How Brexit threatens Northern Ireland

Trump and trade: the danger of the deal

Iraq, on the right track at last

If bees could talk MARCH 31ST–APRIL 6TH 2018 AI¯spy

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Contents The Economist March 31st 2018 7

11 The world this week 36 Moldova Cheers for Moldovan wine 36 Spain and separatism Leaders Extraditing Puigdemont 15 Workplace of the future 37 Charlemagne AI-spy Going Dutch 16 Nuclear proliferation Making Satan great again United States 16 America and world trade The danger of the deal 38 Team Trump March madness 17 Ireland and Brexit The United Identity theft 39 Obamacare Northern Ireland Escape routes Kingdom underestimates the 18 The state of Iraq damage it is doing to its most Better days in Baghdad 40 Electoral districts Drawing the line fragile region: leader, page17. On the cover Twenty years after a landmark 40 Special elections As it pushes beyond the peace agreement, questions Letters Attempts to avoid them tech industry, artificial carefully set aside for future 20 On China, Colombia, intelligence could make 41 Suicide generations have been forced Stephen Hawking, workplaces fairer—or more Self-destructing back onto the agenda, page 22 sensible people oppressive: leader, page15. 42 Spanish in America AI has big consequences for The long adiós companies, consumers and Briefing 43 Lexington workers. See our special 22 Northern Ireland The warrior look report after page 46 Past and future collide The Americas The Economist online Britain 44 Mexico Anaya under fire Daily analysis and opinion to 25 Evidence in schools supplement the print edition, plus The education experiment 45 Bello audio and video, and a daily chart 26 Cartographical controversy Peru’s president Economist.com Boxed in 46 Uruguay’s economy E-mail: newsletters and 26 Relitigating Brexit The magic of Montevideo Hawkish America As the mobile edition Did Leave cheat? Iran nuclear deal heads for the Economist.com/email 27 Cambridge Analytica Special report: rocks, the biggest losers will Print edition: available online by A new industry grows up AI in business be Europe and America: 7pm London time each Thursday 27 Popular pastimes GrAIt expectations leader, page16. How the Economist.com/printedition A quizzical country After page 46 agreement that curtails Iran’s Audio edition: available online 30 NHS funding nuclear ambitions looks to download each Friday How to spend it doomed, page 60 Economist.com/audioedition Middle East and Africa 31 Bagehot Labour’s anti-Semitism 48 Iraq after Islamic State Under construction 51 African migrants Europe Homeward bound 33 The “identitarian” right 51 Illegal charcoal Volume 426 Number 9085 White, right and pretentious A very black market Published since September1843 34 Russian diplomats 52 Comic books in Africa to take part in "a severe contest between The defiant pariah intelligence, which presses forward, and Sub-Saharan superheroes an unworthy, timid ignorance obstructing 35 Italy’s populists our progress." Birds of a feather Editorial offices in London and also: 35 Media in Turkey Beijing, Berlin, Brussels, Cairo, Chicago, Madrid, Mexico City, Moscow, Mumbai, Nairobi, New Delhi, It’s an Erdogan- Good news from Iraq Fifteen New York, Paris, San Francisco, São Paulo, Seoul, eat-Dogan world years after America led the Shanghai, Singapore, Tokyo, Washington DC invasion of Iraq, the benighted country is at last finding a new sense of unity: leader, page 18. Will the new spirit hold? Page 48

1 Contents continues overleaf 8 Contents The Economist March 31st 2018

Asia 74 India’s economy Chugging along 53 China and North Korea Conviviality, not clarity 75 Oil futures China’s crude gambit 54 Pakistan’s judiciary Justice on the loose 75 American incomes Home improvement 55 Nepal and India A prickly pair 76 Funeral finance Death and the salesmen 55 Tourism in the Philippines 77 Free exchange A palm-fringed cesspool Wakandanomics Chinese abroad The long 56 India’s armed forces Martin Luther King He was arm of Chinese law- Paper elephant Science and technology assassinated half a century enforcement has ways of 78 Beekeeping ago. His remarkable speeches repatriating suspected What’s the buzz? combined folk religion, criminals, page 57. The China theology and the hard-earned government is trying to 57 Pursuing fugitives abroad 79 Education policy wisdom of his campaigns, prevent a vocal Uighur Forbidding kingdom Selective evidence page 81 diaspora forming, page 58 58 Repatriating Uighurs 80 Cardiology Nowhere to hide Patching broken hearts 59 Banyan 80 Data markets Subscription service Exchange value For our full range of subscription offers, Xi Jinping, Chairman of including digital only or print and digital Everything combined visit Economist.com/offers Books and arts You can also subscribe by mail or telephone at International 81 MLK’s speeches, the details provided below: 60 The Iran nuclear deal 50 years on Telephone: +44 (0) 845 120 0983 A kettle of hawks Like a mighty stream Web: Economist.com/offers 83 Refugee lives Post: The Economist Subscription Centre, Out of many, some P.O. Box 471, Business Haywards Heath, 83 Solar energy’s future RH16 3GY 63 Advertising agencies Rays of hope UK Tough on trade The Trump Mad men adrift administration’s strategy has 84 Johnson Subscription for 1 year (51 issues) 64 Ride-hailing in Build it and they will come Print only UK – £145 many risks and few upsides, South-East Asia page 71. Even if a trade war is Grabbing back averted and China makes 88 Economic and financial Principal commercial offices: concessions, America’s policy 65 Mexican mobile telecoms Red hot indicators The Adelphi Building, 1-11John Adam Street, is economically muddled and Statistics on 42 economies, London WC2N 6HT politically toxic: leader, page16 66 Consumer goods plus a closer look at Tel: +44 (0) 20 7830 7000 Compos menses mergers and acquisitions Rue de l’Athénée 32 66 Spain’s Mediapro 1206 Geneva, Switzerland Tel: +4122 566 2470 Political football Obituary 750 3rd Avenue, 5th Floor, New York, NY 10017 67 European oil majors Tel: +1212 5410500 From Mars to Venus 90 José Abreu Music as salvation 1301Cityplaza Four, 68 Schumpeter 12 Taikoo Wan Road, Taikoo Shing, Hong Kong Corporate crises Tel: +852 2585 3888 Other commercial offices: Chicago, Dubai, Frankfurt, Los Angeles, Finance and economics Paris, San Francisco and Singapore 71 US-China trade Tumbling down Bees Whatever are they 72 China’s supply chains complaining about? A new Collateral damage app listens in, page 78 73 Buttonwood Volatile markets

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The world this week The Economist March 31st 2018 11

nerve agent. More than 25 in $4bn-worth ofpublic-works Politics other countries and NATO contracts, which also involved have supported the move the Brazilian Development against Russia by announcing Bank. In return, Odebrecht their own expulsions. pledged $35m in donations to Mr Maduro’s presidential A fire in a shopping complex in campaign. Most ofthe pro- the Siberian city ofKemerovo jects, including a metro line, killed at least 64 people, more were never finished. than 40 ofthem children. The government’s slow response Brazil’s president, Michel triggered huge demonstra- Temersaid that he plans to run tions; some called forPresident for re-election in October, Egyptians voted in a presi- Vladimir Putin to resign. despite popularity ratings in dential election, which Abdel- the single digits. He later an- Fattah al-Sisi, the incumbent, is John Bolton said he favoured Italy’s parliamentarians elect- nounced that Henrique Mei- sure to win. The authorities keeping up the pressure on ed new speakers for the Senate relles, the finance secretary, prevented any serious chal- North Korea in the run-up to and the Chamber ofDeputies. will resign in order to launch a lengers from running. proposed talks on its nuclear Some saw the choices as a sign campaign ofhis own. programme. Mr Bolton was that a coalition government Kim-Xi talks on nuclear pickle speaking three days after involving the two big populist The proxy war Kim Jong Un, North Korea’s President Donald Trump ap- parties, the Northern League The Houthi rebel group in dictator, visited China in what pointed him as his national and the Five Star Movement, is Yemen fired a barrage ofmis- was his first trip abroad since security adviser, replacing H.R. in the offing. siles at Saudi Arabia, which is taking power in 2011. He reiter- McMaster. Mr Bolton has in bombing the Iranian-backed ated to Xi Jinping, China’s the past advocated pre-emp- fighters in a bloody campaign. president, his offerto give up tive military strikes to prevent The Saudis claim to have shot nuclear weapons in exchange the rogue regime in Pyongyang down several missiles, but forsecurity guarantees. He is from acquiring the ability to hit debris fell on a home in supposed to meet South America with nuclear missiles. Riyadh, killing one person. Korea’s president in April and He has also suggested bomb- Donald Trump in May. ing Iran’s nuclear reactors. In a deal arranged by Russia, some 7,000 people were al- Lee Myung-bak, a former Mr Trump signed a $1.3trn lowed to leave Eastern Ghouta, South Korean president, was spending bill passed by Con- as Syrian rebels surrendered charged with corruption in gress that avoids a government one oftheir last strongholds to relation to bribes he allegedly shutdown and funds public the government after a bom- tookfrom companies, which services until October. The Violent protests erupted in bardment lasting months. he denies. Mr Lee’s successor, president had threatened to Catalonia following the arrest ParkGeun-hye, is in jail await- veto the bill because, among ofthe Spanish region’s leader Jacob Zuma, the scandal- ing the verdict in her trial on other things, it did not resolve in Germany. Carles Puigde- plagued formerpresident of charges ofbribery. the legal status ofthe Dream- mont is wanted in Spain on South Africa, was summoned ers (immigrants brought to charges ofsedition fordeclar- to appear in court on April 6th Malaysia’s government America illegally as children), ing Catalan independence to face corruption charges introduced a bill in parliament or provide the full $25bn to after an illegal referendum. related to an old arms deal. to outlaw fake news, with build his border wall. German police tookhim into offenders facing possible custody as he tried to return to The ruling coalition in prison sentences ofup to ten Tens ofthousands ofpeople, Belgium, where he has been Ethiopia named Abiy Ahmed years. A deputy minister said many ofthem high-school living in exile since October. as its new chairman, signalling that any news not verified by students, rallied in Washing- that he will replace Hailema- the government about a huge ton, DC, in favour ofgun con- A new broom riam Desalegn as prime corruption scandal involving trol. The March forour Lives Martín Vizcarra was sworn in minister. Abiy is the chairman the government would be was led by survivors ofthe as Peru’s president, following ofthe Oromo People’s deemed “fake”. The opposition mass shooting in February at a the resignation ofPedro Pablo Democratic Organisation, said this was a blatant attempt school in Parkland, Florida. Kuczynski. Mr Kuczynski was which is part ofthe ruling to silence criticism ahead of an The measures that the demon- facing impeachment, after coalition but has been sympa- election this year. strators called for, such as evidence emerged linking him thetic to protests against the banning semi-automatic to Odebrecht, a Brazilian con- government. A prominent politician was weapons, are unlikely to be struction company involved in sentenced to 14 years in prison passed by Congress. corruption across Latin Ameri- José Filomeno dos Santos, the in India forrunning a “fodder ca. “We’ve had enough,” said son ofAngola’s former scam”. Lalu Prasad Yadav, a We all stand together Mr Vizcarra in his inaugural president, was accused of formerchiefminister ofthe America decided to expel 60 speech. fraud and embezzlement. Mr impoverished state ofBihar, Russian diplomats in protest dos Santos had been chairman was convicted ofinventing at the attempted murder on Court documents emerged ofAngola’s sovereign-wealth imaginary herds of cows and British soil ofa formerspy, showing that Nicolás Maduro, fund until João Lourenço, the goats in order to obtain public Sergei Skripal, and his daugh- Venezuela’s socialist presi- current president, removed money forfood and medicines ter. They were attacked with a dent, gave Odebrecht priority him in January. forthem. 1 12 The world this week The Economist March 31st 2018

TeslaMotors’ share price German bank’s investors are growth in renewables, the Business tanked by 8%. Moody’s down- unhappy about its run of share offossil fuels in the graded the company’s credit annual losses and anaemic world’s energy mix remains at America and China made rating because ofthe “signif- share price. 81%, the same level it has been efforts to step backfrom a icant shortfall”in production forthree decades. damaging trade war. Officials ofits new Model 3 electric car. Get your coat from both countries held talks One ofits Model Xcars also Under pressure from investors SoftBank’s technology fund after President Donald Trump crashed, killing the driver and to increase shareholder value signed a memorandum of announced plans to impose raising fresh concerns about after a bruising battle last year understanding with Saudi levies on $60bn-worth of self-driving technologies to fend offa takeover bid, Arabia to expand solar power Chinese imports foralleged following the first fatal acci- AkzoNobel strucka deal to in the kingdom. Ifcompleted, unfairtrade practices. China is dent involving a pedestrian sell its specialty-chemicals the $200bn project would add said to have offered to buy and an Uber car. division to a consortium led by 200 gigawatts ofsolar capaci- more American semiconduc- Carlyle, a private-equity firm. ty; the world currently has tors to help reduce its trade Uber sold its business in The Dutch paint-and-coatings around 400GW ofcapacity. surplus with the United States; South-East Asia to Grab,arival group valued the acquisition at it may also hasten a measure to based in Singapore with oper- €10.1bn ($12.6bn). Remington filed forbankrupt- allow foreign companies to ations in almost 200 cities cy protection. The gunmaker, take majority stakes in Chinese throughout the region. It is the founded in1816, piled on debt securities firms. But China latest instance ofUber exiting a CO2 emissions when investors pulled out announced proposed tariffson market in which it is not the Global, energy-related, gigatonnes following the Sandy Hook 128 American products, biggest ride-hailing firm, hav- 40 school massacre in 2012, in including fruit, porkand wine, ing reached similar agree- which the gunman used a 30 in response to earlier levies on ments in China and Russia. Bushmaster rifle, a brand steel and aluminium. 20 owned by Remington. A federal appeals court found 10 The EU, Argentina, Australia, that Google’s use ofOracle’s It’s a small(er) world Brazil and South Korea joined Java technology in its Android 0 Qantas began operating the 2000 05 10 15 17 Canada and Mexico in gaining operating system did not first direct flights from Austra- Source: International Energy Agency exemptions from America’s constitute “fair use” under lia to Britain. The Australian punitive tariffson steel and copyright law,overturning a Global energy-related carbon- airline now flies passengers aluminium imports. South jury’s decision that had fa- dioxide emissions grew by 14,498km non-stop from Perth Korea won a permanent voured Google. The court 1.4% last year, according to the to London in Boeing Dreamlin- exemption by agreeing to ordered that the case be re- International Energy Agency, er planes. The 28,996km round revise its free-trade pact with heard to settle damages. to a record 32.5 gigatonnes. trip can be completed in just America. The new deal im- Some big economies, such as over 40 hours, including a poses quotas on South Korea’s The board of Deutsche Bank America and Japan, saw their generous few hours in steel exports and extends was reported to be seeking a emissions decrease; Britain’s between forsightseeing. tariffsforits truckmakers. replacement forJohn Cryan as fell by 3.8%. Asian countries chiefexecutive, two years accounted fortwo-thirds of the For other economic data and A trade off before his contract ends. The global increase. Despite the news see Indicators section Markets see-sawed. Stock- markets plunged when Amer- ica proposed tariffson China, causing one measure ofmarket volatility, the VIX, to soar by 30%. They bounced backon hopes ofa negotiated out- come. The Dow Jones Industri- al Average jumped 669 points in a day, the third-largest in- crease to date by that measure.

Facebook’s share price took another hammering, after America’s Federal Trade Com- mission opened an investiga- tion into its privacy practices following the scandal in which data on 50m users were ob- tained by a political-analytics firm. MarkZuckerberg has been asked to attend hearings in Congress, where he has few friends. Fears ofregulation caused an index often Ameri- can tech firms, the FANG+, to sufferits biggest one-day loss. YOU’LL KNOW YOU’RE HOME THE MOMENT YOU ARRIVE

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Leaders The Economist March 31st 2018 15 AI-spy

As it pushes beyond the tech industry, artificial intelligence could make workplaces fairer—ormore oppressive RTIFICIAL intelligence (AI)is ten have biases but algorithms, if designed correctly, can be Abarging its way into busi- more impartial. Software can flag patterns that people might ness. As our special report this miss. Textio, a startup that uses AI to improve job descriptions, week explains, firms of all types hasfound thatwomen are likelierto respond to a job thatmen- are harnessing AI to forecast de- tions “developing” a team rather than “managing” one. Algo- mand, hire workers and deal rithms will pick up differences in pay between genders and with customers. In 2017 compa- races, as well as sexual harassment and racism that human nies spent around $22bn on AI- managers consciously or unconsciously overlook. related mergers and acquisitions, about 26 times more than in Ye t AI’s benefits will come with many potential drawbacks. 2015. The McKinsey Global Institute, a think-tankwithin a con- Algorithmsmaynotbe free ofthe biasesoftheirprogrammers. sultancy, reckons that just applying AI to marketing, sales and They can also have unintended consequences. The length ofa supply chains could create economic value, including profits commute may predict whether an employee will quit a job, and efficiencies, of $2.7trn over the next 20 years. Google’s but this focus may inadvertently harm poorer applicants. Old- boss has gone so far as to declare that AI will do more for hu- er staff might work more slowly than younger ones and could manity than fire or electricity. risklosing their positions ifall AI looks foris productivity. Such grandiose forecasts kindle anxiety as well as hope. And surveillance may feel Orwellian—a sensitive matter Many fret that AI could destroy jobs faster than it creates them. now that people have begun to question how much Facebook Barriers to entry from owning and generating data could lead and other tech giants know about their private lives. Compa- to a handful ofdominant firms in every industry. nies are starting to monitor how much time employees spend Less familiar, butjust as important, is how AI will transform on breaks. Veriato, a software firm, goes so far as to track and the workplace. Using AI, managers can gain extraordinary log every keystroke employees make on their computers in or- control over their employees. Amazon has patented a wrist- der to gauge how committed they are to their company. Firms band that tracks the hand movements of warehouse workers can use AI to sift through not just employees’ professional and uses vibrations to nudge them into being more efficient. communications but their social-media profiles, too. The clue Workday, a software firm, crunches around 60 factors to pred- is in Slack’s name, which stands for “searchable log of all con- ict which employees will leave. Humanyze, a startup, sells versation and knowledge”. smart ID badges that can track employees around the office and reveal how well they interact with colleagues. Tracking the trackers Surveillance at work is nothing new. Factory workers have Some people are better placed than others to stop employers longclocked in and out; bossescan alreadysee whatidle work- going too far. If your skills are in demand, you are more likely ers do on their computers. But AI makes ubiquitous surveil- to be able to resist than if you are easy to replace. Paid-by-the- lance worthwhile, because everybitofdata ispotentially valu- hour workers in low-wage industries such as retailing will be able. Few laws govern how data are collected at work, and especially vulnerable. That could fuel a resurgence of labour many employees unguardedly consent to surveillance when unions seeking to represent employees’ interests and to set they sign their employment contract. Where does all this lead? norms. Even then, the choice in some jobs will be between be- ing replaced by a robot or being treated like one. Trust and telescreens As regulators and employers weigh the pros and cons of AI Start with the benefits. AI ought to improve productivity. Hu- in the workplace, three principles ought to guide its spread. manyze merges data from its badges with employees’ calen- First, data should be anonymised where possible. Microsoft, darsand e-mailsto workout, say, whetheroffice layouts favour for example, has a product that shows individuals how they teamwork. Slack, a workplace messaging app, helps managers manage their time in the office, but gives managers informa- assess how quickly employees accomplish tasks. Companies tion only in aggregated form. Second, the use of AI ought to be will see when workers are not just dozing off but also misbe- transparent. Employees should be told what technologies are having. They are starting to use AI to screen for anomalies in being used in their workplaces and which data are being gath- expense claims, flagging receipts from odd hours of the night ered. As a matter of routine, algorithms used by firms to hire, more efficiently than a carbon-based beancounter can. fire and promote should be tested for bias and unintended Employees will gain, too. Thanks to strides in computer vi- consequences. Last, countries should let individuals request sion, AI can check that workers are wearing safety gear and their own data, whether they are ex-workers wishing to con- that no one has been harmed on the factory floor. Some will test a dismissal or jobseekers hoping to demonstrate their abil- appreciate more feedback on their work and welcome a sense ity to prospective employers. of how to do better. Cogito, a startup, has designed AI-en- The march of AI into the workplace calls for trade-offs be- hanced software that listens to customer-service calls and as- tween privacy and performance. A fairer, more productive signsan “empathyscore” based on howcompassionate agents workforce is a prize worth having, but not ifit shackles and de- are and how fast and how capably they settle complaints. humanisesemployees. Strikinga balance will require thought, Machines can help ensure that pay rises and promotions go a willingness forboth employers and employees to adapt, and to those who deserve them. That starts with hiring. People of- a strong dose ofhumanity. 7 16 Leaders The Economist March 31st 2018

Nuclear proliferation Making Satan great again

As the Iran nucleardeal heads forthe rocks, the biggest losers will be Europe and America AST summer John Bolton was ambiguously peaceful. That falls far short of American de- La hawk with clipped wings. mands (see International section). The former ambassador to the Everthe cynic, MrTrumpaccusesBritish and French leaders UN and cheerleader for the Iraq of liking the Iran deal because their countries make money invasion was grumbling that trading with Iran. His new advisers share his bleakworldview. White House staff were thwart- Rex Tillerson, sacked as secretary of state on March 13th, is be- ing his attempts to give Presi- ing replaced by Mike Pompeo, also a fierce critic of the accord. dent Donald Trump his plan for As for Mr Bolton, he has asserted that only military force can scrapping the Iran nuclear deal brokered by Barack Obama in slow Iran’s sprint towards a lethal nuclear arsenal. 2015. Not any more. On April 9th Mr Bolton, whose walrus Although he has recently sounded less hawkish, his hiring moustache and verbal bluster mask a skilled and ruthless bu- surely dooms the Iran deal. But if Mr Trump does ditch it, he reaucratic infighter, becomes Mr Trump’snational security ad- will find that his aides and allies were right: nothing betterwill viser. As a result, that deal to roll back Iran’s nuclear-weapons replace it. The chances of Iran agreeing to tighter constraints programme seems on its last legs. That is bad news for the Mid- are minimal. The hardest-line Iranian factions will pour scorn dle East, for America’s allies and for America itself. on colleagues willing to give diplomacy a try yet again. Mr Trumphas long scorned the deal, the Joint Comprehen- sive Plan of Action (JCPOA), as the “worst ever”. Yet every 120 When worst comes to worse days he must sign a waiver for sanctions to remain unen- The damage to America’s reputation will extend far beyond forced—and hence for America to continue to honour the theMiddleEast. Whywould North Korea agreeto swap its nuc- agreement. Mr Trump half-disowned the Iran pact in January, lear bombs for an accord that a future American president but the sobersides in uniforms and suits running his foreign could simply rip up? The transatlantic alliance would face un- policy at the time persuaded him to give its European parties, precedented strains. Europe would find itself siding with Chi- Britain, France and Germany,one last chance to fix it. na, Russia and Iran against America. New American sanctions The Europeans could point to reports from the Internation- might try to force European companies to choose American al Atomic Energy Agency that Iran is sticking to the letter ofthe over Iranian markets. European governments might feel com- deal (which was also signed by Russia and China). They can pelled to support their defiance. envisage side-agreements to penalise Iran forits pursuit ofbal- And, on top of all that, Iran might resile from the deal, fur- listic missiles and to demand easier access to military sites for therroilingan unstable region atriskoftit-for-tat nuclearprolif- nuclear inspectors. They are willing to tackle the sunset eration. That would leave America nothing to fall back on but clauses allowing, for example, curbs on uranium enrichment bombing Iran’s nuclear sites (every few years, because air to lapse over time. But they have no appetite and see no legal strikes cannot destroy know-how). With an arch-hawk like Mr case for reneging on a hard-won agreement. The best they can Bolton at Mr Trump’sside, expect much rhetoric about Ameri- imagine is a declaration saying that the JCPOA’s signatories ca seeking peace through strength. Yet ditching the Iran deal will demand that a renewed Iranian nuclearprogramme is un- risks war, and is more likely to make America weaker. 7

America and world trade The danger of the deal

Even ifDonald Trump wins concessions, his trade policy is economically muddled and politically toxic UST six words suffice to sum trucks. China is said to be discussing cuts in tariffs on Ameri- US trade balance with China Jup President Donald Trump’s can cars, increased purchases of American semiconductors Trade in goods, $bn approach to trade (and, you and the further opening of its financial industry (see Finance 0 – 100 may mutter, too much else): section). With many of America’s allies belatedly exempted 200 make threats, strike deals, de- from the metals tariffs, and consensus among policymakers 300 clare victory. In recent weeks Mr and business types that China should indeed change its be- 400 Trump’s campaign-trail threats haviour, stockmarkets are less fearful of an outright trade war 2009 11 13 15 17 of2016 have been turned into ta- (see Buttonwood). The man who tweeted that “trade wars are riffsof25% on imports ofsteel and 10% on aluminium, and pro- good, and easy to win” may be able to claim a string of victo- posed levies on up to $60bn-worth ofChinese goods. ries with scarcely a shot fired. Foreigners have duly queued to sue for peace. On March Vindication? Far from it. For one thing, no deal has yet been 26th South Korea agreed to limit its steel exports to America, done with China. Other countries have politics too, even dic- and accepted an extension of American tariffs on its pickup tatorships. Despite the South Korean deal, and keen as China is1 The Economist March 31st 2018 Leaders 17

2 to avoid a trade war—keenerthan MrTrump, itseems—the dan- new round ofthreats against foreigners. ger of a transpacific escalation remains real. Even if conflict is The president’s more fundamental error is to see trade as a averted and China gives ground, however, the result will be a zero-sum game, in which exporting is for winners (or cheats, if bad one for the world, and for America. That is partly because they are foreign) and importing is for dupes. In fact, the gains ofMrTrump’scharacter. Ifhe thinkshe haswon one fight, he is from trade come from the specialisation permitted by the free likelier to start another. It is also because his policy is founded exchange of goods, capital and know-how that allows, for ex- on wretched economics and dangerous politics. ample, Californian-designed iPhones to be assembled in Chi- Take the economics first. The president is obsessed with na and sold worldwide by the bucketload. America’s trade deficits—not just the total, of$568bn, or2.9% of GDP, last year, but its bilateral ones, especially the yawning So long, Geneva’s conventions $375bn deficit in goods trade with China, which he wants cut Mr Trump’smisunderstanding ofeconomics explains why his by $100bn. Mr Trump’s bluster cannot change basic economic politics are so irresponsible. Rather than join with other ag- logic. America’s total trade deficit reflects the shortfall in sav- grieved countriesto putlegal pressure on China, MrTrump has ing by its households, companies and government—the excess threatened putative allies. Rather than work within the rules- oftheircombined spendingovertheirincome. Tariffs and quo- based system of trade, which America helped create and tas can bring trade into balance only if they somehow encour- which, despite the system’s imperfections, has served the age national saving or reduce investment. Protectionism pre- country well, he bypasses it at will. He is particularly reckless dicts trade balances poorly. Just look at India, where, to claim that the steel and aluminium tariffsare justified by na- historically, high tariffs and high trade deficits have coexisted. tional-security concerns (a get-out-of-jail-free card under Bilateral deficits, it is true, can more easily be altered by World Trade Organisation rulesthatshould be used sparingly). trade policy. If America slaps taxes on Chinese goods (and IfAmerica thumbs its nose at the WTO, why shouldn’t others? nothing else changes), it will buy less of them and the $375bn Managed trade is a mistake, not a victory. It substitutes the gap will shrink. However, unless Americans change their total power of political lobbies for market forces, favouring loud, spending and saving, they will buy more from elsewhere. well-organised producers over silent, disparate consumers The tax cuts that the president signed into law in December and robbing economies of the nimbleness needed to adapt to make his fixation on trade deficits even more senseless. Boost- changing technological conditions. Other countries will feel ing the budget deficit to 5% ofGDP in 2019 will, other things be- freer to follow America’s example, making a trade war a re- ing equal, widen the trade gap. It is hard to imagine Mr Trump peated riskrather than a one-offdanger. Mr Trump’sapproach blaming himselfforthat—and all too easy to see him making a threatens to leave everyone much worse off. Some deal. 7

Northern Ireland and Brexit Identity theft

The United Kingdom underestimates the damage it is doing to its most fragile region RITAIN’S bloodiest battle- receive convoys of tourists. Yet beneath the bandage of the B field of the past half-century Good Friday Agreement, the healing has been slow. Protes- was not in the Middle East, the tants and Catholics still lead segregated lives. Just 5.8% of chil- Balkans or the South Atlantic. It dren are in formally integrated primary schools. Stormont is was on home turf. A thousand gridlocked and has been suspended for over a year. British soldiers and police offi- In London some say that this shows the Good Friday deal cers were killed in Northern Ire- has failed. That is to misunderstand its purpose. Peace agree- land during three decades of the ments stop conflicts; reconciliation and integration are genera- “Troubles”, twice the number who died in Iraq and Afghani- tional tasks. Chivvied along by the British and Irish govern- stan combined. The civilian death-toll was twice as high again. ments, Northern Ireland’s parties had until recently kept faith. Twenty years ago that awful conflict was ended by the Society is changing too slowly, but it is inching forward. Good Friday Agreement. As Britain and Ireland each softened Brexit now threatens this. Britain and Ireland are too dis- theirclaim to the province, Protestants and Catholics agreed to tracted to give enough attention to Belfast, which looks like the share power in Stormont. The centuries-old question of to child in an acrimonious divorce. Britain squandered its stand- whom Northern Ireland belonged was carefully buried for fu- ing as a neutral referee when the Conservatives formed a go- ture generations to unearth when they were ready. verning alliance with Northern Ireland’s main unionist party Now Britain’s impending exit from the European Union, and the Labour opposition voted in a vocal republican as its foreseen bynobodyin 1998, hasposed the question again, long leader. The Irish government has aggravated tensions by reviv- before Northern Ireland has an answer. Britain’s ruling Con- ing talkofunification, something it previously tiptoed around. servatives treat this as, at best, a detail and, at worst, an irrita- Both prime ministers must now go out of their way to show tion on the road to Brexit. That is an error—possibly a fatal one. they are committed to getting Stormont up and running. After two decades of peace, Northern Ireland is at once Above all, Brexit has revived nagging questions of identity. transformed and unchanged (see Briefing). Violence has dried The Good Friday Agreement and both countries’ membership up to the point where the crime rate is lower than the British ofthe EU allowed people to forgetaboutwhethertheyfelt Irish average. Hotspots where armoured cars used to rumble now or British. Their option ofdual citizenship, the invisible border1 18 Leaders The Economist March 31st 2018

2 and growing north-south co-operation, on everything from ing superficial and reckless. Northern Ireland’s Catholics are electricity markets to health care, blunted the distinction. deeply unsettled by Brexit, which undermines assumptions Brexit sharpens it again. on which the Good Friday Agreement was made. Protestants This is clearest at the border. Britain says it will leave the are jumpier still. In recent decades they have lost their grip on EU’s single market and customs union, and that new technol- government, business and the public sector; they will soon be ogy will let it do this without any new infrastructure or inspec- outnumbered. Erecting barriers between either community tions at the Irish frontier. The EU (and plenty of others) doubt and the place each considers its home would cause anguish. that this is possible. The EU argues that such technology does Again, Brexiteers play this down, arguing that a border like not yet exist and says that if Britain cannot come up with a Canada’s with America would be easy enough to cross, and more convincing plan, Northern Ireland must maintain cus- that trade between Northern Ireland and the south is small. toms and regulatory alignment with the EU. In effect, that Some have even said Ireland should leave the EU and join a would create a border between it and Britain. single market with Britain, so strong are the commercial links. To understand why this misses the point, they should ex- A farewell to arms amine their own triumph in 2016. They won the Brexit referen- For The Economist, this is not much of a conundrum. We have dum because arguments about culture and identity trumped long argued that Britain would be better off staying in the cus- those about economics. Some of the MPs telling the Irish to toms union and single market; that this also keeps Ireland’s calm down about the prospect of a few cameras and customs border invisible only adds to the case. Polls suggest that most officersare outraged atthe newsthatBritish passports are set to voters agree. But the government believes that anything less be made by a French company. Brexit suggests that, when peo- than a hard Brexit would betray the referendum. ple feel that remote elites are trampling on their culture and Some Brexiteers dismiss the border question as a ploy by threatening their identity, they react unpredictably. Northern Ireland and “Remoaners” to wheedle a softBrexit. They are be- Ireland is a dangerous place to put that theory to the test. 7

Iraq Better days in Baghdad

Fifteen years afterAmerica’s invasion, Iraq is finding a newsense ofunity T IS less than four years since shortly after the defeat of al-Qaeda in Iraq, the precursor to IS. Ithe homicidal zealotsofIslam- That victory was thanks largely to America’s support for ic State (IS) stood on the door- “awakened” Sunni fighters, many of whom were repelled by step of Baghdad, their black flag the jihadists’ brutality. The Kurds, at the time, co-operated with already fluttering over several the government in Baghdad. But after Barack Obama pulled other Iraqi cities. The jihadists most American soldiers out of Iraq in 2011, Mr Maliki locked triumphed, albeit temporarily, the Sunnis out of the security services, cut off funds to the because disgruntled Sunnis, for- Kurds and jailed Iraqis who complained. mer Baathists and others who felt alienated by the rule ofNuri al-Maliki, the Shia prime minister, stood aside. The central gov- Jobs for men with guns ernment lost control over much of the country. The indepen- Today’s prime minister, Haider al-Abadi, is better. A Shia who dence-minded Kurds in the north watched while Iraq fell is nonetheless popular with Sunnis, he has a chance to unite apart—until IS turned on them, too. his country. Mr Abadi should merge the militias that helped Today things look very different. Iraq has defeated IS and vanquish IS into Iraq’s regular security forces. He should split avoided the wave of Shia-on-Sunni violence that many pre- the militiamen up and pay them directly, not through their dicted would follow. The number of civilians killed each leaders, in order to make them loyal to the state. The elderly month in fighting is a fraction of what it was in 2014. The gov- could be pensioned off, the young dispatched to college and ernment in Baghdad saw off a premature Kurdish push for in- those who had jobs sent backto work. dependence last year. Oil production is up and the state has Sectarianism must be stamped out ofpolitics, too. Since the money. The power of foreigners, including Iran and America, invasion, Iraq’s leaders have done deals that guarantee most hasdiminished asIraqi politicianshave learnthowto playone parties a share of power and its spoils. This has led to corrup- off against the others. In six weeks Iraq will hold an election, tion and stagnation, not unity. Jobs are handed out by sect and affirming its status as the only Arab democracy east of Tunisia. ethnicity, not merit, and ministries are plundered. The state is Iraq, in other words, is doing well (see Middle East and Afri- so dirty that many Iraqis have come to doubt the merits of de- ca section). Some will argue that this justifies America’s inva- mocracy. No opposition existsto hold the executive to account. sion to overthrow Saddam Hussein (which we supported). It Lately, parties have delighted Iraq’s increasingly secular does not. Too much blood was shed along the way in Iraq and voters by forming broad coalitions that campaign on issues. elsewhere. America botched the occupation, touching off a They briefly did the same in 2010. The test of this will come brutal Sunni insurgency. Then Iraq’s politicians stoked sectari- after the vote. The winners, having no doubt promised to an divisions, leading to yet more violence. They must learn tackle corruption, should do so. Ditto for vows to keep the from these mistakes, or they will waste this hopeful moment. peace and govern for all. With luck, a more normal Iraqi poli- Iraq now looks much as it did in 2010, anotherelection year, ticswill emerge, based on policies and competence, not sect. 7 Noisy attacks aren’t hard VQƓPFų

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:RUOG/HDGLQJ&\EHU$, 20 Letters The Economist March 31st 2018

Understanding China cident. Mercedes-Benz issued tion continue to finance illegal the beginning oftime, it is the apology because quoting armed groups. arguable that he was at least The problem with the analysis the Dalai Lama hurts Chinese It was inevitable that these partially rethroned by the great offered in “What the West got people’s feelings. The univer- groups—the FARC dissidents, discoveries of20th-century wrong” about China (March sal rule fora company wanting the ELN guerrillas, and narco- physics. These changed our 3rd) is that Western countries to expand in a foreign country related criminal gangs—would understanding ofthe nature of never bothered thinking much is rather simple: respect the move into some ofthe areas space and time, as well as the about China until it became so culture and history. abandoned by the FARC when relation between the observer economically huge that they Most appallingly,you it demobilised. In areas where and reality. had to. The sad truth is that, claimed that China was a these groups were already Putting aside the vulgar beginning in the 1980s, when danger to the world as one day strong, such as North prejudice that significance can China started to open up, it may even “retake Taiwan”. Santander on the Venezuelan be measured by mere size and Americans and Europeans Taiwan is an inseparable part border, they have made it location in space and time, made a number oflazy ofChina, as recognised by almost impossible for the what could it mean to say that assumptions about how more than160 countries, in- voluntary programme to humanity is not at the centre of economic engagement was cluding America. I failto un- proceed. Not surprisingly,the the universe when, according going to lead to inevitable derstand how China resolving homicide rate in coca-growing to most physicists, it has no change in social and political its internal affairs could bring areas has risen. centre? Or not at the beginning areas, without thinking much instability to the world. There will always be oftime when, some physicists about the country they were NARISA TIANJING DAI violence as long as cocaine say, time doesn’t really exist? applying this to. Associate professor remains an illegal and there- Mr Hawking himselfonce Even the most cursory University of International fore an absurdly profitable said that humanity is “just a attention to China’s imperial Business and Economics commodity.But violence could chemical scum”. But apart and modern histories would Beijing be considerably reduced ifthe from being literally untrue, the show that it was unlikely to next Colombian administra- evidence ofhis life suggests conform neatly to such a sim- The paid propaganda piece tion persisted with the volun- that he did not really believe it. plistic approach. After all, published by the Beijing tary programme. Many peas- JOHN SEXTON China has form as a disrupter. Review in the March10th ants are naturally distrustful of Chicago It tookMarxism-Leninism edition ofThe Economist can- the state; the programme of from the Soviets and complete- not go unremarked. Under forced eradication inevitably Getting back in the game ly changed it to a template that authoritarian rule, China’s rise reinforces this. Proposed legis- suited itself. The West in the has been marked by the deaths lative changes to ensure that I was thankful forthe miser- 1980s might have asked the ofmillions because offorced small growers do not face jail, able truth detailed by Bagehot, Soviet Union how its engage- collectivisation, famineand however unlikely that is in that in angry times the “sen- ment with China went. That the brutal suppression of practice, need to go ahead. sible people retreat into private would have spared a lot of dissidents. China has achieved SIR KEITH MORRIS life” (March 10th). Believing wasted effort. economic progress over the British ambassador to Colombia, myselfto be one ofthose Complaining about China’s past 30 years because it 1990-94 sensible people I am at a loss bad form in disrupting these liberalised markets. Despite London forwhat to do. I would like to big engagement plans is un- this progress, China continues rally against the forces of all gracious and hypocritical. The ruthlessly to suppress anyone Be curious that is unreasonable, as many West’s strategic scenario was at odds with the regime. China ofmy creed would. But scat- too simplistic forsuch a com- is a great nation and a great tered and elusive as we are plex place. Moreover, as civilisation. She will be greater (and mindful ofthe threat of shown by the election of still when she allows her any platform being torn away Donald Trump, Brexit, and a people to thinkforthemselves. by masked morons), I can’t for host ofother things that have JONATHAN STAUFER the life ofme thinkofhow to gone awry, the more staggering Vail, Colorado proceed. How do you rally the issue is how the West also got reasonable? LIAM JAMES itselfwrong. Colombia’s difficult task As Sun Tzu pointed out London 2,500 years ago, going into a The Colombian authorities battle where you don’t even face an extraordinarily com- Having read the first 40 pages know yourselfis a near certain plex taskin trying to run forced ofyour March 10th issue, I recipe fordefeat. and voluntary coca-eradica- Your obituary ofStephen suggest that western Europe KERRY BROWN tion and crop-substitution Hawking suggests that “no should be the subject ofyour Professor of Chinese studies programmes in parallel (“See philosophy which puts hu- next Obituary page. King’s College, London it. Spray it. Sorted”, February manity anywhere near the ROD TIPPLE 24th). It is really a Catch 22 centre ofthings can cope with Cambridge 7 Youused the example ofMer- situation. Many peasant coca- facts like these” (March 17th). cedes-Benz issuing an apology growers are reluctant to give The facts here being the age to Chinese customers after up their crops until they are and size ofthe universe as Letters are welcome and should be quoting the Dalai Lama in one assured ofa secure environ- revealed by physics. But al- addressed to the Editor at The Economist, The Adelphi Building, ofits commercials to illustrate ment in which they can invest though the Copernican, and 1-11John Adam Street, how Western firms are miser- in alternative produce. Such a then the Darwinian, revolu- London WC2N 6HT ably treated by the Chinese safe environment is difficult tions may have dethroned E-mail: [email protected] government. Yet the govern- forthe state to provide as long man by revealing he was nei- More letters are available at: ment had no role in the in- as revenues from coca produc- ther at the centre ofspace nor Economist.com/letters Executive Focus 21

The Economist March 31st 2018 22 Briefing Northern Ireland The Economist March 31st 2018

Security has been transformed. In 1972, Past and future collide the bloodiest year ofthe Troubles, 498 peo- ple were killed in sectarian violence. As re- cently as the early 1990s the annual death toll was around 100. Now it is in the low single digits. Northern Ireland’s murder BELFAST, DUBLIN AND LONDON rate is equal to the British average, its over- Twentyyears aftera landmarkpeace agreement, questions set carefully aside for all crime rate slightly lower. Sectarian hate- future generations have been forced backonto the agenda crimes have fallen by more than half since HEN the Irish Republican Army at of more than 3,500 people, mostly civil- 2005, when they started being recorded. Wlast put aside its weapons, ending a ians. Tony Blair, then Britain’s prime minis- Belfast feels like a normal European city. century-longinsurgency against the British ter, later described signing the deal as “one Crumlin Road prison, once a holding place state, witnesses were needed to confirm of the few times in the job I can honestly for paramilitaries, is now a tourist attrac- that the guns were gone forgood. Two cler- say I felt contented, fulfilled and proud.” tion that hosts weddings (promising, and gymen were chosen, Harold Good, a Prot- Yet 20 years on, the mood is sour. In Bel- doubtless providing, “a surrounding that estant, and Alec Reid, a Catholic. As they fast the Stormont assembly has lain empty will keep your guests talking”). travelled in secret between rural arms- for over a year. The British and Irish gov- Yet not all the past is so deeply buried. dumps with the IRA’s quartermasters and ernments have warned that commemora- The police detect the “continuing existence an international team of weapons decom- tions of the agreement will feel “hollow”. and cohesion” of an IRA hierarchy, though missioners, they noticed a young IRA man The two countries are publicly bickering they accept that the organisation is now with an old-fashioned rifle among the over Northern Ireland’s fate after Britain committed to a political path. So-called group. When the last of the arsenal had leaves the European Union next year. dissident republican gangs continue to been destroyed, the young man marched Vexed questions that the Good Friday fight a lonely war against the British state, up to the general in charge, clicked his Agreement had carefully put aside—on foiled most of the time by the police and heels and solemnly handed over his gun. borders, identity and to whom Northern MI5, Britain’s security service, which still Now in his 80s, Reverend Good recalls the Ireland really belongs—are dangerously devotes about 15% of its energies to North- moment: “Father Reid said to me, ‘There back in play. ern Ireland. goes the last weapon out of Irish politics.’ Paramilitary gangs on both sides of the We just fell silent.” Changed utterly sectarian divide are active in organised Northern Ireland’s long war ended Under the agreement Ireland gave up its crime. Their “punishment” beatings and with the Belfast Agreement, signed on claim on the north and Britain agreed to a shootings ofdrug-dealers, pimps and loan- Good Friday in 1998. The deal between the mechanism by which Northern Ireland sharks purport to be for the protection of governments ofBritain and Ireland, in con- could secede via a future referendum. The “their” communities, but often they sim- junction with the main Northern Irish par- Northern Irish gained the right to citizen- ply want the business for themselves. ties and the paramilitaries some of them ship of the United Kingdom, Ireland, or Some former paramilitaries have been spoke for, spun a delicate web of compro- both. International bodies were set up to prosecuted, others have been co-opted. mises between the province’s Protestants, give the two countries shared oversight of The hardest ones to deal with, says George most of whom want to remain in the Un- how the place was run. And a devolved Hamilton, the chief constable, are those in ited Kingdom, and its Catholics, who more government was established at Stormont, the murky middle ground, who “want to often identify with the Republic ofIreland. one in which nationalists and unionists be community workers by day and para- The “Troubles” of the previous 30 years— would share power. Paramilitaries who military thugs by night”. the most recent spasm in a conflict dating had dealt in Semtex and Armalites turned Such organisations live on because back to Britain’s planting of Protestant set- their attention to early-day motions and Northern Irish society is still divided. Phys- tlers in the 17th century—caused the deaths the d’Hondt voting system. ical walls, known as peace lines, still sepa-1 The Economist March 31st 2018 Briefing Northern Ireland 23

2 rate some working-class Catholic and Prot- and nationalism, respectively. Those two same to balance it. Seeing the other side as estant areas. Indeed, more have been built parties have since been swept aside by the ever more extreme, voters feel they have since 1998, because they are popular. “I harder-line Democratic Unionist Party little choice but to vote for their own lot of wouldn’t like it down,” says a resident of (DUP) and Sinn Fein, the former political extremists. As one assembly member puts Bombay Street, a Catholic district in Belfast wing of the IRA and the only party that it: “If they’re going to elect an arse, we’re separated from Protestant Shankill by a stands at elections both in Northern Ire- going to elect an arse.” ten-metre-high wall. “They’re lovely peo- land and the Republic. Whereas in 1997 the When the Stormont government has ple. It’sjustthe lunatics.” The wall hasbeen region’s18 Westminster seats were split be- run aground before, Britain and Ireland made higher several times since it was tween five parties, in last year’s general have stepped in to get it back afloat. But erected in 1969. Stones still sail over, so election the DUP and Sinn Fein tookall but Britain’srole asa referee hasbeen impeded houses nearby have metal cages over their one. They have also come to dominate the by a deal last year between the Conserva- backgardens. devolved assembly and executive. tivesand the DUP, which agreed to support In January last year a long-simmering Theresa May’s minority government in Devout and profane and hard row between the two parties blew up and Westminster on important votes in return Surveys show that three-quarters of peo- Sinn Fein walked out; withoutitsparticipa- for £1bn ($1.4bn) of extra money for North- ple would like to live in integrated neigh- tion, the institutionscannotfunction. Four- ern Ireland. The alliance “undermines a bourhoods, and two-thirds would send teen months without a government have tradition ofneutrality going backto at least their children to mixed schools. Yet mak- proved trying. The budget has been de- 1990,” says Jonathan Powell, who as Mr ing this happen has proved difficult. A layed, laws to reorganise health care and Blair’s chief of staff helped to negotiate the handful of mixed social-housing develop- tackle domestic abuse have been put on Good Friday Agreement. mentshave been started, butthe “lunatics” ice, public-sector pay rises have not been make them dicey places to live. Last year honoured, and institutions such as the pol- Gathering Stormont four Catholic families in a mixed-housing icing board, which holds the police ac- To get Stormont back up and running, Ire- project in Cantrell Close, Belfast, were ad- countable, have been unable to fulfil their land has called for a meeting of the agree- vised by police to leave, after threats from functions. Negotiators predict that it will ment’s British-Irish Intergovernmental paramilitaries. The share ofchildren in for- be months before the two parties work to- Conference—which could be chaired ei- mally integrated schools has edged up gether again. ther by Ireland’s foreign minister and Brit- onlyslightlysince 2000—from 3% to 5.8% in That such an impasse can persist is in ain’s Northern Ireland secretary, orby Mrs primary and from 5.6% to 8.6% in second- part due to the design of the Good Friday May and Leo Varadkar, the Irish taoiseach. ary—partly because ofopposition from the Agreement, which intentionally provided Britain has not taken up the offer (an offi- Catholic church, which runs many schools a plethora of constitutional vetoes to pro- cial says Ireland has not issued a formal re- of its own. The province remains astonish- tect each side against the other. The ability quest). The DUP is opposed to it. “The Brit- ingly segregated (see map). of either main party to collapse the execu- ish government needs to remove the In other areas there has been progress. tive by walking out makes for unstable, blocks. But it’s tied to the DUP,” says Gerry Integration has deepened in the work- high-stakes government. The agreement Kelly, a Sinn Fein assemblyman. place, helped by laws compelling big firms has fostered a structural divide in other What is more, Mrs May and Mr Varad- to publish the religious breakdown of their ways, too. A supermajority required for kar have another matter on their minds: staff. Catholics hold nearly half the jobs in legislation that could threaten one com- Brexit. In 1998 Britain and Ireland were, in both the public and private sectors, in line munity has been cynically used by both the words of the Good Friday Agreement, with their share of the population. A once- sides to block measures they merely dis- “partners in the European Union”. On yawning unemployment gap has nearly like. Parties must declare themselves fol- March 29th 2019 that will cease to be the closed. Catholics hold high-profile public lowers of one of the “two traditions” (they case. In 2016 the High Court in Belfast ruled offices, including those ofattorney-general may register as neither, but then lose some that Brexit would not formally invalidate and Lord Chief Justice. Their share of po- voting rights). the agreement, as some had argued. But it lice officers has risen from one in ten at the Paul Nolan, a Belfast-based researcher, will complicate the relationship hugely. turn of the century to one in three, after a compares the polarisation to a seesaw: Britain and Ireland have identified 142 temporary affirmative-action programme. whenever one party has moved farther areas of cross-border co-operation. Com- National and religious identities are from the centre, the other has done the bined cancer services, a single wholesale 1 blurring, particularly among the young. A Protestant minister says he now christens more children with Irish names like Una, Malachi and Sadhbh. Many young Catho- Northern Ireland Largest religion, % lics have little interest in Ireland, which By ward some refer to as “Mexico”. “I’d rather go to Protestant DDERRY/E R R Y / Spain or something, to tell you the truth,” LLONDONDERRYO N D O N D E R R Y says Martin, a 29-year-old who lives near 40 50 7060 8090 100 AANTRIMN T R I M the Falls Road in Belfast. Surveys find that about a third of the population considers Belfast Catholic itself British, a slightly smaller share says TYRONET Y R O N E Irish, and around the same reports itself to be neither, but rather Northern Irish. This nuanced, cautiously evolving identity is lost in a local politics that is DDOWNO W N crudely sectarian, and becoming grimly FERMANAGHF E R M A N A G H AARMAGHR M A G H more so. At the time of the agreement the main forces in Northern Irish politics were Newry the Ulster Unionists and the Social Demo- cratic and Labour Party (SDLP), which rep- Source: Census 2011 IRELAND 25 km resented the moderate forms of unionism 24 Briefing Northern Ireland The Economist March 31st 2018

