Terror and the Internet

Qatar among the pigeons

China’s polluted soil

The end of causality

TECHNOLOGY QUARTERLY: Civilian drones JUNE 10TH–16TH 2017 Terror and the internet

Contents The Economist June 10th 2017 5

7 The world this week 32 Opioids and lawsuits Ohio high 33 Climbing Leaders Rock stars 9 Curbing jihadists 34 Lexington Terror and the internet North Korea 10 Qatar Donald does Doha The Americas 10 The Federal Reserve Check yourself 35 Haiti A time to sow 11 Education in India Skilled immigrants America’s A waste of 260m minds 37 Bello The bogeyman of Mexico new permanent residents are 12 Soil pollution in China arriving better educated than Buried poison ever before, page 30 On the cover Middle East and Africa Technology firms could do Letters 39 Qatar and Saudi Arabia more to counter terror on the A futile family feud 14 On Israel, Singapore, internet—within limits: cinema, writers, GDP 40 Egypt’s crackdown leader, page 9. Tech giants The punishments of Sisi fuss are under fire for facilitating 41 Al-Qaeda terrorism. Though that is Briefing Yemen’s other war unfair, they are not blameless, 18 Pollution in China 41 Travel in Africa page 52. Another attack The bad earth sparks a debate on what A dream of Schengen police need to stop future 42 The Horn of Africa atrocities, page 49 Asia Shepherds staying put 21 Indian schools Now make sure they learn Technology Quarterly Qatar The Trumpian world The Economist online something order means a less stable Middle Civilian drones East: leader, page 10. Its Daily analysis and opinion to 22 Pakistan’s Khyber After page 42 Pakhtunkhwa neighbours cut off tiny Qatar, supplement the print edition, plus page 39 audio and video, and a daily chart Emergency treatment Economist.com 24 Veneration in North Korea Europe E-mail: newsletters and Follow my leader 43 Emmanuel Macron mobile edition 26 Cambodian elections A second French revolution Economist.com/email The grip starts to slip 44 Obesity Print edition: available online by 26 Press freedom in Japan Ravenously Hungary 7pm London time each Thursday Bristling with indignation 44 Welfare and refugees Economist.com/print A new Scandi model Audio edition: available online 45 Italy’s Mafia China to download each Friday A godfather’s end 27 Politics Economist.com/audioedition 46 Russia’s opposition Xi’s shadowy committees The contender 28 Media 48 Charlemagne A feisty magazine The environment China would Leo Varadkar’s task 29 Banyan be a more convincing green Still shy of the world stage champion if it did not treat Volume 423 Number 9044 Britain pollution data as state secrets: leader, page 12. Contaminated 49 Terrorism Published since September 1843 United States soil is the biggest neglected to take part in "a severe contest between Money or power? intelligence, which presses forward, and 30 Skilled immigration threat to public health in 50 Negotiating Brexit an unworthy, timid ignorance obstructing Six degrees and separation China, page 18 our progress." The hardest test 31 The FBI Editorial offices in London and also: 51 Bagehot Atlanta, Beijing, Berlin, Brussels, Cairo, Chicago, Loyalty schemes Lima, Mexico City, Moscow, Mumbai, Nairobi, The second eleven New Delhi, New York, Paris, San Francisco, 31 Kansas São Paulo, Seoul, Shanghai, Singapore, Tokyo, Back to black Washington DC 32 Puerto Rico Admit one

1 Contents continues overleaf 6 Contents The Economist June 10th 2017

International Science and technology 52 Terrorism online 68 Hurricanes Fighting cyber-jihadists Eyes on the storm 54 The stabbing intifada 69 Early man How to spot a lone wolf Even earlier man 70 Blindness Business White cane 2.0 55 Clean energy 70 Microelectronics We’ve got the power It’s a wrap 56 Iberdrola 71 Causality The BRICs The big four The end of causality If time is The storage question Does one thing lead to developing economies emerge another? fuzzy, that has implications for from a bad dream, page 62 57 Ride-hailing wars the idea of causality, page 71 Lyft’s big lift 58 Air-traffic control Books and arts Trump’s plans 72 Piet Mondrian Subscription service Geometry man For our full range of subscription offers, 58 Replica food in Japan including digital only or print and digital Sampuru chef 73 Football combined visit Secrets and successes Economist.com/offers 59 New retail techniques You can subscribe or renew your subscription Body language 73 Botany by mail, telephone or fax at the details below: The plant messiah Telephone: +65 6534 5166 60 Digital mapping Facsimile: +65 6534 5066 The road ahead 74 Gail Godwin’s fiction Web: Economist.com/offers Sun, sea and spectres E-mail: [email protected] 61 Schumpeter Post: The Economist China Inc 74 Sir Hans Sloane Subscription Centre, Hoarder extraordinaire Tanjong Pagar Post Office Education in India The PO Box 671 Finance and economics 75 Johnson Singapore 910817 country has made huge Hyphen harrumph Subscription for 1 year (51 issues)Print only progress on getting children 62 Emerging markets Australia A$465 into school. Now it must teach Awaking with the BRICs China CNY 2,300 Hong Kong & Macau HK$2,300 them: leader, page 11. More 63 Buttonwood 78 Economic and financial India 10,000 Indians than ever attend Bond-yield surprise indicators Japan Yen 44,300 Statistics on 42 economies, Korea KRW 375,000 school, yet few of them are 64 American third-party Malaysia RM 780 plus our monthly poll of New Zealand NZ$530 learning much, page 21 debt collectors Singapore & Brunei S$425 forecasters Taiwan NT$9,000 Bum rap Thailand US$300 64 Bangladesh’s remittances Other countries Contact us as above Give and taka Obituary 80 Yu Zhijian 65 Green bonds Principal commercial offices: Bounding along One in the eye for the 25 St James’s Street, London sw1a 1hg 66 Banco Popular Chairman Tel: +44 20 7830 7000 Rescue mission Rue de l’Athénée 32 1206 Geneva, Switzerland 66 Italian banks Tel: +4122 566 2470 Pastures new? 750 3rd Avenue, 5th Floor, New York, NY 10017 67 Free exchange Tel: +1212 5410500 How to be wrong 1301Cityplaza Four, 12 Taikoo Wan Road, Taikoo Shing, Hong Kong Admitting errors To err is Tel: +852 2585 3888 human. Society is suffering Other commercial offices: from an inability to Chicago, Dubai, Frankfurt, Los Angeles, acknowledge as much: Free Paris, San Francisco and Singapore exchange, page 67

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ed just14 months ago, will At least19 people were killed in Gulfstate. They accused it, Politics secure a parliamentary major- Kabul and another 90 injured without providing evidence, ity in an election. The first when the funeral ofthe son of ofsupporting and promoting round is on June 11th, the sec- a prominent Afghan senator terrorism. Donald Trump ond on June 18th. was targeted by bombers. The tweeted his approval, perhaps senator’s son had died during forgetting that Qatar hosts a Building a presence protests calling fortighter large American air base. In a new report, the Pentagon security in the Afghan capital said that China was building following the recent bomb In a rare terror assault on Iran’s fighter-sized hangars, fixed- near the diplomatic area, in capital, Islamic State (IS) weapons positions and other which 150 people are now claimed responsibility fortwo military infrastructure on three known to have died. attacks in Tehran, one at the islands it has built in the South Iranian parliament and one at China Sea. It said that when Tight margins the tomb ofAyatollah Khomei- complete, the facilities would With most ofthe vote counted ni, in which at least12 people enable China to base three in the governor’s race in the were killed. Eight people were killed in regiments offighters in the State ofMexico, which bor- London when three Islamists disputed Spratly Islands. ders Mexico City, Alfredo del American-backed Kurdish-led drove a van into pedestrians Mazo Maza, the governing forces in Syria began an assault on London Bridge and then South Korea’s new president, Institutional Revolutionary on Raqqa, the “capital” ofIS’s went on a stabbing spree in the Moon Jae-in, suspended the Party’s candidate, appeared to so-called caliphate. The city trendy Borough Market neigh- deployment ofTHAAD, an have defeated Delfina Gómez, has been encircled forweeks, bourhood. Almost 50 people American missile shield, for at from the left-wing Morena but this is the first time the were injured. The three attack- least a year. China opposes the party. The election in Mexico’s jihadists’ opponents have ers were killed within eight shield and has stepped up the most populous state was a test entered the city limits. minutes by armed police, who pressure on Seoul recently, ofstrength ahead ofnext were praised fortheir swift threatening sanctions. year’s presidential ballot. South Africa unexpectedly response. But questions were Morena alleges that the PRI slumped into recession after asked about why the men had bought votes and has demand- the economy contracted by been free to operate, given that ed a recount. 0.7% in the first quarter, after they were already known to falling 0.3% in the last quarter the intelligence services. Brazil’s electoral tribunal of2016. Economists had fore- began deliberations on wheth- cast a tentative recovery. British voters went to the polls er to remove the country’s on June 8th, in the second president, Michel Temer, from Think global, act local general election in two years. office. Prosecutors say that he More American states signed Theresa May, the Conservative was re-elected as vice-presi- up to a “climate alliance” that prime minister, had called it dent in 2014 with the help of aims to honour the terms of seven weeks ago to give her- illicit money. the Paris accord on climate selfa stronger mandate for change from which Donald negotiating Brexit. She framed More than 100,000 people in Canada’s government has Trump has withdrawn Ameri- the poll as a test ofthe strength Hong Kong joined a candlelit said it will increase spending ca. Mr Trump’sdecision to pull ofher leadership compared vigil to markthe anniversary on defence by 70% over the out ofthe agreement was with a Labour Party adrift ofthe crushing ofthe Tianan- next decade to C$33bn ($24bn) roundly condemned. Califor- under Jeremy Corbyn. But the men Square protests in Beijing a year. That will raise the coun- nia, New Yorkand Washington calm and composed Mrs May in 1989. On July1st Xi Jinping is try’s military budget to 1.4% of have created the United States started to wobble as the cam- expected to pay his first visit to GDP from 1.2% now. The target Climate Alliance in response. paign sparked to life in the the territory as China’s presi- formembers ofNATO is 2%. final weeks. Results and analy- dent, to markthe 20th anniver- Mr Trump said he would sis can be found at econo- sary ofChinese rule. Arab brothers nominate Christopher Wray to mist.com/ukelection2017. be director ofthe FBI. Mr Wray In India, raids by federal used to head the Justice De- Malta’s incumbent Labour investigators on the offices of partment’s criminal division. Party won a snap general NDTV, an influential liberal The announcement came election and another five-year television station, and on the ahead oftestimony to Con- term. Joseph Muscat, the prime homes ofits founders were gress from James Comey about minister, called the vote amid criticised by many in the press why he was sacked by Mr corruption allegations as an assault on free speech. Trump as head ofthe FBI. connected to the Panama The raids were carried out to Papers, which he denied. gather evidence on an alleged An analyst working foran outstanding bankloan, which American spy agency was After his victory in France’s NDTV said had been repaid charged with leaking classi- presidential election, Emman- years ago. It maintains that it is fied information to the media uel Macron is on trackto trans- the victim ofa political witch- Saudi Arabia, Bahrain, the about Russian interference in form the face ofthe National hunt forits sceptical reporting United Arab Emirates and the presidential election. She is Assembly. According to polls, about the government headed Egypt all severed diplomatic the first person to be indicted La République en Marche!, a by the Hindu-nationalist relations with Qatar, and cut fordivulging secret files since movement Mr Macron found- Bharatiya Janata Party. land, air and sea links with the Mr Trump became president. 1 8 The world this week The Economist June 10th 2017

IT experts are deeply sceptical also said that although a mod- that newspapers got more of Business that such a simple explanation est cyclical expansion was their income from circulation accounts forthe chaos. More under way worldwide, this than from ads; and that Santander, Spain’s biggest may be revealed when an would not be enough to sus- streamed music outstripped lender, bought Banco Popular, independent inspection deliv- tain hefty improvements in downloaded songs. This year a distressed rival, in the first ers its conclusions. living standards. In a separate it expects the proceeds from test ofa new scheme in Europe report the World Bankpredict- streaming videos on the web to bail out banks. The inability American employers created ed global growth of2.7%. to overtake sales from DVDs. ofPopular to reduce its pile of 138,000 jobs in May, a lower toxic debt led to a rapid decline number than economists had Getting its house in order TerryGou, the chairman of in its share price. The Single expected. The figure provided Under fire forits management Foxconn, a contract electron- Resolution Board, an indepen- more food forthought forthe shortcomings, Uber has ics manufacturer, said he had dent agency ofthe European Federal Reserve ahead ofits sacked 20 employees after an enlisted the financial backing Central Bank, declared that policy meeting on June 14th. internal investigation carried ofAmazon and Apple in a bid Popular was about to fail, The central bankhas dropped out by a law firm reported its for Toshiba’s chipmaking opening the way fora man- heavy hints that it will raise findings into claims ofharass- business, thought to be worth aged sale to Santander for€1 interest rates at the meeting, ment. At least 90 other mem- around $20bn. That might help ($1.10). The new scheme is but one ofthe arguments for bers ofstaffare either still defuse stiffopposition to the designed to prevent taxpayers doing so is that the jobs market being investigated, in work- bid in Japan, Toshiba’s home, from picking up the tab for a is overheating. place counselling or have because ofFoxconn’s oper- bankrescue. Instead, some of received a warning. A separate ations in China. Popular’s bondholders have report from a law firm led by taken a hit and its shareholders GDP forecasts Eric Holder, a former US The voice: Siri v Alexa have lost their shirts. In Italy, % increase on a year earlier attorney-general, into Uber’s Apple unveiled the HomePod, 2017 2018 the government’s plan to bail 02468 culture has been handed over a voice-activated speaker out Monte dei Paschi di Siena India to the board. equipped with Siri, the virtual- EU was approved by the . China assistant technology found on United Five months after moving into iPhones. HomePod is Apple’s States More than 60 countries signed Euro area mobile gaming by creating a somewhat belated answer to an agreement to clamp down Britain division to focus on the busi- Amazon’s Echo smartspeaker on companies’ tax-avoidance ness, 21st Century Fox agreed (with Alexa voice-control) and Japan practices, such as shifting to buy Aftershock, a developer Google’s Assistant. At the Source: OECD titular headquarters to low-tax that is working on a game launch, Apple played up jurisdictions. By some esti- The OECD forecast that the based on “Avatar”, the world’s HomePod’s audio specifica- mates the path-breaking pact, world economy will grow by highest-grossing film. tions, signalling that it expects advanced by the G20 and 3.5% this year, which would be the device to compete with OECD, could raise an extra 10% the fastestpace since 2011. But Research by PwC into global top-of-the-range speakers in tax revenues. America has the organisation downgraded media trends revealed several made by Bose and others. not signed up, but the deal will its estimate ofAmerica’s GDP firsts. It found that advertising affect its big multinationals, growth rate to 2.1% from the revenue from the internet beat Other economic data and news such as Amazon and Apple. 2.4% it projected in March. It that from television last year; can be found on pages 78-79

Trump air Donald Trump proposed privatising America’s air- traffic control system, calling forit to be put in the hands ofa not-for-profit organisation outside government control. Mr Trump says this will improve air-traffic technology and reduce delays. He is supported by many big airlines, but whether his plan flies depends on winning over its opponents in Congress.

An electrical engineer contracted by British Airways to work at its data centre was blamed by the airline for causing a computer glitch that grounded all its ﬂights. Willie Walsh, the chiefexecutive ofBA’s parent company, said the engineer had disconnected the power and then turned it backon in an “uncontrolled fashion”. But Leaders The Economist June 10th 2017 9 Terror and the internet

Tech firms could do more to help—within limits HREE jihadist attacks in Brit- As with car accidents or cyber-attacks, perfect security is Tain in as many months have unattainable. But an approach based on “defence in depth”, led to a flood of suggestions combining technology, policy, education and human over- about how to fight terrorism, sight, can minimise riskand harm. from more police and harsher Often, commercial self-interest gives an incentive for the jail sentences to new legal pow- technology companies to act. Although fake news is popular ers. But one idea has gained mo- and engaging, and provides opportunities to fill advertising mentum in both Europe and slots, it is bad for the technology giants’ reputations. Accord- America—that internet firms are doing the jihadists’ work for ingly, Google and Facebook are doing more to cut off fake- them. Technology giants, such as Google and Facebook, are ac- news sites from their advertising networks, build new tools to cused of turning a blind eye to violent online propaganda and flag dubious stories and warn readers of them, and establish other platforms of allowing terrorists to communicate with links with fact-checking organisations. each other out ofreach ofthe intelligence services. When self-interest is not enough, governments can prod It is only the latest such charge. The technology firms have the firms to tighten up—as German lawmakers have, threaten- also been condemned for allowing the spread of fake news ing huge fines. Under a voluntary agreement with European and harbouringbullies, bigotsand trollsin the pursuit ofprofit. regulators, the big firms have set a target of reviewing (and, In the past they were accused of enabling people to evade when appropriate, removing) within a day at least 50% ofcon- copyright and ofhosting child pornography. tent flagged by users as hateful or xenophobic. The latest fig- In all these areas, politicians are demanding that the tech- ures show that Facebookreviewed 58% offlagged items within nology giants take more responsibility for what appears on a day, up from 50% in December. For Twitter, the figure was their networks. Within limits, they are right. 39%, up from 24%. (YouTube’s score fell from 61% to 43%.) The strongest measure is new laws. In 2002, for example, Shooting the messenger app? Britain made internet service providers (ISPs) liable for child For as long as there have been data networks, people have ex- pornography if they did not take it down “expeditiously”. The ploited them to cause harm. The French mechanical telegraph ISPs used a charity to compile a list of blocked URLs that it up- system wassubverted in 1834 in a bond-tradingscam thatwent dated twice daily. The charity works closely with law-enforce- undetected for two years. Cold-callers run cons by telephone. ment agencies in Britain and abroad. Similarly, American law- The internet, with billions of users and unlimited processing makers have clamped down on copyright infringement. power, is the most powerful networkofall. It was bound to become the focus ofwrongdoers. It’s no longer 2005 That does not mean it should be wrapped in red tape. As in the offline world, legislators must strike a balance be- Openness online is especially valuable because it allows “per- tween security and liberty. Especially after attacks, when gov- missionless” innovation. Anyone can publish an article, ernments want to be seen to act, they may be tempted to im- upload a video or distribute a piece of software to a global au- pose blanket bans on speech. Instead, they should set out to be dience. Freedom from the responsibilities that burden other clear and narrow about what is illegal—which will also help media companies has served as a boost for a nascent industry. platforms deal with posts quickly and consistently. Even then, But the days when the technology firms needed nurturing the threshold between free speech and incitementwill be hard are long gone. In the past decade they have become the to define. The aim should be to translate offline legal norms world’s most valuable companies. As their services have into the cyber domain. reached deeperinto every aspect ofeveryday life, online activ- Before legislators rush in, they also need to think about unity has gained more potential to cause offline harm. For every intended consequences. If internet firms are threatened with Spotify there is a WannaCry. fines, they may simply remove all flagged content, just in case. Technology firms complain that this combination ofnovel- Regulation that requires lots of staff to take down offensive ty and commercial success makes them a convenient target for posts will most hurt small startups, which can least afford it. politicians, some ofwhom seem to regard regulating the inter- Laws mandating cryptographic “back doors” in popular mes- net as a shortcut to solving complex social problems such as sagingapps would weaken security forinnocent users. Bad ac- hate speech. Eager to protect their special status, technology tors would switch to unregulated alternatives in countries that firms have emphasised that online recruitment is only part of are unlikely to help Western governments. They would thus the terrorist threat. Besides, they say, they are platforms, not become harder forthe intelligence services to watch. publishers, and that they cannot possibly monitor everything. In the past, internetfirmshave tended to “build itfirst, figure Yet the firms can act when they want to. Before Edward out the rules later”. However, the arguments about terrorism Snowden exposed them in a huge leak in 2013, they quietly and extremist content are a stark reminder that the lawless, helped American and British intelligence monitor jihadists. freewheeling era ofthe early internet is over. Technology firms Whenever advertisers withdraw business after their brands may find that difficult to accept. But accept it they must, as part ended up alongside pornographic, violent orextremist materi- of the responsibility that comes with their new-found power al, they respond remarkably quickly. and as part ofthe price oftheir success. 7 10 Leaders The Economist June 10th 2017

Qatar Donald does Doha

The Trumpian world ordermeans a less stable Middle East MERICA’S president got on to Iraq. A billion-dollar ransom would buy a lot ofexplosives. Aso well last month with The spat has split the GulfCo-operation Council, hitherto a King Salman of Saudi Arabia force for stability in an unstable region. It may drive Qatar, as that he has embraced the mon- well as Kuwait and Oman, the other two members ofthe GCC, arch’s foreign-policy goals. Sun- who pointedly declined to support the Saudi move, further ni Saudi Arabia detests Shia into the arms of Iran. Tempers may eventually cool, but some Iran, its chief regional rival. So observers worry that the price of Saudi Arabia backing down does Donald Trump. He also ap- will be the muzzling ofthose pesky Al Jazeera journalists. pears to share the Saudi view that the most egregious bank- Mr Trump’ssupport forSaudi actions also damages Ameri- roller of terrorism in the Middle East is the tiny sheikhdom of ca’s credibility. It suggests that, under him, the superpower can Qatar. He applauded when, on June 5th, Saudi Arabia, Bahrain abandon itsalliesaftera briefchatwith theirenemies. “During and the United Arab Emirates severed diplomatic ties with my recent trip to the Middle East I stated that there can no lon- Qatar, as well as land, sea and air links. The Gulf states gave ger be funding of Radical Ideology. Leaders pointed to Qatar— Qatari citizens 14 days to leave. Ludicrously, the UAE declared look!” tweeted Mr Trump on June 6th. The sober foreign-poli- that anyone publishing expressions of support for Qatar can cy types who cling on in his administration are scrambling to be jailed for up to 15 years. Mr Trump tweeted: “Perhaps this downplay such undiplomatic words and calm tempers. Per- will be the beginning ofthe end to the horror ofterrorism!” haps recognising his error, Mr Trump offered his services as a Though tiny, Qatarmatters. It is the world’s largest producer mediator the following day. of liquefied natural gas and an airline hub. It is also host to Al Jazeera, the nearest the Middle East has to an uncensored Now anything goes broadcaster (so long as it does not criticise the Qatari monar- Abdel-Fattah al-Sisi, Egypt’s autocratic president, has also de- chy). Ithasgood tieswith Iran, with which itexploits a vastgas- cided that Mr Trump is an American leader who will let him field. It is supportive, too, of the (Sunni) Muslim Brotherhood, persecute his enemies without hindrance. On May 23rd, two the most popular face of political Islam. All this makes Saudi days after the two men met and praised each other in Riyadh, Arabia hate it. The Saudi regime has tried in the past to bend MrSisi had a potential opponent arrested forallegedly making Qatar to its will, but failed. Qatar hosts a large American air- an indecent hand gesture at a rally five months earlier. On May base, which until nowhasmade itfeel safe. Butwith MrTrump 25th the government blocked access to the websites of Mada in the White House, nobody is now so sure. Masr, Egypt’s leading liberal newspaper, and those of20 other No concrete reasons have been given for the blacklisting of media outlets, including Al Jazeera and Huffpost Arabic. In Qatar. There is lots of chatter that wealthy Qataris fund terro- Bahrain the authorities killed five people and arrested 286 rism. This accusation, which is also levelled at rich Saudis, is more in a raid on the home of a Shia cleric; shortly after that, unproven, though the Financial Times reports that Qatar paid they dissolved the main secular opposition party. America $1bn to Iran and an al-Qaeda affiliate for the release of Qatari would once have objected to all this. No longer—and that is a royals who were taken hostage while on a falcon-hunting trip recipe for a less stable Middle East. 7

American monetary policy Check yourself

The Federal Reserve should respond to lowerinflation by holding interest rates steady O STATEMENT from the policy is a little tighter than it was back then. The unemploy- US core PCE prices NFederal Reserve is complete ment rate, at 4.3%, is lower than at any time since early 2001. A % increase on a year earlier 2.5 without a promise to make deci- broad range of earnings data show a modest pickup in wage 2% target 2.0 sions based on the data. In each growth. The Fed is right to think that it is better to slow the 1.5 of the past two years, a souring economy gradually than be forced to bring it to a screeching 1.0 0.5 outlook for the world economy halt later, if wage and price rises get out of hand. The rate in- 0 prompted the Fed to delay inter- creases to date have been reasonable insurance against an in- 2012 13 14 15 16 17 est-rate rises. And quite right, flationary surge. too. Yet if the Fed raises rates on June 14th in the face of low in- But no such surge has yet struck. Unexpectedly low infla- flation, asithasstronglyhinted, itwould bringinto question its tion in both March and April has left consumer prices no high- commitment both to the data and also to its 2% inflation target. er than they were in January. According to the Fed’s preferred The central bank has raised rates three times since Decem- index, core inflation—that is, excluding volatile food and ener- ber2015 (the latest rise came in March). Itisgood that monetary gy prices—has fallen to 1.5%, down from 1.8% earlier this year. It1 The Economist June 10th 2017 Leaders 11

2 is now well below the 2% target. which fell in May, joblessness is worse in America than in Nor does a surge seem imminent. For a while, Donald France, where the overall unemployment rate stands at 9.5%. Trump’s promises to cut taxes and spend freely on infrastruc- Second, even the moderate pickup in wage growth to date ture made higher rates appear all the wiser. But fiscal stimulus might encourage firms to invest more, lifting productivity out looks less likely by the week. Tax cuts are stuck in the legisla- ofthe doldrums and dampening inflationary pressure. tive queue behind health-care reform, and Mr Trump’sadministration has tied itself in knots over whether it will increase I like hike the deficit. Meanwhile, the current “infrastructure week” in Jobs growth in America has already slowed from a monthly Washington may generate more headlines than proper plans. average of187,000 in 2016 to 121,000 in the past three months. Even so, the Fed is expected to go ahead and raise rates this That is enough to reduce slack in the economy, but only just. month. The markets think there is a 90% probability of an in- Slowing it still further is needless so long as inflation remains crease of25 basis points (hundredths ofa percentage point). quiescent. It makes still less sense when you consider the Itispossible thatmore inflation iscoming. An economy that asymmetry of risks before the Fed. If tighter money tips the is stimulated will eventually overheat. The central bank may economy into recession, the central bankhas only a little bit of believe that low unemployment is about to cause inflation. room to cut rates before it hits zero. But if inflation rises, it can Butthe truth isthatnobodyissure howfarunemployment can raise them as much as it likes. fall before prices and wages soar. Not many years ago some This asymmetry of risks extends to the Fed’s credibility. In- rate-setters put this “natural” rate of unemployment at over flation has been below 2% for59 ofthe 63 months since the tar- 6%; the median rate-setter’s estimate is now 4.7%. get was announced in January 2012. Continuingto undershoot The only way to find the labour market’s limits is to feel the goal would cast more doubt on the central bank’s commit- them out. Falling inflation and middling wage growth both ment to it than modest overshoots would. suggest that these limits are some way off, fortwo possible rea- For too long, hawks have made excuses for the persistence sons. First, higher wage growth could yet tempt more of the of low inflation. The latest is to blame new contracts offering jobless to seek work (those who are not actively job-hunting unlimited amounts of mobile data, as if cheaper telecom- do not count as unemployed). The proportion of25- to 54-year- municationssomehowshould notcount. The Fed should keep olds in employment is lower than before the recession, by an its promise to base its decisions on the data, and leave interest amount representing almost 2.4m people. By this measure, rates exactly where they are. 7

Education in India Letting 260m minds go to waste

India has made huge progress in getting children into school. Now it must teach them N 1931 Mahatma Gandhi ridi- gers such as South Korea and Taiwan focused on schools. Of Iculed the idea that India might late, India has done more to help those left behind. Spending have universal primary educa- on schoolsrose byabout80% in 2011-15. The literacyrate has ris- tion “inside of a century”. He en from 52% in 1991 to 74% in 2011. Free school lunches—one of was too pessimistic. Since 1980 the world’s largest nutrition schemes—help millions of pupils the share of Indian teenagers who might otherwise be too hungry to learn. who have had no schooling has fallen from about half to less Pointless pampered pedagogues than one in ten. That is a big, if belated, success for the country However, the quality of schools remains a scandal. Many with more school-age children, 260m, than any other. teachers are simply not up to the job. Since 2011, when the gov- Yet India has failed these children. Many learn precious lit- ernment introduced a test for aspiring teachers, as many as tle at school. India may be famous forits elite doctors and engi- 99% of applicants have failed each year. Curriculums are over- neers, but half of its nine-year-olds cannot do a sum as simple ambitious relics of an era when only a select few went to as eight plus nine. Half of ten-year-old Indians cannot read a school. Since pupils automatically move up each year, teach- paragraph meant for seven-year-olds. At 15, pupils in Tamil ers do not bother to ensure that they understand their lessons. Nadu and Himachal Pradesh are five years behind their (bet- Overmighty teachers’ unions—which, in effect, are guaranteed ter-off) peers in Shanghai. The average 15-year-old from these seatsin some state legislatures—make mattersworse. Teachers’ states would be in the bottom 2% of an American class. With salaries, already high, have more than doubled over the past few old people and a falling birth rate, India has a youth bulge: two rounds of pay negotiations. Some teachers, having paid 13% of its inhabitants are teenagers, compared with 8% in Chi- bribes to be hired in the first place, treat the job as a sinecure. na and 7% in Europe. But ifits schools remain lousy, that demo- Shockingly, a quarter play truant each day. graphic dividend will be wasted. Frustrated by the government system, and keen for their India has long had a lopsided education system. In colonial children to learn English, parents have turned to low-cost priv- times the British set up universities to train civil servants, ate schools, many ofwhich are bilingual. In five years their en- while neglecting schools. India’s first elected leaders expand- rolment has increased by 17m, as against a fall of13m in public ed this system, pouring money into top-notch colleges to sup- schools. These private schools can be as good as or better than ply engineers to state-owned industries. By contrast, Asian ti- public schools despite having much smaller budgets. In Uttar 1 12 Leaders The Economist June 10th 2017

2 Pradesh the flightto private schoolsalmostemptied some pub- not their connections. They should be trained better and re- lic ones. But when it was suggested that teachers without pu- warded on the basis of what children actually learn. (They pils move to schools that needed them, they staged violent should also be sackable if they fail to show up.) The govern- protests and the state backed down. ment should use more rigorous measures to find out which of India spends about 2.7% of GDP on schools, a lower share ahotch-potch ofbureaucraticand charitable effortsmake a dif- than many countries. Narendra Modi, the prime minister, ference. And policymakers should do more to help good priv- once vowed to bump up education spending to 6%. However, ate providers—the third area of reform. Vouchers and public- extra money will be wasted without reform in three areas. The private partnerships could help the best operators of low-cost first is making sure that children are taught at the right level. private schools expand. Curriculums should be simpler. Pupils cannot be left to pass MrModi’sgovernmenthasmade encouragingnoisesabout through grades without mastering material. Remedial “learn- toughening accountability and improving curriculums. But, ing camps”, such as the ones run by charities like Pratham, can waryofthe unions, itremainstoo cautious. Granted, authority help. So can technology: for example, EkStep, a philanthropic over education is split between the centre and the states, so Mr venture, gives children free digital access to teaching materials. Modi is not omnipotent. But he could do a lot more. His pro- The second task is to make the system more meritocratic mise to create a “new India” will be hollow if his country is and accountable. Teachersshould be recruited fortheir talents, stuckwith schools from the 19th century. 7

Soil pollution in China Buried poison

China would be a more convincing green champion ifit did not treat pollution data as state secrets FTER Donald Trump said on in China, manifest here and there in the high mortality of“can- Soil contamination risk AJune 1st that America would cer villages”, but a national threat, and that the government pull out of the Paris accord on had been sparing with the truth about it. climate change, many people The government is more forthcoming about air and water CHINA congratulated China for sticking pollution. Thatisbecause these formsare usuallymore visible, with it. With America on the making them harder to conceal. But it was not until 2013, after sidelines, some see China as the years of mounting public anger, that the government began to Low High leader of the fight against global release real-time data foritsbiggest citieson levels ofPM2.5, the warming—an idea that the Chinese Communist Party is eager finest of airborne poisons that lodge deepest in the lungs. A to promote (see Banyan). Although it is the world’s largest documentary on China’s air pollution, released in 2015 by a emitterofcarbon dioxide, China hasmade a determined effort Chinese journalist, was scrubbed by censors from Chinese to cut back. It has burned less coal in each of the past three websites after it attracted more than 200m views. years. In 2016 it installed more wind-power capacity than any other country; three times as much as the runner-up, America. Blue-sky thinking Some analystsbelieve thatChina’sCO2 emissionsmaypeakin Officials are keenly aware of the public’s anxieties. In 2014 the 2025, five years earlier than the goal it set in Paris. Yet it is pre- prime minister, Li Keqiang, promised that he would “resolute- mature to call China a champion ofgreenery. ly declare war” on pollution. Last year the government un- Its air and water are notoriously foul. Less noticed, but just veiled an almost impossibly ambitious plan to make 90% of as alarming, much of its soil is poisoned, too. As our briefing polluted soil usable by the end of the decade. In March Mr Li explains the scale of the problem is hard to gauge, largely be- promised to “make our skies blue again”; PM2.5 levels would cause China’sgovernmentisso opaque. Asoil surveyconduct- fall “markedly” this year, he said. ed between 2006 and 2011was at first classified as secret. Many All this is welcome, but if China is to lead the world in the of its findings are still not public, but one grim statistic has creation of a greener planet it must do more than build wind emerged: one-fifth of Chinese farmland contains higher-than- farmsand erect solar panels. It must also come clean about the permitted levels of pollutants, some of which threaten food full extent of the problems it faces, and then demand no less safety. Thisisbad newsfora countrythathas18% ofthe world’s from other countries. Ifthe Paris accord is to succeed, transpar- population but only 7% of its arable land. And it will be excep- ency will be crucial—because pledges that cannot be verified tionally costly and difficult to clean up. Soil just sits there, are oflittle use in binding countries to a common cause. meaning that toxins linger forcenturies. One way for China to accomplish this would be for it to go Public alarm is growing. For evidence, ask any Chinese beyond the letter of the Paris accord and allow international about “cadmium rice”, which contains a heavy metal that, if monitoring of its carbon emissions. At the very least Chinese ingested, can eventually cause kidney failure, lungdisease and officials should no longer remain so secretive about other bone damage. Leaks from factories sometimes seep into pad- kinds ofpollution that pose an immediate threat to the lives of dy fields, and thence into rice-bowls. In 2013 the nation was their own compatriots. Openness would enable the Chinese horrified by a report that in Guangzhou, a southern city, nearly to understand the risks they face, and to hold officials to ac- halfofthe rice tested by inspectors in restaurants and canteens count for failing to stop polluters from poisoning them. Sun- was laced with cadmium. The story aroused a new awareness light—something our readers in Beijing may only dimly re- among citizens: that soil pollution was not just a local problem member—is the best anti-pollutant. 7

14 Letters The Economist June 10th 2017

Two-state resolution cringes at the prospect ofrepli- The outcomes are not self- 1958, he won best director in cating such folly on the West evident. They would have to 1959, yet still had this to say: One can agree with the Bank. A bilateral agreement be acceptable to all parties. But “Some day I’ll make a film that premise ofyour argument for signed by any Arab leader a confederation is consistent critics will like. When I have “Why Israel needs a Palestin- today would be worthless in with the ideas ofequality, money to waste.” ian state” (May 20th), while the event ofa change ofgov- symmetry, economic viability SETH RUBINSTEIN strongly disagreeing with the ernment in his country. Do you and recognition ofthe basic Singapore analysis explaining why a really blame Israel forhesitat- rights asserted by each ofthe Palestinian state has not come ing to revise the status quo? parties. These are qualities that History quiz about. The inadequate history DAVID LEVINE the two-state solution cannot you present not only unfairly San Francisco claim to possess. Charles Van Doren was men- places the majority ofthe SEEV HIRSCH tioned in your obituary of blame on Israel, but also en- One alternative to two states is Professor emeritus Albert Freedman (May 6th). courages a Palestinian narra- a confederation, consisting of Tel Aviv University People were so interested in tive that continues to be the three autonomous entities: his performance on the “Twen- main obstacle to a solution. Israel, Palestine and Jordan. A The Singaporean way ty One” quiz show in the 1950s Nowhere do you referto confederate structure offers a because he is the son ofMark Israeli initiatives—at Camp frameworkforreconciling I agree completely with Van Doren, who was one of David in 2000, Gaza in 2005 sovereignty and the conflicting Banyan that what has worked the great English professors at and Annapolis in 2008—which claims ofthe two sides, such as forSingapore may not workfor Columbia University. Van could long ago have produced the right ofJewish settlement others (June 3rd). But in Doren’s students varied from that desired state ifnot for in all parts ofEretz Yisrael, explaining how foreigners Thomas Merton, a theologian Palestinian rejection and simultaneously with the right misunderstand Singapore, and monk, to beat writers such inaction. Add the Palestinian ofthe Palestinian refugees to Banyan added two misun- as Allen Ginsberg and Jack incitement against Israel, its return to their homeland. derstandings ofhis own. First, Kerouac. Kerouac came to funding ofthe familiesof The confederation would we maintain racial calm in Columbia as a football player, terrorists and its refusal to include an Arab state adminis- Singapore not to protect the but the story goes that after negotiate throughout Barack tration possessing an Arab Chinese majority but precisely sitting in on one ofVan Do- Obama’s presidency, and it army. This would provide the opposite: to protect the ren’s classes he quit the team should be no surprise that more balance than the two- non-Chinese minorities, so and wrote “On the Road”. peace and a two-state deal states model, where an un- that they can live secure and WILLIAM POLLARD remain a distant dream. armed Palestinian state is peaceful lives and be spared Ocean City, New Jersey It takes two parties to make expected to co-exist with the the atrocities visited on minor- peace and the prospects for army ofIsrael. Jordan would ities in some other countries. GDP rocks! any resolution ofthe conflict gain direct access to the Medi- Second, the People’s Action have been damaged, delayed terranean, thus expanding its Party wins elections based on over the years by the Palestin- economic horizons. broad nationwide support, not ian leadership and their con- Dominated numerically by gerrymandering. In the most tinued refusal to accept the Muslims, the confederation recent general election in 2015, legitimacy ofIsrael as a Jewish would consist oftwo Arab the PAP took70% ofthe nation- state and their unwillingness entities and one Jewish one. To al vote and won all but one of to deal reasonably with the assure its chances ofsurvival, its seats by at least 57% ofthe substantive issues. the three parties would enter vote. The exception was a When this finally happens, into internationally guaran- constituency which the PAP it will have a much greater teed agreements, including the tookbackfrom the opposition impact than your skewed right ofresidence. It would be without any boundary history in bringing the parties economically viable, with changes. backto the table and allowing natural resources such as gas FOO CHI HSIA Israel to make the necessary and phosphates and an abun- High commissioner for So someone in China has concessions forpeace. dance ofeducated people. Singapore written a musical tribute to JONATHAN GREENBLATT To be stable, the confeder- London GDP (“In the name ofGDP”, National director ation would be based on the May13th). Germany had such Anti-Defamation League principle ofsymmetry, which The wild child of cinema a song in the 1980s, too. It was New York means that each party would called “Bruttosozialprodukt”, have the right to favour its own Has the “old guard” ofCannes performed by the band Geier Youavoided the details ofthe residents but undertake to forgotten the history offilm? It Sturzflug. But in that case, it run-up to the Six Day War. refrain from discriminating seems so, judging from their was a satire about the Israel’s maritime channels to between the other two parties. response to Netflix (“Curtain consumption frenzy. the Red Sea had been blocked. Application ofthis principle to call”, May 27th). From live PAUL MÜLLER The UN peacekeeping force the seemingly incompatible theatre to silent films, silents to Schmerikon, Switzerland 7 packed up its bags and left. claims ofthe Palestinians and talkies, blackand white to President Lyndon Johnson was Israelis on exclusive “right of colour, film has never stopped “neutral in thought, word and return” suggests that realising changing. The Old Guard of Letters are welcome and should be addressed to the Editor at deed”. I remember the fear and both “rights” can be accommo- Cannes should get over it, or The Economist, 25 St James’s Street, isolation we felt. Israel was on dated within the geographic lookforward to joining the London sw1A 1hg its own. Fifty years later, Israel confines ofthe original man- Has-Been Guard. Take one of E-mail: [email protected] has had a preview ofa Pales- date granted to Britain by the France’s greats, François Truf- More letters are available at: tinian state in Gaza, and League ofNations. faut. Banned from Cannes in Economist.com/letters Executive Focus 15

Inspector General (Geneva, Switzerland) – D1 Level

The International Organization for Migration is inviting applications for the post of Inspector General (IG) at Headquarters in Geneva. The IG’s responsibility is to prevent, detect and investigate fraud, waste, abuse and misconduct and assist managers in promoting integrity, sound risk management, effective internal controls, efficiency and effectiveness in IOM’s programmes and operations through its functions that include: audits, investigations, evaluations, inspections, and special reviews. The Office of the Inspector General contributes actively to oversight at IOM through its functions. It determines whether IOM’s objectives are pursued efficiently, effectively and in compliance with the Organization’s rules, regulations, expected results and ethical standards. It also provides the Administration with consulting services on management and organizational issues, policies, guidelines and external reviews. Qualifications and Core Competencies: Master’s degree in Business Administration, Economics, Finance, Auditing or a related fi eld from an accredited academic institution. Professional certifi cation as certifi ed internal auditor (CIA), chartered accountant (CA) or certifi ed public accountant (CPA), Chartered Institute of Management Accountants (CIMA), certifi ed fraud examiner (CFE) or Association of Chartered Certifi ed Accountants (ACCA) will be a distinct advantage. Fifteen years of management/auditing and administrative experience at a diversifi ed international level, ten years of which at an executive level. Good knowledge of fi nancial and business administration, and of the principles and practices of management. Excellent communication and negotiation skills; ability to defend and explain difficult issues and positions, proven ability to communicate complex concepts orally; excellent ability to prepare written reports in English that are clear, concise and meaningful. Demonstrated strong analytical, strategic, creative thinking and problem solving skills. Extensive experience with computerized accounting, data analytics and auditing systems and software (SAP a distinct advantage). Salary: IOM offers an attractive salary package based on the United Nations system at D1 level. A full term of reference is available at IOM website: www.iom.int Candidates should upload their applications at http://www.iom.int/how-apply. The Economist June 10th 2017 16 Executive Focus

The Economist June 10th 2017 Executive Focus 17

Managing Director - London RESEARCH DIRECTOR FOR GLOBAL ECONOMY AND FINANCE EuroFinance is the leading global provider of conferences, training and research on cash management, treasury and risk. Centred around the annual international The Royal Institute of International Affairs, Chatham House – London, UK conference and 30 other events worldwide, EuroFinance enables treasurers and CFOs to exchange innovative strategies, best practice and expert opinion into the £75,000 - £110,000 commensurate with skills and experience trends and developments in cash management and treasury areas. In addition to events the business conducts research and training, hosts peer groups and Chatham House is a world leading international affairs think tank with a awards. reputation for providing rigorous and independent analysis on how to build a sustainably secure, prosperous and just world. EuroFinances portfolio businesses include The EuroFinance Corporate Treasury Network (ECTN), which facilitates knowledge sharing, problem solving and best practice ideas for senior Corporate Treasury Professionals as well as Commercial As Research Director for Global Economy and Finance your overriding Payments International the leading global resource for commercial cards and objective will be to generate insights and cultivate a research agenda that payments. explains and anticipates the factors producing or likely to produce signifi cant change in the world economy. You will continue to develop the department While part of The Economist Group, Euroﬁ nance runs as an independent as a centre of excellence in international debate and analysis for our growing business with a stand alone P&L.

external audiences across government, international organizations, businesses Currently, we are seeking a Managing Director to be responsible for the strategy and the informed public. and management of the complete EuroFinance business portfolio. This a successful business with a proven track record of being a leader in its fi eld and In this role you will be the principal in-house authority for global economic the Managing Director will be expected to build on that success by providing and and fi nancial affairs for Chatham House. You will have a strong command of delivering a growth plan for the next three years. economic and fi nancial issues, a background in empirical analysis, as well as excellent current knowledge of policy debates in international affairs more In this role you will be expected to: • Develop a growth strategy and execution plan for the key elements of widely. As a strategic thinker with a talent for leadership and management, you the business specifi cally for Commercial Payments International and The will generate ideas, cultivate talent and have a clear and inspiring vision. EuroFinance Corporate Treasury Network businesses • Achieve or exceed budgeted revenue and profi t We are an equal opportunities employer and welcome applications • Set budgets for business and ensure there are processes in place to track from all backgrounds. revenue and costs and forecast profi tability • Provide guidance and coaching for the senior management team For more information visit www.chathamhouse.org/careers • Build relationships with key partners and customers • Build peer-to-peer relationships with top-level executives in the treasury community

To succeed in the role you must have: INTERNATIONAL COPPER STUDY GROUP INTERNATIONAL LEAD & ZINC STUDY GROUP • An MBA or equivalent work experience • 10+ years in sales, product management, and/or business development INTERNATIONAL NICKEL STUDY GROUP in the fi nancial services industry • A track record of developing new business opportunities and client SECRETARY-GENERAL management • Experience in the Financial Events space including treasury and cash The International Copper Study Group (ICSG), the International Lead & Zinc Study Group management, commercial cards and/or commercial payments (ILZSG), and the International Nickel Study Group (INSG) are autonomous intergovernmental • Strong operational and leadership skills organizations. The purpose of each Group is to promote international cooperation on matters • Ability to balance delivery of programmes against budget realities related to their specifi c metal or metals; to provide a global forum for discussion; and to increase • International experience and knowledge of the fi nancial markets market transparency by facilitating an exchange of information on production, usage and trade. • Exceptional communication skills, both oral and written along with ICSG, ILZSG, and INSG are now seeking candidates to fi ll the position of Common Secretary- proven public speaking skills General located in Lisbon, Portugal. The Secretary-General is the chief administrative offi cer of each Group. Working with a small To succeed in this role you will be able to demonstrate: team of professionals, the Secretary-General is responsible and accountable to each Group for: • Experience leading and managing large teams • An ability to interact successfully with senior level executives and key • The overall delivery of each organization’s mandate, including products and services; business partners • Developing work programs and related budgets; and managing day-to-day operations of each Group; • Business and personal maturity, self-motivation and self-confi dence • Liaising with governments, non-governmental organizations, industry associations and • A driven motivation to reach goals and exceed expectations industry. • Excellent people development and leadership skills Candidates should have 15 years’ relevant professional experience including a period • Ability to get under the skin of a market quickly and then deepen related to commodities in the fi eld of minerals and metals, together with ten years of knowledge and relationships continually over time management experience including fi nancial management. Relevant experience working with • Experience in taking ownership and delivering results along with the intergovernmental and international organizations is highly desirable, with demonstrated strong ability to represent EuroFinance both in the Treasury community and with networking skills. A comprehensive understanding of government policies affecting the metals internal stakeholders industries is expected of applicants. • Gravitas to effectively manage senior level relationships as well as A candidate should have a University degree, preferably with postgraduate qualifi cations; be a effective stakeholder management at all levels citizen of a Study Group member country; and must be fl uent in spoken and written English, • Operational knowledge with broad strategic insight as well as good with excellent communication skills. The net annual salary and conditions for the Secretary- technical knowledge of conference production General position is in accordance with the current United Nations UN D1 level applicable in • Proven public speaking skills Lisbon. This appointment is for an initial four-year period with the possibility of renewal. The • Proven track record of delivering results successful applicant is expected to commence in the position on 1 January 2018. • Ability to be a self-starter and work independently Applications must be sent via e-mail no later than 11 July 2017 and should be addressed to: • An understanding of fi nancial events [email protected] or [email protected]. • Knowledge of the P&L of fi nancial events Prospective candidates are invited to visit the ICSG (www.icsg.org), ILZSG (www.ilzsg.org), or INSG (www.insg.org) websites to obtain application documents and a copy of the position To apply directly for this opportunity, please paste the following link in profi le. your browser - Please note: Only shortlisted candidates will be notifi ed who upon selection to the shortlist https://ukcemeaasia-economist.icims.com/jobs/3753/managing-director- will need to seek backing from their government. --eurofi nance/job The Economist June 10th 2017 18 Briefing Pollution in China The Economist June 10th 2017

