Taiwan and the one-China fiction
IS up against the wall in Mosul
In praise of quinoa, millet and teff
Is there a bubble in the markets? MARCH 11TH–17TH 2017 Quantum leaps
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5 The world this week 32 WikiLeaks, again The spy who came in for the code Leaders 33 Chicago 7 Subatomic opportunities This American carnage Quantum leaps 33 Campus free speech 8 Britain’s budget Blue on blue Spreadsheets v politics 34 Lexington 8 Stockmarkets Safety politics Bubble-spotting 9 Geopolitics The Americas Ryancare The House proposal One China, many meanings 35 Brazil’s president to amend Obamacare may 10 Food snobbery and Accidental, consequential break parts of America’s economics health-insurance market, In praise of quinoa 36 Race in the Caribbean On the cover Curry cultures page 30 After a century stuck in 38 Bello textbooks, mind-bending Letters Stealing Venezuela quantum effects are about to 11 On renewable energy power mainstream innovation: leader, page 7. Middle East and Africa Big firms and startups are Briefing 39 Defeating Islamic State putting some of quantum 17 The one-China policy Mosul on the brink physics’ oddest phenomena The great brawl of China to use: Technology Quarterly, 40 Egypt’s economy after page 42 Green shoots Asia 41 A port for Gaza 21 Australia’s economy Preventing the next war The Economist online On a chiko roll 41 Cameroon Lingua fracas Taiwan The one-China policy is Daily analysis and opinion to 22 Votes in Western Australia Hanson’s return 42 South Africa a preposterous fib—but supplement the print edition, plus America should keep it: audio and video, and a daily chart 23 Free speech in Singapore An epidemic of rape Economist.com leader, page 9. The polite Grumble and be damned fiction that there is only one E-mail: newsletters and 23 North Korea and Malaysia Technology Quarterly: China has helped keep the mobile edition A despot takes hostages Quantum devices peace in East Asia. But it is Economist.com/email 24 Pakistan Here, there and becoming harder to sustain, Print edition: available online by Pak on track? everywhere pages 17-19 7pm London time each Thursday 26 Banyan After page 42 Economist.com/print Where Japan and South Audio edition: available online Korea get on to download each Friday Europe Economist.com/audioedition 43 The Dutch elections China The populists’ dilemma 27 Economic reform 44 A new charter for Turkey Caretaker of the chrysalis Me, the people 28 Non-Communist parties 45 Humanitarian visas Any colour so long as it’s red Another way in? Volume 422 Number 9031 28 Dodging censorship 45 Macedonia’s ethnic crisis Published since September 1843 Xi, the traitor Scared in Skopje to take part in "a severe contest between intelligence, which presses forward, and 46 Strays in Istanbul Mosul The Iraqi army is on the an unworthy, timid ignorance obstructing United States When fat cats are good brink of defeating Islamic our progress." State. But the government 29 Democracy in America 48 Charlemagne Editorial offices in London and also: France’s presidential car must move fast if it is not to Atlanta, Beijing, Berlin, Brussels, Cairo, Chicago, Everything-gate Lima, Mexico City, Moscow, Mumbai, Nairobi, crash squander its victory, page 39 New Delhi, New York, Paris, San Francisco, 30 Replacing Obamacare São Paulo, Seoul, Shanghai, Singapore, Tokyo, Medicine or poison? Washington DC 31 Lobbying for refugees That’s awesome 31 The updated travel ban Improved, unjust
1 Contents continues overleaf 4 Contents The Economist March 11th 2017
Britain 65 Green-shipping finance Cleaning up dirty ships 49 The budget Calm before the storm 66 The Dutch economy Who’s Nexit? 50 Higher taxes Read my lips 68 Free exchange Secular stagnation 50 Northern Ireland An upset in Ulster 51 European Union migrants Science and technology Administrative agonies 70 Synthetic biology 52 Bagehot Something’s brewing Grains The spread of exotic The strained state 71 Underwater drones Mukesh Ambani India’s cereals is evidence that A clever solution richest man makes the business globalisation works: leader, world’s most audacious bet: International 71 Women in research page 10. West Africans are Fairer than it was Schumpeter, page 60 eating more like Asians. 53 Grain consumption 72 Road accidents Asians are eating more like Of rice and men Safe on taxis Americans. And the richest Subscription service Americans…, page 53 72 Smartphone diagnostics For our full range of subscription offers, Business Pictures of health including digital only or print and digital combined visit 55 The mining business 73 Sexual attractiveness Economist.com/offers The richest seam My chemical romance You can subscribe or renew your subscription by mail, telephone or fax at the details below: 56 Snap’s IPO Telephone: +65 6534 5166 A rollercoaster week Books and arts Facsimile: +65 6534 5066 57 PSA buys Opel Web: Economist.com/offers E-mail: [email protected] Used carmaker 74 The future of America Too complacent Post: The Economist 57 North American railways Subscription Centre,
The whistle’s blowing 75 Social media Tanjong Pagar Post Office Divided democracy PO Box 671 58 Micro-multinationals Singapore 910817 75 Dutch fiction Chinese and overseas Subscription for 1 year (51 issues)Print only Rarely flat, never dull Australia A$465 59 Steelmaking China CNY 2,300 Insurance The business moves Furnace of innovation 76 Consciousness explained Hong Kong & Macau HK$2,300 The blind Bach-maker India 10,000 from simply paying claims to 60 Schumpeter Japan Yen 44,300 77 Japanese theatre Korea KRW 375,000 providing services, page 61. Is Mukesh Ambani’s big bet Malaysia RM 780 the future of insurance named The sounds of silence New Zealand NZ$530 Singapore & Brunei S$425 after a soft drink? Page 62. Taiwan NT$9,000 Two Scottish asset managers Finance and economics Thailand US$300 80 Economic and financial Other countries Contact us as above try to defend their share of a 61 The future of insurance indicators shrinking pie, page 62 Counsel of protection Statistics on 42 economies, 62 Peer-to-peer insurance plus our monthly poll of Principal commercial offices: Lemonade fizzes forecasters 25 St James’s Street, London sw1a 1hg Tel: +44 20 7830 7000 MSCI World Index 62 Asset management January 1st 2016=100, $ terms Choosing Life Rue de l’Athénée 32 120 Obituary 1206 Geneva, Switzerland 63 Buttonwood Tel: +4122 566 2470 110 82 Mostafa el-Abbadi Worried Singapore All the books in the world 750 3rd Avenue, 5th Floor, New York, NY 10017 Tel: +1212 5410500 100 64 Deutsche Bank Charting a new course 1301Cityplaza Four, 90 12 Taikoo Wan Road, Taikoo Shing, Hong Kong 64 The China-trade shock Tel: +852 2585 3888 80 Economists squabble 2016 2017 Other commercial offices: 65 Global property prices Chicago, Dubai, Frankfurt, Los Angeles, Paris, San Francisco and Singapore Share prices Stockmarkets are Searching for sanctuary booming. Their underpinnings are fragile: leader, page 8. Economic recovery will put the theory of “secular stagnation” PEFC certified to the test: Free exchange, This copy of The Economist page 68. The mining industry is printed on paper sourced from sustainably managed hopes for another supercycle, forests, recycled and controlled page 55 sources certified by PEFC PEFC/01-31-162 www.pefc.org
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most severe recession on Irish nationalist party, surged missile system in South Korea, Politics record. But inflation and in- by 34%, provoked by the DUP’s which annoyed China. terest rates are falling, which hardline campaign. Talks now should spur a recovery. begin to create a new power- A special prosecutor in South sharing executive. Korea said that the president, Bolivia’s president, Evo ParkGeun-hye, should be Morales, signed a law to Authorities in several German charged with corruption and expand the area on which the cities blocked visiting Turkish abuse ofoffice. The constitu- cultivation ofcoca, the raw ministers from speaking at tional court is weighing material forcocaine, is rallies that were held to en- whether to remove Ms Park allowed. Under the new law, courage local Turkish citizens from office on similar grounds. farmers may now grow coca to vote forconstitutional It is due to rule on March 10th. on 22,000 hectares, up from changes granting more power 12,000 hectares previously. Mr to Recep Tayyip Erdogan, Police in the Philippines said Morales, a formerleader of a Turkey’s president. The au- they were resuming their coca-growers’ union, defends thorities said the rallies violat- controversial war on drugs, Donald Trump signed a re- the crop as a traditional stim- ed safety rules. Mr Erdogan after a month’s hiatus. Perhaps vised executive order to imple- ulant. Coca leaves can be denounced what he called 7,000 people have died during ment a travel ban on citizens chewed or used in hot drinks. “Nazi practices”. Separately, the campaign. The police have from six Muslim-majority Critics contend that much of it the Council ofEurope warned blamed many ofthe killings countries. Iraqis were taken off is used to make cocaine. that the referendum forthe on unknown assailants. the list, as the administration constitutional changes threat- conceded that they have been See you in court ened to make Turkey more like Japan’s Liberal Democratic crucial in the fight against South Africa formally re- an “authoritarian” regime. Party approved a change to its terror. Republicans who had voked its notification that it rules allowing its leader to condemned the original order was withdrawing from the Poland nominated its own serve three three-year terms. fell in line to support the new International Criminal Court, candidate for president ofthe That would allow Shinzo Abe, ban, which comes into force on after a domestic court ruled in European Council to oppose the prime minister, to remain March 16th. February that its decision to do Donald Tusk, the current in office until 2021, provided he so was unconstitutional. The president and a formerPolish can win another election. JeffSessions, the attorney- government has not said prime minister, who is seeking general, recused himselffrom whether it intends to try again. re-election. Poland’s populist an investigation into Russian government has accused Mr attempts to influence last Iraq’s armed forces made Tusk, who was widely popular year’s election, after admitting rapid advances in west Mosul. when he headed the previous that he had spoken to the Optimists predict that the city centrist government, ofa range Russian ambassador during will be liberated from Islamic ofunsubstantiated the campaign. As allegations State within weeks. misdemeanours. swirled about Russian links to his team, Mr Trump said that Groundbreaking In France Alain Juppé, a for- BarackObama had ordered his mer prime minister, said he phones to be tapped, but would not step in as the Re- offered no evidence. publican candidate for presi- dent ifthe current candidate, The annual session ofChina’s Republicans in the House of François Fillon, pulls out. Mr rubber-stamp parliament, the Representatives unveiled a bill Fillon has been under in- National People’s Congress, to replace Obamacare. Among creasing pressure over charges opened in Beijing. The prime other things, it would drop the that he paid his family nearly minister, Li Keqiang, told the requirement forpeople to have €1m ofpublic money forwork meeting that China’s GDP health insurance, but it they barely did. He insists he should grow by “about 6.5%” allows fora penalty on those will stay in the race. this year. In 2016 it expanded who let their insurance expire. by 6.7%. MrLi warned of The bill’s passage is far from It’s complicated financial risks arising from assured. Conservatives have An election was held in North- North Korea said it would not previous years ofdebt-fuelled griped that the new system ern Ireland. The unionists, led allow nine Malaysians in the growth. He also said demands would retain too many by the Democratic Unionist country to leave until it had forHong Kong’s independence subsidies. Some Republican Party, lost their overall major- settled a row with Malaysia from China would “lead senators have raised concerns ity ofseats forthe first time in over the killing ofthe half- nowhere”. that the plan to roll backthe the province since its partition brother ofthe North Korean expansion ofMedicaid ad- from the south in 1921. Turnout dictator, Kim Jong Un. Malay- China said spending on its versely affects their states. was well up and all the big sia responded by barring the armed forces would grow by parties increased their total departure ofthe 1,000-odd 7% this year, the lowest rate in Diminished circumstances vote. But a reduction in the North Koreans in Malaysia. this decade. The defence Brazil’s economy shrankby number ofseats from 108 to 90 North Korea also tested four budget would be equivalent to 3.6% in 2016, according to new contributed to lowering the missiles simultaneously, 1.3% ofGDP, an official said. data. This follows a contrac- DUP’s tally by ten and the prompting America and South Many Western analysts be- tion of3.8% in 2015. The two- Ulster Unionists’ by six. The Korea to accelerate the deploy- lieve it is much bigger than year slump is the country’s vote for Sinn Fein, the biggest ment ofan American anti- China claims. 1 6 The world this week The Economist March 11th 2017
ore, oil and other commodities GDP shrankby1.2%, much America’s Justice Department Business also played a part. worse than the 0.4% contrac- announced that ZTE, a big tion that had been estimated in Chinese supplier ofnetwork After weeks ofspeculation, Peter Navarro, the contro- an initial government report. It equipment, had pleaded guilty PSA Group, which produces versial head ofDonald was the worst quarterly perfor- to violating American sanc- Peugeot and Citroën cars, Trump’snew National Trade mance since mid-2015, and tions against Iran and North strucka deal to buy General Council, said that the adminis- creates another wrinkle in the Korea and also to obstructing a Motors’ European operations tration wanted bilateral talks wrangling over Greece’s federal investigation. It will for€1.3bn ($1.4bn). The addi- with Germany over its trade bail-out. pay a penalty of$892m and a tion ofthe Opel and Vauxhall surplus with America. Angela further$300m ifit does not brands to its range makes PSA Merkel, Germany’s chancellor, Communication breakdown obey the terms ofthe settle- the second-largest motor will meet Mr Trump in Wash- Responding to more bad pub- ment. It is the biggest fine to company in Europe, behind ington on March 14th. licity about its business ethics, date levied on a Chinese com- Volkswagen. GM has not Uber’s chiefexecutive, Travis pany forsanctions busting. turned a profit in Europe since AkzoNobel, a Dutch multina- Kalanick, said he was looking 1999, losing some $8bn since tional making paint and coat- fora chiefoperating officer to 2010. It was so keen to ditch the ings that owns the Dulux help him run the firm. Uber Top five US-listed business that it agreed to retain brand, rejected a takeover from also lost its legal case against technology IPOs liability formost workers’ PPG, an American rival, saying new rules in London requiring 2011-17, $bn pensions. PSA has said it won’t that its €21bn ($22bn) offer minicab drivers to speakand 0 5 10 15 20 25 Alibaba immediately close factories, undervalued the company. write basic English. Those Sep 2014 but it will eventually have to if Foreign bids for Dutch firms without a school certificate in Facebook May 2012 it is to realise its projected cost are an issue in the country’s English will have to sit a test. Snap savings. election campaign. Uber says 33,000 ofits drivers Mar 2017 First Data would either fail the test or put Oct 2015 Fed-speak Heebie-jeebies on H-1Bs offapplying fora licence, but a Twitter Janet Yellen, the chairwoman A way offast-tracking H-1B court found that being able to Nov 2013 ofthe Federal Reserve, said a visas in America is to be sus- communicate in English is Source: Dealogic “furtheradjustment” to pended forat least six months essential forpassenger safety. Snap’s share price whip- interest rates would probably from April 3rd. Skilled foreign sawed. Having surged by 44% “be appropriate” this month, workers can pay $1,225 to get a In a rare rebuke to the EU’s on its stockmarket debut, the meaning a rise is on the cards response to an application antitrust body, a court quashed share price fell backsharply in for March. It was an unusually within 15 days, but America’s the European Commission’s subsequent trading. The initial frankstatement by a Fed offi- immigration agency wants to decision in 2013 to blocka enthusiasm was dampened by cial ahead ofa policy meeting. halt this service temporarily so merger between UPS and TNT, short-sellers and concerns that that it can quicken the process- two logistics firms, finding that the potential forgrowth is as Deutsche Bank announced ing time for H-1Bs overall. it had based its conclusion on ephemeral as the social-media plans to raise €8bn ($8.5bn) an econometric model which firm’s messages. through a rights issue to bolster A final reading ofthe Greek it did not give UPS a chance to its balance-sheet. The German economy forthe last three argue against. TNT was eventu- Other economic data and news bankalso scrapped the pro- months of2016 reckoned that ally bought by FedEx. can be found on pages 80-81 posed sale ofits Postbank business; said it would sell a stake in its asset-management division; and announced that it would reunite the corporate and markets units ofits in- vestment bank. Deutsche made a €1.4bn loss last year.
Aberdeen Asset Manage- ment and Standard Life agreed to merge. Based in Britain, the combined com- pany will have £660bn ($800bn) in assets under man- agement, making it Europe’s second-biggest asset manager.
China racked up a trade deficit in February, its first in three years, as imports soared by 38% compared with the same month in 2016. Exports unex- pectedly fell. The lunar new year, which fell in February, would have affected trade. Higher prices forimported iron Leaders The Economist March 11th 2017 7 Quantum leaps
Aftera centurystuckin textbooks, mind-bending quantum effects are about to powermainstream innovation BATHING cap that can ground pipes without having to dig up the road, or track sub- Awatch individual neurons, marines farbelow the waves. allowing others to monitor the Other aspects of quantum theory permit messaging with- wearer’smind. Asensorthat can out worries about eavesdroppers. Signals encoded using ei- spot hidden nuclear subma- ther superposed or entangled particles cannot be intercepted, rines. A computer that can dis- duplicated and passed on. That has obvious appeal to compa- cover new drugs, revolutionise nies and governments the world over. China has already securities trading and design launched a satellite that can receive and reroute such signals; a new materials. A global network of communication links global, unhackable networkcould eventually follow. whose security is underwritten by unbreakable physical laws. The advantageous interplay between odd quantum effects Such—and more—is the promise ofquantum technology. reaches its zenith in quantum computers. Rather than the 0s All this potential arises from improvements in scientists’ and 1s of standard computing, a quantum computer’s bits are ability to trap, poke and prod single atoms and wispy particles in superpositions of both, and each “qubit” is entangled with of light called photons. Today’s computer chips get cheaper every other. Using algorithms that recast problems in quan- and faster as their features get smaller, but quantum mechan- tum-amenable forms, such computers will be able to chomp ics says that at tiny enough scales, particles sail through solids, theirwaythrough calculationsthatwould take today’sbestsu- short-circuiting the chip’s innards. Quantum technologies percomputers millennia. Even as high-security quantum net- come at the problem from the other direction. Rather than works are being developed, a countervailing worry is that scale devices down, quantum technologies employ the un- quantum computers will eventually render obsolete today’s usual behaviours ofsingle atoms and particles and scale them cryptographic techniques, which are based on hard mathe- up. Like computerisation before it, this unlocks a world ofpos- matical problems. sibilities, with applications in nearly every existing industry— Long before that happens, however, smallerquantum com- and the potential to sparkentirely new ones. puters will make othercontributions in industriesfrom energy and logistics to drugdesign and finance. Even simple quantum Strange but true computers should be able to tackle classes of problems that Quantum mechanics—a theory ofthe behaviour at the atomic choke conventional machines, such as optimising trading level put together in the early 20th century—has a well-earned strategies orplucking promising drug candidates from scientif- reputation forweirdness. That is because the world as human- ic literature. Google said last weekthat such machines are only ity sees it is not, in fact, how the world works. Quantum me- five years from commercial exploitability. This week IBM, chanics replaced wholesale the centuries-old notion of a which already runs a publicly accessible, rudimentary quan- clockwork, deterministic universe with a reality that deals in tum computer, announced expansion plans. As our Technol- probabilities ratherthan certainties—one where the very act of ogy Quarterly in this issue explains, bigtech firms and startups measurement affects what is measured. Along with that up- alike are developing software to exploit these devices’ curious heaval came a few truly mind-bending implications, such as abilities. Anew ecosystem ofmiddlemen is emergingto match the fact that particles are fundamentally neither here nor there new hardware to industries that might benefit. but, until pinned down, both here and there at the same time: they are in a “superposition” of here-there-ness. The theory The solace ofquantum also suggested that particles can be spookily linked: do some- This landscape has much in common with the state of the in- thingto one and the change isfeltinstantaneouslyby the other, ternet in the early 1990s: a largely laboratory-based affair that even across vast reaches of space. This “entanglement” con- had occupied scientists fordecades, but in which industry was founded even the theory’s originators. starting to see broader potential. Blue-chip firms are buying It is exactly these effects that show such promise now: the into it, or developing their own research efforts. Startups are techniques that were refined in a bid to learn more about the multiplying. Governments are investing “strategically”, hav- quantum world are now being harnessed to put it to good use. ing paid forthe underlying research formany years—a remind- Gizmos that exploit superposition and entanglement can vast- er that there are some goods, such as blue-sky scientific work, ly outperform existing ones—and accomplish things once that markets cannot be relied upon to provide. thought to be impossible. Fortunately for quantum technologists, the remaining chal- Improving atomic clocks by incorporating entanglement, lenges are mostly engineering ones, rather than scientific. And forexample, makesthem more accurate than those used today today’s quantum-enhanced gizmos are just the beginning. in satellite positioning. That could improve navigational preci- What is most exciting about quantum technology is its as yet sion by orders of magnitude, which would make self-driving untapped potential. Experts at the frontier of any transforma- cars safer and more reliable. And because the strength of the tive technology have a spotty record offoreseeing many ofthe local gravitational field affects the flow of time (according to uses it will find; Thomas Edison thought his phonograph’s general relativity, another immensely successful but counter- strength would lie in elocution lessons. For much of the 20th intuitive theory), such clocks would also be able to measure century “quantum” has, in the popular consciousness, simply tiny variations in gravity. That could be used to spot under- signified “weird”. In the 21st, it will come to mean “better”. 7 8 Leaders The Economist March 11th 2017
Britain’s budget Spreadsheets v politics
Philip Hammond’s budget was prudent and, in parts, brave. But the government ducks too many big questions T JUST 68 pages, the spring employees will continue to pay even more NICs via their em- Abudget Philip Hammond ployers. Equalising their tax treatment will slow the slide to- published on March 8th was wards self-employment fortax purposes. It should go further. less than half the length of last Amid the outrage it was easy to forget that the tax raid was year’s. Blessedly short on the worth less than 0.1% of public spending. It is on the big ques- gimmicks favoured by many of tions that the government looks less convincing. Eight months his predecessors in the Treasury, into Theresa May’s term, urgent matters that were crying out its most significant chapter was for answers last summer are still being put off. The question of on official forecasts. The economy has done much better than howto treatthe “gigeconomy” and othernewformsofwork is expected since the Brexit referendum last June (see page 49): it under review until the summer. The social-care system, which is forecast to grow by 2% this year, up from the 1.4% predicted in is close to breakdown, will feature in a green paper later in the November and well ahead ofthe recession many feared. year. The touchy matter of how to set business rates, a tax on Yet the modest, good-news budget got a dreadful reception. firms that is in need of reform, is out for consultation. On sus- MrHammond announced highertaxes forself-employed peo- taining the creaking National Health Service the budget threw ple, which broke a manifesto pledge and infuriated an impor- only crumbs. Because the government lacks answers, the bud- tant Conservative constituency. The criticism is unjustified. get resorted to emergency cash instead: extra money for social The taxplan makeseconomicsense, and with Brexiton the ho- care; a fund for local authorities to help out firms struggling rizon it is right to fund any spending increases with tax rather with rates. than more borrowing. The bigger worry was the chancellor’s It is better to get big reforms right than to rush in. By the end repeated refrain that urgent questions, from housing to health of the year the government may have come up with good an- care, were still under review—a reminder of how many mat- swers to Britain’s problems. But policy reviews underMrs May ters the government has yet to tackle. have so far been anticlimactic. Last month a long-delayed white paper on the chronic shortage of housing, an area with Revenge ofthe white van man plenty of good, but unpopular, solutions, failed to endorse the With Labour in steep decline under an unpopular leader—Mr big ideas needed to boost housebuilding. In January a docu- Hammond aptly compared the party to a driverless vehicle— ment outlining a new “industrial strategy”, which Mrs May the Toriesenjoy unusual freedom. The chancellor used this to flagged as a signature policy in the first days of her premier- raise the national-insurance contributions (NICs) paid by self- ship, amounted to little. So did earlier promises of revolutions employed people, who pay less than employees (see page 50). in railways, prisons and more. Businessfolk pointed out that they lack benefits such as sick A good test will be how the government responds to the fu- pay and parental leave that employees enjoy. They have less rore over self-employment. It is a sound idea which means than half a point: the main reason for the discount was their only minor pain for a small number of mainly Tory voters. If worse state-pension entitlement, which wasfixed last year. Mr Mrs May flinches at the unjustified outrage it has caused, it is Hammond has promised to improve their other benefits. And hard to see her taking on bigger challenges. 7
Stockmarkets Bubble-spotting
Markets are booming. Theirunderpinnings are fragile AVE investors become irra- tation of Snap, an internet firm that is yet to make a profit, MSCI World Index Htionally exuberant? That is brought backmemories ofthe dotcom boom; its shares soared January 1st 2016=100, $ terms the biggest question hanging by 44% on their first day of trading (although they have fallen 120 110 over global stockmarkets. De- back since). By historical standards, valuations in the Ameri- 100 spite tumultuous politics across can market are worryingly dear. The cyclically adjusted price- 90 much of the rich world, share earnings ratio, which averages profits over ten years, is just un- 80 prices are reaching ever loftier der 30, according to Robert Shiller of Yale University. Only 2016 2017 heights. After breaking the twice has it been higher—in the late 1990s, during the internet 20,000 barrier in January, the Dow Jones Industrial Average boom, and just before the crash of1929. swiftly passed 21,000 earlier this month. In Britain the FTSE There are three reasons why investors are ignoring the 100 has been notching up fresh records, too. The MSCI World alarm bells, each of them reasonable. First, investors’ exuber- Index has hit an all-time high. ance comes after a long period of restraint. The S&P 500 index At first sight, the warning signals are flashing. The recent flo- is up by 5.5% so far this year. But in 2016 it returned less than 1 The Economist March 11th 2017 Leaders 9
2 10%. In 2015 it fell. Contrast that with the late 1990s, when the America have been mixed: consumer spending and industrial S&P 500 returned 20% or more in five successive years. Nor production both fell in January. After eight years, this recovery have investors bet the farm on shares. After suffering net out- is already long in the tooth. Mr Trump’s fiscal-stimulus pro- flows for the previous 12 months, equity mutual funds in gramme could take till next year to get through Congress and America recorded their first week of net inflows in February. will be watered down along the way. Some ofMr Trump’spro- That same month a Bank of America Merrill Lynch survey of posals—cracking down on immigration, say, and threatening fund managers found that they held more cash than usual. In- trade sanctions—would harm growth. vestors have a negative view on government bonds: ten-year Meanwhile, monetarypolicy, which hasplayed a bigrole in Treasuries yield 2.5%, compared with 1.8% before Donald supporting stockmarkets since 2009, is becoming less accom- Trump’selection. Equities lookattractive in comparison. modating. The Federal Reserve is widely expected to raise in- Second, there are indications ofa pickup in the global econ- terest rates this month (see Free exchange). The European Cen- omy.That is a big change from the start of2016, when investors tral Bank will scale back the volume of its monthly bond were preoccupied bythe state ofthe Chinese economyand the purchases in April. Around 80% of all global private-sector threat of deflation. After a feeble performance over the past credit creation happens in China, according to Citigroup; the few years, with annual growth in trade volumes barely keep- authorities there are already starting to tighten policy. ing pace with GDP, the signs are that global trade is picking up again. The volume of South Korean exports rose by 20% in the Parties weren’t meant to last year to February, the fastest growth rate in five years. Com- A deeper problem lies in a contradiction between politics and moditypricesare 10% higherthan a yearago (see page 55). Even economics. Elections in the Netherlands, France and Germany European growth forecasts have been revised higher. this year will give voters the chance to hammer established Third, expectations of tax cuts, infrastructure spending and parties. Justaswith MrTrump in America, workersare backing deregulation from the Trump administration have invigorated insurgent candidates because they want a bigger slice of the animal spirits in America. In December American small-busi- economic pie. But mathematics cannot square a surge in real ness confidence saw its biggest rise in nearly 40 years, accord- wages with a market rally based on the hope that profits will ingto the National Federation ofIndependentBusiness. Profits rise faster than GDP. As a movement that rejects globalisation, forfirmsin the S&P 500 indexare expected to rise by12% in 2017 populism is a menace to companies that thrive on the free after being squeezed during the past couple ofyears, partly be- movement of goods, labour and capital. So it will be hard to cause a low oil price hit the energy industry. keep both populist voters and the equity markets happy. The risks to this happy prospect are manifold, however. De- Stocks may fly high for some time yet, but investors should spite the strong tone of surveys, the recent economic data in keep a parachute handy. 7
Geopolitics One China, many meanings
The one-China policy is a preposterous fib—but America should stickto it EW diplomatic sophisms are rightful rulers of all China. (Chiang Kai-shek, Taiwan’s leader Fas skilfully worded as Ameri- until 1975, had fled from the mainland in 1949 afterlosinga civil Beijing ca’s “one-China policy”. Mere war against Mao Zedong.) Until the 1970s, America recognised repetition by American officials only “Free China”, ie Taiwan. Under the new policy, it ac- CHINA PACIFIC that their country sticks to it has knowledged that both sides believed there was only one Chi- Taipei OCEAN helped more than anything else na while tactfully not saying who was the rightful ruler of Tai- TAIWAN to keep the peace between two wan. The aim was to butter up Red China, which Richard nuclear-armed powers. Were Nixon wanted as an ally in the cold war against the Soviet Un- America to reject the policy, mainland China would be en- ion. The communists would have preferred America to accept raged. Anti-American riots would erupt. The government in what they call the “one-China principle”—namely that Taiwan Beijing might even respond by launching a military attack on is a renegade province ofChina, and ought to bow to the Com- Taiwan, or American forces in the region. The global economy munist Party. But they were content that America was pre- would shudder. Millions oflives would be threatened. pared to switch diplomatic recognition from Taiwan to the Small wonder, then, that pulses quickened on both sides of People’s Republic and withdraw American troops from the is- the Pacificwhen Donald Trump, aspresident-elect, questioned land (both ofwhich it did in 1979). So the fudge stuck. the policy. (“I don’t know why we have to be bound by a one- The result has been an extraordinary relationship between China policy unless we make a deal with China having to do two great powers. They were divided by ideology but united with other things, including trade,” he said.) Last month he initially by their common hatred of the Soviets and later by changed his mind and reassured China’s president, Xi Jinping, their common pursuit ofwealth by trading with each other. thathe would, in fact, uphold it. Yetthe one-China policy isin a However, Taiwan remains a flashpoint (see page 17). Com- fragile state. Far from casting doubt on it, Mr Trump needs to munist China has not given up its dream of taking control of make America’s support forthe status quo clearer than ever. the island, by force if necessary. America has kept on selling The one-China policy is a fudge. At the time it was devised, weapons to Taiwan. The “Taiwan Relations Act” requires it to the governments in Beijing and Taipei both claimed to be the viewan attackasa matterof“grave concern” to America: a hint1 10 Leaders The Economist March 11th 2017
2 that it might come to Taiwan’s aid. China has often made clear the giant dictatorship next door. Taiwan has never been ruled its outrage at this. Its rapid military build-up in recent years has by the communists. Since 1895 it has been under the main- been aimed, not least, at deterring America from trying to de- land’s control forless than five years. fend Taiwan. Ifit could keep America out, it could, in all proba- Most are happy to let the one-China fudge persist. But will bility, inflict a crushing defeat on the island. it? Having stirred up nationalist feelings for so long, the Com- munist Party can never abandon its claim. Some day, to shore One China, one Taiwan up its popularity, it may be tempted to invade Taiwan. This tinderbox has now been exposed to the spark of Taiwan- America’s ability and willingness to deter China is not only ese democracy. In the 1990sthe island began to castoffauthori- vital to Taiwan but also a measure ofits role in the world more tarianism. The Taiwanese are pragmatic. Last year they elected broadly. The arms that America sells to Taiwan would not en- an independence-leaning president, but one who prefers not able the island to hold out for long against a Chinese on- to antagonise the communists. Most believe that the island is slaught, but they are a token that America has a stake in Tai- already autonomous enough. Few want to enrage China by wan’s fate, and that China should beware. Rather than using formallydeclaringindependence. Buttheyhave also started to Taiwan as a bargaining chip, America should maintain its mil- question the idea of “one China”. They see the mainland as a itary support for the island. Ifrepeating a misleading mantra is different country, and abhor the idea of being swallowed by the price ofpeace, it is worth it. 7
Food snobbery and economics In praise of quinoa
The spread ofexotic grains is evidence that globalisation works EOPLE are funny about food. more wheat, in the form of noodles or bread, instead of rice. PThroughout history they West Africans are eating 25% more rice per head than in 2006; have mocked others for eating millet consumption has fallen by the same share. strange things. In 1755 Samuel All this is to be celebrated, forit is a symptom of rising pros- Johnson’s dictionary defined perity and expanding choice. The spread of better farming oats as “a grain, which in Eng- techniques has raised yields, helping humanity feed itself de- land is generally given to horses, spite a risingpopulation. Rapid urbanisation means that fewer but in Scotland supports the people grow their own grain, and more have the cash to try people”. Nineteenth-century Japanese nationalists dismissed new varieties. Globalisation has allowed food and farming Western culture as bata kusai, or “stinking of butter”. Unkind techniques to cross borders, meaning that people on every people today deride Brits as “limeys”, Mexicans as “beaners” continent can experience new flavours and textures. Migra- and French people as “frogs”. And food-related insults often tion and tourism have broadened people’s culinary horizons: have a political tinge. George Orwell complained that social- Chinese visitors to France return home craving baguettes; ism was unpopular because it attracted “every fruit-juice Americans who live near Ethiopian immigrants learn to love drinker, nudist, sandal-wearer[and] sex-maniac…in England”. injera (a soft teffflatbread that doubles as an edible plate). In many countries today, politicians who wish to imply that their rivals have lost touch with ordinary voters sneer that Food for thought they are latte-drinkers, muesli-munchers or partial to quinoa. The globalisation and modernisation of agriculture have con- This South American grain gets a particularly bad rap. To its tributed to a stunning reduction in hunger. Between 1990 and fans, it is a superfood. To its detractors, it is like the erotic sci-fi 2015, the proportion ofchildren underfive who were malnour- murals found in Saddam Hussein’s palaces—pretentious and ished fell from 25% to 14%. People who are still underfed are tasteless. An advertisement for Big Macs once riffed on this lessseverelyso: theiraverage shortfall in calories fell from 170 a prejudice. “Foodies and gastronauts kindly avert your eyes. day to 88 by 2016. And between 1990 and 2012 the proportion Youcan’tgetjuicinesslike thisfrom soyorquinoa,” itsaid, add- of their income that poor people worldwide had to spend on ingthat “while [a BigMac] is massive, its ego is not.” Even those food fell from 79% to 54%. As for those quinoa farmers, don’t who love quinoa sometimes fret that scarfing it may not be worry. Astudy by Marc Bellemare of the University of Minne- ethical. What if rising hipster demand pushes the price up, sota found that Peruvian households became better-off be- forcing Andeans to eat less of their beloved grain? Or what if cause of the quinoa boom, even if they didn’t grow the stuff, the price falls, making Andean farmers poorer? A headline because newly prosperous quinoa farmers bought more from Mother Jones, a left-wing magazine, perfectly captured goods and services from their neighbours. the confusion of well-meaning Western foodies: “Quinoa: Granted, rising prosperity has allowed an increasing num- good, evil or just really complicated?” ber of people to become unhealthily fat. But the solution to This newspaper takes no view as to whether quinoa tastes that is not to make them poorer, which is what the backlash nice. But its spread is a symptom of a happy trend. More and against globalisation will do ifit succeeds. Rather than sniping more people are chomping unfamiliar grains (see page 53). snootily about Donald Trump’s taste for well-done steaks Rich Westerners are eating less wheat and more of the cereals slathered with ketchup, liberals should worry about the ad- that people in poorcountries traditionally grow, such as millet, ministration’s plans to erect trade barriers and possibly start a sorghum, teff and yes, quinoa. Middle-class Asians are eating trade war. That would make the world poorer and hungrier. 7 Letters The Economist March 11th 2017 11
Renewing energy markets delivered on a large scale. very high uptake ofrenewable retail level, measures to pre- Other storage technologies energy forits own sake is vent blackouts and clearer Yousuccinctly described the such as batteries will also play indeed a way to turn the rules on cyber-security and the conundrum faced by electric- an important role as part of the world, and economic logic, smartening ofpower grids, ity markets adapting to renew- grid, to balance fluctuations. upside down. and more interconnection able energy (“Aworld turned But we need new market JANE LONG between EU states. This renew- upside down”, February 25th). frameworks to support this Lawrence Livermore Laboratory ables revolution is only pos- Existing renewable-energy change. This means stronger (ret.) sible with the buy-in ofcon- plants with zero marginal carbon-price signals to in- Oakland, California sumers, who need to be generation costs will price any centivise clean-energy in- ARMOND COHEN empowered as part ofthis fossil-fuel power plant out of vestment and technology Clean Air Task Force energy democratisation. The the market. rather than subsidies forpol- Boston role ofproviders and innova- Today’s liberalised electric- luting fuels. As you point out, it tors is indispensable for en- ity markets, where prices are also requires spending to In New Yorkstate we are abling active consumers and set by the marginal cost of enhance and digitise electric- modernising the regulatory providing them with new generation, were concocted in ity networks. Networks are regime and electric grid. These state-of-the art services. the 1990s. These markets are more important than ever in a reforms include allowing MAROS SEFCOVIC not determined by physical smart energy world, to man- utilities to earn returns for their Vice-president of the European laws; we should question age localised multidirectional shareholders by advancing Commission in charge of the established orthodoxies and power flows and to ensure the clean-energy solutions, rather Energy Union design more effective alterna- stable supply ofelectricity. than only by investing more Brussels tives. The current system Many utilities are already capital in the expansion of the neither guarantees that there adapting to deliver this trans- grid’s capacity. This is one way Cross-border power markets are sufficient price signals to formation. But policymakers ofsolving the “utility death can significantly alleviate maintain the high availability also need to meet their side of spiral”. New York’s utilities some ofthe problems you ofelectricity we are used to, the bargain. now have a clear business mentioned. Through a well- nor achieves the deep levels of IGNACIO GALÁN motive to improve the energy integrated Nordic electricity decarbonisation required to Chief executive officer and financial efficiency of the market, Denmarkavoids cur- keep the planet inhabitable. Iberdrola state’s entire grid. For example, tailed power because offluctu- We need to lookat the cost Madrid by using transparent price ating wind energy by export- ofthe “package deal” fora signals in retail energy mar- ing excess capacity to Norway reliable, low-carbon electricity Energy policies are increasing- kets, utilities will be able to and Sweden when the wind system, as Simon Müller ofthe ly and mistakenly geared deploy more renewable gener- blows and importing hydro International Energy Agency towards expanding renewable ation and energy-efficiency power when it doesn’t. In this poignantly puts it, without energy as an end in itself, projects where they can help way, the Nordic power market assigning the derogatory term rather than achieving carbon with grid congestion in high- provides flexibility across “subsidies” to individual reductions and maintaining use areas, which will reduce renewable-energy types, components ofthat package. reliability. The cost ofprovid- the need forcapacity pay- ensuring that electricity gener- By all means, market princi- ing system backup power or ments to dirty and expensive ated everywhere and through ples should rule the new re- storage is not reflected in the “peaker” plants. As a result, every source enters the grid gime, forexample through wind and solar “levelised cost these clean-energy deploy- and reaches consumers. large-scale competitive tender- ofenergy” or the market price. ments will benefit all users of LARS CHRISTIAN LILLEHOLT ing ofrenewable-energy With more renewable produc- the grid, not just those homes Danish minister of energy plants. Recent results demon- tion, these shadow costs esca- and businesses that have the Copenhagen strate that such tenders can late because a full-sized system opportunity to implement achieve extremely competitive ofon-demand power or over- clean-energy projects. We It is said that the shift to renew- pricing forcarbon-free electric- size seasonal storage (which want to provide customers able energy will reduce profit- ity. Visionary policies are does not practically exist to- with what they want, instead ability. However, when consid- what’s called for, not patches day) is needed to cover mul- ofwhat regulators and utilities ering “The Coal Question” in on a colossal market failure. tiple days and weeks when thinkthey want. 1865, William Stanley Jevons MORITZ BORGMANN there is little wind or sun. Ifit RICHARD KAUFFMAN found that as the efficiency of Partner existed, this storage system Chairman energy generation increases, Apricum—The Cleantech would face the same challenge Energy and Finance, New York the quantity ofenergy con- Advisory that capacity markets face in a state sumed goes up by a dispropor- Berlin high-renewables world: large Albany, New York tionate amount. With the capital costs and low usage. switch to abundant, cheap By 2040 global electricity High renewable penetration I agree with your analysis. We renewable energy, consump- demand is forecast to rise by makes all forms ofenergy expect that by 2030, halfofthe tion, and profits, will rise. 70% thanks to its decarbonisa- production “intermittent” and electricity in the European JAMES SHERWIN-SMITH tion potential and the electrifi- therefore costly. Union will come from renew- London 7 cation ofindustries such as Most studies suggest that ables. Upgrading the design of transport. Energy storage will achieving a low carbon grid at outdated electricity markets is become increasingly impor- a manageable cost will require thus an urgent matter. The Letters are welcome and should be addressed to the Editor at tant as intermittent renewable- a mixture ofnuclear, gas with European Commission has The Economist, 25 St James’s Street, power increases: pumped carbon capture or other zero published wide-ranging pro- London sw1A 1hg storage hydro is the economi- carbon on-demand sources in posals, such as allowing price E-mail: [email protected] cally viable technology that is addition to renewables. To spikes at moments ofscarcity More letters are available at: proven to workand can be redesign markets to facilitate and deregulating prices at the Economist.com/letters ADVERTISEMENT
NTT DATA: The rise of a global IT services provider PART ONE IN A SERIES Kazuhiro Nishihata Head of Global Business, Executive Vice President NTT DATA Corporation
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VACANCY ANNOUNCEMENT RECTOR, UNITED NATIONS UNIVERSITY TOKYO, JAPAN Council of Economic Advisers The United Nations University (UNU) is recruiting a Rector. Application deadline: 22 April 2017 Greece The Institution: The United Nations University (UNU) brings together an international community of scholars engaged in research, postgraduate training and dissemination of knowledge in furtherance of the purposes and principles of the United Nations, its Peoples and Member States. UNU serves as a think tank for the United Nations system-it is a platform for new and creative ideas, as well as academic and policy dialogue. In addition to the UNU Headquarters located in ECONOMIST POSITIONS Tokyo, UNU has established i fteen institutes and programmes worldwide. For more information please visit http://unu.edu. The Position: The Rector is the chief academic and administrative officer of the University and The Council of Economic Advisers is the economic policy advisory has overall responsibility for the direction, organization, administration and programmes of the University. agency of the Ministry of Finance. The Council is currently seeking to Required qualifications: Advanced university degree, preferably a Ph.D. in a discipline related to recruit up to i ve economists in the i elds of applied macroeconomics the human sciences, or sciences of life, the earth and the biosphere. The successful candidate must and applied microeconomics for its Economic Research and Analysis have a prominent academic proi le with evidence of high quality research work in the course of his/ her career. In addition, he/she will demonstrate an understanding of contemporary development Unit. The Unit functions under the supervision of the Council’s and policymaking challenges and will have experience translating research for policy communities. Chairman and works closely with the Minister and the Alternate Demonstrated management experience as the head of a university or research centre is required. Fluency in English and a working knowledge of French are essential. Minister of Finance. The Unit is responsible for much of the objective Desirable qualifications and characteristics: Established proi le in the international community. applied research and for a good part of the design of the economic Successful track record of fund raising. Knowledge and appreciation of and commitment to policies of the government. An important role of the Unit is also the the principles and ideals of the United Nations. Capability to maintain close cooperation with individuals, governments and with research and teaching institutions worldwide in order to promote representation of Greece in international economic organizations and scientii c cooperation. Great drive and initiative to achieve the goals of UNU. Some knowledge of the European Union Working Groups and Committees. other UN official languages is desirable. Remuneration: Competitive net salary (tax-exempted) and allowances at a senior level (Under- Candidates must hold a postgraduate degree (minimum Master’s level Secretary-General) within the UN system, including post adjustment. Post adjustment is subject to change. The post carries the standard set of UN entitlements/benei ts, including participation in or equivalent) in Economics, Econometrics, Statistics, or other relevant the UN Joint Staff Pension Fund, the possibility of participation in a health insurance programme, i elds. education grant for eligible children, removal expenses and home leave. For more information please visit: http://www.un.org/Depts/OHRM/salaries_allowances/salary.htm A full job description and application forms can be found at All applications must include a curriculum vitae, a list of publications, and a completed and signed http://mini n.gr/web/guest/soe UNU Personal History (P.11) form, which can be downloaded at https://unu.edu/about/unu- services/hr/applying-for-a-position#files. Applications must be sent to the UNU Rectorship Nominating Committee at [email protected]. Applications may also be accepted by post at the Applications should be submitted by email to hirings_soe@mini n.gr. following address: Enquiries can be addressed to George Chouliarakis, Chairman of the UNU Rectorship Nominating Committee Council of Economic Advisers and Alternate Minister of Finance, at United Nations University 5-53-70 Jingumae, Shibuya-ku, Tokyo enquiries_soe@mini n.gr 150-8925, Japan It is expected that the appointee will take up the position by 1 March 2018. The initial appointment Deadline: March 24th, 2017 will be for a i ve-year term, with the possibility of a second term. Applications from women candidates are particularly encouraged. The Economist March 11th 2017 Executive Focus 15
The International Institute for Strategic Studies
Deputy Director IISS, London Headquarters
The International Institute for Strategic Studies (IISS) intends to hire a full-time Deputy Director based in its London headquarters. The selected candidate will report to the Director-General and Chief Executive Officer and will act as second in command, supporting the Director-General in his global CEO responsibilities, overseeing the research programme, as well as leading fundraising and income diversii cation activities.
The IISS is the world’s leading authority on international conl ict and geopolitical trends. It is international in its composition, perspective and reach. The Institute provides objective facts and independent analysis for its core audiences in government, the private sector, and the expert and opinion-forming communities. Summits convened by the IISS facilitate intergovernmental consultations, while its research helps companies to understand political risk and its publications shape the international strategic debate. The Deputy Director will play a vital role in strengthening the Institute’s international impact as it moves towards and beyond its 60th anniversary in 2018.
The Deputy Director’s principle responsibilities will include:
• Direction and management of the IISS international research programme and coordination of staff engaged in publishable research; • Fundraising for new IISS research, 60th Anniversary capital appeal and conference activity; • Developing new strategic partnerships with the private sector, and leading and coordinating research and briei ng services for major companies; • Assisting the D-G and CEO in widening and deepening IISS relationships with governments around the world; • Supporting the D-G and CEO in the general management and development of the IISS.
The successful candidate will be a dynamic individual, with an entrepreneurial bent, able to take on a wide variety of tasks with tact and efficiency. The position will suit a person with strong intellectual qualii cations, an international outlook and an established record of accomplishment in government, the ‘think tank’ community and/or business.
The post will be available from summer 2017. Salary will be commensurate with skills and experience, and will attract a pension and private medical benei ts package.
Applications should include a cover letter stating the skills the candidate would bring to the IISS, a CV and list of references, and should be submitted by Monday 10th April 2017 to the email address [email protected].