2 powermarketand police intelligence-shar- No one foresees a return to those condi- ting a bit twitchy about where all this is go- ing give an idea of the range. Officials reck- tions. But David Davis, Britain’s Brexit sec- ing to land,” says Mr Irvine. on most of this can more or less continue, retary,betrays a deep and complacent mis- The mood ofreanimated Irish national- though it will involve mountains ofwork— understanding of the problem when he ism and unionist mistrust of the British but regret that future initiatives will be breezily suggests that the frontier could re- government is “all rather redolent of1920”, harder to get started. Northern Ireland has semble that between America and Cana- notes Diarmaid Ferriter, a historian at Uni- received a lot of EU money, via initiatives da. “It’s not a question of the speed of the versityCollege Dublin. Then, Northern Ire- such as Peace IV, worth €270m ($335m) in lorries crossing the border. It’s the question land was separated from the south, ahead 2014-20. Unlike funding from Britain (taint- of identity,” says Mr Powell. To win sup- of the creation of the Irish Free State. Now, ed in the eyes ofsome Catholics) or Ameri- port for the 1998 agreement, nationalist he says, “Brexit has thrown the issue of the ca (long involved in the peace process, but leaders in both north and south needed to unity ofIreland backinto the frame.” seen as leaning towards the nationalists by show tangible benefits. None was clearer some Protestants), EU grants are viewed as than dismantling the border. A Canada- Taking back control neutral. The EU has indicated that some style crossing, one with “people in uni- No one was surprised when Sinn Fein de- funding can continue after Brexit. forms with arms and dogs”, is “not a sol- manded a unification referendum a few The biggest problem concerns the bor- ution [Ireland] can possibly entertain”, Mr days after the Brexit vote. Less expected der, around which Mrs May has drawn Varadkar said on March 5th. have been the shifts in thinking among three negotiating “red lines” that seem to The security services are aware of the moderate nationalists. “If we’re at consti- run into each other. She insists that Britain risks. “We would have a responsibility to tutional ground zero then absolutely, we’re will leave the EU’s customs union and sin- have a presence there,” says Mr Hamilton. going to start looking at the north-south gle market. Yet she also promises there will In policing terms, “any physical infrastruc- question,” says Claire Hanna, an SDLP be no new customs checks or physical in- ture or control measures that required peo- member of the assembly. In December Si- frastructure at the Irish border, or any be- ple to be physically at the border would be mon Coveney, Ireland’s foreign minister, tween Northern Ireland and Britain. a very bad thing…It would be perceived as said he hoped to see a united Ireland The government argues that trusted- being a symbol of the British state.” Dissi- “within my political lifetime”. He is 45. trader schemes, waivers for small firms dent republican paramilitaries, who have Could it happen? Northern Ireland’s and unspecified technology could let cus- almost no public support for their cold- Catholics will soon outnumber its Protes- toms checks be carried out invisibly. So far blooded attacks on police, might win wid- tants. In March 2017 Sinn Fein came within the EU is not convinced. Some member er backing for strikes on border installa- 2,000 votes of outpolling the DUP in elec- states are unwilling to turn a blind eye tions. Resentment at a return to a hard bor- tions to the assembly. Not all the party’s even to trade by small businesses. And no der could provide the “sea” of public supporters, let alone all Catholics, would one, including the Northern Ireland com- sympathy that Mao Zedong said terrorists vote for unification. A poll in 2015 found mittee ofBritain’s Parliament, has yet iden- need to swim in, fears Brian Feeney, a for- that 30% of Northern Irish would be in fa- tified technology that could enforce cus- mer SDLP councillor. vour—and when respondents were told toms controls without any infrastructure. Nor would the EU’s suggested “back- that it would mean highertaxes (a near cer- stop” of a customs border between North- tainty, as Ireland could not afford the £10bn Borderline disorder ern Ireland and Britain be easy to swallow. of subsidies that Britain shovels to North- The opposition Labour Party backs mem- “People would absolutely resist any at- ern Ireland each year), the figure dropped bership of a customs union, as do a hand- tempt to cordon off” the province from the to 11%. Support in Ireland dropped from ful of Tory rebels. Mrs May said in Febru- mainland, says Winston Irvine, a Shankill 66% to 31% when the financial implications ary that she was open to a customs community leader who is familiar with were pointed out. “arrangement”, which could amount to the thinking of west Belfast’s paramilitar- It remains to be seen how much Brexit something very similar. Yet Jacob Rees- ies. Unionist protests have flared over far will move those figures. But at a time when Mogg, who speaks for an influential cau- smaller affronts to British identity. A deci- populist nationalism is on the rise around cus of Eurosceptic Tories, has said that the sion in 2012 to reduce the days on which the world, matters of culture and identity right to set tariffs, possible only outside a the union flag would fly at Belfast City Hall can sometimes count for more than eco- customs union, is “non-negotiable”. And it triggered a yearofprotests in which150po- nomic self-interest. Whatever else they is not clear that membership of a customs lice officers were injured and a political misjudge about Ireland, Brexiteers, of all union alone would be enough to maintain party’s office firebombed. “People are get- people, should understand that. 7 the invisible border, anyway. If Britain leaves the single market and diverges from EU regulatory standards, goods crossing the border would need to be checked. The idea of such inspections is neural- gic for those who live near the frontier. Co- nor Patterson, head of the Newry and Mourne Enterprise Agency in South Ar- magh, remembers when Newry last had a customs post. It was blown up in 1972, kill- ing nine people. His father required a trian- gular badge from the police to cross the border, something which could take an hour at busy times. British soldiers would sprint through the streets ofNewry,forfear of snipers. Nearby Bessbrook was home to the busiest heliport in Europe, operated by the British army. The local roads were so dangerous that it had to fly men and sup- plies around the18 nearby watchtowers. Building walls as well as bridges Britain The Economist March 31st 2018 25

Also in this section 26 Cartographical controversy 26 Did the Leave campaign cheat? 27 The data-analytics industry 27 Quizzes, a national obsession 30 More money for the NHS at last 31 Bagehot: Labour’s anti-Semitism

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

Evidence in schools than 13,000 trials from around the world, rating initiatives on the basis of their cost, The big education experiment the strength of the evidence behind them, and their impact, which is measured in the number ofmonths by which they advance children’s learning. Getting a pupil to re- MACCLESFIELD peat a year, for example, is expensive and there isadequate evidence to suggest thatit Britain has become one ofthe world’s most important laboratories fornew sets them back by the equivalent of four classroom ideas. The struggle is getting teachers to follow the evidence months. The EEF also providesbroaderevi- SH GROVE ACADEMY, a state primary world, like Australia and Latin America, dence summaries on areas of interest for Awhich sits in Moss Roe, a poor suburb and other countries are considering copy- schools, such as written marking and digi- on the outskirts ofMacclesfield, is an excel- ing England’s example. tal technology. lent school. Recently, its team won a local But at home, its efforts have raised diffi- Teachers claim to pay attention. A re- debating tournament, besting fancier ri- cult questions. Does providing teachers port by the National Audit Office, an offi- vals; its pupils are exposed to William with evidence of what works change their cial spending watchdog, found that two- Shakespeare and Oscar Wilde; lessons are behaviour? And ifnot, what next? thirds ofhead teachers say they turn to EEF demanding and there are catch-up ses- evidence for guidance. But the EEF has sions for those who fall behind. Most im- Where the evidence leads come to the realisation that the “passive portant, teaching is based on up-to-date re- The EEF was given two main jobs. First, it presentation of evidence is not enough,” search into what works in the classroom. It dished out cash to researchers with inter- says Sir Kevan Collins, its boss. Naturally, it is the sort ofschool that ministers dream of esting ideas, becoming, on its creation, by did this by testing its approach. Results replicating across the country. farthe biggest funderofschools research in published last year found that providing But how to do so? When the Conserva- the country. Educationalists are inclined to schools with high-quality evidence about tive-Liberal Democrat coalition came to small-scale research projects—the sort of teaching led to no improvement in pupils’ power in 2010, it set about freeing schools studies, says Stephen Gorard of Durham performance. The study did not investigate from local-authority control. Studies have University, where “academicswould write why this was the case. One possibility is suggested that such freedom improves re- up three interviews with head teachers that teachers did not take up the ideas. An- sults. But giving teachers autonomy and call it research.” The EEF has prodded other is that successful strategies are hard doesn’t automatically mean that all will them in a more rigorous direction. to replicate. make good decisions. So in 2011the govern- Some of its results have been influen- Thus the EEF is increasingly focused on ment provided a grant of £135m ($218m) to tial. On March 19th the government set working out how to change behaviour. establish the Education Endowment Fund aside £26m to fund breakfast clubs, after an “One thing we know”, says Sir Kevan, “is (EEF), a laboratory for education research EEF study found that they boosted attain- that teachers really trust other teachers.” which would provide teachers with the in- ment. Just as significant, studies have dis- The EEF hasjoined with officialswho work formation to make smart choices. proved numerous teaching methods, with groups of schools, either in academy In the seven years since its foundation, which isimportantin a field where fads are chains, local authorities or charities, to the EEF reckons it has commissioned 10% common. One recent study found that a spread the evidence-based gospel. It has ofall randomised controlled trialsever car- programme in which 13- and 14-year-olds also increased its meetings with head ried out in education research. In doing so assisted 11- and 12-year-olds with theirread- teachers and has provided extra funding it has turned the English school system ing did not help the youngsters improve. for trials of promising schemes in poorer into a giant test-bed, with a third of all state Its second job is to disseminate existing parts of the country. As ever, all approach- schools involved in at least one of its trials. research. Its online “teaching and learning es will be scrutinised to see ifthey work. Its workhas been used in other parts ofthe toolkit” summarises the findings of more The most ambitious shift is the recruit-1 26 Britain The Economist March 31st 2018

2 ment of 23 “research schools”, of which conferences debating the merits of star risks to Britain’s single-market advantages Ash Grove is one. As a research school, it scholars such as John Hattie and Carol and fully £350m a week extra for the Na- gets money to help around 150 other local Dweck. The challenge for research schools tional Health Service. But Remainers had schools, by putting on events to spread the will be reaching beyond these enthusiasts. plenty of opportunities and money to de- latest research, training teachers and help- It will not be easy. Tellingly, one of the bunkthese claims at the time. ing them to evaluate the effectiveness of most popular briefs published by the EEF The broader conclusion is that the argu- classroom innovations. Jo Ashcroft, the di- found there was little evidence to support ment between the two sides will go on, rectorofeducation at Ash Grove’s group of most marking schemes employed by even as crucial talks begin on Britain’s fu- academies, notes that the schools “don’t schools, which often infuriate teachers ture trade arrangements. On March 23rd haveendlessamountsofmoney”,soevery with their pernicketiness. Teachers “like the EU formally approved its guidelines for penny has to make a difference. proof they are right”, says Becky Francis of the talks, along with the terms for a 21- It is too soon to judge whether such an the UCL Institute of Education; it is more month transition period after March 2019. approach will work. Most educationalists difficult to change behaviour when they At an event on March 26th with the Insti- agree that teachers have become more fo- are wrong. The EEF hopes that evidence tute forGovernment, a think-tank, Carolyn cused on research in recent years. A hard- will be more compelling when it comes Fairbairn, head of the Confederation of core minority spend their weekends at from a friendly face. 7 British Industry, welcomed the transitional deal for giving greater certainty to busi- ness. She was also pleased that the threat Relitigating the Brexit campaign of a cliff-edge Brexit with no deal at all had sharply diminished. But she noted that the Did Leave cheat? gap between the two sides on a future trade agreement was very wide. Based on past experience, the odds are that Britain will end up having to accept the terms of the EU’s guidelines. Because of Mrs May’s red lines, which call for leav- ing the single market, the customs union Claims ofrule-breaking by Leavers will mean the battle with Remainers goes on and the European Court of Justice, these T WAS not perhaps the most propitious Sanni claims that he cleared most ofhis ac- terms point clearly to a free-trade deal that Iway in which to celebrate this week’s tions during the campaign with Mr Parkin- is little broader than the one the EU has first anniversary ofTheresa May’s letter in- son, who has responded by saying that the with Canada. And thatwill leave unsolved voking the Article 50 process for leaving two were in a relationship at the time— the problem of avoiding a hard border in the European Union. Even as Jacob Rees- news that has outed Mr Sanni as gay. Mrs Northern Ireland (see Briefing). Mogg, a prominent Brexiteer, was ridicul- May is resisting calls to sackMr Parkinson. Coming on top of the row over cam- ing Remainers as being like the Japanese Does any of this matter beyond West- paign spending, this will surely fuel de- soldier who surrendered only 30 years minster? If Vote Leave is found to have mands for a meaningful parliamentary after the second world war, Parliament breached the rules, that will support the vote on the Brexit deal this autumn, which was debating a fresh scandal over the fi- notion that Leavers played fast and loose implies more than the simple take-it-or- nancing of the Vote Leave referendum in 2016. Yet Remainers spent a lot more, leave-it option being suggested by the gov- campaign in 2016. The official watchdog, and benefited from a government leaflet ernment. It could even increase calls for a the Electoral Commission, is also investi- costing £9m that openly backed their referendum on the final deal. Voters bored gating the matter. cause. On the evidence so far, it is hard to by the whole subject may blench at the The scandal centres on claims that, as conclude that the 52:48 result was changed prospect. But one unwelcome side-effect Vote Leave neared the £7m ($10m) spend- by digital marketing, however cleverly of the Brexit process is to suck attention ingcap imposed on it by the commission, it done. A more plausible contention is that away from all other political issues. Even a handed £625,000 to another group, Leavers misled voters by claiming there Japanese soldier marooned on a South Pa- BeLeave. The rules would have permitted were no economic downsides to Brexit, no cific island might find this dispiriting. 7 this only if BeLeave were wholly indepen- dent of Vote Leave. But Shahmir Sanni, a whistleblower who worked as a volunteer SHETLAND Boxed in ISLANDS with BeLeave, has come forward to say ATLANTIC that, far from being independent, the It is 100 miles north-east from John O’ Lerwick OCEAN group was told exactly what to do with the Groats to the Shetland Islands, a wind- money. Ifsuch co-ordination were proved, swept outpost of 23,000 souls. Yet on ORKNEY ISLANDS it would be a criminal offence. An extra many maps it looks about the same dis- As often shown frisson arises because most of the cash tance east, with the islands transported SHETLAND seems to have been spent on a digital-mar- in an enclosed box to nearer the main- John ISLANDS O’ Groats keting firm linked to Cambridge Analytica, land, so that less space is taken up by sea. the political-research group that is in the Locals are unhappy, and Tavish Scott, news for misusing Facebookdata. their Lib Dem MSP, has proposed an The story inevitably has a political an- amendment to a bill devolving power to gle. Boris Johnson, the foreign secretary, the islands that would require the Scot- SCOTLAND Aberdeeen and Michael Gove, the environment secre- tish government to place the islands tary, were leading members of Vote Leave. North “accurately” in official publications. Sea Mr Johnson has called the claims against “Given the amount we’ve put into the Edinburgh the organisation “utterly ludicrous” and in- exchequer over the past 40 years with oil sisted that the referendum was won legal- and gas revenues, it’s about frickin’ time ly. Stephen Parkinson, Mrs May’s political they put us in the right place,” he says. 100 km secretary, also worked for the group. Mr The Economist March 31st 2018 Britain 27

Cambridge Analytica Pastimes A new industry A quizzical country growsupfast THE CROWN & TWO CHAIRMEN Fully grown Britons are obsessed with setting each otherexams HE pub quiz is a uniquely British field, where Mr Graham grew up, pubs Regulators move in on the booming invention,” says a character in tried bingo and raffles first. data-analytics industry “T James Graham’s latest play,“Quiz”, The watershed came in1998, when HEY looked distinctly like G-men, ex- which opens in London’s West End on “Who Wants to be a Millionaire?” was Tcept that they had the letters ICO em- March 31st. “It combines our two great first screened. The format was sold to106 blazoned on their backs instead of FBI.On loves: drinking, and being right.” Mr countries. Until then, says Mr Graham, March 23rd 18 “enforcement” agents from Graham might be on to something. A “Apart from the news, when you got the Information Commissioner’s Office conservative estimate suggests at least murdered, there were very few outlets launched an evening raid on the premises 100,000 punters compete each week, fornormal people on television.” True to of Cambridge Analytica. Having combed making such quizzes arguably Britain’s its title, “Millionaire” made its British through everything the last of them biggest assembly rooted in conversation. production company at least £190m emerged only at 3am. When they’re not in the pub, they’re ($270m) in America alone. Visits from the heavy mob were sup- on the sofa.“University Challenge”, Quizzes have also made Britons hap- posed to happen to drug gangs, not nerdy “Mastermind” and “The Weakest Link” pier. Regardless ofwhether a team wins analytics companies. But Cambridge Ana- are all British formats. At its peak,19m or loses, the panic as they grapple forthe lytica is accused of harvesting the data of watched “Who Wants to be a Million- right answer and the hilarity ifthey get it 50m Facebook profiles without permis- aire?” Their catchphrases are famous: wrong releases endorphins that promote sion, in order to microtarget voters for the Starter forten. I’ve started so I’ll finish. group bonding, says Robin Dunbar, a presidential campaign ofDonald Trumpin But we don’t want to give you that! psychologist at Oxford University.The 2016. The company has also been accused Why are Britons so obsessed? The questions also represent a “shared folk of breaking election laws in America that Economist sent a large reporting team to wisdom” that bind us together. ban foreign citizens from participating. The Crown & Two Chairmen, a London So how did your correspondents fare? Facing several legal challenges, the com- pub, to find out. “The idea ofgoing to the They failedto name the cow in “The pany’s boss, Alexander Nix, has been sus- pub fora pint and having a test while Magic Roundabout”, and attributed an pended. There are doubts as to whether you’re there is a very British thing,” says Oscar Wilde quote to Dolly Parton. The the firm can survive the storm. the quizmaster, a barber named Chris. £52 jackpot remained out ofreach. But it is also a moment for the whole of Mr Graham has three theories. Britons Britain’s burgeoning data-analytics indus- love nostalgia. They venerate fairplay, try to take stock. Cambridge Analytica’s which is crucial to pub-quiz discipline in parent company, Strategy Communica- an age ofsmartphones. And they delight tions Laboratories (SCL), was officially in a forum where insecure people can launched in 2005 and specialises in what it prove themselves. “They enjoy that little calls “behavioural-change programmes”. moment ofglory before they retreat back It has worked for the British and American into their shells,” says Brian Thompson governments, and other clients such as ofthe Merseyside Quiz League. Others NATO, on initiatives to counter Islamist love quizzing too, especially Indians. But and Russian propaganda. SCL has de- there has only been one non-English ployed many of the techniques that Lon- winner ofthe annual World Quizzing don’s public-relations companies have Championship, which began in 2003. used to influence elections overseas, but it Quiz leagues may have begun in has also used advanced data analytics, Bootle in1959. Yet it was not until the benefiting from being part of a London- 1980s that quizzing tookover pubs, which based industry that lags behind only had traditionally been reserved for darts, America’s in size and innovation. billiards and serious drinking. In Mans- Space and time, gentlemen, please PwC, a consultancy, estimated in 2016 that the data-analytics industry in Britain was already worth up to £500m ($700m), that SCL used to microtarget voters. Mean- ment-backed initiative to promote the tech employing 6,700 people. It was also the while, data scientists are being churned industry, observes that election rules have fastest-growing bit of the market-research out by British universities, especially Uni- not been modernised for digital cam- sector, having grown by 350% in the previ- versity College London, Imperial College paigns. “This is the most immediate area ous four years. PwC found that market re- London and Cambridge University. As one for reform,” she says. The government is search as a whole was worth as much as of their number says, with academic jobs also spending£9m on settingup a newcen- £4.8bn, already more than the PR and com- scarce and the City “uncool” after the fi- tre for “data ethics and innovation”, which munications industry. nancial crash, data-analytics companies may propose new regulations. There are several reasons why London are an obvious destination. But it is a new European directive, the has become such an industry hub. In the So far, data analytics have been lightly General Data Protection Regulation, that slipstream of a strong advertising industry, regulated. But that was due to change even will have the most immediate impact. This the country developed an early lead in “ad before the rumpus over Cambridge Ana- comes into effect in May, and will make it tech”, the application of digital tools and lytica. The ICO had already started an in- harder for companies to give information analytics to inform marketing and adver- vestigation into the use of data analytics to third parties for unauthorised use. It tising campaigns. Ad tech uses some of the for political purposes last year. Eileen Bur- might have prevented what happened at same techniquesto microtargetconsumers bidge, chairwoman of Tech City, a govern- Cambridge Analytica. 7 ADVERTISEMENT

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On the streets of Zhongguancun, a science and technology Central Government’s work report in 2017. hub of some repute in northwest Beijing, a yellow box, half a The State Council, China’s cabinet, issued the Next meter wide and one meter high with a black semicircular head .LULYH[PVU(Y[PÄJPHS0U[LSSPNLUJL+L]LSVWTLU[7SHUPU1\S`  and six wheels, is running smoothly. Pedestrians hurry by with setting the goal of becoming a global innovation center in the some giving the occasional curious glance. Little do they know ÄLSKI` [OH[[OL`HYLWHZZPUNHWYV[V[`WLVM*OPUH»ZÄYZ[PUKLWLUKLU[S` “We will work faster to build China into a manufacturer developed self-driving delivery robot. of quality, and develop advanced manufacturing, promote “Adorable” is the word its creator, Liu Zhiyong, founder and further integration of the Internet, big data and AI with the real CEO of Zhen Robotics, used to describe it, but inside it is far LJVUVT`¹ZHPK7YLZPKLU[?P1PUWPUNHSZV.LULYHS:LJYL[HY` more sophisticated than it looks. The robot is based on three core VM[OL*VTT\UPZ[7HY[`VM*OPUH*7**LU[YHS*VTTP[[LL technologies: simultaneous localization and mapping, deep learning PUOPZYLWVY[KLSP]LYLKH[[OL [O*7*5H[PVUHS*VUNYLZZ PU object detection, and machine learning control technology. October 2017. A series of policies have since been rolled out According to Liu, logistics has become an important market to this end. with the surging of e-commerce, demonstrated by the 15-percent In December 2017, the Ministry of Industry and share the logistics industry holds in China’s GDP. Human cost Information Technology published an action plan for the AI accounts for 50 percent of the courier service industry, and there PUK\Z[Y`MYVT [VHZHJVTWSLTLU[[V[OL4HKL PU are 2 million couriers in the entire country. China 2025 strategy, the country’s blueprint for upgrading ¸0OVWLHZHY[PÄJPHSPU[LSSPNLUJL(0HUK[OLH\[VTH[LK manufacturing, and previously issued plans. These policies delivery industry mature in the future, robots like ours can free more clearly laid out the schedule and roadmap for the humans from hard labor and make life more convenient for industry’s development. people,” he told Beijing Review. ;OLZLKL]LSVWTLU[ZYLÅLJ[H^PKLY[YLUK0U6J[VILY Now the “delivery minions” developed by Liu’s company, a the White House released a report titled Preparing for the Future pioneer in the application of self-driving technology in delivery VM(Y[PÄJPHS0U[LSSPNLUJLL_WV\UKPUN\WVU[OLWV[LU[PHSPTWHJ[ VM services, have been bringing convenience to several enclosed AI across multiple industries. residential and work units by providing services to customers ,SZL^OLYL[OL0U[LYUH[PVUHS;LSLJVTT\UPJH[PVU

NHS funding service. The average trip to the GP costs the NHS about £38, compared with £140 for a How to spend it visit to an accident and emergency ward. Hospital admission rates in Britain for asthma, a condition which can usually be treated in primary care, are 50% higher than the OECD average. Capital investment—that is, spending on equipment and buildings—could do The National Health Service may soon get more money.Where should it go? with more money, too. Stroll through most HANGE is afoot in England’s NHS. England are among the lowest in rich hospitals and it will not take long to find C After years of demand growing faster countries, and the prevalence of neural- out-of-date equipment or a building that than funding, the government looks tube defects, which can be avoided by giv- needs repairing, says Matthew Kershaw, a poised to loosen the purse strings. On ing expectant mothers folic-acid supple- former boss of East Kent Hospitals Univer- March21stacaponpayrisesforNHS staff, ments,are amongthe highest. Thisis partly sity Foundation Trust. Britain spends 0.3% which had been in place since 2010, was because public-health measures in Eng- ofGDP on investment in health, compared lifted. Four days later Jeremy Hunt, the land do not put enough emphasis on the with an OECD average of 0.5%. The NHS health secretary,repeated his call for a ten- young, argues Ronny Cheung, a paediatri- has a building-maintenance backlog that year spending plan and suggested that cian at the Nuffield Trust, a think-tank. would cost £6bn to clear. Asurgeon reports cash could be raised through “innovative Another area of concern, for which in- that in one hospital, budget cuts were so se- models of taxation” like an earmarked ternational data are patchy, is mental vere that there were no surgical pens to NHS levy. Then, on March 27th, Theresa health. It takes up around 25% of the dis- markwhich bit ofa patient to cut up. May told MPs that she wanted a long-term ease burden of the NHS, but roughly12% of Though almost all health experts are fundingplan forthe health service. “In this, the budget. That is partly due to historical keen to see the NHS get a cash injection, the 70th anniversary year of the NHS’s stigmas. Obtaining treatment can be slow, many, including Mr Hunt, worry about the foundation, we need an answer on this,” particularly for children. Patients often get long-run pattern of feast and famine. Be- the prime minister declared. a “second-class experience” compared tween 2000 and 2009, NHS spendinggrew If the taps are loosened, new funding with physical health treatment, says Paul at 6% per year in real terms. Since then it might initially be used to balance the Farmer, the boss ofMind, a charity. hasslowed to 1%. In the fattimes, managers books. About half of hospital trusts are could be careless with money; staff com- forecast to be in deficit at the end of this fi- Diagnosis and prescription plained aboutspendingon fripperies, such nancial year, to the tune of a total of But politicians cannot just throw money at as making surroundings more pleasant. around £4bn ($5.7bn), once one-off extra particular diseases. Instead, they can only But the lean times have also become ineffi- funding is accounted for. Sanctions for boost funding in different bits of the NHS cient. Some of the savings that hospitals those in the red are not exacting, providing and hope that helps. General practitioners have been forced to make have become little incentive to be thrifty, notes Nick Bo- (GPs), or family doctors, are one such part. counter-productive, such as laying off nur- sanquet ofImperial College London. Britain has fewer per person than other seswho care forpatientsimmediately after But if there is any money left after mak- rich places. And they are quitting faster surgery, meaning fewer operations can ing up these shortfalls, where should it go? than they can be replaced, partly because take place. Health services can aim at various targets, of harder working conditions. By contrast, That is why Mrs May’s endorsement of like patient satisfaction or life expectancy. since 2014 annual growth in the number of a longer-term settlement is a relief to those A starting point might be to look at how hospital consultants has averaged 4%. who work in the NHS. Simon Stevens, its Britain compares with other countries. Studies show that hiring more GPs chief executive, called it “very welcome, In an ideal world politicians would be boosts myriad health outcomes, such as timely and significant”. The question now able to directmoneyto targetspecific mala- survival rates for heart disease. Moreover, is how generous the long-term plan will dies. High on thatlistwould be cancer. Brit- increasing their number reduces the strain be—and where the promised money will ain ranks in the bottom quarter of the on other, more expensive bits ofthe health come from. 7 OECD, a club of mainly rich countries, when it comes to five-year mortality rates for cervical and colon cancer. One reason is late diagnosis. Compared with other countries, those with cancer symptoms in Britain are more reluctant to seekout medi- cal help and less likely to be referred to a consultant by their family doctor. As a re- sult, cancers are caught later, when mortal- ity rates are higher. Britain also performs badly when it comes to obesity,points out Anita Charles- worth of the Health Foundation, another think-tank. Some 27% of British adults are obese, the sixth-highest proportion in the OECD, up from 14% in 1990. And rates are expected to rise over the next ten years. The NHS is also something of a laggard in child health. Britain has the ninth-high- est rate of infant mortality out of 33 OECD countries, a deterioration of about ten places since 1990. Breastfeeding rates in Baby steps towards a new deal The Economist March 31st 2018 Britain 31 Bagehot Nothing to see here

The LabourPartyunderJeremy Corbyn is unlikely to solve its problem with anti-Semitism “Zios”. The artist behind the London mural said it was not an at- tackon Jews but on capitalists such as Rockefellerand Warburg. Another source of Labour’s anti-Semitism is British Muslims. A poll last September found that 55% ofMuslims held anti-Semit- ic attitudes, with 27% believing that “Jews get rich at the expense of others”, compared with 12% of the general population. Mehdi Hasan, a Muslim writer, says that “weird and wacky anti-Semitic conspiracy theories are the default explanation for a range of na- tional and international events.” Forall theirdisagreements on is- sues like gay rights, hard-leftists and Muslims forged a lasting alli- ance in the Stop the War movement against the invasion of Iraq. Mr Corbyn has done more than turn a blind eye to anti-Sem- itism. He has had tea in Parliament with Islamist radicals such as Sheikh Raed Salah, who has claimed that “a suitable way was found to warn the 4,000 Jews who work[ed] every day in the Twin Towers” to stay at home on September11th 2001. He has ap- peared on Iranian national television, despite the fact that the re- gime issues wild threats to destroy Israel. One of his old friends, Ken Livingstone, has repeatedly asserted that Hitlersupported Zi- onism in the early1930s. This week’s row was proof in itself that previous attempts to EREMY CORBYN has spent a remarkable proportion of his life tackle the problem have failed. Several Labour MPs joined the Jon “demos”—indeed, it is no exaggeration to say that protesting protests in a public rebuke to the party leadership. But is there is his core competence. This week, however, the Labour leader also a chance that it marks a turning-point? MrCorbyn has issued found himselfon the receiving end ofa demonstration. Two Jew- a statement recognising that “anti-Semitism has surfaced within ish groups, the Board of Deputies of British Jews and the Jewish the Labour Party”, apologised for his misjudgment over the mu- Leadership Council, organised a protest in Parliament Square to ral and offered to meet Jewish leaders. His aides are reportedly draw attention to Mr Corbyn’s anti-Semitism problem. “rattled” by the fallout from the row, which represents more of a The demonstration was only about a thousand strong. The or- threat to his reputation forsanctity than his links to IRA activists. ganisers forgot to bring a PA system so it was impossible to hear what was being said. Only a handful ofpeople joined in with the Speakno evil chant of “Mural, mural on the wall, who is the biggest racist of Butthere are powerful reasonsforbelievingthatthe problem will them all—Corbyn!” But this was nevertheless a significant mo- not be tackled. One is biographical. Mr Corbyn has spent his life ment: a group of Jews standing outside Parliament, protesting moving in far-left circles since arriving in London in the early about the prevalence of anti-Semitism not on the fascist extreme 1970s. His instinct is that there are no enemies to the left—that fel- but at the heart ofone ofBritain’s two biggest parties. low protesters in the Socialist Workers Party or International The immediate cause of the protest was a recently unearthed Marxist Group should be forgiven their peccadillos (such as be- comment that Mr Corbyn posted online in 2012 in response to a lieving in armed revolution) because they believe in social jus- piece of London street art. The mural in question is a blatantly tice. Mr Corbyn’s supporters have the same attitude. This week anti-Semitic portrait of a group of capitalists, most of them with they rallied to his defence, claiming that the establishment was hook-noses, playing Monopoly on a table resting on the backs of conjuring up the anti-Semitism row to discredit their champion. naked workers. The local authority ordered the mural be painted Another reason is strategic. British Jews—particularly those over. Mr Corbyn leapt to the artist’s defence, writing on his Face- who support Israel—are being marginalised in the Labour Party. bookpage: “Why? You are in good company. Rockerfeller[sic] de- There are 3m Muslims in Britain compared with about 284,000 stroyed Diego Viera’s [Rivera’s] mural because it includes a pic- Jews, and they are concentrated in areas vital for Labour’s future, ture of Lenin.” The discovery of the post proved too much for such asBirmingham and Manchester. The philo-Semitictradition many leading British Jews, who have written to Mr Corbyn with in the Labour Party, exemplified by Harold Wilson and James three complaints: that the Labour Party contains pockets of anti- Callaghan, is dying. Semitism; that Mr Corbyn has repeatedly turned a blind eye to The most important reason is philosophical. Mr Corbyn has such noxious attitudes; and that previous attempts to deal with it devoted much of his life to protesting against racism. But forhim, have proved inadequate. racism is linked to class and exploitation. It is about privileged They are right on all three counts. Jewish Labour MPs such as people doingdown the marginalised, and saintlyactivists like Mr Luciana Berger have been subjected to anti-Semitic rants and in- Corbyn riding to their rescue. But the Jews are perhaps the timidation from supporters ofthe hard left. Jewish students have world’s most successful ethnic minority. They have almost al- abandoned Labour groups because they feel threatened and vil- ways succeeded by the sweat of their brow rather than the lar- ified. One source of the anti-Semitic infection is the hard left, gesse ofactivists or government programmes. They are often hat- which is almost defined by its hostility to Israel and capitalism. ed precisely because they have succeeded where other There is nothing necessarily anti-Semitic about either position. marginalised groups have failed. The danger is not that Mr Cor- But in the heat of political debate, distinctions can blur and an- byn will continue to ignore anti-Semitism after this week’s prot- cient hatreds flame. Hard-leftists habitually refer to Jews as ests. It’s that he doesn’t understand what anti-Semitism is. 7 őńƂƨ IJÖƨ ƨėĝƍ Ǯ֊ƅƂƍ =h
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Also in this section 34 Russian diplomats depart 35 Italy’s co-operating populists 35 Turkey’s co-opted media 36 Moldovan wine 36 Spain and separatism 37 Charlemagne: Going Dutch

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

Europe’s “identitarian” right One way it gains influence is by prompting authorities to overreact. In ear- White, right and pretentious ly March Martin Sellner, an Austrian iden- titarian activist, was barred from entering Britain, where he had planned to deliver a speech in Hyde Park. Mr Sellner’s expul- sion was big news on alt-right and identi- GHENT AND STOCKHOLM tarian websites for weeks. He condemned it as “a new totalitarianism”: “We are being Borrowing tricks from the left, right-wing identitypolitics is on the rise replaced, conquered by radical Islam, and HE Flemish city of Ghent is so packed Europe, like the Netherlands’ Forum for we are not allowed to talkabout it!” Twith medieval antiquitiesthatit isin no Democracy (FvD) or Italy’s CasaPound Mr Sellner is among the biggest figures danger of forgetting its history. Nonethe- (after the fascist-sympathising poet Ezra). in the Identitarian Movement (IM), a net- less, cultural identity is a burning political Others become social-media personal- work with branches in most European issue there. On March 22nd marchers led ities, or run websites and publishing countries. The movement, which began in by a conservative Flemish student group, houses like Sweden’s Red Ice and Arktos. France in 2003, often uses a black-and-yel- the Nationalist Student Union (NSV), filed This new “identitarian” right sprawls low flag with a symbol that represents the into the square ofthe Cathedral ofSt Bavo. across borders; activists from Scandinavia, Spartans’ shields at the battle of Thermo- The march was a protest over the large Italy, Germany and America often collabo- pylae (when Europeans resisted a Persian numberofmurders ofwhite South African rate. In electoral terms, it is tiny. But it also horde). They share common ideas: the farmers by blacks. It was also part of a aims to change politics by spreading ideas need to stop mass immigration, the un- growing movement led by young Euro- and setting the terms ofpolitical debate. Its desirability of Islam and the corrupt au- pean activists aimed at reshaping identity activists call this “metapolitics”, a concept thoritarianism of the EU. The IM does not politics, long the province of the left, into a borrowed from Antonio Gramsci, an Ital- endorse parties. Instead it stages politically right-wing cause. ian Marxist ofthe 1920s and 1930s. charged stunts, such as disruptinga play by White Afrikaners, like Flemings, speak Western Europe’s elections last year a Jewish playwright with refugee actors in a form ofDutch, so there is a cultural bond. were widely seen as dealinga blow to pop- Vienna. The most ambitious IM action yet The NSV, founded in 1976 as part of the ulism. Buttheyalso broughtvictoryto new was Defend Europe, a project last August Flemish independence movement, want- parties focused on identity. In the Nether- by the movement’s Italian branch, which ed to show solidarity with them, said Bavo lands Thierry Baudet, the leader of the hired a boat to discourage NGOs from res- Janssens, one of the group’s leaders. Be- FVD, which won two seats in parliament, cuing migrants in the Mediterranean. The hind him flew flags bearing the Flemish has warned that immigration may mean influence offar-right media is just as signif- lion and a banner reading “ANC murder- the “homeopathic watering-down” of icant. The website Red Ice, based in both ers”. In a jab at multiculturalism every- Dutch culture. In Germany the Alternative Sweden and Texas, connects European where, Mr Janssens said the Belgian media for Germany (AfD) party brought far-right identitarians to American alt-righters. were too politically correct to admit that nativism into the Bundestag. In Italy this “the rainbow nation of Nelson Mandela year the two big winners, the Northern Boomerang has failed.” League and the Five Star Movement, pro- Identitarians largely avoid old-fashioned All over Europe, studious youths with pose strict limits on immigration. Increas- national conflicts by concentrating instead neat haircuts are changing the face of right- ingly, identity is a key issue in European on what they see as the civilisational clash wing activism. Some embrace the new elections, and the identitarian right is start- between Europe and other continents. populist parties that have sprung up across ing to frame the debate. Many of them even advocate a European-1 34 Europe The Economist March 31st 2018

2 level political body that can hold its own There is not much risk of NazBols said Russia’s government used a nerve against superpowers like America and marching through the streets of Ghent. agent, Novichok, in the streets of an Eng- China. But they disagree about liberalism. Much more important is how identitarian lish cathedral city in a bid to kill a former Some see it as part of Europe’s identity, language migrates from these fringe Russian spy, Sergei Skripal, and his daugh- threatened by Muslims who do not respect groups towards the political centre. In the ter, Yulia. Trump tweets condemned a ter- women or gay people. Others, including Dutch municipal elections this month, ads rorist attackin France and denied that he is Daniel Friberg, the Swedish CEO ofArktos, forthegoverningLiberal partyassuredvot- struggling to recruit good lawyers. The see liberalism as the “disease” that made ers that they were “not racist” for celebrat- president tweeted that he would win a Muslim immigration easy in the first place. ing the holiday of Sinterklaas in blackface. fight with the formervice-president, Joe Bi- Such attitudes, and the ironic tone of The German interior minister, Horst See- den, who would “go down fast and hard, much far-right discourse, make for strange hofer, announced this month that Islam “is crying all the way”. But his Twitter account detours. In the social-media channels not a part” of Germany, forcing Angela was silent as 60 Russians were ordered out where identitarians congregate, on Twitter, Merkel to contradict him. In Denmark the ofhiscountry. Indeed, MrTrump hasnever Gab and 8chan, a pseudo-movement call- Social Democrats now want to ship even breathed a word of criticism of Mr Putin. ing itself NazBol has popped up, combin- legitimate asylum-seekers back to the re- The most benign account, from Mr ing Nazi and Bolshevik iconography. No gions they come from. The metapolitics, as Trump’s defenders, is that he takes a mo- one knows whether it is serious. the identitarians put it, is working. 7 narchical view of geopolitics, seeking re- spectful relations with leaders who im- presshim, even asunderlingsscrap. Others Expelling Russian diplomats have less flattering explanations. Russia’s state media and proxies denied The defiant pariah Russia’s involvement in the Skripal poi- soning and offered some fanciful alterna- tive theories. They claimed that America invented Novichok, thatBritain carried out the poison attack to frame Russia or acci- dentally allowed nerve agents to leak from WASHINGTON, DC a chemical-weapons-research facility, that A chemical attackon Britain unites countries appalled by Russian skulduggery Ukraine isbehind the whole thingand that T IS one thing to stand defiant and aloof been switched off and exits blocked. defectors are prone to suicide. Ion the world stage, another to be a pari- America draws “a distinction between the To Russian propagandists, confusion is ah. That is the message that Western gov- Russian people and the actions of their a friend. Their aim is to not to convince but ernments hope President Vladimir Putin government”, the Trump aide said. to foment cynicism, apathy and a sense will absorb as he digests the co-ordinated The same White House briefing called that believing official accounts is for expulsion ofover130 Russian diplomatsby the expulsion of60 alleged spooks, includ- chumps. Russia also likes to divide Europe. more than two dozen countries, in re- ing 12 at the UN in New York, an act of sol- Austria, Greece, Cyprus and Portugal de- sponse to a nerve-agent attack in Britain. idarity with America’s closest ally after “a clined to expel Russians. In Italy and the America’s decision to throw out 60 Rus- reckless attempt by the [Russian] govern- Czech Republic pro-Putin nationalist poli- sian officials accused of spying under dip- ment to murder a British citizen and his ticians questioned the expulsions. lomatic cover was that country’s largest daughter on British soil with a military- Still, Russia’s brazenness is raising the such action, exceeding even expulsions in grade nerve agent”. costs of being a Putin apologist. Brexit Brit- the chilliest years ofthe cold war. President Mr Trump himself did not announce or ain and Mr Trump’s America are re-learn- Donald Trump’s government also ordered explain the expulsions on March 26th. His ing the power of alliances such as the EU the Russian consulate in Seattle to close, thumbs were busy in the days after Britain and NATO. Isolation has its downsides. 7 citing its proximity to a nuclear submarine base and to the headquarters ofBoeing, an aircraft maker. Foreign leaders, notably those from Britain, France and Germany, used a Euro- pean Union summit and a flurry of tele- phone diplomacy to urge allies to act in concert. Suspected spookswere given their marching orders from Oslo to Ottawa, and from Copenhagen to Canberra. New Zea- land shyly admitted it knew of no unde- clared Russian agents on its soil, and so could not join the effort. The NATO mili- tary alliance asked seven Russians to leave and ordered Russia’s mission at its Brussels headquarters to shrinkby a third. Western leaders took care to explain that their confrontation is with Mr Putin and his cronies. A Trump aide’s briefing on the expulsions on March 26th began with an expression of condolences for scores of children and adults killed in a fire in a Sibe- rian entertainment complex. The blaze in the city of Kemerovo inspired public prot- ests after investigators said a fire alarm had The Economist March 31st 2018 Europe 35

Italy it a national party, still has many suppor- two of the country’s four biggest newspa- ters who view southerners with disdain. pers, Hurriyet and Posta; a leading televi- Birds of a feather He and Luigi Di Maio, the M5S’s leader, sion channel, CNN Turk; and a news agen- both know they could face mutinies if they cy, among many others, have been linkup. But the two men have developed a squirming under government pressure for rapport. On March 26th Mr Salvini ex- years. The group’s ageing owner, Aydin ROME pressed qualified backing for Five Star’s Dogan, one of the symbols of Turkey’s de- pledge ofa universal basic income. posed secular order, has been hounded by The populists edge closerto forming a Italian government talks are unpredict- tax inspectors and prosecutors. People government able, however. Other possible combina- close to his group say Mr Dogan conducted HE first duty of a newly elected Speak- tions include a coalition with Forza Italia; a the sale without consulting any associates. Ter of the chamber of deputies, Italy’s link-up between the M5S and the centre- Some believe the mogul faced arrest un- lower house, is to visit the president in his left Democratic Party (PD); and even a less he sold his empire to one of the presi- palace on the Quirinal hill. On March 24th broad government of national unity. In dent’s men. Had that happened to the 81- Roberto Fico of the maverick Five Star any case, an all-populist coalition could year-old, he would have joined overa hun- Movement (M5S) was chosen for the job. give itself a limited mandate to alter Italy’s dred other Turkish journalists already in But instead of following custom by slip- hotchpotch of an electoral law,enact a few prison, most of them jailed since the failed ping into an official limousine for the one- popular reforms and then go back to the coup of2016. kilometre journey, MrFico walked up with country. Their aim then would be to wipe The move leaves Mr Erdogan and his al- his partner. Forza Italia and the PD off the map and in- lies in control of almost all big media out- His election signalled not just a change stall a new,populist two-party system. 7 lets ahead of parliamentary and presiden- of style, but a shift in the political land- tial elections due next year. According to scape that shortened the odds on an all- Esra Arsan, an analyst, two out of every populist government emerging from the three newspapers in Turkey, representing a consultations that President Sergio Matta- crushing 90% of total national circulation, rella is to initiate after Easter. Mr Fico, who are nowin the hands ofbusinessmen close began in politics as an environmental ac- to the government. Some are closer than tivist, won with the help of the populist- others. The current CEO of one big media right Northern League and Silvio Berlus- group is the brother of Mr Erdogan’s son- coni’s conservative Forza Italia party. Yet in-law (who happens to be energy minis- more strikingly, his colleagues in the Sen- ter). Others, including the Dogan group’s ate voted to make Elisabetta Casellati the new owner, Erdogan Demiroren, have new Senate president. Ms Casellati was been pushed into the businessbya govern- the candidate of an electoral alliance in- ment that wants all media to be run by cluding the League and Forza Italia. She is people it can boss around. In a leaked known for her loyalty to Mr Berlusconi, phone conversation from 2013, MrDemiro- whose scandal-strewn past represents ren got such an earful from Turkey’s presi- much thatthe M5S wasfounded to oppose. dent after one of his newspapers pub- Ms Casellati’s election was anything lished details of secret peace talks with the but a victory for the formerprime minister, leader of a Kurdish insurgent group that he however. Mr Berlusconi, whose party suffered both an epiphany and a break- trailed the League in the election, had down. “Why did I ever get into this busi- backed another senator. Just to show who ness?” he was heard asking Mr Erdogan now leads the right, the League’s Matteo through his tears. Salvini refused to support him, torpedoing The Turkish strongman had been put- his chances. The former prime minister ting the screws on the Dogan group for fumed that it was an “act of cold hostility”. much longer. In 2009, after Hurriyet aired Mr Berlusconi’s troubles continue to deep- Turkey corruption allegations against a religious en: on March 26th he was ordered to stand charity close to Mr Erdogan’s government, trial, accused of paying witnesses to lie for It’s an Erdogan- the finance ministry slapped the group him in earlierproceedings in which he was with an extortionate tax fine of $2.5bn (lat- acquitted ofpaying forunderage sex. eat-Dogan world er reduced to about $600m). The move A coalition of the League and the M5S, forced Mr Dogan to sell two newspapers, which won the most votes of any party at ISTANBUL Milliyet and Vatan, to Mr Demiroren on the the general election on March 4th, could of- eve ofa parliamentary election in 2011. Do- An offerTurkey’s last independent ferthe countrystability. Itwould have clear gan outlets have since sacked journalists media group couldn’t refuse majorities in both houses. But it would deemed too critical of the president and send tremors of apprehension through ECEP TAYYIPERDOGAN has been on a toned down their coverage. In the summer markets and European chanceries, for it Rroll lately. On March 18th the Turkish of 2013 the group’s flagship news channel would put into office two parties that have president announced the army’s capture stopped reporting from the scene of the vowed to defy the euro zone’s budget-def- of Afrin, a Kurdish stronghold in Syria, biggest anti-government protests in icit limits and whose electoral pledges, if after two months of relentless attacks. years—to air a documentary about pen- implemented, would add tens of billions Barely a week later, he scored another vic- guins. Amid the mass purges that followed of euros to Italy’s already worryingly high tory when a pliable mogul snapped up the the coup attempt, Dogan newspapers have public debt (more than 130% ofGDP). last bastion of semi-independent journal- toed the government line even more close- The League and the M5S have very dif- ism in Turkey, the Dogan group, for$1.2bn. ly. Last spring Hurriyet censored an inter- ferent policies and constituencies. The For one of the country’s largest media view with Orhan Pamuk, in which the No- M5S swept the south in the election. The conglomerates, the sale must have felt like bel laureate for literature outlined why he League, despite MrSalvini’seffortsto make a coup de grâce. Dogan outlets, including opposed constitutional changes giving Mr1 36 Europe The Economist March 31st 2018

