The Tech Giant Everyone Is Watching

Inside Assad’s new Syria

America’s Supreme Court swings right

Bog-roll Boris, the busted flush

How to make meetings less dreadful JUNE 30TH–JULY 6TH 2018

Thetechgiant everyone is watching Contents The Economist June 30th 2018 5

8 The world this week United States 34 The Supreme Court Leaders Right of way 11 Netflixonomics 35 Bureaucracy The tech giant everyone Shuffle up is watching 36 School design 12 America’s Supreme Court Brutalism After Kennedy 36 Immigration policy 12 The war in Syria How we got here The new Palestinians 39 Lexington Brexit and business Amid a 13 Railways India and America row between business leaders Free the rails and Conservative hardliners, a 14 China’s university- The Americas softer Brexit gains political On the cover entrance exam 40 Canada’s climate policy ground, page 21 Netflix has transformed Gaokao gruel Trudeau and the Toronto television. It is beloved by troublemaker investors, consumers and Letters 41 Funerals in Cuba politicians. Can that last? 15 On trade, surveillance Not going gently Leader, page11. The technology, Xinjiang, 41 Brazilian agriculture entertainment industry is football, Brexit Embrapa’s lost sparkle scrabbling to catch up with a disrupter, page18. The 42 Bello internet was meant to make Briefing The high price of political saviours the world a less centralised 18 Netflixonomics place, but the opposite has The television will be happened. Ludwig Siegele revolutionised Special report: explains why it matters, and Fixing the internet what can be done about it. US Supreme Court Justice The ins and outs See our special report after Britain Anthony Kennedy’s retirement After page 42 page 42 21 Business and politics comes at a worrying time: Hard Brexit unravels leader, page12. The 2017-18 22 Airport expansion Middle East and Africa term was a triumph for The Economist online Problem in the air 43 The future of Syria conservatives, page 34 Daily analysis and opinion to 22 Online campaigning Smaller, in ruins and more supplement the print edition, plus Of barks and bites sectarian audio and video, and a daily chart 23 Labour’s future 45 Protests in Iran Economist.com It’s all Greek to them Rial problems E-mail: newsletters and 23 Rooftop gardens 46 Zimbabwe’s election mobile edition Buzzing and blooming Will it be fair? Economist.com/email 24 Government outsourcing 46 Democracy in Senegal Print edition: available online by The good, the dumb and Reason to worry 7pm London time each Thursday the desperate 48 Somalia and piracy Economist.com/printedition 26 Bagehot A new approach available online Audio edition: Three myths of the NHS to download each Friday Economist.com/audioedition Asia Syria Bashar al-Assad is Europe 49 Politics in the Philippines victorious. But unless refugees can return safely, 27 Turkey’s election Rebel with a cause Recep Tayyip the First 50 Elections in Indonesia they could destabilise the A 175m-man rehearsal Middle East for decades: 28 European defence leader, page 12. How the Assad Coalition of the practical 50 South Korea’s baby bust Volume 427 Number 9098 regime is changing Syria’s 28 Immigration and crime Procreative struggle religious make-up, page 43 Published since September1843 Panic attack 51 Virginity tests in to take part in "a severe contest between South Asia intelligence, which presses forward, and 29 Women in Finland an unworthy, timid ignorance obstructing No-man’s-land Legal assault our progress." 32 Retirement in Russia 52 Banyan Editorial offices in London and also: Asia braces for a trade war Beijing, Berlin, Brussels, Cairo, Chicago, Madrid, Back to work Mexico City, Moscow, Mumbai, Nairobi, New Delhi, New York, Paris, San Francisco, São Paulo, Seoul, 33 Charlemagne Shanghai, Singapore, Tokyo, Washington DC A Balkan opening

1 Contents continues overleaf 6 Contents The Economist June 30th 2018

China Science and technology 53 Community management 70 Psychiatric illness Beefing up neighbourhood Who is to decide, when watch doctors disagree? 54 University admissions 71 Human behaviour The gaokao goes global Oh, the places you’ll go! 71 Cognitive decline International Windows to the brain 55 Patient safety 72 The economics of gifts Physician, heal thy systems Presents of mind China v America Just how 72 Poliomyelitis Patient safety As they strive badly has USA Inc been treated This time it’s real to reduce the alarming by China? Schumpeter, page 62. Business incidence of medical errors, 73 Textiles How the Trump administration 57 European rail Copper-bottomed ideas hospitals are using ideas from will clamp down on Chinese New kids on the track industry and behavioural investment, page 64. Is 58 Bartleby science, page 55 Harley-Davidson’s decision to Taking minutes, wasting Books and arts shift production an isolated hours 74 Revisiting the cold response to Donald Trump’s 59 Restructuring at GE war on screen Subscription service trade war? Page 65 The thaw For our full range of subscription offers, Power failure including digital only or print and digital 60 A victory for Uber 75 The fate of the Romanovs combined visit Family values Economist.com/offers London bridged You can also subscribe by mail or telephone at 60 VW in Rwanda 76 Race, crime and justice the details provided below: First gear in America Telephone: +44 (0) 845 120 0983 Black, white and grey Web: Economist.com/offers 61 Coinbase Crypto’s white-shoe firm 76 A history of skyscrapers Post: The Economist On State Street, that great Subscription Centre, 62 Schumpeter P.O. Box 471, street Haywards Heath, USA Inc v China RH16 3GY 77 How to teach literature UK The art of pouncing Subscription for 1 year (51 issues) Finance and economics Print only UK – £145 63 Wages 80 Economic and financial Railways Why Europe’s train The real story network needs more, not less, indicators Principal commercial offices: competition: leader, page13. 64 Chinese investment Statistics on 42 economies, Safe and secure The Adelphi Building, 1-11John Adam Street, Many state rail firms are ill- plus a closer look at drug London WC2N 6HT prepared for coming reforms, 65 China’s economy production Tel: +44 (0) 20 7830 7000 page 57 Mama’s love Rue de l’Athénée 32 1206 Geneva, Switzerland 65 Harley-Davidson shifts Obituary Tel: +4122 566 2470 production 82 David Goldblatt 750 3rd Avenue, 5th Floor, New York, NY 10017 Roaring away Black and white and read Tel: +1212 5410500 66 The resource curse all over 1301Cityplaza Four, Grand Theft Petro 12 Taikoo Wan Road, Taikoo Shing, Hong Kong Tel: +852 2585 3888 66 Fertility treatment An embryonic idea Other commercial offices: Chicago, Dubai, Frankfurt, Los Angeles, 67 Buttonwood Paris, San Francisco and Singapore Chinese bonds 68 Italy’s asset managers Rich pickings 68 The daily grind Rules for meetings How to Easier money make them less dreadful: Bartleby, page 58 69 Free exchange User ratings

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must be two people ofthe The Syrian army stepped up A federal judge issued an order Politics same sex, but the court found its assault on the rebel-held to reunite familieswho have that this breaches the Euro- part ofDeraa, a province in the been separated at the Mexican pean Convention on Human south-west. The fighting has border when trying to cross it Rights. Those who advocate displaced 45,000 people, illegally. More than 2,000 broadening civil partnerships according to the UN. children separated from their to all people urged the govern- parents in the recent crack- ment to change the law. A moderate climate down remain in custody; in Centrists did well in provincial some cases their parents have Lucky escapes elections in Indonesia. But in already been deported. The An explosion at a campaign the governor’s race in North House, meanwhile, rejected an rally in Zimbabwe attended Sumatra, in which the two immigration reform bill when by Emmerson Mnangagwa, candidates resembled the over100 Republicans ignored the president, killed two peo- likely contenders in next year’s their party’s leaders and voted ple and injured dozens. The presidential election, the mod- against it. Turkey’s president, Recep government claimed that Mr erate whose views are closest Tayyip Erdogan, defied the Mnangagwa was the target of to those ofthe president, Joko In this week’s primaries, Mitt pundits by winning an the attack. He was unharmed Widodo, was beaten by a Romney won his bid to be- outright re-election victory in and said a general election, general backed by religious come the Republican candi- the first round ofvoting. His scheduled forJuly 30th, would and nationalist parties. date for a Senate seat in Utah. Justice and Development (AK) go ahead. He is all but assured ofwin- party, together with its allies, Rodrigo Duterte, the president ning the seat in November; in also triumphed in simulta- A similar attackin Ethiopia ofthe Philippines, called God his victory speech Mr Romney neous elections to parliament. killed two people and injured a “son ofa whore”. “Who is vowed to tackle immigration The elections marked a rise in over150. This one targeted a this stupid God?” he asked in a reform. There was a big upset nationalist sentiment. In his political rally forAbiy Ahmed, speech, prompting predictable in a primary fora congressio- victory speech Mr Erdogan the new prime minister, who is outrage. nal seat in New YorkCity, said the country had “voted pursuing political and eco- where Joseph Crowley, one of for a decisive fight against the nomic reforms and has Malaysian authorities an- the Democrats’ leaders in the PKK”, an outlawed Kurdish reached out to the opposition. nounced that they had seized House, was defeated by group. cash, jewellery, designer hand- Alexandria Ocasio-Cortez, a The warring sides in South bags and other luxury goods 28-year-old socialist. The EU launched a new Sudan’s civil war signed a worth $273m from properties defence co-operation permanent ceasefire, which belonging to Najib Razak, a Slapping a helping hand arrangement, dubbed EI2. calls fora transitional govern- formerprime minister, as part Unlike other non-NATO ment to be created within four ofa corruption investigation. schemes, it will focus on de- months and to govern forthree ployment in conflict zones. years. Ifit holds, the deal will A bad week for liberals secure the flow ofaid into the America’s Supreme Court A European mini-summit on country. issued some blockbuster rul- immigration made little pro- ings. It decided that Donald gress. Italy demanded an end Trump’stravel ban on people to the system whereby mi- from several Muslim countries grants must be processed in is constitutional; let stand a their first country ofarrival. congressional map drawn to favour Republicans in North The British government’s plan Carolina; overturned a law A 24-hour strike to protest fora third runway at from 1977 that required non- against Argentina’s $50bn Heathrow was passed by the unionised public-sector work- standby-loan agreement with House ofCommons by 415 to ers to contribute fees towards the IMF brought much ofthe 119 votes. Boris Johnson, the collective bargaining; and country to a standstill. The foreign secretary, was widely found that religiously oriented General Confederation of ridiculed for missing the vote, A long-standing ban on wom- pregnancy clinics are not Workers, the largest trade having previously said he en driving was lifted in Saudi compelled to provide infor- union, which called the strike, would lie down in front of Arabia. The mood was cele- mation on abortion on free- also demanded pay rises to bulldozers to stop the runway. bratory as women tookto the speech grounds. match the annual-inflation Other opponents ofthe run- road. So farrelatively few have rate, which is 26%. way vowed to continue their been granted licences, though Anthony Kennedy an- fight to prevent furthernoise many thousands have applied. nounced his retirement from The EU imposed sanctions on and air pollution. the Supreme Court. He often 11 Venezuelan officials, in- Big protests erupted in Iran. delivered the swing vote be- cluding the vice-president, A heterosexual couple Thousands ofpeople marched tween the court’s ideological Delcy Rodríguez. The EU said opposed to the “patriarchal towards the parliament build- wings and wrote the opinion that the re-election in May of nature” ofmarriage won the ing in Tehran, angered by rising legalising gay marriage. Mr the president, Nicolás Maduro, legal right to have a civil part- prices and a sinking currency. Trump now has the chance to was “neither free nor fair”. The nership, after appealing to Some clashed with the police, nominate a judge with a more sanctions freeze the officials’ Britain’s Supreme Court. The who eventually dispersed the decisively conservative bent assets in the EU and ban them law states that civil partners crowd with tear gas. and reshape the court. from travelling there. 1 The Economist June 30th 2018 The world this week 9

industry fora post-Brexit that time OPEC’s output fell by Supreme Court’s decision to Business world. The governor ofthe more than had been expected, overturn a 26-year-old law BankofEngland said that mostly because ofthe chaos in through which online retail- General Electric announced Britain has tackled the poten- Venezuela’soil industry; oil ers avoided charging sales tax. that it will spin offits health- tial disruption to derivatives prices almost doubled. Wor- The court found that states care business and sell its 62.5% and insurance contracts, but ried about the economic effect were losing up to $33bn in tax stake in Baker Hughes, which that the EU had yet to offer ofhigher prices, America, revenue each year because of supplies gear to the oil solutions to these “funda- China and India had put pres- the loophole, and that bricks- industry. It was the biggest mental issues”. sure on OPEC, and specifically and-mortar retailers were at a milestone yet in GE’s rolling Saudi Arabia, to act. competitive disadvantage plan to shrinkitselfand focus Apple and Samsung settled because they were obliged to on three core areas: jet engines, their seven-year war over That won’t lower oil prices charge a sales tax. power generation and wind patents, according to court Oil prices leapt, however, after turbines, businesses that ac- documents that did not dis- the State Department said that In a deal that augments its count for60% ofits revenues. close the terms. Apple original- America would apply sanc- takeover ofTime Warner, Shedding its assets will take ly sued Samsung forcopying tions, without exception, on AT&T said it was buying App- time. GE expects to take up to some ofthe iPhone’s features, importers ofIranian oil from Nexus, a digital platform that 18 months to sell its health leading to legal challenges and early November. Iran is OPEC’s helps advertisers buy ads division and up to three years appeals. Apple is still prepar- third-biggest producer. across websites, apps and to exit Baker Hughes. ing to do battle with Qual- streaming video. comm in the courts over what In a first, America’s Food and Born to be riled it claims are excessive royalties Drug Administration ap- On probation Donald Trump reacted angrily forchips. proved a medicine derived A court in London granted to Harley-Davidson’s deci- from marijuana. Epidiolex is Uber a provisional 15-month sion to relocate the production an oral solution to treat two licence to operate in the city, its ofmotorbikes forsale to Brent crude-oil price severe forms ofepilepsy in biggest market in Europe. Europe outside the United $ per barrel children. It contains cannabi- Transport forLondon, a regu- States. The EU recently im- 80 diol, a chemical component of lator, had claimed that the posed levies on a range of the cannabis plant that does firm’s operations were not “fit American imports in retalia- 60 not induce a high. Epidiolex is and proper”, primarily be- tion forAmerica’s higher 40 made by a company based in cause ofconcerns about OPEC agreement duties on steel and aluminium, to cut production Britain, where the recent case Uber’s lapses in reporting pushing up the tariffon 20 ofa boy with acute epilepsy crimes committed by its driv- Harley-Davidson products. 0 whose cannabis-oil treatment ers. London’s mayor, Sadiq The company sells a sixth of its 2016 17 18 was confiscated prompted the Khan, said awarding Uber a bikes in Europe. Mr Trump Source: Thomson Reuters government to rethinkthe probationary licence “vindi- accused it ofusing tariffs as an OPEC and Russia reached a medical use ofcannabis. cated” TfL’s decision to refuse excuse to move jobs outside deal to raise oil production it a new five-year permit. America. from July1st, ending a 18- American consumers may month cut in output designed soon pay more forgoods For other economic data and The Trump administration to push up oil prices. During bought online, following the news see Indicators section backed away from a proposal to create a new body to scrutinise Chinese investment in American technology. Instead, a beefed-up Committee on Foreign Investment in the United States, which screens foreign investors forpotential threats to national security, will have additional powers to blockChinese acquisitions.

Weighed down in part by worries about the trade rift between America and China, the Shanghai Composite, China’s leading stockmarket index, hit a 25-month low. The central bank’s half-a-percentage-point cut to the amount of cash some banks must set aside as reserves did little to improve sentiment.

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[email protected] www.london.edu/gm Leaders The Economist June 30th 2018 11 The tech giant everyone is watching

Netflixhas transformed television. It is beloved by investors, consumers and politicians. Can that last? IG technology firms elicit ex- has long been a hallmark of tech firms. Amazon, Disney and B treme and conflicting reac- others are refining their own direct-to-consumer video ser- tions. Investors love them for vices. But most media firms have a lot ofcatching up to do. their stellar growth and vast am- Other tech giants can also learn from Netflix. Compared bition: the FAANG group oftech- with the other FAANGs, the firm is distinctive in several ways. nology stocks, comprising Face- Unlike Facebookand Google, Netflix has steered clear ofnews book, Amazon, Apple, Netflix and mostly stuck to entertainment. That has protected it from and Alphabet (Google’s parent), scandals over fake news, electoral manipulation and political isworth more than the whole ofthe FTSE100. Withoutthem to tribalism. And unlike those two ad-based platforms, its sub- power its growth, America’s stockmarket would have fallen scription-based business model means that the firm does not this year. Yet the techlash has also entangled the digital giants rely on selling users’ data or attention to outsiders. Instead, it in all manner of controversies, from data abuse and anti-com- offers customers a simple exchange: a monthly fee in return for petitive behaviour to tax avoidance and smartphone addic- television they want to watch. Unlike all the other FAANGs, tion. They have become the firms politicians love to hate. which are global but unmistakably American, Netflix is be- All but one. Alone among the giants, Netflix is a clear excep- coming truly international: it makes TV shows in 21 countries, tion to this mix of soaring share prices and suspicion. Since its dubbing and subtitling them into multiple languages. The oth- founding in 1997, the company has morphed from a DVD-rent- ertech firmsare notaboutto rip up theirbusinessmodels; they al service to a streaming-video upstart to the world’s first glo- work too well. But they can still learn from Netflix: to use data bal TV powerhouse. This year its entertainment output will far with greater care, to be clearer about the terms of trade with exceed that of any TV network; its production of over 80 fea- their customers and to be more respectful oflocal markets. ture filmsisfarlargerthan anyHollywood studio’s. Netflixwill spend $12bn-13bn on content this year, $3bn-4bn more than last Next up: house of cards year. That extra spending alone would be enough to pay forall Ifsuch traits help to explain why the firm has avoided the tech- ofHBO’s programming—or the BBC’s. lash, they do not ensure it can keep everyone happy. The short- The 125m households the company serves, twice as many term danger is financial. Frothy valuations are commonplace as it had in 2014, watch Netflix for more than two hours a day at the moment, but Netflix still stands out. To justify its current on average, eating up a fifth of the world’s downstream inter- valuation, Netflix’s gross operating profits in a decade’s time net bandwidth. (China is the one big market where it is not al- would have to be equivalent to about half of all the profits lowed to operate.) Its ascent has mirrored the decline of tradi- made by American entertainment firms this year. “If Jesus tional television viewing: Americans between the ages of 12 were a stock, he’d be Netflix,” one savvy investor is said to and 24 watch halfas much pay-TV today as they did in 2010. have observed. “Youeither believe or you don’t.” Uniquely among tech upstarts that have reshaped indus- There are plenty of reasons to doubt. The company has tries in recent years, Netflix has wrought its transformation amassed $8.5bn of debt. Reed Hastings, its chief executive, has without triggering a public or regulatory backlash. With a said it will continue borrowing billions “for many years”; free share price that has more than doubled since the start of the cashflow is expected to remain negative for some time. That year, it is as popular with investors as it is with consumers. All strategy will pay offifNetflix can raise prices while continuing of which raises three questions. What are Netflix’s lessons for to add subscribers—26m in the 12 months to March 31st. But othermedia firms? Whatcan the restofthe FAANGslearn from competition is becoming more intense. And in countries with- its success? And can it go on keeping everyone happy? out “net neutrality” protections, owners of wireless or broadband infrastructure that also control content-makers may use Hollywood ending their distribution clout to favour their own material. Start with other media firms. Moguls who once happily hand- The long-term riskforNetflix, paradoxically, isif today’s diz- ed their content to Netflix as a source ofextra revenue are now zying valuation proves not to be too high, but accurate. The scrambling to compete with it. The result is a dealmaking fren- techlash has been driven partly by fears that centralised digital zy, with AT&T buying Time Warner, and Disney and Comcast platforms will end up throttling competition (see our special fighting over bits of 21st Century Fox. Consolidation is only report). Some suspect that Netflix harbours ambitions to part ofthe answer forconventional entertainment firms, how- monopolise TV. Such a move would concentrate enormous ever. They must also follow Netflix’s lead and use the internet amounts of cultural power in the hands of a few content com- to offer consumers lower prices and more choice. Netflix now missioners and algorithms. It would hollow out support for has more subscribers outside America than inside it. From public-service broadcasters, by reducing their audience, and Mexico to India people stream “Narcos” and “StrangerThings” risk leaving poorer users with fewer affordable entertainment in a planet-wide community of binge-watchers. It makes ex- options. And it would inevitably find it much harder to avoid pert use ofdata, categorising individual users’ preferences into the attention of regulators. Here, then, is a final lesson that ap- about 2,000 “taste clusters”, to serve up different shows to dif- plies to Netflix, and all tech firms. To keep consumers, regula- ferent users, including within the same family, via targeted rec- tors and politicians happy over the long term, there is no sub- ommendations. This combination of scale and data science stitute forcompetition. 7 12 Leaders The Economist June 30th 2018

America’s Supreme Court The ﬁnal swing

Justice AnthonyKennedy’s retirement comes at a worrying time OR 12 years, Anthony Kenne- States section). The court upheld Mr Trump’s ban on travel Fdy has been the Supreme from several mostly Muslim countries. It dealt a blow to pub- Court’s swing vote. The court’s lic-sector unions by overturning a 41-year-old precedent that liberal and conservative quar- allows them to charge non-members forcollective bargaining. tets voted predictably. He did And, most consequentially, it issued a series of decisions on not—which is why those who voting laws that found in favour of entrenched (Republican) want the Supreme Court to float majorities. above America’s partisan di- The court declined to condemn gerrymandering. It upheld vide reacted with such dismay to his retirement, announced congressional and state legislative maps in Texas that, accord- on June 27th. Justice Kennedy’s departure from the bench ingto lowercourts, discriminated againstblackand Latino vot- might sound like a minor detail set against everything else that ers. And it rejected a challenge to an Ohio law that takes voters is going on with America’s government at the moment. It is off the rolls who stayed at home for several elections and ne- not. President Donald Trump now has the opportunity to ap- glected to return a postcard (voters who, by some extraordi- point a second Supreme Court justice and with it to cement a nary coincidence, were predominantly Democrats). Most of 5-4 conservative, one might even say Republican, majority at a those decisions were 5-4, with Justice Kennedy, contrary to his time when the constitution is under strain from a norm-break- usual pattern, voting each time with the conservative bloc. ing Republican president. The high stakes herald a gigantic fight in the Senate. Demo- Root and third branch crats are still smartingfrom the way that Senate Republicans in Once a 5-4 majority becomes their worst outcome, Republi- 2016 ignored Barack Obama’s Supreme Court nominee for293 cans will have an incentive to push for more radical change. days. The Republicans’ failure to give Merrick Garland a hear- Republicans have longwanted to overturn Roe v Wade, the ruling before the election allowed Mr Trump to pick a judge. ing in1973 that decided federal abortion law. Justice Kennedy’s Democratswill bend everyremainingSenate convention rath- departure will give them that chance. His was the swing vote er than be bested again. This will poison a polarised polity that decided that the federal government could regulate car- even further. But it is hard to blame them. The legislative bon-dioxide emission. That, too, could go. Another sally branch has become so gridlocked that no president can expect against Obamacare is inevitable. So are attempts to roll back to sign more than one or two significant laws. Far more law- socially liberal rulings of recent terms, such as expansions of makingistherefore done bythe Supreme Court, through itsde- gay rights and limits on capital punishment. cisions to overturn or uphold state laws or presidential de- Even in normal times, activist judicial partisanship is dan- crees. A reliable 5-4 majority will give conservatives immense gerous. All the more so with a president so contemptuous of power to reshape America by doing just that. institutions. In the “Federalist Papers”, Alexander Hamilton For a sense of what a court with a stable conservative ma- called the judiciary the “least dangerous” branch of govern- jority might look like, consider the term just past. Its 63 rulings ment, because instead of “force” and “will”, it has only “judg- marked the most decisive shift to the right in years (see United ment”. That looks like cold comforttoday. 7

The war in Syria The new Palestinians

Basharal-Assad is victorious. But Syria’s refugees may destabilise the Middle East fordecades HE monstrous dictator has pre-war population of 23m. Still more may be pushed out as Syrian refugees Twon. Bashar al-Assad has Mr Assad moves to retake mostly Sunni rebel areas in the By destination*, m Lebanon Turkey bombed, gassed and starved his north and south-west ofSyria. His state, meanwhile, is becom- 3.57 0.98 Internally enemies out ofthe biggest cities. ing more narrowly sectarian as Alawite (his sect), Shia and displaced He has made fools of Barack Christian minorities start to take over property abandoned by Jordan 6.5 0.25 Iraq 0.67 Obama and David Cameron, the fleeing Sunnis (see Middle East & Africa section). 0.83 0.13 Egypt *June 2018, who said he should go but did Syrians could thus turn into another dispossessed, fester- Europe or latest nothing to bring his departure ing, violent diaspora. Like the Palestinians before them, they about. He has shrugged off the missiles that President Donald could become a destabilising presence across the Middle East. Trump fired at his bases. The world has every interest in stopping that from happening. Half a million people have died. Six million people are dis- Mr Assad’s survival is a lesson in the use of butchery, the ri- placed within Syria; a similar number have fled abroad. Most valries of his foes and the emptiness of Western pronounce- of the refugees are Sunni Arabs, who made up most of Syria’s ments. By shooting peaceful protesters, Mr Assad provoked 1 The Economist June 30th 2018 Leaders 13

2 them into violence. By releasing jihadists from prison, he It would be no surprise if Syrian refugees—many times turned many into fighters for al-Qaeda and the even more more numerous than the 750,000 Palestinians uprooted dur- gruesome IslamicState (IS). Thushe persuaded terrified Syrian ing the birth of Israel—became similarly radicalised. They minorities to rally behind him, deterred the West from giving would be easy prey for jihadists. Right now, even without vio- the rebels meaningful help, even when he used chemical lence, refugees are straining host countries, such as Lebanon, weapons, and provided the cover for Iran and Russia to save Jordan and Turkey. A lesson from the Palestinians is that the him in the name offighting terrorism. longer refugees stay out, the less likely they are to return. Many This newspaper has long advocated Mr Assad’s removal as Syrians flinch at the idea ofgoingback, fearful that they will be the best way to end Syria’s nightmare. That opportunity has killed, forced into camps or dragooned into the army. gone. So what now? Mr Trump says he has no interest in Syria; once his troops have smashed IS they will get out of the coun- Quid pro quickreturn try’s east. It is tempting to give up on Syria. Talking to MrAssad The first step to getting refugees home is some form of lasting would legitimise his atrocities. Giving him any money to re- ceasefire, and preferably a broader political deal. This should build his country would be doubly repulsive. Let Russia and involve power-sharing in Damascus, and the devolution of Iran fix the devastation they have caused. power to the provinces. Mr Assad accepted little of this when Yet that would be shortsighted. Apart from the moral obli- he was losing. Would he do so now that he is winning? He is al- gation the world has to help the brutalised Syrian people, the ready reconfiguring the country in favour of those who stayed West—particularly Europe—has hard-nosed reasons to stay en- loyal. The West, and Arab states, have only weak levers. Still, gaged. One is the need to stem the flow ofrefugees who, along he might want better ties with them to avoid becoming entire- with other migrants, have fuelled populism in Europe. Anoth- lydependenton Russia and Iran, to help him recover control of eristhe dangerthata large population ofSyrian refugees could his borders and, above all, to find the billions of dollars he act as a lingering poison in the Middle East. needs to reconstruct his shattered country. The experience of stateless Palestinians is sobering. Those America, Europe and Arab states could test his intentions who fled or were pushed out by a nascent Israel in 1947-48 fo- by offering Syria limited humanitarian funds to help bring ref- mented much violence. Their raids helped ignite the Arab- ugees home, on condition that he grants local autonomy. A Israeli war of 1967. Their fighters lost a civil war in Jordan in good place to start would be rebuilding ghost-towns such as 1970; in Lebanon, they helped precipitate the 15-year civil war Daraya or Douma. Having missed the moment to push Mr As- in 1975 and the Israeli invasion of1982. Some also turned to in- sad out, the world musthold itsnose, and tryto limit the conse- ternational terrorism and helped radicals in Europe. quences ofthe devastation it has allowed him to wreak. 7

Railways Free the rails

WhyEurope’s train networkneeds more, not less, competition RAINSare notquite the third when they implement the reforms—and at the least, to sepa- Trail of European politics. But rate these areas into two different businesses—is strong. they are still causing lots of First, the broader case for competition. It is possible to have angst. France has already en- good rail services without liberalisation. But those that do, in dured three months ofstrikes, as Switzerland and France, consume some ofthe highest levels of railway workers protest against subsidies in Europe. Eliminating state rail monopolies cuts a planned liberalisation. In Brit- costs. Take Sweden, the firstEuropean countryfullyto separate ain, meanwhile, nostalgia for track and train, in 1988. As research from the University of state ownership is on the rise. Around 60% of Britons support Gothenburg has found, the costs of operating trains fell by10% renationalisation ofthe railways, accordingto a poll published in the decade after deregulation due to competing firms bat- in January by Sky, a broadcaster. A botched timetable change tling it out. Passengers benefit from cheaper tickets. On lines in in May, resulting in up to 43% of trains being delayed or can- Austria, the Czech Republic and Italy where there is genuine celled each day by one operator, will not have improved com- competition between operators, fare wars have broken out. muters’ mood. The strikes and surveys show that rail competi- The average ticket price from Prague to Ostrava has fallen by tion is controversial. It is to be embraced nonetheless. 61% since the state rail firm lost its monopoly in 2011. Governments will soon have theirchance to do just that. By June next year, new EU rules called the “fourth railway pack- Platform capitalism age” will force state rail firms to open their tracks to private op- By nudging firms to use innovative marketing and pricing sys- erators. Some countries, such as Britain and Sweden, have tems, competition helps boost train use. In 2007-12 passenger done this already. Others, like Germany and Italy, are in the numbers on Britain’s East Coast main line, which runs from process ofdoingso; Belgium, France and Spain have hardly got London to Edinburgh, grew by 15 percentage points more and started. Many countries want to do the minimum necessary to fares by six percentage points less at stations with competition meet the rules, by putting a “Chinese wall” between the train compared with those without, reckonsAECOM, a consultancy. and track divisions of state firms rather than separating them Between 1996 and 2016, rail passenger-kilometres grew fastest completely. The case for national governments to go further in European countries with the most liberalisation. 1 14 Leaders The Economist June 30th 2018

2 Nor does liberalisation in rail lead to corner-cutting on safe- Britain, where higher passenger numbers often mean sardine- ty, as many trade unionists have argued. Between 2004 and like commutes, the mistake was to give rail franchises to firms 2015 deaths due to accidents on Britain’s railways fell by 74%, which then have a near-monopoly for the duration of their compared with a 36% fall in the EU as a whole. Fear of losing contract. The vast majority of passengers have no meaningful out on contracts is a genuine spur to taking safety seriously. choice between operators, meaning most have nowhere to go The full benefits of competition are less likely to material- when service qualitydeclines. What’smore, the rail franchises ise, however, without a complete separation of track and are run bythe DepartmentforTransport, resultingin more day- trains. A state-owned track company that also runs trains will to-day political fiddling than ever occurred under British Rail. have a clear incentive to cheat in order to best its private train- A better model is to be found in Sweden. There, the system operating rivals. In 2017 NS, the Dutch state rail firm, was is run by a quasi-autonomous government agency, which re- fined €41m ($46m) forusinginformation it had as a track own- duces political meddling. Half of the trains are run by “open erto win a rail contractunfairly.Lithuanian Railways wasfined access” operators that can compete against government fran- €28m for removing a section of track on a cross-border link chisees forpassengers, keeping them on their toes. with Latvia in order to hobble a rival operator. The gains to be had from competition on the railways are It is clearly possible to do liberalisation the wrong way. In real. But only ifgovernments get the implementation right. 7

China’s university-entrance exam The gaokao grind

The world’s most important academicexam is flawed. China must find a betterwayofselecting students N THE past few days nearly workand creativity,are neglected. I10m young Chinese have re- The government accepts that this must change. But parents ceived their results from the complain whenever schools encourage students to do things world’s largest and most impor- other than learn gaokao-required facts. That is understand- tant academic exam, commonly able: they want their children to get into one of China’s hand- known as the gaokao. In some ful ofglobally respected colleges. The answer lies in reforming places the news has been sent to the gaokao and, over time, for the government to focus more them by text message—an inno- on turning China’s many bad universities into better ones. vation that has done nothing to compensate for the horrors of Another worry is that the supposed meritocratic virtues of what they have endured: years of cramming at the expense of the gaokao are notwhattheyseem. Forsure, those who getinto any other activity in the hope ofa gaokao score that will quali- the best universities are chosen fortheirscores, not theirpoliti- fy them for admission to a leading university. In China even cal connections. Butthose who have the bestchance of scoring more than elsewhere, achievement in education is judged not well are rich city-dwellers. Poorer people in many countries by how well you perform at university, but by which one you suffer disadvantages in education, but in China such problems attend. Everything, therefore, depends on the gaokao. are magnified by government spending on schools that is The exam is both cherished and despised. It is praised by heavily skewed in favourofcities. Free education ends afterju- many as being a relatively corruption-free method ofensuring nior high school. The crucial part that prepares students for advancement for those who study hard. The nation rejoiced gaokao can involve crippling expenses for poorer families. In when the gaokao was restored in 1977 after the death of Mao, big cities such as Beijing, the children of rural migrants are of- who had scrapped itand filled collegeswith ill-educated devo- ten barred from entry to schools as a result of the pernicious tees of his cult. But many people resent the huge stress it im- hukou system of household registration that gives greater poses on adolescents. In recent years, along with the rapid benefits and privileges to long-established urban families. growth of China’s middle class, the numbers seeking educa- There is also a problem with the exam questions them- tion abroad, mainly in the West, have soared. Last year more selves. Students have to tailor their answers to suit the Com- than 600,000 did so, fourtimesasmanyasa decade earlier. Es- munist Party’s views. This year candidates were required to caping the gaokao ordeal is often cited as a reason. write essaysaboutthe thoughtsofMrXi. Arguingagainst them The gaokao is flawed, however, not only because so many was not an option. Sun Chunlan, a deputy prime minister, re- young people’s lives are so profoundly affected by the results cently said the gaokao system was “tasked with the important of one exam. Both the test and the schooling that prepares stu- mission to educate and pick talent for the state”. It certainly dents for it are unfair and ill-suited to the needs of a country does a good job ofencouraging toadyism. that wants its workers to be more innovative. A common complaint about the gaokao is that it requires so much rote-learn- One Chinese export the world can do without ing, at least for those parts that do not involve solving mathe- The gaokao system badly needs reform. In the West, however, matical puzzles and the like. That is a problem common to a growing number of universities are admitting Chinese stu- many exams, but the supreme importance of the gaokao dents on the strength ofgaokao scores, rather than results from means that schools usually focus only on cramming students internationally recognised entrance exams (see China sec- forit during their three years ofsenior high school. Other skills tion). They should think twice. No institution that purports to that are needed for the creation of the “knowledge economy” uphold free thinking should endorse an exam that forces ap- that President Xi Jinping says he wants to build, such as team- plicants to conform with political orthodoxy. 7 Letters The Economist June 30th 2018 15

A new trading order Retaliation is never a good But that should not mean that, tion of“apartheid with Chi- option to save a multilateral when a judicial officer has nese characteristics” are totally Yourrecommendation of order based on facilitating issued a warrant, the mobile unfounded. Xinjiang has been retaliatory tariffsagainst Amer- trade and the most-favoured phones ofsuspected criminals battling separatism, terrorism ica is the perfect prescription nation principle (MFN). The or terrorists are inaccessible in and religious extremism, the forensuring a destructive trade better option forAmerica’s an investigation. latter ofwhich is a distortion war (“Rules ofwar”, June 9th). trading partners would be to MICHAEL BARRENGER ofand disrespect forreligion Youstrongly defended the lower their applied tariffs North Vancouver, Canada and undermines public securi- status quo in global trade rules. unilaterally below what has ty. The local government has Although America’s steel and been negotiated on a MFN There are indeed many taken measures to prevent and aluminium tariffsare, at best, basis, thus against all trading advantages to using ankle combat religious extremism dubious on their merits and partners. This would strength- bracelets to keep those accused and protect normal religious represent a threat to the trading en the system, signal a shift in ofless serious crimes under activities. These measures are system, there is a reasonable leadership from America to house arrest. Unfortunately, lawful and have curbed the chance that they could other WTO members and help many jurisdictions (including spread ofextremism. They are withstand a legal challenge. consumers. As tariffswould be Ontario) stifle these techno- a positive contribution to Unilateral retaliatory tariffs no longer the most important logical advances by making international deradicalisation are, on the other hand, clearly barrier to trade, short-term the accused pay fortheir own and counter-terrorism efforts. prohibited under the rules of adjustment costs would be ankle bracelet at a cost of $600 ZENG RONG the World Trade Organisation manageable to the benefit of a month. Ifthey can’t afford to Spokesperson of the Chinese and would never withstand the competitiveness ofthe pay,the state throws them in embassy legal challenges. Yoursupport economies in the longer run jail forten times the cost at London forillegal retaliation under the because ofbalancing incen- taxpayers’ expense. Artificial pretence ofpreserving a rule- tives ofproduction between intelligence is one thing but we Football crazy, football mad based order is bizarre. The imports and exports. Donald need more ofthe organic kind. reality is that such retaliation is Trump’saggressive bilateral- STEPHEN AYLWARD Out ofcuriosity, I was moved driven by local political ism could be sidestepped if the Toronto to watch those World Cup imperatives and forpreserving MFN principle re-emerged as moments you depicted so trade surpluses, not by a faux the trade-policy yardstickof China’s actions in Xinjiang poignantly in “Abeautiful respect forthe rules. America’s trading partners. game” (June 9th). Seeing Diego Anyone who believes that ROLF J. LANGHAMMER Despite what you say, the Maradona’s glory and the retaliatory tariffshave the Kiel Institute for the World Chinese government attaches unravelling ofZinedine Zidane slightest chance ofstopping Economy great importance to the stabil- as an expression ofheroic American policy in its tracks is Kiel, Germany ity and development of genius is just as exquisite as a living in some fantasy world. Xinjiang (“Apartheid with day at the Louvre. KELLY MORGAN The reality is that the post-war Unlocking criminals’ phones Chinese characteristics”, June world order that was steered 2nd). The economic, social and Los Gatos, California by a hegemonic United States Yourleader on technology and security measures that have is no longer fit forpurpose in a surveillance compares an been implemented in the Tissue of lies 21st-century world where trade encrypted mobile phone to a region are based in law and issues are much more complex filing cabinet, stating that just aimed at ensuring stability, and are coalescing around “as filing cabinets can be harmony and economic pros- three competing blocs led by locked, encryption should not perity. These measures have America, China and the Euro- be curtailed” (“Perfected in been effective in safeguarding pean Union. In such a world, China, a threat in the West”, the safety oflife and property competition is more likely June 2nd). Yet a filing cabinet ofpeople from all ethnic than co-operation. Ifan all-out cannot be used instantaneous- groups in Xinjiang and enjoy trade war is to be avoided, we ly to organise a large-scale drug extensive public support. must rethinkthe basis ofour deal, procure firearms or or- Xinjiang’s development global trading system rather chestrate a murder. Moreover, has been notable in recent than sticking doggedly to an assuming probable cause to years. Its gross economic out- unsustainable status quo. believe there is evidence of an put increased from 753bn yuan Europe and Canada should offence, the police can obtain a ($119bn) in 2012 to 1,092bn Brexit on a loo-roll (Cover, June tread with caution. Should a warrant fora filing cabinet and yuan in 2017. Disposable 16th)? A picture is worth a fierce trade war breakout, they easily enter a place to retrieve income per head during the thousand words, and it was stand to lose much more than the evidence. same period grew by10% on not a strain to flush out your anyone else and riskbeing As a prosecutor dealing average each year. The local meaning. squeezed between America with organised crime I have government has allocated 70% ALEC BURNSIDE and China. A severe encountered many instances ofthe public budget to improv- Wezembeek-Oppem, Belgium 7 transatlantic rift would also where the police, with more ing lives, and has successfully jeopardise the future ofa than ample grounds, have resolved a large number of European project that is still obtained warrants formobile difficult issues that matter to Letters are welcome and should be heavily dependent on devices, but have been foiled people’s everyday lives. addressed to the Editor at The Economist, The Adelphi Building, America’s security umbrella. by encryption. Youare right Local ethnic culture and the 1-11John Adam Street, JOE ZAMMIT-LUCIA that computer technology has freedom ofreligious belief are London WC2N 6HT Co-founder facilitated the surveillance fully protected. Yourmention E-mail: [email protected] Radix state in countries lacking con- ofthe “control” ofreligious More letters are available at: Economist.com/letters London stitutional privacy protections. beliefin Xinjiang and descrip- 16 Executive Focus

The Economist June 30th 2018 Executive Focus 17

The Economist June 30th 2018 18 Brieﬁng Netﬂixonomics The Economist June 30th 2018

In the first quarter of this year Netflix The television will be revolutionised added 7.4m net new subscribers worldwide. That gave it a total of 125m, 57m of them in America. With an average subscription of $10 a month, those customers represent some $14bn in annual revenue which the company will plough straight AMSTERDAM, HOLLYWOOD AND LOS GATOS back into programming, marketing and The entertainment industry is scrabbling to catch up with a disrupter technology—along with billions more that N THE heyday of the talkie, Louis B. send cinemas only 23. (Disney, the most it will borrow. Goldman Sachs, a bank, IMayer, head of the biggest studio, was profitable studio, is putting out just ten.) thinks that it could be spending an annual Hollywood’s lion king. In the 1980s, with Netflix is producing or procuring 700 new $22.5bn on content by 2022. That would the studio system on the wane, “super- or exclusively licensed television shows, put it within spitting distance of the total agent” Michael Ovitz was often described including more than 100 scripted dramas currently spent on entertainment by all as the most powerful man in town. Now and comedies, dozens of documentaries America’s networks and cable companies. the honour falls to someone who used to and children’s shows, stand-up comedy Enticed by such prospects, the market run a video store in Phoenix, Arizona. specials and unscripted reality and talk values Netflix at $170bn, which is more Ted Sarandos joined Netflix, a DVD- shows. And its ambitions go far beyond than Disney. Some analysts see this as out- rental firm, in 2000. In 2011, when Netflix Hollywood. It is currently making pro- landish for a company yet to make a profit, was first moving into streaming video, he grammes in 21 countries, including Brazil, which has $8.5bn in debt and hasn’t even bought “House of Cards”, a television Germany, India and South Korea. had thatmanyhitprogrammes. Itscompet- drama starring Kevin Spacey and Robin Mr Sarandos buys quality as well as itors, though, see it as a call to arms. It was Wright and produced by, among others, quantity with his billions. From Mr the prospect of building a similarly inte- the film director David Fincher, for $100m. Fincher on, he has hired directors both grated producer, purchaser and distributor The nine-figure statement of intent was famous and interesting, including Spike of content that led AT&T, a wireless giant, widely derided as profligate, showing that Lee, the Wachowski siblings and the Coen to buy Time Warner for $109bn. If Com- Netflix might be a source of cash but brothers. He is building a bench of estab- cast, America’s largest broadband pro- scarcely offered serious competition. A lished television hit-makers: Ryan Murphy vider, buys most of 21st Century Fox from mail-order video store could hardly be ex- (creator of “Glee” and “American Horror the Murdoch familyformore than $70bn, it pected to take on networks and studios Story”) and Shonda Rhimes (creator of will be to a similar end—and ifthe Fox goes which took decades to build and were no- “Grey’s Anatomy” and “How to Get Away to the mouse house instead, it will be be- toriously difficult to run. with Murder”) both recently signed up. Da- cause Disney knows that to compete with Instead it has become an industry in vid Letterman has come out of retirement the new giant it needs to own even more and of itself. Mr Sarandos, Netflix’s chief to do a talk show. Barack and Michelle content than it already does. content officer, and his colleagues will Obama have signed a production deal, too. Amazon, Apple, Facebook, YouTube spend $12bn-13bn this year—more than any The money helps: Mr Murphy’s deal is re- and Instagram are all developing program- studio spends on films, or any television portedly worth $300m; Mr Letterman is ming efforts of their own. “The first company lays out on stuff that isn’t sport. said to be getting $2m a show. But so does thought on everyone’s mind is how do we Their viewers will get 82 feature films in a the company’s growing reputation. “They compete with Netflix?” says Chris Silber- year when Warner Brothers, the Holly- want to be on the channel that they mann, managing director of ICM, an agen- wood studio with the biggest slate, will watch,” Mr Sarandos says. cy that represents a numberofpeople who 1 The Economist June 30th 2018 Briefing Netflixonomics 19

2 have signed huge deals with Netflix, in- says one Hollywood executive. get better results for a lesser-quality show cluding Ms Rhimes and the comedians Jer- Todd Juenger ofSanford Bernstein, a re- than its peers can by showing it only to ry Seinfeld (another$100m deal) and Chris search firm, says Netflix could have 300m those who will like it. Most readers of The Rock (two comedy specials for a reported subscribers by 2026, with revenues per Economist will not have heard of“The Kiss- $40m). “Apple wouldn’t even be thinking subscriber of $15 a month; that suggests ing Booth”, a romantic high-school com- about this business if it wasn’t for Netflix,” $24bn in earnings before interest, taxes, de- edy released in May. Critics hated it. But it says Mr Silbermann. “Neither would Fox preciation and amortisation and an enter- has been seen by more than 20m house- be in play.” Rupert Murdoch chose to break prise value of at least $300bn, Mr Juenger holds; millions of teenagers targeted by al- up Fox to get out of Netflix’s way. Jeff argues. With investors expecting further gorithms seem smitten by its leads, Jacob Bewkes, the former chief of Time Warner, growth on top of that, its market value Elordi and Joey King. acknowledged after agreeing to sell his would be a lot higher. Itsquantitative understanding, and per- company that Netflix’s direct connection One far-reaching effect of Netflixonom- sonalised marketing, of niche projects has to the consumer gave it a huge advantage. ics is that it has changed the calculus of seen Netflix revive cancelled shows with whether a show or film is worth making. loyal fan bases, such as “Gilmore Girls”, Nobody can watch everything... The company has identified some 2,000 and take up shows others turned down, For Mr Bewkes that was quite a reversal. At “taste clusters” by watching its watchers. such as “The Unbreakable Kimmy the beginning of this decade he poured Analysis of how well a programme will Schmidt”. It has got Emmy nominations scorn on the idea that Netflix could be a reach, draw and retain customers in specif- for the A-list cast of a show about a pair of competitor, comparing it to the “Albanian ic clusters lets Netflix calculate what sort of elderly women, jilted by their gay hus- army”. “He did not believe that the inter- acquisition costs can be justified for it. It bands, making sex toys (“Grace and Fran- net was going to be material fora very long can thus target quite precise niches, rather kie”). Documentaries like “Wild Wild time,” Reed Hastings, co-founderand chief than the broad demographic groups Country” became hot not just by word of executive of the Albanian forces, recently broadcast television depends on. Deci- mouth, but by being pushed on the home- told The Economist in Amsterdam, Netflix’s sions about what projects to pursue, and screen, poster by individualised poster. European headquarters. whether to make them, are up to the exec- What Mr Bewkes missed, but Mr Has- utives in Hollywood; Mr Sarandos has 20 ...but everybody can watch something tings did not, was not just that the wireless people working forhim who have the cov- Netflix can take risks on such projects be- internet would become a reliable conduit eted power to “green light” a project. But cause failure costs it less than it does oth- for high-quality video, but that in doing so the boffins at headquarters in Los Gatos ers. It does not shepherd users towards it would change the rules of television. help set the budgets. shows their co-clusterers have hated, so There would be no time slots and no chan- Once a show is ready for delivery, it is few come to distrust the brand because of nels, no waiting until next week to see up to executives in Los Gatos like Todd Yel- seeing things they really do not like. Stink- whom the Lannisters betray or the Good lin, vice-president of product, to work out ers do not impose the opportunity costs of Wife sleeps with. Given big enough how to get it to the appropriate users and a poor performer in prime-time; no other pipes—in September 2017 Netflix streams check that they are, in the corny parlance shows have to be cancelled because the were taking up 20% of the world’s down- of the company, “delighted” by it. Netflix network could not programme Wednes- stream bandwidth, according to Sandvine, customerswill scroll through 40 or50 titles day nights. The stuff for which there is no a network-equipment firm—a company on their individualised homescreen, he market just disappears. would be able to offer every one of its cus- says, before they choose a title. The choice Cheap, personalised, advertising-free, tomers something he wanted to watch, can come down to details like the poster binge-released video iswidelyseen as hav- whenever and wherever he wanted to art, which Netflix tweaks algorithmically ing hastened a decline in audiences for watch it, foras long as he wanted to. according to the aspects of a film or show broadcast television, thus doing a great That company would need two things: that would appeal most to a given user. deal of damage to television advertising. It a big, broad, frequently renewed range of The combination of personalisation has also led millions of American house- programming; and an understanding of its and reach makes the Netflix homescreen holds to dispense with pay-TV. Americans consumers deep enough to serve up to the most powerful promotional tool in en- aged 12-24 are watching less than half as each ofthem the morsels most likely to ap- tertainment, according to Matthew Ball, a much pay-TV as in 2010, according to Niel- peal. This mixture ofbreadth and depth, of digital-media analyst. It lets the company sen data; those aged 25-34 are watching1 content and distribution, of the global and the personal, is the heart of Netflixonom-

ics—the science of getting people to sub- Islands in the stream Season popularity 50 100 scribe to television on the internet. Netflix, selected programmes Rotten Tomatoes score Not yet released One ofthe reasons that Netﬂixis spending in such haste is that Netﬂixonomics is a 2013 14 15 16 17 18 winner-takes-most proposition. People House of Cards can only spend so much time being enter- Arrested Development* tained by television. If you can provide Orange Is them with entertainment they genuinely the New Black enjoy forthat length oftime, they will have BoJack Horseman The Unbreakable little reason to pay anyone else for further Content spend, $bn Kimmy Schmidt screen-based entertainment—though they Grace and Frankie 12 may splash out more for sport, and put up Narcos

with adverts for news, real or fake. Being 9 Jessica Jones big early thus constitutes a first-mover ad- 6 Stranger Things vantage. And the dash towards size has the helpful side-effect of driving up rivals’ pro- 3 The Crown duction costsatthe same time asiteats into 0 GLOW 2014 15 16 17 18† their revenues. Netflix is “intentionally try- † ing to destroy us, the existing ecosystem,” Sources: Goldman Sachs; Rotten Tomatoes *Seasons 1-3 aired by Fox Forecast 20 Briefing Netflixonomics The Economist June 30th 2018