China’s smog is notorious. Its concen- The bad earth trations of pollutants—ten or more times the World Health Organisation’s maximum safe level—have put clean air high on the political agenda and led the government to curtail the production and use of SHIQIAO, HUNAN PROVINCE coal. Water pollution does not spark as much popular outrage but commands the Contaminated soil is the biggest neglected threat to publichealth in China attention of elites. Wen Jiabao, a former ANG DONGHUA, a wiry 47-year-old samples of Mr Tang’s rice this year and prime minister, once said that water pro- Tfarmer wearing a Greenpeace T-shirt, found it contained 50% more cadmium blems threaten “the very survival of the smokes a cigarette and gesticulates to- than allowed under Chinese law (whose Chinese nation”. China has a vast scheme wards his paddy fields in the hills of south- limits are close to international norms). Yet to divert water from its damp southern ern Hunan province. The leaves of his rice there are no limits on planting rice in pol- provinces to the arid north. plants poke about a foot above water. Mr luted areas in the region, so Mr Tang and Tang says he expects to harvest about one his neighbours sell their tainted rice to the Dishing the dirt tonne of rice from his plot of a third of a local milling company which distributes it Soil pollution, in contrast, is buried: a poi- hectare (0.8 acres) near the small village of throughout southern China. Mr Tang has soned field can look as green and fertile as Shiqiao. There is just one problem: the crop sued the smelter for polluting his land—a a healthy one. It is also intractable. With will be poisoned. brave act in China, where courts regularly enough effort, it is possible to reduce air or Egrets and damselflies chomp lazily on rule in favour of well-connected business- water pollution, though it may take years fish and insects in the humid valley below es. His is an extreme case of soil contami- or decades. By contrast, toxins remain in the paddy fields. But just beyond this rural nation, one ofthe largest and most neglect- the soil for centuries, and are hugely ex- scene lurks something discordant. Mr Tang ed problems in the country. pensive to eradicate. Ittook21yearsand the points to a chimney around 2km away that Soil contamination occurs in most removal of 1,200 cubic metres of soil to belches forth white smoke. It belongs to countries with a lot of farmland, heavy in- clean up the Love Canal, a site covering just the smelting plant which he blames for dustry and mining. In Ukraine, for exam- 6.5 hectares. bringing pollution into the valley. Cadmi- ple, which has all three, about 8% of the China’s soil contamination is so great um is released during the smelting of ores land is contaminated. A chemical dump in that it cannot adopt such a course (see map ofiron, lead and copper. It is a heavy metal. upstate New Yorkcalled Love Canal result- on next page). The country is unusual in If ingested, the liver and kidneys cannot ed in the poisoning of many residents and that it not only has many brownfield sites get rid of it from the body, so it accumu- the creation of the “superfund”, a federal (contaminated areas near cities that were lates, causing joint and bone disease and, programme to clean up contaminated soil. once used for industry) but large amounts sometimes, cancer. But the biggest problems occur in China, of polluted farmland, too. In 2014 the gov- Hunan province is the country’s largest the world’s largest producer of food and of ernment published a national soil survey producer of rice—and of cadmium. The lo- heavy industrial commodities such as which showed that 16.1% of all soil and cal environmental-protection agency took steel and cement. 19.4% offarmland was contaminated by or-1 The Economist June 10th 2017 Briefing Pollution in China 19

2 ganic and inorganic chemical pollutants tories are not the only culprits. About overuse by farmers, illegal dumpingby fac- and by metals such as lead, cadmium and 150km from Mr Tang’s village, in a town tories orsome otherreason is not clear. The arsenic. That amounts to roughly 250,000 called Chenzhou, part of a lead and zinc most common pesticides were present in square kilometres of contaminated soil, mine collapsed in 1985, flooding nearby all the main foodstuffs. equivalent to the arable farmland of Mexi- farms with arsenic, a by-product of min- Third, soil pollution is affecting more co. Cadmium and arsenic were found in ing. Arsenic concentrations in the soil were people than it used to because of eco- 40% of the affected land. Officials say that 24 times the legal limit 30 years later. nomic change and urbanisation. Twenty 35,000 square kilometres of farmland is so The second big problem is that land is years ago, most chemical and pesticide polluted that no agriculture should be al- being poisoned by “sewage irrigation”. plants were built far from cities and allowed on it at all. Wastewater and industrial effluent are though their pollution hurt soil, crops and used in increasing amounts for irrigation farmers, it did not directly affect city dwell- Stick in the mud because there is not enough fresh water to ers. Since then, China has experienced the This survey is controversial. Carried out in go round. In the north ofChina there is less largest urban expansion the world has 2005-13, itwas at first classified as a state se- water available per person than in Saudi ever seen and once-remote factories are cret, leading environmentalists to fear that Arabia, so farmers use whatever they can now surrounded by houses and shops. As the contamination might be even worse get. China produces over 60bn tonnes of the economy switches from heavy indus- than the government let on. Not everyone, sewage a year and in rural areas only 10% try to services, many factories are closing however, is as pessimistic. Chen Tongbin, of it is treated. Most of the sludge goes into down or relocating. head of the Institute of Geographic Sci- lakes and rivers, and thence onto fields. ences and Natural Resources Research in A study in 2014 found that 39 out of 55 Covering a lot of ground Beijing, thinks the figure of 19.4% is too areas using sewage irrigation were con- A case in Changzhou in Jiangsu province high. Based on local studies, he says 10% is taminated by cadmium, arsenic and other showed what can happen next. In early nearerthe mark. Even thatwould be a wor- poisons and that the accumulation of 2016 students at a newly opened campus rying figure, given that China is trying to heavy metals in intensively irrigated areas of the Changzhou Foreign Language feed a fifth of the world’s population on a was rising. An earlier study from 2010 School began complaining of headaches, tenth of the world’s arable land. The con- found that water along18% ofthe length of skin rashes and a strange smell. Hundreds clusion seems to be that China’s soil pollu- China’s rivers was too polluted for use in fell ill, some with lymphoma. The campus, tion is widespread and that information agriculture. It is used anyway. it turned out, had been built next to a about it is disturbingly unreliable. To make matters worse, the soil is bear- dump owned by three chemical compa- There are three reasons why the con- ingthe burden ofthe excess use offertiliser nies that had closed in 2010. tamination is so extensive. First, China’s and pesticide, which has increased as Chi- The land had been acquired bythe local chemical and fertiliser industries were na’s demand for grain has risen. Since 1991 government and cleaned up by a specialist poorly regulated for decades and the soil pesticide use has more than doubled and firm that spread a heavy layer of clay over still stores the waste that was dumped on it the country now uses roughly twice as the top. Alas, the clay leaked. A survey in for so many years. In 2015, for example, much per hectare as the worldwide aver- 2012 found that levels of chlorobenzene, a 10,000 tonnes of toxic waste was discov- age. Fertiliser use has almost doubled, too. solvent, were 80,000 times the permitted ered under a pig farm in Jiangsu province In 2012 a survey by the Institution of Nutri- limit. In May 2016 two NGOs took the in the east of China after a businessman tion and Food Safety reported that in 16 chemical companies to court, blaming proposed plans to build a warehouse on provinces 65 pesticides were detected in them forthe pollution. The court threw the the plot and tested the soil. In 2004 con- food, though whetherthis was the result of case out, leaving the plaintiffs with huge 1 struction workers on the Beijing metro suddenly fell ill when they started tunnelling under a site previously occupied by a What lies beneath? pesticide factory. New environmental regulations have Soil contamination risk sought to crack down on chemical dump- ing but they do not seem to do enough. Low High Since 2008 new plants have had to be built “Cancer villages” in special chemical-industry parks, where oversight is supposed to be stricter. At the end of May, Greenpeace, an environmental NGO, took samples from the waste- Beijing water, soil and airofone such park, in Lian- yungang in Jiangsu. It discovered 226 different chemicals. Three-quarters of them are not subject to hazardous-chemical regulations in China, 16 are definitely or CHINA probably carcinogenic to humans and three are illegal. Shanghai Making matters worse is the astonishing “safety” record of the chemical industry. Between January and August 2016, Chi- na suffered 232 accidents in chemical factories, such as leaks, fires and explo- sions—almost one a day. Since around a fifth of these factories are in China’s most Hong Kong Sources: Institute for Public and Environmental productive agricultural areas or near rivers Affairs; “Impacts of soil and water pollution used for irrigation, many of the spilled on food safety and health risks in China”, by Yonglong Lu et al, Environment International, 2015 chemicals end up in fields. Chemical fac- 20 Briefing Pollution in China The Economist June 10th 2017

pollution could have reduced the harvest metres to the depth of one metre to the Left field by 2% below what it might otherwise have same squeaky-clean standard would in China, arable land, as % of all land area been. With the total amount ofarable land theory cost $1,000 trillion—more than all falling as a result of urbanisation and soil the wealth in the world. Even a less thor- 14 erosion (see chart), China cannot afford to ough clean up would costmore than China contaminate what is left. The national gov- could afford. 13 ernment is obsessed with feeding China’s Instead, the country has piecemeal pro- 1.3bn people and anything that reduces jects. Ithastested a method ofusing chemi- 12 grain yields is a matter ofconcern. cals to fix heavy metals in the soil but the Lastly, soil contamination adds to the results have been disappointing. Research- 11 difficulties that local governments face in ers also worry about controlling pollution acquiring land to build on. A large part of by adding more chemicals. To reduce rice 10 local-government finance depends on offi- contamination, plant scientists have bred a cials taking over land on the edge of cities hybrid variety that absorbs less cadmium. 1985 90 95 2000 05 10 14 (sometimes forcibly) and leasing it to prop- Mr Tang was offered some but rejected it Source: World Bank erty developers who build the new houses because the yield was low. and offices that China requires. Without The Chinese have experimented with 2 costs. As in so many cases, the pollution this moneymaking activity, many provin- growing willow trees, which absorb cad- had been buried for decades but was un- cial and county governments would go mium, and poplars, which do the same for earthed by economic change. bankrupt. In 2014 a working group of the lead, to clean up its fields. This works—but The harm caused by soil pollution is as Communist Party revealed that 12 prov- the fields cannot be used for crops in the grave as might be expected. Heavy metals inces had run out of land for construction. meantime. Typically the treatment of poi- are exceptionally bad for food safety and So when contamination reduces the soned brownfields consists of spreading human health. In 2002 China’s ministry of amount of land for leasing or forces cities layers of clay or concrete over the affected agriculture conducted one of the few na- to build on polluted brownfields, it hurts areas, as happened in Changzhou, but this tionwide food tests to look for such heavy local governments. often just pollutes the water table beneath. metals; it found that 28% of the rice sam- As a result, the attitude of authorities— Gao Shengda, the secretary of the China ples it tookhad excess lead and 10% had ex- especially the national government—has Environmental Remediation Industry As- cess cadmium. begun to shiftfrom indifference to concern. sociation, admits that the country lacks the In 2015 a survey by Yonglong Lu of the In 2011 the environment ministry an- experience and technical skills to stabilise Research Centre for Eco-Environmental nounced a five-year plan to cut heavy-met- its polluted soils. Sciences in Beijing and others in Environ- al emissions in the worst-affected areas by ment International, a scientific journal, 15% from what they were in 2007 by the Serf and turf counted hepatitis A, typhoid and cancers end of 2015. It said that three-quarters of At the end of May Mr Tang’s case came to ofthe digestive tract among the health haz- the targets had been met by the end of court. The judge found that the pollution ards of eating contaminated food. The au- 2014. That year the legislature stiffened wasindeed leakingfrom the industrial site. thors also suggested that there may be a penalties for polluters. Last year the na- He admitted the fields were polluted. But link between soil pollution and China’s tional government issued a ten-point plan he said that Mr Tang had not proved that “cancer villages”, 400-450 clusters with that aims to make 90% of contaminated one had caused the other and threw out unusually high levels of liver, lung, oe- farmland safe by 2020, defines different the case. Mr Tang has launched an appeal. sophageal and gastric cancers. In 2006 a soil types and lays out steps to be taken to While he waits, he and his neighbours Chinese environmental NGO took urine stabilise soil quality foreach one. This year trudge backdailyto theirfieldsto look after samples from 500 residents of Zhuzhou, the legislature has said it will clarify who is the poisoned rice, which is almost ready an area of Hunan province with several responsible for soil pollution in the past forharvest. 7 such villages; 30% of those tested showed and codify into Chinese law the “polluter elevated levels of cadmium and 10% need- pays” principle. ed specialist treatment. This spate of rulemaking is welcome, That alone should have rung alarm but it is only a start. As in many countries, bells forChina’s rulers. In addition, several health, food safety, water pollution and other effects are pushing the problem of soil contamination are all dealt with in polluted soil slowly up the ladder of politi- China by different regulatory agencies, cal concerns. Politicians are becoming in- which do not always co-operate. There has creasingly concerned about public opin- been no nationwide health survey to track ion. Alarm at reports of cadmium rice and the effect of soil contamination. And most other contaminated foods is growing. Nor of the soil-improvement plans lack teeth do local governments want a repeat of the because they depend for enforcement on Changzhou case, which became a public local officials, who are often in cahoots controversy last year. with the local polluters. Efforts to clean up polluted soil have so The law of sod farbeen modest because, without a proper Politicians also worry about the impact law, itisnotclearwho should payfor them. that contamination has on agricultural China has nothing like America’s “super- yields. Poisoned soils are less productive. fund”. Nor could it afford to eradicate con- The ministry of environmental protection taminants entirely by, say, washing the soil said in 2006 that grain yields had fallen by and treating it with bacteria. London did 10m tonnes as a result of soil contamina- this when preparing the site, formerly an tion. It did not specify what period this re- industrial area, for the 2012 Olympic ferred to but in 2006, China’s total grain games: it cost £3,000 ($3,900) percubic me- output was just under 500m tonnes, so tre. Cleaning China’s 250,000 square kilo- Mr Tang calls for assistance Asia The Economist June 10th 2017 21

Also in this section 22 Pakistan’s Khyber Pakhtunkhwa 24 Veneration in North Korea 26 Hun Sen’s grip slips a touch 26 Press freedom in Japan

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

Indian schools The Indian children are a lot poorer yet poverty explains only part ofthe gap. Now make sure they can study More teachers showing up would help. About a quarter are absent when they should be atwork. Payisnotthe problem: a public schoolteacher’s salary is often more than ten times the local median. Indeed, JAIPUR many Indian applicants bribe school boards to get a job, which they treat as a si- More Indians than everattend school, yet few ofthem are learning much necure rather than a career. Then there are N THE ground floor of a primary Pratham. Just a quarter can do simple divi- generous allowances for“sick leave”, often Oschool in Jaipur in the state of Raja- sion. “Where we have failed miserably is taken asholiday. Political workisone cause sthan, five dozen pupils wait for the lunch translating schooling into learning,” says of absenteeism. Teachers can spend sever- break. The school has three teachers, but Yamini Aiyar of the Centre for Policy Re- al weeks a year urging voters to support two of them are absent. One is “off sick” search, a think-tankin Delhi. their political patron. Their unions are, in and the other, the head teacher, left at The consequences of failure are pro- effect, guaranteed representation in the up- noon, explainingthat she has “workto do”. found, ifhard to measure. How well pupils per houses ofsome state legislatures. No child is learning much. Thick poetry do in school is associated with higher And yet more teachers turning up textbooks sit open before pupils who wages and faster economic growth. India might not make much difference. India’s struggle to read simple sentences. will not fully take part in the Programme 17,000 teacher-training institutes are low- Upstairs is different. Rekha Gurjar, an for International Assessment (PISA), an in- grade degree shops. Few trainees are instructor from Pratham, a charity, asks fluential global test, until 2021. But 15-year- taught how to manage a class. Learning children to come to the blackboard and olds in the states of Himachal Pradesh and from otherteachers is hard, in part because read a line of text. She asks questions, and Tamil Nadu did do the test in 2009. Arough schools are so small. Under RTE, every vil- hands shoot up. By adjusting the curricu- analysis of those results puts them five lage must have a primary school within lum to a level pupils understand, years of schooling behind pupils in Shang- one kilometre. This helps explain why a Pratham’s high-intensity “learning camps” hai and otherhigh-performers in East Asia. third of Indian schools have fewer than 50 help teach basic Hindi and maths in 40 pupils—and why, as country people mi- days. “You have to start where children grate to the city, more than 5,000 schools are,” saysRishi Rajvanshi, head ofthe char- The state’s shrinking schools have no pupils at all. With 35% more pupils ity’s office in Rajasthan, “not where you India, elementary schools* than China, India has four times more wish they were.” Schools with fewer Enrolments, m schools. About 260m children attend school in than 50 pupils, Government By law, pupils are automatically shoved as % of total Private† India, more than in any other country. En- up to the next grade each year. So teachers rolment has risen steadily over the past 35 140 have little incentive to help them grasp the two decades, helped by legislation such as 30 120 curriculum. A study in 2016 suggests that the Right to Education (RTE) Act of 2009, 25 100 the knowledge of sixth-grade pupils in a which makes school compulsory up to the 20 80 poor area ofDelhi is 2½ grades below what age of 14. Attendance at secondary school 15 60 the maths syllabus expects of them. By (69% of eligible children) lags behind that, 10 40 ninth grade the gap is 4½ grades. say, ofChina (96%). But primary-school en- 5 20 For some, money is the answer. India rolment is nearly universal. 0 0 spends 2.7% of GDP on schools, less than 2008 09 10 11 12 13 14 15 16 Learning is not. Half of fifth-grade pu- Years ending March other developing countries, such as Brazil. pils (ten-year-olds) cannot read a story de- Two-fifths of schools lack even electricity. Source: U-DISE *6- to 15-year-olds †Officially registered signed for second-graders, according to But much of the budget is not spent, or is1 22 Asia The Economist June 10th 2017

2 spent badly. School funding increased by ing a platform that connects pupils with kash Javadekar, the minister for human 80% from 2011to 2015, according to analysis third parties, including newer software resources, has pledged to increase account- of eight states’ budgets by Geeta Kingdon providers aiming squarely at a mass mar- ability for outcomes in both public and of University College London, yet test ket. It hopes to provide better learning ma- private schools. scores have fallen. Education in India is a terials, at school or at home. EkStep wants Still, the central government has prom- “concurrent” responsibility, shared be- to reach 200m pupils within five years. ised much more than it has delivered. A tween federal and state governments. But Ambition on that scale is needed. But in new strategy foreducation, due in the next officialsatneithercentral norstate level are the end even technological fixes will have few months, has been subject to delays. accountable for academic outcomes. Data to be part of a broader change among Indi- Though it should have some sensible on student achievement are collected an policymakers. The government of Na- ideas, it is unlikely to upset the unions manually, ifat all. rendra Modi, the prime minister, has said it much. That is a shame. And with more Some reformers are trying to improve will undertake some reforms. It has sug- than 20m Indians reaching school age ev- the public system. A programme in Harya- gested amending the law to add commit- ery year, such caution amounts to a huge na, established in 2014, has reversed de- ments about the quality of education. Pra- waste oftalent. 7 clining literacy in the state through regular assessmentand more relevantcurricula. In Delhi, the city government has doubled spending on schools and recruited “men- tor teachers” to help others teach at the right level. Pratham is running learning camps in 5,000 schools in 19 out of India’s 36 states and union territories. Yet although these changes are welcome, their ambitions are limited to helping children grasp just the basics. Richer parents are opting out of public education: nearly half of urban children and a fifth of rural ones attend private primary schools. From 2010-11 to 2015-16, enrolment in public schools fell by 13m while the number in private establish- ments rose by more than 17m. A study published in 2013 found that pupils at low-cost private schools in the south-eastern state of Andhra Pradesh achieved the same scores in maths and Telugu (the local language) as pupils at government-run schools. Yet because private Pakistan’s Khyber Pakhtunkhwa teachers are paid a lot less than public ones, they produced these results for a Emergency treatment third of the cost. Privately educated pupils also did slightly better than their peers at publicschoolsin testsin English, Hindi, science and social studies. Encouraged by such results, reformers PESHAWAR are trying to expand and improve private A cricketer’s party has improved services, but may not hold on to powernext year schools. Punjab and Rajasthan, for example, are trying “public-private partner- HEY are getting away with murder,” another Peshawar hospital nearby. ships” where, like charter schools in Amer- “Tsays Khalid Masud, director of the That reform is possible in Khyber Pakh- ica, schools are run by private outfits but Lady Reading Hospital in Peshawar, the tunkhwa is down to improved security fol- are funded by the government. Voucher largest in a province long racked by insur- lowing the army’s anti-Taliban campaign schemes, meanwhile, have been piloted in gency. Dr Khalid was not talking of the in 2014. Better government has helped too. Delhi, Uttar Pradesh and Madhya Pradesh, Pakistani Taliban or other extremist In elections in 2013 the Pakistan Tehreek-e- among other places. groups, but of his own doctors. Of the 45 Insaf(PTI) partyofImran Khan gained con- Yetthere are limitsto whatsuch reforms senior consultants at the hospital, many trol of the province after breaking the na- can achieve. Teachers’ unions fiercely op- pop in for no more than an hour a day if at tional stranglehold of the two traditional pose vouchers. Public-private partner- all. Then they leave fortheir private clinics, rivals, the Pakistan Muslim League-Nawaz ships are hamstrung by a lack of big opera- taking with them those patients who can (PML-N)—which is in power nationally un- tors able to ensure consistency and scale. afford to pay. Patients without money can der the prime minister, Nawaz Sharif—and And even if private schools are better, die before they see a specialist at the 1,750- the Pakistan Peoples Party (PPP), currently many are still horrendous. bed facility. Such is the state of public the opposition in Islamabad, the capital. So some people are looking to technol- health care for the 27m residents of Paki- Ahead of an election due to be held in ogy to transform education. To date, much stan’s mountainous, troubled border re- 2018, Pakistanis wonder how far the PTI of India’s “ed tech” sector has been in the gion ofKhyber Pakhtunkhwa. has fulfilled its promise to do two unusual business of selling software to help rich Things may be changing, though. A re- things: run a clean government, and trans- children pass exams. But schemes such as cent law seeks to pin wayward doctors to form hospitals and schools. The evidence EkStep, funded by an IT tycoon turned phi- their official place of work. Only a handful is clear on corruption. Ministers no longer lanthropist, Nandan Nilekani, are trying to have reappeared at the notorious Lady drive about arrogantly in motorcades a improve education for all. EkStep is build- Reading. But about 60 are back at work at dozen vehicles long. The PTI’s term has1

24 Asia The Economist June 10th 2017

2 seen little scandal. And the party has end- Veneration in North Korea gime-watchers—though this one will be ed a free-for-all in which provincial assem- dedicated to all three Kims. The Kim family bly members could appoint friends and Follow my leader claims ties to Mount Paektu—Kim Jong Il is family to public-sector jobs (many of the said to have been born on its snowy slopes 119,000 teachers could hardly read or (he was actually born in Russia). It follows write). Federal handouts to the provinces other fresh attempts at cult consolidation: have increased, and in Khyber Pakhtun- portraits of the three generations of Kims, khwa money is at last ending up where it is SEOUL each standing on Mount Paektu, have ap- meant to. peared as triptychs in museums. Work on Old playbook, new propaganda The PTI now wants to see locals flock- mosaic murals of Mr Kim, to be displayed ing to use public services. It has certainly EW could hope to rival the engineering in each province, is under way. Appearing made schools more appealing: the party Ffeats ofChoe Song Chon. One was a de- by himselfon such a scale would be a first. has appointed 40,000 more teachers, re- vice to hoist a 45-tonne red metal flame These exercises in idolisation follow an built institutions blown up by the Taliban atop the Juche Tower in Pyongyang, the old manual, says Oh Gyeong-sup of the and furnished others with toilets and elec- showpiece capital of North Korea; the pil- Korea Institute for National Unification in tricity. Teacher absenteeism has fallen. But lar, named after the country’s clunky state Seoul, South Korea’s capital. The most ju- the PTI’s claim that about100,000 students ideology, was built with 25,550 blocks of nior Mr Kim made his debut on a postage have chosen to switch from private to pub- granite—one for each day to the 70th year stamp within days of his father’s death. lic schools is based on dodgy data. There of Kim Il Sung, the country’s founder and Last October a documentary film on his are other bones to pick. In 2013 the PTI al- eternal president. Other exploits were the rule was first broadcast. New twin statues lowed its coalition partner, the Jamaat-e-Is- city’s May Day Stadium, the world’s big- of Kim Il Sung and Kim Jong Il across the lami, an Islamist group, to remove pictures gest, and a 22-metre bronze statue of Kim country emphasise his lineage. Unlike his in textbooks of women without a veil, outside his mausoleum. grandfather, the youngMrKim has no anti- among other measures. So it was only fitting that Kim Jong Un, Japanese revolutionary exploits to adver- The diagnosis is less mixed when it Kim’s grandson, who took power in 2011, tise—nor, like his father, any birth myth. comes to health care. The PTI has em- should send flowers to Mr Choe’s funeral Instead, he emulated his grandfather ployed many more medical staff, raising on May 28th. Among North Korea’s pre- early on, from suit to hairstyle. State media the ratio of doctors per 1,000 people from eminent architects, Mr Choe helped build often present him as the “father ofthe peo- 0.16 to 0.24. It has also begun, albeit far the props to make Pyongyang less a city for ple”. In February Moranbong, a state-ap- from smoothly, to roll outa comprehensive people to live in than a gigantic stage upon proved all-girl rock band that was formed health-insurance card forpoorfamilies. All which to glorify the Kim dynasty. in 2012, released a hit entitled: “We Call this has had an effect. The number of oper- After American bombs flattened Him Father”. ations in public hospitals has doubled Pyongyang during the Korean war, Kim Il MrKim is now makinghis youth part of since 2013; inpatient cases have risen by Sung remodelled his capital on Moscow’s his appeal too, says Tatiana Gabroussenko, halfas much again. Such change comes de- master plan from the 1930s. Kim died in an expert on the North’s propaganda. His spite objections from special interests that 1994. His son and successor, Kim Jong Il, pet architectural projects, such as water lose out from reforms. Pharmacists broke penned a witty treatise calling for statues parks and department stores, are aimed at the shelves of a new drug dispensary at ofhis father to play “the leading role” in ur- the growing middle class. Nowhere is his one Peshawar hospital, so incensed were ban planning. Only after Kim Jong Il’s own message of material progress clearer than they by its offering medicine at the whole- death in 2011did he too begin to appear in in the capital, an unending building site. In sale price. the statuary, starting with him and his fa- April Mr Kim cut the ribbon for the open- Yetthe PTI maystruggle to win a second ther astride mythical horses. ing of Ryomyong Street, a cluster of new term in 2018. One problem is excessive The news, then, that the first big monu- high-rise apartments, shops, restaurants promises. Mr Khan, who broke into poli- ment to Kim Jong Un would be unveiled in and pharmacies. He, rather than its archi- tics after a stellar career as a cricketer, August beside the pristine caldera lake tects, is portrayed as the mastermind be- pledged a “tsunami” of change. But it took atop the sacred Mount Paektu, on the bor- hind its design—just as his father was for his inexperienced party two years to get a der with China, caused a stir among re- the Juche Tower. 7 handle on government, and many ofits reforms so far, according to Faisal Bari of LUMS university, need much longer to get entrenched. Some of its more notable improvements are hardly photogenic. It is one thingforpeople gleefullyto take selfies in front of a new flyover in Peshawar, another to do the same in front of new toilets in a rural girls’ school. That Mr Khan himself appears to have lost interest in the province does not help. He aspires to national office and spends much ofhis time hecklingthe prime minister, who is under investigation for corruption. The PTI is starting to look more like the established parties. Having long mocked rapid-transit bus lanes, a favourite pork-barrel project of such parties, as a costly distraction from public-sector reform, the PTI is now building one of its own in Peshawar. It is said to be the country’s most expensive, per kilometre, yet. 7 No one cuts ribbons more brilliantly than Kim Jong Un Asset Management Wealth Management Asset Services

Hong Kong: +852 3191 1805 Singapore: +65 6536 1805 group.pictet 26 Asia The Economist June 10th 2017

Cambodian elections Press freedom in Japan The grip starts to Bristling with indignation

slip TOKYO A government that leans on the media takes offence at being scolded PHNOM PENH F YOU had to picksomeone to ruffle per. It tookoffence at this finger-wagging A strong showing forthe opposition in feathers, it would hardly be David by a foreigner. local elections I Kaye, the UN special rapporteur forfree- Most governments give short shrift to HE day after Cambodia held its five- dom ofexpression. A soft-spoken Ameri- rapporteurs, politely listening before Tyearly local elections, both sides could can law professor, MrKaye has prodded ignoring their recommendations, which claim some kind of victory. The ruling Japan to address concerns about the in any case are non-binding. But Japan Cambodian People’s Party (CPP) celebrat- independence ofits media. His report, bristles. A letter last month by Joseph ed because, according to preliminary re- which he presents to the UN’s Human Cannataci, a UN-commissioned expert sults—which both sides appear to ac- Rights Council this month, triggered a on the right to privacy, questioned the cept—it won 1,162 of the country’s 1,646 peppery riposte from the hurriedly merits ofa new bill to guard against communes. But the opposition Cambodia created Academics’ Alliance forCorrect- conspiracies, supposedly needed in the National Rescue Party (CNRP) did remark- ing Groundless Criticisms ofJapan, a fight against terrorism; that sparked a ably well, increasing the communes it will group ofuptight university professors. blistering row. MrCannataci’s assess- now control more than tenfold, from 40 to Mr Kaye’s alarm should be directed ment was “extremely unbalanced”, said 471. Unofficial totals suggest that it won toward his own country, they fumed. Shinzo Abe, the prime minister, and 46% of the popular vote, up from the 30% The official reaction was scarcely “hardly that ofan objective expert”. Two the opposition won in 2012. The CPP eked more measured. Sanae Takaichi, the years ago the government angrily chal- out a slim majority with 51%. Voter turnout communications minister and no liberal, lenged a rapporteur’s claim ofwide- was an impressive 89.5%. Final results will declined to meet the rapporteur. Koichi spread amateur prostitution among not be released until June 25th. Hagiuda, the deputy chiefcabinet secre- Japanese schoolgirls keen to have money As a general election looms next year, tary, said Mr Kaye’s findings were based forbranded goods. A year earlier it reject- the results have given cheer to the CNRP. on “hearsay”. Just before Mr Kaye arrived ed UN censure ofits stingy system for Yim Sovann, a party spokesman, notes in Tokyo to briefthe government, a draft asylum-seekers. that in the past the opposition’s share of ofhis report was leaked to the Sankei Japan’s inability to rise above such the vote in national elections outpaced its Shimbun, an ultra-conservative newspa- slights smacks ofa national inferiority local showing by 15 percentage points. On complex, says Kaori Hayashi ofthe Uni- that pattern, he says the CNRP—formed versity ofTokyo. The government insists when two opposition parties merged and that foreigners are ignorant ofhow things appeared on the ballot in 2013—should get workin Japan but is hopeless at explain- three-fifths of the votes in 2018, winning ing why the country is uniquely different, power forthe first time. she says. It still smarts about a UN report Yet hang on. Even if the opposition in 1996 that condemned Japan’s wartime wins, the CPP may not cede power. Hun military brothels. Radhika Coomaras- Sen, the country’s strongman, has been in wamy, a special rapporteur on violence charge since 1985, making him one of the against women, called foran apology longest-serving leaders in the world. The and compensation for women herded CNRP believes that the ruling party rigged into those brothels. Japan has repeatedly the 2013 election, in which the CNRP ap- tried to have the report pulled, without peared to fare well. Since then Mr Hun Sen success. has led a broad crackdown on dissent and Tension is inevitable in the relation- civil society. Opposition parliamentarians ship between governments and rappor- have been beaten. One critic, Kem Ley, was teurs, Mr Kaye insists. The mistake, he murdered (a crime Mr Hun Sen con- says, is assuming that reports are hostile demned). rather than opportunities for public Though the election itself was largely debate. The 46 professors who signed the peaceful, duringthe campaign MrHun Sen statement accusing him of“unfairand threatened to “eliminate 100 or 200 peo- biased views” preferred to shoot from the ple”, and warned that “war will happen” if sidelines. Ifthey felt so strongly, he says, his party loses. His defence minister threat- why didn’t they meet him face-to-face? ened to “smash the teeth” of protesters. Naly Pilorge, who heads LICADHO, a Cam- bodian human-rights watchdog, alleges equivalent to around a fifth ofthe national vide consultation to people to demon- that soldiers were trucked out to vote in budget. Yet the CPP controls that budget. strate” against communal leaders who fail contested rural communes, village chiefs Mr Yim Sovann gingerly describes this ar- to carry out their campaign promises. told people whom to vote for, and some rangement as “linking campaign promises MrHun Sen’s starmay be fading, partic- polling stations barred observers and to national elections”—in other words, ularly among young Cambodians sick of counted ballots behind closed doors. trusting voters to understand that the one-party rule. But do not expect him to go Much now rests on how the CNRP han- pledge will be fulfilled only if the CNRP gently into that good night. “We’re glad dles its new influence. The party pursued a winsnextyear. nothing violent happened on election risky strategy: Kem Sokha, its boss, vowed That may prove challenging. A small day,” says Ms Pilorge. There was a lot of in- to boost commune budgets from the cur- party allied with Mr Hun Sen has already timidation beforehand, however, she says; rent average of$57,000 a year to $500,000, vowed to open communal offices “to pro- and she expects a lot more in future. 7 China The Economist June 10th 2017 27

Also in this section 28 A feisty magazine in a battle royal 29 Banyan: Still shy of the world stage

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

Chinese politics ing small groups in May 2017. No fewer than 16 of them were set up by the presi- Xi’s nerve centre dent, even though, two years before he took over in 2012, the party issued guidelines saying there should be fewer new bodies. The president’s main innovation, though, has been to create what might be BEIJING called supergroups. The most important is called the Leading Small Group for Com- The president wields powerthrough a growing networkofshadowy committees prehensively Deepening Reform (Mr Xi ONALD RUMSFELD, a former Ameri- tant feature of its politics since 1958, when presided over its 35th plenary meeting on Dcan defence secretary, once delighted the first one was set up. May 23rd; officials up and down the coun- policy wonks everywhere by distinguish- Such committees can get out of control. try have been holding meetings ever since ing between “known unknowns”—things The Cultural Revolution small group, to study its host of pronouncements). A we know we don’t know—and “unknown created in 1966 and later run by Madame sign of this supergroup’s status is that, un- unknowns”. China’s political system is a Mao, almost took over the country at one like other groups, it has a network of its known unknown. We know about the point. They also tend to proliferate and own, with subgroups in every province. It Communist Partyand government but not have to be cut back. According to Alice even has sub-subgroups in counties, two much about how their leaders interact. MillerofStanford University, there were 44 levels ofadministration down. China’s system of government also groups in 1981, 19 in 1998 and 29 in 2009. The reform group does more than assist contains something which is closer to an They cover everything from Taiwan and co-ordination. Ithasa permanentsecretari- unknown unknown. This is the role of Hong Kong to internet security, the legal at (most others borrow officials on an ad “leading small groups” (lingdao xiaozu): system and “preserving stability”. Some hoc basis). It writes many of Mr Xi’s shadowy committees that often eclipse provinces have their own small groups. speeches and drafts party documents. The the power of more public political struc- Guangdong, in the south, for example, has group seemsto playa central role in formu- tures. For years, it was not even known one to promote manufacturing. lating economic policy. It was involved, for how many there were, how often they Zhou Wang of Nankai University in example, in every stage of drafting the cur- met, who was in them or what they did. Tianjin says there are three kinds of group. rent five-year plan, which is supposed to The situation is hardly clearer today. But re- The most important type formulates poli- guide China’s development until 2020. search conducted by a Chinese scholar cy, such as the one for foreign affairs. Most and two analysts at a German think-tank of these date from the 1950s; they conduct The Peking order called the Mercator Institute for China research before big decisions are taken. MrXi uses such groups to advance his own Studies (MERICS) provides fresh insight Next is the sort that has a specific task and authority. In the party’s pecking order, the into the groups and their make-up. It sug- that will, in theory, cease functioning body with the highest prestige is the Stand- gests that Xi Jinping, the country’s presi- when the task is complete. Examples in- ing Committee of the Politburo. Its seven dent, is using them in a new way. clude groups dealing with the Three members were chosen five years ago, at Officially, the role ofleadinggroups isto Gorges Dam (full operation of which be- the same time as Mr Xi was picked as co-ordinate the work of the party and the gan in 2012) or poverty alleviation (Mr Xi leader: he was not in charge of selecting government that serves it. Every country has set a target of eradicating extreme pov- them. In contrast the small groups are needs to keep the bits of its ruling system erty by 2020). Last, there are short-term packed with people who have worked together; the bigger the system, the more it groups to deal with emergencies. with the president for years. MERICS be- needsco-ordinating. China’stwin-engined Under Mr Xi, the number of groups has lieves that Li Zhanshu, the director of the arrangement is unusually extensive, so risen. According to Jessica Batke and Mat- party’sgeneral office (ie, secretariat) and an leading small groups have been an impor- thiasStepan ofMERICS, there were 45 lead- ally of the president, leads a subgroup of1 28 China The Economist June 10th 2017

refused to buy advertisements in Caixin Xi’s in charge that the magazine turned on it. Caixin, China, Xi Jinping’s advisers and leading small groups New group Not officially confirmed which stands by its reporting and says it June 2017 maintains a firewall between its news- room and its commercial operations, has Civil-military Military reform integration threatened Anbang with a lawsuit. Politburo Standing Top-level Caixin’s second fight is with Guo Wen- Committee members political advisers Xi Jinping gui, a billionaire living in self-imposed exile in America. Mr Guo has made head- Hong Kong Comprehensively Zhang Dejiang and Macau deepening reform Wang Huning lines overthe past few months with tweets and interviews laying out accusations of Party discipline Cyber-security high-level corruption in China. Mr Guo Xu Lin has himself been ensnared in a graft inqui- Anti-corruption Wang Qishan ry: in April China asked Interpol to issue a Economics global notice forhis arrest. Xinjiang and finance Liu He Mr Guo has reserved special venom for Tibet Ms Hu. Mr Guo’s troubles were widely re- Yu Zhengsheng National security Li Zhanshu ported in China in 2015 aftera rupture with Party-building his business partner—but nowhere in as Propaganda and ideology Foreign affairs much detail as in Caixin, which docu- Yang Jiechi mented his alleged business dealings and Teaching officials Taiwan Liu Yunshan traditional party values political connections. Mr Guo hit back by accusing Caixin of blackmail and adding Source: Mercator Institute for China Studies the outlandish claim that Ms Hu, 64, had a child with his former business partner. 2 the reform body and that he also serves on charge of the economy (he is a deputy Caixin and Ms Hu deny all allegations and a new group overseeing national security. leader of the group, which Mr Xi chairs). are suing Mr Guo forlibel. Liu He, Mr Xi’s chief economic adviser, is Another supergroup, the national security One possible conclusion from all this is the head of another reform subgroup and commission, which Mr Xi set up in 2013 that Caixin is the rarest ofthings in China: a serves on the small group on finance. And with himself as its chairman, ensures that courageous media outlet, pursuing the so on (see chart). he has the final say on such matters. truth in the face of intimidation. No evi- By stacking the committees with his al- It is not clearwhetherMrXi will need to dence has been presented to support the lies, Mr Xi has diluted the power of the rely so much on these groups after a party allegations that it tried to extort cash for Standing Committee’s other members; congress which is due to be held later this positive coverage. Less scrupulous Chi- they have to be mindful of their boss’s year: the five-yearly meeting is expected to nese journalists have done that, but Ms Hu proxy presence in the small groups they boost his power. But leading groups have and her team have won influence thanks lead. The reform supergroup in effect long been a secretive part ofan opaque po- in part to their reputation forbeing clean. usurps the authority ofthe prime minister, litical system. They have become central to Nevertheless, there is also the cynical Li Keqiang, who is supposed to be in the way Mr Xi governs China. 7 view ofCaixin’s critics that it is a pawn in a power war, going after select companies. In one statement Anbang accused Ms Hu Media of serving an unnamed “interest group”. Mr Guo, less restrained, has named Wang All that’s fit to print Qishan, the official leading China’s battle against corruption, as the force behind Caixin. But the notion that Chinese leaders need Caixin as a weapon stretches creduli- ty. MrWang is more than capable of taking down businessmen such as Mr Guo without the help ofjournalists. Two bitterfights put the spotlight on an influential magazine Strictly speaking, it is true that a power- HINESE media are not known for stir- since 2014 examining the company’s suc- ful entitystandsbehind Caixin. Like all me- C ring up trouble. Their coverage of poli- cess. Like many analysts, it has pointed to dia outlets in China, its right to publish is tics is almost uniformly tame. Business the risks involved in Anbang’s reliance on conferred byhavinga “supervisoryinstitu- coverage is sometimes harder-hitting, but the sale of short-term insurance products tion” as a formal backer (Caixin’s is an offi- journalists still shy away from taking on to fund its long-term investments. The cial publishing house controlled by an ad- powerful companies. One exception is magazine has also raised questions about visory body to the national parliament). Caixin, a financial magazine. It has a repu- the company’s shareholding structure. It is also true that Caixin picks its targets, tation for well-reported exposés, which More explosively, Caixin wrote in its May refraining, for instance, from digging into have earned its editor, HuShuli, the widely 1st issue that Anbang had pretended to the wealth ofseniorleaders—a red line that used moniker of China’s “most dangerous have more capital than it had—an allega- Chinese media dare not cross. But it has woman”. Over the years she has made tion denied by Anbang. pieced together stories about corrupt lead- plenty of enemies. But until recently, she Anbang has gone on the offensive since ers after they have been placed under in- had never faced two prominent foes in the publication of this latest article. It has vestigation; most journalists are wary public at the same time. released three statements, challenging de- even ofdoing that. Perhaps the best way of The first is Anbang, which in recent tails in the various reports and vowing to looking at Caixin is as a magazine that has years has grown at warp speed to become sue Caixin for reputational damage. It has mastered the art of the possible within the one of China’s biggest insurers. Caixin has also directed allegations of its own at Ms confines of China. It is dogged in its report- published three separate cover articles Hu: Anbangclaimed thatitwasonlyafter it ing but also pragmatic. 7 The Economist June 10th 2017 China 29 Banyan Still shy of the world stage

America is creating a vacuum in global leadership. Does China really want to fill it? spending that is intended to tie Asia to Europe, the Middle East and even Africa. Those who worry about Chinese power see the initiative as a gilded instrument ofa new Chinese order. This seeming tilt towards China owes little to its powers of at- traction. It is more of a knee-jerk response to events in Washing- ton: if that’s what you do, Mr Trump, say those who have pros- pered under an American-led order, it leaves us with no choice but to turn elsewhere. But admire China’s sense of timing. In Jan- uary, even before Mr Trump’sinauguration, China’s president, Xi Jinping, speakingbefore the world’selitesin Davos, presented his country as a champion ofglobalism and open markets. And yet: where China appears to be filling a leadership vacuum, there is often less than meets the eye. Climate change is one example. The world’s largest emitter has done much to cut back on its discharge of greenhouse gases, installing more renewable capacity than any othercountry. Yet its own transparency and accountability over pollution and emissions still falls far short of the openness a world leader on climate change would need to adopt. Meanwhile, common cause between Europe and China hassevere limits. AsJamesKynge ofthe Financial Times says, Chi- na’s push to cut emissions is motivated by an environmental cri- VEN analysts who make a living predicting a great shift of sis at home, combined with hopes of conquering world markets Ewealth, powerand global leadership from the United States to forrenewable energy. Europe wants to save the planet. China never anticipated the speed with which Donald Trump As for economic leadership, the EU-China relationship again appears to be marginalising his homeland. Last week Mr Trump reveals the limits. MrXi prises open markets, but many ofChina’s announced he would pull America out of the Paris accord on cli- own remain closed—and where foreigners may operate, the fear mate change. At an annual China-EU summit under way at the is of technology being stolen. That has led to European frustra- time, the president of the European Council, Donald Tusk, de- tions. Anger is growing over China’s divide-and-rule tactics in clared that China and Europe together would demonstrate “sol- separately wooing 16 poorer central and eastern European coun- idarity with future generations and responsibility for the whole tries, using belt-and-road enticements. planet”. Others have gone further: it will be to China that the With the addition of India and Pakistan, the share of the world will now turn for leadership on the issues that matter. world’s population who are citizens of SCO members will bal- China appears to have advanced on other fronts. The Shan- loon to nearly half: Chinese officials proudly point out that the gri-La Dialogue in Singapore, an annual talkfeston security, exists group will embrace three-fifths of the Eurasian land mass. But in part to showcase America’s commitment to keeping the peace managing the newcomers’ bickering could absorb China’s ener- in Asia. Mr Trump’s defence secretary, James Mattis, did his best gies, reducing the forum to little more than a talking shop about at this year’s event over the weekend to reassure Asian friends. terrorism and trade. As for the South China Sea, China has been Their chiefconcern is over the South China Sea, which China ap- strangely quiescent since an international tribunal a year ago pears bent on turning into its own lake. lambasted its territorial claims in the sea. It has been at pains to But though Mr Mattis’s promises to expand American engage- get on with neighbours it has disputes with, especially the Philip- ment in Asia were welcome, they did not dispel the perception pines and Vietnam. that America is taken up with North Korea’s nuclear threat (see Lexington), at the expense of the rest of the region. And America No such thing as a small matter is run not by Mr Mattis but by an erratic man forwhom “America Since at least the days ofNapoleon, the world has been gasping at First” may imply wrecking the world order that America itself the scale ofChina’s potential. China certainly knows how to play builtoutofthe ruinsofthe second world war. Amid doubts about to that imagining. And the propaganda directed at its own people America’s commitment to the region, South-East Asian officials emphasises a return to historical importance every second ofthe proposed that their countries’ navies join China’s to patrol the day. Yet China is reluctant to push really hard on the outer bound- South China Sea, in which China has greatly expanded its pres- aries of what it might hope to do. Just as it is browbeating neigh- ence through the construction and military reinforcement ofarti- bours over the South China Sea less than some had predicted, so, ficial islands. It smacked, to some, of rolling over in the face of for all that it relishes being referred to as a leader in climate Chinese power. change, it is far from keen to take on a leader’s responsibilities. Elsewhere, Chinese leadership seems to move from strength And at Shangri-La, China didn’t even send any senior leaders, to strength. As The Economist went to press, China’s own security merely what Washington wonks call “barbarian handlers”: low- grouping, the Shanghai Co-operation Organisation (SCO), which er-level functionaries whose job is merely to parrot their govern- includes Russia and four Central Asian states, was preparing to ment’s line. Being a world leader involves being able to handle welcome India and Pakistan as new members. Pakistan, an old criticism on an international stage. China remainsvery unwilling ally ofChina’s, is a natural inclusion. But India is a rival, so its nod to risk that. And the reason is simple: fear of how any slip-up to Chinese might is notable. The SCO’s expansion reinforces Chi- mightplayathome. Waishi wu xiaoshi, goesthe saying: there isno na’s ambitions for its “belt and road” initiative of infrastructure such thing as a small matter in external affairs. 7 30 United States The Economist June 10th 2017

Also in this section 31 Comey again 31 Supply-siders in Kansas 32 Puerto Rico’s statehood referendum 32 How the pain pills were sold 33 Climbing without ropes 34 Lexington: North Korea