2 Erdogan a range ofsubstantial new powers Spain and separatism son and is likely to be extradited to Spain as a consequence of transforming Turkey’s within two months. broadly parliamentary system of govern- The long arm Mr Puigdemont’s arrest ended five ment into a presidential one. (The changes months of self-imposed exile, mostly in were narrowly approved by a referendum Belgium, after he organised a post-referen- last year, though opponents say the ballot dum declaration of independence on Oc- was invalid.) MADRID tober27th. It came two days aftera judge of Journalists at Dogan outlets, for whom the supreme court in Madrid charged Mr What Carles Puigdemont’s arrest the inevitable sale of the businesses still Puigdemont and 24 other separatist lead- portends forCatalonia came as a shock, describe the mood in ers with crimes ranging from rebellion to their newsrooms as funereal. Those PAIN’S intelligence service was humili- disobedience. He sent five to prison (four known fortheirpastoutspokennessare ex- Sated last year when it failed to stop sup- more were already there) and ordered pected to get the boot in the coming porters of Carles Puigdemont’s separatist European arrest warrants against six, in- months. “Even if we behave and continue Catalan government from smuggling in cluding Mr Puigdemont. censoring ourselves, that’s not enough for ballot boxes for an unconstitutional inde- Tensofthousandsdemonstrated in Bar- them, because they know what’s going on pendence referendum. The spies got their celona to denounce what they see as re- in our hearts,” says one writer, referring to revenge on March 25th when they tipped pression ofa peaceful, democratic cause. A Mr Erdogan’s government. “It’s not what off German police, who arrested Mr Puig- minority attacked police and blocked mo- we write that matters anymore, but what demont after he drove across the border torways. Many other Spaniards see Mr we represent.” 7 from Denmark. He was remanded to pri- Puigdemont and his fellow separatists as people who used intimidation to try to breakup theircountry and oppress the ma- Moldova jority of Catalans who don’t want inde- pendence (only41% do, accordingto the lat- Cheers for Moldovan wine est poll). Judge Llarena accuses them of PURCARI “contemptuous and systematic” flouting of judicial orders, and the mobilisation of An industryescapes the long Russian shadow crowds to thwart police action. ET’S try this!” Victor Bostan selects a agreement with the European Union. Whether that amounts to “rebellion” (a “L1984 red from the cellar ofhis Pur- Since then the industry has trans- charge which entails violence and is pun- cari winery.He is in a bullish mood. Last formed itself.Like Purcari, all Moldova’s ishable by up to 25 years in jail) or its Ger- month Purcari shares began trading on wineries have redirected their sales to the man equivalent of “high treason” is debat- the Bucharest stockexchange. In 2017 EU. The embargoes have forced produc- able. But the German government of sales from his fourwineries were up 35% ers to make better plonk: European oe- Angela Merkel has been a strongsupporter on 2016. Bad weather in the big western nophiles are picky.The main customers of Mariano Rajoy, Spain’s prime minister, European winemaking countries caused are formercommunist countries where and his handling of Catalonia. “Spain is a production to plummet to its lowest level Moldovan wine was already known, democratic state,” her spokesman said. in 60 years. But in Moldova, where the such as Poland and Romania. Chinese “This conflict has to be settled according to weather was good, producers can scarce- buyers are keen, too. Russia allows some Spanish law.” ly contain their excitement at how well imports, but only from Transdniestria, The conflict has deprived Catalonia ofa things are going. Gagauzia (a small pro-Russian region) regional government since Mr Rajoy im- In Soviet days almost all Moldovan and a handful ofwineries lucky enough posed emergency rule by Madrid in the wine went to the rest ofthe Soviet Union. to have close Russian links. wake of the independence declaration last In the1980s its vineyards were uprooted The Moldovans’ hard workis paying October. After an election in December in when Mikhail Gorbachev began his off.In 2017exports were19.4% higher than which the separatists gained a slim major- anti-alcoholism campaign. With the in 2015.Winemakers, unlike grapes, ity, the Constitutional Tribunal and the collapse ofthe Soviet Union much of cannot easily be trampled underfoot. Catalan parliament’s own lawyers ruled il- Moldova’s industry also collapsed; but legal attempts to elect as regional president the wine and brandy businesses did not. the absent Mr Puigdemont or two others Indeed, says Mr Bostan, these were the facing charges. best times ever. Russia, to which 80% of Divisions among the separatists have the country’s booze went, had an un- also conspired against forming a govern- slakable thirst forit. “It was like pumping ment. Mr Puigdemont and the more radi- oil from the ground.” cal elements want to continue “building Moldova is wedged between Roma- the Republic”. Others want to remain nia and Ukraine. A breakaway sliver, within the law, and mayseekto form a gov- Transdniestria, is controlled by Russia. In ernment by allying with the non- 2006, when Moldova rejected a deal to nationalist left. Unless that happens by end the frozen conflict over Transdnies- May 22nd, Catalonia will face yet another tria, Vladimir Putin’s Russia slapped an election that nobody wants. embargo on Moldovan wine. Millions of The state’s robust response to the sepa- bottles already in Russia were poured ratists has halted the independence drive. away or never paid for. “The sector was But it may be storing up problems. Such dead,” says Gheorghe Arpentin ofthe widespread use of pre-trial detention wor- National Office forVine and Wine. The ries some. Separatists have to be won over, embargo was relaxed a little later, but Mr notcrushed, said Felipe González, a former Putin redoubled it in 2013 when Moldova prime minister, warning of “government annoyed him by signing an association Bowled over by Moldovan plonk by judges”. A lasting political settlement of the Catalan issue looks faraway. 7 The Economist March 31st 2018 Europe 37 Charlemagne Going Dutch

Forthe Netherlands Brexit is a threat—and an opportunity To explain why, MrRutte notes cheerfully that Brexit requires the Dutch to recalibrate their four-century diplomatic balancing- act between France, Germany and Britain. That means two things. First, an unabashed commitment to Europe. The Dutch wantthe EU to forge a strongtradingrelationship with Britain, but will not break ranks to help bring it about. Second, a willingness to form ad hoc coalitions on specific issues. Mr Rutte reels some off: the Germans on migration, trade and the euro; some central European countries on the EU internal market; the French on cli- mate change. “Brexit is a wake-up call,” says Ben Knapen, a for- mer Europe minister. Where the Dutch were often content to let Britain take the lead, now they must step up themselves. In part this is a hedging strategy against a big-power stitch-up. Fear of being steamrollered by the Franco-German engine, now cranking into gear again, sits in the DNA of Dutch diplomats. Yet theyare cautiouslyoptimisticthatthe Germanswill not sell them out on matters like the EU budget or euro-zone reform. Indeed, the Germans are happy to have the group of eight as attack dogs because it places them at the centre of the debate. Peter Altmaier, Germany’s economy minister and a confidant of Angela Merkel, has lent the bad-weather coalition his tacit support. LL the North Sea’s people are connected to each other,” But Mr Rutte is also investing in Emmanuel Macron. After “A muses Hans de Boer, president of VNO-NCW, the Dutch twice hosting Mr Rutte in Paris, France’s president dropped into business lobby, as he gazes from his12th-flooroffice in The Hague. The Hague last week. French-Dutch enmity runs deep, especially It is not a bad place for a Dutchman to consider the consequences on the euro zone; the Dutch want strongernational buffers to pro- ofBrexit. The port ofRotterdam, Europe’s busiest, is just visible in tect against crises, whereas Mr Macron is impatient to build su- the morning haze. Eighty thousand Dutch firms trade with Brit- pranational bodies and a hefty common budget. Mr Rutte ac- ain; 162,000 lorriesthunderbetween the two countrieseach year. knowledges the differences, but suggests that if he and Mr Rabobank, a Dutch lender, calculates that even a soft Brexit could Macron can strike a deal, the rest of the EU may follow in their lop 3% off GDP by 2030. Bar Ireland, no country will suffer more. wake. (Germany might have something to say about that.) Trade- “Brexit was not our preferred option,” offers Mr de Boer, drily. loving Dutch diplomats used to shudder at Mr Macron’s call for a Dutch governments spent the 1950s and 1960s trying to get “Europe that protects”. Now, glancing nervously at rapacious theirBritish friends into the European club; when Britain voted to Chinese investment, Russian menaces, Donald Trump’s tariffs leave, in June 2016, some wondered if they might drag the Dutch and the terrorist threat, they wonder ifhe has a point. out with them. The EU’s economic and migration traumas had tested the patience ofvotersforyears, and MarkRutte, prime min- Not a mouse, and roaring ister since 2010, seemed unwilling to make the case for Europe. It is a delicate moment for the Dutch. Brexit eliminates an ally, but Eurosceptic strains found a vessel in Geert Wilders, a platinum- creates an opportunity to take the initiative. The renewal of the haired race-baiter who urged “Nexit”. Just over a year ago, with Franco-German relationship presents a hazard, but also a chance an election approaching, Europeans braced fortrouble. to shape the debate. The EU’s deal with Turkey to stem illegal im- What happened next was more interesting. Mr Rutte won the migration in 2016, which the Dutch helped construct, taught Mr election, although Mr Wilders’s success forced him into a four- Rutte thatthere isa role forEuropean action in fixing national pro- party coalition with a tiny majority. But rather than continue to blems. Dutch officials admit that they are still finding their feet in play the spoiler, Mr Rutte, with some prodding from his advisers, thisnewworld. Butthere isa fresh swaggerto theirdiplomacy. Mr joined the European debate with a vigour few knew was in him. Rutte bristles at any suggestion that his country is “small”. In earlyMarch he visited Berlin to delivera detailed speech on the Nonetheless, he must be careful to avoid a backlash at home, EU, hisfirstmajorintervention since takingoffice in 2010. Soon af- which makes him careful what he says. MPs, including members terwards the Dutch and seven like-minded small northern and of the ruling parties, and the media are alert to the merest hint of eastern European countries (one official calls it the “bad-weather being dragged into an EU “transferunion”. The Dutch are increas- coalition”) issued a paper laying out a common EU vision. ingly weary ofeastern Europeans who refuse refugees but lap up Arguably, there is no substantive policy change involved. The EU subsidies. The Eurosceptic right also has a new champion in Dutch still want to limit risk-sharing and common spending in Thierry Baudet, a well-groomed, piano-playing political entre- the euro zone, and to boost intra-EU trade. With a Calvinist finger- preneur. Mr Baudet is dismissed by the establishment as a pseud- wag, they urge governments to mind their own yard before seek- in-a-suit, but his calls for the Dutch to leave the EU resonate. His ing common solutions. But Mr de Boer says this is about reassur- Forum forDemocracy has vaulted past Mr Wilders in the polls. ing Dutch voters rather than attacking the EU. And the Berlin That alone will force Mr Rutte to take a tough line in the com- speech marks a change ofstyle fora prime ministerlong reluctant ing EU debates on asylum reform, the budget and the euro zone. to engage in European debates. Mr Rutte used to return from EU Formany Europeans, the Dutch will only everbe a stalwart mem- summits moaning about windbaggery. Now he jumps right in. ber of the awkward squad. But having spent so long on the side- “I’ve never seen him so pro-European,” says a colleague. lines, they are at least now taking part. 7 38 United States The Economist March 31st 2018

Also in this section 39 Alternatives to Obamacare 40 Shaping electoral districts 40 Special elections 41 Suicide on the rise 42 The slow decline of Spanish 43 Lexington: The warrior look

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

Team Trump blown trade war might be only a few more shots away (see Finance section). Larry Ku- March madness dlow (pictured, bottom right), a television pundit who last worked in government under Ronald Reagan, will replace Mr Cohn as chief economic adviser. Though a free trader in his commentary, Mr Kudlow WASHINGTON, DC now says he sees a value in “targeted ta- The latest spate ofhiring, firing and quitting at the White House leaves fewer riffs”, at least as a negotiating tool. checks on the president’s impulses As for Mr Mueller’s investigation, as it HE revolving door of Donald Trump’s (see Lexington). Just one month ago Mr has deepened and apparently widened Tadministration is spinning fast. In the Bolton penned an opinion piece for the (after ensnaring former Trump aides like past couple of weeks the president has Wall Street Journal entitled “The Legal Case Michael Flynn, the first national security fired his national security adviser, H.R. for Striking North Korea First”. American adviser, and Paul Manafort, a former cam- McMaster (pictured, top left), and his secre- participation in the agreement to curb paign chairman), Mr Trump’s temper has tary of state, Rex Tillerson, and lost his Iran’s nuclear ambitions could soon end, flared. With Mr Dowd’s resignation, re- chief economic adviser, Gary Cohn (bot- adding to tensions in a Middle East that is portedly over Mr Trump’s refusal to heed tom left), who resigned after failing to stop already aflame (see International section). his advice and avoid an in-person inter- Mr Trump putting tariffs on aluminium Nominated to replace Mr Tillerson as sec- view with Mr Mueller, the legal team in and steel. John Dowd, the top lawyer rep- retary of state is Mike Pompeo, the hawk- charge of defending the president is in dis- resenting the president in Robert Mueller’s ish director of the Central Intelligence array. Joe diGenova, a staunch supporter investigation into Russian election interfer- Agency who also dislikes the Iran deal and of the president in his Fox News appear- ence, has also quit. Mr Trump is trying to wantsto see regime change in North Korea. ances, had been set to join the team before hire his fifth communications director, fol- At least he is likely to prove a more compe- backing out a few days later. Few top-tier lowing the resignation ofHope Hicks. tent administrator ofthe State Department lawyers are said to be jumping at the While such turnover is rarely good for than Mr Tillerson. chance to represent the president. morale or the crafting of coherent policy, a Then there istrade. Protectionism isone Already the president has taken to as- biggerproblem lurks. The replacement cast of the few political positions that Mr sailing Mr Mueller by name on Twitter—a will now be made up of advisers who Trump has held steadfastly. Trumpologists tactic that Fox News hosts such as Sean could indulge Mr Trump’s worst instincts had divided the administration into two Hannity have been pushing for months. on national security, trade and legal de- camps: the so-called globalists, with Mr Friends of Mr Trump fretted aloud in the fence rather than temper them. The next Cohn as their erstwhile chief, and the na- summer of 2017 that he seemed minded to phase of his presidency could therefore be tionalists, who include Wilbur Ross, the sack the special counsel, a move they be- one ofthe unfettered id: Trump unbound. commerce secretary, and Peter Navarro, lieved would be disastrous. Press reports, Start with national security. In place of the director of the National Trade Council. called fake by the president, asserted that Mr McMaster, a three-star general formerly The two sides had warred overMrTrump’s the White House counsel, Donald best known for his sharp criticism of the mercantilist tendencies, but it now ap- McGahn, threatened to resign if Mr Vietnam war, Mr Trump has elevated John pears that the nationalists are ascendant. Mueller were fired. Now Mr McGahn is Bolton (pictured, top right), a bellicose Steel and aluminium tariffs were quickly said to be keen to leave. nationalist who has talked approvingly of followed by a proposal to levy tariffs on The official with the authority to sack military strikes in Iran and North Korea $60bn-worth of Chinese goods. A full- Mr Mueller, Rod Rosenstein, the deputy at-1 The Economist March 31st 2018 United States 39

2 torney-general, has testified to Congress Alternatives to Obamacare definition of “short-term” to 364 days. This that there is no reason to do so. Torid him- would allow the deregulated plans to com- self of the special counsel, Mr Trump Abandon ship! pete more directly with the exchanges. would have to sack Mr Rosenstein and all The proposal is an ingenious run succeedingofficials who refused to enforce around Obamacare’s regulations, which the order. This “massacre” manoeuvre was have inconvenienced several conserva- performed by Richard Nixon during the tive-leaning states. Most recently, Idaho WASHINGTON, DC Watergate scandal, with disastrous conse- planned to let insurers sell skimpy cover- New effortsto help people escape quences. A handful of elected Republi- age, so long as firms also offered at least Obamacare’s pricey insurance markets cans, most of them members of Congress one Obamacare-compliant policy. On who are not seeking re-election, have EPUBLICANS may have abolished the March 8th Seema Verma, a federal Health warned Mr Trump that firing Mr Mueller R“individual mandate”, an unpopular Department official, warned the state that would jeopardise his presidency. But as part of Obamacare that fines Americans its proposal, however admirable, violates Senator Bob Corker of Tennessee recently for not buying health insurance. But most the law. But under the administration’s noted, Trump support among Republican ofthe law’sricketyarchitecture remains in- proposed rule, Idaho would be able to of- voters is “more than strong, it’s tribal in na- tact. Having given up, for now, on sweep- fer deregulated plans, if reframed as “short ture.” Voters on the trail no longer ask ing legislative reform, the Trump adminis- term” offerings lasting for364 days. about issues, added Mr Corker, who is tration and Republican-leaning states are How many buyers would prefer thin- standing down this year. “They want to seeking ways to help consumers circum- ner coverage? Even for the healthy, such know ifyou’re with Trumpor not.” vent the law. plans are not necessarily better, given the Duringthe latestannualenrolment per- riskoffallingill. Butin placespremiums are Exeunt omnes iod, which ran from November 1st to De- so high that cheaper plans of any sort are Further ejections could be coming. Jeff Ses- cember 15th, just before the individual probably an attractive proposition for sions, the attorney-general, incurred the mandate was repealed, 11.8m Americans those buyers, numbering about 7m in 2017, unending wrath of the president by recus- signed up for coverage on Obamacare’s who earn too much to qualify for subsi- inghimselffrom the investigation into Rus- “exchanges”. Several million more will dies. Forexample, the total annual bill fora sia’s election interference. For the past few have bought similar plans direct from in- typical family of four in Boise, Idaho, is al- months, Mr Sessions has been subject to surers. These markets are designed so that most $18,000 fora benchmarkplan. Such a semi-regularhumiliations—the typical pre- anyone, however ill, can buy generouscov- family must pay this premium in full if its lude to eventual sacking in the Trump ad- erage at the same price as a healthy person. income exceeds $100,000 before tax. ministration (as Messrs Tillerson and The individual mandate was designed to Unsurprisingly, given such costs, exist- McMaster could attest). Scott Pruitt, the ad- bring in enough low-risk customers to ing alternatives to Obamacare have al- ministrator of the Environmental Protec- make the market profitable for insurers. ready proved popular. Tennessee has one tion Agency, has been floated as a replace- Without it, enrolments for2019are likely to of the shakiest individual markets partly ment for Mr Sessions. David Shulkin, the fall(though no one is sure by how much). because its Farm Bureau, a not-for-profit veterans-affairs secretary, is fighting to Having drilled another hole in the ship, agricultural organisation, is allowed to sell keep his post, amid speculation that he Republicans now want to provide life- deregulated health insurance in competi- might be replaced by Pete Hegseth, a Fox boats for those who jump off. In February tion with the exchanges. In 2017, 73,000 News pundit. John Kelly, the chief of staff the Health Department proposed expand- people held a Farm Bureau plan that did credited with imposing some discipline in ing short-term health plans, to which not fully comply with Obamacare’s rules. the White House, has also been the subject many of Obamacare’s rules, including the This is about one-third of the number who ofconstant rumours ofremoval. prohibition on charging sick people more, are enrolled through the exchange. As the mid-term elections loom, con- do not apply. Such plans currently offer Religiouscost-sharingministries are an- gressional Republicans are in defensive coverage for a maximum of three months. other popular escape route. These allow mood, and the White House seems unwill- The administration wants to expand the voluntary cost-sharing among the devout. ing to push big, risky pieces of legislation. As well as paying a monthly charge, enroll- Expect Republicans to talk up their biggest ees must typically abide by certain stric- achievement, a package oftax cuts that has tures, such as abstaining from tobacco and slowly gained in popularity. Mr Trump illegal drug use, and regularly attending may return to his greatest hits at rallies: church. Generally, there are no guarantees new protectionist trade measures, say, or of payment, and no networks of medical attacks on Democrats and left-leaning cit- providers with which the ministry has ne- ies that shield illegal immigrants. Any new gotiated discounts. Services deemed igno- Supreme Court vacancy would galvanise minious—such as abortions—go uncov- conservatives. ered, and ministries need not pay for The president seems to think that he treatment forpre-existing conditions. governs best from his gut, and that bad ad- Adecade ago, before Obamacare, fewer vice hasforced him into unpopularconces- than 200,000 Americans were signed up sions to the Washington establishment. As forthese plans, accordingto the Alliance of nerve-racking as it may be, both within the Health Care Sharing Ministries, a trade White House and beyond, the Trump-un- group. The law exempted cost-sharing bound phase of the presidency could ministries from its new regulations and the prove politically effective. With the econ- individual mandate.Todaythe plansare so omy strong and Mr Trumpvisibly embold- cheap relative to Obamacare that their ened, his popularity has been creeping up. membership has grown to over1m. This week a CNN poll showed his approval The Urban Institute, a think-tank, pre- rating to be 42%—still low compared with dicts that 4.2m Americans would enroll in most previous presidents at the equivalent short-term plans ifthey were expanded. In stage, but his highest in nearly a year. 7 Religion to the rescue combination with the withdrawal of the1 40 United States The Economist March 31st 2018

Shaping electoral districts Drawing the line

How the Supreme Court and the next census could affect the electoral map S LONG as elections have been held, some seemed intrigued by a statistics- Acandidates have sought to bend the based approach pegged to the14th rules to their advantage. American politi- Amendment’s equal-protection guaran- cal parties have taken gerrymandering to tee. But the conservative wing ofthe new heights, using computer models that court was sceptical ofthe standard of- enable districts to be crafted block by fered by those challenging a Republican blockformaximum partisan gain. The gerrymander in Wisconsin. ChiefJustice Supreme Court is now taking notice, John Roberts derided it as “sociological having accepted two cases that question gobbledygook”. For the statistics-shy,the whether it is constitutional for legislators First Amendment approach in Benisek to choose their voters, rather than the may present an attractive alternative. But other way round. But Republicans, its simplicity swings the Goldilocks whose victories in 2010 put them in a problem in the other direction. As Wis- position to doctor farmore districts than consin argues in its amicus brief, the Democrats have, are taking no chances. A Supreme Court’s endorsement ofthe change to the questionnaire forthe de- “retaliation” test may make it “trivially cennial census in 2020 is expected to easy forplaintiffsto scrounge up an increase the share ofdistricts whose expert or two” and spawn lawsuits. Special elections voters preferRepublicans. Any new restriction on gerrymander- The Supreme Court has ruled on ing would aid the Democrats. But the You cannot lose if gerrymandering before. In 2004 a major- Trumpadministration has already begun ity ofthe justices agreed that it should be efforts to counteract this risk. On March you do not play reined in, but they could not decide how. 26th the Commerce Department said it Now they are poised to re-evaluate that would add a question to the census in CHICAGO question. 2020 asking respondents whether they Wisconsin’s governorwants to curtail On March 28th they were to hear are American citizens. The census is elections forthe state legislature Benisek v Lamone, a case pitting Repub- designed to count all residents, regardless lican voters in Maryland against Demo- oftheir immigration status. The depart- E SHOULD call him Walker the crats in the state’s House ofDelegates. In ment says it needs the information to “WRigger,” fumes Martha Laning. 2011, the voters complain, legislators enforce the Voting Rights Act’s protec- The chair of the Democratic Party of Wis- sabotaged the Republican Party in the tions forracial and linguistic minorities. consin is up in arms about plans by Scott sixth congressional district. A year after Democrats say the intention is the Walker, Wisconsin’s Republican governor, this “devastatingly effective” gerryman- opposite. They argue that the spectre of to change a law so that Republicans can der, a House seat which a Republican, officials knocking on doors asking avoid losing another special election. “He Roscoe Bartlett, had won fora tenth time whether respondents are citizens will has already rigged the system so much that in 2010 by 28 points went to John Dela- discourage people in communities where he thought he would not have to worry ney,a Democrat with presidential ambi- undocumented immigrants live from any more,” says Ms Laning, referring to dis- tions for2020. Mr Delaney’s 21-point win taking part in the census. That would tricts gerrymandered to favour Republi- in 2012 may show that Republicans were cause an undercount ofthe population cans, which voters are challenging at the “singled…out fordisfavoured treat- ofthese (mainly Democratic) areas, Supreme Court (see box), and voter-identi- ment”—“retaliation” barred by the First reducing their number ofcongressional fication laws that make it harder for minor- Amendment. The freedom ofassocia- districts and presidential electoral votes. ities and poor people to vote. tion, the plaintiffscontend, “guarantee[s] As with gerrymandering, the final Until a few months ago Mr Walker ex- that no state may punish its citizens for outcome will depend on the courts: pected to cruise to re-election in November their political beliefs”. Maryland Demo- California and New York, among others, for a rare third term. Yet the year started crats counter that First Amendment have announced that they will sue the with a shock for him. In January a histori- retaliation is an “untested theory”. federal government to blockthe census cally Republican district in a rural western Benisek is the court’s second lookthis question. But a decision will have to region in Wisconsin voted for Patty term at gerrymandering. When the jus- come quickly.The law requires the ques- Schachtner, a Democrat, in a special elec- tices heard Gill v Whitford last October, tionnaire to be finalised by March 31st. tion fora state Senate seat, even though her Republican opponent, Adam Jarchow, was farmore experienced and better funded. 2 individual mandate, the resulting exodus that might dry up completely—at great per- To avoid another nasty surprise in a of healthy buyers from Obamacare’s mar- sonal cost for those in poor health who special election, Mr Walker decided not to kets would raise premiums there by an es- could be locked out ofderegulated plans. hold any. Yet on March 22nd Josann Reyn- timated average of18% in the 43 states that In other words, Obamacare would con- olds, a county-circuit judge appointed by do not restrict short-term plans. tinue to act as a safety net for the un- the governor, ruled that by March 29th he This would damage the exchanges, but healthy, but only those whose incomes must call special elections for a vacant seat not destroy them. In 2017 a little over half were sufficiently low. Ironically, given that in the state Assembly and one in the state of buyers benefited from subsidies, which Republicans typically lament welfare Senate. Not holding them, she argued, would rise in tandem with premiums. It is traps, deregulating health-insurance mar- would disenfranchise tens ofthousands of only the market for unsubsidised buyers kets might make it pay to be poor. 7 voters who have not been represented 1 The Economist March 31st 2018 United States 41

2 since December, when two Republicans are roughly two gun suicides forevery gun resigned to work for the governor. Mr A sorry story homicide. Easy access to guns undoubt- Walker reacted by asking Republican legis- United States, suicides by method, ’000 edly worsens matters. Guns are perhaps lative leaders to recall lawmakers for an ex- the most efficient means of getting the job traordinary session on April 4th, so they 25 done: 83% ofattempted suicides by gun are Gas Firearm could pass a bill that would no longer al- Jumping successful, compared with 61% ofhangings 20 low special elections after the state’s Other and a mere 1.5% of intentional drug over- spring election in even-numbered years. doses. Those who try to commit suicide 15 (This year’s spring election is on April 3rd). and fail can receive therapy and recover. Hanging The Republican Party has majorities of 10 According to a Harvard study, only one in 18 to 14 in the state Senate and 63 to 35 in the Drugs/poisoning ten people who survive a suicide attempt Assembly, so neither race risks changing 5 go on to kill themselves. In Britain, where the balance of power. Yet Mr Walker does guns are much less easily available, hang- not want to give Democrats more of the 0 ings make up nearly 60% ofsuicides. momentum that helped them flip seats in 2003 05 07 09 11 13 15 16 White men, especially older ones, over- three dozen elections for state legislatures Sources: Centres for Disease Control whelmingly favour guns as a means ofsui- The Economist since Donald Trump was elected presi- and Prevention; cide. Youngwomen have turned from drug dent. A poll earlier this month by the law overdoses to guns and hanging. Hanging school ofMarquette University in Milwau- according to an analysis by The Economist has surged from 21% of all suicides in 2003 kee found the state evenly divided: 47% of of mortality files from the Centres for Dis- to 26% in 2016. Researchers who interview those surveyed approved ofthe job the go- ease Control. In almost every demo- survivors find that those who choose this vernor is doing, while 47% disapproved. graphic category—men and women, method often imagine a painless death. Two other Republican governors, Rick young Asians and elderly whites, city Determining the cause ofthese dispirit- Snyder of Michigan and Rick Scott of Flori- dwellers and rural folk—the problem is get- ing trends has proved hard. The suicide da, are stallingon special elections. MrSny- ting worse. rate seems to have risen independently of der has decided to wait until November to In nearly all other OECD countries, sui- the lurches in America’s economy. Anne replace John Conyers, a Democratic con- cide has declined since 2000 (Greece and Case and Angus Deaton, two Princeton gressman who resigned in December be- South Korea are exceptions). In America, economists, have argued that a toxic cock- cause of allegations of sexual harassment, however, from 2003 the number began to tail ofopioid addiction and stagnating eco- as well as Bert Johnson, a Democratic state grow by1,000 a year and did not stop. This nomic prospects is worsening the problem senator who resigned after pleading guilty climb has been almost perfectly constant. of premature death, including by suicide, to charges ofcorruption. MrScott, who like In 2016, the latest year for which detailed among middle-aged whites. Mr Snyder is term-limited, is refusing to data are available, there were 45,000 sui- All suicides are, by definition, prevent- hold special elections fortwo seats in Flori- cides in America: 23,000 of them by gun, able. Yet detecting them in time is hard. De- da’s legislature. 11,700 by hanging and 5,300 by overdose. pression and other mental illnesses are A couple of Wisconsin’s Republican Because of suicide’s stigma, these num- clear correlates of suicide, but only a small state senators have expressed concerns bers are thought to be an underestimate. proportion of the millions of Americans about Mr Walker’s proposed opt-out from Though there has been an alarming in- diagnosed with depression will attempt it. special elections. The bill will not pass if crease among women—the number rose Matthew Nock, a Harvard professor, has they vote against it. The governor may still by 39% between 2006 and 2016—men are tried to train an algorithm to comb through be obliged, after all, to abide by Judge still much more likely to kill themselves. patients’ medical records and produce ad- Reynolds’s ruling. 7 Forevery two women who committed sui- vance warnings of suicide risk, but these cide in 2016, so did seven men. White men methods are still plagued by false posi- kill themselves at nearly three times the tives. Machine-learning may one day help. Suicide rate of black, Hispanic and Asian men. Until then, the vigilance of friends and Only Native American men have higher family will be the best defence. 7 Self-destructing rates. Similar racial differences exist in the rates among women, making suicide one of very few public-health crises that dis- proportionately affects whites. SAN FRANCISCO The suicide rate in rural counties is 78% higher than that in big cities. Alaska and The numberofAmericans ending their Montana, two ofthe states with the lowest own lives continues to rise population density, are the worst-afflict- HIRTY-THREE people leapt from the ed—suicide is five times as likely there as in TGolden Gate Bridge last year, plunging the DistrictofColumbia, which hasAmeri- 75 metres to their deaths. Yet the tally could ca’s lowest rate. And suicides are increas- have been much worse. Another 245 con- ing more rapidly in states that already have templating suicide were talked down by high rates, deepening the disparities. the police patrols who diligently comb There is a strong correlation between America’s most famous suicide site. Plans the suicide rate and the Republican share to construct a suicide-prevention barrier (a ofthe vote in the presidential election. Sol- large net) have now been agreed on: it will idly Democratic east-coast states like New be completed in 2021and cost $204m. York and Massachusetts have some of the Though jumping is a relatively rare way lowest rates—a phenomenon that longpre- to end one’s life, it is on the rise. There were dates Donald Trump’s election. 1,123 such deaths in 2016 compared with America is an extraordinarily violent 788 in 2010. The same trend holds for sui- country. Its firearm-murder rate is far cides by gunshot, overdose and hanging, above the rest of the rich world. Yet there A bridge too fatal 42 United States The Economist March 31st 2018

Spanish in America The explanation has a lot to do with changing demography. Net migration to The long adiós America from Mexico, the largest source of immigrants, has been negative since the end of the financial crisis. More Hispanics in America today were born in the United States than arrived from other countries as LOS ANGELES immigrants, making them less likely to speak Spanish at home—or at all. In 2000, Can Spanish avoid America’s language graveyard? 59.9% of Latinos were born in America. By N A sunny classroom scattered with 2015 that share jumped to 65.6%. Lower ISpanish translations of “Green Eggs and Se habla inglés birth rates and a stronger economy in Mex- Ham” and Spanish-English dictionaries, California, Hispanic first-grade pupils ico mean such trends are likely to continue, Anabel Barrón reads aloud to her second- ’000 rendering the future of Spanish in the Un- grade class from a bookabout penguins. “Y 300 ited States uncertain. los pingüinos vuelan?” she asked. “No, Total In his well-known study on “linguistic they don’t fly!” answered an eager boy 250 life expectancies” in southern California in with a neat crew cut. “En español, por fa- 200 2006, Rubén Rumbaut, a professor at the vor, Justin,” Ms Barrón gently chided him. University ofCalifornia, Irvine, found that 150 The classroom is one of several that of- Spanish was following the same trajectory fers bilingual instruction at the Sandra Cis- 100 as other languages in America had—just English-language learners neros Campus, a charterschool in the Echo 50 more slowly. He established thatonly 5% of Park neighbourhood of Los Angeles that fourth-generation Mexican-Americans in serves mostly Latino children. Kindergar- 0 southern California could speak Spanish teners in its dual-immersion programme 1996 2000 05 10 15 17 very well: “After at least 50 years of contin- spend 80% of their days in Spanish and Source: California Department of Education uous Mexican migration into southern 20% in English. Each subsequent year they California, Spanish appears to draw its last spend an extra 10% of their time in English ulation that speaks Spanish at home in breath in the third generation.” until fifth grade, when 70% oftheir instruc- America, which is often interpreted as a In reaction to the idea that Spanish may tion is in English and 30% in Spanish. proxy for Spanish dominance, grew from succumb to the same pattern that saw Ger- The original theory underpinning such 31m to 37m. But during the same period the man, Polish and Italian largely disappear programmes was that they helped Span- share of all Spanish-speaking Hispanics from America, today there is a growing ish-dominant children perform better by who speakSpanish at home shrankby five movement to encourage bilingualism. Be- easing them into English. Today, says Me- percentage points, from 78% to 73%. Data yond California, programmes have also lissa Mendoza, the school’s principal, Lat- analysed by Pew Research Centre, a think- sprung up in states like Utah, which wants ino parents are seeking out dual-immer- tank, show that, in 2000, 48% of Latino to build a healthy core of bilingual mis- sion programmes for a different reason: to adults aged 50 to 68 and 73% of Latino chil- sionaries, and Delaware. “It used to be that make sure theirEnglish-dominantchildren dren aged 5 to 17 spoke “only English” or immigrant parents thought discouraging can speakSpanish at all. “English very well”. By 2014 those figures their kids from speaking foreign languages Such was the motive for Juan Monta- had increased to 52% and 88%. was the way to assimilate. Now there’s a nez, whose five-year-old son, Rocco, at- growing recognition that bilingualism is a tends kindergarten at Sandra Cisneros. Mr great advantage, not only culturally, cogni- Montanez was born in Los Angeles to Mex- tively and to college applications, but prac- ican parents. Even though they under- tically,” MrRumbaut explains. stood little English, they encouraged him Controlling for age, gender, ethnicity, to speak in it to “get ahead”. He married parents’ socioeconomic status and living someone from a similar background and with parents, he found that fluent bilin- they speak to one another and to Rocco guals in southern California made nearly mainly in English. “Now he probably $3,000 more per year than Californians knows more Spanish than me, but without who spoke only English. That income this programme he would only learn it bump was part of what motivated Mr from his grandpa,” Mr Montanez muses. Montanez to enroll Rocco in a Spanish-im- Linguists have often referred to Ameri- mersion programme: “I tried to explain to ca as a “language graveyard”. Despite be- him that more languages means more ing a country of immigrants, it has tended money, which means more toys.” to snuff out foreign languages within two But overall, American language educa- or three generations. Spanish, it has long tion remains poor. As of 2014 only12 states been thought, might be different. Hispan- had more than one in fourelementary and ics account for 18% of America’s popula- secondary schools where pupils studied a tion and are projected to make up 28% by language other than English. Nationwide, 2060, according to the United States Cen- 21.5% ofAmerican pupils were learning an- sus Bureau. Given the large size and rapid other language, compared with more than growth of the Hispanic population, some half of pupils in Europe. Research shows people used to fearthat Spanish would not that 75.5% of English-speaking Americans only endure but overtake English, especial- who are fluent in another language lyin stateslike California and NewMexico, learned that language at home; only 16.3% where Latinos are the largest ethnic group. did so at school. As Spanish use at home That concern has turned out to be un- shrinks among Latino families, the lan- founded. Between 2006 and 2015 the pop- The Americano dream guage seems destined to dwindle too. 7 The Economist March 31st 2018 United States 43 Lexington The warrior look

Donald Trump may be hiring hawks, but he is unlikely to start a catastrophic conflict ment in modern American history,” he tweeted. It is a worrying time, all right. Yet the fears about Mr Trump’s readiness to unleash mass violence are probably inflated. The surge in apprehension about Mr Trump is fuelled by long- standing concerns about his character and judgment, new ones about his national-security set-up and a startling departure from his anti-war campaign rhetoric. On the trail he castigated every recent American intervention: in Libya, Syria and Afghanistan (“We made a terrible mistake getting involved there in the first place”), as well as in Iraq. The world would be better off, Mr Trump argued, if every recent president had ignored foreign af- fairs and “gone to the beach”. To those scouring his rants for an ideological thread, this seemed in line with the isolationist whiff of America First. As Mr Trump had in fact supported most of those interventions at the time (though he denied it), that credit- ed him with too much consistency. The president, as his new en- thusiasm for sabre-rattling suggests, has no ideology and few well-informed beliefs. He has instincts and a day-to-day appreci- ation ofinterests, chiefly his own. In this case that is probably reassuring. True, even in his more dovish phase, Mr Trump seemed obsessed with nuclear weap- FTER Donald Trump gave the order to fire 59 cruise missiles at ons: the prospect of Mr Kim being able to nuke Manhattan horri- Aan air base in Syria last year, no one seemed more surprised fies him. And he has plainly become more hawkish in office, as than the president himself. Ordering military action wasn’t like most presidents do. BarackObama tookcharge vowingto end his deciding to buy a building, he mused on CBS News. “These deci- predecessor’s wars, then bombed seven countries. Yet it is still sions are unbelievable—you know, in terms of importance be- hard to imagine Mr Trump starting a war unless he thought he cause it’s human—it’s…it’s…it’s killing. I hate it.” Is it credible that would gain from it personally, and he would not gain from a someone so shocked and tremulous after launching a strike that bloodbath. The first Gulf war, which was short, victorious and mangled a fewplanesand killed fewerthan a dozen people could saw light American casualties, is the only American war since start a war in North Korea or Iran that might claim hundreds of 1947 that remained popular long after it was launched. War with thousands oflives? North Korea or Iran would be a different matter. MrTrump seemsto want people to thinkso. Despite denounc- ing America’s invasion of Iraq as “the single worst decision ever The art of the nuclear deal made” earlierthis month, he has hired as his national security ad- The fact that Mr Trump appears to have come close to setting red viser one of the few people who still defends it. John Bolton has lines on North Korea does not alter that analysis. Like any busi- also advocated pre-emptive strikes against North Korea and Iran. nessman, he is accustomed to asking fora lot and settling for less. “When you see a rattlesnake poised to strike, you don’t wait until His genius lies in having the gumption to claim he got everything it has struck before you crush it,” Mr Bolton said last year, para- he asked fornonetheless—which may prove useful here. Mr Kim, phrasing Franklin Roosevelt. “I would argue that today North Ko- who knows as much about leverage as Mr Trump, is highly un- rean nuclear weapons and ballistic missiles, and Iran’s, while likely to give up his several dozen nuclear devices, since that we’re on the subject, are the rattlesnakes of the 21st century.” Mr would be to sign his death warrant. But it is possible to imagine Trump has also nominated one of his most hawkish advisers, him agreeing to concessions, such as a freeze of his long-range Mike Pompeo, to be secretary of state. The outgoing CIA boss is missile programme, in return for economic benefits, and Mr another advocate of regime change in Iran and North Korea. In- Trump proceeding to call that victory. There are many ways that deed, Mr Trump’s policies towards those countries, while stop- could go wrong. Were North Korea to emerge from that negotia- ping short ofthat aim, are increasingly consistent with it. tion as a recognised nuclear power, an Asian arms race might en- He has sworn to denuclearise North Korea. Further nuclear sue. But war would have been averted. If so it would probably provocations by Kim Jong Un would be met “with fire and fury”, mean the unyielding Mr Bolton turning out to be less decisive he said last year. He also tasked his outgoing national security ad- than many fear. This seems likely. The president likes Mr Bolton’s viser, H.R. McMaster, to give him a wider array of military op- damn-your-eyesstyle, buthasa wayofsurroundinghimself with tions against Mr Kim’s regime, including plans for a so-called diverse opinions, and tires ofideologues. Even ifhe gives Mr Bol- bloody-nose attack, intended to weaken itwithoutprovoking nu- ton a good run, moreover, there will remain a strong safety-de- clear war. The president is meanwhile unpicking the multina- vice in the form of James Mattis, the admired defence secretary. tional deal to roll back Iran’s nuclear-arms programme, which He is forthe Iran deal and against trying to bloody Mr Kim’s nose. raises the chances of the Iranians resuming the programme and This is hardly ideal. Mr Trump, Mr Bolton and Little Rocket reduces, perhaps to zero, any prospect ofthe resulting crisis being Man are about to assume a combined lead role in maintaining handled diplomatically. The Washington foreign-policy crowd, global security, which in itselfraises the riskofa catastrophic mis- in which Trump fans are rare, is aghast. Richard Haass, president calculation. Yet the notion that this president would be any likeli- of the Council on Foreign Relations, says America is heading for erto riskArmageddon than his predecessors is unconvincing. It is warwith North Korea, Iran orboth. “Thisisthe mostperilous mo- a measure ofdarktimes that such an idea seems a relief. 7 44 The Americas The Economist March 31st 2018

Also in this section 45 Bello: Peru’s fallen president 46 The economic magic of Montevideo

Mexico his family in his home state of Querétaro. The firm paid $815,000 for the plot, built a How AMLO might win warehouse on it and sold it two years later for $2.5m. The investigation and the cover- age of it by the press have raised questions aboutthe probityofthe people MrAnaya’s MEXICO CITY firm dealt with, about the size of the profit itmade and aboutthe taxitpaid. Mr Anaya Accusations against a moderate presidential candidate could hand powerto a insists he is blameless on all counts. left-wing populist Mr Elías Beltrán is looking into whether HEN campaigning for Mexico’s gen- ($71m) of public money had gone missing the purchaser, a company thought to be Weral election officially begins on from two ministries run by Rosario Robles, linked to Manuel Barreiro, a businessman, March 30th, Andrés Manuel López Obra- now secretary of agrarian development. engaged in money-laundering. A lawyer dor, a left-wing populist, will be the clear Mr Peña’s personal reputation was dam- who says he represents two people hired front-runner for the presidency. His two aged in 2014 after reports that his wife had by Mr Barreiro has stated that Mr Barreiro main challengers are political moderates, acquired a house with help from a busi- controlled the money forthe purchase and but their rivalry is no less bitter for that. nessman who had contracts with the gov- told his clients to move it anonymously One is backed by the government. The oth- ernment. through offshore havensbefore paying itto er is feeling heat from the federal prosecu- Mr López Obrador, often known as Mr Anaya’s firm. Mr Barreiro, who has not tor. To many Mexicans, that smacks of po- AMLO, and Mr Anaya have contrasting commented publicly on the case, is also litical bias. It also increases the chances claims to be the candidates of clean gov- the president of the industrial park that that Mr López Obrador will win the presi- ernment. The leftist formermayor ofMexi- originallysold the land to MrAnaya’scom- dency—a prospect that terrifies markets co City has a decades-long career of railing pany. The two people shown in public re- and puts economic reforms in jeopardy. againstcorruptelitesand promisesto clean cords to be the firm’s founders are said to On February 21st the office of the acting up Mexico through the sheer force of his be Mr Barreiro’s driver and the wife ofone attorney-general, Alberto Elías Beltrán, righteousness. Although presidents serve ofhis employees. confirmed that it was investigating a prop- for a single six-year term, Mr López Obra- This connection is awkward for Mr erty deal involving Ricardo Anaya, the dor says Mexicans will get the chance to Anaya. He says he believed that the pur- brainypresidential candidate ofthe centre- vote him out of office every two years, by chaser belonged to a local architect who right National Action Party (PAN). This has referendum. Mr Anaya has a more modest has publicly claimed to own 99% of its shaken up a campaign in which the main suggestion for establishing the rule of law. shares and may well have bought it from issues are crime and corruption. He says he would make institutions such the founders. (That transaction would not Few voters think that José Antonio as the attorney-general more independent. be shown in public documents.) Even if Meade, the nominee of the ruling Institu- He is the only one of the three leading can- the allegations about Mr Barreiro are true, tional Revolutionary Party (PRI), is the best didates to emphasise this. Mr Anaya insists he has done nothing candidate to tackle these ills. No one has wrong. He has posted online a video in accused Mr Meade, a technocratic former Landing in trouble which he contends that it is not his legal re- finance and foreign minister, of wrongdo- The property scandal surrounding Mr sponsibility to verify the source ofthe buy- ing. But voters regard the PRI and Mexico’s Anaya has the twin effect of dramatising er’s money. The sale contract includes an current president, Enrique Peña Nieto, as the need for the institutional reform he anti-money-laundering clause, in which abettors of lawlessness. Crime has soared. champions, while making it less likely that the buyer attested that it was paying with MrPeña’s government has been dogged by he will be in a position to lead it. money that it obtained legally. allegations of graft. In February the gov- It revolves around the purchase of land Mr Anaya says that the money his firm ernment auditor said that 1.3bn pesos in 2014 by a firm owned by Mr Anaya and used to finance the original purchase is1 The Economist March 31st 2018 The Americas 45

2 clean, and that its profit reflects market price of industrial land in Querétaro at Mr Anaya’s company received an inflated prices. He invited The Economist to inspect $50-95 a square metre. Mr Anaya’s firm sum for the sale. In 2016 it paid 3.5m pesos documents attesting to that. They show spent $1.3m to build a 7,000-square-metre ($189,000) in tax. The tax authorities have that just over half the cash to buy the prop- warehouse. Assuming an average ex- confirmed that it paid the right amount. erty came from a loan secured by his change rate of16 pesos to the dollar, that is Whether or not Mr Anaya’s defence house, which is in his wife’s name. A tenth a cost per square metre of 3,000 pesos. A holds up, the conduct of the case raises came from an interest-bearing loan from builder in the area says the going rate to questions about the independence of law- the industrial park. The Anayas used their build such a structure is 3,200 pesos. enforcement agencies and their relation- savings to finance the rest of the land pur- Having spent $2.2m (including ship to the PRI. Mr Elías Beltrán’s office chase and the building ofthe warehouse. $100,000 in tax) to buy and build, Mr posted on its Twitter account security foot- Mr Anaya’s firm paid $63 a square me- Anaya’s firm sold the property for $2.5m, age ofMr Anaya and his entourage visiting tre for13,000 square metres ofland in 2014. making a profit of14% in two years. A prop- its premises. That was unprecedented and That does not look suspiciously low. A re- erty with a building half the size at the illegal, says Armando Santacruz of Mexico port in 2016 by ProMexico, a government same industrial parkislisted for35m pesos, United Against Crime, an NGO. The prose- body that promotes investment, put the or about $1.9m. That does not suggest that cutor’s office also issued a press release 1 Bello Peru’s President Pedro Pablo the Brief

Lessons from anotherfallen leader

VERsince itbegan in July2016the presi- tween private business interests and pub- Edency of Pedro Pablo Kuczynski in lic responsibility that had rendered him Peru looked like an accident waiting to vulnerable to impeachment in the first happen. He squeaked into a run-off elec- place. Companies that he owned or to tion only after his supporters in Peru’s which he was linked earned $4.8m in fees media and business establishment from Odebrecht for consultancy work, helped to press the electoral authority to some awarded when PPK was a minister disqualifya more popular rival, Julio Guz- in 2001-06 and signed a big public con- mán. After he unexpectedly defeated tract granted to the Brazilian construction Keiko Fujimori, a conservative populist, company. This may have been legal, but it in the run-off by just 0.2% of the vote, she was unethical. That politics matters, that exercised her pique by using the congres- technocracy alone is not enough and that sional majority gained by her Popular public servants must be seen to avoid Force (FP) party to harass Mr Kuczynski’s conflicts of interest are lessons that ap- government. After narrowly surviving pear to have been learned by two more one impeachment attempt in December successful businessmen-turned-presi- last year, PPK (as Peruvians know him) re- dents, Argentina’sMauricio Macri and Se- signed on March 21st when defeat in an- businessman. He showed a disastrous dis- bastián Piñera ofChile, but not by PPK. other became inevitable. Having served dain for politics. He appointed cabinets in As for Peru, it may gain a respite under just 20 months, he became the 19th elect- his own image, stuffed with technocrats Martín Vizcarra, PPK’s vice-president, ed president in Latin America in the past and business people. Friendship with the who has taken over the top job. A former 30 years to fail to complete his term. president outweighed knowledge of min- provincial governor who belongs to no Many of these were victims of the in- isterial briefs or of a large and socially di- party, he has a record as a negotiator. FP stability inherent in Latin America’s un- verse country. Aclearer political and com- may give him an easier ride, at least until ique combination ofdirectly elected pres- munications strategy might have kept after local elections in October. Ms Fuji- idents and legislatures chosen by public opinion on his side and thwarted mori is facing an investigation over a proportional representation. This ar- Ms Fujimori. As it was, his government claim by Odebrecht (which she denies) rangement means that presidents often soon seemed rudderless and impotent. that it gave her campaign money in 2011. lack congressional majorities. In PPK’s Faced with impeachment, his response For much of this century, Peru has case, there were two aggravating factors. was a caricature of political bargaining. He been an economic success. But Peruvians The presence of a host of small parties struck a secret deal with Kenji Fujimori, are rightly disillusioned with their politi- meant that the electoral system rewarded Keiko’s estranged brother, who was an FP cians. Four of the five living elected presi- FP with 73 ofthe 130 seatsin the unicamer- congressman, to pardon their father, Al- dents have been accused of corruption. al congress, although it won just 36% of berto, a formerpresident jailed forhuman- Growth has fallen to around 3% a year. Re- the vote. And Peru’s constitution, unusu- rights abuses. The pardon was controver- viving it requires institutional reforms, es- ally for Latin America, contains parlia- sial. PPK gained the votes of Kenji’s nine pecially of local government, education, mentary elements: congress can oust followers in congress, but he lost more: the the judiciaryand the political system. The ministers and cabinets almost at will, and backing of part of the left, of some of his fujimoristas have blocked them. The fact proceeded to do so. own legislators and of many voters. Kenji that they are divided and in disarray of- Any president would have been tested was an ally of dubious worth. The release fers an opportunity. Understandably, Mr bysuch a spiteful and powerful opponent of clandestine videos of him and his allies Vizcarra’s instinct may be to play safe. But as Ms Fujimori. But PPK played a big part offering FP legislators bribes in the form of his best hope of surviving until 2021 is to in his own downfall. Although he had public contracts made PPK’s defeat in a sec- be ambitious, and to set out a bold pro- served in past governments, for most of ond impeachment certain. gramme for a better country that Peruvi- his life he worked as an economist and It was PPK’s failure to distinguish be- ans can rally around. 46 The Americas The Economist March 31st 2018