2 40% less. Networks devoted to scripted en- wants Amazon to have hits as big and Goldman Sachs, which isatthe bullish end tertainment or children’s programming, as buzzy as HBO’s “Game ofThrones”. To that of Netflix assessments, finds that subscrib- opposed to news and sports, have been end the company paid $250m forthe rights er growth correlates with the rate at which hardest hit. to make a “Lord ofthe Rings” TV show. But new content is added. But Netflix faces sev- To stay in the game, cable networks and for Amazon, video will always be part of a eral potential challenges. Its easy-sign-up other streaming services have commis- bigger strategy. For Netflix it is everything. subscription model is also easy to cancel. sioned hundreds of hours of high-quality Netflix’s investments beyond America Netflix does not discuss its churn rate, but scripted programming, providing an un- give it an edge over all its competitors that MoffettNathanson, a research firm, esti- precedented glut ofgood television drama. goes beyond sheer size. It has started turn- mates it to be about 3.5% a month. That is Thishasin turn been bad forcinemas. Tick- ing non-English-language shows into hits: much higher than pay-TV (around 2%) and et sales in America and Canada declined “Money Heist”, a Spanish crime-caper se- wireless providers (closer to 1%). A second by more than 20% between 2002 and ries, and “Dark”, a piece ofGerman science problem is its thirst for bandwidth. In mar- 2017—and by 30% on a per head basis. fiction about missing children, have both kets that lack net-neutrality protections American studios are now either in the been watched by millions in the US, Mexi- (such as America), dominant internet pro- blockbuster business—the five Disney co and Brazil. Nine out of ten people who viders might decide to give their own films released so far this year have made watched “Dark” were from outside Ger- streaming services precedence over Net- over $4bn worldwide—or devoted to low- many. Upcoming releases include “Sacred flix. Aware ofsuch risks, the company is in- budget offerings best enjoyed with a Games”, Netflix’s first series in Hindi, and creasingly persuading internet and pay-TV crowd, like horror. “Protector”, a Turkish superhero story. This distributors like Comcast, T-Mobile and Netflixonomics is also changing the Sky to bundle its service with theirs, an way shows make money. Netflix usually about-face forsome ofthese incumbents. buys up exclusive worldwide rights to the There are other ways to stumble. Enter- shows it makes and acquires, paying a tainment companies are exposed to public mark-up over production costs. Creators concerns about behaviour at the top. Net- forgo lucrative licensing of their shows to flix dropped Mr Spacey from “House of secondary markets because, in Netflixo- Cards” after allegations of sexual miscon- nomics, there are no secondary markets. duct and recently got rid of a senior execu- That produces handsome upfront deals, tive over his use of a racial slur; there is no but offers much less to the producers if way to insure against future scandals. And they make something that outperforms ex- ifthe economy were to turn, reducing both pectations. And the bigger Netflix’s share consumers’ appetite for paid entertain- of the market, the less generous its upfront ment and investors’ appetite for junk deals may need to be. bonds, a company which is valued entirely on the basis of putative profits after 2022 Feel what the community feels would be badly hit. Such a setback would So producers are delighted to see competi- slow Netflix’s growth—and give deep- tors tryingto emulate Netflix’s model ofin- pocketed competitors like Amazon or Ap- tegrated production and distribution. Un- ple time to eat into its leads in inventory, der AT&T, its new owner, HBO is expected tied-up talent and personalisation. to accelerate its move away from its pre- Some think that, even without such a mium-cable base towards direct-to-con- setback, Netflix’s prospects are being exag- sumer streaming. It is investing more in gerated. In April MoffettNathanson de- shows developed outside America, too, clared that it could not justify Netflix’s and unwinding partnerships with foreign share price “under any scenario”. It did not distributors so that it can stream its own advise selling the stock, though, noting waresworldwide. Itwill spend over$2.5bn that investors believed in the Netflix story. on content this year—as will Hulu, a US- Shareshave risen by38% since then, asNet- only streaming service co-owned by four summer “Jinn”, a supernatural teen drama flix reported one of its strongest-ever quar- studios and best known for its drama “The in Arabic, will begin shooting in Amman ters ofsubscriber growth. Handmaid’s Tale”. Apple has hired Holly- and Petra. These shows will be dubbed Sitting in Amsterdam, Mr Hastings ap- wood executives to build out a television into a range of other languages, as Netflix’s pears unconcerned about competition. He offering to which it has committed at least English-language shows are—and that argues there is room both for competitors $1bn so far. YouTube—which is more range will include English. Americans are to succeed and for Netflix to continue win- watched than Netflix, but accounts for less not accustomed to dubbing (outside of ning more screen time. He is instead look- of the internet’s bandwidth because of its 1970s Bruce Lee films). But those watching ing towards the challenges of success— lower definition—also has a subscription “Dark” and “3%”, a dystopian Brazilian those that will arise when Netflixbecomes service alongside its much larger free-to- thriller, seemed to prefer it to subtitles. a large presence in societies around the view business. Disney is pulling its films By offering shows more out-of-the-or- world. “What happened when Televisa off Netflix and launching its own stream- dinary and expensive than companies used to be like 80% of the Mexican televi- ing service next year, hoping that its roster looking just at local markets can normally sion market, what was it like then? What of Pixar, Marvel and “Star Wars” movies, afford, these shows are meant to make Net- was their relationship with government, not to mention copious princesses, gives it flix an enticing premium product. They with the society?” Mr Hastings asks. Or a must-have edge. also allow it to sniff out the best writers Globo, a Brazilian media powerhouse. Amazon seems perhaps the best placed and directors. In June Baran bo Odar and “How did they get along with their societ- to compete globally. Its video service is al- Jantje Friese, the creators of “Dark”, signed ies when they’re so strong? Youhave to be ready available pretty much everywhere up to make more shows forNetflix. gentle obviously as you get that big. How Netflix is. Amazon Studios will spend The company’s growth in international did they pull that off?” more than $4bn this year on content. The subscribers—up 48% in 2016 and 42% in The world’s first global television giant company’s boss, Jeff Bezos, has said he 2017—suggests the strategy is working. may yet get to find out. 7 Britain The Economist June 30th 2018 21

Also in this section 22 Heathrow’s third runway 22 Online election campaigning 23 Greek lessons for Labour 23 Rooftop gardens 24 The future of outsourcing 26 Bagehot: Three myths of the NHS

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

Business and politics services. Combined with a customs union, this is sometimes known as the “Jersey” or Hard Brexit unravels “Isle ofMan” option, as it is broadly the position ofthese islands today. To placate Tory hardliners, the white paper may try to present the plan as a temporary one. That might keep alive the theo- retical dream of regulatory divergence at Amid a row between business leaders and Conservative hardliners, a softerBrexit an unspecified future date, as well as that gains political ground of the “maximum facilitation” option that ITH a Tory government in power, panies feel no party now speaks forthem. uses unspecified technology, not a cus- Wbusiness ought to be content. Yet it is The truth is more subtle. Business lob- toms union, to avoid border controls on crotchety. In Theresa May’s first year in of- bying, especially over Brexit, is having an the island of Ireland. Yet business leaders fice, many businessfolk complained they impact. Mrs May slapped down her minis- who recall the French aphorism that noth- were not getting a hearing. Access to the ters by insisting companies had every right ing lasts like the provisional will be reas- prime minister has improved since she lost to speak out. Greg Clark, the business sec- sured by the white paper. her majority in last year’s election, but retary, and Philip Hammond, the chancel- Hard Brexiteers, however, will not be. plenty say they are still not listened to. lor(whose Treasury was dubbed the “beat- In a nod to a recent cover of this newspa- This is especially true when it comes to ing heart of Remain” by Mr Johnson), are per, Mr Johnson has vociferously attacked Brexit, their biggest concern. Most recently listening. Pressure from business groups to what he calls a “bog-roll” Brexit that is the five biggest business lobbies joined preserve frictionless trade by staying in a “soft, yielding and seemingly infinitely forces to warn that slow progress in the customs union is proving effective. long”. Several ministers believe the Jersey talks in Brussels was forcing firms to plan For it is becoming plain that hard Brexi- option crosses too many of Mrs May’s red for a worst-case outcome, losing the bene- teers in the cabinet are losing the fight. The lines. That it will not cover services, which fits of a transitional period after Britain logic of the “backstop” that Mrs May has make up 80% of Britain’s economy, wor- leaves the European Union next March. accepted to avert a hard borderin Ireland is ries some. Systems of mutual recognition Their letter followed a statement from Air- that Britain will stay in a customs union or regulatory equivalence will not give ser- bus that it might pull out of Britain in the and in regulatory alignment with the EU vice providers the same access to EU mar- event of a no-deal Brexit. Carmakers piled even after the transitional period that is kets. And beingin a single marketfor goods in, with BMW and Honda warning that meant to end in December 2020. Brussels and a customs union will make it far hard- leaving the EU’s customs union and single knows this. EU leaders, who met fora sumer to do trade deals with third countries. market would disrupt supply chains. A mit on June 28th-29th, have been critical of Charles Grant of the Centre for Euro- counter-blast from Brexiteers was notable Mrs May’s delay in setting out what she pean Reform, a think-tank, expects these for its dearth ofbusiness support. wants from Brexit. But their willingness to considerations to trigger ministerial resig- Yet the response from some was still a give her more time reflects the perception nations this summer. Mr Johnson, who raspberry. Jeremy Hunt, the health secre- that she is softening her position. was this week ridiculed even by fellow To- tary, called Airbus’s statement “inappro- On July 6th Mrs May will call her cabi- ries for flying to Afghanistan to avoid a priate”. Boris Johnson, the foreign secre- net to Chequers, the prime minister’s vote on Heathrow airport (see next story), tary, reportedly said, “Fuck business,” a country house, to thrash out the final de- may quit, now that his leadership hopes comment he barely softened by later sug- tails of a Brexit white paper due to be pub- are going down the pan. So might Liam gesting his target was corporate lobbyists, lished on July 9th. Drafts are circulating Fox, the trade secretary. Yet Mr Grant also not business itself. With open cabinet war- around Whitehall. Insiders say its main notes the irony that, although losing hard- fare over fiscal policy as well as Brexit, and proposal is likely to be in effect to remain in liners like these may please Brussels, the Labour under far-left control, many com- the EU’ssingle market forgoods, butnot for EU is still likely to say no to Mrs May’s soft-1 22 Britain The Economist June 30th 2018

2 er Brexit plans. group, said they would apply for judicial Online campaigning The sticking-point is free movement of review within six weeks. Ray Puddifoot, labour. EU negotiators say letting Britain the leaderofHillingdon council, where the Of barks and bites stay in the single market forgoods without airport is located, thinks their case is even free movement would be unacceptable stronger than in 2010. “I’ve got no doubt cherry-picking. Some of them think Mrs that we will succeed,” he says. May can be pushed into further conces- The first issue is carbon emissions. Brit- sions, including big payments into the EU ain has a target to cut these by 80% from The election regulatormakes new budget. Theymaybe wrong. MrsMay’spo- 1990 levels by 2050. To be on course to demands ofdigital campaigns litical ability openly to breach her Brexit meet this goal, the Committee on Climate red lines must be limited. Change, an independent advisory body, HE internet has lost its democratic lus- Moreover, some in the EU see attrac- says that Britain’s aviation sector needs to Ttre. Lauded as a force for change during tions in a goods-only option. An official in cap its emissions at 37.5m tonnes of the gas the Arab Spring in 2010, its reputation has Berlin says that German businesses, keen a year. But with an expanded Heathrow, it since been sunk by a wave of populism in to keep selling into the British market, could produce over40m by the 2030s. And the West. In a report this week Britain’s would welcome it. Free movement can be the north-western site for the new runway election watchdog warned that the rise of blurred at the edges, as other countries will produce more carbon emissions than digital tools in political campaigning had have managed. A compromise could thus two alternative sites that were considered. created an “atmosphere of mistrust”, and be found. And it would be hard Brexiteers, The second problem is emissions of called upon the government and social not businesspeople, in a four-letter fix. 7 harmful nitrogen oxides and particulates media companies to fix it. from vehicles. Heathrow is already the In its report, the Electoral Commission most polluted area of London outside the called for the first time for all social media Airport expansion centre (see map). Nitrogen dioxide levels companiesthatrun election advertsin Brit- are rising and several spots near Heathrow ain to create open databases of those ad- Problem in the air already breakthe EU’s limits forthe gas. verts. Such databases would have a big im- The airport (whose chairman, Paul pact if widely adopted, helping to catch Deighton, is also on the board ofThe Econ- any messaging that was not formally de- omist Group) has been slashing its own clared but co-ordinated. emissions, for instance by charging gassier The commission repeated its recom- planes more to land. But it is not on the air- mendation that digital campaigning mate- Worries about pollution could blow port site itself but at nearby major roads rials should include an imprint which Heathrow’s third runway off course that EU limits are being broken, by people identifies the organisation behind it, N JANUARY 10th 1946 the cabinet ap- driving to and from it. Heathrow wants to which would help the commission to track Oproved plans for a third runway at raise the share of its passengers using pub- campaign activity across the web and en- Heathrow airport, west of London. Some lic transport from 39% to 50% by 2030, by force spending rules. 72 years later, and after more than a dozen using congestion charging on local roads. It also advocated closing a loophole commissions, reports and white papers on But the airport lacks the power to impose which means that money spent on hiring where to put it, the third runway remains such a scheme. It may also annoy locals if staff does not count towards a campaign’s unbuilt. The projectmoved a step closer on drivers clogged up backstreets while seek- spending limits. Since posting on social June 25th, when Parliament voted by 415 to ing to avoid charges on main roads. media is free, and staffing costs need not be 119 to build a new runway to the north- Matthew Coogan, a transport expert, declared, this offers campaigns a channel west of Heathrow.But a big problem could says people might be nudged out of their through which to send unlimited mes- delay it still further: air pollution. cars if the airport moved its car parks and sages to voters. In addition, the commis- This topic matters, as the issue of emis- drop-off areas far from the terminals, and sion requested the power to levy larger sions resulted in the High Court overturn- made life easier for those arriving by train. fines, saying that the current cap of ing a previous decision to build a third run- Heathrow must hope such explanations of £20,000 ($26,000) per offence risked be- way in 2010. In response to this week’s how it could meet its targets hold water in coming a mere cost of doing business for vote, four west London councils, the city’s court. Otherwise it may be decades more rule-breaking campaigns—particularly in mayor and Greenpeace, an environmental before London gets its new runway. 7 referendums, in which campaigners may worry less about their future reputations. Some reactions to the report were over- Choke points blown. The commission did not warn that Greater London, annual mean democracy was under threat from the in- NO2 concentration, 2013 ternet. It praised the positives of online campaigning, stating that new ways of reaching voters are good for everyone. But it did say that changes to digital campaign µg per m3 rules were needed to restore public confidence in the democratic process. 97 Itis up to the governmentto make those Heathrow airport changes. Politicians have little incentive to fiddle with the system that brought them EU limit 40 to power. But public disquiet over the growingnumberofallegations offoul play in the Brexit referendum may provide some fuel. Russian trolls may not have swung the result, but anger over the sug- Source: London Atmospheric 16 Emissions Inventory gestion that they tried could yet be enough to force change on a bad system. 7 The Economist June 30th 2018 Britain 23

Labour’s future It’s all Greek to them

Obsession with Hellenicpolitics once helped but may now hinderthe left REEK words loom large in politics, al- Gthough some are better-known than others. Most people recognise the term “democracy”. “Politics” itself has Greek origins. Fewer people would be familiar with “Pasokification”—unless they are a member ofthe Labour Party. Pasok, a struggling centre-left party Rooftop gardens from Greece, is surprisingly prominent in the minds of Labour activists. Where once Buzzing and blooming the Greek party commanded the support of 44% of voters, a stint in government Above the polluted streets, a breath offresh air overseeing brutal spending cuts saw this figure dribble to 5% by 2015. Naturally, La- HOULD weary hacks trudging at the National Gallery and the Savoy hotel— bour wants to avoid this fate, dubbed Pa- Send ofthe day from The Economist’s boast rooftop gardens or hives. Late last sokification. So the Greek party has be- office to Charing Cross station raise their year the NorthbankBusiness Improve- come a cautionary tale cited by Labour heads, they may raise their spirits, too. ment District, which among other things activists urging their leaders to maintain Across the Strand, four storeys up, is a aims to improve air quality and promote opposition to Toryausterity. Fear of the Pa- band ofgreenery,becoming lusher as the biodiversity in the area around the sokification of Labour boosted the far-left year progresses. On the roofofCoutts, Strand, was named one offive “business Jeremy Corbyn during his successful tilt at the posh, private-banking arm ofthe low-emissions neighbourhoods”, shar- the Labour leadership in 2015, recall those state-owned Royal BankofScotland (of ing in a £1m ($1.3m) fund. Local air quality who worked on his campaign. which the queen is said to be a customer), is among the poorest in the capital. It was another Greek party that Mr Cor- Peter Fiori, the head chef, oversees a London has more than 5,000 hives, byn’s supporters wanted to emulate. Syr- thriving garden, home to a host ofplants says Natalie Cotton ofthe London Bee- iza, the radical left-wing party with a char- and three beehives. keepers Association, ten times the densi- ismatic leader, Alexis Tsipras, promised to “We have four microclimates,” Mr ty ofthe rest ofthe country,although roll back austerity in the Aegean, while Fiori says, as he walks along the thin strip how many are on roofsisn’t known. Ms successfully navigating complicated bail- between the troughs in which the pro- Cotton says that keeping bees on top of out negotiations in Brussels. Across Eu- duce grows, stopping to plucka herb, buildings isn’t always practical anyway. rope, centre-left parties had gone the way crush it and invite you to smell it, or to A full “super”—the part ofa hive where ofPasok, with voters deserting them, often pop it into your mouth. Warmth from the honey is made—weighs more than 20kg, for the far-right. For Corbynistas, Syriza roofon the south side, he says, adds so takes some lifting; and bees expend a provided a rare blueprint for a successful several degrees to the temperature. Thus lot ofenergy to get to hives more than a left-wing party when it was elected in 2015. above one ofLondon’s busiest streets few storeys up. Three years on, however, Syriza now guavas, pepino melons and finger limes, Many ofLondon’s140 bee species are serves as another warning to some on the plus all manner ofberries and wasabi, a struggling, says Ms Cotton, because ofa left. The parable of Mr Tsipras’s eventual pungent-rooted Japanese plant notori- loss ofsuitable forage in gardens and capitulation—his radical government ously fussy about its surroundings, are elsewhere. On the roofofCoutts, Mr Fiori brought to heel by capital markets and an grown forclient lunches and dinners. is doing his bit, planting bee-friendly intransigent European Union—is seeping The garden was built by Mr Fiori’s late plants such as mint, lavender, sage and into the left’s consciousness. Support for friend, Richard Vine, with help from The chives. “It’s important to give something the Syriza government has dwindled in Clink, a charity forprisoners. back,” he says. What goes around comes Greece. Former members accuse the lead- Coutts is not alone. Several other local around: last year Coutts’ hives yielded ership of treachery. “The left loves a good rooftops in central London—including 12kg ofhoney.A jar is thought to have betrayal,” says Joe Guinan, a fellow at the those ofthe Canadian High Commission, found its way to Buckingham Palace, a Democracy Collaborative, an American the London School ofEconomics, the mile away as the bee flies. think-tank. After Labour’s better-than-expected result in last year’s general election, fears of Pasokification have been placated. that the party made it to Downing Street. giving it a target to boost productivity and Now some Labour activists wonder if, in “It tries to answer the question about what allowing it to comment on fiscal policy. office, it could fall victim to Syrizification. happens when or if they [the establish- Empowering technocrats jars with other In front of some audiences, John Mc- ment] come for us,” he said (incidentally parts of Labour’s economic programme, Donnell, the shadow chancellor, implies while on a panel with a Syriza MP). which aims to “democratise” the economy. that he would not capitulate to the forces Yet Mr McDonnell has also shown a The party leadership seems willing to of capital without a scrap. Speaking to ac- willingness to bend his views, launching a compromise for a shot at power. But fears tivists last year, he casually mentioned that charm offensive in the City. One proposal of Syrizification, when a left-wing party Labour had been “war-gaming” events discussed this month by Labour bigwigs surrenders its radicalism, means some La- such as a run on the pound, in the event involves souping up the Bank of England, bour activists may be unwilling to do so. 7 24 Britain The Economist June 30th 2018

Government outsourcing stumps up the cash forthe project. Services covers everything else, from The good, the dumb and the desperate organising councils’ payrolls to cleaning hospitals. Operating trains also comes under this heading, as the government owns the physical infrastructure (the track and signals) but leaves the train service itself to competing private companies. Privatisa- tion isdifferent, asitinvolvesan asset (such A model pioneered by Britain and copied around the world is in trouble as British Airways) being transferred from TEERING Britain’s new aircraft-carrier save moneyand a meansto breakthe pow- the state to the private sector. Sinto its home base at Portsmouth is a er of the public-sector unions (and with Outsourcing is supposed to deliver sev- delicate business. There is little room to them the Labour Party). Although Labour eral benefits. Transferring work from the spare at the mouth of the base, so the became an enthusiastic outsourcer under public sector to better-managed private 65,000-tonne behemoth, HMS Queen Eliza- Tony Blair in the 1990s, Mr Corbyn now businesses should reduce costs and im- beth, is nudged along by a specially com- promises to “take back control of public prove quality, its proponents argue. On the missioned tug, SD Tempest. Despite the sen- services”. On June 25th Labour promised costs front, outsourcers have often man- sitivity of the task, this is not a Royal Navy that, ifelected, it would re-examine all out- aged to save the taxpayer money by trim- vessel. The tugwas built and is operated by sourced defence contracts. ming payrolls. For example, National Sav- Serco, a private company, which also tows Dismantling the outsourcing model ings & Investments, a state-owned bank, the country’s nuclear submarines out to would represent a revolution, as outsourc- contracted out the entire operation of its sea from their base at Faslane. ing has come to occupy a central position organisation in 1999 to Siemens Business This is testimony to the range of work in how the state works—and notjust in Brit- Services. The company tookon 4,200 NS&I that Britain’s outsourcing companies do ain. Since the 1980s Britain’s big idea has staff, which it reduced to fewer than 1,700, for the government, from serving school been exported around the world. Out- including 480 in India. In other cases priv- meals to serving up Armageddon. Serco sourcing now accounts for 6% of GDP in ate companies have saved money by inno- also runs six prisons, an immigration re- America, 11% in France and 16% in the Neth- vating. The Forth Valley Royal Hospital, moval centre and the sleeper-train from erlands. Is it now failing in the country that run by Serco, was the first in Britain to use London to Scotland, among other things. invented it—and ifso, can it be fixed? automated guided vehicles to move laun- So big has the sector become that govern- dry and waste around in the basement, ment spending on outsourcing now ac- Promises, promises savingabout 40 menial jobs. In 2000 a sur- counts forabout11% ofGDP. There are three broad areas ofoutsourcing, vey ofevidence from around the world, by With size has come controversy, partic- says Nick Davies of the Institute for Gov- Graeme Hodge of Monash University, ularly since the collapse of Carillion, a big ernment think-tank: goods, works and ser- found that outsourcing had resulted in an outsourcer, in January. The repercussions vices. Goods, such as hospital beds, are un- overall saving in government expenditure of that company’s demise are still being controversial; no one thinks the ofbetween 6 and 12%. felt; its myriad subcontractors are thought government should manufacture them it- But the savings to be had from out- to be £2bn ($2.6bn) out of pocket. Almost self. Works means chiefly the construction sourcing have decreased over time. A re- all the big outsourcers have seen their ofschools, prisons, roads and the like. This, cent paper by a group of researchers from share price tumble in the past year, with a too, has long been done by private firms, Denmark estimates that the average cost spate of profit warnings. In April Capita re- but since the 1990s companies have taken savings from private contracting across ported an annual loss of £513m, while In- on more responsibility for their financing, several countries fell from 8.5% in 2004 to terserve reported a loss of£244m. via the Private Finance Initiative. PFI con- just 0.4% in 2014. One reason is that over These commercial crises follow a slew tracts run for up to 30 years, during which the past couple ofdecades, successive priv- offiascos. Everyone hastheirfavourite out- time the government repays a firm that ate contractors have cut nearly all the fat1 sourcing blunder. G4S won the contract to provide security for the Olympic games in London in 2012, but failed to rustle up enough personnel, so 3,500 troops had to be deployed just before the opening cere- mony. G4S was the culprit again, together with Serco, when in 2014 the two companies were found to have overcharged for the electronic tagging of offenders on parole, some of whom had already died. Last year the government had to bail out the 21 private companies set up to administer the probation service, to the tune of £342m. Only two of the companies had met their targets to reduce recidivism. Consequently, the outsourcing model is under fire as never before. Jeremy Cor- byn’s Labour Party has seized on the woes of Carillion and others to argue that “rip- off” private companies should not be allowed to “fleece” the public. Labour’s hostility dates back to the 1980s, when Marga- ret Thatcher developed “compulsory competitive tendering” as both a way to The Economist June 30th 2018 Britain 25

2 offthe public services they operate. the promise of new business. Outsourcers Another reason is a dramatic improve- At a loss for profit underbid in the hope that subsequent ment in the efficiency of public providers, Britain, biggest government contractors amendmentsto the contract—extra charges spurred on by competition from the priv- Quarterly net profit margin, Jan 2006-Sep 13, % here and there—will eventually yield some ate sector. Profound changes in political FTSE 100 15 profits. But often they don’t. On June 26th MP culture since the 1980s have helped, in par- Capita Rory Stewart, a justice minister, told s ticular the weakening of the once-power- 10 that his department had learned “a real, ful trade unions. Richard Watts, the leader Serco real lesson” after signing a deal with Caril- Atos of Islington Council, once a byword for G4S 5 lion that was too good to be true. “We did loony-leftism, argues that over the past de- + not get the deal that Carillion was propos- cade or so “councils have significantly 0 ing to give us, because it turned out that overtaken the outsourcers in management – what Carillion was proposing to us was competence.” The decline in unions’ pow- Range Median 5 completely unsustainable,” he said. er meant that Islington could drive a hard- Austerity has had other perverse ef- er bargain with workers when it ended the 10 fects. To cut procurement costs, the govern- Source: National Audit Office outsourcing of rubbish collection in 2012, ment has preferred to negotiate single big bringing it back in house and saving £3m a contracts rather than lots of small ones. year. Michael Guy, the director of Kilmar- The NAO politely observes that “we rarely Outsourcers have thus bought up lots of nock prison, run by Serco, concedes that see performance management measures smaller businesses, to cater for a wide the latest public prisons will be as good as …working as intended”. range of functions. This has led to market his own. “Public service has caught up and A related problem is the rigidity of the concentration, undermining the principle sometimes overtaken us,” he agrees. contracts. Purchasers, such as councils, are of competition that outsourcing is sup- Furthermore, PFI contracts, the first of locked into deals for years, giving them lit- posed to introduce. In total, there are about which were signed in 1992, have turned out tle flexibility to respond to external shocks, 200,000 providers to government. Yet ac- to be costlier than they looked. Although such as the slashing of their budgets under cordingto Tussell, a firm that analyses pub- PFI lets the government keep big projects the Conservatives’ austerity programme lic procurement, last year about a quarter off its books, prettifying the public fi- after 2010. Increasingly, councils have tak- ofthe value ofthe 60,940 outsourcing con- nances, in the long run the costs add up. In en contracts back in-house to give them tracts signed by the government went to January the National Audit Office (NAO), a more control oftheircosts. This is as true of just 29 big companies. spending watchdog, found that “overall Tory-dominated councils, such as Cum- Some services are provided by only a cash spending on PFI and PF2 projects is bria and Bournemouth, which have handful of firms. Only Sodexo, Serco and higher than publicly financed alterna- brought housing services and road-build- G4S run prisons; only the latter two pro- tives,” mainly because the rate at which ing back under their control, as it is of the vide child custody. And although 27% of private contractors borrow is higher than likes ofIslington. government procurement goes to small the rate at which government can borrow. Judging the quality of outsourcing is businesses, most of that goes via the big The NAO’s analysis of one group of made still harder by a lack of information. operators subcontracting their own work. schools found that those financed private- Contracts are rarely made public—due, it is The number of single-bid tenders more ly cost about 40% more than those fi- claimed, to commercial confidentiality. than quadrupled between 2012 and 2017. nanced by government borrowing. Little Thus few comparisons can be made be- Reduced competition, it has been calculat- wonder that PFI has fallen out of favour tween what a contractor promised and ed, can lead to an increase in costs of 2-15%. with procurement departments. The use what is delivered. The NAO argues that of PFI deals peaked in 2007-08, with over Britain lags behind G7 countries such as Contracting, expanding £8bn worth of new work. Now they America on transparency. It may be no tragedy that Carillion’s share- amount to less than £1bn a year. If outsourcing looks less good than it holders lost their shirts, nor that other out- once did to the taxpayer, much the same is sourcers are walking away from an indus- PFI in the sky true for the outsourcing firms themselves. try they no longer find attractive. But as Evaluating whether outsourcing delivers Since the onset of austerity, local and cen- Rupert Soames, the head of Serco, has ar- higher-quality services is much harder. In tral government have driven ever-harder gued, “The objective of government pro- cases where public services used to be par- deals with their contractors. Tenders that curement should not be to create a market ticularly bad, contracting out has made a were supposed to be judged on both price in which the only bidders are the dumb or clear difference. Mr Watts says that in Is- and quality have, it is generally acknowl- the desperate.” Few bidders means bad lington, “we saw a basic improvement edged, come to be awarded to the lowest deals. And clearing up the mess left by Ca- from a very bad set of services to an aver- bidder. As a representative of Serco testi- rillion has already cost taxpayers £148m, as age set of services.” A review of interna- fied to a committee of MPs recently, “the well as causing delays to the projects it left tional evidence by Fredrik Andersson of British government is the most aggressive half-finished. Lund University and colleagues finds that, on contractual terms…and it does not hes- Given that part of the problem is a lack for services that are easy to contract out, itate to use its position as the only buyer in of competition, it would be a mistake to like waste collection, outsourcing typically the market to insist on conditions which in give the state back its monopolies, as Mr causes quality to improve orstay the same. other markets suppliers would simply re- Corbyn suggests. Better for the govern- However, the reviewarguesthatfor ser- fuse to accept.” Though they are criticised ment to award contracts with more em- vices with complicated performance stan- for “ripping off” the taxpayer, outsourcers phasis on quality, rather than simply using dards the evidence is more mixed. Measur- these days have lower margins than most them as a way to cut costs. Still, experience ing a company’s effectiveness at rubbish FTSE 100 companies (see chart). has shown that some public services are collection is one thing; assessing how it Fearing that austerity would slash the easier to outsource than others. One of runs a jail, say, is far harder. The perfor- number of contracts on offer, outsourcers outsourcing’s most important effects has mance of Kilmarnock prison is judged by have engaged in a race to the bottom. Un- been to force public providers to up their 42 indicators, none of which measures re- derbidding, known in the trade as “suicide game. Ifcouncils are now betterable to run offending rates. In some industries, com- bidding”, has become common, as compa- their own efficient services, that is a sign of plex contracts have proved easy to game. nies try to keep shareholders happy with the policy’s success, not a failure. 7 26 Britain The Economist June 30th 2018 Bagehot The three myths of the NHS

The National Health Service is a great institution. It is also the subject offairytales tals, school medical services and employer- and government- subsidised health care. The 1945-51 Labour government didn’t build a single new hospital or add significantly to the number of doctors. Its achievement was to nationalise a patchwork system and make it free at the point ofdelivery. The second is that the NHS is a unique embodiment of compassion. Aneurin Bevan, the health secretary who created it, sold the NHS as proof that, even as Britain was ceding global leadership to America and the SovietUnion, itwasstill a superpower in one vital area. “We now have the moral leadership of the world, and before many years we shall have people coming here as to a modern Mecca, learning from us in the 20th century as they learned from us in the 17th century,” he declared. But there was far more than morality at play. The service’s roots are in the “national efficiency movement” ofthe Edwardian era. The 1905-15 Liberal government introduced medical inspections for schoolchildren in 1907 and national health insurance in 1911, among other reforms, because, in Lloyd George’s words, “The white man’s burden had to be carried on strong backs.” After 1948 the NHS was part of a warfare-welfare state that spent 10% of GDP on defence and maintained a large conscript army because it worried that HE National Health Service’s 70th birthday is turning into an war with the Soviet Union was imminent. Textravaganza. The government has given the service a £25bn The NHS does a middling job of turning compassion into ($33bn) present to mark the anniversary, which falls on July 5th. care—certainly better than America, but worse than several con- The BBC broadcasts daily encomiums to the wonders of free tinental countries that rely on compulsory insurance back- health care. Jeremy Corbyn, Labour’s leader, wore a large badge stopped by the government. The Nuffield Trust, a health think- celebrating the NHS’s birthday at prime minister’s question time. tank, points out that Britain has markedly fewer doctors and nur- The NHS is the most popular institution in the country. In a ses per person than similar countries, and fewer CT scanners and survey by Ipsos MORI last year, 77% of respondents believed that MRI machines. It also has higher rates of mortality for problems it should be maintained in its current form and 91% supported its such as cancer, heart attacks and strokes. On the positive side, it is foundingprinciples, thathealth care should be free at the pointof excellent at providing long-term care and value for money. delivery and funded by general taxation. The final myth is that the Conservative Party is perpetually It is so popularbecause it is more than just a public service. It is bent on selling off the NHS to the highest bidder. There may be a also an embodiment of British values at their best: compassion few ideologues on the right who dream of replacing the health and decency; waiting in line rather than barging ahead; being service with an insurance-based system or an American-style part of a national community rather than a collection of self- public-private mix. But they are outliers. Conservative right- seeking atoms. These values were central to Britain’s conception wingers have shied away from acting on their principles. One of ofitselfin 1948 when the LabourPartyfounded the NHS aspartof the first big boosts in NHS spending came in 1962 when Enoch its New Jerusalem. Many people cling fiercely to the health ser- Powell, an early champion ofthe free market, splashed out on 90 vice today precisely because it is a reminder ofa more egalitarian new and 134 refurbished hospitals. Mainstream Conservatives society and an antidote to our self-seeking times. like the NHS because it gives the government a way ofcontrolling WalterBagehot, the great19th-centuryeditorofThe Economist, health spending and ensuring value formoney. argued that the British constitution was divided into two branches: the dignified, which represents the nation in its sym- Easy on the champagne bolic form, and the efficient, which gets the work of the world It may seem a bit churlish to turn up to a birthday party and spit done. The NHS is the most-loved British institution because it on the cake. Myths can serve a useful function in boosting mo- straddles this divide. It is dignified because it represents Britons’ rale, particularly when morale has been eroded by a decade of collective viewofthemselvesasa decentbunch ofpeople, and ef- austerity. But the myths that surround the NHS have also done ficient because it treats more than 1m patients every 36 hours. harm. They have given the Labour Party an excuse to demonise The fact that the NHS spans the dignified and efficient divide Conservative reforms as “backdoor privatisation” rather than not only explains why its birthday is being celebrated with such subjecting them to serious criticism. They have discouraged the enthusiasm. It also explains why so much of this enthusiasm is NHS from learning from other countries. They have made it im- coupled with nonsense and exaggeration. It is hard to remember possible even to think about boosting NHS revenue by charging a time other than a royal wedding when so many commentators patients a nominal sum for visiting the doctor. They may even have uttered so many half-truths—or indeed non-truths—with have allowed scandals to go uncovered because nobody can such grave conviction. Three myths are particularly cloying. bring themselves to blow the whistle on saintly NHS workers. The first is that Labour summoned up the NHS from thin air; Britain is right to celebrate a service that provides all Britons with that before 1948 the poor died in the streets but after 1948 they free health care at a reasonable cost. But they are wrong to treat were suddenly equipped with new hips and false teeth. In fact, the NHS as an object ofawe rather than a human institution with the government inherited a rich patchwork of charitable hospi- all the imperfections that being human entails. 7 Europe The Economist June 30th 2018 27

Also in this section 28 New moves on European defence 28 Politicising immigration and crime 29 Finland’s man-free island 32 Russia’s pension reform 33 Charlemagne: A Balkan opening

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

Turkey replaces the parliamentary system put in place byAtaturk, the country’sfoundingfa- Recep Tayyip the First ther, with a presidential one. Under the new changes, adopted by a slim majority in a 2017 referendum and now in effect, Mr Erdogan has complete control ofthe execu- ANKARA tive, including the power to issue decrees, appoint his own cabinet, draw up the bud- Afterhis triumph, President Erdogan’s “New Turkey” will be more Islamist, get, dissolve parliament by calling early nationalist and authoritarian elections, and pack the bureaucracy and MID a frenzyofhonking, a youngwom- AK partyand itscoalition partner, the hard- the courts with political appointees. The Aan leant out of the window of a car, line Nationalist Movement Party (MHP), office ofprime minister will disappear. one of the hundreds that besieged the won a combined total of 54%, enough to The president’s supporters say the new headquarters of the ruling Justice and De- ensure a comfortable majority with 344 system will speed up decision-making, fur- velopment (AK) party in Ankara, making seats out of600 in the assembly. The oppo- ther reduce the army’s ability to meddle in an Islamist salute with herlefthand and an sition alliance, led by Mr Ince’s CHP and politics and make unstable parliamentary ultranationalist one with her right. Out- the Iyi party, won just 189 seats. The pro- coalitions a thing of the past. His oppo- side the building, thousands of cheering, Kurdish HDP won 12%, enough to clear the nents say the constitution means Mr Erdo- singingAK supporters awaited theirleader, electoral threshold and send 67 ofits mem- gan no longer presides over a government, fresh from his big victory at the polls. “This bers to parliament. but a regime. is Turkey’s new liberation,” yelled a man Though free, it was the most unfair elec- The only conceivable checkon the pres- hoisting a flag emblazoned with the image tion in Turkey in decades. Under pressure ident’s powers, parliament, is now in the of President Recep Tayyip Erdogan and the from government cronies, most news out- hands of his AK and its ally, the MHP, coat of arms of the Ottoman empire, his lets pretended that two of the main candi- which took 11% of the vote, about twice as voice barely audible over the din. “The dates, Selahattin Demirtas of the HDP and much as most polls had predicted. Mr Er- West will not boss us around,” said anoth- Meral Aksener of Iyi, did not exist. The dogan’s party, ofwhich he is absolute mas- er man, a schoolteacher. It was the evening main national broadcaster and its sister ter, will ensure that whatever comes out of of June 24th, day one of what Mr Erdogan channels offered Mr Ince less than a tenth the president’s mouth becomes law. The calls the New Turkey, a synthesis ofIslamic of the airtime devoted to Mr Erdogan, and MHP and its septuagenarian leader, Devlet nationalism and Ottoman nostalgia, and ignored his last rally, attended by hundreds Bahceli, who went from calling Mr Erdo- possibly the last day ofthe secularrepublic of thousands of supporters, on the eve of gan a dictator to becoming one of his big- founded by Kemal Ataturk. the vote. A report by the Organisation for gest cheerleaders, will pull him even fur- Hours earlier, despite predictions of a Security and Cooperation in Europe wel- ther to the nationalist right. much closer race, Mr Erdogan and his comed the high (88%) voter turnout, but MrBahceli has made it clearhe opposes party, plus their ultranationalist allies, concluded that MrErdogan and AK had en- any new overtures towards the Kurds and scored a double knockout in Turkey’s elec- joyed excessive media coverage, misused other minorities, and that he wants Mr De- tions. In the presidential contest, the Turk- state resources and used the state of emer- mirtasto staybehind bars. (The HDP leader ish strongman defeated the main opposi- gency to restrict the freedoms of assembly has been under arrest since 2016 on vague tion hopeful, Muharrem Ince, by taking and expression. terrorism charges, and fought his presiden- about 53% of the vote, compared with Mr For Mr Erdogan, the victory marks the tial campaign from a prison cell.) Two days Ince’s 31%. In the parliamentary vote, his last step on the road to a constitution that after the election, the MHP called on Mr Er-1 28 Europe The Economist June 30th 2018

2 dogan to extend Turkey’s state of emergen- European defence interests are at stake. When France unilat- cy,which has been in place for almost two erallydispatched troopsto beatback a jiha- years, and which the president had prom- Coalition of the dist incursion in Mali in 2013,it did get help, ised to lift in the last days of his campaign. but mostly logistical. EU decision-making “Erdogan got his presidency, so he must practical structures, say the French, are too ponder- feel very good,” says Soli Ozel, a veteran ous to be useful when it comes to respond- Turkish commentator, “But he’s now be- PARIS ing to such emergencies. holden to Bahceli.” Not everybody has been keen. Angela Salvaging something meatyout of Even if Mr Erdogan ends the state of Merkel, the German chancellor, had ar- European security’s alphabet soup emergency,there is little reason to think he gued that EI2 should be part of PESCO, but will stop hounding opponents (tens of HEN Emmanuel Macron, the French signed up in the end afterreassurances that thousands have been jailed following a Wpresident, gave his first big policy Germanywould notbe obliged to take part bloody attempted coup in 2016), muzzling speech on Europe at the Sorbonne last Sep- in missions. Ashared pragmatism seems to the press (the number of journalists be- tember, it was so packed with ideas that have prevailed. The EI2 will not transform hind bars would be enough to staff a cou- many have long since been forgotten. On Europe’s defence co-operation. Yet it could ple of newspapers) or picking fights with June 25th, however, one of them—a “Euro- prove to be a practical way of enhancing the West. When they first came to power in pean intervention initiative” (EI2)—was the efficiency ofEurope’s military rapid-re- 2002, Mr Erdogan and AK partially kept signed into being by nine European Union action capability,at a time of growing con- their promise of more freedoms for all citi- countries at a meeting ofdefence ministers cern about divisions in the Western alli- zens, especially Kurds. But overthe past de- in Luxembourg. The idea is both to prepare ance, and uncertainty about defence cade, almost the only freedoms they have a coalition of willing countries for joint co-operation after Brexit. 7 upheld are those of their conservative vot- European action in crises, and to tie post- ers—striking down a law banning women Brexit Britain into the continent’s future who wore the Islamic veil from state uni- military co-operation. Immigration and crime versities and institutions, forinstance. Mr Macron’s idea was born out of With his new constitution, Mr Erdogan French impatience with the EU’s efforts at Panic attack has laid the foundation for a system that in defence co-operation, known inelegantly effect removes the secular elite, public in- as Permanent Structured Co-operation stitutions and parliament as the middle- (PESCO). Fully 25 countries signed up last men between the president and the peo- December to this arrangement, which HAPARANDA ple, says Karabekir Akkoyunlu, a Turkish commits members to developing joint de- Confusion overimmigration and crime scholar at São Paulo University. But the fence capabilities. Germany has been keen is riling European politics president may find that remaking society, on this mechanism, which keeps efforts at using a mix of Islamism, nationalism and joint European defence within existing EU S MAYOR ofthe small Swedish town of nostalgia for a vanished empire is harder structures. Its critics, though, regard PESCO AHaparanda, Peter Waara has had his than remaking the institutions. as a low-ambition pact that ropes in too share of problems with refugees and with The Turkey over which Mr Erdogan many countries, including those with little crime. The first refugees arrived in Septem- now presides remains bitterly divided. On interest in sending troops abroad, to be op- ber 2015 (“the middle of moose-hunting one side there are conservative Muslims erationally useful. Britain, western Eu- season,” Mr Waara recalls), when Hapa- and nationalists, for whom he remains a rope’s only other muscular military power randa, which sits on the Finnish border, symbol of prosperity, religious freedom besides France, is not involved. was deluged by busloads of Syrians and and national pride. On the other stand sec- The EI2, by contrast, is a more exclusive Iraqis who thought Finland would wel- ularists, liberals, and the Kurds of the club. It is not a force, nor a new institution, come them. They were met by the Soldiers south-east, who see him as a corrupt and and will have no headquarters. In the of Odin, a far-right group, who demon- repressive despot. Expecting him to heal words of one insider: “It doesn’t look or strated to stop them at the border. Police divisions he has partly been responsible or sound French.” Its members include Brit- had to be called in to protect the migrants. creating is naive, argues Soner Cagaptay, ain and Denmark, neither ofwhich belong Today a few hundred refugees remain in the author of a recent book about Mr Erdo- to PESCO but have an interventionist tradi- Haparanda. The town’s crime problem, gan. “He’s not authoritarian because he is tion, and countries such as Estonia, which however, mainly involves European drug- crazy, but because he is rational,” he says. now contributes to the French “Barkhane” traffickers operating from Sweden. “Down the line, it’s the only way forhim to anti-insurgency force in the Sahel. Ger- Haparanda is typical: Europe’s immi- avoid losing power.” 7 manyisalso on board. Thisclub ofthe will- gration problems and its crime problems ing could prove a more nimble way of im- are mostly unrelated. But they are insepa- proving joint response to emergencies. rable in politics. In Sweden, where an elec- Slam dunk Its purpose, Mr Macron said last year, is tion is due in September, the far-right Swe- Turkey, June 24th 2018 to build a “common strategic culture”, as den Democrats blame immigrants for a Presidential election result* part of a broader effort to “ensure Europe’s recent spate of shootings. The party’s autonomous operating capabilities, in leader, Jimmie Akesson, claims immigra- % of votes Others (1.0) Aksener (7.3) complement to NATO.” Officials say that, tion has made Sweden a place where Demirtas (8.4) in practice, it is mostly about creating links women are “gang-raped, mutilated and Erdogan Ince between general staffs, and sharing train- married off against their will”. Polls show (52.6) (30.6) ing and planning exercises, in order to be them in a virtual tie for second place with Parliamentary election result readier to act together in crises. It has re- the centre-right Moderates, and only a few Seats won*, total=600 ceived the blessing of Jens Stoltenberg, points behind the ruling Social Democrats. NATO’s secretary-general. Similar fears of immigrant crime have People’s Alliance Nation Alliance Mr Macron’s chief concern has been to helped create a political crisis in Germany. AK MHP CHP Iyi HDP (295) (49) (146) (43) (67) share the burden of rapid-reaction inter- The interior minister, Horst Seehofer, has ventions. The French want other Euro- threatened to end his Christian Social Un- Source: Anadolu Agency *Provisional peans to join their efforts when common ion (CSU) party’s alliance with Angela 1 The Economist June 30th 2018 Europe 29

2 Merkel’s Christian Democrats if the chancellor cannot by next week find a way to stop asylum-seekers from elsewhere in Eu- rope coming into Germany. That could bring down her government. The CSU is trying to stem its losses to Alternative for Germany, an anti-immigrant party. In Italy, Matteo Salvini, the interior minister and leader of the populist Northern League, calls migrants “lazy criminals”. He has promised to deport up to 500,000 illegal immigrants and has closed Italy’s ports to asylum-seekers rescued at sea. Italy’s newprime minister, Giuseppe Conte, is demanding a permanent Europe-wide deal to share the refugee burden, ending the current system under which the first country where migrants arrive is responsible for processing their asylum applications. Finland All of this will come to a head at an EU summit in Brussels on June 28th-29th, where Mrs Merkel must try to cobble to- No-man’s-land gether a deal that can satisfy both Mr See- hoferand MrSalvini. Apre-summit gather- Women-only clubs get a makeover ing the previous Sunday failed to make much progress. Some elements of a future OST Finns celebrate the summer alent ofinfluential men’s clubs. In the EU European asylum system have broad sup- Msolstice with a long night ofsweaty women earned16% less than men in 2016, port. Most countries back an idea to set up sauna sessions and binge-drinking. But according to Eurostat. Female entrepre- centres in safe countries outside the EU to this year, on an island offthe coast of neurs tend to have smaller networks than review asylum applications. But it is un- Raseborg, an hour-and-a-half’s drive their male counterparts, mainly consist- clear which non-European countries from the capital Helsinki, a group of ing offamily and friends. Womenonly would be willing or able to host such cen- women from around the world gathered represent a third ofall entrepreneurs in tres. And it is hard to imagine the central for the opening ofa private island resort the EU and are halfas likely to be self- European countries changing their minds to cleanse their bodies and minds of tox- employed as men. on taking a share of asylum-seekers who ins—including, it seems, the patriarchy. Women-only clubs are not a new are accepted. All are governed by anti-refu- “SuperShe Island” is a place forambi- concept. They existed in London as early gee parties. Last week Hungary began im- tious women to networkwhile experi- as1860. Today’s gentlewomen’s clubs, plementing a law which would make aid- encing a “vacation on steroids”, says unlike their male counterparts, feature ing migrants a crime. Kristina Roth, the resort’s German-Amer- Instagram-friendly interiors, and mind- The uproar over refugees comes at a ican founder. Men are strictly banned. fulness classes. The Wing has a lactation time when their numbers have actually The island resort is just one ofa crop room. At SuperShe, women can fly in on fallen dramatically. So far this year 42,845 ofnew women-only spaces hoping to a private helicopter from Helsinki, skin- migrants have crossed the Mediterranean bring a sea-change in the way women ny-dip in the Baltic Sea and dine off a to Europe, down by half from the same network. The Allbright, a new club in low-cal menu. period last year and by over 80% since London, focuses on creating business Like their male counterparts, these 2016. The fear of an immigrant-led crime networks forworking women. An Amer- women’s clubs have not escaped criti- wave, too, is belied by the evidence. When ican firm called The Wing is an all-female cism. The Finnish equality ombudsman Donald Trump tweeted on June 19th that co-working space, and plans to open a investigated SuperShe fordiscrimina- crime in Germany had risen by over10% as London branch later this year. Her Global tion. The project was given the all-clear a result of refugees, fact-checkers respond- Network, originally from Sweden, helps on the grounds that to achieve its goal of ed that overall crime had fallen by a tenth women find business contacts in14 cities female empowerment, women had to since 2016, to its lowest level since 1992. around the world. feel comfortable on the island. The Wing, Mr Trump may have been thinking of a In the #MeTooera, it is little wonder however, is still facing a similar investiga- study that found that violent crime in Low- that many women are seeking the equiv- tion in New York. er Saxony rose by almost 10% from 2015 to 2016, and that 90% of the increase was due to refugees. But Christian Pfeiffer, a crimi- if the number of women goes up,” says Mr Jerzy Sarnecki, a Swedish criminologist. nologist who co-authored the report, says Pfeiffer. “The young husbands suddenly The gangs tend to have immigrant back- data for 2017 sends the opposite message: care about their family.” grounds, but reflect failed integration poli- the rate of violent crime fell by 6%. Many In Italy, few attempts have been made cies in past decades, rather than problems had blamed refugees for rising burglaries, to measure the criminal impact of immi- with the latest wave ofrefugees. which have in fact since fallen by a remark- gration, but overall crime fell by 25% be- Still, whipping up fear of refugees and able 30%. Mr Pfeiffersays they were proba- tween 2007 and 2016. Sweden has seen a crime makes forsuccessful politics. Even in bly the workofeastern European gangs. recent increase in violent crime, including the region around Haparanda, the Sweden Male refugees are committing fewer a spate of attacks with shotguns and hand Democrats are “stronger and stronger”, Mr crimes as they move out of shelters, where grenades. In mid-June, fourmen were shot Waara admits. He says his Social Demo- fights break out. It also helps that the share dead in Malmo over a period of four days. crats will respond that at least a quarter of of women among the migrants is rising. But the violence is mainly between crimi- the town already has an immigrant back- “The biggest factor in reducing violence is nal gangs in specific neighbourhoods, says ground: Finnish. It may not work. 7 ADVERTISEMENT XINHUA (SSMVY6ULVY 6UL MVY (SS& Clarifying the misunderstanding surrounding the Belt and Road Initiative By Hu Biliang

Photo taken on April 16 shows cargo containers of China Railway Express at Duisburg Intermodal Terminal in Duisburg

German newspaper Handelsblatt reported in April that the MVYLPNUJVTWHUPLZHɈVYKLK[OLZHTLIYLHK[OVMVWWVY[\UP[` ambassadors to China of 27 European Union (EU) member :VTLJSHPT[OPZPZ[OLYLZ\S[VMWYLMLYLU[PHS[YLH[TLU[PU[OL states had compiled a report criticizing the Belt and Road awarding of public contracts. However, by this logic, if the Belt Initiative for unfairly advantaging Chinese companies, dividing and Road Initiative—an international development roadmap— the EU and hampering free trade. In short, according to the served only the interests of China, it would be ill-supported and report, the initiative serves only the interests of China. unsustainable, eventually damaging the interests of the Chinese Given that this mega-scale development concept was companies which provide the investment. WYVWVZLKVUS`Ä]L`LHYZHNVHUKT\JOVM[OLHɉSPH[LK :V^O`KVLZZ\JOHUPTWYLZZPVUL_PZ[KLZWP[LILPUN construction work is still in its initial stages, it is not surprising illogical? that multiple opinions and viewpoints abound. At the initial stage of Belt and Road construction, most Thus far, a batch of investment and construction projects undertakings are large infrastructure projects which require involving infrastructure and energy have been launched along heavy investment, a lengthy construction process, and high risk ^P[OZ\WWVY[PUNÄUHUJPHSPUZ[P[\[PVUZZ\JOHZ[OL:PSR9VHK with limited short-term return. China intended for international Fund, the Asian Infrastructure Investment Bank (AIIB) and the collaboration on such projects, but few countries or overseas New Development Bank (NDB), all of which were made possible companies have been willing to get involved during these through international cooperation. China has also tried to pool nascent phases, or to share the risks together with their Chinese international wisdom and increase global understanding of the counterparts. Belt and Road Initiative by hosting a variety of mutual exchange In light of this, some Chinese state-owned enterprises programs including the Belt and Road Forum for International have had no choice but to carry on by themselves at the initial Cooperation last year. stage. Once the backbone of these infrastructure developments @L[PUZWP[LVM[OLZLLɈVY[ZPU[LYUH[PVUHS\UKLYZ[HUKPUNVM is complete, the investment landscape of the countries in the initiative remains inadequate, and the reasons why deserve which they are located will be drastically improved and the circumspection. corresponding risks will be greatly reduced. At this point we will SPRLS`ZLLTVYLHUKTVYLPU]LZ[TLU[MYVTKP]LYZPÄLKZV\YJLZ >OVILULÄ[Z& JOVVZPUN[VILJVTLHJ[P]LPUWYVQLJ[ZHSVUN[OL:PSRYV\[LZ One popular view among Belt and Road skeptics is that Chinese :VTLJSHPT[OH[[OL)LS[HUK9VHK0UP[PH[P]LNP]LZ enterprises monopolize Belt and Road projects, with few China convenient access to raw materials. There is nothing ADVERTISEMENT fundamentally untrue about this claim, nor is there anything regions through the construction of infrastructure, transport wrong with raw material trading with countries along the and economic corridors, the initiative can in fact create a :PSRYV\[LZHJJVYKPUN[V[OLY\SLZVMPU[LYUH[PVUHS[YHKL;OPZ more liberalized and open environment for international trade. exchange of goods not only meets the demand in China, but Through the establishment of a worldwide network of transport HSZVZPNUPÄJHU[S`JVU[YPI\[LZ[V[OLLJVUVTPJKL]LSVWTLU[ and infrastructure, more players than ever before will be able to of the exporting nations. These trade practices conform to partake in global trade, heralding a new era of participation in PU[LYUH[PVUHS[YHKLY\SLZHUKHYLIHZLKVUT\[\HSILULÄ[ZMYLL international exchange. from coercion. It is also true that the development of the Belt and Road 5VJYLKP[VYPTWLYPHSPZT 0UP[PH[P]LJHUOLSWYLK\JL*OPUH»ZZ\YWS\ZJHWHJP[`:VTL Another recent accusation, by Indian scholar Brahma Chinese enterprises are moving production capacity to these Chellaney, is that the Belt and Road Initiative represents a countries—reducing domestic surplus capacity but at the kind of “creditor imperialism.” According to Chellaney, by same time, and perhaps more importantly, promoting the WYV]PKPUNJOLHWKLI[[VJV\U[YPLZHSVUN[OL:PSRYV\[LZ*OPUH industrialization of these partner nations. For instance, in China, is purposefully creating a “debt trap” for these governments, excess production capacity exists in the steel, cement and plate forcing them to cede both natural assets and sovereignty. glass industries, yet these materials are in high demand among Chellaney’s idea was later seized upon by the media in the developing countries looking to rapidly build their infrastructure.