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

Skilled immigration bers have become much better educated. Of the more than 1m new green-card Six degrees and separation holders (or permanent residents) in 2015, the most recent year with numbers available, almost half were immediate relatives of citizens. A further 20% entered through preferences given to other family mem- NEW YORK bers. That left just 14% who were spon- sored by companies, about the same share Immigrants are arriving bettereducated than everbefore who first entered the country as refugees OSÉ ROMMEL UMANO, who is original- French). Some of the president’s advisers or asylum-seekers (a further 5% were lot- Jly from the Philippines, moved to New think this more hard-headed system is bet- tery winners). Despite this bias towards York last autumn. He came on a family- ter than America’s family-centred ap- families, the share of immigrants who ar- reunification visa and joined hiswife, who proach. The doomed immigration bill rived with degrees has risen from 27%, for had been living in America for some time. from 2013 that died in the House of Repre- those who arrived between and 1986 and This is a typical tale: America gives more sentatives also reflected widespread en- 1990, to almost halfnow. weightto close familymemberswhen con- thusiasm for a points-based system. America is not the only rich country to sidering immigration applications than Two things ought to temper this enthu- have seen such an increase. According to some otherrich countriesdo. More surpris- siasm. First, Canada and Australia have the OECD (a club of mostly wealthy coun- ing is that Mr Rommel Umano arrived concluded that pure points systems do not tries), the number of college-educated mi- with a master’s degree from the University work well. A surprisingly high share of the grants heading to member countries grew of Tokyo and 20 years of experience as an people admitted this way ended up unem- by 70% between 2001 and 2011. Recent mi- architect in Japan. Yet this, it turns out, is ployed. Both countries have since changed grants to America are as likely to be highly typical too. Nearly half of all immigrants their immigration criteria so that appli- educated as those who move to Europe who arrived between 2011 and 2015 were cants who have job offers in their pockets are. They still lag some way behind Austra- college-educated. This is a level “unheard may jump the queue. Second, migrants lia and Canada, though. of” in America, says Jeanne Batalova, co- who move to America to join family mem- The result is that America has switched author of the paper containing the finding from importing people who are, on aver- published by the Migration Policy Institute age, less educated than the natives to peo- (MPI), a think-tank. College-educated immigrants, 2010-15, % change ple who are better schooled. Most states One of Donald Trump’s many execu- <0 0-10 10-20 20-30 30-40 >40 gained in college-educated immigrant tive orders instructed the Departments of populations between 2010 and 2015 (see Labour, Justice and Homeland Security to AK ME map). Immigrants were more educated examine immigration rules. The president, WI VT NH than Americans in 26 states. “This shift has whose hostility to illegal migrants is well- WA ID MT ND MN IL MI NY MA gone unnoticed by the broader population known, has also said that he would like to and policymakers,” says Ms Batalova of WY SD change the criteria for choosing legal ones, OR NV -29 -46 IA IN OH PA NJ CT RI the MPI. Many people have an outdated pointing to Canada or Australia as models CA UT CONE MO KY WV VA MD DE notion of who immigrants are, conflating for America to copy. In 1967 Canada be- AZ NM KSAR TN NC SC DC them with the undocumented. The num- came the first country to introduce a points ber of undocumented migrants has been system for immigration; Canada and Aus- OK LA MS AL GA falling, but even they are more likely to tralia now both give priority to would-be HITX FL have a degree these days: the MPI reckons migrants with degrees, work experience that a fifth of graduate immigrants are un- Source: Migration Policy Institute and fluent English (and, in Canada, documented. Nearly a third of refugees 1 The Economist June 10th 2017 United States 31

2 have at least one degree. have been very loyal to you, very loyal”. moreover he has made donations to as- One difficulty even educated migrants (In a bright spot for Mr Trump, Mr Comey sorted Republican candidates. Given his face on arrival is that employers do not al- confirmed he told the president he was not background, his path naturally crossed, ways recognise foreign degrees and experi- personally under investigation.) too, with that ofRobert Mueller, a previous ence abroad. Antiquated licensing require- Whatever else emerged at the commit- boss of the FBI who—in the uproar that fol- mentsand regulationsalso hurt. Upwardly tee hearing, for some of Mr Trump’s critics lowed Mr Comey’s firing—was appointed Global, a charitywhich helpsskilled immi- his behaviour, as laid out by Mr Comey, as special counsel to oversee its probe into grants translate their CVs into American, amounts to obstruction of justice. In any possible collusion between Russia and the cites the example of a former Médecins event, the statement underscored the ex- Trump campaign. Sans Frontières doctor from Botswana traordinarily sensitive context of another Precisely what relationship Mr Wray, as who worked as a waiteruntil he got help to development on June 7th: Mr Trump’s an- a Trump appointee, might have with Mr navigate the system. As for Mr Rommel nouncement of his choice for Mr Comey’s Mueller’s team remains to be seen. But an- Umano, despite his years as an architect replacement. In what those critics saw as a other detail in Mr Comey’s recollections and two degrees, he had a hard time get- bid to distract attention from the hearing, might catch Mr Wray’s eye. After that ex- ting work in his profession in America. the president tweeted that he was nomi- cruciating encounter in the Oval Office, Mr Needing money, he tooka job loading box- nating Christopher Wray, whom he called Comey said that he asked JeffSessions, the es in a New Jersey warehouse two hours “a man ofimpeccable credentials”. attorney-general, to “prevent any future di- away from his home in the Bronx. The In this febrile atmosphere, will others rect communication” between Mr Trump charity polished his CV and put him agree? Mr Wray is certainly a more palat- and him. Mr Sessions—whose relations through mock interviews and in touch able candidate than the various Republi- with the president are also said to have de- with his current employer, a construction can politicians who were once under con- teriorated, in part because ofhis own recu- firm. There, he says the work is pretty simi- sideration, some of whom withdrew their sal from involvement in Russia-related in- lar to what he was doing in Japan. 7 names from the process. Many of them quiries—“did not reply.” 7 would have fuelled accusations that the bureau was in danger of being suborned. The FBI Instead Mr Wray is a former federal prose- A Republican revolt cutor and assistant attorney-general, who Loyalty schemes worked in the Justice Department during Brownback to the fall-out from the September 11th attacks; he was also involved in the prosecu- black tion of Enron executives. He is currently a ATLANTA partner at King & Spalding, based in Atlan- ta and Washington, where he had worked Evidence from a formerFBI boss—and a CHICAGO before entering public service. (Ms Yates candidate to replace him Has the Kansas experiment failed? once worked forthe same law firm.) HE hotly anticipated appearance be- Still, Mr Wray’s biography contains a E HAVE gone too far to the right Tfore the Senate Intelligence committee few elements that Democrats will aim to “Wand are now swinging back to the of James Comey, whom Donald Trump scrutinise at his confirmation, in particular centre,” says Melissa Rooker, a Republican fired as the FBI’s director last month, was his association with Chris Christie, New state representative. Ms Rooker was one of scheduled to begin after The Economist Jersey’s governor and a close ally of Mr the moderate Republicans who on June went to press on June 8th. But his written Trump. Mr Wray represented Mr Christie 6th joined forces with Democrats in the statement, released the previous day, of- in the matter of the closure of traffic lanes state house to override a veto by Governor fered an explosive preview. In it Mr Comey on the George Washington Bridge in 2013; Sam Brownback. The bill in question aims related how, at a private dinner at the to raise $1.2 billion over two years by in- White House on January 27th, Mr Trump creasing income taxes and repealing a tax ominously advised him that many people exemption for small businesses. In votes wanted his job, explaining: “I need loyalty, only a few hours apart, 49 of the 85 Repub- I expect loyalty.” Mr Comey added the lican members of the state house and 18 of small but telling detail that he received the the state’s 31 Republican senators voted invitation that very day—in other words, against the Republican governor. right after Sally Yates, then the acting attor- The veto override’ssignificance goes far ney general, had told the White House that beyond a tussle over the finances of an Michael Flynn, then the national-security agrarian midwestern state. Mr Brownback adviser, was vulnerable to Russian black- is the poster boy for Laffer-curve enthusi- mail and had been interviewed by the FBI. asts who believe that lower taxes always That, in Mr Comey’s words, was “a very boost growth. His radical business- and in- awkward conversation”. So was an en- come-tax cuts, launched in 2012 and 2013, counter in the Oval Office on February were a political and economic test of how 14th—the day after Mr Flynn got the boot. far conservatives could push supply-side Then, said Mr Comey, the president told economics. Judging by the state of Kansas, him: “I hope you can see your way clear to the answer is not as faras they thought. letting this go, to letting Flynn go.” Mr Co- The selling points of Mr Brownback’s mey also gave his version of two subse- tax cuts, explains Duane Goossen, a for- quent phone calls. In one, the president de- mer Kansas budget director, were that they scribed the investigation into Russian would spur growth, pay for themselves meddling in his election as “a cloud” and and make everyone across the socioeco- “asked whatwe could do to ‘liftthe cloud’.” nomic spectrum better off. Five years later, In what Mr Comey says was their last talk, none of these promises have come true. Mr Trump is said to have admonished: “I Christopher Wray, next man up Kansas’s economic growth has been slug-1 32 United States The Economist June 10th 2017

Puerto Rico hood would be mostly symbolic, however. For Puerto Rico to enter the union, Admit one Congress needs to pass a law admitting it. Even though the Republican platform of 2016 officially supported Puerto Rican statehood, it would not rush to add two SAN JUAN senators and five representatives who would probably lean Democratic. The Commonwealth is poised to cast a Moreover, even a future Congress symbolic vote forstatehood might require another referendum. The N 1952 America granted self-rule to the Justice Department (DOJ) rejected Puerto ICaribbean island ofPuerto Rico, which it Rico’s first request for official recognition had obtained from Spain in 1898. Last year forthe vote, citing concerns with the ballot Congress in effect revoked that autonomy, choices and language. Although the pro- bycreatinga control board capable of veto- statehood governor, Ricardo Rosselló, ing any item in Puerto Rico’s budget. modified the options and wording, he did The reversal was hardly an act of impe- not delay the vote to give the DOJ time to rial gluttony. The island had issued $70bn deliver a new verdict. Doing so would in debt, far more than its stagnant econ- have postponed it until after budget cuts, omy could hope to sustain. But because when both he and his cause are likely to be Sun sets on Brownback-onomics Puerto Rico is not a state, its public compa- far less popular. Mr Rosselló will not have nies could not use the bankruptcy code long to celebrate his side’s expected vic- 2 gish at best, the drop in state revenue has used by insolvent borrowers like Detroit. tory before he is saddled with the political been steep and MrBrownbackwasonlyre- That raised the spectre ofa chaotic default. costs ofthe colonial status quo. 7 cently toppled from his perch as the na- In response, Congress passed a law tion’s most unpopular governor by New with a tough trade-off. To obtain a bank- Jersey’s Chris Christie. “The Kansas experi- ruptcy-like proceeding that would shield Opioids and lawsuits ment did not work,” states Mr Goossen. the wayward island from its creditors, Defenders of Mr Brownback argue that Puerto Rico had to relinquish control of its Ohio high Kansas would be doingmuch betternow if finances. Nonetheless, the policybolstered he had been able to implement his reforms the argument long made by proponents of properly. He cut marginal tax rates (which both statehood and independence: that discourage work and investment), but leg- Puerto Ricanshave no rightto self-determi- islators did not let him close many loop- nation. “The creation of the control board LOS ANGELES holes to pay for the cuts, which meant that took our status as a colony out of the clos- How the pain pills were sold the state’s revenue plunged much more et,” says Ana Rivera Lassén, a leader of the than expected. “Kansas increased spend- movementopposingthe board. “Itshowed N 2016 a coroner’s office in Ohio had to ing while taxes were cut,” fumes Grover us what we really are.” Istore corpses in refrigerated lorries for a Norquist of Americans for Tax Reform, a Puerto Ricans now have the chance to week because residents were overdosing lobby group. The low-tax crusader points demand a change. On June 11th the territo- on opioids faster than their bodies could instead to Florida, Arizona, Texas and Indi- ry will hold a referendum on its status. In be processed. This year has been no better: ana to prove that tax cuts done right spur 2012, the last time islanders voted on the is- the coroner borrowed space from a local economic growth. sue, the results were ambiguous. In a two- funeral parlour to stow the dead. Largely Though a Republican state for years stage ballot, 54% said they opposed the sta- because of opioids, Ohio has the third- Kansans did not want to move as far right tus quo, and 61% of voters who made a se- highest drug-overdose death rate in the economically and politically as Mr Brown- lection picked statehood as their preferred country. In a recent survey, four out of ten back was trying to push them. Earlier this alternative. But since a quarter of voters adults there reported knowing someone yearalmost two-thirds ofrespondents said left the second question blank, just 44% of who has overdosed on prescription pain- in a “Kansas Speaks” survey by Fort Hays ballots actually supported statehood. killers. Ohio blames opioid manufactur- State University they felt Kansas was on This time, there will be a single ques- ers. On May 31st the state government filed the “wrongtrack”. At the primary elections tion with three choices: statehood, “cur- a lawsuit against a group of drug compa- in 2016 moderate Republicans ousted rent territorial status” and independence. nies, accusing them of exaggerating the ef- many of the conservatives aligned with Moreover, thanks to the austerity imposed fectiveness of opioid painkillers while the governor. by the control board—representing some downplaying the riskofaddiction. The parliamentary newcomers, who 20% of total public spending by 2019—en- Until the 1990s, doctors mostly re- account for about one-third of the Kansas thusiasm for the status quo has shrivelled. served opioids for acute pain or easing suf- legislature, helped to scupper Mr Brown- And because support for independence fering at the end of life. Around the middle back’s tax agenda. In February lawmakers has always been scant—most Puerto Ri- of that decade, drug companies began a came within a few votes of overriding the cans treasure their American citizenship— concerted marketing effort to convince governor’s veto of a tax increase that many former believers in the Common- doctors that opioid pills were also safe for would have raised more than $1bn to help wealth now see joining the union as the treatingchronic pain. Since then, addiction plug the budget shortfall. In March came least-bad option. Recent polls show that and deaths associated with prescription another blow when the Kansas Supreme 60-70% ofrespondents expressingan opin- opioids have soared. The state ofMississip- Court ruled that the state’s spending on ion want Puerto Rico to become the 51st pi, Santa Ana and Orange Counties in Cali- public education was unconstitutionally state. Moreover, leaders of the two parties fornia, and the city ofChicago, among oth- low. It may not come as a big surprise that opposed to statehood have called for a ers, have recently filed complaints that the beleaguered governor is reportedly in boycott, all but guaranteeing a robust ma- similarly condemn drug companies for fu- talks with the Trump administration about jority among those that show up to vote. elling the opioid epidemic. The suits paint a new job. 7 Even a resounding victory for state- a startling picture of the companies’ mar-1 The Economist June 10th 2017 United States 33

2 keting strategies. Climbing In 2014, the five defendants in the Ohio case spent $168m promoting their products to doctors—twice what they spent in 2000. Rock stars This allowed the companies to hire droves DALLAS of sales representatives, who were de- A series ofremarkable feats increases the appeal ofa niche sport ployed, as is usual in America, to hobnob with doctors at conferences and visit them OST people get sweaty palms just climbers was matched only by relief at in their offices. They doled out coupons for Mstaring up at the sheer granite bulk his safe return. the drugs, as well as branded gifts. Purdue ofEl Capitan, a spectacular rockfor- The exploit marks the latest in a series Pharma, one ofthe largestopioid manufac- mation in California’s Yosemite Valley. ofmilestones for“sport climbing”. This is turers and maker of the popular OxyCon- Alex Honnold’s stayed dry as he ascend- to clambering up monkey bars what tin, was perhaps the most creative. When it ed the 3,000-foot(900-metre) vertical mountaineering is to hiking, a natural introduced OxyContin in 1996, the com- wall on June 3rd, jamming his hands in human pursuit pushed to extremes. In pany handed out soft toys in OxyContin T- cracks and pulling on edges barely big 2015 two other Americans, Tommy Cald- shirts, branded fishing hats and a 1950s- enough forfingertips. well and Kevin Jorgeson, made the front music CD entitled “Get in the Swing with That is just as well, for Mr Honnold page of the New York Times, and got a OxyContin”. An investigation by STAT, a could not afford any slips. He carried no congratulatory tweet from Barack health-news website, found that to con- kit other than painfully snug shoes, with Obama, forestablishing a free (but not vince a doctor with a sweet tooth to begin soles made ofthe same sticky rubber that solo) passage up the Dawn Wall, El Capi- prescribing the drug, one salesman deliv- glues Formula 1race cars to the tarmac, tan’s blankest stretch, after years of at- ered a box of doughnuts and snack cakes and a bag ofgymnasts’ chalkstrapped to tempts. Last year climbing on artificial arranged to spell OxyContin to his office. his waist, to keep his fingers moisture- walls was included in the line-up for the In a strategy that the Ohio suit calls free. There was no rope to secure him if Tokyo Olympics in 2020, part ofa wider “borrowinga page from Big Tobacco’s play- he fell, as there had been when he repeat- effort to rejuvenate the games. book”, the pharmaceutical companies edly rehearsed the route. After a four- This has cemented climbing’s place in also recruited “key opinion leaders”—doc- hour display ofsloth-like precision, the sporting mainstream, in America and tors and pain-treatment advocates identi- power and preternatural poise, the 31- elsewhere. Google invited Mr Jorgeson to fied as amenable to increasing the use of year-old safely made the summit, hiked give a motivational talkto employees; Mr opioids for chronic pain. The companies backdown to the valley, and phoned his Honnold can expect similar offers. paid these people to serve on advisory mother. He then squeezed in a workout. Climbing gyms have mushroomed boards, give talks and hold continuing El Capitan had been climbed part- around the globe in the past decade, medical-education classes for other doc- nerless before, including by Mr Honnold. making the pastime saferand more tors. A report by the Government Account- But never in the way he has, literally, accessible to city dwellers. Millennials, ability Office found that between 1996 and taken to new heights. In 2011an episode keener on experiences than possessions, 2002 Purdue Pharma alone financed of“60 Minutes”, a current-affairs show, have piled in. 20,000 such education programmes. about his earlier “free solos” drew17m Sporty children who may once have Most of the marketing practices de- television viewers. In climbing jargon, pursued gymnastics now often pick tailed in the suits are not new, and opioid “free” means using only rockformations climbing instead. Some start as young as prescriptions have dropped off since 2011. for support, not rope-ladders or other five, leading to dizzying leaps in perfor- The fact that local governments are suing paraphernalia clipped to pre-drilled bolts mance. In November Adam Ondra, a now reflects their desperation, says Juliet or wedged in cracks; “solo” signifies wiry 24-year-old Czech regarded as pos- Sorensen, of Northwestern University’s dispensing with protection. It is the sport sibly the best climber ever to fondle rock, Pritzker School of Law. She believes that at its purest. In Yosemite, the cradle of repeated the scramble up the Dawn Wall, Ohio, Chicago and the others hope for an American climbing, Mr Honnold has assisted by his father, after just a month outcome similar to that in litigation against reached its pinnacle. Praise from fellow ofpractice. the tobacco industry. In the 1990s, 46 state attorneys-general sued the country’s largest tobacco companies over their marketing practices. The companies were forced to change their advertising methods and pay the states billions ofdollars. Opioids are more regulated than tobacco was, which could make cases against their manufacturers harder to win. The Food and Drug Administration approved the painkillers and their marketing; convincing a jury that the companies used “deceptive” advertising to increase sales could be hard. But even if the suits fail in court, they may still achieve other goals, says Timothy Lytton, of Georgia State Uni- versity College ofLaw. Whereas the immediate aim of many local governments may be to recoup money spent on treatingdrug- overdose victims and addicts, Mr Lytton believes the ultimate objective of the suits is to force pharmaceutical companies to Alex Honnold rehearsing at El Capitan change their behaviour. 7 34 United States The Economist June 10th 2017 Lexington Clear and present danger

America’s message to China: eitheryou stop North Korea building nuclearmissiles, or we will is a nonsense to which Americans reply, if you want THAAD gone, deal with North Korean nukes. Something big has changed. In developing intercontinental ballistic missiles (ICBMs) that could hit American cities, and repeatedly testing them, the Kim regime directly threatens the American homeland. Yet in the upperranks ofthe American government there are flickers of optimism, and they concern China. Perhaps its president, Xi Jinping, still fears instability on his bor- dermore than a nuclear-armed North Korea—American opinions are divided. But Team Trump is determined to convince Mr Xi that he has his hierarchy of horrors in a muddle. The new message: if China will not act to halt the North Korean missile threat, America will. As a result, it is North Korean ICBMs that threaten the very chaos that leaders in Beijing fear most. On June 3rd James Mattis, the defence secretary, told the Shan- gri-La Dialogue, a gathering of Asian government leaders and military brass in Singapore, that North Korea’s weapons programmes are a “clear and present danger” to America. Mr Mattis is a figure of rare credibility within the Trump administration, re- vered by his peers as a “warrior-monk”—a ferocious battlefield commander who carried works of Roman philosophy into com- LL serious governments think, hard, about unthinkable hor- bat, and prodded his officers to thinkhard about the ethics ofkill- Arors. For America, China and other Asia-Pacific powers, few ing. Still, his audience in Singapore was anxious as he began. potential events are as grim to contemplate as a war involving Asian governments want to know whether Mr Trump, a man North Korea, or that country’s violent collapse. who seems more concerned with interests than values, might do There are reasons why the world does not seek to topple a deal with China, trading help with North Korea for a Chinese North Korea’s impetuous young leader, Kim Jong Un. For one, his sphere ofinfluence. They fearthat America will bluster, then look regime—a Stalinist take on a feudal monarchy, funded by mafia- the other way as China builds airstrips and military bases on dis- like criminalityaround the globe—keepsartillerypieces and rock- puted reefs in the South China Sea. MrMattis tried to assure them et-launchers aimed at the South’s booming capital, Seoul, 35 thatno such trade-offexists. He declared thatAmerica will notac- miles from the border between the two Koreas. To convey the ceptunilateral, coercive movesto change factson the ground, and costs ofthat conflict, American experts recall the grimmest exam- accused China ofshowing “contempt” forneighbours. ples of urban destruction in Chechnya, and imagine evacuating Cynics may remain sceptical, believingthat MrTrump is quite millions ofcivilians from Seoul and its suburbs, under fire. capable of a trade involving Chinese reef-grabbing for effective Chinese leaders have their own nightmare scenario: the cha- Korean sanctions. The best counter-argument within the Ameri- otic fall of the Kim regime, sending millions of refugees into can government is that such a binary trade-offwould not be clev- north-eastern China as a race begins forcontrol ofthe North’s nu- erdealmaking. Ifpossible, itis argued, America should avoid con- clear arsenal. In the medium term, China’s government fears a fusing the urgent (curbing North Korea) with the enduring unified, pro-Western Korea on its border. The jumpiest Chinese (managing China’s long-term rise within a rules-based order). imagine gum-chewing Marines and American spy stations rising on the Korean banks of the Yalu river, yards from China—despite An appeal to self-interest discreet assurances that America has no intention ofenlarging its Following Dwight Eisenhower’s dictum that “If a problem can- military footprint in Asia, should Korea peacefully reunify. not be solved, enlarge it”, the Trump administration hopes to en- Seoul’s vulnerability as a hostage city helps to explain why gage China on a broaderrange ofinterests. There are, for instance, both Republican and Democratic administrations have spent Uighur militants from western China with ties to extremist net- years hoping that diplomacy and economic pressure will dis- works in Afghanistan, a country about which America knows a suade North Korea from buildingnuclearweapons. To date, these lot. North Korean cyber-attackers have used China as a base: hopes have been in vain. Chinese leaders also fear the destabilis- America calls that an affront to Chinese sovereignty. ing effects of North Korea’s weapons programmes, and have Mr Trump’s affection for Mr Xi after a meeting at Mar-a-Lago, signed up forsomewhat tighter sanctions. But in their internal hi- the American president’s Florida country club—“I thinkI like him erarchy of horrors, the Kim regime’s collapse frightens them a lot, I think he likes me a lot,” he said afterwards—may be more more. Asa resultChina has, until now, been willingto considerall conditional than Asian allies fear. Mr Trump issaid to feel that he forms ofsanctions except those painful enough to work. received personal assurances about unprecedented Chinese Chinese officials, who struggle to meet senior North Koreans, pressure on North Korea. If disappointed, he has a whole tough- continue to insist that they have limited political leverage over on-China agenda left over from his presidential campaign. the Kim regime. Thatissophistry: China hasunrivalled economic All-out war may be unimaginable. But if North Korea contin- power over North Korea, including a stranglehold on its energy ues to sprint forICBMs, America’s appetite forriskwill rise sharp- supplies. China also continues to claim that an anti-missile de- ly, and military options will gain a harder edge. China has for too fence system recently installed by America in South Korea, long tolerated North Korean provocations in exchange for stabil- THAAD, undercuts China’s ability to deter external threats. That ity on its borders. Time to choose. 7 The Americas The Economist June 10th 2017 35

Also in this section 37 Bello: The bogeyman of Mexico

Haiti relevant to their lives,” he says. Mr Moïse ran in a protracted election A time to sow beginning in 2015 as the candidate of the Shaved-Head Party, so named because both he and the previouspresident, Michel Martelly, sport gleaming pates. Mr Mar- DESDUNES, ARTIBONITE VALLEY telly’s pre-presidential career was as a com- pas singer known as Sweet Micky. His po- A new president has a chance to try out fresh ideas fora country desperately in litical heirhasan earthiermoniker, Banana need ofthem Man; he is a planter from Haiti’s remote WIVEL, clank, scoop, dump. On the out- ley will come backto life. north-western peninsula. After leading in Sskirts of Desdunes, a town in Haiti’s fer- The dredging fulfils a promise by Jove- the first round of a presidential election, tile Artibonite valley, three enormous exca- nel Moïse, Haiti’s president since February, Mr Moïse waited over a year to take office vators sink claws into the banks of the who has vowed to make rural areas more because the electoral commission ruled muddy Duclos canal. Arching across it, productive. That he is actually trying to the ballot invalid owing to accusations of their slender hydraulic arms uproot small keep this promise is startling in a country fraud. In the re-run last November, in trees and drag them through the clay-col- notorious for bad government. Haiti’s which just a fifth of the electorate partici- oured water as they gouge out mud from long-run economic record is atrocious. In pated, he was elected with 56% ofthe vote, the canal bed. They deposit the glistening countries that were as poor as Haiti in 1981, buoyed by support from the hinterlands. sludge, mixed with tall grasses, on their GDP per person rose by half on average by side of the channel, forming a neat ridge. 2012; in Haiti it dropped by 40%. After an A new crop of ideas Bored-looking policemen lounge in the earthquake in 2010 that killed more than So far, he has focused on what he knows shade of palm trees, ostensibly to deter 200,000 people and cost 120% of GDP, for- best: the needs of the countryside. “We thieves from stealing the machines’ batter- eign governments and NGOs donated have to feed the people first,” he says. ies. Blue-grey herons stand to attention; $10bn, about 150% of GDP. But donor fa- “That’s why agriculture is my priority.” But cows and horses graze. Ahead of the exca- tigue has set in and aid has dwindled to the growingmore rice and bananaswill not lift vators, the canal is a mere incision through flow rate of the unexcavated Duclos canal. Haiti out of poverty. Mr Moïse is casting the fens. Behind lies the result of their Even the hurricane that devastated Haiti’s about for new ideas in a country where work: the canal looks wide enough to ac- south-western peninsula in October few policies have worked as intended. commodate a battleship. Naked boys dive brought only a drizzle ofmoney. One source of fresh thinking bore fruit in, seeking respite from the Caribbean sun. Haiti has not emerged from the shadow just after he took office. The Copenhagen The Artibonite is Haiti’s rice basket, ca- of the earthquake: amputees are discon- Consensus Centre (CCC), an NGO, com- pable of producing enough grain for the certinglycommon on the streetsofPort-au- pleted a study ofpotential policies in Haiti. whole country. The rice grows in standing Prince, the squalid, chaotic capital; 50,000 With C$2.5m ($1.9m) from the Canadian water, which requires irrigation and drain- people remain in tent cities. Mr Moïse gov- government, the CCC commissioned doz- age. By 2015, marshes had colonised so erns from the rump of the presidential pal- ens of experts to score and rank a wide much of the canal that its waters had ace, whose stately central dome collapsed range of proposed initiatives by their re- stopped flowing. The fields surrounding and has not yet been rebuilt. Nonetheless, turn on investment. After a year of re- Desdunes have since lain fallow, costing he is the first president since 2010 who can search, the CCC presented its findings to farmers four harvests. “Whenever people move beyond a single-minded focus on re- Mr Moïse in Port-au-Prince last month. see these excavators, they start dancing,” construction to devise a new long-term de- It has detractors. Its founder, Bjorn Lom- says Samson Demosthene, the crew’s pot- velopmentstrategyforthe poorestcountry borg, irks climate-change activists by argu- bellied foreman. “Nothing makes them in the Americas. “I have to deliver results ing that some efforts to reduce carbon happier.” When the work is done, the val- so that people understand that politics is emissionsare a waste ofmoney(though he1 36 The Americas The Economist June 10th 2017

2 favours a carbon tax). Some critics accuse enough to judge which policies are worth- (EdH), the creaking national power com- him of using shoddy statistics, a charge he while. The policiesthe CCC endorsed most pany. Expensive and unreliable electricity vigorously disputes. He is not responsible heartily do enjoy widespread support— is one of the biggest obstacles to develop- for the calculations that landed on Mr and Mr Moïse is listening. ment. Consumption per person is a paltry Moïse’s desk, which are the work of inde- The highest BCR comes from fortifying 2% of the level in the Dominican Republic; pendent economists. wheat flour with iron and folicacid, which the price is almost double. EdH only man- The CCC’s call for “prioritisation”—con- would prevent 150 infant deaths and agesto charge for30% ofthe poweritgener- centrating on policies that offer the biggest 250,000 cases of anaemia a year for a tri- ates. The rest is either stolen or lost to tech- bang for the buck—should be well-suited vial overall cost of $5m (see chart). This nical faults. Blackouts can last up to 15 to poor places like Haiti. It promises to practice is standard even in poor countries. hours. To keep the lights on intermittently, guide governments with cold-hearted Jamie Marks, who runs Les Moulins the government spends10% ofits budget to maths, no matter how unsettling the re- d’Haïti, a big flour producer, says his firm buy power for EdH generated at exorbitant sults might be. For example, among Haiti’s could add the micronutrients within prices by local firms. woes is a cholera epidemic that was months of the government specifying a Mr Moïse acknowledges that “there brought by UN peacekeepers in 2010 and formula. Mr Moïse said he found the value will not be any development without en- has killed more than 10,000 people. It of wheat fortification the most surprising ergy reform.” He wants to replace EdH’s might seem wise to vaccinate the entire of the CCC’s findings, and promised to re- costlycontractsto buyelectricitywith pub- country. But Dale Whittington of the Uni- quire it within halfa year. That alone could lic-private partnerships, which would be a versity of North Carolina at Chapel Hill justify the cost ofthe CCC’s research. step in the right direction. But implement- found that delivering the full two doses of Another priority is training first re- ing reform would require confronting the vaccine to every Haitian would be sponders. Haiti is prone to natural disas- EdH’s powerful suppliers. Mr Martelly both prohibitively expensive and of limit- ters: it has suffered four times as many as tried and failed. Such obstacles highlight ed value, since the disease has trouble the neighbouring Dominican Republic rel- the limits ofthe CCC’s approach: no matter spreading once a minimum share of the ative to its area. Deforestation makes the how good an investment may look, mak- population is resistant. He found that the country vulnerable to floods, and unregu- ing it work requires competent govern- highest return—a social “benefit-to-cost ra- lated house-building in vulnerable areas ment. The CCC did not calculate a payoff tio” (BCR) of5.9 to one—came from deliver- makes them devastating. It would cost just from developing better governance; its ing a single dose to schoolchildren, whom over $1m to provide first-aid instruction to costs and benefits are hard to estimate. But the government can easily reach, and volunteers across the country, which the its absence is modern Haiti’s original sin. countingon the resulting“herd immunity” CCC estimates would save 700 lives a year. effects to reduce the spread ofcholera. Ensuring that they have access to vehicles A sorry state In practice, such calculations are sensi- and equipment would be more expensive, In a report published in 2015, the World tive to researchers’ choices and the quality but valuable. Brazil, Venezuela and Cuba Bank asked, “What makes Haiti Haiti?” Its of their evidence. Studies that incorporate have donated nearly 100 ambulances to first answerwas succinct: “a social contract estimates ofpositive knock-on effects or ig- Haiti, but the government has not main- is missing between the state and its citi- nore negative ones yield higher BCRsthan tained them or equipped them with oxy- zens.” Since the dictator Jean-Claude Du- those that do not. The CCC’s models tend gen tanks and defibrillators. “They’re like valier was overthrown in 1986, Haiti has to give generous scores to health projects, ghost ambulances,” says Jean-Pierre Gui- had 18 changes ofleadership, ofwhich few whose benefits are measured in “disabili- teau, the head ofthe Haitian Red Cross. were peaceful, democratic and undisput- ty-adjusted life-years”, and disappointing Easy wins like first-aid instruction are ed. A small business elite has supported ones to the agricultural initiatives dear to small-scale. Another recommendation fragile governments in exchange for low Mr Moïse, whose benefits were simply as- would be transformative and far harder to taxes and oligopolistic control of key in- sessed on the cash value ofa crop. achieve: reforming Electricité d’Haïti dustries, keeping the economy uncompet- However, raising the productivity of itive and obliging the government to fi- subsistence farming, as in the Artibonite nance itself through regressive taxes on valley, will also improve nutrition, an ef- A new breed of league table imports. Perennially short both of cash fect that some of the CCC’s studies do not Haiti, benefit-to-cost ratio per $ of investment and professional civil servants, the state measure. And investments in health and Highest ranked programmes, 2017 has failed to provide infrastructure, the education, particularly for children, may rule oflaw and services such as health and provide less value to a country than their 0 5 10 15 20 25 education. The earthquake made the weak BCRs would indicate if the beneficiaries Wheat-flour state even weaker, killing many civil ser- micronutrient emigrate as adults because they cannot fortification vants and destroying their records. Most find jobs. A full accounting of such interac- Electricity reform Haitians who have escaped poverty have tions could significantly change the rank- done so by emigrating. Many ofthose who Access to ings. Similarly, distinguishing causation contraception stay resort to crime. Violent protests are from correlation in social policy is an inex- common, sometimes toppling presidents Early-childhood act science. All but one of the 85 evalua- stimulation and starting the vicious cycle anew. tions in the CCC’s report were either not First-responder Mr Moïse agrees that a weak state is the based on randomised controlled trials training main explanation for Haiti’s 200-year-old (RCTs), the only way to prove that a policy Shelters for women poverty trap. To correct that, he says, Haiti under consideration will work, or sought and children needs political stability first of all. He RCT Infant to translate s from other countries to immunisation wants to leave the country’s “democratic the unique environment ofHaiti. Mobile broadband apprenticeship” behind by enacting con- Imperfect information is better than no expansion stitutional reforms to hold more elections information, the CCC argues. “What’s im- Domestic-violence at the same time. Currently, presidents, portant is not whether the BCR is [precise- helpline senators and lower-house deputies are ly] 2.3 or 0.9,” says Brad Wong, its chief Assistance during elected on different cycles. Perhaps more childbirth economist; the differences between the contentiously, MrMoïse would replace the Source: Copenhagen Consensus Centre top and bottom of the rankings are big cumbersome semi-presidential system, 1 The Economist June 10th 2017 The Americas 37

2 which includes a prime minister, with a business opportunity: Haiti’s textiles will Georges Sassine, who runs Lafito, says pro- purely presidential one. He has plans to re- continue to enjoy privileged access to the ducers of apparel and motorcycles have form the civil service; he would replace United States. Investors from places like more demand for factory space than he ageing bureaucrats with energetic younger Taiwan are moving in. At Lafito, an indus- can accommodate. “The whole idea is to ones and set up a new training school. He trial development 20km (12 miles) up the have Haiti itself not create problems,” he is trying to improve the business climate, glimmering turquoise coast from Port-au- says, gesturing towards squatters’ homes for example with legislation to cut the Prince, a consortium led by GB Group, a loon hillsides nearby. number ofdays needed to start a company cal conglomerate, is building a $1bn state- In the Artibonite valley there is a bit from 97 to 30 and to allow employers to ex- within-a-state, with a 25MW power plant, more faith. The dredging of the Duclos ca- tend the workday by using shift labourers. a data centre for speedy internet access, a nal has shown that the state can contribute Some enterprises, unwilling to wait for reservoir and desalination plant, and a to prosperity after all. Now farmers need a functional state, are taking matters into container port. Eventually it will include ploughs and trowels, good seeds, access to their own hands. Donald Trump’s with- housing and a teaching hospital. credit and crop-storage facilities, say the drawal from the proposed Trans-Pacific So far, one ofMr Marks’s flour mills and leaders of a local farmers’ association. Ba- Partnership trade agreement provides a a cement plant are the only operations. But nana Man still has much to do. 7 Bello The bogeyman of Mexico

Next year’s presidential election will once again pit AMLO against tactical voting N RECENT months the fluctuation of conservative National Action Party was Ithe Mexican peso against the dollar has diminished by the disappointing presi- resembled an electrocardiogram during a dencies of Vicente Fox and Felipe Calde- panic attack. The currency fell some 15% rón between 2000 and 2012. Worse, the after the victory of Donald Trump, who partyissplitbetween the presidential am- promised to scrap the North American bitions of Ricardo Anaya, its young gen- Free-Trade Agreement (NAFTA) linking eral secretary, and Margarita Zavala, Mr Mexico, the United States and Canada. Calderón’s wife. The peso has since recovered, on mount- Nevertheless, it is far from inevitable inghopes that MrTrump’sadministration thatMrLópezObradorwill win next year. will recognise the mutual benefit in What was once a three-party system has NAFTA. But there is another nightmare fragmented. The victor will be the candi- troubling the currency markets: the no- date who is best at forging alliances. On tion that Andrés Manuel López Obrador, that, AMLO has a mixed record. In the a left-wing populist who in some ways re- State of Mexico, had he struck a deal with sembles Mr Trump, will win a presiden- his former companions in the PRD tial election a year from now. (whose candidate won 18%), Morena After wobbling in May when polls against a corrupt political system and a would have won with ease. But Mr López suggested that Mr López Obrador’s candi- chronically mediocre economy, and by Obrador “wants subordination, not un- date might win the governorship of the promising to review NAFTA and reverse ion”, and is seeking “employees, not al- State of Mexico, the biggest of four states the globalising economic policies Mexico lies”, a PRD leader complained. to hold elections on June 4th, the peso has adopted in the past 30 years. Mexico’s constitution does not allow gained 2.5% when preliminary results sig- But he also gets in his own way. His for a run-off election. (Many political nalled a narrow victory for the ruling In- messianism and unsubstantiated cries of commentators believe that should be stitutional Revolutionary Party (PRI) of fraud in past elections alienated former changed, but it probably cannot be in President Enrique Peña Nieto. That relief sympathisers in the middle class. After time for next year’s contest.) In 2012 Mr may be misplaced. Though final results narrowly losingtwo presidential elections, Peña won with just 38% of the vote. His maytake weeks, overall the outcome gave he split from the centre-left Party of the successor may need less than 30%. In the Mr López Obrador, whom Mexicans refer Democratic Revolution (PRD) because of absence of a run-off, Mexicans vote tacti- to as AMLO, cause forcheer. its support for Mr Peña’s modernising re- cally. Referring to the State of Mexico, En- In the State of Mexico, which contains forms. In 2014 he set up the Movement for rique Ochoa, the PRI’s president, thanked 13% of the national electorate and was National Regeneration (Morena), whose “those who voted for us although we once governed by Mr Peña, AMLO’s can- sole purpose is to promote its leader. weren’t their first choice”. He went on: didate, Delfina Gómez, a teacher, gained AMLO heads most opinion polls for the “Together we halted the advance of au- 31% of the vote. The PRI won, with 34%, in presidential election. That is largely be- thoritarian populism” and “we will do so a state it had never lost, but its vote was cause of the flaws of his rivals. On the one again successfully in 2018.” down by 28 percentage points compared hand, Mr Peña is widely reviled, mainly Whether the PRI can be the standard- with the last election in 2011. It clung on, because of his failure to tackle violent bearer of such an anti-AMLO coalition according to its opponents and some an- crime and rampant corruption. Defeat in next year is questionable. But someone alysts, only by large-scale vote-buying. the State of Mexico would have been cata- can be. A successful candidate will need Mr López Obrador has thus reminded strophic forhim; narrow victory there (and not just to argue that “Mexico does not de- Mexicans that he remains a uniquely po- possibly in Coahuila, a smaller state) is not serve to be Venezuela,” as Mr Ochoa put tent challenger. He has acquired a loyal enough for him to impose his choice of it, but also to present a vision of positive following among poorer voters, especial- candidate on his party. democratic change. Mexico still has a few ly in the centre and south, by railing On the other hand, the appeal of the months to find such a person.

Middle East and Africa The Economist June 10th 2017 39

Also in this section 40 Egypt’s crackdown 41 Al-Qaeda in the Arabian Peninsula 41 Visa-free travel in Africa 42 No country for nomads

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Qatar and Saudi Arabia public, and Dubai, one of the UAE’s seven emirates, provided the biggest back door A futile family feud into Iran when the world imposed sanctions on it. The pretensions of Qatar’s ruling Al Thani family to global grandeur have also vexed other rulers. The statelet has sought significance by offering a sanctuary to the Muslim Brotherhood, the Arab world’s Its neighbours cut offtiny Qatar foremost Islamist movement. Diplomats RIBAL feuding among the Al Thanis, Al CEE found in Qatara place in which to talk to Is- TKhalifas, Al Sabahs and Al Sauds has TURKEY lamists, including Yousef Qaradawi, the been the norm forcenturies. From their be- Aleppoo Brotherhood’s favourite preacher; Khaled Mosul Tehran ginnings in Nejd, the barren interior of the SYRIA Meshal, until recently the leaderofHamas, Med. Sea LEBANON IRAQ Arabian peninsula, they sparred for the ISRAEELL IRAN the militantPalestinian group; Abbassi Ma- KUWAIT JORDAN best coastal spots from which to launch pi- T South Pars dani from Algeria; and several of the Tali- Cairo h e gasfield G rate raids into the Gulf. But even at the u ban’s leaders. A media empire led by Al Ja- Tiran/Sanafir lf height of acrimony, they always observed Islands BAHRAIN zeera, a satellite TV channel, has for DohaD haha unwritten rules of refuge and hospitality. LIBYA EGYPT Riyadh decades helped Qatar find a mass audi- R UAEU e QATAR When the tribes became states five de- d ence. It offered a platform to dissidents

S e cades ago, their people still travelled, lived a SAUDI ARABIA from across the region (except Qatar), giv- and intermarried across lines in the sand. OMAN ing voice to popular anger which erupted Their sheikhs might withdraw their am- SUDAN ERITREA YEMEN in the Arab spring of 2011. It then goaded n bassadors when tempers flared, but even Ade revolutionaries to take up arms, and en- of Gulf when King Salman of Saudi Arabia went DJIBOUTI dorsed Islamists who stood in elections. INDIAN to war in Yemen in 2015, he let more than a SOMALIA Qatar bankrolled their campaigns and million Yemenis in his kingdom stay. 500km ETHIOPIA OCEAN filled their coffers when they tookpower. ForGulfArabs, the expulsion ofQataris The Arabian peninsula is not big by Bahrain, the United Arab Emirates Protruding like a sore thumb from the enough, however, to realise all its rulers’ (UAE) and Saudi Arabia ordered on June Arabian peninsula, tiny Qatar has long ambitions. Rivalries have grown as each 5th is more shocking than a declaration of bugged its neighbours. But the explana- struggles to create global shipping hubs, war. It has torn up their code of conduct. tions offered for the sudden, unprecedent- airlines, media arms, expeditionary forces With two weeks’ notice to leave, Saudi hus- ed closure seem inadequate. Only a fort- and financial districts. A generation ago bands fear they might forfeit their liveli- night beforehand, the Qatari emir had the Gulf was led by consensus-builders, hoods if they follow their Qatari wives. stood smiling alongside those who have whose prime concern was stability. But The queues at Qatar’s only land border, now banished him. In a show of unity, petrodollars, vast arsenals and Mr Trump’s with Saudi Arabia, already tail back for they feted Donald Trump, the American blessingriskturningtheirdescendants into miles. The dunes have become barriers, president, in Riyadh. Saudi Arabia blames vainglorious autocrats with talents for in- preventing the entry of people and goods, Qatar’s involvement in terrorism, which to flaming, not compromising. Saudi Arabia’s including much of Qatar’s food supply. those recalling the role Saudi jihadists young deputy crown prince and de facto 1 Short-haul tourism has collapsed. The UAE played on 9/11 sounds rich. Qatar’s ties to has criminalised any expression ofsympa- Iran, too, irk Saudi clerics and kings, partic- Writer wanted: The Economist is looking for a writer to thy for Qatar, tweets included. Diplomatic ularly the joint and expanding develop- cover the Arab world, based in Cairo. Candidates should ties have been severed, and air, land and ment of South Pars, the world’s largest gas- send a CV, a cover letter and a 600-word original article that could run in our Middle East and Africa section to sea links closed by the three neighbours, as field. But Kuwait and Oman are on [email protected]. Deadline for well as by Egypt and Yemen. similarly good terms with the Islamic Re- entries is June 23rd. 40 Middle East and Africa The Economist June 10th 2017

2 ruler, Muhammad bin Salman, it is said, But things can get much nastier. After had already used travel bans, asset freezes likes to be called Alexander [the Great]. Saudi Arabia closed Qatar’s only land bor- and prosecutions to shut down groups Their intelligence agents run amok, der, Iran offered to make up the shortfall. If they deemed troublesome. This is self-de- spreading dirt on each other, true or false. Qatar drifts further into Iran’s orbit, Gulf feating, say activists. “No one is working One of the triggers offered for the latest officials warn that more “punitive, eco- with the victims [of human-rights abuses], showdown is the revelation in Qatari- nomic measures” could follow. An attack, so they may be easy to radicalise,” says owned media of e-mails purportedly claimed by Islamic State, on Tehran’s par- Mohamed Zaree of the Cairo Institute for hacked from the account of the UAE’s am- liament on June 7th has heightened the Human Rights Studies. Mr Zaree himself bassador in Washington, Yousef Otaiba. tension: Iran is blaming Saudi Arabia, has been charged with taking foreign For now, the Al Thanis have the means though without evidence. funds and could face life in prison. to withstand the pressure. The sheikhdom There will be few winners. Airline em- Egypt’s vaguely worded laws are pur- is the world’s biggest supplier of liquefied bargoes harm tourism across all Gulf pose-built for repression. NGOs must natural gas. Mr Trump might celebrate Qa- states, in the eyes offoreigners who cannot avoid such crimes as “destabilising nation- tar’s come-uppance in tweets, but he must tell one sheikhdom from other, just when al unity”. Mr Ali was charged with “violat- still consider the roughly 10,000 soldiers they are trying to diversify their econo- ing public morals”, while others arrested stationed there at al-Udeid, America’s larg- mies. Investors already unnerved by Ye- recently are accused of “misusing social- est air base in the Middle East (though the men’s protracted war have furthercause to media platforms”. Some members of par- Emiratis would prefer he move it their fear Arabian instability. MrTrump’s recent liament want to make matters worse by way). Egypt, which has also severed ties, proposal for an Arab NATO looks aborted. forcing users of Facebook and Twitter to knows that Qatar may retaliate by expel- Plans for the Gulf Co-operation Council to register with the government and further ling its workers if it hinders Qatari exports forge a common foreign and economic criminalising “insults” against the state. through the Suez canal. Even the UAE wor- policy lie in tatters. If only the world had a The clampdown appears aimed at ries that Qatar might shut off the gas pipe- superpower focused more on diplomacy clearing the way for Mr Sisi to win re-elec- line supplying its domestic market. and less on selling weapons. 7 tion next year. MrAli, a formerpresidential candidate, wasmullinganotherrun. If convicted, he would be ineligible. He has little Egypt’s crackdown chance of winning anyway, but his campaign might raise issues, such as the is- The punishments of Sisi fuss lands transfer, that Mr Sisi would rather avoid. The president appears especially vulnerable to criticism over the economy. To clinch a loan from the IMF last year, the government imposed new taxes, raised CAIRO the price ofpetrol and floated the Egyptian pound, which caused inflation to spike. Donald Trump’s “fanatastic” friend causes a stirby locking up more dissidents “Ordinary people are getting squeezed,” HE fall of Khaled Ali has been as swift sands of political prisoners sit in Egypt’s says Khaled Dawoud of the Dostour party, Tas it has been absurd. Last year Mr Ali jails—so many that the state has had to another target ofthe government. filed a lawsuit against the Egyptian govern- build 16 new ones. Only China and Turkey One thing Mr Sisi can apparently count ment over its plan to return two islands to lock up more journalists. Yet, still fearful of on is the backing ofDonald Trump, Ameri- Saudi Arabia. The deal, which many Egyp- the press, the government blocked several ca’s president, who has hosted him at the tians saw as a shameful swap of land for independent news websites last month. White House and praised the way he “took cash, sparked rare protests against Abdel- Mr Sisi has also tightened his grip on control of Egypt”. Mr Sisi, in turn, gushes Fattah al-Sisi, Egypt’s president. So when NGOs with a new law that gives the gov- that Mr Trump is “a unique personality the country’s highest court blocked the ernment the final say over what they do that is capable of doing the impossible”. transfer in January, MrAli and his suppor- and how they are funded. The authorities Such displays of mutual admiration make 1 ters whooped it up outside the courthouse. On May 23rd the state accused Mr Ali of making an indecent hand gesture during that celebration and, five months after the fact, arrested him. He is one of dozens of opposition figures detained in the past two months on similarly risible charges. The government has also blocked websites, raided homes and hobbled NGOs. Even before all this, Mr Sisi’s repression was unprecedented. But with little protest from America or Europe, and with an election comingnextyear, the presidenthasintensi- fied his suppression ofdissent. The government says it is acting in the name of security. On May 26th gunmen killed 29 Coptic Christians on a bus south ofCairo, the latest in a series ofattacks. But the repression is aimed at critics, not terrorists. The authorities have targeted democratic political parties, such as Bread and Freedom, run by Mr Ali, and activists who have criticised Mr Sisi online. Tens of thou- You can’t read all about it The Economist June 10th 2017 Middle East and Africa 41