2 falsely stating that Mr Anaya had refused This time, the beneficiary is likely to be guay entered new industries, such as soft- to offer a “ministerial declaration”, a state- Mr López Obrador. His advantage has wid- ware and audiovisual services, which ment from an accused in response to a pre- ened since Mr Elías Beltrán launched his exported to new markets. Between 2001 liminary investigation. The electoral com- probe of the land deal in February. He and 2016 the share of exports going to Bra- mission ordered the prosecutor to take leads both Mr Anaya and Mr Meade by zil and Argentina fell from 37% to 21%. down the video and press release. A home more than 15 percentage points, according Recently the government has invested video showing Mr Anaya at Mr Barreiro’s to Bloomberg’s Poll Tracker. There are oth- in raising productivity. Public spending on wedding in 2005 appeared online after po- er reasons forhis ascendancy.Mexicans do science and technology increased by 73% lice raided the businessman’s home. Mr not remember earlier PAN governments in real terms between 2007 and 2015. Even Anaya says the bride was the sister of a more fondly than they do those of the PRI. cattle farmers adopted new technology. high-school friend, and denies knowing Only Mr López Obrador represents a break While Argentina slapped export tariffs on Mr Barreiro well. with the past. An election with just one beef to hold down domestic prices, Uru- That has not stopped the PRI from hurl- round gives him an advantage over rivals guay became the first Latin American ing accusations at Mr Anaya, seconded by scrapping forthe anti-AMLO vote. country to make all its beef exports elec- the pro-government press. Going beyond Without the property scandal, that vote tronically traceable, a way of reassuring Mr Elías Beltrán’s investigation, they claim would have been more likely to consoli- buyers that problems like foot-and-mouth that Mr Anaya was laundering money and date around Mr Anaya. The attorney-gen- disease will be caught early. Between 2005 is beholden to MrBarreiro. Enrique Ochóa, eral’s intervention means that he and Mr and 2012 Argentina’s beef exports fell by the PRI’s president, called the PAN candi- Meade are more evenly matched, and less three-quarters; Uruguay now sells more date “two-faced, a liar and a crook”. of a threat to Mr López Obrador. Mr Anaya than its larger neighbour. Less partisan Mexicans worry that Mr and Mr Meade should hold a two-man de- Atthe same time, FA governmentsstuck Elías Beltrán, who received his law degree bate, the populist cheekily suggested. He is with the orthodox economic policies they in 2011, is acting like a political operative. obviously enjoying the spectacle. 7 inherited and with practices that make the They contrast his pursuit ofMr Anaya with country attractive to investors, such as his apparent leniency towards members keeping taxes low and the judiciary inde- ofthe PRI who are suspected ofcorruption. Uruguay’s economy pendent ofpolitical influence. On March 14th Mr Elías Beltrán decided The formula has worked. Uruguay kept not to press charges of money-laundering The magic of growing after Brazil and Argentina entered and tax fraud against César Duarte, a PRI recession in 2014. The middle class, as de- ex-governor of Chihuahua. Prosecutors in Montevideo fined by the World Bank, grew from 39% of the state (now governed by Mr Anaya’s the population in 2003 to 71 % in 2015. Uru- party) are still pursuing Mr Duarte for al- guay’s income per person is the highest in legedly diverting billions of pesos of pub- Latin America. How a small countryoutperforms its lic money. He is a fugitive. Not everythingis rosy. Growth dropped neighbours In December 2016 executives from Ode- in 2015 and has not bounced back to its old brecht, a Brazilian construction firm at the FTER long recessions, Brazil and Argen- level. The economy still looks over-depen- centre of lots of scandals in Latin America, Atina still cheer when good economic dent on exports, which account for a fifth claimed to have paid bribes worth $10m to news comes out. In tiny Uruguay, sand- of GDP. Both inflation, at 7%, and the bud- Emilio Lozoya, a close friend of Mr Peña wiched between them, it is old hat. On get deficit excluding interest payments, at and an adviser to his presidential cam- March 22nd the central bank reported that 3.5%, are too high. Uruguayhasrigid labour paign in 2012 who became the boss of Pe- GDP grew by 2.7% in 2017, bringing the markets. The education system needs re- mex, the state-run oil firm. Mr Elías Beltrán country’s growth streakto 15 years, the lon- form. The population is ageing. sacked the investigator last year, ostensibly gest expansion in its history. Uruguay’s Taking good tidings for granted, Uru- for illegally disclosing information about growth since 2011, when global prices of guayans are focusing on their discontents. the probe. This month a federal judge sus- commodities started to fall, puts its neigh- A rural workers’ movement is demanding pended the inquiry indefinitely. bours to shame (see chart). Its success lower taxes and electricity bills. Its protests All this suggests that the attorney-gen- shows the value of openness, strong insti- have lasted forweeks, draggingthe govern- eral’s office has yet to achieve the indepen- tutions and investment in know-how. ment’s approval ratings down to an all- dence and stature it is supposed to have as Uruguay’s most recent economic disas- time low of 27%. In an election next year part of a new “anti-corruption system” ter was in 2002, after Argentina defaulted the FA could lose power forthe first time in created by Mr Peña. This month 56 intellec- on its debt. Argentines pulled their money 15 years. That would end at least one of Lat- tuals and activists published a letter accus- out of banks in Uruguay, triggering a bank in America’s longest winning streaks. 7 ing the government of politicising institu- run there. Thanks to a bail-out from the tions to help Mr Meade’s candidacy. Some IMF, it avoided default. That won it a lot of anti-corruption activists say the PRI is actu- trust with investors, says Jesko Hentschel, High-flying Uruguay ally trying to help Mr López Obrador. That the World Bank’s director for Argentina, GDP, 2011=100 is because it fears that a President Anaya Paraguay and Uruguay. would crackdown harder on corruption. Thereafter, Uruguay’s leaders realised 120 Uruguay Mr Anaya’s supporters fear they are that the economy needed to diversify. The 115 witnessing a replay of the election in the Broad Front (FA), a leftist coalition that has state of Mexico last June. Two months be- governed since 2005, began an effort to 110 fore election day Mr Elías Beltrán’s prede- “decouple” Uruguay from its neighbours. cessor accused members of the family of Under two FA presidents—Tabaré Vázquez, 105 the PAN’s candidate of money-laundering. an oncologist who governed from 2005 to Argentina In the end, the prosecutor did not file char- 2010 and again since 2015, and José Mujica, 100 ges. But the allegations helped the PRI win a formerguerrilla who held office between Brazil overvoters opposed to the candidate of Mr Mr Vázquez’s two terms—the government 95 López Obrador’s party, Morena. The PRI created special tax regimes and set up eco- 2011 12 13 14 15 16 17 won by three percentage points. nomic zones to attract investment. Uru- Source: Haver Analytics SPECIAL REPORT AI IN BUSINESS March 31st 2018

GrAIt expectations EMERGING MARKETS LEAP INTO THE DIGITAL ERA: WE SEE ALPHA.

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Your capital is at risk and the value of investments can go down as well as up. Investments in emerging markets may by their nature have higher volatility and risk. Past performance is not indicative of future results.

FIXED INCOME | EQUITIES | REAL ESTATE | ALTERNATIVES | PRIVATE DEBT

Alpha indicates the performance, positive or negative, of an investment when compared against an appropriate standard, typically a group of investments known as a market index. This information is not intended as investment advice and is not a recommendation about managing or investing assets. Investing is subject to investment risk, including the loss of the principal amount invested. 1 PwC, Emerging Markets – Driving the Payments Transformation, July 12, 2016, www.pwc.com/gx/en/fi nancial-services/publications/assets/pwc-emerging-markets-12-July.pdf. 2 “eMarketer Cuts Estimates for Ecommerce in India: New Currency Rules Limit Online Buying Options,” eMarketer, December 6, 2016. 3 Data as of 31 December 2017. © 2018 Prudential Financial, Inc. (PFI) and its related entities. PGIM, Inc. is the principal asset management business of PFI and is a registered investment advisor with the US Securities and Exchange Commission. PGIM is a trading name of PGIM, Inc. and its global subsidiaries. In the United Kingdom information is issued by PGIM Limited, an indirect subsidiary of PGIM, Inc. PGIM Limited registered offi ce: Grand Buildings, 1-3 Strand, Trafalgar Square, London, WC2N 5HR is authorised and regulated by the Financial Conduct Authority of the United Kingdom (registration number 193418) and duly passported in various jurisdictions in the EEA. This information is intended only for persons who are professional clients or eligible counterparties for the purposes of the Financial Conduct Authority’s Conduct of Business. Prudential Financial, Inc. of the United States is not affi liated with Prudential plc, which is headquartered in the United Kingdom. The PGIM logo and the Rock design are service marks of PFI and its related entities, registered in many jurisdictions worldwide. EM-XGM SPECIAL REPORT AI IN BUSINESS

GrAIt expectations

Artificial intelligence is spreading beyond the technology sector, with big consequences for companies, workers and consumers, says Alexandra Suich Bass

LIE DETECTORSARE notwidelyused in business, butPingAn, a Chinese CONTENTS insurance company, thinks it can spot dishonesty. The company lets cus- tomers apply for loans through its app. Prospective borrowers answer 5 Supply chains questions about their income and plans for repayment by video, which In algorithms we trust monitors around 50 tiny facial expressions to determine whether they 6 Customer service are telling the truth. The program, enabled by artificial intelligence (AI), Here to help helps pinpoint customers who require furtherscrutiny. AI will change more than borrowers’ bank balances. Johnson & 7 Human resources Johnson, a consumer-goods firm, and Accenture, a consultancy, use AI to Hire education sort through job applications and pick the best candidates. AI helps Cae- 9 Future workplaces sars, a casino and hotel group, guess customers’ likely spending and offer Smile, you’re on camera personalised promotions to draw them in. Bloomberg, a media and financial-information firm, uses AI to scan companies’ earnings releases 10 External providers and automatically generate news articles. Vodafone, a mobile operator, Leave it to the experts can predict problems with its network and with users’ devices before 11 The future they arise. Companiesin every industryuse AI to monitorcyber-security Two-faced threats and other risks, such as disgruntled employees. Instead of relying on gut instinct and rough estimates, cleverer and speedier AI-powered predictions promise to make businesses much more efficient. At Leroy Merlin, a French home-improvement retailer, ACKNOWLEDGMENTS managers used to order new stock on Fridays, but defaulted to the same In addition to those mentioned in items as the week before so they could start their weekend sooner. The the text, the author would like to firm now uses algorithms to take in past sales data and other information express special thanks to Marco that could affect sales, such as weather forecasts, in order to stockshelves Annunziata, Vijay Balasubramani- more effectively. That has helped it reduce its inventory by 8% even as yan, Katie Baynes, Marc Benioff, AI Jack Berkowitz, Steve Blank, Bryan sales have risen by 2%, says Manuel Davy ofVekia, the startup that en- Catanzaro, James Cham, Frank Chen, gineered the program. Pia Chatterjee, Paul Cheesbrough, AI and machine learning (terms that are often used interchange- Youngcho Chi, Shawn Edwards, ably) involve computerscrunchingvastquantitiesofdata to find patterns Benedict Evans, William Fitzgerald, Anthony Goldbloom, Adam Gold- and make predictions without being explicitly programmed to do so. stein, Jensen Huang, Isabelle Larger quantities of data, more sophisticated algorithms and sheer com- Kocher, Alexander Kvamme, Alfred puting power have given AI greater force and capability. The outcomes Lin, Lucas Mayer, Andrew Moore, are often similarto whatan armyofstatisticianswith unlimited time and Frida Polli, Shankar Raman, Emman- uel Roman, Tariq Shaukat, Peter resources might have come up with, but they are achieved far more Sims, Chiku Somaiya, Mike Volpi, quickly, cheaply and efficiently. Matt Wood and Shivon Zilis. One of AI’s main effects will be a dramatic drop in the cost of mak- 1

The Economist March 31st 2018 3 SPECIAL REPORT AI IN BUSINESS

2 ing predictions, says Ajay Agra- providers, consultants and startups. wal of the University of To- Machine earning This is not just a corporate race but an international one, ronto and co-author of a new Mentions of AI and machine too, especially between America and China. Chinese firms have book, “Prediction Machines”. learning on earnings calls of an early edge, not least because the government keeps a vast Just as electricity made lighting public companies database of faces that can help train facial-recognition algo- much more affordable—a given 800 rithms; and privacy is less ofa concern than in the West. level of lighting now costs There will be plenty of opportunities to stumble. One diffi- around 400 times less than it 600 cult issue for companies will be timing. Roy Bahat of Bloomberg did in 1800—so AI will make Beta, a venture-capital firm, draws a parallel between now and forecasting more affordable, re- 400 the first dotcom boom of the late 1990s: “Companies are flailing liable and widely available. to figure out what to spend money on.” If they invest huge sums Computers have been 200 in AI early on, they run the riskofovercommitting themselves or able to read text and numbers paying large amounts for worthless startups, as many did in the for decades, but have only re- 0 early days of the internet. But if they wait too long, they may cently learned to see, hear and 2007 09 11 13 15 17 leave themselves open to disruption from upstarts, as well as speak. AI is an omnibus term Source: Bloomberg from rivals that were quicker to harness technology. for a “salad bowl” of different Some may have been misled by glowing media reports, be- segments and disciplines, says Fei-Fei Li, director ofStanford’s AI lieving AI to be a magic wand that can be installed as easily as a Lab and an executive at Google’s cloud-computing unit. Sub- piece ofMicrosoft software, says Gautam SchroffofTata Consul- sections of AI include robotics, which is changing factories and tancyServices, an Indian firm. AI systemsrequire thorough prep- assembly lines, and computer vision, used in applications from aration of data, intensive monitoring of algorithms and a lot of identifying something or someone in a photo to self-driving-car customisation to be useful. Gurdeep Singh of Microsoft speaks technology. Computer vision is AI’s “killer app”, says Ms Li, be- of AI systems as “idiots savants”; they can easily do jobs that hu- cause it can be used in so many settings, but AI has also become mans find mind-boggling, such as detecting tiny flaws in manu- more adept at recognisingspeech. It underlies voice assistants on factured goods or quickly categorising millions of photos of phones and home speakers and allows algorithms to listen to faces, but have trouble with things that people find easy, such as calls and take in the speaker’s tone and content. basic reasoning. Back in 1956, when academic researchers held their first gathering to discuss AI, they were looking for a way to Techtonic shifts imbue machines with human-like “general” intelligence, includ- Until now the main beneficiary ofAI has been the technol- ing complex reasoning. But that remains a distant aspiration. ogy sector. Most oftoday’s leadingtech firms, such as Google and The excitement around AI has made it hard to separate Amazon in the West and Alibaba and Baidu in China, would not hype from reality. In the last quarter of 2017 public companies be as big and successful without AI for product recommenda- across the world mentioned AI and machine learning in their tions, targeted advertising and forecasting demand. Amazon, for earnings reports more than 700 times, seven times as often as in example, uses AI widely, for tasks such as guiding robots in its the same period in 2015 (see chart, above). There are so many warehouses and optimising packing and delivery, as well as de- firms peddling AI capabilities of unproven value that someone tecting counterfeit goods and powering its speaker, Alexa. Ali- should start “an AI fake news” channel, quips Tom Siebel, a Sil- baba, a Chinese rival, also makes extensive use of AI, for exam- icon Valley veteran. ple in logistics; and its online-payments affiliate, Ant Financial, is Bosses must keep several time horizons in mind. In the near experimenting with facial recognition for approving transac- future AI will reshape traditional business functions such as fi- tions. Sundar Pichai, Google’s boss, has said that AI will have a nance, HR and customer service, according to Michael Chui of “more profound” impact than electricity or fire. the McKinseyGlobal Institute, a think-tankwithin a consultancy. Bosses of non-tech companies in a broad range of indus- But over time it will also disrupt whole industries, for example tries are starting to worry that AI could scorch or even incinerate by powering the rise ofautonomous vehicles or the discovery of them, and have been buying up promising young tech firms to entirely new drug combinations. Whereas humans may have ensure they do not fall behind. In 2017 firms worldwide spent preconceptions about which product designs or drug combina- around $21.8bn on mergersand acquisitionsrelated to AI, accord- tions are likely to work best, algorithms are more likely to come 1 ing to PitchBook, a data provider, about 26 times more than in 2015 (see chart, right). They are doing this partly to secure talent, which is thin on the ground. Startups without revenue are fetch- ing prices that amount to $5m-10m per AI expert. Artificial sweeteners As AI spreads beyond the tech sector, it will fuel the rise of Global M&A activity in AI and machine learning new firms that challenge incumbents. This is already happening in the car industry, with autonomous-vehicle startups and ride- Value, $bn Number of deals hailing firms such as Uber. But it will also change the way other 20 120 companieswork, transformingtraditional functionssuch assup- ply-chain management, customer service and recruitment. 15 90 The path ahead is exhilarating but perilous. Around 85% of companies think AI will offer a competitive advantage, but only 10 60 one in 20 is “extensively” employing it today, according to a re- portbyMIT’sSloan ManagementReview and the Boston Consult- 5 30 ing Group. Large companies and industries, such as finance, that generate a lot ofdata, tend to be ahead and often build their own 0 0 AI-enhanced systems. But many firms will choose to work with 2010 11 12 13 14 15 16 17 2010 11 12 13 14 15 16 17 the growing array of independent AI vendors, including cloud Source: PitchBook

4 The Economist March 31st 2018 SPECIAL REPORT AI IN BUSINESS

2 up with novel solutions. panies can combine data on past performance with those gener- In private, many bosses are more interested in the potential ated by smart sensors on machinery (part of the much-hyped cost and labour savings than in the broader opportunities AI “internet of things”) to predict when a jet engine or a wind tur- might bring, says John Hagel of Deloitte, a consultancy. That is bine is likely to fail, so they can do maintenance before that hap- certainly not good for workers, but nor, ultimately, is it good for pens. America’s air force and defence department are working business. “If you just cut costs and don’t increase value for cus- with C3 IoT, a startup, to scan maintenance logs and past techni- tomers, you’re going to be out of the game,” he says. Some com- cal problems for signs that aircraft are wearing out. Companies panies may not actually eliminate existing jobs but use technol- are also building “digital twins”—virtual representations of as- ogy to avoid creating new ones. And workers who keep their sets—to run simulations of how weather and other factors affect jobs are more likely to feel spied on by their employers. Some machinery. firms already use AI to comb through theirworkers’ communica- tions to ensure that they are not breaking the law. Such practices Next year’s hits will spread, raising privacy issues. Better predictions will improve inventory management Alonger-term concern isthe wayAI createsa virtuouscircle and demand forecasting, too, freeing up cash and storage space. or “flywheel” effect, allowing companies that embrace it to oper- This is especially important for retailers, which often have very ate more efficiently, generate more data, improve their services, thin margins, says Chen Zhang, chief technology officer of attract more customers and offerlower prices. That sounds like a JD.com, a Chinese e-commerce firm. In 2015 the cost to compa- good thing, but it could also lead to more corporate concentra- nies of overstocking was around $470bn and of understocking tion and monopoly power—as has already happened in the tech- $630bn worldwide, accordingto IHL Group, a research firm. Am- nology sector. 7 azon nowhasalgorithmsto predictdemand forhundredsof mil- lions of products it sells, often as much as 18 months ahead. Among the most difficult items are clothes, where the company Supply chains must decide which sizes and colours to stock at which ware- houses, depending on nearby buyers’ shapes and tastes, says RalfHerbrich, Amazon’s director ofmachine learning. In algorithms we trust Lineage, a firm that keeps food cold for clients such as groc- ers and restaurants, uses AI to forecast in what order items will arrive at and leave a warehouse, so that it can put the pallets in the right position. “I put the toothbrush by my sinkbecause I use it three times a day, and my Christmas tree in the attic for a rea- AI AI is making companies swifter, cleverer and leaner son,” says Greg Lehmkuhl, Lineage’s boss, adding that using for smart placement has boosted efficiency by 20%. DELIVERING 25 PACKAGES by lorry or van might seem AI is also helping firms track the movement of their goods. straightforward enough, but it is devilishly complex. The Most ofthe businesses in global shipping, from ports and lorries number of possible routes adds up to around 15 septillion (tril- to containerships, have been technological laggards, so theircus- lion trillion), according to Goldman Sachs, an investment bank. tomers never knew when their goods might show up. This is Integrating AI into the complex web of production and distribu- starting to change. Systems are getting better at routing items effi- tion—the supply chain—will have a biggereconomic impact than ciently and predicting their arrival, and companies are investing any other application of the technology and affect a larger num- more in them. To forecast arrivals, they can put sensors on ship- ber of businesses, says Sudhir Jha of Infosys, a large IT company. ments or design whole systems to use data like the GPS signals McKinsey estimates that firms will derive between $1.3trn and putoutbylorries. Packagesare also beingrouted more efficiently, $2trn a year in economic value from using AI in supply chains with big potential gains. Jack Levis, director of process manage- and manufacturing (see chart). Many firms are already using ro- ment for United Parcel Service (UPS), a package-delivery firm, bots powered by machine learning to improve the running of says that for every mile that its drivers in America are able to re- their factories and warehouses. But AI will transform several duce their daily route, the firm saves around $50m a year. other aspects ofsupply chains as well. Goldman Sachs expects AI to bring logistics costs down by 1 One is the unglamorous work of managing finances and paying suppliers. Just as Microsoft’s Excel spreadsheets changed finance departments, AI will make routine back-office work more efficient, says Morag Watson, BP’s chief digital-innovation Ballooning officer. Some early adopters are startingto use AI to scan invoices Potential economic-value creation from AI in the next 20 years and predict payments. Workday, a software firm, offers a finan- $trn cial-planning tool using AI to forecast which clients are going to Management Marketing Operations pay late. Another opportunity is to improve manufacturing through Risk computer-vision systems that can inspect products on assembly 0.5 Supply lines and spot flaws. These systems are more accurate than hu- Marketing chain and sales 1.3 mans, says Andrew Ng of Landing.AI, a startup that works with 1.4 Foxconn, a big Taiwanese contract manufacturer, and others. Finance Nvidia, a chipmaker, already uses computervision to ensure that and IT its chips are properly assembled. 0.2 Product development Companies will also use AI to predict when their equip- Other 0.1 Service ment might fail. This will benefit firms that operate large assets, 0.3 Human Strategy and operations resources corporate 0.2 such as airlines, oil firms, energy companies and industrial 0.1 finance 0.1 giants, where unexpected breakdowns come at a big cost. Com- Source: McKinsey

The Economist March 31st 2018 5 SPECIAL REPORT AI IN BUSINESS

2 at least 5%, which could generate additional profits of$25bn over automated services. Surveys suggest that around 40% of Ameri- the next ten years. That would make a big difference in this cut- can internet users would rather use digital customer services throat and low-margin business. It may also introduce new com- than speakto someone on the phone. petitors who completely rethinkold processes. “When you build Virtual agents are on the rise. Some 30% ofcompanies now a new jet, you don’t just put a jet engine on the Wright Brothers’ offerstandalone “bots” that can answerquestions and solve pro- plane,” says Ryan Petersen of Flexport, a logistics startup. Many blems, although their range remains narrower than that of a hu- firms, including JD.com, are investing in AI-powered drone- man. Many of these use some AI. They are trained on logs and delivery technology. transcripts of past customer interactions, and as they are fed Now mighty Amazon is moving into the logistics business, more data they become better at solving more complex queries. piloting a service in Los Angeles for picking up packages from Such bots enable businesses to deal with many more inquiries businesses and delivering them to customers, which puts it in di- without hiring extra people. China Merchants Bank, a commer- rect competition with FedEx and UPS. The e-commerce giant has cial bank, uses a bot on the popular Chinese app WeChat to han- become “everyone’s competitor”, says Ibrahim Gokcen, chief dle 1.5m-2m queries every day,a workload equivalent to around digital officer of Maersk, a global shipping firm. “Everybody in 7,000 human staff. Caesars, the hotel and casino group, offers a the supply chain has a heightened awareness they have to up virtual concierge, Ivy,at two of its hotels, which answers guests’ their game, in part because of the capabilities of Amazon,” says queries by text, many ofthem automatically ifthe inquiry is sim- Rich Carlson of Savi, a smart-logistics startup. Amazon’s rivals ple to answer. This has reduced calls to the human-concierge may fret, but consumers will be pleased. 7 deskby 30%. AI will also enhance customer-service agents’ knowledge, performance and speed. Some companies are experimenting Customer service with “voice-printing” technology which recognises clients’ voices and alerts agents if a caller is impersonating someone else. This will be especially helpful in financial services. Here to help One Australian bank is experimenting with a standalone smart voice-controlled speaker to listen in on agents’ conversa- tions about loans. If the agent forgets something or makes a mis- take, it jumps in. Some companies are also using AI to suggest re- sponses to customer queries which a human agent can approve or adapt before sending. Over the past year this has allowed KLM How AI can make businesses look more caring , the Dutch flag carrier, to double the number of text-based customerinquiries it handles to120,000 a weekwhile increasing “YOUR CALL IS important to us,” a recorded voice tells re- the numberofagents by only 6%, says Dmitry Aksenov ofDigital signed customers as they wait endlessly to speak to a hu- Genius, a firm that helps automate customer support. man agent. AI is starting to help companies improve the quality A few companies have started offering AI-enabled services and consistency of their service in order to persuade customers that listen to calls to judge agents’ performance and send them that they do in fact care about them. suggestions for improvement in real time. One startup, Cogito, Ocado, a British online grocer, receives around 10,000 e- whose customers have included insurance firms such as Hu- mails from customers every day and usesAI to detectthe prevail- mana and MetLife, focuses on recognising “compassion fatigue” ingsentimentin them. Itnowrepliesto the mosturgent onesfirst, in agents. It takes in details such as how fast agents are talking and is planning to route complaints to agents with expertise in and what words callers are using to detect emotion and gauge the relevant field. “Like other applications of AI, it’s about trying whetherthe interaction is goingwell. Ifthere is a problem, it cues to make humans more efficient, not take them out of the process agents to act more empathetically. A tool like this can help large 1 entirely,” says Paul Clarke, Ocado’s chief technology officer. Between 2017and 2021 the share of customer-service interac- tions worldwide handled entirely by AI will rise fivefold, to 15%, and by 2019 at least40% ofsuch interactionswill involve an element of AI, according to Gartner, a research firm. AI will change customer service as much as the telephone did in its day. Be- fore the phone started to spread in the ear- ly 20th century, companies handled cus- tomer inquiries by post or by visiting in person. Phones helped agents to become more productive, and AI will boost pro- ductivity even more dramatically, be- cause it can handle large numbers of cus- tomer inquiries more quickly than humans can. This has become more im- portant as communications channels have multiplied to take in e-mail, mobile messaging apps and social media. And consumers have got used to dealing with

6 The Economist March 31st 2018 SPECIAL REPORT AI IN BUSINESS

2 companies monitor their agents’ performance, but the agents an app for a quick quote for repairs. Building a tool like this is a may also welcome the feedback. Call-centres have a turnover of technological challenge, but getting in early is a good idea. Ser- 30-40% a year, partlybecause agentshave had little help with im- vices that make customers’ lives easier will generate more cus- proving their performance, says Joshua Feast, Cogito’s boss. tomers, who will provide more training data to make the AI sys- Marty Lippert, head oftechnology forMetLife, reckons that tems smarter. Ping An gets15m claims a year and handles 30% of in areaslike customerservice and human resourcesAI offersa re- them on its app. “It takes an enormous amount of cost out of the turn on investment of around 20%. Most companies buy AI ser- system and puts customers in control,” says Jonathan Larsen, vices from outside providers, but firms with technical know- Ping An’s chief innovation officer. Such offerings also reinforce howoften preferto create theirown. Forexample, a team atUber, firms’ direct relationship with their customers. Conversely, voice-controlled smart speakers, as offered by Amazon, Google, Services that make customers’ lives easier will generate Microsoft and Apple, could come be- tween the companies and their targets. more customers, who will provide more training data to Some of these speakers host other firms’ make the AI systems smarter apps. For example, UPS has built a tool en- abling customers to track their packages through Amazon’s Alexa, which they a ride-hailing firm, has built a system using AI to deal with e- might previously have done online or by phone. Companies mailed queries (there is no telephone option). It sends the agent worry they could be disintermediated, so that the firm that ranked options for what to do next, which has cut the time it makes the speaker becomes the customer’s primary relation- takes to resolve a complaint by around 10%. ship, says Paul Daugherty ofAccenture, a consulting firm, and co- One hope for AI is that it will free customer-service agents author of a new book, “Human + Machine: Reimagining Work in from routine tasks so they can sell customers other services and the Age of Artificial Intelligence”. And, since voice-controlled generate newrevenue. KLM hasbeen able to generate millions of speakers guide customers to a single answer rather than offering dollars ofextra sales since it started using AI because agents now them multiple choices offirms to interact with, those that cannot have more time to help customers book upgrades and new or do not want to use these speakers may miss out on forming a flights, says Mr Aksenov of Digital Genius. But not all customers relationship in the first place. Much will depend on how quickly will appreciate more sales pitches. voice speakers spread. Currently only about one in six American AI will certainly change the way sellingis done. Many firms adults owns one, but that is already more than double the figure are experimenting with developing AI-enhanced recommend- a year ago. And as speech recognition improves further, the ap- ation tools, like those used by Amazon and Netflix, to help sales- peal ofspeakers will grow, especially among youngsters. 7 people with their jobs. Google, Facebook and Amazon have been using AI to target consumers with ads and special offers on- line for years, with great success. Similar practices could spread Human resources to other businesses. For example, when sales staff at Goldman Sachs, an investment bank, take orders forcorporate bonds, they Hire education can now see instant suggestions of bonds with similar risk pro- files to pitch to their clients. Caesars uses AI to work out custom- ers’ potential daily spending, choose the clients who will receive personal phone callsand in whatorder, and decide what specific promotions to offer them. The company’s boss, Mark Frissora, says that refining marketing to a “message of one” boosts cus- AI is changing the way firms screen, hire and manage tomer loyalty over time. their talent Don’t call us HUMAN RESOURCES (HR) is a poorly named department. Gartner, a research firm, expects the number of phone- It usually has few resources other than overworked staff, based customer-service agents worldwide to decline by 10% by clunky technology and piles of employee handbooks. Hassled 2019. Thatwould increase the workload ofthose who are left. But recruiters have to sort through reams of applications that vastly companies need to be careful notto dilute theirinteractions with outnumber the jobs available. For example, Johnson & Johnson customers too much. The rise of virtual communication has left (J&J), a consumer-goods company,receives1.2m applications for them with fewer opportunities to establish deep relationships, 25,000 positions every year. AI-enabled systems can scan appli- so customer service will become ever more important. cations far more quickly than humans and work out whether Cleverfirmswill use AI notjustto improve existingservices candidates are a good fit. butto engineernewones. Metro Group, a German retailer, istest- Oddly enough, they may also inject more humanity into ing the use ofcomputer vision at the checkout: the items in a bas- hiring. According to Athena Karp of HiredScore, a startup that ket are recorded by cameras and the shopper is charged accord- uses algorithms to screen candidates for J&J and others, only ingly. Amazon uses similar technology in a convenience store in around 15-20% of applicants typically hold the right qualifica- Seattle. Timo Salzsieder, chief information officer of Metro tions for a job, but they are rarely told why they were not hired, Group, reckons these new unmanned, vision-enhanced check- norare they pointed to more suitable jobs. Technology is helping outs can handle 50 customers per hour, more than double the “give respect backto candidates”, she says. number fora manned checkout. Nvidia, a chipmaker, also gets more résumés than it can Some insurers, includingPingAn ofChina, use AI to let cus- comfortably cope with, so it spent a yearbuildingits own system tomers file a claim after a car accident. Instead of having to to predict which candidates are worth interviewing. It has recog- phone the insurance companyand fill in lotsofforms, customers nised patterns that recruiters might not: for example, candidates take photos of the damage to their car and submit them through who submitespeciallylongrésumésturn outto do lesswell than 1

The Economist March 31st 2018 7 SPECIAL REPORT AI IN BUSINESS

2 others, so those extra words will count against them. Hilton, a hotel chain, has shortened the average time it takes to hire a can- didate from 42 days to five with the help of HireVue, a startup. It analyses videos of candidates answering questions and uses AI to judge their verbal skills, intonation and gestures. This can be especially helpful when the candidate comes from a different culture or speaks another first language, says Ellyn Shook, chief leadership and HR officer of Accenture, a consultancy with 435,000 employees that also uses HireVue. Employers tend to hire candidates who are like themselves, which makes for undiversified workplaces. Orchestras, for ex- ample, used to be mostly male. Recruitment offemale musicians went up only when they introduced “blind” auditions behind a screen. Algorithms can act as virtual screens, making hiring fairer. Pymetrics, a startup whose clients include companies such as Unilever, a consumer-goods giant, and Nielsen, a re- search firm, offers a set ofgames for candidates to play, usually at an early stage ofthe recruitment process, that ignore factors such as gender, race and level of education. Instead they test candi- dates for some 80 traits such as memory and attitude to risk. Py- metrics then uses machine learning to measure applicants againsttop performersand predicttheirsuitabilityfora role. This can help candidates without conventional qualifications. Another firm that is helping companies become more di- verse is Textio, a startup that uses AI to improve job descriptions. For example, it has found that corporate jargon like “stakehold- ers” and “synergies” tend to drive away certain candidates, espe- cially non-whites, and that women are less likely to apply for a job that is described as “managing” than “developing” a team. Tweaking job descriptions can get 25% more qualified people through the door and boost recruitment among minorities, says Kieran Snyder, Textio’s boss. Another time Recruiters often come across candidates who have good qualifications but are not the right fit for the particular position they are trying to fill. In the past, there was no way of redirecting them to other jobs as they became available. AI will make it pos- sible to “repurpose candidates we have attracted before”, says Sjoerd Gehring, vice-president of talent acquisition for J&J. The health-care giant uses HiredScore, a startup, to grade candidates. When a vacancy opens up, the system automatically generates a shortlist ofcandidates that could be a good fit. This will bring big cost savings, says Mr Gehring. AI can also help with managing employees. HR profession- als and recruiters at big firms cannot possibly know all their own talented workers across countries and departments, says Chris Louie of Nielsen. His company is using AI to improve internal mobility. Twine Labs, a startup that is working with Nielsen, sug- more than a year, Arena has reduced its clients’ median turnover gests internal candidates for new roles, based on employee data by 38%, says Michael Rosenbaum, Arena’s boss. and job requirements, taking in hundreds of variables. Around In future AI may also be used to determine pay. Infosys is half the candidates it suggests are approved and promoted, says looking into using AI to decide when to give employees a rise, Joseph Quan, Twine Labs’ boss. That is about the same success based on their performance and their pay relative to that of col- rate as for a human recruiter. leagues. The technology will make pay fairer by taking biases Another use for AI is to help employers reduce staff turn- and personality traits out ofconsideration, says Sudhir Jha, head over. On average, replacinga workertakes around 20% ofannual ofproductmanagementand strategyatInfosys. Butthere isa risk salary, sometimes much more. Workday, a software firm, has that workers will try to game the system. started to predict how likely employees are to leave. It looks at All this points to a broader issue in AI: transparency. Com- around 60 factors—such aspay, time between holidaystaken and panies will need to ensure that algorithms are being constantly turnover in managers to whom the employee reports—and flags monitored. In America, where it is illegal to discriminate against those at riskofquitting so companies can try to retain them. protected groups such as racial minorities, firms must be able to Arena, a startup that works with hospitals and care-home prove that they are hiring from these groups roughly in propor- companies, where turnover is high, considers retention even be- tion to the population and are not introducing any bias, says Mr fore ittakessomeone on. Byusingdata from job applications and Rosenbaum. Startup bosses say they offer their clients transpa- third parties to predict which applicants are likely to stay for rency and regularly check their algorithms to make sure they are 1

8 The Economist March 31st 2018 SPECIAL REPORT AI IN BUSINESS

Future workplaces Smile, you’re on camera

AI will make workplaces more efficient, safer—and much creepier WALK UP A set of steep stairs next to a vegan Chinese res- taurant in Palo Alto in Silicon Valley, and you will see the fu- ture ofwork, or at least one version ofit. This is the local office of Humanyze, a firm that provides “people analytics”. It counts sev- eral Fortune 500 companies among its clients (though it will not say who they are). Its employees mill around an office full ofsun- light and computers, as well as beacons that track their location and interactions. Everyone is wearing an ID badge the size of a credit card and the depth of a book of matches. It contains a mi- crophone that picks up whether they are talking to one another; Bluetooth and infrared sensors to monitor where they are; and an accelerometer to record when they move. “Every aspect of business is becoming more data-driven. There’s no reason the people side of business shouldn’t be the same,” says Ben Waber, Humanyze’s boss. The company’s staff are treated much the same way as its clients. Data from their em- ployees’ badges are integrated with information from their e- mail and calendars to form a full picture ofhow they spend their time at work. Clients get to see only team-level statistics, but Hu- manyze’s employees can look at their own data, which include metrics such as time spent with people of the same sex, activity levels and the ratio oftime spent speaking versus listening. We can see through you Such insights can inform corporate strategy. For example, according to Mr Waber, firms might see that a management team is communicating only with a couple of departments and ne- glecting others; that certain parts of a building are underused, so the space should be redesigned; that teams are given the wrong incentives; or that diversity initiatives are not working. Hitachi, a Japanese conglomerate, sells a similar product, which it has cheerily branded a “happiness meter”. Employee welfare is a particular challenge in Japan, which has a special word, karoshi, for death by overwork. Hitachi’s algorithms infer mood levels from physical movement and pinpoint business problems that might not have been noticed before, says Kazuo Yano, Hitachi’s chief scientist. For example, one manufacturing 2 free of bias. But as AI becomes more prevalent, concerns will client found that when young employees spent more than an grow that algorithms could reinforce discrimination. hour in a meeting, whole teams developed lower morale. Recruitment is just one example of the technological dis- Employers already have vast quantities of data about their ruption that AI will bring to the workforce. The number of re- workers. “This company knows much more about me than my cruiters will come down, because AI will handle many of the family does,” says Leighanne Levensaler of Workday, a software mundane tasks they used to do, and face-to-face interviews will firm that predicts which employees are likely to leave, among become rarer. At Unilever only shortlisted candidates are now other things. Thanks to the internet, smartphones and the cloud, interviewed, after several rounds of AI-enabled screening and employers can already check who is looking at a document, recorded interviews through HireVue. For the remaining recruit- when employees are working and whether they might be steal- ers, though, AI will make workeasier and more interesting. ing company files and contacts. AI will go further, raising con- It may even help some of the workers it displaces. Accen- cerns about Orwellian snooping by employers on their workers. ture isrollingout a custom-builttool called Job Buddy which tells In January Amazon was granted a pair of patents forwristbands employees how vulnerable their job is to automation and pre- that monitor warehouse workers’ exact location and track their dicts what trainingthey might need so they can develop the right hand movements in real time. The technology will allow the skills forthe future. Ms ShookofAccenture says that around 80% company to gauge their employees’ productivity and accuracy. of the people who have tried it are taking the advice it offers. But JD.com, the Chinese e-commerce firm, is starting to experiment they may not have much choice. 7 with tracking which teams and managers are the most efficient, 1

The Economist March 31st 2018 9 SPECIAL REPORT AI IN BUSINESS

2 and using algorithms to predict attrition among workers. ployers and employees. Most employment contracts in America The integration of AI into the workplace will offer some give employers blanket rights to monitor employees and collect benefits to workers and might even save lives. Companies with a data about them, but few workers are aware of that. Mr Waber of high-risk work environment are starting to use computer vision Humanyze thinks these data should have better legal protection, to check whether employees are wearing appropriate safety especially in America (Europe has stronger privacy laws). gear, such as goggles and gloves, before giving them access to a As more companies rely on outside firms to collect and danger area. Computer vision can also help analyse live video crunch employee information, privacy concerns will increase, from cameras monitoring factory floors and workenvironments and employees may feel violated if they do not think they have to detect when somethingis amiss. Systems like this will become given theirconsent to sharingtheirdata. Laszlo Bock, who used to as “commonplace as CCTV cameras are in shops”, says Alastair run Google’s human-resources department and now heads a Harvey ofCortexica, a firm that specialises in building them. startup focused on work, reckons that “it’s going to play out in a Employees will also be able to tracktheir own movements. bad way before it plays out in a good way.” 7 Microsoft, the software giant, already offers a programme called MyAnalytics which puts together data from e-mails, calendars andsoontoshowemployeeshowtheyspendtheirtime,howof- External providers ten they are in touch with key contacts and whether they multi- tasktoo much. It also aggregates the data and offers them to man- agers of departments so they can see how their teams are doing. Leave it to the experts “It doesn’t have that ‘big brother’ element. It’s designed to be more productive,” insists Steve Clayton of Microsoft. The idea is that individuals’ data are not given out to managers, though it is not clear whether workers believe that. As part of a broader in- AI vestment in , Microsoft is also starting to use the technology to A thriving ecosystem has sprung up to offer AI translate the monthly question-and-answer session held by the company’s boss, Satya Nadella, for its workers worldwide, and expertise and technical help analyse employees’ reactions. MANY TECH FIRMS’ offices boast luxurious perks such as It does not take much imagination to see that some compa- nap pods, massages and soda fountains that offer employ- nies, let alone governments, could take this information-gather- ees a choice of exotically flavoured sparkling water. Corporate ing too far. Veriato, an American firm, makes software that regis- bosses like to thinkthat finding customised AI solutions is just as ters everything that happens on an employee’s computer. It can easy as selecting a fizzy drink with a hint of grapefruit. They are search for signals that may indicate poor productivity and mali- wrong. Buying AI takes time, can feel like hard work, and the re- cious activity (like stealing company records), and scans e-mails sults are often imperfect. to understand how sentiment changes over time. As voice- A number of vendors are scurrying to come to would-be enabled speakers become more commonplace at work, they can users’ aid. The leaders are the West’s biggest providers of cloud be used to gather ever more data. storage: Amazon, Google and Microsoft. Cloud computing is a This is of particular concern in authoritarian states. In Chi- vast market worth $300bn, and fiercely competitive. All three na increasing numbers of firms, and even some cities, use cam- firms offer pre-trained models that corporate clients can use to eras to identify employees for the purpose of giving them access build AI-enabled systems. For example, they all sell “vision” to buildings. More troubling, the government is planning to com- tools that enable customers to use computer vision to improve pile a “social credit” score for all its citizens, pooling online data their existing services and build new ones. Uber, the ride-hailing about them to predict their future behaviour. firm, worked with Microsoft’s toolset to design a system that All this may require a new type of agreement between em- scans drivers’ faces to confirm their identity when they start a shift. C-Span, a television network, used Amazon’s vision sys- tem to compile a database of politicians so it can quickly name them when they appear on screen. A broad range oftools is available to help mainstream com- panies build anything from search and recommendation en- gines to speech-recognition and translation systems, customer- service bots and more. Jeff Dean, director of Google Brain, the search giant’s AI-research arm, reckons there are 10m organisa- tions in the world that “have a problem that would be amenable to a machine-learning solution. They have the data but don’t have the experts on staff.” The potential corporate market for AI software, hardware and services is vast: around $58bn by 2021, compared with $12bn last year, according to IDC, a research firm. Amazon has a clear lead in the broader cloud market, with a 44% share of the total, compared with Microsoft’s 7% and Google’s 2.3%, but for AI tools the field remains wide open. Paul Clarke, chief technology offi- cerofOcado, an online grocer, says it can be good for clients to be promiscuous and use the best tools from each. He thinks it un- likely that any one ofthem will sweep the board. Cloud providers try to differentiate their AI offerings in two ways: by ease of use, through a well-designed interface, and by offering better algorithms. Each of the tech giants draws on 1

10 The Economist March 31st 2018 2 where its “strength is today”, says Joseph Sirosh ofMicrosoft. For example, Google offers an excellent tool which companies can use to create or redesign their own search engines, and has espe- cially good engineering talent. Microsoftand Amazon have solid toolsforvoice recognition. Microsoft’sinterface currentlyhas the best design, says Pedro Domingos, a professor of computer sci- ence at the University of Washington and author of “The Master Algorithm”, a bookabout AI and business. In future tech firms will develop more specialised hard- ware thatwill help companiescrunch enormousdata piles more quickly. Google has a lead in this area; it has built some remark- ably powerful custom chips, called Tensor Processing Units (TPUs), and uses other customised accelerators to increase the IBM also suffers from the same problem as any tech firm processing speed of its data centres. The tech firms are also offer- other than Google, Amazon and Microsoft: it finds it hard to get ing free open-source libraries to clients’ machine-learning ex- hold of the best talent. None of the top doctoral candidates in AI perts that can be used to design AI-enabled programs. This is goes to work for IBM, says Mr Domingos of the University of “notaltruistic”, saysMattTurckofFirstMarkCapital, a venture in- Washington. The old saying that “nobody ever got fired for buy- vestor. Tech firms want to provide great tools in order to attract ing IBM” may no longer apply in the AI era. clients to their platforms and impress AI experts. Startups, too, are hoping to jump on the AI bandwagon. Microsofthasmore experience thaneitherAmazon or Goo- Many offerservices like helpingclean up and label data, and take gle ofcateringto large firms’ software needs, so itiswell placed to on specific tasks that large tech firms are not yet offering, like serve mainstream companies in need of help with AI. But most helping firms recruit, scan job descriptions and improve custom- such offerings still require a lot of customisation and technical er service. For large companies it makes sense to outsource most work to make them useful, says Oren Etzioni of the Allen Insti- of their AI work, except where it directly affects their strategic tute forArtificial Intelligence, a non-profit research group. edge. For example, BP would not want to build AI tools to auto- The cloud providers are tryingto fill the gap by offering con- mateback-office orHR functions,butitwouldwanttodevelopits sulting services. Google has opened an “Advanced Solutions own AI system forinterpreting seismic imaging to detect oil, says Lab” that is part consulting service, part tech bootcamp. Whole Ms Watson. teams from client companies can come to acquire machine- If companies want to get products rolled out quickly, they learning skills and build customised systems alongside Google have to work with multiple vendors, says Mr Lippert of MetLife. engineers. Courses typically last from four weeks to several That may be good for startups, which can be nimble. But the in- months. Demand has been “overwhelming”, says VatsSrivatsan cumbent tech firms’ size, computing infrastructure, proprietary of Google Cloud, who is now hoping to roll this out much more data and balance-sheets give them an unassailable advantage. widely. That is a new departure for tech firms, which in the past “Right now everyone thinks they can win. The field will become have been strong on technical infrastructure but light on people. considerably less democratic,” predicts Martin Reeves of Boston The cloud providers will increasingly compete with man- Consulting Group. Having used AI to boost their own fortunes, agement consultancies, which charge fat fees for helping clients the incumbents will move on to selling the technology to cus- navigate technological disruption. “The Googles, Amazons and tomers who may become AI-fuelled giants in their own right. 7 Microsofts of the world may take over from the McKinseys, Bos- ton Consulting Groups and Bains,” says Roy Bahat ofBloomberg Beta, a venture-capital firm. “Consultancies are built for two-by- The future two matrices. AI’s matrices are a million by a million.” In this race, consultancies with deep expertise in data and technology Two-faced are better placed than those that focus on general strategy. Straight from the horse’s mouth The generalists know they are vulnerable. McKinsey has been investing heavily to beef up its expertise in data, for exam- ple bybuyingQuantumBlack, an advanced-analyticsfirm, foran undisclosed sum in 2015. But many clients seek advice direct AI will mainly be good for business, but mind the pitfalls from tech firms, which are themselves pioneering users of AI. MENTION ARTIFICIAL INTELLIGENCE, and most people “All consultants do is listen to you and tell you back what you’ve will think of robots. But a more fitting image may be that of already told them,” says Morag Watson ofBP, an oil giant. Janus, the Roman god of beginnings, transitions and endings, IBM is trying to bridge the gap between the tech wizards who has two faces looking in opposite directions. On one side and the conventional consultants. “People think this will go the are the positive changes that AI will bring, enabling people to way the digital and mobile revolutions went. I would argue the achieve more, far more quickly, by using technology to enhance opposite. If people get their AI right, it’s a great way to extend their existing skills. Recruiters will be able to pinpoint the best their incumbent advantage,” says David Kenny, the boss of Wat- candidates more easily, and customer-service staffwill be able to son, IBM’s AI offering. Watson has been heavily marketed on handle queries faster. Jobs that never existed before could be television and enjoys strong name recognition, aided by its vic- created. And getting machines to do routine work can make pro- tory overhuman contestants in a game ofJeopardy in 2011. But its fessional lives more fulfilling and stimulating. bespoke solutionsforclientstake lotsoftime to develop, running Consumers, too, will benefit from AI-enhanced services up heftybillsforconsultinghours. “Watson isa brandingconcept such as personalised recommendations and fasterand more effi- that’s being portrayed as a product,” says Tom Siebel of C3 IOT, cient delivery, as well as from radical changes in industries like an AI startup. “Youcan’t easily buy it, and you can’t install it.” health care and transportthatcould lead to newdrugdiscoveries 1