Pensions in Russia Several other problems remain unre- solved. First, large swathes of citizens eligi- Back to work ble for early pensions have been left un- touched, in particular those working in hazardous conditions, such as miners and members of the military and security services. Second, the government has not MOSCOW dealt with the country’s outsize informal sector and the millions of workers who do Russia’s government plans to raise retirement ages unchanged since Stalin’s times not pay into the pension system at all. Cru- HEN the Soviet Union started pay- cially, the proposed changes do nothing to Wing pensions in the early years of Jo- More with less stimulate Russia’s underdeveloped alter- sef Stalin’s rule, the retirement age was set Russia, old-age dependency ratio natives to its main pay-as-you-go pension at 60 for men and 55 for women. It has not People over 64 per 100 people aged 15-64 system, the result of a widespread distrust ofpension funds and cash savings. been raised since. Experts have urged 20 change for decades, but squeamish politi- Whether the age rise will improve the cians have balked. Vladimir Putin declared 18 lot of average people remains to be seen. in 2005 that it would not go up as long as 16 With the change beginning in 2019, many he was president. 14 will have little time to plan. Those caught So it was with trepidation on June 14th, 12 in the transition may encounter trouble a month into MrPutin’sfourthpresidential staying employed: job-retraining pro- 10 term, that the government revealed plans grammes are underdeveloped and age dis- to raise the retirement age to 65 for men 8 crimination in hiring is widespread. and 63 for women. They announced the Mass protests followed the last major 1960 70 80 90 2000 10 16 move along with an increase in value-add- changes to the pension system in 2005, ed tax from 18% to 20%, hoping to bury the Source: United Nations Population Division when the government turned a raft of bad news under the opening of the World benefitsforpensionersinto cash payments Cup that day. ment think-tank estimates that without that for many did not nearly add up to the Yet Russians have taken notice. Some changes, the number of pensioners would lost entitlements. Yet sustained unrest this 2.5m have signed an online petition oppos- grow from 40m today to 42.5m in 2035, ex- time is unlikely. The middle-aged workers ing the change; according to a government ceedingthe numberofworkerspayinginto who are most affected tend to be passive pollster, Mr Putin’s approval ratings the system. The proposed changes will see and risk-averse. dropped to “only” 72% on June 17th, levels the number of pensioners instead shrink The Kremlin has also been careful to not seen since before the annexation of to 35m by 2035. distance Mr Putin from the plans, placing Crimea. “They want to solve the govern- The government has promised that the blame instead on Dmitry Medvedev, ment’s money problems at the expense of monthly pensions will go up by1,000 rou- the prime minister. This may leave the the people,” gripes Alexander Serukhin, a bles ($15) in 2019; officials say they could president room to play the saviour, per- 55-year-old engineer in Pskov. Alexei Na- amount to 40% of salaries down the road. haps by introducing an amendment soft- valny, the country’s leading opposition Yet many people remain sceptical of such ening the proposal. Regardless, the move is politician, has called for demonstrations promises, especially after the government certain to deepen distrust of the authori- on July 1st, and labelled the government’s wriggled its way out of mandated indexa- ties. For many, like Alexander Mikhalev, decision “robbery”. tion by turningto one-time payments in re- who makes watersports goods in Perm, The Kremlin’s move does not signal a cent years when inflation was high. Any where male life-expectancy is just 63 years, newfound openness to structural reform. increase in future pension payouts will de- it is a sign that he can rely only on himself. Instead, it reflects overdue necessity. Rus- pend on how the government divides the “I’ll workaslongasmyhealth allows it,” he sia’s pension problems begin, as in much new savings between the federal budget says. “I don’t expect any gifts from fate, and of the world, with an ageing population and the pension system. what’s more not from the state.” 7 that is now once again living ever longer. Raising the retirement age was suggested in Mr Putin’s first economic strategy in 2000. Putting offthe move has compound- ed the problems. Russia’s retirement age is lower than in any of the OECD countries; among former Soviet republics, only Rus- sia and Uzbekistan have not raised it since the USSR collapsed. Unhelpful demographic trends exert additional pressure, with a small generation born during Rus- sia’s turbulent 1990s now entering the workforce and having to help pay for a large post-war generation reaching retirement age. The increase, which will be phased in over ten years for men and 16 years for women, should significantly reduce the burden on the federal budgetand allow for higher pensions to be paid. The pension fund currently sucks up subsidies worth about 2.5% of GDP. A study by a govern- He’s doing what? The Economist June 30th 2018 Europe 33 Charlemagne A Balkan opening

Macedonia’s reformers swallowed a difficult deal with Greece. Now they need Europe’s help ground by a rotten regime that intimidated opponents, hollowed out the state and populated Skopje with kitsch statues of Alex- ander the Great simply to annoy the Greeks. It tooka political crisis, culminating in nationalists storming parliament and beating up MPs, including Mr Zaev, in April 2017, to bring decisive change. Mr Zaev’s government, which took office soon afterwards, has started well, soothing quarrels with neighbours and beginning reforms. Relationsbetween Macedoniansand the large Albanian minority, once close to war, are smoother than ever. Yet corruption and clientelism remain rife, and the history of Mr Zaev’s So- cial Democrats is less than spotless. The government’s reformers need the anchor ofEU accession talks, says Mr Dimitrov. This is where a thoughtful EU would step in. In the autumn Mr Zaev must win a referendum on his name deal. That should be enough to convince the parliament to make the relevant constitutional changes. Yet without a better prospect of EU talks Mr Zaev is exposed to charges from Ms Grceva and her allies that Macedo- nia has humiliated itself for nothing. If the opposition parties all urge a boycott, the referendum may struggle to reach the required 50% turnout. Mr Zaev has vowed to resign ifthat happens. So why the European reluctance to help? Corruption and re- OLZA GRCEVA’s face curdles into a sneer as she traces the be- gional rows have hardly helped the case of the Balkan states. But Strayal of her nation. Over coffee in Skopje, the capital of the they have also fallen victim to the EU’s fatigue with earlier en- country that may soon no longer officially be known as the For- largement. Lookat Poland and Hungary, say sceptics, steadily dis- mer Yugoslav Republic of Macedonia, Ms Grceva outlines her mantling the rule oflaw from inside the club. Turkey began mem- grievances. The government’s “illegal” agreement with Greece bership talks in 2005, and has only turned more illiberal since. last month to rebrand the country North Macedonia, she says, The counterargument is that the Macedonians threw off an was a “gesture of weakness and capitulation”. What Macedo- authoritarian regime, solved what seemed like an impossible re- nians call themselves will now be judged in Athens, forging an gional dispute and now deserve European help to bury the past. “Orwellian” state. Ms Grceva, a former MP now running a new Other powers are sniffing around: Turkey is funding mosques centristparty, isfarfrom alone in heranger. When your columnist and civil society, and Russian flagshave been flown at recentprot- asks forthe bill, it turns out to have been settled by a sympathetic ests. Full EU membership is perhaps a decade away. But simply eavesdropper. starting talks could reassure investors, blunt the arguments ofna- The name issue is one of the sillier disputes in a region hardly tionalists and help convince young Macedonians, who have quit lacking them. The Greeks believe that plain “Macedonia” implies the country in droves, that there is a future at home. a claim on their northern regions ofthe same name; a suggestion the (ex-Yugoslav) Macedonians consider offensive and absurd. To Tidying Europe’s courtyard say that passions run deep on this is like saying Brazilians have a The debate highlights Europe’s conflicted approach to its Balkan passing interest in football. Merely to discuss it is to enter a dizzy- courtyard. The strongest opposition to opening membership ingly Balkan blend of history, geography, linguistics, psychology, talks came from Emmanuel Macron, France’s president, along archaeology and even musicology. After 27 years of this row, it with the Dutch. Mr Macron says the EU must reform before grow- was heartening that Zoran Zaev and Alexis Tsipras, respectively ing. But such opponents of enlargement are just “wetting their the Macedonian and Greek prime ministers, were able to find a pants”, fearing that the prospect of migration from the Balkans mutually acceptable formula. But the deal has sparked violent will be a gift to populists, says an irritated Eurocrat; so much for nationalist protests and political upheaval in both countries. Its MrMacron’s grand ideas fora Europe that lives up to its potential. passage into law is assured in neither. Germany takes the opposite tack, seeing Balkan expansion as Greek vetoes have long kept Macedonia out of NATO and the a strategicnecessity. Itisnotan outlandish view. Macedonian offi- European Union. Theirliftingmeansan offerto join NATO should cials have taken to comparing their detente with Greece to the be forthcoming at the club’s summit in mid-July. But the real prize post-war Franco-German reconciliation, conducted through and remains furtherout ofreach. This week, after a tortuous ten-hour for Europe. If that is overblown, fixing one Balkan problem does debate, the EU’s governments agreed to offerMacedonia (and Al- at least make the others more visible, notes Florian Bieber, an ex- bania) a faint green light, proposinga start to membership talks in pert on the region. Hashim Thaci, Kosovo’s president, says the June 2019 ifjudicial and other reforms are carried out. It was bet- next step could include the talks between his country and Ser- ter than some had feared, but after the Greek deal some Macedo- bia—a dispute over people and borders that retains the potential nians had dared to hope for more encouraging language, with forviolence. fewer conditions and a quicker start to talks. “Our drive towards If the notion that enlargement can solve as well as create pro- European democracy could have been more openly embraced,” blems seems eccentric in parts of Europe, Macedonia’s reformers says Nikola Dimitrov, Macedonia’s foreign minister. offer a corrective. This week may not have delivered the warm Ifthere is frustration, it is because tiny Macedonia offers a rare welcome they sought from the EU, but Mr Dimitrov is hopeful. good-news story in the Balkans. For years it was run into the “The bigger the obstacles,” he says, “the grander the success.” 7 34 United States The Economist June 30th 2018

Also in this section 35 Reorganising Washington 36 School shootings and architecture 36 Immigration policy 39 Lexington: India and America

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

The Supreme Court from Justice Kennedy. While many statements and actions of government officials Right of way “are notsubjectto judicial scrutinyor intervention”, he wrote, “that does not mean those officials are free to disregard the constitution and the rights it proclaims and WASHINGTON, DC protects”. It is an “urgent necessity”, Justice Kennedy continued, “that officials adhere With the swing justice hanging up his robe, the deeply conservative 2017-18 term is to these constitutional guarantees and just a taste ofwhat the Supreme Court could become mandates in all their actions, even in the AST June, progressives breathed a sigh of just eked out a few wins along the way”. sphere of foreign affairs”. With some evi- Lrelief when Anthony Kennedy (pic- But liberals had high hopes that Justice dent trepidation about the hands in which tured) stuckaround to serve a 30th term on Kennedy would see the law their way in he was about to place the responsibility of the Supreme Court. But a year later, with three ofthe year’s most contentious cases. filling his seat, Justice Kennedy added this Justice Kennedy announcing he is ending The first disappointment for liberals mild parting shot: “An anxious world must his tenure on July 31st 2018 and handingan- came in Masterpiece Cakeshop v Colorado know that our government remains com- other high-court vacancy to President Do- Civil Rights Commission, the tiff over mitted always to the liberties the constitu- nald Trump, the left is gasping for air. Abor- whether Jack Phillips, a Christian baker, tion seeks to preserve and protect, so that tion, environmental protections, gay and had the right to refuse to bake a cake cele- freedom extends outward, and lasts.” lesbian rights, racial equality and voting brating the nuptials of two men. Justice rights are all newly vulnerable. Kennedy’s empathy for the baker won the Anthony and Caesar As the court’s median justice for more day in Masterpiece. A civil-rights commis- A pair of partisan gerrymandering cases than a decade, the 81-year-old Reagan ap- sioner had spoken disrespectfully of Mr teed up just forJustice Kennedy might have pointee has sided with the liberals in cer- Phillips’s faith, Justice Kennedy wrote for a reformed voting laws had the man Rick tain key cases. He stood up for abortion 7-2 majority, unconstitutionally impinging Hasen, an election-law expert, calls “Jus- rights and protected affirmative action at on his religious liberty. tice Hamlet” been a little less mercurial. In universities. He helped to save the anti-dis- Another case involving hostility to- 2004, Justice Kennedy lamented election crimination protections at the heart of the wards religion—the wrangle over the third “rigging” butcouldn’tfind a workable stan- Fair Housing Act in 2015. Mostfamously, he iteration of Mr Trump’s ban on travellers dard forpolicing the practice oflawmakers wrote four gay-rights rulings, culminating from certain Muslim countries—seemed drawing electoral districts to rope out the in a 2015 decision openingmarriage laws to different in the outgoing justice’s eyes. In competition; 14 years later, he had little in- gays and lesbians. Yet Justice Kennedy Trump v Hawaii, Justice Kennedy voted to terest in new theories on how to define closed his third decade on the court in a de- uphold Mr Trump’s proclamation despite egregious gerrymandering in Gill v Whit- cidedlyrightward pose. Thisterm the court presidential comments suggesting that “Is- ford and Benisek v Lamone. What could issued 63 rulings, 18 ofwhich were decided lam hates us” and that Muslim terrorists have been a coalition to rein in partisan re- 5-4. Of those, only four rather piddling vic- should be shot with bullets dipped in pig’s districting became unanimous decisions tories went the liberals’ way. And Justice blood. The Supreme Court’s job, Chief Jus- to put off the matter for another day. With Kennedy did not swing towards them in tice John Roberts wrote for the five conser- Justice Kennedy on his way out, and the any ofthe tight decisions. vatives, is not to “denounce” presidential conservative justices unworried by gerry- That should not come as a huge sur- statements but to respect “the authority of mandering, that day may never come. prise, says Leah Litman, a law professor at the presidency itself”. Justice Kennedy and the court’s fourlib- the University of California at Irvine and The decision drew a furious dissent eral justicesmaynothave waltzed together formerKennedy clerk. Herold boss “has al- from Justice Sonia Sotomayor. It inspired in a 5-4 decision this term, but Chief Justice ways been on the right”, she says. “The left an almost plaintive concurring opinion Roberts did, twice, and the soon-to-be-sec-1 The Economist June 30th 2018 United States 35

2 ond-newestjustice, Neil Gorsuch, took one Bureaucracy partment of Education and the Workforce. turn across the aisle. The chief departed The reason for this, according to the White from his conservative colleagues in Car- Shuffle up House, is to avoid duplicating efforts on penter v United States, a Fourth Amend- workforce-development programmes. Yet ment ruling requiring authorities to get a that is a relatively small portion of what search warrant before tracking individ- each department does: the Education De- uals’ location through data beamed to cell- WASHINGTON, DC partment provides university loans and phone towers. Justice Gorsuch, who owes grants and enforces civil-rights laws in The Trump administration fancies his seat to Senate Republicans’ refusal to schools. The Labour Department crunches remaking the federal government consider Merrick Garland, Barack economic statistics, administers unem- Obama’s choice for the court, joined the NE would be forgiven for thinking ployment insurance and workers’ com- liberals in Sessions v Dimaya to curtail the Othat the Department of Agriculture pensations schemes, and investigates un- government’s power to deport people con- primarily concerns itself with farms. In safe working conditions. Because the laws victed ofcertain crimes. fact, over 70% of its money goes to nutri- mandating those programmes are not Yet in his first full term on the bench, tion-assistance programmes like food changing, the amalgamated department says Elizabeth Wydra ofthe Constitutional stamps, a welfare scheme providing 42m would still have to fulfil those functions. “It Accountability Centre, Justice Gorsuch has Americans with pre-loaded debit cards to seems like the goal is just to reduce the largely lived up to his billing as a “legal buy groceries. It also spends $6bn on for- number of departments by one,” says De- vending machine” for the right. He helped estry—a job one might think better suited metra Nightingale of the Urban Institute. form three 5-4 majorities in June to curb to the Department of the Interior—and “Just jamming them into the same depart- voting rights. In NIFLA vBecerra, he joined $1.4bn on rural rental subsidies, duplicat- ment is not going to improve efficiency.” another 5-4, striking down a Californian ingthe workofthe DepartmentofHousing Unlike the proposed education-labour regulation designed to inform pregnant and Urban Development. It also inspects marriage, there is a clearer rationale for re- women about where to go to get an abor- food, with jurisdiction over pepperoni piz- organising welfare. Benefit schemes like tion. Afterremainingsilentin the oral argu- zas but not cheese; liquid eggs but not Medicaid, food stamps, cash welfare, rent- ment for Janus v AFSCME, an important case whole; open-faced meat sandwiches, but al subsidies and earned-income tax credits on public-sector unions, Justice Gorsuch not closed-face. are administered by different cabinet designed onto Justice Samuel Alito’s 5-4 opin- Given these haphazard groupings, a partments. They all have differing eligibil- ion overturning a 41-year-old precedent government reshuffle might not seem a ity cutoffs, which can interact with one an- that let unions charge non-members an bad idea. On June 21st the White House re- other and could cause poor Americans to “agency fee” for collective bargaining. In leased a plan, after several months of tight- face marginal-tax rates of 95% in some Justice Elena Kagan’s dissenting opinion, ly guarded work by the Office of Manage- cases. Harmonising these programmes— Janus is the result of the conservative jus- ment and Budget, to do just that. Some of some of which were devised more than a tices’ “six-year crusade” to cripple the its technocratic recommendations are half-century ago—would be a worthy goal. struggling labour movement. well-considered, like charging a single But that is not the aim of the Trump ad- The term ending this weekoffers a “pre- agency with food-safety inspection or pri- ministration’s reforms. The first, explicitly view ofwhat the Supreme Court would be vatising the postal service. The headline mentioned in the proposal, is to impose like ifChiefJustice Robertswere to become proposals—to merge the education and la- work requirements on all these pro- the swing vote”, Ms Litman says—in other bourdepartmentsand consolidate welfare grammes. The administration has aggres- words, a court with a Gorsuch-like jurist in programmes into a rechristened Depart- sively pursued this policy by encouraging Justice Kennedy’s old seat. Except in some ment of Health and Public Welfare—are Republican-led states to institute work re- criminal cases, “progressives will lose, and not. “This is a plan without an obvious quirements for the first time on Medicaid, they will lose a lot”. As bad a beating as the purpose,” says Paul Light, a professor at health insurance for the very poor. It also left took this year, losses may be starker New York University who has studied the favours workrequirements forfood stamp. and deeper in years to come. And areas of federal bureaucracy for more than 30 Both measures would shrink the number the law in which Justice Kennedy has years. “It seems a lot like moving boxes for of people eligible. This speaks to the sec- stemmed the right-wingtide could soon be the sake ofmoving boxes,” he adds. ond, unstated, motive—to cut the size of the wild west. No outright challenges to Take the proposal to create a new De- these programmes. In its budget proposals, Roe vWade, the 1973 decision establishing a the Trump administration has pitched hef- right to abortion choice, have reached the ty cuts to housing subsidies and Medicaid. court in recent years. That may change It has tried to cut the food stamps pro- with Justice Kennedy’s departure, as cases gramme by 22% and suggested replacing involving state abortion bans as early as the cash transfers with a “Blue Apron”- six weeks’ gestation—like a fetal-heartbeat style boxed delivery service. bill Iowa legislators passed this spring— The Trump administration takes this re- could make theirway to the justices’ inbox. shuffle to be a simple exercise in removing Challenges to gay rights—even Obergefell v tentacles from the bureaucratic leviathan. Hodges, the same-sex marriage ruling— But such reorganisation requires the con- may get a fresh hearing, too. sent of Congress, which is typically tough This is an extraordinary moment in the to secure but nearly impossible several life of America’s constitution which, months before an election. Congressmen though written down, has meanings that who have become grand through commit- the justices find to be ever-changing. The tee memberships will be loathe to give up president holds the keys to an appoint- their power. Actual streamlining would re- ment that could lock down a conservative quire changes to decades-old legislation, majority for decades, while he is under in- which is even more difficult to achieve. All vestigation by a special counsel. The Sen- ofthis requires a dollop ofpolicy nous and ate must carefully scrutinise whoever Mr understanding of the Capitol Hill lore. In Trump taps to replace Justice Kennedy. 7 other words, it probably won’t happen. 7 36 United States The Economist June 30th 2018

School design Brutalism

CHICAGO Can architecture help prevent school shootings? The NRA thinks so TIScalled a lockdown drill,” saysMax, “Ia nine-year-old pupil at a private school on the North side. “One teacherpre- tends to be an intruder. We have to hide in classroom, turn over our desks and hide Sandy Hook’s new school behind them. We have to lock the door, barricade all the heavy stuff in front of the attackon the school. Connecticutprovided trees and bushes or use them to cut door and take a book or a ruler so we can a grant of $50m for the latest in anti-terror through the aforementioned fence; and throw it at the intruder if he comes in. We measures designed to “delay, detect and making do without windows, or only have to be super quiet. Ifsomeone says it is deter” an armed intruder. A similar case is small ones with ballistic protective glass. safe to come out we cannot do that, be- a Jewish school in Las Vegas, sponsored by Front offices should be protected with two cause it could be the intruder. We have to Sheldon Adelson, a casino magnate, and sets of automatically locking doors to wait for the principal to come knocking on built by Mr French’s firm. The task was to create an “entrapment area”. the door to tell us it is safe to come out.” make it terrorist-proof, says Mr French, At the end of the report is a draft for a This year has already seen the murder who cannot disclose more details. law to allow schools to arm their teachers. in February of 17 at Florida’s Marjory Sto- The National Rifle Association (NRA) Sadly it lacks any estimate of the cost of neman Douglas High School, which had produced a 225-page report in 2013, in the “hardening” America’s more than100,000 regularly held lockdown drills for years. wake of the Sandy Hook shootings, which schools, but it would probably run into On May 18th a student at Santa Fe High it dusted off after the massacre at Marjory hundreds of millions of dollars for each School in Texas killed ten of his peers and Stoneman Douglas High. The NRA sug- state, at a time when schools in Detroit wounded13with a shotgun and a revolver. gests limiting entry to a single point; build- have leaking roofs and schools in Balti- In the days afterthe Santa Fe massacre Dan ing a prison-style fence (the report shows a more are unable to heattheirclassrooms in Patrick, the Republican lieutenant-gover- photo of a deficient fence juxtaposed with winter. According to estimates by the nor of Texas, made two suggestions. One one that would have made GDR border American Society of Civil Engineers, was to echo President Donald Trump’scall guards proud); banning greenery outside America’s school infrastructure is under- to arm teachers with concealed weapons schools because intruders may hide in funded by about $38 billion a year. 7 (many teachers abhor the idea of being armed). The other way he suggested to make schools safer was by reducing the Immigration policy number of entrances to one or two (how children might flee such a place was not When good men do nothing apparently a major consideration). Mr Patrick’s proposal might sound ba- nanas, but some new schools are in factde- signed with the prevention of mass shoot- ingsin mind. The average American school MCALLEN, TEXAS is 44 years old, built long before school America’s immigration system is the result ofdecades ofdodging hard decisions shootings were a concern. Jim French, an architect with DLR Group who specialises ESSthan ten milesseparate two rooms in States. Most have travelled for weeks from in building schools, says his trade can help, LMcAllen, a modest, low-slung city on Central America, though some journeys but only up to a point. “The worst thing we the Mexican border. The first is Ursula, an are more arduous than others. Brenda Rio- can do is to turn our schools into prisons,” immense warehouse which squats behind jas, a cheery and tireless spokeswoman for he says. (DLR also designs prisons.) a high brick wall, almost invisible from the the Diocese ofBrownsville, which runs the The recently redesigned school in street. It is the largest immigration-process- centre, says that a woman arrived recently Sandy Hook, site of the deadliest school ing facility in America, and holds children with a ten-day-old baby: she had given shooting to date, has a new, light-filled taken from their parents under a policy birth in the Mexican mountains during her building shaped like an “E” to maximise that President Donald Trump’sadministra- northward trek. On one recent Wednesday the number of evacuation routes. It has tion initiated in April and then ordered afternoon, young men huddled around a three entrances that can be reached from stopped last week. Inside the facility, chil- television watching the World Cup, while parking areas by foot bridges, allowing dren lie on mats beneath bright lights that parents tended to their children and filled staff to monitor comings and goings. The never go out, wrapped in Mylar blankets, out forms. A smattering of Texans arrived school’s ground floor is elevated, making it caged behind chain-linkfences. with boxes ofclothes to donate. difficult to see inside classrooms from the Nine miles north, clad in a modest stuc- If you are a liberal, you probably view outside. Each classroom has locks and se- co, is the second building—the Catholic what is happening in the first building as curity doors as well as windows with im- Charities Humanitarian Respite Centre, unbearably cruel and what is happening pact-resistant glass. where migrants who have been released in the second as decent and just. Ifyou sup- Sandy Hook is a special case, as the from detention can rest, shower, change port the president, you probably view brief for its architects was to build some- clothes and have a hot meal before their what is happening in the first building as thingthatcouldwithstandanotherhorrific onward journey further into the United regrettable but necessary and what is hap-1 The Economist June 30th 2018 United States 37

2 pening in the second as naive and perhaps “undesirables”, a category that included counting for 3% of its population; by 2016 dangerous: after all, if you treat them kind- “idiots, imbeciles, epileptics…polygamists those numbers had risen to 1m and 10%. ly then more will come. and anarchists”. Many of the states that saw the steepest More than any other single issue, atti- America did not set permanent nu- rises in share ofimmigrant population vot- tudes towards immigration define Mr merical limits on immigration until the ed forMr Trump in 2016. Trump’s base. Some immigration restric- Johnson-Reed Act of 1924, which used a A repeated failure to legislate, which tionists use clinical language, arguing that quota system to govern entry. This system gave the impression that immigration was reducing levels of immigration would be provided visas to up to 2% of the number out of control, helped pave the way for his better for American workers and immi- of foreign-born people of each nationality victory. The last significant legislative at- grants already in America. Not Mr Trump. present at the time ofthe 1890 census. In ef- tempt to address illegal immigration came To him, Mexico is sending “rapists” and fect, this restricted immigration to Euro- in 1986. The Immigration Reform and Con- members of MS-13, a hyper-violent gang, peans, and was especially favourable to trol Act legalised 2.7m undocumented im- across the border. (Stephanie Leutert, who Britons and other western Europeans and migrants, tightened border security and directs the Mexico Security Initiative at the unfavourable to southern and eastern punished employers who knowingly University of Texas, points out that his Europeans, who at the time the act was hired undocumented workers. It was sup- own government’s data show that MS-13, signed comprised the bulk of newly ar- posed to halt illegal immigration. How- members made up 0.075% of the total ever, thanks to ineffective employer sanc- number of migrants crossing the southern tions (“knowingly” hides many sins), border in the 2017 fiscal year.) The presi- Borderline continued demand forlabour and the sim- dent discusses immigration in the vocabu- United States, total border apprehensions* ple fact of a long, unsecurable border with lary of a pest-controller. Everything sug- By country of origin, m what was then a poor and dysfunctional gests that he intends to make the Guatemala Honduras country, the opposite happened. That gave “infestation” of immigrants a central issue El Salvador Others hardliners a potent answer to every subse- in the mid-terms, despite the revulsion at 1.8 quent fix: offerundocumented immigrants his policy ofsundering familiesto deter fu- 1.5 “amnesty”—a crude term for a tortuous ture migrants. and selectively granted path out of the 1.2 shadows—and more will come. The traverse in reverse 0.9 Three similar subsequent attempts America’s immigration system offers failed, for similar reasons. The Compre- something to displease everyone. People 0.6 hensive Immigration Reform Act of 2006 Mexico such as Jeff Sessions and Stephen Miller— 0.3 included provisions to enhance border se- the attorney-general and his funereal for- curity, establish a new temporary guest- 0 mer aide, now a policy adviser to Mr 1960 70 80 90 2000 10 17 worker programme and provide a path to Trump—think it far too permissive. Em- Years ending September 30th citizenship forsome undocumented immi- ployers find it rigid and unresponsive to Sources: Stephanie Leutert, *Country breakdown grants. Co-sponsored by five Republicans their needs. The asylum process is, in the University of Texas, Austin; only available and one Democrat, it passed the Senate, US Customs and Border Protection from 1995 words of a case-manager in Houston, “set but the House preferred a different bill— up so people fail.” This is what happens one that enhanced border security, limited when decades of congressional kludges rived immigrants. judicial review for undocumented immi- are piled on top ofeach other. Congress abolished the national-ori- grants, increased criminal penaltiesrelated The Supreme Court did not deem regu- gins quota system in 1965, with legislation to border crossings, strengthened employ- latingimmigration to be a federal responsi- that favoured skilled workers and immedi- er verification requirements and neither bility until 1875. That year, awash in con- ate family members ofimmigrants already expanded guest-worker visas nor legalised cerns over the prevalence of Chinese in America. In the civil-rights era, having any undocumented immigrants. workers, especially in California, Congress an immigration system that used national Congress, with the support of George passed the Page Act, which banned virtual- origins—in effect, race—as its determining W. Bush, then the (Republican) president, ly all Asian women from entering Ameri- factor was seen as discriminatory. made another run at immigration reform ca. The Chinese Exclusion Act, which Ted Kennedy, who championed the bill in 2007, introducing a bill that would have barred Chinese immigrants, followed sev- after the assassination of his brother John, enhanced border security, provided a path en years later. In 1882 Congress passed the promised that “it will not upset the ethnic to citizenship forsome undocumented im- Immigration Act, which put the treasury mix of our society.” Yet the new measure migrants and ended family reunification, secretary in charge of immigration control, made America vastly more diverse. Muzaf- leaving only the spouse and children of a levied a tax on every non-citizen who ar- farChishti, an attorney with the Migration green-card holder eligible to legally immi- rived at American ports and barred all for- Policy Institute, a think-tank, argues that grate to America. It failed in the Senate. eign convicts—“except those convicted of the bill’s backers assumed it would in- A similar measure in 2013 passed the political offences”. Naturalisation and citi- crease immigration from southern Eu- Senate, with the votes of all 52 Democratic zenship were tightlyrestricted, often racial- rope—particularly Greeks, Portuguese and senators, but died in the Republican- ly; but immigration, by and large, was not. Italians. In fact, immigration soared from dominated House, which appeared inter- Ofthe immigrants who arrived in the great newly independent countries in Asia, and ested only in enforcement. Shortly before wave between 1890 and 1930, more than nearby ones in Latin America. that bill died, President Barack Obama en- one-quarter were never naturalised. In 1960, America was home to 9.7m im- acted Deferred Action forChildhood Arriv- By1910 13.5m immigrants lived in Amer- migrants, 75% ofwhom were European. By als (DACA) with an executive order. This al- ica (nearly 15% of the total population), re- 2016 that number had soared to lowed undocumented immigrants sulting in a restrictionist backlash. The Im- 43.7m—13.5% of the total population—89% brought to America as children who en- migration Act of 1917 prohibited of whom were non-European. In recent rolled in or graduated from school, univer- immigration from Asia, with an exception years immigrant populations have spread sity or the armed forces and had no crimi- for the Philippines, which America then beyond the traditional hubs, such as Cali- nal record temporary, renewable legal ruled, and Japan. It also required that im- fornia and New York. In 1990, for instance, working papers. Mr Trump tried to end migrants pass a literacy test, and barred 173,100 immigrants lived in Georgia, ac- DACA last September. 1 38 United States The Economist June 30th 2018

2 If there were ever a perfect moment for and release” will probably require a vast yond (admittedly justified) outrage at Mr immigration reform, this is it. The border increase in the number of border-crossers Trump’s actions. That approach failed in now has more fencing and police than it who are locked up in facilities that look an 2016 and itrisksfailingagain in 2018 and be- did in 2000, when crossings were at their awful lot like prisons. yond. Part of that is circumstance. Enforce- peak. Then virtually all migrants were There are alternatives to this. A pilot ment is an essential part of any compre- Mexicans. Today, with Mexico’s economy programme that the Department ofHome- hensive fix to immigration, but as one and birth rate both stable, nearlyhalf come land Security (DHS) ran from 2015 until the Democratic strategist says, “in moments from Honduras, Guatemala and El Salva- administration killed it in 2017 placed im- when right-wing populism is ascendant, dor—weak states wracked by gang vio- migrant families under the supervision of nuance gets lost…it’s hard to talk about lence—enduring a costly and treacherous social workers, who helped them find toughness when children are being ripped journey north. As of early 2017, America housing and navigate the immigration bu- from their parents’ arms.” Some on the was experiencing a net outflow ofundocu- reaucracy. More than 90% of participants party’s left flank talk as though any en- mented Mexican migrants and a decline in reportedly showed up to all of their check- forcement of immigration law is inherent- its Mexican-born population. ins and court hearings. Another pro- ly racist. It is not, ofcourse, but two years of Yet Mr Trump appears uninterested, gramme used ankle monitors to keep tabs Mr Trump’s racially tinged comments preferring the political gains he makes on immigrants; this too showed a high about immigrants have left nerves raw. from fulminating over the system’s failings compliance rate. Both methods are cheap- The window for comprehensive immi- than doing the hard work of trying to fix er than detention centres; neither fits the gration reform may now have shut. One them. Mr Trump has remade his party, mood oftoday’s Republican Party. thingthat slowed the flow ofrefugees from whose presidential candidates once com- Central America over the past few years peted to outdo each other in compassion Duck and cover was co-operation from Mexico. But Mr towards poor migrants, in his own image. Over the past weeks Republicans in the Trump has torpedoed America’s relation- Republicans have no compelling electoral House have engaged in a pointless politi- ship with its southern neighbour, which interest in fixing the nation’s immigration cal theatre, voting on a pair ofimmigration now appears poised to elect its own popu- laws. More than 60% of those who voted bills: a hardline measure and a “compro- list firebrand, Andrés Manuel López Obra- for the president in 2016 thought it was ei- mise” bill (the compromise being between dor. Perhapsthe two will getalongfamous- ther“very” or“fairly” important to be born moderate and hardline Republicans, not ly. Or perhaps Mr López Obrador will in America in order to be considered truly between the two parties) backed by Paul decide he sees no reason to make things American. Good luck persuading them to Ryan, the outgoing House speaker. Both easier for a president who treats his coun- grant legal status to 11m people born out- failed, though more Republicans backed try and countrymen disrespectfully, and side the land ofthe free. the hardline bill than Mr Ryan’s. The Sen- allow Central Americans free passage to The political backlash against immigra- ate would not have taken up whatever Mexico’s northern border. tion istherefore peakingata time when the measure passed, and MrTrumphas repeat- The current administration’s policy is number of migrants is receding. In the 2017 edly undermined negotiations by, for in- built on a fantasy: that 11m people can be fiscal year, apprehensions along the south- stance, tweeting that Republicans should deported againsttheirwill. Itisthat, notthe ern border hit their lowest level since1971. “stop wasting their time” on immigration people arriving at the southern border, As the tide goes out, a big population of bills before the mid-terms. that makes America’s immigration system undocumented migrants is being left be- And in a narrow sense, he may be right. unique in the rich world. People will die of hind. After peaking in 2007 at around His approval ratings among Republicans old age in America before they ever ac- 12.2m people, the undocumented popula- remain high, while Democrats have strug- quire the legal right to live in America. This tion in 2016 stood at 11.3m, comprising just gled to muster an effective response be- is an extraordinary failure to govern. 7 over 25% of all the country’s immigrants, and about 5% ofthe American workforce. A large number ofcurrent border-crossers claim asylum in America: about 300,000 central Americans did so in 2017. Many northern European countries put asylum-seekers in reception centres, where they are fed, sheltered and are free to come and go. Life outside these centres would be harder for migrants there than it is inside. America’s newest facility for migrant children, by contrast, is a tent city in Tornillo,Texas,wheretemperaturescanex- ceed 40°c (104°f). Once someone seeking asylum is released in Texas, they can melt away into the greylabourmarketormove to a sanctu- ary city (where local police limit co-operation with federal immigration authorities) and, many fear, skip their hearings at an immigration court. The federal government has tried to prevent this by turning police officers across the country into immigration officials, under a programme called Secure Communities, but it does not have the power to compel local police chiefs to comply. The Trump administration’s policy of ending what it calls “catch As it fitfully blows, half conceals, half discloses The Economist June 30th 2018 United States 39 Lexington An underachieving relationship

America needs to invest more in its partnership with India would be insufficient even if it were as strong as it seems. And in reality it is weaker. The last-minute postponement of plans for the vaunted two-plus-two summit seems indicative ofthat. Of the two tracks the relationship is built on, defence and security, and trade and investment, the first is in better shape. Little over a decade ago India, which has long bought most of its arms from Russia, tended to view America’s military reach with suspicion. It is now a cornerstone of America’s quadrilateral partnership for the Pacific, alongside Australia and Japan. It conducts more military exercises with America than with any other country. And America’sPacificstrategyhasbeen renamed the Indo-Pa- cific strategy in its honour. Even so, the bilateral partnership does not seem commensurate with the potential Chinese threat. The two countries do not even agree on what the Indo-Pacific describes. America views it as everything east of India, but India is more concerned with its west, including Pakistan, Iran and the Arabian Gulf, where it has energy and security interests that often run contrary to American policy. More worryingly, India is starting to doubt the superpower’s seriousness. America has mulled over committing only $1.5bn to its Indo-Pacific strategy. It is scarcely present in trouble-spots such as Bangladesh and NDIAN-AMERICANS are enjoying a dazzling coming-out party. Myanmar where India is already fighting a shadow war for influ- IFor years they were stereotyped as convenience-store owners ence with China. “People are too polite to say, ‘Where’s the US?’ and overachieving children. Yet in American politics, media, en- But a lot ofpeople thinkthat,” says Shivshankar Menon, a former tertainment and the arts, they are suddenly everywhere. Indian national security adviser. This retrenchment predates Mr Until 2016 only four Indian-Americans had served in Con- Trump. Yet he has exacerbated it, by gutting the State Department gress. Atleast30 stood forthisyear’scongressional primaries. The and through his preference for dealmaking over strategy. That first Indian-American of cabinet rank, Nikki Haley, President Do- trait has caused much bigger friction in US-Indian economic ties. nald Trump’senvoy to the UN, is a favourite to succeed him. Jour- Mr Trump’s call for “reciprocal” tariffs with India, where in- nalists such as Fareed Zakaria and Manu Raju stand ready to income per head is an eighth of the American average, has caused terview her, and comics such as Aziz Ansari and Hasan Minhaj to disbelief in Delhi. It has also collided with Mr Modi’s protection- mockher. Notcoincidentally, given the bigrole Indian-Americans ism. India has recently raised tariffs several times, a rare occu- played in bringing their old and new worlds together, US-Indian rence since it began liberalising its economy three decades ago. relations are also making history. James Mattis and Mike Pom- Mr Trump’s threatened crackdown on immigration, which India peo, the secretaries of defence and state, are due to meet their In- considers a branch oftrade, has gone down even worse. Last year dian counterparts for an inaugural “two-plus-two” ministerial saw a 28% fall in the number of Indians obtaining US student summit. The format, previously afforded only to America’s clos- visas. America has also made it harderto secure the H-1B visa that est allies, is intended to highlight the recent coming together of is popular with highly skilled Indians. They are starting to look the world’s biggest democracies. Indeed, India has perhaps fared elsewhere for opportunity, says the vice-chancellor of a leading better under Mr Trump than any other major power. Indian university. Being familiar with dysfunctional democracy, The president has lambasted allies, clients and adversaries. they are not counting on a post-Trump revival, either. If these ten- But India is none of those. As a US “strategic partner”—a status as sionsare lessthan America’strade spatwith China, itisin partbe- close to being a US ally as its tradition of non-alignment per- cause India’s and America’s economies are less connected, mits—it has been less bruised. Though America runs a large trade which suggests a degree of fragility. And while it is said the row deficit with India, it is a twelfth the size of America’s deficit with has not touched the Indo-US strategic relationship, that may be China, so less irksome to MrTrump. Some ofhis attacks, especial- untrue. MrModi made unexpectedly vigorous outreaches to Chi- ly on Pakistan, are welcome to India. The president, who has in- na and Russia this year, on visits to both. vestments in India and sees its prime minister, Narendra Modi, as a kindred nationalist, may even have a soft spot for the country. Don’t have a cow Mr Modi’s visit to Washington last year was strikingly convivial. The wasted opportunity this represents extends to Indian-Ameri- The improvement in US-Indian relations, which began under cans. Replete with sparky, second-generation Americans, who Bill Clinton and accelerated under his two immediate successors, have deeper ties to India than their children will have, they are at is based on shared values, interests and fear. Both countries are a point of maximum potential influence. Ms Haley was in Delhi liberal democracies. India’s economic priority, to develop its vast this weekto publicise the ministerial summit; MrMinhaj has per- domestic market, is an opportunity for US firms. Above all, both formed his stand-up routine in Mumbai. Such connectors are are nervous about China—which India, soon the most populous among the reasons US-India relations, a quiet triumph of Ameri- country, alone in Asia can balance. That apprehension persuad- can diplomacy, should be developing apace. Instead they are ed George W. Bush to give India’s nuclear-weapons programme a dawdling, which is bad for both countries. China’s assertiveness carve-out from the usual counter-proliferation strictures. Yet far suggests America needsIndia even more than MrBush imagined. from offering ground for complacency, the US-India partnership Yetitisin danger ofgetting less from India than he hoped. 7 40 The Americas The Economist June 30th 2018

Also in this section 41 The Cuban way of death 41 Embrapa’s lost sparkle 42 Bello: The high price of political saviours

Canada’s climate policy is neither anti-immigrant nor anti-trade. Mr Ford campaigned on a few eye- Trudeau and the Toronto troublemaker catching promises, including sacking the head ofOntario Hydro, a utility, to cut electricity prices; ending the provincial mo- nopolyon the sale ofwine and beer, which OTTAWA would cut the price of some beer to “a buck”; and repealing a sex-education curri- Ontario’s new premierwill disrupt the country’s plan to cut emissions of culum that irked Conservatives by, among greenhouse gases other things, recognising six genders (in- OUG FORD, who is due to be sworn in advocacyofa more musculargovernment. cluding two-spirited, transgender, trans- DasOntario’spremieron June 29th, will Such disputes may dominate the country’s sexual and intersex). not dally. The “very first item” on his agen- politics until the national election sched- The withdrawal from the cap-and-trade da will be to “cancel the Liberal cap-and- uled for 2019, when Mr Trudeau’s main foe scheme, under which businesses that trade carbon tax”, he promised after lead- will be the leader of the federal Conserva- want to emit carbon over a certain limit ing his Progressive Conservative Party to tive Party, Andrew Scheer. must buy permits from the government or victory in an election on June 7th. Motor- The coming clash with Ontario is un- from firms whose emissions fall below it, ists are being “gouged at the pumps”, he usual. Ontarians’ sense of provincial iden- will begin Mr Ford’s tenure on a combative claimed. “The cap-and-trade, the carbon tity is among the weakest in Canada, ac- note. Ontario’s participation in the joint tax, they’re gone, they’re done,” Mr Ford cording to a survey in 2013 by Statistics system with Quebec and California was to vowed in the Trumpian cadences that he Canada, a government agency (only Mani- have been its contribution to Mr Trudeau’s has brought to Canadian politics. tobans were less provincially patriotic). climate policy. This sets a national price for This will please suburban drivers, who With 14m ofCanada’s 37m people, Ontario carbon, which started at C$10 ($7.50) a provided many of the votes that gave the tends to see its interests as identical with tonne on January 1st and will rise progres- Progressive Conservatives 76 of the 124 those of the country. Toronto, Ontario’s sively to C$50 a tonne by 2022. That is sup- seatsin Ontario’slegislature, endingnearly capital and Canada’s main financial cen- posed to ensure that Canada will meet its 15 years of Liberal rule. Ontario’s cap-and- tre, normally gets along with Ottawa, the promise to cut greenhouse-gas emissions trade scheme, which it shares with the national capital, about 350km (220 miles) by 30% from the level in 2005 by 2030. province of Quebec and the American away. Mr Trudeau’s inner circle includes state of California, added about 3% to the several people who began their careers in Rebel, rebel price of petrol last year. Canada’s Liberal Ontario’s Liberal administrations. Provinces can control emissions in their prime minister, Justin Trudeau, will be less Mr Ford, who will replace Kathleen own way. British Columbia has already in- pleased. Mr Ford is taking direct aim at his Wynne, Canada’s first openly lesbian pre- troduced a carbon tax (now C$35 a tonne). plan to set a national price on carbon in or- mier, will disrupt that harmony. He is a Alberta charges C$30 a tonne. Ontario’s der to meet Canada’s commitment to re- populist with Canadian characteristics. cap-and-trade scheme would have quali- duce emissions ofgreenhouse gases under The brother of Rob Ford, Toronto’s late fied. If a province fails to tax or cap emis- the Paris climate agreement. mayor, who was most famous for being sions, the federal government will impose That will be the first and perhaps the caught on video smoking crack, the pre- a tax, and send the moneybackto the prov- most vicious of several fights between Mr mier-designate railsagainstCanada’selites ince where it was levied. Mr Ford says he Trudeau and the premier ofCanada’s most and dislikesthe mainstream media. He has will use “all available resources” to oppose populous province. Other sources of fric- already ordered government departments that power. He plans to join Saskatche- tion are likely to be corporate taxes, busi- to cancel subscriptions to print newspa- wan’s challenge to the national carbon ness regulation and social spending. On pers and magazines. He talks of rebuilding price in Saskatchewan’s Court of Appeal. these issues Mr Ford’s small-government, Ontario’s reduced manufacturing sector. California and Quebec have already shut low-tax instincts clash with Mr Trudeau’s Unlike many ofMr Trump’ssupporters, he their shared market to trades in Ontario. 1 The Economist June 30th 2018 The Americas 41

