A Way Forward a W a Y for Wa Rd Rd • January 2013

JAN 2013 A Way Forward A W a y for wa rd rd • january 2013

Davos 2013: How Europe Can Be Saved The Middle Class Matriarchy Shanghai Swoon What’s Bugging the Swiss? Connect emission-free power to the grid? Electric cars: 15 minutes charging, 200 km driving?

plant is expected to avoid 1.5 million tons of CO2 emissions per year time has been slashed to as little as 15 to 30 minutes. No wonder the Estonian govern- and improve the reliability of the power grid. It’s just one of the ways ment is relying on ABB to build Europe’s largest electric vehicle fast-charging network. that we, as the biggest supplier of electrical products and services for By the end of the year the Estonian main roads will have fast chargers every 50 km. Once

the wind industry, can use renewable power sources to help combat accomplished the goal to significantly reduce CO2 emissions by 2020 moves a lot closer. climate change. www.abb.com/betterworld Naturally. www.abb.com/betterworld Certainly.

Ad_ABB_2Sujets_Reuters_on_sale_Jan28_431-8x276-225_e.indd 1 11.12.12 15:46 Connect emission-free power to the grid? Electric cars: 15 minutes charging, 200 km driving?

ABB is helping construct the world’s most remote offshore wind farm. Having to wait eight hours to fully recharge an electric car is the main reason for not Using our eco-friendly transmission technology, this 400-megawatt buying one. But things have changed: With ABB’s direct current (DC) chargers charging plant is expected to avoid 1.5 million tons of CO2 emissions per year time has been slashed to as little as 15 to 30 minutes. No wonder the Estonian govern- and improve the reliability of the power grid. It’s just one of the ways ment is relying on ABB to build Europe’s largest electric vehicle fast-charging network. that we, as the biggest supplier of electrical products and services for By the end of the year the Estonian main roads will have fast chargers every 50 km. Once the wind industry, can use renewable power sources to help combat accomplished the goal to significantly reduce CO2 emissions by 2020 moves a lot closer. climate change. www.abb.com/betterworld Naturally. www.abb.com/betterworld Certainly.

Ad_ABB_2Sujets_Reuters_on_sale_Jan28_431-8x276-225_e.indd 1 11.12.12 15:46 Cop InfoGraphics Pic A Senior Editor A Creative Managing Editor Executive Editor in Chief ssociate ssistant Managing Editor ture y Editors of allkinds fromof allplaces to help make people more in Reuters,Thomson do every day: harnessing information facts of better andreason use to address ourproblems. with alitany global of risks, while challenging to us make and thefact that European leaders never really sold crisis historical thecurrent andpoliticalunderpinningsof Wapshott onthecritical overlooked ifoften focuses but it may take a Merkel. Reuters columnist Nicholas few promising approaches inthecoming pages. more humane. How to do allthis? We explore at least a rorism andhate more becomesboth effective and gainsscience ground thefightagainst ondisease, ter embraces women as well opportunity as men, erning, year Europe mends, legislatures gov of theart perfect wars, andatrocities have taken countless lives. stayed andnatural high, disasters,ple—has painfully amongyoung peo tottered, joblessness—especially patchyery hasbeen and slow, theEuropean Union has in2008, the economic recov withafiscal cliff) fused world financial system offafell ledge be (not con to ings far hasbeen from upbeat inrecent years. Since the Reuters of this issue Magazine, Way “The Forward.” telligent decisions. And that’s what we attempt to do in Each year, Editors Direc Tackling that challenge iswhat Reuters and itsparent, It won’t take amiracle to liftEuropeitsmorass, outof We remain though ever-hopeful thatthe thiswillbe Certainly, at Davos themood andsimilar gather Editor Editors —namely, longstanding enmity Franco-Prussian

Prudence Crowther, Claudia Parsons

Maryanne Murray, Jenna, Elsa Chan Christine Paul Smalera tors

Stephen J.Stephen Adler

Corinne Perkins, Michael Leckel

Jim Impoco Chrystia Freeland Chrystia

Elizabeth Dilts, Uzra Khan,Clare Richardson

Grace Lee and Robert Lee Grace Priest+Grace Priest, the World Economic Forum terrifiesus

Bob Roe Bob trs tter et L itor’s d E reuters ------�o. 2 the minds of would-bethe minds of terrorists butraises theques Her fascinating notonlyprovides case awindow into the American woman who called herself Jihad Jane. you’ll make sure to get your flu shot after reading this. if onlyto knowwhat it’s to contain one. me, worth Trust economicapandemic, cost thepotential of to ascertain shows, governments andbusiness leaders are working As some otherhighlydisease. she flucontagious or of risk: aglobal nonfinancial tion to outbreak aserious, at least ameasure optimism. of why, insight to heprovides investors useful andoffers ingViews columnist Peter Inexplaining ThalLarsen. feltbe around theworld? writes Probably Break not, downturn there signal abroader slowdown that will turns for investors? Anddoestherecent market quadrupled re inadecade such hasproduced poor is itthat thecountryeconomy whose hasmore than Chancellor Angela Merkel comes in. resurgence. Theleadership required iswhere German choices that can lay the foundation for an economic is tothe offer continent’speople clearer democratic he argues, Thesolution, their union to constituents. All thebest, Reuters News Pro app. world-wide, pleasego to Reuters.com ordownload the news andinsight from Reuters andcolumnists reporters ideas good intheprocess. andsome For hope of more ishing plotters who never come close to succeeding. how fartion of theU.S. justicesystem shouldgo inpun jan.2013 Also checkAlso lookat Colleen LaRose, outourin-depth Veteran writer science Sharon Begley calls ouratten China remains aneconomic head-scratcher: How We you hope enjoy the issue, and take with you a bit Stephen j. Adler,

Editor in Chief Chief in Editor - - - - -

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Table of Contents 24 up in2012 but somethingjustdidn’t add They say it’s allinthenumbers, 2012 in number L by EmmaThomasson back executive pay The HQofthe1%walks 40 the s The Swiss Eading indicators pay walls pay reuters Janury 2013 the globe wreaking havoc across weather events are cyclicalhurricanes, From droughts to CLIMATE INFOGRAPHIC features uper-rich �o. CALAMITIE s 4 turn on 18 jan.2013 S do withthatbankroll sider whatelseonecould Before you answer, con- Was itmoney well spent? raised around $2.6 billion. tial election,candidates In therecent U.S. presiden - F smart mone unding Prioritie by Sharon Begley global recession. trigger adevastating next pandemiccould consider this:The offering free flushots, When you seeasign 46 Flu-conomics C ost of C of ost 26 y 64 s ontagion by Anthony DeRosa shut uponTwitter... powerful, they can’t They’re rich,they’re twitterver ma S

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T:10.875” B:11.125” their wealth.” rich unafraid to flaunt growing class super- of “many resent people a she finds thatbanking, culture permeates As American business Emma Thomasson. zerland bureau chief Reutersreports Swit wealth intheircountry, creasing inequality of byanin incensed egalitarian Swissare Many theproudly of Thomasson Emma - - Islam and hertrip half online conversion to “Jihad Jane,” details her LaRose,alias Shiffman. correspondent John interview to Reuters gave herfirst andonly jihadist Colleen LaRose buttheself-styleddia, seldom talkto theme Convicted terrorists S John than threatening. was moreVilks farcical Larskill Swedish artist that LaRose’s mission to investigation reveals Shiffman’s six-month way around theworld. hiffman - - Contributors smart.” street-off-the-charts maybe, but book-smart, ever interviewed—not I’ve people smartest the “Tiririca isoneof for Brazil Brian Winter, chief correspondent congress. Says Reuters Tiririca, areal clown, to stalemate, voters sent Tired corruption and of inaprofessional?send run byclowns, why not If Brazil’s legislature is Winter Brian reuters �o. 6 jan.2013 lished by W. W. Norton Economics That Defined Modern Keynes Hayek: The Clash latestwhose book, nist Nicholas Wapshott, argues Reuters colum Europe toward unity, take thelead to steer Angela Merkel must the EU, Germany’s disenchantment with In theface growing of ance andextremism. Europe, intoler fueling are resurfacingtypes in Old national stereo Wapshott Nicholas , was pub - - - - business leaders. for governments and estimations vide useful to proof disease effects consider theripple that economists must Sharon Begley argues Correspondent Science U.S.Senior Health & Reutersconsequences. could have devastating callous, butapandemic outbreaks may seem disease nomic cost of Tallying theeco Begley S haron - -

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gutter credit ROUTING Trim: 8.5”wx10.875”h Live: 8x10.375 Description: NightLightad Job No:1058781_A04 LEGEND TRAFFIC TRAFFIC EXEC. ACCT. ART DIRECTOR COPYWRITER PROOFREADER PRODUCTION ON WHEN SHE’S YOUR AGE. LET’S THE LIGHTS KEEP company. Whenusedtogenerateelectricity,naturalgasemitsaround halftheCO ethanol, abiofuelmadefromrenewablesugarcane.Andwe’redelivering naturalgastomorecountriesthananyotherenergy We’re makingourfuelsandlubricantsmoreadvancedefficient thanbefore.WithourpartnerinBrazil,we’realsoproducing to keepthelightsonforher,wewillneedlookateverypossibleenergy source.AtShellwe’reexploringabroadmixofenergies. already sevenbillionpeopleonourplanet.Andtheforecastisthatthere willbearoundtwobillionmoreby2050.Soifwe’regoing What sortofworldwillthislittlegirlgrowupin?Manyexpertsagree thatitwillbeaconsiderablymoreenergy-hungryone.Thereare Search: ShellLet’sGo

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GO Copywriter: Medland Art Director:studio Creative Director:studio Media Issues:Reuter . DATE Studio: Pleaseseeinitials Vendor: TBD Production: Wales Account: Chastain O.K. Output Size: Filed: 2 ofcoal.Let’sbroadentheworld’senergymix. CHANGE REVISION NUMBER 12/18/12 10:38 AM Epic disasters rocked all corners of the globe this year, ranging from natural to political and economic. Afghanistan seems ready to crumble as U.S. troops pre- pare to withdraw, and the war in Syria is escalating, as more and more civilians are displaced or killed. In the U.S. Northeast, a devastating storm crippled New York City and left large swaths of the coastline in tatters, while a lingering global economic crisis further plunged the jobless—and large chunks of Europe—into misery. Alarm bells are ringing everywhere. Unfortunately, this is not a drill. P hotograph by REUTERS/Kevin Lamarque The

usa RUNNING MAN President Barack Obama needed a raincoat while campaigning in Cleveland, but the sun was shining on him in early November—he defied convention by overcoming four years of sluggish economic growth to win a second term in the White House, where a multitude of storms await him. gutter credit gutter credit gutter

�o. shoreuterst8 Jan.2013 s The Portfolio money

P hotograph by REUTERS/China Daily

China MY WAY OR THE HIGHWAY We all know moving is a hassle, especially when the government wants to kick you out without adequate compensation. Officials in Wenling, Zhejiang province, tried to coax one elderly couple out of their home to make way for a new road, but the couple didn’t think they were offered enough to cover rebuilding costs and refused to sign an agreement to have their house demolished. gutter credit gutter credit gutter

�o. reuters 9 Jan.2013 the money shots

P hotograph by REUTERS/Omar Sobhani

kabul FILM CRITICS Afghans were chanting “Death to America!” in September to express outrage over an amateurish movie that mocks the Prophet Mohammad. Muslims all over the world protested, and an anti-U.S. demonstration in Libya was used as a cover by people believed to have ties to al Qaeda to storm the U.S. Consulate, which led to the death of Ambassador Chris Stevens and three other Americans. gutter credit gutter credit gutter

�o. reuters 10 Jan.2013 the money shots

Afghanistan FAR FROM HOME U.S. Army soldiers comfort one another after a comrade was wounded by an improvised explosive device while on patrol in southern Afghanistan. U.S. forces are scheduled to withdraw by 2014, officially bringing the United States’ “longest war” to an end. However, a number of U.S. troops will remain in Afghanistan after the drawdown.

P hotograph by REUTERS/Shamil Zhumatov gutter credit gutter credit gutter

�o. reuters 11 Jan.2013 the money shots

NEW JERSEY SCARY RIDE Hurricane Sandy dumped a roller coaster in the surf as it ripped through a Seaside Heights amusement park on Nov. 1. The storm killed over 100 people, including 42 in New York City, where public transportation was shut down and power was cut off for millions. The flooding of the city’s massive subway system prompted many ambitious proposals: One called for the installation of giant balloons that could be inflated quickly to keep water out of the tunnels.

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�o. reuters 12 Jan.2013 the money shots

Madrid THE PAIN IN SPAIN A man waiting to be evicted from his apartment checks his television, which didn’t have good news. The country’s unemployment rate topped 25 percent, and cuts to social services sparked increasingly large and violent protests against austerity measures.

P hotograph by REUTERS/Susana Vera

P hotograph by REUTERS/Stringer

china POLITICAL THEATER Workers stream Hu Jintao’s speech during the opening ceremony of the National Congress of the Communist Party of China in November, where the party reshuffled its leadership. Xi Jinping became the first Chinese leader since 1976 to be head of both the party and the military. �o. reuters Jan.2012 gutter credit gutter credit gutter

�o. reuters 13 Jan.2013 the money shots

japan WASHED AWAY On the first anniversary of Japan’s devastating earthquake and tsunami, 7-year-old Wakana Kumagai visits the spot where her house once stood in Higashimatsushima, Miyagi prefecture. She escaped harm by fleeing with her mother to a shelter, but her father was found dead four days later.

P hotograph by REUTERS/Toru Hanai

P hotograph by REUTERS/Jacky Chen

north korea BAND AID A band performs for farmers in a field at Hwanggumpyong Island near the China-North Korea border, playing modern instruments gutter credit gutter credit credit gutter gutter and singing revolutionary songs. �o. reuters 14 Jan.2013 P hotograph by REUTERS/Goran Tomasevic the money shots syria FIGHTING SEASON A Free Syrian Army fighter ran for cover during a clash with President Bashar Assad’s army in August. Syria’s rebels and regime forces have been locked in a violent stalemate that has killed over 40,000 people since March 2011, but opposition fighters were drawing nearer to Damascus at year’s end. gutter credit gutter credit credit gutter gutter

�o. reuters 15 Jan.2013 Innovators

Everyone has heard of values” advocated by Michael Muhammad Yunus, who was Porter and Mark Kramer in inspired to start the Grameen last year’s Harvard Business Bank for the poor in 1976 Review cover story that won after encountering Sofiya the 2011 McKinsey award as The Do-Good Begum, a village woman in the most influential of the Bangladesh whose little busi- year’s articles. They argue that ness making bamboo stools capitalism—an unparalleled Profit Motive was held hostage by usurious vehicle for meeting human moneylenders. Yunus went on needs—has wasted its full Momentum grows for an innovative from making micro-loans to potential by narrowly focusing form of capitalism that benefits all collaborating with Franck on short-term profit without Riboud, the imaginative CEO much regard for the impact on of Groupe Danone, to make a community: “The purpose of a low-cost yogurt fortified the corporation must be rede- with protein, iron, vitamins fined as creating shared value, by sir Harold Evans mechanics, cell phones to a and other additives of huge not just profit per se.” radio ham, MRI scanners to a benefit to growing children. What this can mean in prac- one-time tennis coach, video It’s distributed by thousands tice is manifest in vignettes games to a carnival barker, of “Grameen ladies.” across the globe. container shipping to a truck A lot has happened since It’s Regina Gomes, a driver, 24/7 news to a bill- then. Instead of moaning widowed grandmother in a board salesman and the laser about entitlement cultures sprawling favela in Rio de to a one-time radio repairman. and the inefficiencies of Janeiro, finding “a reason to But amid that diversity squabbling nongovernmental live” in a mission to clean up there’s a common factor. They organizations (NGOs), great the rat-infested garbage piled are all men. For most of those corporations like Accenture, high and blocks wide on her two centuries women had few Adidas, Chrysler, Coca-Cola, streets. Government help? chances to innovate anything. Goldman Sachs, Merck, Nike, Forget it. She did it, and then The few in business were there Procter & Gamble and The Coca-Cola helped her expand only to assist men, no different from women fetching the What kind of people cre- water in the villages and town- Gender defender ated the basics of our modern ships of Africa and Asia and Clinton has been a major world? Mass travel on jet Latin America. force in persuading corporations to get more planes, cell phones and MRI The striking thing today is women into business. scanners, video games and that millions of women are gene-based medicines and involved in innovation—an news 24/7 and that laser at the innovation of capitalism itself supermarket checkout? Come that has singular benefits to to think of shopping, how did women, and through them, we get the container ships society as a whole. This in- that make it possible for us to novation arises from corpora- have almost anything from al- tions acknowledging three most anywhere? Orange juice things. One, that a troubled from China, nuts from India, society is bad for business. swordfish from Japan, salmon Two, governments and non- from Alaska... profits alone can’t eradicate Gap are endowing women that success. Through its When I investigated 200 unemployment, illiteracy and with skills at all levels, and 5by20 program, designed to years of innovation for my disease. Three, ways can be often a little capital to start empower 5 million women en- book They Made America, I found to graft the disciplines their own small businesses. trepreneurs by 2020, it linked noted the roots of those inno- of business onto programs Yes, it’s a smart public her to two cooperatives. Co- vators: We owe mass travel to of social merit, especially by relations move by those letivo Artisans enrolled her in a beach taxi pilot building on liberating the energies of half companies, but it’s also a design workshops, where she the work of a couple of bicycle the population. good example of the “shared gained the skills to help local portrait illustration by michael hoeweler michael by illustration portrait

�o. reuters 16 jan.2013 small favors Customers line up to repay their micro-loans from the Grameen Bank, which has over 8 million borrowers, 97 percent of whom are women.

