market and ex- the powers previously held by the presi- Russia. On April 11th the national assembly travaganthandoutshave fuelled consump- dent. The amendments also scrapped di- ratified a “partnership agreement” com- tion (the government has doled out 42.6bn rect elections for the presidency, ensuring mitting to more regulatory harmonisation zlotys in the new child benefit alone since that this post too is occupied by one of Mr with the EU. Second is stemming depopu- 2016) but not private investment. Grzegorz Sargsyan’s yes-men. lation. Around 300,000 Armenians, fully Baczewski of Leviatan, a bosses’ associa- Mr Sargsyan insists that a parliamenta- 10% of the total, have left the country since tion, blames this in part on regulatory un- ry system will strengthen democracy. 2008. Last year Mr Sargsyan set a target 1 46 Europe The Economist April 21st 2018

2 population of4m by2040. The lastprong is Spain making Armenia an information-technol- ogy powerhouse. These goals are not particularly realis- Driving swine to ITACA EU tic. The partnership agreement with the JEREZ DE LOS CABALLEROS isa weakerversion ofan association agree- Mis-labelled ham makes foodies squeal ment which Mr Sargsyan turned down in 2013, choosing instead to join Russia’s Eur- N A spring morning in Extremadura, in feedlots and sired by a non-Ibérico. asian Economic Union. The population Oa few miles from the border with Mr Paredes says this offers budget- target entails no concrete proposals. Mr Portugal, a herd ofbrown Ibérico pigs is conscious consumers a choice. Topolice Sargsyan wants to tempt back some of the gambolling in the dehesa, the open park- the system ASICI has set up a database 7m-10m ethnic Armenians abroad, but it is land that occupies a broad swathe of called ITACA (the Spanish acronym for unclear how many want to return. Arme- south-eastern Spain. The pigs are clean identification, traceability and quality) nia’s IT sector is the fastest-growing part of and friendly.They live outdoors and are which means each leg or shoulder can be the economy,making up 7% ofGDP in 2017, grass-fed. Next winter they will fatten on traced by farmand parentage. This year, but it is mainly known forits cheap labour. acorns. They will be slaughtered at forthe first time, all the hams released to And there is tough competition from Uk- around18 months, and after curing with the market have the collars. raine and Romania. Mr Sargsyan’s stint in sea salt and years ofnatural drying, will Traditionally,hams in Spain were sold his new job is likely to be underwhelming. start going on sale in 2023, says Jaime whole. Now halfofsales are sliced, as are Soon, he may come to appreciate the wis- García ofMontesano, the family-run most exports to growing markets in dom ofhis words from 2014. 7 company that owns them. Europe and Asia. The next step should be Ibérico ham is the beluga caviar of the to colour-code packets ofsliced ham. Mr porcine world. It is slow food. The best Paredes says ITACA can do that. But the Russia hams will hang in Montesano’s drying big processors are against it. Others, like rooms on a hilltop outside the town of Mr García, would like to see a simpler Catch me if you Jerez de los Caballeros forup to six years, system, with the Ibérico tag only for sweating gently when the windows are purebred pigs fed on bellota. “I thinkwe can opened. This breaks down the fat and lets have to defend the purity ofIbérico,” he it seep into the muscle, producing micro- asserts. Barring that, buyers will have to MOSCOW marbling (detectable only when a slice is keep in mind that some Spanish pigs are held to the light). It is this, and the bellotas more equal than others. Russia’s government chases a popular (acorns), which give Ibérico its sweet, messaging service melt-in-the-mouth nuttiness. The finest ELEGRAM, a sleek online messaging legs retail whole forup to €900 ($1,100), Tservice founded in 2013, has 200m us- or much more ifsold sliced. ers worldwide. About 15m of them are in But some ham sold as Ibérico in su- Russia, the homeland of its founder, Pavel permarkets in Spain and elsewhere, at Durov. Russia’s business and political elite suspiciously low prices, is actually a have taken to its anonymous “channel” cut-rate substitute. The pigs may be cross- feature to dish out insider gossip. Even the breeds, and have never met a bellota in Kremlin has adopted it to communicate their lives. Spanish critics call this fraud. with reporters. Andrés Paredes ofASICI, the industry But along with user-friendliness, Tele- association, disagrees: “What we have to gram has built its brand on privacy.Russian do is to inform the consumer about what authorities are not pleased. The Federal Se- they are really buying.” A decree issued curity Service (FSB), the successor to the in 2014 set fourcategories, each denoted KGB, has demanded that Telegram obey a by a colour-coded collar attached to the law requiring firms to hand over the cryp- pigs’ ankles. A blackcollar means a100% tographic “keys” needed to access en- Ibérico pig, reared free-range and fatten- crypted messages. Mr Durov has refused. ed on bellotas; white denotes a pig reared Spot the impostors His lawyer posted a picture of two metal keys he joked had been sent to the FSB. Last week a court ruled against Telegram. Ros- ported problems with online ticket sales. tion of the Russian state’s assaults on inter- komnadzor, the communications author- For many users Telegram has remained net freedom. Russia has no equivalent of ity, announced it would block the service accessible, moving to new hosts each time China’s automatic “great firewall”—it up- from April 16th. The government urged re- Roskomnadzor blocks it. Others have defi- dates its blacklists manually—but such a porters to switch to ICQ, a service owned antly switched to VPN services to maintain possibility is “growing ever closer”, wrote by a Kremlin-friendly billionaire. access. “They’re blocking Telegram be- Sarkis Darbinyan of Roskomsvoboda, a Roskomnadzor has blocked more than cause we created lifehere: we joke, lament, digital-rights group. The law requires com- 19m IP addresses. Many belong to Google laugh, reflect, and discuss,” wrote a popu- panies to store Russian users’ data in Rus- or Amazon, whose cloud services Tele- lar Telegram channel called Stalingulag. sia, but the government has mainly ig- gram began using to bypass the ban. The Mr Durov, who founded VK, Russia’s nored Western companies that do not. agency’s head, Aleksandr Zharov, called it equivalent ofFacebook, before emigrating, That could change. Mr Zharov says if Face- a “battle between shells and armour”. says Telegram has seen no significant drop book does not comply by the end of the Many unrelated businesses have been in engagement. TGStat, a monitoring year, it may be blocked, too. 7 caught in the crossfire, including Odnok- group, reckons that during the first day of lassniki, a social network; Viber, a messag- the block, views of Russian-language Tele- Correction: A cartoon last week depicted Portugal’s ing app; and online retailers and gaming gram channels were actually17%higher. Social Democratic Party as part of the governing platforms. The Kremlin Museum even re- Activists see the episode as a big escala- coalition. It is an opposition party. We regret the error. The Economist April 21st 2018 Europe 47 Charlemagne Jupiter in the bog

Emmanuel Macron’s ambitious plans forEurope are in dangerofgetting stuck were due to meet in Berlin as we went to press.) French hopes that Germany’s Social Democrats (SPD), who have reluctantly rejoined Mrs Merkel in coalition, might soften hard hearts in the CDU lookmisguided, too. OlafScholz, the new SPD finance minister, has failed to purge his department’s upper ranks of staff installed by Wolfgang Schäuble, his flinty CDU pre- decessor. Some MPs grumbled after Mrs Merkel bowed to her party, but the SPD is more concerned to shore up its fragile sup- port than to bolster Mr Macron’s European dreams. The Euro- pean debate Mr Macron was supposed to kick-start is already bogged down in the sort of pettifogging technicalities he detests, on matters like the appropriate level of non-performing loans on the balance-sheets of euro-zone banks. Italy’s political mess, Po- land’s inward turn and Spain’s Catalan distraction further thin the ranks of potential allies. The June summit, once hailed as a make-or-break moment, may yield little more than one of the EU’s endless “road maps”. No matter, say Mr Macron’s aides. They will play the long game on the euro and lookformomentum elsewhere. But the list looks thin. In Strasbourg the French president urged a resolution to the interminable intra-EU fights over how refugees should be HEN France’s president speaks about Europe, his remarks redistributed the next time emergency hits. But this file has been Ware directed in part at Germany. Before his election in 2017 blocked for years, and he appears to have no fresh ideas. Few Emmanuel Macron went to great lengths to show Angela Merkel Europeans have much interest in contributing to his proposed that he could be a credible partner. He lauded her leadership on joint military-intervention force. And as the Syria strikes, co-ordi- refugees and Russia, took the fight to populists, and promised to nated with the United States and Britain, showed, forhard securi- tackle France’s economic rigidities, all wrapped in a European ty matters the Elysée needs partners outside the EU. Union flag. The Elysée Treatyof1963, the basis forFranco-German co-operation, would be given a fresh lick of paint. For years visi- March on, march on tors to Berlin had grown familiar with weary complaints about Mr Macron has at least rallied support forhis cause to build a “Eu- unreformable France. Now the Germans seemed to have what rope that protects”. He has won a battle to equalise pay and bene- they had long claimed to be waiting for. If Mr Macron had not fitsbetween native workersand those temporarily“posted” from come along, perhaps Germany would have had to invent him. other EU countries. The European Commission has taken up his Mr Macron has always argued that his domestic plans cannot call for a special tax on digital giants, although Germany remains be isolated from his European ambitions. So this week, as tran- sceptical about the details. It is warmer towards another Macron sport strikes and university sit-ins roiled his country, he took his priority: a tough line on foreign governments, especially China’s, calls for EU reform to the European Parliament in Strasbourg. that encourage their firms to gobble up “strategic” industries in France’s Jupiterian president loves a good scrap, and it showed. the EU while making life difficult forEuropean investors. Mr Macron sparred with MEPs from across the spectrum, pas- Mr Macron’s other big idea is to run a series of “citizens’ con- sionately defending his decision to attack weapons sites in Syria, sultations” to generate debate about the EU in the run-up to next and reserving particular venom for a former ally of Marine Le year’s European elections. (After his Strasbourg address he went Pen, the nationalist leader he bested last year. Mr Macron issued to a nearbytown to lead a discussion among300 voters.) MrMac- his customary battle-cry against illiberal populists and European ron has convinced other leaders to establish their own versions. naysayers—but also tried to dispel what seems to him to be a But do not expect a revolutionary exercise in grassroots politics, whiff of complacency. “We can’t carry on as if this is any old de- for few of his counterparts share his appetite for disruption. That bate,” he said, adding that he did not want to belong “to a gener- also explains why Mr Macron’s ambitions to shake up Europe’s ation of sleepwalkers”. As he knows, the warnings in Christo- institutions are floundering. His party, La République En Marche, pherClark’s bookofthe same name, which charts the diplomatic remains aloof from the pan-European political groupings missteps that led to the first world war, resonate with Mrs Merkel. through which much EU business is conducted. If he hopes to YetBerlin isslumbering. HoursafterMrMacron’saddress, Mrs make good on his promise to blow up party politics in Europe as Merkel followed her Christian Democratic Union (CDU) in resist- he did in France, he needs to get a move on. ing a beefing-up of the euro zone’s bail-out fund, one of several Traditionally Europe has reinvented itself under two sets of modest reform ideas to be discussed at an EU summit in June. Mr conditions: optimism (the creation of the euro, enlargement to Macron had already scaled back his ambitions for the euro. But the east), or panic (bail-out funds, refugee deals). A different sort even the relatively easy projects are starting to look too difficult. of mood is abroad today, characterised by mutual mistrust, cau- “We are not the ones with our foot on the brakes,” insisted Mrs tion and fear that the next emergency is just around the corner. Merkel. But she seems too tired or weak to respond to Mr Mac- ThatiswhyFrance’spresidentfindsan audience forhisprotective ron’s initiatives. Her latest idea is that meetings ofthe euro zone’s measures, but tumbleweed for the rest. This leaves the EU in lim- finance ministers should occasionally take in economy ministers bo, ill-equipped to cope with the next crisis. That is precisely Mr too. Mr Macron might be forgiven a dash ofimpatience. (The pair Macron’s message. But it is not being heard. 7 48 Britain The Economist April 21st 2018

Also in this section 49 The Windrush scandal 49 Plots to stop Brexit 50 Russia’s anti-Britain propaganda 51 Bagehot: The pacifist illusion

For daily analysis and debate on Britain, visit Economist.com/britain

Enoch Powell, race and migration largest cities of London, Birmingham and Manchester. Birmingham exemplifies the Fifty years down-river trend towards what academics call super- diversity. In the past, minority ethnic groups tended to cluster together. Now, un- precedented numbers of people of differ- ent ethnicities are mixing. No ward in Bir- BIRMINGHAM mingham has fewer than 32 ethnic groups, says Jenny Phillimore of Birmingham Uni- The lasting legacy ofa poisonous speech versity. At the extreme is Handsworth, N APRIL 20th 1968 Enoch Powell rose continue to absorb the current number of whose 31,000 residentshail from 170 differ- Oto give a speech before an audience of immigrants without mass violence. ent countries. Here, says Ms Phillimore, Conservative Party activists in the Mid- The subsequent 50 years have dis- “virtually everyone can fit in”. land Hotel in Birmingham. Normally such proved that idea. Today’s levels of immi- This is reflected in the region’s politics. an occasion, on a Saturday afternoon, gration dwarf those at the time of Powell’s Powell’s nearby former constituency of would have attracted little attention. But speech (see chart). About 14% of Britain’s Wolverhampton South Westwasuntil 2015 the shadow defence secretary, dressed for- population is foreign-born, nearly treble represented by Paul Uppal, a Sikh (and mally, as ever, in a three-piece suit, had oth- the proportion in 1968. Non-whites made Conservative), and is now held by Eleanor er ideas. Powell had invited the TV cam- up 14% of the population at the last census, Smith of the Labour Party, whose mother eras, and promised one journalist that his in 2011; non-British whites (mainly Euro- immigrated from Barbados in 1954 to work speech was “going to go up, ‘fizz’, like a peans) a further 5%. A tenth of adults re- in the National Health Service. Ms Smith rocket; but whereas all rockets fall to Earth, ported that they were in mixed-race rela- remembers her mother’s distress at Pow- this one is going to stay up.” He was right. tionships. All this might have shocked ell’s speech, which called for voluntary re- This was Powell’s “rivers of blood” Powell, who died in 1998. Yet the conflagra- patriation—something which was Conser- speech, so named after the peroration. It tion that he predicted has not materialised. vative Party policy at the time. She had was a direct and provocative assault on im- Birmingham itself provides as good a been encouraged to come to Britain at a migration from the Commonwealth, quot- case study as any. Today halfofall the non- time of labour shortages, and was now be- ingthe fearsofone constituentthat “in 15 or white people in Britain live in the three ing told to go home. 1 20 years’ time, the black man will have the whip hand over the white man.” It caused outrage at the time—Powell was sacked New tributaries Latin America from the Tories’ frontbench—and still does. Britain, long-term international migration by citizenship & Caribbean 500 Excluding British-born, ‘000 Many objected even to an actor reading 400 BBC Africa European out his words in a recent radio pro- Union gramme to markthe anniversary. 300 Powell’s main contention was that if Immigration South Asia 200 mass immigration continued, there would Other Asia 100 be civil strife. “Like the Roman,” he Rest of world warned, “I seem to see ‘the River Tiber 0 100 foaming with much blood’.” The line was Emigration from Virgil but the apocalyptic tone was Data breakdown unavailable 200 borrowed from America, ablaze with riots before 1975 after the murder of Martin Luther King on 300 April 4th thatyear. Powell, “filled with fore- 1968 75 80 85 90 95 2000 05 10 15 17* boding”, implied that Britain could not Source: ONS *12 months to September The Economist April 21st 2018 Britain 49

2 Superdiversity in Birmingham and oth- white-British and Irish people were the But the real effect of his “rivers of blood” er cities is evidence ofintegration, but, cau- least likely to have ethnically mixed social speech was not to open a frank discussion tions Eric Kaufman of Birkbeck College, networks. It also highlighted the socio-eco- on such matters, but to stifle it. As Dame University of London, it has in some cases nomic exclusion and consequent isolation Louise argues, by talking about immigra- meant less contact between whites and of some Pakistani and Bangladeshi com- tion in such menacing tones, Powell shut ethnic minorities. There has been some munities. They have the lowest levels of down sensible debate aboutthe subject for “white flight” from superdiverse areas, he English-language proficiency of any mi- decades. One consequence is that some says, as whites have moved out of the nority group; more than a fifth of Muslim problems have not been tackled, leading to poorer areas where migrants gather, to the women cannot speakthe language well. outcomes like the relative isolation of Paki- suburbs. The end result is that “minorities Such findings mean that Powell still has stani women. “We have had our heads in are mixing with each other, but less so admirers. There was recently an applica- the sand about this,” she laments. with the white British.” tion for him to be honoured with a blue Powell’s speech may also have had an An official review into integration in plaque outside his home in Wolverhamp- unexpected impact on another of his ob- 2016 by Dame Louise Casey found that ton (thousands have petitioned against it). sessions: Britain’s relationship with the European Union. Migration had been a ta- boo subject for decades, because of its as- The Windrush scandal sociation with race. But after the number of mainly white immigrants from eastern Turning the boat around Europe shot up in the early 2000s, pent-up worries about migration and integration were suddenly and explosively aired. The The shamefultreatment ofCaribbean Britons worries othermigrants, too subsequent Brexit referendum of 2016 was HE past few years have been a “night- came halfa century ago as tots. In 2010 lost largely on the issue ofmigration. Tmare”, says Anthony Bryan. After his the Home Office destroyed an archive of Halfa century on from Powell’s speech, passport application was turned down, old landing slips, the only evidence some the blood still shows no sign of foaming. the Home Office claimed he was an had oftheir arrival. The problem has But the lasting and malign effect of his in- illegal immigrant because he lacked the been compounded by cuts to legal aid, tervention on the way in which race and documents to prove otherwise. He lost says NickNason, an immigration lawyer. migration are discussed, or not discussed, his job and did two stints in prison-like The government initially hid from its holds a lesson for all politicians about the migration detention centres. At one point foul-up. Mrs May refused a request by the power oftheir words. 7 the Home Office booked him on a flight leaders ofCaribbean countries to discuss backto Jamaica, the country he left as a the problem at this week’s Common- child in1965. Only an intervention by his wealth summit. But public outrage Voting on Brexit lawyer averted his deportation. prompted a U-turn: she apologised for Mr Bryan is a child ofthe “Windrush the migrants’ treatment, as did her succes- Enough already? generation” ofCaribbean migrants who sor as home secretary,Amber Rudd, who came to Britain in1948-71. Named after faced calls from Labour to resign. the HMT Empire Windrush, the boat that The episode is a cause of“national carried some ofthe first arrivals, their shame”, as David Lammy,a Labour MP right to British citizenship was enshrined and son ofWindrush arrivals, told Parlia- It is Parliament, not a fresh referendum, in law in1971. That applied even to those ment. And it has hardly reassured EU that is most likely to upset Brexit without migration papers, like children migrants living in Britain that they can who travelled on a parent’s passport. believe the Home Office’s assurances T WAS more like a happy-clappy church Many were therefore legally resident, regarding their status after Brexit. Satbir Ithan a political rally, with whoops, without the paperworkto prove it. Singh ofthe Joint Council forthe Welfare cheers and flag-waving. The incongruous For a long time, that didn’t matter. But ofImmigrants sums up the concern: “In setting for this Sunday outing was an old in 2014 Theresa May, then the home 40 years we could see Italian grandmoth- ballroom in Camden, where a campaign secretary, introduced a number ofpoli- ers being removed because they did not was launched on April 15th to demand a cies to create a “hostile environment” for fill in the right application form.” “People’s Vote” on the Brexit deal. All the illegal migrants. Employers and land- main pro-European Union groupscame to- lords faced new duties to perform migra- gether to support this cross-party cause. tion checks—and steep fines or jail time if With less than a year to go before Brexit is they failed. The effect was to bring migra- due to happen, their hope is, in effect, that tion controls inland from the border. the voters may yet stop it. But the policy also snared people like Brexiteers promptly accused a metro- Mr Bryan, who were in Britain legally. No politan elite ofignoring the will of the peo- one, least ofall the Home Office, seems to ple, who decided in June 2016 to leave the know the number ofpeople affected, but EU. Yet the campaign has good arguments. experts reckon it may be tens ofthou- The vote for Brexit was for the principle, sands. Many have lost their jobs, been not the outcome. Britons were made innu- detained in migration centres or denied merable promises, such as no cost to the medical treatment. Some may have been economy, easy agreement on access to the deported—the Home Office is not sure. EU market, more money for the health ser- Proving their right to be in Britain is vice and quicktrade dealswith othercoun- fiendishly hard forsome. Applicants tries. None of these promises is likely to be must show that they have not left for kept. Chuka Umunna, a Labour MP, likens more than two consecutive years since the process to buying a house but finding their arrival, a tall order forthose who Anthony Bryan, betrayed by his country big faults after a survey. The buyer should not then be forced to go through with it. 1 50 Britain The Economist April 21st 2018