2 Mr Ford promises that Ontario will do its Funerals in Cuba tionary families near the gates give way at bit to reduce Canada’s emissions but has the periphery to unmarked stone slabs. not said how. Not going gently These cover vaults containing up to 24 cof- The rebelscould upseta bargain that Mr fins in which the newly deceased rest for Trudeau struck to reconcile his green goals two years. After that relatives must collect with the ambitions of energy-producing the bones to make room for fresh corpses. provinces like Alberta and Newfoundland HAVANA Many deposit the remains in a nearby os- & Labrador. It was already under strain. Al- suary, which houses 80,000 skeletons. Bidding a loved one farewell is berta agreed to the national carbon price The cash-strapped government prom- especially painfulin the socialist state only after the federal government said it ised in January to expand some cemeteries would back an expansion of the Trans UBANS had nine days to mourn Fidel and build more crematoriums. Miguel Mountain pipeline, which carriesthe prov- C Castro, who died in November 2016. Díaz-Canel, Cuba’s president since April, is ince’s crude to a port near Vancouver in After a state funeral, soldiers escorted his eager to boost his popularity. Treating the British Columbia, from where it is export- ashes from Havana to Santiago, retracing dead better would create goodwill among ed. In May last year British Columbia elect- the route taken by the revolutionary army the living. 7 ed a left-wing government committed to he led. When someone less important blocking construction. Kinder Morgan, an dies, undertakers have to hurry up. Just American company that planned to build two funeral homes have refrigeration, and Agricultural research and operate the pipeline, pulled out. It sold that is reserved forforeigners and VIPs. Be- the project to the federal government. Brit- cause of Cuba’s searing heat, most folk Growing pains ish Columbia is challenging in court the have to be in the ground within 24 hours. federal government’s right to override the Cuba’s nine crematoriums handle a tenth province’s environmental laws. ofthe 99,000 people who die each year. Even if the court allows the Trans Funerals, like education and health PLANALTINA Mountain projectto go ahead, Alberta may care, are free in the socialist state (though Embrapa, a jewel ofBrazilian drop out of Mr Trudeau’s climate plan. The cremation costs money). Cubans pay in innovation, is losing its sparkle oil-producing province is due to hold an other ways. Coffins, made by the state- election nextyear. Jason Kenney,the leader owned forestry company, are flimsy. Pall- N HOUR’S drive from Brasília, Brazil’s of the United Conservative Party, which is bearers must carry them with extreme Acapital,humped zebucattle take refuge ahead in the polls, wants to levy the prov- care, lest they fall apart. Government fromtheheatofthecerrado (tropical savan- ince’s carbon tax only on large polluters. workers get better coffins; children are bu- nah) under neat rows of eucalyptus trees. Mr Trudeau will find it difficult to impose a ried in white ones. With flowers in short The grove and the cattle belong to the cer- carbon price on two recalcitrant provinces. supply, mourners make wreaths from rados branch of the Brazilian Agricultural His chance of meeting Canada’s emission- twigs and leaves. That horrifies Miguel Research Corporation (Embrapa) in Planal- reduction target, already small under cur- Pons, one of two deacons at the chapel at tina. Their purpose is to help researchers rent policies, could disappear. the Colón cemetery in Havana. “I would test how best to alternate crops and live- MrFord iscausingtrouble forhimself as not allow someone in my family to put stock in order to turn degraded pastures well as Mr Trudeau. His poleaxing of cap those ‘flowers’ [on my coffin], God forbid. into productive fields. Besides providing and trade leaves firms in Ontario with Never,” he says. shade (and, eventually, timber), the trees C$2.8bn of pollution permits that may Demand for funereal paraphernalia is put nutrients into the soil and offset the ef- now be worthless. He can expect lawsuits. rising because of Cuba’s ageing popula- fects of methane, a greenhouse gas Ontario will lose C$2bn a year, 1.3% of rev- tion. Of the 24 cemeteries in Havana, all of belched by the ruminants. In 2005 such enue, from the sale ofpermits, at least until which were nationalised in 1963, 20 have “integrated systems” covered less than 2m it gets the money from a tax imposed by run out of space. At the Colón graveyard hectares (5m acres). Today they occupy15m the central government. With Canada’s the mausoleums of important pre-revolu- hectares, 5% ofBrazil’s farmland. second-highest public debt per person and Maurício Lopes, Embrapa’s chief since a growing budget deficit, Ontario can ill af- 2012, believes such know-how will be as ford that. Donald Trump’s trade war will valuable as the technology Embrapa in- cause more pain for the province, which vented in the 1970s and 1980s, which produces 70% ofthe country’s steel. helped make Brazil an agricultural super- The need to fight American protection- power. Founded in 1973, Embrapa made ism is one of the few issues on which Mr the cerrado’s acidic soils hospitable to Ford and Mr Trudeau agree. As next year’s maize, soyabean and cattle, and created federal electionsapproach, there will prob- types of crops and livestock that could ably be “a lot of federal-provincial waves”, thrive in such climes. Once an importer of says Peter Donolo ofHill & Knowlton Strat- staples, Brazil nowexports$96bn-worth of egies, a public-relations consultancy. They produce a year. Embrapa reckons that in may get rougher after Quebec’s election, 2017 it returned 36bn reais ($9bn) to the scheduled for this October. The centre- economy through higher productivity and right Coalition for Quebec’s Future is ex- lowercosts, more than ten times its budget. pected to unseat the province’s Liberals. Yet it faces unprecedented criticism. This will make Mr Trudeau’s job of Farmers say that its research is irrelevant to managing Canada harder, but it might them. An Embrapa employees group says make his re-election easier. Provincial re- it is too fragmented, and worries that the bellion gives the prime minister a chance cash-strapped federal government will cut to portray himself as a defender of nation- its budget. Environmentalists grouse that al unity, a long-time Liberal strength. He its research enables farmers to push into may end up being grateful to the trouble- the Amazon rainforest. maker in Toronto. 7 The chintzy coffins of communism Mr Lopes thinks these criticisms are un-1 42 The Americas The Economist June 30th 2018

2 fair. Agricultural production hascontinued 1990s, including one that improved protec- brapa is still paying attention to the wrong to rise over the past decade even as defor- tion of intellectual property, brought for- things. Salaries consume 70% of the bud- estation declined, he says (though the de- eign agri-businesses such as Bayer and get; spending on lab equipment, field trials forestation rate hasgone up again in two of Syngenta. They have more money than and the like accounts for just 2%. Its labs do the pastthree years). Farmersmaybuyfew- Embrapa to spend on such new areas as almost no workon gene-mapping. er sacks of seeds emblazoned with Em- biotechnology. Embrapa should focus on This year Mr Lopes merged 17 adminis- brapa’s logo, but its know-how is part ofal- areas they avoid, such as integration ex- trative units into six and closed four ofEm- most everything they do, Mr Lopes insists. periments like the one in Planaltina, says brapa’s 46 regional branches. A plan for a Yet the critics have a point. Nearly 90% Blairo Maggi, the agriculture minister. Mr bigger overhaul, leaked to the press, calls of Embrapa’s economic contribution Lopes says he wants Embrapa to work in for a more centralised institution. Critics comes from work it did in its first 25 years. areas the big companies neglect. Embrapa say it does not deal with Embrapa’s main Seven areas of research, including rice and has to be “more diversified, not less” to shortcomings. Mr Lopes is rumoured to be beans, provided no return last year. support production of foodstuffs, from on his way out. His successor will need to That is partly because Embrapa faces açaí, a tropical fruit, to tenderloin and fish. pull Embrapa into the 21st century, perhaps more competition. Laws enacted in the But the problem is not just that Em- with the help ofa few head ofzebu. 7 Bello At breaking point

Voters who turn to would-be saviours pay a price fordecades afterwards N JULY 1st Mexicans are set to elect mally chose moderate presidents, but OAndrés Manuel López Obrador as they elected Álvaro Uribe, an intense con- their next president. Since they twice re- servative who promised to be “the first jected him, in 2006 and 2012, by coalesc- soldier of Colombia” and to double the ing behind the opponent with the best size ofthe security forces. chance ofwinning, that requires some ex- Mr Fujimori and Mr Uribe saved their planation. Mr López Obrador is ofthe left, countries, but in both cases there was a but he is a would-be saviour rather than a dark side. Mr Fujimori governed as a dic- social democrat. Instead ofa better future, tator and resorted to systematic bribery. he promises to return Mexico to a better, Mr Uribe appointed officials with links to safer past of strong, paternalist govern- right-wing death squads. ment. He invites voters to trust in him, When voters choose candidates they rather than in democratic institutions. As normally wouldn’t, the negative conse- the last two contests showed, in normal quences are long-lasting. In Venezuela, circumstances he would not win. Colombia and Peru these include politi- But Mexicans are not looking for poli- cal polarisation. Peru is trapped in a battle tics as usual. Under the outgoing presi- between Mr Fujimori’s supporters and dent, Enrique Peña Nieto, they suffer ram- would-be saviours. In 1990 voters in Peru anti-fujimorismo. Mr Uribe’s candidate, pant crime and corruption, and mediocre found one in Alberto Fujimori, an obscure Iván Duque, won Colombia’s presiden- economic growth. Each day 85 people are formeruniversity rector. A political outsid- tial election on June 17th, but he inherits a murdered. Voters “want blood”, in the er, he was elected when his country faced a country that is “divided, polarised and form of systematic punishment of cor- terrorist insurgency, hyperinflation and facing off against itself in a seemingly ir- rupt politicians, according to Jorge Casta- economic meltdown. When he sent tanks reconcilable fashion”, as Juan Gabriel ñeda, who is advising Ricardo Anaya, Mr to shut down the congress two years later, Vásquez, a Colombian writer, put it in El López Obrador’s closest rival. Many think polite society was appalled but ordinary País, a Spanish newspaper. that centrist politicians have failed them Peruvians cheered. Mr Fujimori won a sec- The saviours never give up. Mr Fuji- and that things cannot get any worse. ond term in 1995. mori’s daughter runs what is still Peru’s Brazilians are in a similar mood ahead Or take Venezuela. The collapse of the biggest political party. Not for Mr Uribe, of their election in October. Most are not oil price in the 1980s and 1990sweakened a who was re-elected to the senate, the ex- yet focused on it, but one of the front-run- stable social democracy, hollowing out its ample set by Mariano Rajoy, Spain’s for- ners in the opinion polls is Jair Bolsonaro, welfare state, causing bank failures and ex- mer prime minister. After parliament a crudely authoritarian, misogynistic and posing corruption. In anger, Venezuelans ousted Mr Rajoy this month he returned homophobic former army officer. Brazil, turned to an army lieutenant-colonel, to his job of37 years ago as a property reg- unlike Mexico, has a run-off vote; Mr Bol- Hugo Chávez, who had led a failed coup istrar in a quiet coastal town. sonaro may well figure in it but is unlikely that crystallised popular disillusion with This lasting polarisation is what may to win it. Nevertheless, that he has a the established order. Chávez was elected face Mexico and Brazil. It is the high price chance is a sign of desperate times. Brazil in 1998. As the oil price surged again, he be- that countries pay when the political esis only slowly emerging from a two-year came a popular hero. But long before his tablishment fails in its most basic func- slump, public services are stretched and death in 2013 he had propelled his country tions of protecting the lives of citizens or public security has broken down in many towardsitscurrentferal state ofcorruption, preventing the pilfering of public money. parts of the country. A recent poll found brutality and penury. When thathappens, itishardlysurprising that 62% ofrespondents aged 16-24 would Colombians in 2002 were suffering the that voters look elsewhere. But the pro- leave ifthey could. tightening grip of the FARC guerrillas over blem with saviours is that, sooner or later, It is not the first time Latin Americans much of the national territory as well as a countries have to try to save themselves have turned, in an emergency, to recession and a banking crisis. They nor- from them. SPECIAL REPORT FIXING THE INTERNET

The ins and outs

The internet was meant to make the world a less centralised place, but the opposite has happened. Ludwig Siegele explains why it matters, and what can be done about it HAS THE INTERNET failed? Sitting in his office at Christ Church College, CONTENTS Oxford, Sir Tim Berners-Lee, the inventor of the world wide web, has his answer ready: “I wouldn’t say the internet has failed with a capital F, but 5 History it has failed to deliver the positive, constructive society many of us had More knock-on than network hoped for.” 7 Technology Two decades ago he would have scoffed at the idea that the internet Raiders of the killer dapp and the web would do anythingbutmake thisplaneta betterplace. In his autobiography written in the late 1990s, “Weaving the Web”, he conclud- 9 China ed: “The experience of seeing the web take off by the grassroots effort of The ultimate walled garden thousands gives me tremendous hope that…we can collectively make 10 Regulation our world what we want.” A new school in Chicago Until a few years ago most users, asked what they thought ofthe internet, would have rattled offa list ofthe things they love about it—that it 12 Prospects lets them stay in touch with friends, provides instant access to a huge The art of the possible range of information, sparks innovation, even helps undermine authoritarian regimes. And in some ways it has been a tremendous success. Just under a quarter of a century after the first web browser was released, ACKNOWLEDGMENTS around half the world’s population is online. But like Sir Tim, many peo- In addition to those quoted in the ple have recently become more critical of it, concerned that it creates on- report, the author would like to line addicts, hoovers up everybody’s data and empowers malicious thank the following for their help trolls and hackers. and guidance: Muneeb Ali of Blockstack, Kathleen Breitman of At the heart of their disenchantment, this special report will argue, Tezos, Christopher Burniske of is that the internet has become much more “centralised” (in the tech Placeholder VC, Primavera De Filippi crowd’sterminology) than itwaseven ten yearsago. Both in the Westand of CNRS, Bret Greenstein of IBM, in China, the activities this global network of networks makes possible Andrei Hagiu of MIT Sloan School of Management, Nicola Jentzsch of are dominated by a few giants, from Facebook to Tencent. In his latest Stiftung Neue Verantwortung, Trent book, “The Square and the Tower”, Niall Ferguson, a historian, explains McConaghy of Bigchain DB, Sean that this pattern—a disruptive new networkbeing infiltrated by a new hi- Moss-Pultz of Bitmark, William erarchy—has many historical precedents. Examples range from the in- Mougayar of Stratumn, Ciaran O’Leary of BlueYard Capital, RS and vention ofthe printing press to the Industrial Revolution. WL of Shift, Trebor Scholz of The New At the same time the internet has become much more strictly con- School, Sally Shipman Wentworth of trolled. When access to it was still mainly via desktop or laptop comput- the Internet Society, Jutta Steiner ers, users could stumble across amazing new services and try many and Gavin Wood of Parity Technol- ogies, Ruben Verborgh of Ghent things for themselves. These days the main way of getting online is via University and Ryan Zurrer of smartphones and tablets that confine users to carefully circumscribed Polychain Capital. spaces, or “walled gardens”, which are hardly more exciting than televi- 1

The Economist June 30th 2018 3 SPECIAL REPORT FIXING THE INTERNET

2 sion channels. Makers of mobile operating sys- Today the internet is a very different beast. tems can decide through their app stores which Half the world The connections to transferinformation still ex- servicessmartphone ownershave accessto. An- Internet users worldwide ist, as do the protocols, but the extensions the in- other control point is cloud computing, which % increase on Internet ternet has spawned now greatly outweigh the by its nature puts outsiders in charge of applica- a year earlier users, bn original network: billions of smartphones and tions and their associated data. Meanwhile gov- 10 5 other devices, and cloud-computing factories ernments, which long played no part in the in- the size of football fields, containing unimagin- ternet, have established power over large parts 8 4 able quantities of data. The best way to picture of the network, often using big internet firms as all this is as a vast collection of data silos with willing enforcers, forinstance by getting them to 6 3 big pipes between them, connected to all kinds blockunwelcome content. of devices which both deliver services and col- This is more or less the opposite of what 4 2 lect more data. the early cyber-gurus had intended. When the The centralisation of the internet and the first message was sent over the internet nearly 2 1 growing importance of data has given rise to halfa century ago, on October29th1969, the sys- what Frank Pasquale of the University of Mary- tem was “biased in favour ofdecentralisation of 0 0 land, in a recent paper published in American power and freedom to act”, according to Yochai 2013 14 15 16 17 18 Affairs, calls a “Jeffersonian/Hamiltonian di- f’cast Benkler of Harvard University.Its technological Source: eMarketer vide” among critics of big tech. One group roots played a large part in that. A child of the stands in the tradition of Thomas Jefferson, one cold war, the internet was meant to connect dis- of America’s founding fathers, who favoured parate networks and computers so they could still communicate smallergovernmentandlessconcentration in business.Its mem- even ifcentral links became unavailable, say in the event ofa nu- bers want to rein in the tech titans through tougher antitrust poli- clear attack. “We wanted anything connected to the net to con- cies, including break-ups. The other group follows the thinking nect to anything else connected to the net,” explains Vint Cerf, of Alexander Hamilton, another founding father, who sup- one of the engineers who developed the communication proto- ported strong central institutions, both in politics and in the cols (he now works forGoogle). economy.Its adherents argue that to reap the benefits of artificial To make this possible, Mr Cerf and his colleagues had to intelligence (AI) and distribute them fairly, online giants should make the internet “permissionless”, in today’s lingo. Any net- be treated as utilities. workand any computercan join in as longas it follows the protocols. Packets ofdata are handed from one networkto another, re- Jefferson v Hamilton gardless of content. This loosely coupled architecture later This framing also helps to understand the reactions to cen- inspired Sir Tim, who devised the protocols for the world wide tralisation more generally. The Jeffersonian side worries that a web that workon top ofthe internet proper. centralised internet offers less scope for innovation. Although Those protocols were complemented by a set of organisa- the online giants themselves are a source of much invention, tions that allowed the rules to evolve, along with the software they dampen it elsewhere, so that fewer new ideas are being that puts them into effect, and keep both from being captured by tried. Venture capitalists now talk about “kill zones”, areas they outside interests. Chief among them has been the Internet Engi- will not invest in because one ofthe big players may squeeze the neeringTaskForce, whose philosophy was perfectly summed up life out ofstartups or buy them up at a low price. by David Clark, one of its founders: “We reject: kings, presidents The political consequences of the internet’s growing cen- and voting. Webelieve in: rough consensus and running code.” tralisation are even more troublesome, if less obvious. Walled The combination of open technical rules and flexible gov- gardens often limit free speech, as Facebook’s sometimes ham- ernance set off a frenzy of creativity and innovation. Starting in fisted attempts to police its social network have shown. Having the mid-1990s,millions ofwebsites were set up and tens of thou- to hackthe algorithms ofonly a few platforms makes it easier for sands of startups launched. Even after the dotcom bubble col- Russian trolls and their Western counterparts to meddle in elec- lapsed in the early 2000s, this decentralised activity continued tions by spreading misinformation. The concentration of reams unabated, for instance in the form of blogs. Users actually did of personal data in one place makes serious leaks more likely. what Sir Tim had hoped they would: publish online and link to One example is the recent scandal at Cambridge Analytica, a po- each other, creating a great virtual conversation. litical consultancy that acquired data on 87m Facebook users in underhand ways (and as a result went out of business). Domi- nant platforms are also handy for spooks, as shown by the reve- lationsin 2013byEdward Snowden, a formerCIA employee who Cloudy outlook leaked vast amounts of classified information. Intelligence ser- Cloud services, market share worldwide, Q4 2017, % vices had to tap into only a couple of computing clouds to find what they wanted. And online giants have plenty of cash to in- 010203040 fluence offline politics. Amazon 0.5 Yet among Jeffersonians a sense of a new beginning is also Microsoft 3.0 in the air. The buzz at technology conferences today is reminis- % change on cent of1995, shortly after the birth of the world wide web, when IBM -0.5 a year earlier a new piece of software called a browser took the web main- Google 1.0 stream, and the internet with it. At today’s events startups are Alibaba 1.0 pushing ambitious plans, often based on blockchain technology Next ten -1.0 (immutable distributed ledgers of the sort that underlie Bitcoin and other crypto-currencies), promising to “re-decentralise” the Rest of world -4.0 online world. Source: Synergy Research Group Hamiltonians, on the other hand, argue that without the 1

4 The Economist June 30th 2018 SPECIAL REPORT FIXING THE INTERNET

gerous than an economist is an amateur economist,” he said at a Battle of the titans conference in Brusselsin late 2016, “and there are a lot ofamateur Referral traffic to major* digital publishing websites, % of total economists out there who like to talk about network effects.” He agreed that some firms had benefited from network effects, in 50 particular Microsoft and Facebook. But for Amazon’s e-com- Google merce business and Google’s search engine, for instance, they 40 have been oflittle help. 30 Critics might point out that this assessment is a tad self- serving: Mr Varian has been Google’s chief economist since Facebook 20 2002. But he does have a point. Although economic flywheels played an important role, the story of how the internet became 10 centralised is more complex. It is more about knock-on effects Twitter than networkeffects. 0 2012 13 14 15 16 17 Digging deep Source: Parse.ly *2,500 sites To understand the internet’s recent history, ithelps to keep in mind that, like most digital systems, it is designed in layers. At the bottom are all the protocols that allow different sorts of net- 2 free services and easy-to-use interfaces offered by companies works and devices to exchange information, or “internetwork” such as Google and Facebook, far fewer people would be using (hence internet). At that level, it is still largely decentralised: no the internet. Without cloud computing, which lets firms crunch single company controls these protocols (although the number vast quantities ofdata, AI would be nowhere. Havinga few pow- offirms providing internet access has dropped sharply, too; most erful firms in control also helps curb the demons ofdecentralisa- Americans have a choice between only two offerings). tion, such as cybercrime and hate speech. This kind of thinking, Yetthe nextlayerup—everythingthathappenson top ofthe long used by online giants to make the case against regulation, internet itself—has become much more concentrated. This is par- has gained some traction on the left in the West. But it is mostly ticularly true of the web and other internet applications, which thriving in China, where the government wants tech titans to include many consumer services, from online search to social help it in its quest to turn the country into a cyber-superpower. networking. Tacking between the two sides is a growing group of aca- Centralisation is also rampant in what could be called the demics who are trying to devise new ways to rein in big tech “third layer” of the internet: all the extensions it has spawned. through regulation. Some of their proposals are more Jeffersoni- Most people use one of two smartphone operating systems: Ap- an, such as forcing firms to unwind recent mergers. Others are ple’s iOS or Google’s Android. Cloud computing is a three-horse more Hamiltonian, including making companies share some of race among Amazon, Google and Microsoft. And then there are their data. data. Amazon, Facebook and Google not only dominate their re- This special report will start by chronicling how the inter- spective core markets; they have accumulated more digital infor- net became centralised, then discuss all three strands in turn. mation than any otheronline company in the West. Indeed, they While not hidingits sympathies with the Jeffersionan side, it will can be seen as databases on a planetary scale which use the in- conclude that to re-decentralise the internet, ideas from all three formation they store to sell targeted advertising and fuel artifi- camps are needed. There is no central solution. 7 cial-intelligence (AI) services. So why did the different layers develop different characteristics? The internet’sbase wasdesigned to move data around and History publish information, so its protocols did not record what had been transmitted previously and by whom. “The internet was More knock-on than built without a memory,” explains Albert Wenger of Union Square Ventures, a venture-capital firm. The groupswhich developed the original protocols, the Internet Engineering Task Force network and the World Wide Web Consortium, could have added to the rule book. But they did not do so, or only belatedly. One reason was ideological: many internet pioneers be- How the internet lost its decentralised innocence lieved that the protocols would be enough to prevent centralisation. The other was that, even though they moved faster than IN “INFORMATION RULES”—published in 1999 but still conventional standard-settingbodies, they were still slow. “Ifthe one of the best books on digital economics—Carl Shapiro internet’s governance mechanisms had worked better, we and Hal Varian, two economists, popularised the term “network wouldn’t have had all these private actors rush into the void,” effects”, which means that in the digital world size easily begets says Kevin Werbach of Wharton, the University of Pennsylva- size. The more popular a computer operating system, the more nia’s business school. applications it will attract, drawing in even more users, and so And rush in they did. The lack of built-in memory on the on. Two decades ago the idea helped people understand the web made it difficult to offer certain applications. Online shops, power ofMicrosoft and its Windows software. Today it is the defor instance, had no way ofknowing what a customer had previ- fault explanation for how Facebook, Google and other tech ously ordered from them. Netscape, a now-defunct software giants became dominant. The more people sign up to a social firm, developed a workaround in the form of “cookies”, small network, for instance, the more valuable it becomes for present files that live in a browser, which originally served as a digital and prospective users. shopping cart. Later, as e-commerce became more sophisticated, Yet Mr Varian is not too happy about how his intellectual these became digital identifiers, with the corresponding data re- offspring is being used, and abused. “The only thing more dan- siding on a server. 1

The Economist June 30th 2018 5 SPECIAL REPORT FIXING THE INTERNET

2 These subtle technical changes created an opportunity for ments make it harder forcompetitors to catch up. a few firms to become the internet’s memory. At its core, Google Although Google understood the importance of the user is a list of websites and a database of people’s search histories. experience right from the start, it took longer to work out how to Facebook keeps track of their identity and the interactions be- make money from search. Having tried to sell its technology to tween them. Amazon collects credit-card numbers and purchas- companies, it went for advertising, later followed by Facebook ing behaviour. Yet being the repository ofsuch information does and other big internet firms. That choice meant they had to col- not entirely explain how these firms came to dominate their re- lect ever more data about their users. The more information they spective markets. This is where the networkeffects come in. have, the better they can target their ads and the more they can The internet fundamentally changes the economics of con- charge forthem. tent of all sorts, from news to video. Ben Thompson, the author That approach has proved a huge success, as Google’s re- of Stratechery, a widely read newsletter, has summarised this sults remind investors every quarter (the company took in $31bn shift in what he calls “aggregation theory”. In the offline world, in the first three months ofthis year). Yet as a business model on- he explains, power and profits accrue to firms that control distri- line advertising has two big drawbacks, says Ethan Zuckerman bution, such as printing presses and cable networks. But online, ofMIT’sCentre forCivicMedia. Itrequirescompaniesto trackus- distribution is essentially free and the hard part is to aggregate ers ever more closely, and it encourages even more concentration. And advertisers tend to flock to the biggest ad networks to get the widest ex- To understand the internet’s recent history, it helps to posure. Between them, Facebook and Google now collect nearly 60% of online keep in mind that, like most digital systems, it is advertising dollars in America, according designed in layers to eMarketer, a data outfit. Being large-scale data collectors for advertising purposes has also been the content, find the best and serve it up to consumers. perfect preparation for the firms’ next incarnation as AI compa- So the first priority is to attract as many users as possible, nies, says Glen Weyl, an economist at Microsoft Research who which today’s online giants did by creating a great “user experi- also teaches at Yale University. They not only have reams ofdata ence”. Google, for instance, won out against Alta Vista, the lead- butplentyofengineeringtalentand the necessarycomputing in- ing search engine in the late 1990s, because its interface was frastructure to turn theirdigital hoard into all kinds of“cognitive” cleaner, searches came up more quickly and the results were services, from speech and facial recognition to software for more accurate. Once such advantages have been established, drones and self-driving cars. they start up all kinds of flywheels. The service attracts users, Critics of big tech, such as Jonathan Taplin, a former direc- which attracts suppliers of content (in Google’s case, websites tor of the Annenberg Innovation Lab at the University of South- that want to be listed in its index), which in turn improves the ern California and author of“Move Fast and BreakThings”, wor- user experience, and so on. Similarly, the more people use Goo- ry that AI could trigger another round of concentration. It gle’s search service, the more data it will collect, which helps to certainly introduces another set of network effects: more data make the results more relevant. means better and more popular services, which generate more At some point, Google and the other tech titans also came data. The big fear is that in the future one ofthe online giants will to benefit from good old economies of scale. Each of them now turn into some sort of “Master AI”, ruling not just the online operates dozens of vast data centres around the world, manages world but many other industries too. millions of servers and uses superfast private networks. Google, For now, that has a whiff of science fiction about it, and it which has the biggest one, handles about a quarter of the inter- may never materialise. But meanwhile the dream of changing net’s total traffic. To boost its cloud-computing business, the firm the economic laws of the internet to bring it closer to its decen- is also building three new underwater fibre-optic cables to run tralised roots is being vigorously pursued by a plethora of block- along ocean floors from the Pacific to the North Sea. Such invest- chain startups and activists. 7

6 The Economist June 30th 2018 SPECIAL REPORT FIXING THE INTERNET

Technology because no one knew how to build a robust decentralised database. That changed in 2009 with the invention ofBitcoin and the blockchain, the technology that underlies the crypto-currency. Raiders of the killer In essence, it is a ledger without a centralised administrator, maintained collectively by some of its users, called “miners”, dapp who also protect the blockchain and keep each other in check. Though these days Bitcoin is mostly used to speculate, the Startups want to remake the internet with blockchain crypto-currency can be seen as a dapp. The blockchain is a spe- technology cialised database in the form of an immutable record of the transaction history of every bitcoin in circulation, which makes WHAT MASS IS for Catholics, technology conferences are it clear who owns what. Holders of the currency use a piece of for geeks. Speakers at these gatherings often sound like software called a “wallet”, essentially a browser for the block- preachers, promising a dazzling future. So it was at a blockchain chain that carries the necessary cryptographic keys, to keep track conference in Berlin in March, organised by Blockstack, a startup. oftheir assets and transfermoney. The enthusiasm on display echoed that of gatherings in the Almost all Web 3.0 projects borrow heavily from Bitcoin mid-1990s. Some speakers quoted early cyber-gurus, such as the and Ethereum, another blockchain that comes with “smart con- late John Perry Barlow, author of “Declaration of the Indepen- tracts”, snippets of code that encapsulate business rules which dence of Cyberspace”, and Sir Tim Berners-Lee, the inventor of are executed automatically if certain events occur. The most ad- the original web, now known as Web1.0. vanced projects focus on building the software infrastructure Such events seem to be heralding needed for dapps. Blockstack, arguably the most ambitious, is the birth ofa new technology movement. best seen as an operating system forsuch applications. Businesses and projects with odd names Another field of much endeavour is decentralised digital are already proliferating. They are easily storage. One such effort is Solid, a project led by Sir Tim, which confused with the many startups that features individual “data pods” where people keep their infor- have recently launched new crypto-cur- mation (though it does not use blockchain technology). Another rencies via an initial coin offering (ICO), a is the InterPlanetary Filing System (IPFS), the brainchild of Juan much-hyped form of crowdfunding. But Benet, a co-founderofProtocol Labs, a startup. though Blockstack and its ilk have done Actual dapps are still few and farbetween. Graphite, which the same, theirmain aim is to use technology to make the online world a more decentralised place where people can do Web 3.0 projects need to solve a number of practical business “on their own terms”, in the problems before they can truly take off words of Ryan Shea, co-founder of Block- stack. Again, this sounds like the sort of thing geeks said in the1990s. Will this generation succeed where runs on Blockstack, is a bundle of online word-processor and the previous one failed? other office applications, much like Google’s G-Suite. Open- It will not be easy.Toachieve their objective, they will have Bazaar, which relies on IPFS, is an alternative to Amazon. There is to overthrowan existingdigital regime, called Web 2.0, thatisstill no central server to list what is on offer and to process transac- going strong. But it seems to be a feature of information technol- tions; instead, buyers and sellers download software that can ogy that every few decades its most profitable part becomes settle things directly between them. The most popular dapp so commoditised. In the1970sthe microprocessorradicallyreduced far is a game called CryptoKitties, a marketplace for digital pets the cost of computers. In the 1990s open-source software started that lives on the Ethereum blockchain. to dethrone Windows, Microsoft’sthen-dominant operatingsys- Building the right tools and applications will take time, but tem. Now it is the turn of data, predicts Joel Monegro of Place- it is not the hardest part ofdecentralisation. Plenty of institution- holder VC, a venture-capital firm set up to bet on the trend. al innovation is also needed. If blockchains are to manage without central administrators, others will have to handle the task. You can check out, but you can never leave These could be miners, but also developers and operators of Today online applications bundle user interface, code and “nodes”, computers that keep copies of the blockchain. Web 3.0 data. Facebook, for instance, is best known for its website and projects are often like mini-economies, with a currency and a go- app, but both are just the tip of a virtual iceberg: most of the soft- vernance system. And project leaders, though often ofa libertar- ware and all the information that keep the social network going ian bent, have no choice but to become regulators. lives in the firm’s cloud. Controlling those data gives these com- Previous effortsat decentralisation also foundered because panies power. Users are free to move to another service, but they the economics proved wanting, including those of the original would lose all that information, including the links to their internet. Historically, most protocols were developed by re- friends. By contrast, in the new world of Web 3.0 (or Web 3, for searchers and then maintained by non-profit organisations. But the truly initiated), interface, code and data are meant to be kept when the internet went mainstream and the money poured in, separate. This would allow power to flow back to users, who things got more complex. Commercial interests made finding could decide which application can access their information. If consensus more difficult, and engineers preferred to join fast- they were not happy with one social network, they could easily growing internet companies building applications. Besides, in- switch to another. With such decentralised applications, or centives to adopt new protocols were lacking. So they became “dapps”, users could also interact directly with other users with- the poor relation of the internet, whereas applications thrived, out an information-hoarding intermediary in the middle. explained Mr Monegro, the venture capitalist, in an influential Tobe sure, similar ideas have been tried before—and failed. blogpost, “FatProtocols”, in 2016. With Web 3.0, he says, it will be Decentralised services, then called “peer-to-peer”, briefly flour- the other way round. ished in the late 1990s and early 2000s. They fizzled out mainly Again, Bitcoin pointed the way. Satoshi Nakamoto, its elu- 1

The Economist June 30th 2018 7 SPECIAL REPORT FIXING THE INTERNET

2 sive inventor, also designed what is now called a “crypto-eco- Web 3.0 projects need to solve a number of practical pro- nomic model”. Miners are promised a monetary reward fortheir blems before they can truly take off. Bitcoin, again, helps illus- number-crunching work. Details aside, every ten minutes they trate the hurdles. Chief among them is what crypto-buffs call participate in a lottery. The winner gets the right to update the “scalability”, meaning that blockchains are currently not able to blockchain and a small number of bitcoin. The reward gets paid deal with large numbers of users. Bitcoin’s capacity is higher out only aftera dozen more lottery rounds, so it is in the winner’s than it was, but the maximum is still about ten transactions per interest to keep the system ticking. second, compared with the thousands that a centralised pay- Many Web 3.0 projects have developed their own crypto- ment system can handle. Newer blockchains do better, but are economic models. The idea is to replace a centralised firm with a unlikely ever to beat centralised databases. decentralised organisation, held together by incentives created Moreover, many blockchain projects are themselves quite by a token—a kind of “crypto-co-operative”. All those involved, centralised. Almost all bitcoin mining happens in China and is including the users, are meant to have a personal stake in the en- controlled by a few firms (although the government is now try- terprise and get their fairshare ofthe value created by a protocol. ing to constrain the energy-hungry industry). And token ownership is often concentrated, too. Steemit, the online forum, is an Having kittens extreme example: 90% of the “steem power” tokens are held by Some models are just intended to create a thriving market- 2% ofusers, though the firm is trying to change this. place, which in the case ofCryptoKitties means you can buy, sell “Blockchain is a ten-year-old technology. But where are all and breed them for monetary rewards. Other projects are more the applications?” asks Tim O’Reilly, who pushed peer-to-peer ambitious. Filecoin, too, is meant to be a marketplace where digi- and coined the term “Web 2.0” Still, he does not rule out a sud- tal storage space will be exchanged for an eponymous digital to- den breakthrough that might cut the “blockchain’s Gordian ken. To keep it flowing, the project, also founded by Protocol knot” and make such ledgers more scalable, for instance. Even Labs, has resorted to much economic engineering. A complicat- Facebookseems to see that as a possibility: last month it created a ed mechanism matches supply and demand. blockchain unit. It is also said to be interested in taking over one The most elaborate workingcrypto-economic model, how- ofthe blockchain projects. ever, is Steemit, an online forum which rewards its1m or so regis- If such a breakthrough were to happen, successful dapps tered users for posting contributions or rating content with real might come in unfamiliarshapes. “It is easierfornew technology money in the form of steem, another sort of token. One type is paradigms to win in new areas than to re-fight old battles,” says liquid and can be cashed out using an exchange, which is meant Chris Dixon of Andreessen Horowitz, another VC firm with in- to provide near-instant gratification and attract users. The other, vestments in the field. Remember, Google did not win over Mi- called “steem power”, is less easily convertible and supposed to crosoft by developing another operating system. What might be keep members engaged: the more they own, the more weight the search engine of Web 3.0? Mr Dixon points to services that their votes have. manage data in creative ways, for instance extracting insights If this sounds complicated, the bylaws of these crypto-co- from digital information while letting consumers and compa- operatives can be even more so. Once more, Bitcoin is a good nies keep control oftheir data. place to start, although in this case as an example of how not to But what if trying to re-decentralise the internet is a fool’s do it. When the mysterious Mr Nakamoto disappeared in late errand? That is what China’s leaders think. 7 2010, he did not leave behind any governance mechanism to speak of. Only a ru- dimentary one has been put in place since. Bitcoin developers agree to changes to the system’s software, which miners then implement in what amounts to a vote by computing power. But in recent years the two groups have been at logger- heads over how best to increase Bitcoin’s capacity. As a result, several factions have already created their own version of the currency. Ethereum is now running into similar problems. To avoid such difficulties, some newer blockchain projects are planning to hardcode their decision-making pro- cesses into the software in the form of smart contracts, a method known as “on- chain governance”. Tezos, for instance, calls itself a “self-amending ledger”. It allows anyone to propose changes which are then voted on. Winners get some tokens as a reward. Polkadot, for its part, is planning to write a “constitution” into its “genesis block”, the anchor for every distributed ledger. Token-holders will be able to vote on changes to the system. But there will also be a “constitutional court” which can override decisions.

8 The Economist June 30th 2018 SPECIAL REPORT FIXING THE INTERNET

China Harvard and other American universities found that this “50- cent party”, so called because members supposedly receive 50 cents (in yuan) forevery piece of content, generates nearly 450m The ultimate walled posts per year. Most of them do not attack critics of the Commu- nist Party and the government, or even discuss controversial garden questions. “Weshow that the goal ofthis massive secretive operation is instead to distract the public and change the subject,” the A perfect example of a Hamiltonian internet for authors conclude. Despite this tight government control, Chinese internet maximum control firms enjoy extensive commercial freedom. Indeed, they are less THE HEADQUARTERS OF Western tech giants are typical- regulated than Western ones, which is a big reason why the com- ly horizontal affairs, in keeping with their supposedly flat petition is much tougher and innovation in some areas, such as corporate hierarchies. Facebook’sSilicon Valleycampusisa jum- ride-hailing and rental bikes, has been faster. Kai-Fu Lee of Sino- ble of two-storey buildings connected by parks and bridges. vation Ventures, a venture-capital firm based in Beijing, com- Google’s is a collection of dozens of separate structures spread pares Chinese entrepreneurs to gladiators. Hardened by the over an entire neighbourhood in Mountain View. Employees copycat wars of the 2000s, during which most of them tried to commute between them on colourful bicycles. replicate Western ideas, they have now come into their own. By contrast, Tencent, China’s biggest tech titan, has gone And unlike startupsin Silicon Valley,those in Beijing orShanghai fully vertical. Its brand new home consists of two office towers, sometimes tackle dominant firms head-on. 39 and 50 storeys high, which are among the tallest in the coastal All the same, Alibaba and Tencent are the acknowledged city of Shenzhen. The only horizontal elements are three sky leaders, particularlyin financial services(Baidu, China’snumber bridges connecting the towers, which boast facilities such as a three, struggles to keep up). With their respective subsidiaries, running track and a rock-climbing wall. Once everyone has Alipay and WeChat Pay,they dominate mobile payments. In the moved in, the buildings will accommo- big coastal cities, these services have all but replaced cash for date more than10,000 employees. smaller purchases and generate immense amounts of data, Tencent’s towers are a fitting symbol China’s which the companiesthen use to target advertisements, improve of China’s internet, which is already the their e-commerce services and power artificial-intelligence (AI) world’s most centralised by far. The state internet is offerings. Alibaba and Tencent also control much ofChina’s ven- has always kept close tabs on what is go- already the ture capital. According to McKinsey, a consultancy, between ing on in its virtual space, and more re- them they make about half of all VC investments in mainland cently has teamed up with the country’s world’s China. In America the tech titans account for only around 5% of online giants, notably Tencent and its most such investment. main rival, Alibaba, to control that online But as Xi Jinping, China’s president, tightens his grip on the world even more tightly.What is happen- centralised country, the tech giants, too, have found themselves more con- ing there can be seen as a counter-project by far strained. In addition to being forced to ensure that the govern- to the West’s Web 3.0—a kind of Hamilto- ment retains its monopoly on information, they are now also be- nian internet. The project may provide ing required to help make China a “cyber-superpower”, turning further proof of what the late Melvin Kranzberg, an influential them into “quasi-state-owned companies”, in the words of Max historian of technology, once stated as its first law: “Technology Zenglein ofthe MercatorInstitute forChina Studies, a think-tank. is neither good nor bad; nor is it neutral.” In other words, it all de- Nowhere is this clearerthan in AI, where the country wants to be pends on the aims it serves. the world leader by 2030 and plans to build a domestic industry When China started buildingits “Great Firewall” around its worth $150bn. version of the internet 20 years ago, Wired magazine, then the China’s biggest advantage in AI is data, of which, thanks to central organ of online culture, wondered whether it would suf- more than 770m internet users, it has more than any other coun- fer the fate of its physical predecessor, the Great Wall, which try. But instead of decentralising this treasure trove, as the Web largely failed to protect the country against raids. But it has got 3.0 movement hopes to do in the West, China’s plan seems to be more and more effective. In particular, its operators have learned to centralise them even furtherto make the mostofthem. Each of to balance the aim of keeping out Western democratic values the tech giants has been put in charge of specific types of digital with the need to maintain close links to the world economy.Chi- information, turning them, in effect, into national data champi- na’s recent clampdown on virtual private networks (VPNs), ser- ons. Alibaba collects data needed for smart cities, Baidu for au- vices that tunnel through the Great Firewall, seems designed to tonomous vehicles and Tencent formedical imaging. fine-tune these filters. Some in Beijing even want to enroll blockchain technol- Within China, censorship is, in essence, outsourced to the ogies in their quest for technological world domination—further internet firms. In April Toutiao, a popular news-aggregation ser- proof that, as with the internet itself, technology is what you vice, founditselfinthe cross-hairsofChina’stop media regulator make it. The government has clamped down hard on Bitcoin and for posting “vulgar” content. The firm’s chief executive, Zhang othercrypto-currenciesbecauseitconsidersthemathreattogov- Yiming, quickly issued an apology, saying he should have real- ernment control and a danger to the financial system. But shorn ised that “technology has to be guided by the core values of so- of their anonymity, distributed ledgers can be a boon for regula- cialism.” He also promised to hire another 4,000 censors, on top tors: they can provide visibility,for instance on who owns what. ofthe 6,000 his firm already employs. The total number of “con- In early June it emerged that China’s central bank has built a tent controllers” workingin China’s internet industry,some reck- blockchain-based system that digitises cheques, allowing it to on, is more than 2m. trackthem. Italso seemsto be consideringissuingits own crypto- Nearly the same number,it is thought, workforthe Chinese currency.And NEO, a Chinese firm which has launched a block- government, injecting propaganda and misinformation into the chain similar to the West’s Ethereum, is exhibiting some distinc- social-media flow. In one study in 2017 a group of researchers at tive Chinese characteristics, such as a digital-identity service. 1

The Economist June 30th 2018 9 SPECIAL REPORT

Regulation A new school in Chicago

Conventional antitrust thinking is being disrupted from within MONOPOLIES ARE GOOD—so long as they can be challenged, however remote the possibility. Thatbelief haslong held sway at the University of Chicago, a bastion of free-market thinking, which helped make the word “antitrust” lose most of its meaning in America, not least with respect to technology. “PunishingGoogle forbeinga successful competitorwould stifle innovation and dynamic competition,” concluded the late Rob- ert Bork, long the Chicago school’s leading antitrust expert, in a paper published in 2012 (commissioned by Google, which needed ammunition to defend itself in an antitrust investigation at the time). 2 Leadingthinkersin China argue thatputtinggovernment in Now this monopoly of thought is itself being disrupted charge of technology has one big advantage: the state can distri- from within. In April, for the second time in as many years, bute the fruits of AI, which would otherwise go to the owners of Booth, the university’s business school, invited leading antitrust algorithms. Feng Xiang of Tsinghua University, one of China’s thinkers to discuss monopolies, this time in tech. And many most prominent legal scholars, recently warned that “if AI re- came, from representatives of the old Chicago school, such as mains underthe control ofmarket forces, it will inexorably result Dennis Carlton, to tech’s most ardent foes, such as Barry Lynn in a super-rich oligopolyofdata billionaireswho reap the wealth and Matt Stoller of the Open Markets Institute, a think-tank. created by robots that displace human labour, leaving massive Ideas about what should be done were disparate, including such unemployment in their wake.” Ifgovernment can ensure that AI proposals as creating property rights for data and treating social serves society instead of private capitalists, he argues, the tech- media as a public-health problem because of their addictive nology promises to create wealth forall. qualities. In his winding-up speech Luigi Zingales, one of the or- ganisers, proposed the creation of an interdisciplinary commit- Essential services tee for internet-platform regulation. If it is ever convened, what Such thinking has also been gaining some traction in the should it focus on? West, although so faronly at the political fringes. The underlying Information technology comes in cycles, each giving rise to idea isthatsome typesofservices, includingsocial networks and a new computing platform. In the current cycle, the key compo- online search, are essential facilities akin to roads and other nent—or the next platform—is data. Facebook may have started kinds of infrastructure and should be regulated as utilities, as a social network, Google as a search engine and Microsoft as a which in essence means capping their profits. Alternatively, im- maker of operating systems and other software. But today they portant data services, such as digital identity, could be offered by all deal in data, not least to target advertisements. And now the governments. Evgeny Morozov, a researcher and internet activ- firms are quickly becoming fully fledged data distilleries: they ist, goes one step further, calling for the creation of public data suckup as much digital information as they can, crunch it in vast utilities, which would pool vital digital information and ensure data centres and turn it into artificial-intelligence services. At the equal accessto it. Ben Tarnoff, a left-wingwriter, argues that“data three firms’ annual developer conferences in early May, AI was resources” should be nationalised and put under state control. everywhere. New services unveiled included one by Microsoft “Data is no less a form of‘common’ property than oil or soil,” he to interpret people’s offline movements and one by Google recently wrote. which is able to call hair salons and other local businesses to As with Web 3.0 projects, however, such ideas face many make appointments. practical problems, whether in the West or in China. AI is still in rapid flux. Putting a utility in charge of data would almost cer- Philosopher’s stone.2 tainly slow innovation. National data champions would also The strange thing about data is that they are an inexhaust- make life harder for startups, which may need digital informa- ible resource: the more you have, the more you get. More infor- tion in a different form. And picking winners has generally mation letsfirmsdevelop betterservices, which attracts more us- proved tricky. ers, which in turn generate more data. Having a lot of data helps More important, to most Western thinkers the idea of gov- those firms expand into new areas, as Facebook is now trying to ernments controlling their people’s data has something Orwell- do with online dating. Online platforms can use their wealth of ian about it. Even in the West, where such data utilities would data to spot potential rivals early and take pre-emptive action or presumably be democratically controlled, the potential for buythem up. So bigpilesofdata can become a barrierto compet- abuse would be huge. Not least, it would provide police and itors entering the market, says Maurice Stucke of the University spooks with direct access to people’s data. ofTennessee. When it comes to democracy and human rights, a Jefferso- That said, there are other ways of looking at data. Geoffrey nian internet is clearly a safer choice. With Web 3.0 still in its in- Manne of Northwestern University argues that, unlike physical fancy, the West at least will need to find other ways to rein in the resources, they are not rivalrous, meaning they can be collected online giants. The obvious alternative is regulation. 7 and used by different parties without causinga clash of interests. 1