The Economist March 11th 2017 16 Executive Focus
The Economist March 11th 2017 Briefing The one-China policy The Economist March 11th 2017 17
whole of China. Hence Taiwan’s official The great brawl of China name, the Republic of China. Thus the party that Chiang led, the Kuomintang (KMT), and the Chinese government can both subscribe to an agreement called the “1992 consensus”, which says that there is BEIJING AND TAIPEI only one China but recognises that the two The polite fiction that there is only one China has helped keep the peace in East Asia. sides disagree about what that means in But it is becoming harderto sustain practice, thus piling fudge upon ambiguity. HEN Donald Trump, then America’s state. And China looks the other way, albe- Taiwan’s other major political party, the Wpresident-elect, said on December it with some fulmination, when America Democratic Progressive Party (DPP), rejects 11th that “I don’t know why we have to be sells arms to Taiwan—a traffic which, in both the 1992 consensus and the one-Chi- bound by a one-China policy” he ripped 1982, America said it would phase out, but na principle more generally. But its leader, aside one of the oldest sticking-plasters in continues to this day. Tsai Ing-wen, who succeeded the KMT’s Mr the world of diplomacy. That he stuck it America does not accept the one-China Ma as president last year, prefers not to do back on again two months later, telling Xi principle. Instead it has the one-China so openly. Jinping, China’s president, that he would policy, which acknowledges that China In most areas of politics this surfeit of honour the one-China policy “at President has such a principle—not quite the same uncertainty would be worrying. Yet the Xi’s request”, does not alter the fact that an thing. America does not recognise Chinese agreement not to look too closely at the American leader had questioned a basic sovereignty over Taiwan, nor does it recog- contradiction of “one China” has kept an feature of Asian security. Nor does Mr nise Taiwan as an independent state. It uneasy peace across the Taiwan Strait. Trump’s reversal solve problems with the does plenty of trade with it, though. Small There have been political crises—most re- one-China formula, on which peace be- as it is, Taiwan is the ninth-largest buyer of cently in the mid 2000s—and in 1996 China tween Taiwan and China has depended, American exports, outstripping Italy and fired missiles towardsthe island while Chi- that were evident well before his election. India. America’s unofficial ties with the is- nese leaders scowled for the cameras. But If they worsen, the two sides’ frozen con- land are closer than many countries’ dip- by and large it has worked well enough for flict could heat up. lomatic links. The American Institute in all three sides to want to maintain it. The one-China formula is not so much Taiwan, a private not-for-profit institution Their reasons differ, just as their reading fraught with ambiguities as composed of with headquarters in Washington, DC, of the formula does. China believes that them. China itself does not actually have a looks like an embassy and acts like one, time is on its side. As the motherland be- one-China policy. It has what it calls a one- too. The Taiwan Relations Act of1979 com- comes ever wealthier and more powerful, China principle, which is that there is only mits America to helping Taiwan defend it- its leaders seem genuinely to hope that Tai- one China, with its government in Beijing. self against invasion and embargoes, wan’s people will want to rejoin it. Tai- It regards Taiwan as a renegade Chinese deeming any coercion of the island to be wan’s leaders think the opposite; that with province and refuses diplomatic recogni- “ofgrave concern to the United States”. time the island’s people will see them- tion to any country that recognises Taiwan In Taiwan itself the one-China formula selves as having less and less in common as a state. Yet this rigid principle can be has an even stranger history. It is rooted in with the mainland. Since the 1992 consen- bent. In 2015 President Xi met the island’s the fiction that the island’s first president, sus, the proportion of people on the island then-president, Ma Ying-jeou, for what Chiang Kai-shek, who fled there in 1949 who identify themselves simply as Tai- would have looked to innocent eyes very after losing a civil war to Mao Zedong’s wanese has more than tripled to almost much like a bilateral summit of heads of communists, would one day recapture the 60%; the share of those who call them-1 18 Briefing The one-China policy The Economist March 11th 2017
2 selves Chinese has plunged to just 3% (see storm. Yet China still holds a threat ofinva- chart). Among people between 20 and 30, sion, or blockade, over the island, and it Separating 85% saytheyare Taiwanese. In America the sometimes shows signs of wanting to Taiwan, % of respondents identifying as: attitude is a simpler ain’t-broke-don’t-fix-it bring things towards a head. In 2013 Mr Xi Taiwanese one. The status quo enables the country to sent a tremor across the strait when he told 60 have diplomatic ties with China without Vincent Siew, Taiwan’s vice-president, that 50 breaking off links with Taiwan, and that is their conflict “cannot be passed on from good enough. generation to generation”. It sounded as if 40 Both But this equilibrium of incommensura- the president’s patience was starting to 30 ble interests depends on certain conditions wear thin. On March 6th the head of the being right: that China continues to get Taiwan Relations Office, a government de- 20 richer, confirming its leaders’ optimism; partment, said to the National People’s 10 that people on each side ofthe strait do not Congress (NPC), China’s rubber-stamp Chinese come to see each other as enemies; that parliament, that “I have to emphasise that 0 1994 2000 05 10 16 Asia remains more or less stable, so the Taiwan’s independence...will lead no- Source: Election Study Centre, National Chengchi University sides do not get caught up in other con- where. I hope the Taiwan government will flicts; and that, if the worst comes to the think about this sentence carefully.” All worst, America’s armed forces will step in this is in the context of a military balance fice and Taiwan’s Mainland Affairs Coun- to keep the peace. that has been shifted by a decade of dou- cil, increasing the chances of misunder- All these conditions are now changing. ble-digit increases in Chinese spending. standing and miscalculation. China’s economy has been slowing. And Ten years ago Pentagon planners dis- On November 25th China flew a pair of Asia is no longer so stable. Mr Trump has missed the idea of an invasion as “the mil- Xi’an H-6K bombers round the island, threatened to impose tariffson Chinese ex- lion-man swim”. Youdon’t hear such non- along with some escorts. Two weeks later ports, risking a trade war. Chinese territori- chalance much these days. another Xi’an bomber and three fighter al claims overvarious islands are heighten- jets again circled Taiwan. Then in January ing tensions: America’s secretary of state, Strait and narrow China’s aircraft-carrier, the Liaoning, sailed Rex Tillerson, told the Senate that America America might no longer be able to dis- round the southern tip of Taiwan and into must be able to limit Chinese access to dis- patch two aircraft-carrier groups to the Tai- the Taiwan Strait. “It shows they mean puted islands in the South China Sea. Mr wan Strait to force China to back down, as business,” says Andrew Yang, a formerTai- Trump confirmed to Shinzo Abe, Japan’s it did in 1996. But ifhostilities were to break wanese deputy defence minister. prime minister, that their two countries’ out America would almost surely be Chinese pressure on Taiwan could in- defence treaty covers the Senkaku islands, drawn in. The Taiwan Relations Act does crease further. The five-yearly Communist which China calls the Diaoyu. not fully oblige it to, but to refrain would be Party congress is due near the end of this And while Mr Trump and Mr Abe were a mortal blow to its position and prestige year and Mr Xi may be tempted to burnish meeting, North Korea conducted its first as a superpower. There would also be eco- his hawkish credentials by holding several post-Trump missile test. A month before, nomicconsiderations: Taiwan makesmore sabre-rattling military exercises in the run North Korea’s leader, Kim Jong Un, had than a fifth of the world’s semiconductors; up. He could deplete Taiwan’s tally of 21 claimed his country would soon test its a Chinese blockade could cripple the com- diplomatic partners. There have also been first intercontinental ballistic missile, puter industry. reports that China is considering amend- which could hit the American mainland, Against such a backdrop, the election of ing its “anti-secession” law. At the moment though that was not what was tested. In re- Ms Tsai of the independence-minded DPP it says that China would consider taking sponse to MrKim’sthreatsAmerica isfield- was always likely to ratchet up tension. “non-peaceful methods to defend the na- ing a missile-defence system in South Ko- Soon after her inauguration last May the tion’s sovereignty” only ifTaiwan formally rea—to which China vociferously objects. government in Beijing cut off communica- declared independence or if there is no Taiwan might seem like the eye of the tions between China’s Taiwan Affairs Of- hope of a peaceful resolution. On Febru-1
Two Chinas 2016 or latest CHINA* TAIWAN Area km2 9,596,960 35,980 MONGOLIA Population 1.38bn 23.5m NORTH Beijing KOREA GDP $11.4trn $529bn Population JAPAN density SOUTH Income per person at PPP $15,424 $47,790 2015 (est) KOREA Military budget total $214.7bn $9.8bn Yellow Sea as % of government spending 6.3% 10.6% Imports from US $135.1bn $28.6bn Exports to US $389.1bn $33.5bn CHINA East Fortune 500 number of firms 99 7 China Sea Largest firm annual revenues State Grid $330bn Hon Hai $141bn Infant mortality deaths per 1,000 live births 9.2 4.4 Senkaku/Diaoyu Life expectancy years 76 80 Taipei Islands Population below national poverty line 6.1% 1.5% TAIWAN Gini coefficient 1=most unequal 0.46 0.34 Taiwan 40 (79th) 61 (31st) Strait Corruption index (ranking/176) Hong Kong PACIFIC Press freedom index (ranking/180) 80.96 (176th) 24.37 (51st) VIETNAM MYANMAR OCEAN Economic Freedom index higher=better 52 74.7 LAOS South China Hainan Sources: CIA; CEIC; EIU; IMF; SIPRI; Fortune; Transparency *Not including THAILAND Sea PHILIPPINES 500 km International; RSF; The Heritage Foundation Hong Kong and Macau The Economist March 11th 2017 Briefing The one-China policy 19
2 ary7th Yomiuri Shimbun, a Japanese news- The mainland has around 1,400 land- landers increasingly see themselves as Tai- paper, reported that China is thinking based missiles aimed at Taiwan, plus an wanese; mainlanders, who used to regard about amending this to say it could invade unknown number of air- and sea- the Taiwanese as brothers, have started if Taiwan’s leader refuses to endorse the launched ones. Despite the presence of taking a chillier attitude. They still see the 1992 consensus—a refusal to which the DPP anti-missile defences—both American Pa- islanders as part of the same culture, but has so farstuck. During the NPC, a Chinese triot missiles and Taiwan’s own systems— they are now imposing loyalty tests, de- admiral, Yin Zhuo, said China should use the island’s air bases and many of its other manding (for example) a boycott of Tai- the anti-secession law to make it clear to defences might be quickly destroyed by all wanese entertainers who last year did not Taiwan that “independence means war.” that firepower. But an invasion requires condemn an international tribunal’s rul- Relations between China and Taiwan troops on the ground—ground which, in ing against Chinese claims in the South have been through fraught times before, this case, lies the other side of 180km of China Sea. The Communist Youth League, though, without breaking down complete- open water. And Taiwan’s surviving forces long a training ground for ruling party offi- ly. And there are three reasons for thinking could make that voyage very unpleasant. cials, waged a social-media campaign that, in the short term at least, things will Mr Yang says that, for an invasion to suc- against one well-known Taiwanese per- not go horribly wrong this time. ceed, China would need promptly to de- former in China, Leon Dai, and got him Both Mr Xi and Ms Tsai have strong do- stroy 85% or more of Taiwan’s own mis- blacklisted. mestic reasons forsetting aside their differ- siles; if half of Taiwan’s missiles survived Chinese officials are encouraging suspi- ences fora while. MrXi is consumed by the the first wave of attacks, China’s invasion cion. The number of Chinese tourists to partycongress, and though he maywant to force would be vulnerable. Taiwan has fallen by more than a third in make himselfappeartough with a few bel- the past year, largely because bureaucrats licose gestures he does not want a distract- Exuno, plures have made it harder to travel. Chinese uni- ingcrisis. AsforMsTsai, she knows thather Ifthe invasion could be slowed down, oth- versities have also asked Shih Hsin Univer- chances of re-election in 2020 depend on er countries would have time to react. At sity, in Taiwan, not to discuss “sensitive po- her handling of the economy, not on her that point, any Chinese leader would have litical subjects” (such as the one-China handling ofChina. Taiwanese GDP growth to decide whether to stop the invasion or principle) with exchange studentsfrom the and wagesare flat. Heropinion-poll ratings riska wider conflict. He would surely push mainland. A senior KMT official fears the are dismal. She is about to launch a politi- on for fear of what might happen at home days ofpro-Taiwan sentiment on the main- cally risky reform of the bankrupt state- if he backed down. But he would just as land may be over. run pensions system. The last thing she surely prefer to avoid such a choice alto- Political attitudes are hardening, too. wants is a fight with a superpower. gether. And that is where Taiwan’s real de- Taiwan used to have a one-China party, the A second reason for guarded optimism terrence lies: it does not need to be able to KMT, and a party that preferred indepen- is that Ms Tsai has taken the DPP further to- turn back an invasion; it only needs to be dence, the DPP. But the KMT is in free fall wards China’s position than ever before. able to buy enough time to force on China after its defeat in last year’s election. The At herinauguration she said that she recog- the choice between a coup at home and a fastest rising force is the New Power Party, nised the “historical fact” of the 1992 nego- regional war abroad. which has its roots in student demonstra- tiations, which is as near as she can get to Without the assurance of a quick vic- tions against close ties with China; it is at accepting the consensus without actually tory, cleaving to the familiarambiguities of least as anti-one-China as the DPP. Mr Xi’s doing so. In a speech in October she reas- “one China” will make the most sense to crackdown on dissent and civil society is sured the communist government that she China’s leader. But those ambiguities will leading the political system ever further “will, ofcourse, notrevertto the old path of become evermore difficult to maintain. Mr from Taiwan’s vibrant democracy. The confrontation”. Ms Tsai is a trade lawyer, Trump may yet return to his doubts about Beijing government’s interference in Hong cautious, predictable and restrained— American support for the policy; it would Kong’s local politics is taken to show that everything her risk-taking DPP predeces- hardly be the first time he has changed his “one country, two systems”, a formula de- sor, Chen Shui-bian, the president from mind. And popular attitudes across the vised for Hong Kong and once offered to 2000 to 2008, was not. China’s condescen- strait are hardening. It is not just that is- Taiwan, is a fraud. sion towards her—the Taiwan Affairs Of- In the face of these realities, both sides fice called her inaugural address “an in- want the option of continuing to say that complete examination answer” as if she the one-China frameworkholds, and look- were a stupid schoolgirl—has been mild ing forfresh obfuscations to that end—new compared with the invective levelled helpings of fudge to put on top of that against previous DPP leaders, whom they served up in the 1992 consensus. In 2011 have called “insane”, “evil” and “scum”. Wang Yi, now China’s foreign minister, That may mean Mr Xi wants to keep open then head ofthe Taiwan Affairs Office, said the door forfuture negotiations. privately during a visit to Washington that Third, the military balance in the Tai- China might consider replacing the 1992 wan Strait has not swung far enough for formula, and there have been some signs China’s high command to be confident of that this could still be on the cards. Every swift victory. If the country could sweep two weeks Taiwanese officials meet to sift into Taiwan so fast the world did not have through new forms of words. A new for- time to react (as when Russia invaded Cri- mula might conceivably provide the basis mea) other countries might conceivably offuture talks. treat an invasion as a fait accompli. But Tai- The simple and natural solution is to wan is no Crimea. Only10% of the popula- admit there are two Chinas. But the com- tion wants unification and less than 2% munist government is not ready to do that. wants it as soon as possible. The island has Instead, it is forcing the Taiwanese and a vibrant civil society capable of putting Americans to deal with the fraying ambi- millions of protesters onto the streets guities of a one-China policy, as all three against a Taiwanese government, let alone move slowly towards a new, more danger- a Chinese occupying force. ous endgame. 7 Maurizio Cattelan in
shop at santonishoes.com Asia The Economist March 11th 2017 21
Also in this section 22 Elections in Western Australia 23 Free speech in Singapore 23 North Korea takes hostages 24 Optimism in Pakistan 26 Banyan: Where Japan and South Korea get on well
For daily analysis and debate on Asia, visit Economist.com/asia
Australia’s economy South of Townsville, around Glad- stone, about30,000 workersonce had jobs On a chiko roll building the state’s liquefied natural gas (LNG) industry; last year, the industry em- ployed just 5,000. Similar stories can be found on the other side of the country. In Western Australia, where iron ore is a mainstay, the sinking economy appears to CHARTERS TOWERS be pulling down the conservative govern- The end ofa mining boom leaves the economy surprisingly intact ment. It is likely to lose a state election on GOLD rush in the late 19th century so was so much money around,” says Peter March 11th (see next story). Aenriched Charters Towers, an outback Wheeler, a Townsville estate agent. These local difficulties could have add- town in the state of Queensland, that it Similar booms elsewhere have ended ed up to a national danger. When Austra- opened its own stock exchange. Trading in horrible busts. The turn in the commod- lia’s economy registered a negative growth ceased longago. But the grand building still itycycle helped condemn Brazil and Russia rate in the third quarter of 2016, some stands, its barrel-vaulted portico sup- to brutal recessions. In China a sharp feared the worst: Australia might at last fall ported by eight slim pillars. Over a century downturn in mining and metals prompted into recession (commonly defined as two later, Queensland is reeling from the de- fears of a hard landing that still linger. consecutive quarters of negative growth), mise of another mining boom. “There was Many argue that economic rebalancing a fate it had avoided for25 years. a perception it would go on forever,” says and steady economic growth are incom- But the wobble quickly passed. In the Liz Schmidt, mayor ofCharters Towers. But patible goals. fourth quarter the economy regained mo- unlike so many other booms, this one has That worry also gnawed at Australia. mentum, growing by 2.4% compared with not ended in a national bust. Australia’s As commodity prices started falling, min- a year earlier. Australia’s GDP is now al- multi-pillared economy is still standing. ing companies stopped investing in big most as big as Russia’s (if the two are com- Given the violence of the commodity projects. Fewer fifos landed in places like pared atmarketexchange rates) and the Re- cycle, Australia’s resilience is remarkable. Townsville, depressing local spending and serve Bank forecasts growth of about 3% At its height, mining investment accounted employment. Townsville’s house prices this year and next. “We show that open- for 9% of GDP (see chart). As the economy fell and its unemployment rate rose above ness can deliver both prosperity and resil- scrambled to meet China’s demand for 11%, almost double the national figure. ience,” argues Mr Lowe. iron ore and coal, Australia’s terms oftrade Given how many economies suc- spiked. The price of its exports, relative to cumbed to the global financial crisis or the its imports, reached the highest level since A big hole commodity supercycle, Australia’s resil- the gold rushes of the 1850s, according to Australia, business investment in mining ience may seem miraculous, another ex- Philip Lowe, governor of the Reserve Bank As % of GDP ample of the luck for which the country is ofAustralia, the central bank. 10 famous. But from another perspective, its Like those 19th-century scrambles, the performance should not be surprising at China “rush” broughtsudden prosperity to 8 all. “It’s a textbook example of how a more far-flung places. Townsville, a coastal city open, flexible economy can handle these in north Queensland, hosted thousands of 6 things,” argues Saul Eslake, an economist. fly-in-fly-out workers (or “fifos”), who 4 As the mining boom petered out, the served the Bowen Basin’s coal mines and Reserve Bankcut its benchmark“cash” rate Mt Isa’s copper and zinc mines. Their six- 2 from 4.75% in 2011 to 1.5%. The Australian figure salaries boosted the local economy dollar fell steeply (it is now worth $0.76, and inflated the housing market, which at- 0 compared with a peak of $1.10 six years 2000 02 04 06 08 10 12 14 16 tracted speculative investors from faraway ago). The cheaper currency and lower in- Source: Reserve Bank of Australia Sydney, Melbourne and Brisbane. “There terest rates have allowed the older and 1 22 Asia The Economist March 11th 2017
2 more populous states of New South Wales Elections in Western Australia has doubled, to 6.5%. Falling property and Victoria to keep the economy bustling. prices are hurting miners who bought Property developers are building more Western values McMansions with bigmortgages when the houses, farmers are exporting more food, gravy train was chugging. Mr Barnett’s co- and foreigners (both students and tourists) alition government, meanwhile, splurged are paying more visits: Australia wel- on salaries and showy infrastructure, in- comed 1.2m Chinese last year, a record. cluding a big stadium and a much-derided PERTH Just as Australia’s extractive industries waterfront development in Perth, Eliza- An anti-immigrant partytakes benefited from China’s appetites, its prop- beth Quay, orBetty’s Jetty, as locals have it. advantage ofan economic slump erty market has benefited from China’s The state faces a budget deficit this fiscal anxieties: Australian homes are a popular Y THE standards of Australian politi- year of A$3.4bn ($2.6bn) and debt which is investment for wealthy Chinese eager to B cians, Colin Barnett has lasted several projected to top $41bn by 2020. move money somewhere safer. The fifos lifetimes. Fourprime ministers and crowds Cashing in on the growing disillusion- have also changed direction. Whereas peo- of state premiers have come and gone ment, One Nation has polled as high as ple from Sydney and Melbourne once flew since he first tookthe reins in Western Aus- 13%, although recent counts put its share at to Townsville seekingwork, locals are now tralia in 2008. But his winning streak is ex- 8-9% of the vote. It is unlikely to win any setting off to Australia’s two biggest cities pected to end on March 11th, when his seats in the lower house. However, in the in search of jobs, says Jenny Hill, Towns- right-of-centre Liberal party is likely to be upper chamber, where members are elect- ville’s mayor. trounced in a state election. Polling sug- ed by proportional representation, the As well as rebalancing away from re- gests that 57% of the vote will go to the op- party should win at least three seats, says sources, Australia has also benefited from position Labor party. William Bowe, an analyst in Perth. It will a rebalancing within the industry. Mining In a normal year the rest of Australia probably hold the balance of power in the investment has given way to mining ex- would barely notice. Western Australia is upper house, forcing the state government ports. Shipments of coal and iron ore the source of much natural gas and iron to haggle with it. helped Australia post a record trade sur- ore, but is sparsely populated and three The next test will come in Ms Hanson’s plus in the fourth quarter. The price ofboth time zones removed from Sydney and home, Queensland, another boom-and- has rebounded as China’s growth has sta- Canberra. The election is drawing national bust state which may go to the polls this bilised. But investment is likely to remain attention, however, thanks to the resur- year. Perhaps a quarter of voters there will subdued. Resource firms will use any im- gence of One Nation, a nativist party that opt for One Nation. Yet the party has provement in revenues to “repair balance- briefly flourished in Queensland in the shown itself capable of imploding: inter- sheets rather than invest in new capacity,” 1990s. It won fourseats in the Senate at last nal squabbling reduced it to irrelevance says Michael Roche, a consultant. year’s federal election. Since then its after it won 23% of the vote in state elec- Townsville and Charters Towers have leader, Pauline Hanson, a former fish-and- tions in Queensland in 1998. Mr Barnett, to pinned their hopes on another rebalanc- chip-shop owner, has seen her popularity justify the Liberals’ alliance with One Na- ing, from China to India. Adani, a firm soar. In Western Australia she is fielding al- tion, claims that the party has changed. based in the Indian state of Gujarat, wants most 50 candidates (there are 95 seats in Certainly, where once Ms Hanson feared to build what could be Australia’s biggest the two chambers of the state parliament) that Australia was “in danger of being coal mine in the Galilee Basin, south-west and has strucka deal with the Liberals that swamped by Asians”, she now frets that it of Townsville. It has spent about A$3.2bn is likely to benefit her more than them. is “in danger of being swamped by Mus- ($2.4bn) buying leases and fighting court Conditions suit her anti-immigration lims”. Bad organisation and infighting, petitions against the project from environ- agenda well. The state’s economy, which is however, appearnot to have abated. In De- mental and indigenous groups. heavily dependent on natural resources, cember one of One Nation’s four federal The state and federal governments sup- has struggled since a massive mining senators quit the party; he was subse- port the scheme because of the jobs it boom ended three years ago. Economic quently replaced by the courts with a col- would bring. Adani has applied fora feder- growth fell to 1% in 2015, a fifth ofthe rate of league. Ms Hanson may find that her big- al loan to help build a 380km railway line the preceding decade, and unemployment gest challenge comes after election day. 7 across the outback to a port at Abbot Point, near the Great Barrier Reef, from where coal would be shipped to India. MattCana- van, the federal resources minister, is “open to suggestions of a subsidy”. He pre- dicts a “devastating impact on Queens- land’s confidence” if the project does not go ahead. In Charters Towers the old stock-ex- change building is itself an elegant monu- ment to economic reversals and renewal. It was restored in the 1970s and added to Queensland’s “heritage register”, partly because it “evokes the rise and fall of for- tunes typically connected with goldfield towns”. The building is now home to an art gallery, a museum and the office of a lo- cal politician. At one point it even hosted a beauty parlour offering “microdermabra- sion” to smooth out pockmarked skin. Thanks in part to this capacity for reinven- tion, Australia’s economic record remains remarkably unblemished. 7 My other car is in arrears The Economist March 11th 2017 Asia 23
North Korea and Malaysia A despot takes hostages
SINGAPORE Call Kim Jong Un a killerand he’ll kidnap yourpeople OVERNMENTS often expel foreign- lomatic drama. On March 6th Malaysia Gers who enrage them. North Korea kicked out the North Korean ambassador, offers a worse fate: not being allowed to Kang Chol, who denies that North Kore- leave. On March 7th authorities in Pyong- an spies were responsible for the murder yang, the capital, said that11Malaysian or that the victim was Kim Jong Nam; he citizens living in North Korea would be accused Malaysia ofcooking up the story prevented from flying home until the two with America and South Korea to black- countries had resolved their differences en the North’s reputation. The North over the murder ofKim Jong Nam—the Korean government formally expelled half-brother ofKim Jong Un, the North’s Malaysia’s ambassador the same day, dictator. Kim Jong Nam was assassinated though by then his bosses had already last month at Kuala Lumpur’s main air- called him backto Kuala Lumpur. port using VX, a nerve agent renounced In a furtherdisplay ofrecalcitrance, by nearly all governments except North North Korea tested four missiles simulta- Korea’s. The North later released two of neously on March 6th, in defiance ofUN the hostages, but continued to hold the sanctions. In response to the North’s other nine. frequent tests, America and South Korea Najib Razak, Malaysia’s prime min- are accelerating the deployment in South Free speech in Singapore ister, condemned North Korea’s decision Korea ofTHAAD, an American anti- to detain its citizens as “abhorrent”. He missile system. That, in turn, has riled Grumble and be announced that North Koreans in Malay- China, which fears THAAD could render sia—ofwhom there are perhaps as many its missiles less potent, too. damned as1,000, many doing dirty jobs such as Meanwhile, on March 8th, a previous- mining—would in turn be prevented ly unknown outfit called Cheollima Civil from leaving until the regime backed Defence posted a video it said was of Kim SINGAPORE down. Malaysian authorities are watch- Han Sol, the son ofKim Jong Nam. It The government says it welcomes ing who enters and leaves North Korea’s claimed to have responded to a request to criticism, but its critics still suffer embassy in Kuala Lumpur. The chiefof “extract and protect” him from his home IKE most constitutions, Singapore’s police believes that at least two North in Macau, along with his mother and Lpromises freedom of speech. Unlike Koreans wanted forquestioning about sister. The group said it had received help most, it allows the governmentto limit that Kim Jong Nam’s murder are hiding in- from China, America and the Neth- freedom with “such restrictions as it con- side; he has said that his men will stand erlands. Whether Kim Han Sol will be- siders necessary or expedient” to maintain guard for“five years” ifit takes that long come a vocal critic ofthe regime that national security, friendly relations with forthem to come out. murdered his father, orchoose to vanish other countries or public order and moral- The stand-offcaps a weekofdip- from sight, remains unclear. ity, as well as to protect “the privileges of Parliament” and to prevent “contempt of court” or “incitement to any offence”. Offi- ery sacred cow”. Tommy Koh, another dip- them, Han Hui Hui, who ran for parlia- cials have not hesitated to quell their crit- lomat, urged his countrymen to prize ment as an independent in 2015, was also ics. Opponentsofthe People’sAction Party “challengers who are subversive and who convicted of organising a public protest (PAP), which has ruled Singapore without have alternate points ofview”. without approval (the authorities said she interruption since independence, have of- These comments were presumably not had applied to give a speech rather than a ten found themselves on the losing end of intended as a criticism of the Supreme demonstration). The courts fined Ms Han defamation suits regarding accusations Court. Just two days before it had upheld S$3,100 ($2,199). Anyone convicted and that American or European politicians the conviction and fining of three activists fined more than S$2,000 is barred from be- would have shrugged or laughed off. who took part in a protest about the man- coming a member of parliament for five Singapore’sgovernment has longinsist- agement of the Central Provident Fund, a years—another restriction the authorities ed that such measures are essential to safe- compulsory savings scheme administered must still deem necessary or expedient for guard the country’s hard-won racial har- by the government. The three had been the maintenance ofsomething or other. mony and public order. Recently, however, marching in Hong Lim Park, home to The upholding of Ms Han’s conviction the country’s rulers have begun expound- Speakers’ Corner (pictured), a spot set up comes six months after Singapore’s parlia- ing the virtues of thick skins. In late Febru- for Singaporeans to exercise their freedom ment enacted a law stiffening the penalties ary Lee Hsien Loong, the prime minister, of speech without any restriction whatso- for contempt of court, to as much as three said leaders need to be challenged: “If all ever, beyond the obligation to apply for years’ imprisonment or a fine of up to you have are people who say, ‘Three bags permission to speak and to comply with S$100,000. The law defines contempt full, sir’, then soon you start to believe the 13 pages of terms and conditions upon broadly: any comment that, in the court’s them, and that is disastrous.” On the very which such permissions are predicated, as judgment, “poses a risk that public confi- same day Kishore Mahbubani, a former well as all the relevant laws and constitu- dence in the administration of justice diplomat who runs a public-policy insti- tional clauses. would be undermined”. If the prime min- tute at the National University of Singa- The three protesters were convicted of ister wants to encourage criticism of the pore, said that Singapore needed “more creating a public nuisance, for disrupting a government, making more of it legal naysayers [who] attack and challenge ev- public event being held in the park. One of would be a good first step. 7 24 Asia The Economist March 11th 2017
Pakistan gion along the Afghan border as so un- tameable that its tribal chieftains were left Pak on track? to impose their own laws, a dispensation that has continued to this day. One result is backwardness: in one district the propor- tion ofgirls enrolled in school in 2011was a shocking 1%. Across FATA as a whole, fe- male literacy in 2014 was estimated at just ISLAMABAD 13%. This contrasts with national literacy An unfamiliarhope infiltrates a country more used to pessimism rates of43% forwomen and 70% formen. by HE first thing to come back was the Swat Valley Pakistan) Another result has been insecurity. The prime minister. Havingtwice held Paki- endless war in Afghanistan flooded FATA T KHYBER PAKHTUNKHWA stan’s highest office before the army top- Islamabad with guns, refugees and radicalism, all of FEDERALLY ADMINISTERED pled him in 1999, Nawaz Sharif returned TRIBAL AREAS which Pakistan’s armed services unwisely from exile to win it back in 2013. This was a Lahore sought to harness in pursuit of their own AFGHANISTAN personal triumph but also a historic mo- PUNJAB murky agenda, both in Afghanistan and at ment, marking the only time since Paki- home. Having slipped completely out of FATA stan’s founding that one elected govern- PAKISTAN control in the late 2000s, has been ment has completed its term and passed pacified in recent years only by a mix of BALOCHISTAN power to another. It also turned out to be s American drone strikes and Pakistani of- IRAN u d n the first of a heartening series of signs that I fensives on the ground. As many as a third Pakistan itself seems to be returning, slow- INDIA of the region’s 4.5m people are believed to ly and haltingly, to a more stable and SINDH have fled. Agovernmentreportin 2016 esti- prosperous state. Karachi mated that military operations over the Arabian For the eight years since terrorists at- Sea 300 km previous decade had destroyed 67,000 tacked a visiting Sri Lankan team, Paki- houses and left 27,000 dead. stan’s cricket-mad citizens have forfeited Given all this, the government’s recent the joy of watching top international 200,000 soldiers are being mobilised to announcement that it plans to normalise matches on Pakistani soil. But on March count the country’s 200m-odd inhabit- the administration of FATA is welcome. It 5th Lahore, the capital of the province of ants. The results will be used, among other will be absorbed into the neighbouring Punjab and site of the attack in 2009, host- useful things, to reapportion parliamenta- province ofKhyberPakhtunkhwa, giving it ed the final match of the Pakistan Super ry districts. Until a recent revision, Paki- elected leaders rather than tribal elders, League, a lucrative franchise with many stan’s constitution stipulated that a census regularcourts that apply national laws and foreign players. Forsafety reasons the PSL’s should be taken every ten years. The fact ordinary police instead of tribal militias. matches had until now, embarrassingly, thatthere have been onlytwo in the past 45 Localsseem pleased: a recentsurveyfound been staged in the United Arab Emirates. years says much about the tragic drift un- hefty majorities backing all these changes. In FebruaryPakistan also held itsfirst inter- der both military and civilian rulers. Despite all the good news, however, national skiing competition since 2007, Of anywhere in Pakistan, the part that Pakistan’s progress remains unsure. Terro- when Taliban militants overran its biggest may have got the shortest shrift is the Fed- rist attacks, bombings, murders, kidnap- ski resort, at Malam Jabba in the Swat Val- erally Administered Tribal Areas (FATA). pings and brutal state retaliation continue ley, and smashed the “heathen” lifts. British imperialists regarded this rugged re- at a brisk pace. Pakistan’s powerful mili- More broadly indicative is that Paki- tary remains dominant and its secret ser- stan’s stockmarket has risen faster than vices opaque. Take the case of the vanish- any other in Asia over the past 12 months, ing bloggers. Over three days in January, by a heady 50%. Perhaps this is because an- five obscure social-media commentators nual GDP growth, having languished be- who had dared to criticise the army van- low4% from 2008 until 2013, isnowback to ished from different parts of Punjab. The the long-term average ofaround 5%. Pover- army denied any involvement, but pro- ty has fallen and the urban middle class is military social media sites were quick to la- growing. Nestlé, a giant maker of pro- bel the abductees blasphemers, apostates cessed foods, says its sales in Pakistan have and traitors—in a country where blasphe- doubled in the past five years, to over $1bn. my remains punishable by death. “Their Across much of the country, too, lights crimes are so heinous that no one should are coming on again. When Mr Sharif re- say…that they suffered injustice,” tweeted sumed office fouryears ago Pakistanis rare- one notoriously craven television host. ly enjoyed more than 12 hours ofelectricity Four of the men were eventually released, a day. “It was so acute that private backup buthave refused to talkabouttheirordeals. generators could not recharge the batteries Some Pakistanis question how much that start them up,” says Ahsan Iqbal, the has really changed. Commenting on the minister of planning. Big investments in elaborate security for the PSL final, Anjum powerinfrastructure mean thatpowercuts Altaf, a columnist for the Dawn newspa- are now down to a more manageable 6-8 per, harrumphed: “I fail to understand hours a day. The government hopes to how spending hundreds of thousands of eliminate them entirely in time for nation- dollars to bribe a handful of foreigners to al elections next year. playa game in a nuclearbunkercan be con- That deadline has prompted another vincing proof that the country is back to important step: over the next two months normal…This is self-delusion carried to Pakistan is due to hold its first national cen- absurdity.” For Pakistan, however, even to sus since 1998. Some 90,000 civilians and Euphoria in the bunker be debating the subject is encouraging. 7 MOLECULAR DIAGNOSTICS SYMPOSIUM \ GENOMICS IN HEALTHCARE \
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PROF TEO YIK YING Role of Genetics in Public Health & Clinical Healthcare: An Effi cient or Expensive Future? PROF WANG LINFA Infectious Diseases Genomics A/PROF ROGER FOO Application of Clinical Genomics - Inherited Cardiac Conditions & Rare Diseases A/PROF MAHESH CHOOLANI Evidence-based Use of NGS-based Noninvasive Prenatal Testing in Modern Day Clinical Practice A/PROF TAN SOO YONG Mutational Landscape of Monomorphic Epitheliotropic Intestinal T-cell Lymphoma: Defi ning a New Disease Entity DR DAVID TAN SHAO PENG Profi ling of Gynaecological Cancers to Optimize Therapy A/PROF SAMUEL CHONG The Utility of NGS in Preimplantation Screening & Diagnosis A/PROF LEE YUAN KUN Microbiota Profi le as Quantitative Markers for Mental Health Status DR SAFEDIN SAJO BEQAJ How to Setup a CAP-accredited Molecular Diagnostic Laboratory with NGS as a Specialty DR PAULINE NG Beyond Genomics: What Happens Afterwards DR BENEDICT YAN Genome in a Hospital - The Laboratory Perspective DR LEE HONG KAI Clinical Utility of Genomics in Infectious Diseases Smdxs 2017 This symposium will showcase the clinical and translational applications of genomic technologies in Singapore. Key opinion leaders in their field will share their experience in utilizing genomics in cardiology, infectious diseases, oncology, prenatal & preimplantation diagnostic.
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For more information, visit www.sequencinggo.com/event/3/smds2017/ or contact SHERRY at [email protected] | BENEDICT at [email protected] 26 Asia The Economist March 11th 2017 Banyan A tale of two statues
TSUSHIMA South Korea and Japan are at loggerheads, but the ports ofBusan and Fukuoka remain close matter to rest by agreeing to compensate the surviving comfort women in 2015, recalled itsambassadorto Seoul aswell as itscon- sul-general in Busan. Neither has yet returned to his post. The spat also threatened to upset the centuries-long exchange between Busan and its Japanese sister city, Fukuoka, which lies roughly200km across the Tsushima strait. Both citiesare closer to each other than to their respective capitals. In the 1960s the peo- ple of Busan found it easier to receive Japanese TV signals than those broadcast from Seoul. Karaoke machines, now a staple in both nations, first came to South Korea via Busan, in the 1980s. Lastyeara record 1.2m South Koreanstravelled byferryto Kyu- shu, the island ofwhich Fukuoka isthe main city, forits shopping, food and onsen (hot springs). Flights between Busan and Fukuo- ka have doubled since 2010, to eight round-trips a day. Akihiko Fukushima of the government of Fukuoka prefecture says that Busan is geta-baki de iku: close enough to visit in casual wooden slippers, as ifpopping round to see the neighbour. Exchanges have remained remarkably resilient, despite the visit in 2012 ofLee Myung-bak, the president ofSouth Korea at the time, to Dokdo, which sent diplomatic relations into a tailspin. That year the Fukuoka Asia Collection, an annual fashion show, OR centuries the wako, dastardly Japanese pirates, skulked in invited designers from Busan, and still does (Busan returns the fa- Fthe countless coves of Tsushima island, roughly halfway be- vour at an equivalent event). Foundations on both sides have tween the Japanese archipelago and the Korean peninsula, fre- worked on a joint submission of historical documents chroni- quently raiding the coast of Korea. In 1592 General Toyotomi Hid- cling the Joseon tongsinsa for UNESCO. Journalists at Busan Daily eyoshi and his 200,000 men launched the seven-year Imjin and Nishinippon Shimbun in Fukuoka participate in an exchange invasion from the island, landing in Busan, on Korea’s southern programme—remarkable in countries where the media routinely coast. Centuries earliersueki ceramics, a new form ofpottery, had peddle a nationalist line. been transmitted from Korea to Japan via Tsushima. Todayitismainlyleisure-seekerswho take the hour-long ferry Idol threats ride from Busan to Tsushima: fishermen, hikers and day-tripping In 2013 it was a local stand-off that threatened to end for good the teens. Once a year, however, a delegation of South Koreans raucous jamboree on Tsushima that honours the missions. The dressed in the colourful garb of 17th-century envoys makes the previous year South Korean thieves had stolen a small 14th-cen- crossing. They are re-enacting the Joseon tongsinsa missions, or tury statue, thought to have been made in Korea, from the tiny “sharing of good faith from Joseon” (an ancient name for Korea), temple ofKannonji on the island. The South Korean police recov- which began in the aftermath of the Imjin war to reaffirm friend- ered it soon afterwards. But a local court blocked the statue’s re- ly ties between the Korean king and the Japanese shogun. turn to Tsushima, on the grounds that it had probably been pil- The envoys travelled along a 2,000km route, from Hanyang, laged centuries ago by the wako from a South Korean temple that as Seoul was then known, to Edo, present-day Tokyo, via Busan was suddenly demanding its return. Incensed, the islanders told and Tsushima. The emissaries carried notes of friendship, and a the Korean contingentto the festival notto bothercoming. Butthe dazzling assortment of Korean artwork. Over two centuries, a Japanese went ahead with the commemorations by themselves; dozen such expeditions sent poets, painters, acrobats and calli- one participant was Akie Abe, Japan’s First Lady, who claims to graphers from Korea to Japan; by the time the delegations em- keep a special fridge justforkimchi, the pickled cabbage that is Ko- barked from Busan, they had about 400 artists in tow. Another rea’s national dish. And in 2014, when the visitors from Busan 1,800 joined them on the Japanese side. Villagers lined the streets called for the statue’s return, Tsushima allowed the festival to go to greet them, waiting up all night to receive a poem or painting. ahead again, despite protests from Japanese nationalists. The two governments are a long way from such cordial ex- Last year the Bokchon museum in Busan celebrated two de- changes today. In the open sea north-east of Tsushima, they cades of exchanging artefacts with museums in Fukuoka, free of squabble over a group of rocks (Dokdo to South Koreans and Ta- charge. A curator says such swaps would be impossible without keshima to the Japanese), and bicker with each other about his- personal friendships and trust. Sekko Tanaka, the retired chief tory. Japan annexed Korea in 1910 and exploited it ruthlessly until monk of Kannonji, says he feels “betrayed” by the court. Still, he 1945; many South Koreans feel Japan has done too little to atone welcomes South Korean tourists to the temple’s guesthouse. forits colonial atrocities. Japanese diplomats say they watch such exchanges as a more Among the most painful incidents for South Koreans is the accurate measure of popular sentiment towards South Korea corralling of tens of thousands of women into Japanese military than strident press clippings and noisy protests organised by brothels. South Korean civic groups erected a bronze statue of a nationalist groups. The islanders of Tsushima, unlike other Japa- “comfortwoman” outside the Japanese embassy in Seoul in 2011, nese, use chingu, a word borrowed from Korean, to mean a close to serve as a daily rebuke to the diplomats inside. In December a friend. South Korean visitors are charmed to hear that, on the similar statue was installed outside the Japanese consulate in Bu- clearest ofdays, the shoreline ofBusan can be spotted; only a few san. In a huff, Japan’s government, which thought it had put the spoilsports insist the sightings are, in fact, just a mirage. 7 China The Economist March 11th 2017 27
Also in this section 28 A veneer of democracy 28 Xi, the traitor
For daily analysis and debate on China, visit Economist.com/china
The national legislature ever more on infrastructure, the amount of money it plans to spend on building rail- Caretaker of the chrysalis ways and roads in 2017 is the same as last year. It helps that, after a big dose of fiscal and monetary stimulus in 2016, the econ- omy is growing strongly. The stockmarket is also rallying and the currency, long un- der pressure to devalue, is holding steady. SHANGHAI But Mr Li was candid about dangers Bold talkconceals a much simplereconomic agenda: don’t mess up that still lurk after a decade of debt-fuelled I KEQIANG is a master of metaphors for best of times, it now seems even more of a growth. He sprinkled his report with refer- Lpainful economic reform. In 2013, his sideshow to what truly matters in Chinese ences to financial risk. In recent weeks, the first year as prime minister, he told the Na- politics. The big event in 2017 will be a government has started to devote more at- tional People’s Congress (NPC), China’s quinquennial party congress towards the tention to curbing it. A mild increase of rubber-stamp parliament, that reform re- end of this year, when Mr Xi is expected to short-term interest rates by the central quired the courage ofa “warrior cutting his solidify his power by giving important bankhas rippled through the bond market, own wrist”. At the NPC’s annual gathering jobs to his allies. Whether he will support forcing investors to pare back risky bets. In in 2015, he described it as “taking a knife to MrLi fora second term as prime minister is FebruaryGuo Shuqing, a blunt-talking offi- one’s own flesh”. On March 5th, at the a subject ofmuch speculation. cial, took over as bank regulator. It was a opening in Beijing of this year’s 11-day The approaching party event is casting sign that the government is getting more meeting ofthe legislature, he was less gory, a shadow over policymakers. Mr Li clearly serious about cleaning up the debt-entan- calling it “the struggle from chrysalis to sees it as his mission to ensure nothing gled financial system. butterfly”. Mr Li (pictured, right) deserves goes wrong in the run-up. The economic full marks for his range of imagery, but re- targets he announced suggested his preoc- Behind the rhetoric forms on his watch have been less impres- cupation with stability, even ifthat were to Yet on how to proceed with reform, Mr Li sive. This year’s parliamentary session has mean slightly lower growth. After aiming had little new to offer. He said state-owned highlighted one big reason forMr Li’s limit- for, and achieving, 6.5-7% growth last year, enterprises should be more competitive, ed accomplishments: his limited power. Mr Li said China would shoot for “about but shied away from suggesting they be For the past three decades, China’s 6.5%” this year. While that might sound like privatised. He promised that China would prime ministers have presided over the a tiny tweak, it sends a message that the improve the market for rural land, but said country’s economic affairs. But the 3,000 central government wants restraint. It does nothing about letting farmers own it. He delegateswho are meetingin Beijingknow not want to encourage local authorities to did not even raise the idea of levying a that President Xi Jinping (pictured, left) splurge on wasteful investments (as they property tax, which officials have previ- calls the shots on the economy these days. are wont to do given the slightest of signals ously touted as a possible way of patching At news conferences, many officials have from Beijing). Mr Li is wary of overheating up local budgets (such taxes would be praised Mr Xi as the “core” of the Commu- and a further build-up of already massive bound to anger middle-class Chinese). nist Party, a title that was granted to him levels ofdebt. This is the kind of painful change that last year in recognition of his primacy Other targets revealed at the NPC were China needs if its economic transforma- (though he still hascritics; see story on next similarly conservative. After a widening of tion is to continue successfully. But it is not page). Mr Li paid tribute to the president’s the budget deficit for three straight years, the stuff of this year’s parliament. Mr Li’s “sound leadership”. the finance ministry wants to keep it to 3% job is simply to ensure that the chrysalis Mr Xi’s status as China’s most powerful of GDP in 2017, the same as last year. The stays healthy. MrXi and the party congress leader since Deng Xiaoping has given this central bank called for slower growth in in a few months’ time will have much year’s NPC meeting a feeling of the unreal. the money supply. And most strikingly for more say over how to transform the pupa More ceremonial than substantive at the a government accustomed to spending into a butterfly. 7 28 China The Economist March 11th 2017