ciding to lend its supply chain seven years gender equality expertise so that delivery will increase productivity in Coke loaned its supply chain times for life-saving drugs in emerging countries by 14 per- expertise so that delivery times for Tanzania have been cut from cent. Secretary of State Hillary 30 days to five. Clinton’s ambassador for life-saving drugs in Tanzania It’s Grace Wakado in Kam- women, Melanne Verveer, and were cut from 30 days to five. pala, Uganda, working with Kim Azzarelli, president of the Exxon and Ashola, to provide Women in the World Founda- solar lamps to 277 women tion, are at the forefront of this women turn salvaged bottles she says, “This is where my working in direct sales busi- new form of capitalism, stress- and fabrics into saleable soul lives.” nesses that have brought light ing its social effects: “Women items. Those materials come It’s Kabeh Sumbo in Liberia to 30,000 homes. are more likely than men,” from a recycling cooperative, learning record-keeping from Momentum has come they write, “to put their in- Coletivo Recycling, orga- Goldman Sachs’ 10,000 from the unique convening come into their communities, nized by Coke. She started Women program, and her power of former President Bill driving illiteracy and mortality a shop next to it and is now business, which began with Clinton. His Clinton Global rates down and GDP up.” part of a flourishing trade in one gallon of palm oil, now Initiative, begun in 2005, There are bound to be craftwork in Rio’s slums that employs 18 and ships oil has been a galvanizing force, mistakes as the movement is being greatly assisted by overseas. getting commitments from develops, and, for sure, a Brazil’s artisans. Regina’s It’s Gabriel Jaramillo of the companies and NGOs to turn surfeit of the cynicism that business grows; the commu- Global Fund to Fight AIDS, ideas into action. Programs benevolence incites. But my nity appreciates the jobs and Tuberculosis and Malaria, empowering women figure guess is that as the successes clean streets. She’s done well envying Coca-Cola’s ability prominently. Muhtar Kent, of “shared value” businesses enough to buy a home but is in to get its beverages to every the chairman and CEO of multiply we’ll wonder why we the favela every day because, remote region, and Coke de- Coca-Cola, reckons that in just didn’t do it before. portrait illustration by michael hoeweler michael by illustration portrait

�o. reuters 17 jan.2013 Smart Money

Pay a year’s salary for nearly 67,000 new Funding teachers in the U.S. Priorities Have as much In the recent u.s. presidential money election, candidates raised around as the $2.6 billion for their campaigns. highest- Was it money well-spent? Before you grossing answer, consider what else one could film of do with that bank-roll: all time, Avatar

Provide 153 years of weekly therapy sessions for every member of Buy 1,733 Bugatti Veyron 16.4s, Congress (and both 2012 presidential the world’s most expensive car candidates) with Manhattan OR psychiatrist Dr. T. Byram Karasu, 1,040,000 Tata Nanos, who specializes in treating the the world’s cheapest car powerful and wealthy

Buy Mukesh Ambani’s extravagant 27-story home in Mumbai (~$ 2 billion), and send 2 million Buy the three islands China and Japan poor Indian are wrangling over children to school for a year ($240 each)

Buy mosquito nets for over half the people Fund NASA’s Mars rover living in Africa Curiosity as it searches for Buy formula for all life on the Red Planet the infants in Haiti for a year, and still have money leftover to give Vespa scooters to two-thirds of Haiti’s Cover $2 billion IMF loan teenagers Buy all assets of former China Jordan got to offset P.M. Wen Jiabao’s family, estimated the cost of hosting Syrian by New York Times at $2.7 billion refugees

�o. reuters 18 jan.2013 illustration by elsa Jenna

Cover the Social Security checks for every person over the age of 65 in Boca Raton, Florida until 2022

Provide four-year, full-ride scholarships for the entire freshman classes at Harvard, Yale, Princeton, Penn, Columbia, Stanford and MIT

Purchase 21 Boeing 787 Dreamliners

Buy Mukesh Ambani’sBuy Mukesh extravagantAmbani’s Pay fines levied 27-storyextravagant home against HSBC for 27-story home in Mumbai (~$ 2 laundering in Mumbai Mexican drug lords’ Cover total billion),(~$ 2 billion), and money and cover expenditures in 2011 sendand 2 millionsend Standard for Medicines poor2 million Indian poor Chartered’s fine Sans Frontieres and the childrenIndian children to for illegal dealings International Committee to school for with Iran of the Red Cross schoola year for a year ($240($240 each) each)

Cover the medical expenses for every veteran Fund UNDP’s 2011 aid budgets for in the state Afghanistan, Argentina, Bangladesh, of New York Give $20.26 Brazil, China, Congo Sudan, Haiti, Iraq, last year to every person who Pakistan and South Sudan voted in the 2012 U.S. Presidential election

Buy Manchester United, the world’s most valuable sports team, and have enough leftover to pick up the Dallas Mavericks

�o. reuters 19 jan.2013 Stock Tips poor way to measure China’s economic performance. Even after two decades of reform and liberalization, the portion of the economy financed by Shanghai equity investors remains small. According to figures published by the People’s Bank of China, Swoon equities accounted for less than 2 percent of China’s “total The Chinese economy is booming, social financing” in the first so why do their stock markets nine months of 2012. The main perform so poorly? source of financing was bank loans, which still account for 57 percent of the total. China’s still-fledgling bond market contributed 13 percent. China’s by peter thal larsen nary economic development— economic growth, it seems, and to understanding whether depends mostly on debt. it can continue. Other evidence points to a On one level, the poor bigger concern about growth. stock market returns can be Take the performance of Chi- explained quite easily: Share na’s state-owned enterprises prices reflect expectations (SOEs), which still dominate of future growth, and these the economic landscape. A projections are often wrong, recent report by the State- so the performance of markets owned Assets Supervision and does not necessarily track the Administration Commission, underlying economy. This is which oversees China’s largest An investor working the big board at particularly true of the Shang- SOEs, suggests their returns a brokerage house in Huaibei hai index, which is dominated remain poor. by domestic investors. Over the The report, presented at past 12 years, it has slumped as low as 1,000 and peaked at Shortly after China unveiled 6,000 before reaching its cur- its new leadership last Novem- rent, relatively subdued level. Stock market returns are a poor ber, the country’s main stock But a different benchmark way to measure China’s market delivered a downbeat and a different timespan tell a verdict on the world’s second- very different story. Take the economic performance largest economy. For a few MSCI China index, a more because the portion of the economy days, the Shanghai Composite broad-based measure that financed by equity investors index dipped below the psy- includes Chinese companies chologically important 2,000 listed in Hong Kong and the remains very small. mark—where it was 12 years United States: An investor earlier. who bought the stocks in the The drop was puzzling to index on the day Hu Jintao last November’s Communist had more than three times many. How could an economy was announced as China’s Party Congress, trumpeted as many assets at the end of that more than quadrupled new leader in November 2002 the increase in profitability in that period as they did at the in size in a decade, bringing and sold on the day Xi Jinping the Hu era: Between 2003 and beginning. prosperity to many of China’s took the stage a decade later 2011, the combined net profit In other words, most of the citizens in the process, have would have earned a return of SOEs increased by roughly expansion in the earnings of tringer produced such poor returns of 392 percent—a reasonable four-and-a-half times, to 914 those SOEs came from ex- S / for investors? Resolving this reflection of China’s economic billion yuan. But this is less panding their balance sheets; paradox is central to explain- expansion over that period. impressive when consider- the combined return on assets ing the country’s extraordi- Stock market returns are a ing that the same companies improved only slightly, to 3.26 portrait illustration by michael hoeweler michael by illustration portrait REUTERS photos:

�o. reuters 20 jan.2013 propertyand, most recently, pouring their cash into wealth management products that are held off a bank’s balance sheet and promise a better return. But as long as the system is essentially underwritten by state-owned banks—and by the government—China is a long way from a market-based system of allocating credit. But before you dismiss the Chinese economy, recall that unsustainable investment booms are not necessarily all bad. In both the American railway boom in the 1800s and the telecom bubble in the late 1990s most investors lost their shirts, yet helped finance valuable infrastructure that fueled monumental economic growth. China may yet prove to be a similar case, but the country’s economic model brings substantial risks: rising inequality, rampant corruption and capital flight are all

percent. That’s less than half China has been investing the average for a member ever-increasing amounts to of the S&P 500 index, and generate additional economic even these mediocre figures growth, and the returns on this The prolonged economic surge hasn’t are puffed up—compared to investment have been poor. lifted all boats in private-sector rivals, most This analysis has prompted eastern China. state-owned companies get many to predict an imminent preferential pricing for raw end to China’s economic materials, energy and credit. miracle. As returns dwindle, In this sense, China’s SOEs flows of new capital dry up, are a proxy for the country’s and growth stalls. Yet this logic investment-heavy growth in assumes a market-based sys- much of the past decade were threats to popular support for recent years, particularly after tem of capital allocation that below the rate of inflation. In the Party. And shifting from the 2008 financial crisis dulled is largely absent from China’s other words, Chinese banks investment- and export-led global demand for Chinese financial system. In fact, much are cheating their millions of growth toward domestic con- exports. By most estimates, capital is distributed by the depositors so that they can sumption and private enter- gross fixed capital forma- country’s state-owned banks make too-cheap loans to SOEs. prise will have to go hand-in- tion accounted for around 45 and guided by the Party’s There is no chance this hand with a more efficient way tringer

S percent of China’s economic political priorities. The banks, state of affairs will change in of doling out capital. Until that / GDP between 2008 and 2011— meanwhile, are financed with the next few years. Consum- happens, the Shanghai index much higher than in other de- deposits that pay an interest ers have tried to move their will not be a reliable gauge of veloping nations. In a nutshell, rate capped at levels that for money elsewhere, buying up China’s economic progress. portrait illustration by michael hoeweler michael by illustration portrait REUTERS photos:

�o. reuters 21 jan.2013 Wealth trends are reshaping the work- graduates. They found that place and family life in the in 2005, 8 percent of Harvard developed Western and Asian men earned more than $1 mil- economies, and are starting lion, while just 2 percent of the to take hold in many middle- women crossed that threshold. The income countries, too. One of the most important In the younger genera- economic shifts of the past tions, the shift is even more three decades has been an ex- 99% pronounced. Girls are out- plosion of income inequality, pacing boys in high school driven in large part by a wid- and they are more likely to ening chasm between those Matriarchy graduate from college: In the at the very top and everyone U.S., more women than men else. An essential character- Women have made tremendous between 25 and 34 years old istic of these new plutocrats strides toward equality in have a college degree. Even is that they are, as Berkeley all parts of society, except at the graduate schools, particularly economist Emmanuel Saez very top of the wealth pyramid law school, are starting to has put it, “the working rich.” turn pink. At a time when the They tend to have made their economic rewards of higher own fortunes, rather than education are greater than inherited them, and their ever, this female academic wealth today, however they by chrystia freeland But these celebrations—and prowess makes it easy to describe it when talking to occasional lamentations—of imagine that in the coming the taxman, tends to come the ascendancy of girl power decades the percentage of from work and investment, ignore one important global women who are the chief rather than returns on assets. constant. Women are making breadwinner in the family Not many of these merito- tremendous headway in the will increase further. cratic tycoons are women. middle class around the world, But while women are “One of the ironies of the new but at the summit of wealth increasingly dominant in the boom in wealth is that, be- and economic power, they are middle class in the rich world, cause more of it is self-made, almost entirely absent. Robin they aren’t scaling the summit there are fewer ultra-wealthy Rogers, a sociologist at the of economic power. Consider women,” Rogers wrote in City University of New York, the 2012 Forbes billionaire an email exchange with me. says that women account for just 2 percent of the world’s self-made billionaires, and that half of these female 2009 was a watershed for the tycoons are Chinese. The American workplace—it was the first One of the great transfor- middle class may be becoming women outnumbered mations of our age is the lib- a matriarchy, but the plutoc- time eration of women. Within the racy is as patriarchal as ever. men on the country’s payrolls. development community it has The growing economic become conventional wisdom power of women in the middle to emphasize the empower- class that writers like Rosin list. Just 104 of the 1,226 bil- “Inheritance is a gender ment of girls and women, have been documenting is a lionaires are women. Subtract equalizer.” partly because of the multi- clear and consequential shift. wives, daughters and widows The Chinese exception— plier effect educated women The year 2009 was a water- of rich men and you are left half of the women in the have on their families and shed for the American work- with a fraction of that already world who earn their way to communities. In the developed place—it was the first time small number. a billion-dollar fortune are Western economies, the rise since data was collected that Another window into how in the Middle Kingdom—is of women has picked up such women outnumbered men on the gender divide widens striking. One explanation is pace that some have begun to the country’s payrolls. In 2010, at the very top comes from that China’s family structure declare, as Hannah Rosin did about four in 10 working wives a landmark study Harvard helps women get to the top. in her acclaimed 2012 book of were the chief breadwinners economists Claudia Goldin Close connections between the same title, The End of Men. for their families. Similar and Larry Katz did of Harvard generations mean grandmoth- portrait illustration by michael hoeweler michael by illustration portrait

�o. reuters 22 jan.2013 illustration by brian rea

ers often help raise grandchil- benign reason. In its state- buro (only two of 25 members a matter of time. But Rog- dren, and Chinese mothers capitalist model, political are female) may make it ers believes that assumption are subject to little of the power trumps economic pow- easier for Chinese women to overlooks the profound ways social stigma their Western er (although the former can be become billionaires. in which the world of the sisters face if they don’t care a source of the latter). Women In the rest of the world, super-elite is deviating from for their own children. And are still largely excluded from particularly the developed the space inhabited by the the one-child policy means middle class. Given the vast smaller families and thus less and growing gap, she says time spent nurturing them. we should be careful about Another cause is political. “One of the ironies of the new boom extrapolating broader social As in the former Soviet Union in wealth is that there are fewer trends into the plutocracy. and other communist societ- “Why would we expect the ies, China has a state ideology ultra-wealthy women. rise of women to trickle up, that formally supports female Inheritance is the great equalizer.” when over the past 30 years participation in the labor force we have had rising inequal- and the education of girls and ity?” she says. “The distance young women, including in the senior leadership of the Western economies, the between the top and the scientific and technical fields Communist Party of China— strong academic perfor- middle is growing. So, when that are often seen in the West leaving the smartest and most mance of young girls and it comes to women, why as masculine domains. ambitious ones free to choose women makes it tempting—at would we expect them to China’s communist system the lower-status path to power least for feminists—to imag- converge? They are different may also encourage the rise of of building business empires. ine that gender parity in the worlds. They are more likely women billionaires for a less The barred door to the polit- billionaire’s club is merely to be parallel tracks.” portrait illustration by michael hoeweler michael by illustration portrait

�o. reuters 23 jan.2013 Infographic

PARCHED The Standardized Climate Precipitation Index (SPI) is a probability index that considers only precip- Calamity itation anomalies and measures drought. Purple regions are the driest and got far less water this from droughts to hurricanes, year compared with average, cyclical weather events are wreaking while yellow and lighter regions havoc across the globe received more rainfall.

india LET’S TALK ABOUT the weather. In a lethally cruel paradox, it was Rainfall was 17 percent devastatingly dry this year … and devastatingly wet. From southern below normal this year, India to the Midwestern United States, withering droughts afflicted and the El Niño weather important crop-producing regions, while major hurricanes pounded pattern made for a disappointing monsoon the North Atlantic basin. Hurricane Sandy, the largest storm system season, which typically ever recorded in that region, battered coastlines from the Dominican provides 75 percent of Republic to Connecticut, and killed at least 200 people. India’s rainfall. Many amateur meteorologists assume these whipsaws of weather are caused by global warming, but scientists aren’t so sure. Rainfall, they explain, is highly—and sometimes maddeningly— variable, so it is not a conclusive measure of climate change. (They are confident global warming is causing increases in temperature and evaporation.) Despite the extreme weather in 2012, recent studies find drought is little changed over the past 60 years. What is changing are the extremes—regions that are much wetter or dryer—altering a climate landscape we’ve grown accustomed to over centuries. Farmers have never been able to rely on the rain, but as they are forced to deal with scorched or flooded fields, they find the fickleness of rain more worrisome than ever.—Elizabeth Dilts

Depicting the world as one continuous island in one ocean with minimal visual distortion of landmass, the “Dymaxion map” is the brainchild of the late American inventor R. Buckminster (Bucky) Fuller.

Gimme Shelter 60 YEARS OF TROPICAL CYCLONE TRACKS IN THE NORTH ATLANTIC, CLUSTERED BY DECADE. EACH LINE REPRESENTS

KEY CATEGORY 5 HURRICANES OTHER STORMS

DONNA DAVID

CAMILLE

1953 – 1962 1963 – 1972 1973 – 1982 Hurricane Donna (1960) killed more than Hurricane Camille (1969) caused heavy Hurricane David (1979) caused 150 people from the U.S. to the Bahamas. rains and catastrophic flash flooding. Over widespread damage in the Dominican For nine straight days, Donna had maximum 250 deaths were reported, and damage Republic and rainfall of up to sustained winds of at least 115 mph. was estimated at over $1.4 billion. 21 inches in Puerto Rico.

�o. reuters 24 jan.2013 by CHRISTINE CHAN

sahel region ( Western Africa) brazil People in the region are In Pernambuco struggling through the third state in Northeastern severe drought since 2005, Brazil, 80 percent of and their food supply has municipalities report been severely compromised. water emergencies, and riverbeds are totally dry.

united states From South Dakota to Texas, 60 percent of the Midwest was in drought conditions; the wheat crop was devastated, and there was less quality grass, which led to an increase in reports of thefts of hay.