2 Yet the call for a vote on the final Brexit Russian propaganda Thus, Britain and France staged a chem- deal is fraught with problems. Mark Mal- ical attackin Douma, Syria, and used a fake loch Brown, a formerLabourministerwho Anglichanka YouTube video to justify their strikes with chairs Best for Britain, a pro-EU lobby America on April 14th. “This is an estab- group, admits it is “a long shot”. Polls may strikes again lished fact,” asserted Dmitry Kiselev, the find support for a vote, but there is little anchor of Russia’s main weekly TV news sign of a big shift of public opinion against MOSCOW show. The media first said that there was Brexit. There is no parliamentary majority no evidence of the use of chemical weap- Kremlin-backed media peddle exotic fora new vote. Labour’s Brexit spokesman, ons in Syria, before adopting the line that theories ofBritish perfidy Sir Keir Starmer, confirms that the party the evidence was fabricated by Britain. does not support one. And as June 2016 T WAS Britain, not Russia, that poisoned Both the poisoning of the Skripals and showed, referendums are too binary. Re- ISergei Skripal and his daughter, to stoke the attack on Syria, Mr Kiselev claimed, jecting a Brexit deal might mean more un- Russophobia. Or perhaps Ukraine targeted were “Anglo-Saxon provocations”, led by certainty,not reverting to membership. the formerspy,to frame Russia. Then again, “petty Britain” with America participating The place that is having a vote—many maybe the Skripals were accidentally ex- in its “devilish plot”. (The world, he added, of them, in fact—is Parliament. This week posed to a British nerve-agent, produced at wasluckyto have so soberand restrained a the Lords inflicted a heavy defeat on the Porton Down laboratory. Or maybe the leader as Vladimir Putin.) The studio back- government by amending the EU with- culprits were the daughter’s half-crazy drop showed Big Ben and an old Russian drawal bill to ask it to negotiate a customs fiancé and his mother, who did it out of saying, Anglichanka gadit (an Englishwom- union with the EU. Other amendments jealousy.After all, Russia does not produce an makes mischief), which was first ap- likely to pass make it illegal to build infra- the Novichok nerve-agent that is said to plied to Queen Victoria after she humiliat- structure on the Irish border and bolster a have been used. And in any case it was not ed Russia in the Crimean war of1853-56. clause giving Parliament a “meaningful” Novichok at all, but a toxin called BZ, as a Victoria isnotthe onlyAnglichanka said vote on the Brexit deal. More Brexit-related Swiss laboratory secretly confirmed. to have made mischief in Russia. The larg- legislation lies ahead, including on trade, These are some of the claims made by est pro-Kremlin tabloid, Komsomolskaya customs and immigration. Russia’s state media, its foreign ministry Pravda, last month ran a long interview Because Theresa May’s government and by online trolls following last month’s with a “historian of intelligence services”, lacks a majority in both the Commons and assassination attempt on a former Russian who claimed that Elizabeth I dispatched the Lords, itisvulnerable to furtherdefeats. spy in Salisbury. Their contradictory char- herphysicians to the “noble and kind” Tsar Itisfendingthem offwith three arguments. acter is not a flaw of the Kremlin’s propa- Ivan IV (better known as Ivan the Terrible), One is to claim that amendments to its leg- ganda, but a feature. The purpose of the to poison him and his wife with mercury. islation are intended only to sabotage disinformation campaign is to drown “The English had every reason to poison Brexit. A second is to insist that, if it loses a Western intelligence in a cacophony of Ivan the Terrible. He started to display in- vote on the Brexit deal, that will be an in- wild claims, rather than offer a coherent dependence, stripped English merchants struction to leave with no deal at all. And counter-narrative. Russia has used the tac- of their privileges and contradicted the the third is to tell potential Toryrebels that tic before, during the wars in Ukraine (in- queen herself,” the historian explained. this and many other votes will in reality be cludingthe downingofMalaysian Airlines English spies, disguised as merchants, ones of confidence: if any are lost, an elec- flight MH17) and Syria. The stories are regu- were also behind the so-called time of tion could follow that brings Labour’s Je- larly collated by Britain’s Foreign Office. troubles, a spell of famine and uprising in remy Corbyn to power. Earlier this year the Russian embassy in the early17th century, he added. Yet these arguments are not convincing. the Netherlands tweeted a suggested slo- All this is framed as a historical prece- Many amendments are aimed at softening gan to describe its foreign policy: “Russia’s dentto the supposed plotbyanotherAngli- Brexit,notstoppingit. Asa newreport from strength isin truth”. Itwasunclearwhether chanka, Theresa May, to poison the image the Institute for Government, a think-tank, the nod to George Orwell was intentional. of Russia’s modern tsar, Mr Putin, by un- explains, voting down the Brexit deal need But Russian officials have barely hidden leashing a nerve agent on the Skripals. But not mean leaving with no deal. Other out- their engagement in information warfare, the real history is somewhat different, and comes are possible: new negotiations, a claiming that Russia is under attack from perhaps telling. In his letters to Elizabeth I, change in Britain’s red lines, a decision to the Western media, which wants to stir Ivan proposed to marry the English queen, reverse Brexit. And the Fixed-term Parlia- trouble. In so doing, they project Russia’s and asked her for shelter in case he met ments Act of2011makes it hard to label any own tactics onto other countries. trouble at home. She turned him down. 7 vote, even on Brexit, a confidence matter. Mrs May might resign, triggering a Tory leadership contest. But an early election can be called only via a confidence vote or by a two-thirds majority in Parliament. The biggest obstacle to a People’s Vote is the timetable. The government has de- layed much Brexit legislation to avoid de- feats. The Brexit deal is due to be agreed by October, but as trade talks have only just begun, a slippage to December is likely. And details of the future relationship may still be vague, to be firmed up during a tran- sition period to December 2020. Dominic Grieve, a Tory MP who favours a People’s Vote, says the EU would extend next March’s Brexit deadline if need be. But the risk of accidentally crashing out without a deal will rise the closer that date gets. 7 Someone’s up to mischief The Economist April 21st 2018 Britain 51 Bagehot The pacifist illusion

Jeremy Corbyn’s reluctance to use force threatens to make the world a more dangerous place campaigning against the Vietnam war and nuclear weapons. He has also been a longtime critic ofNATO. Buthisconscience hasbeen lesssensitive when itcomes to op- posing the use of force by anti-Western regimes or by various non-state actors. He half-justified Russia’s invasion of Ukraine in 2014, sayingthatthe rootsofthe conflictlayin “belligerence” from the West and that Vladimir Putin was “not unprovoked”. He has often found time to hold meetings with left-wing groups that have sanctioned the use ofviolence to achieve theiraims. In 1984, a few weeks after an IRA bomb nearly killed Thatcher (and did kill five others) at the Conservative Party conference in Brighton, he invited Gerry Adams, the leader of the IRA’s political wing, to Parliament fora reception. The essence ofCorbynism is the rejec- tion of one of the basic tenets of British foreign policy: that you side with the West, ratherthan itsenemies. He isa pacifistof ideo- logical convenience rather than principle. Two noxious events in the past two months—a poisoning in Salisbury and a chemical attack in Syria—have given a vivid sense of what Mr Corbyn’s quasi-pacifism means in practice. He has repeatedly raised questions about the government’s (and in- deed the West’s) version of events. He has called for the govern- EORGE ORWELLwrote, a little wickedly, in “The Road to Wig- ment to delay acting until international bodies have had their Gan Pier” that the British left acts as an irresistible magnet to say—despite the fact that, in the case of Syria, Russia’s ability to cranks ofevery variety: fruit-juice drinkers, nudists, sandal-wear- veto any decision by the UN means that this would be like wait- ers, sex-maniacs, “nature cure” quacks, and, a particular peeve of ing forGodot. his, pacifists. On the whole the Labour Partyhas done an admira- Mr Corbyn’s prevarications are a reminder of what a risk Brit- ble job of keeping its crank-wing under control when it comes to ain would be taking with its foreign policy if it sent Mr Corbyn to serious issues like national security. ErnestBevin was one of the Downing Street in the next election, which is due in 2022 but architects of NATO. Nye Bevan slammed supporters of unilateral could happen earlier given the government’s lack of a majority nuclear disarmament with a rhetorical flourish about sending a and the agonies of Brexit. A Corbyn government would weaken foreign secretary “naked into the conference chamber”. Tony Britain’s relations with its allies. The United States might well re- Blair’s failure, ifanything, was to go too farin the use offorce. fuse to share sensitive information with a leader who has built There are two exceptions to this tradition. One was in 1980-83, hiscareeron anti-Americanism. Itwould weaken NATO, since Mr when Michael Foot committed Labour to unilateral nuclear dis- Corbyn has refused to say whetherhe believes in Article 5 (which armament and shrinking the armed forces. That hardly mattered states that an attack on one is an attack on all) and has opposed because Foot was crushed under the wheels of Margaret Thatch- the use of nuclear weapons (bizarrely, he supports maintaining er’s chariot in the general election of1983. Another was in 1932-35, Britain’s nuclear submarines but not arming them). It would also when the party was led by a committed pacifist, George Lans- embolden Mr Putin, who could assume that, through the UN, he bury. In 1933 Labour’s annual conference passed a resolution call- could exercise a veto over British foreign policy—and thereby ing for“the total disarmament ofall nations” and pledging never neutralise one of the world’s strongest military powers and one to take partin anywar. The partyroutinelyopposed rearmament. ofthe West’s most consistent champions. This mattered enormously. Adolf Hitler and his confrères took it as evidence that they could proceed with impunity. Nudists in the conference chamber Enter Jeremy Corbyn. Today’s world has more than a whiff of The classic objection to pacifism is that it makes conflict more the 1930s about it. The old order is shaky. Strongmen are on the likely, because bullies conclude that they can act unpunished. march. Wars on the periphery are threatening to spread. And the This is even more true ofMr Corbyn’s quasi-pacifism. It insists on leader of the Labour Party is talking about peace. The big differ- erecting endless obstacles to the West’s use of force, from the ence this time is that Mr Corbyn is much more powerful than seemingly reasonable (such as a parliamentary debate before the Lansbury everwas. He has a tight grip on his party apparatus and use offorce), to the deliberately impossible, such as international is the most likely winner ofthe next general election. consensus. At the same time, it makes endless excuses for the use Mr Corbyn says that he is not a pacifist. He is willing to sanc- offorce by the West’s enemies. tion the use of force in certain circumstances—“under interna- In 1935, as the strongmen flexed their muscles, the Labour tional law and as a genuine last resort”—and gives the second Party replaced the hapless Lansbury with Major Clement Attlee, world war as an example of a conflict he would have been will- who combined a vigorous support forBritain’s entry into the sec- ingto support. Itistrue thathe isnota pacifist, but notforthe high- ond world war with unceasing work to found the post-war wel- minded reasons that he gives. He has spent his life opposing the fare state. Today, alas, Labour’s parliamentary party is bereft of use offorce by Western governments. He not only objected to the Attlees. Meanwhile, the partyin the countryisdominated bysan- Iraq war, and acted as chairman of the Stop the War Coalition in dal-wearers and nature-cure quacks, who are willing to give the 2011-15. He also opposed the West’s decision to strike against Ser- slippery Mr Corbyn the benefit of the doubt in return for the bia’s Slobodan Milosevic in 1999. He not only spent his youth vague promise ofa more just society. 7 52 International The Economist April 21st 2018

Integrating refugees Such failures hold lessons for other countries, but so do Uganda’s successes, Making them welcome say some economists. Paul Collier and Alexander Betts, of Oxford University, ar- gue that rich countries should pay other “havens” to open their labour markets, as OMUGO Uganda has. The result, they say, is a triple win: for refugees; for host economies; and Two articles considerhow best to integrate refugees, and the benefits ofallowing for rich countries to which the refugees them to work. The first, on poorcountries, focuses on Uganda otherwise might swarm chaotically. WO years ago, a group of elders in this peace deal in July 2016. Hilda walked for Butsecurityand cultural concerns often Tvillage in north-western Uganda two weeks, carrying her four-year-old son. trump potential economic benefits. In Jor- agreed to lend their land to refugees from “If those Dinkas get you on the road, they dan refugees make up 20% of the popula- South Sudan. About 120,000 are now in will kill you,” she says, referringto the pres- tion. Only since 2016 has the government the surrounding area. Here they live in tar- ident’s ethnic group. This is the third time allowed them to work, in exchange for paulin shelters and mud-brick huts on a she has found refuge in Uganda. help from Britain, the World Bank and the patch ofscrub where cows once grazed. Ke- Refugees are “brothers and sisters”, say European Union. The “Jordan Compact” mis Butele, a gravel-voiced Ugandan elder, many Ugandans. Mr Butele was once one has had mixed results. The government explains that hostingrefugees is a way for a himself. But the welcome is also a prag- handed out work permits, but only for cer- remote place, long neglected by the central matic one. Northern Uganda is so poor tain sectors. Some refugees found con- government, to get noticed. He hopes for that some locals pose as refugees to receive struction work, but many shunned low- new schools, clinics and a decent road— food aid. Others see refugees as buyers for paying factory jobs. and “that our children can get jobs”. local goods. Elsewhere in Uganda has in- There are more than 20m refugees in deed seen such positive spillovers. One They will go far the world today, more than at any time study from 2016 found that the presence of Sending aid to the countries from which since the end of the second world war. Congolese refugees in western Uganda refugees come may actually encourage mi- Nearly 90% reside in poor countries. In had increased consumption per house- gration, as potential migrants gain the many, to preserve jobs for natives, govern- hold. Another estimates that each new ref- means to pay smugglers. This suggests that ments bar refugees from working in the ugee household boosts total local income, rather than sending aid, rich countries formal economy. Uganda has shown how including that of refugees, by $320-430 should lead by example and open their a different approach can reap dividends. more than the cost of the aid the house- own labour markets (see next article). In The government gives refugees land plots hold is given. That rises to $560-670 when the short term, as Mr Collier and Mr Betts and lets them work. In some places, the ref- refugees are given cash instead ofrations. argue, it may be easier for refugees to find ugees boost local businesses and act as a Uganda’s generous refugee policy also employmentin nearbycountriessimilar to magnet for foreign aid. Mr Butele and opens possibilities for skulduggery. In Feb- their own. But in the long term, they will manyotherUgandanssee theirnewneigh- ruary the government suspended its se- make more money in richer countries, and bours as a benefit, not a burden. Sadly, nior refugee official and three colleagues, so send more remittances home. such attitudes are still the exception. after the UN passed on reports offraud. Al- Refugee influxes produce both winners Uganda hosts more than 1m South Su- legations include extortion, the trafficking and losers. In Tanzania, a surge ofBurundi- danese refugees, in unfenced “settle- of women and girls, and the systematic in- an and Rwandan refugees from 1993 ments” across hundreds of square miles in flation of refugee numbers, to skim off aid caused a sharp rise in food prices, helping the north. Most came afterthe collapse ofa money for non-existent beneficiaries. local farmers but hurting town-dwellers. 1 The Economist April 21st 2018 International 53

2 Even in northern Uganda, protestinglocals got one-hectare parcels of land. New arriv- lowing refugees to work outweigh the blocked a road last year, complaining that als get smaller, stony plots, big enough to short-term costs, not just to the public their hopes for improved living conditions grow household greens, but not a surplus. purse, but to natives’ jobs and wages. In and abundant jobs had not been met. Duringa foodshortage lastyear,some refu- America, within six years, refugees’ em- Many refugees in the latest influx are gees ventured homeward to recover aban- ployment rates exceed natives’. The aver- also struggling. Settlements have restau- doned crops; a few got killed. The World age refugee becomes a net fiscal contribu- rants, billiard halls, pharmacies and vege- Food Programme gave others half their ra- tor just eight years after arriving. Also, in table stalls, but business is sluggish. In one, tions in cash. But as yet the markets to sup- European countries sectoral wage agree- Imvepi, Jeff Mambo, a refugee, recently ply grain quickly and in sufficient quanti- ments often make it expensive to employ opened the “Exile Salon”, offering “cute ties did not exist—as hungry refugees were low-productivity workers and tough to fire styles for mens” at 1,500 shillings ($0.41) well aware. them. America has no difficulty creating per trim. But few refugees come for hair- Refugees are more likely to thrive and low-wage jobs for unskilled immigrants, cuts; they have little cash to spare. Next integrate if allowed to move freely and and its welfare benefits are too mean to door, women sell their bland UN food ra- worklegally.It helps, too, ifthey receive aid tempt refugees out ofwork. tions forsalt and soap. in cash rather than kind. However, in But European countries have shown One problem is that donors have given Uganda, which is also coping with a new that it is possible to accommodate an in- only a third of the funding needed in influx from Congo, the welcome for refu- flux of low-paid workers without either 2017—ashortfallof$443m. Health and edu- gees is wearing thin. And in South Sudan, driving people permanently out of work, cation services are expanding too slowly: the killing continues. Having returned and or forcing their wages down. A study that one school has 4,200 students and just 16 fled twice before, Hilda is not hopeful. “I examined two decades of employment teachers. In the past, refugees in Uganda will not go back,” she says. 7 data from Denmark found that low-skilled native workers in towns that received large numbers of refugees (mostly from Afghan- Integrating refugees (2) istan, Iraq, Somalia and Bosnia) were in- deed displaced from their jobs. But they From asylum-seeker to taxpayer tended, eventually, to move into higher- skilled, higher-paying jobs at other firms. A recent study by Patrick Joyce, a Swed- ish economist, compared refugee labour- force integration in Denmark, Germany, AMSTERDAM the Netherlands, Norway and Sweden. Germany was the clear leader, with 70% of Allowing refugees to workcan bring benefits to rich countries, too refugees working after 15 years, nearly as OUHANAD SALHA would like noth- rived in the Netherlands in the late 1990s, high as the native employment rate of 74%. Ming better than to work. But since ar- only 55% were in the workforce15years lat- One reason for Germany’s success is riving in the Netherlands in late 2014, he er, compared with a rate among natives of that the Hartz labour-market reforms, be- has managed to do so for just one week. 80%. Yet the Dutch unemployment rate is ginning in 2003, allowed the economy to Like more than 80% of Syrian refugees in under 5%, and last year 40% of Dutch con- create more low-wage jobs suitable for im- Europe, he is unemployed. struction firms said they were struggling to migrants. Moreover, Germany has al- He was studying information technol- fill positions. In particular they needed lowed municipalities to adapt their refu- ogywhen he fled Syria in 2012, and worked electricians, like the redundant Mr Salha. gee-integration policiesto local conditions, as an apprentice electrician in Lebanon, Evidence from past refugee waves, and whereas Scandinavian countries have where “you can just go in and fix every- the experience of other countries, suggest one-size-fits-all policies. Unlike the Nether- thing.” Not so in the Netherlands. Becom- that the long-term gains to everyone of al- lands, Germany encourages asylum-seek- ing an electrician requires elaborate certifi- ers with a high likelihood of receiving ap- cation, and jobs usually need proficiency proval to begin working before they get it. in Dutch. Such rules, intended to shield na- Germany does a better job of co-ordinat- tive workers, deter asylum-seekers from ing asylum-claim processing with refugee looking for jobs. Refugees who do find housing, language and job training, and worklose their government-paid benefits. job placement. Other European countries Asylum-seekers in the Netherlands are could do a lot more along these lines to in- housed in government-run centresand not crease the chances that refugees’ role in the allowed to work until six months after labour force is complementary to native they arrive. If they then find a job, the gov- workers, rather than competitive. ernment withholds 75% of their wages to But, first, rich places that receive just a cover room and board. (Unsurprisingly, fraction of the world’s refugees would few do.) Once granted refugee status, as Mr need to heed their own advice to the Salha was last year, they are moved out poorer countries that receive the lion’s into subsidised housing. Mr Salha regis- share: allow asylum-seekers to work. Mr tered with a temporary-job agency,but the Salha is now enrolled in a training pro- local government told him working would gramme sponsored by Alliander, an elec- mean losing housing and other subsidies. trical-grid operator. It will earn him a job at The agency could not guarantee the company and a piece of paper that enough work, so he quit, and the Dutch proves that he knows how to install elec- taxpayer is supporting him again. Across tric cable. This is a step in the right direc- Europe unemployment rates among refu- tion. But it has taken three years. 7 gees are higher than among the native- ...... born. In the Netherlands, the gap is among Details of all the papers and studies referred to in these the highest. Even among refugees who ar- German lessons two articles are at economist.com/refugees2018 54 Business The Economist April 21st 2018

Also in this section 55 WPP after Sir Martin Sorrell 56 New curbs on Chinese telecoms 56 Heineken in Congo 57 American entrepreneurship 58 European airlines 58 ESPN starts streaming 59 Postal services in the rich world 60 Schumpeter: Dismantling Deutsche