2 Egyptian activists nervous. “This is a disas- Travel in Africa ter,” says Mr Dawoud. “Sisi feels he has the green light from Trump.” Mr Trump’s lack of interest in human A dream of Schengen rights, made clearata summitin Saudi Ara- bia last month, is having effects elsewhere It is still remarkably hard forAfricans to get around theirown continent in the region. On May 23rd the authorities in Bahrain, a Shia-majority island that is Y 2063, according to the African Un- run by Sunnis, killed five people and ar- B ion’s (AU) rather long-range predic- rested 286 more in a raid on the home of a tion, Africa will be “a continent ofseam- prominent Shia cleric. “The timing of this less borders”. People, capital, goods and operation—two days after King Hamad’s services will flow freely from South convivial meeting with President Trump— Africa to Tunisia and from Senegal to can hardly be a coincidence,” says Nicho- Somalia. Europe’s frontier-free Schengen las McGeehan of Human Rights Watch, a area may be creaking under the strain of pressure group. A week later the govern- migration and terror, but another will ment banned the country’s largest secular arise, this one encompassing a continent opposition group. ofmore than 1.2bn people. Last year, with Yet autocrats emboldened by Mr that goal in mind, the AU boldly intro- Trump’ssupport may not have a complete- duced a single African passport. The first ly free hand. Mr Sisi waited months before recipients were two ofthe continent’s signing the NGO law, in part due to pres- most powerful strongmen: Rwanda’s sure from American senators such as John president, Paul Kagame, and Chad’s McCain and Lindsey Graham. They now president, Idriss Déby. hope to make America’s aid to Egypt con- For now, however, crossing borders ditional on improvements in human rights remains a painful experience formost and democracy. 7 Africans. The World Bankestimates that intra-African trade is more expensive, all things considered, than trade in any year. Ghana made the most progress: in Al-Qaeda in the Arabian Peninsula other region. According to Anabel Gon- 2016 the government announced that it zalez, senior director ofa World Bank would provide visas on arrival forciti- Yemen’s other war group on trade and competitiveness, one zens ofevery AU member state, while African supermarket chain reports that it offering entirely visa-free travel to 17 spends $20,000 every weekto get import African countries, including the 14 other permits formeat, milkand other goods in members ofthe Economic Community ECOWAS MUKALLA one country alone; every day one of its ofWest African States ( ). The lorries is held up at a border costs it $500. Seychelles is still the only country on the A textbookoperation against al-Qaeda On average, Africans need a visa to travel continent to offervisa-free access to all now risks turning sour to 54% ofthe continent’s countries; it’s Africans. (An archipelago in the middle AFE behind multiple walls of sandbags easier forAmericans to travel around ofthe Indian Ocean, it is a haven for Sat his airbase on Yemen’s coast, a United Africa than it is forAfricans themselves. well-heeled tourists but hard to get to if Arab Emirates army commander points at So far, the AU has issued its single African you are poor.) amap ofsouthern Yemen liberallycovered passport only to heads ofstate and senior Elsewhere, progress has been patchy. in red. It indicates, he says, the reach of al- AU officials. Less than a quarter ofAfrican countries Qaeda in the Arabian Peninsula (AQAP) in But in the past year things have im- provide “liberal access”—meaning visa- March 2016. A second map, dated six proved a little, according to a new report free travel or at least visas on arrival—to months after his men marched ashore that from the African Development Bank. all African citizens, and most ofthe con- month, has just a few red blotches left. Africans now need visas to travel to tinent’s richest countries tend to be more In a four-pronged attack, Emirati forces slightly fewer countries than they did in restrictive. War-torn central Africa re- managed in a single day, without loss, to 2015, and 13 African countries now offer mains the most closed region; east and evict AQAP from Mukalla, one of Yemen’s electronic visas, up from 9 the previous west Africa have opened up the most. main ports and the capital of its largest province, Hadramawt. Soon after, the Emi- ratis took Zinjibar, a provincial capital strike America and its allies worldwide. survive, getting out of Yemen to kill for- 500km (300 miles) west of Mukalla, and But the last foreign attack it claimed, the eigners has grown harder, thanks to three Mansoura, its stronghold in Aden, the massacre at Charlie Hebdo, a magazine in years of war and the destruction of tran- main southern port. Security at Yemen’s Paris, was more than two years ago. Even at sport hubs. gas terminal at Balhaf has been reinforced. its peak, it never looked very professional. Emirati commanders give most of the “If we had not gone in, al-Qaeda would Previous attempts to blow up synagogues credit for forcing al-Qaeda to pull back to have held the south, and [Shia militias] the orAmerica-bound planeswith printer-car- themselves. Their forces are well- north, and Yemen would have been forev- tridges and booby-trapped underpants equipped, and they have carefully wooed er off the rails,” says the commander, who were botched. The sum of AQAP’s success- local support. Before the assault on AQAP is responsible for the UAE’s 5,000-odd sol- ful foreign attacks since it was founded in in March, the Emiratis paid, armed, kitted diers in Yemen. If only beating jihadists 2009 can be counted on one hand. and briefly trained 30,000 fighters. Many everywhere was as easy. The Pentagon says its drones have of AQAP’s recruits were tribal hangers-on, Though AQAP isstill seen bysome asal- weakened AQAP. BarackObama launched who pragmaticallyhungup theirKalashni- Qaeda’s most potent affiliate, its long arm around 150 drone attacks on the terror kovs after their leaders ran away from the looks shrivelled today. Its leaders still re- group, wiping out its upper tier, including advancing Emiratis. Whereas Aleppo (in lease videos appealing for lone wolves to its best engineers. For the jihadists who Syria) and Mosul (in Iraq) lie in ruins, Mu-1 42 Middle East and Africa The Economist June 10th 2017

The Horn of Africa stock to fresh pastures gives them an ad- AQAP area of operations vantage over sedentary farmers. But that March 2016 June 2017 Source: American Enterprise Staying put mobility has shrunk. Two decades ago a Institute’s Critical Threats Project nomadic pastoralist like Mr Abokor might SAUDI ARABIA 200 km have travelled as far as 500km (300 miles) each season, sometimes deep into neigh- HADRAMAWT bouring Ethiopia, says Ahmed Ibrahim of NGO YEMEN BALIGUBADLE Candelight, a local . Today most rarely Red Sana’a move fartherthan 50km, except perhaps in The hard life ofSomali pastoralists Sea times ofemergency. Mukalla ARUUD ABOKOR has lived in Baligu- The spread of small towns like Baligu- ERITREA BAYDA Balhaf B badle for the past four decades. Before badle, with a school and a health clinic, is Zinjibar settling in this remote Somali town abut- one important factor. So is restricted access Aden Gulf of Aden ting the border with Ethiopia, he roamed to land. The vast rangelands stretching DJIBOUTI widely. “I was master of myself,” he says. across Somalia are governed by a commu- “The economy was good and I had many nal system of ownership known as the 2 kalla is almost unscathed. animals.” But over the years successive xeer. But the xeer was weakened in the But AQAP’s retreat might not make it droughts, and warbetween the breakaway 1990s with the collapse of the state during less dangerous. Shorn of territory, it has region of Somaliland that he inhabits and the country’s civil war. Tracts of land gone back to being an amorphous and the central government down south in which were once open for roaming have largely invisible network. Hiding in moun- Mogadishu, have taken their toll. His herd been fenced off by unscrupulous town- tain ranges as inaccessible as Afghanistan’s of more than 100 sheep has shrunk to a dwellers and wealthier herders. Tora Bora, its leaders still manage over dozen. Somaliland, like elsewhere in the The remaining land has been degraded $100m in looted bank deposits, copious Horn of Africa, has this year suffered from by overgrazing. Somaliland now has al- heavy weaponry ransacked from military the worst drought in living memory. But most no seasonal reserves, which are cru- bases, and multiple sleeper cells in cities Mr Abokor is staying put. cial for allowing pastures to lie fallow and which can be reactivated at any time. The This makes sense. Since Baligubadle is recover, and which in the past were pro- war has created new opportunities for only a couple of hours’ drive south of So- tected by guards. Vegetation is in desperate smuggling and protection rackets, which maliland’s capital, Hargeisa, food aid condition: the land that surrounds Baligu- the jihadists undoubtedly exploit. De- reaches the town without too much diffi- badle is all thorn bush and acacia trees. mand has also risen forguns forhire. culty. His herd was too weak to travel else- Much of the vitamin-rich grass that once Few Yemenis would relish al-Qaeda’s where in search of grazing when, earlier covered it disappeared years ago. return. But given the mayhem now sweep- this year, the drought was most severe. Ba- These are problems felt by many of the ing the south, the order they brought in ligubadle has man-made boreholes, roughly 23m pastoralists scattered across their year-long rule of Mukalla appeals to which keep them alive even as the sun the Horn ofAfrica and Kenya. Soaring pop- some. After taking the port in March 2015, beats the dusty, parched streets. The town ulation growth in pastoral areas is putting AQAP established a harsh but predictable is a blessing for once-nomadic pastoralists ever more pressure on already dwindling judicial system. By contrast, their Emirati- like Mr Abokor. But its existence also helps resources. Rich commercial herders, some backed successors have no courts to try to explain why pastoralism here is in the with animalsnumberingin the thousands, prisoners. The jihadists were not conspicu- grip of a crisis that runs much deeper than monopolise the best land. Mushrooming ously corrupt, say locals, with grudging re- drought. towns encroach on the ranges. spect. They paid civil servants’ salaries, Pastoral nomads—the animal herders Attemptsto addressthishave been half- and were surprisingly flexible in their in- who dwell in large numbers in the Horn of hearted at best. Communal land rights are terpretation of sharia (Islamic law). Men Africa—are hardy in times of water short- weak across the region. And governments were not forced to grow beards or stop age. Being able to pack up and move live- tend to look unfavourably on mobility: so- workat prayer time. Male doctors persuad- cial services, especially schools, are rarely ed clerics to let them operate on women, designed to cope with it. Baligubadle’s because they lacked female doctors. school is closed because its teachers have UAE commanders now hope to secure moved elsewhere, along with their ani- Donald Trump’s backing to stay in Yemen mals. Pastoralist children are generally less until their mission is accomplished. In the educated than their sedentary peers, mak- first five months of his presidency, Mr ing it harder for them to find other jobs. Trump has launched more strikes on Ye- Those who do settle in towns often find men than Mr Obama did in all of 2016, in- themselves destitute cluding one on the day after he took office. Pastoralism in the east African drylands American boots are back on the ground, persists despite such Malthusian pres- too, if in small numbers. To speed things sures. In a harsh environment, many see it up, the White House has eased restrictions as the only way of staying alive. Repeated on the authorisation ofairstrikes. attempts to settle populations and intro- Despite its success, the campaign duce large-scale irrigated farming have a against AQAP has critics. Some UAE offi- history offailure in the region, not least be- cers wonder how long it will be before Ye- cause they have often involved coercion. menis view them as occupiers. Another In Somaliland less than a tenth of the fear is that AQAP’s defeat might create land is reckoned to be suited to agriculture. space for Islah, the local offshoot of the So the choice is between carryingon as no- Muslim Brotherhood, another Islamist mads, or getting educated and doing some- movement against which the UAE is fight- thing completely different. Of his chil- ing. Instead ofbreaking al-Qaeda, Yemen’s dren’s future, Mr Abokor says he hopes war could end up spreading it. 7 Nowhere to go “their life will change”. 7 TECHNOLOGY QUARTERLY June 10th 2017 CIVILIAN DRONES

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Most drones today are either cheap toys or expensive weapons. But interesting commercial uses are starting to emerge in the middle, says Tom Standage TARTING a riot at a football match. Reveal- though unit sales of commercial drones are much ing an unknown monument in the desert smaller, total revenues from them are nearly twice as near Petra. Performing at the Super Bowl. big as forthe consumer kind (see chart, next page). ALSO IN THIS TQ Sneaking drugs and mobile phones into pri- In “Drones Reporting for Work”, published in 2016, TECHNOLOGY sons. Herding elephants in Tanzania. What Goldman Sachs, a bank, argued that drones are be- Give and take links this astonishing range of activities? coming “powerful business tools”. It predicted that of SThey are all things that have been done by small flying the total of $100bn likely to be spent on both military COMMERCIAL robots, better known as drones. and civilian drones between 2016 and 2020, the com- APPLICATIONS To most people a drone is one of two very different mercial segment would be the fastest-growing, nota- Seeing is believing kinds ofpilotless aircraft: a toy or a weapon. It is either blyin construction (accountingfor$11.2bn), agriculture a small, insect-like device that can sometimes be seen ($5.9bn), insurance ($1.4bn) and infrastructure inspec- FUTURE USES buzzing around in parks or on beaches, or a large mil- tion ($1.1bn). Oppenheimer, another bank, predicts Can drones deliver the itary aircraft that deals death from the skies, allowing that the commercial market “will ultimately contrib- goods? operatorsin Nevada to fire missilesatterrorist suspects ute the majority ofUAV industry revenues”. in Syria. The first category, recreational drones aimed The rise of commercial drones was made possible BRAIN SCAN Dario Floreano at consumers, are the more numerous by far; around by three developments. First, fierce competition in the 2m were sold around the world last year. The second consumer market has made the machines much REGULATION category, militarydrones, accountforthe vast majority cheaper, more reliable and more capable than they Rules and tools (nearly 90%) of worldwide spending on drones. But were just a few years ago. “These are not military pro- after a pivotal year for the civilian drone industry, an ducts that were downsized—these are consumer tech- interesting space is now opening up in the middle as nologies that got better,” says Brendan Schulman, drones start to be put to a range ofcommercial uses. head of policy at Da-Jiang Innovations (DJI), the Chi- Last year around 110,000 drones (technically nese firm that dominates the consumer-drone indus- known as unmanned aerial vehicles, or UAVs) were try. DJI’s bestselling Mavic, which costs $999, can hold sold for commercial use, according to Gartner, a con- its position in light winds, detect obstacles and land sultancy. That figure is expected to rise to 174,000 this automatically. At a company office in Shenzhen, Shuo year and the number of consumer drones to 2.8m. Al- Yang, one of the engineers who worked on the Mavic, 1 The Economist June 10th 2017 3 TECHNOLOGY QUARTERLY Civilian drones

2 proudly demonstrates that it can even respond to hand gestures to stead of competing with DJI on hardware, it makes more sense to follow its owner around or snap a “drone selfie”. And it folds up to complement its products by providing software and services for fit into a backpack. commercial users. “Everyone is moving to a model where we let In many ways modern consumer drones are more advanced DJI control mostofthe on-board stuffand we move all our innova- than far more expensive military systems, says Adam Bry of Sky- tion up the stackto the cloud,” says Mr Anderson. dio, a consumer-drone startup that is developing a rival to the Mavic. The best consumer models are now being redeployed for Pause forreflection commercial use, often with little or no modification. As previous- Having jumped, funding for drone startups is now maintaining a ly happened with smartphones, the fastest innovation is taking roughly stable altitude. In 2015 drone firms attracted $479m in ven- place in the consumer market and then being adopted by compa- ture capital, up from $149m the year before, according to CB In- nies. And just as with smartphones, people who enjoyed playing sights, a research firm; last year the total fell slightly to $452m. with consumerdrones realised it made sense to take them to work Some investors had their fingers burned and were put off, says Pe- too, says Jonathan Downey of Airware, a startup that makes ter Harrop of IDTechEx, a consultancy. “People are distracted by drone-management software. Even military users are beginning toydrones,” he notes. Butbeyond the consumermarket, a wide ar- to pay attention to developments in the consumer market. ray of potential uses is emerging in construction, agriculture and Second, the proliferation of consumer drones in America other industries, as well as public safety. prompted regulation from the Federal Aviation Administration More speculative uses are on the horizon. Amazon, Google (FAA), which had repeatedly delayed introducing rules for com- and several startups are developing drones for delivering pack- mercial drones. “The flood of consumer vehicles forced the regu- ages. Facebook is working on a giant drone to provide internet ac- lators to allowcommercial use,” saysChrisAnderson of3D Robot- cess in remote areas. Energy utilities are looking at generating ics, another drone startup. (Mr Anderson is a former editor-in- power using high-altitude tethered drones that act as flying wind chief of Wired, and previously worked at The Economist.) A set of turbines. Tiny insect-like drones may one day pollinate plants; big rules known as “part107”, issued by the FAA in August 2016, spec- ones might carry not just cargo but people in self-flying sky taxis. ifies the conditions under which drones can be used commercial- This report will focus on the fastest-growing part of the drone ly; previously commercial use had been allowed only with a spe- business, namely the commercial market in between small, cheap cial waiver that was costly and time-consuming to obtain. The consumer drones on the one hand and large, expensive military default thus switched from “commercial use is illegal” to “com- ones on the other. It will considerthe evolvingtechnology and the mercial use is legal under the following conditions”. Many other emerging opportunities, and examine the new challenges that countries follow the FAA’s regulatory lead, so this cleared com- drones pose for regulators. Having come from nowhere in just a mercial drones for take-off not just in America but worldwide. few years, civilian drones are now taking flight. 7 Still, “the technology is moving so fast that the regulatory and legal frameworks are having a hard time keeping up,” says Astro TellerofX, Google’s semi-secret research laboratory. Third, the industry underwent a shake-out as a crowd of jost- Technology ling startups came to be dominated by DJI. Based in Shenzhen, where the world’s technology firms go to develop and manufac- ture hardware, DJI outperformed both local and foreign rivals and Give and take now has about 70% of the consumer-drone market. It is valued at around $8bn and has established itself as a global, premium brand with a reputation for quality and reliability, defying the ste- reotype ofChinese firms. Its consumer drones generally cost $999 to start with and are subsequently discounted as new models ap- Originally a military technology, drones are now benefiting DJI pear. also makes slightly heftier models specifically for com- from rapid advances in consumer electronics mercial use; a fully equipped Inspire 2 costs around $6,000. Several rival dronemakers, including Autel, GoPro, Parrot and HE first drones were military. The use of pilotless flying Yuneec, have announced lay-offsin recentmonths. Lily, a consum- machines as weapons dates back to the siege of Venice er-drone startup that attracted thousands of pre-orders, shut in 1849, when Austrian forces launched balloons laden down in January. 3D Robotics laid off 150 workers and stopped with explosives against the city. But the origin of mili- making hardware altogether last year after its Solo drone failed to tary drones is usually dated to the development of un- dent DJI’s market share. Many drone startups concluded that in- crewed, remote-controlled aircraft for use as targets by Tanti-aircraft gunners after the first world war. The first truly successful example was the de Havilland DH82B Queen Bee, which Pointing skywards entered service in Britain in 1935 and seems to have been the inspi- Civilian drones, worldwide ration for calling such aircraft “drones” (after stingless male bees); Number, m Disclosed Number Germany’s V-1 flying bomb was another early drone. funding, $m of deals In recent years drones have become a vital component of air 6 500 125 power. America’s armed forces have a fleet of more than 11,000 FORECAST drones, compared with just a handful in 2001. Peter Singer of the 5 400 100 New America Foundation, a think-tank, says around 80 countries Personal 4.6 4 now have military drones, including about 20 with armed ones, 300 75 either already in use or in development. But the vast majority are Revenue, $bn 3 unarmed surveillance aircraft ofvarious shapes and sizes. 200 50 1.1 2 At one end of the spectrum are small, hand-launched fixed- 6.6 wing surveillance drones such as the Raven, Wasp and Puma, all 1 100 25 2.2 Commercial made by AeroVironment, which fly either autonomously or un- 0 0 0 der short-range remote control. The Raven, used by many coun- 2015* 16* 17 18 19 20 2012 13 14 15 16 17† tries’ armed forces, is the world’s most widely used military UAV, Sources: Gartner; CBInsights *Estimate †Forecast with around 20,000 units deployed; it can fly forup to 90 minutes.1 4 The Economist June 10th 2017 TECHNOLOGY QUARTERLY Civilian drones

could suddenly be used in all kinds of new ways, beyond what Know your drones was possible with small fixed-wing aircraft. Researchers were Selected UAVs (Manufacturer, country of origin) soon getting small multirotor drones to form amazing feats ofagil- ity. In a popular online video from 2013, Raffaello D’Andrea, a ro- Civilian 3ft boticist at the Swiss Federal Institute of Technology in Zurich, demonstrates quadcopters balancing broomhandles, carrying a glass of water without spilling a drop and returning ping-pong EBEE MAVIC PHANTOM TYPHOON MATRICE balls by hitting them in mid-air. Eight of Dr D’Andrea’s drones, re- (SenseFly, Switz.) (DJI, China) (DJI, China) (Yuneec, China) (DJI, China) sembling flying lampshades, even perform in “Paramour”, a Broadway show by Cirque du Soleil. Military And formy next tricks… Military drones are built to survive in demanding conditions, RQ-4A GLOBAL HAWK (Northrop Grumman, US) have special requirements (such as stealth capabilities or long en- durance) and tend to be expensive. So although makers of military drones are keen to adapt some of their products for civilian MQ-9 REAPER (General Atomics, US) use, commercial drones are more likely to be based on scaled-up consumer drones than on scaled-down military ones. Gartner es- RQ-20B PUMA timates that military suppliers will capture just 10% of the com- (AeroVironment, US) 6ft mercial-drone market by 2020. The drones being put to commercial use now “are pretty much all consumer”, says Mr Bry. Sources: DJI; SenseFly; Yuneec; The Economist For their part, military types are paying increasing attention to consumer-drone technology, particularly for indoor use in urban 2 Larger drones like the Predator and Reaper can typically stay aloft combat. “We’re interested in havingsomethingthat can operate in for 12-20 hours and carry weapons. Biggest of all are long-endur- a building, in a confined space,” says a NATO spokesman. And as ance, high-altitude reconnaissance drones such as the Northrop theiradversariesadopt low-costdrones(IslamicState has used off- Grumman Global Hawk, which can loiter over an area for 32 the-shelf consumer drones in Iraq forsurveillance and to drop ex- hours, longer than any human pilot. plosives), Western armed forces are tryingto workout how to stop Perhaps surprisingly, the recent rise of consumer drones owes them reliably and inexpensively. A member of Britain’s special little to military systems. Instead, it springs from two completely forces says that a shotgun is currently the simplest method. different technologies: hobbyists’ radio-controlled (RC) aircraft on Military and consumer drones alike are being transformed by the one hand and smartphones on the other. Many people work- rapid progress in two cutting-edge areas of drone research: auton- ing in the drone industry started out flying small RC aircraft pow- omy and swarming. If you automate away the need for a skilled ered by tiny petrol engines, which were “annoying, messy and su- operator, drones suddenly become much more useful. Military per-finicky”, says Adam Bry of Skydio. The combination of ones that do not require the oversight of a human operator can be brushless electric motors and lithium-polymer batteries, used in radio silentand stealthier. Consumeronescan followrunners, ski- laptops and smartphones, allowed RC aircraft to be electrically ers or cyclists and film them from above. Commercial ones can fly powered, making them lighter, quieter and more reliable. a specific, pre-planned path over a field, building site or quarry, Cheap microcontrollerchips, which allow a small computer to avoiding obstacles as they gather data. Improved flight-control al- be squeezed into a box the size of a cigarette packet, led to the de- gorithms, more on-board processing power and progress in mach- velopment of open-source autopilot software for fixed-wing hob- ine vision will allowdronesto handle more decisionsthemselves, byist aircraft. Microcontrollers also provided the on-board brains rather than relying on fallible or inexpert humans. Most existing for a new design of drone, with four or more helicopter-style ro- drones simply move the pilot from the vehicle to the ground. The tors. By 2005 several research groups had figured out how a drone next generation ofdrones will not need pilots at all–just orders. with four vertical-axis rotors could control its position and move- Greater autonomy also opens the way to swarms of drones1 ment by adjusting the speeds of different rotors—much easier than controlling a traditional helicopter. “That enabled a completely new way for drones to fly around, hover and so on,” says Dario Floreano, a roboticist at the Swiss Federal Institute of Technology in Lausanne. But for all this to work, a quadcopter needed to know its orientation and direction of movement. Serendipitously, the price of accelerometers based on micro- electromechanical systems, used as tilt sensors in smartphones, had come down rapidly. Drones also borrowed small, cheap camera sensors and fast Wi-Fi chips from smartphones. Moreover, handsets loaded with suitable apps could be used as drone-control units, taking advantage of the phone’s screen, radio and processing power. “Drones have really been ridingthe smartphone revolution,” says Dr Floreano. The stability of multirotor flight meant Churchill with the Queen Bee, the mother of all drones that small electrically powered aircraft The Economist June 10th 2017 5 TECHNOLOGY QUARTERLY Civilian drones

2 that act as a single unit. In a test carried out in October 2016 over barrier to entry for commercial-drone operators. The industry is California, 104 tiny fixed-wing Perdix drones, with a wingspan of now looking for the most promising applications and trying to 30cm, were launched from three American fighters and per- gauge how the market will evolve. formed a series of manoeuvres. This is the shape of things to The first commercial use of drones (and still their main use for come, says Mr Singer. A swarm of small military drones might be consumers) was to act as flying cameras. Over the past 150 years released into a theatre of operations, spread out to look for targets cameras have changed shape from bulky wood-and-brass con- and then collectively assign tasks to different drones within the traptions to handheld devices and then smartphones. In many swarm. When one target has been destroyed, the swarm can ways drones are the logical next step in their evolution. It is telling move on to another. Away from the battlefield, too, some tasks, that GoPro, a company known for its indestructible action cam- such as search-and-rescue missions or mapping, might best be eras, recently launched its first drone; and that DJI, the dominant done by drone swarms. They are already used in entertainment: maker of consumer drones, has acquired a majority stake in Has- 300 Shooting Star drones, made by Intel, perform a regular light selblad, an iconic Swedish camera firm. Using drones for photo- show at Disney World in Florida. graphy is much cheaper than using manned helicopters. Aerial Getting swarms to collaborate, avoid collisions and cope with shots have proliferated on television in recent years, and are also the odd failure is no mean feat. But as the technology advances, popular with property agents and fordramatic wedding videos. says Mr Singer, the prospect of autonomous military swarms is running into both ethical objections—there is no human “in the Eye in the sky loop” to make life-or-death decisions—and cultural resistance Paul XuofDJI lists photography as one offive areas ofopportunity from militarytypeswho wantto retain a role forhuman pilotsand for commercial drones, along with agriculture, construction, in- traditional aircraft. (Tanks faced similar objections in the first spection, and publicsafetyand othercivil-governmentuses. Once world war, when they were initially seen merely as an adjunct to you have a flying camera, there are lots of things you can do with infantry.) Such constraints do not apply in the business world, it. Agriculture, and measuring the health of crops in particular, however, where companies see ever more potential in drones as was identified early on as a promising market for commercial they become smarter, more numerous and more capable. 7 drones. Crop health can be assessed by taking pictures using special multispectral cameras which “see” more than the human eye. By measuringthe relative intensity ofcolourin particular frequency bands, they can identify undernourished or diseased crops. Commercial applications This can be done by satellite, or by sending people into fields with clipboards, but drones can do it more cheaply. A GPS-equipped tractor can then precisely spray water, fertiliser or pesticides only Seeing is believing where needed, increasing yields and reducing chemical run-off. In a report published in 2013 the Association for Unmanned Vehicle Systems International (AUVSI), an industry body, identified precision agriculture as by far the most promising market for commercial drones. But enthusiasm for drones in agriculture has Today’s drones are mostly flying cameras. They are already cooled lately. In part, thatisbecause atthe time ofthe AUVSI report being put to a wide range of business uses most civilian drones were of the fixed-wing variety, ideally suited to flying over large areas; the rapid progress made since then by HOENIX DRONE SERVICES, operating from a business multirotor drones, which have a shorter range but can hover, park on the outskirts of Phoenix, Arizona, is typical of opened up other markets that are now seen as more promising. the small firmsthathave sprungup in recentyears to pur- Encouraging farmers to adopt drones also proved harder than sue the commercial opportunities around drones. Its expected, notes Chris Anderson of 3D Robotics. The agricultural founders, Mark Yori and Brian Deatherage, started off by use of drones sounds good in theory—feed the world, save the building radio-controlled planes. To stream live video, planet—but is difficult in practice. The market is very fragmented Pthey modified a baby monitor and attached its camera to a fixed- and conservative, with many subsidies and distortions, and some wing drone. These were the days of“crash, smash, rebuild and try of the social goods that flow from using again”, Mr Deatherage recalls. Then in 2011 they used a drone- drones, such as reducing run-off of chemi- mounted smartphone to take some pictures, for which they were cals, do not benefit farmers directly. The ag- paid $200. “That’s a business,” Mr Yori concluded, and their com- ricultural market “is littered with strug- pany was born, one of the first permitted to operate drones com- gling technology companies that have mercially under a “section 333 exemption” granted by the Federal tried to break in”, says Jonathan Downey Aviation Administration. ofAirware. In the company’s offices, fixed-wing and multirotor drones of MrAnderson believes that the most im- various shapes and sizes hang on the walls like hunting trophies. mediate opportunity lies in construction Atechnician surrounded by tools and components tends to a half- and related industries. Most big construc- built drone in a workshop area; a black DJI hexacopter sits on a tation projects go way over budget and end ble, poised like some giant insect. For years Mr Deatherage and Mr Various in a lawsuit, he says. Mistakes made early Yori built their own drones, and still use custom-built aircraft for on in a project may not be noticed until some types of work. “In the beginning you had to be able to build industries much later, and cost time and money to and repair your own aircraft,” says Mr Deatherage, who has a rectify. . Buildings are designed in a flaw- computingdegree and taught himselfhow to use the various tools have woken less digital environment but must be con- to process the data from his drones. up to the structed in the much messier real world. Mr Yori likens the fast-moving drone business to surfing: “You “It’s all an information problem,” says Mr always have to be ready to catch the next wave,” he says. There potential of Anderson. So the industry has been pursu- have already been several waves of enthusiasm for drones, as va- ing the idea of“reality capture”, using tech- rious industries have woken up to their potential and small firms drones nology to measure buildings precisely dur- have rushed to meettheirneeds. The introduction ofthe “part107” ing construction and track the use of raw rules in America last year has removed the previously formidable materials on site to ensure that everything1 6 The Economist June 10th 2017 TECHNOLOGY QUARTERLY Civilian drones

2 isgoingaccordingto plan. Dronesare ideally suited to the task. Thousands of aerial photographs are crunched into a 3D site model, accurate to within a few centimetres, called a “point cloud”, which can be compared with the digital model of the building. And safety worries that hamper the use of drones in other fields are kept to a minimum because construction sites are closed areas, workers wear hard hats, and drones fly within line ofsight. Andrew Kahler of John Deere, a maker of agricultural and construction machin- ery, explains how drones can also stream- line the process of grading—preparing the ground for constructing a building, road or railway. This involves measuring the original topography, which by conventional methods might take several weeks for a large site; using bulldozers and other equipment to move large quantities of earth; then “fine grading” the site to within Up in the air, down on the farm an inch or two of the desired final shape. The great benefit ofdrones, says Mr Kahler, is that they can carry out a topographic survey in half an hour, and But for utilities and other large companies to make the most of the 3D model is ready the next day. That makes it possible to resur- drones, theyneed to be able to integrate them smoothly with their vey the site frequently and make any necessary changes. Mr Kah- existing computer systems and workflows. A single drone flight ler’s company recently strucka partnership with Kespry, a startup, can generate as much as 100 gigabytes of data, says Anil Nanduri to provide drones and related software and services. of Intel. Airware, which is working with large insurance companies in Europe and America, has developed a system that handles Keep away from the cliff edge the whole process. The insurance company specifies what data it Drones are also useful fartherup the construction supply chain, in wants, and in what format, and Airware’s software generatesa miningand aggregates, says George Mathew, Kespry’s boss. Work- suitable flight plan. This is sent to an operator who uploads it into ing out how much material is sitting in a stockpile in a mine or the drone, which gathers the required data completely autono- quarry usually involves taking a few dozen measurements with mously. The results are then sent back, converted into the form manual surveying equipment and then calculating the volume. A needed by the claims assessor and a summary is delivered into drone can measure the volume of dozens of stockpiles in a single the insurance company’s systems. What makes the insurance in- flight, taking thousands of measurements that are turned into an dustry particularly attractive, says Mr Downey of Airware, is that accurate point cloud within an hour. As well as being far quicker it is highly concentrated: “By working with the top ten players you and more accurate, itisalso much safer. Fallingoffstockpiles isone can target a pretty big proportion ofthe market.” of the industry’s biggest occupational hazards. Using drones to Inspection by drone will get even better with further automa- survey quarries and building sites also means human surveyors tion, says Mr Xu. Some dream of “drone in a box” systems, where do not need to venture close to dangerous sheer drops. drones sit charging in weatherproof boxes in remote areas, pop- Such is the interest in drones, says Mr Kahler, that he is asked ping out when needed to gather data entirely autonomously. The about them at every site he visits. Customers are “ready and will- use of machine-learning systems to identify anomalies could ing to jump into this technology”, he says. Sarah Hodges of Auto- automate the process even further. Kespry, which is also targeting desk, which makes software used to design and model buildings, the inspection and insurance market, has built a machine-learn- notes that drones are making it possible to digitise the construc- ing system that can count hail strikes on a roof. “It’s mind-blowing tion industry, which has been relatively slow to adopt new tech- for people in property and casualty insurance,” says Mr Mathew. nology. With a complex building like a hospital, being able to After a flood or an earthquake, drones are already used in check that plumbing, heating and electrical systems are being in- search-and-rescue operations to sweep large areas forpeople who stalled correctly “is really transforming—it’s eliminating a lot of er- need help. By enabling relief workers to see the bigger picture, rors”. In China, she says, drones are being flown over building they allow relief efforts to be co-ordinated more effectively. After sites at night (which current American rules forbid) to measure flash floods in Chennai, India, in December 2015, for example, the progress made during the previous day and ensure that every- police used drones to locate and rescue around 200 people. A trial thing is going precisely to plan. Autodeskand others are also start- carried out in 2016 by Donegal Mountain Rescue in Ireland found ing to use virtual reality and augmented reality to overlay digital that a drone could sweep an area for a missing person more than models with real-world views. five times faster than a ground-based team of rescuers. In Febru- Drones are attracting interest in a related field, too: the inspec- ary four skiers in British Columbia, who got lost and ended up in tion of buildings and other infrastructure, such as pipelines, wind the dark, were spotted and rescued with the help of an infra-red turbines, electrical pylons, solar farms and offshore platforms. At camera mounted on a DJI Matrice drone. the moment, inspecting a roof for storm damage or checking the For police use, drones are a cheaper and quieter alternative to state ofan electrical pylon involves sending someone up a ladder, helicopters for monitoring crowds and can be used to create de- which can be dangerous. “We are working with a lot of power tailed 3D models to help investigators of traffic accidents. Journal- companies,” says Mr Xu of DJI. His company has developed the ists and environmental groups are also experimenting with Matrice 200, a drone specially equipped for use in harsh environ- drone-based photography. Fixed-wing drones monitor animal ments by adding features like backup batteries and GPS systems, populations and detect and deter poachers in Kenya, Namibia, magnetic shielding and weatherproofing. South Africa, Tanzania, Zambia and Zimbabwe; multirotor drones1 The Economist June 10th 2017 7 TECHNOLOGY QUARTERLY Civilian drones

2 keep an eye out forsharks offAustralian beaches. Future uses As drones expand into all these areas, what shape will the industry take? Some drone startups took a “vertical” approach, focusing on specific industries and creating integrated drone hard- Can drones deliver the ware, software and services for particular applications, as Kespry does in mining. Others, like Airware, bet that hardware from different makers would become standardised around a single drone goods? operating system that would run on a wide range of designs from different vendors, just as Google’s Android operatingsystem pow- The wait for cargo-carrying drones may be longer than ers most of the world’s smartphones. Some companies focused expected on making specific components, such as sensors, complete drone airframes, or software tools to analyse data from drones. HERE is a striking disparity between the commercial ap- For the moment the commercial drone industry does not look plications drone companies are pursuing in fields like remotely like the smartphone industry; instead, it is a mirror im- construction, inspection or agriculture and the public age ofit. DJI so dominates the hardware side that its on-board soft- perception of commercial drones. Media coverage is ware has emerged as the industry’s main platform. The leading dominated by one particular application: delivery. Ex- software platform for drones thus belongs to a single company perimental deliveries of parcels, pizzas and other items and is tied to its own hardware; it is what the smartphone industry Tconjure up visions ofskies abuzz with drones ferryingpackages to would looklike ifApple’s market share were 80% rather than 20%. and fro. But although delivery and logistics companies are inter- An equivalent of Android for drones does exist—a free, open- ested in drones, many drone companies are not interested in de- source platform called Dronecode, used by 3D Robotics, Yuneec, liveries. “It’s not on our immediate radar,” says Paul Xu ofDJI. Intel, Parrot and others—but DJI’s platform is more widely used. Astro Teller, the bossofX, Google’ssemi-secretresearch labora- Once itbecame apparentthatDJI’shardware and software was tory, is one ofthe lucky few to have received a delivery by drone. It emerging as the standard, many drone companies switched their was dispatched last September as part of a test carried out in Vir- focusto buildingenterprise-grade software and services forspecif- ginia by Project Wing, Google’s drone-delivery programme. Its ic industries—an area that DJI seems happy to leave to others, giv- machines come in a variety of shapes: some are “tail-sitters”, fly- en that some companies might prefer not to hand over their data ing wings capable of flipping upright and hovering; others are to a Chinese company. For software providers the vertical model fixed-wing drones augmented by vertical-axis rotors like those on is winning, as startups target clients in particular industries. a quadcopter. Both designs combine the benefits of a fixed-wing aircraft for efficient long-distance flight with those of a multirotor Start here for hovering and vertical take-off and landing. When delivering a But how, in practice, will companies adopt drones? Initially, they package the drones do not actually land but float above the recipi- may choose to pay drone-services companies to workforthem on ent and use a winch to lowertheircargo: in DrTeller’scase, a fresh- a job-by-job basis. Matchmaking services like Measure, Drone- ly prepared burrito. Base, Fairfleet and Airstoc have already sprungup to connect com- Receiving something by drone is “kind of magical”, he says, panies that want to get a particulartaskdone by drones with small launching into an impassioned case for drone delivery. Imagine firms and individuals who can do it for them. DJI has a stake in you had a magic elf that could bring you anything you asked for1 DroneBase, and some makers of drone software, including Air- ware and DroneDeploy, operate similar services. But this may just be an interim solution. “Companiesusuallywantto startbyhiring a service provider,” says MrDowney, “and then they see how easy it is, and realise they can do it themselves.” Drone companies, for their part, have been forming partnerships with incumbent suppliers, notably in the construction industry, which already have access to a large customer base. Hence partnerships have been formed (many of them underpinned by an equity stake) between Kespry and John Deere, 3D Robotics and Autodesk, Airware and Caterpillar, and Skycatch and Komatsu. Mr Xu of DJI reckons that more needs to be done to promote growth in the industry over the next five to ten years, so his company is fostering insurance, repair and financing services for drones that corporate customers are likely to want. With full automation some years away, it is also encouraging the training of drone operators. “We are transforming this from a hobby to a profession,” says Mr Xu. So far DJI’s training schemes, launched in June 2016 and outsourced to third parties, are available only in China. Each month 500-600 people are certified for particular kinds ofdrone operation, such as photography, pesticide spraying or infrastructure inspection. The company is also trying to assist startups that act as “UAV systems integrators”, helping companies in particular industries integrate drones into their business. Thus many overlapping models and initiatives are competing to shape the future of the drone business. Mr Downey thinks that consolidation over the next five years will leave a couple ofdomi- nant providers in each industry. But in essence, all the commercial applicationsbeingpursued todayuse dronesto gatherdata. Asthe machines become more capable, they will start moving things Lunch has arrived around, which will give rise to a vast range ofnew uses. 7 8 The Economist June 10th 2017 TECHNOLOGY QUARTERLY Civilian drones

2 within a minute or two, provided it could fit in a breadbin. You would no longer worry about what to take with you when going The buzz about drones out. Nor would you keep common items, like batteries or perish- United States, % polled June 9th-19th 2016 able foodstuffs, on hand at home just in case you needed them. When, if ever, do you expect that companies might start to deliver mail or You might not need to own some rarely used objects at all if you packages using a UAV* or drone? could summon them when needed. Rapid drone delivery could Within the next five years Within the next ten years Longer than that or never thus accelerate the trend from ownership to access in the “sharing 0102030405060708090100 economy”, says Dr Teller. He claims delivery drones could be faster, quieter and more environmentally friendly than large delivery trucks. Project Wing now carries out experimental flights daily. Which of the following would you be most concerned about if a company The technology giant most closely associated with delivery were to deliver mail or packages using a UAV* or drone? drones is Amazon. When its boss, JeffBezos, revealed his plans for Malfunction Theft Misuse Misdelivery Drone damage Other drones in December 2013 on “60 Minutes”, an American televi- 02040608010010 30 50 70 90 sion programme, they were widely assumed to be a publicity stunt. But Amazon is quite serious: it carried out its first trial delivery to a customer near Cambridge, England, last December—“13 Do you agree or disagree that deliveries made with UAVs* or drones would be safe? minutes from clickto delivery,” says GurKimchi, the head ofAma- 02040608010010 30 50 70 90 zon’s drone effort. In March 2017 it conducted its first delivery demonstration in America, at a conference in Palm Springs. Like Agree Neither agree nor disagree Disagree Google, Amazon is evaluating a range of different designs, all of Source: USPS *Unmanned aerial vehicle which involve the drone lowering its package onto a target in the recipient’s garden or backyard. Logistics firms such as DHL and him thathe used to workon dronesthatdrop bombs, “and nowhe UPS, as well as some startups, are also looking at drone delivery. builds drones that drop blood.” But if widespread drone delivery is to become a reality, many Otherstartups say that drone delivery in urban areas is already technical and regulatory hurdles must be overcome. These in- possible—but using drones moving on the ground rather than in clude ensuring that drones do not fall and cause injury, and can the air. Starship Technologies, based in Estonia, and Dispatch, land safely if something goes wrong; and preventing collisions based in California, have both developed wheeled, coolbox-sized with power lines, trees and other aircraft. Moreover, small drones drones that trundle along pavements to make local deliveries. have limited cargo-carrying capacity; not everyone has a garden Starship’s drones are being tested in several cities around the or backyard; and deliveries require beyond-line-of-sight, autono- world, and Dispatch is about to begin tests in the San Francisco mous operation, which requires special permission. So at least for Bay Area. Both firms use a “partial autonomy” model, meaning now, many drone firms are steering clear. “It’s very challenging, that their drones can be remotely piloted forsome or all ofa route. and we do not want to promise something we can’t deliver,” says As the drone approaches its destination, the recipient receives a Mr Xu. “Delivery just bundles together all the hard problems,” smartphone alert, and when it arrives he uses his phone to pop says Mr Bry, who worked on Project Wing before leaving to found open a lockable compartment to retrieve the cargo. Skydio. He thinks it could take a decade to solve these problems. What if people steal the drone? Anyone who tries, says Stav One application where drone delivery may make more sense, Braun of Dispatch, has “just stolen a homing beacon”. A bigger and is already in use, is ferrying medical concern, she says, is ensuring that the robot is courteous and peo- supplies to remote areas that are hard to ple feel safe around it. But so far the response has been positive. reach by road. Zipline, an American startup staffed by veterans of Google, SpaceX, Instant gratification Boeing and NASA, began delivering medi- Clement Jambou of Unsupervised.ai, a French delivery-drone cal supplies in rural Rwanda using fixed- startup, thinks the steps and kerbs of urban environments will be wing drones in October 2016. It has an too difficult for wheeled robots to navigate, so his firm’s delivery agreement with the government to deliver drone has legs instead and resembles a dog. He may disagree with blood products to 21 transfusion clinics Dr Telleron the best way to set about it, but Mr Jambou has a very from two bases, the first of which is al- similar vision for fast, cheap drone delivery. For example, he ima- ready serving five clinics. Zipline’s drones gines people renting rather than buying clothes, tools and other can fly 150km on a single charge and work household items, dispatched by drone from a neighbourhood de- in rain and winds of up to 30km an hour. pot when needed. They are launched using a catapult, fly be- Dr Teller, for his part, is confident that the technical and safety low 150 metres (500 feet) and drop cargo obstacles to flying delivery drones can be overcome. But it will be packages weighing1.5kg by parachute. a gradual process involving “lots of data and demonstration” to Rolling out the service means mapping satisfy regulators. “The magical elfwon’t change the world unless the best routes forthe aircraft, which fly au- it can go beyond visual line-of-sight, fly over people and have a tonomously, co-ordinating with military small number ofoperators responsible for a large number ofvehi- and civilian authorities, trainingclinic staff cles,” he says, none ofwhich is allowed undercurrent regulations. to receive cargo and reassuring the local Google is working on making its drones resilient to the failure of a communities along the route. Whether all single rotor, battery or motor, the loss of GPS coverage and other this is economically viable, or just a public- potential problems. “We are building up evidence that we can do ity stunt by Rwanda’s tech-loving govern- this safely,” he says. That will take a while, but Google expects its ment, isunclear. Butthe companyistalking “moonshots” to take up to a decade to pay off. Work on Project to governments in other countries about Wing began in 2012. operating similar services, focusing on The disagreement over the viability ofdelivery drones, then, is medical deliveries outside urban areas. It mostly a matter of timing. For companies that wish to put drones hopes to change public perceptions of the to worknow, deliveryisnota good bet. Butforlogistics companies word “drone”. Zipline’s Justin Hamilton it makes sense to start exploring the possibilities. The end result says one of the firm’s engineers once told may well be a hybrid system of delivery trucks that arrive in a1 The Economist June 10th 2017 9 TECHNOLOGY QUARTERLY Civilian drones

2 neighbourhood and disgorge flying and wheeled drones. just a day or two. Large, lightweight UAVs can theoretically use so- Deliveries are just one of the proposed uses of drones that lar power to remain in the air for weeks at a time; a prototype seem speculative or impractical now but may become significant Zephyrdrone, built by Airbus, Europe’s aviation giant, stayed aloft in future. Facebook, like Google and Amazon, is also investing in for14 days during a test flight in 2010. drones, but not for delivery: instead its drone, called Aquila, is a High-altitude drones have also been proposed as a way to gen- huge solar-powered machine intended as a communications re- erate electricity, because strong winds blow more reliably well lay, to extend internet access to parts ofthe world that lackconnec- above the ground. Known as wind drones or energy kites, such tivity. This will have health and educational benefits, the social- drones are tethered so that cables can deliver the electricity back media giant says, but will also help it sign up more users. Aquila to the ground. Makani, a startup acquired by Google in 2013, reck- made its first test flight in June 2016. Facebook’s boss, MarkZucker- ons a single energy kite can generate 50% more electricity than a berg, explained in a blog post afterwards that his goal is “a fleet of single wind turbine while using only 10% of the materials. Each Aquilas flying together at 60,000 feet, communicating with each Makani drone, which resembles a wing with eight propellers, other with lasers and staying aloft for months at a time”, beaming weighs11tonnes, compared with about100 tonnes fora compara- internet access over wide areas. ble 600kW turbine. This approach is beingpursued by other firms Making all this work is a lofty goal. In November it emerged too, including Ampyx Power and Kite Power Systems, both that the prototype Aquila had been substantially damaged on backed by E.ON, a German utility. Tethered drones on a smaller landing, triggering an investigation by flight-safety inspectors. scale are also being considered for indoor use in warehouses, And getting permission to fly such aircraft over any populated ar- where they might help with stocktaking. Flying indoors neatly eas will not be easy. In January Google scrapped its own high-alti- sidesteps many regulatory problems, and supplying power via tude communications-relay drone, Titan. tethers does away with the need forrecharging. But GPS cannot be Dr Teller says that Google now sees more promise for extend- used for positioning. ing internet access in high-altitude balloons; they are easier to At the lowest end of the spectrum are insect-like drones, just a keep airborne and much more lightly regulated than drones. Mil- few centimetres across, that could be used for surveillance inside itary drones such as the Global Hawk can already act as telecoms buildings, search and rescue, or even pollinating plants. Building relays, so that part of the technology is proven; the challenge is to very small drones is hard because the technology used in larger harness solar power to keep drones aloftforweeks or months, not drones cannot simply be scaled down; different approaches are1 Brain scan Dario Floreano

A pioneer of evolutionary robotics borrows drone designs from nature THE drones that most people are familiar letting it trade speed formanoeuvrability. with today are “very boring”, declares But not everything needs to be borrowed Dario Floreano, head ofthe Laboratory from nature. Flyability, anotherspin-out ofIntelligent Systems at the Swiss Federal from Dr Floreano’s lab, makes a “collision- Institute ofTechnology in Lausanne. He tolerant” drone that resembles a flying thinks that drones will come in a much spherical cage, for mapping and inspec- wider range ofshapes and sizes in future, tion in confined spaces. and that nature will provide the inspira- These sorts ofunconventional ap- tion needed to make them more agile, proaches enable drones to do things that saferand more capable. “There is space existing designs cannot. Dr Floreano foran enormous range ofmorphologies imagines search-and-rescue drones capa- and sensing capabilities,” he says, giving ble ofperching on walls or landing on a slightly worrying example: vampire power lines, like birds, to survey their bats. As well as flying, they can also walk, surroundings. This “multi-modal” ap- jump and even run along the ground. Dr proach could also increase the safety of Floreano and his colleagues have built delivery drones by allowing them to glide, bat-like drones with folding wings, and land or perch ifsomething goes wrong. locust-like ones that can jump and fly. Multirotor drones can carry a maximum A pioneer in the field ofevolutionary of30% oftheir total mass as payload, he robotics, which borrows ideas from notes, so to carry useful amounts ofcargo nature, Dr Floreano became interested in they will have to be quite large and heavy. drones as a result ofhis workon insect- At very small scales, fixed-wing and inspired vision systems. Curved com- multirotor designs become less efficient, pound “eyes”, which (like insect eyes) French drone company. SenseFly’s main and insect-like drones with flapping wings can “see” in many directions, turn out to product is a black-and-yellow fixed-wing may make more sense. Tiny drones could be useful in helping a drone sense its mapping drone called eBee. be used for virtual tourism, letting remote surroundings, navigate and avoid obsta- Birds are another inspiration. Dr users “fly” around with the aid ofvirtual- cles, forexample. Dr Floreano’s workon Floreano’s team recently published reality goggles. In short, today’s drone fixed-wing drones, with stabilisation and research on the benefits ofadding artifi- designs barely scratch the surface. “There autopilot systems inspired by the way cial feathers to fixed-wing drones. By is a huge range ofshapes and sizes that we bees navigate, was spun offinto a startup spreading its feathers, the drone can have to explore,” says Dr Floreano. “Future called SenseFly, now part ofParrot, a increase the surface area ofits wing, drones may lookvery different.”