Above 0.5 Wet conditions -0.5 to 0.5 Near normal australia -0.5 It’s the driest inhabited 12-MONTH Minor drought continent, but it had been STANDARDIZED -0.8 getting wetter from the PRECIPITATION Moderate drought 1970s up until 2006, when INDEX (SPI), SOURCEs: rainfall rates dropped to -1.3 Dec 2011 - Nov 2012 Severe drought NOAA, Unisys, their lowest levels there International Research since the 1900s. -1.6 Institute for Climate Extreme drought and Society, World Below -2 Meteorological Exceptional drought Organization, Munich Re, Reuters

ONE STORM. THERE HAVE BEEN MORE CATEGORY 5 HURRICANES SINCE 2003 THAN IN ANY DECADE IN THE PAST 50 YEARS.

MITCH

KATRINA

ANDREW

1983 – 1992 1993– 2002 2003 – 2012 Hurricane Andrew (1992) was one of the most Hurricane Mitch (1998), the only Category Hurricane Katrina (2005) killed over destructive U.S. hurricanes ever; it produced a 5 hurricane in the decade, ravaged the 1,300 people, and damage was 17-foot storm surge near landfall in Florida, and offshore islands of Honduras and Central estimated at $125 billion. tides of at least 8 feet hit the Louisiana coast. America, killing more than 9,000 people.

�o. reuters 25 jan.2013 Social Media

by Anthony De Rosa What makes Twitter so alluring? Is it the instant grati- fication of getting thoughts, big or petty, off your chest? The immediate feedback? The Masters indifferent spelling? Whatever the reason, tweeting is addic- tive, even for those who have of the (you’d think) more important things to do, such as building multinational empires. Twitterverse Sometimes, though, the most powerful people on earth (even They’re rich, they’re powerful, the Pope—@pontifex!) need to they can’t shut up on Twitter... sound off. And when that urge surges, more and more of them let their thumbs do the talking.

Rupert Murdoch 1 3 Mark Cuban 711 TWEETS • 34 FOLLOWING • 368,543 FOLLOWERS 4,881 TWEETS • 746 FOLLOWING • 1,372,578 FOLLOWERS

The fact that there’s no filter between the Austra- Cuban made his fortune with Broadcast.com, so it’s lian media mogul’s thoughts and the large number not surprising he was one of the first people on this of people who follow him on Twitter must keep his list on Twitter. Cuban, whose abrasiveness wins him corporate officers on edge. Among CEOs, there’s occasional enmity, doesn’t just “broadcast” in his nobody who can shock and awe as consistently as he tweets, he engages and interacts, setting the standard can. One of his most memorable recent tweets had for how a CEO can get real feedback from his cus- very detailed customer support for someone who tomers. In his other “job” as owner of the Dallas Mav- didn’t get their copy of the Wall Street Journal. And ericks, he’s even been fined by the NBA for criticizing then there was this one: refs in a tweet, leading him to respond, on Twitter: “Terrible news today. When will politicians find “can’t say no one makes money from twitter courage to ban automatic weapons? As in Oz now. the nba does” after similar tragedy.” https://twitter.com/mcuban/status/1413954596 https://twitter.com/rupertmurdoch/status/279759365328732161

2 4 Richard Branson Oprah Winfrey 2,469 TWEETS • 3,811 FOLLOWING • 2,644,525 FOLLOWERS 5,083 TWEETS • 81 FOLLOWING • 14,889,039 FOLLOWERS Branson often explores undiscovered territory, and She may no longer have the daily television plat- while many CEOs fear the unpredictability of Twitter, form she once had, and her OWN network is having he welcomes questions from his followers, recently trouble gaining traction, but she does have 5 million soliciting them with his #askrichard hashtag. He has Twitter followers. She’s a natural on Twitter, but that advised CEOs not to shill their businesses on Twitter, is not to say she hasn’t had growing pains. Winfrey often shares his adventures and promotes causes he recently sent out a tweet hyping the new Windows believes in. For Thanksgiving he asked people to tweet tablet ... from her iPad. When she tweeted for the first photos of whom or what they’re most thankful for, of- time in 2009, she sent it in all caps, a social media fering a trip to a mystery destination for three nights no-no gently pointed out to her by Shaquille O’Neal: to the best response. He memorably tweeted this de- “HI TWITTERS . THANK YOU FOR A WARM WEL- fense of Prince Harry after naked photos turned up: COME. FEELING REALLY 21st CENTURY .” “Shock horror, single man naked in own hotel https://twitter.com/Oprah/status/1542224596 room with woman. What on earth has this got to “@oprah ur caps r on, btw” do with anybody else? Leave Prince Harry alone” https://twitter.com/SHAQ/status/1542241989 https://twitter.com/richardbranson/status/238641258107662336 portrait illustration by michael hoeweler michael by illustration portrait

�o. reuters 26 jan.2013 illustration by ben kirchner

Jason Calacanis 5 8 Steve Case 34,441 TWEETS • 122,232 FOLLOWING • 157,547 FOLLOWERS 15,866 TWEETS • 2,507 FOLLOWING • 545,044 FOLLOWERS

Internet entrepreneur Calacanis may have moved Case was the co-founder of AOL when it was the out of Bay Ridge, Brooklyn, a long time ago, but his on-ramp to the Internet. These days he’s trying to New York attitude remains in his pronouncements find the next big thing through his investment in and his tweets. His proclivity for sounding off on en- Revolution, a holding company for startups like trepreneurship and the business of startups doesn’t ZipCar and LivingSocial. His feed is a mix of dis- spare anybody’s feelings. Twitter seems to be where cussions of entrepreneurship, public policy, and he hashes out ideas that he can use in his occasional sports, where he shows his love for @StanfordW- e-newsletter, and he also tweets inspirational mes- Soccer and Washington Redskins phenom @RGIII. sages like this: He memorably had this comment after AOL ac- “To my samurai: be the 1%. Make bank, create quired the Huffington Post: jobs + change the world. Don’t complain,create. “AOL to Buy Huffington Post; Tim Armstrong says Don’t whine,take power. Don’t occupy,inspire.” “1 + 1 will equal 11” (NYTimes) http://nyti.ms/ https://twitter.com/Jason/status/180861382139457536 g3QFHN Really? That wasn’t my experience.” https://twitter.com/SteveCase/status/34482016330186752

Arianna Huffington 6 10,416 TWEETS • 2,054 FOLLOWING • 1,094,544 FOLLOWERS 9 Bill Gates 649 TWEETS • 141 FOLLOWING • 8,853,128 FOLLOWERS Nobody has figured out how to harness the power of online community better than Huffington. She Gates has transitioned from personal comput- has steadily built her Huffington Post brand on the ing pioneer to philanthropist and humanitarian seemingly unquenchable need people—famous and through his Gates Foundation. He uses Twitter to unknown—have to express themselves; she gives remind us that there are still places on this earth them the platform to reach a vast audience. On Twit- where people are dying from polio and that the ter she mainly broadcasts—it would be nice to see fight against AIDS is not over. Unfortunately he’s her interact more with her followers. She had a lot to more of a broadcaster than an engager. He had a say about Mitt Romney during the recent election, complicated relationship with fellow tech pioneer though. This was one of her most memorable tweets: Steve Jobs, and this tweet about his “frenemy” was “We are all children of the same God.” re-tweeted over 11,000 times: Did Romney just accuse God of being an “of us lucky enough to get to work with Steve, unwed, single father? it’s been an insanely great honor. I will miss https://twitter.com/ariannahuff/status/258396753588543488 Steve immensely.http://t.co/g4HLDYtb” https://twitter.com/BillGates/status/121746029308678145

Jack Dorsey 7 12,252 TWEETS • 1,287 FOLLOWING • 2,168,564 FOLLOWERS 10 Martha Stewart 4,114 TWEETS • 7,894 FOLLOWING • 2,645,601 FOLLOWERS Dorsey, who invented Twitter as a way to more ef- ficiently dispatch taxis, now uses his service in a Stewart is a relentless marketer on Twitter, urg- very casual way, like most Twitter users—photos ing people to tune in to her shows and hawking of where he is, generous (native) re-tweeting and her many products. That’s the bad news. The good a lot of backslapping with celebrities and Twit- news: It looks like she’s actually manning the key- ter supporters. He also does a little business here: board, unless her ghost is purposely throwing in oc- he’s often offering customer service for his other casionally misfired tweets, misspellings and writing company, Square, which turns a mobile device into in a jaunty, casual style. She’s quick to share photos a credit-card swipe. Dorsey likes to drop favorite of where she is and what she’s up to. This popular quotes into his tweets, such as this: tweet is classic Martha Stewart—homespun, unex- “Humans have always been tool makers. pected and messy: Our tools were once large and caused local “just got home, let out the dogs, within minutes change, now they fit in our pockets and they cornered,attacked and killed an opossum. cause global change.” had to wash little bloody mouths .life on farm” https://twitter.com/jack/status/224619649076178944 https://twitter.com/MarthaStewart/status/5638126088 portrait illustration by michael hoeweler michael by illustration portrait

�o. reuters 27 jan.2013 Nights of Rage A protester throws a Molotov cocktail at a riot police water cannon during a 48-hour strike by the two major Greek workers unions in central Athens

Creative Destruction

�o. �o. reuters 28 Jan.2013 A Way Out

The solution to the Euro-zone crisis is not just economic. It’s also political

photograph by REUTERS/Yannis Behrakis

by Nicholas Wapshott Is She The one? German Chancellor Merkel listens to a speech by newly elected German President Gauck after his swearing-in ceremony at the Reichstag in Berlin.

When the 2012 Nobel Peace Prize was awarded to the ble down on its grand plan to forge a single European state. The European Union, jaws dropped from Belfast to Belgrade. The ci- award by the notionally apolitical Nobel Committee—whose tation said the EU had helped transform Europe “from a conti- host country, Norway, chose in 1972 and again in 1994 not to nent of war to a continent of peace,” and that its “most important join the EU—appeared to be a desperately needed vote of con- result” was “the successful struggle for peace and reconcilia- fidence for an ambitious dream that has turned into a divisive tion and for democracy and human rights.” Many think that is nightmare. a strange way of interpreting the last 100 years, given that the maintenance of a free Europe since the end of World War II is due more to the thankless diligence of NATO and the unsung gener- Neither awards nor plaudits will save the European osity of the United States. Union. Central bankers alone won’t fix it, either. That’s because The timing of the award was also puzzling. The very existence a lasting remedy for what’s ailing the region must be political as of the European Union is under severe threat as it struggles to well as financial. The modern history of Europe largely revolves maintain its common currency. To protect the euro, EU bureau- around the bitterly fought and seemingly eternal contest between crats in Brussels and political leaders in Berlin and Paris have France and Germany, with Europe’s third great power, Britain, made the poorer members the target of austerity measures that sometimes wisely and often mischievously maintaining the bal- threaten to undermine those nation’s democracies. Instead of ance. Both of the 20th century’s ruinous world wars and several homas P eter T homas

celebrating the EU as a benign force for peace and transnational other destructive conflicts stemmed from Franco-Prussian enmi- / cohesion, the Nobel Committee might just as easily have con- ty. It was primarily to bring this perennial conflict to an end that

demned it for using the global financial crisis as a pretext to dou- the EU founders—French diplomat Jean Monnet, French states- REUTERS

�o. reuters 30 Jan.2013 man Robert Schuman and Belgian premier Paul-Henri Spaak— opposition parties. Anti-European sentiment binds the poisonous envisioned a Europe in which the nations were bound ever closer creeds of extremists that threaten the very peace the EU was in- by an economic pact. The other unstated aim was to create a tended to guarantee. British Deputy Prime Minister Nick Clegg, single European state to rival the United States in population and who is pro-EU, warned in May 2012: “Opinion polls across the wealth, and, as time went on, to compete with the burgeoning EU—in the Netherlands and in the south [of Europe]—are show- economies of India, China, Russia and Brazil. ing a growing disenchantment with the EU as a whole. … If the A huge leap toward those goals was made in 1999 with the es- euro zone doesn’t come up with a comprehensive vision of its own tablishment of a single currency—the euro—that replaced the na- future, you’ll have a whole range of nationalist, xenophobic and

“We’re back to calling the Greeks lazy, the Italians shady, the British disconnected and the Germans bent on domination.”

tional currencies in 17 of the EU’s 27 states. To speed up the euro’s extreme movements increasing across the European Union.” birth, almost every EU nation—countries with fragile economies, We’ve seen this before. In 1919, having witnessed firsthand the such as Greece and Ireland, as well as rich nations like Ger- vindictiveness of the Paris peace talks at the end of World War I, many, France and the Netherlands—flagrantly bent the rules of John Maynard Keynes wrote in “The Economic Consequences of entry. The hurried shift from sovereign nations controlling their the Peace” that the reparations imposed on Germany and Austria own currencies, interest rates and fiscal policies to a common- in the Treaty of Versailles were so severe that widespread poverty currency coalition with a uniform monetary policy determined would inexorably lead to the rise of extremist politics and a sec- by a central bureaucracy was pushed through with minimal pub- ond world war. Twenty years later, Nazism had brushed aside the lic debate. Europe’s governing elite deemed this alliance so self- democratic Weimar Republic, and the world was at war again. evidently beneficial that the end justified the means, but the wish- Now, ironically, it is Germany imposing savage economic re- ful thinking behind the hasty creation of their single currency is trenchment on its neighbors. Citizens of the poorer European na- now evident as the euro unravels. tions have been given no option but to pay off their debts, endure The central—and perhaps fatal—flaw of the euro is that it is a austerity for the foreseeable future, or be expelled from the euro common currency without a common fiscal policy. The world fi- zone. Half of young Spaniards under 25 are jobless, and even the nancial crisis of 2008-09 exposed a number of frauds, among most optimistic EU estimates suggest austerity will continue in them Bernard Madoff’s gigantic Ponzi scheme. Another revela- the southern nations for at least a decade. For younger Europe- tion was the core defect in the design of the euro. Some anti-Amer- ans, that means leaving their country of birth to find jobs in Ger- ican Europeans, including Thorbjørn Jagland, chairman of the No- many, Britain, or the Benelux countries, or staying home and un- bel Committee, take cold comfort from the fact that an economic employed. For those at or near retirement it means returning to meltdown that started in the United States exposed the euro’s work, if they can, to supplement their devalued pensions. There inherent instability, but it is little solace to the Greeks, the Span- is no easy alternative to this punitive regime. ish, the Portuguese and the Irish that the tight fiscal conditions Pushing austerity rather than policies for growth has spurred and long-term misery they face might have been avoided had that an alarming rise in populist extremist parties, the clamor for the meltdown not taken place. Had those countries rejected the euro, dissolution of established national borders, the resurgence of they could have devalued their currencies to weather the financial regional nationalism in Scotland, Catalonia and elsewhere, and storm. As it is, they face a Hobson’s choice: to stay in the euro zone the widespread resurgence of xenophobia and racial intolerance. or leave and be driven into bankruptcy and destitution. There is now severe poverty in Europe on a scale not seen since immediately after World War II. Women in Athens sift through re- fuse, searching for food. Child prostitution is rife in Naples. Gen- Instead of humbly admitting that mistakes were made, eral strikes and violent demonstrations against austerity have be- European leaders have bet everything on a headlong drive toward come regular occurrences across Greece and Spain. Greeks have a single state. They are speeding up the unification process, with lost a third of their earning power in the last five years and their disastrous consequences. The debtor nations must send their prime minister, Antonis Samaras, warns that the social cohesion homas P eter T homas

/ best people abroad to find work and impoverish those left behind. of his country is “endangered by rising unemployment, just as it The folly of pushing this political union without first convincing was toward the end of the Weimar Republic in Germany.”

REUTERS their populations of its merits is increasingly evident in the rise of The old national stereotypes are quickly reemerging. “We’re

�o. reuters 31 Jan.2013 back to calling the Greeks lazy, the Italians shady, the British disconnected, and the Germans bent on domination,” says Richard Whit- man, professor of politics at Kent University, England. This intolerance feeds on itself and conjures the specter of the racial cleansings that ravaged Europe in the past. “As ethnic identities return, ethnic differences become more pronounced,” says Yale political science professor Nicholas Sambanis, “and all sides fall back on stereotypes and stigmatization of the adversary through language or actions intended to dehumanize, thereby justifying hostile actions.” Economic Stakes Workers raise the Greek flag after replacing a All this anguish might be worth it if the economics torn-off one atop behind it made sense, but attacking insolvency with austerity is the parliament in Athens self-defeating. In countries as disparate as Greece and Britain,

Anti-European sentiment binds the poisonous creeds of extremist parties that threaten the very peace the EU was intended to guarantee.

more burdensome taxation and reduced public services—osten- sibly to pay down debt—have resulted in a return to recession and increased national borrowing. Nor does trying to appease the money market work. As fiscally continent Northern European nations enjoy reduced inflation, prices are soaring for southern nations. Instead of rewarding fiscal moderation, giant European investment funds like Finland’s Varma, which manages $44 billion in assets, are shunning government bonds issued by “problem countries” like Spain and Italy. “There is so much political risk,” says Risto Murto, Varma’s chief investment officer. The crisis has also trampled democracy. In Spain and France, governing parties of both the left and right have been voted out, but their replacements quickly adopted policies identical to those of their predecessors. This is creating widespread disenchantment with the democratic process. Even more troubling, demo- budget across all European nations designed and applied in a central cratically elected politicians are being pushed out in favor of more treasury and policed by an unelected “super-commissioner” seems pliant technocrats—Mario Monti, a former EU official who held intolerable and may be untenable. It may also be that Germany, no elected post, was parachuted in to lead Italy out of its financial fearful of inflation and driven by its reliance upon exports, has too mire at the behest of Brussels. What Yale historian Timothy Sny- strong an economy to be shackled to the rest of the EU. As George der has described as “pantomime republics” make a mockery of Soros bluntly put it, “Germany should either lead or leave.” the Nobel Committee’s admiration for the EU’s “successful strug- The pressure is on German Chancellor Angela Merkel to lead gle … for democracy and human rights.” Europe out of this morass. She must see that her goal of a single European state is imperiled by an economic chasm that divides Europe into north and south. The way out of the euro crisis is not There is a way out—if Europe’s leaders can persuade to demand more austerity and closer unity but to allow Europe to Europeans that a united state is not only desirable but essential in an grow its way out of trouble. increasingly competitive world. If the EU is to succeed, the people An intensely practical woman, Merkel embraces the no-non- ehrakis B ehrakis annis Y

must be offered clear democratic choices about Europe’s future. If sense approach to big ideas of her predecessor Helmut Schmidt, / not, the EU will fall apart. For Germany to dictate terms to the rest of who once said, “Those who have a vision should see a doctor.”

the euro zone and install a single fiscal regime with a single annual Growing up in East Germany, she learned to keep her thoughts REUTERS

�o. reuters 32 Jan.2013 to herself, but now is the time to think big and talk big. First she There is no mood for the type of generous government spending would need to have a serious talk with her constituents, who have that cured the Great Depression and lifted Western Europeans prospered mightily thanks to the euro—German exports were ex- to their feet in 1945 through the Marshall Plan, but Merkel could pensive when priced in Deutschmarks and are now a bargain in offer prosperity through growth so that all Europeans would feel euros. As the rest of Europe slid into recession, Germany’s econo- they had a stake in the EU. She should reassure all the peoples of my continued to grow, and young Germans, unhampered by their Europe that they can better weather the current economic storms parents’ and grandparents’ war guilt, have grown tired of picking and fierce market challenges ahead by sticking together. up the tab for the rest of Europe. Merkel might even affirm the commitment of Europe’s lead- Merkel would have to convince those adoring voters that the ers not merely to a united state but to a united people. She should biggest threat to their affluence is not hyper-inflation, as it was pledge that the EU will be a democratic, transparent, benign, well- for the Weimar generation, but deflation, long-term joblessness, ordered, peaceful society in which national and regional aspira- chronic poverty in the rest of Europe, and the ancient grievances tions are guaranteed and individual rights protected. those conditions feed. Then she could deliver a bold, defining Herman Hesse once wrote, “It is not our purpose to become ehrakis B ehrakis annis Y

/ speech that would explain how all parts of the continent will bene- each other; it is to recognize each other, to learn to see the other, fit from a strong EU, while offering compassion to those caught in and honor him for what he is.” If Merkel could hit that note, the

REUTERS an economic bind and an optimistic endgame to these hard times. whole of Europe would owe her their loyalty and gratitude.