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Indian business with bankers, who often had little choice but to agree to debt reduction. Exit, pursued by a tiger The result ofthe new regime, says Rash- esh Shah of Edelweiss, an investment bank, has been lively auctions for compa- nies once thought to be impossible to liber- ate from their promoters’ grasp. A dozen MUMBAI large firms, that were in effect pushed into bankruptcy by the authorities last summer A new bankruptcy code is upending the Indian corporate landscape and given nine months to sort out the NRIQUE IGLESIAS, a Spanish pop sing- cussions about finding ways to reign in mess, have attracted winning bids from far Eer, plays an unlikely part in the story of failed promoters. A new bankruptcy code and wide, including from the Tata Group Indian capitalism. His presence at a party entered into force in May 2016, and after al- and Vedanta, a mininggiant. Deep pools of tomarkVijayMallya’s60thbirthday,inDe- most two years ofpreparation, governs the capital, such as Canadian pension funds, cember 2015, was, literally, a showstopper. final rulings on its first big cases this private-equity firms and the World Bank’s A flamboyant booze heir, Mr Mallya was month. Tycoons who had once fobbed off commercial arm, are among those looking then best known for founding Kingfisher bankers are now getting turfed out of com- to buy “distressed” assets. Airlines, which had earlier imploded be- panies they had held onto for decades de- Just this dozen big cases account for cause of its debts. Given that he had perso- spite repeated defaults. As a result the out- around 2.2trn rupees ($33.4bn) of bank nally guaranteed some of these loans, the lines of a fresh era in Indian capitalism are debt. That is about a quarterofall the loans self-proclaimed “king of good times” was taking shape. banks have already admitted are unlikely assumed to have been chastened. Upon The law is brutal for those who fall foul to be repaid. Nearly all of the problems lie hearing of Mr Iglesias’s performance, of their creditors. Promoters who have de- with state-owned lenders, which have bankers—and politicians—started asking faulted are explicitly banned from staying longmade injudicious loans to large indus- how Mr Mallya had continued to live so on as owners, following an amendment trial projects, such as shipbuilding, steel or large. The party had lasted for three days. made to the code in November. If a firm is infrastructure, which have proven espe- Mr Mallya is hardly the only embattled found to be insolvent by a specialised tri- cially prone to default. Indian tycoon to have cocked a snook at bunal, the company’s board is in effect A further pipeline of 28 cases is due to his bankers. Some “promoters” of compa- fired and an independent expert appoint- be resolved by September, accounting for nies, as founding shareholders of Indian ed to run the firm on behalf of its lenders. another 2trn rupees or so of bad loans. companies are known, have long made (In America, say, the owners of an insol- These include coal-fired power plants that fulluse ofa loophole oflocal corporate law vent firm usually continue to run it.) The are uneconomical to run, for which liqui- that thwarted banks’ attempts to seize new manager then prepares the company dation is a real possibility. All told, over companies in default on their loans. A forfresh investors. Ifcreditorscannot reach 1,500 companies are said to have been bunged-up court system made foreclosure a deal in nine months, the business is liqui- deemed insolvent by the courts. The cases1 all but impossible, so owners of even the dated and its assets sold for scrap—a bad sickliest of companies could spend lavish- outcome forall parties. Business writer: The Economist is looking for a business ly without fear ofrepercussions. Before the code came in, promoters correspondent to work at its headquarters in London. An ability to write informatively, succinctly and wittily, The party is now over. MrMallya fled to were able to stay on as managers in the combined with numeracy and curiosity, matter more London soon after the bash (Indian au- stricken firms, which some unscrupulous than prior experience. Applicants should send a CV and thorities are trying to extradite him on moguls used as an opportunity to drain an article which they think would be suitable for publication in the Business section to charges of fraud, which he denies). But the them of cash. Their position at the helm [email protected]. The closing date for spotlight on him gave fresh impetus to dis- also gave them leverage in negotiations applications is May 18th 2018. The Economist April 21st 2018 Business 55

2 ofseveral thousand more are pending. vestors sniffing out bargains are offering to radical shake-up. Tech platforms have The consequences are still being buy bankrupt firms for less than half the made it easier and cheaper for companies gauged. Lots of “zombie” companies face value of their outstanding loans, says to appeal directly to customers, without which ambled on for years despite being Ashish Gupta of Credit Suisse, another needingthe servicesofan upscale ad agen- unable to repay their debts may be ac- bank. In one instance banks got just six cy. Upstart consumer brands have been quired by healthier firms or closed down. cents on the dollar. taking on the world’s biggest advertisers, Such consolidation will bring industry- The bankers’ current pain will be the such as Procter & Gamble, which have in wide benefits. And the share prices of system’s future gain. The aim of the new turn pressed WPP (and its rivals) to cut firms owned by promoters with reputa- law is as much to prevent future wrongdo- their fees. Marketing via social media has tions fortransparent corporate governance ing as to recover outstanding loans. Ash- eclipsed the lucrative 30-second television are already trading at a premium, says San- wini Mehra of Duff & Phelps, an advisory spot. Last year WPP suffered its worst year jeev Prasad ofKotak, a bank. group, says promoters now approach since the financial crisis. But the disruption will have short-term banks well ahead of potential insolvency, economic costs. Many healthy firms decid- in the hope of working something out be- Principal-agency problem ing whether to build plants are waiting to fore it is too late. That is an encouraging Some wonder if the company will survive see if they can buy distressed assets on the sign that the balance of power between without its talismanic boss. Whatever hap- cheap instead, which prolongs a depres- debtors and creditors is shifting. “If you pens, WPP faces the loss of some business. sion in the investment cycle. State-owned failed in business before, nobody thought “I have no doubt every competitor is get- banks face hefty losses. Except for steel there was a price to pay,” says Raamdeo ting ready to swoop [in on its clients],” says plants (which have returned to profit Agrawal ofMotilal Oswal, an asset manag- a senior executive at a rival advertising thanks to a resurgence in metals prices), in- er. “Now,people aren’t so sure.” 7 giant. Even before Sir Martin stepped down, multiple large clients said they would be formally reviewing their rela- WPP tionships with WPP this year. They includ- ed HSBC, a bank, Royal Dutch Shell, an oil Ads and subtracting firm, and Mars, a chocolate-maker. Infor- mally, Ford Motor Company is considered the largest account at risk. Without Sir Mar- tin to sweet-talk clients into keeping their business with him, investors and creditors WPP NEW YORK are worried. On April 16th shares dropped by nearly 7%; Moody’s, a ratings SirMartin Sorrell leaves the world’s biggest ad company in a sorrystate agency, downgraded its outlook on the URING his spectacular rise from Lon- lipped about the alleged misconduct, stat- firm from “stable” to “negative”. Ddon beancounter to the globe-trotting ing only that Sir Martin resigned after the But some current and formerinsiders at boss of WPP, the advertising powerhouse investigation had concluded. (He said he WPP say that Sir Martin’s departure could he created out of a backstreet wire-basket quitin protestathowthe investigation was actually be a blessing in disguise. He mi- and trolley company, Sir Martin Sorrell handled.) The lack of transparency came cromanaged his empire, and was loth to was rarely sentimental. The man who as little surprise. The board had previously sell companies or fire loyal lieutenants, helped turn a ramshackle butchicindustry been criticised for coddling its superstar even when they deserved it. WPP has be- into a global force poached accounts mer- CEO, awarding him overgenerous pay come unwieldy, with more than 400 com- cilessly and often pitted his own firms packages—£70m ($107m) in 2015. Even as panies and 200,000 employees in more against each other in the quest forclients. the company lost about a third of its value than 100 countries. The common business Not for nothing did the late David in the year up to Sir Martin’s departure, it model is huge fixed contracts with clients, Ogilvy, one ofthe industry’s founding pa- made no succession plans. Onlynowhas it locking them into long-term relationships triarchs, reputedly describe him as an “odi- begun the hunt for a permanent replace- with multiple agencies, whose activities ous little shit” when WPP came after the ment, while putting its chairman, Roberto range from media-buying to public rela- Ogilvy Group in the late 1980s at the dawn Quarta, in charge, and appointing two se- tions. As the speed and precision of digital of its decades-long acquisition spree (see nior WPP executives, Mark Read and An- advertising has increased, that model is chart). But Ogilvy laterbecame WPP’s non- drew Scott, as joint chiefoperating officers. looking increasingly dated, complex and executive chairman, and the company WPP is struggling to find a new leader costly. Critics wondered if Sir Martin had turned into the world’s largest marketing just as upheaval in the industry calls for a become too sentimental about the firm he 1 conglomerate with more than $20bn in an- nual revenues. In business, Sir Martin charmed as well as cajoled. A trolley-load of trouble Significant acquisitions, $bn On April 14th Sir Martin’s 32-year reign WPP share price, $ over the company ended. He quit follow- Young & Martin Sorrell buys Rubicam Martin Sorrell resigns 2,000 ing an inquiry commissioned by WPP’s 30% stake in WPP 5.6 Taylor board into a whistle-blower’s allegation of Nelson JWT AKQA 1,500 “personal misconduct” and misuse of Ogilvy Forms an company assets, accusations that he has 0.6 Group alliance with 1.6 0.5 Asatsu-DK, Japan denied. The shock departure came with 1,000 very little public explanation. The investi- 0.9 gation, which was conducted by 500 WilmerHale, a law firm, came to light only because of a report in the Wall Street Jour- nal, which led to a public confirmation by 0 1985 90 95 2000 05 10 15 18 WPP but no furtherdetails. Source: Thomson Reuters The board has since remained tight- 56 Business The Economist April 21st 2018

2 built to remake it again. are just as bruising. ZTE’s phones use the WPP needs to become nimbler, leaner Android operating system developed by and better able to serve clients at competi- Google, which under the ban may no lon- tive prices, they say.It could combine agen- ger be able to license its apps to ZTE. It does ciesthatSirMartin once had ateach other’s not have its own operating system. As The throats. It could sell off Kantar, its large but Economist went to press, ZTE’s shares had stagnant data-research business, to a simi- been suspended from trading in Shenzhen lar company looking for scale (like Niel- and Hong Kong forthree days. sen). It could shift its focus to digital ser- America had dangled the threat of this vices, such as app design and the sort of ban (known as a denial of export personalisation of customer service, pro- privileges) last year but shelved it when vided by consultancies-cum-rivals like De- ZTE confessed to wrongdoing and paid loitte and Accenture. That would reduce its $890m in penalties. As part of the deal ZTE excessive reliance on conventional adver- pledged to discipline senior staff. But al- tising, which Sir Martin believed would though it fired four people, it was found to surely make a comeback. have neitherreprimanded norcut bonuses Sir Martin was always a buyer of busi- to 35 others, as promised. That seems in- nesses, not a seller. Yet some analysts esti- credibly foolhardy. According to the De- mate the break-up value of WPP is greater partment of Commerce, ZTE admitted it than its market capitalisation of £14bn had submitted false statements but said it ($20bn). WPP, via its advertisements, has had no intention ofmisleadingthe govern- hawked countless products. It may now be ment. The department decried “a pattern time to start selling itself. 7 ofdeception” and “repeated violations”. ZTE stood outasthe onlyChinese hand- Heineken in Congo set-maker to have cracked the American Chinese telecoms market; half of its phones are sold there. It Refreshing the is the country’s fourth-largest seller of Not so phoney smartphones, with a 12% share—despite its parts... inclusion in a reportfrom America’sHouse war Intelligence Committee in 2012 that urged domestic telecoms firms purchasing net- KINSHASA working equipment to shun its products SHANGHAI ...(most) otherbeers cannot reach over espionage worries. (The report also A ban on using American components targeted Huawei, ZTE’s larger Chinese ri- HE Bralima brewery in Kinshasa, the puts ZTE in peril val, which, because of deeper concerns Tcapital of the Democratic Republic of ALK ofrestricting the use ofChinese te- overits possible ties to the Chinese govern- Congo (DRC), isan island ofmodernity in a Tlecoms equipment in the West is grow- ment, has struggled to make inroads since.) city where chaos is the norm. Inside a ing. This week the curbs went the other Although the sanctions row predates building near the docks where barges be- way, when America banned its companies the administration of President Donald gin the journeyup the Congo river, convey- from selling hardware and software for Trump, it will make an example of ZTE, or belts rattle as thousands of glass bottles seven years to one of China’s state-owned reckons Mr Su, as tensions mount between are washed and filled with amberliquid. A tech champions, ZTE. On April 16th Ameri- America and China over trade disputes generator hums to power the new brewing ca’s Department of Commerce said that and technological dominance. Since the machinery, creating enough booze to fill China’s second-largest telecoms firm had start ofthe year a bill has been proposed in 28,000 crates every two days. trampled on a settlement reached in America’s Congress to block the govern- Yet the real achievement of Bralima, March 2017 over ZTE’s illegal shipments ment from using telecoms equipment which is owned by Heineken, a Dutch since 2010 of American-made technol- made by Huawei and ZTE; and Mr Trump brewer, is not making the beer. It is what ogy—telecommunications equipment to has halted the takeover of Qualcomm by happens when it leaves the factory. Congo Iran, and routers, servers and microproces- Broadcom, a rival chipmaker, on national- is one of the worst-connected, most dys- sors to North Korea—in known violation of security grounds, forfearit would give Chi- functional countries on Earth. Four times trade sanctions. na the edge in setting standards for 5G, a the size of France, it has almost no all- The one at risk of being crippled by an wireless technology. weather roads. In large parts of eastern embargo is now ZTE. In 2016 UBS, a bank, A parallel salvo this week, by the Feder- DRC, the state is a fiction and rebels control estimated that 80-90% of its products re- al Communications Commission, was all the roads. Yet there is scarcely a village lied on American parts. Jean Baptiste Su of of a piece. America’s telecoms regulator where it is impossible to get a beer. Atherton Research, an American technol- voted unanimously to move forward with Bralima was founded in 1923. Its main ogy-research outfit, described the ban as a plan to stop federal subsidies to domestic competitors, Bracongo and Brasimba, both “devastating” for ZTE, especially the loss of carriers who use suppliers that are consid- owned by Castel, a secretive French family chips made by America’s Qualcomm used ered to be a riskto American national secu- firm that operates across Africa, have been in about 70% of ZTE’s smartphones. Al- rity. It pointed in particular to congressio- there almost as long. They are among the though ZTE makes most of its money from nal scrutiny ofHuawei and ZTE. only surviving companies from the colo- its telecoms-equipment business, nearly a Edison Lee of Jefferies, an investment nial era. By his fall, and the start of the first third ofits revenues come from phones. bank, thinks that ZTE has a shot at negotiat- Congo war in 1997, Mobutu Sese Seko, Switching to other suppliers (and it ing the ban away, but that if it fails it will Congo’s flamboyant post-independence must seek out those with zero parts hope to involve the Chinese government dictator, had looted almost everything sourced from America) would require in a mediation process. Even if ZTE’s fate else. Today Congo is falling back into con- handset redesigns to match new specifica- becomes a bargaining chip in a trade dis- flict. Can the industry survive? And what tions that would take years to bring to mar- pute, a resolution may take many months. can other companies learn from it about ket, says Mr Su. The software restrictions Until then the firm will at best limp on. 7 doing business in such a trouble spot? 1 The Economist April 21st 2018 Business 57

2 Almost every other processed food in limit the extortion. neurial activity.The second, and less obvi- Congo is imported. Milk is brought in from Can it last? In February, Heineken de- ous, is that after years of seeing their lead- France. But beer is patently local. Bralima, clared a €286m ($353m) impairment loss ing technologies and business models including its sales and the production ofits for 2016 in Congo, after closing down two stolen by Chinese imitators (a practice raw materials, accounts for 2% of GDP, of its factories. In western Congo, Angolan dubbed C2C, or “copy to China”), Ameri- reckons its boss, Rene Kruijt. That is far less beer in cans—less tasty but cheaper than can entrepreneurs are starting to copy Chi- than mining, which makes up 22% of out- Primus or Tembo—has flooded the market. na’s trailblazers. put. But with about 2,500 workers, the firm It is not sold at cost since the smugglers’ America still leads the global innova- claims it is the biggest private-sector em- main aim is to acquire dollars to trade on tion race by most measures but China is ployer in the country. Primus, its main the black market in Angola. In the east, as catching up. That is one of the conclusions brand, labelled in the light blue and gold of Joseph Kabila, Congo’s president since ofthe Global Startup Ecosystem Report, re- the national flag, is “a source of national 2001, refuses to leave office, the violence is leased on April 17th by Startup Genome pride”, says Mr Kruijt, not implausibly. worsening. In South Sudan, another con- and the Global Entrepreneurship Net- Castel’s operations may be as large. The flict-ridden failed state, the only brewery work, two groups that support entrepre- two compete fiercely. David Van Rey- was forced to close in 2016. The South Su- neurs worldwide. China leapfrogged Ja- brouck, a historian of Congo, records how danese now drink beer imported from pan last year to become the second-largest just a few years after a peace agreement in Uganda and Kenya. generator of quality international patents 2003, Bralima was instructing its marke- But in all likelihood, brewing in Congo after America. Its venture-capital invest- teers to fight a war forbusiness. will survive. Without Primus or Tembo, mentsare soaringand itproducesnearly as During the worst of the fighting itself, Congo would hardly be the same place. many “unicorns” valued at $1bn or more the real war and the war for business were Even in wartime, the music plays—and each year as does the United States. arguably intertwined. Some even talk who can listen to rumba without a beer? 7 China is surging ahead of America in about “conflict beer”, on the same lines as sectors ranging from mobile payments to conflictminerals. In 2013,when M23, a new messaging. Shared-mobility services pro- rebel movement, emerged, two academ- Entrepreneurship vide another example. Though they will ics, Jason Miklian and Peer Schouten, esti- not admit this, the American scooter firms mated that third-party truckers selling Bra- Red capitalism v are borrowingbusiness models developed lima’s beer might have been making by Mobike and Ofo, Chinese unicorns that payments to rebel groups of as much as red tape pioneered docklessbicycle-sharingseveral $1mayear. years ago. GGV Today, no large towns are rebel-con- NEW YORK Hans Tung of Capital, a venture- trolled but the workis almost as difficult. In capital fund, hasinvestmentsin both coun- Some American startups lookeast for 2012 Castel opened a brewery in Beni, a tries—including a stake in LimeBike, an inspiration small city in the north-east of the country, American dockless bicycle and scooter ata costof$125m. Ayearlater, Beni suffered HEN you enter [the marketplace] startup based in Silicon Valley. MrTung ob- the first of dozens of massacres that have “Wwith that level of hubris and arro- serves that in China “the government is killed up to 1,000 people over the past five gance, youdon’tcreate trust.” So declared a much more open to innovators experi- years. The roads out of the city are among memberofSan Francisco’s Board ofSuper- menting, and then regulating afterwards.” the least secure in the world. Nonetheless, visors this week. He was upset about the That allows for more “learning by doing”. Tembo and Skol—Castel’s brands—are sent sudden appearance of dockless electric In contrast, he reckons that inventive from Beni to markets farand wide. scooters, rented via smartphone, all over American firms must slow down and ne- Even moving in the peaceful parts of the city.Several American startups are bat- gotiate with local officials first or get shut the country is expensive. Travelling tling each other and the authorities to pro- down quickly.“Copy to America” is harder 1,000km can take a lorry three weeks, at a mote them. They are clean, cheap and con- than it seems. 7 cost of thousands of dollars. Producing venient. The snag is that some users ride beer in the DRC is also pricey.Heineken es- them wildly or dump them willy-nilly timates that the cost of water alone is five after use. On April 17th the city passed an times that in neighbouring Congo-Brazza- ordinance requiring a permit to parkscoot- ville. Even in Kinshasa, electricity is unreli- ers on its pavements. able, making the Bralima generator—big Similar clashes have taken place else- enough to power a small cruise liner—nec- where. Bird, a Californian startup that essary.They in turn have to be fuelled with raised $100m in venture-capital funding imported fuel. And then there are the taxes last month, launched its rental service for and shakedowns. electrified scooters in September at its Yet the companies also have impressive home base of Santa Monica. Since then, marketing and distribution operations. the beach town’s hipsters have completed Beer companies in Congo are huge spon- over half a million rides on its scooters. sors of music (so too are mobile-phone Rather less keen were city officials, who companies). The most popular stars can filed a criminal complaint against Bird for command large sums in exchange for en- operating without proper licences. The dorsing Primus or Tembo—so much so that firm paid $300,000 to settle the matter, it has corrupted Congolese musicians, pledging to change its practices and even complains Lexxus Legal, a rapper. Mean- share some revenue with the city. More while, the firms’ distribution networks are conflict is likely elsewhere as firms roll out unparalleled. On the Congo river, barges their services in cities like Austin and operated by Bralima are among the only Washington, DC. vessels left operating a regular schedule. There are two lessons to be drawn from Outside ofthe big cities, distribution is out- the scooter skirmishes. The first is that sourced—presumably to people able to America remains a hotbed of entrepre- Hipster Hells Angel 58 Business The Economist April 21st 2018