The Economist March 31st 2018 11 SPECIAL REPORT AI IN BUSINESS

2 and treatments and saferways to move around. The third question is about Look the other way,though, and there are plenty of poten- the effect of AI on competition Offer to readers tial pitfalls. Technological change always causes disruption, but in business. Today many firms Reprints of this special report are available. AI AI A minimum order of five copies is required. islikelyto have a biggerimpactthan anythingsince the advent are competing to provide -en- Please contact: Jill Kaletha at Foster ofcomputers, and its consequences could be farmore disruptive. hanced tools to companies. But Printing Tel: +1 866 879 9144 Ext: 168 Being both powerful and relatively cheap, it will spread faster a technology company that e-mail: [email protected] than computers did and touch every industry. achieves a major breakthrough Corporate offer in artificial intelligence could Sunny with a chance of thunderstorms Corporate orders of 100 copies or more are race ahead of rivals, put others available. We also offer a customisation In the years ahead, AI will raise three big questions for out of business and lessen com- service. Please contact us to discuss your bosses and governments. One is the effect on jobs. Although petition. This is unlikely to hap- requirements. chief executives publicly extol the broad benefits AI will bring, pen in the near future, but if it Tel: +44 (0)20 7576 8148 e-mail: [email protected] theirmain interest lies in cuttingcosts.One European bankasked did it would be ofgreat concern. Infosysto find a wayofreducingthe staffin itsoperations depart- More likely, in the years For more information on how to order special AI AI reports, reprints or any copyright queries ment from 50,000 to 500. This special report has shown that - ahead might contribute to the you may have, please contact: enhanced tools can help pare staff in departments such as cus- rise of monopolies in industries The Rights and Syndication Department tomer service and human resources. The McKinsey Global Insti- outside the tech sector where 20 Cabot Square tute reckons that by 2030 up to 375m people, or14% of the global there used to be dynamic mar- London E14 4QW workforce, could have their jobs automated away. Bosses will kets, eventually stifling innova- Tel: +44 (0)20 7576 8148 Fax: +44 (0)20 7576 8492 need to decide whether they are prepared to offerand pay forre- tion and consumer choice. Big e-mail: [email protected] training, and whether they will give time off forit. Many compa- firms that adopt AI early on will www.economist.com/rights nies say they are all forworkers developing new skills, but not at get ever bigger, attracting more the employer’s expense. customers, saving costs and of- Future special reports A second important question is how to protect privacy as fering lower prices. Such firms Germany April 14th AI spreads. The internethasalreadymade itpossibletotrackpeo- may also reinvest any extra pro- Universal health care April 28th AI International banking May 5th ple’s digital behaviour in minute detail. will offer even better fits from this source, ensuring China in the world May 19th tools for businesses to monitor consumers and employees, both that they stay ahead of rivals. online and in the physical world. Consumers are sometimes Smaller companies could find Previous special reports and a list of forthcoming ones can be found online: happy to go along with this ifit results in personalised service or themselves left behind. economist.com/specialreports tailored promotions. But AI is bound to bring privacy violations Retailing is an illustration that are seen as outrageous. For example, facial-recognition tech- of how AI can help large firms nology has become so advanced that it may be able to detect win market share. Amazon, someone’s sexual orientation. In the wronghands, such technol- which uses AI extensively, controls around 40% of online com- ogy could militate against fair and equal treatment. Countries merce in America, helping it build moats that make it harder for with a record of surveillance and human-rights abuses, such as rivals to compete. But AI will increase concentration in other in- China, are already using AI to monitor political activity and sup- dustries, too. If, say,an oil company can use AI to pump 3% more press dissent. Law-enforcement officials around the world will efficiently, it can set prices 3% lower than those of a rival. That use AI to spotcriminals, butmayalso snoop on ordinary citizens. could force the competitor to shut down, says Heath Terry of New rules will be needed to ensure consensus on what degree of Goldman Sachs. He thinksthatAI has“the powerto reshuffle the monitoring is reasonable. competitive stack”. It is too early to tell whether the posi- tive changes wrought by AI will outweigh the perils. But leading a company in the Janus, the years ahead is sure to be more challenging Roman god, than at any time in living memory. AI will require bosses to rethink how they struc- contained ture departments, whether they should both build strategic technologies internally or trust outside firms to deliverthem, wheth- beginnings erthey can attract the technical talent they and endings need, what they owe theiremployees and how they should balance their strategic within him. interests with workers’ privacy. Just as the That duality internet felled some bosses, those who do not invest in AI early to ensure they will characterises keep their firm’s competitive edge will AI, too flounder. Janus, the Roman god, contained both beginnings and endings within him. That duality characterises AI, too. It will put an end to traditional ways of doing thingsand starta newera forbusiness and for the world at large. It will be pervasive, devastating and exhilarating all at the same time. Lookahead. 7

12 The Economist March 31st 2018

48 Middle East and Africa The Economist March 31st 2018

Iraq after Islamic State Also in this section Moving forward 51 Migrants head back to Nigeria 51 Kenya’s illegal charcoal trade 52 “Black Panther” in Africa

BAGHDAD, BASRA AND MOSUL Iraq is getting backon its feet. But will its new spirit ofunityhold? HISKYis backon the tables in Mosul, reached record levels. No wonder 2,000 heritage, like Mosul’s old city, was reduced Wone of Iraq’s biggest cities. Until last foreign investors packed hotel ballrooms to rubble. About 6m people, most of them year, boozing was punishable with 80 earlier this year at an Iraq-reconstruction Sunnis, lost their homes. lashes. These daysa refurbished hotel with conference in Kuwait. In quick succession, three ideologies a nightclub on the roof, set in a wood that Remarkably, given its belligerent past tearing the country apart have been had sheltered the high command ofthe so- and the region’s many conflicts, Iraq en- tamed. Revanchism by the Sunni Arab mi- called Islamic State (IS), is fully booked. joys cordial relations with all its neigh- nority, who are about15-20% ofthe popula- Shops around the ruins of Mosul’s univer- bours. America and Iran may be bitter ri- tion but have dominated Iraq since Otto- sity have new fronts. Families queue at res- vals, but both give Iraq military and man times, was a cocktail of Saddam taurants on the banks ofthe Tigris. There is political backing. Gulf states, overcoming Hussein’s brutal Baathist nationalism and not a niqab, or face-veil, in sight. decades-long sectarian and security fears, even more brutal jihadism. It spawned al- The revival of Mosul is a metaphor for have restored diplomatic relations and Qaeda in Iraq and IS. But today it seems Iraq as a whole. When IS captured the city want to invest. To cap it all, Iraq remains a weaker than ever. “Sunnis finally felt what in 2014, Iraq seemed a lost cause. Its armed rarity—the onlyArab state, otherthan Tuni- it meant to be Kurdish or Shia,” says an in- forceshad fled. The governmentcontrolled sia, to get rid ofits dictatorand remain a de- fluential government adviser. “They know less than half the country and the jihadists mocracy. Its fourth multiparty election they are no longer top dogs.” stood primed to march into Baghdad. With since 2003 will take place on May12th. In a Triumphalism by the long-repressed the collapse of oil prices in 2015, the gov- region of despots, Iraqis talk freely. Media Shia Arab majority, making up about 60% ernment was broke. Iraq was a byword for and civic groups are vibrant. of the population, also turned violently civil war, sectarianism and the implosion sectarian. But this seems to have lost much of the Arab state order established at the Counting the cost of its appeal after 14 years of misrule by end ofthe first world war. Some think the war was needed to bring Shia religious parties. The Shia south may Now Iraq, home to nearly 40m people, Iraqis to their senses. If so, it was a terrible have most of Iraq’s oil, but it looks as is righting itself. Its forces have routed the form oftherapy. In the 15 yearssince Ameri- wrecked and neglected as the Sunni north. would-be caliphate and regained control ca’s invasion of Iraq, some 300,000 Iraqis And Kurdish nationalism lies in tatters, of the borders. A wave of victories has and 4,400 American soldiers have been too. Denied independence in the 1920s, the turned Iraq’s army into what a UN official killed (see chart, next page). Of the many Kurds are scattered across four countries. calls the Middle East’s “winniest”. Bagh- rounds ofstrife, none matched the vicious- In Iraq they have long enjoyed quasi-inde- dad feels safer than many other Middle ness of the fight against IS. At least 7,000 ci- pendence in an enclave in the north-east. Eastern capitals. The government is flush vilians, 20,000 security personnel and But last September Masoud Barzani, the with money as the oil price has doubled over 23,000 IS fighters were killed, accord- Kurdish president, overreached by calling since its low in 2016 and production has ing to a think-tank in Baghdad. Priceless a referendum fora fully fledged state, defy-1 The Economist March 31st 2018 Middle East and Africa 49

2 ingBaghdad as well as protests from Amer- 150 km TURKEY Islamic State ica and Iran. When he refused to back Largest extent of down, Iraqi forces snatched back the dis- Nineveh Plains territory controlled/ puted territories that Kurds held beyond Mosul Erbil influenced by IS (August 2014) Qaraqosh their official autonomous region (about IRAQI Eu KURDISTAN IRAN Baghdad 40% of their realm); the Iraqi government ph Hamrin Kirkuk ra SYRIA t e Mts. also imposed an embargo on foreign s Tikrit Kurdish areas retaken flights (now lifted). Kurdish leaders are ne- by Iraqi forces since gotiating a way out of their isolation. But IRAQ September 2017 many Kurds seem none too upset, given ANBAR Falluja Baghdad Religion how autocratic and dirty Mr Barzani’s re- Predominantly Sparsely T gime is. “It would have been a Barzanistan, igri Sunni JORDAN populated s not a Kurdistan,” says a teacher. areas Shia Najaf Iraq has not looked so united since 1991, Christian Mixed/ Baghdad when Kurds and Shias rose up against Sad- SAUDI ARABIA other dam after his occupying forces were Basra Safwan pushed out of Kuwait by an American-led Areas of control, March 26th 2018 Kurdish forces coalition. ManyShia volunteersdied deliv- Iraqi Security Forces/tribal The Sources: Institute fighters and Shia militias KUWAIT ering Sunnis from the barbarous rule of IS. Gulf for the Study of War; Source: IHS Conflict Monitor M. Izady, Columbia University About 45,000 Sunnis mustered alongside the Shia-led Hashd al-Shaabi, or “popular mobilisation units”. And millions of Sun- peaceful coexistence”, says the dean of Basra’s billboards invite scorn. Cinemas nis fled the would-be caliphate to seek ref- Sharia Studies, Anwar Faris Abd. In this banned since 1991are reopening. Iraq’s first uge in Kurdish and Shia cities. staunchly Sunni city, trainee clerics now commercial film in a generation went on Revenge killings by Shia militias have study Shia as well as Sunni schools of law. release this month. “The Journey” tells of a been rarer than many had feared. “We ex- In the spirit of reconciliation, half of the female suicide-bomber who, just as she is pected much worse,” says a local council- university’s 30,000 students are Shia. about to blow herself up, questions how lor in Falluja, a Sunni city recaptured in Religious minorities feel safer, too. Over she will rip apart the lives of people 2016. The Hashd still display their religious 70% of the 100,000 Christians who fled to around her. It pours compassion on perpe- insignia at checkpoints on the highways Kurdistan have returned to their homes on trator and victim alike. (softened with plastic flowers), but in Sun- the Nineveh plains, says Romeo Hakari, a Secularism is making inroads even in ni cities the policing is largely local. Hashd Christian parliamentarian in Erbil. Sunnis the holy city ofNajaf, the seat ofIraq’s aya- barracks are low-key and often mixed. from Mosul joined Chaldean Catholics to tollahs, which has thrived on Shia pilgrim- “Half of them are Sunni,” says a Hashd celebrate mass at their church in Bakhdida, age since the American invasion. The new commander in Tikrit, Saddam’s home whose icons IS used fortarget practice. public library at the golden-domed shrine town, pointing at the dozen men in his There has been a striking backlash of Imam Ali includes sizeable collections mess. A Kurdish politician who supported against organised Islam. Mosque atten- of Marx’s tracts and non-Muslim scrip- the referendum expresses relief. “No one dance is down. Although Sunnis are re- tures. Shia clerics who until recently threatened me or my job,” says Dara Ra- building their homes in Falluja, the mina- banned Christmas trees and smashed shid, a deputy housing minister. rets and domes in the city once known as shop windows displaying love-hearts on As security improves, barriers within “the mother of mosques” lie abandoned Valentine’s Day now let them pass. the country are coming down. Many ofthe and ruined. “Only old men go to pray,” ex- Iraq’s dominant religious parties used checkpoints snarlingtraffic in central Bagh- plains a 22-year-old worker mixing ce- to flaunt their sectarian loyalties to get out dad have gone. The curfew was lifted in ment. Designer haircuts and tracksuit tops the vote at elections. Now many hide 2015. The Suqur checkpoint separating are the latest male fashion, because IS them. An opinion poll last August showed Baghdad from Anbar province, notorious banned them. “Our imams radicalised us that only 5% ofIraqis would vote fora poli- for delays and maltreatment, still shuts at with IS and terror but refuse to admit it,” tician with a sectarian or religious agenda. sundown. But Anbar’s Sunnis no longer says a Sunni final-year student at Tikrit Yesteryear’s Shia supremacists these days need a sponsor to enter Baghdad. For the University with a bouffant hairdo. promise to cherish the country’s diversity, first time since 2003, your correspondent Mistrust of clerics is as keenly felt in the and recruit other sects to their ranks. drove the length of Iraq, from the border Shia south. The turbaned Iranians gracing All this produces strange bedfellows. with Kuwait to the one with Turkey, with- Muqtada al-Sadr, a Shia cleric with a base out a security escort or special permits. in the shantytowns of Baghdad and Basra, The calm is drawing Iraqis home. Peace and progress has allied with communists, whom he Worldwide it takes five years on average Iraq once damned as heretics. Iraq’s branch of for half of those displaced by conflict to re- Conflict-related civilian deaths GDP per person the Muslim Brotherhood, an Islamistparty, turn home after a war, says the UN. In Iraq Per month*, ’000 $’000, 2010 prices hasjoined forceswith al-Wataniya, an anti- it has taken three months. “We’ve seen 6 6 sectarian party led by a former Baathist, nothing like it in the history of modern 5 † ‡ 5 Iyad Allawi. Asold alignmentsbreakapart, warfare,” says Lise Grande, who headed the Iraqi National Alliance, which grouped 4 4 UN operations during the war on IS. Mil- the main Shia parties, has split into its con- lions returned without compensation, 3 3 stituent parts. Kurdish and Sunni blocs are electricity or water. Rather than wait for 2 2 fragmenting too. Several religious factions the government to provide homes, they 1 1 have assumed secular names. “At least five are repairing the wreckage themselves. masquerade behind the word ‘civil’,” com- 0 0 Lecturers at Tikrit University have 2003 05 07 09 11 13 15 18 plains the leader of the Civil Democratic raised funds from private evening classes, Sources: Iraq Body Alliance, a genuinely secular party. rebuilt their war-battered campus and re- Count; IMF; World *Preliminary data from Feb 2017 Against this background one worry † ‡ designed the curriculum “to promote Bank; The Economist Estimate Forecast stands out. Iraq’s politicians are mostly 1 50 Middle East and Africa The Economist March 31st 2018

2 failing to rise to Iraq’s new spirit. If not on potential investors. Iraq’s Safwan border sandals and walked out,” says an interna- the international conference circuit, the crossing lies an hour’s drive away from the tional observer. In February a squad hid- government can be found in the Green Kuwait conference where Haider al-Abadi, ing in the Hamrin mountains north of Tik- Zone, the city within a city that the Ameri- the prime minister, declared Iraq open for rit ambushed and killed 27 soldiers. There cans carved out of Baghdad with six-me- business. It could not be less inviting. Rub- have been frequent strikes since. The refu- tre-high concrete blast walls. The fortress ble left over from American bombing 15 gee camps are thought to be full of sleeper provides a safe space for foreigners and of- years ago spills over the pavements. Four cells, padlocked behind wire fencing. The ficials to do business, say its residents. But sets ofofficials had to sign and stamp entry rain floods theirtents, wateringgrievances. for many Iraqis it is where officials con- papers before your correspondent could Just as Egypt’s prisons nurtured Ayman al- spire to siphon offpublic money. bring in his laptop. “We still think foreign- Zawahiri, al-Qaeda’s leader, and Ameri- The main government jobs are still ers are spies or imperialists bent on plun- ca’s Camp Bucca in Iraq bred Abu Bakr al- dished out by sect and ethnicity.In healthy der,” grumbles an Iraqi fund manager. Baghdadi, the IS leader, Iraq’s prisons may democracies the opposition holds the ex- Disgruntlement carries great dangers. It now be “incubating a new generation of ecutive to account. In Iraq the government is common to hearIraqis longfora military trauma and terror”, says Nada Ibrahim, a is a big tent. Factions name their own min- strongman like Egypt’s general-cum-presi- Sunni doctor in Baghdad. isters, and they in turn appoint ghost work- dent, Abdel-Fattah al-Sisi, or a Chinese- ersto claim salaries. Ports, checkpoints and style autocrat, to rid Iraq of democracy’s Breakthe curse even refugee camps are seen as sources of curse. Many even express nostalgia for Iraq has known, and wasted, other hope- cash and divvied out between factions. Saddam, most notably in the south, where ful moments. The overthrow of Saddam Appointment is rarely on merit. The head his yoke fell heaviest. They recall how, de- was botched by America, which shut Sun- of Najaf’s airport is a cleric. Opinion polls spite UN sanctions, he repaired bombed nis out of the new order. The respite won suggest that most Iraqis want new faces, bridges and power plants within a year of by its surge of troops in 2007-08 was but Iraq’s leaders remain mostly the ones the war of1991. He somehow kept the hos- botched by Nuri al-Maliki, the then prime America installed in 2003. pitals and electricity running, criminals off minister from Dawa, a Shia Islamist party, Reasons fordisillusion include the slow the streetsand the countryself-sufficient in who ran a sectarian government. Can Mr pace ofreconstruction and the lackof jobs. rice, sugar and vegetable oil. “Before 2003 Abadi breakthe cycle? Many Iraqis praise the speed with which the state still cared about art, theatre and Iraq holds much promise, given its the UN helped the displaced get home; the preservation of antiquities,” says a abundant oil and water and its educated they think their own politicians were re- sculptor who works above Basra’s old ca- population. And Mr Abadi is remarkably miss. Three million children are still out of nal, which now flows blackwith sewage. popular among Sunnis even though he, school. A quarter ofIraqis are poor. For all the war fatigue, the threat of re- like Mr Maliki, is from Dawa. “We want Iraq’s economy has fluctuated as wildly newed violence is never far away. Mr Bar- elections and we want Abadi to win,” as its geopolitical fortunes. GDP perperson zani’s humiliated Peshmerga fighters cheers a female lawyer in Mosul’s court- collapsed after the war for Kuwait in 1991 threaten to hit backiftheir marginalisation house, surrounded by nodding colleagues. and during the American-led invasion of continues. “Just as they destabilised Kur- Yet Mr Abadi has failed to turn his mili- 2003. A gradual recovery was interrupted distan, we can destabilise Iraq,” says one tary victory into political gain. Some of his by the upheaval of 2014 and 2015 (see chart of his advisers. He threatens to send fight- own advisers compare him to Churchill, on the previous page). Economic activity ers to pillage Iran, which he holds ultimate- who led Britain to victory over Nazi Ger- maynowbe setto take offagain. Oil output ly responsible for the Iraqi army’s strike many only to be voted out of office. Iraq’s has risen from a low of 1.3m barrels a day against the Kurds. The Hashd, fortheir part, leadersseem unlikelyto actasBritain’sdid, (b/d) in 2003 to 4.4m. Iraq is already are armed and expect to be treated like he- turning from war to social reform; instead OPEC’s second-biggest producer, with out- roes, not sent home empty-handed. they are risking a reversion to civil strife. put predicted to rise to 7m b/d by 2022. It On a map ofnorthern Iraq, a UN official Confronted with a dispirited population, has amassed over$50bn in reserves, about draws five large red boxes, covering most powerful militias, lurking jihadists and a quarter ofGDP. of its main cities. Each, she warns, indi- scheming politicians, Iraq’s governing There are small signs of government in- cates where IS could resurface. “Many IS class has yet to show it knows how to win vestment: fancy lampposts in Falluja and fighters shaved their beards, put on dirty the peace. 7 Mosul, astro-turf pitches in Hilla and a grass verge with fountains along Bagh- dad’s airport road. But some of the Middle East’s largest factories still lie idle—every- thing from steel and paper mills to fac- tories that made syringes, textiles and more. Since most sanctions were lifted in 2003 a country that used to make things has come to rely far more on oil. It uses its oil money to finance patronage in the bloated public sector and imports almost everything, including petrol, from its neighbours. Officials pocket commissions and bribes in the process. As a result, foreign governments are wary of giving aid. “It’s a bottomless pit,” despairs a Gulf minister. The country has an anti-corruption watchdog, the Com- mission of Integrity, but that too is said to have succumbed to factional profiteering. Suspicion of foreigners, a relic of the Saddam era, risks lowering the appetite of Abadi in motion The Economist March 31st 2018 Middle East and Africa 51

Returning migrants 150,000 naira demanded by smugglers for the trip across the Mediterranean. His boat Homeward bound was stopped by Libyan coastguards and he was taken back. “I don’t want to go back to my village, because if I hear people saying: ‘This is the guy who got nowhere,’ I’d probably kill BENIN CITY them,” he says. “If the government doesn’t train me in something decent, I might be Europe is sending Africans home. Will they stay? forced to go into crime to get the money to NCE considered the smartest hangout buy my mother’s land back.” Oin town, the Benin Plaza motel in Out of Africa Abibu’s hopes ofa better lifeabroad are southern Nigeria’s Benin City has seen bet- Migrants from sub-Saharan Africa living in the widely shared. In a Pew poll, about 40% of ter days. Its chalet-style rooms are normal- European Union, Norway or Switzerland respondents in countries such as Nigeria, ly empty, and the Moat Bar, which prom- Top origin countries, 2017, ’000 Ghana and Senegal said they planned to ises “groovy nights and exotic cocktails”, 0 100 200 300 400 move to anothercountry within five years. has falleninto disrepair. Asked whethertheywould move atonce if Nigeria For the Plaza’s recent influx of guests, they had the means and opportunity, 75% though, the motel is the first comfortable South Africa of Nigerians and Ghanaians said yes. Poll- night they have had in rather a long time. Somalia ing by Afrobarometer in Nigeria last year Requisitioned by the government for mi- Senegal suggests why. Most of those thinking of leaving said it was to find work or escape grants repatriated from Libya, it offers new Ghana arrivals free accommodation for a few economic hardship. days while they find their feet. Angola Mr Okoduwa admits that some who The repatriation programme is part ofa Kenya are returning can be hard to please, as can joint UN and EU effort to stem the flow of Congo theirparents. One mother,on receiving her migrants to Europe. It encourages those Cameroon daughter from Libya, said she would sim- who have made it to Libya to go home vo- ply try to fly her to Europe instead. Ivory Coast luntarily, rather than risk a rickety boat He insists, though, that most are grate- across the Mediterranean. People who Source: United Nations ful for the help. Yes, the scheme could do turn back get a free flight—cutting out the with much more funding, he says, and no, need for a perilous return journey across Trust Fund for Africa. This €3.2bn pot, set he cannot guarantee that some will not try the Sahara. up in 2015, gives African states money and again to go to Europe. Those who do will The programme, launched in Decem- help in resettling migrants returning from be “a minority, just two or three per cent”. ber 2016, repatriated some 15,000 migrants Europe and Libya in exchange for trying to Yet even if he is right that those returning to various west African countries in its first stop illegal migration at its source. A study will stay at home, the queue of young Ni- year. Most of them were in squalid Libyan released earlier in March by Pew, a think- gerians who want to seek their fortune detention centres ordestitute on the streets tank, estimated that at least 1m sub-Saha- abroad is long and wide. 7 ofTripoli.This barely scratches the surface. ran Africans moved to Europe between The International Organisation for Migra- 2010 and 2017. tion (IOM), part of the UN, has registered Many of them are Nigerian. Of those Illegal charcoal more than 400,000 migrants in Libya, but flown home from Libya by the IOM, the it reckons there are between 700,000 and great majority are from Edo, says Mr Oko- Averyblack 1m ofthem in the country. duwa. The state has a long tradition of mi- Nigeria’s repatriation scheme did not gration, much of it by illegal means. In the market startuntil latelastyear.Butitproved timely. late 1980s local women who went to Italy In November video emerged showing Ni- as tomato-pickers found they could earn NYAKWERI gerian and other African migrants being more as prostitutes. When they came back The charcoal trade is harming the sold for the equivalent of $400 each in rich, others followed. Trafficking networks environment and fuelling war what appeared to be Libyan slave markets. evolved to help would-be migrantsget into The chilling footage, and interviews with Europe. Kevin Kyland, a former Scotland RESSED in a faded T-shirt bearing the rescued migrants, spelled out some of the Yard detective who is now Britain’s anti- Dface of the American rapper 50 Cent, risks ofthe crossingfarbetterthan any gov- slavery commissioner, guesses that 90% of Samson Okenye leans on a shovel in ernment-run campaign could. About Nigerians working in brothels in Europe Nyakweri forest in south-western Kenya. A 3,000 Nigerians have been brought home are from Edo. 62-year-old from the Rift Valley, he has a and another 15,000 are expected by June, Mr Obaseki hopes to stop the traffick- new gig for his retirement. Having worked says Solomon Okoduwa, an adviser to ers, likening them to the slave traders who in a factory for most of his life, he is now Godwin Obaseki, the governor of Edo did business in his region in colonial times. chopping down trees and burning them state, ofwhich Benin City is the capital. He has enlisted the help of local pastors, for charcoal. He sells each bag he produces Those who return are given 100,000 who nowwarn ofthe dangersoftraffickers from his crude earthen kilns for 400 Ken- naira ($278) to tide them over for the first from their pulpits. yan shillings (about $4). Men carry it off on three months, and training on how to start But the downbeat mood ofmany ofthe motorbikes to Nairobi, the capital, and Ki- their own businesses. Options include Plaza motel’s new guests shows how diffi- sumu, Kenya’s third-largest city. fashion design, hairdressing and farming cult it is to stand between people and their Charcoal is one of the biggest informal on land set aside by the state. dream of a better life. Most paid to be businesses in Africa. It is the fuel of choice The Nigerian leg of this programme is smuggled to Europe, in the hope ofbecom- for the continent’s fast-growing urban funded by Edo state, but Nigeria is one of14 ing richer than their parents. Take Abibu, a poor, who, in the absence of electricity or African countries sharing a €140m reinte- tough-looking 25-year-old whose mother gas, use it to cook and heat water. Accord- gration package from the EU’s Emergency sold her last plot of land to raise the ing to the UN, Africa accounted for three-1 52 Middle East and Africa The Economist March 31st 2018

2 fifths of the world’s production in 2012— Comic books in Africa and this is the only region where the busi- ness is growing. It is, however, a slow-burn- ing environmental disaster. Sub-Saharan superheroes In Nyakweri, the trees are ancient and JOHANNESBURG rare. Samwel Naikada, a local activist, The success of“BlackPanther” encourages African artists points at a blackened stump in a clearing cut by burners. It is perhaps 400 years old, INCE the release of“BlackPanther”, a demand versions in Zulu and Xhosa he says. The effect of burning trees spreads Sfilm based on a Marvel comic, internet (which, incidentally,is what Wakandans far. Duringthe dryseason, the forest isa ref- searches forAfrican travel have spiked. speakin the film). “Our superhero”, says uge for amorous elephants who come in But those seeking the African kingdom a display box. from the plains nearby to breed. The trees over which the titular superhero reigns Bill Masuku, the Zimbabwean creator store water, which is useful in such a will be disappointed. Wakanda does not ofa comic about a vigilante superhero parched region. It not only keeps the Mara exist, unless one counts a water park of called Razor-Man, says “Black Panther” river flowing—a draw for the tourists who that name in Wisconsin. has made it easier to market his work in a provide most of the county government’s Africa has been affected in more part ofthe world where geekculture is revenue. It also allows the Masai people to tangible ways by “BlackPanther”, which unfamiliar. More interest has come from graze their cows and grow crops. “You can- has a predominantly blackcast and is comic fans in America and Europe, who not separate the Masai Mara and this for- one ofthe highest-grossing superhero are curious about the African scene. The est,” says Mr Naikada. movies ofall time. Its popularity extends team behind “Kugali”, a slickanthology Short-term financial interests are doing to the continent, where filmgoers from ofAfrican comics due out in June, is just that. Most of the burners are not from Lagos to Nairobi dress in Afro-futurist hoping the enthusiasm lasts. nearby, where people are mostly Masai. In- garb forscreenings. Fashion designers It probably will. Nnedi Okorafor, a stead, like Mr Okenye, they come from far- have received a boost from the film’s Nigerian-American writer, has been ther north-west. At the moment the forest distinctive mix oftraditional and con- commissioned to write a comic series is communally owned, but local power- temporary African styles. titled “Wakanda Forever”, about the brokers illegally sell parcels of it to the African comic-bookartists are per- king’s all-female bodyguards. Black burners. “The problem is the need for haps the biggest beneficiaries. Take Panther will also appear in the next quick money,” says Johnson Mopel of the “Kwezi”, a comic by Loyiso Mkize about a Marvel movie, due out in April. That isn’t Transmara Wildlife Scouts Association, a South African superhero who battles soon enough forNollywood, Nigeria’s local NGO. “Charcoals are like hot cakes in baddies in Gold City,a proxy for film industry.Cheesy spin-offsare al- the marketplace.” Johannesburg. Kwezi is a cocky teenager, ready circulating. One, also called “Wa- Nyakweri is hardly the only forest at but as his powers grow he draws closer to kanda Forever”, is set in a Nigerian vil- risk. The Mau forest, Kenya’s largest, which his ancestors and embraces his heritage. lage. It lacks the technological splendour lies farthernorth in the Rift Valley, has also South Africans love it; bookshops sell out ofthe Marvel universe. But the crowing been hit by illegal logging. Protests against fast.At one in Johannesburg, customers roosters give it an air ofauthenticity. charcoal traders broke out earlier this year, after rivers that usually flow throughout the dry season started to run dry. In late February a trader’s car was reportedly burned in Mwingi, in central Kenya, by a group ofyoungsters who demanded to see the trader’s permits. At the end ofFebruary the governmentannounced an emergency 90-day ban on all logging, driving up retail prices of charcoal by 500%, to as much as 5,000 shillings a bag in some cities. The problems caused by the charcoal trade have spread beyond Kenya. In south- ern Somalia, al-Shabab, a jihadist group, funds itself partly through the taxes it lev- ies on the sale ofcharcoal (sometimes with the help of Kenyan soldiers, who take bribes for allowing the shipments out of a Somali port that Kenya controls). The log- Kwezi doesn’t need vibranium ging also adds to desertification, which, in turn, causes conflict across the Sahel, an arid belt below the Sahara. It forces no- so destructive. In Kenya the burners are Mr Naikada does not think the prohibition madic herders to range farther south with meant to get a licence. To do so, they have will change much. In 2015, after environ- their animals, where they often clash with to show they are replacing the trees they mentalists kicked up a fuss in the Kenyan farmers over the most fertile land. are cutting down and that they are using press about the loss of Nyakweri, a KFS In the power vacuum of the eastern modern kilns that convert the trees effi- camp was set up to protect the forest from Democratic Republic of Congo, rampant ciently into fuel. But, admits Clement Ngo- loggers. A helicopter buzzed over the trees, charcoal logging has destroyed huge riareng, an official at the Kenya Forest Ser- putting out fires. Yet by the end of 2016, swathes of Virunga National Park. That vice (KFS), the rules are laxly enforced. afterthe forestservice’sbudgetwascut, the threatens the rare gorillas which tourists Some suspect that powerful politicians camp had closed. As the dry season gives currently pay as much as $400 a day to stymie efforts to police burners. way to rains, protests will die down and view, even as it fuels the conflict. In Nyakweri forest, trade has slowed the new ban will probably be lifted. And In theory, charcoal burning need not be since logging was banned in February. But then the logging will start again. 7 Asia The Economist March 31st 2018 53

Also in this section 54 Pakistan’s meddling judges 55 Bollywood upsets Nepal 55 A tainted paradise in the Philippines 56 India’s woeful armed forces

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

China and North Korea rea for talks—taken as further evidence of Chinese engagement. More conviviality than clarity Seen from the North Korean perspec- tive, Mr Kim’s visit looks like an attempt to reassure himself that his country’s most important ally and main financial backer remains behind him as he begins a risky BEIJING AND SEOUL period ofdiplomacy. In late April Mr Kim is due to hold a summit meeting with South Kim Jong Un’s visit to Beijing clears up some questions and raises others Korea’s president, Moon Jae-in, to be fol- N MARCH 28th a sandstorm descend- a warningthat “no country can afford to re- lowed by the one with Mr Trump, proba- Oed on Beijing like a chemical-weap- treat into self-isolation”—widely seen as a bly in May. In Beijing he confirmed that ons attack, sending pollution-monitoring digat MrKim. When the Chinese president both meetings would take place. The trip equipmentoffthe chartsand reducing visi- sent a special envoy to North Korea, Mr came days before North and South Korean bility to a few metres. The same day the Kim refused to meet him. But straining officials were scheduled to make final Chinese government announced that Kim doesnotmean breaking. Thistime the tone preparations for the summit with Mr Jong Un, North Korea’s leader, had met his of Mr Xi’s speech of welcome was emol- Moon. Mr Kim cannot afford to be wran- Chinese opposite number, Xi Jinping, in lient. Xinhua, China’s news agency, gling with China just now. Beijing, sending diplomatic speculation quoted him saying“we speakhighlyofthis His comments in Beijing on the denu- off the charts and leaving the prospects for visit” and referring to “the major efforts clearisation of the Korean peninsula also talks about North Korea’s nuclear weap- that North Korea has made” towards im- raised hopes that he may be moderating ons as hard to discern as ever. proving the situation on the Korean penin- his stance somewhat. Xinhua quoted him Mr Kim’s visit was shrouded in secrecy sula. In communist diplomacy, it seems, saying that, if South Korea and America re- from the moment an armoured train, simi- old habits die hard. sponded to his efforts “in good faith” and lar to the one his father and grandfather built a “peaceful and stable atmosphere”, used for foreign trips, pulled into Beijing Back on track then the issue ofdenuclearisation could be station, unannounced. The mystery con- ForMrXi, the visit may come as something resolved. He told Mr Xi he is still commit- tinued throughout his two-day stay, Mr of a relief. The Chinese were alarmed in ted to achieving that goal. Kim’s first meeting with any head of state early March when Mr Kim offered to meet But his language does not differ much and his first known foreign trip since he Donald Trump for direct talks, and the from the North’s previous public com- took power in 2011. The visit was not even American president accepted. They feared ments. To North Korea, building a “peace- confirmed to have taken place until he had being shut out of negotiations and being ful and stable atmosphere” means the returned to Pyongyang. But ifit added new left to face Mr Trump’s threats of a trade withdrawal of American troops from the puzzles to the geopolitics of North-East warwithoutanythingto offeron North Ko- peninsula and the end of America’s mili- Asia, it also made a few things clearer. rea. Optimists in Beijing now hope that, in tary alliance with South Korea and Japan, The trip affirms China’s central role in the wake of Mr Kim’s visit, Mr Xi may be which are all non-starters. Nevertheless, keeping the peace in the region after a flur- able to limit some of the risks of the forth- the Trump administration cited Mr Kim’s ry ofdiplomatic activity had shifted the fo- coming summit with Mr Trump. The hope visit to Beijing as further evidence that cus to South Korea and the United States. is that, iftalks go awry (which seems all too America’s campaign of maximum pres- Relations between China and what it used possible), China is more likely to step in to sure was “creating the appropriate atmo- to refer to as its “little brother” have been help. Just after the summit, China an- sphere fordialogue with North Korea”. The severely strained by Mr Kim’s nuclear- nounced that one of its top foreign-policy sandstorm that blanketed Beijing seems a weapons programme. Last year Mr Xi gave officials, Yang Jiechi, would visit South Ko- suitable image for that atmosphere. 7 54 Asia The Economist March 31st 2018

Pakistan’s judiciary who bring money home from abroad, the chief justice has formed a commission to Justice on the loose investigate how to seize the assets. “He’s filling the role of the opposition,” sighs Ju- naid Jahangir, a barrister. Indeed, the actu- al opposition, in the form of Pakistan Teh- reek-e-Insaf (PTI), a party led by Imran Lahore Khan, a former cricketer, often plays sec- ond fiddle to the courts, applauding the The top court is eagerto take on any brief, except curbing the army chiefjustice’s rulings. HE chief justice of Pakistan, Saqib Ni- ceeds his brief, Mr Nisar points to the dire Yet even opposition politicians ought to Tsar, peers through a pair of gold- state ofmany public services. “Call me any be wary of the Supreme Court’s hubris. rimmed spectacles at the ingredients list time I am crossinga line,” he told a journal- The court is cramping the space fordemoc- on a packet of powdered milk, shakes his ist, “but why should not the ordinary peo- racy, argues Babar Sattar, a lawyer and col- head in sadnessand then shoos20 lawyers ple ofRawalpindi have clean water?” umnist. In disqualifying Nawaz Sharif, the for the industry away from the bench. He former leader of the PML-N, as prime min- has a busy schedule. Consumed in recent Filling orcreating a vacuum? ister for failing to live up to the injunction months by a mission to deliver “clean air, Unfortunately, it is not clear that the chief in Article 62 of the constitution that politi- clean water and pure milk” to Pakistan, the justice can get the water purified single- cians be “honest” and “righteous”, it set a 64-year-old is spending a Saturday hearing handed. Worse, in the run-up to a general potentiallysweepingprecedent. On March 16 cases that he has taken up suo motu,or election due to be held this summer, Mr Ni- 2nd Mr Nisar doubled down. He annulled on his own initiative. Crowds throng the sar’s actions distort national politics. His a law that allowed MPs removed from of- courthouse in Lahore, the capital of the impromptu visits to hospitals prompt cov- fice in this way to run parties (a measure state ofPunjab, drawn by the spectacle ofa erage harmful to the Pakistan Muslim the PML-N had passed on Mr Sharif’s be- judge dispensing verdicts like a king. The League-Nawaz (PML-N), the ruling party. half), on the feeblest of grounds. “Faithful powder, he rules, must be relabelled post- Most of his complaints focus on Punjab, adherence to Article 62,” Mr Nisar writes, haste. After milk, he turns to the owners of the party’s stronghold. He has threatened “provides a recipe for cleansing the foun- a factory allegedly dumping effluent into a to “shut down” the Orange Line, the first tainheads of the State from persons who river. An elderly villager in a white turban phase of Lahore’s new metro system, ifthe sufferfrom character flaws.” breaks forward, begging the justice to pun- government does not improve health and Such talk is music to the army’s ears. It ish them. “I cannot let my children be poi- education. Other decisions clash with the was under its aegis that Article 62 was soned,” thunders Mr Nisar (pictured). PML-N’s policies. Whereas the govern- slipped into the constitution in 1973, to con- Mr Nisar is not Pakistan’s first celebrity ment promises a tax amnesty for citizens trol civilian politicians. Leaders of the judge. In 2008 IftikharChaudhryhelped to PML-N often imply that the judiciary is a oust General Pervez Musharraf, a military tool of the army. At any rate, the two insti- dictator, overturning the Supreme Court’s tutions offerone another undisguised sup- previously pliant reputation, which it had port. Unlike Mr Chaudhry, Mr Nisar has gained by rubber-stamping a series of avoided topics the army would rather not coups. The successful exercise of his au- discuss, such as unexplained disappear- thority went to Mr Chaudhry’s head, how- ances of those who annoy the top brass. ever. He began to interfere in all manner of This month Qamar Javed Bajwa, the chief areas typically seen as beyond the court’s ofarmystaff, warned thatthe armed forces remit, such as fixing the price of sugar. All would stand behind the judiciary in any four of his successors (until Mr Nisar) were dispute with parliament. more circumspect, stung in particular by Although the PML-N is now casting it- the potential $12.5bn bill left by Mr Chaud- selfas the persecuted champion ofdemoc- hry’senergeticvoidingofgovernmentcon- racy, the party did little to burnish it before tracts with foreign firms. Mr Sharif’s ousting. In four years as prime Most lawyers blanch at the judiciary’s minister, MrSharifappeared in the Nation- return to the headlines. Mr Nisar has al Assembly just six times. Politicians have launched around 30 suo motu cases since ceded more and more ground to the courts, the beginning ofthe year. In one, he was so pointsoutAsad Rahim Khan, a lawyer. Par- moved by the plight of a medical student tiesnowregularlyfile legal petitions aimed unable to pay his $3,000 school fees, he atdisqualifyingtheirrivals, instead ofleav- said the Supreme Court would pay in- ing voters to adjudicate their disputes. The stead. He has also delved into such press- army also has no shortage of supporters in ing matters as the quality of chicken feed politics, despite its blatant refusal to sub- (he launched a commission on standards), mit to civilian control. even as the judiciary groans under a back- This two-pronged attack on democracy log of3m pending cases. is only likely to get worse. A corruption The Supreme Court is obliged to act be- trial may soon put Mr Sharif behind bars, cause ofthe indolence ofthe executive, say hamstringing the chief foe of both institu- the judge’s supporters. His assault on tions. After this summer’s election the dodgy private medical colleges could limit more pliable Pakistan Peoples Party and the growing number of doctors unsure of the PTI might be able to form a coalition to where to find the appendix. Bank employ- remove the PML-N from office. Whoever ees have the chief justice to thank for rais- wins, one thing appears certain: they will ing their paltry pension, from $13 to $70 a have a boot on their neck and a gavel month.Inresponsetothechargethatheex- Judge, benefactor, milkman poised to strike them over the head. 7 The Economist March 31st 2018 Asia 55

Nepal and India A prickly pair

KATHMANDU A Bollywood muscleman retreats in the face ofNepalese nationalism RIGHT lights, a booming soundtrack B and 100 back-up dancers set the stage for the “Da-Bangg Tour”. The main attrac- tion, a heavily built 52-year-old man dressed in spangly clothes, gyrates and lip- syncs just as in his Hindi blockbusters. Who wouldn’t wish to see India’s Salman Khan, tough guy of the Dabangg (“Fear- less”) film franchise, bring his song-and- Tourism in the Philippines dance routine to Nepal? A tiny faction of Maoists, it turns out. Da-Bangg’s local promoter postponed the A palm-fringed cesspool show because of a warning against “Indi- BORACAY an cultural interventions” issued by the Even paradise has its flaws Communist Party of Nepal (Maoist), or CPN(M). Those parentheses matter. In 2014 TANDwhere the warm sea laps the told his environment secretary,Roy this group splintered from the CPN-M, Sgleaming white sand ofthe 4km-long Cimatu, “I’ll give you six months. Clean which has a hyphen; both descend from beach on the resort island ofBoracay and the goddamn thing.” the CPN (Maoist Centre), now a partner in whip out your selfie stick. Youcan cap- Boracay’s beach has earned the island Nepal’s coalition government. ture an image ofyourselfagainst the world renown. Over 2m tourists visited Thousands of Nepalis had paid be- impossibly beautiful backdrop ofan in 2017, spending 56bn pesos ($1.1bn). Yet tween 2,000 and 10,000 rupees ($19-96) for orange sun dropping from a pinksky into businesses here seem reluctant to invest tickets to see Mr Khan prance on March a deep blue sea. Or you could, ifthe in disposing oftheir sewage in the way 10th. A new date has been promised for parasailors and banana-boat riders required by law.Mr Cimatu’s inspectors mid-April, but frustrated fans are still wait- would only get out ofthe way.And then found that only 383 ofthe 578 places they ing. Others could not resist mocking the there is the local feature that your camera had checked by late February were con- less-than-dabangg leading man in retreat. cannot capture: the peculiar whiffwaft- nected to the sewage system and that, Kedar Ghimire, a celebrated comedian, ing up from the water at your feet. anyway,the system needed repairs. was not jokingwhen he tweeted that mon- “Boracay is a cesspool,” President The legend among backpackers is that ey would be better spent on local talent. Rodrigo Duterte declared, with custom- two Swiss discovered Boracay in the age Resentment at India’s shadowhas dark- ary frankness, in a speech last month. ofthe Hippie Trail. The ensuing trickle of ened since a blockade of the landlocked “Yougo into the water, it’s smelly.Smells escapees from suburbia were delighted country’s border in 2015. Independent In- ofwhat? Shit.” Lookdown, and your toes to have to wade straight onto the beach dia, like the British Raj before it, has a long curl up in the green algae washed ashore from an outrigger boat, dine on the bar- history of meddling in Nepalese affairs, of- from the shallows where it grows, fed by becued catch oflocal fishermen and ten to constrain the farleft. No wonder Ne- sewage that seeps untreated into the sea sleep in thatched huts. These days plane- pal’s Communists seize on insults to their from the resorts and ancillary businesses loads ofvisitors step ashore on a concrete country’s sovereignty. (This week they that cram the island. Lookup, and you jetty,from which motor-tricycles whisk scolded the EU for finding fault with its see the start ofthe evening parade of them to concrete hotels complete with air electoral system; “Nepal,” the prime minis- tourists up and down the beach-front. conditioning, cable and Wi-Fi. ter reminded them sternly, “is sovereign.”) They are Chinese or Koreans, mostly,a By threatening to close this flawed Last year it joined the Belt and Road Initia- horde in search ofthe perfect place to paradise, the president is perhaps just tive, a big infrastructure scheme champi- drink, eat and be merry after a day offun trying to scare resort-owners into spend- oned by its only otherneighbour, China. In in the water. They appear unperturbed. ing some money to preserve their main Februarythe prime ministerwelcomed his Resort-owners, in contrast, are asset, the beach. But as his bloody cam- counterpart from Pakistan, India’s impla- alarmed. “I will close Boracay,”the presi- paign against drug-dealers proves, not all cable rival, before makinghisfirsttrip to In- dent has threatened. He claims to have Mr Duterte’s threats are hollow. dia since taking office. Yet there is no comparing China’s influ- ence with India’s. Across the dusty parade There have been at least eight such fu- both eastand west—isan exercise in narcis- ground awaiting Da-Bangg in Kathmandu, rores, mainly based on nonsense. In 2009 sism. Then again, in their tireless vigil the China Town Centre mall bears a a movie was banned because one charac- against “cultural interventions”, Nepalese plaque commending the Sinohydro group ter in it described the Buddha as Indian. have good companyin India. Ayearago In- that built it. Inside, however, the cinema Years later, stickers on taxis remind visitors dia’s foreign minister asked Amazon to screens only Indian and Nepalese films. that “Buddha Was Born in Nepal”, albeit stop selling doormats printed with India’s The love affair with Bollywood has been nearthe borderwith India, and longbefore flag and flip-flops bearing the image of fraught: in 2000 unfounded rumours either country existed. Gandhi. And Indian Standard Time itself is about another star’s disregard for Nepal Nepal’s time zone—15 minutes ahead of an unusual five-and-a-half hours ahead of sparked deadly riots. Indian Standard Time, which it borders on Greenwich Mean Time. 7 56 Asia The Economist March 31st 2018