�o. reuters 33 Jan.2013 Special Investigative Report

The Unmasking of Jihad Jane

Prosecutors say she is the terrifying new face of al Qaeda—a blond American yearning for martyrdom. Her mission: fly to Sweden and shoot a man in the chest six times. How that plot unraveled is a stunning and sometimes comical tale that reveals the strengths—and flaws—in the government’s ever-changing war on terror. H andout ’s Off ice/ ’s op photos); op H andout andout T H andout reen C ounty G reen om S heri ff T ntelligence G roup/ I ntelligence S ite /Family P hoto/ /Family / / REUTERS REUTERS REUTERS (

�o. reuters 34 Jan.2013Jan.2012 Prosecutors say she is the terrifying new face of al Qaeda—a blond American yearning for martyrdom. Her mission: fly to Sweden and shoot a man in the chest six times. How that plot unraveled is a stunning and sometimes comical tale that reveals the strengths—and flaws—in the government’s ever-changing war on terror. H andout ’s Off ice/ ’s op photos); op H andout

andout T H andout evolution of a revolutionary The many faces of Colleen LaRose: as an abused schoolgirl in Michigan (top, left); her 1997 mug shot from a DUI in Texas (lower left); wearing a burka during her quixotic quest for martyrdom (above). reen C ounty G reen om S heri ff T ntelligence G roup/ I ntelligence S ite /Family P hoto/ /Family / / REUTERS REUTERS REUTERS ( by John Shiffman �o. reuters 35 Jan.2013 Chapter One “Kill him.” Colleen LaRose, the American who called herself Jihad second said the case “demonstrates yet another very real danger Jane, was fiddling on the Internet, passing time in her duplex near lurking on the Internet” and “shatters any lingering thought that Philadelphia, when the call to martyrdom flashed onto her com- we can spot a terrorist based on appearance.” puter screen. The order was from an al-Qaeda operative half a The case was so serious, authorities said, that they charged world away. The date: March 22, 2009. LaRose with crimes that could keep her in prison for the rest of This was it, she thought. Her chance. At 45, LaRose was ready her life. The conspiracy included a troubled trio of Americans: to become somebody. LaRose, a Colorado woman named Jamie Paulin Ramirez, and A compact woman with a 7th-grade education, LaRose was Mohammed Hassan Khalid, a teenager living with his parents in a recent convert to Islam. She found a place for herself quickly, Maryland. All have pleaded guilty to breaking U.S. terrorism laws, raising money and awareness online for the plight of her Muslim but only LaRose was charged in the plot to kill Vilks. Her sentenc- brothers and sisters. They were underdogs, just like her. During ing was recently rescheduled to May 7 from Dec. 19. her darkest days, she had endured incest and rape, and worked as The court filings and press releases draw a frightening portrait a prostitute. She had surrendered her life to drinking and drugs, of the Jihad Jane conspiracy. But an exclusive review by Reuters from crack to crystal meth. Now, if she accepted this order to kill, of confidential investigative documents and interviews in Europe she would surrender her life to a higher power: Allah. and the United States—including the first with Jihad Jane—re- The man who issued the directive called himself Eagle Eye and veals a less menacing and more preposterous undertaking than claimed to be hiding in Pakistan. LaRose knew him only by his the U.S. government asserted. online messages and his voice. Eagle Eye wanted her to fly to Eu- Since the 9/11 terror attacks, the FBI has investigated hundreds rope to train as an assassin with other al-Qaeda operatives, then of cases similar to this one. With each investigation comes a chal- to Sweden to do what few other Muslim jihadists could: blend in. lenge: how to prevent acts of terrorism without violating civil The terrorists believed that her blond hair, white skin, and U.S. rights or overreacting to plots that are little more than bluster. passport, even her Texas “We are going to err on the twang, would help her to get side of caution,” says Richard close enough to their target: P. Quinn, the FBI’s assistant

Lars Vilks, a Swedish artist who special agent in charge for H andout had blasphemed the Prophet counter-terrorism in Phila- Mohammad by sketching his delphia. “We will go after op- face on the head of a dog. eratives and operations that /Family P hoto/ /Family “Go to Sweden,” Eagle Eye are more aspirational than instructed LaRose. “And kill operational because to do him.” otherwise would almost be negligent.” andout; REUTERS H andout; A year later, when U.S. au- Quinn says the case ex- thorities exposed the plot, emplifies al-Qaeda’s new ap- they repeatedly described the proach to terrorism. He says

Jihad Jane case as one that the Jihad Jane conspiracy, from H andout should forever alter the pub- recruiting to planning, “repre- lic’s view of terrorism. One running with the wrong crowd sents the many new faces of Ramirez (left), who went to Europe looking for love, didn’t know olorado H erald/ C olorado L eadville

official said the conspiracy the terrorist threat.” / P hoto/ /Family about the assassination plot; Khalid, who describes himself as a “underscores the evolving na- “keyboard warrior,” has pleaded guilty to terrorism charges. But some civil rights advo-

ture of the threat we face.” A cates say the U.S. government REUTERS REUTERS

�o. reuters 36 Jan.2013 has exaggerated the danger posed by aspiring terrorists, in this That dalliance with the Muslim man sparked an interest in case and scores of others. “You can’t say these people are total- Islam, one that LaRose kept secret from Gorman when they rely innocent—they aren’t, and there’s something wild and scary turned to Pennsylvania. She began visiting Muslim websites, and about them—but almost all of them seem to be incompetent and signed up for a popular dating site, Muslima.com. She used Gor- deluded in some way,” said Ohio State University professor John man’s credit card to pay for access to the site, and when he saw Mueller, who has written extensively about how the government the bill, she laughed it off as a lark. has handled terrorism cases. “When you look closely, many of She met a man online in Turkey who became a mentor. He ex- these cases become interestingly cartoonish.” plained the Five Pillars of Islam, and LaRose learned the wudu, Interviews and documents, many composed by those involved in the Muslim washing ritual. She ordered a Koran. the Jihad Jane conspiracy as it unfolded, often reveal participants’ A few weeks later, she discovered that converting was easy: All innermost thoughts. The gullibility of the main players or the ways she had to do was recite the Shahada, a pledge to accept Allah as they botched almost every assignment along the way is also evident. her only God and the Prophet Mohammad as his messenger. Just Khalid, a troubled high school honor student, inadvertently months after her one-night stand in Amsterdam, while chatting linked his secret jihadist blog to a page on his school website. online with a Saudi Arabian man, LaRose typed the Shahada and Ramirez, a lonely Colorado woman who called herself Jihad Ja- converted to Islam via Instant Messenger. mie, headed to Europe to train for holy war. She was lured to Ireland by a Muslim man promising a pious, married life but she soon came to believe that all he really sought was a cook, a maid and a sex slave. Perhaps most intriguing is the story of LaRose, the would-be assassin whose devotion and naiveté left her susceptible to re- cruitment but prone to failure. In the only interview she has given, LaRose says she became devoted to the Muslim men she met online and blindly followed their instructions because they seemed righteous. “I just loved my brothers so much. When they would tell me stuff, I would listen to them, no matter what,” she says. “And I also was lost.” Indeed, just weeks into her jihad, she became homesick. And days before returning from Europe to America, she emailed the FBI—to see whether the government might spring for her air- fare home. “Jihad Jane is a perfect figure in some ways because it’s like a soap opera,” says her intended victim, the artist Vilks. “This is today’s most interesting part of terrorism—the amateurs.”

The One-Night Stand

Colleen LaRose’s path toward terrorism began with what devout Muslims would consider a sin—a one-night stand. That tryst occurred in 2007. She was in Amsterdam on vacation with her longtime boyfriend, Kurt Gorman, and they were arguing. girl trouble As part of her plot, LaRose stole two passports issued to her boy- andout H andout They had met when Gorman, a radio technician, was dis- friend, Kurt Gorman (far right). Gorman managed to lure her back to patched to repair a radio tower south of Dallas in 2002. LaRose the U.S., where federal agents helped her disembark. had been living there then beneath the tower in a trailer home she shared with her sister, her mother, her stepfather, and two ducks. /Family P hoto/ /Family Gorman, who declined to talk to Reuters, is a few years younger Sitting before her computer, an unusual feeling washed over than LaRose. Colleen found him to be mellow, gregarious and ad- her. Happiness. venturesome. He fell for her loud, infectious laugh and penchant “I was finally where I belonged,” she recalls today. for practical jokes. He flattered her and spoiled her. When she told She took as her Muslim name Fatima, after one of the Prophet andout; REUTERS H andout; him that she wished she had bigger breasts, he paid to get them Mohammad’s daughters. “That’s the prophet’s favorite daugh- enlarged. Her new DDs came to dominate her 4-foot-11 frame. ter,” she reasons, “and I was my dad’s favorite daughter.” One night during their Amsterdam vacation, the two were at a By “dad,” LaRose means her stepfather. Her biological father—

andout H andout bar and LaRose got loaded. She could be a mean drunk and she lit she calls him “nothing more than a sperm donor”—was, by his into Gorman. He left the bar. LaRose remained. own admission, a monster. The clearest documentation of that is A short time later, a man approached her. He was Middle East- contained in archived juvenile court records reviewed by Reuters. olorado H erald/ C olorado L eadville

/ P hoto/ /Family ern, a Muslim, and handsome. She went home with him, in part to On Nov. 6, 1980, when LaRose was 17, she wandered into Run- spite her boyfriend, in part because she was curious. away House, a shelter for teens in Memphis, Tennessee. Her hair

REUTERS REUTERS The decision would change her life. desperately needed a wash, her eyes were hollowed by cocaine

�o. reuters 37 Jan.2013 and heroin use, and she had a venereal disease. She had her two cats, chatted on the phone with her sister in Colleen told a counselor that she had run away from home at Texas and played games on websites like pogo.com. She also age 13 and lived on the streets as a prostitute. She became preg- flirted with men in chat rooms and became obsessed with fantasy nant and suffered a miscarriage that left her unable to have chil- warrior stories. She became riveted by violent YouTube videos dren. At 16, she married a man twice her age. of Israeli attacks on Palestinians and American attacks on Iraq- Colleen’s story deeply shook the counselor, Ollie Avery Man- is. The videos of dead and wounded children moved her most. nino, who spoke to Reuters with Colleen’s permission. Sometimes while she watched, she could hear the young Ameri- Mannino was told that Colleen’s parents, heavy drinkers, di- can children in the duplex below, laughing and playing. The jux- vorced when she was 3. Growing up near Detroit, she struggled in taposition infuriated her. No one seemed to know or care about school and had to repeat the the plight of the Palestin- first grade. Once, she came ians. It was so unfair. to school with mouse bites By summer 2008, on her fingers. LaRose was posting jihad- There was more, Colleen ist videos on YouTube told the counselor. When and MySpace. She used Colleen was 8 and her sister, various names online, in- Pam, was 11, her biological cluding Sister of Terror, father began to rape them. Ms. Machiavelli and Jihad Her father, Richard LaRose, Jane. She exchanged mes- would appear at their door at sages with avowed jihad- night with a bottle of lotion, ists—people with code- a silent signal that it was time names such as Eagle Eye, to undress. The rapes contin- Black Flag, Abdullah and ued until she ran away. Hassan—as well as with a Mannino promised to help woman in Colorado who but explained that the law seemed a lot like her. required her to notify a mi- Domestic terror LaRose didn’t try to hide As a child, Colleen (left, in undated photo) was regularly abused by nor’s parent that a runaway her father, Richard LaRose (right). Richard, who boastfully admitted her posts. She didn’t know was safe. Colleen gave Man- that he had abused her, was never prosecuted for those crimes. how. Whenever she want- nino her father’s number. ed to have a private discus- When the counselor reached Richard LaRose, she told him that sion with Eagle Eye, she simply let him take remote control of her his daughter was in Memphis. Then she told him what Colleen had computer so he could ensure the secrecy of their chat. Eagle Eye said about the abuse. seemed careful, brave and righteous. He claimed to be on the run “Yeah,” he replied, “I raped her.” from Pakistani authorities and to have participated in the 2008 Mannino recalls that he said it without remorse, in a prideful Mumbai attacks in which terrorists killed 166 people. She asked tone. To this day she vividly remembers what happened next. what she could do to help. Colleen took the phone. Her face flushed and tears flowing, she His first request was innocent enough: Send money to your screamed at her father: “Look what you’ve done to me! You did Muslim brothers and sisters, he told her. So she did, dipping into this to me! It’s your fault! Why? Why?” A moment later, she hurled cash that her boyfriend gave her. Among those she helped: a the phone at a bulletin board, scattering notes and pictures. Then Cairo cab driver who wanted $450 to fix his broken taxi. She also she crumpled into the chair. tried to send $440 to a Somali man who wanted to start an on- The counselor bundled the girl off to a hospital for psychiatric line forum for an al-Qaeda cell, but she discovered that Western treatment. Union doesn’t serve war-torn Mogadishu. Mannino said she reported Richard LaRose to local authorities atrick B rowne/Files atrick but he never was charged with raping either daughter. He died in P The Pledge / 2010. “He never did say he was sorry for what he did to us,” says Pam In January 2009, al-Qaeda operatives asked LaRose to LaRose, now 52, who described the rapes recently in her first me- do more. They wanted her to become a martyr. dia interview. “I still have a lot of anger. Colleen feels the same She agreed, and by February sent an online message pledging andout; REUTERS H andout; way. We don’t talk about it a lot. Too much pain is involved.” to use her blond hair, green eyes and white skin to “blend in with many people … to achieve what is in my heart.”