10 The Economist June 30th 2018 SPECIAL REPORT FIXING THE INTERNET

2 It is not the data that are valuable, he says, but the services pow- cial graphs, the network of connections between friends, to ered by them. Some firms are just better at developing new offer- make thingseasierforcompetitors. In the earlydaysof social me- ings than others. dia thissortofdata-sharingwas possible. Instagram, for instance, Still, assuming, as many economists in the field now do, asked new users to import a list oftheir Twitter followers. that data matter quite a bit, what can regulators do to limit their Viktor Mayer-Schönberger ofOxford University would like power? Broadly, possible actions fall into two buckets, one more to introduce a “progressive data-sharing mandate”. If a com- Hamiltonian, the othermore Jeffersonian, to stickwith the labels pany’s market share reaches a certain threshold of, say, 10%, it of Frank Pasquale of the University of Maryland mentioned ear- would have to startsharingsome ofits“feedbackdata” (informa- lier in this report. tion collected from people using AI services). When the market Ofthe two, the firstisthe more straightforward. When Face- share increases, so would the sharing requirement. “When feed- book took over WhatsApp, a popular messaging service, for back data from large players is available to smaller competitors, about $23bn in 2014, the deal barely raised any eyebrows in anti- then innovation…is not concentrated at the top,” he argues in trust quarters. Today the acquisition would probably be blocked, “Reinventing Capitalism in the Age of Big Data”, a new book co- because it has since become clear that Facebook was taking over written with Thomas Ramge, a journalist. a serious rival. And despite promises to the contrary, the social Albert Wenger ofUnion Square Ventures, a venture-capital network proceeded to merge some of the two firms’ data, which firm, calls for a “right to an API key”. This would not just give us- last year earned it a fine of €110m ($122m at the time) from Euro- ers real-time access to their data but allow them to plug into the pean Commission regulators. inner workings ofa service. A good example is Twitter in its early days: people had the choice of different applications that linked Turning back the clock into the microblogging service. As well as blocking new mergers, this approach could in- All these suggestionsraise two bigquestions. One is wheth- volve unwinding some that have already happened. One pro- er any of them are workable. The measures in the first option posal tabled in Chicago was to require Facebook to spin off seem feasible, although merger controls can be sidestepped. The WhatsApp and Instagram, another popular social-media app proposals under the second approach could stymie innovation. which it took over in 2012. Whether it makes sense to split up the As for the third, what type of data should be shared, and in firms’ core business is a different question; equipped with the which format? And how can the tension between data-sharing same data set, one of the successor generation would probably and privacy be resolved? Much will depend on how regulators end up dominant again after a few years. interpret the GDPR, but the legislation does not seem to condone A related idea being considered is to block big online firms the idea ofexportingyoursocial graph because it includes perso- from offering certain services on top of their platforms because nal information on your friends. they might favour them over rival offerings. Such a conflict of in- The other big question is whether any ofthese ideas can be terest was at the core of an antitrust case in Brussels in which made to fit with existing antitrust law. Critics of the tech titans Google was accused of having discriminated against competing have not spent much time thinking about that, says Carl Shapiro comparison-shopping services and fined of the University of California, Berkeley. Before €2.4bn. Amazon, too, often competes with mer- regulators can limit data power, for instance, chants that use its online marketplace. To avoid they have to show that it has been abused, such conflicts, limitationshave been imposed in How dominant? which will be tricky. So faronly one big data-re- other industries, such as railways and banking, Global market share lated antitrust investigation has been launched, points out Lina Khan of the Open Markets Insti- April 2018, % by Germany’s Federal Cartel Office. In Decem- tute. Why, she argues, should this not be possi- Search ber it found that Facebook had abused its domi- ble for platforms? nant position by getting users to agree to let the The second, Jeffersonian bucket is various- firm collect personal data from other websites. ly labelled “data sharing”, “data portability” Google Many participants at the Chicago confer- and, in geekish, “regulation by API” (application 91% ence called fora big trial that could put the spot- programming interface). The champions ofdata light on firms’ practices, as the Microsoft case did in the 2000s. In Europe this is a distinct pos- monopolies accept that they will be hard to Smartphone avoid and even harder to take apart, so they web sibility. Data “can foreclose the market—they traffic want incumbents to be required to give startups Apple can give the parties that have them immense access to some of their data and thus create 45% business opportunities that are not available to more competition. others,” said Margrethe Vestager, the EU’s com- Some of the proposed measures already petition commissioner, in a recent interview. In exist. Both Facebook and Google allow users to April she announced an investigation into Ap- export many of the data they hold on them. Eu- Social ple’s proposed acquisition ofShazam, a popular media rope’snewprivacylaw, the General Data Protec- smartphone app that identifies songs. This tion Regulation, now mandates “data portabil- would give the iPhone-makeraccess to data that ity” (as a well as a “right to be forgotten”, which Facebook could help it poach customers from rivals such requires firms to delete personal data if a user 66% as Spotify. asks). But so farnot many are clicking the down- But in America a major case seems unlike- load button, mainly because of the dearth of Online ly to be brought, even if the Democrats regain services that allow such data to be uploaded. retail power in Washington, DC. The recent techlash This is why some want to push this ap- Amazon notwithstanding, the online giants still have proach further. Mr Zingales and Guy Rolnik, an- 37% many left-leaning friends, and have contributed other organiser of the Chicago conference, have to Democratic campaigns. So in the absence of suggested that dominant social networks any quick technical or regulatory fixes to the in- should be required to allow access to their so- Source: Global Stats Counter ternet’s centralisation, what can be done? 7

The Economist June 30th 2018 11 SPECIAL REPORT FIXING THE INTERNET

Prospects dustry has solved more difficult problems in the past. Offer to readers Equallyimportant, govern- Reprints of this special report are available. The art of the possible A minimum order of five copies is required. ments must make it easierfor de- Please contact: Jill Kaletha at Foster centralised alternatives to Printing Tel: +1 866 879 9144 Ext: 168 emerge. That could mean creat- e-mail: [email protected] ingdemand forsuch offerings ei- Corporate offer ther by using them themselves Stopping the internet from getting too concentrated Corporate orders of 100 copies or more are orby mandatingtheiruse, forin- will beaslog, but the alternative wouldbeworse available. We also offer a customisation stance by requiring that some of service. Please contact us to discuss your FIXING THE INTERNET can look like mission impossible, them, such as blockchain-based requirements. even in the West. A Jeffersonian reform in the form of Web digital identities, are offered by Tel: +44 (0)20 7576 8148 e-mail: [email protected] 3.0 appears a long way off, and its regulatory equivalent, a vigor- bigonline-service providers. But For more information on how to order special ous antitrust policy, does not look much more promising. On- it also means doing away with reports, reprints or any copyright queries line, humanity seems bound to sink ever deeper into a Hamilto- regulation thatendsup strength- you may have, please contact: nian hole. But such an outcome is not inevitable. ening existing online giants. The Rights and Syndication Department It is important to set realistic expectations. Nobody serious- In America the Computer 20 Cabot Square ly thinks that the internet could ever return to its first, totally de- Fraud and Abuse act and Digital London E14 4QW centralised beginnings. Most markets are somewhat concentrat- Millennium Copyright makes it Tel: +44 (0)20 7576 8148 Fax: +44 (0)20 7576 8492 ed, and no technologyislikelyto change that. In the metaphor by an offence, punishable by pri- e-mail: [email protected] Niall Ferguson quoted at the start of this report, rather than tear son, for outside firms to plug www.economist.com/rights down the data towers, the task at hand is to create a sufficiently into the platforms of online vibrant digital town square to make diver- giants. Such legislation should Future special reports sity flourish. be dispensed with. It is also un- America’s Democrats July 14th Similarly, there is no single solution helpful to treat all crypto-tokens Spain July 28th TQ: Crypto-currencies September 1st for decentralising the internet. But a de- as securities and regulate them Liberalism September 15th cent-sized digital square could be main- as such, as America’s Securities tained through a mix of measures, com- and Exchange Commission Previous special reports and a list of forthcoming ones can be found online: bining both Jeffersonian and Hamilton- seems set to do. Exceptions economist.com/specialreports ian approaches, as well as regulation. should be made for those that What might that looklike? are clearly intended to power Looking back, forcing the tech giants new types of services. The Euro- of the past to share some of their wealth pean Union may need to tweakits brand-new General Data Pro- seems to have been a good idea. Intel tection Regulation (GDPR) to make it less complex. Bigfirms have would have found it harder to develop the resources to comply with its rules, whereas smaller outfits microprocessors without a consent de- are likely to struggle. cree in 1956 that forced AT&T, then Ameri- The internet’s physical infrastructure is still less concentrat- ca’s telephone monopoly, to agree to li- There is no ed than the applications that run on top of the network, and ev- cense all its past patents free of charge, single ery effort should be made to keep it that way. America’s recent including the ones for the transistor. Mi- decision to scrap strict rules requiring telecoms carriers to treat crosoft might never have come to rule PC solution for all types of traffic equally (known as “network neutrality”) is software if IBM, accused of monopolising decentral- counterproductive: it will give the carriers more control over the mainframes, had not decided in 1969 to network and allow them to extract more rent. Instead, the Feder- market computers and their programs ising the al Communications Commission should expand such initia- separately, a move that created the soft- internet tives as the Citizens Broadband Radio Service, which allows ware industry. Google might not have tak- more sharing ofradio spectrum. en off in the way it did had Microsoft not Some of this may sound like small beer, but the history of agreed, at the end of its antitrust trials in America and Europe in information technology shows that small tweaks have often the 2000s, not to discriminate against rival browsers and to li- been effective in bringing down the giants. Moreover, the mix of cense technical information which allows other operating sys- technology and regulation will have to be adjusted and re-ad- tems to work easily with Windows. justed over time. “There won’t be a great moment, one great bat- The equivalent course of action now would be to force to- tle which you win,” says Mr Benkler, the Harvard academic. day’s giants to open up their data vaults, thus lowering the barri- It sounds Sisyphean, but the alternative would be even ers to market entry and giving newcomers a better chance to more painful. Decentralisation is ultimately a question of de- compete. Auseful case studymightbe the European Union’sSec- mocracy. As digital technology penetrates society ever more ond Payment Service Directive, which came into force early this deeply and the two become ever more intertwined, the rules of year. On the old continent big banks must now give other firms the former will increasingly govern the latter. And the more the access to transaction data at the say-so ofan account-holder. internet, along with its applications and everything that is at- Admittedly, designing a similar solution for the world of tached to it, is controlled by tech titans (or indeed by the govern- data would be tricky. Mandating extensive data-sharing would ment, as in China), the less free it is likely to be. As John Sherman, amount to expropriation. It would also clash with privacy con- the senator who gave his name to America’s original antitrust siderations: the reason why data on tens of millions of Ameri- law in 1890, put it at a time when the robber barons ruled much cans leaked from Facebook ahead of the 2016 presidential elec- ofAmerica’seconomy: “Ifwe will notendure a kingasa political tion was that the applications on the firm’s platform had some power, we should not endure a king over the production, trans- access to users’ social graphs. Butthe information-technology in- portation and sale ofany ofthe necessaries oflife.” 7

12 The Economist June 30th 2018 Middle East and Africa The Economist June 30th 2018 43

Also in this section 45 Rial problems in Iran 46 Will Zimbabwe’s election be fair? 46 Worrying signs in Senegal 48 Dealing with Somali pirates

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

The future of Syria mosques. Advertisements forShia pilgrim- ages line the walls. In the capital’s new ca- Smaller, in ruins and more sectarian fés revellers barely notice the jets over- head, bombing rebel-held suburbs. “I love those sounds,” says a Christian woman who works for the UN. Like other regime loyalists, she wants to see the “terrorists” ALEPPO, DAMASCUS AND HOMS punished. Mr Assad’s men captured the last rebel How a victorious Basharal-Assad is changing Syria strongholds around Damascus in May. He NEW Syria is emerging from the rubble mass, hoping for charity or a visa to the now controls Syria’s spine, from Aleppo in Aof war. In Homs, which Syrians once West from bishops with foreign connec- the north to Damascus in the south—what dubbed the “capital of the revolution” tions. Even these Sunnis fall under suspi- French colonisers once called la Syrie utile againstPresidentBasharal-Assad, the Mus- cion. “We lived so well before,” says a (useful Syria). The rebels are confined to lim quarter and commercial district still lie Christian teacher in Homs. “But how can pockets along the southern and northern in ruins, but the Christian quarter is reviv- you live with a neighbour who overnight borders (see map on next page). Lately the ing. Churches have been lavishly restored; called you a kafir (infidel)?” government has attacked them in the a large crucifix hangs over the main street. Even in areas less touched by the war, south-western province ofDeraa. “Groom of Heaven”, proclaims a billboard Syria is changing. The old city of Damas- featuring a photo of a Christian soldier cus, Syria’s capital, is an architectural testa- A prize of ruins killed in the seven-year conflict. In their ment to Sunni Islam. But the Iranian- The regime is in a celebratory mood. sermons, Orthodox patriarchs praise Mr backed Shia militias that fight for Mr Assad Though thinly spread, it has survived the Assad for saving one of the world’s oldest have expanded the city’s Shia quarter into war largely intact. Government depart- Christian communities. Sunni and Jewish areas. Portraits of Has- ments are functioning. In areas that re- Homs, like all ofthe cities recaptured by san Nasrallah, the leader of Hizbullah, a mained under Mr Assad’s control, electric- the government, now belongs mostly to Lebanese Shia militia, hang from Sunni ity and water supplies are more reliable Syria’s victorious minorities: Christians, than in much of the Middle East. Officials Shias and Alawites (an esoteric offshoot of predict that next year’s natural-gas produc- Shia Islam from which Mr Assad hails). Still going tion will surpass pre-war levels. The Na- These groups banded together against the Syrians, m tional Museum in Damascus, which rebels, who are nearly all Sunni, and locked up its prized antiquities for protec- 8 chased them out of the cities. Sunni civil- Internally-displaced tion, is preparing to reopen to the public. ians, once a large majority, followed. More persons The railway from Damascus to Aleppo than half of the country’s population of 6 might resume operations this summer. 22m has been displaced—6.5m inside Syria To mark national day on April 17th, the and over 6m abroad. Most are Sunnis. 4 ancient citadel of Aleppo hosted a festival The authorities seem intent on main- Refugees for the first time since the war began. Mar- taining the new demography. Four years 2 tial bands, dancing girls, children’s choirs after the government regained Homs, resi- and a Swiss opera singer (of Syrian origin) dents still need a security clearance to re- crowded onto the stage. “God, Syria and turn and rebuild their homes. Few Sunnis 0 Bashar alone,” roared the flag-waving 2012 13 14 15 16 17 18* get one. Those that do have little money to crowd, as video screens showed the battle Source: UNHCR *Year to date restart their lives. Some attend Christian to retake the city. Below the citadel, the ru-1 44 Middle East and Africa The Economist June 30th 2018

2 ins stretch to the horizon. tarian approach to policymaking. The first Mr Assad (pictured) has been winning demonstrations attracted hundreds of the war by garrisoning city centres, then thousands of people of different faiths. So shooting outward into rebel-held suburbs. the regime stoked sectarian tensions to di- On the highway from Damascus to Alep- vide the opposition. Sunnis, it warned, po, towns and villages lie desolate. A new really wanted winner-take-all majoritar- stratum of dead cities has joined the ones ianism. Jihadists were released from pri- from Roman times. The regime has neither son in order to taint the uprising. As the the money nor the manpower to rebuild. government turned violent, so did the Before the war Syria’s economic growth protesters. Sunni states, such as Turkey, approached double digits and annual GDP Saudi Arabia and Qatar, provided them was $60bn. Now the economy is shrink- with arms, cash and preachers. Hardliners ing; GDP was $12bn last year. Estimates of pushed aside moderates. By the end of the cost ofreconstruction run to $250bn. 2011, the protests had degenerated into a Syrians are experienced construction sectarian civil war. workers. When Lebanon’s civil war ended Early on, minorities lowered their pro- in 1990, they helped rebuild Beirut. But no file to avoid being targeted. Women such workforce is available today. In Da- donned headscarves. Non-Muslim busi- mascus University’s civil-engineering de- nessmen bowed to demands from Sunni partment, two-thirds of the lecturers have employeesforprayerrooms. Butasthe war fled. “The best were first to go,” says one swung their way, minorities regained their who stayed behind. Students followed Bashar the destroyer confidence. Alawite soldiers now flex them. Those that remain have taken to arms tattooed with Imam Ali, whom they speaking Araglish, a hotch-potch of Arabic tributed thousands of empty homes to consider the first imam after the Prophet and English, as many plan futures abroad. Shia militiamen. “Terrorists should forfeit Muhammad (Sunnis see things different- Traffic flows lightly along once-jammed their assets,” says a Christian business- ly). Christian women in Aleppo showtheir roads in Aleppo, despite the checkpoints. woman, who was given a plush café that cleavage. “We would never ask about Its pre-war population of 3.2m has shrunk belonged to the family of a Sunni defector. someone’s religion,” says an official in Da- to under 2m. Other cities have also emp- A new decree, called Law 10, legitimises mascus. “Sorry to say, we now do.” tied out. Men left first, many fleeing the the government’s seizure ofsuch assets. Ti- The country’s chiefmufti is a Sunni, but draft and their likely dispatch to the front. tle-holders will forfeit their property if there are fewer Sunnis serving in top posts As in Europe after the first world war, Syr- they fail to re-register it, a tough task for the since the revolution. Last summer Mr As- ia’s workforce is now dominated by wom- millions who have fled the country. sad replaced the Sunni speaker of parlia- en. They account forover three-quarters of ment with a Christian. In January he broke the staff in the religious-affairs ministry, a A Palestinian-like problem with tradition by appointing an Alawite, hitherto male preserve, says the minister. The measure has yet to be implemented, instead ofa Sunni, as defence minister. There are female plumbers, taxi-drivers but refugees compare it to Israel’s absen- Officially the government welcomes and bartenders. tees’ property laws, which allow the gov- the return of displaced Syrians, regardless Millions of Syrians who stayed behind ernment to take the property ofPalestinian of their religion or sect. “Those whose have been maimed ortraumatised. Almost refugees. Syrian officials, of course, bridle hands are not stained with blood will be everyone your correspondent spoke to at such comparisons. The ruling Baath forgiven,” says a Sunni minister. Around had buried a close relative. Psychologists party claims to represent all of Syria’s reli- 21,000 families have returned to Homs in warn of societal breakdown. As the war gions and sects. The country has been led the last two years, according to its gover- separates families, divorce rates soar. More by Alawites since 1966, but Sunnis held se- nor, Talal al-Barazi. But across the country, children are begging in the streets. When nior positions in government, the armed the number of displaced Syrians is rising. the jihadists retreat, liquor stores are the forcesand business. Even todaymanySun- Already this year 920,000 people have left first to reopen. nis prefer Mr Assad’s secular rule to that of their homes, says the UN. Another 45,000 Mr Assad, though, seems focused less Islamist rebels. have fled the recent fighting in Deraa. Mil- on recovery than rewarding loyalists with Butsince pro-democracyprotestserupt- lions more may follow ifthe regime tries to property left behind by Sunnis. He has dised in March 2011, Syrians detect a more sec- retake other rebel enclaves. When the regime took Ghouta, in east- Syrian refugees Religion ern Damascus, earlier this year its 400,000 By destination†, m TURKEY 2010 (latest available) residents were given a choice between Predominantly 3.57 leaving for rebel-held areas in the north or Sunni Shia* Christian accepting a government offer of shelter. 0.83 Mixed/other Aleppo Internally The latter was a euphemism for intern- (Europe) Latakia displaced† Russian 6.5 ment. Tens of thousands remain “cap- air base T tured” in camps, says the UN. “We CYPRUS i Homs E g up r h i r s a swapped a large prison for a smaller one,” t SYRI e LEBANON s 0.98 says Hamdan, who lives with his family in Beirut Damascus IRAQ a camp in Adra, on the edge of Ghouta. Golan DERAA Baghdad Sparsely They sleep under a tarpaulin in a school- Mediterranean Heights populated Sea 0.25 yard with two other families. Armed 0.03 Source: M. Izady, *Includes Alawites guards stand at the gates, penning more ISRAEL JORDAN Columbia University and others (N. Africa) than 5,000 people inside. 0.67 SAUDI ARABIA IRAN The head of the camp, a Christian offi- 0.13 EGYPT 200 km cer, says inmates can leave once their secu- Areas of control, June 25th 2018 Syrian government Rebels Turkish troops/rebels Kurds Islamic State rity clearance is processed, but he does not † Sources: UNHCR; IHS Conflict Monitor; Institute for the Study of War June 2018 or latest available know how long that will take. Returning 1 The Economist June 30th 2018 Middle East and Africa 45

2 home requires a second vetting. Trapped group linked to al-Qaeda, and other Sunni and powerless, Hamdan worries that the rebels. American and French officers over- regime or its supporters will steal his har- see a Kurdish-led force east of the Euphra- vest—and then his land. Refugees fear that tes river. Sunni rebels abutting the Golan they will be locked out of their homeland Heights offer Israel and Jordan a buffer. In altogether. “We’re the new Palestinians,” theory the territory is classified as a “de-essays Taher Qabar, one of 350,000 Syrians calation zone”. But violence in the zone is camped in Lebanon’s Bekaa Valley. escalating again. Some argue that Mr Assad, with fewer New offensives by the regime risk pull- Sunnis to fear, may relax his repressive ing foreign powers deeper into the conflict. rule. Ministers in Damascus insist that Turkey, Israel and America have drawn red change is inevitable. They point to a lines around the rebels under their protec- change in the constitution made in 2012 tion. Continuing Iranian operations in Syr- that nominally allows for multiparty poli- ia “would be the end of [Mr Assad], his re- tics. There are a few hopeful signs. Local as- gime”, said Yuval Steinitz, a minister in sociations, once banned, offer vocational Israel, which has bombed Iranian bases in training to the displaced. State media re- the country. Israel may be giving the remain Orwellian, but the internet is unre- gime a green light in Deraa, in order to keep stricted and social-media apps allow for the Iranians out ofthe area. unfettered communication. Students in ca- There could be worse options than war fés openly criticise the regime. Why for Mr Assad. More fighting would create doesn’t Mr Assad send his son, Hafez, to Are they next to leave? fresh opportunities to reward loyalists and the front, sneers a student who has failed tilt Syria’s demography to his liking. Neigh- his university exams to prolong his studies Though he rules most of the population, bours, such as Jordan and Lebanon, and and avoid conscription. about 40% of Syria’s territory lies beyond European countries might indulge the dic- A decade ago Mr Assad toyed with infi- his control. Foreign powers dominate the tator rather than face a fresh wave of refu- tah (liberalisation), only for Sunni extrem- border areas, blocking trade corridors and gees. Above all, war delays the day Mr As- ists to build huge mosques from which to the regime’s access to oilfields. In the sad has to face the question of how he spout their hate-speech, say his advisers. north-west, Turkish forces provide some plans to rebuild the country that he has so He is loth to repeat the mistake. Portraits of protection for Hayat Tahrir al-Sham, a wantonly destroyed. 7 the president, appearing to listen keenly with a slightly oversized ear, now line Syr- Protests in Iran ia’s roads and hang in most offices and shops. Checkpoints, introduced as a counter-insurgency measure, control move- Rial problems mentasneverbefore. Men underthe age of 42 are told to hand over cash or be sent to Iran’s struggling economy is pushing people overthe edge the front. So rife are the levies that dip- lomats speakofa “checkpoint economy”. IX months after the last round of prot- Having resisted pressure to compro- Sests over their country’s anaemic Up, down and bad all around mise when he was losing, Mr Assad sees economy, Iranians are at it again. But Iran no reason to make concessions now. He unlike the demonstrations in December, Implied annual Exchange rate hastorpedoed proposalsfora political pro- which began in the provinces, the latest inflation rate Unofficial, inverted scale cess, promoted by UN mediators and his unrest erupted in Tehran’s bazaar on June % Rials per $, ’000 250 0 Russian allies, that would include the Sun- 25th and spread from there. Anger is ni opposition. At talks in Sochi in January growing over rising prices, the plunging 200 20 150 he diluted plans for a constitutional com- value ofthe Iranian rial (see chart) and 40 mittee, insisting that it be only consultative the cost offoreign adventurism. 100 60 and based in Damascus. His advisers use The regime looks worried. Security 50 the buzzwords of “reconciliation” and forces fired tear gas to disperse crowds + 0 80 “amnesty” as euphemisms for surrender that gathered at parliament’s gates. Aya- – and security checks. He has yet to outline a tollah Sadeq Larijani, the conservative 50 100 2012 14 16 18 2012 14 16 18 plan forreconstruction. head ofthe judicial system, threatened Source: Prof. Steve H. Hanke, Johns Hopkins University those “who disturb the Islamic econ- War, who is it good for? omy” with execution. Mr Assad appears to be growing tired of President Hassan Rouhani, a moder- Iran’s nuclear programme. In August his allies. Iran has resisted Russia’s call for ate, seems stumped. Instead ofthe boun- America will reimpose curbs on Iran’s foreign forces to leave Syria. It refuses to re- tiful foreign investment he promised purchase ofdollars and sale ofgold; it linquish command of 80,000 foreign Shia would come from compromising with also wants a full ban on oil sales. militiamen. Skirmishes between the mili- America, he is reeling from what he calls Mr Rouhani won an election last year, tias and Syrian troops have resulted in President Donald Trump’s“economic but he is challenged by hardline clerics scores of deaths, according to researchers war”. The value ofthe rial on the black and the Islamic Revolutionary Guard at King’s College in London. Havingdefeat- market has fallen by over halfsince Mr Corps, the regime’s military arm. Mem- ed Sunni Islamists, army officers say they Trump tookoffice in January 2017, partic- bers ofparliament seekhis impeach- have no wish to succumb to Shia ones. Ala- ularly since May, when America with- ment. While protesters cry forthe restora- wites, in particular, flinch atShia evangelis- drew from the deal it and five other pow- tion ofthe monarchy, regime insiders ing. “We don’t pray, don’t fast [during Ram- ers signed with Iran in 2015. It had lifted mull a military takeover. In its 40th year, adan] and drinkalcohol,” says one. sanctions in return forrestrictions on Iran’s theocracy looks in poor health. But Mr Assad still needs his backers. 46 Middle East and Africa The Economist June 30th 2018

Zimbabwe’s election say which posts they hold. Nor has the ZEC met another opposition demand that it Try not to rig spell out where the ballot papers will be printed, stored or distributed. Foreign observers will play a vital role in trying to ensure a clean election. Mis- sions under the aegis of the African Union and the Southern African Development Community are likely to whitewash the Can foreign observers keep the coming poll in Zimbabwe clean? election, provided it is non-violent, as they IMBABWEANS shuddered when a Zanu-PF’s strongest backers. have always done before. The key watch- Zbomb went off on June 23rd in Bula- This time an updated register of 5.7m ers are a European Union team and a joint wayo, the country’s second city, a few voters has raised hopes of a fairer poll. But mission from America run by the National yards from President Emmerson Mnan- other worries persist. One is the role of the Democratic Institute (NDI) and the Inter- gagwa as he left the podium at the end of army, which brought Mr Mnangagwa, a national Republican Institute (IRI). Cru- an election rally. Would the explosion, former security minister, to power. The cially they will stay for at least a month which killed two security men, herald a generals have yet to declare publicly that afterthe election, when hanky-panky over wave ofviolence against the opposition, as they would serve under a government run the count is most likely to occur. it might well have done if the vengeful by a party other than Zanu-PF. In the past, The NDI and IRI have acknowledged Robert Mugabe had still been president? army chiefs have declared undying alle- “several notable improvements in the po- In the event, Mr Mnangagwa (pictured), giance to Mr Mugabe at election time. litical environment and electoral prepara- who displaced Mr Mugabe in a coup last Still more disturbing are unconfirmed tions as compared to prior elections,” but November, called for calm rather than ret- reports that soldiers, discarding their uni- they also lamented that “a number of sig- ribution. He implied that friends ofMr Mu- forms, have been deployed in the country- nificant opportunities to break with the gabe’s ambitious wife, Grace, who had side, where more than half the voters re- past have been missed.” Tension is rising. wanted the top job, were the likeliest cul- side, quietly threatening them if they vote Mr Mnangagwa, now 75, was Mr Mugabe’s prits. The main opposition leader, Nelson “the wrong way”. Many of the 2m-plus ru- long-serving chief enforcer, including dur- Chamisa, called for calm, too. With parlia- ral people who have been receiving food ing the outrageous poll in 2008. Does he mentary and presidential elections set for handouts from international donors fear seekredemption? That is the question. 7 July 30th, Zimbabweans of all parties are such necessities could be withheld. Many praying fora peaceful poll. also think their influential chiefs and vil- But will it be fair? That is harder to tell. lage headmen, who have been in thrall to Politics in Senegal Elections since 2002 have been both viol- Zanu-PF, will be able to tell how they vot- ent and rigged. Among the worst was in ed. The main wing of the MDC, led by Mr Writing on the 2008, when the Zimbabwe Electoral Com- Chamisa, a sharp-elbowed 40-year-old mission (ZEC) tookmore than five weeks to lawyer, may once again win the urban wall declare a result; more than 270 activists, al- vote, but he must break Zanu-PF’s strangle- mostall belongingto the opposition Move- hold on the countryside if he is to have a DAKAR ment for Democratic Change (MDC), were chance ofwinning. Worrying signs in a rare west African killed. The last national polls, in 2013, were The head of the ZEC, Priscilla Chi- democracy relatively peaceful but generally regarded gumba, a judge, has so far said the right as rigged. Mr Mugabe’s ruling Zanu-PF things, but the MDC has already charged O THE casual observer, all seems well comfortably beat the MDC, which had her with favouring Zanu-PF. A leading op- Tin Senegal. Visitors to Dakar, the capital, been discredited by a hapless spell in a co- position lawyer calls her “the military’s fly into a new world-class airport. The alition government. The result was also at- pick”. She has acknowledged that 14% of economy grew by 6.8% last year and the tributed to a gross manipulation ofthe vot- herstaffare past orpresent members ofthe discovery of natural gas heralds an even ers’ roll in favour of rural voters, who are army or ex-guerrillas, but has refused to brighter economic future. To boot, the national team has performed well at the football World Cup. But the political graffiti scrawled across Dakar’swallstell a differentstory. The messages demand freedom forthe political opponents ofPresident Macky Sall, several of whom have been imprisoned. With a presidential election just eight months away, fears are growing that democracy in Sene- gal, long an example for west Africa, is being subverted. The political system has been tested before. Unlike most west African countries, Senegal has never had a military coup, but in 2012 the previous president, Abdoulaye Wade, did run for a third term, which the constitution proscribes. Mr Sall, riding a wave ofpopular anger, defeated him. Now Mr Sall’s government stands accused of selectively enforcing corruption laws to sideline his opponents. In March Hoping for victory, praying for peace Khalifa Sall (no relation), the mayor of Da-1 48 Middle East and Africa The Economist June 30th 2018

Somalia and piracy A knave’s ransom

A new approach to negotiations with Somali pirates has freed more hostages O ONE seized by pirates can be Oceans Beyond Piracy.He has cajoled Nconsidered lucky.But many ofthe Somali villagers into renouncing pay seamen taken hostage by Somali pirates owed by pirates forfood, transport and have at least been set free fast,once fat guard services. (Many villagers did not ransoms have been paid. At the height of like the attention that hostages attracted.) the piracy scourge offthe coast of Soma- Though negotiators have generally lia almost a decade ago, the average adopted the expenses approach, it is not ransom to free a crew and vessel was, by a magic wand. Eight seamen are still held one tally,$3.5m. in Somalia, all ofthem Iranian fishermen Some seamen, however, have lan- seized in 2015.Negotiators must still guished in captivity formonths or even convince governments that paying the years because their companies balked at pirates’ expenses will not benefit people coughing up—often because their ship with links to terrorist groups. Negotiators was uninsured, or had run aground, or must also contend with pirates fearful of Macky Sall stares down the opposition had been disabled by fire, or had sunk. being double-crossed by a rival in their Crew taken from them were sometimes group. Such suspicion is sometimes 2 kar, was sentenced to five years in prison tortured. “Hard as it may sound, these justified, says Leslie Edwards ofCompass for embezzling $3.4m. Another opposition guys, they don’t have any value,” says RiskManagement. His London firm has leader, Barthélémy Dias, was found guilty John Steed, a former UN man in Mogadi- reluctantly negotiated releases whereby of contempt of court when he protested shu, Somalia’s capital. a pirate leader gets a secret extra payment against the verdict. He will spend six Pirates are still loth to cut their losses that he will not share with his colleagues. months in prison. by freeing such hostages without pay- Somalia’s pirates have seized few Another potential challenger, Karim ment. Ofthe few Somali pirates who hostages oflate, thanks largely to more Wade, the former president’s son, was ar- havegivenupinthisway,mostwere use ofarmed guards on ships. But iJET, a rested in 2013 and found guilty of corrup- soon killed, Mr Steed notes, since they risk-management firm based in Mary- tion two yearslater. AfterMrSall pardoned could not repay the financiers who un- land that uses “a facilitation fee” to secure him in 2016, Mr Wade immediately flew to derwrote the attacks and the hostages’ releases, foresees trouble. It reckons that Qatar. Some observers think his exile was upkeep. The resulting trap forsuch failing attacks on easier-to-capture fishing boats part of a deal with the government. But he pirates and their “forgotten” hostages will pickup as more Somali fishermen is now consideringcomingbackto stand in seemed inescapable. turn to piracy as a protest against over- the election. Yet 54 hostages, held on land by va- fishing by foreign commercial firms. Potential candidates face other obsta- rious groups ofSomali pirates, have been Anger is rising again, as officials in Soma- cles. A law introduced in April requires freed in the last several years. This was lia’s semi-independent Puntland region them to obtain signatures from 1% of the because ofa new approach, say those cash in by selling licences to foreign boats registered voters in each ofSenegal’s14 dis- who negotiated the deals. Rather than try forcatches that are depleting the fish tricts. Hundreds of people protested to convince unscrupulous vessel owners stocks that have hitherto sustained So- against the measure, saying it was unfairto to forkup big ransoms, the negotiators, mali fishermen—without their having to poorer candidates. But the government mostly working fornothing, first estimat- resort to piracy. says it is needed to ensure that only serious ed the pirates’ costs—often $100,000- contenders appear on the ballot. Parlia- $200,000 forrenting a boat and getting mentary elections held last year were cha- weapons and kit; expenses forfuel and otic, in part because they featured 47 elec- food; and payoffs to stop government toral lists. officials, warlords and village elders from The protests over the election law and interfering. Ifthat amount or a bit more more recent demonstrations by students, could be raised from charities and sym- angry about unpaid grants, have been met pathisers, pirates would often accept the with violence bythe government. In May a deal, once convinced that it was their student was shot dead in the northern city only hope ofsatisfying their creditors. of Saint-Louis, leading to yet more unrest. It is easier to raise money for“ex- Images ofpolice brutality have been wide- penses reimbursement” than forthe ly shared on social media. One disturbing actual ransom, not just because the for- video shows a police van crashing through mer is much less. “Youcan argue that protesters outside Dakar’s main university. you’re not enriching these people,” says Many Senegalese are also unhappy David Snelson, the boss ofPbi2, a securi- that little of the country’s new wealth is ty firm in Mogadishu that has helped free trickling down to them. GDP per person some ofthe hostages. Even so, covering was just $2,566 (measured at purchasing- pirates’ expenses proved unpalatable to power parity) in 2016, according to the the UN bureaucracy,so Mr Steed quit in World Bank. The unemployment rate is 2013 to continue his efforts from Nairobi, over 15%. That makes the government ner- the capital ofneighbouring Kenya, vous—and may increase its propensity to through an American charity called Off to file his expenses silence critics. 7 Asia The Economist June 30th 2018 49

Also in this section 50 Bellwether elections in Indonesia 50 South Korea’s baby shortage 51 Virginity tests in South Asia 52 Banyan: Asia prepares for a trade war

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

Politics in the Philippines would transfer power and money away from Manila to other, poorer parts of the Rebel with a cause country. It would also bolster peace deals with armed groups in Mindanao which have sought greater autonomy. The country’s 18 regions could become states. The main argument in favour ofa parliamenta- Manila ry model, meanwhile, is to fosterparty politics, rather than the patronage system that The president wants to change the constitution. Critics suspect an ulterior motive currently applies. Lowlier politicians, EVER one to stick to a script, Rodrigo Those who are not drawn in find them- whatever their notional partisan affili- NDuterte regales audiences with ti- selves in trouble. In May the chiefjustice of ation, typically rush to ally themselves rades, profanities and anecdotes. A politi- the Supreme Court lost her job, ostensibly with the president of the day; there are no cian forged in town-hall frays, he knows for failing to file some asset-disclosure mass, ideologically based parties. Even so, how to capture hearts and headlines. This forms, after she upbraided the president the president struggles to push legislation week he decided to take on God, calling for infringing on the independence of the through Congress, not because of deter- him “stupid” and a “son of a whore”, to judiciary in his anti-drugs campaign. Sena- mined opposition but because it is a hope- predictable uproar. Mr Duterte clearly rel- tor Leila de Lima, who has accused Mr Du- less morass. The need for a government to ishes the spotlight—which has caused terte of orchestrating extra-judicial killings command a durable majority in parlia- some Filipinos to wonder whether he will in Davao, a city he ran for more than two ment, it is hoped, would change all that. ever willingly leave it. decades, has found herself in prison for 16 In theory, all these changes would re- MrDuterte became president two years months. She was accused and convicted, duce Mr Duterte’s authority, both over the ago, after winning 39% ofthe vote in a four- improbably enough, of peddling drugs regions and over Congress. But critics wor- way race. He immediately implemented a with a former lover. “De Lima is not only ry that amid all the upheaval Congress series of controversial policies, most nota- screwing her driver; she is also screwing could easily be induced to slip in a provi- bly a bloody anti-drugs campaign. He also the nation,” Mr Duterte thundered before sion scrapping the rule limiting presidents imposed martial law on the troubled her arrest. In both cases, Mr Duterte denies to a single six-year term. And there might southern island of Mindanao, a bold step involvement, but did nothing to restrain not be term limits for the new office of given that a former president, Ferdinand the allies and underlings who pursued the prime minister, giving Mr Duterte two po- Marcos, used martial law to turn himself two women. tential future perches. Even elections could into a dictator. Indeed, he allowed Mar- be affected if the period of transition to a cos’s embalmed body, previously pre- Formy next trick federal system is deemed an excuse to de- served in a ghoulish shrine in his home The president’s next initiative, and per- lay them (the next ones, for half the Senate province, to be interred in Heroes’ Ceme- haps his most controversial, is an attempt and the entire House, are due in May). tery in Manila, the capital. to change the constitution, both to intro- Mr Duterte has repeatedly said that, Most voters are untroubled: seven in duce federalism and to change the central should he attempt to stay in office beyond ten Filipinos approve of Mr Duterte’s per- government from a purely presidential the six-year limit, someone should shoot formance. Members of Congress, intimi- system to a presidential-parliamentary him. But sceptics note that he showed no dated by his popularity, fawn in the face of model, similar to that of France. In his big compunction about gaming term-limits his rough talk and tough policies. Both the set-piece address to Congress in late July he when mayor of Davao. The first time he Senate and House of Representatives vot- is expected to urge the lawmakers to de- reached the maximum of three consecu- ed overwhelmingly to extend the state of clare themselves a constituent assembly tive terms, he spent three years as the local emergency. “There’s something about him with the authority to redraft the constitu- congressman before running for mayor which draws you in,” trills Alan Cayetano, tion. They may cravenly oblige. again. The second time, he served as vice- the foreign secretary. Mr Duterte argues that federalism mayor while his daughter was mayor. In 1 50 Asia The Economist June 30th 2018

2 all, he held the job for 23 years. He has ernorship of West Java, a province of 47m made no secret of his admiration for Mar- people. Although he was not PDI-P’s candi- cos, who was president for21years. And as date, he has a similaroutlookto MrJokowi. long as Mr Duterte is president, he is im- His main opponent, Sudrajat, was another mune from prosecution—something activ- formergeneral backed by MrPrabowo and ists say he deserves for his conduct of the PKS, a conservative Muslim party. He re- war on drugs. ceived only 30% of the vote, even though There are plenty of obstacles to “cha- West Java is reputed to be a conservative cha” or “charter change”, as Filipinos call stronghold and plumped for Mr Prabowo the process of amending the constitution. in 2014. Three administrations have previously As the result in West Java suggests, vot- tried to alter it and failed. Mr Duterte com- ers’ choices in provincial elections may not mands Congress like a strongman, thanks always square with their presidential pref- to his approval ratings. But his predecessor, erences. Batma, a housewife in south Me- Benigno “Noynoy” Aquino, also enjoyed dan, explains that she opted for Mr Edy be- sky-high ratings for a couple of years because he is most likely to help the fore voterslosttheirenthusiasm.Accelerat- unemployed. But she says she will still ing inflation is a potential vulnerability. In vote forJokowi in April. May prices rose 4.6% year-on-year, the Presidential candidates must formally highest rate in five years. register by August10th. Tosecure a spot on Even if the fawning Congress produces the ballot, they must have the support of a new constitution, a plebiscite will be parties that won at least a fifth of the seats needed to approve it. Mr Duterte is proba- 174,999,999 to go in parliament or a quarter of the popular bly the most powerfulpresident since Mar- vote at the last election. The next six weeks cos’s dictatorship was overthrown in 1986. backed by PDI-P, or in a similar mould to will see a flurry of activity as Jokowi and The centrepiece of the constitution ap- the president, swept Java. But the result in others try to put together an adequate co- proved in the wake of the “People Power North Sumatra, a province Jokowi won alition. Picking a running-mate from a wa- Revolution”, ironically enough, was the narrowly in the presidential election of vering party can be one way to win the six-year limit on the presidency. 7 2014, gives an indication of how his oppo- needed support. nents might forge a winning coalition. Ultimately, though, the pairings will Mr Edy’s victory is relevant to next need to appeal to voters. Outside a polling Provincial elections in Indonesia year’s presidential race for three reasons. station in a well-to-do part of Medan, Ela First, the local candidates echoed the prob- Wijayo, a lawyer sporting a bejewelled hi- A175m-man able presidential ones. Like Jokowi, Mr jab and a shiny gold handbag, waxes lyri- Djarot is a reformist, who promised to fight cal about Mr Edy’s piety. Maybe Jokowi rehearsal corruption and bring transparency to the can find an even more godly sidekick. 7 regional government. Mr Edy, meanwhile, MEDAN is a former army general, as is Prabowo Subianto, Jokowi’s opponent at the last Demography in South Korea Local polls give hope to both sides in presidential election, who is likely to run next year’s presidential election against him again next year. Mr Edy also Procreative N A shady shop porch in central Medan, appeals to more conservative Muslims. For Ithe biggest city in the province of North his final rally he held a communal prayer, struggle Sumatra, votes are being counted. A young while Mr Djarot opted for political speech- man tirelessly unfolds each ballot, holds it es followed by live music. DANYANG up and announces the candidates marked Second, the partisan alliances in North South Korea’s fertilityrate is the lowest to a handful of onlookers. Behind him, a Sumatra resemble the likely national coin the world woman wearing a floral hijab tallies the alitions next year. As well as PDI-P,MrDja- votes on a large piece ofpaper that is taped rot was backed by the United Develop- N THE cherry-tree-studded hills a couple to the shop’s bright blue wall. Polling mon- ment Party, a mildly Islamic outfit. More or Iof hours south-east ofSeoul sits a bunga- itors from assorted political parties count less the same nationalist and Muslim par- low-style school building made of dark along too. The main race on the ballot, for ties that backed Mr Prabowo in 2014 bricks. Its wooden floors are lovingly pol- governor, pits Djarot Saiful Hidayat, the backed Mr Edy. ished. The brightly coloured walls are candidate of a coalition led by the presi- Third, the election was marred by what lined with books and toys. The only thing dent’s Indonesian Democratic Party of Indonesians call “black campaigns”. On it is missing is children. Forty years ago, in Struggle, or PDI-P, against Edy Rahmayadi, social media supportersofMrEdyshared a the region’s heyday as a miningarea, Bobal who is backed by an alliance of Islamist doctored photo that seemed to show Mr primary school had more than 300 pupils. and nationalist parties. Early estimates Djarot being served a pig’s head at a ban- Today it has three: one girl and two boys, suggest Mr Edy will win easily. quet. One supporter of Mr Edy claimed, looking forlorn among the empty chairs. In all, provinces accounting for 175m of without any evidence, that Chinese mi- The school isonlybeingkeptopen because Indonesia’s 260m people went to the polls grants had been shipped into Medan to a handful of villagers mounted a cam- on June 27th, including the four most pop- skew the vote. These smears resemble paign to resist the education ministry’s ulous: West, East and Central Java, and widespread allegations that Jokowi is a plan to merge it with the one in the next North Sumatra. The president, Joko Wi- closet Christian, or has licensed the build- town, ten kilometres away. “Keeping the dodo, known as Jokowi, had hoped for a ing of umpteen churches while restricting school is important for the community,” strong performance by his allies ahead ofa the construction ofmosques. says Kim Jung-hoon, whose daughter is presidential and parliamentary vote in However, similar falsehoods did not one of the three pupils left. “How will we April next year. By and large, the results prevent Ridwan Kamil, the modernising ever persuade familiesto stay ifthere is no- were promising for him: candidates mayor of Bandung, from winning the gov- where to go fortheir children?” 1 The Economist June 30th 2018 Asia 51

2 But the education ministry’s plan, NGO in Seoul. “Why would I want to do spends less of its GDP on family benefits which Mr Kim and his fellow activists see that?” Yet having children outside mar- than most other rich countries. Mr Moon as an assault on their village, is a symptom riage is seen as shameful. has also pledged to work towards greater ofa widertrend. Since the early1980smore The lack of babies threatens the gender equality and less punishing hours than 3,500 schools have closed; 28 are set strained pension system and future eco- in the workplace. The emphasis is on en- to do so this year. The reason is that South nomic growth. It does not help that the at- hancing people’s freedom to choose how Korea is running out of children. The fertil- tempts of past governments to tackle it to live, ratherthanjustboostingbirths. This ity rate, which suggests how many chil- have mostly inspired resentment. The ad- reframing may help, says Mr Lee: “Women dren the average woman will have over ministration of Park Geun-hye, the previ- don’t want the government to decide her lifetime, stood at just 1.05 last year, the ous president, suffered a backlash in 2016 whether they have babies or not. They lowest in the world and far below the “re- when it published a “birth map” highlight- want it to create conditions under which placement rate” of about 2.1 needed to sus- ing the most fertile areas of the country in they might want to have them.” tain a population. In Seoul, the capital, the bright pink in an attempt to spur others Still, the shift is unlikely to result in a rate is just 0.84. Though South Koreans are along. Unsurprisingly, women took excep- rapid enough change. The government not as old as their Japanese neighbours, tion to being treated like farmanimals. also helps to arrange marriages between they are ageing faster. President Moon Jae-in seems set on a rural men and “imported” brides from Most demographers blame a growing different tack. His government has an- poorerAsian countries. In theory,it accepts mismatch between traditional mores and nounced measures to improve child care the need for foreigners not just to make ba- the changing preferences of younger peo- and increase supportforsingle-parent fam- bies but to do other jobs as well. But mass ple. Women are now more educated than ilies. That makes sense, since South Korea immigration remains a touchy subject. 7 men and are keen to succeed in the workforce, despite entrenched sexism and a Virginity tests in South Asia huge gender pay gap (the average South Korean woman makes just 63% of the sala- ry ofthe average man). The long hours and Two fingers rigid hierarchies in South Korean businesses mean that family life is not easy to fit in, Despite legal changes, victims ofrape face furtherviolation from the courts even for men. But women face more hurdles. “Many companies still see women as HEN a judge in the high court of the changed. Only nine of29 states have temporary workers who will drop out as WIndian state ofRajasthan recently enshrined the Supreme Court’s ruling in soon as they have children,” says Lee Do- acquitted a man ofrape, he noted of the local laws, and even when they have, hoon of Yonsei University. “So women accuser, “Herhymen was ruptured and implementation has been patchy. In worry that they won’t be able to return to vagina admitted two fingers easily. The Pakistan judges who do not follow the their jobs after starting a family.” medical opinion is that the prosecutrix law go unchallenged, says Sarah Zaman, Affording a family is difficult. Unem- may be accustomed to sexual inter- who campaigns forwomen’s rights. ployment among young people stands at course.” The implication was that only a Across South Asia, many doctors are 10.5%. University graduates, who make up virgin can really be raped. taught outdated ideas in medical school. 69% of those between 25 and 34, can no The so-called “two-finger test”, in Jaising P. Modi’s “Medical Jurisprudence longer expect to walk into a lucrative job which a doctor examines the vagina to and Toxicology”, first published in 1920, and keep it for life. Owning a house in decide ifa woman is sexually active, was remains the standard textbookin the Seoul, where most economic opportuni- banned in India in 2014, after the Su- three countries. “The entire medical tiesare, isoutofreach forall but the richest. preme Court ruled that it was an invasion profession has to be retrained,” says Formany, marriage is also unappealing. ofprivacy (as well as irrelevant). In 2016 Meenakshi Ganguly ofHuman Rights Men worry that they will not be able to Pakistan prohibited the test from being Watch. “It is literally teaching old dogs support a family. Women complain about used in rape trials. This year Bangladesh new tricks.” the outdated expectations of potential sui- followed suit. Yet in all three countries New attitudes are even more needed. tors. Matchmaking companies deduct the test is still widely used. In Dhaka’s slums it is often said that points from female applicants who have Last year Human Rights Watch, an “women are flames and men are can- serious jobs but insufficient domestic international pressure group, found that dles,” notes Ruchira Naved ofthe Interna- skills. “Getting married just means that the the test is still routine in Rajasthani hospi- tional Centre forDiarrhoeal Disease, a guy expects you to stay at home and cook tals. And this year an Indian human- campaigning local NGO. “When the for him,” says a woman who works for an rights organisation, Jan Sahas, looked at candle comes to the flame, it melts.” The the records of200 group-rape trials and implication is that men cannot control concluded that the test was a deciding their lust; it is up to women to make sure Bye-bye babies factor in 80% ofthem. not to arouse it. Such views, laments Dr Fertility rate, births per woman There have been pockets ofprogress. Naved, are still “pervasive”. In a recent rape trial in the city of Mum- Experts reckon that fewer than 10% of 5 bai, the judge disregarded the findings of rapes in South Asia are reported. The 4 the two-finger test and cited instead the two-finger test, says Dr Naved, stops South Korea legal change in 2014. “The girl…has a women from coming forward “and then 3 right to make a choice, which includes a stops them getting justice”. In Bangladesh right to deny sexual intercourse to a only 22 convictions were secured in 2 person without her consent,” he argued. 2012-17 out of18,668 rape cases filed. Japan The Centre forEnquiry into Health and Politicians make excuses, Mrs Ganguly 1 Allied Themes, another NGO, is working says: “This is a rural community, they’re with Mumbai’s public hospitals to stamp very traditional, they’re conservative, it’s 0 out the use ofthe test. a workin progress. I say no, the law is the 1970 75 80 85 90 95 2000 05 10 16 But in much ofIndia little has law. People should jolly well follow it.” Source: World Bank 52 Asia The Economist June 30th 2018 Banyan Chain reaction