10 The Economist June 10th 2017 TECHNOLOGY QUARTERLY Civilian drones

2 needed. In a paper published in February in the journal Chem, other’s meetings and learning from each Japanese researchers explained how insect-sized drones covered other, while also competing to attract in hairs coated with a special gel picked up pollen from one plant drone startups. “It’s very good for the in- and deposited it on another. They concluded that robotic pollina- dustry, because every nation wants to be a torsmight offera remedy forthe decline in honeybee populations. leader,” says Mr McNeal. Perhaps the most far-out proposal to date is to use drones to The FAA’s part 107 rules, providing for carry human passengers in self-flying taxis. This is harder than us- certification of commercial drone opera- ing drones for package delivery, because it raises safety concerns tors, are generally seen as a model by other for people in the air, not just on the ground. EHang, a Chinese countries. These rules, a decade in the drone firm, hopes to test its one-person drone, which resembles a making, allow operators with a remote-pi- Flying over giant quadcopter with a passenger compartment, in Dubai in July. lot certificate (obtained by passing a test Other companies, including Airbus, Uber and Kitty Hawk, have costing $150) to fly a drone for commercial people proposed similar “flying car” drones. Dario Floreano, a robotics purposes during the day, within line of professor at the Swiss Federal Institute of Technology (see Brain sight, in uncontrolled airspace, and with- raises scan, previouspage), has been thinkingaboutpassenger dronesas out flying over people who are not in- additional part of the European Union’s “myCopter” project. Packages, he volved in operating the drone. Other coun- says, can withstand sudden accelerations during flight that hu- tries have since followed America’s lead, problems mans cannot, which makes path-planning and obstacle avoid- and some are already going further: France ance more difficult. And the limited energy density of batteries and Switzerland allow some operation be- may restrict the range ofpassenger drones to intra-city hops. yond visual line of sight, says Mr McNeal, It is a big leap from today’s drones to these sorts of uses. Trying and from 2018 Japan will permit it fordelivery drones. In America to imagine how drones will evolve, and the uses to which they the next set of proposed rules from the FAA, expected later this will be put, is a bit like trying to forecast the evolution of comput- year, will deal with flight over people and remote identification of ing in the 1960s or mobile phones in the 1980s. Their potential as drones. Next year there will be proposals for the control of multi- business tools was clearat the time, but the technology developed ple drones by a single operator, “extended visual line of sight” opin unexpected ways. The same will surely be true ofdrones. 7 eration overlongerdistances, and nightoperation. In 2019, saysMr McNeal, the FAA will propose its first rules governing flights with- outa visual line ofsight, a crucial requirementfordelivery drones. Drone companies can already go beyond part107 by obtaining Regulation special waivers from the FAA, provided they can show that the proposed operation can be conducted safely and meet some additional requirements. This offers a way to test new regulations be- Rules and tools fore they are formalised. Such waivers impose additional safety requirements on drone operators: getting a waiver for night-time operation, for example, requires mounting a light on the drone that is visible three miles away, and providing night-flight training for operators. If all goes well, this could form the basis of a new Regulation and technology will have to evolve together to rule, says Brendan Schulman, head ofpolicy at DJI. FAA ensure safety Flying over people raises additional problems. The ’s proposed rule, due out later this year, is expected to ask drone opera- OVING bits around the internet is one thing; moving tors to show how they would mitigate the risk of injury to by- atoms around in the real world is something else en- standers. The best way to do this, explains Mr Schulman, is to tirely. In the two decades of the internet era, many specify an acceptable level of risk, and then require dronemakers world-changing technologies—web-publishing, file- to show that their vehicles meet that standard. This might involve sharing, online auctions, internet telephony, virtual adding cushioning or parachutes to drones, or ensuring that they currencies, ride-hailing—have raised new legal and can still operate if some parts fail, or making them so small and Mregulatory questions. In each case, regulators had to work out the light that they would cause little injury ifthey fell on someone. rules after the event: figuring out how libel law applies to the web, An idea from Australia also deserves to be more widely adopt- banningthe sale ofNazi memorabilia, decidingwhetherBitcoin is ed, he suggests: the creation of a special category for very small a currency, determining whether Uber drivers are employees or drones, allowing commercial operation without any certification. contractors, and so on. But drones are a different matter, because In Australia’s case this applies to drones weighing less than 2kg. of the danger that flying robots pose to life and limb, and the exis- Similar rules apply in Mexico and Canada, and are being consid- tence of strict rules that govern the use of physical airspace. Their ered in India and several European countries. In America all future will depend as much on decisions made by regulators as it drones weighing less than 25kg are still treated the same. But does on technological advances. How will it play out? broadly speaking, regulators are learning from a variety of ap- Global policymakers are currently engaged in a “very interac- proaches being tried in different countries. tive process of competition and co-operation”, says Greg McNeal, a law professor at Pepperdine University who advises the Federal Traffic lights in the clouds Aviation Administration (FAA) on drone regulation and is co- To operate drones beyond visual line of sight and in large num- founder ofAirmap, a drone-software startup. Before the introduc- bers, particularly in densely populated areas, will take not just ex- tion of America’s “part 107” rules last August, Google’s Project tra rules but the establishment of new traffic-management sys- Wing tested drones in Australia and Amazon in Canada, where tems, akin to air-traffic-control systems, to preventdrones crashing the regulatory regimes were more accommodating. France’s rela- into each other or veering off course. Around 80% of consumer tively permissive regulation put it at the forefront of the agricultur- drones, including those made by DJI, Yuneec and Intel, already al use of drones. And in Britain a drone cluster has sprung up support “geo-fencing”, using technology provided by Mr around an airport in Aberporth, in Wales, where drone-friendly McNeal’s company, Airmap. Its database ofwhere drones are and regulations and facilities have been put in place. Now regulators are not allowed to fly is built into the software used to control in different countries are working closely together, attending each them, working with satellite positioning to prevent an operator1 The Economist June 10th 2017 11 TECHNOLOGY QUARTERLY Civilian drones

widely to take in drones as well. And even once all these rules and tools are in place, not everyone will respect them. Some people may want to use drones for nefarious purposes. A range of anti-drone technologies is already being tested. Police forces in some parts of the world have trained birds of prey to attack small drones. Nets can also be used to trap them, either fired from bazooka-like launchers or dropped by other drones. America’s Department of Defence holds an annual event called BlackDart at which various anti-drone technologies are evaluated. “The biggest surprise to military folks was how difficult it was to combat small drones,” says Grant Jordan, the founder of SkySafe, an anti-drone startup, who worked on Black Dart a few years ago when he was in the air force. When the target is “tiny, very light and relatively slow”, the assumptions of traditional air defence are all wrong, he says. Biglasersystemsworked prettywell, he recalls, but are expensive and complex. Is- rael has used Patriot missiles to shoot In perfect formation down fixed-wing drones operated by Ha- mas, Mr Jordan says. By contrast, his firm disables drones by intercepting their con- 2 from flying a drone too close to an airport, for example. Airmap’s trol signals and video feeds. Examining the radio traffic to and database can be updated in real time to keep drones away from from a drone makes it possible to determine what type it is, track it unexpected events such as fires and other incidents. and if necessary take it over to disable it or force it to land. Anti- But once drones are flying beyond their operators’ line ofsight, drone systems made by SkySafe, and rivals such as Dedrone and a more elaborate system will be needed to track large numbers of DroneShield, are being evaluated for military and government them and ensure they avoid each other and stay away from use and to police airspace around airports, stadiums and prisons manned aircraft, says Parimal Kopardekar of NASA’s Ames Re- (to prevent smuggling of phones, drugs and other items to in- search Centre. He is leading the development of a system called mates). But it is unclear who has the legal authority to stop drones Unmanned Aerial Systems Traffic Management (UTM), an auto- that pose a threat to public safety, says MrJordan. Existing air-safe- mated traffic-management system for drones. Existing air-traffic- ty rules aim to protect passengers in aircraft; for drones, “the logic control systems are operated manually, with human controllers ofthese laws falls apart.” co-ordinating with human pilots during flight, but that will not It is clear that the complexities of operating drones in large work for unmanned drones flying in much larger numbers. The numbers have barely begun to UTM system will be automatic, with drones filing requests to use be understood. As the first wide- particular flight paths with a local data exchange, which then co- ly deployed mobile robots, OFFER TO READERS ordinates all the movements. “The regulator only sets the rules drones already offer many excit- Reprints of Technology and defines the exchanges, so it’s a very different way of doing ing possibilities today, and no Quarterly are available from the Rights and Syndication things from air-traffic control,” says Dr Kopardekar. doubt other, as yet un- NASA UTM Department. A minimum order Last year carried out a trial ofits architecture across dreamed-of uses will follow in of five copies is required. the United States which revealed several challenges, notes Dr Ko- the future. Frank Wang, the foun- pardekar. In particular, it turned out that fixed-wing and multi- der of DJI, pictures people being CORPORATE OFFER rotor drones respond very differently when they encounter rising followed around by tiny perso- Customisation options on columns of air, called thermals. Fixed-wing drones “bounce nal drones, like fairy sidekicks. corporate orders of 100 or more around quite a bit, by a few hundred feet”, says Dr Kopardekar, Astro Teller of Google foresees are available. Please contact us which meansdronescannotbe stacked too closelytogether. Route deliverydronesthatcan come up to discuss your requirements. planning will, in short, require a detailed understanding ofmicro- with any item on demand. And For more information on how to order special reports, reprints or climates and ofthe behaviours ofdifferent types ofdrones. Build- passenger drones might some any queries you may have please ing the necessary systems will take a few years. day act as magic carpets, whisk- contact: ingpeople acrosscitiesfrom roof- Where are you going? top to rooftop. The Rights and Syndication The FAA plans to introduce the first rules around UTM from 2019. Drones make the extraordi- Department Drones will need to be equipped with “sense and avoid” systems nary power of digital technol- The Economist and long-range radio to communicate with each other and with ogies physically incarnate. But 20 Cabot Square the data exchange. That also poses a challenge, says Jane Rygaard because they operate in the phys- London E14 4QW ofNokia, a makerofnetworkequipment, because existing mobile ical rather than the virtual world, Tel +44 (0)20 7576 8148 networks are designed to work with users on the ground, not in exploiting the many opportuni- Fax +44 (0)20 7576 8492 the air. Networks will have to be augmented with antennae that ties they offer will depend just as e-mail: [email protected] pointtowardsthe sky. Thistechnologyalreadyexiststo provide in- much on sensible regulation as www.economist.com/rights flight connectivity to aircraft, but will have to be extended more on technological progress. 7 12 The Economist June 10th 2017 Europe The Economist June 10th 2017 43

Also in this section 44 Ravenously Hungary 44 Refugees in the welfare state 45 A godfather’s end 46 Russia’s feisty opposition 48 Charlemagne: A task for Gob Almighty

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

Emmanuel Macron’s chances parliamentary seat in the northern ex-mining town of Hénin-Beaumont. But this A second French revolution would still be a disappointment fora party that had hoped to turn itself into a proper force ofopposition. That role will fall to the centre-right Republicans, who are themselves heading for big losses. The Republi- VILLEURBANNE cans had once expected to win both the presidency and a parliamentary majority. MrMacron’s party looks set to sweep to victory Instead, they could end up with little more UMPIN!” yellsBruno Bonnell from be- achieved by any party since Charles de than 100 seats, halftheir current share. “Jhind the wheel of his rented minivan. Gaulle founded the Fifth Republic in 1958. There could be some big-name casual- A tech entrepreneur more used to labs (The current record is held by Jacques Chir- ties. Among those vulnerable is Najat Val- than leafleting, the local candidate for Vil- ac, whose centre-right party won 365 seats laud-Belkacem, a former education minis- leurbanne in the upcoming parliamentary in 2002.) “There’s no longer any doubt ter, who is running as the Socialist elections has never fought a political cam- about him getting a majority,” says a So- candidate against Mr Bonnell in Villeur- paign in his life, and is having a blast. He cialist former minister, whose own party is banne, an inner-city constituency well has plastered a huge photo of himself and heading for a wipe-out. Its share of seats stocked with kebab shops as well as patis- Emmanuel Macron, the French president, could plunge from 271 to a rump of just series. A well-known figure nationally, she whose party he is standing for, on the out- 25-35. The party that has governed France also cut her political teeth locally as an ad- side of the van. “I love it,” he grins, as he forthe past five years could become all but viser to the mayor of Lyon, Gérard Col- drives around the constituency, next to inaudible in parliament, its representation lomb. But they have since parted ways. An Lyon: “People recognise the photo, and barely bigger than that of Jean-Luc Mélen- earlysupporterofMrMacron, MrCollomb they smile.” chon’s Unsubmissive France, a far-left is now his interior minister, and turned up A second revolution is underway in fringe group. in Villeurbanne thisweekata rallyto drum France. On the backofthe remarkable elec- up support for the 58-year-old Mr Bonnell. tion in May of Mr Macron, who had never Amateur power Polls suggest that the techie will win the before run for election to any office, La Ré- Mr Macron is hoovering up votes across run-offvote. publique en Marche! (LRM), a movement the spectrum. Marine Le Pen’s xenophobic The Macron parliamentary revolution he founded just14 months ago, looks set to National Front could improve its current is not only about upsetting the old party secure a parliamentary majority at the tally of just two deputies to perhaps 15. Ms balance, which has dominated France for two-round legislative election, on June 11th Le Pen stands a chance of securing her first 60 years, in favour of a new radical centre. 1 and 18th (see chart). Onlyweeksago, such a prospect looked slim. But almost everything Mr Macron has achieved so far has Marching forward defied expectations. In constituencies Predicted seats after France’s legislative election, June 2017 across the country, enthusiastic political 0 100 200 300 400 500 577 novices, such as Mr Bonnell, are preparing La République En Marche! (395-425) to transform the face of the National As- The Republicans and allies (95-115) sembly, and ofFrench party politics. Socialist Party and Greens (25-35) Polls suggest that LRM could get 395-425 Unsubmissive France/Communists (10-20) ofthe 577 seats. Ifso, this would be unprec- National Front (5-15) edented for a new political movement. It Others (5-10) would also be the biggest majority Source: Ipsos 44 Europe The Economist June 10th 2017

2 It is also changing the face of French poli- could yet resist the Macron mania. And for the firm yet dignified way Mr Macron tics. Fully 251 of the 525 candidates LRM is those political novices who are indeed has represented France since his election. fielding, which it selected from among elected for LRM will have to learn fast. “I’m Hispoll ratingsare high. Fully76% ofvoters 19,000 online applicants, have never run completely new to this world,” laughs Mr judge his first diplomatic steps favourably. for elected office before, according to Le Bonnell: “You have to be humble.” Yet the Adrien Taquet, the LRM candidate in the Monde, a newspaper. Half are women; the French like the idea of turfing out the old Paris suburb ofAsnières and the brains be- average age is 47. Like MrBonnell, some are guard, and seem ready to take the risk. hind the name “En Marche!”, says that, entrepreneurs. There are also many teach- “Let’s give him a chance,” says a voter in when he is out canvassing, voters sponta- ers, civil servants and doctors, 11 farmers, Villeurbanne who did not backMrMacron neously mention the president’s muscular two firemen, a hairdresser, an ex-profes- in the first presidential round, but intends handshake with America’s Donald Trump. sional golfer, a theologian, a mathemati- to do so at the legislative election. Mr Macron has already torn up the un- cian and a female fighter pilot. A parliamentary majority for Mr Mac- written rules governing the French presi- This astonishing democratic experi- ron would be in line with tradition, where- dential elections. Now he looks set to rip ment is both refreshing, and a gamble. by voters backthe presidential winner. But apart those behind the party-political sys- Some deputies with strong local roots it could also reflect widespread approval tem too. 7

Obesity Welfare and migrants Ravenously Hungary A new Scandi model Taxes to trim waistlines are spreading across Europe STOCKHOLM ISIT any culinary establishment in Obesity* Immigration is changing the Swedish Budapest and some ofthe reasons V As % of adult population welfare state why Hungary is the most obese country 2015 or latest in Europe will soon become clear. In the 30.0+ 25.0-29.9 T THE height of the migrant crisis the 20.0-24.9 15.0-19.9 coffee houses, you’ll see dobostorta, a Sweden Democrats, a populist anti- 10.0-14.9 <10.0 A FINLAND five-layer chocolate buttercream concoc- Source: OECD *BMI ≥ 30 immigrant party, released a video. Over tion topped with glazed caramel; somloi images of burnt-out cars and groups of galuska, a chocolate and rum sponge SWEDEN ESTONIA homeless people it read: “No money. No LATVIA cake; and gesztenyepure, a chestnut purée DENMARK jobs. No homes. No welfare. Welcome to served with whipped cream. In markets IRELAND BRITAIN Sweden.” The message, like a previous vid- you can buy slabs offried dough covered NETH. POLAND eo from the party in which burqa-clad GERMANY in cheese, bread served with goose fat BELGIUM SLOVAKIA women race ahead of an old Swedish lady and lumps oflard and, ofcourse, lashings CZECH REP. to grab a share ofpublic funds, was hysteri- AUSTRIA ofgoulash. FRANCE HUNGARY cal. But it touched on a real problem: large- According to new data released by the SLOVENIA scale immigration is putting a strain on OECD, a club ofmostly rich countries, Sweden’s welfare system. POR. ITALY almost two-thirds ofHungarians are SPAIN Sweden has long been admired for its overweight and nearly a third are obese. GREECE blend ofprosperityand social cohesion. Its Hungarians eat fewer vegetables than model combines high taxes, generous wel- most people in the rich world and more fare, collective bargaining, high education- salt than any other EU state. Educated al standards and a reasonably free-market Hungarian men are at least as likely to be unhealthy ingredients. Another study economy. The result is high living stan- overweight as their unschooled male found that consumers shifted to cheaper, dards: the lowest wages, forexample in ho- compatriots. Uneducated Hungarian often healthier products. Three years tels or restaurants, are far higher than mini- women are 60% likelier to be obese than after the tax was introduced, the con- mum wages elsewhere in Europe says educated women; in slim Italy uneducat- sumption ofsugary drinks had fallen by Marten Blix, a Swedish economist. Rela- ed women are three times more likely to a tenth, says Michele Cecchini, an analyst tive to other countries that have compara- be obese. Hungarians’ life expectancy is at the OECD. By 2015 the tax had generat- ble data, Swedish men in manufacturing five years below the EU average: 76. ed 61.3bn forints to help cover the cost of earn the highest minimum wage. In 2011Viktor Orban, the prime min- public health care. Aspects of this welfare state have long ister, declared that those who “live un- Other European countries are also seemed unsustainable, with an ageing healthily” would have to pay more tax. attempting to trim waistlines by perform- workforce and a recent rise in the number That year his government, led by the ing paysliposuction. In 2011Denmark ofsick-leave absencestaken byemployees. populist Fidesz party, introduced one of introduced a tax on saturated fats. Just15 Some changes were made in the 1990s: the the broadest levies on unhealthy foods in months later, however, as prices rose and pension system is far less generous than it the world. Dubbed the “chips tax” it Danes began popping over to Germany used to be, and much more school choice applies to sugar, salt, fat, booze and ener- or Sweden to load up on lard, the policy was introduced. But the influx ofhundreds gy drinks. The rate changes depending on was abandoned. In 2018 Britain (the of thousands of refugees from Syria, Af- the type offood: the tax adds 250 forints second most obese country in Europe) ghanistan and elsewhere in 2015 has put ($0.91) to the cost ofa litre ofenergy drink, will introduce a sugar tax that is expected huge extra pressure on the system. To cope, forinstance, and 500 forints to the cost of to add 8p to a 70p can ofCoke. Spain and Sweden needs to reform benefits, build a kilogram ofjam. Estonia have announced similar plans. more houses and boost the numberofdoc- The policy has had some success. One Hungary’s example may tip the scales in tors and teachers outside big cities. If it review showed that 40% ofmanufactur- Europe’s fight against fat. Hold the dump- does not, the country will struggle to ab- ers tweaked their recipes to use fewer lings and pass the cucumber salad. sorb so many culturally dissimilar migrants—and anti-immigrant views may be-1 The Economist June 10th 2017 Europe 45

Around two-thirds of those employed The judgessaid a lowercourt’srejection Pressure cooker there are foreign-born or refugees. “We ofan application forhouse arrest by Mr Ri- Swedes who think that immigration is one of the have tried to create a market for ‘simple ina (pictured) had not offered proofthat he three most important social issues, % polled jobs’,” says Torkild Strandberg, its liberal still posed a threat. The lower-court judges 60 mayor. “We have begun delivering while must now rewrite their verdict. Ifit is again others are talking.” judged unsatisfactory, the 86-year-old 50 Swedes are generally more sanguine “godfather” could end his days in his home 40 than other Europeans about immigration. town ofCorleone, in Sicily. But a survey from the University of Goth- Also known as la belva (The Beast), Mr 30 enburg finds that the issue has become Riina is an exceptionally ferocious mob- 20 more fraught (see chart). Research by Clara ster. Under his command a 14-year-old boy 10 Sandelind for Demos, a British think-tank, was strangled before his body was dis- shows that talk of “Swedish values” is on solved in acid. After snatching the leader- 0 the rise: they were mentioned 1,600 times ship of the Corleone “family”, Mr Riina 1987 90 95 2000 05 10 15 in newspapers and blogs last year, up from tookon the established clans in the Sicilian Source: SOM Institute, the University of Gothenburg 286 times in 2012. A recent poll put support capital of Palermo, sparking a Mafia war for the Sweden Democrats at 24%, almost that cost several hundred lives. Once he 2 come mainstream. double their share of the vote in 2014. Cen- was recognised as the undisputed chief of The government, led by the Social tre-right and liberal parties, with an eye on Cosa Nostra, he led it into a terrorist on- Democrats, has made a few tweaks to the the election next year, propose a benefit slaught on the state, which culminated in welfare state. Previously, failed asylum- cap and tying benefits to schemes to pro- the assassination ofthe two prosecutors. seekers would receive a cash benefit (of mote integration. But without big changes Paolo Borsellino’s brother, Salvatore, around 1,200 SEK, or $140 a month) and the welfare system could buckle, and with said the judges should “not even begin to housing; this was scrapped last year. On it, Sweden’s generous culture. 7 thinkofa dignified death foran animal like May 31st the government voted to limit Totò Riina”. Relatives of the prisoner’s vic- paid parental leave for immigrants: previ- tims sneered that Mr Riina had scarcely ously, refugees could claim the full amount Italy’s Mafia given their loved ones a dignified end. of paid leave (480 days per child under the Though he has tumours on both kidneys, age ofeight). Nowtheycan onlydo so ifthe The end of the Mr Riina remains subject to the strict re- child isunderone yearold. The benefit will gime designed to ensure that Mafia bosses also be limited in big families. (This change boss of bosses cannot escape or communicate with their does not apply to Swedes.) subordinates outside. He attends court But these changes do not deal with the ROME hearings that concern him via a video link, biggest problem: a rigid labour market lying on a trolley bed. A dispute overhow to deal with an aged which prevents unskilled workers from Politicians are divided on the issue: the “godfather” raises awkward questions getting a foothold. As a result, Sweden has leader of the populist Northern League, one of the largest gaps in employment be- HAT place, if any, has humanity in a Matteo Salvini, deplored the court’s ruling; tween native and foreign-born workers. Wfight with barbarism? On June 5th his party colleague, Roberto Maroni, a for- After nine years in Sweden, only half of such a question was posed in an unusual mer interior minister, supported it. Several immigrants have a job. Even after 20 years fashion in Italy when the country’s highest commentators protested that Mr Riina of residency, foreign-born workers are less appeals court hinted that Salvatore “Totò” could receive adequate medical treatment likely than the native-born to have jobs. If Riina should be freed to “die with dignity”. in jail. Others questioned that; he is said to they cannot work, they will not pay tax. Asthe head ofthe Sicilian Mafia, Cosa Nos- need an adjustable bed that cannot fit This will undermine the welfare state both tra, Mr Riina is credited with ordering or through the door ofhis cell. directly (because they will not pay for it) committing several hundred murders, in- Whether Mr Riina remains a threat de- and indirectly (because locals may resent cluding those in 1992 of two of Italy’s mod- pends in part on whether he is still Cosa supporting so many foreigners). The only ern heroes, Giovanni Falcone and Paolo Nostra’s capo di tutti i capi (boss of all way that the newcomers will integrate and Borsellino, two anti-Mafia prosecutors. bosses). It was once widely thought that, 1 contribute is if they have jobs, and that probably means starting at the bottom. For decades Sweden consciously tried to get rid of low-skilled service jobs, says Karin Svanborg-Sjovall, of Timbro, a free- market think-tank. “We are fanatics about equality here,” she says. These jobs now need to come back to help newcomers. In March the LO, an umbrella body for blue- collar trade unions, indicated that it would accept lower wages for unskilled workers for a short period of time if they were also given the equivalent of a high-school education. So farnothing has happened. A few local schemes have attempted to step in where the governmenthasfailed. In Landskrona, a town of40,000 people near the southern tip of Sweden, a laundry was opened in May in order to employ low- skilled workers; previously, the washing would be shipped over to Copenhagen. Caged Beast 46 Europe The Economist June 10th 2017

2 after his arrest in 1993, overall command spell behind bars. from leaving home, but also to make him passed to his associate, Bernardo Proven- Mr Roberti also noted that, despite the seem unpopular. zano, and that since Provenzano’s arrest in restrictions on him, MrRiina had managed The tactic failed. The protests in March 2006 (he died last year) the supreme com- to issue at least one death threat from jail, were the largest since people took en mas- mander has been a godfather from Tra- against a prosecutorwho has been probing se to the streets 2011. This suggests that Mr pani, Matteo Messina Denaro. But Italy’s claims that representatives of the govern- Putin’s efforts to make voters forget about chief anti-Mafia prosecutor, Franco Ro- ment negotiated with Cosa Nostra. Anoth- the national malaise by rallying them berti, hinted at new evidence that Cosa er experienced anti-Mafia investigator, Ni- around the flag are not working as well as Nostra’s mobsters have never ceased to re- cola Gratteri, said: “A boss like Riina can he hoped. Even after he annexed Crimea gard him as their chief, despite his long even give orders just with his eyes.” 7 and started a war in Ukraine, Russians are still gloomy. The political mood has changed over the past six years. The protests in 2011were good-natured, mostly in Moscow, led by journalists and artists and lacked political leadership. Now the protest is angrier, geographically broader and involves younger people, many of them teenagers. Their main grievance is that the government of- fersthem no appealingvision ofthe future. Elena Omelchenko of the National Re- search University in Moscow argues that the protests demonstrated a “demand to bring moral order” back to Russia. Protes- ters complain of the injustice, hypocrisy and cynicism of daily life. “Corruption steals our future” is their slogan. The new generation of protesters are hard for the Kremlin to win over. They es- chew television in favour of YouTube videos and social media. Here, Mr Navalny has a clear advantage. He is banned from state television, but what ofit? He rejects its Russia’s opposition output as propaganda and offers a digital alternative. Hisinvestigative film about the The contender castles and yachts amassed by Dmitry Medvedev, Russia’s prime minister, has been viewed over 22m times. It has also prompted an angry response from Alisher Usmanov, an oligarch, who is now suing MOSCOW Mr Navalny fordefamation. Even though he rarely appears on tele- Still recovering from an acid attack, Aleksei Navalny continues to defythe odds vision, most Russians recognise Mr Na- NSIDE a modern business centre in Mos- tion. On April 27th thugs threw green anti- valny. For now, they largely disapprove of Icow, of the kind that has mushroomed septic mixed with acid in his face. The day him, havingbeen told by theirgovernment across Russia in the 17 years that Vladimir your correspondent visited his election that he is a criminal. But this could change: Putin had been in power, a team of 30- headquarters, Mr Navalny was in a clinic in the most recent parliamentary elections year-olds are making plans to replace the in Spain, having stitches removed after eye 52% ofRussians did not vote. Ifeven a quar- president with Aleksei Navalny, a 41-year- surgery to bring back his sight. ter of these abstainers chose to believe Na- old formerlawyerand anti-corruption cru- None ofthis is likely to stop Mr Navalny valny’s message that Russians can live bet- sader. Perched on the edge of white desks and his team, who claim to have seized the ter, the political landscape would shift or lounging on red bean bags, Mr Na- initiative. Overthe pastfewmonthsMr Na- dramatically, argues Leonid Volkov, the valny’s team exude youthful confidence as valnyhasmanaged to mobilise volunteers, head ofMr Navalny’s campaign. they discuss last-minute preparations for a mostly through social media. His team big rally. It all looks like a normal presiden- boasttheyhave opened 77 campaign head- Fight forthe flag tial election campaign. Indeed, Mr Na- quarters in 65 regions. Such speed has Mr Navalny’s task, for now, is to persuade valny’s staff have studied the methods of caught the Kremlin by surprise. people that he is a viable alternative to Mr American candidates such as Donald On March 26th Mr Navalny brought Putin. To do so, says Mr Volkov, he must Trump and Bernie Sanders. But this being thousands of people onto the streets in 90 gain such a high profile that if he is not on Russia, nothing is what it seems. Russian cities to protest against corruption. the ballot, the election will not seem legiti- For a start, the campaign for Russia’s “The Kremlin did not expect Navalny to mate. To this end, he has called for an even presidential election in 2018 has not yet be- start making trouble until the Autumn,” largerrally, complete with flags, on Russia’s gun. Once itdoes, MrNavalnyisunlikely to says Valery Fedorov, the head of VTSIOM, independence day, June 12th, in 150 cities. get on the ballot. A trumped-up conviction an opinion pollster. For now the govern- Few Russians remember that the day both for embezzlement in 2013, though dis- ment is trying to avoid further escalation. marks the anniversary of Russia declaring missed by the European Court of Human Physical attacks have mostly stopped. In itself partially independent from the Sovi- Rights, bars him from being registered. If the past Mr Navalny was pelted with eggs et Union, and the election of Boris Yeltsin that was not enough to put him off, he has and tomatoes in nearly every town he visas Russia’s first president. MrNavalny is de- already suffered a campaign of intimida- ited. The aim was not simply to deter him termined to refresh their memory. 7

48 Europe The Economist June 10th 2017 Charlemagne A task for Gob Almighty

Leo Varadkar, Ireland’s first gay leader, will find bigotry much less ofa problem than Brexit phe. What has distinguished him is a relaxed approach to ruffling feathers and a growing taste for ideological flexibility. During the Fine Gael leadership campaign, for example, Mr Varadkar tacked right with a crackdown on welfare cheats, garnished with a Mitt Romney-esque jab at those “who believe they should be entitled to everything for free”. Some other proposals hint at a preference forthe free market. Subsidies could be phased out for first-time homebuyers, while effective income-tax rates would be kept below 50%. In response Fianna Fail, the main opposition party, disdainsMr Varadkar as a “Thatcherite”. Yet that is not quite right either: he also speaks of a “new social contract” and promises an investment splurge, funded by more ofa leisure- ly approach to debt-reduction. The big question is how Mr Varadkar will tackle the daunting in-tray he inherits, from Ireland’s antediluvian health-care system to accusations of police corruption. A strong recovery after Ireland’s banking crisis may provide a tailwind, but non-economic tests lie ahead, too. Ireland’s constitutional ban on abor- tion is likely to be placed before voters next year. Mr Varadkar’s stated preference for a limited liberalisation may come close to the median Irish view, but he must tread carefully on an issue ARAD the impaler”, “Leo the Lion”, “Gob Almighty”. Any that, unlike gay rights, retains the power to divide. Mr Varadkar “Vself-respecting Irish politician acquires a range ofcolourful must also manage a minority government that Fianna Fail could nicknames, and those attaching to Leo Varadkar, whom parlia- bring tumbling down at any moment. ment will, barring disasters, elevate to prime minister on June And then there is Brexit. The departure ofIreland’s main Euro- 13th, are nothing unusual. If none of them refers to the attributes pean trading partner from the single market will force difficult that have earned Mr Varadkar global attention—that he is half-In- questions on this export-dependent economy. Yet more pressing dian, gay and, at 38, his country’s youngest-ever leader—that is is the threat to prosperity and peace posed by a possible “hard” testament to a society that has lost interest in the bigotries that border between the Republic and Northern Ireland, which will marked public life in the not-too-distant past. quit the European Union along with the rest ofBritain. Mr Varad- “Prejudice has no hold in this republic,” declared Mr Varadkar kar’s suggestion is to keep the north inside the EU’s customs un- to a rapturous crowd at Dublin’s Mansion House on June 2nd, ion, an ingenious but unworkable idea that would in effect shift after winning the leadership of Ireland’s ruling, centre-right Fine some border controls to the Irish Sea. Gael party. His rousing words satisfied outsiders seeking a good yarn about a country that decriminalised homosexuality only in Hipster politics 1993, but were atypical for a man who has been reluctant to use In some respects—his instinctive pro-Europeanism, his friendli- his minority status to advance his politics. Indeed, some Irish left- ness to business—Mr Varadkar sits squarely in the contemporary wingers sniffed hypocrisy from a politician who in his time has Irish tradition. But his political style may mark something of a spurned such causes as gay adoption and once suggested paying rupture. He feels no compulsion to indulge paddy-whackery by unemployed immigrants to return home. playing up to stereotypes of false bonhomie or to subsume poli- Mr Varadkar is both less and more interesting than that. His tics under personal relationships. As one observer puts it, Mr Va- identity is not leashed to his politics in the manner of, say, Barack radkar’s fellow EU leaders, whom he will meet at a summit in Obama, whose victory hinted at deliverance from America’s Brussels later this month, may have to get used to “that most un- deepest trauma. In 2015 he came out as gay in the gentlest of fash- usual ofthings: a cold-blooded Irishman”. ions, during a radio interview a few months before Ireland be- So how might he leave his mark? After joining Mr Macron on came the first country to pass same-sex marriage by referendum. the campaign trail in Paris in April, Mr Varadkar declared his alle- Comparisons to Emmanuel Macron, France’s fresh-faced new giance to the view that the old left-right divide in politics is yield- president, are also offthe mark. WhereasMrMacron single-hand- ing to a fresh rupture between open and closed. A rethink of the edly upturned France’s political establishment, Mr Varadkar has way politics is conducted in Ireland might appeal to parts of an taken a familiar route to the top: schooled expensively in Dublin, electorate badly served by parties that remain relics of the battle he used the youth wingofFine Gael as a springboard to local gov- for independence from Britain in the 1920s. Here lies one possible ernment, a seat in the parliament and a string of ministerial jobs course forMr Varadkar’s premiership. after his party tookoffice in 2011. But failure cannot be ruled out. MrVaradkartakes office under Articulate but sometimes awkward, Mr Varadkar is not whol- trying circumstances without the benefit of a popular mandate. ly comfortable in the back-slapping world of Irish politics. Yet he Ifhis rapid ascent hints at an instinct forcalculation, on policy his secured hisFine Gael victorythe old-fashioned way, quickly lock- fundamental views remain elusive. Flexibility will prove useful ing in support among his fellow MPs, whose votes counted dis- in navigating Brexit and Ireland’s domestic challenges. But if he is proportionately in the contest. His ministerial career, which in- to meet the expectations some have heaped upon him, Leo the cludes stints running the big-spending departments of health Lion will need to demonstrate deeper reserves of political steeli- and social protection, is unmarked by either triumph or catastro- ness than Ireland has yet demanded ofhim. 7 Britain The Economist June 10th 2017 49

Also in this section 50 Negotiating Brexit 51 Bagehot: The second eleven

Britons were voting as The Economist went to press. For continuing coverage of the election see Economist.com/ukelection2017

Terrorism likely to be prosecuted than the wife of an armed robber. The sentences for some of More money or more power? those lesser crimes could perhaps be increased, he suggests, but the likelihood of getting caught is a bigger deterrent than the severity ofthe punishment. At least one ofthe London Bridge assail- ants, as well as the Manchester and West- minster attackers, had in the past come to Anotherattacksparks a debate on what police need to stop future atrocities the attention of the authorities, before be- F TERRORISM’S success is measured by ers they need, including longer sentences ing put on one side. That has raised ques- Iits disruption ofa city’s way oflife, the re- for terrorism offences. She added that this tions about whether the police and securi- action ofRichard Angell exposes the fanat- could mean changing human-rights laws ty services are overstretched. Jeremy ics’ failure. “If me having a gin and tonic to restrict the movements of suspects and Corbyn, the Labour leader, accused the with my friends and flirting with hand- ease their deportation (two of the London prime minister oftrying to protect the pub- some men…is what offends these people Bridge plotters were foreign nationals). lic “on the cheap”. He is only partly right. so much, I’m going to do it more, not less,” Few experts think that Britain’s police The budget for counter-terrorism policing Mr Angell, an eyewitness to a terrorist at- or security services lackpowers. Theirs are rose from £579m ($750m) in 2010-11 to tackon June 3rd, defiantly told the BBC. as extensive as those of any Western coun- £633m in 2017-18. The intelligence agencies The details of the attack are grimly fa- terpart, says David Anderson, a former sta- were given the go-ahead to recruit almost miliar. Three men rammed a van into pe- tutory reviewer of the country’s anti-terro- 2,000 extra officers in 2015, as the threat destrians on London Bridge before stab- rism legislation. Police can hold suspects from Islamic State emerged. bingpeople in restaurants and bars around without charge forup to 14 days, much lon- But the general police budget has been nearby Borough Market. Eight minutes ger than in most democracies. “Temporary slashed. The number ofofficers in England after the first call to the emergency ser- exclusion orders”, only one of which has and Walesdropped from about 144,000 in vices, police shot all three dead, but not be- been issued, allow the government to pre- 2010, when Mrs May became home secre- fore the perpetrators had killed eight and vent Britons merely suspected of fighting tary, to 124,000 in 2016. England and Wales injured dozens more. with foreign terrorist groups from re-enter- have fewer police per person than coun- It was Britain’s third deadly terrorist ating the country. “Terrorism prevention and tries such as France, Germany and Italy. tack in as many months. As after a similar investigation measures”, also rare, impose The numberofarmed officers has fallenby incident on Westminster Bridge in March curfews on and exclude from certain about 700 from nearly 7,000 in 2010. After and the bombing of a concert in Manches- places those believed to be involved in ter- a spate of terrorist attacks in France in 2015, ter in May, Theresa May expressed her out- rorism, even if they have not been convict- David Cameron, Mrs May’s predecessor, rage. But she went further: the country ed. Police and intelligence agencies may ordered that their ranks be boosted. But “must not pretend that things can continue access large quantities of personal data, that has proved hard. It is a dangerous job, as they are. Things need to change.” subject to judicial permission. subject to criticism and scrutiny. One of those things, she said, is that ex- Criminalising actions such as encour- Crime has been dropping steadily, so tremism should be curbed online (see In- aging terrorism is intended to allow offi- reducing officer numbers is reasonable. ternational section). Violent Islamist ideol- cers to intervene before more serious But the cuts have come as police face other ogy should be more readily identified and crimes take place, says Lord Macdonald, a pressures. Officers say that a squeeze on squashed. And Britain’s counter-terrorism former director of public prosecutions. social services has left them spending strategy should be reviewed to ensure that During his time, at least, the wife of a terro- more of their time dealing with people law-enforcement agencies have the pow- rist who failed to report a plot was more with mental-health problems, forinstance.1 50 Britain The Economist June 10th 2017

2 Neighbourhood officers build the relation- cy, reports that Brussels is confused even plex than any others the EU has. They add ships that lead to people sharing informa- about whom it is negotiating with: the that it will need ratification by national tion on shady characters. But keeping their prime minister, the Brexit secretary or se- and some regional parliaments: a court numbers up is expensive. nior officials. That the talks will be con- ruling that a simple trade deal can be ap- On efforts to combat extremism at its ducted more or less in public, with even proved by a majority cannot apply to one roots, Mrs May was most vague. Recent draft papers published in full, will make that covers many services, regulatory stan- governments have struggled to define it. A things trickier forLondon. dards and non-tariffbarriers as well. tendency to conflate religious conserva- So will the widening chasm between This point, plus the ticking clock, leads tism with the kind of fanaticism that feeds the two sides. Within the EU, that is down to another conclusion: the need quite soon violence has undermined efforts to root to pressure from national capitals, not to talk of transitional arrangements. Air- out terrorism. This has sometimes frustrat- Brussels. One Eurocratcallsthe negotiating lines, drugmakers and other businesses ed Prevent, the government’s counter-radi- guidelines “maximalist, even surreal”. Yet want assurances in early 2018 that their calisation programme. It is the only serious it will be hard to change them. A good ex- cross-border activities will not just cease in scheme of its kind in Europe, says Thomas ample is sequencing. The British want to March 2019. Yet negotiating a transitional Hegghammer, an expert on violent ex- talk about a trade deal from the outset, deal will itself be tricky. Another EU dip- tremism. He argues that Prevent’s struc- pointing out that Article 50 talks of “taking lomat notes that its terms depend on tures and principles are sound, but that its account of the framework for [Britain and whether it is a bridge to a future deal or a intentions have been misunderstood. the EU’s] future relationship”. But the EU mere phasing-out. Moreover, the EU will Muslims fear that it focuses on them alone, insists that such talks can happen only surely insist on any transition keeping the although in reality it targets extremism of after “sufficient progress” is made on the status quo, including free movement of all varieties, including the far-right. divorce terms. Mr Barnier’s team will not people, budget payments and the ECJ. That It also needs to be more transparent, be allowed to deviate from this decision. will be awkward forBritain. suggests Mr Anderson, making clear how Making sufficient progress will be test- The underlying mood may be unhelp- success is measured, and should involve ing because the two sides are so far apart ful. Brussels is not impressed by talk of no more young Muslims. Fixing its reputa- on the three main divorce arguments. The deal being better than a bad deal, seeing tional problem is crucial. But that will not first is protecting EU citizens resident in the implied threat as empty since Britain happen quickly. In the meantime, the plots Britain and vice versa. All parties accept would suffer the most. But there is still will keep coming. 7 this in principle, and the British say it can some concern that a post-Brexit Britain be dealt with fast. Yet the details are fiend- could undercut the EU in its social, fiscal ish; and the EU’s demands give their citi- and environmental practices. Most parties Negotiating Brexit zens in Britain more rights than Britons, in the election have made promises not to with full protection by the European Court do this, but the EU remains nervous. The hardest test of Justice (ECJ). No British government can Moreover, no party has faced what agree to this, as even Labour’s Brexit Anand Menon ofthe UK in a Changing Eu- spokesman, Sir Keir Starmer, concedes. rope network calls the biggest question of The second problem is how to avoid a all. As a new report from his group points BRUSSELS hard border with customs checks in Ire- out, a hard Brexit is predicted to cut Brit- land. Again, all sides agree in principle. But ain’s annual GDP by a net 2.4%, and much The new government faces big since Britain is heading for a hard Brexit, more if immigration is curbed. Yet nobody obstacles to securing a deal leavingthe EU’s single market and customs has even begun to debate how to share out HE next parliament will be dominated union, it will be difficult to avoid a border such a large future drop. Brexit negotia- Tby Brexit. Formal negotiations are due in practice. Much agrifood trade takes tions may be tough, but living with lower to start in Brussels in the weekofJune 19th. place between north and south: what hap- incomes afterwards could be tougher. 7 Besides their sheer complexity, there are pens if a post-Brexit Britain no longer ap- three big reasons why they are so daunt- plies the EU’s high (and rigid) phyto-sani- ing. The European Union isbetterprepared tary standards, say? than the British; the gap between the two Third and toughest is the money. On sidesiswidening; and the clockisticking to this, one Eurocrat talks of an unholy alli- March 2019, when Brexit is due to happen. ance of countries that are net contributors Preparations are clear in Brussels. The to the EU budget and those that are net re- European Commission has a Brexit team, cipients. The one thing all agree upon is to led by Michel Barnier, working under a ne- extract as much as they can from Britain. gotiating mandate from the 27 other EU That is why the gross Brexit bill has mush- governments. The key Article 50 council roomed to as much as €80bn-100bn working group, chaired by Didier Seeuws, ($90bn-112bn). No government in London is meeting twice a week. Officials liken the would pay so much. Yet the notion that it process to accession negotiations in re- might be possible to avoid numbers by verse. That is not reassuring for Britain: as merely accepting a methodology to calcu- Charles Grant of the Centre for European late the bill will not work either; once the Reform, a think-tank, notes, accession talks method is clear, it does not take a genius to consist more of take-it-or-leave-it offers workout the figures. than real negotiations. And so farthe EU 27 As one EU diplomat concludes, all this have proved both united and hardline. makes it unlikely that sufficient progress In contrast, Britain seems ill-prepared, will be made by October, or even Decem- and not just because of the election. Euro- ber. Thatcould mean talkson trade starting crats say they have spent much time debat- only in February 2018. The idea that they ing Brexit with British officials, only to find can be concluded in a year is a fantasy. Eu- this not reflected at political level. Mujtaba rocrats say the depth of the relationship Rahman ofthe Eurasia Group, a consultan- makes a deal with Britain far more com- The Economist June 10th 2017 Britain 51 Bagehot The second eleven