A month later, LaRose also agreed to an overseas rendezvous H andout The Righteous Cause with Eagle Eye, to marry him and help him get “inside Europe.” Throughout the first half of 2008 LaRose remained Travel from Pennsylvania to Europe, he told her. Find Lars Vilks, ntelligence G roup/ I ntelligence S ite

infatuated with Muslim men and Islam, but her pledge to stop the Swedish artist who has blasphemed the Prophet Mohammad P hoto/ /Family / drinking was unfulfilled. She never visited a mosque. She never and shoot him.

learned how to properly pray. LaRose felt torn. She wanted to say yes to Eagle Eye instantly. REUTERS REUTERS

�o. reuters 38 Jan.2013 It would be an honor to become a martyr, she knew, and few The Honor Student sisters received such an opportunity. Plus, she wanted to make Eagle Eye proud. Shortly after the FBI agent left her duplex, LaRose But there were other considerations. Her elderly mother had emailed her teenage accomplice, who lived near Baltimore. recently moved to Pennsylvania to live with her, and her boy- Please contact jihadi forum administrators, LaRose begged Kha- friend’s ailing father also lived in her duplex. Whenever Gorman lid. “Ask him to PLEASE remove ALL my posts… because I told traveled for work—which was often—she was left to care for them. the FBI guy I don’t know that site.” She read and reread Eagle Eye’s message: “Go to Sweden…And The teenager, who went by Hassan online, did as asked. Khalid, kill him.” She would have to choose between an exciting life as 15, was a gangly Pakistani immigrant who lived with his parents, jihadist and a mundane one as caretaker. She chose jihad. older brother and two younger sisters in Ellicott City, Md. He had “I will make this my goal,” she promised Eagle Eye, “’til I met Jihad Jane online months earlier, and their friendship had achieve it or die trying.” grown quickly, and they were talking to some of the same people overseas, including Eagle Eye and Black Flag. Like LaRose, Kha- Patiently, she awaited further instructions. But she didn’t keep lid had become radicalized watching videos of Muslim children a low profile. maimed or killed in attacks by Israeli or American forces. Throughout the spring and into mid-summer, LaRose drew Khalid had been born a Muslim in Dubai and raised in Pakistan attention to herself, posting jihadi videos, anti-Zionist rants and from age 11 to 14. His family, seeking a better life for their chil- solicitations to raise money. dren, had moved to Maryland in 2007. Khalid’s father delivered Then, on a humid day in mid-July, a stranger rapped on her pizzas. His mother kept the home. The family of six squeezed into door. LaRose didn’t answer, and the man left his business card a tiny two-bedroom apartment selected for its location inside the behind. When she picked it up, she rushed to her computer and best school district his parents could afford. In one bedroom, Kha- quickly sent two messages—one to a high school student 150 miles away and another to her al-Qaeda handler on the other side of the world. Both messages said the same thing: the FBI was on to her. The business card left at the door directed LaRose to call a local FBI agent. Eagle Eye told her to call the agent back. Find out how much the FBI knows. LaRose did as she was told. Have you ever visited extremist Is- lamic forums? the agent asked. No, never, she lied. Have you ever solicited money for terrorists? No. Another lie. Do you know anyone who goes by the online name Jihad Jane? No, LaRose said. The call didn’t last long, and the

FBI agent didn’t reveal much. She Lowering the black flag couldn’t tell if the FBI had seen her LaRose flew to Ireland thinking Damache (right), whose nom de guerre was “Black Flag,” would instruct her in the ways of jihad, but she soon decided he was a coward. Damache was arrested in Ireland for atrick B rowne/Files atrick

P YouTube posts supporting al-Qaeda / crimes unrelated to the Jihad Jane case; U.S. prosecutors are trying to have him extradited. and violent jihad. What if agents had read the messages she had exchanged with Eagle Eye in Pakistan or his associate Black Flag in lid and his brother shared a mattress. In the other, his sisters lived Ireland? What about her jihadi friends inside the United States-- beside stacked boxes of perfume the family peddled at a weekend andout; REUTERS H andout; the woman in Colorado and the teenager in Maryland? flea market. Their parents slept on a mattress in the dining room. Without disguising her identity, LaRose began contacting fel- He excelled during his first two years at Mt. Hebron High

H andout low jihadists online. She told them of the FBI visit and asked them School. He earned A’s in English, algebra, science and U.S. his- to delete anything that might prove incriminating. Then she took tory. He joined the chess club and later became an administrator the next step on her path to martyrdom, an act she later described for the school website. ntelligence G roup/ I ntelligence S ite

/Family P hoto/ /Family / as one of her proudest moments in the conspiracy to kill the art- Although his parents were thrilled with Khalid’s grades, they be- ist in Europe. She found a bargain flight to Amsterdam for $400. gan to notice subtle changes—he seemed withdrawn and spent so

REUTERS REUTERS Jihad Jane booked her flight for Aug. 23. much time alone in his bedroom on his laptop. continued on pg. 58

�o. reuters 39 Jan.2013 The HQ of the 1% Walks

Back

E xecutive Pay

el rodriguez ed by Pay Walls illustration wiss the ich The urnS onR

by T Emma Thomasson Super- wiss the ich The urnS onR T Super- forcing all listed companies to have binding votes on compensation for company managers and directors, and ban golden handshakes and parachutes. It would also ban bo- nus payments to managers if their companies are taken over, and impose severe penalties—including possible jail sentences and fines—for breaches of these new rules. Despite strong opposition from the business elite, Mind- er’s initiative is given a good chance of passing on March 3. And even if his referendum fails, the country will automatically adopt a counterproposal put forward by parliament that would compel companies to hold votes on executive pay, although the results would not be binding.

February 2008, Thomas Minder, a Swiss businessman whose family-owned company is known for its old-fashioned herbal toothpaste, attacked his banker, UBS Chairman Marcel Ospel, as if he were a form of stubborn plaque. At a shareholders’ meeting in Basel, he stormed the podium as Ospel addressed the crowd. Os- pel’s bodyguards grappled with Minder and wrestled him away before he could hand the embattled head of Switzerland’s largest bank a copy of Swiss company law, which codifies corporate temperance. “Gentlemen, you are responsible for the biggest write-downs in Swiss corporate history,” Minder had railed just a few minutes before, referring to UBS’s loss of $50 billion during the subprime meltdown that prompted it to seek a government bailout. “Put an end to the Americaniza- tion of UBS corporate philosophy!” The bodyguards marched Minder out “There’s no sustainable feeling of how managers lead a company. It shouldn’t be for the money.” of the hall amid a chorus of boos and jeers. Two months later, Ospel was gone, taking the fall for UBS’s recklessness, but Minder’s campaign This is a stunning turn of events for the land of secret bank against corporate excess had only just begun; shortly after accounts and carefully calibrated neutrality. Even though Ospel was ousted, Minder launched a referendum to im- most Swiss enjoy a very high standard of living, Minder’s pose some of the tightest controls on executive compensa- campaign has struck a chord in a proudly egalitarian coun- tion in the world. Of the top 100 Swiss companies, 49 give try increasingly unhappy with a growing class of super-rich shareholders a consulting vote on the pay of executives. A unafraid to flaunt their wealth. In another sign of discon- few other countries, including the United States and Ger- tent, parts of the country are also considering scrapping the many, have introduced advisory “say on pay” votes in re- tax breaks that have lured wealthy foreigners such as For- hristian H artmann C hristian sponse to the anger over inequality and corporate excess mula One driver Michael Schumacher and Switzerland’s / that drove the Occupy Wall Street movement. Britain is richest man, Ingvar Kamprad, the Swedish founder of Ikea. also planning to implement rules in late 2013 that will give “There is severe inequality that one really senses, even if shareholders a binding vote on pay and “exit payments” there is no abject poverty in Switzerland,” says economist

at least every three years. Minder’s initiative goes further, Hans Kissling, former head of the Zurich statistics office, REUTERS by photos

�o. reuters 42 Jan.2013 who has written a book warning that the growing influence farming past, a nation with no history of monarchy or even of the super-rich carries the risk of turning Switzerland into aristocracy. “Even though Swiss people earn good money a feudal state by undermining a tradition of direct democ- and have an average high salary, we also have a strong tra- racy that dates back to the Middle Ages. ditional feeling about what is good corporate governance,” Minder says as he sucks one of his company’s herbal throat lozenges. “You can have your second home, you can drive taking Statistics say the Swiss are the richest your Ferrari, you can eat your beef every day, but Swiss peo- i t t o people in the world, with net financial assets of nearly ple are middle class, with no extreme highs or lows.” the bank $148,000 per capita. That is a third more than the average Minder is the epitome of the Swiss entrepreneurs whose UBS was a popular target for the next two wealthiest nations—Japan and the United small businesses are the backbone of the country’s econo- of protesters States. And when it comes to distribution of income, Swit- my. They chide big banks and other homegrown multina- during Zurich’s version of zerland is one of the most equal societies. But the owner- tionals—like Roche, Novartis, Nestlé and ABB—for adopt- Occupy Wall Street in 2011.

“There’s no sustainable feeling of how managers lead a company. It shouldn’t be for the money.”

ship of wealth is much more unequally shared in the nation, ing an American-style get-rich-quick corporate culture. in part because Switzerland has no inheritance tax. The top That, in their view, contrasts with a Swiss business ethos 1 percent control more than a third of the wealth, slightly that favors sustainability and long-term relationships. larger than the share owned by the richest 1 percent in the (Minder took over the family business, Trybol, from his fa- United States. Switzerland also has the highest density of ther in 1999; his grandfather bought the company in 1913. millionaires in the West, with 9.5 percent of all households Founded by a dentist in 1900, Trybol produced one of the having $1 million or more, and the greatest number of ultra- first toothpastes in Switzerland and is also known for its rich—366 households worth more than $100 million. Ten herbal mouthwash and natural cosmetics. hristian H artmann C hristian / percent of all the world’s billionaires live there. Minder blames bankers like Ospel—a Swiss national who This astounding concentration of wealth riles many spent several years in investment banking in London and Swiss, although their economy has held up relatively well New York—for infecting Swiss business with a high-pay cul- through the financial crisis. For all its prosperity and success ture. “He was working for Merrill Lynch in New York—Wall

photos by REUTERS by photos in banking, Switzerland is a country still firmly rooted in its Street—and there is where the music was playing. [Big bo-

�o. reuters 43 Jan.2013 nuses] came over, and now [they’re] not only in the finan- Zeitung daily. “No well-advised company would chose to set cial industry: [they’re] also in productive industry, phar- up headquarters in a country where an infringement of cor- ma... There’s a lot of bullshit coming from America. There’s porate government rules can lead to imprisonment.” no sustainable feeling of how managers lead a company. It Many believe support for Minder’s initiative is driven shouldn’t be for the money, it shouldn’t be personal gain—it by a national allergy to high achievers. The Swiss seem to should be for the customer.” feel the need to cut their stars down to size; one exception In 2001, two years after Minder took over at Trybol, to that aversion is tennis player Roger Federer, who has it was threatened with ruin when Swissair reneged on a managed to stay popular, in part by retaining a down-to- $530,000 contract after the debt-ridden airline had to earth image despite his wealth and success with a racket. ground its fleet for two days in October 2001. That same Experts attribute the Swiss aversion to star culture to a year, Swissair paid CEO Mario Corti $13.4 million, even long history of consensus building between the German- though he had failed to keep the company aloft. “It was speaking majority and French- and Italian-speaking mi- nearly the grounding of Switzerland, not only of Swis- norities, and between Protestants and Catholics. Apart sair,” says Minder, who saved his company by begging from folk hero William Tell, Swiss history is thin on great the new head of the airline—which was taken over by figures, perhaps because, having stayed out of the con- Lufthansa—to honor the contract. tinent’s major wars, the country Minder spent several years vent- has not needed strong leaders. pay l e s s , pay more ing his outrage to newspapers be- “Egalitarian thinking and behav- Minder (top) fore going to war. He spent two ior is in the DNA of Switzerland,” is fighting to cap compensation, years raising funds to force a refer- says Karin Frick, an economist at while other endum on executive compensation the Gottlieb Duttweiler Institute, reformers want to put a bigger and another two years gathering an independent research body, tax bite on signatures. It took him another five “which means that people who are wealthy foreign residents, such years to put the issue to the people richer or more successful than oth- as IKEA found- as the Swiss Parliament wrangled ers tend not to show it. The name er Kampard (bottom). over proposals and tried to get of the game is understatement.” Minder—elected to parliament in Communicaid, a London- 2011—to drop his initiative. based business consultancy that specializes in cross-cultural awareness, cautions executives The influential business visiting Switzerland that its busi- federation Economiesuisse, which ness leaders tend to be modest represents 100,000 companies, about their role and discreet in says Minder’s proposals could un- their exercise of authority. dermine Switzerland’s position as In his campaign, Minder, the the world’s most competitive econ- vice president of his local soccer omy, a title awarded to it this year club and a keen birdwatcher and for the fourth year running by the Alpine sports enthusiast, has re- World Economic Forum because of peatedly jabbed at the growing low taxes, stable politics and busi- number of foreign CEOs, tapping ness-friendly laws. Swiss compa- into simmering resentment of nies accounted for five of the top 10 best-paid chairmen in outsiders in this tight-knit nation of just 8 million. The Europe in 2011, but only the heads of Novartis and Roche highest-paid chief executives in Switzerland in 2011 made it into the continent’s top 10 for chief executives. were all foreigners: Americans Joe Jiminez and Joe Ho- While Minder expects Economiesuisse to spend up to gan at Novartis and ABB, Roche’s Severin Schwan from $16 million to defeat his referendum, a poll in May showed Austria, and Nestlé’s Paul Bulcke from Belgium. Minder that 77 percent of Swiss voters back his proposals. Even regularly pillories Credit Suisse’s American CEO, Brady the Swiss monthly business magazine Bilanz has criticized Dougan, who has drawn fire for the $75 million stock high pay for CEOs and chairmen. “Too powerful, too ex- grant he received in 2009. “The moment you have the ieber (bottom) S ieber J ean- B ernard

pensive,” it scolded in a cover story, noting that the board guys like Brady Dougan and all the foreigners, if it’s not / presidents of Novartis and Roche earn 10 times more than working, they’re on the next plane back to New York,” their counterparts at British pharma companies. Minder says. “Swiss guys in my position, usually they’re Few top executives have dared speak out on this land- accepted in the village. They don’t only have their work, mine issue. Nestlé Chairman Peter Brabeck, an Austrian but they have something besides their work—they can- who has a fortune of up to $215 million, is one of the few. not manage a company the same way as Brady Dougan.” ARC (top); L auener ascal P rnd W iegmann A rnd

“If the Minder initiative were to be adopted, Switzerland (The ill will is compounded by the fact that Dougan still / / would unnecessarily give up one of the world’s best compa- doesn’t speak German, even after five years leading

ny laws…,” he wrote in an opinion piece in the Neue Zürcher Switzerland’s second-biggest bank.) REUTERS REUTERS

�o. reuters 44 Jan.2013 tackle wealth inequality is to increase the inheritance tax, Regardless of which reform plan the Swiss another issue the Social Democrats want to put to a vote. adopt, David Roth, the leader of the youth wing of the Social Democrats, says it won’t do much to address Switzerland’s deep inequality of wealth. He is pushing for more radical re- The 1 percent may be outraged by these form: Limit the annual compensation of top executives to assaults, but they are already adjusting. Back at that UBS just 12 times that of their lowest-paid worker. “If the share- shareholder meeting from which Minder got the bum’s holders vote on executive pay, it is still the rich voting about rush, another chiding stockholder offered Ospel sausages. the rich,” Roth says. “This whole cartel needs to be broken.” “In the future you will have to live a little more modestly,” His initiative is likely to be put to a vote in late 2013. he told the UBS chairman. Forewarned, Ospel whipped A campaign to end special tax deals for wealthy for- out a tube of mustard, as though he were ready to tuck into eigners who live but don’t work in Switzerland has also them. But he got the message. Later that year, Ospel and been driven by the growing wealth divide and taps into other ex-board members agreed to return $35 million in ane emerging hostility to immigrants. The annual list of bonuses and other payments from the bank. Credit Suisse Switzerland’s wealthiest 300 people published by Bilanz has not paid top executives any cash awards for the last four has 131 foreigners, with Ikea founder Kamprad on top, at $38 billion. Special tax deals for foreigners were first introduced in 1862 to boost the tourist industry in poor rural regions by encour- aging wealthy pensioners to move there. The deals were later adopted nationwide in rules dubbed Lex Chaplin after Charlie Chaplin moved to Switzerland in 1953. The number of super-wealthy foreigners lured to Switzerland has doubled in the last decade, to more than 5,000. Their taxes are based on the rental value of their property rather than their income or wealth, on the condition that they do not work in the country. The influx is blamed for pushing up housing prices, particularly in desirable areas around Lake Zurich and Geneva as well as the more glitzy Alpine resorts. The cantons of Zurich, Basel, Schaffhausen and Appenzell Ausserrhoden have al- Wheels within ready scrapped special deals for foreigners, but others years, in favor of stock-based schemes linked to the bank’s wheels have upheld the current system, albeit raising the taxes share price. Ethos, an influential group of shareholders that Union levied. Roth’s Social Democrats are campaigning to force makes recommendations to Swiss pension funds, says man- members in Basel marched a national referendum on this issue too. “The system has agers’ total pay at financial firms dropped 23 percent in 2011, past a Bentley an extremely damaging impact on the housing market, on although remuneration in other sectors rose 5 percent. as they protested job cuts Switzerland’s image, and international tax justice,” he says. UBS drew howls of outrage again last year over the at Novartis and The Swiss government is seeking to head off the Social $4 million signing-on fee for new chairman Axel Weber, other Swiss companies. Democrat campaign by increasing those taxes by about prompting more than a third of its shareholders to reject ieber (bottom) S ieber J ean- B ernard

/ 40 percent, and both Minder and Roth fear their cam- the bank’s pay plans. Weber, who is German, refuses to paigns could be scuppered. “It is going to be a battle of comment publicly on the debate around the Minder pro- money,” says Minder. “It’s the classic battle between the posals. That might be caution, or it might be a smart tacti- small guy and the huge Economiesuisse establishment.” cal decision. “It is a matter for the Swiss people,” he told He’s right to be worried. Zurich economist Kissling says the SonntagsZeitung newspaper. “At the moment, we gen- money has increasingly determined the outcome of Swiss erally see that the more bankers publicly wish for some- auener (top); ARC (top); L auener ascal P rnd W iegmann A rnd

/ / referenda, especially since billionaire industrialist Chris- thing, the less likely it is to be fulfilled politically.” toph Blocher started funding campaigns by the right-wing

REUTERS REUTERS Swiss People’s Party. Kissling argues that the only way to Additional reporting by Caroline Copley

�o. reuters 45 Jan.2013

Cost of Contagion

Flu conomics

by Sharon Begley

When you see a sign offering free flu shots,

masking sorrow A mourner wears a mask to ward off SARS during the funeral of Tse Yuen-man, the first front-line doctor to be killed by the disease

in Hong Kong in 2003. credit gutter credit gutter

�o. reuters 46 Jan.2013 Flu conomics photograph by Bobby Yip/REUTERS

consider this: The next pandemic could trigger a devastating global recession. gutter credit gutter credit gutter