Asia is at last waking up to the threat ofa trade war empt Japan from steel and aluminium tariffs, even though other allies have won a reprieve. Now Mr Abe is mending bridges with China. And he is continuing to fly the multilateral flag with another regional initiative. On July1st MrAbe hosts trade ministers from the ten countries of the Association of South-East Asian Nations (ASEAN), plus the countries in the region with which ASEAN signed bilateral free- trade deals: Australia, China, India, Japan, New Zealand and South Korea. Negotiations over the so-called Regional and Com- prehensive Economic Partnership (RCEP) have for years crawled alongat a snail’s pace. But the meetingin Tokyo signals a quicken- ing—and is the first big RCEP meeting to be held outside ASEAN. In termsofrigour, RCEP fallsfarshortofCPTPP. Itincludes Chi- na, which was pointedly excluded from TPP, in which the previous American administration explicitly set out to design a tem- plate for open trade that would not be diluted by China’s questionable commitment. RCEP was seen at the time as the lowest common denominator—a pointless or even counterproductive distraction. But today its backers promote it as a useful step towards regional integration. With America now hostile to open trade, every initiative has fresh worth to countries whose pros- T IS hard to argue that the United States and China are not on perity was built on commerce. Ithe brinkofa trade war. President Donald Trump is threatening Collateral damage from trade tensions between America and to impose higher tariffs on $450bn of imports from China, with China seems inevitable. Even if a full-blown trade war is avert- the first tranche, on $34bn of Chinese goods, due to take effect on ed—because either country backs down—both sides would not July 6th. Mr Trump expects China to blink. But what if it doesn’t? return to the rules-based trade order that has prevailed until now. Other countries in Asia are only now starting to ask that as they Rather, a deal would involve some kind ofmanaged trade. That is realise how much is at stake. certainly better than full-blown conflict. But it repudiates that or- Nowhere would a rupture of global supply-chains have more der, while diverting trade and investment. impact than in East and South-East Asia, which sit at the heart of As for a full-blown war, it could upend the world-spanning them. Intermediate goods account for more than half of Asian supply chains which epitomise Asian economies. Above all, Mr countries’ exports, on average, and more than three-fifths of their Trump’s trade nationalists hate it that, in their search for efficien- imports. The region is deeply integrated, in often underappreciat- cy, savings and speed, American businesses have international- ed ways, argues Deborah Elms of the Asian Trade Centre, which ised theiroperationsoverthe pastfourdecades. Ifthe administra- advises governments and business. South Korean screens and tion’s belligerence on trade unsettles American firms and forces Taiwanese chips famously head to China for assembly into them to “onshore” production, Asia would be an early victim. iPhones for American end-users; there are countless similar examples. Many Asian companies, Ms Elms says, may not even re- The supply-chains that bind alise where their products end up. They may still not be aware Yet some spy a silver lining. Led by China and Japan, Asian coun- that they are at riskfrom the looming trade war. tries are at last opening to one another. They are striking bilateral Political leaders appear to be ahead of local businesses in trade deals among themselves, as well as with the European Un- thinking about the consequences. Mr Trump’s lambasting of ion. And that begs a question: if the Trump administration suc- America’s traditional allies at a vitriolic G7 summit in Canada in ceeds in smashing existing supply-chains, why assume manufac- early June belatedly triggered alarms across Asia. Since then lead- turing will return to America? Might more links in the chain ers have rushed to show their commitment to an open, rules- simply relocate within Asia instead? Afterall, as Japanese policy- based trading order—one without America ifneed be. makers point out, America does not have a monopoly on tech. One example is the Comprehensive and Progressive Agree- Reforming Vietnam, which is a member of the CPTPP and has ment for Trans-Pacific Partnership (CPTPP), a gold-standard free- eight bilateral free-trade agreements, including with the EU, has trade pactinvolving11countrieson both sidesofthe Pacific. Asuc- greatallure asa production base. RecentlyPresidentJoko Widodo cessor to the Trans-Pacific Partnership, which Mr Trump pulled of Indonesia, which does not typically make life easy for foreign America out of in early 2017, the CPTPP was signed in March. But investors, has been asking visitors whether there might be an up- several of its members had seemed in no particular rush to ratify side forhis country. it. No longer. Canada, Australia and Japan have all said they will Even American multinationals are accountable to share- speed up the process. South Korea, which was forced by Mr holders, not to Mr Trump. And America’s 326m potential con- Trump to renegotiate a bilateral trade pact (and which also has sumers, walled up behind trade barriers, may not prove such an concerns about the strength of its military alliance with Ameri- appealing market as Asia’s nearly 4bn consumers at a time when ca), looks set to apply to join the CPTPP. dynamic Asian economies are openingto each other. It’s an inter- Japan’s prime minister, Shinzo Abe, once hoped he might per- esting time, as Ms Elms puts it, to experiment with resetting trade suade Mr Trump to bringAmerica backin to the pact. Instead, Mr patterns. Not that anyone would wish an all-out trade war to be Trump hasrepeatedly humiliated him, not least by refusing to ex- the occasion to experiment. 7 China The Economist June 30th 2018 53

Also in this section 54 The gaokao goes global

For daily analysis and debate on China, visit Economist.com/china

Community management to curb crime, help solve residents’ complaints and watch out for hazards such as Vigilaunties fire risks and pollution. They also want to make sure they can forestall any unrest long before it has a chance to break out. Many residents want greater security, too. BEIJING They often blame migrants from other areas forcrimes such as robbery and rape. China is reviving a traditional neighbourhood-watch system, adapted fora The system involves dividing neigh- high-tech era bourhoods into grids covering a few VERY day Zhong Zhenhua patrols a munist leaders have been especially fond streets. A manager such as Mr Zhong is as- Esmall network of streets in a well- of deploying local residents to keep a look- signed to each of them. The authorities heeled part of northern Beijing, where a out on street corners. mobilise volunteers, mostly local pension- dozen apartment blocks house about Under Mao, city dwellers were as- ers, to help. Retirees have long been the 3,000 people. In recent weeks he has been signed to workplace “units”, or danwei, backbone of neighbourhood-watch paying attention to local construction which were responsible for providing schemes. During big political meetings or workers to make sure that their building them with housing and telling the authori- around the time of sensitive anniversaries materials do not block people’s way. Mr ties about potential troublemakers, includ- large numbers of them stand on pave- Zhongsayshe also likesto call on local resi- ing people considered disloyal to the Com- ments wearingred hats and armbands (see dents—particularly sick or elderly ones munist Party. As a result of economic picture). In some rural places residents are who might need help. The aim is to visit at reforms that China launched in 1978, the being issued with set-top boxes that allow least one household a day, he explains, danwei system hasmostlyvanished. Every them to monitor feeds from security cam- though sometimes he can fit in up to five. urban area still has a “neighbourhood eras in the comfortofarmchairs, according Mr Zhong is a “grid manager” operating committee” (itsleadersare “elected” byres- to state media. In regions where officials in part of Huayan Beili Xi Community, a idents from among party-approved candi- are worried about the possibility of large- middle-class residential area near the capi- dates). But such organisations have only a scale or violent unrest, such as Tibet and tal’s iconic “bird’s nest” Olympic stadium. shaky foothold in the newly built districts Xinjiang, the grid system has been used as He has been recruited by the local govern- that are home to many millions of young part of a vast extension of surveillance ment to watch over a “grid” ofstreets in the commuters. Luigi Tomba of the University measures aimed at keeping secessionists neighbourhood, solve problems if possi- of Sydney says the emergence of new and terrorists in check. In some parts of ble and pass bigger ones up the chain of grassroots forces, such as profit-driven Xinjiang waiters and shop assistants have command for higher-level attention. The property-management companies and been issued with clubs, body armour and grid system of ensuring order in urban ar- nimbyish homeowners’ associations, has hard hats to help them perform security eas was pioneered in Dongcheng, a central been complicating the work of the party- duties when required. district of Beijing, in 2004. By 2017 about backed committees. Officials in Mr Zhong’s grid say that one 60% of China’s cities were using it in some in seven local residents plays some role in form, reckons Zhou Wang of Nankai Uni- Grid, locked public-security work. One of his duties is versity in Tianjin, up from 45% in 2015. The aim of grid management is to tighten to look into the problems they report (they China has a long history of community control again. The government wants this often do so using WeChat, an instant-mes- control involving civilians. In the 16th cen- partly because so many urban residents saging app). He says he also asks volun- tury a system known as baojia was de- are recent migrants from the countryside teers in each apartment building to suggest vised that required households to take or other cities. Long gone are the days familieswho mightbenefitfrom hishouse- turns to monitor each others’ activities. when local officials would know, or be calls. Cui Baoxiang, a recently retired busi- Modifications ofit have persisted for much able to checkquickly, everyresident’sback- nessman who has lived in the area for of the country’s history since then. Com- ground. They want to use the grid system three decades, is part ofa team of120 party 1 54 China The Economist June 30th 2018

2 members who mount a regular lookout. easy to handle, says Samantha Hoffman, a The option of sending gaokao results to For a while there was a rota system for se- visiting fellow at the Mercator Institute for universities abroad gives them an “exit curity patrolling, he says, but now every China Studies. Increasingly sophisticated route”, says Liu Weishi, a parent in Beijing. team member knows to keep an eye out databases aim to make it easier for higher- She says it “spares them an additional year whenever they are outdoors. Mr Cui’s ups to tap into information logged by grid of mind-numbing exam preparation”. work includes approaching strangers who staffand search it forpatterns. Some foreign institutions, including New enter the neighbourhood to find out who The impact ofthe grid system is difficult York University and the University of To- they are and whether they need any to gauge. The government says that public ronto, do not set minimum gaokao scores, help—or whether they might pose some satisfaction with law and order has risen unlike Chinese counterparts. kind ofthreat. from about 88% in 2012 to more than 95% Western universities that accept gaokao The authorities’ definition of what is today. But those figures are no more reli- results do not publicly complain about the threatening is sweeping. It might include able than the country’s notoriously dodgy political constraints imposed on takers of someone engaging in unauthorised reli- crime statistics. All this attentiveness may the exam (it is safe to assume that no marks gious activity,or involve a person from the be a help to some people with minor would have been earned forsuggesting the countryside who has arrived in the capital grumbles that are easy to solve. But foroth- party should not be in charge). But they are to petition the central government about ers with more complex complaints the ef- aware of its other limitations. They require an injustice in their own hometown. Local fect may be the opposite. Officials now additional evidence of English-language governments hope that grid staffwill get to find it easier to identify problems earlier competency—students often do well in the know their patch well enough to be able to and put pressure on people to keep quiet gaokao’s compulsory English section but detect problems while they are small and about them. 7 have nearly non-existent oral skills. They also know that the gaokao involves a lot of rote learning, and that those who sit it have University admissions little time to develop critical-thinking skills. An admissions officer at New York Kowtow to the gaokao University says the gaokao can still be helpful forevaluatingapplicantsbecause it assesses “a different readiness”, including self-discipline. Students who get in through the gaokao do “very, verywell aca- demically”, she adds. Others are more sceptical. The Univer- Some Westernuniversities see merit in the flawed college-entrance exam sity of Melbourne is the only one of Aus- RAWING on your political knowl- Cambridge University in Britain. Other tralia’s Group of Eight not to endorse the “Dedge, explain why the Communist European universities, including in France, gaokao. Carolyn Evans, a deputy vice- Party should exercise leadership over the Spain and Italy,are following suit. chancellor there, says the university has country’s economy, armed forces, schools This should be good news for Chinese “looked at it a number oftimes” and decid- and all aspects ofsociety.”So read an essay students. Previously,taking tests approved ed that “other criteria better predicted suc- question in this year’s gaokao, China’s uni- by Western universities had usually meant cess in university study.” versity-entrance exam which was held in opting out of the gaokao, which requires That stance may become hard to main- early June (anxious parents are pictured years of undistracted preparation. Now tain. Around one-third ofinternational stu- outside a test centre in the city of Shen- they can try their luck at both domestic dents in Australia and America are from yang; results have been announced in the and foreign universities. Last year 1.5m out China. Many Western universities are be- past few days). The test is notoriously ofmore than 9m gaokao takers were repeat coming increasingly dependent on rev- tough, butpolitical flatterycan help. Exam- examinees. Many of them were sitting it enue from this source. If some top-class inees in Beijing were asked to discuss an again not because they had failed, but be- universities offer entry using gaokao environmental slogan used byPresident Xi cause they wanted another shot at getting scores, theircompetitorsmayfind it hard to Jinping. The paper noted that more marks into one of the best Chinese universities. resist doing the same. 7 would be given forbeing “positive”. Despite the Chinese political flavour of some of the questions, growing numbers of Western universities are using gaokao results to select students from China instead ofrequiringthem to sitinternational- ly recognised exams such as the Scholastic Aptitude Test (SAT). This month the Uni- versityofNewHampshire became the first public state-level university in America to accept gaokao scores. It joins a handful of privately funded American colleges such as New YorkUniversity and the University ofSan Francisco. In Canada around 30 universities allow gaokao results to be used instead of the SAT or similar tests. They include the University ofToronto and McGill University. In Australia the University of Sydney took the lead in 2012. Now more than half of Australian colleges welcome the gaokao, including seven members of the prestigious “Group of Eight”. So does Waiting for the hell to end International The Economist June 30th 2018 55

Patient safety to improve safety. Much is standard fare— tweaks to regulations, changes to training Physician, heal thy systems and new kit less prone to cause infection. But Virginia Mason is not alone in looking outside medicine—not just to industry,but, for example, to behavioural science. There COVENTRY is a growing sense that, to make patients safer, hospitals need to simplify the ever As they strive to reduce the alarming incidence ofmedical errors, hospitals are more complex world ofhealth care. using ideas from industryand behavioural science Efforts to reduce the harm medics do FTER a brain aneurysm in 2004, Mary Since the team was set up a year ago, re- have a long history. In the 20th century, AMcClinton was admitted to Virginia porting of such incidents has increased doctors began systematically to compare Mason Medical Centre in Seattle. Prepar- from 35 incidents per1,000 bed-days in Oc- how patients are treated in different set- ing for an x-ray, the 69-year-old was inject- tober 2015 to 57 per 1,000 in April 2018. tings. Take James Alison Glover, a doctor, ed not, as she should have been, with a dye After the meeting, the safety team apolo- who noted that,by1938, 83% ofnewboysat that highlights blood vessels, but with gises to the patients involved. It also de- Eton, England’s poshest public school, had chlorhexidine, an antiseptic. Both are col- briefs the relevant staff, and sometimes, as no tonsils (perhaps so the silver spoons ourless liquids. The dye is harmless; the in the case of the botched chest drain, rec- could fit). Yet just 2% ofBasque refugee chil- antiseptic proved lethal. After kidney fail- ommends changes to procedures. dren fleeing the Spanish civil war then rag- ure, a stroke and two cardiac arrests ing had their tonsils out, and were no McClinton died19 days later. Error messages worse off for it. So Glover urged an end to In response, Virginia Mason committed “To Err Is Human”, a study published in widespread tonsillectomies, which, given itselfto improving safety.It used an unlike- 2000 by America’s National Academies of the rate of surgical infections at the time, ly model: the Toyota Production System Sciences, Engineering and Medicine, esti- spared English teenagers a lot ofsuffering. (TPS), the Japanese carmaker’s “lean” mated that medical errors were to blame Even so, until the 1990s, notes Ashish manufacturing techniques. Nearly every forup to 98,000 deaths a year in American Jha of Harvard University, harm done to part of the hospital, from radiology to re- hospitals, or twice as many as deaths in patients was often blamed on doctors, not cruitment, was analysed and standar- road accidents. A study published in 2016 defective health-care systems. “To Err Is dised. Staffwere trained to raise safety con- by researchers from Johns Hopkins medi- Human” changed that by showing that cerns. Today Virginia Mason prides itself cal school in Baltimore puts the number most cases of harm resulted from dysfunc- on its safety record—and sells its take on much higher, at 250,000 deaths per year. tional ways of working. A lack of good his- Toyota to hospitals across the world. That is probably an exaggeration. But a torical data makes it impossible to know if Among its recent customers are five in study in 2017 by the OECD estimated that medical errors have become more com- England’s National Health Service (NHS), 10% of patients are harmed at some point mon. But Dr Jha suspects that the increas- including University Hospitals Coventry & during their stay in hospital. It also found ing complexity of health care means they Warwickshire. On a recent Thursday that unintended or unnecessary harm in a are more prevalent than in the 1960s. Back morning the hospital’s patient-safety team medical setting is the 14th leading cause of then, a paediatrician, say, would need to1 began itsdailymeetingbyreviewingerrors ill health globally—a burden akin to malar- reported overnight. In one case, a surgeon ia. At the annual meeting in May of the Award: On June 20th, at the Medical Journalists’ had perforated a patient’s bowel during a World Health Organisation (WHO), the Association annual awards for health-care journalism, laparoscopy. In another, a patient’s chest UN’s public-health body, delegates dis- John McDermott, our global public-policy editor, and Natasha Loder, our health-care correspondent, both won drain, a tube used to remove air, fluid or cussed “global action” on patient safety. prizes—for writing about trauma medicine and cancer, pus from the thorax, was dislodged. So policymakers are trying many ways respectively. 56 International The Economist June 30th 2018

2 know at most a few dozen different drugs. ric care in India again found no firm link and fill out a lengthy form. By making re- Today it is over a thousand. between their introduction and reduced ferral to rehab the default setting, and pro- Evidence from developing countries deaths of infants or new mothers. The rea- viding pre-filled forms, rates rose to 85%. supportsthe idea thaterrorsare the side-ef- sons for these disappointing results “are Opioids offer another example. Many fectsofbetter, ifmore complex, health care. primarily social and cultural”, suggested EMR systems are set by default to prescribe A study in 2010 for the WHO found that an article in the Lancet medical journal co- 30 pills to patients requiring pain relief, rates of hospital infections were higher in authored by Charles Bosk, a medical so- when ten may be sufficient. The conse- poorcountries. But, since fewerdrugs were ciologist. He argues that many surgeons quences can be severe. The more pills in doled out, less harm was done by incorrect feel that using a checklist infantilises them the first opioid prescription, the greater the prescriptions and side-effects. and undermines their expertise. chance ofbecoming addicted. By changing To improve their hospitals, rich coun- So, more promising may be approaches the default setting of their EMR, the Penn tries have borrowed heavily from two in- that do not ask much of doctors them- team doubled the number of patients on dustries: manufacturing and aviation. selves. Over the past few years behaviour- the ten-pill doses. “Lean” is one of the popular industrial- al scientists have begun to try to nudge Other researchers are exploring the management theories taken from manu- doctors to make better decisions by study- power ofdesign to improve safety. The He- facturing. It suggests that hospitals should ing and acting upon their inherent biases. lix team based at St Mary’s hospital in Lon- study a patient’s “flow” through the build- “Default bias”, the tendency to accept the don is a joint project of Imperial College ing much as a car is monitored through the status quo, is powerful in clinical settings. London and the Royal College of Art. One production line. That way bottlenecks and Most doctors, for example, follow the pre- of its projects involved prescription forms. otherinefficiencies can be spotted. In addi- scription dosages suggested by electronic The team noticed that when doctors had to tion, Virginia Mason, for example, uses a medical-record (EMR) software. The same write out the units of the drug to be pre- policy of “stop the line”—ie, any member scribed they often made mistakes—milli- of staff is encouraged to halt a procedure grams instead of micrograms, for example. deemed unsafe. It also has genchi genbutsu, The Helix team redrew the form so that or“go and see foryourself”, a standardised doctors just had to circle a pre-written unit. way forexecutives to visit wards and speak to staff about safety risks. Moving upstream Virginia Mason claims that since 2001it Perhaps the greatest potential for reducing has become more profitable as it has re- medical errors, however, lies in new tech- duced liability claims. Yet there is little evi- nology. Streams, an app developed by dence that introducing manufacturing- DeepMind, an artificial-intelligence com- based management to other hospitals has pany owned by Google’s parent, is on trial made much difference. A literature review at the Royal Free hospital in London. It is published in 2016 found that just 19 of 207 currently being used to alert doctors and articles on the effects of“lean” methodolo- nurses more quickly to patients at risk of gies were peer-reviewed and had quantifi- acute kidney injury, a potentially fatal con- able results. These found no link between dition often first detected by blood tests lean methods and health outcomes. Mary rather than by a patient’s feeling unwell. Dixon-Woods of Cambridge University Instead of having to receive a pager mes- notes that evangelists for the use of manu- sage and then log on to a computer, the facturing methods can be loth to submit to medics get an alert to the Streams app on rigorous, randomised studies. their mobile phone, along with all the data As foraviation, overthe past decade the needed to make a quickclinical decision. use of checklists like those used by pilots In future, Streams may use machine has become commonplace. Before cutting learning to improve how it crunches data. a patient open, surgeons, anaesthetists and istrue ofthe defaultsettingson medical kit. But for now the researchers have focused nurses go through a simple exercise to en- Research in ICUs has shown that, on their on how to make the app useful for clini- sure they have the right equipment (and standard settings, artificial ventilators can cians. One concern it is trying to tackle, for the right patient), know the operation to be put huge pressure on the lungs, tearing tis- example, is “alarm fatigue”. A study of ICU performed and understand the risks. sue and provoking inflammation. Tweak- wards found an average of 350 alerts per In 2009 another study for the WHO ing ventilators so that they have a “low tid- bed per day; one averaged 771alerts. Other suggested that a simple checklist in eight al volume” setting is often better, but many research has found that nurses are inter- hospitals in cities in eight countries cut the doctors do not have the time to make the rupted every five to six minutes. Little rate of death during surgery from 1.5% to necessary calculations. In a study pub- wonder, perhaps, that staff can ignore 0.8%, and that ofcomplications from 11% to lished in 2016, doctors at the University of alerts, with sometimesfatal consequences. 7%. Since then checklists have become Bristol showed that, just by switching the Medical technology is savingever more ubiquitous in Danish, French, Irish, Dutch default settings on the machine, patients lives. But by expanding the range of what and British hospitals, and used about half received saferventilation. medicine can do, progress also brings with ofthe time in developing countries. Established in 2016, the Penn Medicine it new routes forharm. It is surely right that But, again, there are very few rando- Nudge Unit, based at the University of to tackle these medicine studies the ad- mised studies to bear this out. And, often, Pennsylvania, is the first dedicated behav- vances other fields have made in dealing medics know procedures are under evalu- ioural-science unit to be set up within a with complexity. But the profession has ation, which may change behaviour. Some health system anywhere. It has shown too often been oddly slapdash in imple- of the more rigorous studies are disap- how courses of action can be safer when menting these advances. They too need to pointing. One published in 2014, of doctors have to opt out of typically better be subject to the scientific rigour—and ex- 200,000 surgical procedures in 101 hospi- practices, rather than opt in. For example, haustive testing—that has served medicine tals using checklists in Ontario, Canada, just15% ofpatients with heart attacks were so well. It might also help to remember found no link to improved outcomes. A re- being referred on to cardiac rehabilitation, that, for all health care’s dazzling progress, cent study ofthe use ofchecklists in obstet- because doctors had to opt in to the service doctors are mere humans. 7 Business The Economist June 30th 2018 57

Also in this section 58 Bartleby: Laws for meetings 59 General Electric restructures 60 A regulatory win for Uber 60 VW in Rwanda 61 Coinbase of the crypto realm 62 Schumpeter: USA Inc v China

For daily coverage of business, visit Economist.com/business-ﬁnance

European rail forpublic-service contracts on lines that require state subsidies to operate. New kids on the track The experience of countries that have already opened up to competition is that it cuts costs and hammers down fares. In the Czech Republic, for example, new opera- PARIS AND PRAGUE tors have achieved costs per seat kilometre that are 30-50% lower than those of the A fight is brewing as European state rail giants prepare to compete with scrappy state operator. Passengers are benefiting: new train operators the average ticket price from Prague to HE opening of Britain’s Liverpool and in 1991 when it forced rail operators to pro- Ostrava has fallen by 61% since 2011, when TManchester Railway in 1830 marked duce separate financial accounts for their the state rail firm lost its monopoly. Greater several firsts in rail history. It was the track and train-operations units. As part of liberalisation is also associated with rising world’s first inter-city line. It was the scene its latest reforms, the commission wanted passenger numbers and an ability to get by ofthe first widely reported passenger fatal- to introduce a strict separation of the two on lower subsidies (see chart). ity. And it was also the first where all trains businesses. However, under pressure from Competition is also spurring innova- were hauled by the track owners. Previous some state rail operators—in particular tion. Many firms are adopting yield-pric- lines had seen competition between oper- Deutsche Bahn and SNCF—it compro- ing strategies used by budget airlines to in- ators, leadingto the driversofhorse-drawn mised. Only an internal “Chinese wall” is crease the utilisation of their trains and to passengers trains and steam-pulled coal needed to separate the functions. cut costs per seat. To keep customers from trucks having fisticuffs on the tracks. Two Even so, the comingchangesare radical. defecting to rivals, some are attaching oth- centuries later, the question of whether The “market pillar” of the reforms will er travel services to their own in order to train and tracks should be operated by the force state rail firms to open their tracks to differentiate themselves. Deutsche Bahn, same firm still simmers across Europe. competition. From 2019, anyone will be al- which doesalreadyface some private com- Thatisbecause newEU rules, enticingly lowed to run services on profitable routes petition, now offers e-bike hire as well as called the “fourth railway package”, will using “open access” rights. And from 2026, train tickets in some German cities. On force all state rail firms to open their tracks private companies will also be able to bid June 22nd Italy’s state rail firm launched an to rivals from next year. It means a “tec- app called Nugo through which travel ser- tonic shift” for the industry, argues Leos vices from 50 other companies, including Novotny of LEO Express, a rail startup Peak fare v super saver ferryand car-sharingrides, can be bundled based in Prague. And it comes at a time European railways into the firm’s tickets. when commuters are particularly grumpy Passenger km Operator subsidies As for the newcomers, they come in about trains. In France three months of la- 1994=100 Pertrainkm,€,2014 three main types: state rail operators from bour strikes at SNCF, the state rail firm, 250 France other countries; bus companies looking to have made millions late for work every Britain 23 diversify, such as Germany’s Flixbus; and week and chaos marks Britain’s railways 200 private rail firms that have started from after an abortive timetable change on May Italy scratch, a category which includes LEO Ex- France 10 20th. In Germany, Deutsche Bahn, the state 150 press. A few of them are simply copying rail giant, once looked up to as a paragon of Germany the business models of incumbents but Ger. quality and efficiency in Europe, is increas- 100 9 with much lower costs. Some, such as ingly underattackin the country’s press for Italy NTV-Italo, an Italian startup, behave more Britain* its dirty, late trains. 50 like full-service airlines, with four classes The new rules are the culmination of a 94 2000 10 16 -2 of service instead of two and loyalty decades-long effort by the European Com- Sources: International Union of *Operator pays schemes. That has forced its rivals to up mission to boost competition. This began Railways; European Commission government their game. 1 58 Business The Economist June 30th 2018

2 Fiercer competition could not come at a ofthe University ofLyon. The entry of more rivals is intended to worse moment forsome ofthe continent’s Deutsche Bahn will face far more com- encourage such firms to become leaner. It biggest state rail firms, which are already petition from private operators after the is also forcing them to diversify abroad. suffering from dire financial problems. fourth package takes effect. It has so far Trenitalia, Italy’s rail giant, has done so Worst of all is SNCF, which has a towering struggled to compete with newcomers. very recently, into Britain. Ernesto Sicilia, debt pile of €47bn ($54bn). The fourth Profits have been squeezed; worries about chairman and managing director of its package will mean itwill lose the monopo- its credit-worthiness are rising. A decade of new British unit, says that his firm is mov- ly it has long held on France’s tracks. It is cost-cutting has produced a steady fall in inginto the country in orderto replace con- doing well on high-speed and commuter punctuality,quality and customer satisfac- tracts lost at home as liberalisation bites. routes but its regional trains and rail-freight tion. The number of late trains has in- Yet the strategy has risks. NS, the Dutch businesses are faring badly. Rail unions, creased by 30% since 2009; Germans are state operator, has expanded abroad so which have been striking against reforms among the least satisfied with their rail- rapidly that it now attracts criticism from to end their members’ right to a job for life, ways in Europe. In 2016 the firm needed a politicians at home for carrying more pas- will make it hard for SNCF’s bosses to react €2.4bn bail-out from the German govern- sengers each day in Britain than in the to change in the industry,notesYves Crozet ment to keep its investment plans on track. Netherlands. Yet passenger numbers have 1 Bartleby Taking minutes, wasting hours

How to make meetings workbetter OST workers view the prospect of a ised into small teams, there is much to be they cannot be intimidated. Another op- Mtwo-hour meeting with the same said for the “morning huddle” in which tion would be to let people submit views enthusiasm as Prometheus awaited the members update each other on their pro- anonymously in advance. daily arrival of the eagle, sent by the gods gress; the whole thing can take15minutes. The danger of a “no interruption” rule to peck at his liver. Meetings have been a But most meetings drag on for much is that garrulous colleagues might make formoftorture foroffice staffforaslongas longer. Maurice Schweitzer, professor of such meetings extremely lengthy. At one they have pushed pencils and bashed management at the Wharton School ofthe point, every worker will have lost pa- keyboards. University of Pennsylvania, says they tience with “Tommy Tangents” (those One eternal problem hasbeen their in- work best when preparation is done. In- who drone on at length about an issue efficiency.In1957, C. Northcote Parkinson, forming people of the agenda in advance thatisirrelevantto theagenda) and “Hear- an academic and legendary writer on keeps them from being caught off guard— sayHarrys”(thosewhocannottell the dif- management, came up with the law of surprise often leads to a negative reaction ference between a personal anecdote and triviality,that “the time spent on any item to plans. Sadly, he adds, preparation is not scientific evidence). So Bartleby would fa- of the agenda will be in inverse propor- a sexy part of management so seldom gets vour limiting all interventions to a maxi- tion to the sum [of money] involved.” In done. mum of2-3 minutes. that same spirit, this columnist would like One prerequisite is to establish if the The best way to avoid Parkinson’s law to propose an even broader principle, ap- meetingis designed to persuade the staff to of triviality is to get the agenda right. Jay plying to gatherings of ten people or go along with a management decision or Bevington of Deloitte, a consultancy, says more, and immodestly called Bartleby’s to learn about the workers’ ideas and pro- there is a temptation to leave the most im- Law: “80% of the time of 80% of the peo- blems. Ifthe former,then alliesofwhoever portant—and therefore the most conten- ple in meetings is wasted.” is in the chair should speak first, and drive tious—items until the end of the meeting. Various corollaries to this law follow. the agenda. But such meetings ought to be Instead they should be tackled at the start. After at least 80% of meetings, any deci- rare in a well-run firm. Furthermore, there is no point in hold- sions taken will be in line with the HIPPO, If a meeting’s object is to learn what ing a meeting unless everyone knows or “highest-paid person’s opinion”. In people think, a new approach is required. what has been decided afterwards. Mr short, those who backed a different out- Low-status employees should be encour- Bevington says that many would be sur- come will have wasted their breath. Per- aged to speak, says Mr Schweitzer, and prised how many board directors leave a haps because they are aware of the futili- there should be a “no interruption rule” so meeting without being sure of what has ty of their input, fewer than half of the been agreed upon. people in a large meeting will bother to But perhaps the best solution to te- speak and at least half of the attendees dious gatherings is to have far fewer of will at some point checktheir phones. them. GE’s new boss, John Flannery, has Part of the problem lies in the paradox called for “little or no meetings where that, although workers hate attending possible”. Thanks to the miracle of mod- meetings, they loathe being excluded ern technology, messaging groups allow even more. Nothing is so likely to induce management and employees to keep in paranoia than a department meeting to touch. Information can be imparted in which you are not invited. To avoid this succinct form and those who are not in- fear, managers are tempted to invite as volved can ignore the messages and get many people as might be interested. on with their work. Next time a manager Clearly there are occasions when istempted to call colleaguestogether, they everyone should be involved: when a sig- must have a good answer to the question: nificant event occurs such as a change of “Is this meeting absolutely necessary?” leadership or strategy, or the announce- ment of job losses. If workers are organ- Economist.com/blogs/bartleby The Economist June 30th 2018 Business 59

2 in fact disappointed in recent years on Restructuring at GE many ofits British franchises, and it is worried about possible losses. Deutsche Bahn Power failure lost money on its Scotrail franchise last year and needed a £10m ($13m) bail-out from its parent. With their backs against the wall, state rail firms are not above using questionable NEW YORK tactics. Some have been found guilty of us- Booted from the Dow,a corporate icon is poised to become humblerbut fitter ing their control over the tracks to win unfair advantage over private operators. Last HIS should have been one of the very yearSpanish competition watchdogs fined Tdarkest weeks in the history of General Deutsche Bahn and Renfe, Spain’s state rail Electric (GE). The firm founded by Thomas company, over €75m for collusion in the Edison has been a member of the Dow country’s rail-freight market. The same Jones Industrial Average, a stockmarket in- year NS was fined €41m for using data it dex composed of leading American com- had as an infrastructure owner to unfairly panies, for over a century. Alas, misman- win a rail contract in Limburg, a Dutch agement and a failure to move with the province. Meanwhile, last October, Lithua- times have turned the erstwhile icon of in- nian Railways was fined €28m forgoing as novation into a disorganised, debt-laden far as removing a section of track on a mess. GE’s shares have plunged to below a cross-border link with Latvia to make life quarter of their peak value in 2000. On harder for a rival train operator. Rail start- June 26th GE was ejected from the Dow in- ups also accuse various national champi- dex and replaced by Walgreens Boots Alli- ons of hogging the best rail slots, of engag- ance, a big health-care firm. ing in predatory pricing and of pursuing Yet on that same day a ray of sunshine vexatious litigation against them to push also fell on GE. John Flannery, an insider them out ofthe market. known for his number-crunching skills But many newcomers, includingRadim who has been the troubled firm’s boss Janèura, founder of Student Agency, an- since last August, announced details of a otherbus company,from the Czech Repub- much-awaited restructuringplan. Over the lic, are hopeful that the fourth package will next couple of years GE will spin off its overcome many of these problems. The healthcare division and unwind itsnewish John unwinds what Jeff did rules strengthen the regulators’ powers to stake in Baker Hughes, a petroleum-ser- prevent anti-competitive behaviour,rather vices firm. He had previously confirmed profitable health-care unit to a strategic than acting in retrospect when complaints the sale of its train locomotive division. buyer in return fora rapid infusion of cash, are made, as now. And the Luxembourg Taken together, these three units generate Mr Flannery will spin it offas a standalone Protocol, a new set of global rules on roll- roughly $40bn a year, about a third of the firm. He will give 80% of its shares to GE ing-stock leasing, will make it easier for firm’s annual revenues. shareholders (who will thus capture any startups to finance new trains, says How- GE’s share price rose on the news. The future financial gains), and sell the remain- ard Rosen of the Rail Working Group, a obvious reason for cheer was Mr Flan- ingfifth. Research byEmilie Feldman ofthe trade body. nery’s renewed promise to slim down the Wharton School shows that such spin-offs unwieldy conglomerate, including a vow create value in two ways. Freed from over- Ticket to ride to slash its net debt and pension obliga- bearing parents, the new entities become New entrants have often found it easier to tions by $25bn. He also promised to cut an more efficient at allocating capital. Intrigu- take market share in smaller countries, extra $500m in costs, on top of previously ingly, herresearch shows that the divesting where state rail firms do not have as much announced cuts, by 2020. Beyond this will- firms also improve their financial perfor- financial muscle as in larger states. And ingness to wield the axe, Mr Flannery’s mance after a spin-off. bigger companies, such as Flixbus and Stu- plan for fixing GE has three attractive ele- The third reason for cheer is Mr Flan- dent Agency, are less easily pushed ments: call them “spinners”, spin-offs and nery’s desire to reform GE’s management around. Flixbusfound iteasyto request the “spinning down”. culture. This week he launched a new “GE track slots it wanted from Deutsche Bahn, First, the plan lets management focus Operating System” which promises less says Jochen Engert, its chief executive— on the core businesses of power genera- centralised decision-making and red tape, possibly because the incumbent feared a tion, aviation and renewables (what peo- and a spinning down of resources from backlash from Flixbus’s legions of custom- ple at the firm call “things that spin”). This headquarters to business units. GE’s bloat- ers (the firm controls over 90% of Ger- rump produces about $70bn a year in rev- ed board of directors has been replaced many’s bus market). enues. GE’s power division, which gener- with a smaller, more relevant one that in- Smaller outfits may be too financially ates about half of those revenues, is in par- cludes Ed Garden, a co-founderofTrian, an weakto take advantage ofthe reforms: LEO ticularly deep trouble. A combination of activist investor. Steven Winoker of UBS, Express, for all Mr Novotny’s optimism mismanagement, ill-judged investments an investment bank, calls this the most im- about the coming changes, has lost money and weak global demand has left it in cri- portant ofall the reforms, praising the new since its founding in 2010. And the high sis. The division is shedding some 12,000 directors as “sharp, useful people”. costs involved in starting a new railway workers, nearly a fifth of its global work- The road ahead remains rocky. The firm firm mean that it will take time for the full force. Deliveringon GE’spromise to contin- may be forced to cut its dividend again, benefitsofcompetition to be feltby EU pas- ue “right-sizingthe business” to match low- reckons Mr Winoker, which will produce sengers, says Lorenzo Casullo ofthe OECD, er demand will require hard work. howls of protest from investors. Still, if his a think-tank. Europe’s railways are on a Second, the restructuring is being done bold plan succeeds, Mr Flannery will in longjourney, but commuters will surely be in a thoughtful way that should produce time have moulded a humbler but fitter GE better offdown the line. 7 shareholdervalue. Ratherthan, say, sell the that may yet endure another century. 7 60 Business The Economist June 30th 2018

A victory for Uber Crossing the London bridge

SAN FRANCISCO Uberwins a regulatory reprieve in a key market ECOND chances exist, afterall. Last Sep- Stember Uber was sideswiped when Transport for London (TfL), the city’s transport regulator, revoked the ride-hailing giant’s licence to operate in the capital, cit- ingconcernsrelated to publicsafety and reporting of drivers’ criminal offences. The decision appeared to dent the prospects of VW in Rwanda the firm, which countsLondon asitslargest European market and one of the most lucrative of its 600 cities. Uber continued to First gear operate in London while appealing the decision, but a lot still hung in the balance. Volkswagen sets up Rwanda’s first car-assembly plant Welcome news came on June 26th when a judge in London awarded the firm OWto sell cars when most people city.Anyone with the mobile app will a licence for 15 months. In court Uber had Hcan’t afford to buy one? That is the also be able to call up a lift, starting this taken a contrite and muted stance, promis- conundrum forVolkswagen in Rwanda, October. The cars will be used fora few ingto do more to provide supportfor riders where it is opening the country’s first years, then sold into the second-hand and drivers, including launching a tele- car-assembly plant. A new Polo costs 33 market. The $20m project will initially phone hotline for passengers. The chief times the average Rwandan income. produce 1,000 vehicles, with capacity to magistrate for the case, Emma Arbuthnot, Most cars on the road are second-hand churn out 5,000 units a year. decided that Uber had not acted in a suffi- imports. Rwanda absorbs perhaps 3,000 Kigali is a small, orderly place in ciently “fit and proper” mannerpreviously, new cars a year, says Thomas Schäfer, which to test the idea. Ifit works, VW but that its new approach and leadership VW’s chiefin Africa. Past projects by could replicate it. It has recently restarted suggests it is ready to do so now. carmakers in Africa, he admits, have assembly in Kenya and Nigeria, after TfL will still monitor it over the next 15 ended in “monumental failure”. decades away, and hopes to enter Ghana months, which will serve as a probation- Yet there was a hopeful mood when and Ethiopia. Mr Schäferlikens VW’s ary period of sorts before its licence is VW launched its operations in Kigali, the African ambitions to its decision to enter again reviewed. Some doubt if Uber has Rwandan capital, on June 27th. The mo- China in 1985. At the time, Chinese car- really changed its rough-and-tumble ways. ment opens ”a new chapter in Rwanda’s ownership rates were lower than in most Gerald Gouriet, a lawyer representing the journey,” said Paul Kagame, the presi- African countries today. Now, VW sells Licensed Taxi Drivers’ Association, said dent, after taking a demonstration model over 3m passenger cars a year there. that an “Uber in sheep’s clothing” had ap- fora spin. In truth, little ofthe manufac- Some help comes from African gov- peared before the court. turing will happen locally, at least to ernments, which shield producers from Uber certainly has plenty to be sheep- begin with. VW will build its vehicles competition. Kenya plans to lower the ish about. It was Silicon Valley’s biggest elsewhere, partly dismantle them, then maximum age forimported vehicles, star before it suffered a series of public-re- put them backtogether in Rwanda. from eight years to five. Nigeria imposes lations and legal scandals. One episode, The real novelty is how the cars will tariffsofup to 70% on car imports. Yet which fuelled concerns in London, in- be used. VW is linking production to a protection is often patchily implemented. volved revelations that the ride-hailing ride-hailing and car-sharing service, For now, cautious carmakers are firm had designed software, called Grey- stocked with its own vehicles. More edging along in first gear. Firms such as ball, to hide information from regulators people will pay to use a car, it reasons, Peugeot, Nissan and Toyota have also and law-enforcement officials. Another than can afford to own one. At first, firms opened new operations in Africa, often complaint involved Uber’s lack of timely and government agencies will be able to in partnership with local firms. Like VW, reporting of attacks on passengers by driv- use shared vehicles; from 2019 a similar they are typically assembling knock- ers, suggesting the ride-hailing company service will be rolled out to the general down kits, rather than building new cars prioritised profits over public safety. public, with cars stationed around the from scratch. There is a long road ahead. Dara Khosrowshahi, who took over as chiefexecutive last August, has been trying to win back trust. Uber is trying to change now allows passengers to tip drivers in firm makes, the more concessions that reg- its image by undertaking a marketing cam- many markets. ulators and drivers will feel they can ex- paign; it includes a national TV advert in He must also tend to the firm’s busi- tract from the firm. America starring Mr Khosrowshahi, who ness. Earlier this year he raised money Regulatory pressures remain heavy. In almost seems to be running forpolitical of- from SoftBank, a Japanese investor, which Britain Uber is appealing a ruling that it fice as he pledges “new leadership and a should tide it over until an initial public of- must count drivers as employees rather newculture”. He hasalso invested more ef- fering expected next year. In the first quar- than contractors, entitling them to a mini- fort in improving the firm’s treatment of ter of 2018 Uber claimed around $11.3bn in mum wage and holiday. MrKhosrowshahi drivers; previously being “nice” was a hall- gross bookings, a huge sum; losses are nar- has so much to do that he is unlikely to get mark of Uber’s American rival, Lyft. Uber rowing. But it may be the more money the much time offhimselfthis summer. 7 The Economist June 30th 2018 Business 61

Coinbase spike in demand fornew accounts. According to people close to the firm, Crypto’s white-shoe firm Coinbase wants to go public as soon as nextyear. But, in addition to crypto-currency volatility, three potential threats to its plans loom. The first is regulation. America has adopted a hands-off attitude towards SAN FRANCISCO crypto-currencies; it is the largest market not to have big restrictions on trading The Wild West ofdigital currencies gives birth to a disciplined startup them. China, India, Japan and South Korea OST startups proudly announce their have all imposed rules that make trading Mpresence on buildings, billboards Random walk crypto-currencies difficult, costly or illegal. and any surface offering visibility. Not Any change could be disastrous for Coin- Coinbase app Coinbase, a crypto-currency startup. Visi- download rank* $ per bitcoin base. A change to America’s currently gen- tors to its headquarters on a high floor of 0 20,000 erous tax treatment could also reduce an office tower in San Francisco find them- crypto’s allure as an investment. selves before an unmarked door and door- 15th 15,000 A second threat is competition. Coin- bell. Theyare asked to confirm byintercom base has shown that there is lots of appe- which firm they intend to see. An online 30th 10,000 tite for investing in crypto-currencies, and search for Coinbase shows its offices at a banks are now eyeing the market. Robin- different location, a diversion tactic to keep 45th 5,000 hood, an online brokerage that has won away disgruntled crypto-currency inves- customers by selling shares without charg- tors, thieves who are trying to get access to 60th 0 ing a commission, now offers crypto-cur- crypto-assets, and other malefactors. 2017 2018 rencies. Just as stock-trading fees have col- Such inconspicuousness contrasts with Sources: App Annie; *Finance apps in the US, lapsed over time, transaction fees in the company’s high profile. Coinbase is CoinMarketCap across iOS and Android crypto-currencies are likely to tumble, put- one of Silicon Valley’s fastest-growing ting pressure on Coinbase’s margins. youngfirms and by farthe most prominent first seeking government approval, Coin- Security is the third and most acute risk. businessto emerge from the mania around base was careful to first secure licences in In January armed robbers targeted a crypto-currencies. The six-year-old start- American states where it planned to oper- crypto-currency exchange in Canada; up, an online brokerage for buying and ate. This has probably hampered its therehavebeenmanyinstancesofindivid- selling bitcoin and other crypto-curren- growth but helped it to avoid controversy. ual investors’ bitcoin being stolen by hack- cies, claimed a valuation of $1.6bn when it Mr Armstrong became an advocate for ers and thieves. A similar incident could raised $100m from venture capitalists last crypto-currencies after seeing the difficul- devastate Coinbase’s business, since most year. It reportedly now has a valuation of ties of moving conventional money of the $20bn of crypto-assets it stores are around $8bn. It claims to have around 20m around the world. While studying at Rice uninsured. Executives and the board are user accounts, perhaps half of all crypto- University in Houston, he co-founded an aware of the risks. “As a bank chief execu- currency exchange accounts held globally, online marketplace for tutoring, called tive you can authorise a bigwire transfer in and stores assets worth $20bn. As well as UniversityTutor.com, which grappled a robbery, and then undo it the next day. catering to retail investors, it manages an with how to pay tutors worldwide in va- Digital currencies are like handing over a exchange for professional ones trading riouscurrencies. He laterworkedatAirbnb suitcase of cash. Youcan’t get it back,” says large volumes of crypto-currency. Ru- and then attended Y Combinator, a startup Balaji Srinivasan, Coinbase’s chief tech- mours swirl that Facebook, a social-net- school, before setting up Coinbase with nology officer. The doors of the office re- working giant, is interested in buying it. Fred Ehrsam, once ofGoldman Sachs. main unmarked fora reason. 7 Asthe price ofcrypto-currencies rocket- Both founders contradict the stereo- ed last year, with bitcoin notching up a six- type of crypto-enthusiasts as wild, lawless teen-fold increase, Coinbase achieved rev- iconoclasts. On June 27th Mr Armstrong enues in 2017 of around $1bn. “We’re launched GiveCrypto.org, a philanthropic selling picks and shovels in a gold rush,” effortto encourage people who have made says Brian Armstrong, its boss. Coinbase fortunes in crypto-currency to give some charges a fee on every transaction, much away; he pledged $1m of his own money. like Charles Schwab does when people Yet Coinbase’s digital fortunes are not im- purchase stocks. The question now is mune to volatility. Mr Armstrong declines whether Coinbase can be a star performer to comment on how recent falls in the val- if, as has been the case recently,crypto-cur- ue of crypto-currencies have affected rencies perform poorly. (Bitcoin, for exam- Coinbase’s sales, but acknowledges that ple, had fallen by 55% between the start of “in up markets people tend to trade more”. the year and June 27th.) Since bitcoin’s peak in December Coin- Crypto-currencies are “everything you base has fallen from America’s most- don’t understand about money combined downloaded finance app to the 29th-most with everything you don’t understand popular, according to AppAnnie, a re- about computers”, in the words ofJohn Ol- search firm (see chart). To insulate itself iver,a comedian. Such opacity has present- from price swings, Coinbase is diversifying ed an opportunityforCoinbase, which has beyond the brokerage business. It has add- both an easy-to-use mobile app and a law- ed an asset-management division, custody abiding reputation. In contrast to other and other business lines, and is buying startups such as Airbnb, a room-sharing other crypto-startups. Trying to expand app, and Uber, a ride-hailing firm, both of quickly is never easy, however. Last year which launched in new markets without Coinbase struggled to accommodate a Crisp shirts in cryptoland 62 Business The Economist June 30th 2018 Schumpeter Raging against Beijing

Just how badly has USA Inc been treated by China? economic development. Firms often fail abroad—there is no God- given right to triumph. And few bosses bother to calibrate their China problem. They should ask themselves how big their business in China ought to be—or, what would “fair” looklike? Schumpeter has considered four measures of Chinese corporate unfairness, using data from Morgan Stanley and Bloom- berg. The first is the weight of China in the foreign sales that American firms bring in. It stands at15%; ifit was in line with Chi- na’s share of world GDP, it would be 20%. This shortfall amounts to a small 1% ofAmerican firms’ global sales (both foreign and domestic). America Inc is similarly underweight in the rest of Asia, but there is much less fighting talkabout South Korea or Japan. The second testiswhetherthere isparityin the commercial relationship. Firms based in China make sales to America almost exclusively through goods exports, which were worth $506bn last year. American companies make their sales to China both through exports and through their subsidiaries there, which together delivered about $450bn-500bn in revenue. Again, there is notmuch ofa gap. American firms’ aggregate marketshare in Chi- na, of 6%, is almost double Chinese firms’ share in America, based on the sales ofall listed firms. NE of the naughty secrets about America’s trade war with The third yardstick is whether American firms underperform OChina is that it has the tacit support of much of America’s other multinationals and local firms. In some cases failure is not business establishment. For the past 20 years big firms’ default China-specific. Walmart has had a tough time in China, but has mode has been Sino-infatuation. Schumpeter attended a dinner also struggled in Brazil and Britain. Uber sold out to a competitor in 2016 between the captains of USA Inc and Li Keqiang, China’s in China, but has done the same in South-East Asia. American premier, and you could taste the deference in the air more keenly consumerand industrial blue chipsare typicallyofa similar scale than the beef on the plates. But lately bosses’ mood has flipped in China to their nearest rivals. Thus the sales of Boeing and Air- into a hostility that risks becoming jingoistic and unhelpful. bus, Nike and Adidas, and General Electric and Siemens are all While a few Sino-dependent companies such as Apple and broadly in line with each other. Where America has a compara- Boeing want to lower the temperature, many others consider tive advantage—tech—it leads. Over half of USA Inc’s sales in Chi- themselves mistreated by China; forthem, it is payback time. This na are from tech firms, led by Apple, Intel and Qualcomm. Over- stance has two flaws. The sense of victimhood is over the top; all, American firms outperform. For the top 50 that reveal data, American firms have done reasonably well in China. And it is sales in China have risen at a compound annual rate of12% since stoking the White House to escalate a conflict that may spill over 2012. That is higher than local firms (9%) and European ones (5%). from trade tariffsinto a war over investment by multinationals. The final measure is whether American firms are shut out of China may have been bad for steel workers in Cleveland but some sectors. This is important as China shifts towards services the calculation forcompanies is different. Globalised production and as the smartphone market, a goldmine, matures. The answer has lowered labour costs. Since China’s entry into the World is clearly “yes”. Alphabet, Facebookand Netflixare nowhere, and Trade Organisation in 2001, profit margins in America have been Wall Street firms are all but excluded from the mainland. Chinese 22% above their 50-year trend. And companies engage not just in firms, however, can make a similar complaint. The market share trade, but in cross-border investment too. of all foreign firms in Silicon Valley’s software and internet activ- ItisthisinvestmentthatrilesAmerican firms. China originally ities, and on Wall Street, is probably below 20%. America’s na- promised to open up its vast market, bosses complain, but today tional-security rules, thickets of regulation, lobbying culture and it bars companies from some industries and forces them into political climate make it inconceivable that a Chinese firm could joint ventures with partners that steal their intellectual property. play a big role in the internet or in finance there. Chinese firms get cheap state loans. The “Made in China 2025” plan envisions that foreign firms are excluded from new areas The great wail about China such as artificial intelligence. The overall result, bosses grumble, Far-sighted bosses know their stance on China must reflect a bal- is that American firms are puny in China, making 4% of their glo- anced assessment, not a delusional vision of globalisation in bal sales there. Champions such as Amazon and Goldman Sachs which anything less than a triumph is considered a travesty. But have eitherflopped orbeen largelyexcluded. Onlyperhaps a doz- their voices are being drowned out. The shift of the business es- en companies make over $1bn of profits a year from China, in- tablishment to hawkishness on China has probably emboldened cluding General Motors and a few tech-hardware stars. the White House and also led the Treasury and Department of Such complaints are valid, but the picture is lopsided. Most Commerce to be more combative. Most big firms are blasé about bosses love China’s state-run model when it involves them get- tariffs; they can pass on the cost to clients. Few export lots to Chi- ting privileged access to its omnipotent leaders. Other big coun- na. But soon China will run out ofAmerican imports to subject to tries have infuriating investment curbs, both explicit and tacit, in- retaliatory tariffs; in a tit-for-tar war, beating up American firms’ cluding India and France. The transfer of know-how from rich Chinese subsidiaries is a logical next step. USA Inc’s Sino-strop countries to poorer ones, by hook or crook, is an integral part of would then end up enabling the opposite ofwhat it wants. 7 Finance and economics The Economist June 30th 2018 63