Airlines in Europe Charlton of Aviation Advocacy, a consul- Really low-cost tancy. It would ensure that the weakness Shooting down Share prices ofNorwegian’s balance-sheet does not kill June 30th 2016=100, $ terms off low-cost long-haul flying. But it would 200 take out the biggest disruptive threat to IAG the competition IAG Ryanair and other flag-carrier rivals. A deal might be blocked on competi- 150 tion grounds. Last month the European A possible mergerbetween IAGand Commission’s transport chief, Henrik Ho- Norwegian should worry flyers EasyJet lolei, said he did notwantEurope’sfive big- HEN flag carriers such as British Air- 100 gest airline groups, including IAG, to gain Wways (BA) ruled the skies, only the market share. From a competition perspec- rich could afford to fly across the Atlantic. Norwegian tive, a takeover by a low-cost rival such as That was until Freddie Laker, a British en- 50 Ryanair would be preferable. It does not 2016 17 18 trepreneur, came along. His dream was to yet do long-haul and would have no Source: Thomson Reuters open long-haul travel to the masses. In 1977 qualms about carrying on disrupting the he launched Skytrain, the first low-cost flag carriers. But Ryanair’s boss, Michael long-haul flights between London and Norwegian’s sagging share price is an O’Leary, is surprisingly cautious about a New York. “Thanks to Freddie Laker you opportunity forIAG. It launched a low-cost bid. It is harder to boost aircraft utilisation can cross the Atlantic forso much less,” de- long-haul brand last June; adding Norwe- on longer flights, which is what makes Rya- clared Margaret Thatcher in 1981. “Compe- gian would strengthen that venture. But nair so cheap on shorter routes. Moreover tition works.” But within a year of her IAG may also see the advantage of remov- he is convinced that Europe’s three big flag speech Laker Airways had gone bust, amid ing a rival that has lowered fares on routes carriers and their partners, which now accusations ofpredatory pricing. flown by all fourofits main airlines. control 78% of transatlantic flying, will do Since 2013 Norwegian, another low- A takeover would therefore be a “cu- everything they can to destroy low-cost ri- cost carrier, has been trying to make Lak- rate’s egg for passengers”, says Andrew vals. Including, perhaps, buying them. 7 er’s dream a reality. Last year it painted his face onto one of its jets to show it is serious ESPN starts streaming about disrupting transatlantic air travel. But just like Laker Airways, it has run into financial headwinds. And BA is once again A Netflix for sports nerds IAG a potential beneficiary. On April 12th , a NEW YORK group of flag carriers including BA, said Disney’s hesitant debut reflects fears ofan own goal that it had bought 4.6% ofits budget rival as a precursor to possible takeover talks. That HE first weekfor ESPN+, a sports heft to compete with Netflix. Disney is cheered Norwegian’s investors. Its shares Tstreaming service that Disney, owner betting that streaming is the future. rose by 47% (see chart). But passengers ofESPN, launched in America on April The problem is that ESPN retains have much more to lose from a deal. 12th, had none ofthe razzmatazz associat- tremendous value as a pay-TV business, Norwegian’s difficulties stem from its ed with a firm known for blockbuster even with subscribers and viewership in foray into long-haul. Founded in 1993 by openings. Forget marquee matchups decline. Pay-TV distributors like Comcast, Bjørn Kjos, still its chief executive and big- from the National Basketball Associa- Charter and AT&T view live sports as the gest shareholder, Norwegian started off tion. The games come from lesser-known linchpin oftheir offering, along with live with just three small planes that served a football (ie, soccer) leagues, minor college news, and feel they must offer ESPN to few domestic routes. Then in 2002 it ex- sports and international fixtures with keep customers. Kagan, a research firm, panded into short-haul flights in Europe, limited American audiences, like rugby estimates that ESPN has 86m subscribers becomingthe continent’sthird-largestlow- and cricket. and receives $8.14 offees per subscriber cost carrier. Following a few years of de- This was tactical, says Kevin Mayer, per month from distributors, far more cent profits, from 2013 Norwegian the boss ofDisney’s first shot at stream- than any other network. Even after ac- launched new “no-frills” long-haul routes ing in America. At $5 a month, the aim is counting for the high cost ofsports rights, to America, Asia and Argentina after hav- to create a sort ofmini-Netflix for sports. subscriber feeshelp make ESPN the most ing placed orders for 222 new jets costing But Disney is loth to take customers away profitable networkin America, generat- several times its own value. from the company’s lucrative ESPN net- ing an estimated $2.1bn in cash this year, By the end of2017 the airline had 145 air- works on pay-TV. It wants to avoid the says Kagan. craft operating on 512 routes. But to grow own goal ofdisrupting itself. That makes building an audience for rapidly, and achieve the scale needed to The delicate positioning ofESPN+ ESPN+ tricky.Jimmy Pitaro, the boss of compete againstestablished carriers, ithad reflects an industry in flux. Cable net- ESPN, says the new service will go after to slash ticket prices to fill planes. In Febru- works are losing millions ofsubscribers the “hard-core sports fanatic” and the ary Mr Kjos revealed that the airline had to “cord-cutting”, whereby customers “underserved sports fan”. Such people lost NKr299m ($36.2m) in 2017, against pro- drop expensive pay-TV packages in fa- may happily pay to watch, say,ice-hock- fits of NKr1.14bn the previous year. In vour ofmuch cheaper internet services ey games between Ivy League schools. March the airline had to raise fresh capital, like Netflix. In response to this threat Neither Mr Mayer nor Mr Pitaro are say- sell some aircraft and put its frequent-flyer Disney decided to pull its films from ing how many subscribers they hope to scheme up for sale to avoid breaching Netflix and to develop its own internet- lure. But forthe foreseeable future they banking covenants. Last year its net debt only entertainment service, which is will keep the highest-profile games off (including leases) was14 times its gross op- scheduled to debut next year. In Decem- the internet service. As long as ESPN erating profits, compared with just 0.7 and ber the company agreed a $66bn deal to continues to make billions, ESPN+ will 0.4 for easyJet and Ryanair, its two biggest buy much ofthe entertainment business remain in the little leagues. But its day low-cost rivals, says Ross Harvey of Davy, of21st Century Fox, in order to gain the will come. an investment firm. The Economist April 21st 2018 Business 59

Post offices in the rich world custom completely. Amazon has already hit Britain’s Royal Mail hard by starting its Going postal own door-to-door deliveries. In California it has launched a grocery-delivery service as a way of gaining greater scale to deliver its own e-commerce parcels itself. The big- gest threat of all may come from Amazon’s Chinese rival, Alibaba, which is injecting $15bn into its own delivery arm, Cainiao, Amazon is not the only threat to universal mail services and aims to expand beyond China. By do- T MAY be hard to imagine a world with- vertising on smartphones. Online govern- ing their own deliveries in cities, where Iout cheap postal services, but 200 years ment services are likely to reduce demand profits are juicier, these firms could leave ago sending mail was a luxury. Posting a for first-class letters even further. Denmark less money on the table for post offices to letterfromLondontoEdinburghcostanav- scrapped that service in 2016. cross-subsidise rural services, where costs erage daily wage. In 1840, after a proposal Parcels could come to the rescue. In are higher. by Rowland Hill, an inventor, Britain 2014-16 global package volumes surged by The answer to these challenges is not to launched the Penny Post, the world’s first 48%, reckons Pitney Bowes, a tech firm. But shield postal services from competition. universal mail service. The state-run post unlike with letters, most post offices do not Four out ofthe world’s five fastest-growing office was given a mail monopoly in return have a monopolyin parcels, so margins are legacy firms—Singapore Post, Poste Ital- for delivering letters to any address in the thinner. The machines needed to sort iane, bpost of Belgium and Austrian Post— country at the same rate. Cheaper postage bulky parcels require heavy investment are privately owned and face rivals. Royal proved wildly popular and the flows of in- that strains cash-strapped post offices. Mail, which was privatised earlier this de- formation it enabled boosted economic Their struggles are also due to delivery cade, is using gig-economy staff to deliver growth. But the scheme’s finances proved startups. Investors are pouring money into parcels and is investing in startups to im- controversial. The low cost of the service gig-economy couriers that use cheaper, prove its services, says Daniel Roeska of hit profits and the government introduced self-employeddrivers.BCG reckonsthatin- Bernstein, a research firm. Although Deut- income tax to fill the fiscal hole. vestment in such firms grew from $200m sche Post DHL of Germany will be 30% That did not stop the idea of a “univer- to nearly $4bn in 2014-16. Post offices, more labour-efficient in a decade’s time, sal service obligation” for post spreading weighed down by strident unions, high la- Frank Appel, its chief executive, insists that across the entire rich world over the next bour costs and costly networks of sorting the growth ofe-commerce will keep his ex- century.At the industry’s peak, post offices centres, struggle to compete. isting workforce fully employed. worldwide delivered nearly 350bn items But it is not yet clear that gig couriers of mail in 2007. But over the past decade will survive in the long term, says David Typical mail thismodel hascome underthreatfrom fall- Jinks of ParcelHero, a parcel broker. Last Amazon dreams ofusing drones to disrupt ing letter volumes and from gig-economy month two American startups, UberRUSH, delivery to the doorstep. But that will take firms and e-commerce giants expanding a service owned by Uber, a ride-hailing years to win regulatory approval. And in into parcel delivery. app, and Shyp, shut themselves down due spite of new rivals and continued univer- As a result, the postal service in Ameri- to a lack of demand. Bad publicity about sal service obligations, the sheer scale of ca has again become controversial. On working conditions is forcing others, such post offices still give them a big compara- April12th President Donald Trumpset up a as DPD of Britain, to introduce holiday and tive advantage. Royal Mail has dozens of task force to examine the finances of the sick pay.Tighter labour markets may make competitors, yet still has nearly all of the state-owned United States Postal Service it harder to find enough cheap drivers to door-to-door letter business. The same is (USPS). Over the past month he has at- compete with the postal services. true for other EU countries with competi- tacked Amazon, an e-commerce giant, on E-commerce giants may prove a greater tion. Postal firms can survive and thrive if Twitter for costing USPS “massive amounts threat. The biggest risk is not that post of- they are prepared to change how they op- of money” for delivering its items. An- fices bid for their business too cheaply, as erate. Rowland Hill, a radical reformer in alysts think that claim is dodgy. Mr Trump Mr Trumpsuggests. It is that they lose their his own era, would approve ofthat. 7 has a well-known dislike of Amazon and its boss, Jeff Bezos, who also owns the Washington Post, no fan of the president. Butitistrue thatUSPS isin seriousfinancial trouble. Since 2008 revenues have fallen by 35% in real terms and it last made a profit in 2006. Post offices elsewhere in the rich world suffer the same underlying problems, yet are more financially successful. Letter vol- umes have fallen at a rate of between 3% and 5% a year across the developed world over the past decade, says Brody Buhler of Accenture, a consultancy. Up to 80% of let- ter volumes could be lost before a floor is reached, says Rob Wolleswinkel of BCG, another consultancy. Most of the decline has been due to bank statements and utility bills going on- line and personal letters and greeting cards going out offashion. Junkmail has also be- gun to crumble due to the rise ofdigital ad- The Pony Express, British style 60 Business The Economist April 21st 2018 Schumpeter Dismantling Deutsche

Should the world’s eighth-largest bankby assets be wound down? to close the gap. Deutsche’s weakness is structural. The German retail operation is badly run and has to compete with state- and mutually owned banks that do not care much about profits. The investment bank, meanwhile, has decent market shares in some activities such as currency dealing, but is unable to cover its mas- sive overheads. One way to demonstrate this is to compare it with itsbigfourrivals, Goldman Sachs, and the investment-bank- ing units of JPMorgan Chase, Citigroup and Bank of America. Deutsche’s division is less than half their size in terms of its rev- enue. Yet it spends a similar sum—$9bn—on non-compensation expenses such as feesand IT. Deutsche’s second defence is that it is indispensable to Ger- many. That is debatable. The investment bank books only 5% of its revenue in Germany. Deutsche’s corporate-loan book in the country is only about €40bn, equivalent to 5% ofthe total debt of all the country’s listed firms, and only twice as big as JPMorgan Chase’s German book. The payments business has a better case, with a quarter ofits business from German customers. Any benefit that Deutsche brings to Germany should be weighed against the potential cost to the government of hostinga barely profitable bank that relies on wholesale funding. During EUTSCHE BANK is one of the financial industry’s hardest the subprime and euro-zone crises, the benefit to Deutsche of Dproblems. Itisnota viable businesswhen judged by anysen- having an implicit government guarantee was worth billions of sible yardstick, because itisunable to make enough profits to gen- euros a year. Germany has a new “bail-in regime” that is meant to erate a remotely adequate return. Its existence does not seem to protect taxpayers and eliminate subsidies by imposing losses on be in the public interest, since it is dominated by an investment bankbondholders. But it has never been tested in an emergency. bank that has paid its lucky staff a colossal €40bn ($49bn) over No one would recreate Deutsche. Breaking it up would take the past decade. The bank’s governance has misfired forages. On several steps. DWS could be spun off or sold. The retail bank April 8th Deutsche fired John Cryan, its chief executive, in the could be merged with Commerzbank, anotherGerman lender, in third regime change in seven years. If the rules of capitalism ap- a government-blessed deal. The payments business could be ply to banks, Deutsche should be wound down. Is that possible? sold to the likes of BNP Paribas, a solid euro-zone bank that took Deutsche was founded in 1870 to help German companies go on the global payments arm ofRoyal BankofScotland in 2015. abroad. In 1999 it bought Bankers Trust, a Wall Street firm, and Its investment bankwould need to be wound down responsi- went on a long expansion in the investment-banking business. bly over ten years, reflecting the long life ofsome of its positions. Today it has four elements. A decent asset-management opera- For example, 16% of its €42trn of notional derivatives have a ma- tion called DWS; a profitable payments business that ships mon- turity of over five years. Revenues might fall faster than costs, re- ey around the world for companies; a mediocre German retail sulting in losses. There would be redundancy costs for 30,000 bankthat uses the Postbankand Deutsche brands; and a faltering staff. And regulators would allow the capital trapped in the busi- global investment bankthat soaks up halfofthe bank’s capital. ness to be released only gradually. It would be messy. But the net The bank’sprofitabilityhasbeen dismal. Overthe past decade present value that shareholders would recover from the invest- its average return on equity (ROE) has been 5%; it was 2% last year. ment-bankingdivision could be roughly€15bn. While thatisonly These figures exclude the cost offines and goodwill write-downs halfofits bookvalue, it is more than investors attribute to it today. and assume that today’s capital levels were always in place. Shareholdershave almostlosthope, valuingthe bankat 0.4 times The hardest job in finance its book value, roughly where American banks were during the The new boss is Christian Sewing, a lifetime employee who has 2007-08 crisis. Creditors have not panicked, but have got gloomi- worked across the bank. It is unlikely that he will dissolve the in- er this year. They think that Deutsche is riskier than other banks, stitution he owes his career to. But he should, at a minimum, judged by the cost ofinsuring its debt against default. halve the size of the investment bank, push the authorities for a The bank’s troubles reflect weak businesses but also weak go- new supervisory board and attempt to merge the retail operation vernance. Paul Achleitner, the chairman since 2012, has presided with Commerzbank. He should find new shareholders—one op- over chaos. As a German company, halfofthe supervisory board tion would be to persuade a good bank, such as BNP, to buy a are staff representatives, who may have opposed deeper cost stake, in order to provide a credible force on Deutsche’s board. cuts. As Deutsche has drifted, its shareholder register has become The danger is that Deutsche just staggers on, cloaked in patrio- bizarre. Its largest investors include HNA, a Chinese tourism con- tism and payingonly lip service to makingan adequate ROE. Ger- glomerate loaded with debt, and funds linked to Qatar’s royal many’s politicians protest that they will never bail out Deutsche family that lackan established record ofstewardship. but they probably want one big German bank that is active Deutsche offers two defences. First, that it has a plan to restore abroad, just as they did back in 1870. That is a slippery slope. The profitability. Not really. To make a passable ROE it needs to gener- world’s best-run lenders, such as JPMorgan Chase, are safe be- ate pre-tax profits of €7bn a year, compared with the €1.5bn it cause they are disciplined enough to crank out high and stable managed last year. Planned cost cuts are not nearly deep enough profits. A bankthat cannot pay its way is no champion at all. 7 Finance and economics The Economist April 21st 2018 61

Also in this section 62 Buttonwood: A Victorian survivor 63 American banks’ earnings 63 Disappointing coco bonds 64 Indicators of trouble in the markets 65 Currency manipulation 65 The Hong Kong dollar peg 66 Free exchange: Business cycles

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China’s economy property developers. Wang Tao of UBS, a Swiss bank, notes that these efforts have Life after digging given investors more confidence. Chinese shares listed in Hong Kong have risen in value by a third over the past two years. The government has also helped arrange behind-the-scenes rescues of troubled WUHAN firms. One was in Wuhan. The big local steel company, bleedingcash, merged with Aftera good run ofgrowth, China braces forbumps its much stronger counterpart in Shanghai UST a few years ago Wuhan, a sprawling ernment has started to tackle several in- in 2016. The combined entity is profitable. Jmetropolis in the middle reaches of the grained problems. After a long period of A second factor is that China’s econ- Yangtze River, exemplified China’s eco- overproduction of steel and coal, a cam- omy is maturing. Growth is bound to slow nomic woes. Municipal debt had soared. paign to close unused capacity restrained as China gets richer, but structural changes The most senior local official was known output and pushed up prices. To reduce the are also making growth more stable. as “Mr Dig Up The City”, a reference to his property overhang, local governments Thanks in part to a falling working-age zeal for grandiose construction projects. A bought millions of unsold homes from de- population, which peaked in 2011, incomes movie theme park, intended as a land- velopers and gave them to poorer citizens. are growing faster than the overall econ- mark, closed after failing to draw crowds. It Financial regulators have taken aim at omy. This, in turn, is rebalancing the econ- would take nearly a decade, it was estimat- banks’ murky off-balance-sheet loans, and omy. Excessive reliance on investment is ed, to sell all ofWuhan’s vacant homes. at heavily indebted borrowers such as giving way to consumption. And heavy in- These days, the city of 11m stands as a dustry is yielding to services, which now monument to China’s resilience. Its econ- accountformore than halfofGDP, up from omy has accelerated even as the govern- Strong foundations a third two decades ago. ment has controlled debt more strictly. Five China At the same time, China is reaping re- subway lines were opened or extended in Nominal GDP, % increase on a year earlier turns on some big investments of the past the past two years alone; they are jammed 30 decade, such as high-speed rail in densely in rush hour. Investment is pouring into populated areas. Qin Zunwen, a govern- semiconductor production, biotech re- 20 ment economist in Wuhan, says that al- search and internet-security companies. though local debt shot up, it was almost all The glutofunsold homes is almost cleared. 10 tied to infrastructure—halfa dozen subway China’s economy, like Wuhan’s, is in lines, bridges spanning the Yangtze River, much better shape than it was in late 2015. 0 elevated expressways—that is now being Then, the country was reelingfrom a stock- 2002 05 10 15 18 used. “Yes, it’s much more than we had in market crash, suffering from capital out- the past,” he says. “Has it exceeded our Total non-financial debt as % of GDP flows and accumulating debt at an alarm- needs? No.” 300 ing rate. But figures reported on April 17th The final factor has been luck. Robust showed growth of 6.8% in the first three growth in America and Europe has given 200 months of 2018 compared with the same Chinese firms a lift. After falling in 2016, ex- period a year ago. In nominal terms ports have rebounded. The rise in global growth was above 10%. China’s total debt- 100 commoditypriceshasfiltered into stronger to-GDP ratio has stabilised, a sign that the industrial revenues in China, boosting riskoffinancial crisis has faded (see chart). 0 miners and metal producers. That has 2002 05 10 15 18* The improvement in China’s fortunes helped them service their debts. And it has Sources: Wind Info; The Economist *Estimate Q1 2018 can be traced to three factors. First, the gov- made the task of deleveraging for the wid-1 62 Finance and economics The Economist April 21st 2018

2 er economy less daunting. Outflows of hot The downsides of the campaign to con- could also weigh on investment. Credit money have been curbed by tighter capital trol debt might also become more appar- growth is the weakest since 2015. controls. China has also benefited from a ent. Last year regulators focused on the fi- Over the past decade China’s leaders weak dollar since the start of 2017, which nancial system, clamping down, for have revved up investment whenever the has increased the yuan’s appeal. instance, on borrowing to buy bonds. This economy has slowed beyond their com- The comingfew quarters are likely to be year their focus has shifted to government fortzone. But Xi Jinping, the powerful pres- bumpier, however. The biggest immediate funding. That will have a more direct im- ident, has often said that the quality of worry is President Donald Trump. The pact on the economy. China has tried be- growth mattersmore than the quantity. Of- American administration has announced fore to rein in profligate local officials, but ficials in Wuhan seem to be getting the tariffs on about $50bn of Chinese exports they have found ways around the rules. A message. At recent meetings they have and may soon triple that. Exports to Amer- popular recent trick has been to disguise stressed the importance of fostering inno- ica are only a fraction of Chinese GDP, but debt in public-private partnerships. Policy vation, cleaning up the environment and a trade war between the world’s two big- this time seems stricter. Subway construc- keeping a lid on debt. The test is whether gest economies could wreak havoc on sen- tion has been halted in cities whose fi- they will still be singing that same tune as timent and supply chains. nances were too weak. Tighter liquidity growth turns down. 7 Buttonwood Christie, Cats and copious chaps

A Victorian survivorin fund management HEN the Foreign & Colonial Gov- trendy modern alternative of exchange- Wernment Trust was launched in traded funds (ETFs) can do this. 1868, The Economist had its doubts. “The F&C has also favoured continuity. Be- shape is very peculiar,” we worried, add- tween 1969 and 2014, just two managers ing that “the exact idea upon which it (Michael Hart and Jeremy Tigue) were in starts has never been used before.” Some overall charge ofthe fund. That must have of the trust’s promises were “far too san- allowed them to take a long-term view. guine to ever be performed”. Neverthe- Another incident in the fund’s history il- less, we concluded that: “In our judg- lustrates the theme. The only time the ment, the idea is very good.” trust’s offices were raided by police was in That turned out to be one ofthis news- 1926. They were looking for evidence paper’s more successful forecasts. One about the disappearance ofAgatha Chris- hundred and fifty years later, the trust is tie, the crime novelist. Her husband at the still going strong, having delivered a com- time, Archibald, was a fund manager for pound annual return of8.1%. It now looks the group. Mrs Christie turned up safe after a portfolio of £4bn ($5.7bn), rather and well in a Harrogate hotel. Her soon- than the £588,300 it raised at launch. to-be ex-husband remained an F&C direc- In its own way,the trust is an example term focus can deliver superior returns. toruntil his death in1962. Even at that date of how much the financial sector has The approach is more systematic than the the group had on its staffone person who changed—and how much it has stayed the fund’s occasional forays into unquoted in- had served in the Boer War and another same. The idea of a pooled portfolio vestments in the past. A stake in a musical, who had fought in the Battle of Omdur- seems commonplace now,but at the time “Cats”, bought in the 1970s, is still paying man of1898. it was revolutionary. royalties today. Less happily, this sense of tradition This was the 19th century, when Brit- Ifthe portfolio has changed hugely,one meant the trust was an old boys’ club. The ain was confident of its worldwide role. feature ofthe fund hasstayed the same. Itis first female director was not appointed The first portfolio comprised 18 overseas an investment trust, or closed-end fund. until 1988, 120 years after its foundation. bonds, some in markets, such as Argenti- Unlike a mutual fund, assets under man- And the group is only now dropping the na and Peru, not ruled by Britain (the for- agement do not rise and fall in line with word “colonial” from its company name, eign element) and some that were, such customer demand. Shares can be bought and adopting the shorter F&C. That as New South Walesand Nova Scotia (the and sold only on a quoted exchange. should have been done long ago. colonial). This diversity allowed the trust At times this structure has been unfash- After 150 years the trust is now one of to offeran initial dividend yield of 6%; not ionable. In the 1970s and early 1980s the the better adverts foractive management. bad given that the prevailingyield on Brit- trust’s share price traded at a big discount It has beaten its benchmark over the past ish government bonds was 3.3%. to its asset value. Other trusts succumbed five years and increased its dividend for a The 20th century saw not just the de- to takeovers and the sector seemed remarkable 47 straight years. It has a mod- cline of empires but the rise of inflation, doomed to disappear. F&C was the first est annual fee of0.37%. which made a bond portfolio hazardous trustto introduce a savingsscheme and the There is another way in which things to investors’ health. The fund moved into firstto advertise in the press, and it gradual- have changed, yet stayed the same. Given equities in the 1920s; its first holding was ly lured back private investors. The dis- current high valuations, an equity portfo- in Shell, the oil giant, and the shares are count is now a modest 2%. lio will not deliver the same returns as in still in the portfolio today.A century after The investment-trust format has also the past, but it will still beat bonds and its formation, the fund was almost entire- given managers flexibility, as in the after- cash. And, as we said in1868, diversifying ly invested in equities. math of the crash of 1987, when the fund globally is a very good idea. The most recent shift has been into was able to borrow money to buy shares private equity, with the hope that a long- on the cheap. Neithermutual fundsnor the Economist.com/blogs/buttonwood The Economist April 21st 2018 Finance and economics 63