The British political class is not up to the job cludingDavid Cameron and MrOsborne) have retired, while several leading Leavers (such as Boris Johnson and Michael Gove) are seriously weakened. The Conservative Party chose Mrs May because she hadn’t expressed any strong opinions about the most important question ofher time. There are also deeper reasons. For most of the 20th century British politics has enjoyed an embarrassment ofriches. Britain’s competing elites directed their most gifted offspring towards Par- liament. The landed aristocracy sent Churchill and the Cecil clan. The businesscrowd offered Harold Macmillan and the Chamber- lain dynasty. The trade unionsputforward ErnestBevin, Nye Bev- an and James Callaghan. And the meritocratic elite sent intellectuals galore—so many, in fact, that the 1964-66 Labour cabinet contained seven people with first-class degrees from Oxbridge. (Mr Corbyn left school with two grade “E”s at A-level.) There was plenty of dross among the gold, of course: Tory knights of the shires who didn’t care about much except badger culling and Labour trade-unionists who were only there for the beer. But the gold shone brightly. And it was well distributed between the major parties, with the Toriesmobilising the forces of property and Labour the workers and intellectuals. Today it is as T HAS been impossible to watch the general election without if Britain’s various elites have all decided, at exactly the same Ibeing haunted by a single question-cum-exclamation: surely time, to stop sending their best people to Parliament. Britain can do better than this? The best performer in the cam- It is harder to sell landed aristocrats to the people than it used paign, Jeremy Corbyn, the Labour leader, is a 68-year-old crypto- to be. The trade unions are shadows of their former selves. But communist who has never run anything except his own mouth. there isone bigreason. Overthe past30 yearspoliticshasbecome Theresa May, the Toryleader, tried to make the election all about a profession. Yesterday’s tribunes of the people, or at least of the herselfand then demonstrated that there wasn’t much ofa self to people’s leading interest groups, have been replaced by profes- make it about. As for Tim Farron, the Liberal Democrats’ leader, sionalswho make theirlivelihood outofpolitics. The trouble is, it he looked more like a schoolboy playingthe part ofa politician in turns out that politics is not a very attractive profession. an end-of-term play than a potential prime minister. Complaining about the quality of your leaders is an ancient A sticky wicket tradition: Gladstone’s older contemporaries no doubt moaned Most people crave two types ofrewards: material (money and se- that he wasn’t a patch on Pitt the Elder. George Osborne, a former curity) and psychological (esteem and fulfilment). Politicians Tory chancellor, has had an enjoyable election skewering Mrs don’t get much ofany ofthis. They have seen theirsalaries fall rel- May from the editor’s chair at the Evening Standard, a London ative to the sort of jobs that their university contemporaries go newspaper. But only four years ago that same organ was skewer- into, such as banking, consultancy and the law. They endure hor- ing Mr Osborne for his “omnishambles” Budget. And Britain’s rendous workloads: constituencies to nurse, speeches to make leadership problems pale compared with those of America, and, if they are ministers, huge departments to run. They live where Donald Trump crashes from one disaster to another. with the possibility ofhaving the rug pulled from under their feet Yet sometimes decline really is decline. Both Mrs May and Mr byelectoral misfortune orpersonal scandal. And the public treats Corbyn want to extend the already considerable powers of the them with a mixture of suspicion and contempt. The proportion government, Mr Corbyn massively so. And both promise to lead ofBritons tellingpollsters that they almost nevertrust the govern- Britain outofthe European Union, a fiendishlycomplicated oper- ment has risen from one in ten in 1986 to one in three today. The ation. Unfortunately, both candidates have demonstrated that biggest reward for putting up with all this is nebulous: the sense they are the flawed captains of flawed teams. Mrs May broke the that you are part ofthe whirl while history is being made. first rule of politics: don’t kick your most faithful voters in the There are a few things that can be done to slow the decline. teeth for no reason. Mr Corbyn has stood out in part because his One is to give more respect to age and experience in selecting team is so mediocre. Diane Abbott, his shadow home secretary, MPs. Parliament is over-stuffed with young former aides. Selec- stepped down the day before the election citing ill health, after a tion committees need to pay more attention to candidates who succession ofdisastrous interviews. have already succeeded in other professions. A second is to In 1922 Winston Churchill dubbed Bonar Law’s coalition gov- broaden the talent pool. Margaret Thatcher used the House of ernment the “second eleven” because so many top players, in- Lords to bring in business people such as David Young. Gordon cluding Lloyd George, refused to serve in it. Today both major Brown did the same to try to create an administration of “all the parties are fielding their second elevens—Labour because of the talents”. The devolution of power to the cities may also provide rise of the far-left and the Tories because of Brexit. On the left, another road to the top. If Britain embraces these and other ideas three-quarters of Labour MPs have concluded that Mr Corbyn is the electorate might face a more inspiring choice at the next elec- not fit to run their party, either personally or politically, scupper- tion. But it is too late to do anything about the current mess: who- ing their chances of a front-bench position. On the right, Brexit ever wins the election, Britain will go into bat against Brussels has hollowed out the party. Several prominent Remainers (in- with one ofthe weakest teams it has fielded in decades. 7 52 International The Economist June 10th 2017

Terrorism online Also in this section Fighting the cyber-jihadists 54 The stabbing intifada

LONDON AND SAN FRANCISCO Tech giants are underfire forfacilitating terrorism. Though that is unfair, there is more they could do FTER last weekend’s terrorist attack in of them was known to law enforcement. for IS followed Mr Jibril on Twitter. ALondon Theresa May, Britain’s prime According to the Henry Jackson Society, a The London attackers probably also minister, declared that “enough is British think-tank, a quarter of all those used jihadist websites to help them plan. enough.” She was not suggesting that convicted in Britain for offences related to Instructional videos showing how to kill some reasonable amount of terrorism had Islamist terrorism between 1998 and 2015 as many people as possible by driving into now been exceeded; rather, that extrem- were affiliated to Al Muhajiroun. them are not hard to find. And judging by ism had been too readily tolerated in the But evidence is emerging of the role the past attacks, the perpetrators may well past. She specifically criticised the big in- internet played in reinforcing the three have communicated through an “end-to- ternet firms. “We cannot allow this ideolo- men’sextremism and helpingthem to plan end” encrypted messaging app such as gy the safe space it needs to breed,” she theirattack. One, Khuram Butt, had links to WhatsApp or Telegram. said, adding that Britain and its allies need- Mohammed Shamsuddin and Abu Ha- ed to “regulate cyberspace to prevent terro- leema, two extremist preachers. The latter Radicalisation superhighway rist and extremist planning”. has a hefty following on YouTube and is Fears that the internet is promotingand en- The threats Mrs May and other political thought to have been partly responsible abling Islamist terrorism are not new. But leaders identify online are twofold. The for the online radicalisation of an Austra- they have become sharper since 2014, first is the extremist material that spews lian teenagerconvicted last yearofplotting when IS established its “caliphate” in parts from jihadist websites and chat-rooms and to behead a police officer. Abu Haleema of Syria and Iraq. It has put much more ef- spreads across social media. The second is was arrested on suspicion of encouraging fort than its older rival, al-Qaeda, into cre- terrorists’ ability to communicate via en- terrorism, then released on condition that ating sophisticated online propaganda, crypted messaging apps. Together, they he stopped using social media to spread which it uses to recruit, promote its ideolo- create an online echo chamber that ampli- his views. His Twitter account was closed gy and trumpet its social and military fies anti-Western messages and helps pro- at the request of MI5, Britain’s security ser- achievements. It puts as much attention pel a few individuals on their journey to- vice; YouTube is reported to have refused into digital marketing as any big company, wards murder. to take down his videos. says Andrew Trabulsi of the Institute for The three men who stabbed and Mr Butt was also reportedly influenced the Future, a non-profitresearch group. “It’s rammed Londoners in the latest attack by the online videos ofAhmad Musa Jibril, a conversion funnel, in the same way you were not classic “lone wolves”, radicalised an American preacher and IS recruiter, would thinkofonline advertising.” online and invisible to the security ser- which YouTube still carries. According to At first, IS’s aim was to recruit foreign vices until they acted. They were part of a the London-based International Centre for fighters to Syria and Iraq, where they London-based group that supports Islamic the Study ofRadicalisation and Political Vi- would help build the caliphate. Around State (IS) and is linked to Al Muhajiroun, a olence, more than half of a sample group 30,000, including some 6,000 from Eu- banned Islamist organisation. At least one offoreigners who had gone to Syria to fight rope, heeded its call. But as the tides ofwar1 The Economist June 10th 2017 International 53

2 have turned (western Mosul, its last big re- though online jihadist content can trigger said he wants to invest in artificial intelli- doubt in Iraq, is about to fall, and Raqqa, its or reinforce radicalisation, it is rarely gence to root out terrorist propaganda, but “capital” in Syria, is under assault by the enough on itsown. Creatinga terrorist usu- that it will take many years to develop new American-backed Syrian Democratic ally requires grooming through offline so- tools. In the meantime, the social network Forces), it is turning its energies to creating cial networks that provide the camarade- and other platforms must rely on human mayhem in the West, in particular Europe. rie of shared purpose and the personal moderators, who have to make difficult Through its various outlets, including Ru- bonds which create feelings ofobligation. judgments. Facebook’s guidelines, which miyah, an online English-language maga- There is, however, broad agreement were recently leaked, show how hard it is zine, it is asking supporters not to travel to that the internet both amplifies the impact to distinguish posts that should be re- Syria or Iraq, but to kill people at home. of terrorism and launches some disaffect- moved from those that are offensive but IS’s media operation was portrayed in a ed youths on the path to jihad. The violent permissible. For example, posting “I’m go- report published in 2015 for the Quilliam images they view desensitise them. Propa- ing to destroy the Facebook Dublin office” Foundation, a counter-extremism think- ganda validates their extremist ideology, is allowed, but posting “I’m going to bomb tank in London. “Documenting the Virtual provides them with the support of a com- the FacebookDublin office” is not, because Caliphate” described an outlet that re- munity and primes them to act by empha- it is more specific in suggesting a weapon. leased nearly 40 items a day, in many lan- sising purification through sacrifice. Some firms are experimenting with guages, ranging from videos of battlefield All this puts the big internet firms in a new tactics. Jigsaw, a sister company of triumphs and “martyrdom” to documen- bind. They have no interest in helping us- Google, has tested a “redirect method”, taries extolling the joys oflife in the caliph- ers spread extremism, and already ban pro- showing ads and videos that counter IS ate. Each wilayat or province of the caliph- terrorist content in their terms and condi- propaganda to people who search for ex- ate has its own media team producing tions. But they have been slow to police tremist material on Google and YouTube. local content. Microsoftis tryingsomethingsimilar forits Unlike al-Qaeda, which aims its mes- search engine, Bing. Last year Google, Face- sages at individual terror cells, IS uses book, Twitter and Microsoft agreed to mainstream digital platforms to build so- work together on a database, where they cial networks and “crowdsource” terrorist mark terrorist content with a unique iden- acts. Its Twitter supporters play whack-a- tifier. Other companies can spot tagged mole with moderators, setting up new ac- content and remove it from their own plat- counts as fast as old ones are shut down. forms. But the database is at an early stage Some accounts broadcast original content; and includes only the worst material. others promote the new accounts that re- Further progress will require joint ac- place suspended ones; others retweet the tion by internet firms and governments. most compelling material. Unfortunately, relations have been When IS releases a new recruitment strained in recent years. The firms used to video, its supporters spring into action. give some discreet help to authorities on Rita Katz of the SITE Intelligence Group, a both sides of the Atlantic, says a former Washington-based firm that tracks global British intelligence officer. But they terror networks, analysed what happened stopped when their co-operation was re- to “And You Will Be Superior”, a 35-minute vealed in the classified material leaked by video released in March that follows sui- Edward Snowden in 2013. Some of their cide-bombers, from a doctor to a disabled customers were horrified to learn that fighter to a child. Translators, promoters, their privacy, however notionally, was be- social-media leaders and link-creators ing compromised by what they saw as col- joined together to promote it across the in- lusion with government spooks. ternet. One of these groups, the Upload Commercial interests combined with Knights, creates hundreds of links daily west coast libertarianism to create a dia- across streaming and file-sharing sites. Ms logue ofthe deaf. Securityservicesaccused Katz found that in the two days after the fake news and extremist propaganda, lest firms of ignoring public safety and their le- film’s release, it distributed the video with they be accused of making editorial judg- gal responsibilities; Apple, Google and oth- 136 unique links to Google services (69 for ments about what can be shared on their ers retorted that what they were being YouTube, 54 for Google Drive and 13 for platforms. They have mostly relied on re- asked to do was either impossible or Google Photos). porting systems, whereby users flag ex- would threaten their profits. After Mrs tremist content and companies decide May’s speech, some felt they were being Network effects whether to remove it after reviewing it. scapegoated. “Politicians aren’t blaming There is no doubt that the way IS uses the This is cumbersome, slow and costly. Face- the car-rental companies for renting white internet adds greatly to the fear that terro- book recently announced that it plans to vans, or telecoms firms for offering phone rists set out to foster. But security experts double its workforce of content modera- and internet services to bad guys, but they differ in their assessment of its overall im- tors, hiring another 3,000. are blaming internet platforms for allow- pact. “Ifthere is a message that resonates, it In the 1990s, under pressure from gov- ing them to do bad stuff,” grumbles an ex- will get out there,” says Nigel Inkster, a for- ernments, internet firms cleared most ecutive at an American internet firm. mer intelligence officer now with the Inter- child pornography from their platforms. Even so, firms are waking up to the fact national Institute for Strategic Studies in But it is easierto write a program that recog- that if they do not find ways to work with London. Whatthe internethaschanged, he nises an image of a child in a sexual act governments, they will be forced to do so. says, is the speed at which the message tra- than one that can distinguish extremist They fear laws along the lines of one re- vels, and its ubiquity. content. An algorithm might spot and cently proposed in Germany that would A counter-terrorism expert at Britain’s block images of beheadings, but that see them fined vast sums unless they Home Office agrees: “The internet has al- would censor some news articles and doc- speedily remove any content that has been lowed the process of radicalisation to umentaries. flagged as hate speech. They also have a evolve, but it has not revolutionised it.” Al- Mark Zuckerberg, Facebook’s boss, has growing commercial interest in cracking 1 54 International The Economist June 10th 2017

2 down on terrorist content, which hurts The stabbing intifada their brands and could cut revenue. In recent months some of YouTube’s clients How to spot a lone wolf pulled their ads after realising that they were appearing next to extremist videos. Quietly, co-operation between governments and internet firms is pickingup once more. In Britain a specialist anti-terror po- SAIR lice unit that trawls the web for extremist Israel may have lessons forthe West material removed 121,000 pieces of content last year with the help of some 300 IS last Facebook post was perhaps the ised terrorist groups, so they struggle to companies around the world. Getting Honly clue of Raed Jaradat’s yearning spot imminent attacks by self-radicalised around encryption poses greater technical for vengeance: it showed a Palestinian individuals or small groups. After review- challenges. Weakening it would not be in teenager lying dead with her headscarf ing the profiles of scores of attackers, IDF the public interest, says Robert Hannigan, soaked in blood and the message “Imagine intelligence officers found they often acted who ran GCHQ (Britain’s signals-intelli- if this were your sister.” Dania Irsheid, 17, on the spurofthe moment. Theywere rare- gence agency) until January this year. had been shot by Israeli security forces in ly linked to militant factions, and were not The idea of forcing firms to put “back October 2015 at the entrance to the Ibra- especially religious or poor. Many had a doors” into their software that authorities himi mosque (Jews call it the Cave of the grievance: a son who felt unjustly treated, a could use to spy on terrorists has been Patriarchs) in Hebron. Police said she had brotherwho wasdisinherited, a bride who largely abandoned. It would make the soft- tried to stab Israelis; Palestinian witnesses was beaten by her husband, and so on. ware less secure for all its users, might vio- say she was unarmed. Sometimes they were teenagers bullied late free-speech protections in America The next day Raed, a 22-year-old ac- at school who wanted to be admired as and would anyway be impossible, since counting student from the town of Sair, “martyrs”—Clark Kent becomes Super- some messaging apps, including Telegram near Hebron, went to a checkpoint nearby man, as one officer put it. Often they were (developed by a Russian, Pavel Durov, now and stabbed an Israeli soldier in the neck so inept that they appeared to be trying to a citizen of St Kitts and Nevis) are beyond before he, too, was shot dead. Later his 19- commit “suicide by IDF”. And, as with the reach ofWestern laws. year-old cousin, Iyad, was killed during teenage suicides, there was a pattern of The authorities do, however, have oth- stone-throwing clashes with Israeli troops. copycat attacks, or at least a tendency of er options. Once an intelligence agency Raed and Dania had never met but, at his those close to a “martyr” to seek revenge. has access to a target’s phone or laptop, al- funeral, their fathers said their children In Sair, for instance, 13 people have died most anything is possible. These devices’ should be married “in Paradise”. since 2015 in attacks on, or confrontations built-in cameras and microphones make Such is the rhythm of the Palestinian with, Israelis. them excellent for bugging. Or the spooks “stabbing intifada”. Since its outbreak in These days IDF algorithms monitor the can install covert monitoring software to late 2015, there have been hundreds of social-media accounts of young Palestin- see what is being displayed on the screen knife and car-ramming attacks against Is- ians to look for early-warning signs. These and to log a user’s keystrokes. Since mes- raelis. If the violence has ebbed, it may be include “tripwire” terms such as the sages must be decrypted before their recip- in part because the Israel Defence Forces “sword of Allah” or “day of the sword”, as- ients can read them, this makes it possible (IDF) have become better at forestalling at- sociated with the writings of past attack- to bypass even the strongest encryption. tacks. Israeli spooks reckon they have les- ers. The IDF also monitors the activity of Governments and tech firms now sons to offer Western countries struggling relatives, friends, classmates and co-work- broadly accept that they have a common to stop lone wolves. ers ofrecent “martyrs”. interest in establishingglobal standards for One is that conventional intelligence The parents of those deemed suspi- exchanging data across borders. A bilateral organisations, even Israel’s well-honed cious might receive a telephone call or a agreement that Britain and America system, are designed to penetrate organ- visit from the Shin Bet security service, and reached during Barack Obama’s adminis- their names could be passed on to the Pal- tration isbefore Congressand awaiting leg- estinian Authority. Their phones are islation. It would not permit Britain to get tracked to see if they meet other suspects, data on American citizens orresidents; and or leave their districts to move towards po- access would be limited to targeted orders tential Israeli targets. In such cases, securi- relating to the prevention or investigation ty forces detain the suspect. ofserious crime and terrorism. How much of this could be applied in This could become a template for other the West? Perhaps not much. Israel holds international agreements. In testimony be- millions of Palestinians under occupation. fore the Senate Judiciary Committee in Its security barriers restrict their move- Washington in May, Brad Smith, the presi- ment and keep them segregated. The army dent of Microsoft, argued for a change in can seal off restive areas, enforce curfews the legal framework, which he said “im- and impose punishments, such as the de- pedes America’s allies’ legitimate law-en- molition of homes. In contrast, most Mus- forcement investigations” and exposes lims in the West move and mix freely as American tech firms to potential conflicts full citizens. Israeli-style ethnic profiling of jurisdiction. Greater legal certainty, less and ubiquitous electronic surveillance confrontation and more co-operation be- would be neither possible nor desirable. tween governments and firms will not Still, cleverly fusing clues from social drive jihadist propaganda off the internet media with other information might help, altogether. But they should clear the worst as could early intervention to steer sus- material from big sites, help stop some ter- pects away from possible violence. That rorists—and absolve tech firms from the means keeping would-be attackers online, charge ofcomplicity with evil. 7 where they can be watched. 7 Business The Economist June 10th 2017 55

Also in this section 56 Iberdrola, energy clairvoyant 57 Lyft v Uber 58 American plans for air-traﬃc control 58 Replica food in Japan 59 Shopping, an emotional journey 60 Digital maps and self-driving cars 61 Schumpeter: China Inc’s buying spree

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

Business and clean energy recently, enthusiasm is extending beyond tech firms to energy-intensive industries, We’ve got the power including manufacturers. It is also moving from corporate headquarters to subsidiaries and suppliers, and from developed countries to emerging markets, where the costs of wind and solar energy are falling fastest. Some environmentalists now see businesses as allies, rather than adversar- President Trump may not see the promise ofclean energy. Alot ofbig business does ies, in the fightagainstglobal warming, and ITY America’s big businesses. For years energy to their customers. believe they could become strong forces Ptheir efforts to reduce their carbon foot- Utilities do sign clean-energy PPAsas behind the worldwide spread of clean en- printwere dismissed byenvironmentalists well. But in 2015, more than half the coun- ergy. “There used to be rhetoric and little as “greenwashing”. Now, after months try- try’s wind-energy PPAs went to big compa- action,” says Marty Spitzer, head ofclimate ing to persuade a supposedly pro-business nies hoping to take advantage of a federal and renewable-energy policy in America new president, Donald Trump, of the mer- tax credit before it was due to expire. Big forthe World Wildlife Fund (WWF), a char- its of staying in the Paris climate accord, he business has by now spurred the world- ity. “Now I see fundamental changes.” practically laughed in their faces by with- wide development of a cumulative 20 Take Anheuser-Busch InBev, for exam- drawing on June 1st. gigawatts (GW) of wind and solar farms ple. The world’s biggest brewer, with Executives fear the exit will do no good (see chart on left). That is four GW more brands ranging from Budweiser to Stella to America’s—and by implication their— than the entire onshore and offshore wind Artois to Corona, has a fairshare of millen- reputation. Not for nothing have more capacity ofBritain. nials among its tipplers, and many take en- than 900 American firmsand investors, in- Last year it was American IT firms such vironmental issues seriously. Electricity— cluding Amazon, Twitter, Target and Nike, as Amazon and Google that led the way. used as part of the brewing process, for re- put their names this week to a “We are still They use clean energy to power their vast frigeration, and so on—amounts to up to a in” open letter to the UN. Its signatories banks of servers (see chart on right). More tenth of its costs, says Tony Milikin, the 1 pledge to help reduce the country’s carbon emissions by 26% by 2025, in keeping with America’s Paris pledge. That may be quix- Making hay while the sun shines otic but is a rallying cry nonetheless. Business power-purchase agreements (PPAs) Top PPA buyers, 2016, MW Solar Wind Indeed, some American firms are tak- Worldwide, GW of capacity 0 200 400 600 ing climate change so seriously that they 6 Amazon are surprising even former critics. Along- Americas side energy-efficiency measures, the stron- Europe, Middle East & Africa 5 Google* gest evidence of their commitment is the Asia Pacific Microsoft 4 number of new wind and solar projects Norsk Hydro that they are helping to build around the 3 Facebook world. Companies are using power-pur- Dow Chemical chase agreements (PPAs), in which they 2 US Department of Defence sign long-term contracts to buy clean elec- 1 3M tricity from firms that develop solar and Switch SuperNAP wind farms at agreed prices, instead of 0 2008 09 10 11 12 13 14 15 16 17† Walmart buying the bulk of their power from utili- Source: Bloomberg New Energy Finance *The Ivanpah solar plant, pictured, is not a PPA †To May 24th ties, which can rarelyguarantee 100% clean 56 Business The Economist June 10th 2017

2 firm’s chief sustainability officer. In March Iberdrola it set out to increase the role of renewables in generating power from 7% to 100% by 2025; as much as 85% will come via PPAs. The storage question “My generation, as a baby-boomer, looks atclean airand energyasinfinite commod- A trailblazing utility bets against fully distributed energy ities. The generation coming up looks at it totally differently,” he says. NE ofIgnacio Galán’s early jobs as years, the Germans have been through Iberdrola, one of the world’s greenest Oan engineer was to design lead-acid near-death experiences, and have belat- utilities (see box), is building a 220-mega- batteries forthe milkfloats that used to edly created stand-alone renewables and watt wind farm in a blustery part of Mexi- trundle around Britain’s streets. So the grid businesses. Iberdrola’s share price co to supply AB InBev’s largest brewery 66-year-old Spaniard, who heads Iber- has more than doubled. with clean electricity from 2019. That will drola, one ofthe world’s largest utilities, The renewables revolution has, in add a hefty5% to Mexico’srenewable-ener- claims he has been thinking about the turn, caused the latest dilemma, because gy capacity. The brewer expects other PPAs storage ofelectricity forhis whole career. intermittent sun and wind require ways to follow in Argentina, Brazil, India, South That is useful, because forthe second ofstoring electricity as a backup. Battery Africa—and possibly China. Mr Milikin time since he tookover Iberdrola in 2001, firms like Tesla, as well as some utilities, says the firm will “heavily negotiate” with the industry faces a forkin the road. This see a mixture ofrooftop photovoltaics, its suppliers, such as those producing its time round, the big debate in energy is home-mounted batteries and electric aluminium cans and bottles, to encourage about batteries and storage. vehicles as the way ofthe future, with them to do likewise. The first time, Mr Galán blazed the power being stored locally and new Other companies are even tougher. right trail. He made a prescient bet on business models emerging to manage Walmart, the world’s largest retailer, in renewable energy, turning Iberdrola into customers’ energy use remotely. But Mr March said it would require its own opera- one ofthe world’s biggest providers of Galán is sceptical that batteries can last tions and those alongits supply chain to re- onshore wind while at the same time long enough to handle intermittency, or duce carbon-dioxide emissions by 1bn underpinning returns with relatively that customers will care enough about tonnes (it calls this “Project Gigaton”) by safe, regulated electricity networks in distributed energy to make the domestic- 2030—the equivalent of taking 211m pas- America (Avangrid) and Britain (Scottish- battery business compelling. “I can’t senger cars off America’s roads for a year. Power). Some European peers, such as imagine saying to my wife that we have a The announcement was welcomed by Germany’s E.ON and RWE, tookthe choice between a new fridge and the charitiessuch asthe WWF, which are help- opposite approach, prioritising conven- latest Powerwall battery.” ing Walmart’s suppliers work towards the tional fossil-fuel-fired power plants in Instead, he believes there is more to goal. Apple, maker of the iPhone, said in less regulated markets. In the past five be gained by using renewable energy to April that seven of its big global manufac- pump water up to hilltop reservoirs, and turershave promised to powertheirApple- letting it flow downhill to produce hydro- related production with renewable energy electricity when needed. Iberdrola has by the end ofnext year. It is helping its sup- already done this with its successful pliers improve energy efficiency, but also $1.3bn Cortes La Muela project in Spain, hopes to have brought 4GW of renewable completed in 2013. It is building a large power online by 2020, halfofit in China. pumped-hydro storage facility in north- Some multinationals are clubbing to- ern Portugal. Mr Galán does not dismiss gether to do deals. For instance, AkzoNo- batteries altogether. But he thinks it bel, DSM and Philips, a trio of Dutch firms, would be better forutilities to deploy have teamed up with Google to buy elec- them to regulate the intermittency of tricity generated from a co-operative- electricity supply in substations, rather owned wind parkin the Netherlands. than putting them in homes. The buzz is spreading beyond the cor- His reservations about fully distri- porate stratosphere. Enel Green Power, one buted electricity may be self-serving. If of the biggest sellers of PPAs, is close to de- users buy batteries to help them cut loose veloping wind energy in Morocco forlocal from grids, networkoperators would cement factories, steel firms and chemical have to raise prices to remaining custom- companies, says Antonio Cammisecra, its ers, causing a “utility death spiral”. Yet it boss. It will also build a clean-energy plant is probable that centralised electricity for a gold-mining project in South Africa. will survive, especially in big cities. And In Britain a startup, Squeaky Clean Energy, do not write offIberdrola’s predictive is hooking up small and medium-sized powers. “They could see the future,” says businesses with wind and solar farms in The way the wind’s blowing Antonella Bianchessi ofCitigroup. what it calls “peer-to-peer electricity”. Hervé Touati ofthe Rocky Mountain In- stitute (RMI), a clean-energy research out- producers are, predictably, the laggards. Yet there are also complications with fit, believes the biggest incentive for busi- Economics is also a draw. In America PPAs, which explain why their growth has nesses to do PPAs is to meet sustainability the cost of procuring wind energy directly been more fickle of late. The most straight- goals, which improve their public image is almost as cheap as contracting to build a forward are forrenewable plants on a com- and help attract customers, staffand inves- combined-cycle gas power plant, especial- pany’s own property, because that saves tors. According to the WWF, almost two ly when subsidies are included, Mr Touati the cost of grid-based transmission and dozen of America’s biggest firms have says. In developingcountries, such as India distribution. But it is rare for a firm to have committed to becoming 100% renewable and parts of Latin America and the Middle sufficient spare land in a suitably sunny or in the near future. Consumer-staples firms East, unsubsidised prices at solarand wind windy area. make the greenest promises. Fossil-fuel auctions have fallen to record lows. More complex, and most common, are 1 The Economist June 10th 2017 Business 57

2 remote or virtual PPAs, in which a com- fits such as the WWF and RMI are promot- two do not just compete for passengers; pany agrees to buy an amount of wind or ing “buyers clubs” that help bring firms to- each also triesto woo the other’sdrivers. In solar energy from a distant developer, gether and standardise PPA contracts. They 2014 Uber’s boss, Travis Kalanick, attempt- which feeds it into the grid. The company also press for regulatory reform in places ed to buy Lyft. receives an equivalent amount of energy such as China and some parts of America, ButLyft’sculture hasturned outto be an from a utility, which gets paid as a middle- where incumbent utilities block PPAs be- asset. Uber’s controversies, including Mr man. Such bespoke transactions can re- cause they fear being disintermediated. Kalanick being caught on video berating a quire a bevy of lawyers, which can put off At a conference in Beijing on June 7th, driver, have helped its rival—particularly smaller firms. the International Renewable Energy Agen- on America’s liberal-minded west coast, The long-term nature of such PPAsis cy, a global body, launched a survey of where people are more squeamish about also a hindrance, because they lock in a firmsto find outhowbetterto promote cor- using a brand associated with sexism. Half price that can be costly if power prices do porate PPAs in such places. At the same of those who have switched to Lyft in fall. Other options include buying renew- event, Google spoke of the regulatory hur- America say that company reputation was able-energy certificates as evidence of dles it faces in expanding beyond the five the chief reason, says Survey Monkey, an clean-energy use, or entering into a green countries where it has bought 2.6GW of online-polling firm. contract with a utility. These may not bring PPAs since 2010. This month a pro-Republi- On June 6th Uber said it had fired 20 the same environmental kudos, however, can alliance of big businesses will even employees after the conclusion of an in- because they might not lead to new wind press for carbon taxes and other clean-en- vestigation into sexual harassment (the re- and solar farms being built. ergy measures. With such powerful back- sult of a broader probe, led by a former at- On the bright side, says Simon Currie of ing, the growth of renewable energy may torney-general, is due soon). One venture Norton Rose Fulbright, a lawfirm, non-pro- one day win over even Mr Trump. 7 capitalist who has backed Uber says he is embarrassed to be seen gettinginto its cars. It seems no coincidence that in April Lyft said it had raised another $600m from investors, valuingthe firm at$7.5bn, around a third more than its previous mark. That also reflects a change of mind amonginvestors overthe ride-hailing business. Having thought of it as a winner- takes-all market, in which one big company has a near-monopoly in each country, plenty now believe people will spend enough on transport for more than one player to prosper. Mr Zimmer, Lyft’s co- founder, compares ride-hailingto the wire- less-carrier market, in which several companies boast high-quality coverage and plenty ofcustomers. Offering good “coverage” in ride-hailing so that rides can arrive within a few minutes, of course, requires resources. “We’re at the stage of building cell towers. That’s expensive,” says Brian Roberts, Ride-hailing wars Lyft’s chieffinancial officer. But it may help the firm that it remains geographically and Lyft’s big lift strategically focused. It has fewer distrac- tions than Uber, which in addition to expanding globally is pushing into new business lines, like food delivery and trucking. Lyft’sstrategy on self-drivingcars is also SAN FRANCISCO distinctive. Uber is investing heavily to build its own autonomous technology, America’s numbertwo ride-hailing firm has benefited from Uber’s struggles guarding against the chance that another NE firm’s bad news is often another’s Lyft is far from a typical Silicon Valley service could come in without drivers and Ogood fortune. For years Lyft, an app company. Unlike Uber, it does not lust for undercutiton price. ButLyfthasopened up that offers on-demand rides, was outdone world domination and it operates only in its network to other firms, including by its seemingly unstoppable rival, Uber, America. Nor does it take itself especially Waymo, a self-driving car unit that is Goo- which zoomed into new markets and seriously. For years it identified its drivers gle’s sister company (and which has ac- grabbed a near-$70bn valuation, the larg- by pink, fuzzy moustaches fastened to the cused Uber ofstealing trade secrets). est of any private American tech firm in front of cars, and encouraged riders to fist- Collaborating with others is better than history. Uberdoes not report a share price bump their drivers and sit in the front seat building expertise in-house, Lyft reckons, that would register its recent troubles, (though it has now relaxed this etiquette to because so much uncertainty surrounds which include one investigation into al- attract more customers). the evolution of autonomous technology. leged intellectual-property theft and an- Its founders, Logan Green and John This week Lyft announced another rela- other into its workplace culture. But that Zimmer, put an early emphasis on being tionship, with an autonomous-driving Lyft’s market share in America has risen nice to drivers, for example by allowing startup called nuTonomy, which will start from 18% five months ago to 25% now (ac- people to tip through the app. Many in Sil- testing cars in Boston. There is a risk that cording to TXN Solutions, a data provider) icon Valley viewed such cuddly behaviour Waymo and other partners may try to per- is a gauge ofthe larger firm’s crisis. as a sign that Uber would trounce it. The fecttheirown self-drivingtechnology with1 58 Business The Economist June 10th 2017

Air travel Roger, Tango Romeo…ump

The president wants to privatise air-traffic control N JUNE 1956 a TWA Constellation col- dian airspace, has costs per flight hour of Ilided with a United Air Lines DC-7 over $340 compared with the FAA’s $450. the Grand Canyon in Arizona, killing all Replacing old radar-based methods 128 people on both aircraft. At the time it with accurate satellite navigation and was the worst ever airline disaster. Strug- better digital communications is a partic- gling with outdated technology and a ular priority. Aircraft using satellite navi- post-war boom in air travel, overworked gation can be safely spaced more closely air-traffic controllers failed to spot that together, which permits many more the planes were on a collision course. planes to be in the air at the same time. That crash led to the creation of a new Digital systems also provide data links to body, which became the Federal Aviation control centres and to other planes by Administration (FAA), in charge ofrun- regularly broadcasting an aircraft’s iden- ning and modernising the world’s biggest tification sign, its position and course. air-transport system. With that system This would allow “free routing”, which again struggling to keep pace with de- means pilots can fly directly to a destina- mand, Donald Trump thinks it is time to tion, rather than follow established privatise America’s air-traffic control airways, which often zigzag around. Replica food in Japan service. This weekthe president outlined The president’s proposal might even a plan to turn air-traffic control into a speed a move towards “virtual” control Sampuru chef separate non-profit entity financed by towers in low-rise buildings, which can user fees, instead ofthe present patch- replace towers physically located at workoftaxes and grants. Shorn ofits airports. The virtual versions are fed live FAA air-traffic responsibility, the would video from airfield cameras. Proponents TOKYO become a safety body. argue that they are both saferand around How sham food became a multi-billion- America’s air-traffic system is vast, 30% cheaper to operate. Virtual towers yen industry consisting of14,000 controllers working can lookafter more than one airport. One in 476 airport-control towers that handle in Norway is set to supervise 32 airports, UESTS to the factory of Tsuyoshi Iwa- take-offs and landings, as well as in 21“en some ofthem in remote areas. Gsaki are presented with a rasher of ba- route” centres looking after flights along The European Union reckons such con. The succulent marbled sliver is brand- the nation’s airways. It has a good safety innovations will allow three times as ed with his name, title and e-mail record, but elderly technology limits the many flights to be handled in the region address—an apt introduction to the owner number offlights that can be handled. and save airlines some €9bn ($10bn) a of Japan’s biggest manufacturer of replica This leads to delays and frustrated flyers. year. It also, optimistically perhaps, pre- food. At the headquarters ofIwasaki Co on With passenger numbers set to grow dicts that on average aircraft will land the outskirts of Tokyo, racks of golden- from 800m a year to almost1bn by 2026, within one minute oftheir scheduled brown gyoza jostle forattention with boat- the problem will only get worse. arrival time. That would count as a mirac- shaped dishes of lustrous raw tuna, bowls Mr Trump believes that, no longer ulous improvement foranyone, let alone ofcreamy ramen and a dozen pinkish scal- mired in a federal bureaucracy, the air- America’s weary airport warriors. lops in iridescent shells. The acrid smell of traffic service will become more efficient Mr Trump, though, may struggle to get resin and paints is the only hint that every- and better able to invest in technology. the proposal through Congress. A similar thing on show is utterly tasteless. Many countries, including Australia, plan got stucklast year, despite being Most of these Japanese sampuru, from Britain and Canada, have privatised backed by most airlines and the air-traffic the word “sample”, will go on display in air-traffic services or turned them into controllers’ union. At least the president restaurant windows, from fast-food outlets state-owned firms. Nav Canada, a non- can dodge the queues: Air Force One to izakaya (bars), throughoutthe east ofthe profit firm that has long managed Cana- flights get special clearance. country, in the hope of luring hungry customers. A sister company, managed by Mr Iwasaki’s brother, covers the western half 2 Lyft’s data and then launch a competing of “mutually assured destruction”, says of Japan. Together they make over ¥5bn ride-hailing network, but that seems a dis- Vincent Letteri of KKR, an investment firm ($46m) in annual sales, and claim to ac- tant possibility. that recently put cash into Lyft(after declin- count for four-fifths of Japan’s food-replica In the immediate future Lyft may find it ing to join in two previous funding market. Mr Iwasaki says they have no real harder to keep differentiating itself. Uber rounds). Ubernow accepts that Lyftis there competitors; sales at the next-biggest firm has mimicked some of its successful tac- to stay; it will have to rein in promotional are one-tenth the size. Mostare small work- tics, such as tipping, and is overhauling its spendingifit wants to achieve healthy pro- shops, many based in Gujo, a city in Gifu culture. Many ride-hailing drivers now fitsin America to payforexpansion abroad prefecture where the founder of Iwasaki work for both services, which means trav- and to reassure nervous investors, says Mr Co, which started in 1932, was born. elling in a Lyft car is no longer unique. Letteri. Lyft will have less need to spend The firm has a garnished founding The fact that Lyft has won a quarter of heavily on subsidies for drivers and riders. myth. AfterTsuyoshi Iwasaki’sgrandfather the American market could help both It has stopped its practice of offering new dripped candle wax on a tatami mat, he firms’ profits. In 2016 it lost around $600m customers $50 in free trips to sign up. Lyft used it to reproduce an omelette dish with and Uber $2.8bn. They formerly seemed still wants to be nice, but has no wish to be ketchup, based on one his wife made. The likely to spend money fighting to the point taken fora ride. 7 market for fakes was ripe: newly arrived 1 The Economist June 10th 2017 Business 59

2 Western dishes needed promoting and ex- New retail techniques plaining to locals in the 1930s, as more people dined out. Traditional Japanese restaurants also switched from hanging noren Body language curtains in their entrance-ways—which granted passers-by a peek at the food in- Shoppers’ emotions may help physical retailers compete with online ones side—to doors, creating demand for shop- front replicas that gave a true sense ofdish- OR eight months up to this April, a typically in exchange fora discount or es’ presentation and size, says Mr Iwasaki. FFrench bookstore chain had video in a other reward. Wearable “galvanometer” Though wax counterfeits were used for Paris shop fed to software that scrutinises gadgets, for example, measure moisture decades, they lost their shape and faded shoppers’ movements and facial expres- and electrical resistance on hand skin to quickly. Now most are made from ultra- sions forsurprise, dissatisfaction, confu- reveal arousal. durable polyvinyl chloride (PVC). Design- sion or hesitation. When a shopper All ofthis could be a chance, some say, ers go to restaurants to watch chefs prepare walked to the end ofan aisle only to forbricks-and-mortar retailers to trim the dishes. They come away with what Mr return with a frown to a bookshelf, the advantage that data have long given Iwasaki calls “an architect’s sketch”, photo- software discreetly messaged clerks, who online sellers. A race is on to work out graphs and notes on textures, colours and went to help. Sales rose by a tenth. how best to collect and use emotions consistency. At the factory, each bit of the The bookseller wants to keep its name data, be it to improve packaging, displays, dish is individually cast to create a silicone quiet fornow. Other French clients ofthe music, or the content and timing of sales mould, into which the PVC is poured, Paris startup behind the technology, pitches, says Rana June, chiefexecutive baked and hand-painted or airbrushed, Angus.ai, are testing it in research shops ofa firm in New Yorkcalled Lightwave. It from the boiled-egg halves in a bowl of ra- that are not open to the public. They measures shoppers’ emotions forretail- men to its noodles (string, coated with res- include Aéroports de Paris, an airport ers, formalls, and forconsumer-goods in). These ingredients are then assembled owner; LVMH, a luxury conglomerate; firms such as PepsiCo, Procter & Gamble into a display. and Carrefour, a chain ofhypermarkets. and Unilever. Trade secrets are jealously guarded in In a test at a Mothercare shop in Tallinn, Not everyone is impressed. Some find an industry that competes mainly on real- Estonia, software from Realeyes, an it all a little creepy. Nielsen, a consumer- ism. MrIwasaki’steam only mastered clear emotion-detection firm based in London, research giant, deems using technology liquids a decade ago, with the discovery of showed that shoppers who entered to workout shopper emotions en masse a new material. Raw food, fish in particu- smiling spent a third more than others. too “avant-garde” fornow, says Ricardo lar, remainsamongthe mostchallenging to Simple video yields a lot ofinsight. Gutiérrez, head ofshopper insights at mimic: designers proudly claim that it But there are farmore sophisticated and Nielsen Colombia in Bogotá. takes as long to master fake sushi—about a initmate ways oflearning about emo- But it is much cheaper than old-fash- decade—as it does to become a sushi chef. tions ofshoppers. Thermal-imaging ioned interviews. Nielsen charges Grains of rice are individually made and cameras can detect the heart rate. Wire- roughly $10,000 to interview 25 shoppers balls of it shaped by hand. For more con- lessly captured data from smartphone about three products. Angus.ai’s service vincing counterfeits, natural shells, spices accelerometers can suggest when shop- costs just €59 ($66) a month per camera. and herbs are used with the plastics. pers become fascinated (movement often For $15,000 orso, iMotions, based in The hours spent crafting a replica deter- stops) or are fretting over prices (a phone Copenhagen, gives retailers an EEG cap mine its price tag, which can be up to twen- is repeatedly raised to search forcheaper that detects brain activity, an eye-tracking ty times the selling price of the original products online). headset that notes when an attractive dish. But demand for them is wilting. For even more insights, shoppers are object dilates pupils, and a galvanometer. Young people turn to food blogs for re- sometimes asked to don special kit, iMotions’ 150 orso consumer-goods views of how dishes taste; hip retailers are clients include Mondelez International, using digital menus with appealing pic- Nestlé and Unilever, which use them in tures. High-end restaurants snub plastic, mock-up stores and real ones. no matter how appetising. The much lon- What’s more, conventional market ger shelf life of PVC replicas means many research can mislead. People typically do not need to be replaced for years. Mr “edit” verbal responses to make them- Iwasaki is looking to increase sales in new selves sound rational, when purchases areas, including tourist trinkets and educa- are often driven by subconscious emotional replicas for hospital patients that ex- tions. The key is in tracking the uncon- plain what foods to eat after an operation. scious things that shoppers do, says Jeff Food fads can still be lucrative: a boom Hershey ofVideoMining, a firm in Penn- in ramen has raised demand for distinct sylvania whose software also analyses noodle shapes and sizes in a category of store video. And surveys can also ask the replica food that had been standardised. wrong questions—such as how much Chain restaurants, the biggest clients, are people like a product when what really launching more seasonal variations. Ow- matters, notes Simon Harrop ofBrand- ing to this turnover of menu items, more Sense, a consultancy in Britain, is wheth- are hiring replicas: rentals account for 60% er, say, it makes them feel attractive. of Iwasaki Co’s sales. Some 13,000 restau- The notion of“retail therapy”, con- rants across the country pay a flat monthly sumers driven to spend when they are fee—around ¥1,000 fora hamburger, for ex- feeling blue, is an obvious example of ample—that includes refinements and up- shopping’s emotional side. Whichever dates to their display every three months. store is first to workout how to spot Iwasaki Co recycles some of the stale food mildly depressed customers could make for new displays, the beauty of working in In the mood for buying? a bundle. a business ofimperishables. 7 60 Business The Economist June 10th 2017

Digital mapping names ofstreets and businesses. Its photos were gathered from its “StreetView” cars, Car-tography which have trawled the planet capturing street imagery since 2007, at a vast cost. This archive is a barrier to entry foroth- er companies, but it may be tumbling. Ma- pillary, a Swedish startup which also uses deep learning to process imagery, has re- As mapping systems forautonomous cars emerge, a tangle ofstartup firms and new leased a data-set of 25,000 street photos alliances vie with Google Maps collected through its own sensor network. N THE 1940s Jorge Luis Borges, an Argen- Its chiefexecutive, Jan ErikSolem, says that Itine writer, wrote a short story about Are we nearly there yet? Mapillary’s fastest-growing business is mapping. It imagines an empire which sur- Market forecast for mapping in self-driving cars providing data mined from those images veys itself in such exhaustive detail that $bn to companies that are trying to build maps when unfolded, the perfectly complete 1:1 25 for autonomous cars. (Laser scanners and paper map covers the entire kingdom. Be- radarused by autonomouscarsto navigate cause it is unwieldy and thus largely use- 20 will add to the torrents ofdata.) less, subsequent generations allow it to de- 15 Large quantities of real-time GPS loca- cay into tatters. Great scraps are left Google Maps tion data from people with smartphones ad revenue carpeting the deserts. Forecast 10 in their pockets are the third important in- In their capacity for up-to-the-minute 5 put. Google harvests such data from Goo- detail, modern mapssurpasseven Borges’s gle Map users as they move around the creation. By using networks of sensors, 0 world. Ifit stops seeingdata streaming off a computing power and data-crunching ex- 201520 30 40 50 street, for example, it is likely to mean that pertise, digital cartographers can produce Sources: Goldman Sachs Global Investment the road has been closed. Here, too, Goo- Research; Morgan Stanley what are in effect real-time simulations of gle’s defences are looking less impassable. the physical world, on which both hu- Mapbox, a young firm based in San Fran- mans and machines can base decisions. have things all its own way. An assortment cisco, has found another clever way to These maps show where roadworks are of other Silicon Valley giants, startups, car- compete—a map-specific software-devel- blocking traffic or which street corners are makers and a few old-fashioned mapping opment kit (SDK) which any developer can the most polluted. Innovative products firms, are fighting hard. install and use to present maps to users. will make new demands of them. Drones The inputs for digital mapping are When those users call up one of its maps, need to know how to fly through cities; an threefold. First comes information about Mapbox receives anonymised location augmented-reality game might need to roads, buildings and so on. Such base data. Mapbox’s SDK is now in some 250m know the exact position in London of Nel- maps have been commoditised. A British phones. Marc Prioleau, a mapping guru son’s column. open-data repository called OpenStreet- whom Mapboxpoached from Uber, a ride- Google is the giant of the consumer- Map (and itscousin organisation, OpenAd- hailing firm, says the firm is gathering mapping world. More than 1bn people use dresses), that is already widely used and enough data in the Bay Area alone to re- the Google Maps smartphone app every has global data, provides the basics. Many draw every road there ten times a day. month. Rivals can still prosper by provid- new mapping businesses build on top of Google is also vying with a legacy map- ing detailed directions in dense cities: City- OSM data. ping firm that has sold map data for car- Mapper, for example, tells its users which Imagery containing close-up detail of navigation systems since 1985. Germany’s exit to take in London’s warren-like tube streets is the second main ingredient. In three largest car companies, Daimler, stations. But none can match Google’s rev- May Google said it had used an artificial- Volkswagen and BMW, bought HERE, enues. Local search ads allow firms to intelligence technique known as deep based in Chicago, for €2.8bn ($3.1bn) in place adverts inside the search results of a learningto scan 80bn photos, automatical- 2015. In Decembera Chinese and Singapor- person who is physically near their pre- ly identifying house numbers and the ean consortium including Tencent, an in- mises, along with maps showing their lo- ternet giant, and NavInfo, a mapping firm cations. And promoted pins permit busi- based in Beijing, tooka 10% stake in it. HERE nesses to highlight their own positions will provide Tencent with digital maps of along routes that Google calculates for China. It will get access to location data navigation—a pin for a Starbucks en route from WeChat, Tencent’s popular chat app, to Central Park in New York, say. Morgan connecting it to a sensor network the scale Stanley, an investment bank, projects that of which rivals Google’s. The firm has also such ads will generate $1.4bn of revenue joined forces with Shenzhen-based DJI, forGoogle in 2017, rising to $3.3bn by 2020. the world’s biggest drone-maker. Yet the race to develop autonomous America’s big three car companies, cars, which cannot run without guidance General Motors, Ford and Fiat Chrysler, from machine-readable maps known as have also invested heavily in digital map- “splines” or “digital rails”, could be a far ping through AI startups and in partner- bigger opportunity. Goldman Sachs, an- ships with ride-hailing firms and with other investment bank, reckons that the TomTom ofthe Netherlands, anotherolder market for maps for autonomous cars will mapping firm. Google is hard to avoid, grow in value from around $2.2bn in 2020 though: Fiat Chrysler has joined Waymo’s to $24.5bn by 2050 (see chart). Google’s self-driving programme in Phoenix, Arizo- dominance in consumer mapping means na and will use the search giant’s mapping it has a strong advantage in this emerging data. And whoever ends up winning most field (which will mainly accrue to Waymo, sway over cartography, Borges’s every- its autonomous-carspin-off). But it will not thing map is no longer imaginary. 7 The Economist June 10th 2017 Business 61 Schumpeter Crossing the river