Also in this section 64 Investment wars 65 Monetary policy in China 65 Harley-Davidson shifts gear 66 Gaming the resource curse 66 Funding fertility treatment 67 Buttonwood: Aim and amiability 68 Asset management in Italy 68 The rewards of work 69 Free exchange: Barely managing

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Wages In the long run, changes in real wages are linked to changes in workers’ produc- The real story tivity, which has grown slowly everywhere since the financial crisis. In the year to the first quarter of 2018, for example, American productivity grew by only 0.4%. But some spy a rebound. For current fore- WASHINGTON, DC casts of blazing economic growth in Amer- ica to bear out, productivity must grow Pay is rising, but so are prices. That is bad news forworkers faster. In the second halfof2017, productiv- ENTRALbankersand economistshave in the sales tax from 5% to 8% in 2014 ity in Britain grew at the fastest rate since C spilled much inkin recent years on the squeezed wallets.) 2005. The Bank of Japan thinks that firms question of why wages have not grown Since then, nominal wage growth has there are investing heavily to boost pro- more. The average unemployment rate in gradually picked up as labour markets ductivityso thattheydo nothave to payfor advanced economies is 5.3%, lower than have tightened, roughly in line with the higher wages by raising prices. before the financial crisis. Yet even in predictions of economists who use broad- Yet even a recovery in productivity America, the hottest rich-world economy, er measures of slack than just the unem- would not guarantee good times for work- pay is growing by less than 3% annually. ployment rate. But inflation has risen in ers. In recent decades the share of GDP go- This month the European Central Bank de- tandem with wages, as the oil price has re- ingto labour, ratherthan to capital, has fall- voted much of its annual shindig in Sintra, covered to close to $75 a barrel. That means en because real pay has increased more Portugal to discussing the wage puzzle. many workers are yet to feel the benefit of slowly than productivity. In advanced Recent data show, however, that the the global economic upswing that began economies labour’s share fell from almost problem rich countries face is not that during 2017. In America and Europe, real 55% to about51% between 1970 and 2015, ac- nominal wage growth has failed to re- wages are growing barely faster than they cording to researchers at the IMF. A widely spond to economic conditions. It is that in- were five years ago, when unemployment heard explanation is that a fall in union flation is eating up pay increases and that was much higher. membership, combined with rising off-1 real—that is, inflation-adjusted—wages are therefore stagnant. Real wages in America and the euro zone, for example, are grow- Pay checked ing more slowly even as the world econ- Hourly wages and salaries, % change on a year earlier omy, and headline pay, have both picked United States Euro area up (see chart). 3 3 The proximate cause is the oil price. As Nominal the price of Brent crude oil, a benchmark, 2 2 fell from over $110 a barrel in mid-2014 to Real Nominal under $30 a barrel by January 2016, inflation tumbled, even turning negative in Eu- 1 1 rope. That sparked justified worries about + Real + a global deflationary slump. But it was an 0 0 immediate boon for workers, who saw – – nominal pay increases of around 2% trans- 1 1 late into real wage gains of about the same 2013 14 15 16 17 18 2013 14 15 16 17 18 The Economist size. (An exception was Japan, where a rise Sources: Bureau of Labour Statistics; Eurostat; 64 Finance and economics The Economist June 30th 2018

2 shoringandoutsourcing,haserodedwork- Now for the investment war ers’ bargaining power. More recently,econ- Not for sale omists have suggested that labour’s falling Safe and secure Foreign direct investment inflows, $bn share could be linked to the rise of “super- 50 star” firms such as Google that dominate Chinese FDI in US their markets and have low labour costs 40 relative to their enormous profits. Reversing the fall in labour’s share of How the Trump administration will 30 GDP would require real wages to grow fast- clamp down on Chinese investment er than productivity, weighing on firms’ 20 profit margins. Continued tightening in la- RESIDENT Donald Trump’s view of in- US FDI in China bourmarkets might yet boost workers’ bar- Pvestment depends on who is doing it. 10 gaining power enough for that to happen, On June 22nd he railed against Europeans as was the case during the late 1990s and exportingcars to America, demandingthat 0 1990 95 2000 05 10 15 17 late 2000s, two unusual periods in which they “build them here!” On June 26th he Source: The US-China FDI Project labour’s share of GDP rose across the rich tweeted that all Harley-Davidson motor- world. There isstill room forimprovement. cycles should be made in America (see For instance, even where unemployment next page). But when it comes to Chinese fact an attempt to avoid a duplication ofef- rates are low, the number of part-time investors buyingAmerican technology, Mr fort. Both America’s inbound-investment workers who want full-time jobs remains Trumpwould prefera frostier approach. restrictions and its export controls are be- unusually high. This continues to weigh on Investors have feared a clampdown ing beefed up by the Foreign Investment wage growth, according to an analysis by since March, when the administration con- Risk Review Modernisation Act (FIRRMA), the IMF late last year. cluded that China’s unfair actions against a bill with bipartisan support that should Some countries, such as Italy,still suffer American companies merited retaliatory become law in the coming months. It from unemployment rates that are far restrictions on Chinese investments in “in- would expand CFIUS’s scope of review higher than they were before the financial dustries or technologies deemed impor- and strengthen controls on exports of tech- crisis. Such pockets of slack might con- tant to the United States”. Mr Trumpdirect- nologies deemed particularly sensitive. A strain wages everywhere now that goods ed Steven Mnuchin, the treasury secretary, version was approved overwhelmingly by are produced in international supply to come up with options. On June 24th it the House ofRepresentatives on June 26th. chains and sold on global markets. In a re- appeared policy might tighten dramatical- So the Trump administration’s decision cent working paper, Kristin Forbes of the ly,with reports ofplans to limit investment not to set up new constraints does not sig- Massachusetts Institute of Technology in America in the sectors targeted by Chi- nal a change of heart towards China. Rath- concluded that the influence on inflation na’s “Made in China 2025” development er, it reflects a desire shared with Congress of global slack and commodity prices has policy,from aerospace to robotics. to block Chinese cash. China’s share of di- grown in the past decade, while local eco- Those plans were quickly shelved, per- rect investment into America is still small, nomicconditionshavebecomelessimpor- haps because of market falls on June 25th. but has risen quickly (see chart). Of $137bn tant. Philip Lowe, the governor of Austra- On June 27th the White House confirmed in the ten years up to 2017, 24% was invest- lia’s central bank, told the audience in that there would be no new China-specific ed by state-owned enterprises, fuelling Sintra that when he asks firms that are restrictions. Instead, it would rely on the widespread concern thatthe purchases are struggling to find workers why they do not Committee on Foreign Investment in the part of a Chinese government strategy to pay more, they “look at me as if I’m com- United States (CFIUS), an intra-agency dominate America economically. pletely mad” and deliver a lecture on how committee that reviews inbound invest- That concern has been reflected in competitive the world has become. ment. Mr Trump also told the Commerce CFIUS’s activities. Ofthe 387 transactions it If slack were eliminated everywhere, Department to review export controls. reviewed between 2013 and 2015, 74 in- pay might rise faster. The question is What might look like a non-event is in volved Chinese investors. Of the five tran- whether inflation continues to rise in tan- sactions it has ever recommended to be dem as companies find that, when push blocked, four involved Chinese buyers. In- comes to shove, they can pass higher costs vestment from China has already fallen onto their customers. If they can, there is from its peak in 2016, pulled down by Chi- little hope formuch improvingworkers’ lot nese capital controls and tougher Ameri- in real terms. The Federal Reserve has been can scrutiny. Since FIRRMA was drafted raising interest rates in response to a per- with China in mind, opportunities for ceived inflationary threat. The European such scrutiny will only increase. Central Bank, too, is tightening, saying that Historically, Congress has not been shy it will probably stop asset purchases at the about callingfora tough approach towards end ofthe year. Mario Draghi, its president, America’s economic rivals. CFIUS was set points to growth in hourly pay of1.8% as a up in the 1970s in response to concerns that justification forthe move. members of OPEC, the oil producers’ car- That seems a little hasty,given workers’ tel, were hoovering up American assets for lamentable fortunes in recent decades. But political ends. Congress granted the presi- hawks think there is little room to boost dent authority to review investments in real wages by running labour markets hot- the 1980s, amid fears over Japan’s eco- ter. If they are proved right, it will be hard nomicrise and itsfirms’ attemptsto buyup to refute the argument that structural American makers of semiconductors. The changes in the economy,rather than weak firstsetofconcernshassince faded; the sec- demand alone, have stacked the deck ond now focuses on China. against workers. Governments will then But policymakers have tried to avoid have to find novel ways to respond—or discouraging investment in America. In hope foranother crash in the oil price. 7 Bouquets and brickbats the 1980s Ronald Reagan fought against1 The Economist June 30th 2018 Finance and economics 65

2 broadening the scope of CFIUS to include “essential commerce” as well as “national Harley-Davidson shifts production security”. Handing the power of approval to the president rather than Congress was Roaring away supposed to depoliticise the process, and so protect ordinary businesses. An isolated response to Donald Trump’s trade war, orthe first ofmany? Today, as Mr Trump seems eager to hit China where it hurts, these roles may be re- MERICAN companies “will react and versed. Congress has softened the most Athey will put pressure on the Ameri- draconian parts of the bill. An earlier ver- can administration to say,‘Hey,hold on a sion of FIRRMA would have led to CFIUS minute. This is not good for the American being able to review any outbound trans- economy.’” So said Cecilia Malmström, fer of intellectual property between com- the European Union’s trade commission- panies in joint ventures or licensing deals. er, on news that Harley-Davidson plans But it was pared back after companies to move some production out ofAmerica voiced fears that this could interfere with to avoid tariffsimposed by the EU on their everyday operations, by leaving even motorcycles imported from America. the most vanilla transactions exposed to a Those tariffshad themselves been in- cumbersome review process. troduced in retaliation forAmerican New, vaguely worded China-specific duties on steel and aluminium imports. restrictions from the administration could President Donald Trumpshowed no have increased the uncertainty swirling signs ofabsorbing this salutary lesson. In around multinationals. In the run-up to one ofmany splenetic tweets about June 27th, some had worried that ordinary Harley,he said: “Ifthey move, watch, it cross-border business could be hit. Could will be the beginning ofthe end.” Other an engineer sharing information with an- American firms are no doubt watching. On their bikes other in a foreign subsidiary count as a Will any follow? transfer of America’s intellectual re- Harley is unusually vulnerable to Mr NAFTA’s lowest-cost location, has many sources? The news that Mr Trump’s push Trump’sescalating trade war. Not only preferential trade agreements with other for investment restrictions had narrowed have its inputs, namely metals, risen in countries—and, thanks to NAFTA, plenty to CFIUS and FIRRMA, therefore, was a re- price, but it makes a fairchunkof its sales, ofspiffy car factories. Rather than react as lief to some. When it became public, the 16%, in Europe. It puts the cost ofabsorb- Mr Trump wants, auto manufacturers S&P 500 ticked up. 7 ing the EU’s tariffsup to the end ofthis may expand in Mexico and make less in year at $30m-45m. It has facilities in America forsale abroad. countries unaffected by European tariffs But most firms will want to wait for China’s economy that can ramp up relatively quickly. greater clarity before making funda- (Some thinkit may have been consid- mental changes to supply chains. That, at Mama’s love ering the shift anyway,and wanted to pin least, is the lesson ofBrexit. It has taken blame on the dastardly Europeans.) two years since Britons voted to leave the Other American industries have EU formanufacturers to say loud and fewer options. Mexico and Canada, as clear that they will pull out unless Britain EU EU SHANGHAI well as the , have targeted foodstuffs, retains seamless trade links with the . from porkand apples to cheese and Although many foreign firms have scaled China starts easing monetarypolicy. Or orange juice. American farmers will have backon investment in Britain, none has does it? to find other markets, lower prices or cut actually shut up shop. HINESE investors often refer in jest to production. The EU has also put tariffs on So Harley-Davidson may not presage C the central bank as “central mama”. whiskey; JackDaniels is made only in an immediate wave ofsimilar announce- The idea is that it can be counted on to pro- Lynchburg, Tennessee and is going no- ments. Ifthe tariffwar drags on, however, vide tender love—that is, policy easing— where in a hurry.But jeans, another more will follow.Mr Trumpbelieves that when market conditions are rough. But target, are made all over the world. Tex- no country can afford to lose access to the during the past couple of years it has been tiles firms may be able quietly to siphon mighty American consumer. Some busi- more of a disciplinarian, taking cash away production away. nessmen are less sanguine, fearing that from reckless investors. Its latest move, a Carmakers are worth watching. Mr other countries will act in concert against cut of banks’ required reserves, has trig- Trumpis seeking to reworksupply chains America. Ironically,Harley is behaving gered a debate about which school of par- within the North American Free-Trade just as Mr Trumpwants, “tariff-hopping” enting it subscribes to these days. Is central Agreement (NAFTA), in order to bring to be on the right side oftrade barriers. mama turning soft again, or is she still more production to America. But Mexico, Just not in the direction he wanted. cracking the whip? On June 24th the People’s Bank of Chi- na said it would reduce the portion of cash quantity of money in the economy, reduc- tral bank’s arsenal this year has not been that most banks must hold in reserve by 50 ing required reserves could be seen as a monetary tightening but stricter regula- basis points. This was equivalent to de- form ofloosening. But in recent years it has tion. It has, for example, forced banks to ploying 700bn yuan ($106bn) in the finan- placed more emphasis on interest rates. Its bring off-balance-sheet loans onto their cial system, or nearly 1% of GDP, which most important target is banks’ short-term books. There is no sign that officials are might sound like a healthy dose of liquid- cost of borrowing from each other. That re- about to reverse these policies, which are ity to shore up growth. But the central bank mained stable over the past week at about at the heart of their campaign to rein in insisted that it was not easing policy. 2.8% in annual terms, proof that the an- debt. E Yongjian of Bank of Communica- Many analysts take the central bank at nouncement had little discernible impact. tions, a Chinese bank, says cuts in required itsword. In the past, when itfocused on the Moreover, the main weapon in the cen- reservescan, overthe longterm, be viewed1 66 Finance and economics The Economist June 30th 2018

2 as policy normalisation. China used to rely drinks reception at Hôtel Capitale, Mr Lille Funding fertility treatment on reserves to neutralise the inflationary notices one of these foreign advisers si- effect of money flowing in from its whop- dling up to listen in. An embryonic ping trade surplus. Even after the latest cut, Mr Lille does not exist. Neither does the banks must park15.5% of their assets at the country,Petronia. They appear instead in a idea central bank as reserves, earning meagre new online game created by the Natural NRGI interest. But with China’s current-account Resource Governance Institute ( ), a NEW YORK surplussteadilyshrinking, the central bank think-tank based in New York and London An innovative way to pay for has started to release this pent-up liquidity. that seeks to improve the management of babymaking The counterargument is that, despite oil, gas and mineral wealth in developing the central bank’s protests, the timing and countries. As a player, you take on the role N 2016, 71,000 babies were born in Amer- manner of these cuts matter. The latest of that pesky foreign adviser eavesdrop- Iica after in vitro fertilisation (IVF), triple move stood out. In April it also cut the re- ping on Mr Lille. As well as the drinks re- the number two decades earlier and 1.8% serve requirement ratio, and by twice as ception, your adventures will take you to of all births. The share of births that are by much: 100 basis points. Yet that was more the presidential palace, the capital city’s IVF varies around the world, rising as high of a technical adjustment. The cash injec- cafés and markets, and the coastal district as 4% in Denmark, Israel and Spain. One tion was mostly cancelled out by the cen- of Neftala, where the oil was discovered. consistent trend, however,isgrowth. Fertil- tral bank’s withdrawal of liquidity from In its training courses NRGI has long ex- ity technology is steadily improving and another channel. This time, all of the perimented with role-playing. It hopes women are choosing to delay child-bear- 700bn yuan freed up was available for that the game, which took £130,000 ing, meaning more couples need medical banks to use. The central bank specified ($170,000) and three years to produce, will help to conceive. that it wanted them to step up the pace of reach a wider audience, including activists For many would-be parents the main swapping corporate loans into equity in countries that see a lot of themselves in impediment to conception is now not sci- stakes (part of China’s strategy for paring Petronia. A former employee, Jed Miller, ence but finance. Data for 2017 gathered by its debts). But as Julian Evans-Pritchard of has described it as “grand theft petro”. ICMART, an international non-profit orga- Capital Economics, a consultancy, notes, In truth, it is more educative than addic- nisation, show vast variation in prices. A this amounts to a “convenient excuse”, al- tive. The freedom that players enjoy is nec- single IVF attempt costs around $3,000 in lowing China to inject large amounts of li- essarily constrained, says Katarina Kuai of Japan, $4,000 in Cameroon and up to quidity without abandoning its commit- NRGI. Even perverse decisions will not $10,000 in Europe. In America it costs ment to tackling financial risks. Analysts take you too far from the main plotline. more. The countries with the highest IVF with Nomura called it a “clear signal of The game does little to disguise the priori- birth rates are those where taxpayers pay policy easing”. ties ofits makers. (In Petronia, even the taxi for treatment. (There are a few exceptions, The stockmarket, in so faras rationality drivers talk about the need for transparent such as Croatia, where medical tourism can be ascribed to it, came down on the data on revenues.) pushes the IVF birth rate up.) side of those saying that the central bank The game nonetheless conveys the di- A three-year-old startup, Carrot, is tak- has not really started to ease. Prices contin- lemmas faced by countries like Petronia. ing a novel approach to helping with the ued to fall, taking the benchmarkShanghai Should the government lock in a stream of costs. It was born out of the experience of index down more by than 20% since Janu- revenues through royalties, ortake a riskier its co-founder and CEO, Tammy Sun, who ary.Technically,thatmakesthisa bear mar- equity stake? Should it seek to build up lo- wasstartled to realise thatthe health-insur- ket. Should the tumbles continue, it may cal staff and expertise, or tap foreign firms ance plan offered by the technology firm not be long before central mama puts her and outside know-how? Saving revenues where she worked would offer no support more indulgent side on full display. 7 for the future will help stabilise the econ- for her own efforts at conception. After omy, but could also frustrate voters and $35,000 yielded a dozen fertilised eggs, leave the president’s successor with mon- one of which will, she hopes, one day The resource curse ey to squander. make her a mother, she decided to think Even experts will learn something. And through the funding of fertility treatment Grand Theft Petro they will enjoy the inside jokes scattered from first principles. What was needed, 1 throughout the game. One of the foreign advisers is tediously eager to promote his new book (“Big Bang Growth”). Another is modelledonNicolaWoodroffe,alawyerat the NRGI. And Mr Lille, the shady French Fighting Dutch disease through online oil man, is the spitting image of Robert Pit- gaming man, the upstanding head ofthe institute’s LAIN LILLE is not pleased. His wildcat workon transparent contracts. Aoil firm spent a fortune looking for oil NRGI is not alone in venturing into this in Petronia, a former colony known for kind of “serious gaming”. Petronia’s cashmere wool, long before anyone else launch event featured Elizabeth Newbury was willing to take the risk. After sealing a of the Wilson Centre, who has helped deal with the long-ruling government, he create games out ofAmerican government was poised to reap the rewards. But in last policy. In “The Fiscal Ship”, for example, year’s election, a new president came to players try to cut America’s public debt power, promising a better deal for the peo- while meeting national goals they can ple. Mr Lille fears she will reopen negotia- choose (or copy from President Donald tions, further delaying any profits for the Trump). Ms Kuai thinks that films like “Ava- company or revenues for the country. She tar” and “BlackPanther” show that the pol- has invited four foreign “experts”, who itics ofnatural resources has broad cultural have neversetfootin the countrybefore, to resonance. “We wanted to catch this advise her. As he shares these concerns at a wave,” she says. 7 Injecting some innovation The Economist June 30th 2018 Finance and economics 67

2 she concluded, was not only help paying Carrot’s answer is to act as an interme- tion or marital status, as long as they are for it but also certainty upfront about how diary for fertility-related medical-service used for eligible services; the exceptions much money she would get. providers to American companies and are where that would break national law, Such transparency is unusual for Amer- their foreign operations in 22 countries; Po- such as a French ban on IVF for same-sex ican health insurance, which requires a land and Singapore are next on its list. Car- couples and a Japanese ban on IVF for un- muddle of out-of-pocket payments, if it of- rot collects and shares information on married couples.) fers coverage at all. Patients do not know costs and results, which companies use to Since users can be certain oftheir bene- how much they will get backfrom insurers set up benefits, and employees to shop fits, they know exactly how much treat- until much later. It is also different from around. It charges firms an administrative ment they can afford. The same applies to public health-care systems, which often re- fee, and they offer their employees a fixed firms: they know how much they will be strict coverage in other ways. In Britain, for sum, ranging from $2,000 to $100,000, av- on the hook for. Carrot’s clear cap on pay- example, eligibility rules vary from place eraging $10,000, that can be used for IVF ments means that would-be parents may to place and waiting-lists are long. Patients and related services. (In most countries, run outofmoneybefore theyconceive. But rarely know they will not be covered until corporate benefits can be claimed by any at least it is transparent about it—unlike they have asked and been turned down. employee regardless ofsex, sexual orienta- many alternative systems. 7 Buttonwood Aim and amiability

Why foreign portfolio managers are buying Chinese bonds N MAY 1945 John Maynard Keynes can share in the inevitable losses. Yet so Iwrote a memo on the post-war econ- Enter the dragon far, foreign buyers have trodden carefully, omy. In it he argued that Britain should Chinese government bonds mostly buying government bonds and seek to be in the mainstream of global % owned by foreign investors steeringclearofriskiermunicipal and cor- commerce. Itwould suitfinance aswell as 7 porate bonds, says Zhenbo Hou of Blue- Bond market Bond Connect industry to have the whole world as a opens to foreign established 6 Bay Asset Management. The raciest bets playground, he wrote. “We built up the institutions in China that foreigners have made are on the pre-war sterling area because we were 5 bonds of policy banks, such as the China bankers amiable to treat with and having 4 Development Bank, and on short-term a long record ofhonouring our cheques.” 3 paper issued by biggish provincial banks. He passed over how Britain’s eco- 2 It is telling that foreigners hold less than nomicmuscle had helped sterling’sdomi- 2% of the overall market, but 7% of the nance—perhaps because by then that 1 stockofsafergovernment bonds. muscle was wasting. Yet it is implacable 0 The gradual opening of the bond mar- economic might that leads many today to 2016 17 18 ket is part of a step-by-step approach to fi- conclude that the yuan, China’s currency, Source: Wind Info nancial reform. China is thus proving a lit- will supplant the dollar, just as sterling tle more amiable to foreign capital. And gave way to the dollarafter1945. The yuan year ago the yield on a ten-year Chinese by letting foreign money in, albeit still is already one of five constituents of the government bond was around 1.5 percent- with some hurdles, it might hope to let Special Drawing Right, a basket ofreserve age points higher than the yield on an some domestic money out and still keep currencies created by the IMF. And China equivalent US Treasury bond. The spread the yuan stable. The big test will be is opening up to capital flows. This year has since narrowed. Yet at 3.6% yields are whether China will always honour its foreignershave been the biggestbuyers of still attractive, especially in comparison cheques—can foreigners get their money Chinese government bonds. with the yields of under 1% offered by the out when they want to? It has kept control It is tempting to see this as another safest European bonds. of both its exchange rate and its domestic milestone on the way to the yuan’s pre- Chinese bonds have many other useful monetary policy through capital controls. ordained supremacy. But it is an error to qualities, notes Jan Dehn of Ashmore, a But if it allows foreign bondholders to interpret current events in the light of an fund manager. Prices have been less vola- move capital in and out more freely, it imagined future. Foreign buyers of Chi- tile than those of other emerging-market must eitherlose control ofthe yuan oruse nese bonds are not swept along by an un- bonds. Chinese bondsare valuable to port- interest-rate policy to support it and not seen law of history. Rather they are folio managers because they tend not to the economy. Faced with this trilemma, spurred by more prosaic considerations. move in synch with other assets. They are most rich countries let the currency float To start with, it has become a lot easier thus prized as diversifiers. And—yes—Chi- freely. Avolatile yuan would be a marked to buy the bonds. Foreign institutional in- na’s scale is a draw. Given the size of the change—forChina and its bondholders. vestors with a presence in China have market, the world’s third-largest, foreign- Perhaps in a decade or two historians been allowed to buy them for more than ers still own rather few ofits bonds. will look back and point to this policy or two years (see chart). Last July Beijing es- that event as the turning-point in China’s tablished a bond-trading link between Safety first emergence as a financial hegemon. If so, Hong Kong and the mainland. Since then Still, there are dangers for the unwary. The they will be kidding themselves. China is the number of foreign asset managers ratio of debt to GDP in China has risen to likely to open up in fits and starts. There with trading accounts in Hong Kong has 260%, from 160% in 2008. In other places, will be mistakes, accidents and reversals. mushroomed. In March Bloomberg-Bar- such a surge in credit has led to souring In the meantime, investors will, as al- clays said it would add China to its main loans and, sometimes, financial crisis. ways, respond to incentives. For a grow- bond index next year. There is a natural suspicion that China is ing number, for now at least, the case for The bonds have intrinsic merits, too. A opening its bond market so that foreigners buying China’s bonds seems to add up. 68 Finance and economics The Economist June 30th 2018

Asset management in Italy ofprivate savings will keep them keen. With interest rates at rock-bottom, banks Last year Amundi, a French asset man- are scrambling for fees. Savers meanwhile Rich pickings ager, bought Pioneer, the fund-manage- understand that they must diversify from ment arm of UniCredit, Italy’s biggest cash and bonds to make a return. Cash and bank. Over half of assets under manage- deposits account for a third of households’ ment are owned by 10% of Italians, which portfolios. Bonds still accounted for 7.6% of MILAN makes the wealthier end of the business invested assets in the third quarter of 2017, especially appealing. Mediobanca, an in- farmore than the 1.2% in France and 2.6% in Resilient savers are driving vestment bank, last year opened a private Germany. That is down from 19.6% in 2010. consolidation in the sector bank and bought 69% of RAM Active In- The share of banks’ bonds has shrunk HE rumour mill is grinding again. In vestments, a Swiss investment manager. from 10% to 2.5%. Buyers were scared off by Tearly 2017 reports swirled of a possible And in May Indosuez, the wealth-manage- haircuts in the past few years on some of merger between Generali, Italy’s biggest ment arm of Crédit Agricole, a French the debt issued by several struggling re- insurer, and Intesa Sanpaolo, the country’s bank, acquired Leonardo, a private bank. gional banks, which had sold those bonds second-biggest bank. That deal came to There is lots to fight for. Although Italy’s to their own clients as safe investments. nothing. But Intesa is still looking for a savings rate has fallen by more than half (The government later repaid retail inves- partner. Now it is said to be in talks with since the 1990s, at 10% of personal income tors, declaringthem victimsofmis-selling.) BlackRock, the world’s biggest asset man- it still beats Britain’s or Spain’s. The finan- Santo Borsellino of Generali Invest- ager, about a stake in Eurizon, the bank’s cial crisis a decade ago saw assets under ments, which manages a quarter of Ital- asset-management unit. Deal or no deal, management contract by €290bn ($335bn) ians’ savings, suggests that some may have two things are clear. Italy’s asset-manage- in a year; Italian GDP has not yet returned been burnt by do-it-yourself investing, cre- ment industry is consolidating. And to its pre-crisis level. Yet those assets have ating greater demand for funds offered by though investors fret over a populist gov- since more than doubled to over €2trn. asset managers. If recent crises have a sil- ernment and towering public debt, its pool Both supply and demand are shifting. verlining, it may be that they made Italians more financially literate, according to De- loitte, a consulting firm. The daily grind Italy has not seen the same expansion of equity products as the rest of Europe, Easier money says Tommaso Corcos, Eurizon’s boss. But some are on offer, such as piani individuali di risparmio (PIR), individual savings ac- The world ofworkhas improved since 1950. But the gains are spread unevenly counts that offer favourable tax treatment ONEY often costs too much,” The study has limitations. Differences forinvestments in listed firms. Italian com- “M quipped Ralph Waldo Emerson. between the sexes could be concealed if, panies must account for 70% of the funds But a new study suggests that since 1950, within a category, they are doing different invested. PIR have raised over €11bn since the price ofbuying it with labour in work. Attitudes to jobs might depend on they were introduced last year. Intermonte America has fallen. Greg Kaplan ofthe status, pay (in absolute or relative terms) SIM, an investment bank, suggests that University of Chicago and Sam Schulho- or the kind ofpeople who do them, all of could surpass €55bn by 2021. fer-Wohl ofthe Federal Reserve Bank of which could have changed over time. Alternative investments, such as ven- Chicago have linked measures ofhow It also leaves a puzzle. Research by ture capital, private equity and hedge Americans today feel about various jobs Betsey Stevenson and Justin Wolfers of funds, are growing in popularity, too, to changes in employment. the University ofMichigan has found though from a low base. Crédit Agricole is Both men and women are less likely that women in the 1970s reported being due to open a startup incubator in Milan to be farmers, forexample, now than in happier than men and that the gap has this autumn, partly to present new invest- 1950, and more likely to be in manage- since narrowed. Ifthe assumptions in ment opportunities to clients. Ditto ethical ment. Women are less likely to be secre- both studies are right, well-being away investment. Deloitte notes that this ac- taries, and men more likely to be in ser- from workcould be worsening forwom- counted forless than 5% ofthe average Ital- vice-sector jobs. Assuming that people in en relative to men. Worrying stuff. ian portfolio at the end of 2016. But retail 1950 felt the same way about particular ethical funds grew by 26% between 2014 jobs as people do now, workers today are and 2016, according to Eurosif, an associa- less sad, less tired and in less pain. How was your day? tion that promotes them. Mr Borsellino But changes in other measures of United States, feelings about work says he has seen attitudes shift in the past well-being, and a separate analysis of 0=lowest, 6=highest 18-24 months, particularly among institu- men and women, are less uniformly Happiness Meaning tional investors. 4.50 4.50 positive (see chart). The economists find New European regulation may both 4.25 4.25 that modern employment patterns prob- Men make Italian investors more demanding ably mean that today’s workers are more 4.00 4.00 and hasten dealmaking. The Markets in Fi- stressed. And although the jobs women Women 3.75 3.75 nancial Instruments Directive (MiFID 2), have moved into are ones they associate 1950 2010 1950 2010 which came into effect in January, aims to with more happiness and a greater sense make costs more transparent, especially Tiredness Stress ofmeaning, the opposite holds for men. 2.75 2.75 for retail investors, which in Italy account Some ofthis is because women and men 2.50 2.50 for85% ofthe market. Its real impact will be seem to view similar jobs differently. 2.25 2.25 felt in 2019, says Cinzia Tagliabue of Both have moved away from working as 2.00 2.00 Amundi, when clients begin to see a break- a “machine operator, assembler or in- down of charges—which are among Eu- spector”, which is associated with happi- 1950 2010 1950 2010 rope’s highest. Banks, which account for ness below the average forwomen, but Source: “The Changing (Dis)-utility of Work” 70% of distribution, will seek to work with above formen. by Greg Kaplan and Sam Schulhofer-Wohl selected asset managers to negotiate lower fees. More consolidation is coming. 7 The Economist June 30th 2018 Finance and economics 69 Free exchange Barely managing

User-rating systems are cut-rate substitutes fora skilful manager platform that cares whether rides lead to repeat business and which therefore bears the cost of poor behaviour by drivers. Or- dinarily a firm in such a position would need to invest heavily in monitoring its workers—hiring staff to carry out quality assur- ance by taking Uber rides incognito, forinstance. A rating system, however, reduces the need for monitoring by aligning the firm’s interests with those of workers. (Drivers with low ratings risk having their profile deactivated.) Outsourcing management like this appeals to cost-conscious firms of all sorts; hence the proliferation of technological nudges to rate one service worker or another. Towork as intended, however, ratings must provide an accurate indication of how well workers conform to the behaviour that firms desire. Frequently, they do not. Raters may have no incentive to do their job well. They may ignore the prompt to rate a worker, orautomatically as- sign the highest score. They may adhere to social norms that dis- courage leaving a poor rating, just as diners often leave the standard tip, however unexceptional the service. Uber’s customers often award drivers five stars rather than feel bad about themselves fordamaging a stranger’s work prospects. And even when users are accurate, their ratings may reflect factors beyond a ser- T OFTEN arrives as you stroll from the kerb to your front door. vice provider’s control, such as unexpected traffic. Systems that IAn e-mail with a question: how many stars do you want to give allow users to leave more detailed feedback(as Uber’s has begun your Uber driver? Rating systems like the ride-hailing firm’s are to) could address this, but at the cost of soaking up more time, essential infrastructure in the world of digital commerce. Just which could mean fewer reviews. about anything you might seek to buy online comes with a When the quality of a match between a worker and a task is crowdsourced rating, from a subscription to this newspaper to a particularly important, the problem ofsorting the signal from the broken iPhone on eBay to, increasingly, people providing ser- noise in rating systems grows. Skilled managers can tell when a vices. Butpeople are notobjects. Asratingsareapplied to workers worker struggling in one role might thrive in another; rating sys- it is worth considering the consequences—forrater and rated. tems can capture only expressions of customer dissatisfaction. User-rating systems were developed in the 1990s. The web Such difficulties also affect gig-economy platforms. Poor ratings held promise as a grand bazaar, where anyone could buy from or on a job-placement site could reflect an inappropriate pairing be- sell to anyone else. But e-commerce platforms had to create trust. tween a workerwith one set ofskills and a firm that needs anoth- Buyers and sellers needed to believe that payment would be er, rather than the worker’s failure ofeffortor ability. forthcoming, and that the product would be as described. E-tail- Platformscan reduce the potential forsuch errorsby including ers like Amazon and eBay adopted reputation systems, in which more information about tasks and the workers who might tackle sellers and buyers gave feedback about transactions. Reputation them. Yet they may discover to their chagrin that more informa- scores appended to products, vendors and buyers gave users con- tion also provides users with more opportunities to discriminate. fidence that they were not about to be scammed. An analysis of Upwork, for example, found that employers of In- Such systems then spread to labour markets. Workers for gig- dian descent disproportionately sought Indian nationals fortheir economy firms like Uber and Upwork come with user-provided tasks. True, this particular sort of information could be con- ratings. Conventional employers are jumping on the band- cealed—and conventional management permits plenty of dis- wagon. A phone call to your bank, or the delivery of a meal or- crimination. But firms typically have a legal obligation not to dis- dered online, is now likely to be followed by a notification criminate, and to train managers accordingly. prompting you to rate the person who has just served you. Superficially, such ratings also seem intended to build trust. Overrated For users of Uber, say, who will be picked up by drivers they do Management is underappreciated as a contributor to success. Re- not know, ratings look like a way to reassure them that their ride cent work by Nicholas Bloom, John Van Reenen and Erik Bryn- will not end in abduction. Yet if that was once necessary, it is no jolfsson suggests that good management matters more than the longer. Uber is a global firm worth tens of billions of dollars and adoption of technology for a company’s performance. Even so, with millions of repeat customers. Its customers know by now the use ofratings seems sure to grow.They are, as “LeftOutside”, a that the app records drivers’ identities and tracks their route. It is pseudonymous blogger, puts it, a genuine disruptive technology: Uber’sbrand thatcreatestrust;formostriders,waitingforadriver cheap enough to be adopted widely even if inferior to estab- with a rating of4.8 rather than 4.5 is not worth the trouble. lished practice. Further advances could improve such systems, as Rather, ratings increasingly function to make management is common with disruptive technology. Artificial-intelligence cheaper by shifting the burden of monitoring workers to users. programs may one day know how much people enjoyed a taxi Though Uber regards its drivers as independent contractors, in ride better than they do themselves. In the meantime, manage- many ways they resemble employees. The firm seeks to provide ment risks being left to the wrong sort ofstars. users with a reasonably uniform experience from ride to ride...... And because drivers are randomly assigned to customers, it is the Sources for this story can be found at Economist.com/ratings2018 70 Science and technology The Economist June 30th 2018

Also in this section 71 The limits of human movement 71 Dementia and the eyes 72 The economics of gifts 72 Polio in Papua New Guinea 73 Fabrics that kill bugs

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Psychiatric illness psychiatric diagnosis, by providing a genetic explanation for shared symptoms. Who is to decide, when doctors There were also, however, observable patterns in the data that might help refine disagree? the process of classification. Major depression has at least some positive genetic correlation with each of the other nine conditions. Schizophrenia, bipolar disorder, A huge international collaboration is attempting to get to the bottom ofpsychiatric anxiety disorders and attention-deficit hy- illnesses peractivity disorder (ADHD) are strongly ISEASES of the psyche have always as genome-wide association studies, or correlated with one another, as well as Dbeen slippery things. Schizophrenia, GWASs. In these, thousands of genomes with major depression. Anorexia nervosa, bipolar disorder, major depression and a are searched in order to identify places obsessive-compulsive disorderand schizo- host of others have no visible markers in where differences between people’s DNA phrenia also cluster, as do Tourette’s syn- the brain. Their symptoms overlap suffi- seem associated with the presence or ab- drome and obsessive-compulsive disor- ciently that diagnoses may differ between sence of particular diseases or symptoms. der. The only psychiatric illness that medical practitioners, or even vary over Past GWASs, comparing pairs of diseases, showed no significant correlation with the time when given bya single practitioner. In have shown overlapping genetic involve- others was post-traumatic-stress disorder. this they are unlike neurological diseases. ment in some psychiatric illnesses. But, by Such clustering was absent from most These either leave organic traces in the pooling the work of so many groups, the neurological disorders. In particular, Alz- brain that, though not always accessible Brainstorm Consortium was able to go be- heimer’s disease, Parkinson’s disease, mul- before a patient’s death, are characteristic yond this and cross-correlate the putative tiple sclerosis and epilepsy all stood inde- of the condition in question, or cause rec- genetic underpinnings of 25 psychiatric pendent from each other. Nor, with the ognisable perturbations of things such as and neurological problems. In all, the con- exception of migraine, which clustered electroencephalograms. sortium looked at 265,218 cases of different with Tourette’s, major depression and The impulse to categorise, though, is brain disorders and 784,643 healthy volun- ADHD, did neurological disorders show enormous—as witness the ever greater teers who acted as controls. much correlation with psychiatric ones. number of conditions identified in succes- This study therefore confirms genetically sive editions of the Diagnostic and Statisti- Metamorphoses the idea that the set of diseases dealt with cal Manual ofMental Disorders, published Of the 25 conditions in question, ten are by psychiatry is indeed distinct from that by the American Psychiatric Association. conventionally classified as psychiatric. dealt with by neurology and explains why That is because diagnosis and treatment go Besides schizophrenia, bipolar disorder psychiatricdisease isa hydra-headed mon- hand in hand. But if diagnostic categories and major depression, these include ob- ster that is difficult to pin down. are misconceived then treatment may be sessive-compulsive disorder, anorexia ner- Going from the sorts of GWASson misapplied. In this context a paper pub- vosa and Tourette’s syndrome. Neurologi- which the consortium relied to an underly- lished recently in Science, by a group call- cal problems, the remaining 15 conditions, ing understanding of psychiatric illness ing itself the Brainstorm Consortium, is include Alzheimer’s disease, Parkinson’s will, though, be a longhaul. The genetic dif- helpful. The consortium has brought to- disease, various forms of epilepsy, strokes ferences picked out are often things called gethermany research groups who workon and migraines. single-nucleotide polymorphisms (SNPs), various psychiatric diseases, as well as on There were many underlying genetic which are places in the genome where a neurological diseases, and has run their correlations between pairs of psychiatric lone pair of bases, the chemical letters in collective data through the wringer. disorders. Assuming these are in part caus- which genetic messages are written, can In particular, the consortium’s re- ative of disease, such overlaps go a long vary between individuals. Frequently, searchers have looked at what are known way to explaining the slippery nature of such SNPs are not even in the bits of the ge-1 The Economist June 30th 2018 Science and technology 71

2 nome thatdirectlyencode proteins. Rather, they are in what was once called junk Cognitive decline DNA, because its function was unknown. Recent research suggests that much of Windows to the brain the junk serves to regulate when genes are translated into proteins, and how much The structure ofthe eye holds information about the health ofthe mind protein is thus produced. That, in turn, de- termines how cells grow and what sorts of ECAUSE it is locked away inside the nosed with diabetes or a neurodegener- cell they turn into. With luck, analysing the B skull, the brain is hard to study.Look- ative disease, both ofwhich could have genetic patterns exposed by studies such ing at it requires finicky machines which interfered with the results. as this will eventually point out where to use magnetism or electricity or both to The eye scans had been conducted look in the brain’s microanatomy to find bypass the bone. There is just one tendril using a technique called optical coher- whatever miswiring is causing psychiatric ofbrain tissue that can be seen from ence tomography. This employs long- disease. For, though that may not be visible outside the body without any mucking wavelength light to penetrate into and at the moment, even the psyche must about ofthis sort. That is the retina. Look scatter from biological tissues, building somehow be manifested physically in the into someone’s eyes and you are, in some up a three-dimensional picture ofthat brain and its debilitations must thus be rec- small way,looking at their brain. tissue. Comparing the scans and the ognisable. When that moment of under- This being so, a group ofresearchers at cognitive tests showed that those people standing occurs psychiatry will truly have Moorfields Eye Hospital in London, whose RNFL was in the thinnest fifth of taken a great leap forward. 7 working with others around the world, the group were 11% more likely to fail at decided to study the structure ofthe eye least one cognitive test than those with forsigns ofcognitive decline. Changes in an RNFL in the thickest fifth. A small Human behaviour the brain, they reasoned, might lead to portion ofthe original cohort sat a sec- changes in the nervous tissue connected ond cognitive test three years later. This Oh, the places to it. They focused on a part ofthe eye showed that those in the bottom two- called the retinal nerve-fibre layer (RNFL). fifths ofRNFL thickness were twice as you’ll go! This is the lowest layer ofthe retina and likely to have suffered a decline in cogni- serves to linkthe light-sensitive tissue tive function as those in the top fifth. above to the synapses which lead to the Although these results show only a brain. The team’s results, published in correlation between eye structure and JAMA Neurology this week, show that brain health, without an underlying It turns out there are about 25 ofthem people with a thin RNFL are more likely explanation, they do suggest that scan- HEN it comes to habitat, human be- to failcognitive tests than those with a ning eyes is a fruitful road to diagnosing Wings are creatures ofhabit. It has been thickone. They are also more likely to and even predicting cognitive decline. known for a long time that, whether his suffercognitive decline as they age. That would be warmly welcomed, espe- habitat is a village, a city or, for real globe- To discover this, the researchers relied cially fordementia, which currently lacks trotters, the planet itself, an individual per- on Britain’s Biobank, a repository of any form ofpredictive test. son generally visits the same places regu- medical data from halfa million volun- In the future, then, a visit to the opti- larly. The details, though, have been sur- teers. Ofthese, 32,000 aged between 40 cians might also lead to a diagnosis about prisingly obscure. Now, thanks to an and 69 had provided information perti- mental health. Poets say that the eyes are analysis of data collected from 40,000 nent to the study,namely ocular scans the window to the soul. Perhaps. But this smartphone users around the world, a and relevant scores from cognitive tests. worksuggests they are surely a window new property of humanity’s locomotive None ofthese people had been diag- to the brain. habits has been revealed. It turns out that someone’s “location capacity”, the number of places which he or But analysing movement patterns helps il- dividual can routinely socialise with. That she visits regularly, remains constant over luminate the distinction and the research- socialisation figure, about150 formost peo- periods of months and years. What consti- ers found that the average location capaci- ple, is known as the Dunbar number, after tutes a “place” depends on what distance ty was 25. If a new location does make its its discoverer, Robin Dunbar. between two places makes them separate. way into the set of places an individual Dr Lehmann says he expects that the tends to visit, an old one drops out in re- group’s finding will inform urban plan- sponse. People do not, in other words, ningand be useful in predictinghuman be- gather places like collector cards. Rather, haviour more generally. Understanding they cycle through them. Their geographi- the nature of restricted location capacity cal behaviour is limited and predictable, might be of particular use to advertisers. not footloose and fancy-free. On seeing someone start to spend a lot of The study demonstrating this, just pub- time in a new place, an advertiser might lished in Nature Human Behaviour, does reasonably assume that the person in notofferany explanation forthe limited lo- question was now in the market for new cation capacity it measures. But a statistical servicesin thatarea. DrLehmann says he is analysis carried out by the authors shows unsure whether Facebook and Google, the that it cannot be explained solely by con- most obvious beneficiaries of this insight, straints on time. Some other factor is at are, as yet, aware ofit. work. One of the researchers, Sune Leh- The group’s findings also show the im- mann of the Technical University of Den- portance of a new scientific instrument: in mark, draws an analogy. He suggests that this case, the smartphone. Such phones, people’s cognitive capacity limits the num- now ubiquitous in the rich world, mean ber ofplaces they can visit routinely,just as many human beings have, in essence, vo- I’m sure that one’s not on our list it limits the number of other people an in- luntarily radio-collared themselves. That 1 72 Science and technology The Economist June 30th 2018

2 gives social scientists (who might reason- gratitude that do not seem to correspond prefer to give roses in full bloom while ably relabel themselves as “human zoolo- with a gift’s long-term utility. only 32% ofthe women said they preferred gists” in this case) a new and affordable Totest this idea, Dr Yang and Dr Urmin- that gift to the two dozen buds. Similarly, lens through which to study their subjects. sky framed an experiment around St Va- with the bouquet and the bonsai, 40% of The bulk of the data Dr Lehmann used lentine’s day.They picked three pairs of ap- the men preferred to give the bouquet but came from an app called Lifelog, a phone- propriate gifts: a dozen roses in full bloom only 28% of the women preferred to re- based activity tracker developed by Sony, versus two dozen rose buds that were ceive it. Both of these results are in line an electronics firm. About 36,000 people about to blossom; a bouquet of freshly cut with Dr Yang’s and Dr Urminsky’s hypoth- contributed in this way. The other 4,000 flowers versus a bonsai; and a heart- esis. The case of the biscuits or the fruit, were monitored through behaviour-track- shaped basket of biscuits versus a similar though, is more complicated. As predicted, ing programmes at several universities. All basket of fruit. In each pair they hypothe- men preferred to give the biscuits more ofthese sets ofdata show the same pattern of sised that the first, with its immediate visu- ten than women preferred to receive them. 25 preferred locations. al appeal, strongscent orflavour, was more But the relevant numbers were 73% and As with Dr Dunbar’s work, which likely to induce a powerful appreciative re- 61%. In other words, unlike the other two showed predictable, nested circles of ac- sponse in the recipient but that the second, cases, a majority of women did also prefer quaintances, so Dr Lehmann and his col- because of its greater quantity, durability the gift with immediate, sugary appeal leagues found several levels of location ca- or wholesomeness, was likely to be more rather than long-term wholesomeness, de- pacity—meaningthat the numberofplaces satisfying in the long term. They also spite what they had said about the long- where people spend just a few minutes a checked that these beliefs were not mere term value offruit. week is just as predictable as the number personal prejudice by confirming them None of this, however, explains why re- where they spend dozens ofhours. Dr Leh- with104 volunteers recruited online. cipients should be willing to pay more en- mann says his group is now in search of They then recruited a further295 online thusiastically in the currency of gratitude- similar data from other primates, in an at- volunteers on February 13th, the day be- displays for short-term pleasure rather tempt to work out where human patterns fore St Valentine’s, in order to catch people than long-term satisfaction. Ifthe gratitude of mobility have their roots. For those, in an appropriate mood for the experi- market were working correctly, buds though, they will have to rely on old-fash- ment. Volunteers were required to be in a would trump flowers, bonsais bouquets ioned methods ofzoological observation— romantic heterosexual relationship and and fruit cookies. Yet they don’t. 7 unless they can work out a way to get were paid $2 each to evaluate the pairs of chimpanzees to carry smartphones. 7 gifts. Men were asked which of each pair they would prefer to give to their inamora- Poliomyelitis ta. Women were asked which they would The economics of gifts prefer to receive. Both sexes were also This time it’s real asked to predict how much ofan “affective Presents of mind reaction”, as psychologists label such things as smiles and hugs, the receiver would show in response to a particular gift and which would create the greater long- term satisfaction. Polio has been reported in Papua New As far as affective reaction and satisfac- Guinea tion were concerned, this second group of NJUNE 8th reportsofa suspected case A paradoxat the heart ofgift-giving volunteers agreed with the first group Oof polio came from Venezuela. Fortu- FORMEReditorofthisnewspaperonce about which gifts would elicit what re- nately, it turned out to be a false alarm. The Asaid that “a gift is a sale at a price of sponse. Even so, men went for the smiles report that came from Papua New Guinea zero”. In strict monetary terms this is true. and hugs more often than it would seem on June 22nd, though, isno fiction. It wasis- But most people do expect to be paid for that women would have wished. Specifi- sued by the World Health Organisation gifts, albeit in the non-monetary currency cally, 44% of them said that they would and concerns not one, but three children known as “gratitude”. This has many de- who have tested positive for a threatening nominations: words of appreciation, hugs polio virus. and kisses and, particularly, smiles. The Around the world, polio is in full re- wider point our ex-editor was making, treat. A mere three countries are still though, is pertinent. A giftwill cause a mis- known to harbour wild polio viruses. allocation of resources if the recipient These are Afghanistan, Nigeria and Paki- would have preferred something else that stan. In 2017 only 22 cases of polio caused would have been no more expensive for by such wild viruses came to the attention the donor to acquire. of the authorities. Unfortunately, the rea- In this context, a study just published in son for this success, which is the extensive Psychological Science, by Adelle Yang at the vaccination against polio of children National University ofSingapore and Oleg throughout the world, can occasionally Urminsky at the University of Chicago, backfire and itselfcause polio outbreaks. looks illuminating. Dr Yang and Dr Urmin- In many countries polio vaccine in- sky have studied the currency of gratitude cludes live, attenuated viruses which and think it may be creating poor incen- breed in the recipient’s intestines and then tives. Their hypothesis is that the reason enter the bloodstream, thereby triggering a gift-givers sometimes appear to make bad protective immune response. An atten- decisions (that is, choose gifts the receiver uated virus is one that has been weakened would not have chosen him or herself) is to a form which is not hazardous to health not always that they do not know what the but remains potent enough to provoke the recipient wants. Sometimes it is that the re- immune system into providing lifelong ceiver rewards the giver with signals of Ooo! Lovely! Honest... cover against real infection. Occasionally, 1 The Economist June 30th 2018 Science and technology 73