�o. reuters 47 Jan.2013 more than 50 percent in the second quarter of 2003 compared with the year before, mainly because Asian high rollers hun- kered down rather than risk infection while traveling. Fear even hurt businesses dependent on sales calls. AIG, which pulled almost 30 percent of its revenue from Asia back then, was hobbled when the epidemic kept its agents from visiting potential customers. That’s just the easily measured stuff; the indirect costs pushed the total SARS bill much higher. “The biggest driver of the economics of pandemics is not mortality or morbidity but risk aversion, as people change their behavior to reduce their chance of exposure,” says Dr. Dennis Carroll, director of the U.S. Agency for International Development’s programs on new and emerging disease threats. “People don’t go to their jobs, and they don’t go to shopping malls. There can be a huge decrease in consumer demand, and if [a pandemic] contin- ues long enough, it can affect manufacturing” as producers cut output to align supply with lower demand. If schools are closed, healthy workers may have to stay home with their children. People afraid of becoming infected are less likely to go out to stores, restaurants or movies. Most of China was essentially on lockdown in the first half of 2003 as the government did everything in its considerable power to minimize human-to-human contact and, hence, the spread of SARS. Beijing was shut down tighter than at any time since martial law was declared during the 1989 Tianan- men Square protests. Discos, bars, shopping malls, indoor sports facilities, and movie theaters were closed, and 80 percent of the capital’s five-star hotel rooms were vacant. By May 2003, Singapore Airlines had cut capacity 71 percent and put its 6,600-member flight staff on unpaid leave. A global outbreak of the flu or some other Tourism to Singapore fell 70 percent, and the country’s gross highly contagious disease can exact a huge economic cost, in domestic product took a $400 million hit that year. addition to killing lots of people. It might sound like a ghoul- From Asia, where the disease was largely confined, the rip- ish calculation, but government officials and business leaders ples spread in all directions. Toronto recorded 361 SARS cases need to ascertain the potential cost of a pandemic, because and 33 deaths, and the World Health Organization issued an only by putting a price tag on an outbreak can they know what advisory against traveling there—surely a factor in the $5 bil- it’s worth to contain one. lion loss Canada’s GDP suffered in 2003. The financial damage by itself can be devastating. The ex- It’s not surprising that a pandemic hurts businesses depen- pense of major epidemics is evident every time a health agen- dent on employees or customers moving from point a to point cy totes up the cost of treating infected people—the outlays b (as AIG and the airlines learned), but SARS also set back for drugs, doctors’ visits, and hospi- transport companies such as FedEx talizations. But that spending is only (closed airports; fewer people do- the most obvious economic impact ing business), telecom equipment- of an outbreak. In our interconnected makers such as Nortel (vendors and Consider the effect on internation- world, a farmer customers staying home) and cable- al airlines. During the 2003 SARS running a fever in southern TV-box maker Scientific-Atlanta (severe acute respiratory syndrome) China can reduce the income (multiple parts made in Asia). It pandemic—which began in south- of a baggage handler in even cut deeply into profits for Es- ern China and lasted about seven tée Lauder, which under normal cir- months—business and leisure trav- Frankfurt, and hence all cumstances sells a lot of cosmetics elers drastically cut back on flying. the businesses that worker in Hong Kong, Singapore and China, Asia-Pacific carriers saw revenue patronizes. and in duty-free airport shops. plunge $6 billion and North Ameri- In our interconnected world, a can airlines lost another $1 billion. farmer running a fever in Southern tringer S

The tourism industry also took a beating. The net revenue China can reduce the income of a baggage handler in Frankfurt, / of Park Place Entertainment, owner of Caesar’s Palace in and hence all the businesses that worker patronizes. “Within

Las Vegas and other gambling and hotel complexes, plunged hours or days, an event that starts on one side of the world can REUTERS

�o. reuters 48 Jan.2013 A little sting A student receives an H1N1 vaccine injection at a hospital in Suining, Sichuan province, on November 11, 2009. The disease is on the rise in China and Japan.

establish itself on the other,” says Carroll. Lufthansa saw de- Human Services estimates that the ho-hum seasonal flu is re- mand for flights to and from the Far East tumble 85 percent that sponsible for 111 million lost workdays each year in the United year, and grounded a dozen planes. With planes grounded, oil States. That’s $7 billion in sick days and lost productivity. demand fell by 300,000 barrels a day in Asia, dinging the rev- A global pandemic that lasted a year could trigger a “ma- enues of oil companies from Kuwait to Venezuela. jor global recession,” warned a 2008 report from the World Bank. If a pandemic were on the scale of the Hong Kong flu of 1968-69 in its transmissibility and severity, a yearlong A Cost Beyond Measure? outbreak could cause world GDP to fall 0.7 percent. If we get hit with something like the 1957 Asian flu, say goodbye to 2 The World Bank estimated China’s SARS-related percent of GDP. Something as bad as the 1918-19 Spanish flu losses at $14.8 billion, and although the United States and Eu- would cut the world’s economic output by 4.8 percent, and rope were largely spared its ravages, the pandemic reduced cost more than $3 trillion. “Generally speaking,” the report tringer S

/ the global GDP by $33 billion. And here’s a scary thought: As added, “developing countries would be hardest hit, because health crises go, SARS wasn’t that bad—it killed just 916 peo- higher population densities and poverty accentuate the eco-

REUTERS ple and lasted well under a year. The Department of Health & nomic impacts.”

�o. reuters 49 Jan.2013 For the birds A worker disinfects a train in Cairo on June 15, 2009. Egypt was hit hard by the deadly H5N1 bird flu virus.

The majority of the economic losses would come not from sickness or death but from what the World Bank calls “efforts to avoid infection: reducing air travel … avoiding travel to infected destinations, and reducing consumption of services such as restaurant dining, tourism, mass transport, and non- essential retail shopping.” The really bad news is that we may not be hearing all the bad news. Economists who study pandemics worry they may be underestimating the financial toll because they haven’t been considering all the ramifications. “Research to under- stand the indirect costs of an epidemic has been growing, focusing on how to accurately incorporate productivity losses and effects on economic activity,” says Bruce Lee of the Uni- versity of Pittsburgh Medical Center, where he is an associate professor, director of the Public Health Computational and Operations Research Group, and an expert in the economics shipping department? Lee and colleagues found that for the of infectious diseases. 22 main occupations defined by the U.S. Bureau of Labor Sta- Take workplace vaccination. Public health officials recom- tistics (legal, management, food preparation, education, and mend it, but does it help the bottom line? Would targeted 18 more), when the employer footed the bill, “employee vac- shots bring a higher return on investment? Should employers cination was cost-saving for the median wage” if contagion vaccinate only their older employees? Or just those, say, in the was on the low side (one case producing 0.2 to 0.6 additional

Broadband carriers: During quarantines, The Bottom Base metals and steel: Prices would the Internet becomes the collapse as demand for cars and construction main link to the outside world for people line on in China and India plummets

FedEx, DHL, UPS and other delivery pandemics Oil: Prices would drop as China’s economic services, as people shop online (assuming Many businesses, industries boom comes to a screeching halt and they have enough drivers to function) and sectors would be populations in wealthy OECD countries fall devastated by a global because of flu deaths. Movie studios: People may not go to outbreak, but a few might theaters, but they’ll buy and rent DVDs actually prosper Gold: Rather than the usual flight to gold seen in times of crisis, there could be more sellers Netflix: Streaming movies—enough said than buyers as survivors try to liquidate their deceased relatives’ jewelry Telecoms: When people are afraid to go out and meet in person, they’ll call and text each other Theme parks, sporting events, movies theaters, museums, zoos, restaurants, hotels and Grocery manufacturers and stores, bars: Attendance would fall sharply as people especially at first, when hints of an approaching become too afraid to go out or are quarantined pandemic cause panic buying and hoarding Residential real estate: The real estate oversup- U.S. Treasuries will benefit from an immediate ply will be even greater than it was after the knee-jerk flight to safety before plunging as 2008 housing collapse central banks in flu-crippled Asian countries, especially China, are forced to sell off their Banks: Many of their business loans will default huge holdings to raise capital as companies’ revenues dry up; mortgage defaults will also rise as owners flee or die Producers of hand sanitizers, anti-bacterial soap, tissues Airlines: An outbreak would add alsh new meaning to “fear of flying” Manufacturers of flu drugs Stock markets: The World Health Organization

Hospitals, ambulence services D A bdallah A mr predicts that a huge death toll and panic would / and mortuaries force them to suspend operations REUTERS

�o. reuters 50 Jan.2013 cases). It was almost cost-neutral for low-paid occupations, for the construction boom it triggers, but a dollar spent on and a clear benefit for high-paid ones. The biggest payoff is medicine still contributes to a company’s bottom line and to for older workers, since they are more likely to become ill the GDP. In fact, analysts do a robust business figuring out and miss work if infected. As a result, “employers could gain how investors can profit from an epidemic. Sales of vaccines money” by underwriting flu shots, Lee says, adding that “a flu and drugs to combat H1N1 (swine flu) in 2009 boosted some virus does not have to hospitalize or kill a lot of people to have pharmaceutical companies. By early 2010, when the mild a large effect on society.” epidemic had petered out, Sanofi-Aventis had registered net Analyses of epidemic-related school closings can also inform profits of $10.1 billion, up 11 percent year-to-year. policy. In 2009, as the H1N1 influenza (swine flu) epidemic Speculators never encountered a disaster they couldn’t gathered force, the U.S. Centers for Disease Control and Pre- profit from, and pandemics are no exception. Several compa- vention (CDC) as well as state and local public health officials nies have produced investor guides to avian flu. In the event of considered closing schools in order to reduce transmission of an outbreak, Citigroup concluded in a 2005 report, investors the virus. Taiwan did so, closing schools for one week. should short companies whose revenues come from malls, Lee and colleagues analyzed what closing schools in Penn- casinos, air travel, and tourism. Analysts were also bearish sylvania would cost. Reducing transmission of a virus saves on labor-intensive industries and countries with “inflexible” healthcare expenditures, not surprisingly, and averts deaths. labor laws (most of Europe) because companies cannot easily “But closing a school has a lot of ripple effects,” Lee says. fire workers if demand for their products falls off a cliff. “You not only have teachers and staff not working, and hav- In contrast, Citi says avian flu will not only benefit health- ing to make up the lost time in July, but parents have to stay care companies but also those that provide products and home with their kids.” Bottom line: It would cost as much services people turn to when they’re afraid to leave home: as $51,000 to avert a single case of a telecoms, Internet commerce com- very transmissible flu. As a result of panies, home entertainment and the Taiwan school closings for SARS, even utilities. Finally, because any one study found, 27 percent of house- “Many people told us it worldwide calamity sends currency holds reported workplace absentee- was immoral to include traders scurrying for safe havens, Citi ism and 18 percent suffered an aver- economic analyses in expects the dollar to rise in the event age wage loss of five days’ pay. of a pandemic. Overall, it concluded, A 2009 study by economists at the questions of public “We would expect global economic Brookings Institution analyzed the health, but taxpayers have activity to decline, raw material pric- direct economic impact of closing a right to know.” es to collapse, risk aversion to rise, schools during a flu pandemic. Since monetary policy to ease, and interest about one-quarter of civilian work- rates to fall.” ers in the United States have a child under 16 and no stay-at- Economists acknowledge that there are still plenty of un- home adult, closing all the nation’s K-12 schools for two weeks knowns here. For one thing, they’re not sure how much of would result in between $5.2 billion and $23.6 billion in lost the economic activity lost is eventually made up. Another economic activity; a four-week closing would cost up to $47.1 unknown is the effect on factory production. Illness and fear billion dollars—0.3 percent of GDP. keep most people home during a pandemic, but not in China. “Those are only the first-order effects,” says Ross Ham- During SARS, employees were quarantined to inhibit conta- mond, who led the Brookings study. “There are also multipli- gion, yet because many of them lived in company-owned dor- er effects from a multibillion-dollar decline in economic out- mitories, they continued to work, and their employers built up put.” He looked only at lost wages, but people whose income enormous inventories. falls because they don’t work for several weeks don’t spend The greatest unknowns are such macroeconomic effects as as much, and the people who don’t receive that spending cut interest rates and inflation. Some analyses suggest that when their own in turn. In addition, he said, “The decrease in sup- production is scaled back, the shortage of goods creates infla- ply of some goods as factories run at less than full capacity tionary pressures. That might not occur if the supply cutback might lead to inflation.” were met by a fall in demand as people shopped less. Also tricky is deciding how to account for outbreak-related Researchers are making progress on these fronts, but it spending. For instance, Hong Kong spent $1.5 billion on a hasn’t been easy. “When we economists first came to CDC in “We love HK” campaign to get residents out of their homes, 1995, many people told us it was immoral to include economic facemasks in place. Note that such economic activity counts analyses in questions of public health,” says health economist toward GDP. Similarly, hospital charges, doctors’ fees, medi- Martin Meltzer. “But taxpayers have a right to know, if they’re cation, and other epidemic-related costs add to GDP. putting x dollars on the table [for vaccinations, quarantines or alsh other flu-fighting measures]: What are they getting?” Until all those questions are answered, savvy investors Hard Calculations won’t be putting money on the table to cash in on the next bdallah D A bdallah A mr

/ global pandemic. But as surely as a devastating swine flu epi- It may seem heartless to count such spending demic is coming, some shrewd quants wizard will figure out

REUTERS as an economic plus, on a par with welcoming an earthquake how to profit from it.

�o. reuters 51 Jan.2013 gutter credit gutter credit gutter

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�o. Clown?reuters 53 Jan.2013 booming? The year Tiririca was elected, Brazil’s economy grew 7.5 percent, its best performance in 25 years. In India, which had been enjoying an exceptional run of growth until recently, the parliament has been described as perhaps the most dys- functional in that country’s six decades of democracy. The speaker of South Africa’s legislature got so fed up in May that he publicly berated his colleagues for skipping key votes and drafting unintelligible, unconsti- tutional laws. Despite a decade of strong growth and the slow but steady spread of democracy throughout Africa, the respected magazine Perspectives recently surveyed the continent’s politics and asked on its cover: “Do parliaments matter?” It’s tempting to blame all this on a global disenchantment with politicians, but in many of these countries, the executive branch remains popular. In Brazil, Presi- dent Dilma Rousseff has an approval rating ross-dressing, near 80 percent, as voters credit her—and semi-literate, potty-mouthed clowns her alone, apparently—for record-low unemployment and high-wage growth. That’s aren’t suppose to run for Congress. also generally the case in the rich world, C where, for example, President Barack And if they do, they sure as hell Obama’s popularity never sank lower than aren’t supposed to win. about 38 percent in the United States, even when Congress was plumbing single digits But Francisco Everardo Oliveira Silva— Tiririca’s political buffoonery might sur- and challenging Fidel Castro (5 percent ap- better known by his clown name, Tiririca prise many Europeans and Americans. Af- proval) for “Most Hated” status in America. (Grumpy)—broke those rules, and several ter all, they seem to have cornered the mar- This all suggests a worldwide crisis of more, when he ran for Brazil’s House of ket on people who despise their legislatures. confidence in legislatures. Naked obstruc- Deputies in 2010. Campaigning under The approval rating of the U.S. Congress tionism by Mexico’s legislature has sup- the slogan “It Can’t Get Any Worse” and recently hit an all-time low in one poll, less pressed economic growth there for more wearing a woman’s blond wig, Tiririca took satirical aim at Brazil’s reviled Con- gress, where gridlock and corruption are “this place,” says tiririca. rife. His campaign ads were hugely popu- horrible lar on television and the Internet. “What “nothing about it works. there are a lot of good people, yes, but the system is broken... what can I say? It’s a ” does a federal congressman do? Truly, I circus. don’t know. But vote for me, and I’ll find out for you,” he promised in one ad. In another, he vowed: “Elect me so I can help popular than communism, Paris Hilton and than a decade. In the United States, the the neediest—especially my own family.” even banks. In parts of Europe, the back- most significant contribution of Congress More than 7 million YouTube hits later, lash has been harsher still, with parliaments over the last year could be summed up by Tiririca was elected—with the most votes from Greece to the Netherlands to Roma- the phrase “fiscal cliff.” of any candidate in the history of Brazil’s nia collapsing during the past year. In most So what’s wrong with legislatures? And, lower house. The political elite howled, ac- cases, the widespread hostility to legislators more important, what can be done about cusing the electorate of playing a reckless has been attributed to a merciless mix of them? On these questions, Tiririca’s story practical joke on a hallowed institution. “Is austerity measures and partisan gridlock sheds some light. “This horrible place,” he this a protest vote, or proof that we live in an that has come to define politics in much of said in a frank, surprisingly sober interview, ignorant society?” one pundit asked. Oth- Europe and the United States. Managing a “nothing about it works. There are a lot ers sneered that Tiririca, who dropped out seemingly never-ending financial crisis is a of good people, yes, but the system is bro- eslei M arcelino U eslei

of school at age 9 to join a traveling circus, sure-fire way to make people angry. ken. The things I’ve seen here, let me tell / wouldn’t be able to pass the basic reading How, then, to explain the disdain felt you…” His voice started to trail off. Then he

test required to take office (he did—barely). toward legislatures in countries that are laughed. “What can I say? It’s a circus.” credit gutter credit gutter REUTERS

�o. reuters 54 Jan.2013 Clown, suit Tiririca has traded the blonde wig and funny hat for a suit and tie while the legislature is in session.

many people, it’ll be awesome.’” The reality has, of course, been less than awesome. “Nothing gets done, and a lot of people are just here to steal,” he complains. “I campaigned as a clown because that is my profession,” he says. “[But] politics is serious, Okay? This is about hospitals and schools, and representing the people who voted for you. Damn, man! This is no joke!” To that end, Tiririca has donned a blazer and tie, and remained resolutely wig-free while Congress is in session. Respected aides staff his office. Even more shocking, Tiririca is one of just nine deputies—out of 513—who has not missed a single vote. “It’s the least you can do, man, is show up,” he says, shaking his head. On the other side of the ledger, Tiririca has failed to say a single word on the chamber floor, much less written any legislation, to hear tiririca tell it, his political which has led some peers to question his career is not a joke but a personal quest motives. “I like Tiririca, but come on— rooted in a tragic night 21 years ago, when he Big Rubber let’s be honest about why he’s here,” says worked for a traveling circus in Brazil’s vio- Silvio Costa, who has served in Brazil’s lent, impoverished northeast. During a per- Noses lower house since 2007. “People voted for formance, his pet monkey freaked out and him because they had a total disrespect for bit a rich man’s daughter. Tiririca knew the politics. They said, ‘Since they’re all clowns incident wouldn’t go unanswered. “Where Optional anyway, I’m going to vote for the one who I come from,” he says, “the powerful make Tiririca’s Tips admits to being a clown.’ OK, fine. But their own laws, and they hand out their own for Fixing Brazil’s don’t get angry at us when you elect people sentences.” A few hours later, a truck pulled Congress like that and then the system doesn’t work.” up carrying five or six men with torches. Costa takes a long drag of his cigarette and They burned the circus to the ground, and 1 shakes his head. “And let’s all stop treating Tiririca lost every penny he had. him like a prophet, OK? If people want to Get rid of political parties. The next morning, he, his wife and their “Why should I believe the same know what’s really wrong with Congress, 2-year-old son hitched a ride in the back of thing as somebody else just they can take a look at themselves.” a truck to the nearest city. “I cried a lot,” because they’re from my party? he says, “and I made myself a few prom- We’re supposed to think for Costa was involved in an inci- ourselves, aren’t we?” ises—which I kept.” dent in May that displayed two of the core The first promise: Never live hand-to- problems facing legislatures everywhere. mouth again. So Tiririca expanded his rep- 2 The setting: a televised hearing of a con- ertoire, and recorded an album of humor- Fewer speeches, shorter gressional commission investigating cor- ous, somewhat edgy songs about the gritty speeches. “Man, nobody listens ruption allegations against Demostenes world he grew up in. It sold more than 1.5 to these guys speak anyway. Torres, a senator who gained nationwide million copies, and Tiririca was rich and fa- Let’s all talk to each other like fame and adoration for … investigating mous. That, in turn, helped with his second people.” corruption. Costa was trying to interrogate promise: “To try to do right in the world, so Torres, but the senator kept invoking his others wouldn’t suffer like I did.” 3 constitutional right to remain silent. “Ah, As his success grew, the clown handed I know why you’re staying quiet,” Costa Term limits. “Some of these out money to friends and quietly donated guys have been here too long. declared, his voice rising. “Your silence a large sum to charity. When his mother They’ve stolen too much, and writes your guilt in capital letters. … You

eslei M arcelino U eslei everybody knows who they are.