Politics and Workers Democratic Party, because most prestigious of these, the Chinese Peo- they know their groups exist only with the ple’s Political Consultative Conference Any colour, so long Communist Party’s assent. (CPPCC), which is holding its annual meet- It was not until 2007 that people from ing to make polite suggestions to the rub- as it’s red non-Communist parties were chosen to ber-stamp parliament (see previous story). serve as ministers—one was put in charge On March 5th he attended a meeting of of health, another science and technology. around 45 fellow party members who are BEIJING Loyal to the Communists though the non- delegates to the CPPCC. They sat around a China has a clutch oftame political Communists are, they are only trusted square table declaring “great satisfaction” parties. Has one ofthem broken ranks? with jobs that do not have a direct bearing with the Communist Party’s achieve- OW many parties does it take to run a on the Communists’ grip on power. ments—albeit without obvious enthusi- Hone-party state? Although the Com- Mr Luo is one of many people from the asm. Many of them tapped away on their munist Party is in sole charge, China also eight parties who are rewarded for their phones; one read a newspaper. has eight other legally registered ones. It subservience with memberships of advi- Mr Luo drank tea and remained silent. calls this a system of“multiparty co-opera- sory bodies (just as much flower vases as He had reason to be subdued. Censors had tion”, which involves “sharing weal or the parties themselves, many Chinese begun their work online, deleting much of woe”. The role of the non-Communist grumble). He is a vice-chairman of the the discussion ofhis party’s proposal. 7 groups is to add a veneerofdemocracy. Or- dinary people dismiss them as “flower vases”—pure decoration. Dodging censorship On March 1st Luo Fuhe, a senior leader of one such misleadingly named party, the Xi, the traitor Chinese Association for Promoting De- BEIJING mocracy, challenged that description. He A prankon state television shows dissidents’ cunning told reporters that his party had a proposal to make. Amid a sweeping crackdown on CCORDING to a programme on Chi- discovers he has been betrayed. An un- dissent, it was a remarkable one. Mr Luo Ana Central Television, a state-run derling is shown reading the traitors’ said China’s “strict” controls on the inter- broadcaster, the following are the names names, inscribed on a bamboo scroll in net should be relaxed to avoid hampering oftraitors: Xi Jinping, Li Keqiang, Hu an ancient script (see picture). The scene the country’s scientific and economic de- Jintao and Wen Jiabao. Well, sort of. The lasted only a second or two but that was velopment. Rarely has a prominent mem- broadcaster itselfwas clearly not claim- long enough foreagle-eyed viewers to ber of the establishment taken such aim at ing the president ofthat name, or his read the names. The censors were equal- China’s “great firewall”, which blocks ac- prime minister, or their immediate pre- ly quick, deleting screen shots, blocking cess to many foreign websites (including decessors, were enemies ofthe people. online versions ofthe episode and leav- this newspaper’s). Even more strikingly, Rather, it aired a historical drama called ing behind comments on what would some official newspapers reported his “The Qin Empire” and someone slipped happen to the show’s producer (“He is views. The delight of China’s long-suffer- the names into the latest episode. Their going to be so dead,” wrote one blogger). ing netizens was palpable. extraordinary, iffleeting, appearance was There is a second, coded layer of Like the other “democratic” parties, as a glimpse ofthe dissent that still lurks in dissent involved. The state the Qin is the non-Communist ones are officially de- China, and that can sometimes outwit its fighting is called the Zhao, and the “Zhao scribed, Mr Luo’s was founded before 1949 army ofcensors. family” is internet code forthe Commu- when the Communists seized power. One The Qin was the first unified Chinese nist elite. The epithet derives from a short of them is called the Revolutionary Com- state (and gave China its name). Its foun- story ofthe early 20th century in which mittee of the Chinese Kuomintang, a pro- der was buried with an army ofter- an aristocrat called Zhao humiliates a Communist spin-offofthe party that ruled racotta warriors. In the episode an earlier sort ofChinese Everyman. So Xi Jinping, China before Mao Zedong took over and Qin leader, who is fighting a rival state, a spy forthe hated Zhao family, is a traitor which then fled to Taiwan. At first, Mao to the first Chinese state. kept these groups alive as a way to win To call the president a traitor, even over people who were not hard-core Com- obliquely, is shocking in China. The munists yet who sympathised with Mao’s harshest recent criticism seems to have goals. But he lost patience with them dur- been an anonymous letter ofmockcon- ing the Cultural Revolution of the 1960s cern, published online last March, urging and 1970s. Many of their members were Mr Xi to step down forhis own safety. jailed. Deng Xiaoping revived the parties The timing ofthe latest gesture—just in the 1980s to show that China was be- before an annual meeting ofthe legisla- coming more tolerant again. ture—adds to its potency. Loyalty to Mr Xi As MrLuo is doubtless aware, that toler- is a theme ofthe gathering: at the open- ance is extremely limited. A Communist ing session, the Wall Street Journal count- Party website says the eight parties are ed eight mentions ofMr Xi in the prime “neither parties out of office nor opposi- minister’s state-of-the-nation speech, the tion parties”, and all of them support the most references to a leader by name in Communists. They are funded by the such an oration since Mao’s time. Communist Party and do not contest any Officials are always on high alert to elections. New members must be recom- prevent shows ofpolitical discord during mended by existing ones and there is no parliamentary meetings. Yet this time a open recruitment. In some cases they also small act oflèse-majesté slipped through. belongto the Communist Party. They often The more effective the censorship, it speakwith even greatercaution than Com- Curiously familiar names seems, the more inventive the dissent. munists, says a member of the Peasants United States The Economist March 11th 2017 29
Also in this section 30 Replacing Obamacare 31 Lobbying for refugees 31 The updated travel ban 32 WikiLeaks, again 33 Violence in Chicago 33 Campus free speech 34 Lexington: The NRA-ification of American politics
For daily analysis and debate on America, visit Economist.com/unitedstates Economist.com/blogs/democracyinamerica
Democracy in America cions that his campaign was, to some de- gree, in cahoots with Russians who—in the Everything-gate view of America’s intelligence agencies— interfered with the election. The latest piece of circumstantial evidence came on March 2nd, when it was revealed that Mr Trump’s attorney-general, Jeff Sessions, had twice met with the Russian ambassa- WASHINGTON, DC dor to Washington, Sergey Kislyak, during Donald Trump accuses his predecessor; Republican congressmen shiver the campaign, despite denying during his T WAS almost as if Donald Trump was appears to have accused his agency of a se- Senate confirmation hearing having had Itaunting his Republican colleagues. After rious crime, reportedly asked the Justice “communications with the Russians”. Mr tweeting an explosive and wholly unsub- Department to repudiate his claim out- Sessions recused himself from any investi- stantiated claim against Barack Obama on right. Mr Trump’s aides have meanwhile gation touching on the campaign—which March 4th—“How low has President put up such a valiant but hapless defence would include an ongoing FBI probe into Obama gone to tapp [sic] my phones…Bad of it that, if the issue were not so serious, it Russia’s role in the election—even though (or sick) guy!”— the president said it was up would be comical. Asked why Mr Trump Mr Trump had said he should not make to Congress to investigate the matter. “Nei- wanted Congress to investigate a crime the such a concession. By smearing Mr ther the White House nor the president president claimed to have proof of, Mr Obama, the president may have hoped not will commentfurther,” primlydeclared his Spicer lost the power of spin. It was be- only to deflect attention from talk of Rus- spokesman, Sean Spicer, “until such over- cause of the “separation of powers”, he sia, but also to arm his supporters with a sight is conducted.” fluffed. It would be good, he explained, to made-up counter-scandal to set against it. Some sort of follow-up is necessary. Mr get Congress “as a separate body to look Trump is the president, 47% of Americans into something, and add credibility to the Warp-speed trust him more than they trust the media look, adds an element that wouldn’t neces- Many Republicans are alarmed by Mr (according to a Quinnipiac poll), and his sarily be there.” Trump’s latest haymaker against Mr charge against Mr Obama was grave. If it Mr Trump, who launched his political Obama. His half-dozen somewhat vocal were shown that his administration ille- career by claiming Mr Obama was born in critics, who are mostly senators and in- gally snooped on Mr Trump, Mr Obama’s Africa and last year suggested the father of clude moderates such as Susan Collins of legacywould be disgraced. Alternatively, if his main Republican rival had a role in the Maine, old warhorses such as John it secured a warrant to bug Mr Trump’s murder of John. F. Kennedy, appears to McCain of Arizona, and, in Ben Sasse of phones, that would mean it had sufficient have based his claims on a rant by a talk-ra- Nebraska, a principled conservative, have cause to believe MrTrump orhisassociates dio host, Mark Levin, which was reported politely cast doubt on Mr Trump’s allega- were involved with terrorists or foreign on Breitbart News, a Trumpish website. To tions. “We are in the midst of a civilisation- spies to convince a judge on the Foreign In- support the president’s contention, White warpingcrisis ofpublic trust, and the presi- telligence Surveillance Court. On the other House aides referred to Breitbart and to dent’s allegations today demand the thor- hand, if Mr Trump, an inveterate conspira- separate reports, by the BBC and others, ough and dispassionate attention of cy theorist, was peddling inflammatory that the FBI had obtained a warrant to in- serious patriots,” wrote Mr Sasse. There nonsense about his predecessor and vestigate individuals linked to the Trump are also signsthatshyercriticsofMr Trump America’s intelligence agencies, that campaign over their Russia ties. None of may be, if not breaking ranks, at least emit- would also be serious. And it is probably the reports mentioned wiretapping. ting distress signals. “I’ve got to believe—I the case. Mr Trump’s motive for turning these thinkhe mighthave somethingthere, but if Mr Obama’s director of national intelli- unproven scraps into perhaps the most se- not, we’re goingto find out,” said Represen- gence, James Clapper, said there was no rious charge by a serving president against tative Jason Chaffetz of Utah when asked warrant against Mr Trump. James Comey, his predecessor appears straightforward, about the president’s allegations. the head ofthe FBI, upsetthatthe president given his history. He is enraged by suspi- Togetherwith MrSessions’s embarrass-1 30 United States The Economist March 11th 2017
2 ment, the episode has at least increased the seems unlikely to pursue its taskwith great have little incentive to control costs. Amaz- pressure on the House and Senate intelli- diligence. Mr Nunes, has suggested that ingly, several studies have found that Med- gence committees to pursue seriously the what needs investigating is the leaks to icaid does not improve the health of those investigations each has launched into Rus- journalists that have embarrassed the enrolled in it. Republicans also reckon that sia’s meddling. Both are in the process of White House, a nod to an idea newly pop- letting states decide how to run the pro- launching their inquiries. The House com- ular among the president’s most ardent gramme will unleash innovation and ex- mittee agreed on the scope of its investiga- supporters that a “deep state” is thwarting perimentation, and hence better coverage. tion last week; most members of the Sen- a democratically elected leader, a conspira- Critics scoff at that. In most states that ate committee, including the Republican torial notion borrowed from semi-democ- did not go along with the Obamacare ex- chairman, Richard Burr of North Carolina, racies that casts Mr Trump as a victim. pansion, Medicaid is a bare-bones pro- and the ranking Democrat, Mark Warner There is greater hope for the Senate gramme. In only one, Wisconsin, are child- of Virginia, were due in Langley to receive committee, which has a history of biparti- less adults eligible, according to the Kaiser a preliminary CIA briefing this week. Yet sanship and includes several indepen- Family Foundation, a think-tank. In Texas there are doubts about how zealously the dent-minded Republicans, including Ms and Alabama parents cease to qualify at committee’s Republican members will Collins. “We are going to have unprece- just 18% of the poverty line (an annual in- quest forthe truth. dented access to all the intelligence,” said come ofabout $3,600 fora family ofthree). It was recently revealed that Mr Burr Mr Warner. “I am confident we’re going to The left worries that states like these have and his counterpart in the House commit- find out the truth.” no interest in experimenting with the best tee, Devin Nunes, a Republican from Cali- The trouble is, the committee may be ways to help the poor. fornia, were both asked by the administra- bipartisan, butAmerica isnot—and therein In any case, states that did expand Med- tion to tryto convince journaliststhat there lies Mr Trump’s abiding opportunity. icaid would gradually lose the extra cash was no incriminating link between the Though his approval ratings are poor gen- Obamacare gives them. This will alienate Trump campaign and Russia—a surrepti- erally, among Republicans they are dandy. some Republican governors. House Re- tious arrangement that made a mockery of Any Republican who defies the president publicans probably hoped the slow pace Congress’s responsibility to hold the exec- therefore risks serious damage to his ca- of change would ease worries. But on utive to account. The House committee reer—so most will not. 7 March 7th John Kasich, governor of Ohio, called the plan “counter-productive”. Medicaid reform, then, is stoking inter- Ryancare nal opposition among moderates in the party. Proposed changes to the individual Medicine or poison? market are causing ire on the right. Obamacare established exchanges, government-run marketplaces where peo- ple can buy insurance. Those earning less than 400% ofthe poverty line, or$47,550 in WASHINGTON, DC 2017 for an individual, get tax credits to The House proposal to amend Obamacare may breakparts ofAmerica’s help pay the premiums. These are more health-insurance market generous at lower incomes. They are also OR such an important bill, it has an health care forthose leftin the programme. pegged to the cost of insurance, which va- Funusually simple name. On March 6th Currently, Washington helps pick up the ries widely by age and place. To stop insur- Republicans in the House unveiled—and tab for the medical expenses of those en- ers designing plans so as to attract only President Donald Trump endorsed—the rolled, chipping in a little more than half healthy people, a thicket of regulations American Health Care Act(AHCA). The bill the total bill. The AHCA would instead give guarantees minimum standards. To ensure would overhaul Obamacare, which Re- states a fixed payment foreach person, and healthy people buy the pricier plans that publicans have decried since its passage in link it to medical inflation. States could result, the “individual mandate” fines all 2010. Its nickname is “Ryancare” after Paul choose how to spend the money. those who do not buy insurance. Ryan, the Speaker ofthe House. Republicans say these changes are nec- Republicans have spent years promis- Obamacare had two main ingredients: essary because Medicaid is inefficient and ing to tear down most of this edifice. But an expansion of Medicaid (health insur- provides nearly worthless coverage. States without 60 votes in the Senate, they can ance for the poor); and a reform of the so- get at only bits of it. The AHCA would called “individual” health-insurance mar- change the tax credits so that they vary ket, which serves those who are not cov- Subsiding with age, but not income or geography (al- ered through an employer. Republicans United States, health-insurance tax credits, $’000 though they would taper out at high in- say both bits are failing. Their proposed By income level for a single non-smoker comes—see chart). Previously, Republicans Age, years fixes may not fare much better. Obamacare, 2017* had argued that insurance would remain First, Medicaid. In compliant states, 45 64 affordable because deregulation would American Health Care Act, 2018 Obamacare expanded eligibility for the bring down costs. But under the AHCA, programme to all those earning less than 10 most ofObamacare’s rules would remain. 138% of the federal poverty line, or $16,400 8 In many places, the funding cuts would for an individual in 2017. So far, this has be dramatic. In Alaska the average tax boosted Medicaid’s rolls by12m, which ac- 6 credit would fall by over 70%, according to counts for nearly three-fifths of the im- 4 Kaiser. The bill’s right-wing critics, how- provement in health-insurance coverage ever, want to abolish the subsidies entirely. since 2010. (Then, 16% of Americans went 2 Campaign groups like the Club forGrowth uninsured; today, only 8.8% do.) 0 have joined the House “freedom caucus” The new bill would, in stages, remove 16.430 40 50 60 70 80 90 100 115 and Senator Rand Paul in slamming a federal funding for Medicaid’s expansion Income level, $’000 “new entitlement programme”. after 2020. At the same time, it would Sources: House Committee on Ways *National and Means; Kaiser Family Foundation average The bill does scrap one crucial regula- change how the federal government funds tion: the individual mandate. In its stead, 1 The Economist March 11th 2017 United States 31
The updated travel ban Lobbying for refugees That’s awesome Improved, unjust
ATLANTA Some who arrived in time and the others leftbehind NEW YORK EFORE he arrived in America in 2013, Donald Trump’s revised ordermay face aged 22, Nur Abdi spent five “very B more trouble in court hard” years in India, sustained by the generosity ofSomali compatriots. He EARLY a month after promising the applied forasylum through the United NNinth Circuit Court ofAppeals that he Nations’ refugee agency, and after a series would “SEE YOU IN COURT”, Donald of“very tough” interviews, he was reset- Trump has staged a lawyerly retreat from tled in Clarkston, just outside Atlanta. his executive order of January 27th. On Now he works fora Lutheran reliefagen- March 6th the presidentrevealed a fresh at- cy, helping other newcomers. Some in his tempt at “protecting the nation from for- family, who like him fled violence in eign terrorist entry”. The new order retains Mogadishu, are stuckin Ethiopia. Donald the original one’s core, limiting access to Trump’sban on new Somali visitors America’s shores for people from several threatens his hopes ofa reunion. Muslim-majority countries, and putting On March 7th—the day after the presi- the refugee programme on hold—but has dent signed the new version ofhis travel been softened in fourways. restrictions—Mr Abdi attended a celebra- First, the order exempts lawful perma- tion of“new Americans” at Georgia’s nent residents—those with a “green card”— state capitol. Troupes from the Andes and from any travel restrictions. Second, Laos danced in resplendent costumes. A whereas the first travel ban was imple- technicolour choir ofrefugee girls sang mented at the stroke of the presidential “This Land is YourLand”. For a finale, a pen—causing chaos and confusion for peo- clutch ofrefugees tookthe oath of alle- ple on flights to America when Mr Trump giance and became American citizens. Liberty print hijab signed the order—the revision will not take The anthem was performed by a former effect until March 16th. Third, the revised Syrian refugee, and another, Dr Heval Some oftheir targets were absent, order applies only to future visa applica- Kelli, now a cardiology researcher at busy or pretending to be. But Scott Hilton, tions, not to people already holding valid Emory University, gave an exhortatory a freshman Republican, was willing to visas, or who manage to secure one before address. “Watering down a bad idea chat. Mr Storlie told him that 91% ofrefu- the deadline. Fourth, the list of seven doesn’t make it a good idea,” Dr Kelli says gees are self-sufficient within six months banned countries has been whittled down ofthe revised edict. He would like to ofarriving in Georgia. (Their economic to six: Iran, Libya, Somalia, Sudan, Syria sponsor his widowed aunt and cousins contribution involves not just ethnic and Yemen. Iraq was removed after its to join him from war-ravaged Kobani, but cafés and shops but labour in unappetis- prime minister asked the White House the ban now means he cannot. ing industries such as poultry process- why Iraqis fighting against IS in Mosul The serious purpose ofthe event, ing.) Then Mr Abdi chimed in. He said he should be considered potential terrorists. organised by the Coalition ofRefugee was Somali but had “found a home here, One of the legal troubles with the first Service Agencies (CRSA), was to lobby I found a job, I found a dream.” “That’s travel ban seems to evaporate with this legislators. Georgia, like other states, awesome,” said Mr Hilton. edited edition: the complaintthatthe order enacts its own immigration-related mea- Now, MrAbdi went on, it “feels like violates the due-process clause of the Fifth sures to complement the federal ones. On refugees are no longer welcome.” After Amendment. This apparent constitutional the roster forthe current session are a all, “they are human beings and deserve infirmity played a central role in the Ninth Trumpesque register offoreign criminals, a second chance.” Pressed on Mr Trump’s Circuit’s refusal to liftan injunction against and punishments forso-called “sanctu- initiative, Mr Hilton cited the need to the ban. By keepinglawful permanent resi- ary” campuses. Next year’s session may protect America from “bad guys”. Mr dents out of America just because they be more demagogic, says Stephanie Ali Abdi countered that refugees are them- happened to be travelling in a targeted ofNew American Pathways, part ofthe selves “running from the bad guys”. Ifthe country, the Ninth Circuitreasoned, the ad- CRSA, because state elections follow it. embargo endures, he “will not be able to ministration may have denied a class of Volunteers were dispatched to talkto the bring [his relatives] here.” “It’s tough,” Mr people “notice and a hearing”. By giving politicians; Mr Abdi teamed up with Hilton conceded. Still, he was “generally ten days’ notice and lifting restrictions on Craig Storlie, a Lutheran pastor. supportive” of a temporary ban. green-card holders, the administration has probably immunised the new executive order from a due-process challenge. 2 anyone who goes without insurance force people out of the market, increasing Another potential constitutional road- would have to pay 30% more in premiums, the riskofa so-called “death spiral”. blockislikelyto plague MrTrump’snewre- for one year, if they change their mind. The AHCA’s total likely effect on cover- lease, however: the claim of religious dis- Some worry this is not a sharp enough age, and on the budget, is uncertain. An- crimination. The First Amendment stick to keep healthy people in the market. alysts have not yet scored the proposal prohibits the government from favouring Mario Molina, chiefexecutive ofone insur- (other than its $594bn in tax cuts over a de- one religion over another, and the equal- er, told the Wall Street Journal that premi- cade). Republicans think their short, sim- protection clause of the 14th Amendment ums could rise by 30% next year as a result. ple-sounding bill is clearing up a mess. But bars it from discriminating on religious Because the tax credits do not rise along in insurance markets, even the smallest grounds. In its February ruling, the Ninth with premiums, big price increases would changes can have huge effects. 7 Circuit noted that “numerous statements1 32 United States The Economist March 11th 2017
2 by the president about his intent to imple- gion.” This has the flavourofprotesting too e-mails, declaring: “I love WikiLeaks!” ment a ‘Muslim ban’,” and evidence that much. The thumbprintofMrTrump’scam- Days before taking office in January, Mr the first order “was intended to be that paign promise to ban Muslims from Amer- Trump accused American spy agencies of ban” constituted a plausible case against ica (a call that remains on his website) will leaking against him, though he finally con- the travel rules. “[E]vidence of purpose be- continue to mar this order and is certain to ceded that Russia might have been behind yond the face of the challenged law” is fair give rise to new lawsuits. the hacking ofDemocratic e-mails. game, the Ninth Circuit noted. The original travel ban had a related The new CIA leaks are a fresh blow to Mr Trump’slawyers, in a clear sign that problem: no lucid explanation of how the an intelligence community still suffering they recognise this embarrassing pedigree restrictions enhance national security. The the after-effects of the release of National as a stumbling block, strucka key line from neworderdoesinclude a fewsentences for Security Agency documents by a former the January 27th order: a sentence permit- each country (drawn from a State Depart- contractor, Edward Snowden, in 2013. The ting refugee applications from minorities ment report of June 2016), purporting to leaks once again highlight the trade-offs (that is, Christians) who have been subject “demonstrate why their nationals contin- underlying espionage in the digital age. to “religious-based persecution”. The new ue to presentheightened risksto the securi- Governments want good computer securi- executive order contains language insist- ty ofthe United States.” But the edit has the ty because they fear cyber-crime and hack- ing that this conspicuous deletion should flavour of a student essay which, in its first ing. Yet they also value security flaws be- not be misinterpreted. The original line version, contained no support forits thesis cause computers and smartphones are “did not provide a basis for discriminating and has been patched up with a visit to a excellent spying tools, even in an age of for or against members of any particular couple of websites. The logic behind cate- strong, private-sector encryption. If spies religion”, the order reads, and “was not gorical bans from particular countries re- can read files directly off a target’s screen, motivated by animus toward any reli- mains as dubious as before. 7 they need not care if it is later transmitted by WhatsApp or similar services. In another trade-off, governments rely on close co-operation with technology companies. That is why in 2010 the Obama administration undertook to alert firms to security flaws when they found them. Wi- kiLeaks appears to show government agents still buying and hoarding so-called “zero-day” vulnerabilities from hackers, meaningcodingflaws not known to a tech- nology product’s creators. The files show agents discussing how to break into such operating systems as Apple’s iOS and Goo- gle’s Android, to extract a target’s location, audio and text messages, and secretly take over control of a smartphone’s micro- phone and camera. Apple said it had al- ready patched many ofthe newly revealed flaws and would “rapidly” address others. One of the more lurid files describes WikiLeaks, again “Weeping Angel”, a program that can turn Samsung internet-connected televisions The spy who came in for the code into listening devices, sending conversa- tions backto the CIA. Otherdocuments de- scribe bids to penetrate vehicle control sys- tems in cars. A WikiLeaks commentary suggested this would allow “nearly unde- tectable assassinations”. WASHINGTON, DC If politicians are incensed that spy The CIA, which exists to find out secrets, fails to keep them agencies seem unable to keep secrets, GRIM year for American spy agencies cyber-weapons, viruses and malware. The spooks can point to still another trade-off: Atooka turn forthe worse with the leak- group said it had redacted computer code the tension between employing hackers ing, on March 7th, ofwhat appeared to be a that could be used to launch attacks, pend- with the skills and cunning to design lengthy, detailed catalogue of the CIA’s se- ing such a debate. cyber-weapons, and the trickiness of en- cret hacking tools for turning computers, That self-justification by WikiLeaks will forcing discipline among workers who internet routers, telephones and even only further strain relations between the may not share the CIA’s culture. The newly web-enabled televisions into remote spy- intelligence community, the administra- leaked files detail codenames that refer to ing devices, and for bypassing encrypted tion of President Donald Trump and tech- the HarryPotterbooks, whisky brands and messaging services by penetrating individ- nology firms in Silicon Valley. In the final a drug used to treat hyperactivity. ual Apple and Android smartphones. The days of the Obama era, American spy The FBI will now hunt for moles and WikiLeaks anti-secrecy organisation post- chiefs assessed “with high confidence” leakers. The CIA must patch up its systems ed nearly 9,000 documents and files dated that a trove of embarrassing e-mails stolen and meanwhile brace itselfforfresh disclo- 2013-16 in what it said was a first taste of a from officials at the Democratic Party and sures. That would be bad enough, but trust “vault” of CIA secrets. WikiLeaks claimed Hillary Clinton’s presidential campaign is low between those agencies and close that the archive was provided by a former were “relayed” to WikiLeaks by Russia, in a supporters of Mr Trump, who charge intel- American government hacker or contrac- bid to sway the election of 2016. A month ligence services with acting as a “deep tor eager to “initiate a public debate” about before that election Mr Trump had gleeful- state” disloyal to the president. Foreign the security and democratic control of ly hailed the leaking of Clinton campaign foeshave much to cheer. 7 The Economist March 11th 2017 United States 33
Chicago This coincided with a sharp decline in the clearance rate for gun crimes in 2016. Campus free speech This American Last year 26% of murders resulted in an ar- rest, down from 36% in 2015, and arrests for Blue on blue shootings fell to 5% from 7%. Many assume carnage Anotherstudent protest descends the fall is related to black Chicagoans’ lack into violence of trust in police officers, which in turn stems the flow of information needed to ART ofthe job ofan intellectual CHICAGO solve a crime. It meant that more than community,” said Laurie Patton, Sending in the Feds is not the answer “P three-quarters of last year’s murderers president ofMiddlebury College in AM sick of President Trump denigrat- walked free. That may have encouraged re- Vermont, “is to argue.” Introducing “Iing Chicago,” said Bill de Blasio, the venge killings, as the likelihood of getting Charles Murray, a controversial author, mayor of New York, during a trip to the caught was so low. on March 2nd, she emphasised the Windy City on March 3rd, lamenting Mr A long-running stand-off between the audience’s right to non-disruptive prot- Trump’s “particularly painful stereotyp- governor of Illinois, Bruce Rauner, and the est. Excitable students who thought Mr ing” of the place. In January Mr Trump state legislature, which has resulted in the Murray unacceptably prejudiced—one of tweeted that he would “send in the Feds!” disruption or end of many social pro- his books touches on the relationship of ifthe city did not fix the horrible “carnage” grammesforChicago’spoorestresidents, is race to intelligence, though he also writ- of gun violence. In his recent speech to a also a factor. Since March 2015 the funding ten on the white working class—evident- joint session of Congress, Mr Trump said it ofCeaseFire, which employs formerfelons ly considered that offerinsufficient. was not acceptable that more than 4,000 and others with insight into local crime as Their protests quickly escalated from people were shot in Chicago last year. community messengers to prevent vio- jovial catcalling to prohibitive heckling With 764 murders in 2016, more people lence, has been cut to almost nothing. The and then—after Mr Murray was inter- were killed in Chicago, America’s third- one district on the South Side where Cea- viewed on camera by Allison Stanger, a largest city, than in its biggest city, New seFire was not slashed was the only one Middlebury professor, in a separate York (334), and its second-biggest, Los An- that saw a drop in shootings. Spokesmen room—into violence. Ms Stanger’s hair geles (294), combined (see chart). Three for the programme, known in other cities was yanked; the car in which the pair children were killed in four days in Febru- as “Cure Violence”, claim that if it were departed was mobbed. “I feared formy ary. Sending in the Feds, whatever it fully funded, murders in Chicago could be life,” she subsequently wrote. means, may sound appealing, but it would reduced to fewer than 350 a year; possibly In this latest tussle between campus be unlikely to help. Though Mr Trump said even fewer than 200. advocates offree expression and those that “very top police” in Chicago had told If that sounds self-serving, consider seeking to banish views they thinklie him that the city’s crime problem could be New York’s experience. After bolstering its beyond that concept’s ambit, there is stopped in a week with tougher tactics, police force, the BigApple had success with some cause foroptimism. Ms Patton there is no single explanation for the rise in community policing, which involves offi- turned up to the talk, organised by a violent crime. Nor is there any quick fix. cers getting to know not just the criminals student club, and afterwards apologised. Many of the reasons frequently discussed, on their beat but also the business-owners, The college ensured Mr Murray could be such as splintered gangs, an influx of guns teachers and local families, in order to heard; it is investigating the scuffle. Still, from states surrounding Illinois, the demo- build trust. In Chicago, the vast majority of like the trouble that erupted recently lition of public housing, concentrated pov- shootings and murders happen in four or over an offensive speaker in Berkeley, erty or even the weather, are things that five poor black or Latino neighbourhoods California, the violence at Middlebury— have been around foryears. where unemployment is high, schools real violence, not the imaginary sort One thing is certain, says John Pfaff at dreadful and urban blight omnipresent. In some hotheads thinkMr Murray’s be- Fordham University in New York: sending January almost halfofthe city’s 51murders liefsinflict—is an ominous turn. in the National Guard, as Mr Trump occurred in Englewood on the South Side Ominous forthe left, in particular. As seemed to suggest, would send the wrong and Harrison and Austin on the West Side. with previous incidents, this was as signal and would probably worsen the al- This lopsided number contains a hopeful much a clash between different gener- ready sour relations between the police sign: a concentrated problem is easier to ations ofliberals as between left and and black Chicagoans. Deploying troops— tackle than one that is diffuse. Nor is Chica- right. Ms Stanger made clear that she when local police are unable to contain un- go fated to suffer: six days passed last week sympathised with Mr Murray’s critics: rest and the mayor of a city appeals to the without a murder, the first time that has “We have got to do better by those who governor, who oversees the state National happened forfouryears. 7 feel and are marginalised,” she wrote, Guard—should be a last resort. adding a sideswipe at Donald Trump. Some things have changed, though. But, as elsewhere, the dust-up pitted her Gangs are using high-powered rifles that Windy and dangerous old sense ofopenness against students’ can tear through cars and even bulletproof United States, number of homicides moral certitude and tightly circum- vests. And the Chicago Police Department scribed idea ofproper discourse. 100 (CPD) made over 80% fewer street stops in Chicago Meanwhile, Mr Murray was left to January 2016 than it did in November 2015. 80 worry about academic freedom and to The officers’ retreat was related to a public note that many ofhis assailants resem- outcry after the release of video footage in 60 bled figures from “a film ofbrownshirt November 2015 showing the execution- New York City 40 rallies”. Middlebury’s agitators might style killing of a black teenager by a white askthemselves how a man whose work policeman. The furore resulted in the firing 20 they decry as racist acquired the right to Los Angeles of the then-police chief, Garry McCarthy, 0 compare them to fascists. Students as well as an investigation ofCPD practices J FMAMJJASOND everywhere should wonder how free by the Department of Justice. A few 2016 speech, a central liberal value, is instead months after that steep reduction in street Sources: Chicago, Los Angeles, becoming the banner ofconservatives. New York City Police Departments stops, gun violence raced up. 34 United States The Economist March 11th 2017 Lexington Fear and loathing everywhere
Increasingly, culture wars are presented as fights with real casualties room bills are good politics. The lieutenant-governor of North Carolina, Dan Forest, joined Mr Patrick at the Texas state capitol on March 6th to insist that damage to his state’s economy has been exaggerated. Mr Patrick, a former talk-radio host, compared the bathroom bill to the siege of the Alamo, urging colleagues to be as “courageous” as the doomed defenders ofthat Texan fort. Presenting culture wars as a fight about safety can be exceed- ingly effective. In 2015 voters in Houston, though a diverse bunch who have elected a lesbian mayor three times, overwhelmingly rejected an equal-rights ordinance banning discrimination on more than a dozen grounds, among them sexual orientation and gender identity. The ordinance was beaten by a one-theme cam- paign headlined “No Men in Women’s Bathrooms”, backed by TV ads showing a young girl cornered in a lavatory. In vain, ordi- nance defenders noted that city and state laws already ban lewd or disturbing behaviour in public lavatories, and would continue to do so. Nor were voters swayed by arguments that, to obey con- servative bathroom bills, bearded transgender men in lumber- jackshirts must use women’s loos ifthey were born female. To be sure, as transgender Americans become more visible, new puzzles emerge. Mack Beggs, a 17-year-old Texan, began tes- N THE annals of political intransigence, few beat Senator Jesse tosterone injections in 2015 and now identifies as a boy. In Febru- IHelms of North Carolina. On abortion or gay rights Helms was ary, to the rage of rivals’ parents (one father filed a lawsuit), he unyielding, insisting that God’s laws pre-empted debate. As AIDS won a girls’ state wrestling championship after his bid to com- ravaged gay America in the 1980s and 1990s, Helms fought to pete with boys was rejected. Transgender rights in prisons or block funds for research and treatment, blaming the disease on women’s shelters raise hard public policy questions. “perverts” whose conduct the Bible deemed an “abomination”. But bathroom use has been going on quietly and harmlessly Today, notquite a decade afterHelms’sdeath, itisharder to sti- for years. And a cynical focus on harm makes it hard for all sides fle debate by citing the Scriptures or other eternal verities. Gay to be pragmatic. In 2016 the Obama administration instructed Americans may marry and join the army; an openly gay person schools to let pupils use facilities corresponding to their gender sits in Helms’s beloved Senate. Yet culture wars continue. identity, asa question ofcivil rights. That wasonce the position of In 2016 North Carolina’s Republican-dominated state legisla- Donald Trump, who as a candidate for president correctly ob- ture passed the “PublicFacilitiesPrivacyand SecurityAct”, one of served that transgender bathroom-users cause “so little trouble”. several “bathroom bills” debated nationwide. Notably, the act On February 22nd the Trump administration withdrew that fed- overturned a local ordinance passed by racially diverse, fast- eral guidance—a move reflectingthe influence ofJeffSessions, the growing Charlotte, the state’s largest city. Charlotte had banned Alabama-born conservative who heads the Justice Department. discrimination on the basis of sexual orientation or gender iden- Transgender advocates have hardened their line, too. An early tity in a range of public places. Opponents paid special heed to debate took place in Vermont, where in 2009 young gay activists the seemingly arcane question of transgender lavatory-access, asked schools to provide one gender-neutral (if need be, single- and whether women and young girls might be ambushed in occupancy) loo forstudents, to avoid bullyingin communal bath- bathrooms or changing rooms by males claiming to be transgen- rooms. The American Civil Liberties Union, representing a trans- der women. Franklin Graham, a prominent evangelical pastor, gender Virginia teenager in a case that the Supreme Court sent called transgender bathroom-rights a boon to “paedophiles and back to lower courts this week, argued that making him use a predators”. Strikingly often, culture wars sound like that today: private loo left him feeling a “walking freakshow” at school. less an appeal to abstract principles than a claim that opponents are—out ofnaivety or wickedness—exposing innocents to harm. The NRA model of politics The Texas state legislature meets only every other year, reflect- All manner of culture wars are becoming an argument between ing Texan disdain for government. Despite the scant time avail- two camps, each demanding: “Why are you trying to hurt my able for lawmaking, arguably the state’s most powerful Republi- children?” Go back 30 years and the National Rifle Association can, Lieutenant-Governor Dan Patrick, calls it a priority to oblige (NRA) thundered about gun ownership as a constitutional right transgender Texans to use lavatories and changing rooms in pub- and a bulwark against government tyranny. Modern NRA ads lic schools and buildings that correspond to the “biological sex” presentAmerica asa dystopia ofviolentcrime and terrorism, urg- on their birth certificates. Anything else is a “free pass to sexual ing citizens to arm themselves to keep loved ones safe. predators”, he says. A University of Texas/Texas Tribune poll Fear resonates. Between 1999 and 2013 the proportion of shows that only 39% of Texans consider it important to pass Mr Americans who said they owned a gun for protection almost Patrick’sbathroom bill. Manybusinessbossesare hostile to it, lest doubled, overtaking hunting as the top reason cited. Donald Texas seem unwelcoming. North Carolina’s bathroom bill Trump, a man who is not in thrall to abstract principles, justified prompted such firms as PayPal to scrap planned investments and his plans for a border wall by accusing Mexico of sending “rap- led the NBA to move the 2017 All-Star basketball game from Char- ists”. Clashes of morality can cause nasty intransigence. Clashes lotte. Still, as a way of rallying socially conservative voters, bath- over safety leave no room forcompromise. 7 The Americas The Economist March 11th 2017 35
Also in this section 36 Curry cultures in the Caribbean 38 Bello: Stealing Venezuela
Brazil Far from hurting the poor, the reforms will protect “the future of all our social pro- An accidental, consequential president grammes”, he insists. He would “rather be unpopular now than a populist”. So far, congress has largely gone along with hisplans. The governmenthas“an ex- tremely solid parliamentary base”, Mr Temer says. Emboldened by that support, BRASÍLIA he intends to begin an assault on the Mus- Michel Temerwould ratherbe unpopularthan populist solini-era labour laws. He is pushing a bill OST presidents in Michel Temer’s sit- charged. Some think Mr Temer’s presiden- that would relaxrestrictions on employing Muation would be called “embattled”. cy will also come to a premature end. temporary workers and let agreements be- Brazil has yet to recover from its worst re- His jauntiness comes from his confi- tween unions and employers override cession on record. Some of the president’s dence that history will vindicate him. A some rules in the labour code. On March closest associates face accusations in the member of the centrist Party of the Brazil- 7th he presented a plan to simplify the tax country’s biggest-ever scandal. His approv- ian Democracy Movement, he is piloting law, whose complexity discourages enter- al rating is below 30%; many Brazilians re- reforms through congress to clearaway ob- prise, and to put out to tender 45bn reais gard his presidency as illegitimate. stacles that have blocked Brazil’s progress ($14bn) in infrastructure projects. Yet, in an interviewwith The Economist, for decades. Although Mr Temerwill have on a Saturday in a nearly deserted presi- been president for less than three years by A better class of politician dential palace, Mr Temerseemed anything the time he is due to leave office in early A constitutional lawyer by training, Mr but embattled. Collar unbuttoned, sleeves 2019, he says he will hand on to his succes- Temer dreams of reforming Brazil’s dys- rolled to his elbows, the energetic 76-year- sor a country that is “backon track”. functional political system. Despite his old was untroubled by the scorn that Bra- Asifto persuade hisaudience that what success in congress, he, like other presi- zilians heap upon him. Asked about the seems fantastic is real, he emphasises his dents, has found it hard to manage a legis- slogan “Temerout!”, spray-painted on a fly- points with the gestures of a stage magi- lature composed of 28 parties, many of over that he passes on his commute be- cian. His government has passed a consti- them machines for extracting patronage. tween his official residence and his office, tutional amendment to freeze federal “Brazil has no parties, only acronyms,” he Mr Temer called it “proof of democracy’s spending in real terms for 20 years. It will complains. The number could be cut by in- vibrancy”. He could arrange to have it soon reform the pension system. Those troducing a British-style first-past-the-post painted over, but would not dream ofit. measures will help contain the increase in electoral system or voting by party lists He was not expecting to become presi- Brazil’s massive public debt, one of the rather than for individual candidates, he dent. Until last May, he was the largely main threats to its long-term prosperity. muses. Congress is considering the intro- powerless vice-president under Dilma They face fierce opposition, especially duction of a 3% nationwide vote threshold Rousseff, of the left-wing Workers’ Party from the PT and from trade unions, which forpartiesto enterthe legislature and a ban (PT). He took over when she was im- contend that the government is balancing on coalitions that bring in small parties. peached for manipulating government ac- its accounts on the backs of the poor. Mr Both would be significant reforms. counts. To herallies, Mr Temeris a golpista Temer retorts that without such action the ManyBraziliansscoffatthe idea thatMr (coup-monger). To many other Brazilians, federal government will suffer the fate of Temer could be part of the solution. The he isa typical memberofthe corrupt politi- states like Rio de Janeiro and Minas Gerais, prosecutor-general, Rodrigo Janot, will cal class responsible for a vast bribery “which are virtually bankrupt because of soon present a list of politicians he wants scheme centred on Petrobras, the state oil public pensions”. He points to himself as a investigated as part of the Lava Jato (Car firm. Ms Rousseff was driven out of office “clear example of premature retirement”: Wash) investigations into the Petrobras by anger about that scandal, though she he has been drawing a generous pension scandal. They are expected to include peo- was not directly implicated, rather than by since he stopped working as a prosecutor ple close to Mr Temer, as well as figures the technical offence with which she was in São Paulo more than two decades ago. from rival parties, including the PT. Sepa-1 36 The Americas The Economist March 11th 2017
2 rately, the electoral tribunal is investigating he gives a good impression of being their Britain’s parliament five years earlier. Re- whether the re-election campaign of Mr biggest fan. Lava Jato, he says, is the “best cruiters based in Calcutta trawled impov- Temer and Ms Rousseff in 2014 benefited example” ofa process that is strengthening erished villages for workers willing to sign from dodgy donations. An executive jailed Brazil’s national institutions. As for the up foratleastfive yearsoflabour—and usu- in the Lava Jato investigation testified that case against his re-election campaign, he ally ten—on plantations growing sugar, co- he and Mr Temer had discussed campaign has “full peace of mind”; all the donations conut and other crops in Trinidad, British donations. were registered legally. Ifso, there is little to Guiana (now Guyana), the Dutch colony Voters suspect that the president would stop Mr Temer from serving out his term. ofSuriname and elsewhere. like nothing more than to thwart investiga- This accidental president could end up be- Workers were housed in fetid “coolie” tions that could threaten him. Perhaps, but ing a pretty consequential one. 7 barracks, many of which had served as slave quarters, and were paid a pittance of 25 cents a day, from which the cost of ra- Ethnicity in the Caribbean tions was deducted. Diseases like hook- worm, caused by an intestinal parasite, Favouring curry were common. But the labourers’ lot was better than that ofenslaved Africans. Colonial govern- ments in India and the Caribbean tried to prevent the worst abuses. Workers re- PORT OF SPAIN ceived some medical care and were not The flow ofindentured workers ended 100 years ago. It still shapes the region in subject to the harsh punishments meted surprising ways out to slaves, notes Radica Mahase, a histo- HEN Anthony Carmona, the presi- dadians who have joined Islamic State (IS). rian. In some periods the colonial govern- Wdent ofTrinidad and Tobago, showed About 130 of the country’s 1.3m people are ment offered workers inducements to stay up in a Carnival parade last month wear- thought to have fought for the “caliphate” at the end ofa contract: five acres of land or ing a head cloth, white shorts and beads or accompanied people who have. That is five pounds in cash. like those worn by Hindu pandits, he was a bigger share of the population than in Opposition from Indian nationalists not expecting trouble. Nothing seems any country outside the Middle East. The and shortages of shipping during the first more Trinidadian than a mixed-race presi- government wants a new law to crack world war prompted the British govern- dent joining a festival that has African and down on home-grown jihadists, which ment of India to shut down the traffic on European roots. But some Hindus were some Muslim groups denounce as dis- March 12th 1917. By then, more than half a outraged. “[O]urdress code has neverbeen criminatory. The attorney-general, Faris Al- million people had come to the Caribbean. associated with this foolish and self-de- Rawi, is guiding both measures through Today, just over a third of Trinidad and To- grading season,” huffed a priest. Trinidad’s the legislature. bago’s people say they are ofIndian origin, cultures blend easily most of the time; oc- Both debates are causing unease in the slightly more than the number of Afro-Tri- casionally, they strike sparks. communities that trace their origins to the nidadians; the share is higher in Guyana, The Hindu-bead controversy is not the influx of indentured workers in the 19th lower in Suriname. Hindus outnumber only one ruffling feelings among Indo-Tri- century. This month marks the 100th anni- Muslims. Many, especially those whose nidadians. Another is caused by a propos- versary of the end of that flow. By bringing forebears were educated at Presbyterian al in parliament to raise the minimum age in large numbers of Indians, mostly Hin- schools, are Christians. for marriage to 18 for all citizens. Currently, dus and Muslims, the migration did much Caribbean people of Indian origin are Muslim girls can marry at 12, girls of other to shape the character of the Caribbean to- as successful and well-integrated as any faiths at 14. Muslim and Hindu traditional- day (see chart). The arguments about mar- social group. Many of Trinidad and Toba- ists want to keep it that way. riage and terrorism are part ofits legacy. go’s state schools have religious affiliations Another argument has been provoked The migration from India began in 1838 but are ethnically mixed; the government by the disproportionate number of Trini- as a way of replacing slavery, banned by pays most of their costs regardless of de- nomination. Eid al-Fitr, which celebrates the end ofRamadan, and Diwali are public Routes holidays. Many Hindus celebrate the reli- giousfestival ofShivaratri, then join in Car- Indentured migration* to the Caribbean Ethnic composition By origin and selected destination countries, estimates 100,000 people 2012 or latest available, % nival parades. “An individual can have 1838-1917 multiple identities,” says Ms Mahase. Indian African/Black Origin Destination Politics still has ethnic contours. In Trin- Chinese Javanese idad and Tobago, most voters of African 0 20406080100 origin support the People’s National Guyana Movement, which is now in power. Indo- Guyana Mixed-race Trinidadians tend to back the opposition India and other United National Congress. Guyana’s presi- dent, David Granger, is from a predomi- Trinidad Trinidad and Tobago and Tobago nantly Afro-Guyanese party.