American banks “Coco” bonds Spring in their step Lost in conversion

Taxcuts, higherinterest rates and revived trading help banks to theirbest quarter A risky form ofbankdebt fails to live up since the crisis to its promise O THIS is how normality feels. Between URING the financial crisis, Western SApril 13th and April 18th America’s big- Levytation Dgovernments poured hundreds of bil- Effective tax rates*, % gest banks reported a strong set of first- Return on equity, lionsofdollarsinto theirbanksto avert col- quarter earnings, with a helping hand Q1 2017 Q1 2018 Q1 2018, % lapse. The search for ways to avoid future from the taxman. Some are more profit- 0102030 bail-outs started before the turmoil ended. able than they have been for years. They One of the niftiest proposals was the “con- are paying billions to shareholders; regula- Citigroup 9.7 tingent convertible” (coco) bond, which tory reins are beingloosened. Yet the stock- turnsinto equitywhen the ratio ofa bank’s Morgan Stanley 14.9 market shrugged. On April 18th the S&P equity to risk-weighted assets falls below a 500 index of banks’ share prices was 4.1% Wells Fargo 12.5 predetermined danger point (since set at a lower than at the start ofreporting season. minimum of 5.125% for cocos, although it Banks expected three main effects from JPMorgan Chase 15.0 can be up to around 7%). The ambition was the corporate-tax cut signed into law by Bank of America 10.9 grand. As the Squam Lake Group, com- President Donald Trump in December. The posed of mostly American academics, put † first was a write-down of deferred tax as- Goldman Sachs 15.4 it in 2009, the automatic conversion of co- sets—past losses that could be set against Source: *Corporate tax as % of pre-tax profit cos would “transform an undercapitalised future bills—which clobbered most lend- Company †Reduced by tax benefits on the settlement or insolvent bank into a well-capitalised ers’ bottom lines in the fourth quarter but reports of employee share-based awards bankat no cost to taxpayers”. did no real damage. (Some, includingWells At first, regulators were keen. In 2010 Fargo, carried deferred liabilities and business rebounded by 23% after a poor Mervyn King, then the governor of the hence recorded a gain.) The second was a start to last year. Revenues from advice and Bank of England, said he wanted contin- permanent reduction in their tax bills. The from underwriting new bond and share is- gent capital to be a “major part ofthe liabil- third was a boost to business from a more sues were mixed. ity structure of the banking system”. Swiss lightly taxed America Inc. All this leaves America’s largest banks regulators, too, pushed for coco issuance. The direct benefits of lower taxes are in rude health—the rudest, arguably, since The hybrid nature of cocos seemed a way plain. Although pre-tax profits at the six the financial crisis a decade ago. The un- to satisfy both regulators, who wanted biggest banks rose by $4.3bn, compared weighted average return on equity for the banks to have bigger safety buffers, and with the first quarter of 2017, taxes fell at biggest six in the first quarter was13.1%. Ac- bankers, who were reluctant to issue new five of them. (At the sixth, Goldman Sachs, cording to data from Bloomberg, it is at its shares because of the high cost of capital. the bill was unusually low a year ago be- highest since the crisis. Only Citigroup, at The hope was that investors, too, might see cause of a change in the treatment of em- 9.7%, was below the 10% mark that inves- the appeal of an asset that offered a higher ployees’ shares and options.) Of a total in- tors regard as par. Bank of America cleared yield than bank bonds but lower risk than crease in net profit of $5.4bn at those five, that hurdle for the first time in six and a bankshares. lower taxes accounted for $2.1bn. The ratio halfyears. Goldman’s15.4% was its best for Nine years after the first cocos were is- oftaxto gross profit dropped by as much as five. Morgan Stanley’s 14.9% easily beat its sued by Lloyds Banking Group in Britain, nine percentage points (see chart). self-effacing target. they have not fulfilled this promise. To be Conclusive evidence on whether tax Moreover, those returns are built on a sure, they are now an established asset cuts will ginger up the whole economy much thicker equity base. The average ra- class, with around $155bn of issuance in will take longer to appear, although some tio of common equity to risk-weighted as- 2017 in dollars, euros and pounds. But this bankers detect it already. Even so, the sets, a key regulatory gauge of banks’ isa fraction ofmore than $1trn in bankdebt strong showing indicated more than mere- strength, is 12.5%, more than three times as issued that year. Cocos are issued by only ly a stroke of the presidential pen. JPMor- high as at the end of 2007 (using an esti- around 50 banks in a dozen countries, 1 gan Chase, America’s biggest bank, would mate by Autonomous Research). Lately, in have claimed a record profit even without fact, the ratio hasdeclined slightly, asbanks lower taxes. Higher interest rates pushed have returned money to shareholders and Hopes and prayers its net interest income (the gap between the Federal Reserve has felt confident Contingent convertible (coco) bonds* lending revenues and borrowing costs) up enough to let them. Last June the Fed ap- Spreads over equivalent mid-swap rate, percentage points by $1.1bn, or 9%. As the Federal Reserve proved the big six’s plans to spend $72bn 12 raises rates further, banks can expect more buying back shares over the next year, as Euro-denominated ofthat. Perky loan growth helped, too. well as increasing dividends. 10 In investment banking, the brightest The sky is not unblemished blue. Legal 8 spot was in buying and selling shares. clouds linger over Wells Fargo, which may Choppier markets meant livelier trading have to revise its earnings. Its net profit was 6 after a quiet 2017. Revenues leapt by 38%, the slowest-growing among the six. Regu- 4 Dollar-denominated year on year, at BankofAmerica, Citigroup lators have offered to settle investigations 2 and Goldman Sachs and 25%-plus at ofits sales ofcarinsurance and some mort- JPMorgan Chase and Morgan Stanley. Trad- gages for$1bn. And a trade war would help 0 2013 14 15 16 17 18 ing of bonds, currencies and commodities no one. But big banks are once again get- Source: Credit Suisse *Credit Suisse index was flatter—except at Goldman, where ting used to sunshine. 7 64 Finance and economics The Economist April 21st 2018

2 mostly in Europe (American banks, barred holders and shareholders. (At least coco in- yield curve, which plots the yields of Trea- from issuing cocos by regulatory and tax vestors in the stricken bank could console sury bonds of different maturities, abrupt- constraints, instead use preferred equity, themselves that they had been paid an ly flattened. When that happens, it may be an established asset class with similar 11.5% coupon. Junior debt investors got just because expectations forgrowth and infla- traits). Although cocos are held by the 5%, even right at the end.) tion—and hence for interest rates—have world’s largest asset managers, including Coco bonds’ technical characteristics, slumped. Then in February, as the stock- BlackRock and PIMCO, few specialise in and their premium over other forms of ju- market dropped, the VIX, an index of vola- them. Exceptions include niche funds run nior debt, mean that they will remain an tility dubbed the “fear gauge”, spiked. by Algebris Investment and Old Mutual attractive niche investment. But this is Sometimes, though, an eerie sound is Global Investors (OMGI). quite a comedown for an asset class once just the wind. Non-threatening explana- The main reason is that, despite early touted as an elegant, almost automatic, tions are possible for all three measures. enthusiasm, regulators did not throw their way to return struggling banks to health. 7 Startwith the yield curve. Itcan also be flat- weight behind cocos. In 2011 the Financial tened by a central bank raising rates in re- Stability Board, a global grouping of regu- sponse to buoyant growth today, while lators, decided that they would not count Financial markets long-term expectations are unchanged. towards the capital “surcharge” the biggest America’s recent tax cuts may be stimulat- banks would be required to hold. Only Jitterbugs ing the economy now. But their long-term equity would do. Rules on “total loss ab- impact, most analysts agree, is less certain. sorption capacity” finalised in 2015 require Likewise, the volatility reflected in the banks to have liabilities that can take a VIX can have a variety of causes. Volatility haircut or be wiped out ifthey are liquidat- rises when a shock hits markets. Traders ed or restructured. But a wide range of li- might be surprised by bad news about eco- Indicators that signal financial-market abilities, from shares to subordinated and nomic growth and future profits. Equally, trouble are flashing even senior debt, is included. Cocos be- they might be caught off-guard by good came part of a spectrum of at-risk liabil- ATCHING financial markets can be news, such as rising wages, that portends ities, rather than a neat, catch-all solution. Wlike watching a horror film. A charac- higher interest rates. Because higher rates The result is that cocos are a specialised ter walks into the darkness alone. A floor- depress the present value of future earn- investment proposition. They still offer board creaks. The latest spooky sign is the ings, they are bad for stocks. fairly high yields—currently 5.3% for dollar spread between the three-month dollar As for the LIBOR-OIS spread, one reas- cocos and 3% for those in euros, according London interbank offered rate (LIBOR) and suringsign is that the price ofcredit-default to indices compiled by Credit Suisse, a the overnight index swap (OIS) rate. It usu- swaps, which shows the premium inves- bank. And they offer a premium over ju- ally hovers at around 0.1%, but has recently tors must pay to insure against bank de- nior debt. They have appealing technical climbed to 0.6% (see chart). As it widens, fault, has barely risen. Some observers characteristics, too. Unlike bonds with a bankers are bracing fora jump scare. think the spread has widened because in- fixed maturity, they are perpetual, but re- To see why, considerwhat each rate rep- creased Treasury issuance, a consequence deemable after five years. Ifnot redeemed, resents. LIBOR is the rate that banks charge of tax cuts and higher government spend- their coupon resets with reference to the other banks for unsecured loans. The OIS ing, is drawing short-term funding away mid-swap rate, a widely used rate related rate measures expectations for the federal from banks. A second possibility is that to interbank lending rates (so a bond is- funds rate, which is set by the central bank. corporate-tax cuts have encouraged firms sued at 8% when the swap rate was 2% As LIBOR rises above the OIS rate, that sug- to invest or make acquisitions when they would reset to 11% if rates rose to 5%). That gestsbanksfearitisgettingriskier to lend to would previously have bought banks’ offers some protection against inflation. In each other. (The gap was 3.65 percentage bonds, forcing banks to borrow more in LI- 2016 investor jitters caused a spike in coco points in the depths of the crisis, after Leh- BOR markets. On top of that, market jitters yields. But since then, nerves have calmed man Brothers filed forbankruptcy.) earlier in the year encouraged investors and spreads have narrowed (see chart on Market-watchers were already twitchy. into low-risk funds, which buy more Trea- previous page). Last November they shuddered as the suries than bankdebt. This raises the fund- But the idea that cocos would help ing costs ofbanks relative to Treasuries. struggling banks recapitalise seems far- All three of the metrics that have had fetched. Without a regulatory requirement Boo! traders fretting are signs that financial con- to issue lots of them, the banks that are Spread between 3-month $ LIBOR and overnight ditions, more broadly, are tightening. That least likely to need them are the ones best index swap rate, percentage points can be worrying; it means less lending and able to find buyers. Rob James, who co- 4 slower growth. But it may be intentional. manages the coco fund at OMGI, empha- 3 The Fed has been raising rates for over two sises the importance of looking at the 2 years precisely because it is trying to apply strength of banks, and rules out investing 1 the brakes, gently, to the economy. Yet for in “stressed” ones. Forinvestorsalready ex- most of that time, markets have boomed 0 posed to distressed banks, it generally 2005 07 09 11 13 15 18 defiantly, leading hawks to warn that the makes sense either to buy equity—and lots central bank was letting a bubble in- ofit—to recapitalise the bank, orto lend to it Kansas City financial stress index* flate—ie, that financial conditions were too 0=long-term average loose, the opposite worry. in the form ofsafersenior debt. 8 Last June Banco Popular, a Spanish The biggest risk has always been that bank, was forced into a restructuring and 6 the Fed might have to act abruptly to see sale under the European Union’s new 4 off inflation. On April 18th the IMF warned bank-resolution framework. It was a test 2 that markets look exposed to a sudden MORE STRESS + for both cocos and the regulator. The bank 0 tightening in financial conditions, perhaps had already had trouble selling cocos, de- – triggered by an unexpected rise in interest 2 monstrating investors’ lack of interest in 2005 07 09 11 13 15 18 rates. Threats to the economy can lurk in the asset class. In the restructuring, cocos Source: Thomson *Measure of stress in the US financial obscure corners of financial markets. They were wiped out, alongside junior bond- Reuters system based on 11 variables can also be found in Washington, DC. 7 The Economist April 21st 2018 Finance and economics 65

Currency wars Mr Trump’s tweet was at odds with his Treasury Department’s assessment. Every Tweeting the six months it must tell Congress if any big trading partner is manipulating its curren- dollar down cy. (Offending governments are scolded, followed by other chastisements if they do not mend their ways.) But its latest report, published on April 13th, refrained from America’s president, but not its branding anyone a manipulator. Treasury, names currency manipulators The report did admonish China for its OST governments are happy when persistently large trade surplus in goods Mforeigners want their bonds, espe- with America. But Russia was barely men- cially when those foreigners are long-term tioned. The recent decline in its currency holders, like central banks. But America is was, after all, prompted by the Treasury’s different. It worries that some foreign gov- decision to strengthen sanctions. ernments buy its debt to keep the dollar Instead the reportpaid uncustomary at- pricey and their own currencies cheap. tention to India, pointing out that it has a This “currency manipulation” gives other large trade surplus in goods with America countries a competitive edge, raising their months. America has reportedly persuad- and that its central bank has intervened own trade surpluses and America’s deficit. ed South Korea to forswear currency ma- heavily in currency markets, with net for- Brad Setser of the Council on Foreign nipulation in a “side-agreement” to their eign-exchange purchases worth 2.2% of its Relations, a think-tank, sees an “arc of in- revised trade deal. And on April 16th Presi- GDP. It was added to a “monitoring list” of tervention” across Thailand, Singapore, dent Donald Trump tweeted that “Russia countries warranting closer scrutiny. Taiwan and South Korea that has slowed and China are playing the Currency Deval- The list itselfdoes not bear much scruti- the dollar’s decline over the past nine uation game...Not acceptable!” ny, however. As well as India, it comprises China, Germany, Japan, South Korea and Switzerland. But India has no overall trade The Hong Kong dollar peg surplus and Germany has no currency of its own to manipulate. The list also ignores Reserve power Thailand and Singapore, which have inter- vened over the past year to curb the rise in their currencies, according to Mr Setser. Hong Kong keeps a long-standing promise about its currency These oddities are not entirely the Trea- HE Hong Kong dollar is one ofthe Hong Kong dollars, which withdraw sury’s fault. It is required to assess a coun- Tmost and least manipulated monies them from circulation, would reduce the try against three criteria: its trade surplus in the world. For over 34 years the territo- money supply enough to force up in- with America, its current-account surplus ry’s monetary authority, the HKMA, has terest rates, making the currency more with the world and its intervention in cur- kept it pegged to America’s currency at attractive and arresting its weakness. The rency markets. The first measure makes lit- around HK$7.80 to the dollar, resisting all only worry—forhomeowners—is that tle sense, point out Fred Bergsten and Jo- temptations to let it fall orrise. In 2005 it higher interest rates would weigh on seph Gagnon of the Peterson Institute for refined the peg with two promises: to Hong Kong’s property prices, which have International Economics. In today’s global buy dollars at the price ofHK$7.75 and to risen by 30% in the past two years. supply chains, countries like Singapore sell them forHK$7.85. Hong Kong’s peg to the dollar has can sell materials to China that end up in The strength ofthe Hong Kong dollar survived three global slowdowns, sever- products bought by America. Their direct has obliged the HKMA to keep the first al stockmarket crashes, an Asian finan- exports to America may seem modest. But promise many times since. Its purchases cial crisis, a global one, an epidemic and their indirect exports, embedded in goods ofAmerican dollars have even drawn the the handover from one ofthe world’s sold by China, may be large. accusation that it manipulates its curren- first capitalist countries to its largest The Treasury is also required to consid- cy forcompetitive advantage. communist one. It has little to fear from er only America’s “major” trading part- In fact, the HKMA has always been several furtherhikes in America’s bench- ners. It thus limits its analysis to the largest ready to manipulate its currency up- markinterest rate. dozen (plus Switzerland, the 15th-largest). wards, too. But since 2005 it has had no That gives small, interventionist econo- occasion to, until last week. On April 12th mies a free pass, notes Stephanie Segal of the Hong Kong dollar weakened to Bouncing off the walls the Centre for Strategic and International HK$7.85, forcing the authority to buy Hong Kong dollar per $, inverted scale Studies, another think-tank. HK$51bn over the next few days in ex- Within these broad limits the report’s change forAmerican dollars. 7.70 authors enjoy substantial discretion. And The Hong Kong dollar’s weakness the Treasury is considering broadening the reflects the gap between rising American 7.75 definition of a “major” trading partner. It interest rates and Hong Kong’s low bor- thus had leeway to prepare a more rigor- rowing costs. In other places, investors 7.80 ousreportifithad wished to do so. Instead, might worry that the central bank’s says Mr Setser, it wrote this report to be ig-

efforts to defend its currency would HKMA* RANGE nored. Perhaps Treasury officials do not 7.85 exhaust its dollar reserves. But the HKMA want to be drawn into Mr Trump’starifftit- has enough foreign assets to buy its entire for-tat, suggests Mr Gagnon. The report money supply (strictly defined) with 7.90 waves the flag (invoking “fair and recipro- 2005 07 09 11 13 15 18 plenty to spare. cal” trade) but fires no bullets. It may be Source: Thomson Reuters *Hong Kong Monetary Authority Long before that point its purchases of hard to cheapen the dollar, but it is easy to depreciate a report. 7 66 Finance and economics The Economist April 21st 2018 Free exchange Diminished expectations

The business cycle is misunderstood. The second in ourseries on the shortcomings ofeconomics aging the business cycle. The job was outsourced to central bank- ers, who promised to keep a lid on inflation. Adopted around the world, this approach seemed to work. Downturns became less frequent and less severe; inflation was low and stable; expan- sions became longer. But all was not well. Many neoclassical economists rejected the “New Keynesian consensus” and worked along separate lines. Some followed their models back to the classical idea that fluctuations were natural and required no intervention. That oc- casionally led to absurd conclusions, for instance that falling in- flation in the early1980shad almostnothingto do with monetary policy.Although central banks largely ignored this work, its lead- ing theorists retained influence within the profession—winning Nobel prizes, forexample—and with conservative politicians. The New Keynesians had their own troubles. To satisfy critics they built more mathematical models, which aimed to show how decisions by rational, forward-looking people could, in ag- gregate,causedownturns.Theprojectwasquixotic. People are of- ten irrational. Their behaviour in groups is not as predicted by models that treat the economy as a mass of identical individuals. These models were complex enough to be fitted to almost any HE aftermath of the 2007-08 financial crisis ought to have story. They could replicate features of the economy, but that did Tbeen a moment of triumph for economics. Lessons learned not amount to understanding why those features occurred. from the1930s prevented the collapse ofglobal finance and trade, The gap between many neoclassical economists and the New and resulted in a downturn far shorter and less severe than the Keynesians running central banks remained unbridgeable. As Depression. But even as the policy remedies were helpful, the cri- Paul Romerhaspointed outin some scathingrecentpapers, the ri- sis exposed the economic profession’s continued ignorance of val camps were unable to settle their arguments by appealing to the business cycle. That is bad news not just for the discipline, but facts, or even to debate politely. You might suppose that the exis- foreveryone. tence of wildly different business-cycle theories would make The aim of those studying the macroeconomy has always macroeconomists more humble, but no. Improbably, both been to understand the economy’s wobbles, and to work out groups argued that, in the words of Professor Lucas, the “central when governments should intervene. That is not easy. Down- problem ofdepression-prevention has been solved”. turns come often enough to be a serious irritant, but not often enough to give economists sufficient data for rigorous statistical The return of depressing economics analysis. It is hard to distinguish between short-run swings and Where consensus did prevail, it proved to be misguided. Econo- structural economic changes resulting from demography or tech- mists of all ideological stripes cheered on the financial deregula- nology. Most classical economists were sceptical of the idea that tion of the 1980s and 1990s. The work of thinkers like Hyman the macroeconomy needed much oversight at all. Minsky and Charles Kindleberger, whose writings on financial By the early 20th century some thinkers were groping their excess were rediscovered after the financial crisis, gathered dust. way towards a better understanding of money in the economy, In a speech in 2005 to central bankers, Raghuram Rajan, an aca- and how its mismanagement could cause problems. The Depres- demic who later ran India’s central bank, warned of the risks sion forced non-interventionists to concede ground. John May- building within the financial system. He got a chilly reception. nard Keynes blamed recessions on a shortfall of demand linked There has been progress since the crisis. New research ques- to changes in saving and investment behaviour. Governments tions the old orthodoxy on matters from the appropriate role of used both monetaryand fiscal policywithgusto in the years after fiscal policy and the risks associated with large-scale financial the second world war to maintain full employment. flows to the relationship between unemployment and inflation. Yet the Keynesians’ heavy-handed approach never sat well But the profession remains in a dangerous and unsustainable po- with classically minded economists. In 1963 Milton Friedman sition. The macroeconomic approach favoured by economists and Anna Schwartz published their “Monetary History of the within central banks, regulatory agencies and finance ministries United States”, which resurrected the pre-Depression “monetar- has erred repeatedly in its prognostications over the past decade, ist” view that monetary stability can mend all macroeconomic predicting that labour markets would heal quickly, for example, ills. Other economists, including Edmund Phelps and Robert Lu- while underestimating the risks of targeting a low rate of infla- cas, recognised thatpeople learn to anticipate policychanges and tion. Acompellingnew paradigm seems a distant prospect. Noris adjust their behaviourin response. They predicted that sustained it cleareconomists are capable ofsortingout theirdisagreements. stimulus would eventually cause inflation to accelerate and were Macroeconomics must get to grips with its epistemological woes vindicated by runaway price growth in the1970s. ifit hopes to maintain its influence and limit the damage done by In the years that followed, Keynesians regrouped, borrowed the next crisis. Because economists have learned one thing: there ideas from their critics and built “New Keynesian” models (on is always another crisis. 7 which much modern forecasting is based). The synthesis of Key- nesian and neoclassical ideas informed a new approach to man- Economist.com/blogs/freeexchange Science and technology The Economist April 21st 2018 67