Chinese companies have a weakrecord abroad. They must do better ry hotels, a Portuguese bank, a Russian gold mine and a yacht- maker. It is hard to see industrial logic behind the purchases. Fosun and HNA, which disclose their accounts, have eye-watering ratios ofdebt to gross operating profit of8 and 13 timesrespec- tively. In the last category are outright flops: $230bn of deals worth $1bn or more have collapsed because the buyer or the Chi- nese government got cold feet, or because of a hostile reception abroad. As a result Chinese buyers are seen as unreliable. Other countries have been on foreign M&A benders: in 1989-90 Japanese companies bought a Hollywood studio and the RockefellerCentre and in 2005-15 Indian firms splurged overseas. But China is different. It is much bigger. And its firms’ weaknesses abroad reflect the unique problems ofits economy at home. State-controlled firms are the most financially undisciplined. They are also more likely to provoke opposition abroad from private rivals and from politicians who can argue that China’s government is meddling in their economy. As for the country’s entrepreneurs, cheap loans from state banks and a reluctance to issue equity leads them to assume too much debt and to specu- late. They need to be politically connected to get bank loans and get around currency controls, but such connections can be fickle. ONSIDERING the size of China’s economy, it seems inevita- In 2015 Fosun’s boss was arrested and then released. This month C ble thatitsfirmswill eventuallyplaya huge role on the world Anbanghas had to deny that its chairman is banned from leaving stage. Yet China Inc’s adventures abroad in the past 15 years have the country. China’s outbound foreign investment dropped by been a mixed bag. Thousands of small deals have taken place, 49% yearon yearin the firstquarterof2017, with an official clamp- some of which will succeed. But of the mergers and acquisitions down on such speculative deals partly to blame. that have been worth $1bn or more, it is a different story. There More sensible ways of going global may be emerging, how- have been 56 abandoned deals, 39 state-backed acquisitions of ever. State-backed firms are using new mechanisms to persuade commodities firms at frothy prices, and, lately, wild sprees by ty- foreign countries that they will operate on a largely commercial coons scooping up trophies such as hotels and football clubs. basis. ChemChina has just bought Syngenta, a Swiss chemicals Some deals defy any conventional logic. Last month HNA, an firm, for $46bn. It has promised to keep Syngenta’s headquarters airlines-and-tourism conglomerate from Hainan, said it had and research in Switzerland. China Investment Corporation bought a 10% stake in Deutsche Bank, having earlier considered (CIC), a sovereign-wealth fund, is to spend $14bn buying Logicor, buying a Landesbank. The Chinese firm, which runs a beach-vol- a European warehousing business. CIC will presumably argue leyball tournament in Beijing, appears to think it can consolidate that it is a financial buyer and won’t meddle. China’s one-belt- Germany’s fragmented banking industry—the financial equiva- one-road initiative is partly aimed at reassuring foreign countries lent of bringing peace to the Middle East. If China Inc is to realise thatdo businesswith state-backed firms, byputtingcontracts and its potential abroad, it needs a more credible approach. activity under a bilateral, diplomatic umbrella. The experience of Britain, and then America, in the 20th century suggests that economic hegemons control a disproportion- M&A with Chinese characteristics ate share of the world’s stock of cross-border corporate invest- For China’s private firms the focus must be on deals that contain ment. Today China’s slice is only 4%, below its15% share ofglobal industrial logic, rather than those with a strongly speculative or GDP and its 13% share of total stockmarket value. Its leaders want trophy-hunting flavour. Last year Haier, which makes white firms to go faster. If companies don’t globalise, China won’t be- goods, bought General Electric’s appliances business. Even these come powerful, argues Wang Jianlin, boss of Dalian Wanda, a deals are hit and miss. Geely, a carmaker, has made a success of property firm, and China’s richest tycoon, in his autobiography. Volvo, which it bought in 2010, but Lenovo, a computer firm, has In their hurry, Chinese firms have made mistakes. Deals struggled since buying Motorola’s handset business in 2014. Yet, worth $1bn or more account for two-thirds of activity by value over the long term they have a better chance of succeeding than since 2005. Ofthese about halffall into three problematic catego- almost anything else. As China’s internet firms accumulate cash ries. First, acquisitions by state-controlled groups of natural-re- theywill go abroad; theyhave much to offerin termsof expertise. sources firms. The aim was to secure access to raw materials but Last year Tencent paid $9bn forSupercell, a Finnish gaming firm. manydealswere badlytimed, with high pricespaid atthe peakof In the past, each economic superpower has created its own the commodity cycle between 2010 and 2014. CNOOC, an oil corporate form abroad, reflecting its national character and the firm, for example, has written off part of its $17bn acquisition in state of the world it sought to bestride. British firms used manag- 2012 ofNexen, a Canadian oil firm. ing agents in the 19th century to run remote businesses. From the The second difficult category consists of acquisition sprees by 1970s American firms perfected the multinational, taking advan- leveraged conglomerates, financed by debt or by the funds that tage oftechnology and open borders to run things on an integrat- policyholders entrust to these firms’ insurance subsidiaries. Four ed basis. China’s firms are emerging out of a state-led economy such companies—HNA, Dalian Wanda, Fosun (based in Shang- into a more protectionist world. They must find their own ways hai) and Anbang—have spent $100bn on assets that include luxu- to adapt to this environment ifthey are to fulfil their destiny. 7 62 Finance and economics The Economist June 10th 2017

Also in this section 63 Buttonwood: Bond-yield surprise 64 Three cheers for debt collectors 64 A remittances mystery in Bangladesh 65 The growth of green bonds 66 Banco Popular no more 66 The saga of Italian banks 67 Free exchange: How to be wrong

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Emerging markets has since receded and the yuan has strengthened this year against the green- Awaking with BRICs back, as capital outflows have been tamed. Indeed, China’s central bank may have re- sumed adding to its foreign-exchange reserves, which increased by $24bn in May, having declined by about $1trn since their HONG KONG peakin 2014 as capital fled. Will the resumption of growth in Brazil The big fourdeveloping economies emerge from a bad dream and Russia (and the return of “dollar MERGING markets have been through a eight consecutive quarters as commodity growth” in China) breathe new life into the Elot over the past four years. The “taper prices tumbled, a president was im- BRICs brand? The term was coined by Jim tantrum” in 2013 (prompted by fears of a peached and a corrupt political class was O’Neill, when he was chief economist of change in American monetary policy); the impugned. Brazil’s political scandals re- Goldman Sachs, and took on a life of its oil-price drop in 2014; China’s botched de- main far from resolved, but at least the own. The countries’ leaders began holding valuation of its currency in 2015; and In- weather has improved. Generous summer an annual summit, inviting South Africa to dia’s botched “demonetisation” of much rains in states like Bahia contributed to a join as an additional member. They also of its own currency in late 2016 (removing bumper harvest of soyabeans and corn in set up a development bank, with its head-1 high-value banknotes from circulation). the early months of the year. That helped But 2017 has started more brightly. Indeed, Brazil’s GDP expand by 1% in the first quar- forthe first time in two and a halfyears, the ter (an annualised pace of over 4%). Since No two BRICs the same world’s four biggest emerging economies bumperharvestscannotbe repeated every BRICs, GDP, $trn, 2016 prices (Brazil, Russia, India and China, known as three months, some economists fear GDP BRIC 20 the s) are all growingat the same time. mayshrinkagain in the second quarter, but 2011 projection Russia’s GDP bottomed out at the end many forecasters believe growth will be of 2015 (using seasonally adjusted figures) positive for 2017 as a whole. 15 after the longest recession since the 1990s. Faster growth has not jeopardised price Actual It has expanded at a gathering pace for the stability. Rather, inflation has eased in Bra- 10 past three quarters. Higher oil prices have zil, just as in Russia and India. Whether helped, though Russia cannot profit fully lower inflation will allow Brazil’s central 5 from the improved market by ramping up bank to make further big interest-rate cuts 2003 projection saleswithoutviolatingthe production lim- partly depends on a new political furore 0 its that caused the market’s recovery. engulfing Michel Temer, the president. If 2001 03 05 07 09 11 13 16 During the collapse ofthe rouble in late thatpreventsthe governmentfrom reform- 2014 and early 2015, it was easy to forget ing social security and curbing fiscal ex- GDP, 2016, $trn some of Russia’s economic strengths, such cess, the central bankmay be loth to soften Actual 2003 projection 2011 projection as its consistent trade surpluses and its sub- its stance dramatically, lest fiscal indisci- 024681012 stantial foreign-exchange reserves (which pline and monetary easing combine to China never fell below $300bn). As Russia has re- weaken the currency and push up prices. gained its footing, the rouble has rebound- If inflation has been too high in recent India ed, gaining 15% against the dollar over the yearsin Brazil, ithasbeen too lowin China. past 12 months, making it one of the Thanks to downward pressure on prices Brazil world’s best-performing currencies. and the currency, China’s economy actual- Russia Brazil’s torment has been even more ly shrankin dollar terms in 2016 forthe first The Economist prolonged. Its economy contracted for time in 22 years. But the deflationary threat Sources: Goldman Sachs; IMF; The Economist June 10th 2017 Finance and economics 63

2 quarters in Shanghai but headed by an In- lished in 2003. The investment bank then broader emerging-market product (“a dian, which now has operations in all five upgraded those growth projections in 2011 more holistic solution in emerging-mar- countries, having approved its first loan to in light of the BRICs’ strong performance kets equity”, in its words). These setbacks Brazil in April. (Lord O’Neill has always felt over the previous decade. That proved to seemed to vindicate the curmudgeonly that South Africa, a country of only 56m be a mistake. Of the four economies, only sneer cited by Peter Tasker, ofArcus Invest- people with a GDP of less than $300bn, China’s dollar GDP has kept pace with ment, dismissingthe BRICsasa “BloodyRi- was too small to stand alongside his origi- those optimistic 2011projections (see chart diculous Investment Concept”. nal quartet. And so far this year, the fifth on previous page). The others have fallen But if the BRICs have not sustained the member’s fortuneshave diverged from the short ofthem by a combined $3trn. euphoria of 2011, they have amply fulfilled others’, as South Africa’s economy slipped A similar disappointment befell stock- the original “dream”, asarticulated by Lord into a recession in the first quarter.) market investors. The BRIC equity index O’Neill in 2001 and quantified by his team Having christened the BRICs in 2001, compiled by MSCI has lost 40% since its two years later. Even after their recent Goldman Sachs later sketched out their fu- 2007 peak. In October 2015 Goldman tribulations, theircombined GDP ($16.6trn) tures over the next five decades in a paper Sachs folded one of its BRIC equity funds, remains far greater than the Goldman entitled “Dreaming with BRICs”, pub- meant for American investors, into a team envisaged back in 2003 ($11.6trn). 1 Buttonwood Wrong numbers

Once again, investors have been surprised by the bond market VERYyearitseemsthatanalystsand in- Since the stimulus was expected to push Evestors play a ritual game. They begin Twin peaks up the budget deficit (and require the issu- by asserting that government bonds are Ten-year government-bond yields, % ing of more bonds), any delay is good terrible value and that, accordingly, this news forbond yields. must be the year when yields will rise 3.0 More broadly, investors have also United States (and prices fall). And then they get 2.5 started to worry again about a potential mugged by reality. 2.0 slowdown in the Chinese economy, amid The same pattern seems to be playing signs that the authorities are tightening out in 2017. Back in December, a poll of 1.5 monetary policy. Commodity prices, Britain fund managers by Bank of America Mer- 1.0 seen as an indicator of Chinese demand, rill Lynch (BAML) found that pessimists are at a 12-month low. on global bonds outnumbered optimists 0.5 If these worries are real, why is the by 58 percentage points. Investors be- 0 stockmarket doing so well? One reason is lieved in a “reflation trade”, with tax cuts Jan Feb Mar Apr May Jun the strength of corporate profits. Accord- 2017 from Donald Trump’s administration ing to Factset, annual profits growth in the Source: Thomson Reuters leading to faster American growth, to first quarter forcompanies in the S&P 500 which the Federal Reserve would re- indexwasaround 14%. Partofthisisthe respond with higher interest rates. forbond yields to rise, not fall. sult of a rebound in energy companies’ For a while, such forecasts seemed to Although analystsare revisingtheir glo- earnings, after a slump in the oil price be on the money. The yield on the ten- bal growth forecasts upwards, there is little dropped out of the annual comparisons. year Treasury bond picked up to 2.63% by sign yet of any rebound in inflation. In But global profits forecasts for 2017 are still March 13th (see chart). But since then the America the core inflation rate forpersonal being revised higher. trend has changed. The Treasury-bond consumption expenditure, a figure Companies are benefiting because yield recorded a low for the year of 2.13% watched closely by the Fed, declined to there is little sign of wage pressure. Even on June 6th. In Britain the yield on the ten- 1.5% in April. Inflation rates in China, Japan though the American unemployment year gilt dipped below1% on June 6th and and the euro zone are all under 2%. It is in- rate dropped to 4.3% in May, year-on-year 7th; in real terms (ie, after inflation), the flation that saps the appeal of fixed-inter- growth in average earnings in America yield is negative. Swiss ten-year bonds est investments like bonds. was just 2.5%. “Labour is in demand be- still offer a negative yield: investors will In the absence of inflation, the Fed has cause it is cheap,” say analysts at Rabo- lose money if they hold them until matu- lessreason to keep increasinginterest rates. bank. In turn, subdued wage growth rity. According to BAML, by the end of Kit Juckes of Société Générale (SG), a means there is little upward pressure on May more money had flowed into global French bank, says the market is pricing in inflation—good news forbonds. bond funds ($168bn) this year than into short-term interest rates of only1.7% in two This helps to explain why investors equity funds ($141bn). years’ time. “Investors are losing faith in keep getting caught out in their expecta- All this is slightly at odds with the opti- the idea that the Fed will push rates up to tions for the bond market. In a normal mism that has helped push stockmarkets 2.5% or above,” he says. economic cycle, bond yields would be to repeated highs. Closing prices for the Another reason why bond yields have heading a lot higher by now. But it has S&P 500 and NASDAQ Composite retreated is that the fiscal stimulus prom- been pretty clear since 2008 that these are reached new peaks on June 2nd, even as ised by Mr Trump seems likely be delayed. not normal economic times. Perhaps in- the bond yield was dropping. The MSCI The proposed infrastructure programme vestors should have reflected on the ex- World Index, an equity benchmark, has (actually tax credits for investors) is a long ample of Japan, where bond yields have risen by 10% so farthis year. Global stock- way from fruition. And the administra- stayed low for two decades despite the markets have been recovering since Feb- tion’s budget proposal includes cuts to ups and downs ofthe cycle. ruary 2016 on hopes of faster economic popular programmes such as Medicaid growth. That would usually be a signal that will struggle to get through Congress. Economist.com/blogs/buttonwood 64 Finance and economics The Economist June 10th 2017

2 Only Russia has failed to live up to those early expectations. China has easily sur- passed them. In Brazil, growth was slower than Goldman Sachs projected but the country’s real exchange rate appreciated further than they imagined, boosting its GDP in dollar terms. Moreover, at some point after 2015, the BRICs became unmodish enough to count once again as good investments. Since Goldman Sachs closed its fund, the BRIC stockmarket index has gained almost 20%. The trickiest problem for the BRIC concept may be its final consonant. China contributed about half of the club’s GDP in 2001and now accounts forfully two-thirds of it. China is also home to most of the group’s biggest companies. Eight out of the ten largest stocks in the MSCI BRIC index are from China, including Alibaba, Baidu and Tencent(a tech trio thathave their own acronym, BAT). As its markets grow and Not in the rule book open up to capital inflows, China seems destined to become an asset class in its can largely be explained by their business borrow. Default is perceived to come with own right, one that is hard to contain in a models. Some operate on a contingency- lower costs. This is likely to lead to higher “holistic” emerging-market fund, let alone fee basis: their sole remuneration comes default rates, forcing lenders to reduce the a narrower four-country vehicle. The big- from pocketing a percentage of any arrears supply of credit to mitigate losses. Those gest threat to the BRIC idea may not be the they recover. Others buy the debts out- with low credit scores will bear the brunt, quartet’s economic shortcomings but the right. They keep whatever they collect, but as they become even less likely to qualify singular success ofits largest member. 7 lose their whole investment if they fail to for loans. So the debt collectors provide a recoup what is owed. Both models encour- service to borrowers as well as lenders. It age over-persistence. will take more than a well-argued academ- American third-party debt collectors Yet Mr Kettelkamp thinks the debt-col- ic paper, however, to burnish the image of lection industry is overburdened by regu- an industry neither lender nor borrower Bum rap lations. These govern everything from deals with by choice. 7 when debtors may legally be contacted to the manner and content of those communications. They set out licensing require- Remittances into Bangladesh NEW YORK ments and impose hefty financial penalties forbad behaviour. Tighterloan-recovery rules make credit Give and taka Consumer-rights advocates would harderforborrowers to find doubtless scoff, but he may have a point. A EW cheer the rising levels of America’s provocative new paperby Julia Fonseca, of Fhousehold debt, which reached a re- Princeton University, and Katherine Strair cord $12.7trn at the end of the first quarter. and Basit Zafar, of the Federal Reserve DHAKA Nearly 5% of the total, or $615bn, was in Bank of New York, reveals that restrictions Inflows from migrant workers decline some stage of delinquency. One group, on debt-collection practices may, perverse- however, can barely hide its glee: third- ly, hurt some consumers more than they T IS a mystery. Last year Bangladesh’s party debt-collection firms, which try to re- help. The authors look at the “restrictive- Iarmy of migrant workers abroad in- cover mostly consumer loans on behalf of ness” of debt-collection legislation at the creased by a record 750,000, to reach 8m- creditors without the resources to chase state level. They find that, after controlling odd. They travel to earn money for their down bad borrowers themselves. for external factors, such as unemploy- families. Yet the statistics suggest they are Business is expanding “at a robust rate”, ment and income levels, borrowers in sending less money home. In the fiscal saysKeith Kettelkamp, the bossofRemex, a states where debt-collection practices are year that ends this month, recorded remit- debt collector based in New Jersey whose more strictly regulated find it moderately tances will have fallen for the second con- clients include banks, utilitiesand musical- harder to access credit, because lenders cut secutive year, this time by more than 10%, instrument sellers. Across the country back. Borrowers in states where debt-col- to $12bn (see charton nextpage). To explain more than 6,000 collection firms contact lection practices are less intense (owing to the puzzle, look to the places they work, to debtors more than 1bn times a year. One in stricter rules) received on average $213 less technology and to the growing popularity eight Americans has an account with a in car loans and $136 less in retail and other ofa fiddle used by Bangladeshi importers. third-party collector. The average amount personal loans than borrowers in states The abrupt cancellation last November outstanding is just over $1,300. where debt collectors had a freer hand. by the Indian government of most bank- Third-party collectors have, it is fair to That is because a robust third-party notes by value was one factor: monthly in- say, a dubious reputation: they are the tar- debt-collection industry partially insures flows crashed, as the millions of Bangla- get of more complaints from consumers lenders against excessive losses, in much deshis working in India were strapped for than any other type of financial-services the same way that personal bankruptcy cash. In the Gulf, the source of 60% of Ban- provider, according to the Consumer Fi- protects consumers. Without the deterrent gladesh’s remittances, the economy has nancial Protection Bureau, a watchdog. effect of third-party collectors, consumers been relatively sluggish. Their reputedly heavy-handed tactics are likely to assume more risk and to over- But even without these shocks, remit-1 The Economist June 10th 2017 Finance and economics 65

2 tances were falling—and fewer were being tegrity, an American research and advoca- counted. Bangladesh is not unique in suf- cy group. It blames an estimated 90% of Green shoots fering such a downturn: forthe first time in these on trade misinvoicing. After an eight- Green bonds issued, worldwide, $bn three decades, remittances to developing fold increase since 2002, about 40% ofBan- 100 countries fell in both 2015 and 2016, accord- gladesh’s $40bn in annual imports come Supranationals/sovereigns ing to the World Bank. But it has punched a from China and Hong Kong, where under- Financials 80 hole in the balance of payments. The cur- invoicing is rife. Typically, a Chinese ex- Corporates 60 rent account swung from a surplus of porter invoices a Bangladeshi buyer for, Municipals $3.7bn (1.7% of GDP) in the last fiscal year to say, $1, instead of $10, evading Chinese for- Other a deficit of $1.8bn in the first ten months of eign-exchange controls on most of the in- 40 this one. This does not pose an immediate come; the importer pays $1 through official 20 threat, but alarms a government used to channels, saving duties on $9, which is double-digit growth in remittances. transferred via hundi. 0 It is especially worried about mobile So the hundi network has a demand for 2010 11 12 1314 15 16 17* apps that facilitate transactions through dollars to buy with taka. Expatriate savings Sources: Skandinaviska Enskilda Banken; Bloomberg *To May 5th hundi, an informal money-transfer system are an obvious source, and are now, in ef- in which an expat transfers an amount of fect, helping pay for Bangladesh’s imports money to an agent wherever they are from outside the country, shrinking official and industry; and over 10% transport. But based, and an equivalent payment is made remittances. For all Bangladesh’s booming definitions of what counts as “green” vary in taka backin Bangladesh. Hundi is cheap- economy, growing at 7% a year, it is still a widely. Initially, this judgment was made er, faster and thought to handle at least as place where those with money are looking by the World Bank’s environment depart- much in remittances as banks, without for- forclever ways dodge the rules. 7 ment, or, forsome ofthe first private issues, eign currency ever crossing the border. by the issuer itself. The authorities have identified 15 illegal Over 130 of the world’s largest banks mobile apps. As hundi goes digital, more Green bonds and asset managers have since signed up and more are using authorised mobile- to the Green Bond Principles, guidelines money operators, such as bKash, which Bounding along that specify what is green, stipulate report- alone has 28m accounts and 170,000 ing requirements and recommend the use agents. In February the central bank limit- ofexternal reviewers. One option is certified daily deposits of mobile money to cation offered by the Climate Bonds Initia- 15,000 taka ($190) and withdrawals to tive (CBI), an NGO. Others opt to get a sec- 10,000 taka (down from 25,000 taka for ond opinion from a specialised environ- Questions about standards bedevil a both). In the budget, on June 1st, the finance mental consultancy such as Vigeo Eiris, or fast-growing young market minister promised to abolish banks’ fees from a large auditor like EY or KPMG. The on remittance transfers and to come up HEN Donald Trump announced CBI reckons 85% of bonds issued in 2017 with other ways to keep cash flowing WAmerica’s withdrawal from the Paris have undergone an external review. through official channels. The exchange climate agreement on June 1st, he spelled Standards still vary widely, however. rate, controlled by the government, makes out that it would no longer contribute to China’s central bank, for instance, has its remitting money through banks unattrac- the Green Climate Fund. This is a UN initia- own standardsforthe Chinese market. Un- tive. The spread between banks’ and hundi tive to use rich countries’ money to bring like the Principlesorthe CBI, forexample, it rates is five taka (six cents) per dollar. climate finance to developing ones. But regards investments in “clean coal” as Ahsan Mansur of the Dhaka-based even if the fund were going swimmingly, green. India and ASEAN, a club of South- Policy Research Institute also links falling public-sector finance would only be able East Asian countries, are also working on remittances to the rising demand among to provide a small part of the cash needed their own rules. The WWF, a conservation Bangladeshis to hold foreign currency by poor countries, and indeed the world. NGO, has warned that the lack of a single abroad. Government cronies, businesses Private markets, however, are mobilis- standard opens up the risk of “greenwash- and the growing middle class are already ing—notably that for“green bonds”, which ing”. Doubts about standards were high- nervous ahead of an election in late 2018 tie the proceeds of bond issues to environ- lighted recently when Lombard Odier, an and want to keep money offshore. mentally friendly investments. The market asset manager, launched a climate-bond Between 2005 and 2014, uncounted started a decade ago with issues from mu- fund. It has set up its own assessment pro- flows from Bangladesh amounted to nicipalities and multilateral development cess and excluded a quarter of “green” $61.6bn, according to Global Financial In- banks, worth just a few hundred million bonds, citing insufficient reporting. dollars annually. Progress is being made, however. Sean By 2016 issuance had grown to $97bn, Kidney, head of the CBI, points out that Not coming home of which $32bn came from China alone; China wants to harmonise its standards Bangladesh, remittance inflows, $bn SEB, a Swedish bank, reckons volumes more closely with global ones. The Green 16 may hit $125bn this year. Public-sector issu- Bond Principles are constantly refined, ers together accounted for only around with the latest version due out this month. 12 30% of the total last year. The largest por- Credit-rating agencies are venturing into tion, over 35%, was issued by financial in- the business. Both Moody’s, last year, and 8 stitutions; around 20% came from other S&P Global, this April, have launched companies. Investor demand, too, is green-evaluation services. These resemble 4 booming. Zurich Insurance, a Swiss insur- the conventional credit ratings the firms of- er, has already invested over $1.2bn in fer in that they will grade bonds on a scale 0 green bonds, with plans to reach $2bn; of greenness rather than give a yes-no rul- 2008 09 10 11 12 13 14 15 16 17* BlackRock and other asset managers have ing. If they win market share, a binary Fiscal years ending June 30th set up dedicated green-bond funds. judgment on what counts as “green” could *Jul 2016-May 2017, As for the proceeds, over 40% is used to evolve into a more nuanced debate on de- Source: Bangladesh Bank annualised finance clean energy; nearly 25% buildings grees ofenvironmental impact. 7 66 Finance and economics The Economist June 10th 2017

Banco Popular tiesto the OpusDei movementin the Cath- European banking stress tests and its suc- olic church, tried to weather the crisis by cessive capital increases were deemed suf- The popular turning to shareholders, not the govern- ficient by regulators. As recently as April, ment. In 2016 it completed its third capital Spain’s economy minister, Luis de Guin- mandate increase since 2012. The strategy didn’t dos, said it had “no problems ofliquidity”. work. Popular’s 300,000 or so share- By then Popular had posted a record MADRID holders have now had the value oftheir in- loss of €3.5bn for 2016. It was smaller than vestment reduced to zero. So have inves- Bankia and never posed a systemic risk. A relatively tidy clean-up ofSpain’s tors in some €2bn of bonds, including That helped the government shun a bail- latest banking mess “contingent convertible” instruments, in- out. But Spain’s opposition parties called VEN a bankfailure can be presented as a troduced after the crisis, that are turned on Mr de Guindos to explain Popular’s de- Etriumph. This week Banco Popular, a into equity when things go wrong. mise in parliament. “What riles people”, big Spanish lender, endured a run. Deposi- The terms of the Santander deal are said Miguel Ángel Revilla, head of the re- tors were said to be withdrawing €2bn likely to be challenged in court. Some gional government in Cantabria, is that ($2.2bn) a day. The bank lost half its stock- shareholders called it an expropriation. In- successive capital increases were autho- market value in four days, as a self-im- vestors will also askwhy supervisors with rised and various bank heads went home posed deadline to find a saviour loomed. supposedly beefed-up powers failed to “weighed down by millions of euros” in On June 6th, it was declared by the Single step in earlier. Popular underwent various pension and compensation packages. 7 Resolution Board (SRB), an independent agency of the European Central Bank Italian banks formed in 2015 and charged with winding down banks, to be “failing or likely to fail”. The next morning, Santander, Spain’s big- Pastures new? gest bank, announced its purchase for the symbolic sum of €1 ($1.10). It is to raise A state bail-out ofailing Monte dei Paschi draws near €7bn in capital to help absorb Popular’s property-related losses. ELP is at hand forthe world’s oldest Spain’s government, the European Hbank. On June 1st the European Commission and Santander all cheered Commission said it had agreed in princi- the outcome as a model European re- ple to a bail-out by the Italian govern- sponse to a bank crisis. Shareholders and ment ofMonte dei Paschi di Siena, found- junior bondholders in Popular have been ed in 1472. For years Monte dei Paschi, wiped out. Spanish ministers pointed out Italy’s fourth-biggest bankby assets, has that taxpayers would not have to pay for a lurched from crisis to crisis. Last July it rescue of the sort arranged for Bankia, a flunked a test by European supervisors of giant savings bank nearing collapse, when its capital strength. In December a priv- Spain needed a banking bail-out in 2012. ate-sector restructuring scheme came to Ana Botín, Santander’s boss, declared the naught and the state decided to step in. deal good for Spain, for Europe, for Popu- The details, including the size of the lar’s 4.4m customers and for her share- bail-out, have yet to be hammered out. In holders. Santander’s market leadership in December the European Central Bank Spain and Portugal will be strengthened. (ECB) estimated that Monte dei Paschi The cheerleaders do have a point. Com- would need €8.8bn ($9.2bn) in capital to pared with previous banking disasters, withstand the “adverse scenario” in last this one has been handled, in Ms Botín’s summer’s test. The BankofItaly reckoned words, with “agility and speed”. But Popu- that the state’s share would be €6.6bn. lar’s demise is also a reminder of Europe’s That included €2bn to compensate residual banking woes (see box). retail investors in the bank’s junior Not the world’s oldest customer In Spain these go back to uncontrolled bonds, many ofthem ordinary custom- lending that financed a construction bub- ers. European state-aid rules say that they debts. Atlante 2, a fund backed by Italian ble which burst in 2008. Popular, a bank should lose their money along with financial institutions, and others are whose executives historically had close shareholders. Technically, they will. In negotiating with the bankover more fact, to preserve their savings and avoid a junior slices. political outcry, they will be deemed to Italian officials have high hopes fora How to be popular have been “mis-sold” the bonds: they cleaned-up Monte dei Paschi. The coun- Banco Popular Español, share price, € will receive shares which will in turn be try’s biggest bank, UniCredit, refreshed swapped fornew, saferbonds. by a new boss and capital increase, is 40 Italy has to come up with a restructur- creaking no more. And the system’s pile ing plan, likely to involve job losses and ofbad loans is at last declining. But trou- 30 branch closures, forthe commission’s bles remain, notably at two smaller approval. (The ECB must also certify the lenders, Banco Popolare di Vicenza and 20 bank’s solvency.) Bosses’ pay will be Veneto Banca, which also want state capped at ten times the staffaverage. And help. The commission is said to want private investors to provide €1bn-plus 10 Monte dei Paschi must sell its sofferenze, the worst category ofnon-performing before approving a bail-out; such bene- exposures, which in March amounted to factors are understandably hard to find. 0 24% ofall its loans. A state guarantee will Italy’s banking ills may be easing, but 2007 09 11 13 15 17 cover senior tranches ofthese securitised they are farfrom cured. Source: Thomson Reuters The Economist June 10th 2017 Finance and economics 67 Free exchange How to be wrong

To erris human. Society is suffering from an inability to acknowledge as much price bulls might conjure up fanciful theories for why prices should behave unusually, and supporters of a disgraced politician might invent conspiracies or blame fake news. And lastly, in “self-signalling”, the believer creates his own tools to interpret the facts in the way he wants: an unhealthy person, for example, might decide that going fora daily run proves he is well. Motivated reasoning is a cognitive bias to which better-educated people are especially prone. Not all the errors it leads to are costly: preachingthe superiority ofArsenal despite contradictory evidence does little harm. But when biases are broadly shared— within troubled firms, say, or financial markets or political parties—danger lurks. Motivated reasoning helps explain why view- points polarise even as more information is more easily available than ever before. That it is easy to find convincing demolitions of climate-change myths, for example, has not curbed misinforma- tion on the topic. But the demand forgood (orbad) information is uneven. Polling shows, for example, that Democrats with high levels of scientific knowledge are more concerned about climate change than fellow partisans with less scientific background; among Republicans, the level of scientific awareness has no effect on climate beliefs. Even, or especially, sophisticated news NEWSPAPER cannot publish for 174 years without some mis- consumers lookforwhat they want to find. Atakes. This one has made its share. We thought Britain was Work by Mr Bénabou suggests that groupthink is highest safe in the European exchange-rate mechanism just weeks before when people within groups face a shared fate: when choosing to it crashed out; we opined, in 1997, that Indonesia was well placed break from a group is unlikely to spare an individual the costs of to avoid financial crisis; we noted in 1999 that oil, at $10 perbarrel, the group’s errors. If an individual politician’s fortunes rise and might well reach $5, almost perfectly timing the bottom of the fall with his party’s, breaking from groupthink brings little indi- market; and in 2003 we supported the invasion of Iraq. For individual benefit (and may impose individual costs). The incentive viduals, like publications, errors are painful—particularly now, to engage in motivated reasoning is high as a result. Even as the when the digital evidence of failure is both accessible and indel- facts on a particular issue converge in one direction, parties can ible. But they are also inevitable. The trick, then, is to err well: to still become increasingly polarised around starkly different be- recognise mistakes and learn from them. Worryingly, humanity lief-sets. That, in turn, can make it harderstill fora memberofone may be getting worse at owning up to its goofs. party to derive any benefit from breaking ranks. Indeed, the Few enjoy the feeling of being caught out in an error. But real group has an incentive to delegitimise independent voices, such trouble starts when the desire to avoid a reckoning leads to a re- as statistical agencies or budget watchdogs. So the unanimity of fusal to grapple with contrary evidence. Economists often as- views can be hard to escape until it contributes to a crisis. sume that people are rational. Faced with a new fact, rational ac- Lowering the cost of admitting error could help defuse these tors should update their view of the world in order to take better crises. A new issue of Econ Journal Watch, an online journal, in- decisions in future. Yet years ofeconomic research illuminate the cludes a symposium in which prominent economic thinkers are ways in which human cognition veers from rationality. Studies asked to provide their “most regretted statements”. Held regular- confirm what is obvious from experience: people frequently dis- ly, such exercises might take the shame out of changing your regard information that conflicts with their view ofthe world. mind. Yet the symposium also shows how hard it is for scholars Why should that be? Last year Roland Bénabou, of Princeton, to grapple with intellectual regret. Some contributions are can- and Jean Tirole, ofthe Toulouse School ofEconomics, presented a did; Tyler Cowen’s analysis of how and why he underestimated frameworkforthinkingaboutthe problem. In manyways, beliefs the risk of financial crisis in 2007 is enlightening. But some disap- are like other economic goods. People spend time and resources point, picking out regrets that cast the writer in a flattering light or building them, and derive value from them. Some beliefs are like using the opportunity to shift blame. consumption goods: a passion for conservation can make its owner feel good, and is a public part of his identity, like fashion. I don’t want to be right Other beliefs provide value by shaping behaviour. The convic- Public statements of regret are risky in a rigidly polarised world. tion that one is a good salesman may help generate the confi- Admissions oferror both provide propaganda forideological op- dence needed to close sales; religious asceticism can help one ponents and annoy fellow-travellers. Some economists used to avoid unhealthy habits. seethe when members of the guild acknowledged that trade lib- Because beliefs, however, are not simply tools for making eralisation could yield costs as well as benefits—though eco- good decisions, butare treasured in theirown right, new informa- nomic models had always allowed for this. In the long run, such tion that challenges them is unwelcome. People often engage in self-censorship probably eroded trust in economists’ arguments “motivated reasoning” to manage such challenges. Mr Bénabou more than it built support for trade. It is rarely in the interest of classifies this into three categories. “Strategic ignorance” is when those in the right to pretend that they are never wrong. 7 a believer avoids information offering conflicting evidence. In “reality denial” troubling evidence is rationalised away: house- Economist.com/blogs/freeexchange 68 Science and technology The Economist June 10th 2017

Also in this section 69 Homo sapiens gets older 70 Helping blind people to navigate 70 The smallest transistors yet 71 The end of causality?

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

Meteorology intensification would also help ensure that evacuation orders are not issued needless- Eyes on the storm ly. In 2011, for example, Hurricane Irene (pictured above) made landfall with far less intensity than predicted, after it ran into a pool ofcold water that sapped its energy. Warnings that turn out to have been overblown may undermine public confi- An array ofsensors that stretches from space to the deep ocean is keeping tabs on dence in the forecasters. That could be hurricanes in the Atlantic risky when people really need to evacuate. N SEPTEMBER 1961 a small hurricane driven planes fly right into storms, measur- The reason a hurricane’s intensity is Icalled Esther swirled into being above ingtheirpropertieswith radarand its mod- hard to predict, whereas forecasting its the warm waters of the mid-Atlantic. It ern, laser-based cousin, lidar. Unmanned track is reasonably easy, is that the things bore down on America’s east coast, execut- drones fly in even deeper. And floats, bu- which influence a storm’s course occur on ed a graceful clockwise loop-the-loop off oys and aquatic drones survey storms a larger scale, and are thus simpler to mea- the shores of New York, then gusted up from below. sure, than those which affect its strength. through Maine and into Quebec as little All of the data these machines gather The direction of the wind in the jet stream, more than a squall. are transmitted directly to computer mod- a high-altitude circumpolar air current, Esther’s place in history was not as- els which are used to forecast two things. plays a role in steering a storm, as do re- sured through its destructive power, al- The first is what track a hurricane will fol- gions of high and low pressure around it. though it did kill seven people when it low, and thus whether, where and when it Satellites and high-altitude planes can brought down an American navy plane will make landfall. The second is how measure both ofthese phenomena easily. thatwason route to Monrovia, in Liberia. It much energyitwill dump on North Ameri- In contrast, manyofthe factorsthat con- was, rather, the surveillance of Esther that ca if it does indeed cross the coast—a value tribute to intensity are tucked away in a made the storm famous, for this was the known as its intensity. storm’s heart, where lack of light (both vis- first hurricane to be discovered from space. ible and infra-red) means it is difficult to Trackingbegan afterthe third Television In- An object of intense scrutiny make measurements. Winds there can frared Observation Satellite (TIROS-3), an Of these two variables, intensity is by far have wildly different speeds and direc- early meteorological satellite launched by the harderto predict, accordingto Paul Rea- tions at different altitudes, a phenomenon the United States, spotted precursor thun- sor of the National Oceanic and Atmo- known as vertical wind shear. This pulls derstorms in the eastern Atlantic, south- sphericAdministration (NOAA), an Ameri- energy out of a storm, acting as a brake. west ofthe Cape Verde Islands. can government agency. Dr Reasor is the Pools of dry air tucked deep inside a storm America’s suite of hurricane sensors field director of this season’s research pro- have a similar effect, and are tricky to spot has grown since 1961. The current Atlantic gramme. He says that how and why even with radar. Measuring all of these hurricane season, which began on June 1st, storms intensify rapidly is the big unan- properties means getting sensors deep in- sees the country running a stack of instru- swered question in hurricane forecasting. side a hurricane. And sensors are needed, ments that reach from orbit to a kilometre Finding an answer is important because too, in the ocean ahead of a storm, for an- beneath the ocean. TIROS-3’s successors rapidly intensifying storms have the great- otherthingthataffectsintensification isthe keep a constant watch on storms’ tracks est potential to cause damage and offer the temperature ofthe sea in the storm’s path. and sizes. Gulfstream jets fly over and least amount of time for preparation and Advances in automated sensors, both around storms, dropping sensors into evacuation on shore. those that fly and those that swim, are them to measure wind speeds. Propeller- Conversely, a better understanding of making it possible to gather more data 1 The Economist June 10th 2017 Science and technology 69

2 from both of these places. This season, for Early man example, will be the first in which a constellation of microsatellites called CYGNSS (Cyclone Global Navigation Satellite Sys- Even earlier man tem) watchesstormsastheyroll in towards the east coast. The eight-satellite swarm, The time ofhumanity’s emergence is pushed backfartherinto the past which was launched in December, listens for radio signals that come from GPS satel- OW old is Homo sapiens? Compar- turned into something that could be lites directly above it in space, and for the Hing the genomes ofmodern humans called Homo sapiens was therefore ob- same signals when they have been reflect- with those from fossils ofNeanderthals scure. But workled by researchers at the ed from the ocean’s surface beneath the (Homo neanderthalensis) suggests that Max PlanckInstitute forEvolutionary hurricane being studied. Differences be- the lines leading to these two species split Anthropology, in Leipzig, Germany, tween the reflected signal and the original from one another more than 500,000 which has just been published in Nature, are a consequence of the state of that sur- years ago. But that does not answer the has shed some light. The remains of at face, and CYGNSS can use them to infer question ofwhen they achieved their least five individuals, collected from a site wind conditions there. distinctive forms. called Jebel Irhoud, in Morocco, look like Satellite measurementslike thisare use- Fossils recognisable as Neanderthals modern humans and seem to date back ful, but it also helps to get as close as possi- go back250,000 years, about halfway 300,000 years. That not only makes them ble to the hidden bottom kilometre of a between the present day and the time of the oldest Homo sapiens found so far storm. NOAA is doing this with drones their common ancestor with Homo (and shows that sapiens is actually an called Coyotes, built by Raytheon, an aero- sapiens, a member ofa species called older species than neanderthalensis). It space company. Coyotes are released from Homo heidelbergensis. Several sites older also demonstrates that sapiens was far tubes in the bellies of NOAA’s research than 250,000 years and containing fossils more widespread than researchers had planes, then piloted remotely in order to intermediate in form between heidel- suspected, for previous early fossils ofthe gather data from the region in a storm that bergensis and neanderthalensis are species have come exclusively from is just above the ocean’s surface. The data known, making 250,000 years a reason- eastern and southern Africa. the drones collect complement those from ably definitive date. The fossils themselves are described dropsondes, which are sensors that are Until now, however, the most ancient by a group led by Jean-Jacques Hublin. pushed out of the same tubes and plunge bones universally agreed to have be- They include a cranium, a lower jaw down through a storm like bombs, trans- longed to Homo sapiens have dated back bone, an upper jaw, and various other mitting as they go. only195,000 years. And fossils interme- skull fragments and teeth. Adding these The research planes have also started diate in form between sapiens and heidel- together and filling in the blanks yields a using a device called a Doppler wind lidar bergensis are scarce. How quickly the model ofthe creature’s skull (pictured), to measure a hurricane’s moisture content relevant branch ofHomo heidelbergensis and comparing this with other fossils, more accurately. Radar, a standard instru- some definitively identified as Homo ment on these planes, works at radio fre- sapiens and some equally definitively quencies, which means it is reflected only identified as not, shows that the parts from large drops of water. Lidar’s use of from which it is composed come from a light, which isalso reflected bysmall—even sapiens population. microscopic—drops, paints a more accu- The likely age ofthis population was rate picture of the way moisture is distri- worked out by Dr Hublin’s colleague buted within a storm. Daniel Richter and his team (ofwhich Dr Hublin was also a member). They used a Engine room technique called thermoluminescence to What happens in the water beneath the date stone tools found in the same stra- storm is crucial, too. Hurricanes gain ener- tum as the fossils. They also re-dated a gy from warm water as they pass over it. tooth that had been found in a badly But placingprobes in front ofa hurricane is recorded excavation carried out on the a risky and expensive business. “Youhave same site in the 1960s. This tooth had to call up ships and get captains to say, been thought to be 160,000 years old, ‘Sure, I’ll head out towards the hurricane’,” and thus not ofsuch great interest. How- says Glen Gawarkiewicz, a research scien- ever, both tools and tooth proved, within tist at Woods Hole Oceanographic Institu- the margins oferror ofthe techniques tion, in Massachusetts. Unsurprisingly, A three-dimensional jigsaw puzzle involved, to be about 300,000 years old. many mariners are reluctant to do so. A new instrument called ALAMO (Air- Launched Autonomous Micro Observer) son’s battle. He says that they might drop tic this summer will thus be trailed by solves the problem. It was designed at two or three of the probes on a good flight. planes, punctured and scanned by drop- Woods Hole by Steve Jayne and his col- Each would then gather about 150 up-and- sondes and drones, scrutinised from space leagues, and is intended to be launched down profiles as the storm passes over, by satellites, and monitored from the out of the belly of an aircraft, in the way sending data on temperature and salinity depths by floats like ALAMO. All the data that dropsondes and Coyotes are. ALAMO back to Woods Hole and NOAA’s National these probes collect will be pushed imme- parachutes into the ocean in front of a hur- Hurricane Centre via satellite. That diately into models that help the National ricane. Once there, it starts a cycle of de- ALAMO can be deployed this way is cru- Hurricane Centre predict where storms scent and ascent, gathering a profile of the cial to its success. Other sensors, such as will go and how strong they will be. In the sea’s top kilometre as the storm passes Argo, are too big to fit in the launch tube, longer term, those data will also shed light over it. Dr Jayne is currently stationed at and must be pushed out of an open tail- on the atmospheric and oceanic physics Keesler Air Force Base in Biloxi, Mississip- gate—an impossibility during hurricanes. that underpin intensification, making bet- pi, preparing his instruments for this sea- Every storm that rolls in from the Atlan- ter forecasts possible in the future. 7 70 Science and technology The Economist June 10th 2017

Helping blind people navigate Microelectronics White cane 2.0 It’s a wrap

Modern technology can help guide A new transistordesign offers another those with pooreyesight way to extend Moore’s law—fornow OR centuries, canes have served blind LL good things come to an end. Moore’s Fand partiallysighted people well bygiv- Alaw—the observation that the number ing them a means to negotiate the world of transistors that can be crammed onto a around them. The only serious upgrade chip of a given size doubles every two they have undergone dates back to 1921, years—hasbuiltthe modern, computerised when a Briton called James Biggs, who had world. But as transistors get smaller, mak- recentlylosthissight, painted hisown cane ing them smaller still gets harder. In recent white in order to make it easily visible and years Moore’s law has begun to slow. to alert others to the presence of someone Forall the fearsome complexity of com- unable to see nearby obstacles. In the opin- puter chips, their basic components are ion ofDaniela Rus ofthe Massachusetts In- simple. Transistors are nothing more than stitute of Technology (MIT), however, the switches. To turn one on, a voltage is ap- white cane has had its day. Dr Rus would plied to part of it called a gate. This allows like to replace it with a system that scans its Belted up electrical current to flow through a chan- user’s environment and communicates nel between the transistor’s input and out- backto him what it sees. crowded hallways, it reduced blind stu- put. As transistors shrink, though, insula- Dr Rus’s device, of which she demon- dents’ collisions with others by 86%. tion breaks down and the current applying strated a prototype on June 1st at the Inter- The new system can, however, do more the voltage tendsto leakaway, reducing the national Conference on Robotics and than just help someone walkaround with- gate’s ability to control the channel. One Automation in Singapore, consists of a out collisions, for the belt incorporates a reason for this is a phenomenon called camera worn on a lanyard around the touchpad that is inscribed with instruc- quantum tunnelling, in which the uncer- neck, and a belt. A computer inside the tionsin Braille. Thispermitsthe user to pro- tainty of an electron’s position means it is camera creates a three-dimensional image gram it to perform specific tasks. sometimes found in another part of the ofthe area ahead ofthe wearer, processes it For example, Dr Rus knew that blind transistor without having physically to extract relevant information, and uses students often struggle to find an empty crossed there. the results to pass on appropriate signals seat in a crowded lecture theatre. Adding To tryto keep things ticking along, chip- via the belt. an appropriate algorithm to the comput- makers have been tinkering with the basic Dr Rus knew from previous attempts to er’s software helps get around this by en- design ofthe transistor itself. In 2012, forex- build devices of this sort that what might abling it to recognise chairs, and also ample, Intel, the biggest chipmaker of the seem the obvious way of manifesting whether or not a chair is occupied. In this lot, introduced transistors in which the those signals, namely as sounds with spe- case, the motors are used to indicate a di- gate surrounds the channel on three sides, cific meanings, was not, in fact, a good ap- rection to be travelled in, ratherthan one to making it better able to impose its will. proach. Blind people depend a lot on their be avoided. Activating the algorithm using Now IBM, a computing firm, has gone hearing and do not like it when newfan- the touchpad causes the motor pointing one better. In collaboration with Samsung, gled devices hamper this sense with beeps most closely towards an empty chair to vi- a Korean electronics giant, and Global- and clicks. Hence the belt, which has five brate when the system spots one. Foundries, another big chipmaker, it has vibrating motors installed in it. One sits developed a new kind of transistor com- over the centre of the wearer’s abdomen. Good vibrations posed of three sheets of silicon, laid hori- The others flank this central motor, with In trials involving a room that contained zontally, which are surrounded complete- two spaced out on either side ofit. an empty chair, an occupied chair and also ly by gate material. Such devices remain That configuration permits the comput- a recycling bin, the algorithm directed the laboratory prototypes. But IBM’s engi- er to warn a wearer when he is on a colli- belt-wearerstraight to the empty chair 80% neers reckon they should permit Moore’s sion course with an obstacle. It does so by of the time. Cane users presented with the law to carry on until the mid 2020s. telling the motor pointing most closely in same arrangement always found the emp- After that, things get murkier. It is hard the direction of the obstacle to vibrate. If ty chair eventually, but in doing so came to improve on a design that wraps the gate the wearer is walking towards a wall, for into contact with objects other than their entirely around the channel. If firms want example, the central motor vibrates softly target more than five times as often as to keep shrinking their products, more rad- when he comes within a couple of metres those using the camera and belt. ical ideaswill be needed. One isto use new of it. If he ignores this, perhaps because he Whether a camera (ideally, smaller materials, such as tubes composed of actually wants to reach the wall, the com- than the one in the prototype) and a belt rolled-up sheetsofcarbon atoms, the phys- puter increases the amplitude as he closes could replace a cane completelyremains to ical properties of which permit compo- in, giving him a good idea of exactly how be seen. In particular, Dr Rus’s system does nents to be smaller. Another is to make a farawayhe is. Similarly, ifhe isin dangerof lack one important feature of Biggs’s inno- virtue of necessity and build devices that bumping, say, his right shoulder on a door vation. A white cane not only helps a blind take advantage of quantum oddities such frame while walking from one room to an- person to navigate, it also signals his condi- as tunnelling, rather than trying to resist other, the right-most motor on the belt will tion to the rest of the world, allowing oth- them. A third option is to stack transistors warn him of the impending collision. And ers to adjust their behaviour accordingly. on top ofone another, keepinga chip’sarea it works. When compared with navigation As a supplementary aid, however, her ap- the same but increasing its volume. IBM by white cane in one of MIT’s famously proach seems most promising. 7 has fingers in all ofthese pies, too. 7 The Economist June 10th 2017 Science and technology 71