India’s armed forces dramatically: for the navy this dropped from 13% in 2014 to below 8% last year; for Paper elephant the air force from nearly 18% a decade ago to below 12% in 2017. A sharp pay rise means that personnel costs will eat up 63% ofthe army’s budget this year. If pensions are included, some three- Delhi quarters of the overall defence budget will be consumed by salaries and benefits, India spends a fortuneon defence but wastes much ofit leaving scant funding for procurement, let NFEBRUARYIndia quietlypassed a mile- alone such luxuries as research and devel- Istone. The release of its annual budget Outgunned opment. Small wonder that foreign invest- showed that defence spending, at $62bn, Military spending ment in the defence industry, touted as a has swept past that of its former colonial As % of GDP $bn centrepiece of the government’s Make In master, Britain. Only America, China, Sau- India campaign to boost domestic manu- 3.5 250 di Arabia and Russia lavish more on their India facturing, amounted to less than $200,000 3.0 FDI soldiers. For nearly a decade India has also 200 from 2014 to 2017, out ofsome $60bn of been the world’s top importer of arms. In 2.5 China in 2017 alone. terms of active manpower and the num- 2.0 150 There are also doubts about how In- ber of ships and planes, its armed forces China dia’s men and women in uniform are be- 1.5 100 are already among the world’s top five. 1.0 India ing used. Despite increasing pressure on Measured by ambition, India may rank 50 Pakistan, forinstance, the number of cross- higher still. Its military doctrine envisages 0.5 border violations counted by India has fighting simultaneous land wars against 0 0 gone up dramatically, from 152 in 2015 to 1990 2000 10 16 1990 2000 10 16 Pakistan and China while retaining domi- 860 last year, with a consequent rise in ca- Source: Stockholm International Peace Research Institute nance in the Indian Ocean. Having re- sualties on both sides and no movement vealed its nuclear hand in 1998 with a se- towardsresolvingdisputes. The number of ries of tests, India has developed its own gur well,” said the army’s report. intrusions from China also rose from 273 in ground-hugging cruise missiles and is try- In its own commentary the committee 2016 to 426 last year. India’s refusal last ing to perfect submarine-launched inter- noted, by way of example, that despite its summer to permit Chinese road-building continental ones, too. Since the Hindu having repeatedly raised the matter for a in a patch of disputed Bhutanese territory nationalist party ofthe prime minister, Na- decade, the army had still failedto provide showed strong nerves, yet what became rendra Modi, tookpower in 2014 it has also soldiers with adequate body armour. The known asthe Doklam incidenthasnotpre- adopted a more muscular posture. Last other services are no better: antiquated vented China from massively reinforcing summer it sparred with China atop the Hi- MiG-21 fighter jets still patrol the skies and its position in the area. malayas in the tensest stand-off in de- the navy’s shipbuilding programme is a Brahma Chellaney, a hawkish Indian cades. It has also responded to cross-bor- decade behind schedule. security expert, noted in an acerbic com- der raids by militant groups from Pakistan Despite Mr Modi’s chest-thumping, the mentary that Doklam “illustrates that not with counterinsurgency tactics and defence budget has actually shrunk over while India may be content with a tactical diplomatic ire, but with fierce artillery the pastdecade asa proportion ofGDP and win, China has the perseverance and guile strikes against Pakistani forces. is far below China’s in dollar terms (see to win atthe strategiclevel.” The struggle to Yet a growing chorus of Indian officers, chart). More tellingly still, the share ofit de- counter Chinese political and economic civilian officials and defence analysts ap- voted to capital expenditure has slipped encroachment even in zones where Indian pears less than impressed by all this seem- influence has seldom been challenged, ing toughness. In mid-March their long- such as Nepal and the Maldives, also sug- muted criticism burst into the open. Sum- gests difficulties in projecting influence. moned before a parliamentary committee Some of the weakness may be due not on defence, India’s service chiefs revealed to the size of India’s forces, but to their not only dire shortfalls in equipment and shape. Despite numerous expert reports, investment, but mounting frustration with internal military recommendations and a pettifogging civilian defence bureauc- committee findings calling for integrating racy and the government’s penny-pinch- both India’s central and regional com- ing ways. Subsequent public debate has mands, its army, navy and air force have gone further, questioning not only poor re- maintained rigidly independent struc- source allocation but also the armed tures. Whereas China recently streamlined forces’ own failure to reform, restructure or its operational forces into five broad re- revise doctrine. gional commands, India maintains17 sepa- Judging from the three services’ own rate single-service local commands. testimony, the airing of such grievances is Meanwhile the defence ministry, long overdue. MPs were told that some which calls the shots on such vital ques- 68% of the army’s equipment, much of tions as procurement and promotions, is which was first supplied by the Soviet Un- staffed with career bureaucrats and politi- ion, such as BMP-2 personnel carriers and cal appointees who lacknot only technical Shilka anti-aircraft guns, may be described knowledge but also, grumble ex-service- as “vintage”. Only 8% could be considered men, much sympathy for people in uni- state-of-the-art. “Tobe prepared for...a two- form. Mao Zedong, who foolishly derided front war, the huge deficiencies and obso- America as a “paper tiger”, might have ap- lescence of weapons, stores and ammuni- plied similar words to the southern adver- tion existing in the Indian army do not au- Not as scary as it looks sary his country faces today. 7 China The Economist March 31st 2018 57

Pursuing fugitives abroad Also in this section Forbidding kingdom 58 Repatriating Uighurs 59 Banyan: Xi Jinping, Chairman of Everything

BEIJING The first oftwo articles about the long arm ofChinese law-enforcement looks at efforts to repatriate suspected criminals AST year’s big blockbuster in China, ered about 9.6bn yuan ($1.5bn). Still, nearly harassment. In an interview in 2014 a L“WolfWarrior2”, assured citizens not to 1,000 remain on the run, according to the member of Shanghai’s Public Security Bu- fear running into trouble abroad: “Remem- Central Commission forDiscipline Inspec- reau said that “a fugitive is like a flying kite: ber, the strength of China always has your tion, China’s anti-graft watchdog. even though he is abroad, the string is in back!” That is doubtless a comfort to patri- The problem is that only 36 countries China.” Some exiles are told that their ots. But for those who seek to escape the have ratified extradition treaties with Chi- adult relatives will lose their jobs and that government’sclutches, itsgrowingwilling- na. France, Italy, Spain and South Korea are their children will be kicked out of school ness to project its authority beyond its bor- among them, but few other rich democra- if they do not return. Police pressed Guo ders is a source of alarm. In pursuit of fugi- cies. It is easy for Chinese suspects seeking Xin, one of China’s 100 most-wanted offi- tives, the Chinese authorities are refuge abroad to argue that they will not cials, to return from America bypreventing increasingly willing to challenge the sover- get a fair trial if returned home, since the herelderlymotherand hersisterfrom leav- eignty of foreign governments and to seek government does not believe that courts ing China, and barring a brother living in the help ofinternational agencies, even on should be independent. Last year the Canada from entering the country, among spurious grounds. country’s top judge denounced the very other restrictions. In the end she gave in Fugitives from China used to be mainly idea as a “false Western ideal”. What is and went home. dissidents. The government was happy to more, China has thousands of political In countries with closer ties to China, have them out of the country, assuming prisoners. Torture is endemic. agents have occasionally dispensed with they could do less harm there. But since Xi such pressures in favour of more resolute Jinpingcame to office in 2012 and launched The hard way action. Wang Dan, a leader of the Tianan- a sweeping campaign against corruption, These failings have forced the Chinese au- men Square protests of 1989, says that he another type of fugitive has increased in thorities to resort to less-straightforward and other exiled dissidents have long number: those wanted for graft. Though methods to bringsuspects home. Typically, avoided Cambodia, Thailand and other they do not preach democracy, they pose a they send agents, often travelling unoffi- countries seen as friendly to China for fear greater threat to the regime. Most are offi- cially, to press exiles to return. The tactics of being detained by Chinese agents. The cials or well-connected business folk, in- involved are similar to ones used at home case of Gui Minhai, a Swede who had re- siders familiar with the workings of gov- to induce people to do the Communist nounced his Chinese citizenship, suggests ernment. And in the internet age it is far Party’s bidding. Many are subjected to per- they are right to do so. He was kidnapped easier for exiles to maintain ties with peo- sistent surveillance, intimidation and even by Chinese officials in Thailand in 2015 and ple backhome. violence. Occasionally, Chinese agents at- taken to the mainland. In a seemingly So China has changed its stance, and tempt to kidnap suspects abroad and bring forced confession broadcast on Chinese started to hunt fugitives down. It has man- them home by force. television, he admitted to a driving offence aged to repatriate nearly 4,000 suspects Ifrunawayshave familyin China, those over a decade earlier. from some 90 countries. It has also recov- left behind are often subject to threats and Many countries, naturally, are upset 1 58 China The Economist March 31st 2018

2 about covert actions by Chinese opera- mer in which he had threatened to expose both to escape thisrepression and for more tives on their soil. In 2015 the New York the misdeeds of the ruling elite that China mundane reasons. A small number have Times reported that the American authori- asked Interpol to help secure his arrest. become radicalised, and have launched ties had complained to the Chinese gov- When America refused to send him home, terrorist attacks in Xinjiang and elsewhere. ernment about agents working illegally in the Chinese government requested a sec- But in addition to hunting for fugitive ex- America, often entering the country on ond red notice, accusing Mr Kwokofrape. tremists, China is also trying to prevent a tourist or trade visas. Other foreign dip- China’s covert extraterritorial activity big Uighur diaspora forming that could fo- lomats note that officials from China’s suggests that foreign governments are right ment support for Uighurs in China, much Ministry of Public Security sometimes tra- to be cautious about deepening ties in law- as Tibetan exiles campaign to free their vel as delegates of trade and tourism mis- enforcement. If nothing else, the fate of homeland. sions from individual provinces. Chinese those who do return provides grounds for According to human-rights groups hun- police were caught in Australia in 2015 pur- concern. Although few would shed any dreds of Uighurs have been forced back to suing a tour-bus driver accused of bribery. tears for corrupt tycoons or crooked offi- China in the past decade from Egypt, Thai- Though France has an extradition treaty cials, the chances of any of them getting a land, Vietnam and elsewhere. Far more with China, French officials found out genuine opportunity to prove their inno- have been detained and interrogated by about the repatriation of Zheng Ning, a cence are all but zero. Nearly half of the re- Chinese agents on foreign soil. Several businessman seeking refuge there, only patriated officials who were subject to red hundred languish in foreign jails. The actu- when China’s own anti-graft website put a notices have been sentenced to life in pri- al number of returnees may be far higher, notice up saying police had successfully son; the other half have not yet been tried. says Yun Sun of the Stimson Centre, an “persuaded” him to return to China. The Chinese courts have an astonishingly high American think-tank. Along China’s French authorities had not received a re- conviction rate. In 2016, the latest year for south-western borders and across Central quest forhis extradition. which figures are available, it was 99.9%. 7 Asia the Chinese government often re- This pattern is especially disturbing cruits locals on both sides to report the ar- since the anti-corruption campaign is rival of “suspicious” individuals. It fre- sometimes used as an excuse to pursue Repatriating Uighurs quently succeeds in getting them sent back people for actions that would not be con- without ever going through any official le- sidered crimes in the countries where they Nowheretohide gal process. have taken refuge—including political dis- Returnees are often sent to “re-educa- sent. It beggars belief that the Chinese au- tion camps” in Xinjiang. Detention of Ui- thorities would have worked so hard to ghurs within China has gathered pace and capture Mr Gui, the kidnapped Swede, just up to 120,000 may be being held in such to answer for a driving offence. His real centres, accordingto rights groups. Uighurs The government is trying to prevent the crime was to have published salacious in Xinjiang who maintain ties with rela- formation ofa vocal Uighurdiaspora books in Hong Kong about the Chinese tives abroad are sometimes put under sur- leadership. By the same token, last year the HEN the authorities manage to lure veillance or even locked up. Chinese embassy in Bangkok reportedly Wor drag home a fugitive accused of Only a handful of those detained are asked the Thai government to detain the corruption, they crow.But they are quieter violent extremists. The Chinese govern- wife of a civil-rights lawyer after she es- about their equally successful campaign to ment says some 300 Uighurs are fighting caped over China’s south-western border. repatriate Uighurs, a mostly Muslim ethnic with jihadists in Iraq and Syria. Four Chi- Her only known offence was to have mar- group from Xinjiang, in China’s far west. nese Uighurs with suspected links to Is- ried a man who had the cheek to defend Many Uighurs chafe at the growing pres- lamic State were convicted in Indonesia in Chinese citizens against the state. ence of Han Chinese in their region, and at 2015 of conspiring with Indonesian mili- Increasingly,ChinaistryingtouseInter- increasing restrictions on their personal tants. More have since been arrested. Two pol, an international body forpolice co-op- andreligiousfreedom.Sometravelabroad, Uighurs travelling on fake Turkish pass- eration, to give its cross-border forays a ve- ports were among those accused of bomb- neer of respectability. Interpol has no ing a shrine in Thailand the same year. power to order countries to arrest individ- But the charges against most Uighurs uals, but many democratic states frequent- abroad are woollier. Last year Egypt’s gov- ly respond to the agency’s “red notices” re- ernment reportedly detained more than questing a detention as a precursor to 200 Uighurs. Chinese security officials extradition. In 2015 China’s government said they were terrorists, but many say asked Interpol to issue red notices for 100 their only crime was to study Islam. Chi- of its most-wanted officials. To date, the na’s government may see that as threaten- government says half of those on the list ing enough. In Xinjiang many everyday have returned, one way or another. Small Muslim practices have been criminalised, wonder that Xi Jinping, China’s president, including wearing long beards and giving has said he wants the agency to “play an children certain religious names. even more important role in global securi- The Uighur diaspora is thought to num- ty governance”. ber 1m-1.6m, the vast majority of them in Since 2016 Interpol has been headed by Central Asia, according to the World Meng Hongwei, who is also China’s vice- Uyghur Congress, an activist group. That is minister ofpublic security. That year alone much bigger than the Tibetan equivalent. China issued 612 red notices. The worry is Yet without a figurehead comparable to that China may have misrepresented its the Dalai Lama, a Tibetan Buddhist leader reasons for seeking arrests abroad. Miles and a Nobel prizewinner, Uighurs have Kwok, also known as Guo Wengui, a busi- struggled to raise international awareness nessman who fled China in 2015, stands ac- of their plight. The Chinese authorities cused of bribery. But it was only when he seem determined to keep it that way, even was poised to give an interview last sum- Just what China does not want ifit means bringing them home. 7 The Economist March 31st 2018 China 59 Banyan Chairman of Everything

The way Xi Jinping has accumulated powermakes it hard to use This overhaul, referred to by the wishy-washy slogan “Beauti- ful China” involves tougher trade-offs than the flat-out dash for growth of the past. How much growth do you sacrifice to protect the environment? Should subsidies go to the backward west of the country or to upgrade industry in the more prosperous east? The agenda will also be hard to fulfil. Not least, a decentralised bureaucracy is accustomed to pursuing breaknecklocal growth— and damn the consequences. Mr Xi seems to understand the challenges. A big push is under way to streamline and centralise the bureaucracy, separating policymaking from its execution. At the annual gathering of the NPC in March, a new team of ministers and advisers was un- veiled thatstressed technocraticcompetence. (Itmaybe one-man rule, but Mr Xi needs good underlings.) In the provinces the re- ward structure for officials is being reconfigured. You really can get ahead on your environmental record. There is a snag with much of this, however. At their heart, Mr Xi’smovesaim to restore the CommunistPartyto a centrality that it has not enjoyed for years. He is doing that by seizing the state’s policy machinery for the party. That undoes administrative changes made two decades ago by the reformist prime minister UCH has been made ofXi Jinping’s consolidation ofpower, of the time, Zhu Rongji, intended precisely to separate party and Mwhich began long before the National People’s Congress state, professionalise government and spur market-led change. (NPC) agreed in March to abolish term limits on the presidency. Minxin Pei of Claremont McKenna College in America says During his ascent, Mr Xi has displayed ruthless skill. The anti- millions of lower-level officials resent the new orthodoxy. They graft campaign he launched in 2013 is what Kevin Rudd, a former hate the compulsory ideological indoctrination under Mr Xi that Australian prime minister, calls a “masterclass in political war- recalls the era of Mao. The unchecked powers of the anti-corrup- fare”. In addition to reducing theft, Mr Xi used it to remove poten- tion campaign strike fear. And the centralisation of authority tial rivals, install loyalists and cement his own power at the top. A makes it hard for the party’s entrenched system of patronage to new super-agency, the National Supervisory Commission, will operate. Paralysis is one plausible outcome, Mr Pei contends. But take the campaign outside the Communist Party to educational Mr Xi can hardly backdown now. institutions, hospitals, village governments and more. Far more This suggests broader worries about the momentum of re- than any previous member of China’s supposedly collective forms, argues Mr Rudd, now the head of the Asia Society Policy leadership, Mr Xi personally heads a score of top-level commit- Institute in New York. Five years ago China launched an ambi- tees and commissions. In mid-March Xi Jinping Thought was in- tious blueprint to move from low-wage manufacturing and pref- corporated into the constitution. The Chairman ofEverything, as erential financing for state enterprises to a model based on do- anotherAustralian, Geremie Barmé, callshim, looksbent on stay- mestic consumption, services and a more vibrant private sector. ing in power throughout the 2020s—and perhaps forlife. Yet progress has been marginal, in part because of Mr Xi’s obses- Thatmuch hasnowsunkin in the West, which had notwholly sion with party control, which hampers and intimidates admin- grasped Mr Xi’s—and China’s—direction of travel. The question, istrators. The NPC has just promised to re-emphasise the market. as he enters his second term, is what he intends to use his power MrXi’s policy speech in early April at the annual Bo’ao gathering, for. Mr Xi is no banana-republic dictator. He still holds the Com- China’s Davos, will give a powerful clue about whether his inner munist Party, and not himself, as both pinnacle and embodiment control-freakwill leave any slackin the system for reformists. of authority in China. Mr Xi, whose father was a fellow revolu- tionary with Mao Zedong, longs for a party driven by purity and Peakpower zeal, as it supposedly was in the 1950s (along with a bent for Once you accrue power, says Mr Pei, you have to show what you bloody purges). He has warned that cynicism and corruption in- can do with it. It is, in other words, delivery time. Mr Xi will not side the party threaten not only the country’s economic transfor- only be judged on domestic challenges, including today’s loyal- mation, but the party’s very survival. To save the party is to save ists jockeying for position in a post-Xi era. Three external uncer- China. Mr Xi’s historic mission, therefore, is to safeguard the tainties are mounting, each of which will also test Mr Xi’s leader- party’s monopoly. ship. The first is handling the summitry around North Korea, At the party’s five-yearly congress in October, he declared that whose leader, Kim Jong Un, paid a visit to Mr Xi in Beijing this the “principal contradiction” facing Chinese society was no lon- week (see Asia section). The second is America’s increasingly ag- ger getting enough food on the table. It was, rather, aspiring to a gressive demands on trade, which are a terrible backdrop for do- better quality of life in the face of untrammelled development. mestic reforms and threaten to back China into a corner. A third One-party rule will survive the growth of a vast middle class, Mr and growingworry forMrXi is America’s new Taiwan Travel Act. Xi seems to be saying, only ifit can provide what the middle class It encourages high-level exchanges with Taiwan, to which China wants: better schools, cleaner air, good health care. To do that re- could feel bound to respond forcefully. Missteps risk being mag- quires a fundamental shiftin the state and party—and only MrXi, nified. And that is the downside of being the Chairman of Every- with all his extra powers, can force through such a change. thing: you will get blamed foreverything that goes wrong. 7 60 International The Economist March 31st 2018

The Iran nuclear deal to an ultimatum and perhaps even to war. After his appointment, Mr Bolton said A kettle of hawks that opinions previously stated “in priv- ate” (an odd way to describe newspaper articles) were now “behind” him. Playing down his image as a warmonger, sources claim that in his new role he sees himself as an honest broker between agencies. The deal that curtails Iran’s nuclearambitions seems doomed. That is bad forthe They cite Brent Scowcroft, a respected na- Middle East, forEurope—and forAmerica tional security adviser under the senior VER since Donald Trump’s election, he Iran deal, Mr Bolton does at least have an George Bush, as a model. That seems far- Ehas had in his sights the “worst deal answer to the question “what next?” if it is fetched. Mr Bolton is both an ideologue ever”—the one reached in 2015 that sought jettisoned. A few months before the deal and a ferociously effective bureaucratic in- to circumscribe Iran’s nuclear ambitions. was signed in July 2015, Mr Bolton fighter, with a history of reshaping intelli- For a while the threat to the survival of the boomed: “The inconvenient truth is that gence reports to suit his own purposes. agreement looked more rhetorical than only military action…can accomplish Mr Bolton’s appointment alarms the real. No longer. On January 12th the presi- what is required.” Air strikes on Iran’s nuc- “E3” (Britain, France and Germany), which dent signed the waiverthat prevents the re- lear facilities, he argued, could set the pro- signed the Iran deal alongwith Russia, Chi- imposition ofnuclear-related sanctions on gramme backby “three to five years”. na and Iran itself. It casts an even darker Iran for a further 120 days. But, against the In an article this year Mr Bolton strucka cloud over their efforts to find a way of ap- advice of his national-security team at the less bellicose note, claiming that the reacti- peasing Mr Trump’s demands before hit- time, he warned that this would be the last vation of nuclear-related sanctions, plus ting the 120-day bufferon May12th. such waiver unless the European parties to some new ones, could bring the “seeming- the deal—Britain, France and Germany— ly impregnable authoritarian” Iranian re- Spirit measures worked with America to fix what he re- gime to its knees. America’s declared poli- The JCPOA is a highly technical 159-page gards as the fatal flaws in the agreement. cy, he argued, should be to end Iran’s document. But Mr Trump’s two main ob- The prospects forthe deal became even Islamic revolution before its 40th birthday jections are straightforward. The first is bleakeron March 13th, when MrTrump an- in 2019. But it is unlikely that sanctions, that, even if Iran is sticking to the letter of nounced the sacking of Rex Tillerson. His combined with unspecified “material” the deal, its actions often violate its spirit. replacement as secretary of state is Mike support for Iranian opposition groups, So it does not matter that over the past two Pompeo, a fierce critic of the agreement, could bring about regime change, and un- years inspectors from the International known more formally as the Joint Com- clear whether Mr Bolton really believes Atomic Energy Agency (IAEA) have filed 11 prehensive Plan of Action (JCPOA). The re- that they could. reports judging that Iran is keeping its placement of H.R. McMaster as national About North Korea, he is equally blunt. promises to curb its nuclear programme. security adviser nine days later by John In August Mr Bolton called talking to the The Iran deal was designed as a prag- Bolton almost certainly sounded its death hereditary Marxist dictatorship “worse matic arms-control agreement that cuts off knell. Mr Bolton was an abrasive Ameri- than a mere waste oftime”. IfChina would Iran’s route to a nuclear weapon for a per- can ambassador to the UN under George not agree to workwith America to disman- iod of time. But its opponents have always W. Bush. Despite a stint as under-secretary tle Kim Jong Un’s regime (an implausible wanted it to do far more. Some wish it forarms control and international security scenario), the only alternative was “to would also check Iran’s prolific meddling in the same administration, Mr Bolton ap- strike those [nuclear] capabilities pre-emp- across the Middle East. Iran backs Shia mi- pears never to have seen an arms-control tively”. In this view, if the proposed sum- litias in Syria and Iraq, stokes the war in Ye- agreement he liked. mit between Mr Trump and Mr Kim takes men and supports Hizbullah—a Lebanese Unlike other self-declared haters of the place, it may be no more than the prelude Shia militia that threatens Israel with thou-1 The Economist March 31st 2018 International 61

2 sands of missiles and occasionally fires sile (ICBM) capable of hitting America. An banks trading with Iran that will be ex- them. For the accord’s critics, Iran is a “bad ICBM, he points out, only makes sense if it posed to American secondary sanctions. actor” to be isolated, not engaged. carries a nuclear warhead, so testing one Some are optimistic that Iran will stick They also want a deal that curbs Iran’s should prompt broad economic sanctions. to the deal. But Iranian hardliners have al- ballistic-missile programme, which has Patricia Lewis of Chatham House, another ways opposed it and will argue, with some continued apace since 2015. Under UN res- London think-tank, believes that the Euro- justice, that their warnings of American olution 2231 that enshrines the nuclear peans may already be talking to the Irani- perfidy have been borne out. Ellie Geran- deal, Iran is “called upon” to refrain from ans about a future regional missile-deal mayeh of the European Council of Foreign work for up to eight years on ballistic mis- that would ban long- and intermediate- RelationssaysthatIran will see advantages siles for nuclear weapons. But it does not range nuclear missiles. in “winning the blame game” and will impose sanctions if Iran carries on regard- On inspections, Sir Simon believes that want to “delegitimise US sanctions” in the less. Congress has imposed new missile- the existing regime is more than adequate. eyes of China, Russia and most of Asia by related sanctions on Iran in the past year. But the E3 could reach clearer understand- stickingto itsobligations. The Iranians may The E3 have not, though they are reported ings with the Americans: about the in- also calculate that if they swiftly crank up to have sounded out EU support forthem. structions given to national intelligence their nuclear programme, they would give MrTrump’ssecond gripe is that even on agencies monitoring Iran’s nuclear pro- the White House and Israel cause to threat- its own terms, as an arms-control pact, the gramme; and about how they would joint- en military action and Saudi Arabia the ex- Iran deal falls short. It allows for unprece- ly deal with Iranian obfuscation ifa breach cuse to start enriching uranium. (Ironically, dented levels of inspection, but critics say were suspected. both the Saudis and the Israeli security es- that it still allows the Iranians to keep any- As for “sunsetting”, the E3 have made it tablishment, despite their public opposi- thing they classify as a military site off-lim- clear that the issue cannot be dealt with tion to the Iran deal, would these days its to inspectors. This is not strictly true—an quickly. Sir Simon reckons that there is, probably prefer it to survive.) admittedly slow and cumbersome proce- however, broad agreement it must be tack- dure allows access to such sites if evidence led. The trick will be to get the Iranians to Stuck in the middle with EU emerges oftheir being used nefariously. start thinking about what comes after the Mark Fitzpatrick of the International Insti- What most concerns the deal’s detrac- expiry of the constraints imposed by the tute for Strategic Studies hopes that Mr tors are the “sunset” provisions. These al- nuclear deal. It must be made clear to them Trump, having quit the deal, might cut the low key constraints on Iran’s nuclear pro- that continuing to reap the benefits of it Europeans some slack and not enforce sec- gramme to lapse over time. For example, will depend on maintaining a nuclear pro- ondary sanctions. Ms Geranmayeh agrees after eight years (ie, in 2023), limits on the gramme with entirely peaceful purposes. that is possible but thinks it more likely use of faster-spinning uranium-enrich- Installing thousands of new centrifuges that America’s Treasury would allow only ment centrifuges are relaxed; in 2028 Iran and building a huge uranium stockpile a grace period for existing deals, such as can ramp up the number of centrifuges it will not pass muster. those struckby Total and Shell, two energy employs; after 2030 constraints on Iran’s Mr Trump could claim on May12th that giants, and some “carve-outs” for other stockpile of enriched uranium disappear. his toughness had pushed the Europeans firms. She does not thinkthe European Un- However, the IAEA’s uniquely intrusive into tackling the flaws in the Iran deal and ion would achieve much by reinstating monitoring continues until 2040. that he would hold his fire. That has been “blocking regulations” to penalise Euro- The Europeans do not disagree with the E3’s hope. But with Mr Trump’s in- pean firms that comply with American these criticisms of the Iran deal. Nor are stincts fortified by Mr Pompeo and Mr Bol- sanctions. The firms may well fear being they more relaxed than the Trump admin- ton, it looks remote. AfterMay12th, the E3’s shut out of American markets more than istration about Iran’s regional troublemak- priorities will be to convince Iran to keep fines imposed by Brussels. One option, ing. Where they differ is in their belief that complying with the deal; to limit the harm says Sir Simon, is that EU member govern- blowing up the deal would make every- to the transatlantic relationship that will ments could extend non-dollar lines of thing its critics complain about even follow ifAmerica abandons it; and to try to credit and credit guarantees to European worse. That includes perhaps putting Iran buy some time for the European firms and companies that would face stiff penalties back on a path to developing nuclear forsticking to plans to do business in Iran. weapons and thus starting not just the war Europe will find itself in a horribly un- Iranian nuclear that Mr Bolton has long thirsted for, but facilities comfortable place. It will be further dis- also a helter-skelter ofproliferation in a vo- KAZAKH- tanced from its most important ally on a RUSSIA STAN Civilian latile region close to Europe. Military matter of principle. It will at the same time Caspian Working with a joint team from the Sea Uranium mines find itselfsharinga bed with traditional ad- State Department and the National Securi- AZER- versaries (Russia, China and also Iran). ty Council, the E3 have been desperately BAIJAN And it will face a new threat to its own se- trying to find a way for Mr Trump to claim TURKMENISTAN curity—Syria has shown that when bad enough of a win on May 12th to sign the things happen in the Middle East, Europe is sanctions waiver again. European dip- Bonab vulnerable as a target forterrorism and as a lomats had thought that they were making Tehran destination fordisplaced people. some progress on two crucial issues—bal- Fordow Parchin But America will suffer, too, if Mr listic missiles and inspections. Qom AFGHANISTAN Trump refuses to sign the waiver. Its repu- RUSI Arak Natanz Aniseh Bassiri Tabrizi of , a Lon- Saghand tation as a country that keeps its word will Isfahan don-based think-tank, believes that, like IRAQ have been further trashed. It will find that E Yazd the Americans, the 3 could impose sanc- IRAN the international coalition on sanctions tions related to Iranian ballistic-missile KUWAIT patiently put together by the Obama ad- T tests without violating the Iran deal. Sir Si- h Bushehr ministration to bring Iran to the negotiat- e G Gchine Bandar Abbas mon Gass, a former British ambassador to u ing table cannot be rebuilt. It will have l f Tehran who led the British team negotiat- BAHRAIN to OMAN done yet more damage to relations with its ing the deal, says that it might be possible QATAR allies. And it will have increased the SAUDI Strait of Hormuz to get an agreement from Iran not to devel- ARABIA UAE chances of both a big new war and a nuc- op an intercontinental-range ballistic mis- OMAN 300 km lear-arms race in the Middle East. 7

Business The Economist March 31st 2018 63

Also in this section 64 Ride-hailing in South-East Asia 65 A government-run mobile network 66 Innovation in menstrual products 66 Spain’s Mediapro 67 European oil majors 68 Schumpeter: Getting a handle on a scandal

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

Ad agencies media-buying operations, digital services, brand consulting and public relations. This Mad men adrift month Marc Pritchard, chief brand officer of P&G, criticised their model as a “Mad Men” operation that is “archaic” and over- ly complex in an era when campaigns and ads need to be designed and refined quick- NEW YORK ly across lots ofplatforms. Technological forces are buffeting this Technologyhas upended the business model ofthe world’s advertising giants model. The first big challenge is disinter- N BUILDING the world’s largest advertis- cluding America’s Interpublic Group and mediation. Despite the growing backlash Iing company over the past 30 years, Sir Omnicom Group and France’s Publicis against the tech giants, Google and Face- Martin Sorrell, chief executive of WPP, has Groupe, have registered anaemic growth. bookmake it easy forfirms bigand small to weathered two recessions and survived a Publicis posted 0.8% growth in its like-for- advertise on their platforms and across the global financial crisis. His firm nearly went like operations in 2017. Investors are losing internet via their powerful ad networks. bankrupt in the early 1990s. Now he must faith—none more so than WPP’s, who have The American advertising market grew by make his hardest advertising pitch yet, to driven the company’s shares down by 23% around 3% last year, to $196bn, but only be- convince the corporate world that image- since mid-February (see chart). cause of the tech giants. MoffettNathan- making agencies like his are not dinosaurs The ad giants have conventionally son, a research firm, estimates that Google on the brinkofextinction. made much of their money from huge and Facebook each accounted for more The world’sadvertisinggiantsare strug- fixed contracts with clients, which lock in than $5bn of growth in advertising spend, gling to adapt to a landscape suddenly long-term relationships with multiple and for almost 90% of online ad growth. dominated by the duopoly of Google and agencies. Their holding-company struc- All forms of conventional advertising, Facebook. Some of their biggest clients, turesinclude famouscreative firmsthat de- apart from outdoor, shrank. such as Procter & Gamble (P&G) and Un- sign and make ads for TV and other media, The second headache is the rise of ad- ilever, are also being disrupted, in their but also a host of other businesses that free content for consumers, especially on case bysmalleronline brandsand byAma- bring in the bulk of their revenue, such as Netflix, and the corresponding disruption zon. They are cutting spending on advertis- of ad-supported television, which has de- ing services, and also building more capa- clining viewership globally. This hurts bilities in-house. Consultancies with It’s a WPP-out agencies because their biggest clients, in- digital expertise such as Deloitte and Ac- Share prices cluding the manufacturers of consumer centure are competingwith agencies, argu- January 1st 2013=100, $ terms goods, beverages and pharmaceuticals, ing that they know how to connect with 250 use television the most. Planning cam- consumers better, and more cheaply, using Interpublic paigns and creating 30-second spots for data, machine learning and app design. 200 television is a people-heavy, high-margin The resulting picture is an industry un- Omnicom business that the agencies dominate. In WPP der siege. just had its worst year since 150 America television advertising sales fell by the financial crisis, with declining rev- $4.9bn in 2017, or7.3%, to $62.1bn, according enues from like-for-like operations (ie, to Magna Global, which is owned by Inter- 100 stripping out revenue from acquired busi- WPP Publicis public. That is the biggest such drop in a nesses) and a slightly reduced profit mar- non-recession year in two decades. gin. This yearthe company projects that or- 50 Third, Amazon’s e-commerce might, ganic growth will be flat, compared with 2013 14 15 16 17 18 and the growing clout of internet-era di- 5% or so in better times. Its big rivals, in- Source: Thomson Reuters rect-to-consumer upstarts, have weakened 1 64 Business The Economist March 31st 2018

2 the distribution muscle and pricing power cost services. plans mostly boil down to two things: in- of the advertising giants’ biggest clients. In In private, however, a senior executive vesting in digital services and consolidat- America DollarShave Club, a razorstartup, at a rival ad-holding firm rejects much of ing their collections of businesses so that significantly dented the market share of this optimism. Technological disruption they can provide a range of services to one P&G’s Gillette brand in just a few years, and disintermediation, he says, will only client more cheaply under one account. forcing price cuts. (Unilever bought Dollar deepen. The efficiency of targeted digital That should be more than enough to Shave Club in 2016.) Consumer-goods ads means companies can spend less for keep them alive. “Everybody says that companies are responding to such margin the same outcome in branding. we’re dinosaurs but we’re not. We’re cock- pressure by cutting spending on agencies; The advertisingfirms are responding by roaches,” explains Rishad Tobaccowala, P&G has cut agency fees and production hiring away talent, acquiring businesses chiefgrowth officer forPublicis. “We know costs by $750m in three years, and expects (in 2015 Publicis bought Sapient, a digital how to scurry around, we hide out in the to cut at least another $400m. consultancy, for $3.7bn) and gradually corner, we figure out where the food is, we Such cost discipline among clients is changing how they make money. Their reconstitute ourselves.” 7 driven partly by the influence of thrifty private-equity investors like 3G, the Brazil- ian owner of AB InBev, the world’s largest Ride-hailing in South-East Asia brewer. It also stems from a perception that the ad agencies have exploited their com- Grabbing back plexity to boost billings. In 2016 an adver- tiser trade association issued a report ac- cusing the agencies of using opaque practices, including in digital-ad place- ment, to extract higher margins. The hold- SINGAPORE ing firms strongly disputed the findings, Ubermakes a tactical retreat from anothermarket but the report prompted many clients to re- view their contracts with agencies and in- EING a commuter in much of South- dominant ride-sharing app in a market of sist on more transparency. B East Asia requires reserves of patience. 634m people. It operates in 191 cities across Nonetheless, some of the advertising In city after city, bar Singapore, jams con- eight countries, and will now hoover up holding companies’ woes may prove less fine people in taxis forhours, or force them customersofUber, who have two weeks to threatening than feared. It is far from clear onto the back of motorbikes that weave make the switch to the local service. that Google and Facebookwill disinterme- precariously through traffic. These quali- For Uber, cracking the market was al- diate agenciesin the longrun. The agencies ties of perseverance are not shared by waysgoingto be a struggle. With the excep- all do programmatic buying of digital ads Uber, an American ride-hailing firm. This tion of Singapore, most rides in the region for clients. WPP, the only holding com- weekit announced that afterfive years and are astonishingly cheap, particularly if pany that discloses its spending on the two $700m of investment in the region, it perched on the back of a motorbike. In or- giants, spent about $7bn of its clients’ ad would be selling its business there to Grab, der to stay competitive, Uber has had to budgets with Google and Facebookin 2017, a Malaysian startup based in Singapore. burn through cash. out of a combined $46bn in advertising South-East Asia is not known for giving Local companies such as Grab and an sold by both companies that WPP consid- birth to Silicon Valley-beating tech compa- Indonesian competitor, Go Jek, which is ers agency-relevant business (that is, not nies, says Ming Maa, Grab’s president. valued at around $5bn, also offer more counting small-business advertising). Sir “This acquisition shows that this is chang- than just ride-hailing services. Indonesian Martin says that market share is “not dis- ing,” he boasts. Under the terms ofthe deal users of Go Jek can order food, massages similar” to WPP’s share of ad business Uber will take a 27.5% stake in Grab, which and manicures at the touch of the app. with Comcast and Disney. is valued at $6bn. The deal makes Grab, GrabPay provides mobile payment ser- which started in 2012 after its two co-foun- vices, particularly useful for a region Spot of bother ders met at Harvard Business School, the where an estimated two-thirds of people 1 Facebook’s recent troubles over data pri- vacy could lead to a regulatory crackdown that constrains both it and Google, poten- tially opening up the digital-advertising market to more competitors. Facebook’s market share in digital ads in America is forecast to dip this year for the first time. The more options there are for placing ads besides Google and Facebook, the more likely advertisers are to seek the help of agencies. Sir Martin argues that the budgetary pressures that have forced his clients to cut back on advertising are a cyclical problem, not like the structural challenges posed by technological disruption. He believes that big brands will invest more in advertising to protect their positions in disrupted mar- kets. Some analysts agree with this rosy view.Agency executives further argue that digital consultancies will not be a threat to their core advertising business because they mostly compete for different, lower- Green is the new black The Economist March 31st 2018 Business 65

Mobile telecoms networks. Mobile virtual network opera- Pick me ups tors (MVNOs), meaning firms which rent Investments in ride-hailing firms by SoftBank* Red hot their infrastructure from other companies, $bn have a market share of 1% in Mexico, com- 10 Grab Ola pared with 10-15% in most of Europe and Uber 99 North America. Didi Chuxing 8 MEXICO CITY Again, Red Compartida will change that. As an independent wholesaler, Altán Mexico’s pioneering wholesale mobile 6 has no interest in keeping new players out networkis offto a promising start of the market and is obliged to offer its ser- 4 AWS dropped when earlier this year a vices to everyone. Edgar Olvera Jiménez, JWhite House memo argued that the the under-secretary for telecommunica- 2 American government should build and tions, expects MVNOs to make up 5% ofthe run its own 5G mobile network. The rea- mobile market within two to three years, 0 son given was national security. The driving down costs. The government 2014 15 16 17 18 memo cited Huawei, a Chinese maker of thinks the cost of internet per megabyte Source: PitchBook *As sole or lead investor telecoms gear, as a strategic threat. Many will fallby halfalmost immediately. assailed the idea of such massive state in- So far the network does not have any 2 are “unbanked”. Two weeks ago Grab also tervention and the idea was quickly clients, but Eugenio Galdón, Altán’s vice- started providing microloans to business- squashed. South of the border, Mexico is president, says that several companies es in a partnership with Credit Saison, a experimenting with something that could have signed contracts and will publicly an- Japanese firm. With the acquisition of be a more sensible version of the Ameri- nounce their entry into the market after UberEats as part of the deal, it will also ex- can officials’ suggested venture: a whole- completing beta tests on the network. The pand its food-delivery service. sale mobile network. big three players have so far resisted join- In their core businesses, too, local com- Red Compartida (“shared network” in ing the network, but they might use it in fu- panies have innovated successfully. “In Spanish) went live on March 21st. The mo- ture to reach partsofMexico thattheir own San Francisco, most vehicles are four- tive behind one of the world’s most ambi- networks do not cover. wheel cars,” points out Mr Maa. By con- tious telecommunications projects is not Red Compartida’s infrastructure is built trast, most of Grab’s fleet consists of two- national security. Rather, Mexico is trying for easy upgrading to 5G. Mexico will have wheeled motorbikes and drivers wearing to pull offa triple feat ofexpanding mobile it by the end of 2019, says Mr Olvera. 5G is lurid green helmets. In Cambodia three- coverage, lowering prices and creating a vi- hailed for its high connection speeds, low wheel tuk-tuks also chugalong, ready to be able business environment for5G, the next response times and flexibility, which will hailed through a smartphone. In Jakarta, generation ofwireless mobile internet. help to deliver on the promise of the inter- the Indonesian capital, where motorbikes The project is a $7.2bn public-private net of things, as connected devices are can outnumber people, the company also partnership that is part of the country’s called. But the business case for building introduced a new kind ofpayment system: 2014 telecommunications reforms (and in- separate private networks is less convinc- rather than hail a rider through the app, volves both Finland’s Nokia and Huawei). ing. The infrastructure of 5G costs far more only to miss them in the crowd, a customer The government will provide spectrum in than that of its antecedents. It uses higher- can now picktheir rider on the spot and in- the 700MHz band and 18,000km of fibre- frequency radio waves that struggle to stantly booktheir journey. optic cables. Altán Redes, a private consor- penetrate physical objects, so operators This week’s deal is also a coup for Ma- tium that won the right to build the net- need to putup more antennae and connect sayoshi Son, chief executive of SoftBank, a work, will foot virtually the whole bill. It them with fibre-optic cables. Red Compar- Japanese telecoms and internet conglom- cannot sell internet services to customers tida will spread the cost (once Altán has cli- erate. In January his SoftBank Vision Fund, but must instead offer capacity to other ents), making it more manageable. 1 with $93bn to spend, closed a deal to take a firms. The government, checking for fair- 15% stake in Uber. SoftBank itself was al- ness, signs offon each deal. ready Grab’s biggest shareholder. Both The venture, and the wider reforms, are firms could benefit from less competition. badly needed. Internet speeds are slow. Grab gets the market, but Uber’s losses of The mobile-phone penetration rate re- $4.5bn worldwide last year should shrink mains among the lowest in the OECD,a as it hunkers down before a planned initial club of rich countries. In 2016 Mexico had public offering next year. Mr Son aims just 60 mobile-broadband subscriptions eventuallyto ensure thatnone ofthe many per 100 mobile customers. That is partly ride-hailing firms in which SoftBank holds because many Mexicans are poor, but also stakes waste money fighting each other. because existing service providers do not A similar deal in 2016 in China with offer coverage to large parts of the country. Didi, in which Uber took a 17.7% stake, has Red Compartida will fill some of that gap. worked out well for both: the initial value It covers 30% of the population now; it will ofthe holding has risen from $6bn to $8bn. cover 50% by 2020 and 92% by 2024. Dara Khosrowshahi, Uber’s boss since No- Other elements of the telecommunica- vember, recently visited two other markets tions reforms have helped reduce Mexican where his firm is either still battling or pre- mobile-broadband prices, from 30% above paring to rival another SoftBank-backed the OECD average in 2013to 30% below it in firm—India, where Uber competes with 2016. Yet real competition remains elusive. Ola, a local firm, and Japan, a nascent ride- América Móvil, the telecoms giant owned hailing market where Uber and Didi both by Carlos Slim, a local tycoon, still controls have bigplans. Whateverhappens in these around 70% ofthe mobile-broadband mar- markets, ride-sharing increasingly seems ket. Two other companies—Movistar and to mean firms divvying up the spoils. 7 AT&T—own and operate their own mobile G-whizz 66 Business The Economist March 31st 2018

European media Consumer goods Compos menses Political football

Ninetyyears since the tampon, women are getting more choice BARCELONA HE disposable sanitary pad debuted Mediapro serves its Chinese owners a in the late19th century.It was such a T mixofsport and Catalan politics taboo that a purchase involved dropping the exact sum in a box at the chemist’s IKE Jaume Roures and Gerard Romy, two counter. The packwas handed over, no Lof its founders, Mediapro is proudly words uttered. Menstrual products could Catalan. Too proud, according to the Span- not be advertised on American television ish police. The television company, which until1972. In 2015an ad showing a runny launched in 1994, has been investigated for egg yolkwas questioned by New York’s paying for a press centre for foreign jour- subway forbeing too suggestive ofper- nalists during an unconstitutional inde- iod flow (which was the point). pendence referendum in the region last Squeamishness has hampered in- October, and for producing a sympathetic novation. The applicator tampon, invent- documentary on the vote. Mediapro de- ed in1931, was the last big novelty in nies wrongdoing. At Madrid’s main annu- menstrual devices to go into widespread al contemporaryartfairlastmonth its third use. Its cardboard applicator, a tube co-founder, Tatxo Benet, purchased a con- within a tube, allowed women to push a tentious set ofphotographs which labelled tampon inside without committing the plebiscite’s jailed Catalan organisers as another no-no (touching their bodies). political prisoners. In the decades since, big manufactur- Period piece Pro-independence antics may be popu- ers such as Procter & Gamble, Kimberly- lar in Catalonia, which on March 25th Clarkand Essity have only made tweaks. collect menses which is attached to a again erupted in violent protest after Ger- Pads became thinner and acquired an bendable polymer ring. When inserted, man authorities arrested Carles Puigde- adhesive strip. Plastic replaced cardboard the ring creates a seal between the pouch mont, the former Catalan president. But in applicators. Compact tampons with and the cervix. It can be worn for12 they could be a headache for Mediapro’s no applicators that fit into pockets and hours, including during sex—a feature new Chinese owners. On February 15th small handbags appeared in the1960s. that grabbed men’s attention when she Orient Hontai Capital, an investment firm Recent novelties include a blackpanty- pitched for funding, says Lauren Schulte, from Beijing, bought 53.5% of Imagina, a liner to match the most popular colour of the firm’s founder. Diva, Intimina and holding firm which owns Mediapro, in a underwear. Mooncup make reusable silicone cups deal that valued the firm at €1.9bn ($2.4bn), Yet firms have shied away from bring- that also go inside the body. including about €200m of debt. The day ing out alternatives to pads and tampons. They can get offthe ground without before, Mediapro issued a statement de- With well-established brands and profit expensive television spots. Online ads crying the inclusion by the Spanish police margins reaching over 50% the status quo direct intrigued consumers to websites of Mr Roures’s name in an investigation makes for solid business. Startups strug- with step-by-step instructions, videos into who organised the referendum. gled to sell new products with advertis- and user reviews. E-commerce lets manu- The buyers would no doubt prefer ex- ing that allowed only veiled allusions to facturers bypass high-street retailers. Flex citement to be confined to Mediapro’s how they are used. An insertable rubber offers a subscription, paid monthly. business. Earlier this month the company cup, from a startup in the1960s, flopped, These newfangled products remain reported revenue for2017 of€1.65bn, and a in part because ofthese hurdles. niche fornow.Tampax Pearl tampons net profit of €128m, up by 12% from 2016. The rise ofonline marketing and rake in $290m a year in America alone; Most of its earnings come from the resale e-commerce have spurred new products. Diva sold only around $20m-worth of of football rights. Orient Hontai’s takeover Startups are trying to win a slice of the cups worldwide in 2017. But that is up was completed two weeks after Mediapro market (worth some $19bn globally) in from $2.5m five years earlier. Its most acquired the domestic television rights to America, Australia, Canada and Finland. popular model was the top-selling “femi- Italy’s prestigious Serie A, paying €1.1bn a THINX, Knix Wear, Dear Kate and Modi- nine hygiene” product in Canada by year forthe coming three seasons. bodi make knickers ofabsorbent, leak- dollar value in 2016, according to Nielsen, That deal sealed Mediapro’s domi- prooffabricsthat can be tossed in the a market-research firm. Flex, too, has seen nance of football from southern Europe; it wash and reused. The Flex Company demand soar. “We had to pause market- already owns most of the rights to La Liga, offers a menstrual “disk”, a soft pouch to ing because we ran out,” says Ms Schulte. Spain’s top-flight league, until 2019. Media- pro has also designed a few football muse- ums and is investing in a theme park dedi- 2 The network also has risks. An obvious is to roll out the network across the coun- cated to Lionel Messi, the star player for FC one is that Altán acts like the sluggish and try. Mexico is a step ahead ofalmost every- Barcelona, which is due to open in the Chi- underfunded telecoms monopolies of old. one else: only tiny Rwanda has built a nese city of Nanjing in 2020. It produces That has been the case with some of the wholesale mobile network before. But television series and feature films—a few fixed wholesale networks. The average Mexico is unlikely to be the last. Govern- were directed by Woody Allen, including speed of internet connections on Austra- ments in several other countries, from “Vicky Cristina Barcelona”. lia’s government-owned National Broad- Chile to South Africa, are thinking of emu- Mr Roures and Mr Benet will each keep band Network, for instance, lags behind lating the idea. They will watch to see 12% of Mediapro and are to remain its that ofmost rich countries. whetherMexico’s ambitious project quick- bosses. (WPP, a British advertising giant, Mexico’s government says the next step ly accumulates satisfied customers. 7 maintains a 22.5% stake; Mr Romy and 1 The Economist March 31st 2018 Business 67