Also in this section 68 Bacteria that eat plastic 70 How the Bajau evolved to dive 70 TESS and the search for exoplanets 72 Robots can assemble IKEA furniture 72 Wet-wipes that disintegrate

For daily analysis and debate on science and technology, visit Economist.com/science

Palaeontology and eventually vanish. The bone evidence, however, is restrict- Tracking down the truth ed mainly to what are now Argentina and Brazil. Dr Bernardi and his colleagues sought to corroborate it elsewhere, and with a different type of evidence—not ani- mals’ bones but the tracks they left behind. Dr Bernardi and his colleagues identi- fied more than 20 sets ofsuch tracks, called Dinosaurevolution has an intriguingly circularaspect to it ichno-associations, in Dolomite rocks laid HAT the dinosaurs went out with a harder, though. And it is this that the au- down during the relevant part of the Trias- Tbang is well known. About 66m years thors of a study just published in Nature sic. They studied descriptions of them by ago a large space rock hit what is now Communications have done. Massimo Ber- previous researchers and also visited sev- southern Mexico. As a consequence, and nardi of the Museum of Sciences in Trento, eral of the sites themselves to make their with the assistance ofsome enormous vol- Italy, and his colleagues looked in particu- own observations. The Dolomite ichno-as- canic eruptions on the other side of the lar at fossil animal tracks (see picture sociations, they found, fall into three planet, the terrible lizards were consigned above) in the Dolomite mountains, a part groups. The oldest show no signs of dino- to history. That left the world open for the of the Alps to the north-east of Trento. This saur tracks. In those ofmiddling age, about rise of mammals. What is less well known part of the world is rich in such tracks, and 40% of the tracks have been laid down by is that the dinosaurs themselves rose in cir- Dr Bernardi has been able to use them, to- dinosaurs. In the most recent, that propor- cumstances similar to those that felled getherwith detailsofthe Dolomites’ geolo- tion is 90%. them. The animals’ long reign through the gy, to paint a precise picture of the dino- The relative ages of rock strata are easy Jurassic and Cretaceous periods was en- saurs’ emergence. to see. Unless a rock formation has been abled by another, albeit smaller, period of turned upside down by movement of mass extinction, which happened be- Footprints in the mud of time Earth’scrust, younglayerswill be at the top tween 234m and 232m years ago duringthe Dinosaurs were one of many groups that and old ones at the bottom. That is how Dr Triassic period. evolved after the greatest mass extinction Bernardi knew which tracks were older This extinction is thought to have been in history, which happened 252m yearsago and which younger. Working out absolute caused by a period of unstable climate between the Permian and Triassic periods. ages, though, is harder. But the Alps are called the Carnian Pluvial Episode (CPE), This extinction emptied both the land and well studied, and he and his colleagues in which the climate went from dry, to wet, the oceans, leaving a blank canvas for evo- were able to assemble a chronology for to dry again four times over the course of lution to workon. their ichno-associations by looking at re- 2m years. As is often the case in matters pa- The earliest fossil remains that are search that had been carried out on the lay- laeontological, the effects of such changes widely (though not universally) agreed to ers in between them. are easiest to see at sea, because most sedi- be those ofa dinosaurcome from Tanzania The Dolomites’ rocks were formed at a mentary rocks (the sort that the bulk offos- and date from about 245m years ago. For time when the sea’s level, relative to the sils are found in) are marine, and also be- the next 10m years or so, however, dino- land, was going up and down like a yo-yo. cause the composition of such rocks saurs are nothing special. In assemblages This was partly because ofrises and falls in reflects that of seawater at the time, which of the bones of land animals they form the sea itself, and partly because of the in turn reflects matters such as tempera- about 5% of the total. But then the fraction land rising and falling in response to tec- ture, rainfall and carbon-dioxide levels. starts to rise and within 5m years or less tonic shifts. Such transgressions and re- Marine rocks laid down at this time show a (the dates are a bit uncertain) they domi- gressions mean that marine and terrestrial huge turnover of species, and that this co- nate such assemblages, while other, better- sediments are interleaved in these moun- incides with the CPE. established groups of creatures, such as di- tains, and the marine sediments provided Connecting events on land to the CPE is cynodonts and rhynchosaurs, dwindle the information needed. 1 68 Science and technology The Economist April 21st 2018

2 Most obviously, those sediments show the best guess is that it was a consequence must have evolved to do its job within the how far, at the time they were laid down, of vast volcanic eruptions, similar to those past 50 years. the turnover of species had proceeded at at the end of the Cretaceous, that were go- I. sakaiensis digests PET far too slowly, sea. On top of this, some of them contain ing on at the time in what is now Alaska however, to be of much use for industrial layers of volcanic ash that can be dated and western Canada. And that, in itself, is recycling of the plastic. To make it so re- from radioactive isotopes within. And interesting. The extinction at the end ofthe quiresunderstandinghowthe enzymesdo some of them also preserve evidence of Permian also happened at the same time their work. This is what Dr McGeehan and the reversals in Earth’s magnetic field that as a huge outpouring of lava (in what is his colleagues set out to do. As MHET is far happen from time to time, and which act now Siberia). Although the Cretaceous ex- easier to breakdown by standard chemical as useful date markers. tinction is usually blamed on the extrater- means than PET, they focused on PETase. The upshot was that Dr Bernardi and restrial collision that left its mark in the Yu- They compared the DNA sequence of his colleagues were able to establish accu- catan, with the coincidental eruptions the PETase gene with that of cutinases rate dates for the various ichno-associa- (which happened in whatisnowIndia) rel- from thousands of bacterial species, look- tions they had catalogued, confirming, as egated to a supporting role, some geolo- ing for differences. They then created new they had suspected, that those associa- gists wonder if the importance of those versions of PETase, each with one or more tionspreciselystraddle the Carnian Pluvial roles should be reversed. of its amino-acid building blocks changed Episode, thus matching the bone evidence There is no reason, of course, why all to resemble those ofancestral cutinases. from South America. The oldest tracks date mass extinctions should have the same As many of the differences between from 236m yearsago, before the CPE began. cause.Besidescosmiccollisions,bothnear- PETase and cutinases were, presumably, The middling ones were laid down 234m by stellarexplosions and climate-changing what allowed PETase to do its job, they ex- years ago, duringit. The youngest are 230m burps of methane released from the ocean pected these new enzymes to digest the years old, dating from after it was over. depths have been suggested as possible plastic less efficiently. To their surprise, That is clear evidence the dinosaurs were biosphere-killers. But the geological record however, one of the engineered enzymes indeed the beneficiariesofthe CPE, though shows that sub-continental-sized erup- (with two amino acids mutated to be more why they did better than other groups is tions do happen quite frequently. It is hu- cutinase-like) was able to digest PET about not yet understood. manity’s lucknot, thus far at least, to be liv- 20% faster than the natural one. That is a As to what caused this climatic hiatus, ing at the same time as one. 7 modest increase, but one that came about by accident rather than design. This, Dr McGeehan argues, shows there is plenty Greenery ofscope forfurtherimprovement. The team determined the structures of Auf Wiedersehen, PET their enzymes by protein crystallography, a technique thattakesdetailed pictures ofa molecule bybombardingcrystalsofit with X-rays (in this case, at the Diamond Light Source, a machine in Oxfordshire that pro- duces particularly strong X-rays for such purposes). They then used computer mod- An enzyme that digests plastic could boost recycling elling to look at how a molecule of PET MILLION plastic bottles are sold every and ethylene glycol. The bacterium then might dock with the enzyme’s active site— Aminute. Many are not recycled and of uses these chemicals as food sources. The the region where the chemical reaction those that are, only a small fraction be- discoverers of PETase also suggested that it that breaks down the plastic actually oc- come bottlesagain. Thatis, in part, because may have evolved from bacterial enzymes curs. The more-efficient enzyme they engi- recyclingpolyethylene terephthalate (PET), used to breakdown cutin, a waxy polymer neered appears to hold the plastic mole- the polymer used to make such bottles, that coats leaves. That is, in itself, remark- cule more snugly in the active site than the back into material robust enough to hold, able—for PET has been used widely only naturally occurring version. say, a fizzy drink, is hard. What would be since the 1970s, meaning that the enzyme Interestingthough all this is, there is still helpful is a way to breakdown PET into the much to do before PETase can become a chemicals that made it in the first place. useful enzyme. At the moment, a litre of a These could then be used to make new solution of even the improved enzyme high-grade PET. would breakdown just a few milligrams of This week John McGeehan of the Uni- plastic per day. Its plastic-digesting ability versity of Portsmouth, in Britain, and his must therefore be improved by a hundred- colleagues report details of a bacterial en- fold or more to be commercially useful. zyme called “PETase” that can do just that. This the team hopes to do, in part, by us- Furthermore, they have engineered a ver- ing clues from the enzyme’s structure. Fur- sion of this enzyme that can digest plastic ther improvements could come by design- faster than the natural variety. Their work ing the enzyme to work at temperatures is published in the Proceedings of the Na- above 70oC, when PET becomes rubbery, tional Academy of Sciences. and thus more easily digestible. Bacteria PETase is secreted by a plastic-munch- that live in hot springs, and that have cuti- ing bacterium called Ideonella sakaiensis nases that function at such temperatures, 201-F6. This bug was discovered in 2016 at a might be pressed into service here. The PET-bottle recycling plant in Sakai, Japan. gene forthe enzyme would also have to be The researchers behind its discovery transplanted into bacteria that can be showed that the enzyme degrades PET into grown easily at industrial scales. If these mono(2-hydroxyethyl) terephthalic acid hurdles can be surmounted, though, (MHET). A second enzyme then breaks PETase might make a dent in the scourge of MHET down further, into terephthalic acid For bacteria, lunch plastic waste. 7

70 Science and technology The Economist April 21st 2018

Astronomy Hello, neighbours

The search forexoplanets moves to Earth’s backyard EFORE 1992 astronomers could only B presume that alien planets existed. That was the year the discovery of the first such worlds, orbiting a pulsar called PSR 1257+12, about 2,300 light-years from Earth, was announced. These days, astronomers have more exoplanets than they know what to do with. The ExtrasolarPlanets En- Human evolution cyclopaedia lists 3,767 confirmed worlds as of April 18th, with thousands more detec- Born to dive tions awaiting confirmation. This torrent of discovery has made exo- planetology one of the most exciting fields in astronomy. But it is also frustrating, for the majority of those planets are so far away that, besides the fact of their exis- tence, little can be learned about them. A group ofpeople with an amphibious lifehave evolved traits to match Data on most are limited to the orbits they HE Bajau, a people of the Malay Archi- To do so, Ms Ilardo travelled to Indone- trace around their parent stars, and esti- Tpelago, spend almost all oftheir lives at sia and recruited 59 Bajau who were will- mates oftheir sizes and masses. sea. They live either on boats or in huts ing to give her samples of saliva for DNA That is about to change. On April 18th a perched on stilts on shallow reefs, and analysis and also to have their spleens space telescope called the Transiting Exo- they migrate from place to place in flotillas measured ultrasonically.Toact as controls, planet Survey Satellite (TESS), blasted into that carry entire clans. They survive on a she also recruited 34 members of the Sa- orbit from Cape Canaveral in Florida. TESS diet composed almost entirely of seafood. luan, a group oflandlubbing but closely re- is designed to examine almost the entire And to gather this they spend 60% of their lated neighbours of the Bajau. The spleen sky, lookingforevidence ofplanets around working day underwater. scans showed that the Bajau’s are 50% larg- the nearest (and thus brightest stars)— Unsurprisingly,theirdivingabilities are er than those of the Saluan—a difference those, in other words, that are easiest to prodigious. They sometimes descend unconnected with whether an individual study in more detail. more than 70 metres, and can stay sub- was a prolific diver or one who spent most Over the course ofits two-year mission, merged for up to five minutes, using noth- of his time working above the waves on a TESS will stare at around 200,000 of the ing more than a set of weights to reduce boat. This suggests that it is Bajau lineage, stars closest to Earth, watching for telltale buoyancyand a pairofwooden goggles fit- rather than the actual activity of diving, dips in brightness caused by a planet cross- ted with lenses fashioned from scrap glass which is responsible for a larger spleen. ingin frontofitsstar. The transit method, as that are resistant to distortion by the pres- DNA analysis told a similar story. One this is known, relies on the orbital plane of sure at such depth. Since the Bajau have intriguing result was a mutation in part of a planet being aligned with the instrument lived like this for a long time (historical evi- the Bajau genome that regulates the activi- doing the observing, so only a small frac- dence suggests at least 1,000 years), many ty of a gene known to be involved in con- tion of any planets orbiting the stars in researchers have speculated that they car- trolling blood flow,such that blood can be question will be detectable. Nevertheless, ry genetic traits which adapt them to their sent preferentially to oxygen-hungry vital assuming Earth’s cosmic neighbourhood remarkable lifestyle. Now,as they report in organs. Another was a mutation in a gene is similar to the galactic average, TESS Cell, Melissa Ilardo and Rasmus Nielsen of responsible for the production of carbonic should turn up around 3,000 planets. the University ofCalifornia, Berkeley have anhydrase, an enzyme that slows the build The idea is to provide a target list of the shown that this is so. up ofcarbon dioxide in the bloodstream, a most interesting worlds for follow-up ob- Immersing someone’s face in cold wa- phenomenon that is associated with ex- servations by other instruments using oth- ter and thus requiring him to hold his treme diving. Changes in genes associated er methods. One such method (the one by breath triggers whatis known as the diving with muscle contractions around the which PSR 1257+12’s planets were detected) response. This involves a lowering of the spleen and with responses to low oxygen is to measure the wobble that the planet’s heart rate to conserve oxygen; the redirec- levels also turned up. gravity causes in its parent star as it orbits. tion of blood from surface tissues to the Putting these results together, Ms Ilardo Such measurements reveal a planet’s most oxygen-sensitive organs, such as the and Dr Nielsen argue that the need to col- mass. Since TESS’s transit method reveals a brain, the heart and the lungs; and contrac- lect food by diving has indeed led to the planet’s size, the two together give enough tion of the spleen, an organ that acts as an evolution, in the case of the Bajau, of a information to calculate its density, and emergency reserve of oxygenated red group who are literally born to dive. therefore to deduce whether it is made of blood cells, so that an increased supply of Whether that evolution was driven by the rock or gas. Several telescopes around the these cellsisreleased into the bloodstream. failure of those who could not dive well to world are being upgraded with just such Ms Ilardo and Dr Nielsen decided to inves- collect enough food to sustain a large fam- TESS-assisted observations in mind. tigate whether the genetics and anatomy ily,orrather, oftheirdyingin the attempt to Based on existing data, around 500 of ofthe Bajau promote these responses. do so, remains to be determined. 7 the 3,000 planets that TESS is expected to 1 Property 71

The Economist April 21st 2018 72 Science and technology The Economist April 21st 2018

2 find are likely to be rocky worlds with radii et’s atmosphere on its way to Earth, and Sewage up to twice that ofEarth. Ofthose, a couple from that infer the chemical composition of dozen might orbit in the habitable zone of the exoplanet’s air. The presence of cer- Build a better of their parent stars, where temperatures tain gases would be tantalising hints that are right for liquid water to exist on their the planets in question might play host to bog roll surfaces. life. The simultaneous presence of meth- Since liquid water is required by all ane and oxygen, forexample, would excite forms of terrestrial life, looking for it in the interest because these two gases react to- And the world may make a beaten path cosmos makes a good starting-point in the gether quickly, and would thus need con- to yourdoor quest for life of the non-terrestrial sort. stant renewal to coexist. And because TESS’splanetswill be so close It may eventually be possible, for the REPORT published last year by Water to Earth, it should be possible to check closest worlds, to take photographs of the AUK, an industry body, said that more whether they do in fact possess water, not planets. That could show general details of than 90% of sewer-pipe blockages in Brit- merely whether they might. geography, such as how much of the sur- ain were caused by“non-flushable wipes”. A new generation of instruments, in- face of a rocky body is covered by liquid Accumulations of these can clog up cluding ultra-large ground-based tele- and howmuch byland. Going, in the space pumps. Worse, when they are gathered to- scopesandthe delayed, over-budgetJames of less than 30 years, from knowing noth- gether by the adhesive power of kitchen Webb Space Telescope, scheduled to ing at all about alien planets to making grease, they can form giant “fatbergs” that launch in 2020, will be able to observe star- rough maps of them would be a feat of ex- choke the passage ofeffluent. light that has passed through an alien plan- traordinary proportions. 7 Some of the wipes in question were for cleaning surfaces or removing cosmetics. Most of those that could be identified, Artificial intelligence though, were for wiping babies’ bottoms. And probably not only those of babies. As Some assembly needed people grow richer, they can afford more comfortable means of personal hygiene, so many adult nether regions are probably Robots can now put flat-packfurniture together being tended to in this way as well. N1997 it was chess. In 2016 it was the Ordinary toilet paper is not a problem Iancient game ofGo. Now it seems for sewers. It disintegrates rapidly, after be- computers have mastered a taskthat ing flushed, into the fibres from which it is stretches the human brain to its limit. In a made. Wet-wipes are different. To keep paper just published in Science Robotics,a them intactwhile damp, before and during group ofresearchers at Nanyang Techno- use, their fibres are held together by resins. logical University,in Singapore, report But these resins also hold them together having managed to get a pair ofordinary afteruse, meaningtheydo notdisintegrate. industrial robots to assemble most of a Deng Chao and his colleagues at Donghua piece offlat-packIKEA furniture. University, in Shanghai, therefore won- The chair in question was a model dered if it might be possible to make resin- called STEFAN. The robots’ job was to free wipes. And, as they report in Royal assemble the frame. This requires several Society Open Science, they think they have pieces ofdowelling to be inserted into managed to do so. pre-drilled holes before the parts are Instead of using resin to hold the fibres pressed together. In total, says Pham together, Dr Deng and his colleague have Quang Cuong, one ofthe paper’s au- been experimenting with a technique thors,19 components are involved. planning the movements needed to carry called hydroentanglement. This involves The robots were off-the-shelfarm- out these instructions, before they tried bombarding the web of fibres destined to shaped machines ofthe sort found in to execute them. Moreover, though the become a wipe with jets of water. The jig- factories around the world, combined larger components ofthe chair were gling thus induced shifts the fibres around with a stereoscopic camera that can scattered around at random, meaning the in a process that is, in effect, the opposite of produce three-dimensional images. A robots had to use the camera to identify combing. As with uncombed hair, the re- pair ofvideos released by the researchers them by comparing them with electronic sult is strongly knitted together—so strong- show the robot arms making various representations loaded into a database, ly that in Dr Deng’s experiments the effect mistakes, dropping dowelling on the the dowels were gathered together and was as good as with a conventional wipe. floor or misaligning components, before placed upright in a container. Those experiments also showed, though, succeeding at their taskafter almost nine The result is, nevertheless, sufficiently that unlike a conventional, resin-bound minutes ofslow,careful work. impressive, says Dr Pham, for his research wipe, the hydroentangled version disinte- Even with that abundance ofcaution, group to have received considerable grated in the same way as toilet paper does though, the robots needed quite a bit of interest from industry.In future he and when it was put into water and agitated. hand-holding. They were given precise his colleagues hope, gradually,to remove Hydroentanglement is, as a bonus, an instructions before they started (along the robots’ training wheels. One idea is to established industrial process, employed the lines of, “Arm1: take the side piece. get the machines to learn what to do for to make fabrics without weaving. (The re- Arm 2: grab a dowel. Arm1: rotate side themselves by watching a human being sult is known as spunlace.) Adapting it to piece so that hole is pointing up. Arm 2: assemble the chair. Given the difficulties make wet-wipes should not, therefore, be insert dowel into top-left hole.” And so that many people apparently have with that difficult. And if it can be so adapted, on.). Before the nine minutes ofassembly IKEA’s products, that may,however, also then the days of the fatberg should be began, the robots spent a further11min- teach them how to toss the whole thing numbered—meaning that one of the most utes scanning their environments and aside in frustration. vital, if hidden, parts of any society’s infra- structure, its drains, can run free. 7 Books and arts The Economist April 21st 2018 73