China But these distinctions are blurring. A Suriname growing number of Caribbean people Suriname Africa identify with neither group. Nearly 40% of Jamaica Europe† teenagers in Trinidad and a quarter in Guy- Guadeloupe Jamaica ana call themselves mixed-race or “other”, Java or do not state their ethnicity in census sur- Martinique veys. When both countries hold elections *System of unfree labour. Workers are bound to an employer for a specified in 2020, these young people are likely to † Sources: National census data; The Economist period of time Almost exclusively from Madeira, starting 1835 vote less tribally than their parents do. 1
38 The Americas The Economist March 11th 2017
2 Trinidad’s jihadist problem is in part it a criminal offence within Trinidad to join formed by Hollis “Chalkdust” Liverpool, a caused bythe choice ofnewidentities rath- or finance a terrorist organisation or com- former teacher, was called “Learn from erthan bythe embrace ofestablished ones. mit a terrorist act overseas. People travel- Arithmetic”. Its refrain, “75 can’t go into 14”, Many of IS’s recruits are Afro-Trinidadian ling to designated areas, such as Raqqa in mocked Hindu marriage customs and im- converts to Islam. Mr Al-Rawi, who is lead- Syria, would have to inform security agen- plicitly backed the legislation to raise the ing the fight to stop them, claims descent cies before they go and when they come marriage age. Satnarayan Maharaj, an 85- from the Prophet Muhammad through his back. Imtiaz Mohammed of the Islamic year-old Hindu leader, called it an insult. Iraqi father, but has a more relaxed view of Missionaries Guild denounces the pro- The government has enough votes in religion. His mother is Presbyterian, his posed law as “draconian”. parliament to pass the law in its current wife is a Catholic of Syrian origin and one The proposal to end child marriage af- form, but opponents may challenge it in ofhis grandfathers was a Hindu. fects few families; just 3,500 adolescents the courts. Traditionalists may thus hold The anti-terrorist and child-marriage married between 1996 and 2016, about 2% on to an anachronism imported from In- laws he is promoting, though seemingly of all marriages. But it has been just as con- dia, at least for a while. The bead-wearing, unrelated, are rebukes to rigid forms of tentious as the anti-terrorism law. The win- calypso-dancing president is probably a identity. The anti-terrorist law would make ning calypso at this year’s Carnival, per- better guide to what the future holds. 7 Bello How to steal a country
Will Venezuela’s dictatorship get away with it? UGO CHÁVEZ owed much to Raúl What can be done to halt Venezuela’s HBaduel. When in 2002 Chávez was implosion, organise a humanitarian res- forced to step down as Venezuela’s presi- cue and achieve a return to democracy? dent following a massacre ofprotesters in Radicals in the opposition trusted in a Caracas, it was General Baduel, an old po- popular uprising. But repression has litical ally, who restored him to power worked: people seem too scared and pre- afteran opposition junta had illegally sus- occupied with survival to sustain mass pended the constitution. In gratitude, protests. A negotiated solution remains Chávez made General Baduel defence the most plausible option. But it will take minister. But in retirement the general pressure from both within and without. dared to oppose Chávez’s drive to abolish The United States has tightened the term limits. He was accused of stealing screws a little. Donald Trump met Lilian $10m and jailed. Two days before com- Tintori, Mr López’s wife, at the White pleting his sentence, this month General House last month, and called for his re- Baduel was charged with treason. lease. The United States Treasury has His treatment shows how cornered blacklisted Mr El Aissami, accusing him the government of Nicolás Maduro, Chá- of drug-trafficking (which he denies). But vez’s chosen successor, feels. Mr Maduro hand-picked supreme court to nullify par- sanctions are of doubtful effect and are has an approval rating of just 18% accord- liament. The similarly tame electoral au- likely to make officials even less willing to ing to Datanálisis, a pollster. The econ- thority blocked the opposition’s drive for a yield power. Some Republicans would omy is in freefall because of mismanage- recall referendum. It failed to call an elec- like the United States to stop buying Vene- ment and lower oil prices. To service its tion for mayors and regional governors, zuelan oil; that would cause disruption foreign debt, the government slashed im- due last year. The authority is now requir- but provide a pretext forrepression. ports to a third oftheir level in 2012. ing the re-registration of opposition par- The best option is forthe United States Venezuelans are suffering privation ties, a process whose rules are so impracti- to join other Latin American countries in previously unheard of in what was once cal that it appears designed to abolish pressing the regime to accept talks. Last South America’s richest country. Accord- many ofthem. year Luis Almagro, the secretary-general ing to a study by three universities, 82% of Talks between the opposition and the of the Organisation of American States, households now live in poverty. That government, brokered by the Vatican and invoked the group’s democracy clause to compares with 48% in 1998, when Chávez the South American Union, collapsed in call for Venezuela’s suspension. He failed came to power. The rise in poverty fol- January because Mr Maduro showed little to get sufficient backing. Now he may try lows Venezuela’s biggest-ever oil wind- interest in freeing political prisoners or re- again. Political change in South America, fall. Of the $1trn the regime received in oil storingconstitutional rule. Instead he is be- combined with Venezuela’s move to revenue, perhaps a quarter was stolen by coming more repressive. His new hardline open dictatorship, has left Mr Maduro insiders, according to the International vice-president, Tareck El Aissami, heads a more isolated than in the past. Crisis Group, a think-tank. Infant mortal- “national anti-coup command”. This has Diplomatic pressure alone will not be ity is rising, and Venezuelans are need- kept General Baduel in prison and jailed enough to shifthim. Butitwill help. Need- lessly dying because of the shortage of several other army officers along with ed, too, is a more effective opposition: it is medicines. Those who can, leave; per- members of Popular Will, an opposition high time that its squabbling groupus- haps 2m Venezuelans now live abroad. party whose leader, Leopoldo López, has cules united in a single party with one To remain in power, Mr Maduro’s been a prisoner since 2014. It is one of the leader. The alternatives are stark: the con- state-socialist regime is extinguishing de- regime’s fantasies that it faces constant solidation of a Latin American dictator- mocracy. The opposition won a big ma- coup plots. Another is the quasi-religious ship, or the possibility of large-scale jority in a legislative election in 2015. official cult of Chávez, who died of cancer bloodshed. The region should do its ut- Since then, the government has used its fouryears ago this week. most to avoid both. Middle East and Africa The Economist March 11th 2017 39
Also in this section 40 Egypt’s economy revives 41 A port for Gaza 41 Cameroon’s lingua fracas 42 South Africa’s rape epidemic
For daily analysis and debate on the Middle East and Africa, visit Economist.com/world/middle-east-africa
The war against Islamic State bil, a couple of hours’ drive away, partly along roads ploughed up by IS that show Caliphate at bay no sign of being repaired. No international agencies are to be seen in the recaptured city, bar a few clinics and some empty school satchels donated by UNICEF. The central government has failed to provide it MOSUL with an emergency civilian administra- The Iraqi army is on the brinkofdefeating Islamic State. But the government must tion, leaving it either to the army, which is move fast ifit is not to squanderits victory otherwise occupied, or to the local govern- N A series of lightning advances over the American officers working closely with ment, which barely functions. Ipastfewdays, Iraq’sarmyhasseized con- the Iraqi army estimate that as few as 500 Mr Ahmed probably speaks for many trol of most of western Mosul, the last re- IS fighters now remain in the city, the oth- when he recalls that in the days immedi- doubt of Islamic State (IS) in the country. ers having fled or been killed in a devastat- ately after IS took control of Mosul, the ji- On March 7th, a day that may have marked ing campaign of well-targeted air strikes. hadists were rather popular. The previous a turning point, army units took Mosul’s The evidence is clear from a tour of east elected authorities had been corrupt and main government complex, as well as the Mosul, on the left bank of the Tigris river, incompetent, and unable to deliver the ba- city’s famous antiquities museum and which hassplitthe cityin two since IS blew sics. Electricity, he recalls, was available for about half of the old city. The airport had up all its five bridges as it fell back. just three hours a day. Under the caliphate fallen a week or so earlier, and all roads in Residents point out building after the lights stayed on, at least until coalition and outofthe cityin which the leader ofIS, wrecked building that had been used by ji- air strikes began and then, shortly before Abu Bakr al-Baghdadi, declared his “ca- hadists, only to be knocked out from losing control of east Mosul, IS blew up the liphate” in June 2014 are firmly in govern- above. “This was a shopping centre, but city’s main power station and its water- ment hands. Daesh [IS] took it over,” says Muammar pumping station. In the command centre responsible for Yunnis, an English teacher. “Then the the eastern halfofthe city, which was liber- planes destroyed it.” The liberation, he At least they kept the lights on ated in December, Brigadier Qais Yaaqoub reckons, “could not have been handled Ifsquabblingand corruption on the part of was jubilant. “They are in full collapse better. Some have died. That happens in a the politicians hinder the provision of ser- now,” he said. “When an army breaks it war. But the government and the Ameri- vices, citizenswill once again consider sup- happens very quickly. Within a week or cans have been careful.” porting alternative groups. “What can we two, this will all be over.” He may be Driving IS out of the city may come to do?” laments the brigadier. “The govern- speaking prematurely, but probably not by be seen as the straightforward part, how- ment does not have the resources to fix all much. The liberation ofwest Mosul, which ever. Judgingbywhathashappened in east this. It will take 12 years or more. We need a started only last month, has proceeded Mosul, rebuilding will be a slow process. lot ofhelp from outside.” much faster than expected. That said, the Three months after their liberation, east Many will blame the inaction on inse- last of the fighting could be a lot more diffi- Mosulites are getting fed up. They are still curity. But this is overblown. Although the cult. IS clings on in the oldest parts of the without running water, and the only elec- chatter of machineguns and the crump of city, where streets are narrow, making it tricity comes from private generators. mortar rounds can be heard from across hard to manoeuvre vehicles and increas- “We have security now, but no services the Tigris, east Mosul already looks and ing the risk of ambushes and civilian casu- at all,” complains Muhammad Ahmed, a feels reasonably safe. The Shia militias alties. However, tens of thousands have pharmacist. “There is no government have been kept out of the city to avoid sec- been able to make their way to safety. here.” The provincial governor lives in Er- tarian killings, as have the Kurdish pesh-1 40 Middle East and Africa The Economist March 11th 2017
MARCH 2017 Egypt’s economy rency reserves. In February they hit their Tigris Fadhiliya highest level since 2011, promising to ease a NINEVEH shortage ofdollars that has hindered Egyp- Mosul Green shoots Bartella tian business. To be sure, businessmen Direction gripe that it is still difficult to get the dollars Raqqa of attack IRAQOctober 17th that they need, and the government is still SYRIASYRIA Erbil clearing a backlog of payments to oil firms IRAQ Erbil CAIRO IRAQ and other multinationals. Ibrahim Khalil ERBIL Some good signs forEgypt’s DirectionBaghdad of attack Yet even as exporters celebrate, firms 25 km beleaguered economy October 17th servingthe domesticmarketare struggling. Areas of control T TIMES last year it looked as if Abdel- One measure ofthe health ofthe domestic Islamic State Iraqi Security Forces Kurds Fattah al-Sisi, Egypt’s authoritarian economy comes from a purchasing man- Source: Institute for the Study of War A president, was losing his grip. Faced with a agers’ index (PMI) compiled by Emirates osul dam OCTOBER 2016 faltering economy, he told Egyptians that NBD, a bank. Its figures suggest that private, Tigr is FadhiliyaNINEVEH they needed to sacrifice—by not eating or non-oil economic activity has contracted Mosul sleeping, if necessary. Perhaps they could for17 consecutive months, even though of- Bartella Direction send him their spare change too, he said. ficial figures show that the economy as a of attack Rummaging behind the cushions hard- whole (including oil and the state) has IRAQOctober 17th ly seemed enough to turn around an econ- been growing. One reason is that the gov- ErbilErbil S PARSELY omy plagued by political instability, and ernment’s efforts to cut subsidies mean POPULATED Ibrahim Khalil ERBIL by terrorism that had scared off tourists Egyptians are spending more of their in- Direction of attack October 17th and foreign investors. Moreover, while ex- come on fuel and electricity, and have less horting his countrymen to tighten their left over for other things. A weaker curren- 2 merga fighters. There is no curfew; police- belts, Mr Sisi was squandering billions of cy has also led to higher prices for imports men guard many street corners, and the IS dollars of aid from Gulf states on wasteful and fuelled consumer inflation. Red tape “sleeper cells” that some warn of seem to subsidies and on defending Egypt’s over- continues to tie firms in knots, although be soundly asleep, ifindeed they exist. The valued currency. The futility of these poli- the government has promised to make it last incident in the city was a month ago, cies can be seen in a handful of figures: a easier to do business, for example by when a terrorist blew himself up in a res- gaping fiscal deficit that hit 12% of GDP last smoothing the process for getting licences taurant, killing three people. year; ballooning public debt (101% of GDP) and permits to open factories. Children are back at school, to the de- and high unemployment (over12%). The strugglesofJuhayna, a bigjuice and light of parents who had kept them at Yet there are signs that Mr Sisi is starting dairy producer, are typical. Its profits de- home after the city fell to IS rather than to put Egypt back on a more sensible eco- clined by 34% in the third quarter of 2016 send them offto be indoctrinated by homi- nomic track. In orderto obtain a $12bn loan compared with the same period in 2015. cidal zealots. But even though restaurants from the IMF last year, his government has Now it plans to raise prices and cut invest- and shops are open, business is slow. Mu- raised the price ofsubsidised fuel and elec- ment. Seif El Din Thabet, its CEO, blames hammad Attar, who runs a falafel restau- tricity, brought in new taxes and allowed its troubles on “the recession and low con- rant, says this is because no one has any the Egyptian pound to float. sumer purchasing-power”. money. Iraq’s economy is dominated by The currency float was promptly fol- Yet there are signs that a broader recov-1 the state and mostpeople with regular jobs lowed by a sickening lurch in which it lost work for the government. Amazingly, it 50% ofits value. It bounced backsharply in kept paying salaries for about a year after February, then retreated again (see chart). A river of troubles IS conquered Mosul. But even so, most of Though the medicine wasbitter, itseems to Egypt the city’s workers have not been paid for have been justwhatwasneeded to lure for- Foreign reserves more than a year. Pensions, somehow, are eign investors back into the Egyptian mar- $bn MILITARY POUND REVOLUTION COUP FLOATS still getting through, and families are man- ket. A sale of $4bn-worth of government 40 aging on those and on debt. bonds in January was more than three 30 With Mosul recaptured, the rout of IS in times oversubscribed, and foreign pur- 20 Iraq will be complete. Undoubtedly, chases of Egyptian treasury notes doubled 10 though, some of its surviving fighters will in the same month. This appetite for in- 0 revert to suicide-bomb attacks. And, for a vesting in Egypt partly reflects a broader 2010 11 12 13 14 15 16 17 while, the group will live on in Syria. But demand foremerging-market debt. But it is Egyptian pounds per $ there too it is surrounded and shrinking also a clear sign of growing confidence in Inverted scale back to its “capital”, Raqqa. The caliphate’s the Egyptian economy. 0 short, brutal life is drawing to a close. That change in mood is also felt by 5 In the longer term, huge problems re- Egyptians working abroad. Remittances, 10 main for Mosul. Many of its people un- which accounted foras much as 7% ofGDP 15 doubtedly collaborated with the occupi- in 2012, slumped by a fifth last year as peo- 20 ers, and scores will be settled. Sunnis will ple held onto foreign currency rather than 2010 11 12 13 14 15 16 17 want to be sure that they are given a full send it home to be converted into overval- Consumer prices share ofpowerin the city and its surround- ued pounds. Since the currency has float- % increase on a year earlier ingprovince ofNineveh, even though it isa ed, remittances are rising once more. 30 Shia-dominated army that liberated them. A weaker currency is also spurring The Kurds will want some sort of reward growth, albeit gradual, in trade and tou- 20 for their part in beating IS back. Much of rism. Non-petroleum exports increased by 10 the city will need to be rebuilt. Getting the 25% in January compared with the year be- power back on and the water running as fore. Earnings from exports, along with 0 the roasting Iraqi summer approaches new loans from the IMF and other sources, 201011 12 13 14 15 16 17 would be a good place to start. 7 are plumping up the country’s foreign-cur- Sources: Haver Analytics; Thomson Reuters The Economist March 11th 2017 Middle East and Africa 41
2 ery may come soon. The weaker currency raises taxes this year, as planned. Prices for Zohr, a lucrative gasfield, starts production is proving a fillip to some manufacturers, staples have skyrocketed; other products at the end of the year. But international in- as consumers switch from expensive im- are no longer available. “Some medicines I vestors and institutions are watching ports to cheaper domestic alternatives. use disappeared for a while,” says Mr Mu- closely for any sign of backtracking. The Egypt’s trade deficit in January was 44% hammad, who suffers from diabetes. IMF will review matters before sending smaller than it had been a year earlier. “Now they are available, but at higher Egypt more cash later this year. “We are These benefits are yet to trickle down to prices than before.” seeing good progress,” said Christine La- the average Egyptian. “We hear about the The protesters who toppled Hosni garde, the head ofthe fund, last month. improvement on TV and read about it in Mubarak, the strongman who ruled Egypt Egyptians are more circumspect. “I the newspapers, but on the ground, noth- from 1981 to 2011, demanded social justice. don’t blame the government for taking the ing is getting better,” says Ashraf Muham- So Mr Sisi may be wary of imposing too hard way, but, at the same time, they mad, a barber in Agouza. Inflation climbed much pain on Egyptians. His government should have considered the poor people,” to 28% in January. It will probably remain has backed away from reforms in the past says Mr Muhammad. Still, he is sure that high if the government cuts subsidies and and may lose any sense of urgency when things will get better, albeit slowly. 7
A port for Gaza Cameroon Preventing the next war Lingua fracas
NAHAL OZ, ISRAEL-GAZA BORDER Ifyou build it, will they trade? SRAEL’S border with the Gaza Strip is the ruling Likud Party. He has proposed tense at the best oftimes. But tempers building an artificial island three miles I DOUALA are especially frayed after weeks punctu- offGaza’s shores. This could house a port Clamping down on the web and English ated by sporadic exchanges offire. Israeli and airport that would give Gaza much- security chiefsare wondering how they needed access to the world, as well as HE images beaming from the screens can avert another conflict in an area that power and desalination plants that TofCameroon’sstate television channel, has seen, on average, a big one every two would alleviate acute shortages ofelec- CRTV, show a country riding on a wave of to three years. tricity and water. Putting the port off- glory. In February the national football Much ofIsrael’s introspection has shore could allow an international secu- team, “The Indomitable Lions”, beat Egypt been prompted by the release ofa report rity force to inspect imports and prevent to win the Africa Cup ofNations trophy for by the State Comptroller on the decisions the smuggling ofarms to Hamas and the first time in 15 years. In January a Cam- leading up to and during the war be- other militant groups. Mr Katz adds that it eroonian teenagerbecame the firstever Af- tween Israel and Gaza in the summer of would also entail “creating land which rican winner of the Google coding chal- 2014, in which some 2,100 Palestinians no side in the conflict has claim to”. (This lenge, an international programming and 73 Israelis died. Although much of is what passes fora joke in Israeli-Pales- competition. the report dealt with the mayhem that tinian diplomacy.) But turn away from the goggle box and summer, it also underscored long-stand- Mr Katz argues that the $5bn price the country is troubled. When the football- ing complaints by senior officials that would be paid by private investors and ing trophy was brought to Bamenda, Cam- Israel’s government had failed to seek a foreign donors interested in boosting eroon’s third-biggest city, placard-carrying long-term solution to the whole Israeli- Gaza’s dire economy. Building it would protesters joined the crowds of onlookers. Palestinian dispute. It noted, for instance, provide jobs forunemployed Gazans. And for almost two months the country’s that although military and intelligence Above all, he argues, the gateway would young Google prodigy, along with hun- officers had been warning forsome time relieve Israel ofany responsibility for dreds of thousands of others, has been un- that life forthe 1.8m Palestinians living in Gaza. “I have no illusions regarding Ha- able to surf the web because the govern- Gaza was getting much worse, the cabi- mas and its murderous ideology,” he ment has shut it down in two net was presented only with military says. “But our current policy allows them English-speaking regions (see map). The options forconfronting Hamas, a militant to imprison their population without plugwas pulled aspartofa clampdown on1 Islamist group, without any diplomatic any hope ofdevelopment.” alternatives. Mr Katz’s proposal has widespread NIGER English- The report has revived talkwithin support within Israel’s security estab- speaking Israeli security circles offinding ways to lishment and the tacit support ofmany of region ease a blockade ofGaza that contributes his cabinet colleagues, even ifthey are 200 km to its economic stagnation and the frus- wary ofsaying so in public. The main trations that prompt some Gazans to pick obstacles remain political. Israel and CHAD up stones, knives or rockets. Hamas, which raises most ofits revenue NIGERIA Although Israel withdrew from the from taxing imports to the strip, both NORTH territory in August 2005, it continues to refuse to negotiate directly. And Hamas’s WEST control access, along with Egypt, to the testy ties with the Palestinian Authority 365 sq km coastal enclave. Following a and Egypt would furthercomplicate CENTRAL SOUTH Bamenda AFRICAN civil war in 2007 in which Hamas wrest- efforts to reach an agreement. WEST CAMEROON REPUBLIC ed power from the Palestinian Authority, Ultimately, though, the decision over Douala Israel and Egypt have enforced a block- whether to try rests with Binyamin Net- Gulf of Yaoundé ade ofvarying degrees ofseverity. anyahu, Israel’s prime minister—and he is Guinea
Surprisingly, the loudest voice within reluctant to act. His instinct, when it CONGO EQUATORIAL Israel’s government is that ofYisrael Katz, comes to Gaza, is to procrastinate until SÃO TOMÉ & GUINEA the transport minister and a hardliner in there is no choice but war. PRÍNCIPE CONGO- GABON BRAZZAVILLE 42 Middle East and Africa The Economist March 11th 2017
2 Anglophone activists in which more than a hundred people have been arrested and South Africa pressure groups have been outlawed. At least six people have been killed and Disgrace scoresmore injured since Decemberby po- DIEPSLOOT licemen and soldiers who have opened A survey reveals staggering levels ofsexual violence fire on demonstrators. The protests initially began as a series ROWN LEKEKELA dreads the end of ishing 38% admitted to having used force of strikes by the country’s English-speak- B the month. Payday means binge or threats to obtain sex in the preceding ing lawyers, who tookto the streets in their drinking. Violence follows. Women turn year. Add those who said they had beat- wigs and gowns in October 2016 demand- up battered and distraught at his gate, en, hurt or threatened to use a weapon ing English translations of the country’s usually with small children in tow. They against a woman, and the share jumps to key legal texts and better treatment by the have nowhere else to go: Mr Lekekela’s 54%. Ofthose men, more than halfsaid authorities. Since then many others have emergency shelter, Green Door, is the they had committed such crimes more joined in, including teachers. The conflict only one in all ofDiepsloot, a hardscrab- than once. between the government and the Anglo- ble township north ofJohannesburg that Many men in Diepsloot, as in many phone minority is escalating. is home to an estimated halfa million other parts ofSouth Africa, do not think The roots of Cameroon’s linguistic rift souls. The shelter, built in the yard ofhis they are doing anything wrong. They date back to 1919, when Britain and France humble house, can fit two women and thinkthey have a right to use force against divided the country between them, hav- their children, plus maybe one more their partners. In addition, many of the ing taken it from Germany after the first family on the couch in his office. He runs men interviewed had themselves experi- world war. After both parts gained their in- it on donations and sheer willpower. enced childhood abuse or trauma. Some dependence in 1960 and 1961, they reunited Mr Lekekela has a first-aid kit and were mentally ill. Those who abuse to form a bilingual, federal republic. But some training to treat minor injuries. For others sufferfew consequences, whether English speakers, who are less than fifth of more serious ones, it can take hours for from the law or neighbours. Diepsloot, a the population, feel hard done by. They say an ambulance to arrive. Sometimes the warren ofshacks with pockets ofsmall that their regions get less than their share women (or their children) have been houses, did not exist until the mid-1990s, of public money and that it is too hard to raped. But with no other income or sup- so everyone comes from somewhere interact with the state in English. port, they often end up returning to their else. “These men thinkthey can do what- President Paul Biya, who has been in abusive partners. “It’s hard,” says the ever they like,” says Precious Moeketsi, a power since 1982, is sub-Saharan Africa’s soft-spoken Mr Lekekela. “But ifI don’t do 28-year-old with two young children second-oldest ruler, after Robert Mugabe it, who will?” who shares a shackwith her sister’s of Zimbabwe. Yet despite his age, he has Rape and domestic violence are hard family. “I feel worried living here.” mastered social media, in the sense of fig- to measure, since victims often suffer in Although South Africa has strict laws uring out how to silence digital dissent. silence. And headline-writers overuse against violence, they are spottily en- AfteryoungArabsused smartphonesto or- the word “epidemic”. But in South Africa forced. Researchers found that of500 ganise the uprisings of the Arab Spring, it clearly applies. For a study published in sexual-assault cases reported to the despots everywhere grew nervous. But November by the University ofthe Wit- police in Diepsloot since 2013, only one then they found the off-switch. Last year 11 watersrand and Sonke Gender Justice, a resulted in a conviction. Small wonder African governments, including Zimba- non-profit group, 2,600 men in Diepsloot rape is so rarely reported. (Researchers bwe and the inaptly named Democratic were surveyed anonymously. An aston- guess that police are informed about only Republic of Congo, interfered with the in- one ofevery nine sexual assaults in ternet during elections or protests. South Africa.) Women worry about what The government cut offthe internet to a friends and family will think. Some fear part of the country known for its technol- reprisals. Policemen are sometimes ogy start-ups, which probably hasn’t done sceptical and tell women to go home and much for economic growth. Before the smooth things over. Even officers who crackdown internet usage in Cameroon take the issue seriously are hamstrung. had been soaring, with penetration rising Diepsloot’s police station has no special- to 18% in 2016, from 4.3% in 2010. Phonesare ist unit forrape and sexual-assault cases; also ubiquitous, which may be why the the nearest one takes an hour to get to. communications ministry has been send- The closest state hospital that can exam- ingtextmessages, sometimesseveral times ine victims is 30km away. a day, warning ofprison sentences of up to Simply getting to court can be steep 20 years for anyone “found guilty of slan- barrier. To get a restraining order, for derorpropagatingfalse declarations on so- example, a woman in Diepsloot will cial media”. have to pay 26 rand ($2) fora round trip Journalists have been arrested and a by minibus-taxi to the nearest magis- popular radio station has been taken off trates’ court—a lot ofmoney fora woman the air. Although the conflict in Cameroon with no job. Lawyers Against Abuse, a has mainly affected the English-speaking non-profit group, supports women with minority, the government’s heavy-hand- free legal and psychological services edness suggests that worse may lie ahead. offered from a refurbished shipping Next year the country’s 84-year-old leader container near the police station. is expected to run for a seventh term. With The cycle ofabuse “will become the no clearsuccessororchallengerin sight, Mr culture ofhow we live”, frets Mr Leke- Biya probably has no need to ratchet up re- kela. “But this is not how we are sup- pression. But meddling with the internet The message isn’t getting through posed to live.” can be addictive, like the internet itself. 7 TECHNOLOGY QUARTERLY March 11th 2017 QUANTUM DEVICES
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After decades as laboratory curiosities, some of quantum physics’ oddest effects are beginning to be put to use, says Jason Palmer ATRICKGILL, a director ofthe new Quantum ferent devices and approaches relying on quantum- MetrologyInstitute atBritain’sNational Phys- mechanical effects are now nearing market-readiness. ical Laboratory (NPL) in south-west London It has taken so long mainly because the components ALSO IN THIS TQ and an expert in atomic clocks, points to a that make them up had to be developed first: ever-bet- METROLOGY large table full oflenses and mirrors, vacuum ter lasers, semiconductors, control electronics and Sensing sensibility chambers and electronics. “And there’s a techniques to achieve the low temperatures at which Psmaller one over there,” he says. many quantum systems perform best. COMMUNICATIONS NPL is part of a consortium of the planet’s official Britain did not exploit the atomic clock’s discovery Oh what entangled timekeepers. In all its atomic-clock laboratories, each in the market. Instead, a year after the device was in- web we weave of the flagship devices—some of which are huge—is vented, it was commercialised by the National Com- flanked by a smaller one under construction. Mini- pany, an American firm. Given the potential of these QUANTUM COMPUTERS tuarisation is the name of the game. Here is one that new quantum technologies, this time commercialisa- Cue bits fits into a standard electronics rack, 19 inches wide. tion is on many minds. The NPL’s ever-smaller clocks BRAIN SCAN Over there is a fist-sized gizmo designed to hold an are just one step towards marketable products that David Deutsch atomic clock’s precious innards safe within a satellite. could vastly outdo GPS (which itself is an application The caesium atomic clock, developed at NPL, was of atomic timekeeping) in navigation, or help spot SOFTWARE arguably the world’s first quantum technology, what lies underground. The era of quantum technol- Program management though it was not labelled as such. The most common ogy is almost here. approach, first used in 1950, works by putting energy USES into atoms to create a “superposition” in which they The odds are good; the goods, odd Commercial breaks are, in a measurable way, in more than one energy Everything in the natural world can be described by state at the same time—both excited and relaxed. Prob- quantum mechanics. Born a centuryago, thistheory is ing this strange condition reveals the “clock frequen- the rule book for what happens at atomic scales, pro- cy” ofthose atoms—a constant forclocks on every con- viding explanations for everything from the layout of tinent, and the basis for a precise, internationally the periodictable to the zoo ofparticlesspraying outof agreed definition ofthe second. atom-smashers. It has guided the development of Afterdecades ofworkin the laboratory, a raft ofdif- everyday technologies from lasers to MRI machines 1 The Economist March 11th 2017 3 TECHNOLOGY QUARTERLY Quantum devices
amplify and route quantum-communica- No small effort 100 tions signals; and for more robust “qubits” Estimated annual spending on non-classified quantum-technology research 50 i (ofwhich more later) for quantum comput- 2015, €m Nat onal European Union* spending 10 ing. Startups are embracing the technology Netherlands 27 550 with gusto, and tech giants have already Denmark 22 Russia 30 planted theirflags. There iswide agreement Canada Britain 100 105 Sweden 15 that Google is furthest along in quantum- Japan computer technology and that Microsoft Finland 12 63 has the most comprehensive plan to make Germany Poland 12 China 220 the software required. France 120 52 Public money is flowing in, too. Nation- United States South al and supranational funding bodies are 360 Spain Korea 13 backing increasingly ambitious quantum- 25 Italy 36 technology efforts. Britain has a pro- Austria 35 Switzerland 67 Singapore gramme worth £270m ($337m) and the 44 Australia European Union has set aside €1bn Brazil 11 World 1,500 75 ($1.08bn) for a pan-European programme. (estimate) Many quantum technologies have security Source: McKinsey *Combined estimated budget of EU countries implications, so defence departments are also providing funding. 2 and put a solid foundation under astrophysicists’ musings about Many firms are already preparing for a quantum-technology unknowables such as the interiors ofblackholes and the dawn of future. In 2015 IBM set up its Research Frontiers Institute, inviting the universe. Revealed by a few surprising discoveries, such as corporate participants to share ideas about growth areas in tech- that atoms absorb and emit energy only in packets ofdiscrete sizes nology, the quantum kind being one. The research fund of AXA, a (quanta), and thatlightand mattercan actasboth waves and parti- biginsurer, hasendowed a professorship in quantum information cles, it is modern physics’ greatest triumph. at the Institute of Photonic Sciences in Barcelona to consider the It has a weird side, though, and it is this that has captured inter- data-privacy risks presented by the coming quantum boom. est in what is now being called the second quantum revolution. Quantum technology looks set quickly to find its way into all The first one was about physics: about understanding how the mannerofproductsand services—mostlybehind the scenes, asar- world worked at the tiny scales where quantum mechanics rules. tificial intelligence has recently done. It may be weird, but it prom- Notonlycan particlesbe in two statesatonce, aswith the atomsin ises to be wonderful too. 7 an atomic clock; sometimes two of them, separated by a great dis- tance, seemingly sense something about each other’s condition, a situation called entanglement. Aparticle’sexactposition orstate is never certain until a measurement is made; there are only higher Metrology or lower likelihoods of a given outcome, and the measurement changes the situation irrevocably. All this has been clear from the mathematics since the mid-1920s but was made manifest in lab- Sensing sensibility oratory experiments only later in the 20th century. Asthe theory’s more straightforward predictions were put to use, for instance in electronics, quantum mechanics gained a reputation for being counterintuitive, even downright spooky. The expertise gained during those years is now paying divi- Quantum technology’s supersensitivity makes it great for dends. The most counterintuitive quantum-mechanical predic- measuring tions are being harnessed to make measurements of staggering precision, to generate uncrackable codes and to form the basis of INCE its inception a century ago, quantum physics has impenetrable communications networks. Quantum computers faced something of an experimental problem. The the- may eventually crunch through currently unapproachable pro- ory promises all manner of interesting and perhaps blems, improving the transmission ofelectric power or the manu- useful behavioursofparticlesin isolation, under rigidly facture of energy-intensive fertiliser, or simply sifting through im- controlled conditions. But on the lab bench particles practicably large data sets. However, long before then computing and atoms are never fully isolated, so quantum experi- systems that still fall far short of a general-purpose machine are Sments can be damnably difficult. likely to start providing solutions in industries such as finance, en- However, that difficulty also presents an opportunity forquan- ergy and aerospace, and even help with things as mundane as rec- tum technology: sensing. “We turn that on its head,” says Sir Peter ommendation engines. Knight, a British quantum expert. “If it couples to the outside world so effectively, it’s sensing the outside world really effective- From small beginnings ly.” Take the first quantum technology to make it to market, the Much work remains to be done. Although a handful of quantum- atomic clock. Most designs work by tapping into the energy levels enabled sensors, modest quantum networks and rudimentary ofatoms that are prodded with microwaves. Some ofthose atoms quantum computers are already in use, they still fall short offully absorb the light in such a way that they are neither in their unper- exploiting quantum advantages, and few of them are ready to be turbed, lowest-energy state nor in an elevated-energy state but in widelydeployed. According to McKinsey, a consultingfirm, in 2015 both atthe same time, an effectthatiscentral to quantum mechan- about 7,000 people worldwide, with a combined budget ofabout ics. An improved design “entangles” these microwave levels in $1.5bn, were working on quantum-technology research (see one atom with different energy levels in another—levels that cor- chart). Industrialisation will boost those numbers. respond to visible light, which has a much higher frequency. Such What is notable about the effort now is that the challenges are entanglement, another quantum effect, links the fates of two at- no longer scientific but have become matters of engineering. The oms, temporarily but inextricably, so that experiments on one search is on for smaller atomic clocks, for example; for a means to yield information about the other. Entangling microwave levels1 4 The Economist March 11th 2017 TECHNOLOGY QUARTERLY Quantum devices
2 with higher-frequency ones associated with visible light allows ments to its products. the clock to access the higher precision that goes with them. In Michael Bolle, the firm’s head of re- 2012 David Wineland, of NIST, the American national metrology search and development, believes sensors facility, received a Nobel prize for working out how to do this. For will be quantum technology’s first market some years, his clock was the most accurate measuring device on success. “I’m not talking about niche mar- Earth: had it been set ticking at the time of the Big Bang, 13.8bn kets,” he says. “I’m interested in the trigger years ago, it would still be accurate to within a second. point where things really go into mass pro- Precise timing, particularly from the small, cheap devices that duction.” Quantum technologists the are now being developed, has a wealth of uses, from time-stamp- world overare preparingforthis market ex- ing high-frequency market trades to quickly changing settings plosion by patenting their findings. In within a dynamic energy grid. Even lifting an atomic clock up can some countries, such as Japan and Austra- change how long a tick appears to take: according to the general lia, quantum sensors make up a large part theory ofrelativity, time moves everso slightly more slowly closer ofnational patent portfolios (see chart). to the Earth than furtheraway. Nuisance oropportunity? It’sall rel- Precise Mr Bolle and others are also interested ative. A well-calibrated atomic clockcould use this discrepancy to in sensors based on “nitrogen vacancies”— make an ultra-precise height measurement. Or, at a fixed height, it timing has places where a diamond’s all-carbon net- could sense the gravitational attraction of what is below; solid work has been disrupted by one nitrogen bedrockwould give a differentreadingfrom an oil-and-gas pocket. a wealth of atom next to a missing carbon atom. This is uses a quantum physicist’s playground: mostly Laws of attraction isolated by its rigid cage of carbon neigh- Clocks are not the only means to get a handle on gravity. At the bours from the bumpy, fluctuating world microscopic scales where quantum mechanics rules, streams of outside, electrons from the nitrogen atoms can be easily manipu- matterparticles can behave like waves. Like those on a pond’s sur- lated and measured, placed in superpositions and even entangled face, those waves can interfere, adding to and subtracting from with one another. Just like the hypersensitive clock, these systems one another—in the quantum description, altering the probability are extraordinarily responsive to theirenvironment and can act as of finding a particle here or there. In a device called an atom inter- precise sensors ofpressure, temperature and electric current. ferometer, two particle streams are sent at differing heights and Where they have shown the most promise is in measuring then brought back together to interfere with each other. The de- magnetic fields. Recent studies show that nitrogen vacancies can gree to which the two paths are different, indicating the relative detectthe on-and-offmagneticfield ofsingle nerve cells. The same strength ofthe gravitational tugfrom below, measurably alters the principles can work inside the human body, too. Nanoscale dia- degree ofaddition and subtraction. monds with nitrogen vacancies have been used to spot chemical Such devices have a multitude of uses. In Britain, for example, changes in living cells, and researchers from the Institute of Theo- 4m holes are dug every year in the course of roadworks and con- retical Physics and the Institute of Quantum Physics in Ulm, Ger- struction, but two-thirds ofthe time the diggers have no idea what many, have formed NVision, a startup that uses such nanodia- they will find beneath the surface. Test boreholes cover only a monds to match the current best magnetically enhanced MRI small area, and ground-penetrating radar does not reach deep techniques, but 40 times faster and at a quarter ofthe cost. enough. A gravity sensor that could tell pipework from pebbles High performance in these applications depends on well-un-1 would save a lot oftrouble. RSK, an environmental consultancy involved in cleaning up brownfield sites and the like, reckons that a third of construction Excited states projects overrun by up to a month, and another third by two Patent applications to 2015, in: months or more, and that halfofthese delays arise because ofun- Quantum computing Quantum cryptography Quantum sensors derground surprises. The company is collaborating with the Uni- United States China versity of Birmingham in Britain on fieldworthy quantum gravity 295 367 United States 105 Canada 79 United States China 104 sensors, in the hope of deploying them in big infrastructure pro- 233 jects. Other efforts to develop cheap sensors have drawn interest Germany 25 Japan 78 Japan 100 from companies such as Schlumberger, an oilfield-services giant, Japan 18 Britain 36 Britain 50 and Bridgeporth, a surveying firm. Britain 12 Malaysia 31 Military types are interested, too. “You can’t shield gravity,” China 29 Canada 6 South Korea 27 says David Delpy, who leads the Defence Scientific Advisory Australia 26 Israel 6 Germany 24 France 5 Council in Britain’s defence ministry. Improved gravity sensors Germany 22 would be able to spot moving masses under water, such as sub- France 15 Australia 3 South Korea 11 marines or torpedoes, which could wipe out the deterrent effect Australia 14 South Korea 2 of French and British nuclear submarines. Quantum gravimeters Israel 9 Canada 11 Russia 2 could precisely map geological features from the gravitational Finland 7 Italy 11 Taiwan 2 force they induce. That would help with getting around in places Quantum-key distribution 20 Total applications 5 10 where satellite-navigation signals are not available—“a kind of Patent applications by country* Patents issued Google Maps for gravitation”, as Dr Delpy puts it. China 156 And gravity, the theory of relativity also says, is just one mani- United festation of acceleration: a good gravimeter is a good accelerom- States 151 eter. And a good accelerometer is a good vibration sensor. Once Japan 100 they are small enough and good enough, all these high-precision Europe 78 South devices will be of great interest to carmakers, and in particular to 21 the autonomous-vehicle industry, the success of which will de- Korea i pend on accurate sensing of the movements of cars and their sur- Malays a 20 roundings. Bosch, a German firm that is the world’s largest maker 1992 95 2000 05 10 14 of automotive components and a supplier to many other indus- Sources: UK Intellectual Property Office; tries, already has its eye on quantum-technological enhance- European Commission *By location of corporate headquarters The Economist March 11th 2017 5 TECHNOLOGY QUARTERLY Quantum devices
2 derstood nitrogen vacancies, which occur sporadically in natural diamonds but whose positions and number must be known for precision measurement. Enter Element Six (a subsidiary of De- Beers, the world’s largest diamond producer), which manufac- tures diamonds with precision-engineered nitrogen vacancies.
Capture the friendly ghost Quantum-enhanced approaches may also supplement other bio- logical imaging techniques, such as positron emission tomogra- phy (PET), which takes pictures of the high-energy gamma-ray light flying out of injected radioactive tracers. Each tracer mole- cule’s interaction with tissue spits out two photons in opposite di- rections. Quantum-entanglement tomography aims to make use ofthe factthatthose photonsare entangled when theyare created. In PET, the photons can be hard to track because they bounce off body tissues. The entanglement of each pair makes it easier to work out which came from where, so scans take less time and ra- dioactive material. Ghost imaging is another promising way of making use of light’s quantum nature. The technique involves splitting a beam of light in two and aiming the resulting two beams at two detec- tors, one directly and one through a somewhat opaque medium, such as turbulent air rising from hot ground or a smoke-filled room. Because the photons making up the beam are correlated, a rigorous accounting of what the two detectors can see yields im- ages of what the eye cannot. In 2013 researchers from America’s army showed that the technique worked over more than 2km. The technique points to a fascinating debate that underpins That claim, too, turned out to be premature. Hackers have since many discussions in the broader quantum-technology communi- demonstrated that equipment used in such transfers could be vul- ty about exactly how quantum effects confer an advantage. nerable to attack. What is more, such quantum encryption also re- Though ghost imaging was predicted in the 1990s, arguments still quired a single, dedicated fibre between sender and receiver, rage about whether entanglement is playing a role or whether it which limited the technique to high-profile transactions, and pre- works simply because light comes in discrete, countable photons. cluded the cross-linking of many senders and receivers that has “There are plenty of physicists that don’t understand the distinc- made networking and the internet so successful. tion,” says Miles Padgett ofthe University ofGlasgow, a quantum- imaging expert. “And I don’t think it matters. What matters is, are Key findings we using our knowledge in the quantum world to bring compet- That is now changing. In response to hackers’ attacks, the kit has itive advantage?” With hand-held detectors that can sense height become markedly more secure. Field trials have shown that deli- differences down to a millimetre, magnetometers that can in prin- cate quantum lightsignalscan be sentthrough the same fibresthat ciple watch your every neuron and imaging kit that can see across bring the internet to homes and businesses. And efforts to make a smoky battlefield, the answer is ever more clearly yes. 7 quantum-enhanced versions ofthe equipment that amplifies and distributes standard optical signals are bearing fruit. Quantum networks are springing up or expanding. And quantum commu- nications, just like their conventional counterparts, will soon be Communications whizzing through space, too. The most discussed and deployed technique is called quan- tum-key distribution (QKD). In one set-up, a sender launches sin- Oh what entangled gle photons toward a receiver, randomly choosing one of four planes along which the light particles are polarised, two of them associated with a 0 and the other two with a 1. The receiver like- web we weave wise randomly chooses which kind of polarisation to check for. After sending a string ofthese bit-associated photons, the pair can Quantum networks could underpin unhackable publicly compare notes on which polarisations they employed; communications links whenever they happen to have chosen the same one, the 0 or1as- sociated with that polarisation can be used as a bit in a crypto- N 2004 the Bank of Austria and Vienna’s city hall notched graphic key. up the first quantum-encrypted bank transfer. Anton Zeil- What contributes to the system’s security is Heisenberg’s un- inger, a quantum-cryptography pioneer whose lab facili- certainty principle, a much-touted quantum rule which, in this tated the transfer, expressed his hope that “all problems of case, guarantees that an eavesdropper would disrupt the system’s implementation will be solved within three years.” They randomness, because intercepting and measuring a given photon were not. forces it into a given polarisation. That disturbance to the system IThe technology was put to the test again in 2007 when quan- would reduce the number of coincidences the pair sees; if there tum-encrypted vote tallies from the Swiss federal election were are too few (they should be seen about half the time), they know sent from polling stations to the Geneva state government. Engi- someone is on the line. neers insisted that the transmission was utterly impervious to Physics textbooks will tell you that a sufficiently long cipher, eavesdropping or tampering; a company called ID Quantique had randomly generated thisway and used only once, is absolutely se- developed a system that harnessed one of the rules of quantum cure. But Vlatko Vedral, of the Centre for Quantum Technologies mechanics to offertotal security. in Singapore, says that hackers who have been invited to try to1 6 The Economist March 11th 2017 TECHNOLOGY QUARTERLY Quantum devices
2 break into the centre’s quantum-communications experiments wei and Lenovo. The goal at this stage is to have often succeeded—not by beating quantum rules but by ruth- link the Beijing-to-Shanghai network to an- lesslyexploitingshortcomingsofthe kititself. Forexample, storing The future other in Urumqi, in Xinjiang province, a digital 0 generates a slightly different amount of heat from stor- some 3,000km away. Efforts to develop sat- ing a 1, so careful observation of the heat being generated can ex- of the ellite communications are also under way pose the string of digits being received. Once discovered, such in Singapore, Canada, Japan, Italy and hacks are easily prevented. As time has gone on, such shortcom- technology America. Once the challenges of getting ings have narrowed in scope, and have driven innovation. lies in quantum signals into space—through tur- Thanks to the development of ever more secure links, quan- bulent air, clouds and so on—are overcome, tum cryptography has recently been deployed more widely. ID quantum a global networkcould easily follow. Quantique has installed quantum links between data centres of With country-spanning networks and KPN, a Dutch telecoms firm; ofBattelle, an American non-profit re- networks quantum-enabled satellites, it is easy to en- search firm; and of Hyposwiss and Notenstein, two Swiss private visage a global “quantum internet” in banks. It offers links between financial institutions in Geneva and which each link offers quantum-enhanced security. But the kind a disaster-recovery centre 50km away. In 2015 researchers at To- of innovation that will allow the development of such networks shiba in Japan began sending quantum-encrypted genomic data will also be of use, for example, in shuttling information within, from a research facility in Sendai to Tohoku University, 7km away. and between, future quantum-computing devices: think quan- But the future ofthe technology lies in quantum networks—the tum distributed computing and quantum cloud computing. Just infrastructure required to connect many senders and receivers. as the internet has demonstrated the power of linking many stan- These are springing up within and between major metropolitan dard computers, says Seth Lloyd, a theorist at the Massachusetts areas. South Korea’s government is funding a 250km link to join Institute ofTechnology, “the quantum internethasthe potential to existing metro quantum networks. In Britain a network of similar change the way in which people and organisations collaborate length will be deployed between the cities of Bristol and Cam- and compete, establishing trust while protecting privacy.” bridge, via London. Australia is building a closed government net- Not everyone is convinced yet. The defence establishment workin the capital, Canberra. seems to have been put off by some of the early setbacks to quan- No quantum networkismore ambitious than the one complet- tum links. Quantum-communications efforts are under way, for ed in China at the end of last year. Funded by the central govern- example in the research arms of America’s army and navy, but an ment, it links Beijing and Shanghai via Jinan, which already has a analysis by the air force’s Scientific Advisory Board suggested that metro network over 70 square kilometres, made up of 50 QKD had “little advantage over the best classical alternatives”. “nodes”—switchboards connecting senders and receivers—and And doubters rightly point out that encryption is not the weakest Hefei, which has a 46-node network. Its customers include China linkin many security chains. Industrial and Commercial Bank, the China Banking Regulatory Yet as the hardware improves and heavy investment contin- Commission and the Xinhua news agency. ues, quantum networks may begin to look like a strategic must- Distance presents a problem. As the meticulously prepared have; if so, consumer applications are likely to proliferate. The photons with their delicate quantum states bounce along lengths European Telecommunications Standards Institute (ETSI), which of fibre, those states eventually get scrambled and their informa- setsglobal benchmarksforthe industry, isworkingto define quan- tion is lost. To ensure fidelity and security, the fibre link should be tum-cryptography standards. ETSI scientists want to ensure that no longer than about 200km. Standard fibre-optical signals suffer kitfrom multiple vendorscan worktogether, and to create a certifi- from the same weakening of the signal, so “repeaters” to boost it cation so that consumers (including spooks) are guaranteed a are placed at regular intervals along their path. But under the widely agreed level of security. Miniaturisation efforts are well quantum rule book, unknown quantum states cannot be copied, under way too, so before long the equipment may fit in the palm so quantum data would need to be temporarily decrypted before ofyour hand—or in your phone. 7 receiving a boost, creating a security loophole. There are two ways to get round this, one by land and one by air. The land-based solution is to develop quantum analogues of the repeater. That will require a quantum memory that can store Quantum computers incoming information, and a means ofsending them on that does not compromise quantum security. That last part requires another bit of quantum trickery: teleportation. This is a way of projecting Cue bits the quantum state of one particle (not, it should be stressed, the particle itself) onto another, distant one. Last year two research groups showed the benefits ofteleportation across two metropol- itan networks, in Calgary and Hefei. Crucially, they carried out their experiment using the same wavelengths as those used in ex- Tech giants and upstarts alike are piling into a technology isting telecoms networks, to ensure that the new technique can be with huge potential used with existing fibre infrastructure. It did the trick. N1981Richard Feynman, a visionary physicist, had a clever Spooks reacting at a distance idea. Could the odd properties of quantum mechanics, he Anothertackisto take to the air, oversimilardistances butwithout wondered aloud in a lecture, be used to carry out simula- the need fora particularfibre link. The current record forteleporta- tions of physical systems that computers of the time could tion of quantum states in this way was set in 2012, when research- not cope with? Others took up the question. In 1985, David ers sent a quantum-encrypted message between two of the Ca- Deutsch, nowatOxford University, showed howquantum nary islands, 143km apart. A long-standing ambition is to apply Isystemscould be setup asa “universal” computer—thatis, like cur- the idea to space: for a photon, the disturbance caused by the rent computers, able to run any program. Though fascinating, at whole thickness of the Earth’s atmosphere is equivalent to that that point it was all rather theoretical, involving hardware that no caused by just a few kilometres ofair at the surface. one knew how to build. Last August China launched Micius, a quantum-key-distribu- What made the world sit up and take notice was a paper pub- tion-enabled satellite backed by tech companies including Hua- lished in 1994 by Peter Shor, then at Bell Labs. Dr Shor showed that1 The Economist March 11th 2017 7 TECHNOLOGY QUARTERLY Quantum devices
2 a quantum computer would be capable of working out the prime mechanics, which can actually be negative. In the course of a numbers that, multiplied together, make up an exceedingly large quantum computer’s crunching, these amplitudes can (again like number. The fact that this “decomposition” is mathematically waves) interfere, positive with positive and negative with nega- very hard is the basis ofcryptographic protocols still used today. tive—in essence, to reduce the probability of the wrong answer Since then, researchershave come up with a rich variety ofpro- and boost that ofthe right one. blems for which quantum computers should be superior to the Posing a question starts with choosing an algorithm suitable best supercomputers—and a number of algorithms, or sets of forthe problem. This algorithm is actually manifest as the starting steps, to break down problems in such a way that quantum com- states ofthe qubits: 0 here, 1there, a bit ofa mixoverthere. The cal- puters can crunch through them. This evident utility started an in- culation is then just a matter of letting quantum-mechanical laws ternational competition to build one that was, for many years, play out on this system of superposed and entangled qubits. confined to quiet labs and the academic literature. These days, big Changing states, shifting qubit couplings and so on represent a business is seriously interested, and blue-chip companies includ- vast cross-multiplication of all those states and combinations, ing Intel, Hewlett-Packard, Google and Microsoft all have research with probabilityamplitudesreinforcingand diminishing until the programmes. Last year IBM released Quantum Experience, which system settles into a final state that represents the answer. It is a lets all comers play around with a crude quantum computer over matter of setting up the problem, and the machine, so that all the the internet. Governments too are putting money into academic possibilities are sifted through at lightning speed. efforts, both directly and via defence contractors, and a growing Efforts to make qubits often centre on the use of tiny loops of band ofstartup companies are striking out on their own. superconducting wire, arranged like the “gates” of standard com- A computer big enough to do what Dr Shor envisaged would puters. Single charged atoms, trapped by electric or magnetic also be useful forall mannerofcurrently intractable problems. Al- fields, can also do the job; in February an international consor- though that remains a distant prospect, steps towards developing tium of researchers published an open-source blueprint for a one could have big benefits; for many applications, a much sim- trapped-ion machine. Several groups use single photons as qu- pler or special-purpose computer will do. bits—an approach that looks easy to inte- grate with existing semiconductor-fabrica- Bit by bit tion techniques. Microsoft’s planned What makes the idea of quantum comput- “topological” quantum computer uses ers so attractive is not so much that they something else entirely: “anyons”, parti- will work faster than traditional comput- cles that would be more easily tamed than ers—they may for some applications but other qubit candidates but which have not for others—but that they will work fun- never been seen outside the pages of theo- damentally differently. Three intuition-de- retical physics textbooks. fying concepts play a role. The first is super- Setting up a qubit is no longer difficult. position. Today’s computers depend on The problem is looking after it. Quantum bits taking one oftwo values, 0 or1. Qubits, states are notoriously delicate, requiring their quantum analogues, can be arranged complete isolation from the actual stuff of in “states” that are best thought of as some the experiment. But isolation can never be mixture ofboth 0 and 1. To carry out a com- complete, and errors creep in; for a calcula- putation using one of these strange beasts tion to succeed these must be noticed and is to act on both the 0 and the 1, in a sense to corrected. It has become clear that as com- create within the calculation the potential puters scale up, the number of logical qu- outcome ofeither at the same time. bits (the ones actually doing the calcula- The power of this indeterminate state is tion) will be dwarfed by an “overhead” of unleashed through the second quantum- perhaps thousands oftimes as many error- mechanical effect, entanglement. A stan- correcting and command-and-control qu- dard computer depends on the complete bits. The kind of machine required to im- isolation ofone bit from the next to prevent plement Shor’s famed algorithm on the a computation from going awry or a docu- sort of large numbers used in encryption ment from getting corrupted. For a quan- will need to contain something like a mil- tum computer, the entangling of multiple lion qubits. qubits is paramount; in the best case, all of Such machines will, to put it mildly, be a given device’sbitsare entangled with one an engineering challenge. But in a clear in- another. Again, to operate on one qubit isto dication that quantum computing is get- operate, to varying degrees, on all the en- ting closer, names familiar from traditional tangled ones. It is therefore impossible to computing are increasingly getting in- describe such a machine in strict terms of volved. Hewlett-Packard is trying to build its constituent parts. There is a need to con- itsown machine. Intel’sglobal quantum in- sider how one qubit is connected to its vestments include $50m going into workat neighbour, and to the next-but-one, and so QuTech, the Netherlands’ national quan- on through all the cross-correlations. To de- tum-technology hub. Microsoft’s topologi- scribe all the states of a 50-bit standard cal quantum approach, if it works, will be computer requires 50 bits of digital memo- much less error-prone. The quantum-com- ry; a description of a 50-qubit computer puting startup scene is also becoming in- would require a quadrillion. creasingly vibrant. Researchers from Yale It gets weirder. Whereas it is easy to and the University of Maryland have spun imagine an equation that predicts a low or off companies, and physicists who had even zero probability of a given event, it is worked at IBM and America’s Department much harder to reckon with what are ofEnergy have started their own firms. called probability amplitudes in quantum Governments are getting in on the ac-1 8 The Economist March 11th 2017 TECHNOLOGY QUARTERLY Quantum devices
2 tion too. Australia’s has invested A$26m ($20m) in a laboratory at ture superconductors allowing electricity to be transmitted with- the University of New South Walesin Sydney (and the Common- out losses, or with investigating the nitrogenase reaction used to wealth BankofAustralia and Telstra, a telecoms firm, have togeth- make most ofthe world’s fertiliser. er chipped in about the same amount). A lab at the University of Quantum simulation hasitsfansin industry, too. Michael Bolle Sydney down the road is being funded as part of LogiQ, a pro- at Bosch foresees using simulators to design batteries that will su- gramme of the Intelligence Advanced Research Projects Activity, persede the current lithium-ion technology. Paolo Bianco, who an American government defence outfit. Leaked documents have heads the quantum-technology research team at Airbus, a big revealed that America’s National Security Agency has been ex- European aerospace firm, says that quantum-simulating a new ploring “if a cryptologically useful quantum computer can be material such as a stiffer or lighter alloy for use in aeroplanes or built”. Experts now reckon it can. But when? satellites would be much faster and cheaper than manufacturing and then testingthe material itself. “The promise ofquantum tech- Simulating discussion nologies”, he says, “is in engineering terms a step up in perfor- Veryfew in the field thinkit will take less than a decade, and many mance—not of20%, but ofa couple oforders ofmagnitude.” say far longer. But the time for investment, all agree, is now—be- For some applications and classes of problems that may well cause even the smaller and less capable machines that will soon be true. But the experience of D-Wave Systems, a Canadian com- be engineered will have the potential to earn revenue. Already, pany that began selling the first commercially available quantum startups and consulting firms are springing up to match prospec- computer in 2011, shows how little is known about what future tive small quantum computers to problems faced in sectors in- machines will be able to do. D-Wave makes what is known as a cluding quantitative finance, drug discovery and oil and gas. quantum annealer, a special-purpose quantum computer (as op- Perhaps the most interesting early applications will take the posed to a universal one) that works best on “optimisation” pro- form of “quantum simulators”: computers that mimic real physi- blems, such as finding the shortest possible route for a travelling cal systems. This is what Feynman had in mind, imagining in his salesman. The firm’s customers include Lockheed Martin and a lecture “that the computer will do exactly the same as nature”. consortium including Google and NASA. In January Temporal De- Quantum simulators might help in the design of room-tempera- fense Systems, a cyber-security firm, bought one. 1 Brain scan David Deutsch
The father of quantum computing sees it as a fundamentally new way of harnessing nature “I OCCASIONALLYgo down and lookat er would serve as proofpositive ofuni- the experiments being done in the base- verses beyond the known: the “many- ment ofthe Clarendon Lab, and it’s in- worlds interpretation”. This controversial credible.” David Deutsch, ofthe Universi- hypothesis suggests that every time an ty ofOxford, is the sort oftheoretical event can have multiple quantum out- physicist who comes up with ideas that comes, all ofthem occur, each “made real” shockand confound his experimentalist in its own, separate world. colleagues—and then seems rather en- At the same time, quantum computa- dearingly shocked and confounded by tion, and the quantum-mechanical theory what they are doing. “Last year I saw from which it springs, are all subsumed in their ion-trap experiment, where they a newer idea that Dr Deutsch is pursuing. were experimenting on a single calcium He contends that what he calls his “con- atom,” he says. “The idea ofnot just structor theory” provides a perspective accessing but manipulating it, in in- that will lead to the rewriting ofphysics credibly subtle ways, is something I altogether. As with classical computer totally assumed would never happen. science, quantum computation and even Now they do it routinely.” genetics, it is based on the role ofinfor- Such trapped ions are candidates for mation. But rather than letting physical the innards ofeventual powerful quan- laws define what is and is not possible, as tum computers. These will be the crown- science does now, constructor theory ing glory ofthe quantum theory ofcom- me, it’s secondary how fast it is.” asserts that those laws actually arise from putation, a field founded on a 1985 paper Still, these are steps towards a pow- what is and is not possible. by Dr Deutsch. He thinks the widely erful, universal quantum computer that From observed possibilities, a mathe- predicted “quantum supremacy” that could solve a lot ofthorny problems. To matical object called a constructor can be eventually puts a quantum computation describe such a device properly is to fashioned. Operating with and on these incontrovertibly ahead ofa classical one account not only forthe states ofeach of constructors gives rise to what Dr Deutsch will be momentous for scientists and its constituent bits but also for all the reckons is a theory even more funda- laymen alike. He brushes offthe fervent couplings between them, foreach is mental than quantum mechanics. He is debate about whether the commercially entangled with every other. A good-sized enthusiastic about the theory’s potential available D-Wave computer offers a one would maintain and manipulate a to upend the very foundations ofscience, speed advantage. “Ifit works, it works in number ofthese states that is greater than but concedes that testing it experimentally a completely different way that cannot be the number ofatoms in the known uni- remains a distant possibility. Then again, a expressed classically. This is a fundamen- verse. For that reason, Dr Deutsch has few decades ago he would have said the tally new way ofharnessing nature. To long maintained that a quantum comput- same thing about quantum computers.