2 though (less than once in every 17m vacci- in a washing machine. What is needed, nations), the replication of such an atten- reckons Liu Xuqing of the University of uated virus throws up a mutation which Manchester, in England, is a way to make creates a new strain. And because the vac- antibacterial coatings for fabricsthat, quite cine-virus is present in someone’s faeces literally, hold tight. forsix to eight weeks after inoculation, this Instead of gold or silver, Dr Liu’s metal new vaccine-derived polio virus (VDPV) of choice is copper. This exhibits the same can be released into the environment. bug-killing properties but has the benefit When such cases arise and the popula- of being an awful lot cheaper than those tion is under-immunised (meaning that two preciousmetals, makinga commercial there are many susceptible children in it) coating process easier to devise. then the vaccine-derived virus can circu- Working with colleagues from two Chi- late and, over the course of a year or so, re- nese institutions, Northwest Minzu Uni- acquire virulence though additional muta- versity in Lanzhou and Southwest Univer- tions. That means it has the capacity to sity in Chongqing, Dr Liu has been treating cause disease. These new strains are called samples of fabric with a chemical process circulating vaccine-derived polio viruses thatgraftswhatiscalled a “polymerbrush” and have, in the past, caused outbreaks of onto their surfaces. As the name suggests, polio in places such as Syria and Congo. when viewed at a resolution of a few na- They are also culpable in Papua New nometres (billionths of a metre) through Guinea. In April a six-year-old boywith pa- an electron microscope, the polymer ralysis, the most serious symptom ofpolio, strands look like tiny protruding bristles. but one that can have other causes, was That done they use a second chemical pro- confirmed to have a VDPV. Since then, two cedure to coat the bristles with a catalyst. other children, who are not paralysed, Textiles After this, they immerse the fabric in a have been found to be carrying the same copper-containing solution from which VDPV, which is thus now categorised as a Copper-bottomed the catalyst causes the metal to precipitate circulating virus. and form tiny particles that anchor them- The usual way for polio to spread is by ideas selves to the polymer brush. Indeed, they people drinking water contaminated with bond so tightly that DrLiu compares the re- faeces containing the virus. This seems to sulting coating to reinforced concrete. Yet be what has happened in Papua New MANCHESTER the process takes place at such a minute Guinea. Less than half of the country’s scale on the surface of the fabric that it Making fabrics that kill bugs population has access to clean water and should not affect the feel or quality of the 81% do not use proper toilets. Moreover, in ROUND the beginning of the 20th cen- finished material. Morobe province, where the three children Atury the medical profession under- Dr Liu and his colleagues were able to involved live, just 61% of children have re- went an image makeover. Doctors use the process on both cotton and polyes- ceived the recommended course of vacci- swapped their traditional black coats for ter. A test of the cotton samples for their nations. Perfect vaccination coverage in white ones, similar to those worn by scien- antibacterial properties has shown that anycountryisrare, butleavingmore than a tists in laboratories. This was meant to bol- the new material is just as effective as sil- third ofthe population unprotected is dan- ster a physician’s scientific credibility at a ver, if not more so, at killing two bugs, Es- gerous. At least 80-85% must be fully im- time when many practising healers were cherichia coli and Staphylococcus aureus, munised to ensure that polio cannot quacks, charlatans and frauds. As the im- which can cause serious infections. The spread among unvaccinated individuals if portance of antiseptics became more antibacterial effects were persistent, too. it is ever reintroduced. widely understood, white was also They survived more than 30 washes. Acoalition ofinternational health orga- thought to have the advantage of showing The chemistryinvolved, which ispretty nisations therefore descended on Morobe any soiling. straightforward, means the method province when the first case was con- Nowadays many doctors are likely to should be reasonably easy to scale up. The firmed, to conduct immunisations and im- wear everyday clothes, or blue or green researchers are already talking to firms prove surveillance in order to contain the “scrubs”, which are said to reduce eye about the possibilities of doing so. And spread of the virus. These groups are right strain in brightly-lit operating theatres. work is continuing to improve the process to be vigilant. The longera vaccine-derived White coats are reckoned to be capable of and to treat the surfaces of other materials. polio virus is permitted to circulate un- spreading diseases as easily as clothing of Besides medical clothing, the coating abated, the more people it can infect and any other colour, especially when long might, for instance, be employed for gar- the more time ithasto evolve into a proper- sleeves brush against multiple surfaces. ments worn in industries such as food pro- ly adapted pathogen. Many clinics and hospitals now have a cessing, which need to avoid bacterial The rapid reaction to the situation in “bare below the elbows” policy for staff, contamination. Morobe province means this outbreak whether in uniform or their own clothes. Dr Liu is considering other uses for his might soon be contained, with few addi- This is also supposed to encourage more invention, as well. One ofhis thoughts is to tional instances of paralysis. But for a pre- thorough handwashing. make conductive threads that could form ventable disease with no cure and crip- What, though, if the clothes worn by part of electrical circuits woven into cloth- pling symptoms, even a handful ofcases is medical staff could actively help prevent ing. Such circuits might, for instance, link serious. And there are many other places bugs being passed around? Some metals, sensors that monitor the body. They might in the world where a lack of proper sewer- such as gold and silver, have natural anti- even carry current and signals to other fi- age and inadequate vaccination might al- bacterial properties and are used to coat bres, treated to change colour in response, low something similar to happen. Sanita- certain solid items, such as medical im- to produce fabrics that vary in hue and pat- tion and hygiene, unglamorous though plants. But putting metallic coatings onto tern—maybe to reflect, as detected by sen- they are, rank highly among development stretchy and foldable fabrics is tricky, and sors, the wearer’s mood. A doctor could goals forgood reason. 7 those coatings can quickly be swept away then have a coat ofmany colours. 7 74 Books and arts The Economist June 30th 2018

Also in this section 75 Royalty and revolution 76 Race, crime and justice in America 76 A history of skyscrapers 77 How to teach literature

For daily analysis and debate on books, arts and culture, visit Economist.com/culture

Revisiting the cold war now been ousted by richly textured Soviet citizens. “The Americans” is concerned as The thaw much with the marriage of Philip and Eliz- abeth Jennings, the Russian agents (pictured), and the trials of raising their children in America, as with espionage. The pair grapple with guilt and the meaning of freedom. Flashbacks to their country’s Sta- Fortoday’s film-makers and audiences, the confrontation with the Soviet Union is lin-era suffering help explain their devo- more than a storyofgood versus evil tion to their mission; even so, doubts and HE cold war was fought as much in the Cold”, about a British spy’s assignment in disillusionment with the Soviet cause Timagination as on the battlefield. Each East Germany, is also in the works. creep in. Supporting roles are thoughtfully side sought to project images of social and These productions diverge strikingly rendered, too, such as a Soviet diplomat cultural superiority; stories of people cor- from the Manichean tone of many block- who is willing to commit treason for the rupted by the decadent West or persecuted busters made during the conflict, especial- greater good. by the KGB were turned into weapons. ly those from the tub-thumping Reagan era So human are these characters, in fact, This struggle was largely waged on screen, (Mr le Carré was always a subtle excep- that viewers are persuaded not only to em- in shows and films that were subject to vation). For example, Ivan Drago, the antago- pathise with them, but to hope they evade ryingdegrees ofgovernment involvement. nist of “Rocky IV” (1985), was an emotion- capture—even as they kill and blackmail When the Berlin Wall fell, and the Soviet less brute: “If he dies,” he memorably says Americans. The hope cultivated by “Bridge Union followed, writers and directors put ofa defeated American boxer, “he dies.” So ofSpies” is that RudolfAbel, the affable So- down their arms. Barely any films about was Podovsky, a Russian torturer, in the viet agent, will not be executed after he is the cold warwere made in the years imme- “Rambo” series. In “From Russia With sent home. In “The Shape of Water”, Dimi- diately following its end. Love” (1963), the assassin Rosa Klebb rel- tri Mosenkov, an undercover Soviet scien- Nearly three decades later, American ished inflicting pain on both her compatri- tist, is an ally in saving the Amphibian drama is revisiting the period with a ven- ots and her enemies. In his book “Holly- Man. Mosenkov’s survival is vital for the geance. There were occasional cold-war wood’s Cold War”, Tony Shaw, a historian, creature’s own safety and its relationship films in the early 21st century, such as summarises the celluloid Soviets of yore: with Elisa, the heroine. “Charlie Wilson’s War” (released in 2007), “the male of the species normally sported In these stories, the idea of Western su- but the revival began in earnest with “The a cheap suit, a black hat and an ugly face periority—either moral or professional—is Americans”, a TV series that from 2013 fol- …the rare female communist was either a questionable. In the case of “The Ameri- lowed deep-cover KGB agents in Washing- nymphomaniac or frigid and repressed.” cans”, it can be laughable: one ofthe series’ ton. Its finale aired last month. “Bridge of funniest moments comes when the head Spies” (2015), a film directed by Steven Brothers in arms of counter-intelligence at the FBI discovers Spielberg, told the story of a lawyer in- “They” were cold-blooded criminals, sub- that his secretary has secretly married a structed to defend a Soviet spy. The drive versives and deviants; “we” were enlight- KGB officer. The villain of “The Shape of for scientific dominance forms the back- ened defenders of democracy and free- Water” is not Mosenkov but a repulsive drop for both “Stranger Things”, one of dom. Even in grittier, more realistic works, American colonel. In “Stranger Things”, Netflix’s biggest shows, and “The Shape of the motivations of communist characters the bad guys are scientists on the Ameri- Water”, winner ofthis year’s Oscar forbest were rarely explored. They existed mostly can government’s payroll, who use the picture. “The White Crow”, currently in as “foils against which the men ofthe West cold war as a pretext for dangerous and ex- production, is a biopic ofRudolfNureyev, a demonstrated their superior skills,” says ploitative experiments. Russian ballet dancer who defected in 1961. Michael Kackman of the University of The richness of these new storylines in A new six-part adaptation of John le Wisconsin-Madison. partreflectsthe intellectual dividend ofthe Carré’s “The Spy Who Came in from the These hard-faced psychopaths have Soviet Union’s fall. The overseers of “The 1 The Economist June 30th 2018 Books and arts 75

2 Americans”—Joe Weisberg, himself a for- Royalty and revolution all over Europe were linked to the Roma- mer CIA officer, and Joel Fields—based de- novs by a dense matrix of blood ties; they tails and plot points on archive material Family values shared both the griefforthe tsarand the in- that was previously inaccessible. They en- choate urge to help. But could they ever listed Masha Gessen, a Russian-American have saved their Russian cousins? That is writer, to ensure their Russian dialogue the question Ms Rappaport tackles, comb- would feel idiomatic. Likewise, Simon ing intelligently through the often bowd- Cornwell, Mrle Carré’s son and a producer lerised archives of several countries, and The Race to Save the Romanovs: The Truth on the new version of “The Spy Who trying to get past the romantic tone of Behind the Secret Plans to Rescue Russia’s Came in from the Cold”, says it will incor- much previous writing on the subject. Imperial Family. By Helen Rappaport. St porate documentary evidence that was She confirmsthatin March 1917, afterthe Martin’s Press; 400 pages; $28.99. unavailable when the novel waswritten in tsar’s abdication, there was discussion in Hutchinson; £25 the early1960s.“Fora writerwhose work is high British places about the Russian roy- so grounded in reality—he had no access to N LATE July 1918, as British forces slogged als’ future. George V was soon convinced that reality,” he says of his father. Now the Ithrough the last months of a terrible war, that receiving his cousin in Britain, along production team has been “able to spend King George V decreed that his court with the tsar’s allegedly pro-German wife, time in the Stasi archives, to spend time should wear mourning clothes for a would not only compromise the national with people who were on the East German month—not for his own country’s dead, interest but harm the British monarchy. side,” Mr Cornwell says. “There is room in but for a foreign sovereign whose demise Britons might feel that their king had put the six-hour format to explore both sides.” in a remote place had just been confirmed. family feeling before matters of state. The But the political mood in Britain and As Helen Rappaport vividly describes in Provisional Government in Petrograd America has also played a part. Confi- “The Race to Save the Romanovs”, King would have collaborated in an evacuation dence in Western intelligence services was George and Queen Mary then attended a of the Romanovs, but in London it was never unqualified. In Mr le Carré’s novel, memorial service at London’s only Rus- keenly hoped that some other place of ex- Control, a British intelligence chief, blithe- sian Orthodox chapel. Amid the swirling ile would be found. ly acknowledges that “You can’t be less incense and Slavonic chants, the royal cou- As Ms Rappaport recounts, Germany’s ruthless than the opposition simply be- ple visibly shared the mostly Russian con- Kaiser Wilhelm had an equally strong sen- cause your government’s policy is benevo- gregation’s grief,notjust forone slain mon- timental concern for the Russian royals; he lent, can you now?” But faith in Western arch but for a dynasty and an era. was godfather to the sickly heir Alexei, and spooks has drastically decreased in the The British king (pictured right) must was fond of the other royal children. Dur- wake of the Iraq war and recent surveil- have felt guilt as well as family bereave- ing the Romanovs’ final months of incar- lance scandals. Moreover, forall the talk of ment. He was lamenting his first cousin, ceration in Yekaterinburg, many observers a “newcold war”, and despite VladimirPu- Tsar Nicholas II (left), to whom he bore an felt that if anybody could save the Roma- tin’s election-meddling and revanchism, uncannyresemblance. The Bolshevikshad novs, it must be Germany. After all, the most English-speaking viewers no longer by then acknowledged killing “Nicholas Germans had already come to terms with feel they face an existential threat from Romanov”, but they suppressed the news the Bolsheviks and sealed a treaty that Russia. The imperative to deflect criticism that Empress Alexandra and their five chil- knocked Russia out ofthe war. outward, so conspicuous in the 1980s, no dren, plus four loyal retainers, had been But as the kaiser learned whenever he longer applies. The dissipating fear has slain simultaneously,on July17th. That un- tried to raise the fate of his kin, Germany made it easier to focus on the personal side pleasant truth only emerged several was playing a complex game, parleying ofthe stand-off. months later; rumours that one or more with all the forces vying to prevail in the Above all, perhaps, these nuanced nar- children had survived persisted for years. chaos engulfing Russia and Ukraine. A ratives reflect the evolution of audience So by the late summer of1918, efforts to spectacular evacuation of the Romanovs tastes. Used to navigatingmoral minefields save whatever might remain of the fam- would not have helped. Another problem in shows such as “The Wire” and “The So- ily—pointless, as it turned out—were inten- was the tsar’s unwillingness, as a Russian pranos”, viewers have outgrown simplis- sifying. The predicament was not the patriot, to let the Germans rescue him. tic tales ofgood and evil. Proofwas offered king’s alone. Royal and aristocratic houses Few people showed real, disinterested by “Red Sparrow”, a film released earlier concern for the Russian royals. One was this year that starred Jennifer Lawrence as King Alfonso of Spain, who was himself a Russian seductress targeting a CIA agent. toppled by anti-monarchist fury in the It was “designed to make Americans feel 1930s. Another was Empress Alexandra’s good about [themselves] by showing how sister, the Marchioness of Milford Haven, much nicer [their] spies are than their Rus- who had the pragmatic idea that even if sian counterparts,” says Denise Young- the imperial couple and their son were blood, a historian of Russian and Soviet doomed, the princesses might settle quiet- cinema. Judging by its box-office perfor- ly on the Isle ofWight. mance, the formulaic plot was a turn-off. There is bitter irony in the story Ms Rap- Bringing Soviet characters in from the paport skilfully tells. Posterity finds some- cold, mapping their private conflicts with thing horrifying about the sovereigns of geopolitical ones, makes more compelling Europe, who virtually formed a single ex- drama. And it reminds viewers to doubt tended family, sending their subjects to generalisations about history that occlude slaughter one another. But in the end, na- the experiences and complexities of indi- tionalism also constrained the family loy- viduals. “Because Russia has always been alties of the continent’s monarchs, who a land of villains,” Rodric Braithwaite, a could or would not save their Russian rela- former British ambassador to Moscow, tivesfrom murder—the centenaryofwhich once wrote, “it is also a land of heroes and will be commemorated in Russia next saints.” Hollywood is at last imaginative month. The rites will be solemn, but the enough to make room forall ofthem. 7 Embarrassing relatives massacre was a gruesome mess. 7 76 Books and arts The Economist June 30th 2018

Race, crime and justice in America This is an uneven but often beautifully The first architect was John Wellborn written book. Its author will inevitably be Root, who as a boy had fled Sherman’s Black, white and compared with Ta-Nehisi Coates, recently march on Atlanta during the civil war. hailed asthe essential voice ofblack Amer- After his untimely death in 1891 at the age grey ica. But Mr Bailey’s writing has much more of 41, his colleague Daniel Burnham (who concrete detail on lives lived one misjudg- would design the Flatiron Building) enlist- ment away from prison. He offers few poli- ed Charles Atwood to help. Later Atwood cy solutions, and is not striving to be the further distinguished himself with his My Brother Moochie: Regaining Dignity in voice of his people. He is trying to be a work forChicago’s World’s Columbian Ex- the Face of Crime, Poverty and Racism in good husband and father. position of 1893—the “White City” built to the American South. By Issac J. Bailey. And a brother. One day, he gets a stun- celebrate the 400th anniversary of Chris- Other Press; 304 pages; $25.95 and £21.99 ning text message. After countless unsuc- topher Columbus’s arrival in America. SSAC BAILEY’S first book does not open cessful parole hearings and 32 years in jail, “Skyscraper” is not a tale of architects’ Iwith the brother ofthe title. Instead, he is Moochie will be freed. Can America, a egos and the trials of grand construction face to face with his son: he is furious, and country that prizes new beginnings, give a projects, which is a shame. Alittle more de- he wants the boy to know it. The son is blackman in his 50s with a murder convic- tail about the characters involved, and the guilty of little more than routine teenage tion a second chance? Mr Bailey’s book scents and sounds of a great city at the mischief. But Mr Bailey is fighting the urge leaves its reader hopeful that he will have dawn of the 20th century, would have en- to beat him. His brotherMoochie, in prison more, and happier, stories to tell. 7 livened its pages. But Mr Cruickshank does for murder, is always on his mind. Looking develop a convincing case for the Reliance at his son, “my instinct was to crush his Building—which today looks almost whol- soul to save his blackbody.” Architectural history ly unexceptional—as the forerunner of Mr Bailey grew up poor and black with groundbreaking work by later architects ten siblings and a nephew in a trailer in On State Street, such as Walter Gropius and Mies van der South Carolina. Some of them have done Rohe. Mr Cruickshank shows the debt well; some of them have done time. The that great street owed to the Reliance’s elegant lines by suc- mostdramaticfate isthatofMoochie: intel- cessors such as the Seagram Building in ligent, athletic and charismatic, he was his New York and Chicago’s own Sears Tower siblings’ hero. He killed a white man in a (now called the Willis Tower). Skyscraper. By Dan Cruickshank. Head of dispute over money Moochie had stolen; The radical became quotidian; such is Zeus; 301 pages; £9.99 Mr Bailey was nine years old. the history of modern design. In the same What went wrong with the half of the ARK TWAIN was dazzled by the way, the Brooklyn Bridge, the Eiffel Tower men in Mr Bailey’s immediate family who MWindy City.“It is hopeless for the oc- andtheLloydsBuildingwereunprecedent- went to prison? Some relatives think his casional visitor to try to keep up with Chi- ed achievements which now blend into mother should have beaten the younger cago,” he wrote in 1883. “She outgrows his their landscapes, while the risks taken to ones as she had the older. That doesn’t ex- prophecies fasterthan he can make them.” build them, and the rows over whether plain Moochie, the eldest. Is it the lack of a From mail-order to the remote control, the they should be built at all, vanish into the responsible father? That doesn’t fit either. Ferris wheel to the drive-in bank—Chicago past. A structure is most successful when it Mr Bailey himself repeatedly watched his was the birthplace of them all. And while almost seems to disappear. Mr Cruick- drunken father batter his mother. And sev- the term “skyscraper” has come to connote shank does a valuable service in making eral of the youngest boys, raised by a de- New York landmarks such as the Flatiron, the nearly invisible visible once again. 7 cent stepfather, go to prison too. Woolworth and Empire State buildings, it Mr Bailey fought through a stutter—per- was first used to describe towers that rose haps brought on by the loss ofMoochie—to on the shores ofLake Michigan. become an award-winningjournalist. And Dan Cruickshank’s “Skyscraper” takes yet he knows he was a few small mistakes a single Chicago building as the apotheosis from ending up as his brothers had. In the of the form. Mr Cruickshank, a British ar- South, he rarely encounters personal rac- chitectural historian, calls the Reliance ism. Butrace isever-presentanyway; white Building (pictured) “the most architectur- folk are not shy of telling him that black ally consistent, functionally excellent, vi- victims of police violence did something sually restrained, structurally rational and to earn their fate. But Mr Bailey does not technologically innovative high-rise then call them racists. He reminds the reader built” and “the key prototype for high-rise that, like Moochie, theyare more than their architecture of the coming century.”When worst impulses. the 200-foot-tall building opened in the Hisbookposesa hard question: to what spring of 1895, The Economist hailed it as extent are people victims of forces beyond “the most elegant [building] yet erected in their control, such as racism and poverty? Chicago for business purposes”. Conversely, how far are their mistakes Construction began in 1890 as part of their own? Mr Bailey rattles offevidence of thegreatrenewalofthecityafterthedevas- systemic racism, but, looking at his youn- tating fire of1871. The project had an unusu- gest brothers, he sees their failings, not al start. Tenants in the five-storey building black or white America’s. He wants to give that occupied the site on North State Street his country the benefit of the doubt. Still, refused to give up theirleases; work started he is reduced to furyand despairby repeat- on the lower floors of the new building ed news stories of ghastly, public violence while the upper storeys of the old one— against unarmed black men. Everyone and their recalcitrant occupants—were makes mistakes, runs one of Mr Bailey’s raised on jackscrews until those pesky themes—but blackmen’s cost more. leases expired. Things they don’t do on Broadway The Economist June 30th 2018 Books and arts 77

How to teach literature says another acolyte. He was one of the last generation of fel- The art of pouncing lows to live in college, and his life was en- twined with his students’ lives beyond the confines of lessons. He held parties (“Come and be louche”, read the invita- tions), where poetry was read, and Wagner CAMBRIDGE and the Pet Shop Boys were played at full The voice ofa brilliant and unorthodoxteachercan be heard in his lectures blast. He flirted. Atrip to Tennyson country in Lincolnshire ended with whiskey being RESSED in a leather jacket and a shoe- swilled in a ditch. Not everyone enjoyed If Not Critical. By Eric Griffiths. Edited by lace-thin tie, or with Armani trousers the tutelage of a charismatic teacher who D Freya Johnston. Oxford University Press; flapping around his trainers, Eric Griffiths was part exacting literary conscience, part 272 pages; $35 and £25 would begin as soon as he reached the lec- Pied Piper. Especially after a drink, Mr Grif- tern. He spoke, asHamletinstructed the ac- fiths’s tongue could be harsh. He once dis- tors, “trippingly”, pausing only to take Mr Griffiths attracts superlatives. The missed a female student’s contribution as small sips of a drink that looked like water, Guardian once declared him the “cleverest “mildly decorative”. or one that looked like apple juice. His lec- man in England”. Donald Davie, a poet Such asperity came backto bite him. He tures were packed; they were such a hot and critic, called him the “rudest man in thrived as a media don in the 1980s, when ticket at Cambridge in the 1980s that Varsi- the kingdom”. And for many of the pupils TV schedulers enjoyed the sight of high- ty, the student newspaper, listed them in he taught over 30 years at Trinity College, brows feasting on pop culture; he filmed a its entertainment guide. When Robert Cambridge, he was the greatest teacher documentary about Talking Heads, one of Douglas-Fairhurst, now a professor of Eng- they ever had. From today’s perspective, his favourite bands. But his career was de- lish at Oxford University, first attended, he his approach was, to say the least, unortho- railed after he sniped on-air that A.S. asked the student next to him, “Are these dox. He would tease and mock, provoke Byatt’s Booker-winning novel, “Posses- going to be any good?” “Don’t bother tak- sion”, was “the kind of novel I’d write if I ing notes,” she said, “just enjoy the show.” was foolish enough not to know I couldn’t The performance was electrifying. Not write a novel”. In 1998 he was embroiled in just because the audience was uncertain a scandal after a state-school applicant whether, at any moment, Mr Griffiths (pic- claimed that, duringherinterview, Mr Grif- tured) might hurl a book or jump off the fiths pointed to some words in Greek and stage or produce a drum to beat out the said, “being from Essex you wouldn’t rhythm of a line of poetry. Or because his know what these funny squiggles are.” voice might rise into a pinpoint impression of Dame Edna Everage, or of a character Alas and alack from “EastEnders”, a British soap-opera, He disputed that account, but the college speakingcod-Shakespearean pentameters. stopped him interviewing. The press por- Because it seemed as if he had something trayed him as a snob, though he was the fresh to say about every word in European son of a Liverpool docker and himself literature and the spaces between them. state-educated. As it turned out, 1998 was a A selection ofMr Griffiths’s lectures has watershed for British education more now been published as “If Not Critical”. It widely. The Labour government intro- would be heretical to say their wit, vitality duced tuition fees, which made the rela- and acumen leap off the page, because Mr tionship between students and universi- Griffiths does not think words work that ties more transactional. Mr Griffiths’s way. In the “Printed Voice of Victorian Po- bracing style was not in keeping with the etry”, his only full-length book, he argued era of student-satisfaction surveys. He car- thatwritten textsare knotted with ambigu- and scorn. Colin Burrow, who was taught ried on teaching, but was calmer and more ity because they lack the cues of speech— by Mr Griffiths before becoming a col- self-contained. His belief that you could tone, gesture, facial expression and so on. league, recalls that “he had the enormous mould the mind of an 18-year-old dwin- The greatest works of literature are thus la- art of pouncing on what looked like a mi- dled. A blackboard in his rooms bore the tent with possible readings. nor infelicity of phrasing and then teasing words, “How the fuckshould I know?” “IfNot Critical” covers writers he prizes out from that the gross conceptual error In 2011, after being hospitalised for a such as Shakespeare, Dante and Racine. that lay beneath it. One would sit there heart-attack, Mr Griffiths suffered a stroke. The word “Divina” of the “Divina Come- …feeling a bit like a terrified mouse con- He was 57; he has since spoken only in stut- dia”, Mr Griffiths says, is a publisher’s puff fronted by a devastating feline opponent.” ters. It was as if he had been struck down that “means something like ‘fabulous But his ferocity was a sign that he cared. with the vengeful precision ofGreekmyth: poem, darling, loved it loved it loved it’.” He cherished his students’ potential too if a special circle of hell were constructed He is one of the most skilful practitioners much to let them wallow in sloppy forhim, he once said, it would involve hav- of close reading, an approach to criticism thoughts. He examined their work with as ing his tongue cut out. But the voice—pre- indigenous to Cambridge. His attention to much scrutiny as he devoted to T.S. Eliot cise, interrogatory and sarcastic, and also, detail is never pedantic, but provides clues and Wordsworth. Simon Russell Beale, an in private, generous and encouraging—can to attitudes and beliefs. For example, the actor, remembers that he would write his still be heard. “I can only read ‘If Not Criti- epithet “Kafkaesque” is often lazily ap- essays on one side of the paper and Mr cal’ in small bits”, says his friend, the poet plied to any situation with a tingle of bu- Griffiths would respond with an essay of Alice Goodman, “because it’s his voice.” reaucratic menace; Mr Griffiths shows his own on the back. A tick in the margin From his hospital bed, he told a friend that how the mood is produced by small words was gold-dust. “I left every lecture and ev- “ifthat was the last lecture I give, I’m glad it such as “if” and “but”, around which Kaf- ery class thinking that I had learned more was on the important semantic differences ka’s sentences twist and pivot. about trying to be a better human being,” between ‘alas’ and ‘alack’.” 7 78 Courses

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The Economist June 30th 2018 80 Economic and ﬁnancial indicators The Economist June 30th 2018

Economic data % change on year ago Budget Interest Industrial Current-account balance balance rates, % Gross domestic product production Consumer prices Unemployment latest 12 % of GDP % of GDP 10-year gov't Currency units, per $ latest qtr* 2018† latest latest 2018† rate, % months, $bn 2018† 2018† bonds, latest Jun 27th year ago United States +2.8 Q1 +2.2 +2.8 +3.5 May +2.8 May +2.5 3.8 May -465.5 Q1 -2.6 -4.6 2.88 - - China +6.8 Q1 +5.7 +6.6 +6.8 May +1.8 May +2.3 3.9 Q1§ +121.0 Q1 +1.1 -3.5 3.44§§ 6.60 6.81 Japan +1.1 Q1 -0.6 +1.3 +2.6 Apr +0.6 May +1.1 2.5 Apr +196.2 Apr +3.9 -4.7 0.01 110 112 Britain +1.2 Q1 +0.4 +1.4 +1.8 Apr +2.4 May +2.5 4.2 Mar†† -106.7 Q4 -3.8 -1.8 1.41 0.76 0.78 Canada +2.3 Q1 +1.3 +2.3 +4.9 Mar +2.2 May +2.1 5.8 May -53.8 Q1 -2.6 -1.9 2.09 1.33 1.32 Euro area +2.5 Q1 +1.5 +2.3 +1.7 Apr +1.9 May +1.6 8.5 Apr +485.5 Apr +3.2 -0.8 0.32 0.86 0.89 Austria +3.4 Q1 +9.7 +2.9 +5.9 Apr +1.9 May +2.2 4.9 Apr +7.7 Q4 +2.3 -0.6 0.44 0.86 0.89 Belgium +1.5 Q1 +1.3 +1.7 +2.9 Apr +1.8 May +1.8 6.3 Apr -0.8 Dec -0.3 -0.9 0.74 0.86 0.89 France +2.2 Q1 +0.6 +2.0 +2.1 Apr +2.0 May +1.8 9.2 Apr -5.3 Apr -1.0 -2.4 0.66 0.86 0.89 Germany +2.3 Q1 +1.2 +2.2 +2.0 Apr +2.2 May +1.7 3.4 Apr‡ +322.8 Apr +7.9 +1.1 0.32 0.86 0.89 Greece +2.3 Q1 +3.1 +1.8 +1.9 Apr +0.6 May +0.7 20.1 Mar -2.9 Apr -1.2 -0.3 4.05 0.86 0.89 Italy +1.4 Q1 +1.1 +1.4 +1.9 Apr +1.0 May +1.2 11.2 Apr +53.5 Apr +2.7 -2.0 2.83 0.86 0.89 Netherlands +2.8 Q1 +2.3 +2.8 +5.0 Apr +1.7 May +1.5 4.8 May +91.2 Q1 +9.7 +0.8 0.51 0.86 0.89 Spain +2.9 Q1 +2.8 +2.7 +11.0 Apr +2.1 May +1.5 15.9 Apr +24.3 Mar +1.8 -2.2 1.29 0.86 0.89 Czech Republic +3.7 Q1 +1.6 +3.5 +5.5 Apr +2.2 May +1.8 2.3 Apr‡ +0.9 Q1 +0.7 +0.9 2.20 22.3 23.3 Denmark -1.3 Q1 +1.7 +1.8 +6.1 Apr +1.1 May +1.1 4.0 Apr +20.9 Apr +7.7 -0.7 0.34 6.43 6.59 Norway +0.3 Q1 +2.5 +1.9 -1.3 Apr +2.3 May +2.2 3.7 Apr‡‡ +22.8 Q1 +6.5 +4.9 1.84 8.15 8.43 Poland +5.2 Q1 +6.6 +4.2 +5.3 May +1.7 May +1.7 6.1 May§ -0.8 Apr -0.7 -2.2 3.23 3.74 3.74 Russia +1.3 Q1 na +1.8 +3.7 May +2.4 May +3.0 4.7 May§ +41.7 Q1 +3.3 +0.3 8.13 62.9 59.0 Sweden +3.3 Q1 +2.9 +2.7 +3.2 Apr +1.9 May +1.7 6.5 May§ +16.8 Q1 +3.4 +0.8 0.53 8.93 8.65 Switzerland +2.2 Q1 +2.3 +2.2 +9.0 Q1 +1.0 May +0.8 2.6 May +72.9 Q1 +9.2 +0.8 nil 1.00 0.96 Turkey +7.4 Q1 na +4.3 +5.1 Apr +12.1 May +10.9 10.1 Mar§ -57.1 Apr -5.5 -2.8 16.73 4.60 3.51 Australia +3.1 Q1 +4.2 +2.8 +4.3 Q1 +1.9 Q1 +2.2 5.4 May -36.8 Q1 -2.5 -1.0 2.64 1.35 1.32 Hong Kong +4.7 Q1 +9.2 +3.6 +1.0 Q1 +2.1 May +2.5 2.8 May‡‡ +14.2 Q1 +3.7 +1.9 2.23 7.85 7.80 India +7.7 Q1 +10.1 +7.3 +4.9 Apr +4.9 May +4.7 5.3 May -48.7 Q1 -2.2 -3.5 7.87 68.6 64.5 Indonesia +5.1 Q1 na +5.3 +4.7 Apr +3.2 May +3.6 5.1 Q1§ -20.9 Q1 -2.2 -2.5 7.58 14,178 13,328 Malaysia +5.4 Q1 na +5.6 +4.5 Apr +1.8 May +1.9 3.3 Apr§ +12.2 Q1 +2.7 -3.3 4.22 4.03 4.29 Pakistan +5.4 2018** na +5.4 +4.2 Apr +4.2 May +5.0 5.9 2015 -16.7 Q1 -5.8 -5.4 8.95††† 121 105 Philippines +6.8 Q1 +6.1 +6.4 +31.0 Apr +4.6 May +5.1 5.5 Q2§ -1.9 Mar -1.2 -1.8 6.42 53.5 50.3 Singapore +4.4 Q1 +1.7 +3.2 +11.1 May +0.4 May +0.8 2.0 Q1 +61.7 Q1 +20.4 -0.7 2.55 1.36 1.39 South Korea +2.8 Q1 +4.1 +2.9 +0.9 Apr +1.5 May +1.8 4.0 May§ +69.2 Apr +4.8 +0.9 2.58 1,118 1,137 Taiwan +3.0 Q1 +0.8 +2.7 +3.1 Mar +1.6 May +1.5 3.7 May +84.8 Q1 +13.5 -0.9 0.95 30.4 30.3 Thailand +4.8 Q1 +8.1 +4.1 +3.2 May +1.5 May +1.4 1.1 Apr§ +50.2 Q1 +9.8 -2.9 2.55 33.0 34.0 Argentina +3.6 Q1 +4.7 +2.2 -0.8 May +26.4 May +25.1 9.1 Q1§ -33.8 Q1 -4.6 -5.1 8.47 27.3 16.4 Brazil +1.2 Q1 +1.8 +2.2 +8.9 Apr +2.9 May +3.4 12.9 Apr§ -13.0 May -1.1 -7.1 9.50 3.84 3.31 Chile +4.2 Q1 +4.9 +3.7 +7.6 Apr +2.0 May +2.4 6.7 Apr§‡‡ -3.1 Q1 -1.1 -2.0 4.58 646 662 Colombia +2.8 Q1 +2.8 +2.5 +10.4 Apr +3.2 May +3.3 9.5 Apr§ -9.8 Q1 -3.0 -2.0 6.61 2,928 3,021 Mexico +1.3 Q1 +4.6 +2.1 +3.8 Apr +4.5 May +4.4 3.2 May -15.9 Q1 -1.7 -2.3 7.71 20.0 17.9 Peru +3.2 Q1 +5.6 +3.7 +20.3 Apr +0.9 May +1.7 7.0 Mar§ -2.9 Q1 -1.6 -3.5 na 3.27 3.25 Egypt +5.3 Q4 na +5.4 +3.7 Apr +11.5 May +17.5 10.6 Q1§ -9.3 Q4 -3.2 -9.6 na 17.9 18.1 Israel +4.0 Q1 +4.5 +3.8 +3.8 Apr +0.5 May +1.5 3.9 May +9.7 Q1 +2.6 -2.4 2.00 3.64 3.52 Saudi Arabia -0.9 2017 na +1.0 na +2.3 May +4.4 6.0 Q4 +15.2 Q4 +7.0 -4.4 na 3.75 3.75 South Africa +0.8 Q1 -2.2 +1.9 -1.6 Apr +4.4 May +4.8 26.7 Q1§ -12.2 Q1 -2.7 -3.5 8.95 13.7 12.9 Source: Haver Analytics. *% change on previous quarter, annual rate. †The Economist poll or Economist Intelligence Unit estimate/forecast. §Not seasonally adjusted. ‡New series. **Year ending June. ††Latest 3 months. ‡‡3-month moving average. §§5-year yield. †††Dollar-denominated bonds. The Economist June 30th 2018 Economic and ﬁnancial indicators 81

Markets % change on Global drug production Cocaine* manufacture†, tonnes, ’000 Dec 29th 2017 Production of plant-based illicit drugs 1.5 Index one in local in $ Jun 27th week currency terms has surged in recent years, according to 1.2 UN United States (DJIA) 24,117.6 -2.2 -2.4 -2.4 the Oﬃce on Drugs and Crime. Global 0.9 China (Shanghai Comp) 2,813.2 -3.5 -14.9 -15.5 opium production rose by 65% in 2017, to 0.6 Japan (Nikkei 225) 22,271.8 -1.3 -2.2 +0.3 10,500 tonnes, the highest level since 0.3 Britain (FTSE 100) 7,621.7 -0.1 -0.9 -3.0 records began. Most of it was grown in Canada (S&P TSX) 16,231.3 -1.2 +0.1 -5.7 0 Afghanistan, where political instability 2006 08 10 12 14 16 17 Euro area (FTSE Euro 100) 1,181.6 -1.5 -2.3 -5.1 and rural poverty helps to explain why Euro area (EURO STOXX 50) 3,397.1 -1.2 -3.0 -5.8 Opium production†, tonnes, ’000 Austria (ATX) 3,264.5 +0.5 -4.6 -7.3 production reached 9,000 tonnes. Global 10 Belgium (Bel 20) 3,729.1 -0.6 -6.3 -8.9 cocaine manufacture also reached record France (CAC 40) 5,327.2 -0.8 +0.3 -2.6 levels in 2016 (the latest year for which 8 Germany (DAX)* 12,348.6 -2.7 -4.4 -7.1 data are available), rising by 25% year on 6 Greece (Athex Comp) 767.9 +0.3 -4.3 -7.0 year to 1,410 tonnes. More than half of 4 Italy (FTSE/MIB) 21,557.9 -2.5 -1.4 -4.2 this amount came from Colombia, where 2 Netherlands (AEX) 552.2 -0.5 +1.4 -1.5 coca-bush cultivation has signiﬁcantly 0 Spain (IBEX 35) 9,658.6 -1.3 -3.8 -6.6 increased. Unsurprisingly, global drug 2006 08 10 12 14 16 17 Czech Republic (PX) 1,051.7 -1.7 -2.5 -6.7 seizures are also on an upward trend. Source: UNODC *Hypothetical output of 100% purity †Estimate Denmark (OMXCB) 886.6 -1.1 -4.4 -7.2 Hungary (BUX) 35,587.5 +0.6 -9.6 -16.5 Norway (OSEAX) 1,008.1 +0.4 +11.2 +11.9 Poland (WIG) 56,101.8 -0.9 -12.0 -17.8 Other markets The Economist commodity-price index Russia (RTS, $ terms) 1,124.8 +0.5 -2.6 -2.6 2005=100 % change on % change on Sweden (OMXS30) 1,540.9 -2.0 -2.3 -9.6 Dec 29th 2017 one one Switzerland (SMI) 8,504.5 -0.6 -9.4 -10.8 Index one in local in $ Jun 19th Jun 26th* month year Turkey (BIST) 95,954.8 +1.5 -16.8 -31.8 Jun 27th week currency terms Dollar Index Australia (All Ord.) 6,290.5 +0.3 +2.0 -3.3 United States (S&P 500) 2,699.6 -2.4 +1.0 +1.0 All Items 149.2 147.3 -5.9 +5.2 Hong Kong (Hang Seng) 28,356.3 -4.5 -5.2 -5.6 United States (NAScomp) 7,445.1 -4.3 +7.8 +7.8 Food 147.9 146.5 -8.1 -2.2 India (BSE) 35,217.1 -0.9 +3.4 -3.2 China (Shenzhen Comp) 1,575.6 -2.3 -17.0 -17.6 Indonesia (JSX) 5,787.5 -1.6 -8.9 -12.9 Japan (Topix) 1,731.5 -1.2 -4.7 -2.3 Industrials Malaysia (KLSE) 1,666.1 -2.6 -7.3 -6.7 Europe (FTSEurofirst 300) 1,486.5 -1.1 -2.8 -5.6 All 150.6 148.0 -3.5 +13.9 Pakistan (KSE) 41,718.0 -3.0 +3.1 -6.3 World, dev'd (MSCI) 2,088.4 -1.4 -0.7 -0.7 Nfa† 141.7 142.4 -3.7 +9.0 Singapore (STI) 3,254.8 -1.8 -4.4 -6.2 Emerging markets (MSCI) 1,067.8 -2.3 -7.8 -7.8 Metals 154.4 150.5 -3.5 +16.0 South Korea (KOSPI) 2,342.0 -0.9 -5.1 -8.9 World, all (MSCI) 504.9 -1.5 -1.6 -1.6 Sterling Index Taiwan (TWI) 10,701.0 -2.1 +0.5 -1.6 World bonds (Citigroup) 938.8 +0.2 -1.2 -1.2 All items 206.1 202.4 -5.6 +1.5 Thailand (SET) 1,618.7 -2.7 -7.7 -8.8 EMBI+ (JPMorgan) 785.2 +0.4 -6.1 -6.1 Argentina (MERV) 25,966.0 -10.8 -13.6 -40.0 Hedge funds (HFRX) 1,262.8§ -0.5 -1.0 -1.0 Euro Index Brazil (BVSP) 70,609.0 -2.1 -7.6 -18.8 Volatility, US (VIX) 15.1 +12.8 +11.0 (levels) All items 160.4 157.0 -6.7 +1.7 Chile (IGPA) 26,796.5 -2.1 -4.2 -8.0 CDSs, Eur (iTRAXX)† 74.2 +9.6 +64.5 +59.8 Gold Colombia (IGBC) 12,250.5 +1.5 +6.7 +8.9 CDSs, N Am (CDX)† 65.8 +4.4 +34.0 +34.0 $ per oz 1,274.1 1,260.8 -3.2 +1.1 Mexico (IPC) 46,874.4 +0.2 -5.0 -6.2 Carbon trading (EU ETS) € 15.3 +5.3 +87.8 +82.5 West Texas Intermediate Peru (S&P/BVL)* 20,005.9 -2.1 +0.2 -0.8 Sources: IHS Markit; Thomson Reuters. *Total return index. $ per barrel 65.1 70.5 +5.7 +59.4 Egypt (EGX 30) 16,176.4 +0.2 +7.7 +7.0 †Credit-default-swap spreads, basis points. §Jun 25th. Israel (TA-125) 1,372.7 -1.0 +0.6 -4.1 Sources: Bloomberg; CME Group; Cotlook; Darmenn & Curl; FT; ICCO; i r ICO; ISO; Live Rice Index; LME; NZ Wool Services; Thompson Lloyd & Saudi Arabia (Tadawul) 8,317.3 +1.8 +15.1 +15.1 Ind cato s for more countries and additional Economist.com/indicators Ewart; Thomson Reuters; Urner Barry; WSJ. *Provisional South Africa (JSE AS) 55,369.3 -2.3 -6.9 -14.9 series, go to: †Non-food agriculturals. 82 Obituary David Goldblatt The Economist June 30th 2018

ing at 02:45 and getting home at 22:00. On heavily subsidised buses, men wrapped in blankets struggle to catnap without falling over onto their neighbours, their dreams constantly disturbed, if not by the green and red light bulbs inside the bus, then by the headlights flaring in from the highway. Goldblatt sold the family clothing store on the Rand in 1963, after his father died. But even as he became a full-time photographer, he never forgot its Afrikaner customers, “austere, upright, unaffected people” who had struggled to tame the land and had lost, at huge cost, the race against the British imperialists. In one picture from 1964, an elderly man stares at the camera. His face is as lined as the bowl ofhis pipe is smooth. At 15 he had fought the British in the Boer war, then against the Germans in South West Africa (now Namibia), the rebels in 1916, the strikers in Johannesburg in 1922, and, as a major, against the Italians and Germans in the second world war. Goldblatt worked with a young New York Times correspondent, Joseph Lely- veld, who was deported in 1966, after the two collaborated on a photo essay about Coloured (mixed-race) people. Despite the Black and white and read all over exposure this work gave Goldblatt in America, it took a long time for him to become well-known internationally. Only in 1998, when he was67, would he have an ex- hibition at the Museum of Modern Art in New York. Never a news photographer, Goldblatt David Goldblatt, photographerofapartheid, died on June 25th, aged 87 did not capture the massacres at Sharpe- WENTY men move as one, chanting. regation and the power of the mining in- ville or Soweto. American editors com- TFor a split second you think of the ele- dustry. It was what Nadine Gordimer, in an plained that they could not see apartheid phants’ march in “The Jungle Book”. Hup. essay accompanying Goldblatt’s photo- in his pictures, but it was always there. His Two. Three. Four. Then you start to see graphs 25 years later, would call “the black fiercest work was reserved for those who what’s not there. It’s hot. The steel railway man’s baptism by darkness and dust into could look without seeing, apartheid’s en- track they have hoisted aloft cuts into their Western civilisation”. His pictures record- ablers, to use a word from another land of shoulders. They have probably been shift- ed feats of strength and endurance: men denial. One example is ofa woman watching rails for hours. David Goldblatt’s first huddling together to avoid falling rocks as ing over a beribboned white toddler. Her published photograph, taken near his they sink a shaft more than a mile below white nappy stretching across her bottom home town west of Johannesburg in 1946 the earth’s surface; concrete workers’ draws your eye as she crawls into a replica when he was about 16, has all the charac- bunks that looklike pigpens; a kopje (small of a Zulu hut at the Voortrekker Monu- teristics that would make him the most hill), like so many made of shovelled sand ment, a bastion of Afrikaner South Africa. famous chronicler of apartheid. It has ab- and rock from the mines, but this one built Another is “Miss Lovely (white) Legs”, a sence—the heat, the unseen if obvious of spades without a worker in sight (again, beauty competition at a supermarket in a overseer—and an atmospheric presence. that power ofabsence). small town outside Johannesburg. Stand- Between the two, between the presence ing in the crowd, watching, are three black and the absence, which is really what en- Blue sky Africans with their arms crossed. Their gages the viewer’s imagination, the photo- In capturing the spirit of an era, Goldblatt gaze is not so much bored as mystified. graph bears witness. followed in the tradition of Dorothea Goldblatt kept taking stands. He shot In a country that was ruled after 1948 by Lange and WalkerEvans, photographers of PresidentNelson Mandela on a plain kitch- a government that needed to control infor- the American Depression. He shot only in en chair, having once posed Christiaan mation—to “distort, suppress and pummel black and white, the better to portray the Heunis, a former constitutional develop- it” in order to preserve the regime, as one blue sky of the South African tourist bro- ment minister, in one of those squishy, ve- commentator wrote—the photograph-as- chures as sinister and harsh. His interest lour fauteuils beloved of social climbers witnessbecame the clincher, an irrefutable spread from the working day to the work- everywhere. He founded the Market Photo way ofspeaking truth to power. ers’ day: what time segregated labourers Workshop to help young photographers. Goldblatt knew about authoritarian- had to leave the KwaNdebele Bantustan Zanele Muholi, the best known of them, ism. In the 1890s his family had fled the where they were compelled to live and says he was a father to her. In a country Jewish pogroms in Lithuania. His two how they got to work in Pretoria, the capi- where the first thing you notice about much older brothers fought against Hitler. tal. He began photographingthe half-life of someone is the colour of their skin, Gold- Almost 18 when apartheid came in, he humans made into zombies by being blatt questioned white people and upheld grew up in a landscape made by racial seg- forced to commute eight hours a day, start- blackpeople’s agency and depth. 7

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