/ suggested he run for Congress, it seemed say you were a saint. But if heaven exists, like a logical next step. “I thought: ‘Man, Time to go home, guys!” you’re not going to heaven. Heaven isn’t for

gutter credit gutter credit REUTERS gutter I’ll get there, and I’ll be able to help so liars or hypocrites!” continued on pg. 62

�o. reuters 55 Jan.2013 PEOPLE WORLDWIDE TUNED IN TO THE OPENING CEREMONY OF THE LONDON 2012 OLYMPICS (NOT the most ever. Beijing’s opening ceremonies had 1.2 billion viewers.)

illustration by elsa Jenna gutter credit gutter credit gutter

�o. reuters 56 Jan.2013jan.2013 PEOPLE WORLDWIDE TUNED IN TO THE OPENING CEREMONY OF THE LONDON 2012 OLYMPICS (NOT the most ever. Beijing’s opening ceremonies had 1.2 billion viewers.) gutter credit gutter credit gutter

�o. reuters 57 Jan.2013jan.2013 she would say it was embarrassing.” LaRose answered. One of Ramirez’s online contacts was another She stood on her porch with the agent, patient- recent convert to Islam, a woman from Pennsyl- ly answering his questions, trying to act cool. vania who sometimes called herself Jihad Jane, Yeah, she told the agent, she visited Mus- who wrote that day with big news: “Soon, I will be lim websites—as a recent convert to Islam, she leaving for Europe to be with other brothers & sis- wanted to learn as much as possible. Yeah, may- ters,” she wrote. “When I get to Europe, I will send be her political views angered others online. No, for you to come be there with me… This place will she had not raised money for al-Qaeda and did be like a training camp as well as a home.” not have any connection with extremists. “I would love to go over there,” Ramirez re- Lying to the FBI is a crime, the agent told her. plied. He asked if she planned to travel to Holland. The Unmasking of Jihad Jane Their chat turned to politics. She said she was thinking about it, but there continued from pg. 39 Jihad Jane: “When our brothers defend our had been a death in the family. faith, their homes, they are terrorist. Fine, then When the agent asked for a way to keep in They worried he might be downloading porn. I am a terrorist and proud to be this.” touch, LaRose gave him her cell number. Call Eager to learn more about his Muslim heri- Ramirez: “That’s right … If that’s how they anytime next week, she told him. tage, the 15-year-old had instead stumbled call it, then so be it. I am what I am.” Two days later, she pulled the hard drive onto violent jihadi videos. The anti-American Thrice divorced, Ramirez had moved in with from her computer and stashed it in a box. She rhetoric was intoxicating. He began translating her mother to save money. They quarreled gathered $2,000 in cash and packed three suit- sermons and jihadi videos from Urdu to Eng- often, especially about her young son—what cases. She got an acquaintance to drive her to lish—including snuff-style images of U.S. sol- he should read, how he should pray, what he the airport. diers in the throes of death, and the beheadings should eat for dinner. Ramirez had been look- Her boyfriend and mother thought she was of Americans Nick Berg and Daniel Pearl. He ing for a reason to leave. running a quick errand. posted these videos and began to solicit money Her turn toward Islam had begun the year online for al-Qaeda. He later described himself before, while researching a paper for a college As she touched down in Amsterdam, LaRose felt as a “keyboard warrior.” class. After a few months, intrigued by what she euphoric. In the airport, she donned a full burka “I will be a great facilitator,” he wrote to a had learned, she slipped down to a Denver-area for the first time. She gave the taxi driver the friend. mosque and converted. Now, her new friends name of the mosque, and as the cab pulled away, To shield his identity, Khalid studied basic ter- on Islamic forums were enticing her to join a song from childhood popped into her head. rorist tradecraft—how to use programs such as them. The man in Ireland, the one Jihad Jane Who can turn the world on with her smile? Pidgin to encrypt chats and Tor to cloak his loca- knew as Black Flag, pressed Ramirez hardest. Who can take a nothing day, tion. He learned to use code words—for example, Ramirez also knew Black Flag, but only by his and suddenly make it all seem worthwhile? “HK” in place of “jihad.” The letters were chosen real name, Ali Damache. In his latest message It was the theme song from the 1970s TV se- because J falls between H and K on the keyboard. to her, he persisted: Bring your son. Marry me. ries, The Mary Tyler Moore Show. LaRose imag- In mid-July 2009, around the time Jihad Jane I will teach you Arabic and the mystical beauty ined herself as the lead character, Mary Richards. warned him about the FBI, Khalid launched a of the Koran. Well, it’s you girl and you should know it! blog, Path to Martyrdom, that was full of teen- Ramirez hesitated—men had burned her so With every glance and every little movement, age bravado. He linked to hundreds of videos of many times—so Damache urged her to ask Al- you show it. al-Qaeda sermons and violent attacks. lah for guidance. Pray for a week, each night be- You’re gonna make it after all. He was clever, but keystrokes betrayed his fore bedtime, he said, then consider the colors But when the taxi driver stopped in front of anonymity. Pivoting between maintaining the of the dreams: If the dreams come in white or the mosque, no one was waiting for LaRose. For school’s website and his new jihadist blog, he green, it is a sign that she should to fly to Ireland nearly an hour, she stood outside in a full hijab inadvertently linked the “About Me” section of with her son; if the dreams come in red or black, with her luggage. Then it began to rain. FINANCIAL AND RISK MANAGEMENT SOLUTIONS Martyrdom to the wrong Web page—the page she and her son should stay in Colorado. Finally, a Muslim woman arrived and took for his high school track team. Ramirez struggled to recall her dreams. Don’t LaRose to her contact, a man named Abdul- worry, Damache told her. His dreams were lah. LaRose had expected him to introduce her glowing green—the color of Islam, and Ireland. to fellow jihadists, to train her for her mission, THE GREEN DREAM That must be a sign from Allah, Ramirez to teach her the ways of Islam. In the days that A SINGULAR COMBINATION OF CONTENT, On Aug. 1, 2009, around the time LaRose found thought. She began shopping for two plane followed, none of that happened. Abdullah was her bargain ticket to Europe, a 31-year-old wom- tickets. now equivocating, pleading for patience. CONNECTIVITY AND COMMUNITY an sat before a laptop on her mother’s kitchen After two weeks in Amsterdam, LaRose con- table in the remote town of Leadville, Colorado. cluded that Abdullah was a poseur. It was time Start with decision-enabling information that’s current, connected and complete. Both mobile and Jamie Paulin Ramirez felt stifled. Her young A QUICK ERRAND for her to leave, she told him, and he quickly global – and integrated with market-moving stories from Reuters News. Add instant connectivity to son, Christian, bounded past every now and A short while before her flight to Amsterdam, agreed. He suggested that she visit his associate colleagues, customers, compliance products, liquidity and trading venues. All seamlessly streamed then, and her mother kept making excuses to LaRose stole her boyfriend’s current and ex- in Waterford, Ireland, the man who called him- stroll by, so pired passports and copies of his birth certifi- self Black Flag. throughout your workfl ow in ways that are intuitive to use and easy to act on. It’s what we uniquely Ramirez tried to shield her screen. She and cate, presumably to provide false identification LaRose packed her bags and booked a flight bring to the fi nancial community. And with it, new ways to prosper. her mom had clashed about her conversion for terrorists. Following her handler’s instruc- to Ireland. to Islam. It wasn’t that her mother objected to tions, she mailed everything to Khalid. We’re helping customers across the globe profi tably overcome today’s key challenges. the religion; she had married a Muslim herself. Days before the flight—and the start of her Find out more at: thomsonreuters.com/fi nancial She just thought her daughter was overzeal- new life—the realities of her old one intervened: ‘NO MATTER THE RISK’ ous. Ramirez feared her mom would get angry Her boyfriend’s father suffered a heart attack and Back in the United States, one of LaRose’s most if she caught her chatting with her new Muslim died. LaRose wasn’t deterred. She told her al-Qa- trusted allies was struggling, too. friends, just as her mother criticized her for eda associates that she was still coming. “I will Mohammed Hassan Khalid had lost access to wearing a head-scarf, or hijab. “When I would be away from here in a couple days,” she wrote. his primary weapon of jihad: his computer. His pray she would scream at me,” Ramirez recalled “Then…I will get to work on important matters.” parents had taken it away. in a document reviewed by Reuters. “When I Within hours, LaRose heard another knock A few weeks into his junior year in high would wear my hijab to work and to the store, on her door. The FBI had returned. This time, school, Khalid’s parents confronted him about

© 2012 Thomson Reuters 1001679/12-12 �o. reuters 58 jan.2013 FINANCIAL AND RISK MANAGEMENT SOLUTIONS A SINGULAR COMBINATION OF CONTENT, CONNECTIVITY AND COMMUNITY Start with decision-enabling information that’s current, connected and complete. Both mobile and global – and integrated with market-moving stories from Reuters News. Add instant connectivity to colleagues, customers, compliance products, liquidity and trading venues. All seamlessly streamed throughout your workﬂ ow in ways that are intuitive to use and easy to act on. It’s what we uniquely bring to the ﬁ nancial community. And with it, new ways to prosper.

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© 2012 Thomson Reuters 1001679/12-12 the long stretches he spent alone in his bedroom to remain at home, to cook and to clean. LaRose When LaRose got no response, Gorman of- with his laptop. When he refused to explain was given a key, and was free to come and go. fered to buy her ticket. what he was doing, his parents took away his Local Muslim women took LaRose to the Damache tried to talk her out of leaving, to computer. Then, this aspiring jihadist made an mosque and taught her to pray. The first time no end. Reluctantly, Damache agreed to drive odd and impulsive decision: He dialed 911, in- she rose after prayers, LaRose experienced LaRose to the airport. viting law enforcement into his home. His par- what she believed to be a minor miracle. A pain ents, he told the dispatcher, were abusive. in her stomach, one that had bothered her for When LaRose’s flight from London landed in When the police arrived, they backed his years, vanished. What more proof did she need Philadelphia on Oct. 15, 2009, the pilot asked ev- parents. that Islam could heal her? eryone to stay seated. A passenger was ill, he ex- Reluctantly, Khalid gave his parents his pass- Her faith in the jihad was another story. plained, and paramedics needed the aisles clear. word. They began clicking through his computer, Nothing Damache had promised materialized. A few moments later, federal agents boarded and discovered his al-Qaeda translation projects No training, no planning, no brothers and sis- the plane and made straight for the short wom- and jihadi videos. They weren’t happy. As the ters ready to assist her in this assassination. To an in a full burka. Colleen LaRose didn’t resist teenager later wrote to a friend, they “saw the LaRose, the great Black Flag seemed to be a when they handcuffed her. beheadings, which scared the crap out of them.” coward. But she refused to give up. On the last FBI agents drove her to their offices two Denied access to his online life, Khalid be- day of September, she emailed Eagle Eye to blocks from Independence Hall. They asked her came despondent. He refused to eat. He slept let him know she remained on task and that it to tell her story. LaRose mangled some facts, all day. After a few days, his parents dialed 911 would be “an honor & great pleasure to kill” the mostly told the truth: she told them about her and had Khalid admitted overnight to a psychi- artist. “Only death will stop me here,” LaRose one-night stand with the Muslim man in 2007, atric facility. wrote. “I am so close to the target!” her conversion and the videos of atrocities He told no one about Eagle Eye, Jihad Jane, against Palestinian children. She mentioned Black Flag, or the stolen passports LaRose had Eagle Eye and Black Flag, and her disappoint- sent him for safekeeping—including the one he HOMESICK ing trips to Holland and Ireland. She said she had forwarded to Black Flag in Ireland. Two weeks after vowing that “only death” could had returned home because she was concerned Short, thin and handsome, Black Flag was stop her plans to kill for Allah, Jihad Jane decid- about her ill mother. Agents assured her that her known in Waterford by his given name, Ali Dam- ed to head home. mother was fine. The story had been a trick to ache. Born in Algeria in 1965, he grew up in cen- The epiphany came while she waited with get LaRose back to the United States. tral France. After high school, he sold perfume a Muslim woman in a delivery truck outside a One agent pressed. Are you sure you didn’t and cosmetics in a Paris department store for grocery in Waterford while the woman’s hus- abandon the jihad because you got cold feet? many years. Around 2001, he moved to Ireland, band was inside shopping. The two women No, she insisted. And if they let her go, she where he bounced from job to job. He worked at were covered head to toe in burkas. Only their told them, she would plan a suicide attack a drugstore, a telephone call center, a real estate eyes were visible. against U.S. soldiers in Iraq or Afghanistan. agency and an insurance firm. To comply with LaRose thought about the woman’s life. She LaRose told the agents about living briefly Irish welfare and immigration law, each time he had a husband, children, a family and a bond with Ramirez in Ireland, and that she didn’t lost a job he enrolled in computer-training pro- with Allah; she seemed happy. LaRose wanted know much about her. grams, which gave him access to computers and that sort of happiness, too. She thought about The FBI found Gorman’s expired U.S. pass- a reason to spend a lot of time online. Damache and Abdullah. Online, the men were port in her luggage: Where, an agent asked, was He wed an Irish Catholic woman, a marriage aggressive, tough-talking jihadists—romantic, the valid one? that lasted about seven years. In 2007, Damache almost heroic. In person they were tentative, She didn’t give up Khalid. Instead, she low- began regularly going to mosque and, about a chauvinistic and hobbled by pedestrian struggles ered her eyes and asked for a lawyer. year later, wearing Muslim attire. like finding enough cash to pay the electric bill. The FBI kept LaRose’s arrest secret as they By 2009, Damache was calling himself Black LaRose asked her companion what she investigated connections in Ireland, Pakistan Flag online. He made contact with Eagle Eye, thought of Damache. Her husband believed and Maryland. LaRose, Ramirez, Khalid, Abdullah and oth- LaRose was a lost soul, she said, and that Dam- ers whom the FBI has linked to al-Qaeda cells. ache had misled her. Perhaps Vilks did deserve Throughout the summer, even after LaRose to die, but that was up to Allah to decide. ‘JUST A SEX SLAVE’ tipped him that the FBI was watching, Damache The woman and her husband were the first About a week after LaRose’s arrest in Philadel- continued to send online messages such as: Muslims LaRose had met who did not advocate phia, Ramirez sat before a laptop in a southern “The job is to knock down some individuals that violence. They were deeply religious people and Ireland apartment and let her emotions flow. “I are harming Islam.” He said he was busy build- their version of Islam was starkly different from wish I was never stupid enough to come here,” ing “an organization [divided into a] planning that of Eagle Eye and Black Flag. Ramirez typed in a note to herself. “This man team…research team…action team…recruit- LaRose again felt torn. She wanted to please has no intentions to make this relationship ment team…finance team.” Eagle Eye, but not a single thing she had been work, ever. I am just a sex slave to him.” Of LaRose, he wrote: “We have already orga- promised had come to pass. She was also grow- Ramirez felt trapped, afraid that if she re- nized everything for her. We are [willing] to die ing lonely and missed her boyfriend back in turned to the United States her estranged moth- in order to protect her no matter what the risk.” Pennsylvania. She wondered who was caring for er might try to wrest custody of her son. Still, her elderly mother. She thought about her cats. she took tentative steps to come home. When She emailed Gorman the number for her Damache was out, she began reconnecting by ‘SO CLOSE TO THE TARGET!’ Irish mobile phone. A short while later, he email with friends and family in Colorado. LaRose and Ramirez landed in Ireland within called. Come home, he urged. Your mother is Then in January, she learned she was preg- days of the other, during the second week of ill, near death. nant. How could she possibly leave now? September. On the day she arrived, Ramirez Today, LaRose insists that she wasn’t aban- Irish police answered the question two married Damache. doning her jihad, only pausing to visit a sick months later. On the morning of March 9, 2010, There was no honeymoon. Instead, Ramirez, relative. If so, what this budding terrorist did police raided the small flat in Waterford, detain- her son, LaRose and Damache shared a one- next is perplexing: She visited the FBI’s website, ing Ramirez, Damache and five of his associ- bedroom apartment he had rented in the heart located the send-a-tip section and let agents ates for questioning. Later, Ramirez told the of Waterford. Ramirez didn’t get a key to the know she was heading home, hoping the FBI detectives the little she knew. She had come to Waterford apartment; Damache instructed her would pay for her flight. Ireland to live with Damache; he had spoken of