The Economist March 11th 2017 9 TECHNOLOGY QUARTERLY Quantum devices
2 For years experts questioned whether the devices were actual- ly exploiting quantum mechanics and whether they worked bet- ter than traditional computers. Those questions have since been conclusively answered—yes, and sometimes—but only by exhaus- tively testing the machines’ mettle directly. The current best super- computers are able to simulate only what more general-purpose quantum computers of about 50 qubits can do. Tantalisingly, it is difficult to tell at what problems bigger machines will excel. Google is aiming to use its own machinery, a so-called gate- model quantum computerofthe sort most groups are pursuing, to achieve “quantum supremacy”, whereby a quantum computer performs a calculation faster than any known computer could. Google researchers have laid out an ambitious plan which may let them achieve that feat this year. D-Wave has hinted it has already done so, but has made similar claims in the past; their current numbers are still to be checked. Whenever, and by whomever, this is accomplished, it will launch an era of small-scale machines offering quantum-en- multiplying, including open-source software packages such as hanced solutions and services. The first publicly accessible one, QuTip, funded by a number of research outfits in Asia. On March IBM’s Quantum Experience, may be an indication that the ma- 6th IBM released the first commercial program foruniversal quan- chines’ future will be in the cloud. Most users have no more need tum computers (the general-purpose kind). And various startups for one at home than they have for a supercomputer. have released their own quantum software. But some do. In 1982, a year after Feynman gave his quantum- One of the most ambitious, LIQUi¦> (whose name plays on a computing lecture, he was touring the supercomputer facility at symbol in quantum mechanics), comes from Microsoft. It aims to Los Alamos National Laboratory, where he had worked on the tackle the whole “software stack”, from the user interface to code- first atomic bomb. Talking to Bo Ewald, then in charge of the lab’s compilers and ultimately to a machine language suitable for computing efforts and now running D-Wave, Feynman said, “You Microsoft’s planned hardware, and that ofothers. know, young man, one day all of these will be replaced by quan- Krysta Svore, who leads Microsoft’s quantum-software team, tum computers.” One has already moved in. 7 says that the group is also working on reducing the total number of qubits and operations required for quantum calculations, known as “overhead”, and on making standard computers better at emulating quantum ones (the group recently hired a world ex- Software pert in that field, Matthias Troyer). The team’s full-scale simulation of a 32-qubit computer requires 32 gigabytes of memory, more than the average desktop can muster but still manageable. Program management Dr Svore and her colleagues are also making estimates of how many qubits, and minutes, would be needed to crack specific pro- blems. She says the numbers are “down dramatically”, thanks to recent improvements in keeping qubits under tighter control. For example, she reckonsthata thorough analysisofthe energy-inten- Quantum-computer code could do wonders—but also sive nitrogenase reaction to make fertiliser would take a 100-logi- unravel well-kept secrets cal-qubit quantum computer hours or perhaps days, whereas a conventional supercomputer would need billions of years. The TDOESN’Thelp to have a quantum computerifno one prize might be a cut of1-2% in global natural-gas consumption. knows how to program it,” says Tim Polk, of the White But the key to getting the most out of quantum computers are “ House Office of Science and Technology Policy in the algorithms that these various software packages implement. Washington. Although academic efforts to build quan- The firstofthem, includingthe one byPeterShorthat showed how tum-computer hardware have been going on for two quantum computers could crack global encryption systems, test- decades, comparativelylittle hasbeen done to develop ed the theoretical idea by aiming at the most intractable problems the Isoftware needed to run the machines when they come. on the biggest notional machines. That is changing, because in the past few years it has become clear that those machines are getting closer. Two parallel efforts Even deeper learning are under way. One is to create software as generally understood— These days, says Aram Harrow of the Massachusetts Institute of the graphical interfaces, programminglanguagesand so on, a kind Technology, the focus has shifted to algorithms that smaller ma- of “Windows for quantum”. The other is to develop novel algo- chines can make use of, because that kind of hardware will soon rithms, step-by-step instructions that break down problems into be widely available. “We’re still interested in what you can do discrete parts amenable to quantum computing. with a million or a billion qubits, but it’s interesting to see if you Innovation abounds in both camps, and among big tech firms can figure out what you can do with 100,” he says. as well as plucky startups. Some big players are working on both A lot, it seems. One of the most promising areas is in machine sides of the problem, and a growing ecosystem of quantum- learningand deep learning, two facets ofartificial intelligence that friendlyconsultanciesadvisescompanieson whatquantum com- have attracted much attention recently. Applications include puting might do forthem. searching through vast swathes of data to find patterns, such as in “Machine” language for quantum computers, which actually image recognition, cyber-security and, more prosaically, recom- tells the computer what to do, is fairly well understood. It is not so mendation engines that suggest products consumers might like. different from the logic gates of standard computing, except that it But there are all manner of other algorithms, from those that allows for “superpositions” of qubits in which they can be both 0 crunch numbers to those that mimic atoms. and 1at the same time. But how to write computer code to interact All these quantum recipes call for some means of cataloguing with such a machine, or to simulate what it can do? Options are them. Stephen Jordan heads the Quantum Algorithm Zoo at the1 10 The Economist March 11th 2017 TECHNOLOGY QUARTERLY Quantum devices
working on software to combat it. After all, what got researchers going in the first place was the fear that global encryption stan- dards would crumble in the face of quantum computing. That re- mains a danger for the future, and retrospectively perhaps even for the present, if encrypted communications filed away now are analysed by powerful quantum computers later. That is the idea behind post-quantum cryptography, an effort to create ciphers that even future quantum computers will be unable to crack. PQCRYPTO isa three-year, European-funded projectto develop post-quantum ciphers. Its goal is not to find the most mathemati- cally gnarly way ofencrypting data, but rather to identify one that is sufficiently difficult to break without needing too much memo- ry or computation to implement. RSA, a current global standard, could be made hard enough to break, but the cryptographic keys would have to be a terabyte long—an impracticable option. Keys for elliptic-curve cryptography, another current standard, are just 32 bytes long; any post-quantum solution needs to aim for a simi- 2 National Institute of Standards and Technology in Maryland, a lar ratio ofbrevity to security. comprehensive collection ofknown algorithms. He has devised a Tanja Lange, who leads the project, says that post-quantum ef- taxonomy of 59 mathematical familiesthey fit into, each suited to forts are now attracting a lot of attention, particularly from ner- particular kinds ofproblems or breaking down problems in a par- vous Silicon Valley outfits. In 2015 America’s National Security ticular, quantum-friendly way. Agency said it would be updating all its cryptography to make it Many such algorithms, when run on existing special-purpose quantum-computer-proof. Last year Google quietly ran its own machines or as emulations on standard computers, fail to beat post-quantum cryptography test in Chrome, its web browser. their “classical” counterparts. Vlatko Vedral, of the National Uni- Some of its users’ communications were protected both with el- versity of Singapore’s Centre for Quantum Technologies, stresses liptic-curve encryption and New Hope, a post-quantum protocol that traditional techniques, particularly for quantum-chemistry developed as part of PQCRYPTO. The median delay added to problems like the nitrogenase reaction, are already quite sophisti- those communications turned out to be just a millisecond. cated. The trouble isthatno beefygeneral-purpose quantum com- “The powerofquantum computingisrediscoveringall the pro- puter exists as yet, so no one knows whether a given algorithm blems that computers cannot solve, and having a path to solving run on one would beat its classical counterpart. At the same time, them,” says Dario Gil, vice-president of science and solutions at astonishingly efficient algorithms suited to quantum computing IBM. “It’sa reorientation ofwhatwe thinkaboutcomputers.” Buta are waiting to be discovered. device capable of solving big problems will create new ones if it Those 59 families of algorithms, and ever-better emulators for can unravel protocols that have protected secrets fordecades. 7 eventual machines, are an excellent startingpoint forplanning the quantum-computing future, and nowhere is interest greater than in finance. Commonwealth Bank of Australia is getting in early, collaborating closely with a research group led by Michelle Sim- Uses mons at the University of New South Wales. D-Wave has part- nered with 1Qbit, a startup, to develop “Quantum for Quants”, a forum for the quantitative-finance industry. Its editors include Mi- Commercial breaks chael Sotiropoulos, head ofglobal equitiesatDeutsche Bank. UBS, a big Swiss bank, is working with QxBranch, another startup, on using quantum algorithms in foreign-exchange trading and arbi- trage. Hyder Jaffrey, head of Strategic Investments and Fintech In- novation atUBS, sayshe putsquantum computingin the same cat- The most exciting thing about a quantum-enhanced world egory as artificial intelligence and blockchains, “all stuff with the is the promise of what it may yet bring potential to change markets”. HEN the first atomic clocks were built and swiftly Banking on it commercialised, no one used the term “quantum Companies such as QxBranch and 1Qbit play a new role of technology”. The clocks simply harnessed the middleman between the quantum experts and industry, examin- power of quantum mechanics to improve results. ing whether and how a given firm’s business might be improved At the time there were no other examples of how by quantum methods, for example optimising trading strategies the odd predictions ofquantum mechanics such as or supply chains, or monitoring network activity to spot cyber-at- Wentanglement and superposition could be put to practical use. tacks. Landon Downs, a co-founder of1Qbit, says that can lead to Mostly they informed fundamental science, yielding an ever-sub- solutions which can already be put to use. “By taking the lens of tler view ofthe world at the tiniest scales. how you would formulate an algorithm on a quantum computer Here and there, quantum weirdness did escape the lab, as in you often find very good improvements on classical algorithms,” the case of the superconducting quantum interference device, an he says. “That’s where lots ofour successes come from.” exquisitely sensitive magnetic-field sensor. The first of these was The biggest benefit is expected to come from quantum-com- developed in 1964 at Ford Research Laboratory, the American car- puting hardware once it arrives, so much ofthis business depends maker’s blue-skies research facility. Now they are widely used, for on simulating that hardware on standard machines as accurately example in MRI machines. In the early 1980s researchers at IBM as possible. Michael Brett, chief executive of QxBranch, says the turned the quantum effect of tunnelling, in which particles seem idea is that “some Tuesday morning when one becomes available to pass straight through impenetrable barriers, into a way to see we just swap out our simulation for the real hardware.” the microscopic world with staggering resolution. Even as all these computer scientists and consultants are work- The current quantum-technology push is on a far grander ing on software for the quantum future, a handful of others are scale, with multiple research effortsbeingfunded bynational gov-1 The Economist March 11th 2017 11 TECHNOLOGY QUARTERLY Quantum devices
2 ernments and supranational bodies, sometimes for strategic rea- sons. Freeke Heijman has led efforts to build QuTech, the quan- Foreign entanglements tum-technology institute of the Netherlands. “We don’t want to Authorship of papers on quantum computing by nationality of authors* Top 6 nations, 2004–13 risk the scenario that we have invested all this money for years Canada and in the end the money is going to be made in the US or China,” Japan United States International she says. And in the case ofdefence applications, she says security Britain 239 China collaboration plays a role too: “If you have to buy it off the shelf, it’s not just an Germany 197 42 Germany economic disadvantage, it’s also dangerous.” 177 71 88 China Britain But quantum technologies will not pass into the wider world United 216 45 81 85 States Japan in the same way as the global positioning system, which was de- 250 94 137 108 45 veloped with copious government funding behind closed doors Canada 4,511 4,1251,683 1,543 1,443 1,057 Internal and then handed over as a public good. “It’s just not like that to- collaboration day,” saysNeil Stansfield, formerlyofthe British government’sDe- USA China Germany Britain Japan Canada fence Science and Technology Laboratory. “We’re not the big kid 4,8864,232 1,884 1,719 1,535 1,205 Total papers on the government block, and certainly not on the global block.” *Collaborations between more than two That leaves business to step into the breach. But Trevor Cross, Sources: Digital Science; Clarivate countries may be counted multiple times chieftechnology officerofE2v, a British company whose detectors brought the world pictures from the Hubble Space Telescope and things: quantum sensors to gather sensitive readings, quantum which is now doing pioneering work for quantum devices, says cryptography to transmit them securely and quantum computing that quantum technologies are still viewed by many industries as to gather insights from the resulting copious streams of data. risky. That may be because many of the approaches are techno- Many practitioners believe that the applications and technol- logically so farbeyond the current state ofthe art. Richard Murray, ogies outlined in this report are just the beginning. As they be- an emerging-technologies expert at Innovate UK, Britain’s tech- come more familiar, they will give rise to new applications and nology-strategy agency, says that the more transformative the wholly new hardware. Subjects that used to be mere footnotes to technological change, the easier it is to miss opportunities. physics will rule, and engineers (and perhaps even consumers) will have to learn to speakquantum. Material evidence Yet some innovators may find themselves stymied. “The ques- The opportunities are many, because at the level of components tion is to what extent will export controls on these technologies these technologies are intimately connected. Many of them de- become an issue, particularly if any of it has some defence poten- pend, for example, on light sources that can spit out photons one tial,” says Stephen Ezell, ofthe Information Technology and Inno- at a time, every time, and detectors that can just as unfailingly vation Foundation, an American think-tank. Tech firms such as In- catch just one—no small feat, considering that a 60-watt bulb is tel and IBM have had trouble exporting parts and computers to putting out 100,000,000,000,000,000,000 or so of them every countries like China, he says. second. This kind ofkit was unimaginable a decade ago. Such challenges aside, what is exciting about these efforts is New materials, and precisely engineered versions of existing how much is simply not known about theirfuture. Bob Wisnieff, a ones, will be needed too. Element Six, a subsidiary of De Beers, a manager at IBM’s microelectronics-research labs, says that “we’re diamond giant, has carved out a niche selling diamonds with be- not that far from being capable…of building quantum computers spoke “nitrogen vacancies”—flaws that turn them into sensors. Sil- that will do things we cannot predict exactly.” John Preskill, a icon carbide is tipped to be just as quantum-amenable as those di- quantum expert at the California Institute of Technology, who amonds, but so far expertise with it is thin on the ground. coined the phrase “quantum supremacy”, has said that “a quan- New alliances will be forged as the work on materials intensi- tum computer can simulate efficiently any physical process that fies. Intel aims to build qubits into silicon, in orderto piggyback on occurs in nature. Maybe. We existing fabrication infrastructure. But that will require the materi- don’t actually know forsure.” al to be produced to a much higher purity. To that end, Intel has That brings the potential of OFFER TO READERS joined forces with Urenco and Air Liquide, two materials firms. quantum technologies full circle, Reprints of Technology Michael Bolle at Bosch, the multinational engineering firm, en- to the fundamental-science con- Quarterly are available from the Rights and Syndication visagesa seamlesscomingtogetherofthese diverse approaches in siderations from which they Department. A minimum order applications such as autonomous vehicles or the internet of were born. Quantum computers of five copies is required. and simulators should eventual- ly be capable of solving some of CORPORATE OFFER science’s most basic and yet most Customisation options on daunting questions. Sensors of corporate orders of 100 or more unparalleled precision may at are available. 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Also in this section 44 A new charter for Turkey 45 Humanitarian visas 45 Macedonia’s ethnic crisis 46 Stray cats in Istanbul 48 Charlemagne: France’s presidential car crash
For daily analysis and debate on Europe, visit Economist.com/europe
The Dutch election International interest has focused on the possibility that Mr Wilders might come The populists’ dilemma first, adding another populist win to last year’s Brexit vote and the election of Do- nald Trump. That may yet happen, but Mr Wilders, who led the polls for much of last year, has been sliding. The Liberals, the centre-right party of the prime minister, HEERHUGOWAARD Mark Rutte, now lead with about 17% sup- Dutch voters are furious with theirruling class, but lookset to return it to power port, ahead ofthe Freedom Party’s16% (see EENPEIL (“no poll”) is a new Dutch po- competing in the Netherlands’ parliamen- chart). And Mr Wilders is unlikely to enter Glitical party that has the unusual dis- tary election on March 15th. Many Dutch government: every other big party has tinction of having no programme. Instead call it the strangest race they have ever ruled out a coalition with him. it promises to ask its members how to vote seen. Other newcomers include the Forum The broader story in the Netherlands is on every bill, via an online interface. Its for Democracy (FvD), headed by Thierry one ofpopularfrustration with the normal founder, Bart Nijman, thinks this will help Baudet, a swaggering Eurosceptic intellec- process of governance. That will make it solve the biggest problem in Dutch politics: tual; For the Netherlands (VNL), a tax-cut- hard to run the country no matter how the the sense many citizens have that they are ting, anti-immigration party headed by a vote turns out. GeenPeil will probably not ruled by an arrogant, unaccountable elite. sassy news-comedian; Denk (“Think”), a win a seat, but Denk, the FvD and VNL On March 6th GeenPeil’s campaign rolled party that appeals mostly to immigrants have a good chance of doing so. The num- into Heerhugowaard, a town of red-brick from Turkey and Morocco and their off- ber ofparties in parliament could rise from modern developments 30km (19 miles) spring; and the Dutch Pirate Party. Because the current12 to 14 or more. Small, single-is- north of Amsterdam. Some of the entou- the Netherlands has no minimum thresh- sue groups like the Party for the Animals rage went to canvass voters while Mr Nij- old for entering parliament, any of these and 50Plus, a pensioners’ party, are likely man stayed on the bus, typing ceaselessly parties could win seats. to gain seats as well. The result could be a on a laptop. fragmented parliament roiling with anti- “We want to make democracy more establishment sentiment, but unable to flexible,” says Mr Nijman. An editor at Absence makes the Geert go under voice it coherently. GeenStijl.nl, a popular and deliberately of- Netherlands, voting intentions fensive right-leaning news website, he en- Selected parties, % TELEVISED DEBATES Too bold forthe polder tered politics in 2015 by launching a cam- 25 “As a country made up of minorities, we paign for a referendum on the European hate the idea that anyone’s voice is not PVV (Geert Wilders) Union’s association agreement with Uk- 20 heard in The Hague. But we also want our raine. (Dutch voters rejected the agree- own voice to win,” says Tom-Jan Meeus, a ment, only to see their prime minister ne- VVD columnist at NRC Handelsblad, a daily. The 15 (Mark Rutte) gotiate a few provisos and sign it anyway.) D66 contradiction is “very Dutch”. Mr Nijman’s take is much more nuanced CDA Dutch political culture is renowned for than that of Geert Wilders, the populist 10 its “polder” model, in which disparate in- leader of the Freedom Party, who blames PvdA SP terest groups hammer out compromises the Netherlands’ problems on Muslims, 5 through interminable negotiations. It is immigrants and the EU. But one point on GL also notably detail-oriented. At the start of which he agrees with Mr Wilders, and oth- 0 each parliamentary election, the govern- er populists across Europe, is that “citizens Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar ment’s Bureau for Economic Policy Analy- 2016 2017 don’t feel like they’re being heard.” sis reviews the budget plans submitted by Source: Peilingwijzer, Tom Louwerse GeenPeil is one of a raft of new parties political partiesand calculatestheir effects.1 44 Europe The Economist March 11th 2017
2 This analysis underpins the parties’ jock- for a Trump-style surprise. Because the was set up in 2011; more than 60,000 peo- eying forweeks afterwards. Freedom Party has been shut out of co- ple, as well as hundreds of universities, A debate between the party leaders on alitions, a vote for it carries little cost. Syw- think-tanks and NGOs, wrote in with pro- March 5th was dominated by clashes over ert van Lienden, a former political activist posals. Turks made it clear that they want- the bureau’s scoring. The candidates ar- nowworkingforthe mayorofAmsterdam, ed a charter that enshrined new rights, no- gued about the merits of turning the car- says he has heard even dissatisfied D66 tably by lifting restrictions on free speech, ownership tax into a tax on mileage, and supporters considering a protest vote for strengtheningchecks and balances and en- similar proposals. Their command of poli- Mr Wilders. “When the curtain closes, you suring the independence of the judiciary, cy was impressive, but the debate failed to never know how strong that ‘fuck ’em’ fac- says Fuat Keyman of the Istanbul Policy generate thematic conflicts that would al- tor will be.” 7 Centre, a think-tank. low any leader to pull away from the pack. The committee collapsed after two In previous elections, the right and left years amid squabbles between AK and the have usually produced one large party A new charter for Turkey Republican People’s Party, the main oppo- each. Not this time. “I’ve never experi- sition. Faced with a wave of anti-govern- enced an election like this, where there is Me, the people ment protests, a corruption scandal and a no competition developing between the falling-out between AK and the Gulen top two parties,” says Sjoerd Sjoerdsma, an movement, a powerful sect, Mr Erdogan MP forthe left-liberal D66 party. marshalled his nationalist base and One reason may be the Netherlands’ stepped up repression. The constitution ISTANBUL strong economy (see page 66). GDP grew Mr Can had wanted to write went up in The democratic constitution that never by 2.1% in 2016, and the government’s pre- smoke. “The priority became to save the was liminary estimates show that it ran a small day and consolidate power,” he says. budget surplus of €200m ($210m). The OR the past 92 years, says Osman Can The new charter was drafted late last prospect of winning budget goodies F(pictured), a formerheavyweight in Tur- year, after a failed coup and amid a mass (spending or tax cuts) might reduce tactical key’s ruling Justice and Development (AK) crackdown on any form of opposition. voting, thinksTom van derLee, a candidate party, his country has lived under three Some 40,000 people, includingthe leaders MP for the GreenLeft party. “Voters think, constitutions, each a product of upheaval of the pro-Kurdish Peoples’ Democratic why should I pickmy second-favourite?” and none of them democratic. The first set Party and over 100 journalists, have been Yet the chief reason for the lack of a the stage for a secular one-party regime. thrown in prison. Mr Erdogan rules by de- competitive race is the strange absence of The next two followed military coups. The cree under a state of emergency that will Mr Wilders. He has declined to join any of newest, adopted by parliament in January remain throughout the referendum cam- the debates so far, instead campaigning and setfora referendum on April 16th, isno paign. The press has been defanged. chieflythrough Twitter. Thathassabotaged exception. Billed by the AK government as The revised charter enshrines Mr Erdo- Mr Rutte’s plan to confront him and pose a safeguard against political chaos, the gan’s power. It abolishes the office of as the populist’s main opponent. Mr Wild- new charter would transfer all executive prime minister, leaving the president fully ers will take part in a final one-on-one de- power into the hands of the country’s au- in charge ofthe government. Instead of en- bate with Mr Rutte, on March 13th. “That is thoritarian president, Recep Tayyip Erdo- suring the separation of powers, it gathers the only hope to create that battle,” says gan. If approved, it would be the most them together under the roof of Mr Erdo- Henri Kruithof, a former spokesperson for comprehensive overhaul ofthe state appa- gan’s gaudy1,150-room palace. The Turkish the Liberals. ratussince the birth ofthe Turkish republic. leader would handpick his own cabinet, Without much excitement in the cam- It is not what Mr Can and most Turks other senior officials and his party’s MPs. paign, the mainstream parties’ support had in mind. As a respected jurist, and sub- He would be free to rule uncontested for baseshave solidified. The Christian Demo- sequently as a member of AK’s top execu- up to two five-year terms, and under some crats, the left-liberal D66 party, the environ- tive body, Mr Can campaigned to replace circumstances into the early 2030s. mentalist GreenLeft and the Labour Party the current junta-drafted constitution with “Under normal circumstances this are all pollingsomewhere between 8% and a civilian one. A constitutional committee would not pass,” says Mr Can, referring to 1 12%. At that rate, the Liberals would need at least three other parties to form a coalition; they might need to perform the ideological acrobatic trick of teaming up with Green- Left. That would require long negotiations and produce just the sort of compromise government that many Dutch have grown sick of. If Heerhugowaard is any indication, mainstream voters are already voicing ar- guments once heard only on the extremes. Ruud Bakker, who sells cleaning supplies in the town’s weekly market, is a lifelong Liberal voter who says he once hosted a family of Chechen refugees. This year he may vote for Mr Wilders or for Mr Baudet’s FvD. “We used to be very liberal in this country,” he says; now he worries that Is- lamists will try to “take over” and “tell our women how to dress”. For now, the polls show Mr Wilders’s support continuing to sink. But some Dutch wonder whether the country is in The man who nearly reconstituted Turkey The Economist March 11th 2017 Europe 45
2 the constitutional changes. But normality in Turkey is gone. The Venice Commission, an advisory body to the Council ofEurope, has warned in a leaked report that the country is on the road to autocracy. Mr Er- dogan and his prime minister, Binali Yildi- rim, have threatened opponents of the new constitution by comparing them to terrorists and coup plotters. Neither Mr Er- dogan’s predecessor as president nor Mr Yildirim’s as prime minister, both believed to be critical of the new constitution, have dared to make their views public. With thousands purged from universities across the country, many academics who took part in the constitutional debate in the ear- ly 2010s are also reluctant to speakup. Members of Mr Erdogan’s team insist the country needs strong leadership to stave off the turmoil at home and abroad, including terrorist attacks and the war in No jumping the queue Syria. But the kind of democratic reforms under debate in the early 2010s are not off at the Belgian embassy in Beirut last Octo- certain groups on humanitarian grounds the table, suggests Mehmet Ucum, a presi- ber. Belgian officials refused to consider (such as staff employed by their armed dential adviser. “Think of this [constitu- the bid because the family intended to stay forces abroad, who face retribution from tion] as the beginning,” he says. in the country longer than the permitted enemies) might have pulled back under Mr Erdogan’s critics think of it as the 90 days. But in February the court’s advo- the glare of the spotlight. The fight to find end. Those who can afford to do so have al- cate-general said the visa application newwaysto safetyforrefugeeswill contin- ready started to vote with their feet. Ac- should fall under the EU’s Charter of Fun- ue: the European Parliament wants to clari- cording to a recent survey, 6,000 million- damental Rights, which protects against fy the conditions under which humanitar- aires left Turkey in 2016, a fivefold increase the sort of violent treatment the family ian visas can be issued, though on the previous year. As Turkey’s democra- claim to have suffered in Syria. That would governments are wary. But for now, the cy unravels, more are likely to follow. 7 have obliged Belgium to grant the visas— smugglers’ business model is safe. 7 and could have opened the door to thou- sands more such applications from Humanitarian visas would-be refugees. Yet although the court Macedonia’s political crisis usually follows the advocate-general’s rea- Another way in? soning, this time it demurred, ruling that it Scared in Skopje was up to national governments whether or not to issue humanitarian visas. NGOs, as well as the UN’s refugee body, see humanitarian visas as a useful alterna- BRUSSELS SKOPJE tive to the cumbersome process ofresettle- The European Court ofJustice declines A Macedonian-Albanian breakdown ment. Brazil, among other countries, has to upend EU asylum rules gets Europe’s attention begun to issue them to Syrians. Yet many N UNEASY paradox underlies asylum EU governments, 13 of which backed Bel- N NORMAL times, the world tends to ig- Apolicy in Europe. As signatories to the gium’s case, insist that the EU visa code Inore Macedonia and its 2m people, a Refugee Convention of 1951, all European was never intended to impose humanitar- quarter of them ethnic Albanian. But the Union countries must allow foreigners on ian obligations on national authorities— world is not ignoring Macedonia now. their territory to apply for protection. But and after the 2015-16 refugee crisis, there is Western politicians are rushing to Skopje, none is obliged to help them arrive in the little appetite formore generosity. After the Russia is issuing warnings and Serbian first place. As most war-torn places are ruling Theo Francken, Belgium’s out- newspapers proclaim that war is coming. some distance from Europe, asylum-seek- spoken immigration minister, celebrated “Geopolitical relevance is returning to the ers must endure dangerous journeys, and his victory overthe NGOs he said were try- Balkans,” laments Veton Latifi, an analyst. rapacious people-smugglers thrive. ingto extend Europe’sbordersto itsembas- The Macedonian crisis started with a Resettling refugees directly from coun- sies abroad. coalition dispute. To preserve ethnic peace, tries that host lots of them, such as Turkey, Advocates themselves lamented what governments consist of the winning Mac- Lebanon and Kenya, is another option. A they consider a missed chance to save lives edonian party and an Albanian one. Elec- third is to issue humanitarian visas, which and dent trafficking. Yet, says Elizabeth tions last December gave the incumbent entitle the bearer to travel safely to his or Collett of the Migration Policy Institute Eu- Macedonian party, the nationalist VMRO, her destination before claiming asylum. rope, a think-tank, they may have dodged a a slight edge. But after talks with the VMRO But European governments hand them out bullet. Had the court ruled the other way, failed, the leading Albanian party, headed sparingly, and there is little legal clarity sur- governments would quickly have tight- by Ali Ahmeti, opted for the Social Demo- rounding their use. Advocates for refugees ened EU visa law further. Worse, govern- crats. On March 1st Macedonia’s president hoped that the European Court of Justice ments that have been quietly admitting refused to askthe Social Democratsto form might change that in a ruling this week. a government, saying Albanian demands The case before the court involved a Correction: In a photo accompanying an article last would “destroy” the country. The Social week (“A Tale of Two Mayors”), the identifications of family of five Christians from Aleppo, in Virginia Raggi and Chiara Appendino, the mayors of Democrats called it a “coup”. Syria, who applied for humanitarian visas Rome and Turin, were reversed. Sorry. Every weekday since, thousands of 1 46 Europe The Economist March 11th 2017
BOSNIA SERBIA Strays in Istanbul MONTENEGRO Pristina When fat cats are a good thing KOSOVO BULGARIA ISTANBUL Skopje A Turkish affection forstreet cats and dogs has blossomed online Adriatic Tirana MACEDONIA Sea PRAWLING on doorsteps, on café them: butchers leave out scraps; in winter benches, inside hamams: stray cats locals build small huts for the cats to ALBANIA S ITALY GREECE and dogs are everywhere in Istanbul. sleep in. Since 2004, following European Some 130,000 dogs roam the city; at least convention rules, towns have had to 100 km 125,000 wild cats prowl its streets. The neuter and vaccinate the dogs; almost all Ethnic Albanian population: majority minority prevalence ofstrays across the city is are fitted with electronic chips that record nothing new: “The dogs sleep in the their health history. This is expensive: streets, all over the city,” MarkTwain between 2009 and 2016 the central gov- 2 Macedonians have demonstrated in sup- wrote after a visit in 1867 to Istanbul. ernment spent some 19m Turkish liras port of the president. The European Un- “They would not move, though the Sul- ($5m) in 40-odd municipalities on ani- ion’s foreign-policy chief, Federica Moghe- tan himselfpassed by.” More recently mal welfare. Cats seem to cause less rini, along with the head of NATO and their presence has taken on a new, more trouble, although in 2005 Recep Tayyip America’s State Department, have pleaded modern twist. Erdogan, the president, who was then the with him to reverse his decision. VMRO The popularity ofanimal photos on prime minister, successfully sued Cum- has staunchly supported joining NATO, social media—combined with a desire for huriyet, a secular newspaper, and its but in this crisis it is backed by Russia. a glimmer ofgood news in Turkey—has cartoonist, after it depicted him as a kitty At a deeper level, the conflict goes back boosted the renown ofthese creatures caught up in a ball ofwool. The cartoon- to 2015, when the Social Democrats began both at home and abroad. There are at ist in question is currently under arrest, releasingtapesofconversations(tapped by least halfa dozen Facebookpages dedi- one ofthe more than 100 journalists who the intelligence services) which implicated cated to the strays around Istanbul. One, have been rounded up since a failed coup Nikola Gruevski, the VMRO prime minis- “Cats ofIstanbul”, has nearly 70,000 last summer. ter at the time, in corruption. Under EU followers; its canine cousin, “Pups of Authorities have taken drastic, and auspices, a special prosecution office was Istanbul”, a more modest 20,000, attest- unpopular, measures to get rid ofthe set up, but VMRO nowclaimsitispacked ing to the pointlessness ofcompeting creatures. In 2012 the government tried to with Social Democrats. Lately VMRO sup- with cats on the internet. One particular introduce a law that would have con- porters have accused George Soros, a phi- photo, ofTombili, an obese feline who signed street dogs and cats to remote, lanthropist named in many potty conspir- was papped leaning casually against a deserted areas referred to as “nature acy theories, of plotting against them. Ms step, so tickled its fans that a bronze parks”. It was shelved after an outcry Mogherini has been attacked in the press statue (pictured, with original) was put from animal-rights activists and dog as a “fascistic Sorosoid bimbo”. American up in his honour after he died. The craze lovers. Thousands marched in the streets. congressmen sympathetic to VMRO have has also moved from the little screen to Last weekseveral women wearing ani- attacked the American ambassador to the silver one: in February “Kedi”, a fea- mal masks in Alanya, a coastal town, Macedonia as a tool ofMr Soros. ture-length documentary about cats in tried to file a petition “as cats” against the At the centre ofthe crisis is Mr Ahmeti, a the city, opened in New York. It is now killing ofaround 50 oftheir fellow fe- former guerrilla leader. Sharing power being released across America. lines—to be told that only humans could with Mr Gruevski since 2008 cost him sup- Many Istanbulites treat these strays as file petitions. For now, anyway. Acat can port. He says Mr Gruevski would not agree their grandparents have done before always dream. to extend the mandate ofthe special prose- cutor investigating him. Meanwhile, Alba- nian parties asked the government to keep itsagreementto widen the use ofAlbanian as an official language. According to Radmila Sekerinska, depu- tyhead ofthe Social Democrats, MrGruev- ski instigated the crisis when he realised that he might lose power, which would leave him exposed to the special prosecu- tor investigating him. Not so, says Nikola Poposki, Macedonia’s foreign minister and a VMRO official. The Albanian language demand accepted by the Social Democrats “endangers the unity and sovereignty of Macedonia”, he says. Mr Ahmeti warns against turning the crisis from a political one into an ethnic one, saying he has a tough job keeping his side’s own nationalist radicals in check. He disclaims any plans for a Greater Albania. Russia, he says, is stirring the Balkan pot; the best way out is to accelerate Macedo- nia’s accession to the EU and NATO. 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François Fillon’s presidential race will appeal to those who watch forthe crashes over the years came to €900,000 ($949,000); the average pre-tax annual salary is €20,670. But there was also an uncomfortable sense offeudal entitlementaboutthe affair. The tweedy MrFillon lives in a historic manor house in La Sarthe, complete with cha- pel and horse. Paris-Match once published a photo ofhim, a prac- tising Catholic, and his large family, taking tea on its sweeping lawn. Worse, MrFillon insisted on his own reputation for probity. Asdisillusion grew, and hispoll numberssank, MrFillon dugin. It was a conspiracy, he exclaimed, fingering the usual suspects: the media, the left, even the judiciary. The people, he cried to die- hard supporters at a hastily organised weekend rally in Paris, had chosen him; they would be his judge. Mr Fillon hit the most dis- cordant note of all when he sought to mimic the grandiose ora- tory of Charles de Gaulle, whose photo he kept on his bedroom wall as a child. “France”, he declared, “is greater than my errors.” Nothing, it now seems, will deflect Mr Fillon from his course. Not the loss of his campaign manager, Patrick Stefanini, nor his spokesman, Thierry Solère, nor the scores of deputies who have also quit his campaign team. Defeat in the first round, said MrSte- fanini, could no longer be ruled out. In their despair over the weekend, defectors appealed to the primary’s runner-up, Alain HEN a British television show, Top Gear, was marketed to Juppé, another ex-prime minister, to take over as candidate. Wthe French a few years ago, it seemed an improbable propo- Somehow, anyhow. But Mr Fillon was having none ofit. It was all sition. The hit programme, which appeals to petrol heads and the “too late”, an embittered Mr Juppé replied: Mr Fillon had a bou- nation’s innerladdishness, was not an obvious fit forGallic sensi- levard in front ofhim, but has driven into a dead end. bilities. More improbable still, when the French version was Besides the harm done to the image of democratic politics, launched in 2015, was the choice of an early special guest, whose one casualty of this sorry saga is an ambitious economic pro- challenge is to set the fastest time possible when driving an ordin- gramme, gone to waste. Forall hisflaws, MrFillon grasps the need ary car round a race track: it was the rather dour, besuited, centre- to shake up France’s rule-bound system to free up the creation of right formerprime minister, François Fillon. jobs, ideas and profits. He knows, having served as prime minis- As it turned out, MrFillon, who is now the Republicans’ belea- ter under President Nicolas Sarkozy, that reforms need to be guered presidential candidate, did rather well. Strapped into a spelled out before an election in order to secure a mandate to put specially adapted Dacia Sandero, equipped with a crash helmet them into place afterwards. Butthe damage nowdone to his cred- and an internally mounted camera recording his every move, Mr ibility is such that, even were he to defy the odds and win, Mr Fil- Fillon wasunerringlycalm and focused atthe wheel. His lap time lon would lackthe authority to do what he has promised. earned him a highly respectable fourth place. Fillon devotees were not surprised. He is an amateur racing driver; his brother, Tragédie française Pierre, runs the 24-hourrace at Le Mans, which lies in his rural for- Anotheris political unity on the French right. When Jacques Chir- mer constituency of La Sarthe, in western France. For anybody ac stood for re-election in 2002, he brought rival cliques from the else struggling today to understand why Mr Fillon has defied in- centre and the right together under a broad umbrella, originally sistent calls from his own team to quit the French presidential named the Union for a Presidential Majority (UMP). It helped race, despite a judicial investigation into alleged misuse of the him in the run-off, where he roundly beat Jean-Marie Le Pen, of parliamentary payroll, his Top Gear appearance offers an insight. the nativist National Front. Today, Mr Le Pen’s daughter, Marine, This is a man who—alone, impervious to distraction, unafraid of is likely to reach the second round, and Mr Fillon needs to keep risk, and under pressure—has an unwavering faith in his capacity those same constituent parts together in order to make it as well. to hold steady and make it over the finishing line. Instead, the centrists are wavering. Many centre-right figures Mr Fillon’s troubles have turned an election that was difficult around Mr Juppé have quit the campaign. Mr Fillon is left with for the centre-right to lose into one that will be difficult to win. the socially conservative right wing, whose most organised ele- LastNovember, the politician once mocked asMrNobodysurged ment is a Catholic movement that mobilised vigorously against from poll outsider to grab his party’s nomination, with a sweep- the legalisation ofgay marriage. ing 67% ofcentre-right voters. Overnight, Mr Fillon became the fa- This spectacle has blown the wheels off one of the few cred- vourite in the election on April 23rd and May 7th. The sitting So- ible efforts to keep Ms Le Pen out of the Elysée. “If it’s a choice be- cialist president, François Hollande, was so unpopular that he tween Fillon and Le Pen, I’ll abstain,” said a retired Socialist voter bowed out before he was pushed. L’alternance, orthe habitual ro- in Angers, a cathedral town nearhis rural fief. The stakes are high- tation of power between the left and the right, meant that centre- er than at any other election since de Gaulle established the Fifth right politicians just assumed it was their turn. Republic in 1958. Mr Fillon may think he can still make the final Such expectations have now collapsed. Investigative judges lap. But hopes of defeating Ms Le Pen are increasingly turning in- say they will put Mr Fillon under formal investigation on March stead to a young centrist untested behind the wheel, Emmanuel 15th over alleged fake jobs forhis Welsh-born wife, Penelope, and Macron. And he, against all the unwritten rules ofFrench politics, two of his children. The sums were bad enough. The payroll bill has never run forelection to any office before. 7 Britain The Economist March 11th 2017 49
Also in this section 50 Taxing the self-employed 50 An upset in Northern Ireland 51 EU migrants’ right to remain 52 Bagehot: The strained state
For daily analysis and debate on Britain, visit Economist.com/britain
The budget their future, thanks to the fall in the value ofsterling. Calm before the storm The third factorconcernsfinance. Great- er uncertainty can prompt banks to reduce lending. Dearer finance hampers consum- er spending and investment. After Britain voted Leave, however, firms’ funding costs if anything fell, partly because the Bank of The post-referendum economy continues to beat expectations, but the chancellor England quickly relaxed credit. Indeed the acknowledges big risks ahead worry now is that Britain, and especially Y TRADITION the chancellor of the ex- vail at the referendum. (Wage growth, its consumers, have over-borrowed. B chequer may drink alcohol during the however, will be much weaker.) Whatever the reasons, the stronger eco- budget speech, the only time of the year Three factors help to explain the econ- nomic growth means juicier tax revenues. when any minister may imbibe in the omy’s resilience since the referendum. Thanks also to one-off factors, the OBR has House of Commons. On March 8th Philip First, consumer spending has remained handed Mr Hammond a fiscal windfall of Hammond stuck to water. But others were strong. With the benefit of hindsight this is £16bn ($19.7bn) over the current and next fi- longing fora stiffdrinkas they watched his unsurprising. Leave voters got what they nancial year (equivalent to about 2% of an- speech. He made a few good jokes but oth- wanted. And forRemainers, Brexitremains nual government spending). Borrowing in erwise was monotone; he reeled off end- vague and some way off. 2016-17 will be £52bn, about £16bn less than less statistics (usually including the deci- Second, businesses may be less wor- was predicted in November. mal point); and unlike his predecessor, ried about Brexit than economists had as- George Osborne, he resisted the urge to sumed. In two recent speeches Kristin Taking away the punch bowl pull rabbits out of his hat. Mr Hammond is Forbes of the Bank of England digs into the Some hoped that the chancellor would in no mood to party, and for good reason. impact of uncertainty on economic take advantage of his stronger fiscal hand The economy is looking strong now but he growth. Following the referendum, there to boost spending, in particular on the Na- knows that, with Brexit negotiations loom- was a spike in a closely watched measure tional Health Service, which is struggling ing, things are likely to get worse. ofuncertainty, builton analysisofnewspa- in the face of its tightest-ever financial Most economists had assumed that per articles. Yet this measure is weakly cor- squeeze. Mr Hammond offered a smidgen after the vote to leave the European Union related with actual economic outcomes of extra NHS funding and channelled an the British economy would slow sharply. such as investment: what London-based extra £1.2bn in 2017-18 towards social care, Heightened uncertainty would immedi- journalists thinkisimportantmaynot mat- which will ease the burden on hospitals. ately deter investment and consumer ter much to a firm in Birmingham. That was by far Mr Hammond’s biggest spending, the thinking went. In its Novem- Other measures of uncertainty, such as new commitment. He made much of a ber forecast the Office forBudget Responsi- those derived from surveys of firms, do tweak, costing £200m-odd in 2017-18, that bility (OBR), the fiscal watchdog, reckoned correlate more strongly with economic ac- will lessen the impact on firms due to pay that GDP growth in 2017 would be 1.4%— tivity. And these measures did not increase higher business rates (a tax on property) in and that put it at the optimistic end of the to nearly the same degree, Ms Forbes April. MrHammond also started to harmo- spectrum. notes. Managersare perhapstoo busywith nise the way that self-employed and em- The OBR has since revised its forecast to their day-to-day jobs to worry about ployed workers are taxed, generating a bit 2%, one ofits biggest-ever upgrades. It reck- whether or not Britain remains in the EU’s of extra revenue and a lot of outcry (see ons that in 2017 unemployment will re- customs union in 2019. Many saw little next story). All in, though, this was one of main around itscurrentlevel of5%, a slight- point in adjusting their plans in light of the the least fiddly budgets in memory; the ly better reading than it gave in March 2016, Brexitvote. Firmswhich exporttheir wares document itself was less than half as long when it assumed that Remain would pre- may even have felt more confident about as Mr Osborne’s last. 1 50 Britain The Economist March 11th 2017
2 By maintaining an austere stance, Mr under 2% in 2018-21. Northern Ireland Hammond has now amassed what is be- Yet the OBR’s outlook is rosier than that ing called a £26bn “reserve”. Contrary to of most economists. Judging by its fore- An upset in Ulster what is implied, that is not a piggy-bank of casts for trade and immigration, the OBR free cash. Instead it is the difference be- appears to be assuming a “soft” Brexit, tween two things: the OBR’s forecast of the where Britain retains some form of mem- budget deficit, adjusted for the economic bership of the EU’s single market and ac- BELFAST cycle, in 2020-21 (£19bn); and the chancel- cess to its workers. But the government has The unionist majorityis destroyed by a lor’s self-imposed limit for that measure in signalled otherwise; Britain could even surge in republican turnout that year (£45bn or so). quit the EU with no trade deal at all. NonethelessMrHammond will be glad In the event of a hard Brexit, Mr Ham- INCE the partition ofIreland in 1921, par- that he can increase spending if need be mond could deploy his fiscal reserve, but it Sties supporting the union with Britain and still meet his fiscal goal. No one has the would not be enough to offset fully a seri- have been comfortably in control of the is- foggiest idea how the economy will per- ous slowdown. Even a mild recession land’s north. On March 2nd that changed. form from 2018 onwards, when the terms would force him to spend it quickly. Britain In a surprise election result the two main ofthe post-Brexit settlement become clear- also faces a large “Brexit bill” on quitting unionist parties, the Democratic Unionists er. For now the government’s strategy re- the EU. Beyond that, he has diminishing (DUP) and Ulster Unionists, won only 38 mains vague. Even the OBR appears to room to boost the economy: the ratio of seats in the 90-member Assembly. Sinn have no answers to the simplest questions, public debt to GDP is already around 85%. Fein, the main republican party, came such as the terms of the deal hammered The chancellor’s sober approach to bud- within fewer than 1,200 votes of overtak- out with Nissan, which has pledged to get-makingisthe rightone. Still, if the econ- ing the DUP to become the Assembly’s big- keep making cars in Sunderland. Its best omy is really buffeted as Brexit gets under gest force (see chart). “The notion of a per- guess is that GDP growth will average just way, he will only be able to do so much. 7 manentorperpetual unionistmajority has been demolished,” said Gerry Adams, Sinn Fein’s president. New taxes The historic tilt in the sectarian balance of power followed a disastrous campaign Read my lips by the DUP and its leader, Arlene Foster, who has been Northern Ireland’s first min- ister since January last year. The election, A raid on the self-employed pleases economists but annoys Tory voters which came only ten months after the pre- HEN Philip Hammond announced hairdressers, who earn £12,700 a year on vious contest, was triggered when Sinn Wan increase in tax forself-employed average, will see their annual NICs bill Fein’s leader and deputy first minister, workers in his budget on March 8th, drop by £70. Taxi-drivers, earning an Martin McGuinness, resigned in protest at many asked whether the Conservatives average of£17,300 a year, will forkout an Mrs Foster’s “arrogance” and supposed re- still stood forthe “strivers”, as they have extra £20. Those making £51,100 a year, fusal to work with republicans in the pow- long claimed to do. Not only did Mr the average fora self-employed manage- er-sharing administration. Sinn Fein fur- Hammond breaka manifesto promise by ment consultant, will send an extra £620 ther accuses Mrs Foster of wasting raising the rate ofclass four national- to the exchequer. hundredsofmillionsofpoundsin her han- insurance contributions (NICs), a tax on There is still a gaping hole between dling ofa green-energy initiative known as the profits ofself-employed people. He taxes paid by employees and the self- the “cash forash” affair. also cut the value ofdividends that in- employed. Companies face an incentive Her response was to run a hardline vestors could withdraw from their com- to hire self-employed workers, to avoid campaign, curtly rejecting any suggestion panies tax-free. paying their own NICs of13.8%. MrHam- of concessions to Sinn Fein. “If you feed a As the self-employed fumed, experts mond could go furtherand close this gap. crocodile it will keep coming back and swooned. Mr Hammond’s move nudges But there is political riskinvolved in looking for more,” she declared. Sinn Fein the tax system closer to their rational swiping at the self-employed, who make made hay with this, a dozen of its mem- ideal, bringing the taxes paid by the up around 15% ofBritain’s workers. bers wearingcrocodile costumes cavorting self-employed closer to those paid by Lowering the threshold ofdividends on stage to Elton John’s “Crocodile Rock”. 1 employees. Once, the lower rate ofNICs that can be withdrawn tax-free, from paid by the self-employed—which £5,000 a year to £2,000, will hit some of equates to a subsidy of£1,240 ($1,510) per the same people. Those affected will find DUP in the dumps person, according to the Institute for their wallets lighter to the tune of £320 a Northern Ireland Assembly elections Fiscal Studies, a research institute—was year, on average. Most ofthe cash will be First-preference votes, ’000 justified by their worse state-pension stumped up by higher-rate taxpayers. 2016 (54.9% turnout) Seats won* entitlement. But as oflast April that is not The government also hopes to hold back 2017 (64.8%) the case. The self-employed still lack the surge ofpeople registering them- 0 50 100 150 200 250 benefits like sickpay or maternity pay. Mr selves as company directors. Since 2008 38 DUP 28 Hammond has commissioned a review the number ofcompany owner-manag- 28 to lookinto it. ers has almost doubled, which looks Sinn Fein 27 Taken in conjunction with another more like mass tax-dodging than a surge SDLP 12 forthcoming tweakto NICs, 1.6m people ofenterprise. 12 will pay more. Analysis by the Resolution These changes are sensible, but may 16 UUP 10 Foundation, a think-tank, finds that 96% not raise as much money as Mr Ham- 8 ofthe extra tax will be paid by the high- mond hopes. In targeting the self-em- Alliance 8 est-earning halfofhouseholds. Those ployed he is taking aim at a particularly Others 6 struggling in low-paid jobs in the “gig slippery form oftax revenue—and giving 5 economy” will be exempt. Self-employed those who would pay it a year’s notice. Source: Electoral Office *Assembly reduced from for Northern Ireland 108 to 90 seats in 2017 The Economist March 11th 2017 Britain 51