Also in this section 74 Motherhood and literature 75 A novel of apes and apocalypse 75 Death, where is thy sting? 76 Contemporary art in Italy

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Suffragism, 100 years on The rumbustious suffragettes are rele- gated to small etchings on the new statue’s Persuasion and the broken pane plinth, a marginalisation that hints at lin- gering unease with their methods. Some historians think the new rights were won solely by the suffragists, and that the suf- fragettes’ outrages were a distraction from the cause or even—by alienating some wa- vering supporters—actively damaging to it. The fight forwomen’s right to vote offers many lessons formodern campaigners Others argue that hearts and minds would HE is a picture of peaceful protest. Milli- images are of a diminutive Emmeline have proved more intransigent without Scent Fawcett’s clothes are unruffled, her Pankhurst being accosted by a policeman their pyrotechnics. “Twenty years of gaze fixed, her mouth shut. She holds a at the gates of Buckingham Palace, or of peaceful propaganda had not produced placard at her waist: “Courage Calls to one ofherimprisoned supporters having a such an effect, norhad fiftyyears of patient Courage Everywhere”. The statue, made dirty force-feeding tube thrust into her pleading which had gone before,” one by Gillian Wearing, will be unveiled in nose. The organisation that Pankhurst (pic- woman wrote at the time. London’s Parliament Square on April 24th; tured above) founded in 1903, the Wom- Fawcett will be the first female figure en’s Social and Political Union (WSPU), op- Soldiers in petticoats among the statesmen in bronze. It cele- erated fora little over a decade. In that time This is a false dichotomy. Pitting one group brates the centenaries of two laws that en- it pioneered the use ofshocktactics such as againstthe otherobscuresthe factthat they franchised some British women and gave hunger strikes, borrowed from Russia and operated in tandem. Fawcett—who hosted those over 21 the right to stand for Parlia- emulated elsewhere. In “Rise Up Wom- a banquet at the Savoy for a group of suf- ment. These were the culmination of de- en!”, a history of the suffragettes that is fragettes on their release from prison—ac- cades of polite lobbying—and of a ten-year among several books on the period pub- knowledged that “the successful conduct campaign of militant protests. Both strat- lished thisyear, Diane Atkinson writes that of every great change needs the combina- egies hold lessons forreformers today. “women’s political campaigning would tion of the spirit of order with the spirit of Fawcett, the president of the National never be the same again”. audacity.” The order and the audacity are Union of Women’s Suffrage Societies equally instructive. (NUWSS), was the leader of the moderate Order was essential foreffective organi- “suffragist” wing of the movement, which Rise Up Women! The Remarkable Lives sation. Fundraising paid for grassroots believed in “constitutional agitation” and of the Suffragettes. By Diane Atkinson. campaigners, who drummed up support, “law-abiding propaganda”. From the 1870s Bloomsbury Publishing; 650 pages; $40 co-ordinated events, sold suffrage litera- she oversaw lobbying and the delivery of and £30 ture and wrote reports. They were energet- thousands ofpetitions and letters to Parlia- The Stalled Revolution: Is Equality for ic and incorrigible. In 1913 Helena Swan- NUWSS ment. At the start of the 20th century such Women an Impossible Dream? By Eva wick, one organiser, spoke at decorous tactics were the preference of Tutchell and John Edmonds. Emerald nearly 80 public meetings and wrote feminists around the world, from Ameri- Publishing; 320 pages; £26.99 “50,000 words on the future of the wom- ca’s Susan B. Anthony to France’s Jeanne en’s movement”. By-elections provided Schmahl and New Zealand’s Kate Shep- Equal Power: And How You Can Make It opportunities for targeted campaigns. In pard. Their fortunes varied. Women in Happen. By Jo Swinson. Atlantic Books; 1912 the NUWSS established a fund to assail NewZealand were granted the vote in 1893. 383 pages; £16.99 candidates who opposed suffrage. Two French women got it only in 1944. anti-suffrage Liberals duly lost their seats. Deeds Not Words: The Story of Women’s Yet posterity’s view ofthe British move- The suffragists’ sense of order also pro- Rights, Then and Now. By Helen ment focuses on the disorder fomented by vides a good leadership model. Fawcett Pankhurst. Sceptre; 376 pages; £25 the militant “suffragettes”. The archetypal was an elected leader who inspired respect1 74 Books and arts The Economist April 21st 2018

2 and loyalty and encouraged debate. By campaigning remains the main way of Motherhood and literature contrast Pankhurst and herdaughters were changing the law. In “Equal Power”, Jo bold, impressive orators who led by exam- Swinson, deputy leader ofBritain’s Liberal Medea’s shadow ple. But they governed as tyrants and cast Democrats, encourages women to “keep out dissenters. They also spent long, dis- the pressure on” their political representa- ruptive stretches in prison and exile. tives by raising uncomfortable issues, even Yet though the suffragists did make outside election season. Internet petitions waves, particularly with their “Mud have already scored some victories (an av- March” through London’s boggy streets in erage of70% ofsignatories on change.org, a Writers and Their Mothers. Edited by Dale 1907, it was the suffragettes’ audacity that petitions website, are female). In Britain a Salwak. Palgrave Macmillan; 257 pages; secured publicity. Their exploits cleverly call forthe sales tax on menstrual products $34.99 and £19.50 reflected their demands. Smashing win- to be lifted was signed by more than Mothers: An Essay on Love and Cruelty. By dows and setting fires were comments on 320,000 people, nudging Parliament to Jacqueline Rose. Farrar, Straus and Giroux; women’s lack of property rights. Emily pass an amendment in 2016. 256 pages; $26. Faber & Faber; £12.99 Wilding Davison, best known for being fa- These days women’s organisations tally trampled by the king’s horse at the Ep- tend to lack the financial heft needed to SHIVER of anxiety may strike female som Derby in 1913, hid in a broom cup- emulate the suffragists’ election fund. But Areaders who pick up “Writers and board in the Houses of Parliament during they can make a difference in other ways. Their Mothers”. On top of everything else, the census of 1911, so that a woman could International research byMala Htun and S. are mothers to be blamed for creativity list the House ofCommons as her address. Laurel Weldon, two political scientists, skewed or thwarted in the cradle, at the The suffragettes were witty. Guards at found thatbyinfluencingtrade unions and breast or on the potty? Open this book of Parliament were wary of well-dressed other power-brokers, such groups played a essays, and sure enough, there is William women, so Muriel Matters—“one of their vital role in workplace reform. In India and Golding’s mum apologising on her death- youngest but more determined warriors”, Latin America women’s movements have bed for having been a “bad mother”. “Too according to the Daily Express—hired an air helped secure gains for rural and domestic little cuddling” was what she meant, the balloon emblazoned with “Votes for labourers. Meanwhile the British govern- author himself thought; “too much bottle Women” and tried to rain WSPU pam- ment recently enforced a law obliging …too little bosom”. phlets over Westminster. Adverse weather firms with more than 250 employees to These details come in a wonderful threw her off-course, but the madcap stunt publish data about the average earnings of piece by Golding’s daughter, Judy Carver. made headlines across the world. men and women. The Fawcett Society, a Mildred Golding was not a “bad” mother, charity named after Millicent, pushed for but several others fit the description. John The shackles of yesterday that transparency. Ruskin’s made him interpret the Bible, Their willingness to suffer engendered Cultural change is trickierto orchestrate from Genesis to Revelation, again and sympathy as well as havoc. Some, such as than the legislative kind. For that, making again, as soon as he could read. Robert Kitty Marion, were force-fed over 200 as much noise as possible is often the best Lowell’s never allowed him onto her lap times. Plenty were sexually assaulted by strategy. Acentury ago women resorted to forfear ofcreasing her dress. True, Mrs Gol- policemen or agitated crowds. This fiery the “argument of the broken pane” be- ding was physically remote, but her imagi- approach consumed the suffragettes’ liveli- cause they had no other way of making nation was alive, and her son acknowl- hoods and health—inevitably making it themselves heard. They chained them- edged his debt to her. “She was, as I am, a harder to sustain than the constitutional selves to railings, set buildings on fire and fantasist,” he wrote, with a “tumultuous one. The WSPU suspended its militant ac- put bombs in post-boxes. Today’s cam- …torrid, complex” inner life. tivities in 1914, out of deference to the war paigners can harness more effective mega- Predictably, some of the collection’s effort; the NUWSS persisted. Fawcett de- phones, such as social media and journal- best essays are in its autobiographical sec- scribed the suffragist campaign as “like a istic exposés. One of their forebears’ tion, in which the writers themselves cast glacier; slow moving but unstoppable”. lessons is that shocking the public into their minds back, reinterpreting things As Helen Pankhurst, Emmeline’s great- changingitsmind maynotbe achieved in a seen or guessed at in childhood. Many re- granddaughter, outlines in “Deeds Not year or even ten. But it can be done. 7 member noticing their mothers’ unspoken Words”, modern feminists’ aims are less marital frustrations. Ian McEwan’s was si- straightforward than those of 100 years lenced by her military husband’s “iron cer- ago. Then campaigners cared about many tainties”; Andrew Motion’s escaped into a causes, from access to the professions to world of books at odds with her spouse’s sexual double standards, but they were guns and fishing rods. Lyndall Gordon’s galvanised by a single, simple goal: the endured a “boredom that deadens the air right to vote. Today, write Eva Tutchell and around my father”. John Edmonds in “The Stalled Revolu- As a child, Ms Gordon determined nev- tion”, discrimination “is much less obvi- er to “settle for a blocked-off man like hus- ous than the blatant injustice that was bands of my mother’s generation”. This prevalent a generation ago”, but it still post-war generation features repeatedly, as blights lives. Now, though, no specific issue it does in Jacqueline Rose’s “Mothers: An supersedes all others, within countries let Essay on Love and Cruelty”. These were alone between them. Moreover, though the mothers, writes Ms Rose, “who found some problems can be fixed by laws, such themselves, after a devastating war, under as paid parental leave and subsidised child the harshest obligation to be happy and care, others, such as the gender pay gap fulfilled in that role”—as though their func- and harassment, endure despite prohibi- tion, as mothers, was to kiss the world bet- tions (albeit often shabbily enforced). ter, wipe away its tears and smile. Different and varying as these modern “Mothers” is a passionate polemic, not challenges are, together the suffragists and just against that obligation—bound as it is suffragettes offer a road-map. Ordered Their daughters’ daughters to fail—but against its personal and politi-1 The Economist April 21st 2018 Books and arts 75

Apocalyptic fiction Planet of the apes

Theory of Bastards. By Audrey Schulman. her controversial theory about the “Bene- Europa Editions; 416 pages; $18 and £12.99 fits ofBastards”. She also begins to walk again after an operation forendometri- N “Three Weeks in December”, Audrey osis. Aiding her little steps and scientific ISchulman’s novel of2012, an American leaps is an ex-soldier, David Stotts. ethno-botanist heads to Rwanda in Gradually the pair develop a common search ofa potentially life-saving vine. language, he no longer “Kansas-polite”, She befriends a family ofgorillas, but she no longer “Manhattan-rude”. More their bond is threatened by a group of important forFrankie, though, is the Congolese child soldiers. Ms Schulman’s ability to communicate with the bono- new novel, “Theory ofBastards”, also bos. But just as she begins to make pro- revolves around a female scientist who gress, a dust storm approaches—“Like interacts with an endangered great death or anaesthesia, an inching thief”— ape—in this case the bonobo, or pygmy and wreaks havoc. Days later, with sup- chimpanzee. What begins as a fascinat- plies exhausted and rescue elusive, Fran- ing study ofevolution turns into a taut kie, Stotts and 14 apes, all hungry, thirsty battle forsurvival. and dirty, take their chances outside. This time the setting is not Africa but a The main section ofthe book, chroni- futuristic Midwest. Francine (“Frankie”) cling Frankie’s initial spell at the Founda- Rethinking death Burk—Canadian like the author—takes a tion, is devoted to relationship-building placement at a research institute outside and fact-finding. Occasionally those facts, The only end of Kansas City. There she observes the evolutionary and psychological, are mating behaviour ofbonobos, to verify intrusive. Fortunately, MsSchulman’s age imagined future is intriguing, an all-too- credible realm ofself-driving cars, talking fridges, printable food and data-accessing Natural Causes. By Barbara Ehrenreich. BodyWare, plagued by extreme weather Twelve; 210 pages; $27. Granta; £16.99 and cyber-attacks. Her cast, human and simian, is compelling, particularly her FEW years ago Barbara Ehrenreich heroine, who rebounds from one cruel Astopped going for check-ups. The deci- blow after another. sion to forgo cancer screenings and physi- The novel changes gear when the cal exams has set her apart from her storm sweeps in, disabling technology friends, whose calendars are full of doc- and bringing Frankie and Stotts closer. tors’ appointments and whose cupboards Their final, desperate trekacross a treach- are crammed with supplements and medi- erous, post-apocalyptic landscape is cines. But as the American writer, who is expertly rendered. The reader’s mount- 76, explains in “Natural Causes”, once she ing dread proves that the characters’ fates realised she was “old enough to die”, there have come to matter. Ms Schulman’s was no good reason to live a “medicalised finest novel yet is an examination of life”. Herremainingtime is “too precious to sexual relations, the “careful theatre” of spend in windowless waiting rooms”. civilisation, and humanity’s responsibil- Ms Ehrenreich is no anti-science hippy. ities in a rapidly changing world. It is both She will go to the doctor in an emergency. an edifying read and an exhilarating one. The author of over 20 books of social com- mentary, including “Nickel and Dimed”, an acclaimed account ofpoverty in Ameri- 2 cal implications. “What are we doing to acquaints women with extremes of feel- ca, she has a PhD in cellular immunology. mothers,” Ms Rose asks, when they are ex- ing. It reaches parts most never thought What angers her is the “illusion of con- pected to carry the burden “of everything they had. “There is nobody in the world I trol” sold by the “medical-industrial com- that is hardest to contemplate about our love as much as my child, nobody in the plex”. She skewers the fads that promise society and ourselves?” It is a big question world who makes me as angry,” Ms Rose eternal youthfulness, such as celebrity-en- with many layers, and she pursues it confesses. “Instead of maternal goodness dorsed “radio-frequency skin-tightening”, through a huge variety of texts, settings welling up”, says another mother she and bossy books on “successful ageing”. and experiences, from the Sun newspaper quotes, “the situation seemed to open up But she argues that mainstream proce- to Euripides, North America to South Afri- new areas ofbadness in my character”. dures such as cancer-screening are over- ca, feminist critique to psychoanalysis, po- The spectre of bad mothering, of Me- sold as well. One study published in 2012 etry, fiction and personal history. dea and her descendants, haunts this by the New England Journal of Medicine es- Ms Rose’s intellectual range is dazzling; book, as do “blood, guts, misery and lust”. timated that from 1976 to 2008 over 1m perhaps, for some readers, exhausting. Yet Ms Rose’s point is that pain is the qualifica- American women received a diagnosis— woven through her analysis is a simple tion mothers bring to the world: the fact plus painful treatment—for tumours that proposition. Motherhood is messy, physi- that “they are not in flight from the anguish would not have led to clinical symptoms. cally and emotionally. Like nothing else, it ofwhat it means to be human.” 7 Yet“Natural Causes” ismore than a rant1 76 Books and arts The Economist April 21st 2018

2 about snake-oil salesmen. It is an eclectic, Contemporary art in Italy if scattershot, musing on attitudes to life and death. These have changed hugely The new Medicis since the pre-modern era, as other writers have noted. In a seminal bookabout West- ern attitudes to mortality published in 1974, Philippe Ariès, a French historian, ar- gued that before the 18th century death FLORENCE was rarely resisted. Life expectancy at birth The supreme Renaissance city is learning to love contemporary art hovered at around 30. Since Christianity taught that time on Earth was preparation HEN Arturo Galansino returned to Penone into the16th-century fortress. for the afterlife, and that God decided Whis native Italy from a post at the Roy- In 2015 Mr Risaliti—in collaboration death’s moment, you might as well do al Academy of Arts in London in 2015, he with a public-private partnership, Mus.e— good works in the meantime. soon realised thatthe zeitgeist“wasexactly set a gilded Jeff Koons statue alongside the Thanks to the wonders of science and the opposite of what was happening in copy of Michelangelo’s David in Piazza economic growth, life expectancy in rich New York and London: the art of the past della Signoria (see picture). He compares countries is now more than 80. Death is was having more success than contempo- his activities to “prodding a dormant generally less capricious and sudden. Con- rary art”. Italy could boast some of the body”. This jabbed a finger at the most in- comitantly humans are farless likely to see most influential cutting-edge artists and ert bit: a square in which the last original themselves as helpless against the grim collectors. Yet enthusiasm for their efforts statue was installed five centuries earlier. reaper. Doctors have ousted priests as the was confined to a small minority. The metallic surface ofthe Koons statue anointed experts in mortality. Spin classes Nowhere was that truer than Florence, reflected the works around it, capturing a have replaced the sacraments. where Mr Galansino had just become di- special qualityofFlorence’scontemporary For Ms Ehrenreich, the notion that hu- rectorgeneral ofPalazzoStrozzi,a prime ex- boom—its opportunities forinteraction be- manscan mastertheirbodiesisflawed and hibition space. Though his reputation as a tween the creativity ofpast and present. “It dangerous. Disease will strike everyone curator had been built on shows of Old can seem as if artists cancel what went be- eventually. As Philip Roth wrote in his nov- Masters at the Louvre and Britain’s Nation- fore them,” says Mr Risaliti. “But in fact el “Everyman”, “Old age is a massacre.” al Gallery, he set about lending the Palaz- they never do.” Mr Galansino aims to “put Equating health with virtue, she adds, zo’s substantial reputation and resources together the two things and see how much means that the rich, who may spend $100 to a fledgling movement that is turning the of the contemporary is old and how much per hour on fitness regimes, look down on supreme Renaissance cityinto Italy’s liveli- ofthe old is contemporary”. obese people as incapable of self-control, est arena for contemporary art. Since 2016 The show dedicated to Mr Viola, who when they may instead lackeducation. Palazzo Strozzi has hosted ambitious lived in Florence in his 20s, was a striking In one ofthe book’s more interestingdi- shows by Ai Weiwei and Bill Viola. attemptto do that. Some ofhisbest-known gressions, Ms Ehrenreich argues that the On April 19th Mr Galansino will take a videos were set alongside the Renaissance idea of self-mastery is misguided since it more provocative step when the latest in- masterpieces that inspired them, by Maso- stems from a misreadingofbiology. Articu- stallation—or is it an experiment?—from a lino, Pontormo and Uccello. Mr Galansino lating her “dystopian view of the body”, German scientist-turned-artist, Carsten says one factor that encouraged him to she rejects the concept of it as a well-oiled Höller, opens at Palazzo Strozzi. Devised gamble on contemporary art was that he machine. Instead it is a battleground. She with help from an Italian neuro-biologist, could count on the foreigners who visit the emphasises new research in immunology Stefano Mancuso, it involves one of Mr city as tourists or students. It speaks vol- that suggests different cells are often in con- Höller’s trademark spiralling chutes, two umes about the success of Florence’s new flict with each otherratherthan working in cinemas and some bean plants (it would departure that 85% of tickets for the Viola concert. Macrophages, often seen as bio- spoil the fun to say why). show reportedly went to Italians. 7 chemical binmen which circulate gob- Two days later, the new director of the bling pathogens, can help cancer cells Museo Novecento, Sergio Risaliti, will un- spread—“cheerleaders on the side of veil an exhibition of sculptural designs, in- death”, she calls them. cluding sketches by Louise Bourgeois and It is just one logical step from Ms Ehren- Rachel Whiteread—the first in a string of reich’s dystopian view to believing that new initiatives at the only museum in Flor- control over our health is illusory. She ence earmarked for modern art. Among urges readers to spend less time self-medi- other ideas, Mr Risaliti hopes to put large cating. “Many people will find this per- contemporary sculptures in the magnifi- spective disappointing, even defeatist,” cent square separating the museum from she concedes. the Basilica of Santa Maria Novella. Not She does go too far. Forall the false posi- long ago, such a suggestion would have tives, screening programmes still save provoked outrage. “But the city has finally lives. Other tenets of preventative medi- understood that it can’t just look back at cine, such as vaccines, sanitation and anti- the glorious past,” says Mr Risaliti. smoking initiatives, save many more. And For that, he himself must take much of formost ofthe world, includingAmerica, a the credit, along with two imaginative lack of health care is a bigger problem than mayors: Matteo Renzi, who went on to be- a surplus of it. It may be easy for a well- come prime minister, and Dario Nardella. heeled American to feel over-medicalised; It was Mr Risaliti who in 2014 used the less so a single mother without insurance. Forte di Belvedere overlooking the south Nevertheless there is a profound mes- bank of the River Arno fora ground-break- sage buried in this survey. It is that real ing exhibition of work by Giuseppe Pe- choice in health care must involve the free- none, an Arte Povera maestro. Antony dom to refuse it. 7 Gormley and Jan Fabre soon followed Mr Roll over, Michelangelo Courses 77

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Asia Middle East & Africa Shan Shan Teo - Tel: +65 6428 2673 Philip Wrigley - Tel: +44 20 7576 8091 [email protected] [email protected] The Economist April 21st 2018 Tenders 79