Quantum mechanics and relativity theory ed by the superposition as well, and, reciprocally, will affect the original clock in Does one thing lead to another? a similar manner. Since clocks, whatever the specific details of their mechanisms, are the only way time can be measured, the whole concept of time itself therefore becomes fuzzy. Nor is that the end of it. In the wake of the clock paper Dr Brukner and his col- Iftime is fuzzy, that has implications forthe idea ofcausality leaguesare workingon anotherGedanken- HE thing about Gedankenexperi- and the energy required to run it form a experiment. This investigates the conse- Tmente—or thought experiments, for Heisenberg pair: the more accurately the quences that superposing gravitational those who find Albert Einstein’s native clockis read, the less accurately the quanti- fields has for causality—the idea that one tongue too twisting—is that you never ty of energy involved can be determined. event can truly be said to cause another. know where they might lead. For Einstein, The result is that the clock’s energy is in a they led to the theory of relativity. For state called a quantum superposition. The The metric system James Clerk Maxwell, they conjured an energy in question may be large or small, Besides mass-energy equivalence and imaginary demon who could violate the both at the same time—just as Schrödin- gravitational time dilation, a third concept second law ofthermodynamics. ForErwin ger’s cat is both alive and dead. which emerges from the mathematics of Schrödinger, they created an existentially At this point, quantum mechanics and relativity is something known as the met- confused cat that was simultaneously relativity collide. One consequence of Ein- ric field. Just as general relativity is an ex- dead and alive. stein’s theories is that energy and mass are tension of Isaac Newton’s theory of gravi- Physicists like to devise Gedankenexpe- equivalent. This means energy, like mass, ty, so the metric field is the relativistic rimente because they are a way to consider has a gravitational pull. A second conse- extension of the Newtonian idea of gravi- ideas that cannot be tested for real, usually quence is that gravity changes the flow of tational potential—namely that the because the technology needed is not yet time. Such gravitational time dilation is a strength ofthe gravitational interaction be- available or even envisaged. Though not a well-established phenomenon. Atomic tween two objects depends on the dis- substitute fortrue experimentation, a good clocks kept at different altitudes on Earth, tance separating those objects. The Gedankenexperiment may point to conclu- for example, get out of sync with one an- strength of gravitational interaction in a sions that proper experiments can indeed other because they are subjected to differ- metric field similarly depends on the dis- test. And, though the famous Gedankenex- ent gravitational forces. tance between objects. But because gen- perimente mentioned above are all quite Dr Brukner and his colleagues ob- eral relativitytreatstime asa fourth dimen- old now, the idea of conducting them has served that in the case of their own hypo- sion, equivalent to the three dimensions of neither gone out of fashion nor lost its am- thetical clock, the quantum superposition space, in a way that Newtonian gravity bition. Indeed, some of the most recent of its energy states means that the gravita- does not, metric-field distance is measured such thought experiments, carried out by a tional effects ofthose energy states also ex- in both space and time. group ofquantum physicists led by Caslav ist in a quantum superposition. The time According to Dr Brukner, the clock Brukner of the University of Vienna, are dilation created by these gravitational ef- thought experiment shows that the metric questioningthe nature ofone ofthe funda- fects thus becomes superposed, too. field is yet another phenomenon which is mental aspects ofthe universe, time itself. Worse, a second quantum effect, entangle- subject to Heisenberg’s principle, and That one thing happens after another, ment, means other clocks within the gravi- therefore to superpositional effects. As a and that there is no doubt about which tational influence of the first will be affect- consequence, it is no longer only location came first, is intrinsic to the commonsense in space that becomes uncertain, but also notion of time. It was also intrinsic to the location in time. Often, therefore, it would developmentofthe theoryofrelativity, the no longer be possible to say which of two Gedankenexperimente for which often de- events came first. pend on clocks moving relative to one an- The new Gedankenexperiment the team other. Add quantum theory to the mix, have devised to test this involves a giant though, and then think through the conse- atom in a superposition of two divergent quences, and doubts start to emerge about energystates. Theyare attemptingto calcu- what order events are really happening in. late the consequences ofsuch an object for the conceptofcausality, namelythe idea of Let’s do the time warp again event A causing event B. They believe that The first thought experiment that Dr if the atom’s two energy states are suffi- Brukner’s group came up with, published ciently different it will become impossible earlier this year in the Proceedings of the to say whether A or B came first, and cau- National Academy of Sciences by him and sality will thus disappear. two of his students, Esteban Castro Ruiz Although, like all Gedankenexperi- and Flaminia Giacomini, involved an mente, this latest one cannot be conducted imaginary clock of great precision. The ac- with current experimental technologies, curacy with which such a clock could be all of the assumptions behind it have been read is constrained by Werner Heisen- so tested in the past. Ittherefore obeys both berg’s uncertainty principle. This limits quantum mechanics and the theory of how well pairs of properties of any physi- general relativity. But one big question cal system (such as location and velocity) nags. If the Gedankenexperimente that led can be measured. The more precisely one to relativity relied on a linearity of time member of a pair is known, the more un- that the theory itself is now helping call certain is the value ofthe other. into question, can those original thought In the case of a clock, the time it tells experiments themselves be relied on? 7 72 Books and arts The Economist June 10th 2017

Piet Mondrian and the Stijl movement Also in this section Square man 73 Football history 73 The plant messiah 74 Gail Godwin’s “Grief Cottage”

THE HAGUE 74 Collecting Hans Sloane The co-founderofthe Stijl movement grew up drawing cows, but became the 75 Johnson: hyphen harrumph world’s greatest abstract geometrist. A new exhibition explains how dance steps and was fully engaged in the avant-garde culture that surrounded him. “The Discovery of Mondrian” presents about a quarter of his output, from his ear- liest student drawings to his final master- piece, “Victory Boogie Woogie” (pictured), which he leftunfinished on his easel when he died ofpneumonia in New Yorkin 1944. Walking through the show, you can see a clear progression. It starts with traditional landscape paintings such as “Trees along the Gein” (1905)—by a precocious and skilled painter with a strong, intuitive sense ofline, form and composition. These turn into more experimental landscapes, for example “Evening: The Red Tree” (1908- 10) or the highly colourful and luminous “Mill in Sunlight” (1908), a response to Vin- cent van Gogh, and the more formally Luminist works, including “The Red Wind- mill” (1911). The visitor encounters such paintings as “Composition No. IV” (1914), inspired by Braque and Picasso, and sees how Mondrian moved into the familiar colour-grid works, notably “Composition with Large Red Plane, Yellow, Black, Grey and Blue” (1921). The show is a visual pilgrimage. The artist moves from lush, realistic illusion- ism, paring down the act of painting until he reduces it to its essential elements: pure, clean colour, line and form. (The “Discov- ery” ofthe exhibition title happens both to Mondrian and to the viewer.) The breakthrough to abstraction came HEN he was 68, Piet Mondrian dotted with cows and windmills. after the first world war ended. Just before Warrived in New York, having fled An important new show, “The Discov- Mondrian returned to Paris in 1919, he Nazi-occupied Europe. He was celebrated ery of Mondrian”, at the Gemeentemu- painted two pictures with lots of colourful by such 20th-century American greats as seum in The Hague, plotseverystep of that squares arranged in a Cubist structure, and Ad Reinhardt, Jasper Johns and MarkRoth- development through the 300 works it made “Composition with Grey Lines”, a ko, who called him the most sensual of art- owns—the largest trove of Mondrian’s diamond-shaped canvas with a grid of ists. Mondrian had an even more obvious work anywhere. The most extensive exhi- horizontal, vertical and diagonal grey lines impact on design, paving the way for Ger- bition ever devoted to his painting (no oth- thatdivide up the canvasinto triangles and rit Rietveld’s “Red Blue Chair”, Yves Saint er artists feature), it is the centrepiece of a squares. The painting looks unassuming Laurent’s 1965 shift dress, packaging for nationwide celebration of the Dutch mas- today, but it represented a revolution in art: L’Oréal, a cosmetics company, and even ter and De Stijl (“The Style”), the art move- “Thatwasthe momentwe realised howfar Nike trainers. Along with Kazimir Malev- ment that Mondrian helped found exactly he dared to go,” says Benno Tempel, direc- ich and Wassily Kandinsky, the Dutch a century ago. tor of the Gemeentemuseum and one of painter is one ofthe fathers ofabstract art. In 2009 the Gemeentemuseum the curators of the show. “It became more What is less well known about Mondri- launched a project to re-examine every and more about rhythm and harmony.” an is that he only developed his signature Mondrian painting in its collection. At the And then, after emigrating to America style when he was in his 50s. The shift same time its chief Mondrian expert, Hans in 1940, Mondrian went even further. His came after a long and focused process of Janssen, was busy writing a new life of the late canvases—represented in this exhibi- searching and experimenting with paint, artist, “Piet Mondrian: A New Art for a Life tion by just one work, “Victory Boogie form and composition, which had begun Unknown”. Far from being an eccentric re- Woogie”, displayed in a room of its own— when he was still in his teens and living in cluse, as has long been thought, Mondrian, made art into a form of visual music, sepa- his native Netherlands, where the reigning it turns out, was something of a ladies’ rating it from the world of the tangible to genre was sombre landscape paintings man. He loved jazz, learned all the latest reach forthe transcendent. 7 The Economist June 10th 2017 Books and arts 73

Football Secrets and success

The Mixer: The Story of Premier League Tactics, from Route One to False Nines. By Michael Cox. HarperCollins, 486 pages; £16.99 The European Game: The Secrets of European Football Success. By Daniel Fieldsend. Arena Sport; 255 pages; £14.99

N THE opening weekend of the Pre- Omier League in 1992, all but 13 players were from Britain orIreland. In the 25 years since, the top tier of English football has been transformed into the sport’s most globalised—and lucrative—domestic competition. As Michael Cox, a football jour- Cantona en marche nalist whose writing often focuses on tactics, shows in “The Mixer”, the Premier tion, and the professionalisation of all fac- Whereas Britain’s reputation abroad League’s sporting evolution has been ets of football, have transformed the sport faces uncertainty, the globalised Premier mostly driven by foreigners. on the continent, too. League “is effectively Britain’s best adver- In the league’s early years Eric Cantona, The book benefits from not just focus- tisement foritself,” MrCoxconcludes. Are- Dennis Bergkamp and Gianfranco Zola ing on European superclubs. It tells the recent poll of foreign citizens found that the were all revolutionaries. The three brought markable tale of Athletic Bilbao, one of league is the nation’s most popular foreign a dazzling skill to the game, and excelled at three clubs never to have been relegated brand. It has always relied on foreigners. playing “in between the lines”, defying the from La Liga, the Spanish top division, de- Now, more than ever, Britain needs the ex- rigid tactical orthodoxy with which Eng- spite having a policy of selecting only ample ofthe outward-lookingattitude that lish football had traditionally been associ- Basque players. Bilbao’s story emphasises has underpinned its football. 7 ated. When Arsène Wengerwasappointed a recurring theme of the book: the impor- Arsenal’s manager in 1996, he was derided tance of development programmes for Botany by Sir Alex Ferguson, manager of Man- youngplayers and the lengths that clubs go chester United, as “a novice” who “should to in order to nurture footballers. Benfica, a keep his opinions to Japanese football”. Portuguese club, uses a 360-degree “foot- The gospel of bark Yet Mr Wenger was also revolutionary. ball room”, walled by LED lights, to train He transformed the diet and conditioning players in over 100 scenarios. Targets ap- of players, who liked to eat full English pearforthe players to hit with the ball; sen- breakfasts before training, and would en- sors measure the players’ effectiveness. gage in notoriously heavy drinking ses- Important regional and national differ- The Plant Messiah: Adventures in Search of sions on Tuesdays (the “Tuesday club”) as ences between teams still linger. Italian the World’s Rarest Species. By Carlos they had a day off on Wednesdays. Mr clubs, for instance, are better at nurturing Magdalena. Viking; 217 pages; £16.99 Wenger steered Arsenal to the champion- veteran players, perhaps a reflection of ship in 1998, his first full season: the first howvalued oldergenerationsare in Italian ITH his long brown locks and his time the top-flight tournament had been culture, Mr Fieldsend suggests. But clubs’ Wknack for rescuing rare flora from ex- won by a manager from outside Britain. unrelenting focus upon maximising rev- tinction, it is easy to see why Carlos Mag- The trajectoryhascontinued. José Mou- enue is now universal. Barcelona, which dalena has come to be known as “the plant rinho and Rafael Benítez, who joined Chel- treasures its image as més que un club messiah”. A botanical horticulturalist at sea and Liverpool respectively in 2004, (“more than a club”) has now become the Kew Gardens in London, he denies having introduced more technical nuance. Last embodiment of the modern giant. After a messiah complex. But his book, which season Antonio Conte, Chelsea’s Italian years of not having paid advertising on tells of his efforts to track down and revive manager, reintroduced the 3-4-3 formation, players’ shirts, it succumbed in 2010. long-lost species, suggests otherwise. previously considered unpopular, and It seems inevitable that clubs will be- Growing up in Spain as the son of a flo- promptly won the title. Thanks to his come ever more international. Less certain rist, Mr Magdalena’s ability to nurture meticulous research and his focus on strat- is whether the Premier League will main- wildlife was his “miracle of the loaves and egy, Mr Cox finds a fresh perspective on a tain its position as the globe’s most cele- fishes”. In his 30s he won an internship at story that football fans will think they brated football league, or whether Brexit Kew, where a “sixth sense” for breeding already knew. will undermine the league, cutting it off dying plants attracted interest and scepti- “The European Game” is an interesting from footballing innovations in continen- cism. Even after he saved several doomed counterpoint to “The Mixer”. It is an idio- tal Europe. Richard Scudamore, the species, “some people still did not believe syncratic book involving vignettes from 17 league’s executive chairman, favoured Re- the good news”. In recent years he has European teams, interspersed with the tra- main in the referendum last year, and clubs been sent around the world to train other vel observations of the author, Daniel have called for European players to be gardeners—or rather, “disciples”. Fieldsend, a UEFA-qualified coach. Mr exempt from immigration regulations Yet Mr Magdalena’s claim to be a green- Fieldsend’s book shows how globalisa- should they be introduced after Brexit. fingered Jesus has its merits. His record of1 74 Books and arts The Economist June 10th 2017

2 propagating plants that others have con- Hans Sloane much of which he eventually catalogued signed to botanical history is impressive. himself. The most gripping passages are about his Hoarder Or try this: “a set of surgeons’ instru- workwith the last remnants ofa species—a ments made from fish-skin; inks and ink- handful of seeds glued to an envelope or a extraordinaire horns; face-paint; medicinal powders and plant discovered living in a single bubbling pills; women’s shoes made of leather and spring. He draws on his years as a waiter silk; gold and silver pins and needles for for similes: watering Kew’s trees is like be- the practice ofacupuncture; tobacco pipes; Collecting the World: The Life and Curiosity ing a sommelier; the beetles that pollinate several portable Buddhist ‘idols’; gilded of Hans Sloane. By James Delbourgo. Allen Amazonian waterlilies are like revellers rhinoceros horns; ‘metallick burning glass- Lane; 503 pages; £25. To be published in flitting between nightclubs. es’ and ‘a ball of several colours to be America by Belknap in July; $35 The botany can get thorny, with de- thrown into the fire to perfume a room’.” scriptions of stamens, stigmas and styles OINED-UP words and sentences with These are some of the objects Sloane (and a rap on the knuckles forreaders who Jverbs are not enough to describe Sir acquired from Japan. were “daydreaming during biology”). The Hans Sloane. Only a list can do justice to The Anglo-Irish physician, collector author comes across as passionate but this man, who was both quite remarkable and naturalist was not a man of small am- prickly, with little time for bunglers. His and, to some, a little touched. Over the bitions. He aimed for universal knowl- gospel, however, is important. A fifth of course of a lifetime, he managed to accu- edge, available to all humankind, with a plants face extinction. They feed people, mulate 3,516 volumes of manuscripts, as serious play for personal immortality clothe them, heal them and produce the well as books of prints, which together thrown in. He did not make such a bad fist oxygen they breathe. Some 30,000 plants amounted to 50,000 volumes; 32,000 of them: his acquisitions became the foun- have recorded uses for humans. Most peo- medalsand coins; 5,843 testacea and shells; dation of the British Museum, as well as ple, the messiah preaches, are blind to 173 starfish; 12,506 vegetable substances the collections of the Natural History these everyday miracles. This book will and 55 mathematical instruments. This is Museum and the British Library. teach them to see. 7 just a selection from Sloane’s collection, He would surely be irritated that his name endures more strongly in London’s topography than in universal understand- Fiction ing. There are a dozen or so Sloanes and Hanses listed in the city’s “Ato Z”, because Sun, sea and spectres Sloane had the presence ofmind to buy up most of Chelsea in the course of his long and prosperous life. He was born in Ulster in 1660 and died Grief Cottage. By Gail Godwin. Bloomsbury; miss him after he was gone”. at 92 with a cunning plan to leave a perma- 324 pages; $26. To be published in Britain in But “GriefCottage” is no ordinary nent mark on human civilisation. He had August, £18.99 haunted-house tale. Marcus’s relation- set himself up in London as a physician ship with the boy is at the heart of the and made himself the undisputed king of UT with the clichés ofcold draughts novel, yet peripheral to its action. Marcus the capital’s medicine men, attending the Oand creaking doors. Contemporary spends most ofhis time looking after his best bedsides for the best prices. He novelists are refocusing the ghost story, aunt, who is haunted by demons ofher married money and enjoyed the revenues 1 revelling in its potential forpsychological own. He also watches over a nest site of drama. “GriefCottage” by Gail Godwin, a turtles’ eggs, so that he can help them prolific American writer, is a quiet, hope- reach the sea once they hatch. When the ful ghost story—a wistful reflection on weather is bad, he slowly works his way loss, loneliness, coming ofage and com- through the boxes ofbelongings pack- ing to terms with the past. aged up after his mother’s death and Marcus, the narrator, is11years old shipped to his aunt’s house, sorting when his mother is killed in a car acci- through all oftheir shared possessions dent. He is sent to live on a small island in and the memories they dredge up. South Carolina with his great aunt, a Ms Godwin’s vivid prose ensures that reclusive painter. A precocious, imagina- these mundane activities are just as tive boy, he worries constantly about compelling as his encounters with the how his words and actions affect others. supernatural. The author, who turns 80 Desperate not to burden his new this month, never forgets that “there are guardian, he spends much ofhis time enough horrors in the real world to wor- outdoors, finding himselfdrawn to a ry about”, as Marcus’s aunt puts it, when derelict house known as GriefCottage the boy finds himselfgrappling with because ofa hurricane halfa century “awful things I didn’t want inside me”. earlier during which a teenage boy and Like Joanna Briscoe’s “Touched” and his parents went missing. They are pre- Sarah Waters’s “The Little Stranger”, sumed to have been swept out to sea. “GriefCottage” is an ambiguous, beguil- One day Marcus sees a boy with a “flat ing tale in which the presence ofthe unsmiling mouth” and “hungry dark supernatural is entangled with—and pools” foreyes. He is both repelled and perhaps precipitated by—characters who attracted by this apparition. Struggling to are undergoing an emotional crisis. Ms deal with his losses, Marcus believes the Godwin’s interest lies not with the dead boy “had been waiting all this time…for but with the living, and how they learn to someone to wonder where he was—to lay their ghosts to rest. Lots more where that one came from The Economist June 10th 2017 Books and arts 75 Johnson Don’t go mad

Hyphens can be tricky, but they need not drive you crazy F YOU take hyphens seriously, you seurs should really insist that a hyphen is “Iwill surely go mad,” warns the style nota matteroftaste. Abestselling guide to manual of the Oxford University Press. punctuation was subtitled “The Zero Tol- This maxim is quoted in The Economist’s erance Approach to Punctuation”. Punc- own style book, which goes on about the tuation pros sniggered. The Economist, punctuation markforeight pages. like most other publications, would re- People can get very excited over things quire a hyphen (“Zero-Tolerance”) here. like the presence or lack of a hyphen in This hyphen is starkly different from “e-mail”. Most of the world is trending the one in “arch-rival”. It has a critical towards “email”; hyphens disappear over grammatical function, not just a stylistic time, in favour of the closed-up form. one. It tells the readers that several words (“Today” overtook “to-day” in frequency are to be taken together as a single modifi- around 1926 in America, according to data er. Youcan write “we have zero tolerance from Google Books, and a bit later than for bad punctuation,” but when “zero tol- that in Britain.) The Economist, being erance” is used to modify a noun, it acts a stylistically conservative, still prefers bitlike an adjective. Itdoesnotbecome an “e-mail”, but that may well change one adjective, as many people think. But tak- day even if absolutely nobody is con- en together, as a modifier, “zero-toler- fused by either form. ance” functions like a single word; hence English is a Germanic language that the hyphen. allows for many different kinds of com- Reading means parsing grammar on pounds, including those made from two the fly, a tricky task requiring concentra- adjectives (“blue-green”), two nouns rows about the marginal cases. De gustibus tion. Everything that helps with that does (“kitchen sink”), adjective-noun (“dark- non est disputandum, goes the saying: a favour to the reader. Strings of words room”), noun-adjective (“slate-blue”) and “there’s no arguing about taste.” Except with no punctuation can often be parsed so on. But which ones should be written that people argue endlessly about taste; a in several ways. The hyphen eliminates separately, which hyphenated and which truer phrase is “there’s no way of proving one possibility. This not only speeds up closed up? As so often in language, those your case in matters of taste.” De gustibus comprehension, but in some (rare) cases, looking for perfectly clear strictures will non est probandum. is crucial for avoiding ambiguity. The dif- be disappointed. Most of The Economist’s style book en- ference between a “third-world war” and The rules are mostly unofficial ones. try on hyphens consists of seemingly arbi- a “third world war” is nothing to sniff at, The shorter and more native (ie, Ger- trary rulings on disputable cases: “non-ex- and those selling a car might get rather manic) the roots are, the more likely they istent” but “nonaligned”, “arch-rival”, but more interest in the sale ifthey remember are to be closed up: you might call some- “archangel”. Still, a few patterns emerge: the hyphen in “a little-used car”. one who is behaving like a fish “fishlike”. “archrival” looks bad because of the un- This is not to be overdone. Most adjec- Butlongwordsbehave differently: should gainly “rchr” series of consonants in the tives modified by an adverb, like “highly someone behave like a cuttlefish, you are middle. We write “co-operate” and “re- educated”, need no hyphen. And the more likely to call them “cuttlefish-like”. elect” for an analogous reason: this time company advertising a “Metal-Watering That goes doubly for long words that breaking up vowels rather than conso- Can” on Amazon was presumably not came to English from French, Latin or nants that would be awkward together. trying to tempt rust aficionados. Fortu- Greek: almost no one closes up “rhino- The overarching rule is that, at the very nately, this is one rule that need not drive ceros-like” or “hippopotamus-like”. least, you should be consistent, so that anyone mad: a group of words used as a These hyphens have nothing to do readers don’t find “arch-rival” and “ar- single modifier should be hyphenated. with grammar, and everything to do with chrival” on the same page. Any other approach to hyphenation real- feel, which is why people get into such But in one case in particular, connois- ly should receive zero tolerance.

2 from vast slave-plantations in Jamaica. After he had accumulated his Jamai- He was a curious man in every sense. Sloane was president of the Royal Col- cana, he returned to London and set about His biographer has struggled with a short- lege of Physicians and the Royal Society collecting the rest of the world. In this he age ofanecdotal and humanising material. but he was not exactly a man of ideas. had the assistance of a large fortune, a vast That gives “Collecting the World” a some- What he liked was stuff. He was a man of network of contacts—he was reckoned to what static feel, like a cabinet ofcuriosities. the Enlightenment, but not a man remark- have 1,793 correspondents—and a limitless Little of Sloane’s stuff remains on display able for enlightened thought. An enemy curiosity, orperhaps a limitless appetite for in London, though there isstill a store ofhis called him “master ofonly scraps”. curious things. Jamaican specimensin the SirHansSloane In his early days Sloane spent a year in Sloane sold the lotto the nation posthu- herbarium at the Natural History Muse- Jamaica, working as a physician just as mously, for £20,000 (worth about £4m, or um. It is a reminder of that great tradition Britain was concentrating on acquiring an $5.2m, now), which he reckoned was a of learning, based around museums and empire. Prudently he stuck to water while quarter of its value, to be paid to his two libraries and emblematic of what the Brit- his patients drank themselves to death on daughters. Had the nation turned down ish Museum would come to describe as Madeira wine. This was the time when he this offer, his executors had instructions to being, “for the benefit of all studious and began to get serious about collecting. offerthe stuffto St Petersburg. curious persons, native and foreign”. 7 76 Courses

The Economist June 10th 2017 Courses 77

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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 $ latest qtr* 2017† latest latest 2017† rate, % months, $bn 2017† 2017† bonds, latest Jun 7th year ago United States +2.0 Q1 +1.2 +2.2 +2.2 Apr +2.2 Apr +2.2 4.3 May -481.2 Q4 -2.6 -3.5 2.14 - - China +6.9 Q1 +5.3 +6.7 +6.5 Apr +1.2 Apr +2.1 4.0 Q1§ +170.1 Q1 +1.6 -4.0 3.62§§ 6.79 6.57 Japan +1.3 Q1 +1.0 +1.4 +5.7 Apr +0.4 Apr +0.6 2.8 Apr +188.4 Apr +3.6 -5.1 0.03 109 107 Britain +2.0 Q1 +0.7 +1.6 +1.4 Mar +2.7 Apr +2.7 4.6 Feb†† -115.7 Q4 -3.4 -3.6 1.09 0.77 0.69 Canada +2.3 Q1 +3.7 +2.2 +5.4 Mar +1.6 Apr +1.9 6.5 Apr -48.4 Q1 -2.8 -2.7 1.41 1.35 1.28 Euro area Statistics+1.7 Q1 on+2.0 42 +1.8economies, +1.9 Mar +1.4 May +1.6 9.3 Apr +403.9 Mar +3.0 -1.4 0.26 0.89 0.88 Austria plus+2.3 Q1our monthly+5.7 +1.8 poll +3.3of Mar +2.1 Apr +1.9 5.5 Apr +6.6 Q4 +2.3 -1.3 0.52 0.89 0.88 Belgium forecasters+1.6 Q1 +2.6 +1.5 +2.6 Mar +1.9 May +2.2 6.8 Apr -2.0 Dec +1.0 -2.3 0.60 0.89 0.88 France +1.0 Q1 +1.8 +1.4 +2.0 Mar +0.8 May +1.3 9.5 Apr -27.4 Mar -1.2 -3.1 0.67 0.89 0.88 Germany +1.7 Q1 +2.4 +1.8 +1.8 Mar +1.5 May +1.7 3.9 Apr‡ +287.5 Mar +8.1 +0.5 0.26 0.89 0.88 Greece +0.8 Q1 +1.8 +1.2 +8.7 Mar +1.6 Apr +1.0 23.2 Feb -1.2 Mar -0.9 -1.0 6.11 0.89 0.88 Italy +1.2 Q1 +1.8 +1.0 +2.8 Mar +1.4 May +1.5 11.1 Apr +46.9 Mar +2.2 -2.3 2.29 0.89 0.88 Netherlands +3.4 Q1 +1.8 +2.2 +4.0 Mar +1.6 Apr +1.3 6.0 Apr +64.8 Q4 +8.8 +0.7 0.48 0.89 0.88 Spain +3.0 Q1 +3.3 +2.8 -10.2 Apr +1.9 May +2.1 17.8 Apr +26.2 Mar +1.6 -3.3 1.52 0.89 0.88 Czech Republic +3.9 Q1 +5.4 +3.0 -2.5 Apr +2.0 Apr +2.3 3.3 Apr‡ +2.3 Q4 +0.9 -0.5 0.79 23.4 23.8 Denmark +3.1 Q1 +2.4 +1.5 -5.6 Apr +1.1 Apr +1.1 4.3 Apr +26.5 Mar +7.8 -0.6 0.54 6.60 6.55 Norway +2.6 Q1 +0.9 +1.7 +3.3 Mar +2.2 Apr +2.4 4.5 Mar‡‡ +22.4 Q1 +5.0 +2.9 1.48 8.50 8.12 Poland +4.4 Q1 +4.5 +3.2 -0.6 Apr +1.9 May +2.0 7.7 Apr§ -0.1 Mar -1.0 -2.8 3.19 3.73 3.83 Russia +0.5 Q1 na +1.4 +2.4 Apr +4.1 May +4.2 5.3 Apr§ +34.9 Q1 +2.8 -2.2 8.13 56.9 65.0 Sweden +2.2 Q1 +1.7 +2.6 +0.8 Apr +1.9 Apr +1.6 7.2 Apr§ +22.0 Q1 +4.8 +0.3 0.44 8.69 8.14 Switzerland +1.1 Q1 +1.1 +1.4 -1.3 Q1 +0.4 Apr +0.5 3.3 Apr +70.6 Q4 +9.7 +0.2 -0.17 0.96 0.97 Turkey +3.5 Q4 na +2.9 +2.8 Mar +11.7 May +10.2 12.6 Feb§ -33.0 Mar -4.5 -2.4 10.49 3.54 2.90 Australia +1.7 Q1 +1.1 +2.6 -0.8 Q1 +2.1 Q1 +2.2 5.7 Apr -25.0 Q1 -1.5 -1.8 2.39 1.32 1.34 Hong Kong +4.3 Q1 +2.9 +3.0 -0.9 Q4 +2.1 Apr +1.6 3.2 Apr‡‡ +14.9 Q4 +6.6 +1.5 1.18 7.79 7.77 India +6.1 Q1 +7.2 +7.2 +2.7 Mar +3.0 Apr +4.6 5.0 2015 -11.9 Q4 -1.2 -3.2 6.57 64.3 66.8 Indonesia +5.0 Q1 na +5.2 +5.5 Mar +4.3 May +4.2 5.3 Q1§ -14.6 Q1 -1.7 -2.2 6.93 13,305 13,270 Malaysia +5.6 Q1 na +5.2 +4.5 Mar +4.4 Apr +4.0 3.4 Mar§ +6.6 Q1 +1.4 -3.0 3.87 4.26 4.06 Pakistan +5.7 2017** na +5.5 +10.5 Mar +5.0 May +4.6 5.9 2015 -7.2 Q1 -2.6 -4.8 8.96††† 105 105 Philippines +6.4 Q1 +4.5 +6.5 +11.1 Mar +3.1 May +3.3 6.6 Q1§ +0.6 Dec +0.4 -2.8 4.63 49.5 46.1 Singapore +2.7 Q1 -1.3 +2.6 +6.7 Apr +0.4 Apr +1.3 2.3 Q1 +59.0 Q1 +19.0 -1.0 2.06 1.38 1.35 South Korea +3.0 Q1 +4.3 +2.7 +1.7 Apr +2.0 May +1.9 4.2 Apr§ +93.0 Apr +6.0 -0.5 2.16 1,124 1,163 Taiwan +2.6 Q1 +3.8 +2.3 -0.6 Apr +0.6 May +0.5 3.8 Apr +69.1 Q1 +12.3 -0.8 1.02 30.1 32.3 Thailand +3.3 Q1 +5.2 +3.5 -1.7 Apr nil May +0.8 1.3 Apr§ +42.3 Q1 +11.8 -2.4 2.34 34.0 35.2 Argentina -2.1 Q4 +1.9 +2.5 -2.5 Oct +27.5 Apr‡ +24.3 7.6 Q4§ -15.0 Q4 -2.7 -5.7 na 16.0 13.8 Brazil -0.4 Q1 +4.3 +0.6 -4.5 Apr +4.1 Apr +4.1 13.6 Apr§ -19.8 Apr -1.3 -7.7 10.36 3.27 3.47 Chile +0.1 Q1 +0.7 +1.6 -4.2 Apr +2.7 Apr +2.8 6.7 Apr§‡‡ -5.0 Q1 -1.4 -2.2 4.07 668 681 Colombia +1.1 Q1 -0.9 +2.0 +4.8 Mar +4.4 May +4.2 8.9 Apr§ -12.5 Q4 -3.8 -3.2 6.17 2,902 2,949 Mexico +2.8 Q1 +2.7 +1.9 +3.4 Mar +5.8 Apr +5.5 3.6 Apr -22.0 Q1 -2.5 -2.4 7.13 18.2 18.6 Venezuela -8.8 Q4~ -6.2 -7.0 na na +591 7.3 Apr§ -17.8 Q3~ -0.6 -19.6 10.43 10.0 9.99 Egypt +3.8 Q4 na +3.5 +13.7 Mar +31.5 Apr +22.5 12.0 Q1§ -20.1 Q4 -5.8 -9.3 na 18.1 8.88 Israel +4.0 Q1 +1.4 +3.6 -1.5 Mar +0.7 Apr +1.0 4.4 Apr +12.4 Q4 +4.2 -2.5 2.00 3.54 3.83 Saudi Arabia +1.7 2016 na -0.5 na -0.6 Apr +2.2 5.6 2015 -24.9 Q4 +4.0 -7.1 3.68 3.75 3.75 South Africa +1.0 Q1 -0.7 +1.0 -2.4 Mar +5.3 Apr +5.7 27.7 Q1§ -9.5 Q4 -3.5 -3.1 8.48 12.8 14.9 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. †††Dollar-denominated bonds. The Economist June 10th 2017 Economic and ﬁnancial indicators 79

Markets % change on The Economist poll of forecasters, June 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 Jun 7th week currency terms 2017 2018 2017 2018 2017 2018 2017 2018 United States (DJIA) 21,136.2 +0.6 +7.0 +7.0 Australia 2.1 / 2.9 2.5 / 3.4 2.6 (2.7) 3.0 2.2 2.3 -1.5 (-1.3) -2.2 China (SSEA) 3,288.8 +0.7 +1.2 +3.5 Brazil nil / 1.3 1.4 / 3.6 0.6 (0.7) 2.3 (2.5) 4.1 (4.3) 4.6 (4.5) -1.3 (-1.4) -1.7 (-1.8) Japan (Nikkei 225) 19,984.6 +1.7 +4.6 +11.5 Britain 1.0 / 2.0 0.7 / 1.8 1.6 1.3 (1.2) 2.7 2.7 (2.8) -3.4 (-3.3) -3.0 (-2.8) Britain (FTSE 100) 7,525.0 +0.1 +5.3 +9.9 Canada 1.7 / 2.8 1.5 / 2.7 2.2 (2.1) 2.1 (2.0) 1.9 1.9 -2.8 (-2.9) -2.5 (-2.6) Canada (S&P TSX) 15,464.6 +0.7 +1.2 +0.7 China 6.5 / 6.8 4.6 / 7.0 6.7 (6.6) 6.3 (6.2) 2.1 (2.3) 2.3 (2.4) 1.6 (1.7) 1.6 (1.7) Euro area (FTSE Euro 100) 1,213.3 +0.1 +9.1 +16.5 France 1.2 / 1.7 1.4 / 2.0 1.4 (1.3) 1.6 (1.5) 1.3 1.3 -1.2 (-1.1) -1.2 (-1.1) Euro area (EURO STOXX 50) 3,554.2 nil +8.0 +15.4 Germany 1.3 / 2.1 1.4 / 2.2 1.8 (1.6) 1.7 (1.6) 1.7 (1.8) 1.6 (1.7) 8.1 7.7 (7.8) Austria (ATX) 3,171.6 +1.5 +21.1 +29.4 India 6.3 / 7.5 6.8 / 8.0 7.2 (7.1) 7.6 (7.5) 4.6 4.9 (4.8) -1.2 (-1.1) -1.6 (-1.4) Belgium (Bel 20) 3,878.3 -0.3 +7.5 +14.9 Italy 0.8 / 1.3 0.7 / 1.2 1.0 (0.8) 0.9 (0.8) 1.5 (1.4) 1.2 2.2 (2.4) 2.0 (2.1) France (CAC 40) 5,269.2 -0.3 +8.4 +15.7 Japan 0.9 / 1.7 0.5 / 1.7 1.4 (1.3) 1.0 (1.1) 0.6 (0.7) 0.9 (1.0) 3.6 (3.5) 3.6 (3.7) Germany (DAX)* 12,690.1 +0.6 +10.5 +18.1 Greece (Athex Comp) 777.5 +0.3 +20.8 +29.0 Russia 0.8 / 2.0 0.9 / 3.3 1.4 1.7 (1.8) 4.2 (4.3) 4.2 2.8 2.7 (2.6) Italy (FTSE/MIB) 20,760.0 +0.1 +7.9 +15.3 Spain 2.4 / 3.0 1.6 / 2.8 2.8 (2.6) 2.3 (2.1) 2.1 1.5 1.6 1.6 Netherlands (AEX) 521.7 -0.5 +8.0 +15.3 United States 2.0 / 2.9 1.8 / 3.4 2.2 2.4 (2.5) 2.2 (2.3) 2.1 (2.3) -2.6 (-2.7) -2.8 Spain (Madrid SE) 1,092.4 nil +15.8 +23.7 Euro area 1.5 / 2.0 1.4 / 2.1 1.8 (1.7) 1.6 (1.5) 1.6 1.4 (1.5) 3.0 (3.1) 3.0 Czech Republic (PX) 1,006.0 +0.4 +9.2 +19.6 Sources: Bank of America, Barclays, BNP Paribas, Citigroup, Commerzbank, Credit Suisse, Decision Economics, Deutsche Bank, Denmark (OMXCB) 909.4 +1.2 +13.9 +21.6 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) 34,927.0 +1.1 +9.1 +16.8 Norway (OSEAX) 780.8 -0.1 +2.1 +3.7 Poland (WIG) 60,723.5 +1.1 +17.3 +31.6 Other markets The Economist commodity-price index Russia (RTS, $ terms) 1,041.2 -1.1 -9.6 -9.6 2005=100 Othermarkets % change on % change on Sweden (OMXS30) 1,637.9 -0.1 +8.0 +13.0 Dec 30th 2016 The Economist commodity-priceone index one Switzerland (SMI) 8,908.3 -1.2 +8.4 +14.3 Index one in local in $ May 30th Jun 6th* month year Turkey (BIST) 98,331.5 +0.8 +25.8 +25.9 Jun 7th week currency terms Dollar Index Australia (All Ord.) 5,707.8 -0.9 -0.2 +3.8 United States (S&P 500) 2,429.3 +0.7 +8.5 +8.5 All Items 142.2 140.7 -0.3 -0.2 Hong Kong (Hang Seng) 25,974.2 +1.2 +18.1 +17.4 United States (NAScomp) 6,275.1 +1.2 +16.6 +16.6 Food 153.3 153.0 +0.1 -10.6 India (BSE) 31,190.6 +0.1 +17.1 +23.4 China (SSEB, $ terms) 323.8 +0.9 -5.3 -5.3 Indonesia (JSX) 5,707.8 -0.5 +7.8 +9.2 Japan (Topix) 1,597.1 +1.8 +5.2 +12.1 Industrials Malaysia (KLSE) 1,785.9 +1.1 +8.8 +14.4 Europe (FTSEurofirst 300) 1,530.5 -0.1 +7.1 +14.4 All 130.6 127.8 -0.9 +16.8 Pakistan (KSE) 50,144.6 -0.9 +4.9 +4.4 World, dev'd (MSCI) 1,926.1 +0.7 +10.0 +10.0 Nfa† 134.2 130.9 -2.4 +9.6 Singapore (STI) 3,230.5 +0.6 +12.1 +17.4 Emerging markets (MSCI) 1,015.9 +1.1 +17.8 +17.8 Metals 129.0 126.5 -0.3 +20.3 South Korea (KOSPI) 2,360.1 +0.5 +16.5 +25.8 World, all (MSCI) 467.4 +0.8 +10.8 +10.8 Sterling Index Taiwan (TWI) 10,210.0 +1.7 +10.3 +18.2 World bonds (Citigroup) 929.4 +0.5 +5.1 +5.1 All items 201.0 198.4 +0.1 +12.7 Thailand (SET) 1,569.0 +0.5 +1.7 +7.0 EMBI+ (JPMorgan) 830.7 +0.9 +7.6 +7.6 Argentina (MERV) 22,355.6 nil +32.1 +30.7 Hedge funds (HFRX) 1,236.6§ +0.4 +2.7 +2.7 Euro Index Brazil (BVSP) 62,954.7 +0.4 +4.5 +3.7 Volatility, US (VIX) 10.5 +10.4 +14.0 (levels) All items 158.1 155.3 -3.6 +0.6 Chile (IGPA) 24,605.6 +1.0 +18.7 +18.9 CDSs, Eur (iTRAXX)† 62.3 -0.2 -13.7 -7.8 Gold Colombia (IGBC) 10,818.6 +1.3 +7.0 +11.1 CDSs, N Am (CDX)† 60.7 -1.5 -10.4 -10.4 $ per oz 1,262.5 1,295.3 +6.4 +4.3 Mexico (IPC) 49,218.6 +0.9 +7.8 +21.7 Carbon trading (EU ETS) € 5.0 -0.2 -24.5 -19.3 West Texas Intermediate Venezuela (IBC) 82,593.6 +9.7 +161 na Sources: IHS Markit; Thomson Reuters. *Total return index. $ per barrel 49.7 48.2 +5.0 -4.5 Egypt (EGX 30) 13,626.8 +2.2 +10.4 +10.4 †Credit-default-swap spreads, basis points. §June 5th. Israel (TA-100) 1,292.6 -0.2 +1.2 +10.0 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) 6,933.3 +0.9 -4.2 -4.2 Ewart; Thomson Reuters; Urner Barry; WSJ. *Provisional South Africa (JSE AS) 52,251.9 -2.4 +3.2 +10.3 series, go to: Economist.com/indicators †Non-food agriculturals. 80 Obituary Yu Zhijian The Economist June 10th 2017

were broke), and when they hectored the crowds at the railway station more than 3,000 yuan was stuﬀed in their donations box. That gave them the train fare north to Beijing, where they had never been, and they crammed on, standing almost all the way, to bring the regime down.

The outlaw band How to do it, though? In that May of 1989 the student-led protests were going strong, but his fire-breathing gang were disdained. They were older, had jobs, came from the provinces; they didn’t fit in. Their extra- long counter-revolutionary banner was called irresponsible by the students, so careful, so stupidly polite, kneeling down to present theirpetition to the prime minister, like the subjects of a feudal monarch. Yu Zhijian refused to kneel to anyone. No, he would lead a band of outlaws like the bandit-heroes of “Water Margin”, his favourite medieval tale. Too bad there were only three ofthem, and not108. His thoughts turned to the giant portrait of Mao Zedong that had hung since 1949 over Tiananmen Square. There was the source of evil, the bastard despot whose One in the eye for the Chairman cult had to end before China could remake itself, the man he had blubbed so hard for when he died in 1976, competing with his classmates to see who could wail loudest. The portrait was much too high and heavy to take down. But what symbolism, even Yu Zhijian, defilerofMao’s portrait during the protests in Tiananmen Square, died art, ifthey could defile it! Hence the eggs. on March 30th, aged 53 On the day they hung up two banners: HE work was some of the trickiest Yu ers launched their missiles. A shame; he “Time to end 5,000 years of tyranny! Time TZhijian and his friends had ever done. would have got more on target. to lay the cult of Mao to rest!” Then they Firsttheyhad to breakeach egg, 20 ofthem, They were all in their 20s in the spring hurled the eggs, which mostly fell short, neatly over a bowl. Then they had to fill of1989, unbelievably pumped up with po- though a blue one cracked Mao’s eyebrow each one with oil paint, dark blue, red or litical fervour. Literature had been their and ran down his nose. At once they were yellow, and glue it back together. Whose passion, again at his instigation, because seized by the students, who disowned lousy scheme was this? he thought. Lousy his head had been spinning since high them and handed them over to the securi- except for the giant omelette, with spring school with Byron, Shelley, Hemingway, ty forces: an act which did not save the stu- onions, they were going to devour after- Kant and Nietzsche, as well as the more fa- dents from the massacre later. Yu Zhijian wards? Well, his. He had realised that eggs miliar poets ofthe Tang dynasty. Before the heard the gunfire in the square from his jail by themselves were too pale to leave much Deed with the Eggs, revellingin impending cell, like someone sautéeing peas in a pan. of a splash. So here he was sticky-fingered doom, he wrote a last letter to his family. It They were all jailed, for almost 12 years in Beijing, working like a snail, when in- was full ofByron. in his case, as “rapists of the Great Leader”. side he was jumping round like the Mon- At home in Liuyang the friends would Afterwards they fled into exile; he ended key King, able to fly 22,000km in one som- crash together at his place and talk litera- up in Indianapolis. With a wife, a son, dia- ersault, do magic with every hair of his ture orphilosophyall night. Afterthe death betes and not much money, it was hard to body, and freeze demons. Ready to over- that spring of Hu Yaobang, a reformist forget by. His main job was looking after Yu turn China, in fact. mer general secretary of the party, the all- Dongyue, who had lost his mind in prison. There were three of them, all from nighters switched to politics. They seemed He felt that heartbreak was his fault. Liuyang in Hunan province: himself, his to be the only people in that stuck-in-the- Apart from that, no regrets about the classmate Lu Decheng, a mechanic for the mud town who cared whether China fes- eggs. Just worries that his fervent gesture bus company, and Yu Dongyue, no rela- tered in authoritarian corruption or em- would fade from minds, and that the spection, just a poetry-scribbling short-sighted braced democracy. A bunch of hotheads, tre of Mao would remain. Sadly, he was friend, who wrote about art for the local waiting forthe hour to strike. right on both counts. He and his friends, paper. Yu Zhijian was not the eldest, but It was his idea, using proper ink-stone “all average nobodies”, were forgotten in the tallest and fastest, so with his long legs and ink-brush, to write slogans in Hu’s exile, his death largely unnoticed and his he tended to take the lead. He taught at a honour shouting “Democracy! Freedom!” memories, recounted to the poet Liao primary school in town until, because he and stick them round a few streets, which Yiwu for a book, untranslated until now. kept griping, he was demoted to one in the made people tut. But at Changsha, the pro- Meanwhile Mao’s portrait, replaced mere countryside. Troublemakerwas his middle vincial capital, he and his friends found hours after the eggs landed and many name. In the Deed with the Eggshe was the much more sympathy. Bus-drivers refused times since, continues to stare out over one who held people back while the oth- to take their fares (just as well, since they China from the Gate ofHeavenly Peace. 7

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