European Union migrants Home Office does not have enough staff to cope. Yet despite this it has tightened rather Administrative than relaxed the rules recently, says Colin Yeo, a specialist migration barrister. agonies Applicants must pay £65 ($80) and fill in an 85-page form (similar forms run to just two or three pages in Ireland and France). Many need legal help, as well as evidence The real worry is not whetherto let EU ofutility bills, payslips and all outward tra- migrants stay but how to process them vel for five years. The process can take six EGISLATIVE ping-pong continues be- months, during which time the Home Of- Ltween the two houses of Parliament fice keeps applicants’ passports. More bi- over the bill allowing Theresa May to in- zarrely, any applicant who has been eco- voke Article 50 of the EU treaty, which will nomically inactive must have had kick off the Brexit process. The prime min- comprehensive sickness insurance, even isterhopes to persuade the Commons next though EU citizens have a right to use the week to reject two amendments made by National Health Service. the Lords, so that the bill can become law Sunder Katwala, director of British Fu- shortly afterwards. Yet many Tory MPs ture, says the proportion of applications sympathise with at least one of those being rejected because of such complex- amendments, to instruct the government ities is 30%. He reckons this would fall and Sinn Fein, doing fine to guarantee the right to remain ofover 3m the process speed up ifthose in work could EU nationals resident in Britain. The bipar- bypass the Home Office and ask local-au- 2 Anxiety about Brexit, which the DUP sup- tisan Commons Brexit committee has just thority nationality-checkers to use in- ported but 56% ofNorthern Irish voters op- unanimously endorsed this suggestion. come-tax data to confirm their status. He posed, may have contributed to high turn- Mrs May has long claimed that she too also suggests dumping the rule about sick- out. But the main factors were local, Mrs would like to do it. But last summer she de- ness insurance. Yet the Home Office is a Foster’s language energising Sinn Fein sup- clared that she could not without getting a suspicious place that frets about ever being porters and boosting the party’s previous- reciprocal guarantee for the 1m or so seen to let in even one illegal immigrant. ly faltering vote. Edwin Poots, a DUP As- Britons resident in other EU countries. Hard-luckstories and litigation lie ahead. semblyman, admitted to the Ulster Star: Manyofthese feel neglected bytheir home And this is all before, fourth, a new mi- “Unfortunately nationalists and republi- government; most also support a unilater- gration regime is put in place. The Com- cans turned out in a way they haven’t done al guarantee for EU nationals. But some mons Brexit committee suggests that EU for a long time...We have managed to get other EU countries say they cannot act un- citizens should be given preferential treat- [them] angry and that has led to them win- til the Brexit negotiations begin. The im- ment. With industries such as agriculture ning more seats.” passe has created uncertainty and much and hospitality dependent on them, that Republican jubilation, and a sharp in- anguish on both sides ofthe Channel. may be sensible. Yet drawing up a system, crease of unionist anxiety, will do little to In practice everyone agrees that almost getting employers and landlords to police increase the prospects forsuccess in the ne- all residents will be allowed to remain. it and persuading other EU countries to gotiations which the British government Two-thirds of the 3m-plus EU nationals work with it will be hard—and could affect launched this weekwith the aim ofgetting will have been in Britain for five years be- how long it takes to agree to let residents the Assembly back in operation again. fore Brexit, so they should qualify auto- stay where they are. As Mrs May prepares Sinn Fein has a new leader in the north in matically. The bigger concern is the bu- to invoke Article 50, she must sometimes the form ofMichelle O’Neill. (Mr McGuin- reaucracy involved. A first problem is lack wonderifitwould have been wiserto offer ness is said to be gravely ill in hospital.) of information. Britain has no identity a unilateral guarantee to EU residents Sinn Fein insists it will accept Mrs Foster as cards, no register of EU nationals and no months ago, earning goodwill all round. 7 first minister only ifshe is cleared by a pub- checks on who comes and goes. The offi- lic inquiry into the green-energy debacle, cial numbers (see chart) are estimates that due to start soon. The party has further may well understate the true figures. Foreign exchange made it plain that it will not accept her un- Asecond issue is the cut-offpoint forEU 2015, m less she softens her attitude. nationals who want to stay. Some have EU nationals resident Britons resident The law says that a fresh election must proposed June 23rd 2016, the date ofthe ref- in Britain abroad be called if an agreement is not reached erendum, but this has no basis in law. Oth- 0 0.2 0.4 0.6 0.8 1.0 within three weeks. Few believe that a ers are arguing for when Britain actually Poland breakthrough can be made within that ti- leaves, probably in March 2019, but that mescale. But nor do many want a re-run of could encourage a last-minute surge. A re- Ireland the poll, and so the likelihood is that an ex- port in December from British Future, a tension will be arranged so that the parties think-tank, floated a compromise of the Romania can be kept at the negotiating table, proba- day when Mrs May triggers Article 50 later Portugal bly formonths. this month. All of Northern Ireland’s parties, as Third and most problematic is the ad- Italy well as the governments in London and ministrative burden of securing perma- Lithuania Dublin, want devolution to continue, rath- nent residence, a necessary step towards er than return to direct rule from Westmin- citizenship. Last autumn Oxford’s Migra- France ster. But the negotiations will be a long, tion Observatory noted that, at current hard slog. And it will be some time before rates, it would take 140 years to process all Germany all sides come to terms with this sudden those eligible. In the six months since the Spain and dramatic change in the political land- referendum the number applying rose to Source: ONS scape and the balance ofpower. 7 over 135,000. Many more are to come. The 52 Britain The Economist March 11th 2017 Bagehot Theresa May sallies forth
As it prepares forBrexit, the British state is understrain And, like many other cities, Coventry has seen its public ser- vices pruned. On the budget’s eve, Bagehot spoke to Ed Ruane, the councillor in charge ofchildren’s services. He had come fresh from a meeting at which it had been decided to end all remaining council provision of youth services, close 11 of 18 children’s cen- tres and hand many libraries to voluntary associations. Such fa- cilities, he says, were about more than keeping kids occupied; they were an early-warning system alerting authorities to things like child sexual abuse. The Wood End estate, in MrRuane’snorth Coventry ward, saw violent riots in 1992. Now he fears for the in- stitutions—the libraries, sports centres and social programmes— established to heal the wounds. To be sure, Coventry’s council has adapted. It now shares functions with neighbouring authorities, puts services out to ten- der and limits its use of back-office staff. It is much more open to ad hoc partnerships with NGOs, says Ms Leighton. These changes would be welcome even in the absence of austerity. But such reforms have their limits. The city’s public sector has started to struggle. At the hospital 23% ofemergency patients now breach the NHS’s four-hour target for treatment, up from 13% a year ago. The nearest prison saw a 12-hour riot in December. At night rough VERYWHERE things are lean. And not in a strategic, man- sleepers shiver in doorways. “The number rose 30% in 2016, on “Eaged way.” It is March 8th. In Westminster Philip Ham- top of 50% in 2015,” explains Matthew Green, a local homeless- mond is givingthe budget speech. And in the West Midlands Car- ness campaigner. Even in Coventry’s wealthy, sinuous suburbs, oline Leighton is pondering the British state. As chief executive of like Woodlands, concerns about anti-social behaviour and crime the Citizens Advice Bureau (CAB) in Coventry, she knows her are rising. stuff. The CAB network is where people who have been failed by the public sector come for support: those who have fallen The wages of Brexit through the social safety net, are tangled up in the legal, tax and The cityisa cross-section ofthe British state. The austerity cutsbe- health systems, or otherwise need help and do not know where gan in 2010. For several years the effects were limited. Nationally, to turn. So the waiting room outside her office is a sort of dash- confidence in the police service grew despite a real-terms cut of board, constantlymeasuringLeviathan’sperformance. Todayit is 17% in spending. Violence in prisons was flat despite an 18% cut. flashing red: standing-room only. In the past year the CAB’s work- Hospital admissions outpaced funding increases while satisfac- load has grown by over 20%. tion levels remained stable. But since about 2014 the figures have Youdo nothave to spend longhere to find evidence of a public turned. The administrators of the British state have run out of fat sector under intense pressure. One visitor could not get a doctor’s to cut. Assaults on prison staffare up by75% in three years. Home- appointment despite acute mental-health problems. Another, a lessnessin England hasgrown bya third. The proportion ofemer- 50-hour-a-week floor-layer swindled by his boss, was failed by gency hospital admissions hitting the four-hour target has fallen the authorities and ended up at food banks. Staff talk of civil ser- from 98% in 2010 to 82%. vants simply disappearing. “You call an office and the phone Now some services are in full-blown crisis and remain alive rings forever because no one is there any more,” says Ed Hodson, only thanks to emergency infusions from Mr Hammond. It was the research boss. Pressured bureaucrats get client numbers prisons in November, social care in January, and both social care wrong, lose documents and misspell names, leaving vulnerable and the NHS in the budget on March 8th. To quote the Institute for citizens without income forweeks. Increasingly ubiquitous at the Government, a neutral think-tank, “crisis, cash, repeat” has be- Coventry CAB are people who have fallen into the gaps between come the new philosophy of the British state. The next flash- systems—think the man with mental-health problems, unpay- points will probably be the police (who warn the coming cuts able debts and thugs outside his front door. From 2014-15 to 2015-16 will start to reverse the recent fall in crime) and schools (which the average number of“issues” per visitor rose from 2.8 to 3.5. are already experiencinga recruitment crisis and face an 8% fall in Coventry is not an outlier. It is pure Middle England, close to spending per pupil over the course ofthe Parliament). the national average on most economic and demographic indica- And things are set to get worse. In the budget Mr Hammond tors. Its economy blends manufacturing (the largest private em- confirmed that the austerity programme launched in 2010 will ployer is Jaguar Land Rover) with services (Barclays bank and the continue at a similar pace, accelerating in sensitive fields like pri- local building society provide plenty of financial jobs). Like sons and local government. Other pressures are growing. Infla- many English cities it was heavily bombed in the second world tion is rising and the population is ageing. And all this as Britain’s war and was insensitively rebuilt afterwards. The centre is a con- exit from the EU threatens the very tax base that keeps the show crete tangle ofhighways and roundabouts encircling windswept, on the road. The Institute for Government now talks of “a disas- early-1960spedestrian plazas. The average residentofCoventry is trous combination offailingpublic services and breached spend- neither rich nor poor, neither cosmopolitan nor rural, and gets on ing controls just as we exit the European Union in 2019.” At best with life in a cityscape forged by a past generation’s nightmares the coming years will be a rough ride. At worst they could buck and Utopias. the government out ofits saddle. 7 International The Economist March 11th 2017 53
Grain consumption ment for Chinese engineering. Labour is expensive, he says, and “people have be- Of rice and men come lazy.” Worst of all, the price his crops fetch is far lower than a decade ago. The problem, says Mr Kobena, is that now everybody is growing rice. Africa mostly missed out on the green LOS ANGELES, SINGAPORE AND TIASSALÉ revolution that boosted agricultural pro- West Africans are eating more like Asians. Asians are eating more like Americans. duction in Asia from the 1960s onwards. And the richest Americans… That was partly because of war and lousy F YOU think of food simply as suste- government. Another problem is that Inance, or as a source of pleasure, a trip to Grains trust growing conditions in Africa are both dis- the farmer’smarketin PacificPalisades will West Africa, production, tonnes m tinct from those in Asia and highly varied open your eyes. To the Lycra-clad shoppers across the continent. “We don’t have the in this wealthy district of Los Angeles, eat- 18 same soils, we don’t have the same dis- Millet Rice ingis an intensely tricky activity. A woman 15 eases, we don’t have the same pests,” says in a felt hat, Julie, says she tries to avoid Harold Roy-Macauley, the head of Africa white flour because it makes her feel bloat- 12 Rice, which co-ordinates research in Africa. ed—though she makes an exception fortor- 9 Yet the continent is beginning to catch up, tillas. A mother of a four-year-old eats rice with rice farmers in the vanguard. five times a week, but is “not proud of it”. 6 Sorghum Having educated herself about food, a 3 Faster, cheaper, better third woman, Suzanne Tatoy, favours Between 2000 and 2014 rice production in brown rice, quinoa, amaranth and millet. 0 west Africa jumped from 7.1m tonnes to Food fads are strange, powerful things. 2000 02 04 06 08 10 12 14 16.8m tonnes (see chart). In Ivory Coast, Between the 1970s and the 1990s Ameri- Source: FAO which is mostly known as a cocoa pro- cans ate more and more wheat, partly be- ducer, the rice harvest tripled over that cause they were trying to avoid cholester- miliar grains for new ones, for reasons to time. New hybrid seed lines developed ol. Then came a string of popular do with agricultural technology, work, specifically for Africa, such as NERICA and low-carbohydrate diets, from Dr Atkins to health and social aspirations. This shift is WITA, have boosted yields and enabled paleo. A rise in coeliac disease and self- more-or-less circular. Everybody is trying farmersto growrice in dryareaswhere sor- diagnosed gluten intolerance has made to eatmore ofthe grainsthatbetter-off peo- ghum was once the dominant crop. wheat seem decidedly dangerous. Be- ple are eating, except the very wealthy, Rice has long been popular in some tween 1997 and 2015 flour consumption in who prize poor people’s food. The story west African countries, such as Senegal. It America fell from 67kg per head to 60kg. begins in the fields ofwest Africa. is becoming a staple in much of the region. Yet the foodies of Pacific Palisades are Aboud Kobena has been growing rice Thomas Reardon, who studies food at not just swayed by science—or even near Tiassalé, in Ivory Coast, since 1991. He Michigan State University, says that urban- pseudoscience. They are also driven by has many complaints. The pump that isation is driving demand. Urban workers fashion, which has decreed that some draws water from a nearby river to irrigate developed a taste for rice in cafés and now grains are out and others are in. In that his 35-hectare farm is on the blink again. cookitathome. Besides, rice isless fiddlyto sense they are part of a huge global trend. The machines he has bought to speed up cook than millet or sorghum, adds Mr Roy- People in many countries are dropping fa- harvesting have proved a poor advertise- Macauley—a convenience food forAfrica’s 1 54 International The Economist March 11th 2017
2 tired city workers. mates the USDA—up from 16.5m tonnes in tend to be marketed as “ancient grains”. The Food and Agriculture Organisa- 2012-13. Almost all ofit will be imported. In Supposedly they are healthier and more tion, a branch ofthe UN, estimates that rice South Asia consumption is expected to authentic than plain old rice and wheat. consumption per head is growing faster in grow from 121m to 139m tonnes in the same Most assuredly, they are more expensive. A sub-Saharan Africa than in any other re- period. India, which was recently a large few miles north of Venice Beach, in the gion. That is likely to persist, because Afri- net exporter of wheat, has become a net Santa Monica farmers’ market, Larry Kan- ca’s cities are adding inhabitants so importer. Some of the wheat is for animal darian sells organic black barley for $9 a fast—by 3% a year, on average. So there is feed, but most is simply foreating. pound and Ethiopian blue tinge farro (an- plenty of opportunity for African farmers. This trend has a long way to run, thinks other kind ofwheat) for$7. And African demand is also a boon to the Rabobank, a bank. South-East Asians still The fad for “virtuous” grains is spread- rice-producing countries of Asia. They eat only 26kg of wheat a year, much less ing beyond Californian foodies. In 2015 could do with some new customers, be- than the world average of 78kg. They seem General Mills, a large American food com- cause demand at home is not what it was. unperturbed by price rises: wheat-eating pany, introduced a breakfast cereal called So central is rice to life in Asia that in kept growing even as the grain became “Cheerios + ancient grains” containing Ka- many countries, rather than asking “how more expensive between 2009 and 2013, mut, oats, quinoa and spelt. Ronzoni has are you?” people ask, “have you eaten rice although its use as an animal feed de- created a pasta with amaranth, millet, qui- yet?” Around 90% ofthe world’srice iscon- clined. Still, rice will remain central to noa, sorghum and teff. Datassential, a mar- sumed in Asia—60% of it in China, India many Asian cultures. People are unlikely ket-research firm that tracks restaurant and Indonesia alone. In every large coun- to startgreetingeach otherbyasking ifthey menus, reports that 9% of casual restau- try except Pakistan, Asians eat more rice have eaten bagels yet. rants and 16% of “fine dining” ones offered than the global average. quinoa in 2016. Sorghum, which Ameri- Between the early 1960s and the early Newfangled ancient grains cans have long fed to livestock, is also 1990s, rice consumption per head rose As west Africans fill their plates with rice, creeping onto menus for people. So is mil- steadily, from an average of 85 kilograms and South-East Asians munch ciabatta, let, which is normally treated as birdseed. per year to 103. As Asia scraped its way out Americans are moving away from both. It is too early to tell whether ancient of poverty people began to consume more “You can only eat so many cakes,” suggests grainsare more than a fad. Although global food, and rice was available and afford- Graydon Chong, an analyst at Rabobank. quinoa production rose from 58,000 able. In the poorest Asian countries, such And wheat has new competitors, especial- tonnes in 2008 to 193,000 tonnes in 2014, it as Bangladesh and Cambodia, a full rice ly in America’s richest quarters. Or, to be is still a trivial crop compared with rice, bowl remains a sign ofplenty (70% ofcalo- precise, new ancient competitors. wheat or maize. The most important cere- ries come from rice in Bangladesh) and Café Gratitude is a gourmet vegetarian als benefit from dense networks ofagricul- people continue to eat more ofit. restaurant in Venice Beach, a district of Los tural research institutes that work to raise But rice consumption is now more-or- Angeles that is health-conscious even by yields and suppress pests and diseases. less flat in Asia as a whole. In better-off the standards ofthat metropolis. Each item They are often subsidised. countries rice is going out of fashion. Fig- on the menu is an affirmation, so you are Yet it is consumers, not governments, ures from the United States Department of supposed to order a dish called Glorious who ultimately drive changes in diets. And Agriculture (USDA) suggest that rice con- by announcing, “I am glorious.” Pizza is consumers almost everywhere seem to sumption perhead hasfallen since 2000 in available (“I am giving”), but it is made have acquired a taste for novelty. Packaged China, Indonesia and South Korea, and from einkorn and Kamut. Side dishes in- foods are becoming more popular even in has crashed in Singapore. Obeying a rule clude brown rice and quinoa. poor African and Asian countries, says Mr known as Bennett’s law, wealthier Asians Einkorn and Kamut are both types of Reardon. He is especially struck by the rise are getting more of their calories from veg- wheat. Their promoters say they have long ofwheat noodles in Africa. Indomie, an In- etables, fruit, meat, fish and dairyproducts. pedigrees and have escaped meddling by donesian firm, started making noodles in And, as in Africa, many people are switch- modern plant-breeders. Quinoa is some- Nigeria in the mid-1990s. Itnowhasseveral ing to another grain. thing else: the seed of a plant that grows rivals in that country, and demand is rising Whereas roadside stalls in South-East mostly in Central and South America. elsewhere in west Africa. The reign of rice Asia still dish up rice to the masses, fancy Such grains, and various others besides, might prove brief. 7 shopping malls are increasingly domin- ated by wheat. A proliferation of bakeries Wheat consumption MONGOLIA offer traditional European pastries and 54.9 Kg per person, 2016-17 forecast Change, -1.3 NORTH kg per KOREA breads as well as peculiar Asian inven- 100.0+ 75.0-99.9 person, tions. BreadTalk, a fast-growing chain 50.0-74.9 25.0-49.9 2000-16 JAPAN 2.6 based in Singapore, does a roaring busi- <25.0 No data SOUTH KOREA ness in “floss buns”—sweet white buns Sources: USDA; UN; national statistics CHINA 23.2 larded with butter, coated with egg and NEPAL -8.7 -2.0 rolled in dried shredded pork. 23.1 BHUTAN TAIWAN Joseph Lee, the owner of The Bread INDIA 11.3 Table, another Singapore bakery, puts the 9.6 Hong PACIFIC growth in demand down to tourism and MYANMAR Kong LAOS OCEAN migration. “The more people started to tra- BANGLADESH 7. 2 -7.5 vel, the more they wanted to find Euro- 18.7 PHILIPPINES 40.8 THAI- 10.8 pean bread when they came home,” he LAND VIETNAM CAM- says. “Now we have people asking for SRI BODIA 39.9 sourdough.” He opened in 2013, the first of LANKA a rush ofEuropean-style bakeries. -0.8 Wheat consumption is rising quickly in L A Y S countries like Thailand and Vietnam (see INDIAN M A I A 2.0 16.2 map). South-East Asian countries will con- OCEAN -5.6 sume 23.4m tonnesofwheatin 2016-17, esti- SINGAPORE INDONESIA Business The Economist March 11th 2017 55
Also in this section 56 Snap’s rollercoaster week 57 PSA buys Opel 57 A railway legend’s latest project 58 China’s micro-multinationals 59 The reinvention of steel 60 Schumpeter: Jiopolitics
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The mining business shareholders who kept the faith. Even as they promise capital discipline, The richest seam however, demand for green metals and minerals is tempting them to spend. Last year BHP declared that 2017 could be the year“when the electric-carrevolution real- ly gets started”. A recent surge in the prices of battery ingredients, such as copper, co- An industryonly just emerging from crisis hopes that electric vehicles and batteries balt and lithium, has added to the excite- will unleash a new, green supercycle ment. China, the world’s biggest manufac- OR mining investors there is something firm, judges to have been as deep as in the turer of EVs, is gobbling up supplies. In Fsinfully alluring about Glencore, an An- Depression. In 2014-15 the four biggest Lon- November China Molybdenum, which is glo-Swiss metals conglomerate. It is the don-listed miners—BHP Billiton, Rio Tinto, listed in Shanghai, became the majority world’s biggest exporter ofcoal, a singular- Glencore and Anglo American—lost al- owner of Tenke Fungurume, a vast copper ly unfashionable commodity. It goes most $20bn ofcore earnings, or EBITDA, as and cobalt mine in the DRC. Tellingly, the where others fear to tread, such as the commodities plunged. Glencore, which price of platinum, which is used in catalyt- Democratic Republic of Congo (DRC), was hit hardest, scrapped its dividend and ic converters in internal combustion en- which has an unsavoury reputation for vi- issued shares to rescue its balance-sheet. gines, has lagged behind. olence and corruption. It recently navigat- Commodity valuations rebounded last BHP, which has looked closely at EV-re- ed sanctions against Russia to strike a deal year, and again led by Glencore, mining- lated demand, estimates that an average with Rosneft, the country’s oil champion. company share prices rallied. Recent re- battery-powered EV will contain 80 kilo- Yet Glencore could still acquire a halo sults show that the four biggest firms not grams of copper, four times as much as an foritself. It is one ofthe world’s biggest sup- only swung from huge losses to profits but internal-combustion engine. This is split pliers of copper and the biggest of cobalt, also cut net debt by almost $25bn in 2016. between the engine (the largest share), the much of which comes from its investment BHP and Rio made unexpectedly large battery and the wiring harness. It forecasts in the DRC. These are vital ingredients for payouts to shareholders. Ivan Glasenberg, that by 2035 there could be 140m EVson clean-tech products and industries, nota- Glencore’s tough-talking boss, says the the road (8% of the global fleet), versus 1m 1 bly electric vehicles (EVs) and batteries. company is now in its strongest financial The potential of “green” metals and position in 30 years. “What a difference a minerals, which along with copper and co- year makes,” he exclaims. Out of a hole balt include nickel, lithium and graphite, is Underpinning the turnaround have Capital expenditure, $bn adding to renewed excitement about in- been curbs on supply—both voluntary, to vesting in mining firms as they emerge push up commodity prices, and involun- 25 BHP Billiton from the wreckage of a $1trn splurge of tary, such as strikes and stoppages. Capital 20 over-investment during the China-led expenditure has fallen by over two-thirds commodities supercycle, which began in since 2013 (see chart). All the firms are re- 15 the early 2000s. The most bullish argue luctant to embark on big new mining pro- Rio Tinto that clean energy could be an even bigger jects. Mr Glasenberg says the industry’s 10 source of demand than China has been in pipeline of new copper projects, for exam- 5 the past15 years or so. ple, is shorter than it was before the China Glencore Anglo American Optimism about the mining industry is boom. Rio’s giant Oyu Tolgoi copper site in 0 a remarkable turnaround in itself. In the Mongolia’s Gobi Desert is a rare exception. 2007 09 11 13 15 17* past four years the business has endured a The main focus at all the mining firms is on Financial years Sources: Bloomberg; company reports *Forecast slump that Sanford C. Bernstein, a research rebuilding balance-sheets and rewarding 56 Business The Economist March 11th 2017
2 today. Manufacturing them could require could require the addition of a copper Sharply higher prices for copper could, at least 8.5m tonnes a year of additional mine the size of Chile’s Escondida, the however, spur the search for alternative copper, or about a third extra on top of to- world’s biggest, every year. battery and EV materials such as alumi- day’s total global copper demand. Therein lies the rub. By one estimate, it nium. When prices ofnickel, an additive in According to Sanford C. Bernstein, takes at least 30 years to go from finding stainless steel, soared a decade ago, stain- which uses a bold estimate that almost all copper deposits to producing the metal less-steel manufacturers found ways to new cars will be electric by 2035, global from them at scale. Some ofthe big ones in make products less nickel-dependent. copper supplies would need to double to operation today were discovered in the Another difficulty in supplying a future meetdemand bythen. Findingand digging 1920s. Because of declining ore grades, electric-vehicle revolution is the often in- up all the metals that stand to benefit, plus community resistance, lack of water and hospitable location of some of the most new smelting and refining capacity, could other factors, copper supply will be over- promising minerals. Cobalt, for instance, is require up to $1trn in new investment by taken by demand in the next year or two. a by-product of copper and nickel. Total mining companies, it says. Hunter Hillcoat But prices would have to rise considerably volumes are about 100,000 tonnes, and of Investec, a bank, says the transition to spur the necessary investment in mines. about 70% lies in the DRC. Unregulated ar- tisanal miners produce a lot of it, which has led to worries about “conflict cobalt”. Tech IPOs Indeed, the DRC is likely to be the main source of many of the minerals needed for Oh, Snap! EVs and batteries. Paul Gait of Sanford C. Bernstein calls it the Saudi Arabia of the EV SAN FRANCISCO boom, referring to the kingdom’s role in oil A volatile start forthe year’s most high-profile tech offering markets. But firms such as BHP and Rio are HEN Snap, the parent company of thought to be reluctant to invest there be- WSnapchat, an app popular among cause of concerns about the country’s sta- teenagers forits disappearing messages, bility, transparency and governance. staged a public offering on March 2nd, In the short term the mining industry Evan Spiegel, its 26-year-old boss, be- remains gun-shy about new investments. came a self-made billionaire. (Only John As Glencore’s Mr Glasenberg notes, it has Collison ofStripe, an online payments been fooled before by estimates that de- startup, rivals him forsuch youthful mand for copper will double—the latest tycoonery). Whether public-market such misjudgment came as recently as investors will strike it rich remains to be 2008. The very biggest firms, BHP and Rio, seen. In its first day oftrading Snap’s have an additional reason to hesitate be- shares rose by 44%; they have since fallen fore splurging on battery materials. Their by16% from their peak, meaning around cash cows are iron ore and coking coal, the $5bn ofmarket value vanished in days. raw materials of steel, which are used The volatility will probably continue. more heavily in petrol and diesel engines Optimists reckon that Snap’s market than in EVs. BHP also produces oil, de- value could increase more than fourfold mand for which could one day be affected from around $26bn today as it adds users by battery-powered vehicles. Anglo Amer- and advertisers. Veryfew large internet ican has a large platinum and palladium companies have gone public recently, business, feeding demand for diesel and which gives it tremendous scarcity value, Filter bubble? petrol catalytic converters. says Roger Ehrenberg ofIA Ventures, an All the firms insist that such diverse early-stage investment firm. Snap’s losses. These could well rise from mineral exposures in fact provide them But sceptics are growing in number. $515m last year to a whopping $3.7bn in with a “hedge” whichever way the vehicle Every analyst who has started covering 2017, according to Pivotal Research Group, fleet develops (though they play up the Snap’s stockhas issued a negative rating. a research firm. And that does not include copper in their portfolio as possibly the They question its high valuation and huge stockgrants to employees. In 2016 best bet of all). Rio is unique among them underline all the challenges. Snap’s Snap had stock-based compensation in also having a lithium-borate project, in growth has slowed in recent months. Its expenses ofaround $1.7bn, or roughly Serbia, which it is developing as an option total addressable market is estimated to $1.4m per employee, compared with on a batteries boom. be 80% smaller than that ofFacebook, a Facebook’s average of$230,000 and For an unhedged bet, it may be small social network, and it already has 50% Google’s $144,000 per employee. These miners such as Canada-based Ivanhoe penetration among its potential user base grants dilute investors. that are best placed for a surge in EVsand in America, reckons Laura Martin of Before the offering, hopes had been batteries. Ivanhoe recently said it planned Needham, an investment bank. high that Snap would sparka wave of to develop the Kamoa-Kakula deposit in Snap also has an unconventional public offerings by tech startups. Even if the DRC (pictured on previous page), structure that gives shareholders virtual- its shares sinkfurther, many ofthem which it calls the biggest copper discovery ly no power. This weekit emerged that a could still choose to go public, especially ever, containing the highest-grade copper group oflarge institutional investors had enterprise-software firms, which sell IT that the world’s big mines produce. Zijin, a lobbied stock-index providers such as tools to other businesses. Their revenues Chinese miner, sees the same opportunity MSCI not to include Snap in their bench- are more reliable than those ofSnap. One and is paying Ivanhoe $412m for half of its marks forthat reason. That will not di- software company, MuleSoft, is likely to majority stake in Kamoa-Kakula. Ivan- rectly affect share-price performance yet, go public next week. Such companies do hoe’s founder, billionaire Robert Fried- but being viewed as an outlier on cor- not attract the relentless public scrutiny land, speaks of the metal as the king of porate governance does not help. that Snap and other tech stars do. Increas- them all. “Based on world ecological and Analysts have also drawn attention to ingly, that looks enviable. environmental problems,” he says, “every single solution drives you to copper.” 7 The Economist March 11th 2017 Business 57
PSA buys Opel sponsible for massive pensions obliga- tions. Mr Tavares reckons he can eventual- Used carmaker ly save €1.7bn a year through economies of scale and other synergies. But most of the efficiency gains at PSA came from layoffs. Similar cuts at Opel will be much harder. Even ifhe can close factories, such as those GENEVA in Britain, where labourlaws are more flex- PSA’s turnaround will be hard to repeat ible than in Germany and France, his plan at Opel to reinvent Opel as a brand suffused with HE Peugeot 3008, a striking SUV, was German engineering prowess (and to fulfil Tvoted European car of the year on PSA’s dreams of exporting beyond Europe) March 6th, the eve of the opening of the will probably depend on keeping thou- Geneva motor show, an annual industry sands ofworkers employed in Germany. shindig. PSA Group, the maker of Peugeots The biggest headache for the combined and Citroëns, would doubtless view it as company will be its over-reliance on Eu- the second prize it scooped that day. News rope, which will account for over 70% of also came that the French carmaker was sales. Recent rapid growth in car sales in buying Opel (branded as Vauxhall in Brit- Europe is now slowing. And Europe is the ain), the European operation of America’s world’s most competitive market: for General Motors (GM). Few of the car-in- mass-market carmakers, profits are much dustry experts at the show, however, harder to eke out than elsewhere. would call Opel a trophy. Whetherornot MrTavares makes a suc- The consensus was thatGM was right to cess ofthe deal, it has given the car crowd a rid itself of a business that had lost money chance to speculate about further consoli- for16 years straight. Opel has around 6% of dation in the industry. One popular theory the European market; that makes it too is that getting rid of Opel would eliminate small and inefficient in a business where GM’s overlap with Fiat Chrysler Automo- scale is key. It has been confined mostly to bile in Europe (FCA’s chairman, John El- Europe for three reasons: the particular kann, sits on the board of The Economist’s Just the ticket tastes of the region’s car buyers (for in- parent company). That in turn could open stance, for small diesel cars); tighter emis- the way for a mega-merger. Sergio Mar- his departure and entered negotiations sions regulations outside Europe; and chionne, FCA’s boss, has long hoped to with Florida-based CSX to become that GM’s fear of taking sales from its other combine with GM to tackle what he sees as railway’s CEO. brands further afield. The result has been the industry’s needless duplication of in- Just the rumour that Mr Harrison might to leave it boxed in and isolated. vestment—even if nowadays Mr Mar- be moving to CSX caused the share price to Shorn of Opel, the American firm can chionne is talking more about merging rise by 23% in 24 hours. It continued to rise redirect investment to China and America, with VW, which is still struggling to move when the negotiations became public. At where its profit margins are healthy, and to on from its emissions-cheating scandal. It last, on March 6th, CSX appointed Mr Har- technologiessuch as autonomouscarsand remains to be seen whether other car rison as CEO and met the condition set by ride-sharing schemes. That bucks the con- bosses share Mr Tavares’s appetite for an Mantle Ridge, an activist hedge fund with ventional car-industry wisdom of gaining adventurous transaction. 7 which he has partnered, to name five new market share whenever you can. One in- board directors. Mr Harrison made long- sider questions whether GM is as commit- term shareholders in CP and CN rich, tri- ted to carmaking as it is to the technologies Railways plingprofitsatboth duringhistenures. CSX that will underpin mobility in future. shareholders expect the same. PSA’s adherence to carmaking is not in The whistle’s Will he deliver? CSX is different from question. Buying Opel will propel it to sec- the railways Mr Harrison has run in the ond place in Europe with 16% of the mar- blowing past. Its 21,000-mile network is concentrat- ket, overtaking Renault but behind Volks- ed, spaghetti-like, in heavily-populated wagen (VW). But why Carlos Tavares, the eastern America, unlike the linear, conti- OTTAWA firm’s chief executive, wants to stake his nent-spanning networks of roughly simi- Can HunterHarrison, a railway legend, reputation on a full revival of Opel is less lartotal length that are operated by CN and deliverat CSX? clear. Executives from a rival European car- CP. And he faces two new and potentially maker suggest that revenge might be part . HUNTER HARRISON, a veteran rail- damaging headwinds: the decline of coal, of his motivation. Leapfrogging Renault Eway executive, tried retiring in 2010, a mainstay ofrailway-freight volumes; and may be satisfying for Mr Tavares, since its after he made Canadian National (CN), a Donald Trump’s views on trade. Both chairman, Carlos Ghosn, sacked him as formerly state-owned company, the best- could seriously disrupt business on North number two in 2013 after he expressed a performing of the large railways in North American railways. desire to run a big carmaker. America. But once he pocketed the gold Mr Harrison certainly knows the indus- After that, Mr Tavares turned PSA watch and attended the retirement party try inside and out. He reportedly started around from a state of near-bankruptcy to he faced a void that raising and training out lubricating the undercarriage of rail- solid profitability in under four years. If he horses for showjumping did not fill. By cars for $1.50 an hour and worked his way could do the same with Opel his creden- mid-2012 he was backat the helm ofanoth- up at Burlington Northern before leaving tials would soar higher. Yet the cost-cutting er railway, Canadian Pacific (CP), whose to work for Illinois Central. He joined CN that helped PSA will be hard to repeat. glory days were long past. Once he had when it bought Illinois Central in 1998. Mr Tavares did at least get a good price— turned around CP, he didn’t make the Alongthe way he became an evangelist for just €1.3bn ($1.4bn) for Opel and less than same mistake again. On January 18th the precision railroading, his concept that €1m for its finance arm. GM will still be re- 72-year-old Tennesseean both announced freight trains should run on a strict sched-1 58 Business The Economist March 11th 2017
2 ule regardless of whether they are near- Rise of the micro-multinational land economywasgrowingatdouble-digit empty or full. This went against the pre- rates and China’s rising middle classes vailing trend of adding more locomotives Chinese and were eager for new products. Marketing and cars and leaving their schedules flexi- and distribution were easier to get right on ble. Operatingfewertrains, but on time, Mr overseas the mainland than overseas. Harrison showed, meant greater efficiency But times are changing: more Chinese and better service for customers, who startups want to go global from the start. GUANGZHOU know when their shipments will arrive. Often founders are mainlanders who have A new breed ofstartup is entering Another part of precision railroading is worked or studied abroad. In some cases, foreign markets early on ditching old equipment and slashing staff. says Benjamin Joffe of Hax, a hardware Mr Harrison retired 700 locomotives, or N THE outskirts of Guangzhou, a city “accelerator” in Shenzhen, the startups two-fifths ofthe fleet, at CP; about 6,000 of Oin southern China, lies an abandoned may have little choice but to widen their 20,000 jobs disappeared, largely through park filled with crumbling replicas of the horizons. Their products may simply be attrition. This earned him the ire of some wonders of the world. To the right are fad- too innovative and expensive for China’s unions, which also questioned the impact ing golden spires that are meant to repre- frugal consumers. on safety of time-saving measures like al- sent Angkor Wat, a temple in Cambodia. One such firm is Makeblock, a startup lowing staff to jump on and off (slow-) On the left, a row ofdusty Egyptian statues based in Shenzhen that sells do-it-yourself moving trains or insisting that managers towers over a desolate Greek amphith- robot kits. Jasen Wang, its founder, says he drive trains ifno other staff were available. eatre. Adding to the surrealism, the tops of went “global” from day one. His firm has This reduced some managers to tears, says the trees have been lopped off and a buzz- quickly entered developed markets. For- a former employee: “They weren’t afraid ing noise fills the night air. eign sales (including to such big retailers as of driving the train, they were afraid of This strange place is the testing ground America’s Radio Shack) make up nearly crashing it.” Mr Harrison thought the for EHang, a Chinese startup that makes three-quarters ofthe firm’s total revenues. hands-on experience would help them do drones. (The treetops were chopped off, an The fact that the mobile internet is par- their deskjobs better. employee explains, because drones kept ticularly advanced in China means the CSX is in better shape than either of his crashing into them.) Hu Huazhi, EHang’s mainland can throw up truly inventive previous two charges. CN was govern- founder, is beaming. His firm has just set a new business models, says Shi Yi, a serial ment-owned until 1995 and was hobbled world record fora drone-swarm light show entrepreneur. DotC United, his company, by bureaucracy. CP, created to tie Canada in Guangzhou, where it flew a thousand looks for models on the mainland and together with a line extending to the west small drones in perfect unison. Next it then adapts them for foreign markets. “We coast, was the laggard among the big North plans to launch an autonomous flying-taxi are like Rocket Internet, but in reverse,” he American railways when Mr Harrison ar- service with a giant drone big enough to declares, referring to a German e-com- rived. Its operating ratio (operating ex- take a person (pictured). Dubai has just merce conglomerate that takes business penses as a percentage of revenues) was signed a deal with EHang to launch drone models from advanced markets and 81.3 at the end of 2011. By 2016 it had been taxis this summer. adapts them for developing ones. For ex- driven down to around 60, although some EHang is an example of a new kind of ample, Wifi Master Key is a Chinese shar- people quibble thatone-offsalesmay have Chinese firm, labelled “micro-multina- ing-economy app that lists details of priv- flattered the ratio. CSX had an operating ra- tionals” by some. In the past, Chinese con- ate and public wifi networks around the tio of 69.4 in 2016, and is already making sumer-goods firms focused on the home world. Swift WiFi, Mr Shi’s homage to it, many of the moves Mr Harrison has used market; startups were particularly inward- now has over150m users in 50 countries. elsewhere, like increasing the ratio of cars looking. The rare exceptions to this rule— Musical.ly is another micro-multina- to locomotives and cutting staff. firms like Lenovo, Haier and Huawei— tional. Valued at about $500m, it is one of Asforcoal, revenuesfrom the commod- were giant technology companies with the most fashionable apps among Western ity fell by nearly $2bn to $1.7bn between deep pockets. That made sense: the main- youngsters. More than 100m teenagers use 2011 and 2016. Further falls are expected. it to share short videos of themselves lip- The main replacement as a source of rev- synching to popular songs. Teens and par- enue is intermodal container freight carry- entsalike maybe surprised to discover that ing all manner of goods. Here Mr Trump is this trendy app is run by Chinese engi- a problem. His proposed renegotiation of neers, working round the clockin an open- the North American Free-Trade Agreement plan office in Shanghai in the company of (NAFTA) is creating alarm in the industry. the firm’s mascot, a small white dog Re-imposing borders in the North Ameri- named Mu Mu. can market would have a “tremendously Alex Zhu, Musical.ly’s co-founder, reck- negative effect”, says William Vantuono, ons his firm can become “Instagram for editor-in-chiefofRailwayAge. music videos”. Unlike other micro-multi- Accepting the job, Mr Harrison con- nationals, Musical.ly did give the local firmed that he will bring precision rail- market a go but has flopped at home. Mr roading to CSX. Might he have grander am- Zhu notes that Chinese schoolchildren bitions? Mr Vantuono believes that his typically have hours of homework and tu- ultimate goal is to arrange one of the merg- toring after school. They did not use his ersthateluded him in the pastand to create firm’s app. In contrast, he observes, “Amer- a transcontinental railway. Others think he ican kids have lots of free time to play and just wants to show—again—that his way is experiment with social media after 3pm.” the right way. “There isn’t a railroad that In the past, fear of getting sued over in- Hunter Harrison couldn’t improve,” says tellectual property (IP) kept many Chinese AnthonyHatch, a NewYork-based analyst. firms at home. The new micro-- But it will be difficult to repeat his previous multinationals are tackling the issue successes or to match sky-high share- head-on. Ninebot, a Beijing-based firm, holder expectations. 7 They’re coming your way makes better versions of the clunky, self-1 The Economist March 11th 2017 Business 59