2 some otherminorityinvestorshave divest- providers to whom it sells the rights. That ain’s Big Six, is worth £7.6bn ($10.8bn), ed theirs.) Orient Hontai hopes they will makes it vulnerable to streaming services compared with Shell’s market value of continue to draw viewers keen to watch with huge subscriber bases such as Ama- £190bn. They often operate in only one or the likes of Mr Messi in action. Yet they zon or Netflix, which are eyeing sports, two national markets, each a regulatory may have their workqcut out. says Miguel Jiménez of Renta4, a broker in minefield. Bill-paying customers tend to Football rights no longer look the mon- Madrid. Mediapro could sell them rights, loathe them farmore than they do the pur- ey-spinners they once were. In February but they tend to prefer full control. Media- veyors ofpetrol and pain aux raisins. Sky and BT Sport, two British broadcasters, pro’s current customers, meanwhile, mur- Power-generating utilities have also bid only £4.5bn ($6.2bn) for the rights to mur about getting out of football. In Febru- performed poorly in recent years com- broadcast 160 English Premier League ary, Telefónica, a Spanish telecoms pared with their oil and gas counterparts. matches for three seasons, starting in 2019, operator, said it was reviewing whether to They piled on debts before the 2007-08 fi- down from £5.1bn for the preceding three. continue streaming football online. nancial crisis and were then hit by the rise In ItalyMediapro barelymetthe minimum Mr Benet describes this as nothing of wind and solar, which drove down bid threshold set by the league, yet Fran- more than haggling before the contracts’ wholesale electricity prices. Peter Ather- çois Godard, an analyst at Enders Analysis, renewal. He insists that Spaniards will still ton, of Cornwall Insight, a consultancy, still does not foresee the firm generating a want to tune in to live football and are pre- says that whereas supermajors aim for re- positive return from Serie A. pared to reward those who air it. His Chi- turns on capital on big oil and gas develop- Mediapro’s vulnerability is that it is a nese bosses must be hoping that political ments of 15%, renewables provide returns middleman. It does not have its own sub- crosswinds, not trouble in the core busi- of 7-9%. In Britain, the energy retailers aim scribers, but relies instead on those of the ness, will be all they come up against. 7 forprofit margins of4-5%. Yet Jake Leslie Melville of BCG, a con- sultancy, says the oil companies are right to European oil majors “test the waters” in electricity. For instance, Shell’s acquisition of First Utility, reported- From Mars to Venus ly for $200m, may be deemed expensive consideringthe latter’s850,000 household customers. But as a way of exploring whether Shell’s prowess in natural-gas supply and energy trading can be extend- ed to providing services to millions of cus- tomers, some of whom will increasingly Royal Dutch Shell and Total flirt with the idea ofbecoming utilities generate their own electricity, it may be a N AMERICA Big Oil remembers BP’s at- small price to pay—especially for a com- Itempt to go “Beyond Petroleum” in the pany that invests at least $25bn a year. 2000s as a toe-curling embarrassment. In Moreover, small beginnings may mask Europe it is seen as being ahead of its time. big ambitions. Mr Wetselaar says his aim is Once again the oil industry is experiment- to generate electricity returns of 8-12%, ing with cross-dressing. Statoil, a Norwe- which he thinks is feasible because Shell, gian oil firm, is abandoning a name given with its energy-trading experience, can to it almost 50 years ago to become the profit from the heightened volatility of wispier Equinor. The firm formerly known power markets in the era of renewables as Dong, forDanish Oil and Natural Gas, is and EVs, as well as from more flexible de- now Ørsted, a big wind firm named after mand from consumers. To become materi- the founder ofelectromagnetism. al to Shell, the electricity business would Royal Dutch Shell and Total, Europe’s need to grow to $50bn-100bn, on a par biggest private producers, are (mercifully) with the size of its current gas business, he not changing their names. But they are toy- says. Scott Flavell of Sia Partners, a consul- ing with a strategy that could be far more tancy, mulls whether, having acquired BG, adventurous—moving their core business- an upstream producer once owned by Brit- es from hydrocarbons to electrons. ish Gas, Shell might covet Centrica, owner Amid pressure to limit climate change, ofthe downstream part ofBritish Gas. and the growth of renewable energy and There are reasons for caution. Julian electric vehicles (EVs), they expect low-car- Critchlow of Bain, a consultancy, com- bon electricity to become a much bigger pares the risks facing the oil industry with part of the world’s energy mix within the tal Spring brand. Both have invested in re- those of Eastman Kodak when its business next few decades. They have already in- newable energy and are installing EV was ruined by digital photography and vested heavily in building global natural- charging points in their networks of petrol photo-sharing. It is clear that increased gas businesses for cleaner power genera- stations. “We don’t see how we can be an electrification isbound eventuallyto cause tion. Now they plan to take on utilities in energy major if we don’t become a signifi- upheaval. “The challenge, aswith Kodak, is deregulated markets to provide electricity cant player in electricity,” says Maarten whether you can spot where the returns and gas direct to homes and businesses. Wetselaar, head ofgas and new energies at will be.” Another risk is that technology Last month Shell completed the acqui- Shell. A Total executive says: “Why should firms may move into the domestic electric- sition of First Utility, a midsized British gas we limit ourselves to selling gas to a utility itymarket, makinguse ofsmartmeters and and electricity supplier that already oper- when we can sell to end-customers?” digital devices, which would provide more ates under the Shell brand in Germany. At first glance the shift could be consid- alternatives to traditional energy suppli- The Anglo-Dutch firm plans to make a sim- ered a shrinking of horizons. These firms ers. Yet if other oil and gas producers are ilar move in Australia. Late last year Total are global beasts with vast balance-sheets. not following in Shell and Total’s tentative launched the supply ofgas and green pow- Customer-facing utilities are minnows by footsteps, they probably should be. It is er to households in France, through its To- comparison. Centrica, the biggest of Brit- time to plug in. 7 68 Business The Economist March 31st 2018 Schumpeter Getting a handle on a scandal

Corporate crises drive the media and politicians wild. But do they damage shareholder value? often in an exaggerated fashion. But consolidation has muted competition in many industries and made firms bigger and more resilient. Western governments may be willing to protect or bail outbigfirms, notjustbanks, because theyworryabout job losses. The eight firms in the sample have all been seared by scandal. All were large before their calamity, with a market value of at least $15bn. Their problems were different, but all led to a media scrum and prompted politicians and regulators to intervene. In all butone case, the firm’sbossleftasa result. The figures measure returns in dollars, including dividends (for Uber, reports of priv- ate market valuations are used). As well as BP, the infamous eight include another energy firm, Petrobras, a Brazilian giant at the centre of the “car-wash” corrup- tion scandal that erupted in 2014. Two firms beginning with “V” are included fortheir antics in 2015: Volkswagen, which admitted fiddling emissions tests, and Valeant, a drugs firm accused of price gouging and publishing inaccurate accounts. Wells Fargo is included fora mis-selling scandal that blew up in 2016, as is Uber, where the wheels came offin 2017. The last two firms are Equifax, a credit bureau which last year said hackers had gained access to data on 143m clients, and United Airlines, which set new lows for POPULAR riff doing the rounds in tech circles is that, if data airline conduct when it asked security staff to remove a passen- Aare the new oil, then Facebook’s Cambridge Analytica fiasco ger from an overbooked flight, who was injured in the process. is the equivalent ofDeepwater Horizon. That was the name ofan After their crises struck all these firms suffered an absolute oil platform that exploded in April 2010, coating the GulfofMexi- drop in their share prices. At the lowest point the median share co and the reputation ofBP, the firm responsible, in a toxic slick. price was down by 33%, although it took anywhere from two Yet just how damaging are “Deepwater” incidents for firms weeks to two years for different firms to reach this nadir. In most and their owners over time? Perhaps they cease to matter after cases the companies have clawed back the absolute losses they the initial burstofmedia purgatory, grovellingbyexecutives, cele- suffered. However, what matters is their relative performance bratory cant from competitors and politicians’ grandstanding. compared with a basketofindustrypeersoverthe same time per- To answerthis, Schumpeterhaslooked ateightofthe mostno- iod. On this basis the median firm is worth 30% less today than it table corporate crises since 2010, including those at Uber and would have been had the scandals not happened. For the eight WellsFargo. The evidence showsthatthese episodeswere deeply the total forfeited value is a chunky $300bn. injurious to the companies’ financial health, with the median Fines and legal costs explain only a small part of this. A big firm losing 30% ofits value since its crisis, when compared with a scandal distracts management, leads to other kinds of painful basket ofits peers. Facebookshould beware. regulatory scrutiny and, if a firm has a stretched balance-sheet, When a scandal first breaks, executives at the top of a firm and forces it to shrink. BP has spent years trimming its budgets while securitiesanalystsoutside itare often myopic, viewing itasa pub- its longtime rival, Shell, stole a march on it by buying BG, a gas lic-relations blip that will not alter a firm’s operations or its com- firm. WellsFargo faces a cap on its size imposed by the Federal Re- petitive position. In the case of Facebook, 44 of the 48 Wall Street serve. Equifaxmaybecome more heavilyregulated. Uberhas lost analysts who cover it still rate it a “buy”, according to Bloomberg. market share to a reinvigorated domestic competitor, Lyft. Many have downplayed the scandal, even though Facebook’s Two firms out of the eight come out relatively well. For Petro- shares have dropped by18% since the news broke on March 17th. bras, the explanation is that its share price had already sunk be- Of course, speculators and the media do frequently overreact fore the car-wash affair began in earnest, reflecting cost overruns to bad news. Credit Suisse, a bank, analysed 5,400 instances of that were an augury ofthe epic mismanagement that the scandal American firms’ sharesdroppingbyover10% in one day, between revealed. Volkswagen is the only standout. It got hit by a huge 1990 and 2014. On average the shares regained two-thirds of the $30bn bill forfines, productrecallsand legal costsfor “dieselgate”, lost value within the subsequent 90 days. But big corporate scan- butreacted to itscrisisbyputtingin place an efficiency drive and a dals are in a different league. They capture the public imagination bigbeton newcarmodels. Even so, itand the othersix listed firms and lead to heat from politicians and regulators. Infrequent and in the sample are valued on low multiples of profits compared idiosyncratic, they defy easy analysis. with their peers, suggesting that investors remain nervous. Considertwo infamiesfrom the 1980s. In 1982 Johnson & John- son had to withdraw 31m bottles of the painkiller Tylenol from Messing up, then fessing up shops after seven people were poisoned in Chicago. Seven years The aftermath of a scandal is unpredictable. In Facebook’s case later, the Exxon Valdez, a ship run by Exxon, struck a reef in Alas- the absence of established laws and regulations covering social ka’s Prince William Sound and spilled 11m gallons of oil. Yet both media make it even harder than normal to predict how harsh the firms’ share prices recovered within a few weeks, and today they backlash will be. Its biggest advantage is its strong balance-sheet, remain among the world’s most valuable companies. which has $42bn ofnet cash. Its weakness is a management team Since the 2008-09 financial crisis, plenty has changed. Social that seems keen to downplay the severity of what has just hap- media mean that news of scandals spreads faster than ever and pened. Recent experience suggests that is a mistake. 7 Property 69

The Economist March 31st 2018

Finance and economics The Economist March 31st 2018 71

Also in this section 72 China’s supply chains 73 Buttonwood: Buckle up 74 India’s economy 75 China’s oil futures 75 American household incomes 76 Financing funerals 77 Free exchange: Wakandanomics

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

US-China trade WTO’s legal procedures, which could take years. If America wins, China might re- Tumbling down spond by changing its ways. Its record of complying with rulings against it is no worse than those ofAmerica and the Euro- pean Union. Orthe two sidesmightnegoti- ate a settlement. If that fails, then a victo- rious America could impose tariffs allowed by the WTO. This would be un- The Trump administration’s trade strategy has many risks and few upsides usual. Such tariffs have been approved MERICA’S president claims to view lies squarely within the multilateral sys- fewer than 15 times in the WTO’s history AChina as a friend. But the friendship is tem created in 1995 to resolve trade dis- and, even then, WTO members have going through a rocky patch, to say the putes. On March 23rd the American ad- sometimes chosen not to impose them. least. America’s trade deficit with China, ministration lodged an official complaint But the WTO dispute is just one part of “the largest deficit in the history of our at the WTO, claiming that China has been the strategy. Mr Lighthizer’s team thinks world”, is “out of control”, Donald Trump breaking the rules on intellectual property. some of China’s practices inflict damage groused on March 22nd. “Atremendous in- Mr Lighthizer reckons that by pressing on America but are not covered by WTO tellectual-property theft situation” also American companies to hand over their rules. The Section 301 investigation irks him. And so, after laying out his con- technology when they form partnerships claimed to find evidence that the Chinese cerns, he announced plans for some tough with Chinese ones(thisisoften a condition government directs its firms to invest in love. Litigation against China at the World of operating in China), and by making it American firms as part of its industrial Trade Organisation (WTO), investment re- hard to enforce intellectual-property rights strategy, and sometimes to steal informa- strictions and tariffsare all on the cards. once a technology-related contract ends, tion from them. MrLighthizerthinksChina The announcement early in March of the Chinese state has rigged the system wants to overtake America and make it tariffs on steel and aluminium imports to against American companies. less globally competitive. He wants the America was chaotic, even prompting the The case will now wend through the threat of unilateral action to fill in the resignation of Gary Cohn, the head of Mr multilateral system’s blanks. Trump’s National Economic Council. The If America decides to strike, the first latest targeting of China, by contrast, is the Teeter totter blow would be tighter rules on investment culmination of months of planning and United States, trade in goods with China, $bn between the two countries. The details are commandsbroadersupport. Itwasmaster- 200 unclear. The president can already block minded by Robert Lighthizer, the United Exports investment on national-security grounds, States Trade Representative (USTR) and a + using the Committee on Foreign Invest- seasoned trade lawyer. As a deputy USTR 0 ment in the United States (CFIUS). Blocks under Ronald Reagan in the 1980s, he used – on economic grounds might also be al- Section 301 of the Trade Act of1974 to bully lowed, as, perhaps, might curbs on Ameri- 200 Japan into limiting exports to America. Balance can investment in China. This time, using the same law, his depart- The second hit involves tariffsof 25% on ment has penned a 200-page report outlin- 400 certain Chinese exportsworth up to $60bn ing damage to America of “at least $50bn Imports in 2017. Mr Lighthizer says that the list of per year” arising from China’s unfair trade products, which includes aerospace, infor- practices. In his telling, America is seeking 600 mation and communication technology 2009 10 11 12 13 14 15 16 17 no more than the compensation it is due. and machinery, drew inspiration from Source: US Census Bureau The first of Mr Trump’s three measures “Made in China 2025”, the Chinese govern-1 72 Finance and economics The Economist March 31st 2018

As for Chinese investment in America, China’s supply chains the CFIUS committee was already tough- ening its oversight. According to Rhodium Collateral damage Group, a research firm, this was part of the reason Chinese investment in America fell by 35% from 2016 to 2017 (a Chinese clamp- In a trade war, Asia’s small open economies would be caught in the crossfire down on outbound capital was the main HINA is the stated adversary in Do- shift from China to other, cheaper coun- factor). New rules that give wide discretion C nald Trump’sincipient trade war. But tries in the region. Tariffson goods made to the president, or block investment on 30% ofthe value ofthe goods China in China would speed this up. economic rather than national-security exports to America is added elsewhere. If Ifthe Chinese retaliate, an early target grounds, could easily be abused. the row escalates, countries entwined in will be America’s farm exports. Brazil, the In the short term, bullying could get re- Chinese supply chains will suffer. world’s second-largest producer ofsoya- sults. Mr Lighthizer is not the only person In absolute terms, Japanese suppliers beans behind America, would be happy in Washington frustrated by the limited re- will fare worst. Japan is the country that to pickup the extra business. But Ameri- sults of years of talks with China about its exports most to firms in China that ex- ca’s and China’s competitors should not economic strategy. The threat of stiff tariffs port onwards to America. But relative to cheer from the sidelines. A trade war on South Korean steel imports and ofwith- economic size, such suppliers are a bigger would damage the world’s two largest drawal from KORUS, a trade deal between part ofseveral small, open Asian econo- economies and hit global growth. That America and South Korea that came into mies (see chart). Between 1% and 2% of would be bad foreveryone. force in 2012, speedily secured changes to some countries’ total output is shipped that deal desired by the Trump administra- first to China and then on to America. If tion and announced by South Korea’s gov- Chinese exports to America were to fall Supply-chain pain ernment on March 26th. by10%—an extreme but not impossible Value added to Chinese exports to United States But browbeating tactics also weaken scenario—it could knock0.1-0.2 percent- As % of GDP, 2017 estimate the rules-based trading system. They do age points offtheir economic growth. 0 0.5 1.0 1.5 2.0 2.5 this, in part, by encouraging managed China’s competitors in industries that Taiwan trade. In the 1980s America could be have been threatened with tariffs, name- bought off by other countries that prom- IT Malaysia ly aerospace, machinery and , how- Singapore ised “voluntary” restraints on their ex- ever, would benefit. There are many of South Korea ports. But this made a mockery of the idea these in Mexico, Germany and Japan. Hong Kong that markets, rather than bureaucrats, should determine trade flows. The re- Tariffsalso encourage companies to Chile switch their investment plans. When vamped KORUS includes a cap on South Saudi Arabia Ronald Reagan forced Japan to restrict its Korean steel exports to America of 70% of Thailand car exports to America in 1981he (unin- the average between 2015 and 2017. (This Philippines tentionally) boosted Japanese invest- arrangement would appear to flout the Japan ment in Thailand’s fledgling car industry. WTO’s rules, though other members may Source: OECD Manufacturing has already started to choose not to challenge it.) China is report- edly offering to buy more American semi- conductors to stave off tariffs. Wilbur Ross, 2 ment’s plan to achieve global dominance tices. Using the WTO to resolve this trade the commerce secretary, recently suggest- in industries it regards as strategic. tussle could be taken as a vote of confi- ed that China could buy more natural gas Two clocks have thus been set ticking. dence in the multilateral trade system. from America. The full list of proposed tariffs will be pub- A grand bargain, too, might contain As the Chinese representative com- lished by April 6th, after which it will re- some useful additional measures. The plained during a heated WTO committee main open forpublic comment for30 days. Trump administration is reportedly de- meeting on March 26th, Article 23 of the Stephen Mnuchin, Mr Trump’s treasury manding that China lower its tariffs on im- WTO’s rules includes a pledge not to claim secretary, has until May 21st to come up ported American cars, liberalise its rules violations of the trade rules unilaterally, with proposals for restrictions on invest- governing financial services and, perhaps, but to use the WTO’s dispute-settlement ment. Itseemspossible thatneitherwill ac- cut subsidies for state-owned enterprises. process. Article 23 refers only to commit- tually go into effect. Even as Mr Trump Similarly, more systematic scrutiny of in- ments specified within the WTO. The talked tough on March 22nd, he also spoke coming Chinese investment could be pru- Americans say that where such commit- of a big, ongoing negotiation with the Chi- dent, rather than nakedly protectionist. ments have been broken, they have duly nese government. He has asked it to reduce But given the Trump team’s attitude to- filed a WTO dispute. What they do regard- America’s bilateral trade deficit by $100bn. wards the rules-based multilateral trade ing other misdemeanours, they argue, is He seems to be presenting China with a system, such hopes seem fleeting. Mr their own business. But since America is choice: a grand bargain or a trade war. Trump often blasts the WTO for being bi- threatening China in ways that would con- ased (there is no evidence that it is). That travene its own WTO commitments not to Fighting on many fronts weakens its ability to resolve disputes. For break agreed tariff limits, the distinction is The first part of the plan seems sensible the system to work, WTO members must not so clear. And once WTO members start enough. WTO procedures are designed to support it and think that others will, too. If writing and enforcing their own rules, the reduce the risk that a trade dispute esca- China thinks America may ignore a ruling existing rules could lose their force. lates, by giving countries a chance to vent against its interests, why should it play There is more potential for trouble if their frustrations in a controlled setting along? Meanwhile, the Trump administra- America’s unilateral actions do not have and by setting out the consequences if the tion is undermining the WTO by blocking their desired effect—especially if the multi- rules are broken. America could find sup- the appointment of judges to its court of lateral system weakens. So far China has port for its case from Japan and the EU, appeals. IfAmerica ends up wanting to ap- been keen to be seen to follow the WTO’s both of which share America’s concerns peal against a ruling in favour of China, rule book. On March 23rd it responded to over China’s technology-licensing prac- this will become self-defeating. steel and aluminium tariffsby announcing1 The Economist March 31st 2018 Finance and economics 73

2 its own rebalancing tariffs on American sponded to Mr Trump’sannouncement by that trade is devilishly difficult to manage. goods, including pork products, fruit and saying that “if people want to play tough, Factors beyond China’s control could easi- recycled aluminium. It argues that such re- we will play tough with them and see who ly overwhelm the impact of any deal on taliation is allowed under the rules. will last longer.” At risk would be agricul- the bilateral trade deficit. Mr Trump’s cuts A new wave of tariffs on China would tural exporters and American companies to income and corporate taxes mean that probably be met by claims that America operating in China. Mr Lighthizer told a America’s economy is about to receive a had also broken rules, and perhapsan anti- congressional committee on March 21st large stimulus. All else equal, this will suck dumping investigation into American that he would defend farmers’ interests in imported goods. soyabeans. In 2009, when Barack Obama should they be hit, adding to the impres- American and Chinese trade negotia- imposed tariffs on Chinese tyres, China sion that Mr Trump would not shy away tors thus have their work cut out. Any deal slapped anti-dumping duties on American from a trade war. they reach must allow both sides to claim exports ofchicken feet. Another risk stems from Mr Trump’s victory. And since it will be judged a suc- China’s desire to be seen to adhere to obsession with the bilateral trade deficit. cess or failure according to outcomes that the rule book could weaken, however. Cui No deal can guarantee to bring it down. have little to do with their agreement, it is Tiankai, its ambassador to America, re- Whatever the two sides agree to, the fact is bound to be a fragile one. 7 Buttonwood Buckle up

Economic shiftsmay mean more market volatility ASTEN your seat belts. It’s going to more losses on March 27th. The index has “Fbe a bumpy night.” Those famous Turbulent times dropped by 5.2% so farin March. lines of Bette Davis in “All About Eve” S&P 500, 1941-43=10 All this has taken a toll on sentiment. may turn out to be the motto for the mar- The latest survey of investors and strat- ketsin 2018. Afterthe “volatilityvortex” in 2,900 egists by Absolute Strategy Research February, sparked by concerns about in- (ASR), a consultancy, shows that they flation, markets have thrown a “tariff tan- 2,800 have become less confident about the trum” after President Donald Trump economy. The survey responses generate sparked fears ofa trade war with China. 2,700 only a 43% probability of the business cy- In February stocks sank on heavy cle being stronger a year from now.That is hints of American levies on imported 2,600 down from 55% in the first quarter of 2017. steel and aluminium. The prospect of Investors thinkthere is a 58% probabil- trade measures against China, signalled 2,500 ity that equities will be higher a year from Jan Feb Mar on March 22nd, again hit shares. Then re- 2018 now. But that is not particularly optimis- ports that China and America were mak- tic. According to the Barclays Capital ing progress in trade talks caused the S&P Source: Thomson Reuters Equity-Gilt Study, American shares rose 500 indexto rise by2.7%on March 26th, its in 64% of the years since 1926. And inves- best day since August 2015.It promptly fell plexion of this stockmarket is changing be- tors expect a more testing economic cli- again by1.7% the next day (see chart). fore our eyes,” says David Rosenberg, a mate. Both inflation and bond yields are Further volatility seems likely, not strategist at Gluskin Sheff, a Canadian forecast to rise over the next12 months. least after the appointment of John Bol- wealth-management firm. Central banks The ten-year Treasury-bond yield has ton, an ultra-hawkon foreign policy,asMr are withdrawing some of the monetary already risen from 2.4% at the start of the Trump’s national security adviser. That stimulus that has supported the market ral- year to 2.79%, in part because the market raises the possibility of increased tension ly since 2009. And economic data have not expects America’s tax cuts to lead to a lot with North Korea, despite the recent sug- been quite as positive as before. Citi- more debt being issued. It is not clear how gestion of a summit between Mr Trump group’s “surprise” index, which is based faryields can rise before they start to have and Kim Jong Un. The changes of tone on whether actual numbers turn out to be a palpable economic impact. “Debt be- from the White House have been so rapid better or worse than forecast ones, has comes more of a problem with slower that you might thinkpolicy is being set by dropped back from the high levels reached growth and higherinterestrates,” saysDa- Twoface, a Batman villain, whose deci- atthe end oflastyear. The price of copper,a vid Bowers ofASR. sions are controlled by the toss of a coin. commodity that is particularly sensitive to As a sign of tightening liquidity condi- Last year was a bumper one for global economic conditions, has fallen by 9% so tions, the ASR team also points out that stockmarkets. Investors shook off pessi- farthis year. the real growth rate of the global M1 mism about growth, which had led to The prospect of further interest-rate in- money-supply measure has slowed many earnest discussions about “secular creases has taken its toll on bank stocks, sharply,frommorethan9%tolessthan stagnation”, and enthused instead that with America’s KBW NASDAQ Bank index 4%, in recent months. Another warning the world was experiencing a period of dropping by 8% in the week to March 23rd. sign is that the gap between short-term synchronised economic expansion. Tax The technology sector has also taken a hit. and long-term interest rates has shrunk. cuts passed by America’s Congress in De- Led by the FAANGs (Facebook, Apple, Am- In the past, a flatter yield curve has sig- cember were the icing on the cake, boost- azon, Netflix and Google), the S&P 500 In- nalled an impending economic slow- ing both the American economy and formation Technology index managed a down. These signals may turn out to be payouts to the shareholders of multi- five-year annualised return of 18.5%. But false alarms. But even so, investors would national firms. controversy over the use of Facebook data be forgiven forchecking their seat belts. But this year has seen a number of in the 2016 presidential election prompted worries come to the fore. “The entire com- a reversal. Fears of extra regulation caused Economist.com/blogs/buttonwood 74 Finance and economics The Economist March 31st 2018

India’s economy written offorconsidered likely to turn sour are near a fifth of the loan book at state- Chugging along owned lenders, which have about 70% of market share. The resulting losses have left banks short of capital for fresh loans, though a planned bail-out and new bank- ruptcy code should, belatedly, help clear MUMBAI up the mess. Worse, a recently discovered fraud at a state lender, where rogue em- India’s economy is backon track. Can it pickup speed? ployees allegedly facilitated $2bn of loans TISeasyto be awed bythe Indian railway to a diamond merchant who is now no- Inetwork. The 23m passengers it carries Semi-fast service where to be found, has highlighted their daily travel, in total, over ten times the dis- GDP, 1998=100 weakgovernance. tance to the sun and back. It is just as easy Early in Mr Modi’s premiership growth 600 to find it unimpressive. Delays are frequent China was helped by the tumbling price of oil, and trains antiquated. It takes 14 hours to 500 which India imports in vast quantities. But get from India’s capital, Delhi, to its com- India the price of crude, which fell from $110 to mercial hub, Mumbai. The equivalent trip 400 $30 a barrel during his first two years, has Developing in China—from Beijing to Shanghai, a simi- economies 300 since rebounded to $65. Any higher and lar distance—takes just over fourhours. World some familiar problems, namely current- 200 Similarly, India’s economy can be seen Advanced account deficits, budget shortfallsand high economies in two lights. Its long-term growth rate of 100 inflation, will make an unwelcome return. 7% a year has proved far more dependable Yields on Indian government bonds have than the rail timetable. GDP has doubled 0 risen from 6.4% last summer to around twice in the past two decades. Yet deep 1998 05 10 15 18* 7.5%, indicating some increase in investor poverty still lingers and jobs are scarce. Source: IMF *Forecast concern. And Indian growth has been left in the Although India’s growth has depended dust by the Chinese express (see chart). growth seem over-optimistic in the ab- less than, say, China’s on exports, it has After slow running for much of 2017, In- sence of deeper economic reforms. Doing benefited from a buoyant global economy dia is now near to full throttle. Growth of business in India has become easier in and an open trade environment. The latter 7.2% in the three monthsto Decemberput it some ways, such as getting permits or maybe changing. Indian IT firms are facing ahead of China (which grew at a relatively bringing in foreign capital. But the labour restrictions on their employees working in leisurely 6.8%) and made it once again the market is as gummed up as ever. Private America, challenging their business mod- world’sfastest-expandingbigeconomy. Ex- businesses find securing land for new fac- el. And India itselfhastaken a protectionist pectations forthe rest of2018 are similar. tories near-impossible. Whole swathes of turn, recently imposing tariffs on a wide Fans of Narendra Modi, India’s prime the economy, from coal and steel to bank- range of products, from mobile phones to minister, credit structural reforms he has ing and condom-making, remain at least perfume, in an ill-conceived bid to encour- made over the past four years. The more partly under state control. age domestic production. plausible explanation is that Indian The hangover from a bout of over-exu- “India is a country that disappoints growth has returned to trend after a bout berance dating from before the global fi- both optimists and pessimists,” notes Ru- ofpolitical meddling. “Demonetisation” in nancial crisis has left companies financial- chir Sharma of Morgan Stanley, a bank. late 2016, when most banknotes ceased to ly stretched and with enough production Naysayers who expected political med- be legal tender overnight, squeezed capacity to be able to delay capital expen- dling to hit the economy hard underesti- growth to 5.7% in the first half of last year. diture. A few sectors are now contemplat- mated its resilience. Like commuters New notes were printed, but last July, even ing investment—only to find that banks whose train has finally pulled in, optimists as life was returning to normal, a new may be unable to provide finance. Loans feel theirtime has come. All aboard? 7 goods and services tax replaced hundreds of local and nationwide taxes, once again throwing the economy into confusion. Atleastthe taxoverhaul, which knits In- dia into a single market for the first time, will eventually increase growth. Boosters speak of annual GDP gains of 8-10% in the years ahead. That would not be farshort of China in its boom years. Renewed economic vim would be wel- comed by the government in the run-up to elections due by early 2019. Even at 7% growth, too few jobs are created to absorb roughly 1m new entrants into the work- force every month. More than 20m people recently applied for 100,000 railway jobs, as train drivers, technicians and porters. A third of15- to 29-year-olds are not in school, training or jobs. Mr Modi’s opponents have found that the theme of scarce em- ployment opportunities has played well with voters. Faster expansion would help. But predictions of Chinese-style Along for the ride The Economist March 31st 2018 Finance and economics 75

Income growth Home improvement

The average American is much betteroffnow than fourdecades ago UST how bad have the past fourde- average federal tax rate forfamiliesin the Jcades been forordinary Americans? middle fifth ofthe pre-tax income dis- One much-cited figure suggests they tribution fell from19% to14%. Transfers have been pretty bad. The Census Bureau rose from 0.8% ofpre-tax income to 4.7%. estimates that for the median household, Other data also suggest that the CBO’s halfway along the distribution, income methods paint a fairer picture. Bruce has barely grown in real terms since1979. Sacerdote ofDartmouth College has But a recent report by the Congressional calculated that household expenditure, Budget Office (CBO), a non-partisan converted to 2015dollars using the CPI, think-tank, gives a cheerier rise of 51% for has risen by 32% since1972. Spending on median household income between1979 food and clothing has fallenfrom 27% of and 2014. Which is nearer to reality? the total to16% in 2016, and the share The gap between the two is accounted spent on health care and housing has forby three methodological differences stayed roughly constant. That means Oil futures (see chart). First, the CBO takes demog- more left over forluxuries. Homes have raphy into account. This seems sensible: got bigger, and the number ofcars per Crude gambit more Americans are living alone and household has risen from1to1.6. American women are having fewer The past fourdecades have been hard children, so households have fewer formany Americans. Trade and tech- mouths to feed. nology have upended the labour market, The second is that the CBO uses the and many low-skilled men have left the personal-consumption expenditures workforce. Economic growth has been China vies formore clout in the global (PCE) index to measure inflation, whereas weakin non-coastal states, and the top oil market the Census Bureau uses the consumer- few percent take home a greater share of RADITIONALLY, to count as an oil price index (CPI). These differin two all income. Wage growth, by any mea- Tpower a country had to be a big pro- main ways. The CPI includes only what sure, has been farlower than in the post- ducer of the black stuff. China is the consumers spend on themselves, where- war decades. But the idea that the typical world’s biggest importer but still wants to as the PCE index also includes expendi- American is little better offthan four break into that exclusive club. On March tures on their behalf, such as employee decades ago does not withstand scrutiny. 26th it launched a crude futures contract in health insurance. And the CPI’s basket of a bid to gain more clout in the global mar- goods is updated every two years, where- ket. Some thinkthat, ifsuccessful, the yuan as that for the PCE index is updated quar- Fixer upper could start to displace the dollar in oil trad- terly.This means it is quicker to pick up United States, median household income ing. For now, though, that is fanciful. substitutions: as the price ofone item 1979=100 Using CPI A previous attempt by China to intro- (apples, say) rises, consumers seek cheap- 160 duce oil futures, in the early 1990s, failed er alternatives (forexample, pears). CPI, adjusted for because of unstable pricing. This time reg- In 2000 the Federal Reserve’s rate- household size ulators prepared methodically. To ward off setting body switched from the CPI to the PCE, adjusted for 140 household size… PCE index forits inflation target, citing speculators, notorious in Chinese markets, …and after taxes they made the storage of oil very expen- this reason. Growth in the PCE index has and transfers sive. Volumes were light in the first few generally been halfa percentage point 120 days of trading—less than a tenth of the av- below the CPI. The gap, small in the short erages for similar contracts in New York run, grows wider with each passing year. 100 and London. But all went smoothly. It was The third difference is that the Census a good, ifmodest, start. Bureau uses pre-tax incomes, whereas China has two goals. The basic one is to the CBO takes taxes and transfers, such as 80 1979 85 90 95 2000 05 10 14 help its companies hedge against volatility. government-funded health insurance, Sources: Census Bureau; CBO; BLS; BEA; The Economist Chinese refiners and traders have strug- into account. Between1979 and 2014 the gled to manage currency risks because of capital controls. An onshore contract that lets them lock in the future price of oil in eigners. Trading runs until 2.30am Chinese One group of producers who might in yuan is thus appealing, says Michal Mei- time, to overlap with daytime in America theory be tempted are those under Ameri- dan ofEnergy Aspects, a research firm. and Europe. Glencore and Trafigura, two of can sanctions. For Iran, Russia and Venezu- More ambitiously, China hopes to the world’s biggest commodity traders, got ela, trading oil in yuan would wean them create a standard for oil pricing as a rival to into the action on the contract’s debut. offdollar-based earnings and so help them Brent in Europe and West Texas Intermedi- Nevertheless, the same restrictions that steer clear of American banks. But they ate in America—a standard that reflects its make it hard for domestic firms to trade chafe under sanctions precisely because own supply and demand. For that to hap- abroad will deter foreigners from going they want to be free to spend their cash as pen it needs to attract overseas participa- deeply into China’s market. To gain access they see fit. So long as China quarantines tion. So, in a first forcommodities in China, to it they must open special onshore bank its financial system from the rest of the the contract, hosted on the Shanghai Inter- accounts. And they cannot use their profits world, talk of a petroyuan replacing the national Energy Exchange, is open to for- forany other investment in China. petrodollar will be premature. 7 76 Finance and economics The Economist March 31st 2018

Funeral finance ers, policies rarely pay out in full if the cus- tomer dies within two years of the start Death and the salesmen date. In some countries the money can only be spent with an insurer-approved provider. They can be terrible value. For some particularly poor policies, premiums are paid indefinitely but the payout is capped. Since most people live longer than they expect, it is not uncom- Insurers and undertakers profit from people who prepay theirfinal expense mon to pay farover the odds. Salesmen of- HEN are you thinking of dying?” ly, to increases in funeral prices. Unlike ten take advantage of people who are not “WasksJohn Cleese, a British comedi- other life-insurance policies, they typically very numerate, says James Daley of Fairer an, in a recent television ad. Dressed as the do not require a medical examination Finance. He cites a recent case of a woman Grim Reaper, he addresses the viewer as (though do often have an upperage limit of who paid £10,000 over the years into a he prepares a cup of tea. “Yourloved ones 85). This makes them especially attractive policy with a maximum £2,500 payout. could be left all alone and distressed and to people who are noteligible forother life- “At-need” funeral lending, a growing facing a whacking great bill,” he warns. His insurance products. Buyers of funeral business in America, is another subject of advice? Phone in and buy a funeral plan. plans, too, like the fact that they can visit a concern. Lenders provide emergency As populations age, ads of this sort, im- funeral director, write down their wishes loans via undertakers, typically charging ploring people to make financial prepara- and pay immediately. The main reasons 15-35% interest and sometimes lending to tions for their demise, are appearing on people buy them, says Gordon Swan of people who will struggle to repay. The both sides of the Atlantic. Some 1.3m Golden Charter, a British firm owned by good news for undertakers, one such lend- Britons now have a pre-paid funeral plan, independent funeral directors, are “emo- er brags, is that people who have been giv- up from just over 400,000 in 2005. An esti- tional and security-related, not financial”. en loans are more likely to spend more on mated 2.5m more have a funeral-insurance They like to “know that it’s all sorted”. a funeral, “meaning more sales for the policy.MillionsofAmericansprepaysome Except that often, it isn’t. A funeral plan funeral director”. or all oftheir funeral costs. rarely covers the full cost of a funeral. Bu- The average American funeral now rial plots (which can cost thousands of dol- Last rights costs nearly $9,000, according to the Na- lars) are almost never included. Nor are ex- Like engaged couples and first-time par- tional Funeral Directors Association tras such as headstones, flowers or fees for ents, recently bereaved people must take (NFDA). In Britain prices have risen by 5.5% death certificates. Many plans restrict big decisions at a time of heightened emo- on average each year over the past decade, when and where cremation or burial can tion. Insurance salesmen and funeral di- faster than inflation. Add to that stories in take place, and may charge steeply for any rectors hint that a “proper send-off”—a the press of bereaved people unable to af- changes. In Britain funeral plans are not swanky coffin, a grand headstone and fan- ford the burial of their loved ones, and the regulated, though customers often think cy catering—is a statement of love and re- scene is set for salesmen to proffer “peace they are. Last year Fairer Finance, a British spect. That idea is widely shared: haggling ofmind”. advocacy group, highlighted concerns about a funeral can feel like a display of Consumer advocates worry about the about mis-selling and the solvency of hard-heartedness. The best fix for the in- value of some pre-paid funeral packages some providers. The Financial Services dustry would be a move away from the and insurance schemes, however. They Compensation Scheme responded by idea thata funeral hasto be expensive, says wonder whether customers really know clarifying that it would not refund buyers Josh Slocum ofthe funeral-consumers’ alli- what they are signing up for. And since iffuneral plans went bust. ance in America. “The big missing piece in death is certain, why not simply save up so The lump-sum payout from funeral in- the market has been a critical, informed that a legacy can pay fora send-off? surance also comes with caveats. For start- consumer.” 7 The most straightforward option for people who want to spare relatives the cost of burying or cremating them is indeed to leave them money.Alegacy used to pay for a funeral will, in most places, be exempt from inheritance tax. A funeral plan, known as “pre-need” in America, is bought from a plan providerorundertaker, and paid for in a lump sum or instalments. An alternative is funeral insurance, often sold as “final expense” or “over-50s” insur- ance, which is also paid in instalments. Funeral insurance works like other life- insurance policies, with monthly premi- ums that vary with age and, sometimes, behaviour such as whether the buyer is a smoker. Whereas a pre-paid plan promises a funeral of a specific value (at their most basic they cover the undertaker’s bill), in- surance policies generally promise a fixed cash amount. This can typically be spent on somethingelse, should the pre-appoint- ed beneficiary decide. Such products can be useful, especially ifpayouts are indexed to inflation or, ideal- With all the trimmings The Economist March 31st 2018 Finance and economics 77 Free exchange Wakandanomics

“BlackPanther” resists one economic myth but perpetuates another The suit is matched by sneakers that silence the king’s footsteps, replacing sandals that his sister mocks (“What are those?”). The applications extend to weaponry and transport, such as the royal talon fighter that zips from Wakanda to Oakland, California, and the vibranium rail above which high-tech chariots levitate. “Wakanda’s upstream, midstream and downstream mineral sector are entirely controlled by Wakanda itself,” points out Ni- cola Woodroffe of the Natural Resource Governance Institute, a think-tankin London. It is as ifBotswana not only mined, cut and polished diamonds, but also designed and produced the world’s diamond necklaces, drills and bearings. It is as if Norway had a monopoly on oil, petrochemicals and plastics. Comics deal in fantasy and wish fulfilment. And it is the eco- nomic wish ofmany resource-dependent countries to master the more refined products that lie further along the value chain. In the minds of many policymakers, this is “a logical, natural pro- gression”, said Ricardo Hausmann, Bailey Klinger and Robert Lawrence of Harvard University in a paper in 2008. In pursuit of “beneficiation”, as it is called, policymakers often impose heavy taxes or even bans on the export ofraw, unprocessed minerals. In the film Wakanda goes further still, barring the export even HIS will require a quick lesson in global economics…bear of finished, manufactured items. Its economy prospers in seclu- “Twith me,” says Erik Killmonger, the muscular villain in sion and autarky.The sole supplier of vibranium and its applica- “Black Panther”, a long-running Marvel Comics series. In that tions, it is practically the sole buyer as well. It is as if Norwegians saga and the recent film it inspired, Killmonger and the Black were the only consumers of petrochemicals, or the people of Bo- Panther vie for the throne of Wakanda, a fictional African king- tswana the only wearers ofdiamond necklaces. dom little known to the outside world. Aland ofgreat wealth and In reality, rather than Marvel, forced beneficiation is rarely technological sophistication, it lends itself to several quick les- beneficial. Countries blessed with natural resources are not al- sons in economics. Bear with us. ways blessed with the combination of labour, capital, skill and The source of Wakanda’s riches is its “great mound” of vibra- infrastructure required to succeed further down the same pro- nium, a versatile ore left behind by a meteor strike, which can ab- duction chain. The best place to cut and polish diamonds is not sorb sound and motion. Like other deposits of natural treasure, Botswana, with its population of 2.3m, but coastal India, which Wakanda’s vibranium attracts some vicious intruders. But unlike can bring many more hands to bear. some other resource-rich countries, Wakanda has never suc- Countries often find it easier to move diagonally, rather than cumbed to outside foes. vertically,graduating into products that belong to different value That has helped it escape the “resource curse”, in which natu- chains but require similar mixes oflabour, capital and knowhow. ral riches keep a country poor by crowding out manufacturing or According to Mr Hausmann and his co-authors, only a third of ushering in predatory government. The curse is greatly feared. raw-sugar exporters also export confectionery. But two-thirds ex- But Wakanda’s success in eluding it is not as fantastical as widely port clothing. Only a third of raw gold and silver exporters also believed. Many resource-rich economies, including Botswana export jewellery and silverware. But over halfexport fish. and Norway, have prospered without superheroic help. Accord- ingto an article in 2015by BrockSmith ofMontana State Universi- Erikonomics ty,the 17 countries that discovered big oil, gas or diamond depos- Not every Wakandan supports the country’s economic isolation. its after 1950 achieved GDP per person 40% higher on average Indeed, the comic-book version of Killmonger (unlike his on- than ifthey had continued to evolve in line with their peers. screen counterpart) reveals a rival economic creed of his own. Belief in the resource curse may partly rest on a statistical illu- Boasting an MBA, he has turned his Wakandan birthplace into a sion. Countries that use natural riches well tend to enjoy vibrant corporate playground, includingwhat looklike a Burger Kingand economies of which resources are a diminishing share. As their a McDonald’s. After he lays his hands on Wakanda’s sacred GDP grows, the size oftheir mining, drilling or logging sector rela- heart-shaped herb, which enhances strength, speed and the tive to their GDP falls. They may then appear less “resource-rich” senses, his first thought is to find a way to market it. When the than stagnant economies that depend heavily on natural bounty. Black Panther tries to thwart his economic schemes by expropri- Though vibranium is woven into Wakanda’s flourishing econ- ating all foreign companies, Killmonger foresees the result: finan- omy,mining it is probably now a small part of GDP, especially as cial panic, retaliatory sanctions and economic chaos. its near-inexhaustible supply has presumably driven down its Fortunately for Wakanda’s economy, the Black Panther soon price, giving it a smaller weight in the national accounts. reverses course. After battling zombies, aliens, rogue bodyguards Wakanda’s stewardship of its natural resources is, however, and the Hulk, he turns his might to restoring market confidence. unusual in another respect. The country not only mines vibra- Whatsuperpowerormystical rite allowshim to pull off thishero- nium but designs and builds a dazzling variety of downstream ic feat? A peg to the American dollar. 7 applications. They include a nano-tech panthersuit that absorbs blows and bullets, then echoes the energy back against its source. Economist.com/blogs/freeexchange 78 Science and technology The Economist March 31st 2018

Also in this section 79 Education, genes and families 80 Patching broken hearts 80 Securing data markets

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

Beekeeping This work is ongoing, but it has also led to other research. The academics came to What’s the buzz? realise that if minehunting bees are to be deployed successfully by soldiers or civil- ian contractors, then the operators would need to have good beekeeping skills. Such skills, of course, can be taught but it would take a long time for novices to acquire the knowledge of an experienced beekeeper, A new app listens to what honeybees are complaining about let alone be in tune with the many ail- OU might expect to hearan angry buzz- the pollination ofcertain crops. ments that bees are susceptible to. This led Ying when honeybees have been dis- The development of the app has an un- in turn to the idea ofdevelopinga machine turbed. But some apiarists reckon they can usual back story. The idea came from one that could, like a seasoned beekeeper, lis- also deduce the condition of their bees of the many bee projects which Dr Bro- ten to the buzz of bees to help determine from the sounds they make. A steady hum menshenk and his colleagues are involved their health. could be the sign of a contented hive; a in. This workinvolves trainingbees to hunt For such an idea to work, it is necessary change in tone might indicate that the bees for landmines. Landmines leak traces of to attribute specific bee ailments to partic- are about to swarm. That intuition is about explosive chemicals into the ground and ular sounds. To do that, the university to be put to the test. Soon, beekeepers will the air. These tiny emissions can be de- tapped into its worldwide network of bee- be able to try to find out what is troubling a tected by well-trained sniffer dogs. Since keepers to find colonies that were known colony by listening to the buzz using a dogs can be heavy enough to detonate to sufferfrom only one problem, and to ob- smartphone app. mines, some instead use rats that have tain sound recordingsofbeesin those colo- The app, which is in the final stages of been trained to do the same thing. nies. The sounds that bees make come testing, has been developed by Jerry Bro- from their beating wings (although move- menshenk and a group of fellow bee ex- Explosive reaction ments by other parts of their bodies may perts at the University of Montana. It uses Training dogs and rats to find mines is slow also be involved). Having built up a data- a form of artificial intelligence to analyse and expensive. However, the Montana re- base of sounds, an artificial neural net- the sound that bees are making in order to searchers reckon they can train bees to find work, a form ofmachine learning used for deduce whether they are suffering from a mines in only a few hours. They do this by pattern recognition, was employed to help number ofmaladies. spiking a syrup feed with a small sample build algorithms that can match bee Those afflictions might provide an indi- of explosive chemicals. The bees then as- sounds to those associated with certain cation of an impending Colony Collapse sociate the scent of the chemicals with hive problems. Disorder (CCD), a mysterious syndrome food. This influences them to fly towards Rather than produce a stand-alone de- that has plagued beekeepers in North and around any source of the chemicals vice, the group developed a system which America and Europe. Unlike a natural when foraging fornectar. As there could be could be used on a smartphone. The result- swarm, in which a large group of worker some 20,000 bees flying, some means of ingapp, which is called Bee Health Guru, is bees leave with their queen to form a new trackingthem is required. To do that, the re- being produced by Bee Alert Technology, a colony, CCD involves bees suddenly disap- searchers use lidar, a form of radar, which company spun out from the university. pearing for no obvious reason, leaving they tune to the frequency of the bees’ To check on the health of a colony of their queen behind. Although recent re- wing beats. This way an electronic map bees it is usually necessary to open the ports suggest there has been a reduction in can be built up showing where the bees fly hive, a procedure which involves using bee die-offs, according to some estimates to, and thus where any landmines might smoke to pacify the bees. That is a time- 10m hives in America alone were wiped be. In tests with the American army, the re- consuming process for commercial bee- out by CCD from 2006 to 2013. Besides hit- searchers found bees were more than 97% keeping operations, some of which may tinghoneyproduction, thiscan also hinder accurate in locating landmines. have several thousand colonies to take 1 The Economist March 31st 2018 Science and technology 79