�o. reuters 60 jan.2013

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© 2012 Thomson Reuters L-374317/5-12 Thomson Reuters and the Kinesis logo are trademarks of Thomson Reuters. jihad but offered few specifics. U.S. terrorism charges. with a Harvard education, does it matter?” Damache refused to cooperate. He played During an exclusive interview from jail, LaRose coy, deflecting questions by posing his own. He says she still believes that Islam saved her. “I sur- almost seemed to relish the interrogation. TALKING ON THE BOWLS vived a lot of things that should have rightfully Hours after the raids in Ireland, the FBI an- Three years have passed since Jihad Jane’s arrest. killed me,” she says. “I also thought there was a nounced they were pressing terrorism charges LaRose, Ramirez and Khalid all confessed to con- purpose for me to be alive and then when I found against LaRose, who remained in custody in the spiring to provide material support to terrorists. Islam, I thought, This is why I have lived so long.” United States. U.S. officials called her by the on- LaRose also pleaded guilty to conspiracy to kill in U.S. sentencing guidelines suggest LaRose line name she had chosen, Jihad Jane, and the a foreign country, lying to the FBI and attempted could be jailed for 30 years to life. story led the network newscasts. identity theft for stealing her boyfriend’s pass- Her intended victim, the Swedish artist LaRose’s teenage accomplice, Khalid read ports. All of them still await sentencing. Lars Vilks, says he believes LaRose has served the government’s statement online, and noted Ali Damache caused a sensation in Irish le- enough time already. “They should let her go,” that it mentioned an unnamed co-conspirator gal circles by successfully contesting the police he says. “Now that she is known, they can keep and quoted excerpts from online posts Khalid search of his Waterford apartment, but U.S. an eye on her.” recognized as his own. prosecutors have indicted him on terrorism LaRose expresses few regrets. “I did every- Not long after, FBI agents arrived at his charges and have asked Irish authorities to ex- thing I did for the love of my ummah,” the Mus- parents’ apartment with a search warrant. As tradite him. Today, he remains in Ireland, await- lim community, she says. “Whatever happens agents began rifling through the family’s posing trial on charges unrelated to the Jihad Jane to me, it’s my destiny. Whatever time they give sessions, Khalid was escorted to his bedroom. conspiracy. His lawyers declined to comment. me, it’s already predestined for me. So I’m not “Tell us about it,” one of the agents said to U.S. authorities won’t say if they know the worried.” him. “There’s no benefit in lying.” Khalid told whereabouts of Eagle Eye, the al-Qaeda oper- With limited access to media, LaRose says she the agents that he was no longer a jihadist. The ative who instructed LaRose to kill, or Abdul- hadn’t heard that the U.S. government held up people in those forums were misguided, he said. lah, the man who was supposed to train her in her case as one that “underscores the evolving He had reformed, he insisted. Amsterdam. nature of violent extremism” and demonstrates During the next few weeks, he met with LaRose, Ramirez and Khalid are scheduled a “very real danger lurking on the Internet.” agents a half dozen times, without a parent or to be sentenced by summer 2013; Until then, LaRose also hadn’t realized that her arrest attorney present. He believed he was a witness, they are in the same federal prison in downtown caused so much buzz back in 2009 that Katie not a suspect. By then, Khalid had acceded to Philadelphia. LaRose has been held largely in Couric had opened the CBS Evening News with his parents’ wishes to seek counseling. A local solitary confinement; on rare outings, she says her story, declaring that prosecutors were warn- Muslim scholar was teaching him that he was she has caught glimpses of Ramirez, though the ing that this “petite woman from the Philadel- misinterpreting the Koran, and Khalid also met two women haven’t spoken. phia suburbs” now “represents the new face of regularly with an imam who preached peace. Ramirez, who miscarried the baby she con- terrorism.” But it was all a front. Khalid continued to lead ceived with Damache, may face the shortest “Wow,” LaRose says, almost tickled by the a double life, assembling a strong resume for his sentence of the three. Authorities say she never characterization. Then, after a momentary college applications while secretly translating ji- knew about the plot to kill Vilks. “I’m not saying pause: “Well, they’re right.” hadi videos. He entered two high school writing that I like being in prison, but I am very grate- Confined to her cell, often for 23 hours a day, contests. For one, he chose as a subject the Dalai ful for this time to be able to reflect and study,” LaRose has nonetheless found a new path to Lama. For the other, Malcolm X. Ramirez says in a statement provided by her love. She has discovered a makeshift Internet court-appointed lawyer, Jeremy H. Gonzalez that exists within the walls of the federal pris- Months passed without any public word on the Ibrahim. “I was a parakeet. I just repeated what on in Philadelphia: If she scoops enough water case. That fall, Khalid began his senior year of other people said.” Her young son now lives from her toilet bowl, LaRose can communicate high school. with her mother in Colorado. with other inmates by speaking through the In October, he aced the SAT college entrance Khalid’s admission to Johns Hopkins was re- sewer pipes—they call it “talking on the bowls.” exam and submitted an early decision applica- scinded. His court-appointed lawyer, Jeffrey M. While talking on the bowls, LaRose fell for a tion to prestigious Johns Hopkins University. Lindy, says his client now realizes that his vir- new man. She knows little about him, but thinks He also struck up an online friendship with a tual friends did not love him the way his parents he is wise, compassionate and righteous. He is 21-year-old neo-Nazi-turned-jihadist who lived and teachers did. He also says Khalid regrets not a Muslim but promises to convert when he in the Pittsburgh area. During an online chat on translating videos that may have led others gets out so that they can marry and be happy. Nov. 22, Khalid told the man that he had day- astray. “If you take away Jihad Jane and the ri- Colleen LaRose believes him. dreamed about “doing martyrdom operations diculous plan to kill the cartoonist,” says Lindy, together in my school.” “what you have is a teenager becoming fasci- “Like Columbine?” the man asked. nated with and learning about and adopting a “Na’am,” Khalid said, using the Arabic word radical ideology… I wish that all the terrorists in for yes. “It was like we both were in a big truck the world were like these guys because none of and had guns and we were shooting randomly us would have anything to worry about.” at a huge crowd of kids. Subhan’Allah how great The lead prosecutor, Assistant U.S. Attorney would it be. I live in Maryland…and the kids who Jennifer Arbittier Williams, says she cannot com- study in my school proudly state that their par- ment on the cases until after sentencing. But ents work in NSA and FBI.” FBI officials in Philadelphia emphasize that they A few weeks after that exchange, good news cannot afford to discount possible terrorism sus- arrived in a fat envelope. “Congratulations!” be- pects, no matter how incompetent they might gan the letter from Johns Hopkins. Not only had seem. Once a plot matures, they say, authorities You Voted For That Clown? Khalid won early admission but the school was might be too late to stop an attack. “The more so- continued from pg. 55 offering a full-ride scholarship worth $54,000. phisticated that capability becomes, we may not In June 2011, Khalid, now 17, graduated from be able to control the outcome,” said Richard P. Another senator, Pedro Taques, spoke up in high school. A month later, FBI agents quietly Quinn, the FBI’s assistant special agent in charge Torres’ defense: “[A] senator can’t be treated arrested him for his role in the Jihad Jane case, for counterterrorism. “If you get shot by someone like that,” he said. “In fact, nobody should be and he became the youngest person to face with a seventh-grade education versus someone treated with such indignity. People around the

�o. reuters 62 jan.2013 world have died for the constitutional right to ing a loud speech at a podium—while hundreds Regardless of who or what is ultimately remain silent.” of his fellow deputies milled about paying no to blame, one truth is inescapable: Something’s After some back-and-forth, Costa appeared heed, talking or fiddling with their iPhones. It got to change. On this, even people as diverse as to lose it. Red-faced and screaming, he jabbed could easily have been Washington, D.C. “No- Castle and Tiririca agree. The former Republican his finger at Taques: “I won’t put up with this body’s listening to that poor man speak!” Tiririca congressman, who lost a Senate primary bid in garbage!” he thundered, as other congressmen exclaimed, cringing. “But you know what? I’ll 2010 to a Tea Party favorite who had dabbled in rushed to separate the two men. “You’re a hypo- bet you he doesn’t care. He’s just performing for witchcraft, says the U.S. Congress could regain crite! A demagogue!” the cameras anyway, to show people back in his its credibility by forging a compromise solution Costa apologized the next day, but a bleak home state that he’s working. But you watch,” on entitlements and the federal debt. “They’ve mood was established for the commission’s he predicted, “there will be no work tonight.” got to show the public they have the wherewithal work. Each session turned up more evidence Sure enough, within a few minutes, the chamber to deal with these difficult issues,” Castle says. that Torres—despite posing for years as a righ- failed to muster quorum for a major vote on a for- Tiririca, naturally, is a bit more blunt: “Either this teous crusader—had used his influence to ben- estry bill. There was a collective groan, and the thing changes, or people are going to go crazy.” efit a shady tycoon who had gone to jail for run- room emptied. Others have suggested such reforms as ning a gambling ring. “These stupid rules, how do they make any more public financing for campaigns, or more And there we have the first big problem facing sense?” Tiririca said. “Damn, this whole sys- stringent financial disclosure for members of legislatures around the world: that corruption tem is crazy! It has nothing to do with how the Congress, as a way to get money out of legis- and abuse of power are lurking just beneath the world works.” latures—and maybe improve their image. To surface. From the 2009-10 expenses scandal in that end, after the allegations of insider trad- Britain’s parliament to last year’s head-scratch- Some people who get paid to think about ing surfaced in 2011, the U.S. Congress quickly ing decisions by Australian and Kenyan legisla- such things agree with him. Moises Naim, a passed legislation that requires members and tors to award themselves huge pay hikes during senior associate at the Carnegie Endowment their families to report stock trades. Naim of the times of economic duress, to recent allegations for International Peace, says legislatures and Carnegie Endowment—and a former Venezue- of insider trading involving members of the U.S. traditional political parties have been losing lan minister—believes in a solution that sounds Congress, legislators around the world have of- relevance for decades. In a book to be pub- counterintuitive: strengthening political parties ten displayed, at best, an astonishing indiffer- lished this spring called The End of Power, Naim in countries where they are weak so they can ence for what the public will bear—and, at worst, points to events as diverse as the Arab Spring, better train, educate and develop future leaders. an appalling belief that they are above the law. In Occupy Wall Street, Germany’s Pirate Party— “Democracy without strong parties,” he says, Torres’ case, the evidence was so overwhelming and, yes, the election of Tiririca—as proof that “trends towards dysfunction, opportunism and that his peers had no choice but to act, and they old-school institutions are losing their abil- amateurism.” voted to kick him out of the Senate. ity to influence events. That’s due largely to Whatever the cure, it needs to come quickly: But here’s the intriguing twist—Torres’ al- new technologies. “We are surrounded by in- In Britain, France and other parts of Europe, leged corruption wasn’t what seemed to anger novation in everything except how we govern parliaments have already seen some of their Brazilians most. One more sticky-fingered con- ourselves,” Naim says. “If the system doesn’t authority usurped by strong executives, says gressman was hardly a discovery. What left the evolve, this anti-establishment, anti-politician Jacques Reland, head of the European program public disgusted and angry was the near-brawl trend will only continue, with unpredictable at the Global Policy Institute in London. “What with Costa, which made national TV news, was consequences. Tiririca apparently understands you’re seeing is a presidentialization of these in every major newspaper and generated more that. Why doesn’t everyone else?” systems,” Reland says. That might not be cause than 10,000 hits on YouTube... and an endless Others, especially those with experience in for panic in the mature democracies of Europe, barrage of derision on Facebook and Twitter. Congress, say: Hold on—hasn’t representa- but it’s also happening in places like Russia and That’s the second big problem: the notion tive democracy been an instrument of peace Venezuela, where strong executives are taking that, in addition to being thieves, our legislators and prosperity? Are we really ready to throw advantage of the void to limit press freedoms are too busy bickering, making empty speeches out centuries of success because of a decade- and extend their rule indefinitely. And what or sleeping around to get anything worthwhile long malaise? Michael Castle, who served in about the shaky young democracies in the Arab done. In America, few people recall that Con- the U.S. House of Representatives from 1993 world? Can we really expect them to follow a gress passed a free-trade agreement with South to 2011, agrees that technology has changed system that is under such duress elsewhere? Korea in 2012. Yet almost everybody remem- the way legislatures operate—mainly for the For his part, Tiririca no longer has any illu- bers the congressman who, in 2011, tweeted in- worse. “In a corporate boardroom or in a uni- sions. With two years left in his term, he has decent pictures of himself to a female admirer versity, if somebody has a fight or a marital is- narrowed his focus to passing his pet legislation and then resigned when they were made public. sue, probably nobody finds out about it. Yet, in that would, among other things, make it easier Similarly, India’s parliamentary session of mid- Congress these days, it’s all over the Internet for kids who frequently move around Brazil to 2012 will forever be remembered for opposition and cable news right away. Why is that?” Castle transfer from one school to another—so that fu- members repeatedly interrupting debate to de- says, zeroing in on a complaint voiced by legis- ture Tiriricas won’t have to drop out, as he did. If mand the resignation of Prime Minister Singh, lators from Johannesburg to Paris. “Look, I’m it passes, Tiririca says he’ll finally speak on the permitting only a few hours of productive work all for transparency. But it has led to a culture chamber floor. “I’ll be so happy. I’ll say, ‘Man, over the course of an entire month. Perhaps in- that emphasizes the trivial and the sensational, many thanks to all of you. This is so cool. Awe- evitably, there was also a scuffle involving sev- it keeps people from working together… [and] some.’” Until then, “I have nothing to say.” eral MPs. Things got so bad that Singh gave an it obscures the good things that do get done.” In September 2012, Tiririca was named a final- angry speech on the steps outside Parliament on Indeed, with more sober analysis, even last ist for Brazil’s best congressman, an award voted the last day of the session, lamenting a “wasted” May’s debacle in Brazil’s Congress looks a little by journalists in Brasilia. He points to his per- month that had damaged Indian democracy. different. The system worked in the end, and it fect attendance mark and his sober demeanor Tiririca believes such boorish behavior is the was just the second time a senator had been re- as reasons for the distinction, and says he was rule in legislatures, not the exception. He says moved by his peers for corruption in Brazil. Not honored. “Not bad for a clown,” he adds with a the system is set up to encourage pointless the- bad for a democracy that’s not even three decades wry grin. He’s already anticipating what he’ll do atrics and confrontations while making serious old. “Everybody thinks they’re a hero, but I don’t when he escapes from what he calls “my prison.” deliberations nearly impossible. On a tour of the think it’s any worse here in Congress than it is out “I’ll get out of here, and I’m going to do my chamber floor late one evening, it was hard not there,” Costa concluded, months after his tirade. funniest show ever,” he confides. “It’s going to to see his point. A sweaty, balding man was giv- “They should really just let us do our jobs.” be all about Congress.”

�o. reuters 63 jan.2013 illustration by MCKIBILLO After Hours

1. Angelina Jolie 2. Bono 3. Al Gore 4. Mark Zuckerberg Search 5. Joseph Stiglitz 6. Nouriel Roubini “Dr. Doom” 7. Jamie Dimon Party 8. Steven Schwarzman 9. David Cameron Google used to throw the best 10. Yo-Yo Ma bash at Davos, but it’s taking down the disco ball and rolling up the dance floor

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Same-day appointments available. policy wonks (Bono), and revelers could belly up to an oxygen bar (Who’s ready for a double-shot of eucalyptus-flavored O2?). 1.866.276.9954 One recent bash featured a dance floor that converted their gyra- Celebrities, CEOs and economists come to Davos for many tions into electricity. (Prudential PLC CEO Tidjane Thiam is said to clevelandclinic.org/globalpatients reasons, but they all boil down to one: to schmooze. And what better have been among the more enthusiastic dancers.) The floor, made place to do that than at a great party? And Davos has plenty of those. of little modules with springs that captured the kinetic energy, was Since the early ’90s, Accel has hosted a swanky affair (great backlit with LEDs that made it look like a fluorescent Rubik’s Cube. wines), and McKinsey usually does something at the Hotel Europe At another, the party had an underwater theme (a comment on the piano bar (karaoke alert!). When JP Morgan took over that venue world economy?)—there were rounded aquariums protruding off for a cocktail party in 2010, guests only got in after signing a non- the walls, the sea-green mojitos had blue-lime mint jelly, and tray disclosure agreement. PriceWaterhouseCoopers’ dinners tend to passers served sushi on two-dozen iPads (decadence or a droll jab at be a little more sedate (the swag one year was a Thomas Friedman Apple?). One guest said the screen-savers made it look like she was book), Coca-Cola always puts out a nice spread and—as one would “plucking the salmon out of the fresh water.” expect—the party hosted by Japan has great sushi. But that was then, and this is “Welcome to hard times.” Google But for the past decade, the Davos party has been the Google is toning things down this year, eschewing extravagance for what a blowout, which seemed to get a little crazier every year. The guest P.R. woman will only describe as “executive dinners,” which don’t list was supposedly capped at 300, but tent-crashers turned it into sound very sweaty, or fun. a noisy, sweaty scene—think Studio 54, but with more billionaires Alas, it’s time to turn off the LED dance floor. This party’s over. and fewer poppers. It pulled in rock stars (Mark Zuckerberg) and —Elizabeth Dilts and Uzra Khan

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