2 balancing scooters that were invented by means the domestic market is less attrac- tech steels especially for belt casting, in- America’s Segway. Confronted with an IP tive than it used to be. A younger genera- cluding advanced low-density steels that lawsuit from the latter firm, Ninebot sim- tion offounders unafraid ofgoing global is are stronger, lighter and more flexible than ply bought Segway. Now, argues Mr Joffe, it in charge. David Cogman of McKinsey, a conventional steel. innovates “on top of Segway”, which was consultancy, who works with many Chi- A twin-roll process, much as Bessemer stagnating, and the combined firm’s strat- nese entrepreneurs, recalls that a decade conceived, is already employed by Nucor, egy will be global. ago itwasalmostunheard offorsmall, con- a giant American steelmaker. Called Cas- Neil Shen of Sequoia, an American sumer-oriented firms to look abroad. trip, it is producingsteel in two of its plants. venture-capital firm, reckons this all adds When he advises companies today, it is “a A big advantage of twin-roll and belt-cast- up to a trend. Slowing growth in China regular conversation”. 7 ing is compactness. Nucor reckons a Cas- trip plant needs only 20 hectares (50 acres) and provides a good investment return New production technologies from the production of only 500,000 tonnes of steel a year. A conventional steel Recasting steel plant, by comparison, may sprawl over 2,000 hectares and need to produce some 4m tonnes a year to turn a profit. Other firms are licensing Castrip as well. Shagang, a large Chinese steelmaker, is replacing a less energy-efficient plant with the new technology. The numbers A150-year-old idea could help to reinvent the steel industry look compelling enough to encourage a LTHOUGH he is best known for devel- startup, too: Albion Steel is talking to inves- Aoping a way to mass-produce steel, tors about building a £300m ($370m) Cas- Henry Bessemer was a prolific British in- trip plant in Britain. The plant would be ventor. In the 1850s in Sheffield his conver- “fed” by a low-cost mini-mill that melts ters blasted air through molten iron to scrap and produces steel for galvanising, burn away impurities, making steel the mostly for the construction industry, says material of the industrial revolution. But Tony Pedder, one of Albion’s founders. Mr Bessemer knew he could do better, and in Pedder is the chairman of Sheffield Forge- 1865 he filed a patent to cast strips of steel masters, an engineering company, and a directly, rather than as large ingots which formerboss ofBritish Steel (which later be- then had to be expensively reheated and came Corus). Britain has a surplus of scrap shaped by giant rolling machines. but imports galvanised steel. The plant Bessemer’s idea was to pour molten would employ only about 250 people; tra- steel in between two counter-rotating wa- ditional integrated operations need a thou- ter-cooled rollers which, like a mangle, sand or so. “We believe in the technology,” would squeeze the metal into a sheet. It says Mr Pedder. “In our view it is past the was an elegant idea that, by dint of having point ofbeing experimental.” fewer steps, would save time and money. Salzgitter, a German steelmaker, Yet it was tricky to pull off. Efforts to com- opened the first commercial single belt- mercialise the process were abandoned. caster at Peine, near Hanover, in 2012. It be- Until now. Advances in production gan by making construction steel but has technology and materials science, particu- progressed to more specialist steels. The larly fornew types ofhigh-tech steel, mean trick is to keep the water-cooled belt per- that Bessemer’s “twin-roll” idea is being fectly flat, says Roderick Guthrie of McGill taken up successfully. An alternative sys- ofthe 1.6bn tonnes ofsteel produced annu- University in Canada, one of the pioneers tem that casts liquid steel directly onto a ally worldwide is now made this way. ofthe technology. Salzgitter uses a vacuum single horizontally moving belt is also be- Continuous casting, however, still takes underthe beltto do that, whereasMr Guth- ing tried. Both techniques could cut energy a lot of rolling to reduce slabs cast 80- rie employs powerful magnets to the same consumption—one of the biggest costs in 120mm thick to the 1-2mm required by effect on a pilot plant at the university. His steelmaking—by around 80%. Other sav- many producers, such as carmakers. Cast- research group is working with a number ings in operating and capital costs are also ing any thinner causes quality problems of companies, including a big carmaker. possible. If these new processes prove and flawsin the steel’smicrostructure. One Whereas twin-roll casting is constrained themselves, steelmaking could once again reason forthatisthe bottomlessmould has by practical limitations, such as the size of be transformed. to be oscillated to ensure molten steel does the rollers, horizontal single belt-casting is not stickto its sides. The new techniques of less so, argues Mr Guthrie. On a roll twin-roll and single belt-casting are, in ef- The techniques may end up being com- Steelmakers are cautious about new tech- fect, “moving moulds”—the rollers and the plementary. Their spatial efficiency and nologies. It was not until the 1960s that the belt move with the steel as it cools and so- low cost would also allow production to industry ventured from casting ingots to lidifies. This allows direct castingto a thick- be located closer to customers. Mr Guthrie buildinggiantintegrated plantsforthe con- ness of just a few millimetres, requiring thinks it is not inconceivable for such a tinuouscastingofsteel. Thisinvolves pour- only minimal rolling thereafter. plant to be integrated within a car factory. ing molten steel through a bottomless The new techniques are particularly “If we can make the quality as good as the mould which, being cooled by water, par- good for making higher-value, specialist big slab-casting plants, it would change the tially solidifies it. The steel is then drawn steels, says Claire Davis, a steel expert with face of the steel industry,” he says. New down through a series of rolls to form the Warwick Manufacturing Group at the technologies might just blast a dose of sheet steel or other shapes required by fac- University ofWarwickin Britain. Ms Davis fresh air through an old industry, much as tories and construction companies. Most and her team are developing new high- Bessemer’s converter did 150 years ago. 7 60 Business The Economist March 11th 2017 Schumpeter Jiopolitics
India’s richest man makes the business world’s most aggressive bet fining and petrochemicals unit accounts for two-fifths of its capi- tal employed but over 100% of operating profits. The other busi- nesses, developed mainly after Mr Ambani took sole charge, swallow a majority ofresources but don’t make money. A lesser man might have lost his nerve, but Mr Ambani has pursued another colossal bet in the form of Jio. He knows tele- coms: in 2002 he oversaw the family’s first attempt to build a big mobile-phone business (his brother now owns the struggling op- eration). The latestefforthasbeen a decade in the making. Step by step, RIL acquired spectrum, worked with handset suppliers and built a “fourth-generation” network. Jio’s offer of free services caused a sensation. A savage price war has ensued. One rival ex- ecutive reckons Jio is carrying more data than either China Mo- bile or AT&T, the world’s two most valuable operators. That underlines the potential ofIndia’s telecoms market. Data usage is low, there are few fixed lines and most people don’t have smartphones. The incumbent firms are heavily indebted, so have limited ability to respond to a price war. Jio will startchargingfrom April 1st. Yeteven assumingit keeps cranking prices up and wins a third of the market, a discounted- cash-flow analysis suggests that it would be worth only two- OME businesspeople are guided by experts, spreadsheets and thirds of the sum that Mr Ambani has spent. To justify that Scrunchy questions. What is your three-year target for market amount Jio would at some point need to earn the same amount share? Will a project deliver a reasonable return on the capital in- ofprofitthatIndia’sentire telecomsindustrymade in 2016. In oth- vested? A few hurl all the forecasts and reports into the bin and er words, there is no escaping the punishing economics of pour- surrender to their own hunger to make a mark. ing cash into networks and spectrum. For every customer that Jio One such figure is Mukesh Ambani, India’s richest man. In might eventually win, it will have invested perhaps $100. Com- September 2016 he placed one of the biggest business bets in the pare that with Facebook or Alibaba, both asset-light internet world by launching Jio, a mobile-telecoms network that allows firms, which have invested about $10 per user. India’s masses to access data on an unprecedented scale. In the Jio’s three main mobile competitors have scrambled to re- past six months it has won 100m customers. Only one other firm spond. Bharti Airtel is buying a smaller rival to try to lower its on the planet has such an acquisition rate—Facebook. From Kol- costs. Vodafone is in talks about merging with Idea Cellular, an- kata’s slums to the banks of the Ganges, millions of Indians are other operator. Half a dozen or so weaker companies (including using social media and streaming videos forthe very first time. the firm now run by Mr Ambani’s brother) will probably disap- To achieve this, Mr Ambani has spent an incredible $25bn on pear. The besthope forJio isthatin the distantfuture itwill be one Jio, without making a rupee of profit, terrifying competitors and of three firms left and that a cut-throat industry will evolve into a manyinvestors. The motivation forhisgamble probablylies with comfy oligopoly, which is possible. his turbulent family history. Reliance Industries Limited (RIL), Mr RIL’s share price has gone nowhere for years but excitement Ambani’s company, was set up by his father, Dhirubhai, in 1957. about Jio’s 100m new customers has helped it bounce over the Born in humble circumstances, Dhirubhai was famous for three past month. Still, the scale of the investment illustrates the risks things: running rings around officials; creating a fortune for him- that shareholders face at a firm that is controlled by one man. self and RIL’s army of small shareholders; and his appetite for Even ifJio eventually gushes cash it is not clear ifRIL will pay big- giant industrial projects. RIL jumped from textiles into oil refining gerdividends, orifMrAmbani will instead pursue another grand and petrochemicals. Its refinery in Gujarat is one of the world’s project. As investors wait, however, many more of India’s 1.3bn largest. It opened in 2000, two years before Dhirubhai died. consumers will gain—not only from low prices, but a welcome Mukesh Ambani and his brother, Anil, took the reins in 2002 splurge on the nation’s telecom infrastructure. and split from each other in 2005, leaving Mukesh in full control of RIL. Since then his record has been patchy. RIL’s shares have Defiance from Reliance lagged India’s stockmarket over the past decade and its return on And whatofMrAmbani? Perhapshe hopesto gethismoney back capital has sagged, halving from 12% to 6%. by turning Jio into an internet firm that offers payment services Emulatinghis father, MrAmbani has rolled the dice on several and content, not just connectivity. China’s Tencent, which owns huge projects. He hasinvested huge sumsto modernise the petro- WeChat, a messaging service, has successfully diversified into chemicals and refining business. This decision has been a suc- games and banking. Still, no telecoms firm has managed this feat cess—it is an excellent operation that makes a return ofabout 12%. and it is hard to see how RIL’s clannish culture can become a hot- But Mr Ambani’s other investment calls have flopped. In 2010-15 bed of innovation. More likely, Mr Ambani, aged 59, just doesn’t RIL spent $8bn on shale fields in America. Now that oil prices are care what all the spreadsheets point to. Sitting atop his skyscrap- lower they lose money. The group invested about $10bn in ener- er, overlooking teeming Mumbai, where some 5m new Jio cus- gy fields off India’s east coast; they have produced less gas than tomers are surfing the web at high speed for peanuts, he can at hoped forand are worth little. And RIL has spent around $2bn on last say that he has changed India. When you are Dhirubhai’s a retail business that produces only small profits. All told, RIL’s re- son, that is probably enough. 7 Finance and economics The Economist March 11th 2017 61
Also in this section 62 Peer-to-peer insurance 62 Another asset-management merger 63 Buttonwood: Singapore, Asian hub 64 Deutsche Bank’s new plan 64 Trade with China, revisited 65 Our global house-price index 65 Green finance for dirty ships 66 The Dutch economy 68 Free exchange: Secular stagnation
For daily analysis and debate on economics, visit Economist.com/economics
The future of insurance sure, notably from price-comparison web- sites. In combination with the stubbornly Counsel of protection high costs of maintaining their old sys- tems, this has meant that profitability has steadily deteriorated. The American P&C industry, for instance, has seen its “com- bined ratio”, which expresses claims and costs as a percentage of premium revenue, steadily creep up from 96.2% in 2013 to Insurers move from simply paying claims to providing services 97.8% in 2015, and to an estimated 100.3% N THE stormy and ever-changing world could. Other upstarts have developed al- for 2016 (ie, a net underwriting loss). Hen- Iof global finance, insurance has re- ternative sales channels. Simplesurance, a rik Naujoks of Bain & Company, a consul- mained a relativelyplacid backwater. With German firm, for example, has integrated tancy, says this has left such insurers facing the notable exception ofAIG, an American product-warranty insurance into e-com- a stark choice: become low-cost providers, insurer bailed out by the taxpayer in 2008, merce sites. or differentiate themselves through the the industry rode out the financial crisis Insurers are responding to technologi- services they provide. largely unscathed. Now, however, insurers cal disruption in a varietyofways. Two Sig- One fairly simple way to offer distinc- face unprecedented competitive pressure ma contributes its analytical prowess to a tive services is to use existing data in new owing to technological change. This pres- joint venture with Hamilton, a Bermudian ways. Insurers have long drawn up worst- sure is demanding not just adaptation, but insurer, and AIG, which actually issues the case scenarios to estimate the losses they transformation. policies (currently only for small-business would incur from, say, a natural catastro- The essential product of insurance— insurance in America). Allianz, a German phe. But some have started working with protection, usually in the form of money, insurer, simply bought into Simplesu- clients and local authorities on preparing when things go wrong—has few obvious rance; many insurers have internal ven- for such events; they are becoming, in ef- substitutes. Insurers have built huge cus- ture-capital arms for this purpose. A third fect, risk-prevention consultants. AXA, a tomer bases as a result. Investment rev- approach is to try to foster internal innova- French insurer, has recently started using enue has provided a reliable boost to pro- tion, asAviva, a British insurer, has done by its models on the flooding of the Seine to fits. This easy life led to a complacent building a “digital garage” in Hoxton, a prepare contingency plans. Gaëlle Olivier refusal to modernise. The industry is still trendy part ofLondon. of AXA’s P&C unit says the plans proved astonishingly reliant on human labour. The biggest threat that incumbents face helpful in responding to floods in June Underwriters look at data but plenty still is to their bottom line. Life insurers, reliant 2016, reducing the damage. rely on human judgment to evaluate risks on investment returns to meet guaranteed and set premiums. Claims are often re- payouts, have been stung by a prolonged Damage control viewed manually. period of low interest rates. The tough en- Tech-savvy insurers are going one step fur- The march of automation and technol- vironment has accelerated a shift in life in- ther, exploiting entirely new sources of ogy is an opportunity fornew entrants. Al- surance towards products that pass more data. Some are using sensors to track though starting a new soup-to-nuts insurer ofthe riskto investors. Standard Life, a Brit- everything from boiler temperatures to from scratch is rare (see box on next page), ish firm, made the transition earlier than health data to driving styles, and then of- many companies are taking aim at parts of most, for example, and has long been pri- fering policies with pricing and coverage the insurance process. Two Sigma, a large marily an asset manager (see next article). calibrated accordingly. Data from sensors American “quant” hedge fund, for exam- Meanwhile, providers of property-and- also open the doorto offeringnew kinds of ple, is betting its number-crunching algo- casualty (P&C) insurance, such as policies risk-prevention services. As part of Aviva’s rithms can gauge risks and set prices for in- to protect cars or homes, have seen their partnership with HomeServe, a British surance better and faster than any human pricing power come under relentless pres- home-services company, the insurer pays 1 62 Finance and economics The Economist March 11th 2017
2 to have a sensor(“LeakBot”) installed on its down, it offers services ranging from road- One example of what the future may customers’ incoming water pipes that can side car-repair to alternative transport (eg, hold comes from the car industry. Carmak- detect even minuscule leaks. HomeServe calling a taxi). ers have traditionally bought product-li- can then repair these before a pipe floods a Insurersface manyhurdles, however, to ability insurance to cover manufacturing home, causing serious damage. becoming service providers and risk con- defects. But Volvo and Mercedes are so The shift towards providing more ser- sultants. Maurice Tulloch, head of the gen- confident of their self-driving cars that last vices fosters competition on factors be- eral-insurance arm of Aviva, admits that year they said they will not buy insurance yond price. Porto Seguros, a Brazilian insur- such services are yet to catch on with most at all. They will “self-insure”—ie, directly er, offers services ranging from roadside customers. So far, hisfirm, like its peers, has bear any losses from crashes. assistance to scheduling doctor’s appoint- focused on enticing them to adopt the new Some think that such trends threaten ments. In France AXA provides coverage offerings by cutting insurance premiums, the very existence of insurance. Even if forusers ofBlaBlaCar, a long-distance ride- rather than on making money directly they do not, Bain’s Mr Naujoks is not alone sharing app. The main aim of the policy is from them. It reckons it can recoup the cost in expecting the next five years to bring to guarantee that customers can still reach of, say, the HomeServe sensors and repairs more change to the insurance industry their destination. If, say, the car breaks from the reduction in claims. than he has seen in the past 20. 7
Peer-to-peer insurance Asset management When life throws you lemons Choosing Life
Is the future ofinsurance named aftera softdrink? T IS not typhoons or earthquakes that Two Scottish asset managers try to insurers should fear most, but geeks I defend theirshare ofa shrinking pie alert to their businesses’ inefficiencies. Daniel Schreiber and Shai Wininger, tech rom fishing buddies to co-CEOs: that is entrepreneurs with no insurance back- Fhow the relationship between Martin ground, spotted that the industry is huge Gilbert, chief executive of Aberdeen Asset (worth $4.6trn in global premium income Management, and Keith Skeoch, his coun- a year, reckons Swiss Re, a reinsurer), terpart at Standard Life, will change after distrusted, antiquated and hopelessly the companies this weekannounced plans unreformed. to join forces. The merged company, to be In September they started Lemonade, based in Scotland, will have £660bn a New York-based insurer forhome- ($800bn) in assets under administration, owners and renters. Some describe it as a making it Britain’s largest, and Europe’s peer-to-peer insurer (“Spiritually we’re a second-largest, “active” asset manager. tech company,” says Mr Schreiber). Most Competition is forcing asset managers agree that its app makes insurance a lot to consolidate. Henderson and Janus Capi- easier. This appeals to the digital gener- When insurance quickened the pulse tal teamed up last October; Amundi and ation: of2,000 policies sold in its first 100 Pioneer did the same in December. They days, over 80% were to first-time buyers. reviewed the claim, cross-checked it with hope to defend market share from fast- Insurance, the founders reasoned, the policy, ran 18 anti-fraud algorithms, growing “passive” fund managers, whose suffers from misaligned incentives. Every approved it, sent payment instructions to funds track market indices rather than try dollar paid out comes from insurers’ the bankand informed Brandon. The to beat them, as active funds do. The re- pockets, encouraging poor behaviour. real-life Jim (Hageman), Lemonade’s search involved in trying to pick winners Normally upright people have few chiefclaims officer, was driving home for inevitably makes actively managed funds qualms about defrauding their insurer (as Christmas at the time. dearer than passive ones; once these costs 25% ofAmericans do), pushing up premi- Lemonade’s bots are still learning and are factored in, active managers tend to un- ums. Lemonade’s solution is to take 20% pass more complex claims to humans. It derperform passive ones. The fee gap is ofpremiums as a fee and to reward un- is hoped that one day they will handle wide enough to have attracted scrutiny der-claiming customers by giving a share 90% ofclaims. In an industry with ex- from British and European regulators: in 1 ofunused income to a chosen charity. pense ratios as high as 30% this could This brings good publicity. Butjust as offerhuge savings. But there are limits to important is how different Lemonade the claims that bots can be let loose on. Scottish widows looks behind the scenes. Instead of un- And insurance dinosaurs have one ad- Assets under management, £bn derwriters it uses algorithms; and instead vantage: data. For bots to get really clever Aberdeen Asset Management ofexpensive brokers and salespeople it they need lots. IfLemonade’s customer Standard Life uses chatbots. It even uses AI and mach- numbers remain small, they will not 400 ine-learning to handle claims, a job typi- learn fast enough to stay ahead ofthe big cally seen as needing a human touch. boys using the same technology. 300 Late last year a customer called Bran- But insurance moves slowly. Miguel don claimed fora stolen coat. He an- Ortiz from BCG, a consultancy, says that 200 swered a few questions on the app and the big bet forLemonade is that “it can recorded a report on his iPhone. Three stay ahead ofa sleepy industry by doing 100 seconds later his claim was paid—a world standard insurance processes better than record, says Lemonade. In those three everyone else.” Already, the shake-up it 0 seconds “A.I. Jim”, the firm’s claims bot, promises has added some fizz and zest. 2005 07 09 11 13 15 16 Source: Company reports The Economist March 11th 2017 Finance and economics 63
2 Britain passive funds’ feesare around 0.15% new company—will move even further Skeoch may know each other well, but the of assets under management, compared away from its roots as an insurer, and will history of such condominiums in other with 0.9% at actively managed funds. be able to make use ofAberdeen’s more in- companies has not been happy. Both Aberdeen and Standard Life have ternational client base. For its part, Aber- The benefits to clients are also unclear, struggled to compete. Aberdeen has seen deen can sell itsproductsthrough Standard says Jonathan Miller of Morningstar, a re- net outflows from its funds since 2013 (see Life’s wider British distribution network. search firm. Cost savings could end up chart on previous page), not helped by its Another attraction is cutting costs: spend- boosting shareholder returns rather than focus on emerging-market and Asian ing on IT and sales can be scaled back; un- lowering charges. Research by the Finan- funds, which have had a rough patch. At derperforming managers fired. The com- cial Conduct Authority, a British regulator, Standard Life, overall assets under man- panies estimate that the deal will generate finds that increased scale does not lead to agement increased, but its flagship range of annual savings ofaround £200m. lower fees. The two firms say the merger funds faced net outflows in 2016. Shareholders seemed happy. Share will offer investors better value for money, The hope is that coming together will prices for both companies rose by around through a wider choice of funds. It will change this picture. Standard Life—whose 8% on the announcement. There are some need to, ifit wants to keep regulators at bay shareholders will own two-thirds of the uncertainties, though. Mr Gilbert and Mr and withstand the passives’ aggression. 7 Buttonwood A port in a storm
The mood in Singapore’s financial sectoris subdued INGAPORE owes its existence, and its ($797m), down by 19% on 2013 and less Sprosperity, to its place at the heart ofin- than a tenth of the Hong Kong stock ex- tra-Asian trade. In more than 50 years of change’s daily volume. independence, the city-state has striven Indeed, the magnetic pull of China mightily to attract investment from all may only increase if America under Mr over the world. Such has been its success, Trump retreats from its Asian role. Multi- indeed, that others hope to imitate its nationals may feel that they simply have open, low-tax model. In Britain, for exam- to locate more resources in Hong Kong ple, there has been talk of the country than Singapore for the sake of proximity turning into a “European Singapore” once to the regional superpower. withdrawal from the EU is complete. (It Singapore’s long-term prospects may would be a nice start ifLondon’s Tube op- depend on how two trends resolve them- erated with anything like the same effi- selves. Asians are becoming wealthier ciency as Singapore’s subway network.) and are looking for other ways to invest The current mood in Singapore, how- their money aside from bank deposits ever, is far less buoyant than you might and property. As Asian economies be- imagine. Singapore has survived and come more important to the world econ- thrived by steering a middle course be- The IMF last year described its banks as omy, so banks, insurance companies and tween America and China. It has been “well capitalised”, with adequate provi- fund managers will look to increase their alarmed both by the isolationist rhetoric sions for bad loans, despite worries about operations in the region. As the thief Wil- ofPresident Donald Trump and by recent, their exposure to oil-and-gas firms. Singa- lie Sutton said when asked why he rob- highly unusual, public spats with China. pore is now the third-biggest trading centre bed banks: “That’s where the money is.” Global trade growth has slowed in re- for foreign exchange in the world (having At the same time, however, technol- cent years. Despite signs of a pickup, this overtaken Tokyo in 2013). Italso hasa grow- ogy means that investors can manage has had a big effect in a city that has the ing derivatives market with daily over-the- their money with the click of a mouse or world’s second-busiest port and that (ac- counter volume of $400bn, as of October the swipe ofan app. And they can do so at cording to Barclays, a bank) is the country 2015. Finance comprises 13% of the coun- very low cost. Vanguard, an index-track- most exposed to the global value chains try’s GDP, considerably more than the 8% ing fund manager, attracted more global created by multinational companies. An- share it contributes to Britain’s. mutual-fund inflows last year than its ten nual GDP growth in 2016 was just1.8%, the But Singapore faces a strong challenge largest rivals combined. Index-tracking slowest rate since 2009. Even in this fam- as a regional finance hub from Hong Kong, managers don’t need to have a regional ously open economy, the government has which benefits from far stronger links to base in a gleaming office tower in Singa- been allowingin fewerforeign workers in the Chinese economy. Hong Kong has the pore or Hong Kong. the face ofpressure from the voters. upper hand over Singapore in terms of in- This city is trying to ride this trend by The city still has enormous potential vestment banking, particularly in cor- becoming known as a hub for “fintech”, asa regional financial centre. Thanks to its porate-finance businesses such as mergers whereby new, technology-driven groups political stability and strong legal and reg- and acquisitions. Hong Kong’s capital mar- take aim at established, high-cost finance ulatory systems, Singapore looks like a ketsare much deeper; the local economy in firms. But this is a tricky tightrope to walk. natural haven—an Asian Switzerland. In Singapore is simply not large enough to Fintech may cannibalise existing finan- particular, Indian offshore wealth is being generate the same volume of business. cial businesses without generating many attracted to the city, which hopes to be a Many of South-East Asia’s businesses are additional jobs. The next 50 years may hub for the budding market in masala family-owned and rely on banks (or rein- present Singapore with even greater chal- bonds (rupee-denominated debt issued vested profits) rather than the markets for lenges than its first half-century. outside India). finance. Singapore’s daily stockmarket Singapore has a rare AAA credit rating. turnover in 2016 was around S$1.1bn Economist.com/blogs/buttonwood 64 Finance and economics The Economist March 11th 2017
Deutsche Bank each have around 5% ofretail deposits. The rowcentreson howthe effect ofthe A deal in January with America’s De- China shock is measured. The trio wanted Blues in a different partment of Justice has also made it easier to isolate the effects of extra Chinese sup- to tap shareholders. In September the DoJ ply, rather than ofsomething happening in key demanded $14bn to settle claimsthatDeut- America, so they checked that imports of sche mis-sold residential mortgage-backed particular Chinese products were surging securities in its swashbuckling pre-crisis in otherrich countries, too. They then com- days, and sent the shares plummeting. The pared places in America more exposed to FRANKFURT eventual bill, $7.2bn, less than half of it in these Chinese imports—typically those Germany’s biggest bankchanges course cash, came as a relief. with lots of labour-intensive manufactur- HREE times since the financial crisis, Though Deutsche still claims “global ing—with less exposed ones. TDeutsche Bank’s bosses have turned to corporate-and investment-banking ambi- MrRothwell’s critique does not attempt its shareholders for cash: €10.2bn ($13.6bn) tions”, feeding the domestic roots looks to debunktheirresearch completely. But he in 2010, €3bn in 2013 and €8.5bn in 2014. wise: America’s big banks show that do- asks whether combining changes in the Since becoming chief executive in 2015, mestic strength begets strength abroad. But 1990s and the 2000s makes sense. When John Cryan has had no plans to ask for there is another lesson. Like many Euro- he splits this period up, he confirms the more. Deutsche still needed to thicken its pean lenders, Deutsche has taken too long finding that Chinese imports had large ef- equitycushion, butdisposals, cost cuts and to choose a course. Meanwhile, the Ameri- fects on American manufacturing employ- earnings (if any: it has made losses for the cans have marched into the distance. 7 ment. But several other effects of Chinese past two years) would provide the stuffing. imports become smaller or no longer sta- Well, plans change. On March 5th Mr tistically significant. Forexample, the effect Cryan announced an €8bn rights issue. Trade with China of Chinese imports on the size of the la- Some comfort for investors: the price, bour force falls to a quarter of its 1990s size €11.65 a share, is 39% below the previous Shock horror in the 2000s. This is hardly conclusive— close; and Mr Cryan, who had suspended slashing sample sizes inevitably reduces the dividend, promises a return to “com- the power ofa test. petitive” payouts next year. In another re- Mr Rothwell has not disproved any- versal, Deutsche will keep rather than sell thing. But he has provided an opportunity Postbank, a mass-market retail business to think through the assumptions of the Research on the effects ofChinese that was once part of the post office. Deut- original research by Messrs Autor, Dorn imports has not been debunked sche has owned it since 2010. and Hanson. Theirattemptto isolate the ef- Postbank and the posher “blue” Deut- OMPETITION from Chinese imports fects of China would not have been entire- sche Bank brand will be more closely inte- C may have cost some Americans jobs, ly successful, for instance, if other coun- grated—notably, sharing computer sys- but economists have done pretty well out tries were experiencing non-China-related tems. Mr Cryan is also selling a slice of of it. Since 2013 David Autor, David Dorn shocks similar to those hitting America. Deutsche’s asset-management division and Gordon Hanson have published nine More broadly, it is impossible to know and some lesserassets. And he isreorganis- separate studies digging into the costs of what would have happened had Chinese ing its corporate and investment bank to trade. They have found that, of the fall in imports not surged. Monetary policy concentrate on servingmultinational com- manufacturing jobs between 1990 and might have been different. And what a panies, taking charge of the American 2007, one-quarter could be attributed to a company such as Apple would have done business himself. surge in imports from China. Other sectors without low-cost Chinese assembly work- The shifts on Postbank and the share is- failed to soak up the extra workers. Their ers is unknowable. Moreover, adding up sue are two sides of a coin. Selling Post- research also suggested that the China individual effectsoverthe whole economy bank had been part of Deutsche’s plan to shock has cut the supply of marriageable could miss important interactions. raise its ratio of equity to risk-weighted as- men and opened the door of the White Mr Rothwell’s strongest criticism is not sets—an important gauge of resilience— House to Donald Trump. of that China-shock literature at all, so above 12.5% by 2018. With the capital in- In recent weeks a dispute has erupted much as of the way it was received. Some crease, Deutsche says, the ratio would over their results. Jonathan Rothwell, an have taken evidence ofdisruption as proof have been 14.1% at the end oflast year, rath- economist at Gallup, a pollster, alleged “se- that tariffs would be a good idea, or that er than 11.9%. It should stay “comfortably” rious flaws” in one paper, prompting a trade with China has hurt America. But, as above 13%. fierce eight-page response from the au- Mr Autor says himself, “our research does Mr Cryan may be making virtue out of thors, and an acrimonious public tiff. not tell you the net societal costs and bene- necessity: he was struggling to get the price fits of trade.” It does not estimate the bene- he wanted for Postbank. However, Deut- fits to exporters as China opened up sche says altered circumstances have Cheap but not cheerful (though this was smaller than the rise in made Postbanka better prospect. United States Goods imports imports) or to American shoppers able to Supervisors demand a higher leverage Manufacturing employment from China buy cheaper stuff. ratio (of equity to total liabilities) of Deut- As % of working-age population* As % of GDP Other research is emerging that at- sche than ofthe many smaller institutions, 18 3.0 tempts to answer those questions. One pa- chiefly municipally owned savings banks 15 2.5 per, by Kyle Handley and Nuno Limão, or co-operatives, where most Germans 12 2.0 found that the extra trading certainty asso- stow their cash. But this has turned out to ciated with China’s accession to the WTO be lowerthan first expected—so that retain- 9 1.5 lowered American manufacturing sales ingPostbankrequires less equity. Mr Cryan 6 1.0 and employmentbymore than 1%, butalso also reckons that the miserable, ultra-low- lowered American prices and raised con- 3 0.5 interest-rate economics of German retail sumers’ incomes by the equivalent of a 13- banking are improving and that there is 0 0 percentage-point cut in tariffs. It also strength in scale in a land of more than 1990 95 2000 05 10 16 helped poor Chinese workers get richer, 1,600 lenders. Postbankand the blue brand Sources: Census Bureau; BEA; BLS *15- to 64-year-olds which isn’t to be sniffed at either. 7 The Economist March 11th 2017 Finance and economics 65
Global property prices Green-shipping finance The Economist house-price indicators Searching for December 2016 or latest available Light at the end of
Real % change Under(–)/over sanctuary on a year Since valued*, %, against: the funnel earlier Q1 2007 Rents Income† New Zealand 12.7 35.9 114 59 Bolthole money pushes prices up for China 12.0 29.9 36 na How to help a bankrupt industrypay local and foreigneralike Canada 11.1 47.4 112 46 forenergy-efficiency upgrades ANY Americans were taken aback Ireland 5.9 -35.7 30 1 HIPPING may seem like a clean form of Mwhen news broke in January that Pe- Germany 5.6 31.4 -2 -4 Stransport. Carrying more than 90% of ter Thiel, an internet billionaire and advis- Britain 5.3 -3.8 45 30 the world’s trade, ocean-going vessels pro- er to Donald Trump, had New Zealand citi- Spain 4.2 -36.0 25 16 duce just 3% of its greenhouse-gas emis- zenship. For five years this backer of an United States 3.7 -15.0 11 -3 sions. But the industry is dirtier than that “America first” president had kept his Kiwi Hong Kong 2.9 129.8 86 49 makes it sound. By burning heavy fuel oil, passport quiet. Then the government re- Australia 2.4 34.8 71 50 just15 ofthe biggest ships emit more oxides leased details ofhis $10m-lakeside estate. of nitrogen and sulphur—gases much Japan 2.3 5.2 -21 -31 A growing horde of rich foreigners see worse for global warming than carbon di- New Zealand as a safe haven. In 2016 over- Switzerland 1.7 35.5 3 nil oxide—than all the world’s cars put togeth- seas investors bought just 3% of all proper- France 1.5 -5.9 28 22 er. So it is no surprise that shipowners are ties. But theirpurchases were concentrated Italy -1.1 -25.7 -7 -2 being forced to clean up their act. But in an at the expensive end of the market, which Singapore -3.1 10.1 17 -42 industry awash in overcapacity and debt, is growing fast: sales involving homes Sources: Haver Analytics; OECD; *Relative to long-run few have access to the finance they need to worth more than NZ$1m ($690,000) in- Thomson Reuters; national average †Disposable improve their vessels. Innovative thinking creased by 21%. That helped push prices in statistics offices; The Economist income per person is trying to change that. the country up by13% over the past year, to A new report from the Carbon War lead The Economist’s latest tally of global sustainable. By these measures house Room (CWR), an international NGO, and house-price inflation (see table). prices in Australia, Canada and New Zea- UMAS, a consultancy, highlights the threat NewZealand isone ofseveral countries land look high. In America as a whole, that new environmental regulations pose where the impact of foreign money on housing is fairly valued, but in San Francis- to the industry. The International Maritime housing is under scrutiny. Prices have also co and Seattle it is 20% overpriced. Organisation, the UN’s regulatory agency risen rapidly in Australia and Canada. Haven investors may disregard afforda- for shipping, has agreed to cap emissions Central bankers fret about the dangers fick- bility measures. Property can either be a ofsulphurfrom 2020. Last month the Euro- le capital flows pose to financial stability. bolthole or earn an income; in many sup- pean Parliament voted to include shipping London’s mayor has ordered a study on ply-constrained cities its value may rise in the EU’s emissions-trading scheme from foreign ownership in the capital after prop- rapidly; even if not, the risks may be lower 2021. Without any retrofitting of ships to erty prices rose by 54% in fouryears. than at home. Investment from China has meet the new rules, many firms may be Foreign capital also makes itself felt in gone up as its own property market has be- forced out of business. That also imperils America, where house prices have recov- come stretched, fears of devaluation have banks across the world, which have lent ered to a new nominal high. Canadians risen and a crackdown on corruption con- $400bn secured on smoke-spewing ships. once dominated; now they are outnum- tinues. A study in 2016 found that in- Tens of billions of dollars are needed to 1 bered by Chinese citizens spending some creased political risk in places such as of the $1.3trn that has left the country since Greece and Syria explained 8% ofthe varia- autumn 2014. The National Association of tion in London’s house prices since 1998. Realtors estimates that Chinese investors Policymakers may well scratch their bought 29,000 American homes for a total heads. It is difficult both to make housing of $27bn in the year to March 2016. Foreign more affordable for a country’s own citi- buyers focus on a handful of cities: San zens and to encourage foreigners to buy. Francisco, Seattle, New Yorkand Miami. Britain has in fact tried to curb foreign en- In some places, foreign investment has thusiasm with higher taxes, and by pub- led to a construction boom. In Miami lishing a registry of100,000 British homes apartments are being built in numbers not owned by foreign companies—a potential seen since the financial crisis, financed in embarrassment forsome. part by Venezuelan money. Australia lets But unintended consequences lurk. foreigners invest only in new-build proper- After a 15% levy on purchases from abroad ties, and they do: 26,000 new flats are due was introduced in the Canadian city of on the market in Sydney and Melbourne Vancouver last August, the number of for- over the next18 months. In London 45,000 eign buyers dropped by 80%. That helped homes have been built since 2014—the dampen house-price inflation there but highest rate in ten years—but locals grum- pushed up demand in nearby Victoria. It ble many are pads forfootloose foreigners. also deterred highly skilled immigrants. In manyofthese countriesaffordability The levy will soon be amended to exclude looks stretched. The Economist gauges foreigners on skilled-workvisas. house prices against two measures: rents Some foreigners will stump up even if and income. If, over the long run, prices costs rise. More Americans are house- rise faster than the revenue a property hunting abroad, for example. By one mea- might generate or the household earnings sure, interest in boltholes in New Zealand that service a mortgage, they may be un- has tripled since Mr Trump’selection. 7 Smokestack lightening 66 Finance and economics The Economist March 11th 2017
2 pay forupgrades to meet the new rules, ac- green upgrades. The average retrofit has a that, in a country once enthusiastic about cording to James Mitchell at CWR. But the payback time of three years, whereas 80% the EU, 46% favour a “Nexit” referendum industry can hardly pay even its existing ofship charters are fortwo years or less. on whether to leave. debts. Freight rates have collapsed owing Hence the interest in new green-lend- Yet it is precisely places such as Rotter- to a slowdown in world trade since the fi- ing structures. One, called “Save as you dam, the Netherlands’ “gateway to Eu- nancial crisis and to enormous overcapac- Sail”, comesfrom the Sustainable Shipping rope”, that stand to lose the most from any ity. An earnings index compiled by Clark- Initiative, another NGO. The idea is to retreat from globalisation. Over the past 20 sons, a research firm, covering the main share the fuel savings between the ship- years the Netherlands’ lucrative re-exports vessel types (bulkcarriers, container ships, owner and the charterer over a longer con- (computers shipped in from China, say, tankers and gas transporters), touched a 25- tract, giving both an incentive to make the and then sent on to Germany) have qua- year low in 2016. Banks do not want to upgrades. Such schemes used to be thwart- drupled by value. throw good money after bad. ed by the difficulty of measuring exact fuel So Brexit and a protectionist America Even those that are expanding their consumption on ships. New technologies under the presidency of Donald Trump ship-lending have seen less demand than allow more accurate readings. both threaten the Netherlands more than they expected for retrofit loans. ABN Finance providers are keen to get in- most. In an otherwise upbeat report on the AMRO, a Dutch bank, and a market leader volved. Last June the European Investment country’s prospects, the European Com- in this business, has made less than $500m Bank announced €250m ($282m) in fund- mission picks out Brexit-related risks as an in green loans over the past five years, says ing for such retrofits; it hopes other banks Achilles heel. Ratings agencies put the Gust Biesbroeck, its head of transportation will follow suit with billions more. In fu- Netherlands (along with Belgium, Ireland finance. The problem, he adds, is one of in- ture, the idea might be extended to green- and Malta) as beingat high riskfrom Brexit. centives. Ship owners, who would nor- ing aircraft and trains. For now these busi- By value added, Britain is the Netherlands’ mally borrow for such upgrades, do not nesses do not suffer a shortage of finance. second-biggest export market after Ger- benefit from lower fuel bills. It is the firms But a downturn is a matter of “when not many (see chart). chartering the vessels that enjoy the sav- if”, says Michel Dembinski at MUFG, a Around 80% of the flowers and 70% of ings. But their contracts are not long bank. Green finance could rescue many the plants that Britain imports come from enough to make it worthwhile to invest in other industries sailing into a storm. 7 the Netherlands. Growers could be partic- ularlyhard hitifBrexitled to newtrade bar- riers. At a parliamentary hearing last The Dutch economy month, representatives of other Dutch in- dustries voiced similar concerns. The fish- Who’s Nexit? ing lobby emphasised how much it needs access to British waters: 60% of the Nether- lands’ fish, including 90% of its beloved herring, are caught there. Agricultural and food exports to Britain were worth €8.9bn ($9.8bn) last year. The farming lobby says it AMSTERDAM is already suffering from sterling’s weak- Ifglobalisation is in retreat, the Netherlands would be a big loser ness, which makes its products 20% dearer, S ANYfootball fan knows, little delights and worries that the EU’s farming policy Athe Dutch more than beating the Ger- The Brexit disease will become more subsidy-driven when mans. So, as the country prepares for an Netherlands, leading export markets Britain no longer has a seat at the table. election on March 15th, it should be cheer- By value added, 2015, €bn The country’s economic-policy bureau, ing an economy that, after lagging behind 0 1020304050 the CPB, estimates that a “hard” Brexit, in Germany’s for years, is at last outpacing it. which British trade is governed just by GDP grew by 2.1% last year, which was the Germany WTO rules, could cost the Dutch economy fastest rate since 2007 and a stronger per- Britain 1.2-2% of GDP by 2030. And Britain is not formance than its neighbours, including Belgium the only headache. Exports to America— Germany. Unemployment has fallen to United States and hence the threat of American tariffs— 5.3% and more people are in work than be- also matter disproportionately to the France fore the crisis in 2007-08. Dutch: 3.4% of GDP (compared with 2.6% After years of belt-tightening, house- Source: Statistics Netherlands on average for the EU) and 300,000 jobs holds are spending again, thanks to a depend on them. strong housing-market recovery and rising the PVV ofGeert Wilders, an anti-immigra- Needless to say, a Nexit would cause wages. Government finances are sound. tion populist. much greater upheaval. Leaving the EU This year the budget may be in balance— Niek Stam, a trade-union leader, says would hit the Netherlands much harder perhaps even in surplus—and public debt that dockworkers in the port of Rotterdam than Brexit will hit Britain, says Wim Boon- may drop below 60% of GDP. Yet this will vote forMr Wilders—not because they stra, an economist at Rabobank’s research sunny outlook has not brightened the are racist but because they fear for their arm: “We’re the world’s second-largest ex- mood ofa tetchy election campaign. jobs, which are beingthreatened byrobots, porter ofagriculture; without free trade we That is not so surprising. Marieke Blom, and for their pensions, which they see re- would drown in milk and cheese.” The the chief economist at ING, a bank, attri- ceding as the retirement age creeps up. Re- country grew rich in its golden age by sail- butes the positive forecast mostly to tough ferring to Brexit, Mr Stam says some think ing the seas and trading globally; on many government reforms over the past few “maybe we should do what the English are measures it is still the world’s most open years—particularly raising the retirement doing, as globalisation also brings harm.” economy. Today it is the fifth-largest ex- age to 67 (from 2021) and reforming the fi- Jeroen Dijsselbloem, the finance minis- porter of goods. A third of its GDP comes nancing ofthe health-care system. Years of ter, acknowledges that, despite positive from exporting goods and services. Few reform, austerity and recession have taken forecasts, “many of our voters have really countries have as much to lose from a their toll. Pollsters predict strong votes for had some harsh times.” So truculent is the world where drawbridges are pulled up protest parties such as the Socialists and mood that a poll by Ipsos last May found and ships are kept in port. 7 HEALTH CARE FORUM WAR ON CANCER MARCH 30TH 2017 • SINGAPORE
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Gold sponsor Silver sponsors 68 Finance and economics The Economist March 11th 2017 Free exchange Borrowed time
Economic recovery will put the theory of“secularstagnation” to the test N PERIODS of economic stress all sorts of theories are enter- logical progress, forexample. But it can also be driven by the con- Itained about the nature of the problem. When better times re- centration of income among those with little inclination to turn, some theories fade from memory. Others linger, however. spend. Income inequality could contribute to stagnation, for in- During the economic mess of the past decade, economists fright- stance, by leaving a shrinking share ofincome in the hands ofthe ened themselves with tales of “secular stagnation”: a nasty con- poorer households that would most like to spend. dition that dooms its victims to chronically weak growth. Now In such cases, the bonds of secular stagnation may temporar- that the economic outlook is brightening a bit—deflation has ily be broken by a period offinancial excess in which bubble con- been dispatched, and for most advanced economies 2017 is fore- ditions drive speculative investment, or in which groups short of cast to bring a third consecutive year of economic growth—it is purchasing power borrow from those with savings to spare. The tempting to laugh off the idea of secular stagnation as a bit of cri- reason to doubt the solidity of this recovery is that we have been sis-induced hysteria. Tempting, but also premature. in such circumstances before, only to watch it end in tears. In the In a time of secular stagnation, the normal relationship be- late 1990s, for example, soaring tech stocks drove a wave of in- tween saving and investment goes haywire. People save some vestment in internet infrastructure which yanked the American portion of their income each year. Because one person’s spend- economy out of a jobless recovery. When that fever broke, the ing is another’s income, such saving can drain away demand and economy slumped again, until the global financial system found lead to recession, unless the funds set aside by savers are rein- a way to funnel credit to American households looking to buy or jected into the economy through lending to those looking to in- borrow against a home. In the euro area, thrifty core economies vest: aswhen bankslend savers’ depositsto businesses, for exam- lent heavily to the periphery, often against soaring property ple. Central banks help manage this process. When planned prices, fuelling an economic boom that ended disastrously. saving threatens to outstrip desired investment, they will reduce interest rates to keep the two in line and the economy on track. Post-traumatic stress But when secular stagnation strikes, the gap between what peo- Is this time different? It is, a bit. Across advanced economies, bor- ple want to save and what they want to invest grows too large to rowing capacity is still impaired afterthe trauma ofthe crisis; and reconcile. The interest rate needed to balance the two drops, ulti- banking reforms mean that credit taps cannot be turned back on mately to below zero. Central banks are stymied. The result is so easily. Those obstacles might simply delay rather than prevent chronic economic weakness: low growth, low inflation, low in- a return to form, however. A mood of optimism is fuelled by a terest rates and the constant threat ofrecession. stockmarket that is scaling new heights. In America, household Several years ago those symptoms could be found across debt is rising again, driven by loans to students and for cars. much of the global economy. No longer. Headline inflation is Across advanced economies, private debt as a share of GDP is trending upward, even in Europe and Japan. Commodity prices above the pre-crisis level and risingfast (see chart). Most dramatic have stabilised, helping struggling emerging markets. And Amer- ofall has been the increase in borrowing in China, where private ica’s Federal Reserve has begun raising its benchmark interest debt as a share of GDP has nearly doubled since 2008. It seems rate, suggesting that the American economy is no longer trapped veryunlikelythatthe world economywould have escaped itsde- in a world in which rates cannot be pushed low enough to keep flationary doldrums without this vast credit expansion, which growth on track. In a speech on March 3rd Janet Yellen, the chair- has kept its building boom rumbling along. woman of the Fed, reckoned that America was ready for more Economists sympathetic to the secular-stagnation story argue rate hikes than in 2015 and 2016, including at least three this year. that there are ways to escape the trap. Firms might suddenly find But the most devilish aspect of the secular-stagnation story is new capital projects in which to invest: thanks, perhaps, to tech- that good times do not necessarily indicate underlying health. nological advance. An effort to reduce inequality could be a way The persistent gap between desired saving and investment that it out: the rich could be taxed and their wealth redistributed rather describes can result from a scarcity of attractive investment op- than lent. A massive public-investment campaign would be an- tions—owing to an ageing population or a slowdown in techno- other. Emerging markets contributed to the world’s savings glut by buying government bonds in order to build up their foreign- exchange reserves, funnelling money to governments of ad- Debt be not proud vanced economies with little appetite for fiscal stimulus. Rather Private-sector credit, as % of GDP than see the private sector overextend itself, those rich-country governments could instead seize the opportunity to borrow 300 Advanced economies more, soak up excess savings and invest the proceeds in new 250 roads and railways, electric grids and broadband. United States If the secular-stagnation idea holds, central banks face a stark 200 choice until politicians do some of these things. The Fed, poised China to raise rates laterthis month, seems confident it can tap its brakes 150 and keep the American economy on a safe growth trajectory. But Emerging markets 100 it might face a nastier dilemma: to tolerate the rising asset prices and indebtedness which enable recovery, or to choke off recov- 50 ery and wait for the government to solve the problem. Just what sort of story best describes the state of the economy—and how 0 scary it is—will become clear this year, one way or another. 7 2002 03 04 05 06 07 08 09 10 11 12 13 14 15 16 Source: Bank for International Settlements Economist.com/blogs/freeexchange Property 69
The Economist March 11th 2017 70 Science and technology The Economist March 11th 2017
Also in this section 71 Aluminium batteries 71 Women in research 72 Yellow cabs are safe cabs 72 Diagnosing disease by phone 73 Do human pheromones exist?