MINISTRY OF INFRASTRUCTURE AND ENERGY NOTIFICATION OF THE CONTRACT Name and address of the contracting authority: Ministry of Infrastructure and Energy, Abdi Toptani No. 1 Name and address of the person responsible: Teuta Balili, Ministry of Infrastructure and Energy, (e-mail: [email protected], cc [email protected]) Type of contracting authority: Central Institution The form, object and type of contract: The form: Concession/PPP; The object: Construction and Maintenance of the Thumanë – Fushe-Kruje – Vorë – Kashar Road and the type of contract is “Work” Project Forecast Value: The estimated value of the project based on the feasibility study is: 245,750,755 Euros Contract duration: 13 years The location of the contract: The layout of this road starts from the roundabout in the axis Milot-Fushe Kruje (Thumana) and ends with an interchange intersection in the road axis of Tirana-Durres (approximately at km 12 near Kashar at the Limuthi Bridge) Legal, economic, inancial and technical information and Criteria for the selection of the winner: In accordance with Appendix 9 of ToR Deadline for submission of bids: Within and not later than: 11th of June 2018, 12:00 CEST Deadline for opening of bids: Within and not later than: 11th of June 2018, 12:00 CEST Period of validity of bids: 180 days HEAD OF CONTRACTING AUTHORITY Gentian Këri The Economist April 21st 2018 80 Economic and financial indicators The Economist April 21st 2018

Economic data % change on year ago Budget Interest Industrial Current-account balance balance rates, % Gross domestic product production Consumer prices Unemployment latest 12 % of GDP % of GDP 10-year gov't Currency units, per $ latest qtr* 2018† latest latest 2018† rate, % months, $bn 2018† 2018† bonds, latest Apr 18th year ago United States +2.6 Q4 +2.9 +2.8 +4.3 Mar +2.4 Mar +2.4 4.1 Mar -466.2 Q4 -2.7 -4.6 2.84 - - China +6.8 Q1 +5.7 +6.6 +6.0 Mar +2.1 Mar +2.3 3.9 Q1§ +164.9 Q4 +1.3 -3.5 3.33§§ 6.29 6.89 Japan +2.0 Q4 +1.6 +1.5 +1.6 Feb +1.5 Feb +1.0 2.5 Feb +194.1 Feb +3.7 -4.9 0.02 107 109 Britain +1.4 Q4 +1.6 +1.5 +2.2 Feb +2.5 Mar +2.5 4.2 Jan†† -106.7 Q4 -3.9 -2.7 1.53 0.70 0.78 Canada +2.9 Q4 +1.7 +2.2 +2.4 Jan +2.2 Feb +2.0 5.8 Mar -49.4 Q4 -2.6 -1.9 2.29 1.26 1.34 Euro area +2.8 Q4 +2.7 +2.4 +2.9 Feb +1.3 Mar +1.5 8.5 Feb +462.4 Jan +3.1 -1.0 0.53 0.81 0.93 Austria +2.9 Q4 +1.6 +2.7 +6.1 Jan +1.9 Mar +2.0 5.2 Feb +7.7 Q4 +2.4 -0.7 0.62 0.81 0.93 Belgium +1.9 Q4 +2.1 +1.9 +6.6 Jan +1.4 Mar +1.8 6.4 Feb -0.8 Dec -0.2 -1.1 0.76 0.81 0.93 France +2.5 Q4 +2.8 +2.2 +4.0 Feb +1.6 Mar +1.5 8.9 Feb -14.4 Feb -1.0 -2.4 0.75 0.81 0.93 Germany +2.9 Q4 +2.4 +2.5 +2.4 Feb +1.6 Mar +1.6 3.5 Feb‡ +310.4 Feb +7.8 +0.8 0.53 0.81 0.93 Greece +1.8 Q4 +0.4 +1.6 -1.9 Feb -0.2 Mar +0.8 20.8 Dec -1.7 Jan -1.4 -0.2 4.00 0.81 0.93 Italy +1.6 Q4 +1.3 +1.5 +2.5 Feb +0.8 Mar +1.2 10.9 Feb +53.9 Jan +2.7 -2.0 1.72 0.81 0.93 Netherlands +2.9 Q4 +3.1 +2.8 +4.1 Feb +1.0 Mar +1.5 5.0 Feb +84.9 Q4 +9.5 +0.7 0.65 0.81 0.93 Spain +3.1 Q4 +2.7 +2.8 +3.1 Feb +1.2 Mar +1.4 16.1 Feb +25.5 Jan +1.7 -2.6 1.17 0.81 0.93 Czech Republic +5.5 Q4 +3.2 +3.3 +2.7 Feb +1.7 Mar +2.2 2.4 Feb‡ +1.9 Q4 +0.7 +0.8 1.73 20.4 25.0 Denmark +1.3 Q4 +3.7 +1.9 +0.5 Feb +0.5 Mar +1.3 4.1 Feb +24.3 Feb +7.7 -0.7 0.55 6.02 6.95 Norway +1.4 Q4 -1.1 +1.8 -1.3 Feb +2.2 Mar +2.0 4.0 Jan‡‡ +20.2 Q4 +5.5 +4.9 1.92 7.75 8.52 Poland +4.3 Q4 +4.1 +4.2 +7.4 Feb +1.3 Mar +1.9 6.8 Feb§ +0.3 Feb -0.2 -2.2 3.01 3.36 3.96 Russia +0.9 Q4 na +1.9 +0.9 Mar +2.4 Mar +3.1 5.0 Mar§ +41.7 Q1 +2.9 -1.0 8.13 61.2 56.1 Sweden +3.3 Q4 +3.5 +2.7 +6.7 Feb +1.9 Mar +1.8 6.3 Feb§ +17.1 Q4 +4.2 +0.6 0.67 8.39 8.99 Switzerland +1.9 Q4 +2.4 +2.1 +8.7 Q4 +0.8 Mar +0.6 2.9 Mar +66.6 Q4 +8.6 +0.8 0.05 0.97 1.00 Turkey +7.3 Q4 na +4.2 +9.9 Feb +10.2 Mar +9.9 10.8 Jan§ -53.3 Feb -5.5 -2.8 12.83 4.02 3.67 Australia +2.4 Q4 +1.5 +2.8 +1.6 Q4 +1.9 Q4 +2.1 5.5 Mar -32.3 Q4 -2.2 -1.2 2.76 1.28 1.33 Hong Kong +3.4 Q4 +3.3 +2.8 +0.6 Q4 +3.1 Feb +2.0 2.9 Feb‡‡ +14.3 Q4 +4.5 +0.8 2.10 7.85 7.77 India +7.2 Q4 +6.6 +7.2 +7.1 Feb +4.3 Mar +4.8 6.2 Mar -39.1 Q4 -2.1 -3.5 7.54 65.6 64.6 Indonesia +5.2 Q4 na +5.4 -3.5 Feb +3.4 Mar +3.7 5.5 Q3§ -17.3 Q4 -2.0 -2.6 6.63 13,775 13,297 Malaysia +5.9 Q4 na +5.5 +3.0 Feb +1.3 Mar +2.9 3.3 Feb§ +9.4 Q4 +2.8 -2.8 4.01 3.89 4.41 Pakistan +5.4 2018** na +5.4 +5.5 Feb +3.2 Mar +5.7 5.9 2015 -15.7 Q4 -5.0 -5.5 9.00††† 116 105 Philippines +6.5 Q4 +6.1 +6.1 +24.8 Feb +4.3 Mar +4.5 5.3 Q1§ -2.5 Dec -0.2 -1.9 6.22 52.1 49.6 Singapore +4.3 Q1 +1.4 +3.0 +8.9 Feb +0.5 Feb +0.9 2.1 Q4 +61.0 Q4 +21.2 -0.7 2.37 1.31 1.40 South Korea +2.8 Q4 -0.8 +2.9 -6.4 Feb +1.3 Mar +1.8 4.5 Mar§ +71.7 Feb +5.0 +0.7 2.66 1,069 1,143 Taiwan +3.3 Q4 +4.3 +2.5 -1.9 Feb +1.6 Mar +1.3 3.7 Feb +84.1 Q4 +14.2 -0.8 1.01 29.4 30.4 Thailand +4.0 Q4 +1.8 +4.0 +4.6 Feb +0.8 Mar +1.1 1.3 Feb§ +49.3 Q4 +10.4 -2.3 2.43 31.2 34.4 Argentina +3.9 Q4 +3.9 +2.9 +4.2 Feb +25.6 Mar +21.1 7.2 Q4§ -30.8 Q4 -5.0 -5.6 4.19 20.1 15.2 Brazil +2.1 Q4 +0.2 +2.7 +2.8 Feb +2.7 Mar +3.4 12.6 Feb§ -7.8 Feb -1.2 -7.0 7.76 3.38 3.09 Chile +3.3 Q4 +2.6 +3.2 +8.9 Feb +1.8 Mar +2.4 6.7 Feb§‡‡ -4.1 Q4 -0.6 -2.1 4.37 594 649 Colombia +1.6 Q4 +1.1 +2.5 +1.5 Feb +3.1 Mar +3.3 10.8 Feb§ -10.4 Q4 -2.9 -2.0 6.42 2,699 2,837 Mexico +1.5 Q4 +3.2 +2.1 +0.7 Feb +5.0 Mar +4.3 3.3 Feb -18.8 Q4 -1.8 -2.3 7.38 18.0 18.5 Peru +2.2 Q4 -1.3 +3.7 +0.2 Jan +0.4 Mar +1.5 8.7 Feb§ -2.7 Q4 -1.8 -3.5 na 3.21 3.25 Egypt nil Q4 na +5.1 +12.3 Feb +13.3 Mar +16.9 11.3 Q4§ -9.3 Q4 -4.0 -9.8 na 17.7 18.1 Israel +3.0 Q4 +4.1 +3.9 +6.9 Jan +0.2 Mar +0.9 3.8 Feb +10.5 Q4 +3.5 -2.4 1.76 3.52 3.67 Saudi Arabia -0.7 2017 na +1.0 na +3.0 Feb +4.4 5.8 Q3 +15.2 Q4 +4.0 -7.2 na 3.75 3.75 South Africa +1.5 Q4 +3.1 +1.9 +0.8 Feb +3.8 Mar +5.0 26.7 Q4§ -8.6 Q4 -2.7 -3.6 8.03 11.9 13.3 Source: Haver Analytics. *% change on previous quarter, annual rate. †The Economist poll or Economist Intelligence Unit estimate/forecast. §Not seasonally adjusted. ‡New series. **Year ending June. ††Latest 3 months. ‡‡3-month moving average. §§5-year yield. †††Dollar-denominated bonds. The Economist April 21st 2018 Economic and financial indicators 81

Markets % change on Government debt General government gross debt, as % of GDP Dec 29th 2017 Global gross public debt has risen in 2013 2018 forecast Index one in local in $ recent years and is set to stand at 82% of 0 50 100 150 200 250 Apr 18th week currency terms GDP in 2018, according to the Interna- United States (DJIA) 24,748.1 +2.3 +0.1 +0.1 tional Monetary Fund. Japan’s level of Japan China (SSEA) 3,237.5 -3.6 -6.5 -3.2 gross government debt is the highest in Italy Japan (Nikkei 225) 22,158.2 +2.2 -2.7 +2.2 GDP Britain (FTSE 100) 7,317.3 +0.8 -4.8 +0.2 the world: it is likely to be 236% of United States Canada (S&P TSX) 15,530.0 +1.8 -4.2 -4.7 this year. Although Saudi Arabia has a Euro area (FTSE Euro 100) 1,216.1 +1.9 +0.5 +3.6 smaller amount of public debt relative to Brazil Euro area (EURO STOXX 50) 3,490.9 +2.1 -0.4 +2.7 output, it has rocketed in recent years, Austria (ATX) 3,448.8 +2.5 +0.8 +3.9 partly because of an oil-price slump. The Britain Belgium (Bel 20) 3,910.5 +1.4 -1.7 +1.3 average amount of government debt World average France (CAC 40) 5,380.2 +1.9 +1.3 +4.4 owed by low-income economies is set to Germany (DAX)* 12,590.8 +2.4 -2.5 +0.5 be 46% of GDP this year, a 14-percentage- Germany Greece (Athex Comp) 842.3 +5.4 +5.0 +8.2 Italy (FTSE/MIB) 23,759.9 +3.2 +8.7 +12.1 point increase since 2013. That still trails China Netherlands (AEX) 553.4 +1.6 +1.6 +4.7 rich economies, where public debt has Saudi Arabia Spain (IBEX 35) 9,857.3 +1.2 -1.9 +1.2 been about 105% of GDP on average since Czech Republic (PX) 1,129.0 +0.4 +4.7 +8.9 2012, a level not seen since the second Russia Denmark (OMXCB) 887.4 +0.4 -4.3 -1.4 world war. Source: IMF Hungary (BUX) 38,766.5 +2.1 -1.6 +1.5 Norway (OSEAX) 959.6 +1.9 +5.8 +11.6 Poland (WIG) 60,517.1 +1.3 -5.1 -1.9 Other markets The Economist commodity-price index Russia (RTS, $ terms) 1,154.6 +6.6 nil nil 2005=100 % change on % change on Sweden (OMXS30) 1,552.5 +3.2 -1.6 -4.0 Dec 29th 2017 one one Switzerland (SMI) 8,831.9 +1.4 -5.9 -5.1 Index one in local in $ Apr 10th Apr 17th* month year Turkey (BIST) 112,099.0 +2.6 -2.8 -8.3 Apr 18th week currency terms Dollar Index Australia (All Ord.) 5,956.3 +0.5 -3.4 -3.6 United States (S&P 500) 2,708.6 +2.5 +1.3 +1.3 All Items 154.9 155.0 +3.4 +9.7 Hong Kong (Hang Seng) 30,284.3 -2.0 +1.2 +0.8 United States (NAScomp) 7,295.2 +3.2 +5.7 +5.7 Food 159.5 157.7 +0.9 +4.4 India (BSE) 34,331.7 +1.2 +0.8 -1.9 China (SSEB, $ terms) 320.4 -1.9 -6.3 -6.3 Indonesia (JSX) 6,320.0 -0.6 -0.6 -2.1 Japan (Topix) 1,749.7 +1.4 -3.7 +1.1 Industrials Malaysia (KLSE) 1,879.3 +0.5 +4.6 +8.8 Europe (FTSEurofirst 300) 1,496.3 +1.4 -2.2 +0.8 All 150.1 152.2 +6.1 +16.0 Pakistan (KSE) 45,478.6 -2.2 +12.4 +7.3 World, dev'd (MSCI) 2,123.8 +2.0 +1.0 +1.0 Nfa† 141.1 141.0 +1.5 +3.4 Singapore (STI) 3,557.8 +2.2 +4.6 +6.7 Emerging markets (MSCI) 1,176.1 +0.1 +1.5 +1.5 Metals 154.0 157.0 +8.0 +21.7 South Korea (KOSPI) 2,480.0 +1.5 +0.5 +0.7 World, all (MSCI) 518.3 +1.7 +1.0 +1.0 Sterling Index Taiwan (TWI) 10,847.9 -1.1 +1.9 +3.3 World bonds (Citigroup) 973.2 -0.3 +2.4 +2.4 All items 198.8 197.0 +1.2 -2.2 Thailand (SET) 1,771.6 +0.5 +1.0 +5.4 EMBI+ (JPMorgan) 819.1 nil -2.0 -2.0 Argentina (MERV) 31,531.9 -1.6 +4.9 -2.0 Hedge funds (HFRX) 1,274.4§ +0.6 -0.1 -0.1 Euro Index Brazil (BVSP) 85,776.4 +0.6 +12.3 +10.1 Volatility, US (VIX) 15.6 +20.2 +11.0 (levels) All items 156.0 156.1 +2.7 -4.9 Chile (IGPA) 28,408.7 +1.2 +1.5 +5.1 CDSs, Eur (iTRAXX)† 53.4 -6.9 +18.3 +21.9 Gold Colombia (IGBC) 12,331.6 +0.2 +7.4 +18.8 CDSs, N Am (CDX)† 59.3 -6.5 +20.7 +20.7 $ per oz 1,339.3 1,343.7 +2.4 +4.4 Mexico (IPC) 49,090.7 +1.2 -0.5 +8.2 Carbon trading (EU ETS) € 13.9 +2.1 +70.8 +76.1 West Texas Intermediate Peru (S&P/BVL)* 21,362.0 +0.8 +6.9 +7.8 Sources: IHS Markit; Thomson Reuters. *Total return index. $ per barrel 65.5 66.5 +4.7 +26.9 Egypt (EGX 30) 17,705.9 -1.3 +17.9 +18.3 †Credit-default-swap spreads, basis points. §Apr 17th. Israel (TA-125) 1,346.4 +2.9 -1.3 -2.5 Sources: Bloomberg; CME Group; Cotlook; Darmenn & Curl; FT; ICCO; i r ICO; ISO; Live Rice Index; LME; NZ Wool Services; Thompson Lloyd & Saudi Arabia (Tadawul) 8,146.1 +4.4 +12.7 +12.7 Ind cato s for more countries and additional Economist.com/indicators Ewart; Thomson Reuters; Urner Barry; WSJ. *Provisional South Africa (JSE AS) 57,713.3 +2.7 -3.0 +0.7 series, go to: †Non-food agriculturals. 82 Obituary Milos Forman The Economist April 21st 2018

professionals and non-professionals and to use two cameras, so they never knew which one was tracking them. He could catch them off-guard then, for unrepeat- able moments. He did not fraternise with the cast himself, let alone compliment them, but clamped a cigar or a pipe in his mouth and went about his work. The film was the thing. Only the film. Scriptwriting was a labour, and he re- garded it as half of his director’s job. He weighed every word and how it should go. But ideally he would dispense with scripts altogether, leaving the cast to improvise in their own personalities and their own voices. The stories might be fairly unstruc- tured, too. The plot forhis second film to be noticed abroad, “Loves of a Blonde” in 1965, came when he saw a girl walking down the street with a suitcase at two in the morning. She had come to Prague to find a man she had slept with once, but the address he had given her did not exist. With this slim plotline he could make a film as real and compelling as the Italian and French new wave, which he adored. At first his work was appreciated at home. The regime even felt a bit proud of Rebel yells him. But then “The Firemen’s Ball” in 1967 succeeded in bugging them. It was just a comedy of errors, but the unacceptable part was the gradual pilfering of the raffle prizes. Because no one would admit who had done it, everyone in the hall became a suspect. The analogy with wholesale state Milos Forman, film director, died on April 13th, aged 86 kleptocracy was too sharp, and the film T THE end of Milos Forman’s “Ama- realism, but the day to day unprettified was banned for ever. This delighted him, Adeus”, at the fade to black, a whinny- round ofordinary life. but also sent him abroad. When he re- ing last laugh shrieks out of the dark. It is From the purchase of his first movie turned to Prague to make “Amadeus”, Mozart’s laugh, which has plagued his Vi- camera in the 1960she set out to capture re- about the sort of rebel he wished he might ennese patronsall through the film. But itis ality. Streets or hospital wards or dance have been, it was under the cold eyes of also R.P. McMurphy’s laugh near the start halls contained not crowds, but individ- secret police who hid among the extras. of “One Flew Over the Cuckoo’s Nest”, uals. Each film he made dwelled on the de- For America he felt fervent admiration. when the petty crook, played by JackNich- tails ofthose faces. When casting, the small His career there saw ups and downs, frus- olson, sheds his handcuffs at the doors of roles were as important as the larger ones: trations and thin audiences as well as tri- the mental institution and prepares to the catatonic mental patients, the flunkeys umphs. Commercial pressure meant that make mayhem. Milos Forman, who saw at the emperor’s court, the sulky girls lined no big studio would touch either “Ama- “Cuckoo’s Nest” take five Academy up to be Miss Fireman in “The Firemen’s deus” or “Cuckoo’s Nest”. In 1971 he holed Awards in 1975 and “Amadeus” take eight Ball”, white workers casually baiting the up in despair in the Chelsea Hotel, living in 1985, loved that sound: the disruptive, black hero of “Ragtime”. He wanted to put on tinned chilli and beer, but after his first anarchic signal ofcreativity on the loose. It on the screen credible, moving human be- crop ofOscars he became professor of film could triumph over death or incarceration; ings. Much of the horror in “Amadeus” at Columbia, a post he held for40 years. and it could explode the lying propaganda came from faces hidden by masks. He loved America asthe countrywhere of the communist Czech regime under speech was free. In “The People vs Larry which he stifled until 1968 when, as the So- The woman on the bus Flynt” in 1996 he celebrated the factthat the viet tanks rolled in, he got out. Whenever he could, he picked non-profes- most disgusting speech, a smut-peddler’s, For him show business had liberating sionals. The starof“Lovesofa Blonde” was had been ruled permissible by the Su- power, whether in the shape of the brave his formersister-in-law in herfirst film role; preme Court. Democracy was either for little clown with a spanner, like Chaplin in her “mother” was a woman he had heard everybody, or for nobody. It meant that “The GreatDictator”, orofthe fantasy oper- laughing wildly (that laugh again) at a joke even the most despised or sidelined per- ettas of his boyhood, with their backstage on a bus. Professional actors were too keen son could make himself heard. In the smells of make-up and sweaty tights, vio- to act rather than be natural: Jim Carrey in course of “Cuckoo’s Nest” Chief, a native lets and beer. Barred from actingschool be- “Man on the Moon”, for example, who ap- American who begins the film as appar- cause he was already disruptive, he went plied such belligerent method acting to his ently deaf and dumb, gradually reveals to the Prague film academy as a despera- portrayal of a comedian, Andy Kaufman, that he can both hear and talk. By the end tion move—only to find that film nour- that he had to beg him to stop. Non-profes- of the film, as he smashes his way out of ished his growing passion, to make some- sionals, by contrast, were oblivious to the the institution, he is talking freely. As he thing real. Not some ideological socialist camera. His trick during shoots was to mix gainsthe mountains, he mayeven laugh. 7

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