2 care of. With the app, all a beekeeper need and his colleagues found that a bee virus ents, the differences vanished. That makes do is to hold their smartphone near to the and a fungus from a species known as No- sense. Previous research has shown that hive’s entrance for30 seconds while it ana- sema were often prevalent in collapsed many ofthe traits that selective schools are lyses the sound of the bees. The app then honeybee colonies, and that it was likely screening for are, in part, inherited from lists any health problems which it detects. the two workingtogetherwere more lethal their parents. The tests being used by Seven different disorders will at first be to bees than either pathogen alone. schools appear to be inadvertently picking checked, says David Firth, a team member With the permission ofusers, data from up some ofthese genetic differences. who is helping to bring the app to market. the app can be shared with the researchers, The researchers then scored each child These include the presence ofhive beetle, a who plan thereby to update the software based on the results of science, maths and serious honeybee pest, parasitic mites and to detect otherdiseases and problems, says English GCSE exams, typically taken by all “foulbrood”, a bacterial infection which Dr Firth. This could include exposure to schoolchildren in England and Wales at can destroy bee colonies. pesticides, in particular a group called ne- the age of16. On average, the results of chil- The results might also point to early onicotinoids which are suspected ofharm- dren at private or grammar schools were a signs ofCCD, which is now regarded as be- ing honeybees (pesticide producers reject full GCSE grade higher than those at state ing caused by a combination of problems such claims). Finally, if all works to plan, schools. That suggests attendinga selective rather than one particular disease. In a bees will get to have their say about the school gives children a boost. Without cor- 2010 paper in PLoS One, Dr Bromenshenk things that cause them harm. 7 rectingforany otherfactors the researchers calculated the boost to be worth about 7.1% ofthe difference in GCSE results. Education policy But was this due to better teaching at these schools or an outcome of the selec- Selective evidence tion procedure? To see, the team adjusted the grades based on the results of each child’s test scores, family circumstances and genes. Once they did this, the gap be- tween the schools narrowed dramatically, with school type explaining just 0.5% of the difference in average GCSE grades. For Genes and backgrounds mattermore to exam results than the type ofschool any individual, genetics accounted for ARENTS in England are faced with a the innate ability and socio-economic about 8% of the difference, modest in com- Pchoice when their children are old background of pupils at selective schools parison with the many other factors in- enough to attend secondary school. They are taken into account. volved, such as socio-economic back- can pay to send their offspring to a private Astheyreportin npjScience ofLearning, grounds, test results at 11 and things still to school, which usually involves sitting an the researchers selected over 4,000 unre- be accounted for. entrance exam. Alternatively, in some lated individuals from the TwinsEarly De- The research comes with important ca- parts of the country, the child can sit an velopment Study, a large ongoing project veats. First, the thousands of genetic varia- eleven-plus exam and, provided they pass, gathering information from British twins tions so far linked to educational attain- attend a grammar school. Grammar born in the mid-1990s. That information ment are not well understood. Many of schools are publicly funded and tend to ex- includesDNA data and the resultsofintelli- these variations may not be linked to intel- cel in league tables of academic perfor- gence tests and exams. ligence at all. If, for instance, a weak blad- mance. The overwhelming majority At first the researchers calculated a ge- der leads a child to perform poorly in (about 90%) of British pupils, however, at- netic score taken for each child by adding timed exams or protuberant ears means tend non-selective state schools. up contributions from thousands ofminor bullying blighted their education, genetic Debate has raged for years over wheth- variations in their DNA that past studies variants forthese traits will show up as dis- er most selective schools do well because (including data from 300,000 individuals) advantageous. Stronger bladders and flat- they provide a better education than state have linked to educational attainment. Pu- ter ears will therefore confer advantages schools, or merely because they cream off pils attending grammar and private and better genetic scores. Second, had the the brightest and most privileged. Accord- schools had significantly higher genetic study also been conducted in a nation, ing to research led by Robert Plomin and scores than those in comprehensives. But such as Denmark, where wealth is more Emily Smith-Woolley, both of King’s Col- when those scores were adjusted to reflect evenly spread it is possible that genetics lege London, the educational benefits of each child’s test results at 11, as well as the would appear to play a bigger role in edu- selective schools largely disappear once education and occupations of their par- cational outcomes, because socioeconom- ic disparities would have a lesser impact. The research does not appear to sup- port “progressive eugenics”, as advanced by Toby Young, a journalist and a co-au- thor ofthe study. MrYoung has argued that poor people should be able to screen em- bryos free on the basis ofintelligence, ifthe technology becomes available. Setting aside ethical questions, many of the genet- ic differences that might appear to contrib- ute to social mobility (thinkflatter ears, etc) may not be associated with actual intelli- gence. Overall, such an idea might shift educational attainment by a few percent- age points at best. That is tiny compared with the advantages enjoyed by the chil- I blame my parents, one way or the other dren ofthe educated and wealthy. 7 80 Science and technology The Economist March 31st 2018

Cardiology deals allowing many cities to access data generated by its fleet of drivers. This helps Patching broken city planners understand traffic flows. Such dealscan be clunkyto setup, how- hearts ever. They tend to concentrate on datasets that hold obvious value. They may also in- volve data physically moving between one computerand another, which makes it A new way to help repairdamaged vulnerable to abuse, as in the recent scan- tissue dal surrounding Cambridge Analytica’s LTHOUGH the possibility is several use of Facebook data. New schemes, Ayears away, people may one day be created as part of the crypto-currency helped to recover from heart attacks by boom, aim to change all that. having specially engineered patches that One of these, called Fetch, was an- have been seeded with cardiac cells placed nounced on March 28th. It was founded by over the damaged tissue in their hearts. Humayun Sheikh and Toby Simpson, re- The idea is that these cell-impregnated spectively an investorin and early employ- patches will encourage the regeneration of ee of DeepMind, a British artificial-intelli- heart muscle. Laboratory studies using an- gence company that is part of Alphabet. imals suggest the advantages could be so Instead of sending blobs of data around great that it is worth the risk of the surgery the internet, Fetch allows an organisation needed to put such patches in place; they One day we can patch this to askquestions about datasets residing on might even provide an alternative to heart another organisation’s servers. The net- transplants. The problem is finding a suit- over them. As they had hoped, this soft- work will keep track of which datasets are able way to make the patches stay put. ened the scaffolds, which then moulded used to answer these questions, allowing Stitching is one possibility, but sutures themselves to the surrounding tissue and future queries to be directed to the right bring risks. They might block the blood subsequently remained in place. place automatically. A local weather-fore- supply to the vulnerable area, or injure Dr Dvir worried, however, that heat casting group, say, might have its algorithm nearby healthy tissue, or cause haemor- generated when the laser struck the gold tap into performance data from a power rhages. They might also introduce harmful would end up cookingnearby tissue. Toas- grid to improve its predictions (the fre- bacteria. Noris gluing—an obvious alterna- sess that risk he ran a second experiment. quency at which electricity moves in ca- tive to stitching—much better in practice. In this the team applied the scaffolds to the bles is related to the air temperature). Some glues stiffen with age. Some are hearts of living rats, fused them into place Fetch, which plans to launch itself in mildly toxic. Some are not porous enough with the laser and then studied those 2019, is a non-profit organisation and sees to permit cells to grow and move around. hearts for cell damage. They found none. itself as a custodian of this question-and- Toameliorate these problemsone ofthe re- More importantly,when they analysed the answer network. Payments to ask ques- searchers working on such patches, Tal patched hearts in situ for health and func- tions will be made in the form ofdigital to- Dvir of Tel Aviv University, in Israel, is de- tion, they noted that the scaffolds were not kens. Unlike some make-a-buck crypto veloping a new type of cardiac scaffold impeding them at all. schemes, Fetch says that its tokens will not that can secure a patch in place using light There is a long way to go, but Dr Dvir be available for public purchase until it is instead ofstitches or glues. does seem to have found a promising way up and running, and has demonstrated its Dr Dvir’s inspiration came from recent that one day could help people recover value. Fetch’s financial backer, Outlier Ven- workhis research group has carried out us- from heart failure. 7 tures, has bought future rights to these to- ing tiny particles of gold. These can be kens rather than shares in the company. warmed and manipulated by light from The idea is that as more organisations the red end of the spectrum, which travels Data markets make their data searchable, and more peo- well through tissue. He found himself ple pay to ask questions with tokens, the wondering whether he could create a sup- Exchange value value ofthe tokens will go up. portive scaffold bymixingalbumin, a com- Anotherproject, called IOTA, operates a mon protein, with tiny particles of gold similar scheme. Bosch, a German engi- and then sculpting the resultant material neering giant, thinks that it could use IOTA with a laser into a shape that would fit the to earn money from the data its domestic damaged tissue so snugly that neither appliances generate. It has bought IOTA to- New ways to trade some ofthe world’s stitches nor glue would be needed. kens through its venture-capital arm. vast amounts ofdata Tothis end, as he and his colleagues ex- These new data markets face stiff chal- plained recently in Nano Letters, they N 2016, according to Cisco, an American lenges. Maintaining individual privacy mixed albumin with a solution of beta- Itechnology group, the volume of data and monitoring questions to prevent cor- mercaptoethanol and trifluoroethanol, flowing through the internet each month porate leaks will be difficult. The cryptog- which softened the protein so that they passed a zettabyte, enough to fill some raphysecuringthe networkneedsto be air- could spin it into ribbonlike fibres. They 16bn 64GB iPhones. By2025 itwill be many tight. Perhaps the biggest challenge will be used these fibres to build cardiac scaffolds, times greater. Immeasurably more data sit convincing people to use them. The then soaked the scaffolds in suspensions outside the public internet on company take-up of similar efforts, such as Solid, de- of the golden particles for an hour, during servers. Most of these data are valuable in- veloped by the Massachusetts Institute of which period most of the particles at- formation, which means that people are Technology, and Maidsafe, a Scottish data- tached themselves to the scaffolds. After keen to trade it. sharing network, has been lacklustre. Nev- that, they added the cardiac cells. Typically, data deals are at present ertheless, Fetch says several large Euro- This done, they tried attaching the scaf- worked out between someone holdingthe pean firms are lined up to give it a go. And, folds to hearts taken from pigs. They laid information and those who want to ex- like other digital currencies, IOTA’s token them on the organs and played the laser tract insights from it. For instance, Uber has value has soared and fallen. 7 Books and arts The Economist March 31st 2018 81

Also in this section 83 The lives of refugees 83 Solar energy’s future 84 Johnson: The language market

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MLK, 50 years on and his rhetoric. His faith was grounded in personal Pietism, a doctrine that ignored Like a mighty stream the political origins of injustice. In a stu- dentpaperhe wrote thatalthough “the sin- fulness of man is often over-empha- sised…we must admit that many ofthe ills in the world are due to plain sin.” At More- house he began to question that stance; Martin LutherKing was assassinated halfa century ago. His speeches combined Crozer Theological Seminary in Upland, folkreligion, theology and the hard-earned wisdom ofhis campaigns Pennsylvania, where in 1951 he would be IDWAYthrough Zora Neale Hurston’s tive explanation of the controversy might valedictorian of his graduating class, fur- Mnovel of 1939, “Moses, Man of the focus on the dual heritage he shared with thered his education and his thinking. He Mountain”, Moses tells the Israelites that Hurston. Like her, King straddled two encountered the writings of Walter Raus- God has finally forced Pharaoh to release worlds, one learned and formal, the other chenbusch, a Baptist pastor and central fig- them. The people are quiet; but on every spontaneous and communitarian. Com- ure in America’s social-gospel movement. mind are the words, “Free at last! Free at bined with the wisdom hard-earned in his At Crozer and during his subsequent doc- last! ThankGod Almighty I’m free at last.” campaigns, this fertile combination toral studies in Boston he delved into the Hurston was the African-American shaped the oratory forwhich he is remem- Christian Realism of Reinhold Niebuhr, a daughter of a poorly educated Alabama bered 50 years after his death. theologian who believed that Christians Baptist preacher, but she had studied an- committed to justice must sometimes thropology at Columbia University. Folk The iron feet of oppression wield political power to achieve it. religion shaped her childhood; elite educa- Hurston may have picked up “Free at last!” Ifhis childhood instilled King’s beliefin tion moulded her career. Twenty-four from one ofthe flourishes forwhich her fa- a loving God, Niebuhr’s work tempered years after her book was published, at the ther was known, or from a sermon by an- his idealism and contributed to his strategy March on Washington of August 28th 1963, other African-American preacher. Like- of mass mobilisation. In time his confi- Martin Luther King looked out from the wise King might himself have heard the dence in the capacity of love to overcome Lincoln Memorial over a sea of oppressed words at Ebenezer Baptist Church in Atlan- white resistance to black freedom suc- people (the date is incised on the memori- ta, where his own father was pastor, or cumbed to the hardened hearts and cruel- al’s marble steps). His speech, with its from his preacher-grandfather, or at a cha- ty he witnessed in Montgomery, Birming- dream of a post-racial gathering around pel service at Morehouse College, the bea- ham and Selma. He saw that the “the table of brotherhood”, is one of the con for aspiring black students where he benevolence of good people could not, by most celebrated in history. After quoting was an undergraduate in the mid-1940s. itself, secure social change. Even the non- Isaiah and Amos, Hebrew prophets well In the tradition of both black and white violent tactics of Mohandas Gandhi tem- acquainted with injustice, he concluded southern folk preaching, ministers usually porarily struck him as simplistic when with a crescendo: “Free at last! Free at last! spoke extemporaneously to unlettered white terrorists threatened his life. His in- ThankGod almighty we are free at last!” congregants, who expected the Spirit of sistence, in “I Have a Dream”, on the “fierce King attributed the words to “the old God to impartmessagesofencouragement urgency of now”, his approbation of “the Negro spiritual”. But this was not his only and hope. Manuscripts represented the whirlwinds of revolt” and disdain for “the borrowing. In 1988 an archivist discovered preacher’s preparation, which was subor- tranquillising drug of gradualism” stem a troubling pattern in his scholarship; dinate to God’s inspiration. Repetition of a from this understanding. eventually it emerged that 40 of his gradu- memorable phrase was a sign of respect, When he began his pastorate at Dexter ate papers contained plagiarised material. not duplicity. There was no place in ser- Avenue Baptist Church in Montgomery, a He was posthumously subjected to racist mons forsources or footnotes. block from Alabama’s capitol, a sophisti- rants, some demanding that Boston Uni- Elite academic culture imposed differ- cated note crept in. His small congregation, versity rescind his doctorate. An alterna- ent standards, refining both King’s beliefs mostly drawn from Alabama State Univer-1 82 Books and arts The Economist March 31st 2018

2 sity,was among the city’s elite. In 1955, two My friends, I want it to be known that we’re months after receiving his doctorate, he going to work with grim and bold determi- carefully wrote a sermon on “Worship” in- nation to gain justice on the buses of this ci- tended to impress his well-educated pa- ty…If we are wrong, the Supreme Court of rishioners. Proper biblical worship, he told this nation is wrong. If we are wrong, the constitution of the United States is wrong. If them, combined “the rich and the poor,the we are wrong, God Almighty is wrong. If we white-collar worker and the common la- are wrong, Jesus of Nazareth was merely a bourer…in a vast unity”. After all, “we are utopian dreamer that never came down to all the children ofa common father”: earth. If we are wrong, justice is a lie. Love has no meaning. And we are determined Worship is as natural to the human family as here in Montgomery to work and fight until the rising of the sun is to the cosmic order justice runs down like water, and righteous- …Buddhism, a religion theoretically with- ness like a mighty stream. out a God, would impress us as a religion Between the Montgomery bus boycott in that excludes worship; yet in every country where Buddhism is dominant, worship is 1955 and the Birmingham campaign of present. Confucius urged his followers not to 1963, King perfected the marriage of Gan- have much to do with the gods; yet immedi- dhian non-violence and public activism. atelyafterhisdeath hisfollowersdeified him Bull Conner, Birmingham’s public-safety and today millions worship him. commissioner, and George Wallace, Ala- bama’s governor, became his foils, inad- These elements—academic, political and vertently helping to shame cautious politi- spiritual—fused after black religious lead- cians, such as John and Bobby Kennedy The whirlwinds of revolt ers drafted a reluctant King to head the and Lyndon Johnson, into intervening to Montgomery Improvement Association. stop the carnage. In a city where white ter- in the vicinity of the Temple in Jerusalem. In December1955, fourdays after the arrest rorists had bombed dozens ofsynagogues, Afterbeingreunited with his parents, Jesus of Rosa Parks on a Montgomery bus (and churches and homes, Kingshowed that ab- explained, “I must be about my father’s with only 20 minutes to prepare), he of- stract Christian charity was no match for business.” King added his own commen- fered an audience of 5,000 at Holt Street dynamite. The coercive forces of evil had tary, at once liturgical and demotic: Baptist Church a sermon forged by Nie- to be met with the coercive power offeder- buhr’sChristian Realism, butembedded in al courts, Congress, the White House, even Don’t worry about your children; they’re go- the cadence of the black church. That ser- the federalised National Guard. ing to be all right. Don’t hold them back if mon triggered the first civil-rights move- they want to go to jail. These young people ment in the Deep South in halfa century. Up to the mountain must be about their father’s business. And they are carvinga tunnel ofhope through the Intended to find a mean between mili- His sermons still evoked the Exodus narra- great mountain of despair…And they will tancy and non-violence, the sermon could tive. But Conner, Wallace and Jim Clark, bring to this nation a quality of idealism it so have chilled the movement or spun it into the sheriff who brutalised the marchers at deeply needs…Keep this movement going. anarchy. “There comesa time when people Selma, did not let the people go. By the Keep this movement rolling…If you can’t fly, get tired ofbeing trampled over by the iron time he wrote “A Realistic Look at Race Re- run. If you can’t run, walk. If you can’t walk, feet ofoppression…We are here,” Kingpro- lations”—an essay based on a speech he crawl. But by all means keep moving. claimed, “because we’re tired now.” He gave in 1956—Kingwas no longerrelying on firmly eschewed bloodshed. “The only individual conversion. Instead, in terms If Winston Churchill “mobilised the Eng- weapon that we have in our hands,” he in- that reflected the street as much as the sem- lish language and sent it into battle”, as JFK sisted, “isthe weapon ofprotest.” Indubita- inary, the “walls of injustice” must be put it, King appropriated the language of bly, however, protest was itselfan arsenal: “crushed by the battering-rams of histori- Zion to dispatch armies of peaceful protes- cal necessity…And the guardians of the ters in pursuit oftheir freedom. status quo are always on hand with their In 1967, exactly a year before his assassi- oxygen tents to preserve the dying order.” nation, King spoke to Clergy and Laity By 1963 his vision of the “beloved com- Concerned, an activist group, at Riverside munity”, or ideal society, had fully Church in New York. There he broadened evolved. He knew that direct action—moti- his indictment ofAmerican injustice, look- vated by love and committed to non-vio- ing beyond southern racism to domestic lence—must employ confrontation in the poverty and foreign conflicts. In one of his name of reconciliation and redemption. best prepared and professionally publi- That year his “Letter from Birmingham cised speeches, he referred to President Jail” stressed the failure of even the most Johnson’s “War on Poverty” as a “shining enlightened white ministers and rabbis to moment” in American history: abandon tokenism on behalf of actual jus- tice. From his cell he wrote: “History is the Then came the build-up in Vietnam, and I long and tragic story of the fact that privi- watched this programme broken and evis- leged groups seldom give up their privi- cerated as if it were some idle political play- leges voluntarily.” thing of a society gone mad on war…I knew that America would never invest the neces- Realisingthat mass mobilisation would sary funds or energies in rehabilitation of its be difficult in Birmingham because com- poor so long as adventures like Vietnam con- pany bosses could penalise the protesters, tinued to draw men and skills and money King launched the Children’s Crusade. like some demonic, destructive suction tube. Speaking without notes at a church filled with parents anxious about their chil- Despite King’s increasing militancy, he dren’s safety, he told the story of 12-year- ended this homily with a sweeping con- Drum-major for justice old Jesus, separated from Mary and Joseph demnation of war, arguing that “a true rev-1 The Economist March 31st 2018 Books and arts 83

2 olution ofvalues” would “say ofwar: ‘This en almost to death in prison, used as a hu- she sees as the indignity of coerced grate- way ofsettling differences is not just’.” man shield by Serb fighters and blown up fulness to an often intolerant society. A year later, on the night before his by a Bosnian rocket-launcher. He then The vast majority of refugees end up in death, his rhetoric came full circle. Speak- walked through barren countryside for six poor countries; they are not represented in ing to a mass rally in the familiar confines days to besieged Sarajevo; eventually he this volume. Still, the collection succeeds of an African-American church in Mem- found his way to America, where he suf- in demonstrating that this dispersed com- phis, he did not quote Niebuhr. Instead, in fered near-suicidal post-traumatic stress. munity in some ways resembles other na- the language and biblical rhythm of black The best contributions approach such tions. It has its founding myths, but its citi- folk-Christianity, he again turned to Exo- calamities from unexpected angles. Ms zens all have their own tragedies, victories dus to explain the failures and dreams of Bhutto’s report ofherexperience in a virtu- and pain—and each has a story to tell. 7 American democracy: al-reality art installation, which simulates an illegal crossing ofthe Mexican border, is Like anybody, I would like to live a long life compellingly weird. The outstanding piece Solar energy …But I am not concerned with that now. I is by Maaza Mengiste, an Ethiopian-Ameri- just want to do God’s will. And he’s allowed can who gives a lyrical, erudite and unset- me to go up to the mountain. And I’ve looked Rays of hope tling reflection on refugees as Lazarus fig- over. And I’ve seen the promised land. I may not get there with you. But I want you to ures whose existence is forever defined by know tonight, that we, as a people, will get to a single miracle. the promised land. Out of these diverse histories, shared motifs emerge, like recurring dreams in a Taming the Sun: Innovations to Harness He was 39 years old. The next day,April 4th collective unconscious. The most striking Solar Energy and Power the Planet. By 1968, as he stood on the balcony of the Lor- is the ensemble of ghosts that haunt the Varun Sivaram. MIT Press; 392 pages; $29.95 raine Motel, King was shot and killed. 7 book: ghosts of those who perished on the and £24.95 journeys it describes, ghosts of irrepress- ible memories, plus the sense that the refu- N 1954 the New York Times reported on a Refugee lives gees themselves are unwelcome spectres. Ibreakthrough in solar photovoltaic (PV) In his essay Vu Tran observes that refugees technology that could lead to “the harness- Out of many, some are often seen as invaders from obscure ing of the almost limitless energy of the worlds, bearing traces of past lives. Like sun”. American researchers had discov- phantoms they are either invisible and for- ered that silicon transistors, the building gotten, or conspicuous and threatening. As blocks of computers, could also generate in many ghost stories, the menacing pres- electricity when hit by sunlight. ence often turns out to be a projection of The same year, however, Lewis Strauss, The Displaced: Refugee Writers on Refugee the beholder’s own neuroses. chairman of America’s Atomic Energy Lives. Edited by Viet Thanh Nguyen. Abrams The headline politics that feed on such Commission, made a balderdash predic- Press; 192 pages; $25 and £18.99 fears remain largely in the writing’s back- tion that nuclear power would soon be- F THE world’s 65.6m forcibly displaced ground. In an encomium to a pan-Latin- come “too cheap to meter”. In the atomic Ipeople formed their own country, it American supermarket in North Carolina, frenzyofthe 1950sAmerica unleashed vast would be the 21st-largest—smaller than Ariel Dorfman rejoices in the colour and R&D support for nuclear energy. Almost at Thailand, but bigger than France. One of variety of the “undocumented food”, a be- birth, the silicon solar cell was gazumped the many things that this imaginary nation nevolent invading army of burritos and by a rival non-fossil technology. For de- lacks, in comparison with others, is a liter- taco bowls. For most of the contributors, cades it lay in nuclear’s shadow. ary canon. In this collection of 17 essays however, politics is personal, never more No longer. Several recent books have (one consisting of cartoons) by writers starkly than for Porochista Khakpour, who celebrated a solar renaissance, as the cost who were forced to leave their homes, Viet was born in Iran. Her indictment ofAmeri- of electricity generated by silicon PV has Thanh Nguyen, a Pulitzer-winning novel- can racism is withering, spitting out what become competitive with that from fossil ist and himself a Vietnamese refugee to fuels and cheaper than nuclear power. America, begins to assemble one. In so do- “Taming the Sun” is not one ofthem. ing he gives ordinary Westerners a heart- Instead Varun Sivaram of the Council wrenching insight into the uprooted lives on Foreign Relations, a think-tank, issues a led in their midst. timely warning that solar power could To judge by the roster of contributors, stagnate as abruptly as nuclear did as a this disparate nation consists mostly ofdis- share of global energy in the 1990s, with tinguished literati. But though their stories dire consequences for the planet. Unless, often end in coastal, cosmopolitan Ameri- that is, there is a triple focus on improving ca, theybegin amid distantviolence, perse- technology, new financial structures to cution and despair. This original trauma is backit and more resilient energy systems. the thread that binds their testimonies, The book is not gloomy. It lays out the which stretch from 1940s Germany to pre- history, promise and pitfalls of solar tech- sent-day Zimbabwe. nology with an easy-going lack of wonk- Some are grimmer than others. Fatima ishness. But it offers a sobering message Bhutto, niece of a former Pakistani prime that may be as prescient—and as read- minister, admits her displacement was able—as Robert Shiller’s “Irrational Exu- “comfortable”, if born of peril. This could berance” was before the dotcom and hous- not be said of the “Candide-like” succes- ing crises ofthe 2000s. sion of horrors that befell one Bosnian fu- Mr Sivaram is a good guide to a sector gitive from the Balkan wars, recounted by that, for all the attention it gets, generates the novelist Aleksandar Hemon. Mr He- just 2% of the world’s electricity. He has mon details how his compatriot was beat- Farewell, Sarajevo worked on the front-line as a grunt in a sil-1 84 Books and arts The Economist March 31st 2018

2 icon-waferfactoryand a scientistat Oxford More recently the ongoing decline in installed, the less of the electricity that it University, with a startup in Silicon Valley, the cost ofsolar panels has been caused by produces in the middle of the day is need- and as an energy adviser to the mayor of mass production in China; but this is incre- ed. Unless it can be stored, the more costs it Los Angeles. His father lost a fortune in the mental, rather than revolutionary, change. imposes on the rest ofthe system—in other industry. He has studied with (and affec- Microchip costs have fallen a million times words, the lower the value of solar be- tionately describes) some ofthe boffins de- faster than those of solar panels. And Chi- comes. As solar penetration rises, the costs vising the future ofsolar technology. na has an incentive to impede the develop- of silicon solar cells will not fall fast None of these anecdotes distracts from ment of breakthrough technologies, exac- enough to outpace this drop in value. his central argument—that the silicon cell, a erbating the underlying problem. Hence the solution: new technologies worthy workhorse of the solar revolution, Critics might argue that there is nothing and business models, from America to In- can carry the burden only so far. He con- wrong with incremental progress; the dia and Africa. Some, such assolarfarms in tends that improvements in a cell’s effi- more silicon solar is deployed, the more its outer space, may sound outlandish. But ciency, ie, the extent to which it converts performance will improve. Mr Sivaram ar- the more meticulously Mr Sivaram exam- sunlight into energy, stopped driving costs gues the reverse. He uses the term “value ines them, the more convincingly they down as farbackas 2001. deflation” to explain how the more solar is point to a solar-powered future. 7 Johnson Build it and they will come

Motivation must come before means in getting people to learn yourlanguage EMARKABLY, a French president had However, it has recovered. As Germany’s Rnever addressed the Académie Fran- economy roared back from a long post-re- çaise before. The French have a soft spot unification slump, German-learning in- for authority, and the mighty presidency creased by 4% between 2010 and 2015 (a (atypical for Europe) and the academy lot, in historical terms). Perhaps more sur- (founded to guarantee the purity of the prisingly, a country once considered stol- French language) are both symbols of id and conservative has developed a rep- that. So when Emmanuel Macron told the utation for cool. Berlin is seen as the academicians—modestly known as les hippest capital in Europe. German is both immortels—of his ambitions to revitalise useful and attractive. French around the world, it was a very French could combine all these attri- French affairindeed. butes. Like English, it is found around the In some ways Mr Macron constitutes a world. Like Chinese, it is economically break with Gallic tradition. He speaks important: French-speaking countries ac- English not only well but gladly, in con- count for 8.4% of global GDP. And like trast to his predecessors, François Hol- Germany recently, France has long had lande (whose ropy English was the butt of cultural cachet. How, then, to revive the jokes) and Jacques Chirac (who often optimism forthe language itself? pointedly refused to talk in English, Much ofthe workwill be done outside though he could). But in the best French France, and by growth in Africa in partic- tradition, Mr Macron spoke with passion ular. Mr Macron knows this; after an ini- about French and confidence in its future. tial announcement, in Burkina Faso, that He announced more money for the Alli- English simply because there are already a he wanted to give new vigour to the ance Française, for example, to teach the lot ofpeople to speakit with—a majority of French-speaking world, he was seen as language, and more support for teaching them, today, outside the chief Anglophone neocolonialist. His speech at the Acad- French to refugees who have arrived in countries. A Swede learns English to do emy was better, conceding that French France. His aim is to see French go from business in Brazil. This is why, despite the had “emancipated itself from France”. He being the world’s fifth-most-spoken lan- irony, English will probably still dominate told the Academy that it was high time guage to its third. the European Union after Brexit. French schools began teaching literature It is very French to think that this can Or consider Chinese, a language of written in French outside France. be accomplished by determined state ac- booming interest to foreign learners. It is in By one projection, in 2050 there will tion. Yet people don’t learn a language be- a way the opposite of English: the vast ma- be 700m French-speakers—80% of them cause somebody has built a fancy new jority of its speakers live in just one coun- in Africa. To keep that forecast on track school nearby. These days there are plen- try. But what a country. China’s economy and keep Africans speaking French—not ty of language-learning options, especial- will soon be the world’s largest, and its switching to English, as Rwanda did— ly online. The cost of learning a language people still do notspeakverygood English. France would be wise to continue this ap- is mainly measured not in money but in Learning Chinese is an obvious way to ex- proach of fraternité rather than autorité time. You have to give someone a reason ploit an unrivalled economic opportunity. with its African friends, by helping those to do the work, before even bothering Finally, take German. In the 19th cen- countries develop economically. And the with the means and opportunity. tury it was a posh language of science and best thing Mr Macron could do at home is Think about the rivals to French. One scholarship, expected ofall educated Euro- release the talents of the French people. is English. Americans and Britons might peans. Early Zionists pondered making it Reforms that get the French economy think foreigners learn English because the national language of the Jewish state. growing as Germany’s has done would their culture is appealing. But if that was But two wars, horrific atrocities and four do more than all the shiny new French- ever true, it no longer is. Foreigners learn decades of division wrecked its image. teaching schools in the world. Publications 85

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The Economist March 31st 2018 Tenders 88 Economic and financial indicators The Economist March 31st 2018

Economic data % change on year ago Budget Interest Industrial Current-account balance balance rates, % Gross domestic product production Consumer prices Unemployment latest 12 % of GDP % of GDP 10-year gov't Currency units, per $ latest qtr* 2018† latest latest 2018† rate, % months, $bn 2018† 2018† bonds, latest Mar 27th year ago United States +2.5 Q4 +2.5 +2.8 +4.3 Feb +2.2 Feb +2.3 4.1 Feb -466.2 Q4 -2.7 -4.5 2.84 - - China +6.8 Q4 +6.6 +6.6 +7.2 Feb +2.9 Feb +2.3 3.9 Q4§ +172.0 Q4 +1.3 -4.0 3.66§§ 6.27 6.89 Japan +2.0 Q4 +1.6 +1.4 +2.5 Jan +1.5 Feb +1.0 2.4 Jan +200.1 Jan +3.7 -4.9 nil 106 111 Britain +1.4 Q4 +1.6 +1.5 +1.6 Jan +2.7 Feb +2.6 4.3 Dec†† -118.1 Q3 -4.4 -2.8 1.50 0.71 0.80 Canada +2.9 Q4 +1.7 +2.2 +4.0 Dec +2.2 Feb +1.9 5.8 Feb -49.4 Q4 -2.6 -1.8 2.14 1.29 1.34 Euro area +2.7 Q4 +2.4 +2.5 +2.7 Jan +1.1 Feb +1.5 8.6 Jan +464.3 Jan +3.1 -1.0 0.50 0.81 0.93 Austria +2.9 Q4 +1.6 +2.2 +6.1 Jan +1.8 Feb +1.8 5.5 Jan +8.5 Q3 +2.0 -0.8 0.63 0.81 0.93 Belgium +1.9 Q4 +2.1 +1.9 +6.6 Jan +1.5 Feb +1.8 6.6 Jan -3.9 Sep -0.3 -1.5 0.79 0.81 0.93 France +2.5 Q4 +2.8 +2.2 +1.2 Jan +1.2 Feb +1.5 9.0 Jan -15.5 Jan -0.9 -2.7 0.76 0.81 0.93 Germany +2.9 Q4 +2.4 +2.5 +5.5 Jan +1.4 Feb +1.7 3.6 Jan‡ +311.8 Jan +7.8 +0.8 0.50 0.81 0.93 Greece +1.8 Q4 +0.4 +1.6 -1.7 Jan +0.1 Feb +0.8 20.8 Dec -1.7 Jan -1.4 -0.2 4.37 0.81 0.93 Italy +1.6 Q4 +1.3 +1.5 +4.0 Jan +0.5 Feb +1.1 11.1 Jan +57.0 Jan +2.6 -2.0 1.87 0.81 0.93 Netherlands +2.9 Q4 +3.1 +2.8 +7.1 Jan +1.2 Feb +1.5 5.0 Feb +84.9 Q4 +9.8 +0.7 0.57 0.81 0.93 Spain +3.1 Q4 +2.7 +2.8 +4.0 Jan +1.2 Mar +1.5 16.3 Jan +25.7 Dec +1.6 -2.6 1.20 0.81 0.93 Czech Republic +5.1 Q4 +2.1 +3.3 +5.5 Jan +1.8 Feb +2.3 2.4 Jan‡ +1.9 Q4 +0.9 +0.5 1.92 20.5 25.0 Denmark +1.2 Q4 +3.9 +1.9 +4.7 Jan +0.6 Feb +1.3 4.1 Jan +24.5 Jan +7.8 -0.7 0.55 6.01 6.88 Norway +1.4 Q4 -1.1 +1.8 -0.7 Jan +2.2 Feb +2.0 4.0 Jan‡‡ +20.2 Q4 +5.5 +4.9 1.96 7.71 8.49 Poland +4.3 Q4 +4.1 +3.8 +7.4 Feb +1.4 Feb +2.4 6.8 Feb§ nil Jan nil -2.7 3.22 3.40 3.94 Russia +1.8 Q3 na +1.8 +1.3 Feb +2.2 Feb +3.3 5.0 Feb§ +40.2 Q4 +2.7 -1.0 8.13 57.4 57.1 Sweden +3.3 Q4 +3.5 +2.7 +9.2 Jan +1.6 Feb +1.9 6.3 Feb§ +17.1 Q4 +4.2 +0.5 0.74 8.23 8.81 Switzerland +1.9 Q4 +2.4 +2.0 +8.7 Q4 +0.6 Feb +0.6 2.9 Feb +66.6 Q4 +9.7 +0.8 0.09 0.95 0.99 Turkey +11.1 Q3 na +3.9 +12.9 Jan +10.3 Feb +9.9 10.4 Dec§ -51.6 Jan -5.2 -2.1 12.93 3.99 3.61 Australia +2.4 Q4 +1.5 +2.8 +1.6 Q4 +1.9 Q4 +2.2 5.6 Feb -32.3 Q4 -1.8 -1.2 2.66 1.30 1.31 Hong Kong +3.4 Q4 +3.3 +2.8 +0.6 Q4 +3.1 Feb +2.0 2.9 Feb‡‡ +14.3 Q4 +4.6 +1.1 2.03 7.85 7.77 India +7.2 Q4 +6.6 +7.2 +7.5 Jan +4.4 Feb +4.8 6.1 Feb -39.1 Q4 -2.0 -3.5 7.33 65.0 65.4 Indonesia +5.2 Q4 na +5.4 -0.4 Jan +3.2 Feb +3.5 5.5 Q3§ -17.3 Q4 -1.9 -2.3 6.79 13,742 13,327 Malaysia +5.9 Q4 na +5.5 +3.0 Jan +1.4 Feb +2.9 3.4 Jan§ +9.4 Q4 +2.8 -2.8 3.95 3.88 4.43 Pakistan +5.7 2017** na +5.4 +9.4 Jan +3.8 Feb +5.7 5.9 2015 -15.7 Q4 -5.0 -5.6 8.80††† 115 105 Philippines +6.6 Q4 +6.1 +6.1 +21.8 Jan +3.9 Feb +4.0 5.3 Q1§ -2.5 Dec +0.1 -1.9 5.99 52.3 50.3 Singapore +3.6 Q4 +2.1 +3.0 +8.9 Feb +0.5 Feb +0.9 2.1 Q4 +61.0 Q4 +19.5 -0.7 2.38 1.31 1.40 South Korea +2.8 Q4 -0.8 +2.9 +4.6 Jan +1.4 Feb +1.9 4.6 Feb§ +75.8 Jan +5.1 +0.7 2.68 1,070 1,123 Taiwan +3.3 Q4 +4.3 +2.4 -1.9 Feb +2.2 Feb +1.3 3.7 Feb +84.1 Q4 +13.6 -0.8 1.03 29.1 30.5 Thailand +4.0 Q4 +1.8 +4.0 +3.4 Jan +0.4 Feb +1.3 1.3 Jan§ +49.3 Q4 +10.6 -2.3 2.42 31.2 34.6 Argentina +3.9 Q4 +3.9 +3.1 +4.2 Feb +25.5 Feb +20.3 7.2 Q4§ -30.8 Q4 -4.8 -5.6 4.19 20.2 15.6 Brazil +2.1 Q4 +0.2 +2.6 +5.7 Jan +2.8 Feb +3.5 12.2 Jan§ -7.8 Feb -1.3 -7.0 7.87 3.33 3.12 Chile +3.3 Q4 +2.6 +3.0 +5.3 Jan +2.0 Feb +2.6 6.5 Jan§‡‡ -4.1 Q4 -0.2 -2.2 4.47 606 661 Colombia +1.6 Q4 +1.1 +2.5 +1.0 Jan +3.4 Feb +3.3 11.8 Jan§ -10.4 Q4 -2.9 -2.0 6.36 2,780 2,899 Mexico +1.5 Q4 +3.2 +2.1 +0.9 Jan +5.3 Feb +4.2 3.3 Feb -18.8 Q4 -2.0 -2.3 7.39 18.4 18.9 Peru +2.2 Q4 -1.3 +3.7 +0.2 Jan +1.2 Feb +1.4 8.7 Feb§ -2.7 Q4 -1.3 -3.5 na 3.22 3.24 Egypt +5.2 Q3 na +5.4 +11.1 Jan +14.4 Feb +16.9 11.3 Q4§ -12.2 Q3 -4.5 -9.7 na 17.6 18.1 Israel +2.9 Q4 +3.6 +3.9 +6.9 Jan +0.2 Feb +0.9 3.7 Jan +10.5 Q4 +3.5 -2.4 1.66 3.49 3.64 Saudi Arabia -0.7 2017 na +1.0 na +3.0 Feb +4.4 5.8 Q3 +12.4 Q3 +4.0 -7.2 na 3.75 3.75 South Africa +1.5 Q4 +3.1 +1.5 +1.5 Jan +4.0 Feb +5.0 26.7 Q4§ -8.6 Q4 -2.7 -3.6 7.90 11.6 12.4 Source: Haver Analytics. *% change on previous quarter, annual rate. †The Economist poll or Economist Intelligence Unit estimate/forecast. §Not seasonally adjusted. ‡New series. **Year ending June. ††Latest 3 months. ‡‡3-month moving average. §§5-year yield. †††Dollar-denominated bonds. The Economist March 31st 2018 Economic and financial indicators 89

Markets % change on Global mergers and acquisitions $trn Dec 29th 2017 Mergers and acquisitions announced so Q1 Q2 Q3 Q4 Index one in local in $ far this year have been worth $1.1trn, Mar 27th week currency terms according to Dealogic, a data provider. 5 United States (DJIA) 23,857.7 -3.5 -3.5 -3.5 This is 42% more than the value of deals China (SSEA) 3,316.4 -3.8 -4.2 -0.8 Japan (Nikkei 225) 21,317.3 -0.3 -6.4 +0.4 made in the first three months of 2017 4 Britain (FTSE 100) 7,000.1 -0.9 -8.9 -4.3 and is set to be the strongest first-quar- Canada (S&P TSX) 15,216.2 -2.6 -6.1 -8.9 ter result on record. Improving global Euro area (FTSE Euro 100) 1,160.0 -2.6 -4.1 -0.6 growth and rising business confidence 3 Euro area (EURO STOXX 50) 3,317.0 -2.8 -5.3 -1.9 provide an explanation, as does the Austria (ATX) 3,421.6 -1.8 nil +3.7 reduction in the American corporate-tax Belgium (Bel 20) 3,824.4 -2.8 -3.9 -0.4 rate. The biggest deal so far this year is 2 France (CAC 40) 5,115.7 -2.6 -3.7 -0.2 the acquisition by Cigna, an American Germany (DAX)* 11,970.8 -2.7 -7.3 -4.0 insurer, of Express Scripts, a pharmacy- 794.6 -1.4 -1.0 +2.6 Greece (Athex Comp) benefit manager, for $70bn. Regulatory 1 Italy (FTSE/MIB) 22,209.8 -2.6 +1.6 +5.3 AT&T Netherlands (AEX) 525.8 -1.8 -3.5 nil hurdles remain, though. ’s $108bn Spain (IBEX 35) 9,473.6 -2.1 -5.7 -2.3 bid for Time Warner, announced back in 0 1,115.1 -0.5 +3.4 +7.5 2016, still awaits completion pending the Czech Republic (PX) 2007 08 09 10 11 12 13 14 15 16 17 18* Denmark (OMXCB) 882.1 -1.8 -4.8 -1.4 outcome of a court case. Source: Dealogic *To March 27th Hungary (BUX) 37,301.0 -1.7 -5.3 -2.6 Norway (OSEAX) 907.8 +0.8 +0.1 +6.5 Poland (WIG) 59,077.7 -1.5 -7.3 -5.0 Other markets The Economist commodity-price index Russia (RTS, $ terms) 1,244.0 -1.0 +7.8 +7.8 2005=100 % change on % change on Sweden (OMXS30) 1,510.1 -2.7 -4.2 -4.3 Dec 29th 2017 one one Switzerland (SMI) 8,638.4 -2.4 -7.9 -5.0 Index one in local in $ Mar 20th Mar 26th* month year Turkey (BIST) 116,196.5 -0.2 +0.7 -4.1 Mar 27th week currency terms Dollar Index Australia (All Ord.) 5,943.7 -1.6 -3.6 -4.3 United States (S&P 500) 2,612.6 -3.8 -2.3 -2.3 All Items 150.0 150.6 -2.9 +4.2 Hong Kong (Hang Seng) 30,790.8 -2.4 +2.9 +2.5 United States (NAScomp) 7,008.8 -4.8 +1.5 +1.5 Food 156.3 157.1 +0.1 +2.2 India (BSE) 33,174.4 +0.5 -2.6 -4.2 China (SSEB, $ terms) 324.7 -1.5 -5.0 -5.0 Indonesia (JSX) 6,209.3 -0.5 -2.3 -3.5 Japan (Topix) 1,717.1 nil -5.5 +1.3 Industrials Malaysia (KLSE) 1,862.5 +0.3 +3.7 +7.7 Europe (FTSEurofirst 300) 1,438.4 -2.1 -6.0 -2.6 All 143.4 143.7 -6.1 +6.6 Pakistan (KSE) 45,004.2 +1.6 +11.2 +6.5 World, dev'd (MSCI) 2,069.1 -2.0 -1.6 -1.6 Nfa† 138.9 137.9 -3.2 -2.7 Singapore (STI) 3,439.4 -2.1 +1.1 +3.0 Emerging markets (MSCI) 1,182.3 -2.3 +2.1 +2.1 Metals 145.3 146.2 -7.2 +10.9 South Korea (KOSPI) 2,452.1 -1.3 -0.6 -1.6 World, all (MSCI) 506.9 -2.0 -1.2 -1.2 Sterling Index Taiwan (TWI) 10,986.8 -0.2 +3.2 +5.4 World bonds (Citigroup) 977.7 +1.2 +2.9 +2.9 All items 194.6 192.5 -5.3 -8.2 Thailand (SET) 1,802.6 +0.2 +2.8 +7.6 EMBI+ (JPMorgan) 812.7 +0.1 -2.8 -2.8 Argentina (MERV) 31,255.8 -1.7 +4.0 -2.9 Hedge funds (HFRX) 1,266.5§ -0.6 -0.7 -0.7 Euro Index Brazil (BVSP) 83,808.1 -0.4 +9.7 +10.0 Volatility, US (VIX) 20.8 +18.2 +11.0 (levels) All items 151.9 150.5 -4.5 -9.0 Chile (IGPA) 27,463.3 -1.2 -1.8 -0.3 CDSs, Eur (iTRAXX)† 60.5 +2.9 +34.0 +38.9 Gold Colombia (IGBC) 11,301.4 -2.1 -1.5 +4.1 CDSs, N Am (CDX)† 66.0 +5.0 +34.5 +34.5 $ per oz 1,312.7 1,355.3 +2.8 +8.0 Mexico (IPC) 46,793.6 -0.6 -5.2 +1.0 Carbon trading (EU ETS) € 13.7 +18.4 +68.3 +74.3 West Texas Intermediate Peru (S&P/BVL)* 4,755.0 -77.0 -76.2 -76.0 Sources: IHS Markit; Thomson Reuters. *Total return index. $ per barrel 63.5 65.6 +4.0 +35.5 Egypt (EGX 30) 17,270.4 +0.9 +15.0 +15.9 †Credit-default-swap spreads, basis points. §Mar 23rd. Israel (TA-125) 1,322.1 -2.2 -3.1 -3.9 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) 7,942.5 +2.8 +9.9 +9.9 Ewart; Thomson Reuters; Urner Barry; WSJ. *Provisional South Africa (JSE AS) 56,050.8 -3.8 -5.8 +0.1 series, go to: Economist.com/indicators †Non-food agriculturals. 90 Obituary José Abreu The Economist March 31st 2018

alienable right of the masses, as was beau- ty. Surely Beethoven, that profoundly democratic humanist, would be outraged to see it now, an exclusive and privileged thing, while the weakcried out forit.

The Chávez problem It would have pleased Maestro Abreu to keep El Sistema out of politics, but that proved impossible. His founding motiva- tion was part-patriotic anyway: he wanted Venezuela to have a classical-music culture as good as Mexico’s or Argentina’s. His principal orchestra was named after the great regional liberator and its child-play- ers shone in the national colours, red, yel- low and blue. For a few years, in the social- democratic period later mocked by Hugo Chávez, he was a congressman and culture minister; he knew the ropes. Nine succes- sive governments funded him, none more generously than that of Chávez, so to keep the orchestra afloat he dared not cross him. But chavismo was not his creed. He be- lieved in the emancipation, even perfect- ibility, ofhuman beings through music. That required exhausting discipline. The children rehearsed forfourhours after Music as salvation school, 22 hours a week, playing until they were tired out, forthisideal. He drove them as he drove himself, convinced from that first session in the car park by the spark he had seen in their eyes. As more and more núcleos sprang up, he made sure his will was vehemently channelled through José Abreu, founderofEl Sistema, died on March 24th, aged 78 them. Tocar y luchar. When El Sistema pro- HAT underground car park in Caracas and collaboration he would raise up Vene- duced a star in Gustavo Dudamel, now di- Twas like any other: dim, low-pitched, zuela’s young, especially the deprived rector of the Los Angeles Philharmonic, he musty with damp. The acoustics were go- young, to their full potential of body, mind took him firmly under his wing, even ing to be dreadful, like an echo chamber. and spirit. Out in los ranchos, the sprawling standing beside him, small, gaunt and But as he waited there one afternoon in shanty-towns of tin-roofed shacks and ghostlike in coat and scarf, vestigially con- 1975, José Abreu was excited. He had been stinking drains, a boy would lift his bow ducting while Mr Dudamel did. Some given 50 musicstands, one foreverytwo of across violin strings while his father ham- thought him more or less a tyrant, and the hundred children he expected, and al- mered at his workbench, or a little girl questioned whether El Sistema had done ready these resembled a skeleton orches- would practise her clarinet as her mother any good, since weak players did not ad- tra, set out in rows. So he waited. And, folded clothes. Achild who did this was no vance and Venezuela was falling even fast- eventually, 11boys straggled in. longer poor, but noble, and would instil er to pieces. But there was no doubt, in his Another man might have given up then pride too in his parents. Inspired adoles- mind or most others, that he had raised the and there. But he had a vision that pos- cents would no longer smoke cannabis on aspirations and, with them, the prospects sessed him, and it was not just to teach mu- street corners, or fall into prostitution. Res- ofthousands ofyoung Venezuelans. sic. He intended to transform society, first cued themselves, they would gradually He was certain it would work, because in Venezuela and perhaps, with God’s save their communities from crime and it had worked on him. Once he knew, at grace, worldwide. So he did not send the their country from its chronic disorder. nine, the joy of a piano, a musician was all boys home, but told them he was going to He stressed the word “social” in his he wanted to be. He had studied econom- turn them into one ofthe best orchestras in plans, as a trained economist whose stud- ics only because it fitted round his course the world. His first lesson was tocar y lu- ies, rather than his life, had introduced him in composition. For that he won prizes, char, play and struggle. He would multiply to desperate poverty. (His childhood in an producing a cantata on the Samaritan these boys until, at the last count, at least Andean town had been hard, but not like woman, an oratorio on the Apocalypse, 700,000 children were enrolled in 440 nú- that; there was a piano in the house, and a and a wind quintet. His conducting was cleos, centres for choirs or orchestras, in family history of music-making in Italy.) rigorous and reverent, searching the Venezuela; the Simón Bolívar Orchestra of “Social” also expressed the first purpose of depths, always challenging his players. For his best players was acclaimed all over Eu- El Sistema, playing together, rather than what he wanted them to find was not only rope and America; and his method had having music theory drilled into young self-esteem and solidarity, but the sacred spread there too, farbeyond his country. heads. Its funding, in fact, came through so- life within music which was Being, Truth It acquired the name El Sistema al- cial services, not the cultural department. and Goodness, God himself. This, the final though it was not, he emphasised, a sys- “Socialist” he did not say, though his transformation, was also why he had set tem. It was a social project, almost a reli- language often strayed that way. Music up the music stands in that underground gious one, whereby through hard work was not a monopoly of elites. It was an in- car parkthat day, and waited. 7 Policy impacting business influencing government regulating industry.

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