For daily analysis and debate on science and technology, visit Economist.com/science
Synthetic biology of chromosomes that were once believed useless are now known to have functions. Something’s brewing But some useless DNA does exist and the Sc2.0 researchers are getting rid ofit. They are also cleaning up the genetic code’s punctuation in their new chromo- somes—reducing the number of types of three-letter “stop” signals that mark the An international consortium is trying to make an artificial yeast genome. Success ends of genes from three to two. Their would usherin true genetic engineering hope is that the redundant signal’s triplet IOLOGY’S biggest division is not be- they will be served up soon. code (one ofonly 64 available) can then be B tween plantsand animals, noreven be- Rather than building entire chromo- used to extend from 20 to 21 the range of tween multicellular and single-celled crea- somes in one go, Sc2.0’s researchers pro- amino acids, the building blocks of pro- tures. It is between prokaryotes and ceed in stages. They start with pieces of teins, which the new chromosomes can eukaryotes. Prokaryotes—bacteria are the DNA 750 letters long. These, known as oli- encode. That would permit the production most familiar sort—are simple. Their DNA gonucleotides, can be synthesised, by spe- of completely new sorts of protein. And is an unadorned circular molecule be- cial apparatus, with the genetic letters in they are moving certain genes that some- tween 500,000 and 10m genetic “letters” any desired order. The consortium’s teams times get in the way ofDNA replication to a long. As such, it is fairly easy to replicate then stitch appropriate oligonucleotides special extra artificial chromosome that from off-the-shelfchemicals. together to build chunks about 10,000 let- will exist in addition to the conventional The DNA of eukaryotes—animals, ters long. Finally, they splice these chunks 16, in effect quarantining them. plants, fungi and so on—isboth more abun- into “megachunks”, with 30,000-60,000 The aim of all this is twofold. One goal dant and more complex than that. It may letters each. Those get inserted one at a is to make a genomic “platform” that can have hundreds of millions, even billions, time into natural yeast chromosomes by be adapted to do useful things. Genetically of letters and it is organised into several being swapped for corresponding sections modified yeasts already make vaccines, elongated chromosomes inside a cell’s nu- of existing DNA. The result is tested each drugs and speciality chemicals. Sc2.0’s cleus. Synthesising a eukaryote’s genome time by checking that the modified chro- technique means that it will be possible to is thus a far harder task than creating its mosome still allows the cell it is in to grow design completely new yeasts, and the prokaryote equivalent. But if biology is and reproduce. Once it has passed that test, range ofproducts will widen. ever to be brought within the realm of another megachunk can be swapped in, That will be to the good. But the other technology in the ways that physics and and the process repeated until the whole goal may disturb some people, for it is to chemistry have been, it is an essential task. chromosome is made ofsynthetic DNA. test techniques that could then be used on This week has seen a big step towards other eukaryotes. It is here that a pause that achievement, with the publication in Shock and awe should be taken for thought. The trivial Science of recipes forfive artificial chromo- There would be little point to all this, modifications that have already been somes for yeast cells. Yeast, a fungus, is one though, if the DNA going in was the same made by genetic engineers to crops and an- of the workhorses of eukaryotic genetics. as that coming out. The value ofbeing able imals are as nothing compared with what The chefs who have devised these recipes to synthesise a genome lies in beingable to might be possible if whole genomes could are members of a consortium called the manipulate it. And this, tentatively, iswhat be manipulated at will. Even CRISPR/Cas9, Synthetic Yeast Genome Project (Sc2.0). In the members ofSc2.0 are trying to do. a technique much in the news at the mo- 2014, as an aperitif, Sc2.0 created a single First, they are clearing out the rubbish. ment, modifies only small bits of DNA at a artificial yeast chromosome. The latest set The final synthetic genome, as currently time. The Sc2.0 approach writes entire ge- ofpapers are the meat ofthe matter, mean- planned, will be 8% smaller than a natural netic sequences from scratch. The results ing that over a third of the yeast genome one. The difference is bits of DNA thatseem could be awesome. To make sure they are has now been synthesised. The remaining to serve no useful purpose. Such DNA is not also shocking, people should start ten chromosomes are still cooking, but not always easy to identify, for many parts thinking about them now. 7 The Economist March 11th 2017 Science and technology 71
Unmanned underwater vehicles Women in research A clever solution Fairer than it was
Science is male-dominated. But a new report says females are catching up ARCH 8th was International Wom- Japan, by contrast, barely a fifth of re- Aluminium batteries could let en’s Day. That seemed to Elsevier, searchers are female—a fact that may submarine drones range farther M an academic publisher, a good occasion reflect the particularly uncool image UCH is made of the potential of fly- to publish a report looking at the num- science has among Japanese schoolgirls. Ming drones. But drones are useful at bers and performance offemale scien- Women are best represented in sub- sea, too. Unmanned underwater vehicles tists around the world. The report, “Gen- jects related to health care. In nursing and (UUVs), as they are known technically, are der in the Global Research Landscape”, psychology, forexample, they outnum- employed for things ranging from pros- analysed the authorship ofmore than ber men in several countries, including pecting for oil and gas to naval warfare. 62m peer-reviewed papers published in America and Britain. Less than a quarter Like their aerial cousins, though, ocean- 27 subject areas over the past 20 years, in ofresearchers who publish papers in the going drones have limited ranges—limits 11mostly rich countries and in the Euro- physical sciences are women. Perhaps as that are often imposed by their batteries. pean Union as a whole. The papers and a consequence ofthis, inventors who At the moment those batteries are usu- their citations are indexed in Scopus, a register patents are still almost all men. In ally either alkaline or lead-acid. Lithium- database that is run by Elsevier. the places covered by the report the share ion batteries, fashionable elsewhere, have In the EU, and in eight ofthe 11coun- ofpatent applications by women ranges not conquered the UUV world. Their ten- tries considered, the share ofwomen from 8% ofthose filed in Japan to 26% in dency to catch fire counts against them. authors grew from about 30% in the late Portugal. Women are, however, making And they are sensitive to pressure, which is 1990sto about 40% two decades later. progress, even in the still-male-heavy undesirable in devices that operate under- Brazil and Portugal are closest to equality, world ofengineering. Though they con- water. But a firm in Massachusetts, called each just a percentage point shy of it. In stitute only between 10% and 32% of Open WaterPower(OWP), is offeringan al- authors ofpapers in that field in the ternative: batteries based on aluminium. places the report looks at, the share of With these, its engineers hope to extend Still a man’s world those papers in which a woman is the the ranges ofunderwater drones tenfold. Women among researchers with papers published* lead author is between 35% and 52%. Each of OWP’s battery cells has a block 2011-15, % of total, in: All ofthis is qualified good news. of aluminium as its anode. The cell’s cath- health sciences engineering Women do, nevertheless, still suffer from ode is made ofnickel. In a working battery, physical sciences computer science, maths a “leaky pipeline” phenomenon that sees these anodes and cathodes alternate, and Inventors† them drop out ofscientific careers at a are bathed in an electrolyte made of sea- 0 102030405060 higher rate than men do. At Imperial waterwith some potassium hydroxide dis- Portugal College, London, regarded by many as solved in it. This chemical keeps the bat- Brazil Britain’s leading technological university, teryfree from marine organisms that might Australia about 35% ofundergraduates are women. otherwise grow within it. It also plays two But that percentage falls with each step other roles. These are in the battery’s Canada up the career ladder. At the moment, only chemical operation. France 15% ofImperial’s professors are women. One of these roles lies in the reaction EU28 Partly, this stems from the fact that that drives the battery, between the alumi- Denmark when those professors were undergradu- nium of the anode and the hydroxide ions Mexico ates the sex ratio was even worse. But it in the electrolyte. A hydroxide ion is a neg- also reflects the problem ofcareer-build- United States atively charged combination ofa single hy- ing which women face in all areas, not drogen atom and a single oxygen atom Britain just science. Even in the most progressive (OH- in chemical shorthand). Unadulterat- Chile countries, they still shoulder the lion’s ed water contains some hydroxide ions (its Japan share ofchild care and housework. molecules, H2O, sometimes disintegrate Sources: “Gender in the Global *Indexed in Scopus Boosting their numbers in the laboratory spontaneously into OH- and positively Research Landscape” by Elsevier; †Who filed patent will take more than merely convincing charged hydrogen ions, H+) but adding po- The Economist applications girls that science is cool. tassium hydroxide boosts their number. The result of the reaction is aluminium hydroxide, which is electrically neutral, with aluminium hydroxide, which isinsol- whose chemistry encourages the alumi- and electrons, which carry away the hy- uble in water. This is where the added po- nium hydroxide to precipitate on that sur- droxide ion’s negative charge. These elec- tassium hydroxide does its third job, for an face. A small piece offoam rubber can thus trons then travel towards the cathode via a aqueous solution of potassium hydroxide hold a lot of aluminium hydroxide. When circuit that can, for example, power a mo- will dissolve aluminium hydroxide in a a plugissaturated with the stuffthe battery tor. To complete the circuit, electrons at the way that pure water cannot. ejectsitand replacesitwith a fresh one that cathode combine with hydrogen ionsfrom A pump circulates the potassium-hy- has been kept, compressed, in an adjacent the electrolyte’s water to produce hydro- droxide-bearing electrolyte through the plug store. Each battery carries enough gen gas, which is vented from the battery, battery, where it picks up aluminium hy- plugs to keep it going until its supply ofalu- leaving those ions’ hydroxide partners be- droxide from the anodes. The resulting sol- minium has run out. hind to replenish the store ofOH-. ution then passes through a chamber filled One test of OWP’s technology will Previous attempts to make a commer- with a plug made of foam rubber. This is a come this summer, when the firm will fit cial aluminium battery have failed be- material that packs an enormous amount its batteries into UUVs built by Riptide Au- cause their anodes have got clogged up of surface area into a tiny volume and tonomous Systems, which is also in Mas-1 72 Science and technology The Economist March 11th 2017
2 sachusetts. Riptide’s products are used by oil and gas companies to undertake under- water surveys. At the moment, they have a range of about ten nautical miles (19km). Riptide reckons that OWP’s batteries could increase that to 110 nautical miles. The armed forces are interested, too. Though OWP is coy about the details, re- cords in the public domain show thatOWP is working with America’s navy and also with the country’s Special Operations Command, which carries out clandestine missions. The navy contract asks forsome- thing to replace the existing batteries on its Shallow Water Surveillance System, a se- ries of acoustic sensors designed to detect Mellow yellow enemy submarines. The Special Opera- tions contract is light on detail, but is for and 12,525 blue ones. All are the same mod- dents per 1,000 taxis per month than did “man-portable UUVs”. el (a Hyundai Sonata) and all undergo the blue cabs, while in daylight, the difference One other use for aluminium batteries same maintenance schedules. Any differ- was two. (There were not enough noctur- might be to power crewed deep-diving encesin safetybetween the two, DrHo rea- nal collisions with no streetlights around submersibles such as Alvin, which found soned, must therefore be caused by their for a meaningful comparison to be made fame in 1986 when it was used to explore respective colours. in this third case.) Based on these findings, the wreck of Titanic, a British liner sunk by To work out if such differences actually Dr Ho calculates that if the firm changed an iceberg in 1912. At the moment Alvin still exist, he and his colleagues analysed three the colour of its entire fleet to yellow, it relies on lead-acid batteries. This limits its years’ worth of data supplied by the firm. would, over the course of a year, have to divesto eighthoursand meansitcannot go They found that its blue taxis were in- deal with 917 fewer accidents and would as far down into the ocean as its titanium volved in an average of 71.7 accidents per save around S$2m ($1.4m). shell would otherwise permit. Aluminium thousand vehicles per month while its yel- Yellow, then, seems to be a lucky colour batteries would let it and its kind dive lon- low ones were involved in an average of for owners of cabs and their customers. It ger and deeper, letting researchers visit the 65.6. The yellowones, in otherwords, were certainly proved lucky for John D. Hertz. abyss more easily in person. 7 9% less likely to have an accident. The Chicago Yellow Cab company, as he To confirm that what they had ob- renamed his firm, was the foundation of a served was nothing to do with the drivers business empire that led, eventually, to the Road accidents of the respective cabs, Dr Ho and his team world’s largest car-hire company. Its logo? picked a fifth of those drivers at random The word “Hertz”, in black, italicletters. On Safe on taxis and studied their behaviour behind the a yellow background. 7 wheel. They did this by looking at data col- lected by satellite-tracking devices carried by each of the firm’s taxis. These devices Smartphone diagnostics record, every 15 seconds, a cab’s location and itsstatus(free to pickup a fare, carrying What coloura cab is painted helps Pictures of health a passenger or on a break). These data determine its chance ofcrashing showed that yellow cabs’ drivers were N 1907 John D. Hertz, the owner of a taxi driving in an identical manner to those of Ifirm in Chicago, asked some academics blue cabs. at the University of Chicago to do a piece The researchers then delved into de- of research for him. He wanted to know tailed accident reports, looking at the na- The rise ofthe medical selfie what colour he should paint his cabs in or- ture of each accident and the lighting con- der to make them stand out among the sea ditions in which it had occurred. They had F THE millions of photos shared on- of black vehicles that then inhabited two hypotheses. Oline every day, which most faithfully American city streets. The researchers’ The first was that if yellow really was represent their subjects? The popular #no- conclusion was: yellow. Now, more than a having a protective effect, a yellow cab filter hashtag would suggest it is those that centurylater, a group ofresearchers ata dif- would be less likely than a blue one to be have not been digitally altered. But photo- ferent university have concluded that yel- involved in a collision when it was clearly graphs of the same thing can differ greatly, low was a wise choice for other reasons, in the view of the other driver involved, depending on ambient light and the dis- too. In a study just published in the Pro- but not when it was not. This proved true. tance and angle they were taken from. So ceedings of the National Academy of Sci- The second hypothesis was that yellow the rightmanipulation can actuallymake a ences, Ho Teck Hua of the National Univer- would grant a greater advantage at night picture more honest—and therefore more sity of Singapore and his colleagues show than during daylight hours, since it con- useful formedical purposes. that yellow taxis are less likely to be in- trasts more strongly than blue does with a That is the idea behind an app from volved in accidents. dark background. This, too, was true. Healthy.io, an Israeli firm. Dip.io, as this Dr Ho’s research made use of a merger When the researchers compared accidents app is known, uses mobile-phone cameras that took place, in 2002, between two Sin- occurring in the three sorts of lighting con- for clinical-grade urine analysis. The pa- gaporean taxi companies. One of the pre- dition (daylight, streetlight and no light) tient follows the instructions, waits for the cursor firms had a yellow fleet. The other’s listed in the accident reports, they found colourson the dipstickto develop and then was blue. The merged concern has contin- that the rate-difference was indeed greatest takes a picture of it against the background ued that bichromatic tradition to this day. in scenes illuminated by streetlight. In this of a proprietary colour card. The app uses At the moment it owns 4,175 yellow taxis case, yellow cabs suffered 4.5 fewer acci- the card to correct the colours so that the 1 The Economist March 11th 2017 Science and technology 73
2 dipstick appears as if in a neutral, standard ambient light. The result is then analysed Sexual attractiveness automatically, in light ofthe patient’s med- ical history. If this analysis suggests a con- My chemical romance sultation or prescription is needed, that can also be arranged automatically. Two putative human sexpheromones turn out not to be The first urine-dipstick test was devel- oped in 1956, to look for glucose, which in- OR several decades biologists have hopeful Romeos and Juliets.) To try to dicates diabetes. Since then, sticks have Fpondered the question ofwhether clear up the confusion, a group ofre- been used to test forthe presence of blood, men and women produce pheromones. searchers led by Robin Hare ofthe Uni- of protein, of hormones indicating preg- A pheromone is a chemical signal from versity ofWestern Australia have per- nancy and also of various bacteria that one animal to another. Often, though not formed one ofthe most stringent studies cause urinary-tract infections. Some sticks, always, such chemicals indicate sexual to date. They report their results this notably those employed for pregnancy availability—and when it comes to hu- weekin Royal Society Open Science. tests, can be bought over the counter and man mating signals in particular, those Dr Hare and his colleagues took43 used at home. But for tests that require col- looking into the matter have a couple of men and 51women, all ofthem straight, our-matching, ratherthan merely checking specific molecules in mind. and gave them two tasks. One was to whether a single line is present or absent, Androstadienone (AND) and estra- decide whether an androgynous com- home analysis is regarded as unreliable. tetraenol (EST) are derived, respectively, puter-generated face was, on balance, from male and female hormones and are more likely to be female or male. The Point, click, treat exuded in sweat. The idea that they are other was to rate members ofthe oppo- It is this unreliability that Healthy.io is at- pheromonal is thus worth investigating. site sex shown in photographs for both tempting to deal with. The firm is, for in- The results ofsuch investigations as have their sexual attractiveness and their stance, working with doctors in Israel on a been made so far, though, are contra- likelihood ofbeing unfaithful. system that lets pregnant women at risk of dictory. Some experiments have found The participants completed both tasks pre-eclampsia (dangerously high blood that these molecules make opposite-sex twice, on consecutive days. On one day pressure, which is signalled by protein in faces, or photographs thereof, appear they were exposed to the appropriate the urine) use dip.io to monitorthemselves more attractive to heterosexual volun- molecule (AND forthe women; EST for at home. In Britain, meanwhile, the Na- teers. Others discern no such effect. the men) and on the other to a placebo tional Health Service (NHS) is starting to Unfortunately, most ofthese studies that ought to have had no effect. Cru- employ a version of the app to monitor were done with groups ofvolunteers too cially, the study was double-blinded, those suffering from multiple sclerosis small for clear conclusions to be drawn, which meant that neither the researchers whose bladders are affected by the dis- or using less-than-rigorous experimental nor the participants knew which day was ease. Members of this group, which is methods. (That has not stopped business- which. This should have made it impos- around 60,000-strong, are at particular es taking up the idea: several brands of sible for unconscious biases on the part risk of urinary-tract infections. About “pheromone perfume” based on EST ofthe experimenters or the subjects to 5,000 of them develop severe infections and, especially, AND are available for have had any effect on the result. every year. At the moment, when some- IfAND and EST really are aphrodisiac one in this position spots early symptoms pheromones, the researchers reasoned, he must go to a clinic to be tested. Home- then they ought to make participants testing, followed by a prescription posted more likely to assume that androgynous to those who need it, should obviate that faces belonged to the opposite sex. They need, speed up treatment and also save the should also boost the sex appeal of the NHS around £10m ($12m) a year. people in the photographs—and, because A third dipstick test the app may soon ofthat boost, increase the perception that be applied to is chronic kidney disease. In those people might be unfaithful, since America alone some 26m people have this the attractive have more opportunities condition, which is often associated with forinfidelity than the plain. diabetes and high blood pressure in a phe- In fact, they did none ofthese things. nomenon known as metabolic syndrome. The study thus found no evidence that Patients in the late stages of kidney disease either AND or EST is a pheromone. Those need costly dialysis. But if the illness is de- who buy pheromone perfumes based on tected early, byscreeningthe urine of those them would therefore appear to be wast- at risk to check for protein, sufferers can be ing their money. Whether the triumph of given drugsthatlowertheirblood pressure hope over experience will cause them to and thus slow the disease’s progress. carry on doing so anyway is a different Nor is urine analysis the only part of No pheromones here question altogether. medical practice that may benefit from healthy.io’s standardised selfies. Derma- tology should profit, too. To diagnose a as a reference which the app uses to correct spectroscopy—a detailed analysis of the skin condition from a picture, or to moni- and standardise the resulting image. frequencies of light making up an im- tor its development over the course of Yonatan Adiri, Healthy.io’sfounder, has age—or extend its range beyond visible time, dermatologists need not only to con- ambitions beyond even this. As he ob- light into the infrared and ultraviolet parts trol the colour of an image, but also its size serves, phones are everywhere and are im- of the spectrum. This may help analyse and the angle from which it is taken. In this proving all the time without his firm hav- wounds and surface infections, by study- case Healthy.io’s answer involves a stick- ing to lift a finger. By using their built-in ing characteristics that are invisible to the ingplasterprinted with coloured hexagons cameras, the company can piggyback on naked eye. That will save both doctors and that is placed near the relevant patch of phone-makers’ research and develop- patients time, and should result in better skin. Like the dipstick card, the plaster acts ment. Soon, his app may be able to employ outcomes all round. 7 74 Books and arts The Economist March 11th 2017
Also in this section 75 Improving social media 75 Dutch fiction, never dull 76 Consciousness explained 77 Traditonal Japanese theatre
For daily analysis and debate on books, arts and culture, visit Economist.com/culture
The future of America restrictions preventing the construction of more low-cost housing. A housing market Bland comfort that allocates the nicest housing to the highest bidder will inevitably push poor folk out of sight—and thus out of mind. Richer, well-educated people want to live neareach other, and high house prices con- veniently discourage poorer people from Two books examine American society. One analyses its growing complacency and spoiling the view. another(see following page) the importance ofserendipityin social discourse There will be consequences, says Mr MERICA is the land of opportunity, Cowen. Hyman Minsky, an economist Athey say. Inspired by the ambition of The Complacent Class: The Self- who grew up during the Great Depression, its Founding Fathers, its people revel in Defeating Quest for the American had a theory that financial stability would St Martin’s Press; theirdynamism. Diversity is theirstrength, Dream. By Tyler Cowen. breed overconfidence, sowing the seeds of 241pages; $28.99 as captured in the national motto—E pluri- future instability. Largelyignored in hislife- bus unum (“Out ofmany, one”). Americans time as he pushed against the prevailing embrace change and reinvention, and this, ingable to selectthe perfectproduct, neigh- wisdom that efficient markets would pro- they like to think, sets their country apart bourhood or partner. Freedom to choose tect capitalist society against disaster, his from Europe or Asia. means that it is ever easier for people to idea became widely celebrated only after Tyler Cowen, an economist, believes marry, live near or school their children the financial crisisappeared to confirm itin that this ideal is self-indulgent nonsense. with other people of the same kind. In the 2007-08. Complacent financiers, regula- America is losing its vim, he says, and South, the proportion of black students in tors and central bankers allowed risk to Americans are settling into stagnation. In majority-white schools was 44% in 1988; in build and put the whole system in danger. his new book, “The Complacent Class”, Mr 2011 that figure was 23%—lower than in Extending the idea to all society, as Mr Cowen shows not only that Americans 1968. Segregation by income has risen dra- Cowen does, is tricky because of the diffi- move less now, crossing state lines at matically in the past few decades. The culty in telling the difference between around half the average rate that they did American elite might celebrate diversity in complacency, contentment and submis- between 1948 and 1971, and stay longer in dinner-table conversation, but in practice sion. He is unclear who the complacent their jobs, but American entrepreneurial- Americans are cocooning themselves in class really are, and who exactly is respon- ism is floundering too. Markets are becom- enclaves oflike-minded folk. sible for the mess. Are Americans betray- ing more concentrated. Fewer new compa- Segregation shuts off growth and sty- ing their history of reaching for the Ameri- nies are being started, and many struggle mies innovation. Poorer states used to be can dream, or are they suffering because of to grow. Even in the vaunted technology able to attract talented people by offering a rotten system? (Were the bankers greedy, sector the creation and expansion of new them a combination of promising job op- or responding to incentives?) firms peaked in 2000. Sluggish growth in portunities and cheaper housing. But now Still, there is some truth to Mr Cowen’s productivity and living standards is mak- no one expects Louisiana to catch up with diagnosis that America’s strength is under- ing America more like Europe and Japan. Silicon Valley. For the past few decades mined byitsdivisionsand bya willingness On the surface, Americans enjoy more poorer states have been caught in a vicious to protect the powerful. Pockets of rich choice than ever before. From over 1,400 circle, says Mr Cowen, where the expecta- Americans and the lackofopportunity im- types of music on Spotify, a music-stream- tion that they will not catch up makes it plied for those who are shut out of those ing service, to a swipeable menu of dating harder forthem to do so. pockets represent a festering problem, says options, and rare books available at the When it comes to economic segrega- Mr Cowen. In a crisis, the system’s creaki- click of a button, consumers have never tion, market forces are not helping, or at ness will leave it ill-equipped to cope. In had it so good. But there is a darkside to be- least not when they are combined with the final chapter he reveals his fear that the1 The Economist March 11th 2017 Books and arts 75
2 biggest story ofthe last15 years is the grow- clude, among other things, that citizens be Dutch fiction ing likelihood that “a cyclical model of his- exposed to a wide range of ideas and per- tory will be a betterpredictorthan a model spectives—even, and especially, those they Madness in words ofongoing progress.” would not choose to see or hear. Un- The main question Mr Cowen raises is planned, chance encounters—with a prot- whether a dose of disorderliness will jolt est as one wanders down the street, or a America backto strength. He offers an opti- competing argument aired on the evening mistic scenario, in which driverless cars al- news—help guard against “fragmentation, The Evenings: A Winter’s Tale. By Gerard low Americans to overcome the pain of polarisation and extremism”. They ensure Reve. Translated by Sam Garrett. Pushkin having to commute over longer distances, that people are not hearing only an echo of Press; 317 pages; $22 and £12.99. or where global crises convince them that their own voice. They reduce the likeli- they should live for the moment. Artificial hood that people will be stirred to ex- A Foolish Virgin. By Ida Simons. Translated intelligence, clean cheap energy and alter- tremes, such as terrorism. And they pro- by Liz Waters. MacLehose Press; 216 pages; natives to tranquillising opioids could all mote shared information and experiences, £14.99. return America’s lost dynamism. makingiteasierto solve problemsand gov- The Penguin Book of Dutch Short Stories. But the pessimism of his analysis sits ern in a heterogeneous society. Edited by Joost Zwagerman. Penguin Modern uncomfortably with these rosy scenarios. This is the positive side of the free- Classics; 555 pages; £12.99 Other, likelier forms of chaos include pop- speech principle, Mr Sunstein writes. It ulist politicians bent on sowing division, means not only forbidding censorship, but ERARD REVE’S diabolically funny or even international violence. The path also creating a culture where people en- Gnovel, “The Evenings”, came out in from those to a restored, vibrant America gage with the views offellow citizens. 1947, but has only recently been translated seems longer and rockier. In cycles, things In the digital age social media function into English. The bookhas been praised on often go down before they go up. 7 as the public forums where ideas are ex- both sides of the Atlantic and has led read- changed. But when people filter what they ers to other freshly translated modern clas- see—and providers race towards evergreat- sics of Dutch literature. Among these are Social media er “personalisation” in the name of con- Ida Simons’s comic “A Foolish Virgin” sumer choice—democracy is endangered. (1959), about pre-war Jewish life, and Joost In praise of People live in separate worlds. Even hash- Zwagerman’s collection of 36 landmarks tags, meant to help users find information ofmodernist short fiction for“The Penguin serendipity on a certain topic, lead them to different Book of Dutch Short Stories”. Together bubbles. Democrats use #ACA and #black- they map a landscape of the imagination livesmatter; Republicans use #Obamacare that is farfrom flat and never dull. and #alllivesmatter. Partyism might be Zwagerman, a prolific writer who com- #Republic: Divided Democracy in the Age said to exceed racism in America, Mr Sun- mitted suicide in 2015, says in the preface of Social Media. By Cass Sunstein. Princeton stein argues. Whereas in 1960 only 5% of that the writers he selects share one aim: University Press; 310 pages; $29.95 and Republicans and 4% of Democrats said “To give a voice to madness”. As voters in £24.95 they would be “displeased” if their child the Netherlands prepare for an election on AST June Facebookannounced a change married outside their political party, by March 15th that may reward the unruly Lto its newsfeed. Henceforth it would re- 2010, those numbers had reached 49% and populism of Geert Wilders and his Free- jig the way stories were ranked to ensure 33%, a far higher percentage than those dom Party, readers abroad should hearken that people saw “the stories they find most who would be “displeased” if their child to that literary voice in all its cliché-busting meaningful”. But what does “most mean- married outside their race. oddity. Rational calculation and amiable ingful” actually mean? Posts from family Mr Sunstein wants an “architecture of consensus do not invariably govern Dutch and friends, apparently, as well as those serendipity” to combat these forces: that is, heads and hearts. Dig beneath the topsoil users you frequently “like”. Yournewsfeed media that promote chance encounters of“thissupposedlyhard-headed country”,1 should be “subjective, personal and and democratic deliberation like the pub- unique”, Facebook went on, promising to lic forums of old. Facebook might design work on building tools to give users “the “serendipity buttons”, he suggests, allow- most personalised experience”. ing users to click for opposing viewpoints Cass Sunstein, a law professor at Har- or unfiltered perspectives. Conservative vard University and Barack Obama’s for- news sites could feature links to liberal mer regulation tsar, is one of Facebook’s sites and vice versa, alerting people to ma- dissatisfied customers. “Facebook can do terial beyond theirusual sources. Asite like better,” he writes in “#Republic”, his new deliberativedemocracy.com—the domain book about democracy in the age of social isnotyettaken—could offera space for peo- media. Mr Sunstein is disturbed by some ple of divergent views to discuss issues. aspects of ultra-customised information, Democracies should take their cue from yet he shows himself a master of restraint Learned Hand, an American judge who in his criticism. He clearly wants to influ- said the spirit ofliberty is that “spirit which ence MarkZuckerbergand othertech titans is not too sure that it is right”. without alienating them. Although Mr It is not just up to Mr Zuckerberg, then, Zuckerberg dropped out of Harvard, per- to foster a culture of curiosity and open- haps he can still pick up the occasional ness. Citizens must demand it, Mr Sunstein book by a Harvard professor—along with argues, and they must seek out those ser- his new honorary degree. endipitous encounters. “#Republic” is full In some ways, “#Republic” is a kind of of constructive suggestions. It should be Democracy 101, a review of the basic re- required reading for anyone who is con- quirements for those who may have cerned with the future of democracy—in skipped the course. These requirements in- Silicon Valley and beyond. 7 76 Books and arts The Economist March 11th 2017
2 advises Zwagerman, and you hit a contra- tion does justice both to the deadpan dictory layer of “contemplative arch-ro- humour and the half-buried pain. mantics” and “reserved iconoclasts”. “The Evenings” mentions a schoolboy These quiet rebels are all over his an- called Sal Jachthandelaar who “made it to thology, from “An Eccentric” by Marcellus Switzerland and from there to England. His Emants, convinced that“we are doomed to family is dead.” No explanation given; live in absurdity”, to J.M.A. Biesheuvel’s none required. Under the Nazi occupation, tragicomic loser, plagued by “unspecified more than 100,000 Dutch Jews (out of fears that devour the soul”. The colonial 140,000) were killed. Many English-lan- legacy ofthe Dutch East Indies sprinkles its guage readers who pick up Simons’s “A fiery spice of adventure, danger, desire— Foolish Virgin” will have read only one and guilt—throughout the book. In a fable other account of a Dutch Jewish girlhood: by Harry Mulisch, Sergeant Massuro liter- the diary of Anne Frank. Yet Simons, who ally turns to stone “from remorse” at his narrowly avoided transportation to a jungle atrocities in New Guinea. Several death camp, refuses to let the grief of hind- stories track the revenge that society takes sight darken her effervescent story. on its heretics and mavericks. “We were on Astute but naive, little Gittel shuttles be- top ofthe world,” recallsthe narratorof the tween her home in The Hague and rela- 1915 tale “Young Titans” by Nescio (pen- tives in Antwerp. In the 1920s, the Jews of name of J.H.F Gronloh), “and the world both citieslive safely, even merrily. Still, the was on top of us.” In Frans Kellendonk’s grave banker Mr Mardell reprimands her poignant “Foreign Service”, the Egyptian skittish folly and insists that “there’s no joy cleaner Gamal assesses his new neigh- without suffering.” This translation by Liz Dan dares bours. With the Dutch, he decides, “there is Waters conveys Gittel’s madcap exuber- [a] war of the soul and the greediness and ance amid fun-loving families who scent spective on the nature of design, purpose then the greediness wins.” no storms over the horizon. Grandpa Har- and consciousness—to loosen the pull of Driven by mischief and devilry, these ry is even “a Jewish anti-Semite”: a “rela- “Cartesian gravity”, or the human propen- books show the Dutch awkward squad on tively innocent pleasure” then, “of a kind sity to thinkofthe mind as mysterious and parade. Reve himselfwould rankas a colo- no longer available to the gas-chamber non-physical. nel in any regiment of renegades; a gay generation”. Planted in this dancing novel, One of Mr Dennett’s key slogans is Catholic, he offended every orthodoxy. that phrase goes off like a bomb in a ball- “competence without comprehension”. “The Evenings” chronicles the ten final room. Within living memory, this phleg- Just as computers can perform complex days of 1946 through the aimless encoun- matic and pragmatic land has endured a calculations without understanding arith- ters of a vain but troubled filing clerk, Frits state-enforced collective madness. For metic, so creatures can display finely tuned van Egters, with his friends, his parents Zwagerman, Dutch writers habitually “ex- behaviour without understanding why and strangers in a dank December Amster- plore the vague borderland between delu- they do so. The rationale for their behav- dam. Reve combines a pitch-black comedy sion and reality”. In public, as in private, iour (diverting a predator, say, or tempting of manners with swingeing satire and that line may not always prove as firm as a mate) is “free-floating”—implicit in the metaphysical despair. He joins hilarity to the sturdy dams and dykes of Zuiderzee. 7 creatures’ design but not represented in heartbreak. “A day squandered in its en- theirminds. Competence withoutcompre- tirety,” ponders Frits after another drab hension is the default in nature, Mr Den- outing. “Hallelujah!” Consciousness explained nett argues, even among higher animals. Bleak, droll and exquisitely expressed, How then did human intelligence in the manner of Samuel Beckett’s near- The blind arise? People do not have a special faculty contemporary works of fiction, “The Eve- of comprehension. Rather, the human nings” hints at the anguish that underlies Bach-maker mind has been enhanced by a process of this anomie. Frits and his jesting chums cultural evolution operating on memes. hardly mention the second world war, Memes are copyable behaviour—words which inflicted such misery on the Nether- are a good example. From Bacteria to Bach and Back: The lands. A mood of stunned trauma hangs Initially, memes spread in human pop- Evolution of Minds. By Daniel Dennett. W.W. over this novel like the clammy mist on ulations like viruses, selected simply for Norton; 496 pages; $28.95. Allen Lane; £25 Amsterdam’s canals. In this frozen after- their infectiousness. Some were useful, math, the memory of horror surfaces indi- UMAN neurons are distant relatives of however, and the human brain adapted to rectly in Frits’s gruesome nightmares and, Htiny yeast cells, themselves descen- foster them: genetic and memetic evolu- very occasionally, in overt allusions. A dants of even simpler microbes. Yet they tion working together. Words and other news report tells of a child blown up by a are organised in structures that are capable memes gave humans powerful new com- grenade. “Deferred suffering from the of astonishing feats of creativity. How did petences—forcommunication, explicit rep- war,” remarks Frits. “That is always a joy.” the world get from bacteria to Bach, from resentation, reflection, self-interrogation These kids’ air of brutal nonchalance— fungus to fugues? Daniel Dennett, an and self-monitoring. To use a computer theirmorbid chats about diseases and acci- American philosopher and cognitive sci- analogy, memetic evolution provided dents; Frits’s comic obsession with bald- entist, tells the tale in his new book, revisit- “thinking tools”—a bit like smartphone ness as a harbinger of death; his claim that ing and extending half a century of work apps—which transformed humans into “Everything over 60 should be done away on the topic. comprehending, intelligent designers, trig- with”—masks the shock of damaged survi- The story is one of Darwinian natural gering an explosion of civilisation and vors. From the deep midnight of shattered selection: ofcomplexity emerging gradual- technology. Europe, Reve crafted not only an existential ly as beneficial mutations are preserved MrDennettseeshuman consciousness, masterwork worthy to stand with Beckett and harmful ones weeded out. It requires too, as a product of both genetics and me- or Albert Camus but an oblique historical the reader to make some “strange inver- metics. The need to communicate or with- testament. Sam Garrett’s splendid transla- sions of reasoning”—bold changes of per- hold thoughts gives rise to an “edited di-1 The Economist March 11th 2017 Books and arts 77
2 gest” of cognitive processes, which serves on them, and thatthe institutionsand prac- recently posted on the internet may help as the brain’s own “user interface”. The tices on which human comprehension spread the word, but Mr Shiba admits that mental items that populate consciousness depends may erode as a result. gagaku is still a minority interest. are more like fictions than accurate repre- This only hints at the richness of this His conservatoire-trained players make sentations ofinternal reality. book. Mr Dennett provides illuminating ends meet by teaching piano and violin, “From Bacteria to Bach and Back” con- explanations of the ideas he employs and and by working as monks in shrines and cludes with a look ahead. Mr Dennett ex- cites fascinating experimental work. Many temples. But he believes the music’s future pects that computers will continue to in- of his claims are controversial, and some will be as bright as its past. A virtuoso on crease in competence but doubts that they readers will be more persuaded than oth- the ryuteki flute, he surveys his own past will soon develop genuine comprehen- ers. However, Mr Dennett has an excellent with a smile: “My father played the ryuteki sion, since they lack the autonomy and so- record of predicting developments in cog- in the imperial ensemble, as did my grand- cial practices that have nurtured compre- nitive science, and it would be rash to bet father, as did his father, and so on back hension in humans. He worries that that he is far off track. Persuaded or not, through eight centuries.” people may overestimate the intelligence readerswill find theirmindsenriched with Meanwhile, on little wooden stages all of their artefacts and become over-reliant many powerful thinking tools. 7 over Japan, noh theatre is still being per- formed as it was 600 years ago on the pe- nal island of Sado. At the National Noh Traditional Japanese theatre Theatre in Tokyo, a performance of a ghost drama takes the audience into a world Enduring power even more rarefied than thatofgagaku. The gorgeously costumed actors pose like stat- ues—with climactic moments of ferocious activity—and their sepulchral voices, ac- companied by flute and drum, create the momentum ofa dream. TOKYO Admirers of this art form in the West The thrill ofan ancient tradition have included W.B. Yeats, an Irish poet, and APAN’S Westernisation is only skin- Peter Brook, a theatre director. Among its Jdeep. For musical proof of this, consider Japanese devotees is Toshio Hosokawa, a the eagerness with which the Japanese composer who combines a successful periodically forsake their high-tech exis- avant-garde career in Europe with loyal ad- tence and immerse themselves in their herence to his roots. Noh draws him, he age-old music-theatre. The most popular says, through its notion of purification by form ofthisiskabuki, which offerslashings contact with the spirit world, and through of violence, gore and palpitating, cross- its reliance on the power of silence, as dressed sex(all the actors are male). But the shown by the ritual gestures made by the Japanese also love the exquisite restraint of musicians and actors before a drum-stroke noh theatre, and the sacramental grace of or a sword-thrust. “My music is calligraphy gagaku music, which has scarcely changed painted on a canvas of space and time,” over the past 1,000 years. Each of these says Mr Hosokawa. “Silent movement in forms has been designated by UNESCO as the air—as the drummer makes his ges- representative of the “intangible cultural ture—has as much life as sound. And this heritage of humanity”, so the rest of the movement I imply in my music.” world might profitably pay attention. Does all this sound uncomfortably Gagaku, which literally means “elegant over-refined? Japanese audiences in the music”, was originally banquet music im- 17th century certainly thought so, with the ported from China during the Tang dy- result that noh was ousted as the main the- nasty. Only later was it adopted in Bud- atrical fare by the crazy flamboyance ofka- dhist temples, Shinto shrines and the buki, which was everything that noh is not. Japanese imperial court. Although the im- In place of the austere expressiveness of perial household ensemble now only The sounds of silence noh, kabuki made a brash appeal to the makes a handful ofpublic forays each year, merchant class—and to the samurai, de- otherensemblesare carryingthismusic far cept of “the space between”—in sound it is spite those warriors’ being forbidden to and wide. something Westerners dismiss as mere attend its corrupting spectacle. Playing to a packed house in the Na- silence. In Reigakusha’s sonic realm, that The 18th-century comedies and trage- tional Theatre in Tokyo is one of those silence is made to speakvolumes. dies which audiences now flock to see at groups: the Reigakusha ensemble, led by Reigakusha also plays a new composi- the Kabuki-za theatre in Tokyo represent a Sukeyasu Shiba, a sprightly octogenarian tion by Mr Shiba in which the traditional brilliantly choreographed and intensely (pictured). Dressed in medieval silk robes, sounds are given a Western, jazzy twist, physical art, whose lurid tales of love and the musicians are ranged motionless but one so subtle that the gagaku sound- death resonate powerfully for a 21st- across the stage like chessmen. Their music world remains intact. Interviewed after- century audience. If all this has something unfolds at a glacial pace. A high wail on the wards, he explains that he’s not only reviv- in common with theatre on Broadway and flute is followed by a few notes rumina- ing forgotten scores, he is also broadening in the West End in London, there’s an tively plucked on the koto zither; a slow the audience. “Hitherto, gagaku has been excitement in the air, particularly when skirl on the sho mouth-organ—17 bamboo played only for God, the Buddha and the one ofthe fabled Kabuki-za stars makes his pipes bound together vertically like a emperor. Now I want children to enjoy it, entrance, which is quintessentially Japa- bunch ofpetrified icicles—ispunctuated by so we are going into schools, and speeding nese. Here, too, you catch the spirit of an three thunderous strokes on the big taiko up the tempo.” The zany gagaku spoof of a ancient culture that is bursting with drum. Ma is the word forthe Japanese con- popular nonsense-song that his musicians health—behind the façade ofmodernity. 7 78 Courses
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The Economist March 11th 2017 80 Economic and financial indicators The Economist March 11th 2017
Economic data % change on year ago Budget Interest Industrial Current-account balance balance rates, % Economic Gross domestic data product production Consumer prices Unemployment latest 12 % of GDP % of GDP 10-year gov't Currency units, per $ Statisticslatest onqtr* 42 2017 economies,† latest plus latest 2017† rate, % months, $bn 2017† 2017† bonds, latest Mar 8th year ago United Statesour +1.9 monthly Q4 +1.8 poll +2.3 of forecasters nil Jan +2.5 Jan +2.3 4.8 Jan -476.5 Q3 -2.8 -3.5 2.51 - - China +6.8 Q4 +7.0 +6.5 +6.0 Dec +0.8 Feb +2.3 4.0 Q4§ +210.3 Q4 +2.0 -4.1 3.01§§ 6.91 6.51 Japan +1.6 Q4 +1.2 +1.1 +3.2 Jan +0.5 Jan +0.8 3.0 Jan +186.5 Jan +3.6 -5.4 0.06 115 112 Britain +2.0 Q4 +2.9 +1.6 +4.3 Dec +1.8 Jan +2.6 4.8 Nov†† -138.1 Q3 -4.4 -4.0 1.20 0.82 0.70 Canada +1.9 Q4 +2.6 +1.9 +2.6 Dec +2.1 Jan +1.8 6.8 Jan -51.2 Q4 -2.8 -3.3 1.78 1.35 1.34 Euro area +1.7 Q4 +1.6 +1.6 +2.0 Dec +2.0 Feb +1.6 9.6 Jan +399.5 Dec +2.9 -1.7 0.37 0.95 0.90 Austria +1.7 Q4 +2.0 +1.5 +2.1 Dec +2.0 Jan +1.7 5.7 Jan +8.0 Q3 +2.6 -0.9 0.52 0.95 0.90 Belgium +1.2 Q4 +2.0 +1.3 +9.5 Dec +3.0 Feb +2.0 7.7 Jan +3.4 Sep +0.9 -2.7 0.82 0.95 0.90 France +1.2 Q4 +1.7 +1.3 +1.3 Dec +1.2 Feb +1.3 10.0 Jan -34.5 Jan‡ -0.9 -3.1 0.96 0.95 0.90 Germany +1.8 Q4 +1.7 +1.6 nil Jan +2.2 Feb +1.8 5.9 Feb +294.5 Dec +8.3 +0.5 0.37 0.95 0.90 Greece -1.4 Q4 -4.8 +1.2 +2.1 Dec +1.2 Jan +0.8 23.0 Nov -1.1 Dec -1.2 -6.4 7.23 0.95 0.90 Italy +1.0 Q4 +0.7 +0.8 +6.6 Dec +1.5 Feb +1.2 11.9 Jan +50.7 Dec +2.4 -2.4 2.27 0.95 0.90 Netherlands +2.3 Q4 +2.0 +1.9 +4.8 Dec +1.8 Feb +1.1 6.4 Jan +57.1 Q3 +8.4 -0.9 0.44 0.95 0.90 Spain +3.0 Q4 +2.8 +2.5 +7.2 Jan +3.0 Feb +2.2 18.2 Jan +24.6 Dec +1.5 -3.3 1.73 0.95 0.90 Czech Republic +1.9 Q4 +1.6 +2.5 +2.7 Dec +2.2 Jan +2.3 5.1 Feb§ +3.7 Q3 +0.7 -0.5 0.69 25.6 24.5 Denmark +1.9 Q4 +0.9 +1.3 +2.5 Jan +0.9 Jan +1.2 4.2 Jan +24.5 Dec +6.8 -1.8 0.37 7.04 6.75 Norway +1.8 Q4 +4.5 +1.5 +0.6 Jan +2.8 Jan +2.2 4.4 Dec‡‡ +18.1 Q4 +4.9 +4.1 1.78 8.49 8.54 Poland +3.2 Q4 +7.0 +3.2 +9.0 Jan +1.8 Jan +1.8 8.5 Feb§ -2.5 Dec -1.2 -3.3 3.73 4.08 3.92 Russia -0.4 Q3 na +1.4 +2.3 Jan +4.6 Feb +4.7 5.6 Jan§ +22.2 Q4 +2.8 -3.0 8.25 58.4 72.9 Sweden +2.3 Q4 +4.2 +2.4 +1.3 Jan +1.4 Jan +1.6 7.3 Jan§ +23.7 Q4 +4.9 -0.4 0.65 9.03 8.47 Switzerland +0.6 Q4 +0.3 +1.4 -1.2 Q4 +0.6 Feb +0.2 3.3 Feb +68.2 Q3 +9.6 +0.2 -0.09 1.01 0.99 Turkey -1.8 Q3 na +2.4 +4.2 Jan +10.1 Feb +8.8 12.1 Nov§ -32.6 Dec -3.4 -2.2 11.31 3.73 2.91 Australia +2.4 Q4 +4.4 +2.6 +1.0 Q4 +1.5 Q4 +2.1 5.7 Jan -33.1 Q4 -1.4 -1.8 2.87 1.33 1.34 Hong Kong +3.1 Q4 +4.8 +1.7 -0.1 Q3 +1.3 Jan +1.8 3.3 Jan‡‡ +13.6 Q3 +4.2 +0.9 1.87 7.77 7.77 India +7.0 Q4 +5.1 +7.2 -0.4 Dec +3.2 Jan +4.8 5.0 2015 -11.1 Q3 -1.1 -3.2 6.86 66.7 67.4 Indonesia +4.9 Q4 na +5.2 +4.3 Dec +3.8 Feb +4.2 5.6 Q3§ -16.3 Q4 -2.0 -2.1 7.35 13,350 13,143 Malaysia +4.5 Q4 na +4.6 +4.8 Dec +3.2 Jan +2.8 3.5 Dec§ +6.0 Q4 +1.9 -3.1 4.15 4.45 4.12 Pakistan +5.7 2016** na +5.3 +7.0 Dec +4.2 Feb +4.9 5.9 2015 -4.9 Q4 -1.8 -4.8 7.59††† 105 105 Philippines +6.6 Q4 +7.0 +6.4 +23.0 Dec +3.3 Feb +3.3 4.7 Q4§ +3.1 Sep +0.5 -2.3 4.97 50.4 46.9 Singapore +2.9 Q4 +12.3 +2.1 +2.2 Jan +0.6 Jan +1.1 2.2 Q4 +56.7 Q4 +19.3 -1.0 2.37 1.42 1.38 South Korea +2.3 Q4 +1.6 +2.5 +1.7 Jan +1.9 Feb +1.7 3.8 Jan§ +96.8 Jan +6.2 -1.0 2.30 1,146 1,207 Taiwan +2.9 Q4 +1.8 +1.8 +2.8 Jan nil Feb +2.1 3.8 Jan +70.9 Q4 +11.5 -0.7 1.14 30.9 32.8 Thailand +3.0 Q4 +1.7 +3.3 +1.3 Jan +1.4 Feb +1.2 1.2 Jan§ +46.4 Q4 +10.9 -2.3 2.73 35.3 35.4 Argentina -3.8 Q3 -0.9 +2.7 -2.5 Oct — *** — 8.5 Q3§ -15.7 Q3 -2.9 -4.5 na 15.6 15.4 Brazil -2.5 Q4 -3.4 +0.7 +1.4 Jan +5.4 Jan +4.5 12.6 Jan§ -23.8 Jan -1.6 -7.7 10.12 3.15 3.79 Chile +1.6 Q3 +2.5 +1.8 -0.9 Jan +2.7 Feb +3.0 6.2 Jan§‡‡ -4.8 Q3 -1.2 -2.1 4.21 662 684 Colombia +1.6 Q4 +4.0 +2.4 +2.2 Dec +5.2 Feb +4.2 11.7 Jan§ -13.7 Q3 -4.0 -2.8 7.23 2,987 3,174 Mexico +2.4 Q4 +2.9 +1.6 -0.6 Dec +4.7 Jan +4.9 3.6 Jan -27.9 Q4 -2.6 -2.5 7.36 19.6 17.9 Venezuela -8.8 Q4~ -6.2 -5.8 na na +652 7.3 Apr§ -17.8 Q3~ -1.3 -19.5 10.43 9.99 6.31 Egypt +4.5 Q2 na +3.8 +17.2 Dec +28.2 Jan +19.2 12.4 Q4§ -20.1 Q4 -4.7 -10.9 na 17.7 7.83 Israel +4.2 Q4 +6.2 +4.2 -1.2 Dec +0.1 Jan +0.7 4.3 Jan +12.4 Q4 +3.7 -2.4 2.39 3.69 3.90 Saudi Arabia +1.4 2016 na +0.8 na -0.4 Jan +2.0 5.6 2015 -46.8 Q3 -2.1 -7.3 na 3.75 3.75 South Africa +0.7 Q4 -0.3 +1.2 -0.8 Dec +6.6 Jan +5.7 26.5 Q4§ -12.3 Q3 -3.4 -3.1 8.67 13.1 15.4 Source: Haver Analytics. *% change on previous quarter, annual rate. †The Economist poll or Economist Intelligence Unit estimate/forecast. §Not seasonally adjusted. ‡New series. ~2014 **Year ending June. ††Latest 3 months. ‡‡3-month moving average. §§5-year yield. ***Official number not yet proved to be reliable; The State Street PriceStats Inflation Index, Jan 29.53%; year ago 30.79% †††Dollar-denominated bonds. The Economist March 11th 2017 Economic and financial indicators 81
Markets % change on The Economist poll of forecasters, March averages (previous month’s, if changed) Dec 30th 2016 Real GDP, % change Consumer prices Current account Index one in local in $ Low/high range average % change % of GDP Markets Mar 8th week currency terms 2017 2018 2017 2018 2017 2018 2017 2018 United States (DJIA) 20,855.7 -1.2 +5.5 +5.5 Australia 2.0 / 2.8 2.4 / 3.2 2.6 2.9 2.1 2.3 -1.4 (-2.2) -1.9 China (SSEA) 3,393.4 -0.2 +4.4 +5.1 Brazil 0.1 / 1.5 0.3 / 4.0 0.7 2.2 4.5 (4.9) 4.6 -1.6 (-1.5) -2.0 Japan (Nikkei 225) 19,254.0 -0.7 +0.7 +2.5 Britain 1.2 / 2.0 0.7 / 1.7 1.6 (1.4) 1.2 2.6 2.7 -4.4 (-4.6) -3.8 Britain (FTSE 100) 7,334.6 -0.7 +2.7 +1.1 Canada 1.2 / 2.3 1.5 / 2.7 1.9 2.0 1.8 (1.9) 1.9 -2.8 (-2.9) -2.5 Canada (S&P TSX) 15,497.0 -0.7 +1.4 +1.0 China 6.2 / 6.8 5.8 / 6.9 6.5 6.3 2.3 (2.2) 2.4 2.0 (2.1) 1.8 Euro area (FTSE Euro 100) 1,144.8 -0.1 +2.9 +3.0 France 1.0 / 1.6 1.1 / 1.8 1.3 1.5 1.3 (1.4) 1.3 -0.9 (-1.0) -1.0 Euro area (EURO STOXX 50) 3,389.6 nil +3.0 +3.1 Germany 1.1 / 1.8 1.3 / 2.1 1.6 (1.5) 1.6 1.8 1.6 8.3 (8.4) 8.0 Austria (ATX) 2,813.7 +0.6 +7.5 +7.5 India 6.2 / 8.4 6.5 / 8.4 7.2 (7.4) 7.6 4.8 5.0 -1.1 (-1.0) -1.4 Belgium (Bel 20) 3,699.5 +1.1 +2.6 +2.7 Italy 0.6 / 1.1 0.6 / 1.2 0.8 0.9 1.2 1.2 2.4 2.2 France (CAC 40) 4,960.5 nil +2.0 +2.1 Japan 0.6 / 1.5 0.6 / 1.6 1.1 (1.2) 1.0 0.8 1.0 3.6 (3.5) 3.6 Germany (DAX)* 11,967.3 -0.8 +4.2 +4.3 0.6 / 2.6 0.9 / 3.0 1.4 (1.3) 1.8 4.7 (4.9) 4.3 2.8 (2.9) 2.6 Greece (Athex Comp) 649.3 -1.0 +0.9 +1.0 Russia Italy (FTSE/MIB) 19,482.4 +0.6 +1.3 +1.4 Spain 2.3 / 2.9 1.7 / 2.8 2.5 (2.4) 2.1 2.2 (2.0) 1.4 1.5 1.5 Netherlands (AEX) 502.8 -0.4 +4.1 +4.1 United States 1.7 / 2.8 1.0 / 3.6 2.3 (2.2) 2.4 2.3 2.3 -2.8 (-2.7) -2.9 Spain (Madrid SE) 994.0 +1.0 +5.4 +5.4 Euro area 1.2 / 2.3 1.2 / 2.1 1.6 (1.5) 1.6 1.6 (1.5) 1.4 2.9 (3.0) 2.8 Czech Republic (PX) 972.2 nil +5.5 +5.6 Sources: Bank of America, Barclays, BNP Paribas, Citigroup, Commerzbank, Credit Suisse, Decision Economics, Deutsche Bank, Denmark (OMXCB) 812.8 -2.0 +1.8 +1.9 EIU, Goldman Sachs, HSBC Securities, ING, Itaú BBA, JPMorgan, Morgan Stanley, Nomura, RBS, Royal Bank of Canada, Schroders, Scotiabank, Société Générale, Standard Chartered, UBS. For more countries, go to: Economist.com/markets Hungary (BUX) 32,547.4 -2.4 +1.7 +1.0 Norway (OSEAX) 764.8 -1.1 nil +1.3 Poland (WIG) 58,559.1 -1.8 +13.1 +15.7 Other markets The Economist commodity-price index Russia (RTS, $ terms) 1,097.4 -1.1 -4.8 -4.8 2005=100 Othermarkets % change on % change on Sweden (OMXS30) 1,578.2 -0.8 +4.0 +4.6 Dec 30th 2016 The Economist commodity-priceone index one Switzerland (SMI) 8,626.7 -0.1 +4.9 +5.1 Index one in local in $ Feb 28th Mar 7th* month year Turkey (BIST) 89,484.9 +0.2 +14.5 +8.1 Mar 8th week currency terms Dollar Index Australia (All Ord.) 5,799.5 +0.8 +1.4 +5.8 United States (S&P 500) 2,363.0 -1.4 +5.5 +5.5 All Items 146.7 145.7 -1.7 +12.3 Hong Kong (Hang Seng) 23,782.3 nil +8.1 +7.9 United States (NAScomp) 5,837.6 -1.1 +8.4 +8.4 Food 156.4 155.5 -2.8 +5.1 India (BSE) 28,901.9 -0.3 +8.5 +10.4 China (SSEB, $ terms) 347.1 -0.9 +1.5 +1.5 Indonesia (JSX) 5,393.8 +0.6 +1.8 +2.8 Japan (Topix) 1,550.3 -0.2 +2.1 +3.8 Industrials Malaysia (KLSE) 1,725.5 +1.6 +5.1 +5.8 Europe (FTSEurofirst 300) 1,469.2 -0.8 +2.9 +2.9 All 136.7 135.5 -0.4 +22.3 Pakistan (KSE) 49,754.7 +1.6 +4.1 +3.6 World, dev'd (MSCI) 1,834.7 -1.2 +4.8 +4.8 Nfa† 144.2 146.1 -2.9 +28.8 Singapore (STI) 3,145.3 +0.7 +9.2 +11.3 Emerging markets (MSCI) 934.9 -0.4 +8.4 +8.4 Metals 133.5 130.9 +0.9 +19.4 South Korea (KOSPI) 2,095.4 +0.2 +3.4 +9.0 World, all (MSCI) 443.6 -1.1 +5.2 +5.2 Sterling Index Taiwan (TWI) 9,753.5 +0.8 +5.4 +10.1 World bonds (Citigroup) 880.3 -0.7 -0.4 -0.4 All items 214.5 216.2 -0.3 +30.2 Thailand (SET) 1,551.7 -1.0 +0.6 +2.2 EMBI+ (JPMorgan) 792.3 -0.6 +2.6 +2.6 Argentina (MERV) 19,232.6 -0.7 +13.7 +15.4 Hedge funds (HFRX) 1,222.9§ -0.4 +1.6 +1.6 Euro Index Brazil (BVSP) 64,718.0 -3.4 +7.5 +11.2 Volatility, US (VIX) 11.9 +12.5 +14.0 (levels) All items 171.7 170.9 +1.0 +17.2 Chile (IGPA) 22,441.6 +2.0 +8.2 +9.5 CDSs, Eur (iTRAXX)† 71.8 +1.3 -0.4 -0.4 Gold Colombia (IGBC) 9,836.2 -0.5 -2.7 -2.2 CDSs, N Am (CDX)† 63.8 +6.1 -5.9 -5.9 $ per oz 1,256.6 1,218.9 -1.2 -4.0 Mexico (IPC) 47,539.2 +0.2 +4.2 +9.6 Carbon trading (EU ETS) € 5.2 -4.4 -20.4 -20.3 West Texas Intermediate Venezuela (IBC) 37,603.0 +3.8 +18.6 na Sources: Markit; Thomson Reuters. *Total return index. $ per barrel 54.0 53.1 +1.9 +46.5 Egypt (EGX 30) 12,735.4 +6.1 +3.2 +5.7 †Credit-default-swap spreads, basis points. §Mar 7th. Israel (TA-100) 1,280.7 -0.3 +0.3 +4.6 Sources: Bloomberg; CME Group; Cotlook; Darmenn & Curl; FT; ICCO; Indicators for more countries and additional ICO; ISO; Live Rice Index; LME; NZ Wool Services; Thompson Lloyd & Saudi Arabia (Tadawul) 6,970.8 +0.1 -3.7 -3.7 Ewart; Thomson Reuters; Urner Barry; WSJ. *Provisional South Africa (JSE AS) 51,300.0 -0.7 +1.3 +5.9 series, go to: Economist.com/indicators †Non-food agriculturals. 82 Obituary Mostafa el-Abbadi The Economist March 11th 2017
learning. Imitations had been built in Baghdad, Córdoba, London and Washing- ton, DC; visiting world leaders asked after what remained of it. So in the 1970s he be- gan to float, gently, the idea or dream of a new library, following the “spiritual exam- ple” of the ancients. The seed did not take for years. In 1986, however, UNESCO agreed to help and money began to flow.
The sun half-rising He was well aware of the project’s limita- tions. Because books were so costly, it seemed best to build up the library as a se- ries of circles. He began by amassing all possible bibliographical references for the city of Alexandria, and then moved out- wards: to Egypt, the Middle East, Africa. He did not say “the world”, but he intended it. The new library, like the old, should be uni- versal, taking in donations from all coun- tries, digitising texts (though his love was for physical books, not screens) and draw- ing scholars to a new Shrine of the Muses, where they could workin an almost sacred atmosphere oftolerance and bright ideas. The regime ofHosni Mubarakcould not see what he was getting at. Officials envis- All the books in the world aged a big library and an Egyptian cultural centre; Egypt was, after all, paying half the $225m cost. In 2002 the new Bibliotheca Alexandrina opened, with space for 8m books on 11storeys—and four museums, 19 galleries, a Culturama Hall with a vast in- Mostafa el-Abbadi, the man behind the recreation ofthe Great Libraryof teractive screen, and gift shops. One muse- Alexandria, died on February13th, aged 88 um was filled with the personal effects of HE universe”, wrote Borges, “was ny of his elegant, book-crammed flat—he Anwar Sadat, a former president. Mr Ab- “Tcalled by some the library.” Mostafa might have wished it so. But Syria and Bab- badi gave the library his precious 16th-cen- El-Abbadi, foremost among Egyptian ylon both had libraries earlier, as did the tury copy of the Codex of Justinian. It scholars of the Graeco-Roman world, was temple at Karnak. The difference was that seemed slightly out ofplace. of the same opinion. His universe was the these were regional institutions, with local He was not invited to the opening. He ancient Great Library of Alexandria, long interests. Alexandria’s library was the first was known to have misgivings, and to since vanished, which had occupied his to be set up as a repository of all human have made a fusswhen he spotted the bull- mind and heart since his student days. knowledge: the universe under one roof. dozers dumping chunks of mosaic in the As he told it, an elfin figure wreathed in And it was never, he stressed, just a col- sea; for the project involved huge excava- smileswith the joyofitall, the original Bib- lection of texts. The real heart of the enter- tions on the site of the Ptolemies’ palace, liotheca Alexandrina had been inspired by prise was the Museion or Shrine of the and he was a man whose idea of a holiday the conquering expeditions of Alexander Muses, which was a centre of research. was to tour the ancient ruins of the Middle the Great, which had shown for the first There, amongwalkways and arcades espe- East. He did not carp about his exclusion, time the diversity of mankind and the cially designed forthinking, Euclid came to but kept quiet company in his study with Earth; and had been funded by Ptolemy I, formulate his theorems; Eratosthenes to his cat, Cleopatra. At least his booklet on who wished it to contain “all the texts in measure the circumference of the Earth; the Great Library (only a booklet, he insist- the world that are worthy of study”. There and Herophilos to prove that the brain, not ed, not a book) had been handed out at the had been half a million, maybe many the heart, was the seat of the intellect. opening. He did his job; they did theirs. more. Visitorsto Alexandria were searched There, too (to Mr Abbadi’s chuckling de- The design ofthe library, which he liked in case they had a book which was not in light), the philosopher Plotinus four times in principle, was a half-buried sphere that stock. Ptolemy III managed to acquire, by achieved complete union with the divine. symbolised the sun rising, spreading the trickery, the originals of the plays of Soph- It struck him then as sad, when he re- light ofknowledge over the world. He only ocles, Aeschylus and Euripides. Mr Abbadi turned to Alexandria in 1960 from his doc- wished that it were true. The library made was sure the collection included books toral studies at Cambridge, that the mod- an efficient cultural centre, he sighed. But it from Phoenecia, Buddhist texts from India, ern city had no great library. Of course, did not function as a universal centre of re- the Septuagint of the Hebrews and Maz- Egypt had no sacks of silver now to spill search. Archimedes and Galen would not dean writings from Persia. out on culture, unlike the Ptolemaic kings. have done their thinking under that inter- Alexandria’s library was not the first. Yet the wonder of the library, despite Cae- active screen. The Muses would not have As a proud citizen—Alexandrian by both sar’s incineration of it (for he held Caesar touched brains, and hearts. And Plotinus parents, holder (as was his wife, Azza Kara- strictly to blame), had been seared on the would not have written, having encoun- rah) of distinguished posts at the universi- memory of the world and on its image of tered the One-and-its-power, “He is, Him- ty, admirer of the sea view from the balco- Alexandria, as a cosmopolitan city of self…the encompassment ofall things.” 7 STATE-OF- THE-ART CEO.
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